<PAGE> 1
Filed Pursuant to Rule 424(b)(3)
SEC No. 333-30313
Huntington Bancshares Incorporated [Huntington Logo]
41 South High Street Columbus Ohio 43215
July 11, 1997
Dear Fellow Shareholder:
You are cordially invited to attend the Special Meeting of Shareholders
of Huntington Bancshares Incorporated ("Huntington"), which will be held on
Wednesday, September 10, 1997, at 3:00 p.m. local Columbus, Ohio time. The
Special Meeting will be held in the fourth floor conference room at the
Huntington Center, which is located at 41 South High Street, Columbus, Ohio.
At the Special Meeting, shareholders of Huntington will be asked to
consider and vote on the approval of the merger of First Michigan Bank
Corporation ("First Michigan") into Huntington (the "Merger"), pursuant to a
certain Agreement and Plan of Merger and related Supplemental Agreement, each
dated May 5, 1997 (collectively, the "Merger Documents"). Under the terms of the
Merger Documents, First Michigan's shareholders will receive 1.155 shares of
Huntington common stock (such conversion ratio having been adjusted for the 10%
stock dividend payable with respect to the shares of Huntington common stock on
July 31, 1997, to shareholders of record on July 15, 1997) in exchange for each
of their shares of First Michigan common stock, subject to certain limitations.
First Michigan is a $3.6 billion multi-bank holding company
headquartered in Holland, Michigan, with 91 banking offices, principally in the
Grand Rapids, Holland, and Muskegon, Michigan areas. First Michigan has a
significant market share in western Michigan, which is one of the fastest
growing areas in the United States. The Merger, if approved and consummated,
would give Huntington a total of 134 branches and approximately $6 billion in
assets in Michigan, and 446 branches system-wide and in excess of $25 billion in
total assets.
THE BOARD OF DIRECTORS OF HUNTINGTON HAS UNANIMOUSLY APPROVED THE
PROPOSED MERGER AS BEING IN THE BEST INTERESTS OF HUNTINGTON'S SHAREHOLDERS AND
RECOMMENDS THAT YOU VOTE IN FAVOR OF THE APPROVAL OF THE MERGER.
Additional information regarding the proposed Merger is set forth in
the attached Joint Proxy Statement, which also serves as the Prospectus
regarding the common stock of Huntington to be issued to the shareholders of
First Michigan in connection with the Merger. Please carefully read these
materials and consider the information contained in them.
The affirmative vote of the holders of two-thirds of the outstanding
shares of Huntington common stock is required to approve the Merger.
Accordingly, your vote is important no matter how large or how small your
holdings may be. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, YOU ARE
URGED TO COMPLETE, SIGN, AND PROMPTLY RETURN THE ENCLOSED PROXY CARD TO ASSURE
THAT YOUR SHARES WILL BE VOTED AT THE SPECIAL MEETING. If you attend the Special
Meeting, you may vote in person if you wish and your proxy will not be used.
Very truly yours,
/s/ Frank Wobst
Frank Wobst
Chairman and Chief Executive Officer
<PAGE> 2
FMB
First Michigan Bank Corporation
July 11, 1997
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
First Michigan Bank Corporation ("First Michigan"), which will be held on
Tuesday, September 9, 1997, at 9:30 a.m. local Grand Rapids, Michigan time. The
Special Meeting will be held at Rembrandt's Restaurant, which is located at
333 Bridge Street, N.W., Grand Rapids, Michigan.
At this important Special Meeting, shareholders of First Michigan will be
asked to consider and vote on the approval of a certain Agreement and Plan of
Merger, dated May 5, 1997, between Huntington Bancshares Incorporated
("Huntington") and First Michigan, and the related Supplemental Agreement, dated
May 5, 1997, between Huntington and First Michigan (collectively, the "Merger
Documents"), pursuant to which First Michigan would be merged into Huntington
(the "Merger"). The Merger Documents provide that First Michigan shareholders
will receive 1.155 shares of Huntington common stock (such conversion ratio
having been adjusted for the 10% stock dividend payable with respect to the
shares of Huntington common stock on July 31, 1997, to shareholders of record on
July 15, 1997) in exchange for each of their shares of First Michigan common
stock, subject to certain limitations. Cash will be paid for any fractional
shares. Except in certain unusual circumstances, the receipt of Huntington
common stock in the Merger will not result in the recognition of any gain or
loss for federal income tax purposes.
Huntington, headquartered in Columbus, Ohio, is the fourth largest bank
holding company in Ohio in terms of total assets at March 31, 1997. Huntington,
through its affiliates, conducts a full-service commercial and consumer banking
business, provides a variety of trust and fiduciary services, engages in
mortgage banking, lease financing, discount brokerage activities, underwriting
credit life and disability insurance, and issuing commercial paper guaranteed by
Huntington, and provides other financial products and services. As of March 31,
1997, Huntington affiliates operated 355 banking offices in Ohio, Florida,
Indiana, Kentucky, Michigan, and West Virginia, including 43 offices in
Michigan. Huntington common stock is actively traded in the over-the-counter
market under the symbol "HBAN".
Additional information regarding the proposed Merger and the parties
thereto is set forth in the attached Joint Proxy Statement, which also serves as
the Prospectus regarding the common stock of Huntington to be issued in
connection with the Merger. Please carefully read these materials and consider
the information contained in them.
THE BOARD OF DIRECTORS OF FIRST MICHIGAN HAS UNANIMOUSLY APPROVED THE
PROPOSED MERGER AS BEING IN THE BEST INTERESTS OF FIRST MICHIGAN'S SHAREHOLDERS
AND RECOMMENDS THAT YOU VOTE IN FAVOR OF THE APPROVAL OF THE MERGER DOCUMENTS
AND THE TRANSACTIONS CONTEMPLATED THEREIN.
In considering the effect of the Merger on shareholder value, the offer
from Huntington was deemed by the Board to reflect one of the highest prices in
the nation being paid for a banking company, as a multiple of earnings and book
value, when compared to other mergers of First Michigan's size (see the
references contained in the Joint Proxy Statement/Prospectus under the headings
"THE MERGER - REASONS FOR THE MERGER - First Michigan - Effect on Shareholder
Value" and "THE MERGER - Opinion of Merrill Lynch - (e) Analysis of Selected
Acquisition Transactions").
A separate two-page document containing some of the most frequently asked
questions regarding the Merger and brief answers to those questions is attached
to this letter. These questions and answers do not include all of the detailed
information contained in the Joint Proxy Statement/Prospectus and you should
read that document carefully before deciding how to vote on the proposed Merger.
The affirmative vote of the holders of two-thirds of the outstanding
shares of First Michigan common stock is required to approve the Merger
Documents. Accordingly, your vote is important no matter how large or how small
your holdings may be. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, YOU
ARE URGED TO COMPLETE, SIGN, AND PROMPTLY RETURN THE ENCLOSED PROXY CARD TO
ASSURE THAT YOUR SHARES WILL BE VOTED AT THE SPECIAL MEETING. If you attend the
Special Meeting, you may vote in person if you wish and your proxy will not be
used.
Very truly yours,
/s/ David M. Ondersma
David M. Ondersma
Chairman and Chief Executive Officer
One Financial Plaza * 10717 Adams Street * Holland, MI 49423 * (616) 396-9200
<PAGE> 3
QUESTIONS AND ANSWERS ABOUT THE MERGER
BETWEEN
FIRST MICHIGAN BANK CORPORATION
AND
HUNTINGTON BANCSHARES INCORPORATED
The following are some of the most frequently asked questions regarding
the proposed merger with Huntington and brief answers to those questions. THESE
QUESTIONS AND ANSWERS DO NOT INCLUDE ALL OF THE DETAILED INFORMATION CONTAINED
IN THE JOINT PROXY STATEMENT/PROSPECTUS RELATING TO THE MERGER. YOU SHOULD READ
THAT DOCUMENT CAREFULLY BEFORE DECIDING HOW TO VOTE ON THE PROPOSED MERGER.
Q: WHY ARE THE TWO COMPANIES PROPOSING TO MERGE? HOW WILL I BENEFIT?
A: The merger would give you a stake in a much larger company, with the
opportunity to participate in the anticipated growth of the combined
entities. We believe that the merger will result in greater dividends and an
increased opportunity for long-term appreciation of your investment. The
merger will give the combined companies a significantly larger banking
presence in the State of Michigan, with over $6 billion in assets in the
state and with coverage in both the eastern and western Michigan markets. It
will also expand the scope of the financial products and services available
to the customers of First Michigan and offer the possibility of increased
operating efficiencies.
Q: WHAT WILL I RECEIVE FOR MY SHARES OF FIRST MICHIGAN STOCK?
A: You will receive 1.155 shares of Huntington stock for each of your shares of
First Michigan stock. Huntington will pay cash in lieu of issuing fractional
shares in the merger.
Q: ARE THE TERMS OF THE MERGER FAIR?
A: We believe that the terms of the merger are fair to the First Michigan
shareholders. While the conversion ratio in the merger represented only a
slight premium over the market price of First Michigan stock at the time the
merger agreement was signed, we believe that the record high prices for First
Michigan stock at that time already included a "takeover premium" and that it
would have been difficult for First Michigan to maintain that price level if
it had elected to remain independent. We have received an opinion from
Merrill Lynch, Pierce, Fenner & Smith Incorporated as our financial advisor,
that the proposed conversion ratio in the merger is fair to the shareholders
of First Michigan from a financial point of view. For more information on
this subject, please refer to the sections in the Joint Proxy
Statement/Prospectus under the headings "THE MERGER - BACKGROUND OF THE
MERGER; - REASONS FOR THE MERGER; AND - OPINION OF MERRILL LYNCH."
Q: WILL I SHARE IN THE 10% STOCK DIVIDEND TO BE PAID TO SHAREHOLDERS OF
HUNTINGTON ON JULY 31, 1997?
A: Yes. The original conversion ratio provided under the terms of the Merger
Agreement was 1.05 shares of Huntington stock for each
<PAGE> 4
share of First Michigan stock. This original conversion ratio was adjusted
automatically for the 10% stock dividend payable to Huntington's shareholders
on July 31, 1997. The new conversion ratio is 1.155 shares of Huntington
stock for each share of First Michigan stock.
Q: WHAT IS EFFECT OF THE PROPOSED MERGER ON FUTURE DIVIDENDS?
A: You will continue to receive a regular quarterly dividend from First Michigan
until the merger becomes effective, which we expect to be in the amount of
$.18 per share. After the merger becomes effective, you will receive
dividends from Huntington. Huntington has announced that it intends to
continue to pay a quarterly dividend of $.20 per share after the issuance of
the 10% stock dividend, which is the equivalent of approximately $.23 per
First Michigan share, or an increase of approximately 35% over the dividends
paid by First Michigan during the previous two quarters and an increase of
approximately 28% over the dividends expected to be paid by First Michigan
until the closing of the Merger.
Huntington has issued either a stock dividend or a stock split every year for
24 straight years. It has increased its cash dividend every year since the
company was founded in 1966. For more information on this subject, please
refer to the sections in the Joint Proxy Statement/Prospectus under the
headings "HUNTINGTON BANCSHARES INCORPORATED - DIVIDENDS AND PRICE RANGE OF
HUNTINGTON COMMON STOCK" AND "FIRST MICHIGAN BANK CORPORATION - DIVIDENDS AND
PRICE RANGE OF FIRST MICHIGAN COMMON STOCK."
Q: HOW HAS THE PRICE OF HUNTINGTON STOCK PERFORMED HISTORICALLY?
A: For the five years ended December 31, 1996, the compounded annual total
return on Huntington stock was 26.1%. This assumes the reinvestment of all
dividends and is adjusted for all stock dividends and stock splits. For the
most recent ten years, the return was 19.3%, compared with 15.3% for the S&P
500 Index. For the twenty years ended December 31, 1996, the compounded
annual total return was 20.7%.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE PROPOSED MERGER TO THE SHAREHOLDERS OF
FIRST MICHIGAN?
A: Except in certain unusual circumstances, the exchange of your shares of First
Michigan stock for shares of Huntington stock will be tax-free to you, except
for taxes on cash received in lieu of the issuance of fractional shares.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We expect that the merger will be completed by the end of September 1997.
Q: WHAT DO I NEED TO DO NOW?
A: Just sign and mail in your proxy card in the enclosed return envelope as soon
as possible, so that your shares will be represented at the special
shareholders' meeting and your vote will be counted. The meeting will be held
on September 9, 1997.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger is complete, we will send you written instructions
for exchanging your share certificates.
Q: WHO SHOULD I CALL IF I HAVE ANY QUESTIONS OR IF I HAVE NOT RECEIVED A COPY
OF THE JOINT PROXY STATEMENT/PROSPECTUS?
A: Please call Sharron Reynolds, Vice President - Investor Relations, of First
Michigan, at (616) 355-9263, if you have any questions or if you did not
receive a copy of the Joint Proxy Statement/Prospectus.
THE BOARD OF DIRECTORS OF FIRST MICHIGAN HAS UNANIMOUSLY
RECOMMENDED THAT YOU VOTE IN FAVOR OF THE MERGER.
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<PAGE> 5
HUNTINGTON BANCSHARES INCORPORATED
41 South High Street
Columbus, Ohio 43287
__________________________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
September 10, 1997
__________________________
Notice is hereby given that a Special Meeting of Shareholders (the
"Special Meeting") of Huntington Bancshares Incorporated ("Huntington") has been
called by the Board of Directors and will be held in the fourth floor conference
room at the Huntington Center, which is located at 41 South High Street,
Columbus, Ohio, on Wednesday, September 10, 1997, at 3:00 p.m., local time, for
the following purposes:
1. To consider and vote upon the approval of the merger of First Michigan
Bank Corporation ("First Michigan") into Huntington, pursuant to the
terms of a certain Agreement and Plan of Merger, dated May 5, 1997,
between Huntington and First Michigan, and the related Supplemental
Agreement, dated May 5, 1997, between Huntington and First Michigan, as
more fully described in the accompanying Joint Proxy
Statement/Prospectus; and
2. To transact any other business which may properly come before the
meeting or any adjournments or postponements thereof. (The Board of
Directors is not currently aware of any other business to come before
the Special Meeting.)
Only shareholders of record at the close of business on July 9, 1997, the
record date for the Special Meeting, are entitled to notice of and to vote at
the Special Meeting and any adjournments or postponements thereof.
We urge you to execute and return the enclosed proxy as soon as possible
in order to ensure that your shares will be represented at the Special Meeting.
Your proxy may be revoked in the manner described in the accompanying Joint
Proxy Statement/Prospectus at any time before it has been voted at the Special
Meeting. If you attend the Special Meeting, you may vote in person, and your
proxy will not be used.
Dated: July 11, 1997 By Order of the Board of Directors
/s/ Ralph K. Frasier
Ralph K. Frasier
General Counsel and Secretary
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING,
PLEASE SIGN AND MAIL THE ENCLOSED PROXY IN THE
ACCOMPANYING ENVELOPE. NO POSTAGE IS
NECESSARY IF MAILED IN THE UNITED STATES.
<PAGE> 6
FIRST MICHIGAN BANK CORPORATION
One Financial Plaza
10717 Adams Street
Holland, Michigan 49423
__________________________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
September 9, 1997
__________________________
Notice is hereby given that a Special Meeting of Shareholders (the
"Special Meeting") of First Michigan Bank Corporation ("First Michigan") has
been called by the Board of Directors and will be held at Rembrandt's
Restaurant, which is located at 333 Bridge Street, N.W., Grand Rapids, Michigan,
on Tuesday, September 9, 1997, at 9:30 a.m., local time, for the following
purposes:
1. To consider and vote upon the approval of the Agreement and Plan of
Merger, dated May 5, 1997, between Huntington Bancshares Incorporated
("Huntington") and First Michigan, and the related Supplemental
Agreement, dated May 5, 1997, between Huntington and First Michigan,
pursuant to which First Michigan would be merged into Huntington and
the shareholders of First Michigan would receive shares of the common
stock of Huntington, as more fully described in the accompanying Joint
Proxy Statement/Prospectus; and
2. To transact any other business which may properly come before the
meeting or any adjournments or postponements thereof. (The Board of
Directors is not currently aware of any other business to come before
the Special Meeting.)
Only shareholders of record at the close of business on July 11, 1997, the
record date for the Special Meeting, are entitled to notice of and to vote at
the Special Meeting and any adjournments or postponements thereof.
We urge you to execute and return the enclosed proxy as soon as possible
in order to ensure that your shares will be represented at the Special Meeting.
Your proxy may be revoked in the manner described in the accompanying Joint
Proxy Statement/Prospectus at any time before it has been voted at the Special
Meeting. If you attend the Special Meeting, you may vote in person, and your
proxy will not be used.
Dated: July 11, 1997 By Order of the Board of Directors
/s/ David M. Ondersma
David M. Ondersma
Chairman and Chief Executive Officer
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING,
PLEASE SIGN AND MAIL THE ENCLOSED PROXY IN THE
ACCOMPANYING ENVELOPE. NO POSTAGE IS NECESSARY
IF MAILED IN THE UNITED STATES. PLEASE DO NOT
SEND IN YOUR STOCK CERTIFICATES AT THIS TIME.
<PAGE> 7
Filed Pursuant to Rule 424(b)(3)
SEC No. 333-30313
PROSPECTUS
HUNTINGTON BANCSHARES INCORPORATED
COMMON STOCK
(WITHOUT PAR VALUE)
AND ASSOCIATED RIGHTS
This Joint Proxy Statement/Prospectus relates to up to 34,000,000
shares of common stock, without par value, of Huntington Bancshares Incorporated
("Huntington"), which may be issued in connection with the merger (the "Merger")
of First Michigan' Bank Corporation ("First Michigan") into Huntington. This
Joint Proxy Statement/Prospectus also serves as the Joint Proxy Statement for
(i) the special meeting of shareholders of Huntington to be held on
September 10, 1997, for the purpose of approving the Merger (the "Huntington
Special Meeting"), and (ii) the special meeting of shareholders of First
Michigan, to be held on September 9, 1997, for the purpose of approving
the Agreement and Plan of Merger, dated May 5, 1997, between Huntington and
First Michigan (the "Merger Agreement"), and the related Supplemental Agreement
between Huntington and First Michigan, dated May 5, 1997 (the "Supplemental
Agreement"), thereby approving the Merger (the "First Michigan Special
Meeting"). (The Merger Agreement and the Supplemental Agreement are sometimes
hereinafter collectively referred to as the "Merger Documents.") A description
of the Merger is included herein. A copy of the Merger Agreement is attached as
Exhibit A hereto and a copy of the Supplemental Agreement is attached as Exhibit
B hereto.
At such time as the Merger becomes effective (the "Effective Time"),
each issued and outstanding share of common stock, $1.00 par value, of First
Michigan (the "First Michigan Common Stock") will be converted into the right to
receive 1.155 shares of common stock, without par value, of Huntington
("Huntington Common Stock") (such conversion ratio having been adjusted for the
10% stock dividend payable with respect to the shares of Huntington Common Stock
on July 31, 1997, to shareholders of record of Huntington on July 15, 1997 (the
"1997 Huntington 10% Stock Dividend")), subject to certain limitations as
described herein. Cash will be paid for any fractional shares. Huntington and
First Michigan Common Stock are traded on the Nasdaq National Market under the
symbols "HBAN" and "FMBC," respectively. See "THE MERGER - Terms of the Merger."
_______________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
_______________________________
THE SHARES OF HUNTINGTON COMMON STOCK OFFERED HEREBY ARE NOT
SAVINGS ACCOUNTS OR DEPOSITS AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE SAVINGS
ASSOCIATION INSURANCE FUND, THE BANK INSURANCE
FUND, OR ANY OTHER GOVERNMENTAL AGENCY.
_______________________________
NO PERSON IS AUTHORIZED IN CONNECTION WITH THE OFFERING AND
SOLICITATION OF PROXIES MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN AS CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS
AND ANY INFORMATION OR REPRESENTATION NOT CONTAINED HEREIN MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY HUNTINGTON OR FIRST MICHIGAN. THIS JOINT PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED BY THIS JOINT PROXY
STATEMENT/PROSPECTUS IN ANY JURISDICTION OR TO ANY PERSON TO WHOM IT WOULD BE
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. THE DELIVERY OF THIS JOINT PROXY
STATEMENT/PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
_______________________________
The Date of this Joint Proxy Statement/Prospectus is July 11, 1997.
<PAGE> 8
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION .................................................... 3
INFORMATION INCORPORATED BY
REFERENCE .............................................................. 3
Huntington ............................................................ 3
First Michigan ........................................................ 4
SPECIAL NOTE REGARDING FORWARD-
LOOKING STATEMENTS ..................................................... 4
HUNTINGTON BANCSHARES INCORPORATED
AND FIRST MICHIGAN BANK CORPORATION
JOINT PROXY STATEMENT .................................................. 6
INTRODUCTION ............................................................. 6
SUMMARY INFORMATION ...................................................... 6
Huntington ............................................................ 6
First Michigan ........................................................ 7
The Huntington Special Meeting ........................................ 7
The First Michigan Special Meeting .................................... 8
The Merger ............................................................ 9
Recommendations of the Boards of Directors ............................ 10
No Dissenting Shareholders' Rights .................................... 10
Interests of Management ............................................... 10
Federal Income Tax Consequences ....................................... 11
Accounting Treatment .................................................. 11
Regulatory Approvals .................................................. 12
Comparative Per Share Information ..................................... 12
SELECTED FINANCIAL DATA .................................................. 13
Selected Financial Data of Huntington ................................. 13
Selected Financial Data of First Michigan ............................. 14
Unaudited Pro Forma Selected Financial Data ........................... 15
THE HUNTINGTON SPECIAL MEETING ........................................... 16
General ............................................................... 16
Huntington Record Date; Voting Rights ................................. 16
Proxies ............................................................... 17
THE FIRST MICHIGAN SPECIAL MEETING ....................................... 17
General ............................................................... 17
First Michigan Record Date; Voting Rights ............................. 18
Proxies ............................................................... 18
THE MERGER ............................................................... 19
General ............................................................... 19
Background of the Merger............................................... 19
Reasons for the Merger ................................................ 20
Opinion of Morgan Stanley ............................................. 23
Opinion of Merrill Lynch .............................................. 26
Effective Time of the Merger .......................................... 33
Terms of the Merger ................................................... 33
Exchange of Certificates .............................................. 34
Terms of the Warrant .................................................. 35
The Subsidiary Mergers ................................................ 36
Covenants of the Parties .............................................. 37
Conditions to Consummation of the Merger .............................. 39
Amendment ............................................................. 40
Termination and Termination Fee ....................................... 40
No Dissenting Shareholders' Rights .................................... 41
Interests of Management ............................................... 41
Federal Income Tax Consequences ....................................... 42
Accounting Treatment .................................................. 43
Regulatory Approvals .................................................. 43
Resales of Huntington Common Stock .................................... 44
EFFECT OF THE MERGER ON
SHAREHOLDERS' RIGHTS ................................................... 45
Capital Stock ......................................................... 45
Nomination, Election, and Removal of Directors ........................ 45
Shareholder Proposals ................................................. 46
Special Voting Requirements for Certain
Transactions ........................................................ 46
Evaluation of Mergers and Consolidations .............................. 47
Special Meetings ...................................................... 48
Directors' and Shareholders' Right to Adopt,
Alter, or Repeal the Bylaws ......................................... 48
Personal Liability of Officers and Directors .......................... 48
to Shareholders ..................................................... 48
Rights Plans .......................................................... 49
HUNTINGTON BANCSHARES INCORPORATED ....................................... 51
General ............................................................... 51
The Huntington National Bank .......................................... 51
Dividends and Price Range of Huntington
Common Stock ........................................................ 52
Other Information ..................................................... 52
FIRST MICHIGAN BANK CORPORATION .......................................... 53
General ............................................................... 53
Dividends and Price Range of First Michigan
Common Stock ........................................................ 53
Other Information ..................................................... 53
GOVERNMENT REGULATION .................................................... 53
General ............................................................... 54
Holding Company Structure ............................................. 54
Dividend Restrictions ................................................. 55
FDIC Insurance ........................................................ 56
Capital Requirements .................................................. 56
Federal Deposit Insurance Corporation
Improvement Act of 1991 ............................................. 57
Interstate Branching and Consolidations ............................... 59
Other Applicable Regulations .......................................... 60
EXPERTS .................................................................. 60
LEGAL OPINIONS ........................................................... 61
OTHER MATTERS ............................................................ 61
INDEX TO FINANCIAL INFORMATION ........................................... 62
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS .............................. F-1
EXHIBITS
Exhibit A - Agreement and Plan of Merger ............................... A-1
Exhibit B - Supplemental Agreement ..................................... B-1
Exhibit C - Opinion of Morgan Stanley .................................. C-1
Exhibit D - Opinion of Merrill Lynch ................................... D-1
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF THESE DOCUMENTS RELATING TO
HUNTINGTON ARE AVAILABLE WITHOUT CHARGE UPON REQUEST FROM CHERI GRAY, INVESTOR
RELATIONS ANALYST, HUNTINGTON BANCSHARES INCORPORATED, HUNTINGTON CENTER, 41
SOUTH HIGH STREET, COLUMBUS, OHIO 43287, (614) 480-3803. IN ORDER TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS RELATING TO HUNTINGTON, ANY REQUEST SHOULD BE
MADE BY SEPTEMBER 3, 1997. COPIES OF DOCUMENTS INCORPORATED BY REFERENCE HEREIN
THAT RELATE TO FIRST MICHIGAN ARE AVAILABLE WITHOUT CHARGE UPON REQUEST FROM
SHARRON REYNOLDS, VICE PRESIDENT, FIRST MICHIGAN BANK CORPORATION, ONE FINANCIAL
PLAZA, 10717 ADAMS STREET, HOLLAND, MICHIGAN 49423, (616) 355-9263. IN ORDER TO
ENSURE TIMELY DELIVERY OF THE DOCUMENTS RELATING TO FIRST MICHIGAN, ANY REQUEST
SHOULD BE MADE BY SEPTEMBER 2, 1997.
-2-
<PAGE> 9
AVAILABLE INFORMATION
Huntington and First Michigan are subject to the informational
requirements of the Securities Exchange Act of 1934, as amended, and in
accordance therewith file reports, proxy statements, and other information with
the Securities and Exchange Commission (the "Commission"). Copies of such
reports, proxy statements, and other information filed by Huntington and First
Michigan can be inspected and copied at the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 or at the public
reference facilities of the regional offices of the Commission at Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511; and 7 World Trade Center, Suite 1300, New York, New York 10048.
Copies of such material also can be obtained by mail from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
upon payment of the fees prescribed by the rules and regulations of the
Commission. In addition, the Commission maintains a site on the World Wide Web
at http://www.sec.gov that contains reports, proxy and information statements,
and other information regarding Huntington and First Michigan and other
registrants that file electronically with the Commission.
This Joint Proxy Statement/Prospectus does not contain all of the
information set forth in the Registration Statement and exhibits thereto which
Huntington has filed with the Commission under the Securities Act of 1933, as
amended (the "Registration Statement"), and to which reference is hereby made.
Statements contained in this Joint Proxy Statement/Prospectus concerning the
provisions of certain documents filed as exhibits to the Registration Statement
are necessarily brief descriptions thereof and are not necessarily complete, and
each such statement is qualified in its entirety by reference to the full text
of such document.
All information contained herein with respect to Huntington and Morgan
Stanley & Co. Incorporated, Huntington's financial advisor, was supplied by
Huntington and all information contained herein with respect to First Michigan
and Merrill Lynch, Pierce, Fenner & Smith Incorporated, First Michigan's
financial advisor, was supplied by First Michigan. Although neither Huntington
nor First Michigan has any knowledge that would indicate that any statements or
information relating to the other party contained herein is inaccurate or
incomplete, neither Huntington nor First Michigan can warrant the accuracy or
completeness of such statements or information as they relate to the other
party.
INFORMATION INCORPORATED BY REFERENCE
HUNTINGTON
The following documents previously filed with the Commission by Huntington
pursuant to Section 13(a), 14, or 15(d) of the Securities Exchange Act of 1934,
as amended, are hereby incorporated herein by reference:
1. Annual Report on Form 10-K for the fiscal year ended December 31,
1996;
2. Quarterly Report on Form 10-Q for the quarter ended March 31, 1997;
3. Current Reports on Form 8-K dated January 15, April 9, May 5, 1997,
and June 19, 1997, to report annual and/or quarterly earnings and
certain developments; and
4. Proxy Statement for the Annual Meeting of Shareholders held on April
24, 1997; except that the information referred to in Item 402(a)(8)
of Regulation S-K promulgated by the Commission shall not be deemed
to be specifically incorporated by reference herein.
In addition, the description of the rights issued under a certain Rights
Agreement, dated February 22, 1990, as amended August 16, 1995, between
Huntington and The Huntington Trust Company, National Association, which rights
are attached to all shares of Huntington Common Stock, that is contained in
Huntington's Forms 8-A filed with
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<PAGE> 10
the Commission pursuant to Section 12 of the Securities Exchange Act of 1934,
and Huntington's Current Report on Form 8-K dated August 16, 1995, and as the
same may be updated in any amendment or report filed for the purpose of updating
such description, is hereby incorporated by reference.
All documents filed by Huntington pursuant to Sections 13(a), 13(c), 14,
or 15(d) of the Securities Exchange Act of 1934, as amended, after the date of
this Joint Proxy Statement/Prospectus and prior to the Huntington Special
Meeting shall be deemed to be incorporated by reference in this Joint Proxy
Statement/Prospectus and to be a part hereof from the date of filing of such
documents. Any statement incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Joint Proxy Statement/Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Joint Proxy Statement/Prospectus.
FIRST MICHIGAN
The following documents previously filed with the Commission by First
Michigan pursuant to Section 13(a), 14, or 15(d) of the Securities Exchange Act
of 1934, as amended, are hereby incorporated herein by reference:
1. Annual Report on Form 10-K for the fiscal year ended December 31,
1996;
2. Quarterly Report on Form 10-Q for the quarter ended March 31, 1997;
3. Current Report on Form 8-K dated May 5, 1997, to report the
execution of the Merger Documents; and
4. Proxy Statement for the Annual Meeting of Shareholders held on April
15, 1997; except that the information referred to in Item 402(a)(8)
of Regulation S-K promulgated by the Commission shall not be deemed
to be specifically incorporated by reference herein.
All documents filed by First Michigan pursuant to Sections 13(a), 13(c),
14, or 15(d) of the Securities Exchange Act of 1934, as amended, after the date
of this Joint Proxy Statement/Prospectus and prior to the First Michigan Special
Meeting shall be deemed to be incorporated by reference in this Joint Proxy
Statement/Prospectus and to be a part hereof from the date of filing of such
documents. Any statement incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Joint Proxy Statement/Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Joint Proxy Statement/Prospectus.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the statements contained under the captions "THE MERGER -
REASONS FOR THE MERGER," "- OPINION OF MORGAN STANLEY," and "- OPINION OF
MERRILL LYNCH" and elsewhere in this Prospectus that are not historical facts,
including without limitation, statements of future expectations, projections of
results of operations and financial condition, statements of future economic
performance and other forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, are subject to certain
assumptions, uncertainties, risks, and other factors which may cause the actual
results, performance, or achievements of Huntington and First Michigan to differ
materially from those contemplated in such forward-looking statements. In
addition to the specific matters referred to herein, important factors which may
cause actual results to differ from those contemplated in such forward-looking
statements include: (i) changes in economic conditions; (ii) movement in
interest rates; (iii) the cost of Huntington's and First Michigan's capital,
which may depend in part on Huntington's and First Michigan's portfolio
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<PAGE> 11
quality, ratings, prospects, and outlook; (iv) the results of Huntington's and
First Michigan's efforts to implement their respective business strategies; (v)
actions of Huntington's and First Michigan's competitors and Huntington's and
First Michigan's ability to respond to such actions; (vi) the performance of
borrowers from Huntington and First Michigan; (vii) changes in laws,
governmental regulation, tax rates, and similar matters; and (viii) other risks
detailed in Huntington's and First Michigan's other filings with the Commission.
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<PAGE> 12
HUNTINGTON BANCSHARES INCORPORATED
AND
FIRST MICHIGAN BANK CORPORATION
________________________
JOINT PROXY STATEMENT
________________________
INTRODUCTION
This Joint Proxy Statement/Prospectus and the accompanying proxy are being
furnished to: (i) the shareholders of Huntington in connection with the
solicitation of proxies by the Board of Directors of Huntington for the
Huntington Special Meeting to be held at 3:00 p.m., local time, on Wednesday,
September 10, 1997, in the fourth floor conference room at the Huntington
Center, which is located at 41 South High Street, Columbus, Ohio, and any
adjournments or postponements thereof, for the purpose of considering and voting
upon the approval of the Merger; and (ii) the shareholders of First Michigan in
connection with the solicitation of proxies by the Board of Directors of First
Michigan for the First Michigan Special Meeting to be held at 3:30 p.m., local
time, on Tuesday, September 9, 1997, at Rembrandt's Restaurant, which is located
at 333 Bridge Street, N.W., Grand Rapids, Michigan, and any adjournments or
postponements thereof, for the purpose of considering and voting upon the
approval of the Merger Documents, thereby approving the Merger. (The Huntington
Special Meeting and the First Michigan Special Meeting are sometimes hereinafter
collectively referred to as the "Shareholder Meetings" and individually as a
"Shareholder Meeting.")
This Joint Proxy Statement/Prospectus and accompanying proxies will be
first sent or given to the shareholders of Huntington and First Michigan on or
about July 17, 1997.
SUMMARY INFORMATION
The following is a brief summary of certain information with respect to
the Merger and the Merger Documents. This summary is not intended to be complete
and is qualified in its entirety by reference to, and should be read in
conjunction with, the detailed information and financial statements contained or
incorporated by reference herein and in the exhibits hereto.
HUNTINGTON
Huntington, a multi-state bank holding company incorporated under the laws
of the State of Maryland in 1966, is headquartered in Columbus, Ohio. At March
31, 1997, Huntington had total assets of approximately $21.6 billion and total
deposits of approximately $13.9 billion. Huntington, through its affiliates,
conducts a full service commercial and consumer banking business, engages in
mortgage banking, lease financing, trust services, discount brokerage
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<PAGE> 13
services, underwriting credit life and disability insurance, and issuing
commercial paper guaranteed by Huntington, and provides other financial products
and services. At March 31, 1997, Huntington's affiliates had 202 banking offices
in Ohio and Northern Kentucky, 43 banking offices in West Virginia, 43 banking
offices in Michigan, 43 banking offices in Florida, 24 banking offices in
Indiana, and 1 foreign office in the Cayman Islands. In addition, Huntington's
mortgage company affiliate has loan origination offices throughout the Midwest
and East Coast. The principal executive offices of Huntington are located at
Huntington Center, 41 South High Street, Columbus, Ohio 43287 (telephone number
614-480-8300). See "HUNTINGTON BANCSHARES INCORPORATED."
Effective as of June 30, 1997, all but one of Huntington's banking
subsidiaries were merged into its wholly owned principal banking subsidiary, The
Huntington National Bank ("HNB"), which is headquartered in Columbus, Ohio (the
"Huntington Reorganization"). As of March 31, 1997, after giving effect to the
Huntington Reorganization, HNB operated 43 banking offices in Michigan, with
total assets in Michigan of $2.1 billion, and total deposits in its Michigan
banking offices of $1.9 billion. The principal executive offices of HNB are
located at Huntington Center, 41 South High Street, Columbus, Ohio 43287
(telephone number 614-480-8300). The principal executive offices of the
Huntington Michigan Region are located at 801 West Big Beaver Road, Troy,
Michigan 48099-5823 (telephone number 248-362-5000). See "HUNTINGTON BANCSHARES
INCORPORATED - THE HUNTINGTON NATIONAL BANK."
FIRST MICHIGAN
First Michigan, a bank holding company incorporated under the laws of the
State of Michigan in 1973, is headquartered in Holland, Michigan. At March 31,
1997, First Michigan had total assets of $3.6 billion and total deposits of $3.0
billion. First Michigan owns, either directly or indirectly, all of the
outstanding stock of 15 Michigan state-chartered banks, including: FMB-First
Michigan Bank, FMB-First Michigan Bank-Grand Rapids, FMB-Lumberman's Bank,
FMB-Northwestern Bank, FMB-State Savings Bank, FMB-Commercial Bank, FMB-Sault
Bank, FMB-Security Bank, FMB-Community Bank, FMB-Oceana Bank, FMB-Reed City
Bank, FMB-Maynard Allen Bank, FMB-Old State Bank, FMB-Arcadia Bank, and
FMB-Trust (the "First Michigan Banking Subsidiaries"). First Michigan, through
the First Michigan Banking Subsidiaries, conducts a full-service commercial and
retail banking business, provides trust and brokerage services, engages in
mortgage banking, operates a title insurance agency, and underwrites credit life
and disability insurance. The First Michigan Banking Subsidiaries operate 91
full-service offices in 21 counties in western Michigan, including 18 offices in
the Grand Rapids area, 17 offices in the Holland area, 9 offices in the Muskegon
area, and 2 offices in the Kalamazoo area. The principal executive offices of
First Michigan are located at One Financial Plaza, 10717 Adams Street, Holland,
Michigan 49423 (telephone number 616-355-9200). See "FIRST MICHIGAN BANK
CORPORATION."
THE HUNTINGTON SPECIAL MEETING
The Huntington Special Meeting will be held at 3:00 p.m., local time, on
Wednesday, September 10, 1997, in the fourth floor conference room at the
Huntington Center, which is located at 41 South High Street, Columbus, Ohio. The
close of business on July 9, 1997 (the "Huntington Record Date"), has been set
as the record date for determining the shareholders of record of Huntington
entitled to notice of and to vote at the Huntington Special Meeting and any
adjournments or postponements thereof. Shareholders of record of Huntington at
the close of business on the Huntington Record Date will be entitled to vote at
the Huntington Special Meeting.
A majority of the outstanding shares of Huntington Common Stock,
represented in person or by proxy, will constitute a quorum at the Huntington
Special Meeting. Each share of Huntington Common Stock entitles the holder
thereof to one vote. Abstentions and broker non-votes will be counted for
purposes of determining the presence or absence of a quorum at the meeting. The
affirmative vote of the holders of two-thirds of the outstanding shares of
Huntington Common Stock is required to approve the Merger. Because the approval
of the Merger requires the affirmative vote of a particular percentage of the
outstanding shares of Huntington Common Stock, an abstention or a broker
non-vote with respect to such matter will have the same effect as a vote against
the matter.
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<PAGE> 14
As of the Huntington Record Date, Huntington had 144,807,610 shares of
Huntington Common Stock outstanding and entitled to vote on all matters
requiring a vote of the shareholders of Huntington. The shares of Huntington
Common Stock outstanding on the Huntington Record Date were held by
approximately 29,075 holders of record. Each share of Huntington Common Stock
entitles the holder to one vote, exercisable in person or by properly executed
proxy, on each matter that comes before the shareholders at the Huntington
Special Meeting. As of June 30, 1997, the directors and executive officers of
Huntington and their affiliates beneficially owned 2,910,203 shares of
Huntington Common Stock (excluding shares subject to stock options), which
represent 2.01% of the total issued and outstanding shares of such stock
entitled to vote at the Huntington Special Meeting.
The shares of Huntington Common Stock represented by the accompanying
proxy with respect to the Huntington Special Meeting will be voted as directed
if the proxy is properly signed and received by Huntington prior to the
Huntington Special Meeting. The proxy will be voted FOR the approval of the
Merger if no direction is made to the contrary on a duly executed and returned
proxy. The proxy may also be used to grant discretionary authority to vote on
other matters which may arise at the Huntington Special Meeting, however, no
proxy that is voted against the approval of the Merger will be voted in favor of
any adjournment or postponement of the Huntington Special Meeting for the
purpose of soliciting additional proxies. A person giving the enclosed proxy has
the power to revoke it at any time prior to the Huntington Special Meeting by
filing with the Secretary of Huntington written notice of revocation or a
subsequent proxy relating to the same shares, or by attending the Huntington
Special Meeting and voting in person (although attendance at the Huntington
Special Meeting will not in and of itself constitute revocation of a proxy). See
"THE HUNTINGTON SPECIAL MEETING."
THE FIRST MICHIGAN SPECIAL MEETING
The First Michigan Special Meeting will be held at 9:30 a.m., local time,
on Tuesday, September 9, 1997, at Rembrandt's Restaurant, which is located at
333 Bridge Street, N.W., Grand Rapids, Michigan. The close of business on the
July 11, 1997 (the "First Michigan Record Date"), has been set as the record
date for determining the shareholders of record of First Michigan entitled to
notice of and to vote at the First Michigan Special Meeting and any adjournments
or postponements thereof. Shareholders of record of First Michigan at the close
of business on the First Michigan Record Date will be entitled to vote at the
First Michigan Special Meeting.
A majority of the outstanding shares of First Michigan Common Stock,
represented in person or by proxy, will constitute a quorum at the First
Michigan Special Meeting. Each share of First Michigan Common Stock entitles the
holder thereof to one vote. Abstentions and broker non-votes will be counted for
purposes of determining the presence or absence of a quorum at the meeting. The
affirmative vote of the holders of two-thirds of the outstanding shares of First
Michigan Common Stock is required to approve the Merger Documents and thereby to
approve the Merger. Because the approval of the Merger Documents requires the
affirmative vote of a particular percentage of the outstanding shares of First
Michigan Common Stock, an abstention or a broker non-vote with respect to such
matter will have the same effect as a vote against the matter.
As of the First Michigan Record Date, First Michigan had 27,814,228 shares
of First Michigan Common Stock outstanding and entitled to vote on all matters
requiring a vote of the shareholders of First Michigan. The shares of First
Michigan Common Stock outstanding on the First Michigan Record Date were held by
approximately 7,027 holders of record. Each share of First Michigan Common Stock
entitles the holder to one vote, exercisable in person or by properly executed
proxy, on each matter that comes before the shareholders at the First Michigan
Special Meeting. As of June 30, 1997, the directors and executive officers of
First Michigan and their affiliates beneficially owned 569,116 shares of First
Michigan Common Stock (excluding shares subject to stock options), which
represent 2.05% of the total issued and outstanding shares of such stock
entitled to vote at the First Michigan Special Meeting.
The shares of First Michigan Common Stock represented by the accompanying
proxy with respect to the First Michigan Special Meeting will be voted as
directed if the proxy is properly signed and received by First Michigan prior to
the First Michigan Special Meeting. The proxy will be voted FOR the approval of
the Merger Documents if no direction is made to the contrary on a duly executed
and returned proxy. The proxy may also be used to grant
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<PAGE> 15
discretionary authority to vote on other matters which may arise at the First
Michigan Special Meeting, however, no proxy that is voted against the approval
of the Merger Documents will be voted in favor of any adjournment or
postponement of the First Michigan Special Meeting for the purpose of soliciting
additional proxies. A person giving the enclosed proxy has the power to revoke
it at any time prior to the First Michigan Special Meeting by filing with the
Secretary of First Michigan written notice of revocation or a subsequent proxy
relating to the same shares, or by attending the First Michigan Special Meeting
and voting in person (although attendance at the First Michigan Special Meeting
will not in and of itself constitute revocation of a proxy). See "THE FIRST
MICHIGAN SPECIAL MEETING."
THE MERGER
The Merger Documents set forth the terms of the Merger, as well as certain
representations, warranties, conditions, and covenants made by Huntington and
First Michigan as an inducement to the other party to execute and deliver the
Merger Documents and to consummate the Merger. The consummation of the Merger is
conditioned on the satisfaction of certain conditions, including obtaining the
approval of the shareholders of Huntington and First Michigan and obtaining
various regulatory approvals. Upon the effectiveness of the Merger, First
Michigan will be merged into Huntington and the separate existence of First
Michigan will cease. It is anticipated that, as soon as practicable after the
consummation of the Merger, all of the First Michigan Banking Subsidiaries will
be merged with and into HNB under the charter of HNB (the "Subsidiary Mergers").
At the Effective Time, the shares of First Michigan Common Stock issued
and outstanding immediately prior to the Effective Time (other than shares held
by First Michigan, Huntington, or any subsidiary of Huntington or First
Michigan, in each case other than in a fiduciary capacity or as a result of
debts previously contracted, which shares will be canceled and retired at the
Effective Time) will be converted into the right to receive 1.155 shares of
Huntington Common Stock (such conversion ratio having been adjusted for the 1997
Huntington 10% Stock Dividend) (the "Conversion Ratio"), subject to certain
limitations. Cash will be paid in lieu of the issuance of any fractional shares
of Huntington Common Stock. See "THE MERGER - TERMS OF THE MERGER."
If both (i) the average of the closing sale prices per share of Huntington
Common Stock as reported on the Nasdaq National Market (the "Average Closing
Sale Price") for the five trading days (the "Determination Period") immediately
preceding the date that is five trading days prior to the date on which the
Effective Time occurs (the "Effective Date"), is less than $20.78 (such amount
having been adjusted for the 1997 Huntington 10% Stock Dividend) (the
"Huntington Floor Price"), and (ii) the quotient obtained by dividing the
average of the Standard & Poors Regional Bank Stock Index (the "S&P Index") for
the Determination Period by 355.87 is greater than the quotient obtained by
dividing the Average Closing Sale Price by $25.98 (such amount having been
adjusted for the 1997 Huntington 10% Stock Dividend) (the "Huntington Base
Price"), and the difference between such quotients is greater than 0.15, then
Huntington and First Michigan are required to use their best efforts to
renegotiate the Conversion Ratio, and if they are unable to agree on a revised
Conversion Ratio, then the Merger Documents will be terminated and the Merger
will be abandoned.
In addition, if the sum of the number of shares of First Michigan Common
Stock outstanding at the Effective Time plus the number of shares of First
Michigan Common Stock that are subject to outstanding stock options previously
granted by First Michigan (the "First Michigan Stock Options") as of the
Effective Time differs from 28,848,791 shares, the Conversion Ratio will be
automatically adjusted (to the nearest hundredth of a share of Huntington Common
Stock) by multiplying the original Conversion Ratio by the quotient obtained by
dividing 28,848,791 by the sum of the number of shares of First Michigan Common
issued and outstanding on the Effective Date plus the number of shares subject
to the outstanding First Michigan Stock Options on the Effective Date.
At the Effective Time, each outstanding option to purchase shares of First
Michigan Common Stock shall be converted into an option to acquire the same
number of shares of Huntington Common Stock as the holder would have been
entitled to receive pursuant to the Merger in exchange for such shareholder's
shares of First Michigan Common Stock if such holder had exercised such option
in full prior to the Effective Time. The per share exercise price for each such
option will be adjusted appropriately.
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<PAGE> 16
Huntington has received an opinion of Morgan Stanley & Co. Incorporated
("Morgan Stanley"), Huntington's financial advisor, that, as of the date of such
opinion and subject to the considerations set forth therein, the Conversion
Ratio is fair, from a financial point of view, to Huntington. See "THE MERGER -
BACKGROUND OF THE MERGER," "- Opinion of Morgan Stanley," and "- CONDITIONS TO
CONSUMMATION OF THE MERGER" and the opinion of Morgan Stanley, which is attached
hereto as Exhibit C.
First Michigan has received an opinion of Merrill Lynch, Pierce, Fenner &
Smith Incorporated, ("Merrill Lynch"), First Michigan's financial advisor, that
the Conversion Ratio is fair to the shareholders of First Michigan from a
financial point of view. See "THE MERGER - BACKGROUND OF THE MERGER," "- OPINION
OF MERRILL LYNCH," and "- CONDITIONS TO CONSUMMATION OF THE MERGER" and the
opinion of Merrill Lynch, which is attached hereto as Exhibit D.
It is contemplated that the Merger will be consummated as soon as
practicable after the satisfaction of various conditions, including the receipt
of required regulatory approvals. See "THE MERGER - EFFECTIVE DATE OF THE
MERGER," and "- CONDITIONS TO CONSUMMATION OF THE MERGER."
The Supplemental Agreement provides that First Michigan shall pay to
Huntington a termination fee in the amount of the sum of $22,000,000 plus the
direct costs and expenses incurred by or on behalf of Huntington in connection
with the transactions contemplated under the Merger Documents, but in no event
to exceed $1,000,000, if any of certain specified events occurs. See "THE MERGER
- - TERMINATION AND TERMINATION FEE."
As an inducement to Huntington to enter into the Merger Documents, First
Michigan has issued to Huntington a Warrant, dated May 5, 1997 (the "Warrant"),
to purchase up to 5,534,317 shares of First Michigan Common Stock (such number
of shares having been adjusted for the 5% stock dividend paid with respect to
the shares of First Michigan Common Stock on May 30, 1997), which represents
19.9% of the outstanding shares of First Michigan Common Stock, under certain
specified circumstances, at an exercise price of $29.275 per share, pursuant to
the terms of the Warrant and a certain Warrant Purchase Agreement, dated May 5,
1997, between Huntington and First Michigan (the "Warrant Purchase Agreement").
See "THE MERGER - TERMS OF THE WARRANT."
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
The Board of Directors of Huntington unanimously recommends that the
shareholders of Huntington vote in favor of the approval of the Merger and the
Board of Directors of First Michigan unanimously recommends that the
shareholders of First Michigan vote in favor of the approval of the Merger
Documents. See "THE MERGER - BACKGROUND OF THE MERGER" and "- REASONS FOR THE
MERGER."
NO DISSENTING SHAREHOLDERS' RIGHTS
Under applicable law, neither the holders of Huntington Common Stock nor
the holders of First Michigan Common Stock are entitled to dissenting
shareholders' rights in connection with the consummation of the Merger.
INTERESTS OF MANAGEMENT
First Michigan has entered into certain Management Continuity Agreements
(the "Continuity Agreements") with each of ten senior officers of First
Michigan, which provide for salary and benefit continuation for terms of one to
three years in the event of a termination of employment, reduction in salary,
change in location, and certain other events occurring following a change of
control of First Michigan. The consummation of the Merger will constitute such a
change of control for purposes of the Continuity Agreements. Huntington has
agreed to assume the obligations of First Michigan under the Continuity
Agreements. In addition, Huntington has agreed to offer employment to David
Ondersma, Stephen Stream, Larry Fredricks, and Merle Prins, all of whom are
currently executive officers of First Michigan (collectively, the "Executives")
until December 31, 1999, on such terms as are agreed between such Executives and
Huntington. Huntington has also agreed that, if the employment of any of the
Executives with Huntington is terminated for any
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<PAGE> 17
reason prior to December 31, 1999, such Executive will be entitled to the
benefits under his respective Continuity Agreement. Huntington and First
Michigan have agreed that the amounts payable under the terms of the Continuity
Agreements are $3,465,089 for Mr. Ondersma, $2,296,471 for Mr. Stream,
$2,075,052 for Mr. Prins, and $1,983,463 for Mr. Fredricks.
Upon consummation of the Merger, it is Huntington's intention to appoint
Mr. Ondersma to serve as Chairman of the Huntington Michigan Region and Mr.
Stream to serve as President of the Huntington Western Michigan Region.
Upon consummation of the Merger, Huntington has agreed to provide
generally to the officers and employees of First Michigan who become officers or
employees of any Huntington affiliate after the Effective Time employee benefits
under Huntington benefit plans, including stock option plans, currently provided
generally by Huntington and its affiliates to their similarly situated officers
and employees. Huntington has also agreed to provide severance benefits
consistent with Huntington's Transition Pay Plan as in effect as of the
Effective Time, which benefits will not be less than those provided under such
plan as of the date of the Merger Documents, to all persons who are employed by
First Michigan immediately prior to the Effective Time and whose employment is
subsequently terminated by Huntington or an affiliate of Huntington at any time
after the Effective Time; provided, however, that (i) Huntington will assume the
obligations of First Michigan under the Continuity Agreements, and (ii) for a
period of one year following the Effective Date, Huntington has agreed to
provide severance benefits in accordance with First Michigan's severance
benefits in effect as of the date of the Merger Documents to all First Michigan
Subsidiary Bank presidents and certain key First Michigan corporate and
affiliate department heads (a total of 31 persons in all).
Huntington has also agreed that, for a period of six years after the
Effective Date, Huntington and its affiliates will indemnify the present and
former directors, officers, employees, and agents of First Michigan and its
affiliates against certain liabilities arising at or prior to the Effective Time
to the fullest extent permitted under applicable law or by such companies'
Articles of Incorporation or Bylaws, in accordance with the terms of the Merger
Documents. Huntington has also agreed, for a period of six years after the
Effective Date, to use reasonable efforts to procure and maintain that portion
of director's and officers' liability insurance that serves to reimburse the
persons who are serving as officers or directors of First Michigan on the date
of the Merger Documents with respect to claims against such persons arising from
facts or events which occurred prior to the Effective Time, with the same
coverages and amounts, and terms no less advantageous, as that coverage
currently provided by First Michigan to such persons; provided, however, that
Huntington will not be required to expend more than $300,000 to procure and
maintain such insurance. See "THE MERGER - INTERESTS OF MANAGEMENT."
FEDERAL INCOME TAX CONSEQUENCES
It is anticipated that the Merger will be a tax-free reorganization for
federal income tax purposes and that no gain or loss will be recognized for
federal income tax purposes by the shareholders of First Michigan, except to the
extent that cash is received in lieu of the issuance of fractional shares. See
"THE MERGER - FEDERAL INCOME TAX CONSEQUENCES." All shareholders should consult
with their own tax advisors as to the particular tax consequences of the Merger,
including the applicability and effect of state, local, and foreign tax laws and
possible changes in the tax laws.
ACCOUNTING TREATMENT
Huntington intends to treat the Merger as a pooling-of-interests for
accounting purposes. See "THE MERGER - ACCOUNTING TREATMENT."
REGULATORY APPROVALS
In order to consummate the Merger and the Subsidiary Mergers, the approval
of various regulatory agencies is required. Huntington filed the required notice
with the Federal Reserve Bank of Cleveland (the "Reserve Bank") on
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<PAGE> 18
July 1, 1997, seeking the approval of the Merger by the Board of Governors of
the Federal Reserve System (the "Federal Reserve Board") on an expedited basis.
Under the Federal Reserve Board's expedited procedures, action may be expected
within five business days following a 30-day public comment period. Huntington
filed an application relating to the Subsidiary Mergers with the Office of the
Comptroller of the Currency (the "OCC") on July 1, 1997. Action by the OCC under
its streamlined procedures may be expected within forty-five days of filing.
Huntington also filed an application with the Federal Deposit Insurance
Corporation (the "FDIC") on July 1, 1997, in connection with the merger of
FMB-Trust into HNB, because of FMB-Trust's status as an uninsured entity. FDIC
approval is expected within a time frame similar to that of the OCC. The
Michigan Financial Institutions Bureau (the "Michigan FIB") requires only that
notice of the proposed transactions be provided to it at the time of filing of
the required federal applications. Huntington filed the required notice with the
Michigan FIB on July 1, 1997. See "THE MERGER - REGULATORY APPROVALS."
COMPARATIVE PER SHARE INFORMATION
The following summary presents unaudited selected comparative per share
information, adjusted as appropriate for the 1997 Huntington 10% Stock Dividend
and the 1997 First Michigan 5% Stock Dividend, for (i) Huntington and First
Michigan on an historical basis; (ii) Huntington and First Michigan on a pro
forma combined basis; and (iii) First Michigan on an equivalent pro forma basis.
The data presented below are based upon and should be read in conjunction
with the historical financial statements and related notes thereto of Huntington
and First Michigan incorporated by reference herein (adjusted for stock splits
and stock dividends, as appropriate, including the 1997 Huntington 10% Stock
Dividend and the 1997 First Michigan 5% Stock Dividend). The Huntington pro
forma data set forth below are based upon unaudited pro forma consolidated
financial statements giving effect to the Merger, included herein under
"FINANCIAL STATEMENTS." First Michigan equivalent pro forma amounts were
computed by multiplying Huntington's pro forma amounts by the Conversion Ratio
of 1.155 shares of Huntington Common Stock for each share of First Michigan
Common Stock. See "THE MERGER - TERMS OF THE MERGER." Results for the three
months ended March 31, 1997, are not necessarily indicative of results expected
for the entire year, nor are pro forma amounts necessarily indicative of results
that would have been or will be obtained on a combined basis.
<TABLE>
<CAPTION>
HUNTINGTON FIRST MICHIGAN
--------------------- ---------------------
PRO EQUIVALENT
HISTORICAL FORMA(1) HISTORICAL PRO FORMA
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Book Value Per Common Share:
As of March 31, 1997 ............. $ 9.83 $ 9.53 $ 10.07 $ 11.01
As of December 31, 1996 .......... 9.64 9.34 9.93 10.79
Cash Dividends Declared Per
Common Share(2):
For the three months ended
March 31, 1997 .................. $ 0.18 $ 0.18 $ 0.17 $ 0.21
For the years ended December 31,
1996 ............................ 0.68 0.68 0.62 0.79
1995 ............................ 0.62 0.62 0.52 0.72
1994 ............................ 0.56 0.56 0.45 0.65
</TABLE>
-12-
<PAGE> 19
<TABLE>
<S> <C> <C> <C> <C>
Net Income Per Common Share:
For the three months ended ....... $0.42 $0.41 $0.38 $0.47
March 31, 1997
For the years ended December 31, . 1.63 1.58 1.50 1.82
1996
1995 ........................... 1.47 1.42 1.33 1.64
1994 ........................... 1.47 1.40 1.21 1.62
</TABLE>
- ----------
(1) The pro forma per share data, except for information regarding book value,
do not reflect anticipated expenses and nonrecurring charges attributable
to the Merger. The pro forma data also do not reflect estimated expense
reductions and revenue enhancements expected to result from the Merger.
(2) Pro forma cash dividends represent historical cash dividends per share
declared by Huntington, adjusted for stock dividends and stock splits, as
appropriate, including the 1997 Huntington 10% Stock Dividend.
Both Huntington Common Stock and First Michigan Common Stock are traded on
the Nasdaq National Market. The following table sets forth the last sale prices
per share of Huntington Common Stock and First Michigan Common Stock,
respectively, on the Nasdaq National Market, on an historical basis (adjusted
for the 1997 Huntington 10% Stock Dividend), and the equivalent price per share
of First Michigan Common Stock (computed by multiplying the price of Huntington
Common Stock by the Conversion Ratio of 1.155 shares of Huntington Common Stock
for each share of First Michigan Common Stock, see "THE MERGER - TERMS OF THE
MERGER") as of May 2, 1997, the last trading day prior to the public
announcement of the proposed Merger (see "THE MERGER - BACKGROUND OF THE
MERGER"), and as of July 10, 1997.
<TABLE>
<CAPTION>
First Michigan
--------------------------
Huntington Equivalent
Historical Historical Pro Forma
------------ ------------ ------------
<S> <C> <C> <C>
May 2, 1997 .............. $27 1/4 $30 3/4 $31 1/2
July 10, 1997 ............ 27 13/16 31 3/4 32 1/8
</TABLE>
SELECTED FINANCIAL DATA
The following tables present selected financial data for each of
Huntington and First Michigan on an historical basis and unaudited pro forma
selected financial data of Huntington reflecting the consummation of the Merger.
The unaudited pro forma selected financial data have been prepared giving effect
to the Merger using the "pooling of interests" method of accounting. See "THE
MERGER - ACCOUNTING TREATMENT."
SELECTED FINANCIAL DATA OF HUNTINGTON
The following selected financial data of Huntington for the five years
ended December 31, 1996, have been derived from Huntington's audited
consolidated financial statements. The selected financial data of Huntington for
the three months ended March 31, 1997 and 1996, have been derived from unaudited
consolidated financial statements and reflect all adjustments, consisting only
of normal recurring adjustments, that, in the opinion of management, are
necessary for a fair and consistent presentation of such data. Operating results
for the three months ended March 31, 1997, are not necessarily indicative of
results expected for the entire year. This data should be read in conjunction
with the consolidated financial statements, related notes, and other financial
information of Huntington incorporated in this
-13-
<PAGE> 20
document by reference. All per share data have been adjusted for stock dividends
and stock splits, as appropriate, including the 1997 Huntington 10% Stock
Dividend.
CONSOLIDATED INCOME STATEMENT DATA
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
-------------------- ------------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Total interest income ....... $405,184 $374,296 $1,510,464 $1,461,896 $1,219,721 $1,236,311 $1,202,286
Total interest expense ...... 193,664 189,578 751,640 737,333 463,671 440,111 504,846
Net interest income ......... 211,520 184,718 758,824 724,563 756,050 796,200 697,440
Securities gains ............ 1,977 7,090 17,703 9,056 2,594 27,189 36,332
Provision for loan losses ... 18,892 11,823 65,050 28,721 15,284 79,294 81,562
Net income .................. 66,450 62,825 262,101 244,489 242,593 236,912 161,046
Per common share:
Net income ............ $ 0.42 $ 0.38 $ 1.63 $ 1.47 $ 1.47 $ 1.45 $ 1.00
Cash dividends declared $ 0.18 $ 0.16 $ 0.68 $ 0.62 $ 0.56 $ 0.46 $ 0.40
</TABLE>
CONSOLIDATED BALANCE SHEET DATA
(IN MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
----------------- ---------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Actual balances at period end:
Total assets ............... $21,603 $20,138 $20,852 $20,255 $17,771 $17,619 $16,247
Long-term debt ............. 1,910 1,986 1,556 2,103 1,214 762 479
Shareholders' equity ....... 1,569 1,503 1,512 1,519 1,412 1,325 1,130
Shareholders' equity
per common share .......... 9.83 9.34 9.64 9.44 8.53 8.04 6.98
Average balances during
the period:
Total assets ............... $21,062 $19,984 $20,049 $19,048 $16,750 $16,851 $15,165
Long-term debt ............. 1,790 2,016 1,819 1,424 928 641 300
Shareholders' equity ....... 1,518 1,577 1,513 1,503 1,403 1,216 1,074
</TABLE>
SELECTED FINANCIAL DATA OF FIRST MICHIGAN
The following selected financial data of First Michigan for the five years
ended December 31, 1996, have been derived from First Michigan's audited
consolidated financial statements. The selected financial data of First Michigan
for the three months ended March 31, 1997 and 1996, have been derived from
unaudited consolidated financial statements and reflect all adjustments,
consisting only of normal recurring adjustments, that, in the opinion of
management, are necessary for a fair and consistent presentation of such data.
Operating results for the three months ended March 31, 1997, are not necessarily
indicative of results expected for the entire year. This data should be read in
conjunction with the consolidated financial statements, related notes, and other
financial information of First Michigan incorporated in this document by
reference. All per share data have been adjusted for stock dividends and stock
splits, as appropriate, including the 1997 First Michigan 5% Stock Dividend.
-14-
<PAGE> 21
CONSOLIDATED INCOME STATEMENT DATA
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------ ------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------- ------- --------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Total interest income ... $71,353 $64,771 $ 269,471 $248,597 $ 200,241 $176,119 $179,454
Total interest expense .. 34,659 31,413 129,091 119,527 83,209 74,700 83,745
Net interest income ..... 36,694 33,358 140,380 129,070 117,032 101,419 95,709
Securities gains (losses) 121 16 (84) 324 (297) 127 219
Provision for loan losses 3,488 2,372 11,321 7,991 6,670 5,388 6,651
Net income .............. 10,729 9,579 42,168 37,312 33,727 30,013 26,096
Per common share:
Net income ............ $ 0.38 $ 0.34 $ 1.50 $ 1.33 $ 1.21 $ 1.07 $ 0.93
Cash dividends declared $ 0.17 $ 0.14 $ 0.62 $ 0.52 $ 0.45 $ 0.35 $ 0.27
</TABLE>
CONSOLIDATED BALANCE SHEET DATA
(IN MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
---------------- ----------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Actual balances at period end:
Total assets ............... $3,564 $3,245 $3,520 $3,241 $2,918 $2,596 $2,407
Long-term debt ............. 30 5 30 6 8 10 11
Shareholders' equity ....... 279 257 274 254 223 208 190
Shareholders' equity
per common share ......... 10.07 9.27 9.93 9.16 8.12 7.55 6.79
Average balances during
the period:
Total assets ............... $3,537 $3,227 $3,326 $3,051 $2,749 $2,490 $2,300
Long-term debt ............. 30 5 13 7 9 10 12
Shareholders' equity ....... 280 258 263 240 218 199 180
</TABLE>
UNAUDITED PRO FORMA SELECTED FINANCIAL DATA
The following unaudited pro forma selected financial data combine
Huntington's and First Michigan's historical results for the years ended
December 31, 1996, 1995, and 1994, and for the three months ended March 31, 1997
and 1996, each having been adjusted for stock dividends and stock splits, as
appropriate, including the 1997 Huntington 10% Stock Dividend and the 1997 First
Michigan 5% Stock Dividend, giving effect to the Merger as if it had occurred on
January 1, 1994. This data should be read in conjunction with the pro forma
consolidated financial statements included herein.
-15-
<PAGE> 22
CONSOLIDATED INCOME STATEMENT DATA
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
-------------------- --------------------------------------
1997 1996 1996 1995 1994
-------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Total interest income ... $476,537 $439,067 $1,779,935 $1,710,493 $1,419,962
Total interest expense .. 228,323 220,991 880,731 856,860 546,880
Net interest income ..... 248,214 218,076 899,204 853,633 873,082
Securities gains (losses) 2,098 7,106 17,619 9,380 2,297
Provision for loan losses 22,380 14,195 76,371 36,712 21,954
Net income .............. 77,179 72,404 304,269 281,801 276,320
Per common share:
Net income ............ $ 0.41 $ 0.37 $ 1.58 $ 1.42 $ 1.40
Cash dividends declared $ 0.18 $ 0.16 $ 0.68 $ 0.62 $ 0.56
</TABLE>
CONSOLIDATED BALANCE SHEET DATA
(IN MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------ -----------------------------
1997 1996 1996 1995 1994
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Actual balances at period end:
Total assets ............... $25,167 $23,383 $24,372 $23,496 $20,689
Long-term debt ............. 1,940 1,991 1,586 2,109 1,222
Shareholders' equity ....... 1,825 1,737 1,763 1,750 1,612
Shareholders' equity
per common share ......... 9.53 9.00 9.34 9.07 8.17
Average balances during
the period:
Total assets ............... $24,599 $23,211 $23,375 $22,099 $19,499
Long-term debt ............. 1,820 2,021 1,832 1,431 937
Shareholders' equity ....... 1,798 1,835 1,776 1,743 1,621
</TABLE>
THE HUNTINGTON SPECIAL MEETING
GENERAL
The Huntington Special Meeting will be held at 3:00 p.m., local time, on
Wednesday, September 10, 1997, in the fourth floor conference room at the
Huntington Center, which is located at 41 South High Street, Columbus, Ohio. At
the Huntington Special Meeting, the shareholders of Huntington will be asked to
consider and vote upon the approval of the Merger.
HUNTINGTON RECORD DATE; VOTING RIGHTS
Shareholders of record of Huntington at the close of business on
July 9, 1997, will be entitled to vote at the Huntington Special Meeting.
Each share of Huntington Common Stock entitles the holder to one vote,
exercisable in person or by properly executed proxy, on each matter that comes
before the shareholders at the meeting. A majority of the outstanding shares of
Huntington Common Stock, represented in person or by proxy, will constitute a
quorum at the Huntington Special Meeting. Abstentions and broker non-votes will
be counted for purposes of determining the presence or absence of a quorum at
the meeting. The affirmative vote of the holders of two-thirds of the
outstanding shares of Huntington Common Stock is required to approve the Merger.
Because the approval of the
-16-
<PAGE> 23
Merger requires the affirmative vote of a particular percentage of the
outstanding shares of Huntington Common Stock, an abstention or a broker
non-vote with respect to such matter will have the same effect as a vote against
the matter.
As of the Huntington Record Date, Huntington had 144,807,610 shares of
Huntington Common Stock outstanding and entitled to vote on all matters
requiring a vote of the shareholders of Huntington. The shares of Huntington
Common Stock outstanding on the Huntington Record Date were held by
approximately 29,075 holders of record. As of June 30, 1997, the directors and
executive officers of Huntington and their affiliates owned 2,910,203 shares of
Huntington Common Stock (excluding shares subject to stock options), which
represent 2.01% of the total issued and outstanding shares of such stock
entitled to vote at the Huntington Special Meeting.
PROXIES
The shares of Huntington Common Stock represented by the accompanying
proxy with respect to the Huntington Special Meeting will be voted as directed
if the proxy is properly signed and received by Huntington prior to the
Huntington Special Meeting. The proxy will be voted FOR the approval of the
Merger if no direction is made to the contrary on a duly executed and returned
proxy. The proxy may also be used to grant discretionary authority to vote on
other matters which may arise at the Huntington Special Meeting. While
management of Huntington is presently unaware of any such matters, the person or
persons designated to vote the shares will cast votes according to their best
judgment if any such matters properly come before the Huntington Special
Meeting, however, no proxy that is voted against the approval of the Merger will
be voted in favor of any adjournment or postponement of the Huntington Special
Meeting for the purpose of soliciting additional proxies. A person giving the
enclosed proxy has the power to revoke it at any time prior to the Huntington
Special Meeting by filing with the Secretary of Huntington written notice of
revocation or a subsequent proxy relating to the same shares, or by attending
the Huntington Special Meeting and voting in person (although attendance at the
Huntington Special Meeting will not in and of itself constitute revocation of a
proxy).
Huntington will bear the cost of the solicitation of proxies from
Huntington shareholders, including the charges and expenses of brokerage firms
and others, if any, for forwarding solicitation material to beneficial owners of
stock. Representatives of Huntington may solicit proxies by mail, telegram,
telephone, meetings, or personal interview. Huntington has retained Morrow &
Co., Inc. ("Morrow") to assist in the solicitation of proxies for the Huntington
Special Meeting and will pay such firm fees of approximately $7,000 plus
expenses in connection with such solicitation.
The Maryland General Corporation Law permits proxies to be signed on
behalf of a shareholder by such shareholder's authorized agent. Huntington may
authorize Morrow to contact certain Huntington shareholders by telephone in
order to obtain the authority to sign and deliver proxies on their behalf. If so
authorized, Morrow will be required to follow certain specified procedures to
authenticate the identity of the shareholder. The Morrow representative will
confirm that the shareholder has received and reviewed a copy of this Joint
Proxy Statement/Prospectus. This telephone authorization procedure will be
entirely voluntary on the part of each individual shareholder.
THE FIRST MICHIGAN SPECIAL MEETING
GENERAL
The First Michigan Special Meeting will be held at 9:30 a.m., local time,
on Tuesday, September 9, 1997, at Rembrandt's Restaurant, which is located at
333 Bridge Street, N.W., Grand Rapids, Michigan. At the First Michigan Special
Meeting, the shareholders of First Michigan will be asked to consider and vote
upon the approval of the Merger Documents, thereby approving the Merger.
-17-
<PAGE> 24
FIRST MICHIGAN RECORD DATE; VOTING RIGHTS
Shareholders of record of First Michigan at the close of business on July
11, 1997, will be entitled to vote at the First Michigan Special Meeting. Each
share of First Michigan Common Stock entitles the holder to one vote,
exercisable in person or by properly executed proxy, on each matter that comes
before the shareholders at the meeting. A majority of the outstanding shares of
First Michigan Common Stock, represented in person or by proxy, will constitute
a quorum at the First Michigan Special Meeting. Abstentions and broker non-votes
will be counted for purposes of determining the presence or absence of a quorum
at the meeting. The affirmative vote of the holders of two-thirds of the
outstanding shares of First Michigan Common Stock is required to approve the
Merger Documents. Because the approval of the Merger Documents requires the
affirmative vote of a particular percentage of the outstanding shares of First
Michigan Common Stock, an abstention or a broker non-vote with respect to such
matter will have the same effect as a vote against the matter.
As of the First Michigan Record Date, First Michigan had 27,814,228 shares
of First Michigan Common Stock outstanding and entitled to vote on all matters
requiring a vote of the shareholders of First Michigan. The shares of First
Michigan Common Stock outstanding on the First Michigan Record Date were held by
approximately 7,027 holders of record. As of June 30, 1997, the directors and
executive officers of First Michigan and their affiliates owned 561,116 shares
of First Michigan Common Stock (excluding shares subject to stock options),
which represent 2.05% of the total issued and outstanding shares of such stock
entitled to vote at the First Michigan Special Meeting.
PROXIES
The shares of First Michigan Common Stock represented by the accompanying
proxy with respect to the First Michigan Special Meeting will be voted as
directed if the proxy is properly signed and received by First Michigan prior to
the First Michigan Special Meeting. The proxy will be voted FOR the approval of
the Merger Documents if no direction is made to the contrary on a duly executed
and returned proxy. The proxy may also be used to grant discretionary authority
to vote on other matters which may arise at the First Michigan Special Meeting.
While management of First Michigan is presently unaware of any such matters, the
person or persons designated to vote the shares will cast votes according to
their best judgment if any such matters properly come before the First Michigan
Special Meeting, however, no proxy that is voted against the approval of the
Merger Documents will be voted in favor of any adjournment or postponement of
the First Michigan Special Meeting for the purpose of soliciting additional
proxies. A person giving the enclosed proxy has the power to revoke it at any
time prior to the First Michigan Special Meeting by filing with the Secretary of
First Michigan written notice of revocation or a subsequent proxy relating to
the same shares, or by attending the First Michigan Special Meeting and voting
in person (although attendance at the First Michigan Special Meeting will not in
and of itself constitute revocation of a proxy).
First Michigan will bear the cost of the solicitation of proxies from
First Michigan shareholders, including the charges and expenses of brokerage
firms and others, if any, for forwarding solicitation material to beneficial
owners of stock. Representatives of First Michigan or Huntington may solicit
proxies by mail, telegram, telephone, meetings, or personal interview. First
Michigan has retained Corporate Investor Communications, Inc. ("CIC") to assist
in the solicitation of proxies for the First Michigan Special Meeting and will
pay such firm fees of approximately $6,225 plus expenses in connection with such
solicitation.
The Michigan Business Corporation Act permits proxies to be signed on
behalf of a shareholder by such shareholder's authorized agent. First Michigan
may authorize CIC to contact certain First Michigan shareholders by telephone
in order to obtain the authority to sign and deliver proxies on their behalf.
If so authorized, CIC will be required to follow certain specified procedures
to authenticate the identity of the shareholder. The CIC representative will
confirm that the shareholder has received and reviewed a copy of this Joint
Proxy Statement/Prospectus. This telephone authorization procedure will be
entirely voluntary on the part of each individual shareholder.
THE MERGER
The following information concerning the Merger, insofar as it relates to
matters contained in the Merger Documents, is qualified in its entirety by
reference to the Merger Agreement, which is attached hereto as Exhibit A, and
the Supplemental Agreement, which is attached hereto as Exhibit B.
-18-
<PAGE> 25
GENERAL
The Merger Documents set forth the terms of the Merger, as well as certain
representations, warranties, conditions, and covenants made by Huntington and
First Michigan as an inducement to the other party to execute and deliver the
Merger Documents and to consummate the Merger. The consummation of the Merger is
conditioned on the satisfaction of certain conditions, including obtaining the
approval of the shareholders of Huntington and First Michigan and obtaining
various regulatory approvals. Upon the effectiveness of the Merger, First
Michigan will be merged into Huntington and each outstanding share of First
Michigan Common Stock will be converted into the right to receive 1.155 shares
of Huntington Common Stock, subject to certain limitations.
BACKGROUND OF THE MERGER
The past several years have been a period of substantial and rapid change
in the banking industry in general and in the principal markets served by First
Michigan. In light of the general consolidation of banking institutions and the
need for advanced technology, expertise, and other resources required in today's
banking environment, the Board of Directors of First Michigan concluded that
First Michigan, in order to maintain its strategy of independence, would have to
make substantial investments to remain competitive, to continue to be able to
provide its customers with state-of-the-art services and products, and to
attract and retain talented officers and employees. First Michigan has grown
internally and through carefully selected acquisitions. The First Michigan Board
also concluded that First Michigan's ability to continue to grow through
acquisitions at prices that would enhance the value of First Michigan Common
Stock was limited. These factors raised concerns for the directors as to First
Michigan's ability to continue its favorable growth pattern without undue risk
to maintaining and enhancing shareholder value. The Board was also concerned
with the difficulty of First Michigan continuing to reduce operating costs in
order to maintain and improve historically favorable earnings levels. In light
of the foregoing, and in light of an approach made in August 1996 by a regional
bank holding company to the management of First Michigan inquiring as to
possible interest in an affiliation, the Board authorized management, with the
assistance of Merrill Lynch, to explore the possibilities of an affiliation with
another major banking organization.
During the last quarter of 1996, representatives of Merrill Lynch, on
behalf of First Michigan, entered into conversations with representatives of
several regional bank holding companies known to be interested in expanding
their banking operations in the Midwest and, in particular, in Michigan. A
number of holding companies expressed interest but at levels which were not
deemed to be acceptable from management's or the Board's perspective. However,
one expression of interest was at a tentative price and on terms that management
and the Board believed had to be pursued in the best interests of First
Michigan's shareholders. Preliminary due diligence investigations of First
Michigan's operations were conducted and discussions were held with that party.
However, the interested party did not make a firm offer at a level acceptable to
the Board and those discussions were terminated in mid-January 1997.
Huntington has been an active acquiror of banking institutions for the
purpose of entering new markets and enhancing its market share position in
existing markets. In the past ten years Huntington has acquired over 20 banking
institutions (including both commercial banks and thrifts) and has broadened its
product line and product capabilities through acquisitions of and investments in
non-bank financial institutions. In particular, Huntington has focused on
expanding its banking franchise in its primary markets of Ohio, Michigan, West
Virginia, Indiana, and northern Kentucky and has expanded in Florida as
interstate regulatory acquisition restrictions were relaxed. Huntington
initially entered Michigan in 1986 with the acquisition of Kasco Financial
Corporation, headquartered in Warren, Michigan, a suburb of Detroit. This
transaction was followed by the acquisitions of United Midwest Bancorporation of
Troy, Michigan, in 1987 and First Macomb Bancorp, Inc. of Mt. Clemens, Michigan,
in 1989. Those acquisitions provided the base of Huntington's core franchise in
Michigan which has been expanded by de novo branching.
In February of 1997, Huntington contacted Merrill Lynch and indicated a
strong interest in a possible transaction with First Michigan. Thereafter,
several conversations and discussions were held between representatives of
Huntington, First Michigan, and Merrill Lynch. Those discussions resulted in a
preliminary offer from Huntington which was reviewed in depth at a meeting of
the First Michigan Board of Directors held April 23, 1997, and at a meeting of
the Board of Directors of Huntington on April 24, 1997. After due deliberation
and a careful evaluation
-19-
<PAGE> 26
of the terms of the preliminary offer and other factors, the First Michigan
Board determined that the proposed affiliation with Huntington was sufficiently
attractive, not only to First Michigan's shareholders, but also its employees,
communities, and other constituencies it serves, that the Board authorized
management to proceed to determine if the details of an affiliation could be
negotiated to the satisfaction of management and the Board. At the April 24
meeting, the Huntington Board authorized management to proceed to negotiate a
possible acquisition of First Michigan.
Thereafter, due diligence was conducted by Huntington with respect to
First Michigan's operations and First Michigan conducted due diligence with
respect to Huntington's operations. The Merger Documents were then negotiated by
senior management and its legal and financial advisors. Drafts of the Merger
Documents and other information were distributed to the members of the First
Michigan Board of Directors on May 3, 1997. The Boards of Directors of both
Huntington and First Michigan met on May 5, 1997, and reviewed the terms of the
proposed Merger in detail with the assistance of their respective financial
advisors, legal counsel, and senior management. At the meeting of the Board of
Directors of First Michigan, the Board received and reviewed the written opinion
of Merrill Lynch to the effect that the Conversion Ratio was fair to the
shareholders of First Michigan from a financial point of view. Based in part on
that opinion, the Board concluded that the terms of the Merger were fair to
First Michigan's shareholders and that the consummation of the Merger was in the
best interest of First Michigan and its shareholders and unanimously approved
the Merger and the Merger Documents. At the meeting of the Board of Directors of
Huntington, the Huntington Board determined that the terms of the Merger were
fair to Huntington and unanimously approved proceeding with the Merger.
The Merger Documents were entered into on May 5, 1997.
REASONS FOR THE MERGER
Huntington.
While Huntington's presence in Michigan has centered on suburban Detroit
locations, opportunities to expand by acquisition have consistently been
reviewed and prospective acquisition opportunities have been evaluated. As part
of its evaluation of expansion opportunities in Michigan, Huntington was
familiar with First Michigan and the banking market served through the First
Michigan Banking Subsidiaries. In particular, the western Michigan banking
market has been viewed by Huntington as an attractive market extension because
of the good economic and demographic characteristics of the area. First Michigan
was viewed by Huntington as a good prospective merger partner because of its
strong deposit market share position in western Michigan and its good historical
operating performance.
In the first quarter of 1997, Huntington became aware that First Michigan
was having discussions regarding a possible affiliation with another major
banking organization. Because of those discussions and after preliminary
financial analysis, Huntington contacted Merrill Lynch and indicated an interest
in initiating discussions with First Michigan regarding a possible transaction.
After initial meetings with representatives of First Michigan and on the basis
of the evaluation of additional information on the financial performance and
operating characteristics of First Michigan, Huntington submitted a preliminary
offer to First Michigan's management that was subsequently reviewed by the Board
of Directors of First Michigan. Further negotiations resulted in the
finalization of the terms of the transaction, as reflected in the Merger
Documents.
In reaching its decision to proceed with a merger with First Michigan,
Huntington considered a variety of factors, including the following:
- Economic and demographic characteristics of First Michigan's markets
- First Michigan's strong deposit market share position
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<PAGE> 27
- The similar operating strategies of Huntington and First Michigan:
- retail and small business banking orientation, with emphasis
on customer service
- development of alternative distribution vehicles
- use of a common system-wide operating platform
- An experienced management team
- Consistent operating performance
- Complementary market coverage in Michigan
- Favorable opinion of Morgan Stanley
- The likelihood of regulatory approval
THE BOARD OF DIRECTORS OF HUNTINGTON BELIEVES THAT THE PROPOSED MERGER IS
IN THE BEST INTERESTS OF HUNTINGTON'S SHAREHOLDERS AND THEREFORE UNANIMOUSLY
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE APPROVAL OF THE MERGER.
First Michigan.
In reaching its determination to approve the Merger and the Merger
Documents, the Board of Directors of First Michigan considered a number of
factors, including, without limitation, those referenced above and the
following:
The Financial Terms of the Merger. The Board considered the financial
terms of the Merger in detail, including the fixed Conversion Ratio which
enables the First Michigan shareholders to benefit from any increases in the
trading prices of Huntington Common Stock prior to the Merger while subjecting
First Michigan shareholders to possible declines in such trading price prior to
the Merger, subject to First Michigan's right to renegotiate the Conversion
Ratio or terminate the Merger if Huntington's stock trading price drops below
certain levels prior to the Merger. See "THE MERGER - TERMS OF THE MERGER." The
Board also considered that the Merger Documents provided for First Michigan to
grant Huntington, as a condition to Huntington's willingness to enter into the
Merger Documents, the Warrant to purchase First Michigan Common Stock and also
to pay Huntington a termination fee and reimburse Huntington for a certain
amount of expenses related to the Merger. The Board recognized the risk that the
existence of the Warrant and the termination fee and expense reimbursement
obligations might inhibit other offers from being made but concluded that these
mechanisms to compensate Huntington as a result of competing proposals were
reasonable given the size of the transaction in relation to the size of
Huntington and Huntington's focus on this transaction as opposed to other
opportunities that it might otherwise have had. See "THE MERGER - TERMS OF THE
WARRANT" AND "- TERMINATION AND TERMINATION FEE."
Advice of Financial Advisor and Fairness Opinion. The First Michigan Board
considered the advice of its financial advisor and reviewed detailed financial
analyses, pro forma results, and other information presented by Merrill Lynch.
The First Michigan Board considered the opinion of Merrill Lynch, including the
assumptions and financial information and projections relied upon by Merrill
Lynch in arriving at such opinion, that, as of May 5, 1997, and based upon the
matters set forth in its written opinion as of that date, the Conversion Ratio
in the Merger was fair to the shareholders of First Michigan from a financial
point of view. See "THE MERGER - OPINION OF MERRILL LYNCH."
Information Concerning First Michigan. The Board was familiar with and
reviewed First Michigan's business, operations, financial condition, and
prospects.
Information Concerning Huntington. The First Michigan Board reviewed,
based in part on Merrill Lynch's presentation and information provided by First
Michigan senior management, the business, operations, financial condition, and
earnings of Huntington on a historical and prospective basis and of the combined
company on a pro forma basis.
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Certain Financial and Other Information Concerning First Michigan and
Huntington. The financial and other information concerning First Michigan and
Huntington considered by First Michigan's Board also included, but was not
limited to, information with regard to recent and historical stock performance,
valuation analyses, pro forma analyses, comparative financial and operating
performance, and comparable merger and acquisition transactions as presented by
Merrill Lynch. See "THE MERGER - OPINION OF MERRILL LYNCH."
Effect on Shareholder Value. In considering the effect of the Merger on
shareholder value, the Huntington offer was deemed, by the Board, (a) to reflect
one of the highest prices as a multiple of earnings and book value when compared
to other mergers or acquisitions of banking institutions in First Michigan's
size range (See "THE MERGER - OPINION OF MERRILL LYNCH") and (b) to be more
favorable than any other expression of interest which had been received by
management or the Board, including the one as to which discussions terminated in
January of 1997. While the Conversion Ratio based on the closing stock prices of
Huntington and First Michigan on May 2, 1997 (the last trading day prior to
execution of the Merger Documents), reflected only a slight premium over the
trading price of First Michigan Common Stock, in the opinion of the Board, First
Michigan's stock price at that time reflected not only First Michigan's solid
historical performance but also a certain amount of takeover speculation or
takeover premium already built into the pricing. The Board concluded that it
would be difficult for a holding company of First Michigan's size to maintain
independent financial performance which would continue to support a stock price
at that level of multiple to earnings and book value. Based on the advice and
information available to the Board, it concluded that providing First Michigan
shareholders an opportunity to participate, as Huntington shareholders, in the
anticipated growth of the combined company's business would provide First
Michigan's shareholders with a greater opportunity for long term appreciation
than if First Michigan had remained independent. The Board also considered the
fact that the Conversion Ratio and Huntington's continuation to pay dividends at
its rate per share then in effect would result in a substantial increase in cash
dividends paid to First Michigan shareholders.
Effect on First Michigan Constituencies. The First Michigan Board also
considered the general effects the Merger would have on various constituencies
served by First Michigan, including its customers, employees, and others. The
First Michigan Board took into account that the combined entity would be able to
offer a more extensive range of products and banking services to First
Michigan's customers and communities.
Economic and Competitive Environment. The First Michigan Board took into
account the current and prospective economic and competitive environment facing
the financial services industry generally, and the respective capacities of
First Michigan and Huntington to compete effectively given the rapid changes in
the financial services industry. The Board concluded that with the increasing
competition in the financial services industry and the need for substantially
increased investments to remain competitive, it was in the best interest of
First Michigan shareholders not to take the financial and performance risk of
making those investments alone in order to maintain forward momentum. The
conclusion of the directors was that with Huntington, First Michigan would have
access to technology, expertise, and other resources for competitive
effectiveness in the current banking environment.
Tax Treatment of the Merger. The First Michigan Board considered the
benefits derived from the expectation that the Merger will be a tax-free
reorganization for federal income tax purposes and that the First Michigan
shareholders will not recognize gain or loss for federal income tax purposes
upon the conversion of their shares of First Michigan Common Stock into shares
of Huntington Common Stock. See "FEDERAL INCOME TAX CONSEQUENCES."
Regulatory Approvals. The First Michigan Board believed, based on the
advice of legal counsel, that the requisite regulatory approvals necessary to
complete the Merger would be obtained. See "REGULATORY APPROVALS."
Other Matters. The Board also considered the interests of certain members
of First Michigan's management and the First Michigan Board in the Merger. See
"INTERESTS OF MANAGEMENT."
The foregoing discussion of the information and factors considered by the
First Michigan Board is not intended to be exhaustive, but is believed to
include the material factors considered by the First Michigan Board. In reaching
its determination to approve the Merger, the First Michigan Board did not assign
any relative or specific weight to any of the foregoing factors, and individual
directors may have given different weights to different factors.
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After deliberating with respect to the Merger and the Merger Documents and
considering, among other things, the opinion of Merrill Lynch referred to above
and the other matters discussed above, the First Michigan Board unanimously
approved the Merger Documents and the Merger as being in the best interest of
First Michigan and its shareholders and consistent with the interests of all
other First Michigan constituencies.
THE BOARD OF DIRECTORS OF FIRST MICHIGAN BELIEVES THAT THE PROPOSED MERGER
IS IN THE BEST INTERESTS OF FIRST MICHIGAN'S SHAREHOLDERS AND THEREFORE
UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE APPROVAL OF THE MERGER
DOCUMENTS.
OPINION OF MORGAN STANLEY
Huntington retained Morgan Stanley to provide Huntington with a fairness
opinion in connection with the Merger based upon Morgan Stanley's
qualifications, expertise, and reputation, as well as Morgan Stanley's prior
investment banking relationship and familiarity with Huntington. On May 5, 1997,
Morgan Stanley delivered a written opinion to the Board of Directors of
Huntington stating that, as of the date of such opinion, the Conversion Ratio
pursuant to the Merger Documents was fair from a financial point of view to
Huntington. Morgan Stanley subsequently confirmed its May 5, 1997, opinion by
delivery to the Huntington Board of a substantially identical written opinion
dated as of the date of this Joint Proxy Statement/Prospectus.
THE FULL TEXT OF MORGAN STANLEY'S OPINION, DATED AS OF THE DATE OF THIS
JOINT PROXY STATEMENT/PROSPECTUS, WHICH SETS FORTH, AMONG OTHER THINGS,
ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED, AND LIMITATIONS ON
THE REVIEW UNDERTAKEN, IS ATTACHED AS EXHIBIT C TO THIS JOINT PROXY
STATEMENT/PROSPECTUS. HUNTINGTON STOCKHOLDERS ARE URGED TO, AND SHOULD, READ THE
MORGAN STANLEY OPINION CAREFULLY AND IN ITS ENTIRETY. MORGAN STANLEY'S OPINION
IS DIRECTED TO THE HUNTINGTON BOARD AND TO THE FAIRNESS OF THE CONVERSION RATIO
IN THE AGREEMENT FROM A FINANCIAL POINT OF VIEW TO HUNTINGTON, AND IT DOES NOT
ADDRESS ANY OTHER ASPECT OF THE MERGER NOR DOES IT CONSTITUTE A RECOMMENDATION
TO ANY HOLDER OF HUNTINGTON COMMON STOCK AS TO HOW TO VOTE AT THE HUNTINGTON
SPECIAL MEETING. THE SUMMARY OF THE OPINION OF MORGAN STANLEY SET FORTH IN THIS
JOINT PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THE FULL TEXT OF SUCH OPINION.
In connection with rendering its written opinion dated as of the date of
this Joint Proxy Statement/Prospectus, Morgan Stanley, among other things: (i)
reviewed certain publicly available financial statements and other information
of First Michigan and Huntington, respectively; (ii) reviewed certain internal
financial statements and other financial and operating data concerning First
Michigan and Huntington prepared by the managements of First Michigan and
Huntington, respectively; (iii) analyzed certain financial projections of First
Michigan and Huntington prepared by the managements of First Michigan and
Huntington, respectively; (iv) discussed the past and current operations and
financial condition and the prospects of First Michigan and Huntington with
senior executives of First Michigan and Huntington, respectively; (v) analyzed
the pro forma impact of the Merger on Huntington's earnings per share,
consolidated capitalization and financial ratios; (vi) reviewed the reported
prices and trading activity for the First Michigan Common Stock and the
Huntington Common Stock; (vii) compared the financial performance of First
Michigan and Huntington and the prices and trading activity of the First
Michigan Common Stock and the Huntington Common Stock with that of certain other
comparable publicly traded companies and their securities; (viii) discussed the
results of regulatory examinations of First Michigan with the senior management
of First Michigan; (ix) discussed the strategic objectives of the Merger and the
plan for the combined company with senior executives of First Michigan and
Huntington; (x) reviewed and discussed with senior managements of First Michigan
and Huntington certain estimates of the cost savings and revenue enhancements
projected by Huntington for the combined company and compared such amount to
those estimated in certain precedent transactions; (xi) reviewed the financial
terms, to the extent publicly available, of certain comparable precedent
transactions; (xii) reviewed the Merger Documents and certain related documents;
and (xiii) considered such other factors as it deemed appropriate.
In rendering its opinion, Morgan Stanley assumed and relied upon without
independent verification the accuracy and completeness of the information
reviewed by Morgan Stanley for the purposes of its opinion. With respect to the
financial projections, including the estimates of cost savings and revenue
enhancements expected to result from the Merger, Morgan Stanley assumed that
they had been reasonably prepared on bases reflecting the best
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<PAGE> 30
currently available estimates and judgments of the future financial performance
of First Michigan and Huntington. Morgan Stanley has not made any independent
valuation or appraisal of the assets or liabilities of First Michigan and
Huntington, nor has Morgan Stanley been furnished with any such appraisals and
Morgan Stanley has not made any independent examination of the loan loss
reserves or examined any individual loan credit files of First Michigan and
Huntington. In addition, Morgan Stanley has assumed the Merger will be
consummated in accordance with the terms set forth in the Merger Documents.
Morgan Stanley's opinion is necessarily based on economic, market, and other
conditions as in effect on, and the information made available to it, as of the
date of such opinion.
The following is a brief summary of the financial analyses performed by
Morgan Stanley in connection with rendering its opinion on May 5, 1997.
Comparable Company Analysis. As part of its analysis, Morgan Stanley
compared certain financial information of First Michigan with corresponding
publicly available information of (i) a group of nine publicly traded bank
holding companies that Morgan Stanley considered comparable in certain respects
with First Michigan (the "Peer Group"), and (ii) 35 regional bank holding
companies (the "Morgan Stanley Bank Index" and together with the Peer Group, the
"Comparables"). Historical financial information used in connection with the
ratios provided below with respect to the Comparables is as of March 31, 1997,
or the most recent fiscal quarter available as of May 5, 1997.
Morgan Stanley analyzed the relative performance and value of First
Michigan by comparing certain market trading statistics for First Michigan with
the Comparables. Market information used in ratios provided below is as of May
1, 1997. The market trading information used in the valuation analysis was
market price to book value (which was 3.0x in the case of First Michigan; 2.2x
in the case of the average of the Peer Group; and 2.5x in the case of the
average of the Morgan Stanley Bank Index) and market price to estimated earnings
per share for 1997 (which was 17.1x in the case of First Michigan; 14.4x in the
case of the average of the Peer Group; and 13.6x in the case of the average of
the Morgan Stanley Bank Index). Earnings per share estimates for First Michigan
were based on First Call estimates as of May 2, 1997. Earnings per share
estimates for the Comparables were based on the most recent available
Institutional Brokers Estimate System ("I/B/E/S") estimates. I/B/E/S and First
Call are data services that monitor and publish compilations of earnings
estimates produced by selected research analysts regarding companies of interest
to institutional stockholders. The implied range of stand-alone values for First
Michigan Common Stock derived from the analysis of the Comparables' market price
to book value and market price to 1997 estimated earnings per share ranged from
approximately $20 to $23.
Dividend Discount Analysis. Morgan Stanley performed a dividend discount
analysis to determine a range of present values per share of First Michigan
Common Stock assuming First Michigan continued to operate as a stand-alone
entity. This range was determined by adding (i) the present value of the
estimated future dividend stream that First Michigan could generate, and (ii)
the present value of the "terminal value" of First Michigan Common Stock at the
end of year 2002. To determine a projected dividend stream, Morgan Stanley
assumed a constant tangible equity/assets ratio of 6.5%. The earnings
projections which formed the basis for the dividends were adapted from Company
estimates for 1997 and 1998, and an earnings growth rate of 10% for estimating
earnings from 1999 through 2002. The "terminal value" of First Michigan Common
Stock at the end of the period was determined by applying a range of
price-to-earnings multiples (12.0x to 14.0x) to year 2002 projected earnings.
The dividend stream and terminal values were discounted to present values using
discount rates of 12% to 14% which Morgan Stanley viewed as the appropriate
discount rate range for a company with First Michigan's risk characteristics.
Based on the above assumptions, the stand-alone value of First Michigan Common
Stock ranged from approximately $21 to $26 per share.
Implied Acquisition Value. As part of its analysis of the acquisition
valuation, Morgan Stanley assumed that the net present value of estimated cost
savings and revenue enhancements was added to the stand-alone value of First
Michigan Common Stock calculated as described above (see "THE MERGER - OPINION
OF MORGAN STANLEY - Dividend Discount Analysis"). Based on cost savings ranging
from $28 to $32 million (22% to 25% of First Michigan's 1998 non-interest
expense base) and revenue enhancements of $5-$12 million per year beginning in
1998 estimated by the management of Huntington to result from the Merger,
discount rates of 12% to 14%, a phase-in of cost savings and revenue
enhancements over two years, a cost savings and revenue enhancement growth rate
of 5% after the phase-in period, merger and reorganization charges of $35
million, and price-to-earnings terminal multiples of 12.0x to 14.0x
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<PAGE> 31
in the year 2002, Morgan Stanley estimated the implied acquisition value of
First Michigan Common Stock to range from approximately $29 to $35 per share.
Precedent Transaction Analysis. Morgan Stanley performed an analysis of
fourteen precedent transactions ("Precedent Transactions") by selected holding
companies of commercial banks that Morgan Stanley deemed comparable to the
Merger in order to calculate a valuation range for the First Michigan Common
Stock. Multiples of book value and earnings implied by the consideration paid in
Precedent Transactions were applied to book value and 1998 estimated earnings
per share of First Michigan to yield a range of values for First Michigan Common
Stock. Ranges of multiples of book value and of estimated earnings (based on
I/B/E/S estimates prior to announcement) per share ranging from 2.9x to 3.3x and
16.0x to 18.0x, respectively, derived from comparable transactions were applied
to the book value and 1998 estimated earnings (based on First Call estimates as
of May 2, 1997) per share of First Michigan to yield an implied range of values
for First Michigan Common Stock ranging from approximately $29 to $33.
Pro Forma Merger Analysis. Morgan Stanley analyzed the financial impact of
the Merger on the holders of Huntington Common Stock, using I/B/E/S earning
estimates for Huntington and First Call estimates for First Michigan, and
Huntington's estimates for cost savings and revenue enhancements expected to
result from the Merger. This analysis showed that, after giving effect to the
Merger, before the impact of one-time merger-related charges, current holders of
Huntington Common Stock would realize an increase in fully diluted earnings per
share in 1998 and 1999, in each case compared to Huntington on a stand-alone
basis. Morgan Stanley also analyzed the changes in return on equity from
Huntington on a stand-alone basis, noting that such return on equity would
increase following the Merger. In addition, Morgan Stanley calculated that the
Conversion Ratio would result in an allocation between the holders of First
Michigan Common Stock and Huntington Common Stock of pro forma fully diluted
ownership of the combined entity equal to 17% and 83%, respectively.
In connection with its written opinion dated as of the date of this Joint
Proxy Statement/Prospectus, Morgan Stanley confirmed the appropriateness of its
reliance on the analyses used to render its May 5, 1997, opinion by performing
procedures to update certain of such analyses and by reviewing the assumptions
upon which such analyses were based and the factors considered in connection
therewith.
No company or transaction used in the comparable company and comparable
transaction analyses is identical to First Michigan or the Merger. Accordingly,
the analysis of the results of the foregoing necessarily involves complex
considerations and judgments concerning financial and operating characteristics
of First Michigan and other factors that could affect the public trading value
of the companies to which they are being compared. Mathematical analysis (such
as determining the average or median) is not in itself a meaningful method of
using comparable transaction data or comparable company data.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. In
arriving at its opinion, Morgan Stanley considered the results of all its
analysis as a whole and did not attribute any particular weight to any
particular analysis or factor considered by it. Morgan Stanley believes that
selecting any portion of its analyses, without considering all analyses, would
create an incomplete view of the process underlying its opinion. In addition,
Morgan Stanley may have deemed various assumptions more or less probable than
other assumptions, so that the ranges of valuations resulting from any
particular analysis described above should not be taken to be Morgan Stanley's
view of the actual value of First Michigan.
In performing its analyses, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic conditions, and
other matters, many of which are beyond the control of First Michigan or
Huntington. The analyses performed by Morgan Stanley are not necessarily
indicative of actual values, which may be significantly more or less favorable
than suggested by such analyses. Such analyses were prepared solely as a part of
Morgan Stanley's analysis of the fairness from a financial point of view of the
Conversion Ratio pursuant to the Agreement to the holders of Huntington Common
Stock and were conducted in connection with the delivery of Morgan Stanley's
opinion. The analyses do not purport to be appraisals or to reflect the prices
at which First Michigan might actually be sold.
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As described above, Morgan Stanley's opinion and the information provided
by Morgan Stanley to the Huntington Board were two of a number of factors taken
into consideration by the Huntington Board in making its determination to
recommend approval of the Agreement and the transactions contemplated thereby.
Consequently, the Morgan Stanley analyses described above should not be viewed
as determinative of the opinion of the entire Huntington Board or the view of
the management with respect to the value of First Michigan. The Conversion Ratio
pursuant to the Agreement was determined through negotiations between Huntington
and First Michigan, and was approved by the entire Huntington Board.
The Huntington Board retained Morgan Stanley based upon its experience and
expertise. Morgan Stanley is an internationally recognized investment banking
and advisory firm. As part of its investment banking business, Morgan Stanley is
regularly engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuation for estate, corporate and other purposes. Morgan Stanley makes a
market in Huntington Common Stock. In the course of its business, Morgan Stanley
and its affiliates may actively trade the debt and equity securities of First
Michigan and Huntington for their own account and for the accounts of customers
and, accordingly may at times hold a long or short position in such securities.
In the past, Morgan Stanley has provided financial advisory and investment
banking services to Huntington, for which services Morgan Stanley received
customary fees.
Pursuant to a letter dated April 17, 1997, Huntington has agreed to pay
Morgan Stanley: (i) an advisory fee estimated to be between $50,000 and $75,000
which is payable if the Merger is not consummated and (ii) an opinion fee of
$1.0 million which is payable upon the consummation of the Merger. Any advisory
fee paid will be credited against the opinion fee. In addition, Huntington has
agreed, among other things, to reimburse Morgan Stanley for all reasonable
out-of-pocket expenses incurred in connection with the services provided by
Morgan Stanley, and to indemnify and hold harmless Morgan Stanley and certain
related parties from and against certain liabilities and expenses, which may
include certain liabilities under the federal securities laws, in connection
with its engagement.
OPINION OF MERRILL LYNCH
First Michigan retained Merrill Lynch to act as its financial advisor in
connection with the Merger and related matters based upon its qualifications,
expertise, and reputation, as well as Merrill Lynch's prior investment banking
relationship and general familiarity with First Michigan. At the May 5, 1997,
meeting of the First Michigan Board of Directors, Merrill Lynch rendered an
opinion to the First Michigan Board that, as of such date, the proposed
Conversion Ratio in the Merger was fair to the shareholders of First Michigan
from a financial point of view. Merrill Lynch subsequently delivered to the
First Michigan Board a written opinion, dated as of the date of this Joint Proxy
Statement/Prospectus (the "First Michigan Fairness Opinion"), confirming its
opinion of May 5, 1997.
The full text of the First Michigan Fairness Opinion, which sets forth,
among other things, assumptions made, procedures followed, matters considered,
and limitations on the scope of review undertaken, is attached as Exhibit D to
this Joint Proxy Statement/Prospectus and is incorporated herein by reference.
First Michigan's shareholders are urged to read the First Michigan Fairness
Opinion in its entirety. This summary of the First Michigan Fairness Opinion is
qualified in its entirety by reference to the full text of such opinion.
Merrill Lynch's opinions are addressed to the First Michigan Board, are
directed only to the Conversion Ratio and do not constitute a recommendation to
any shareholder of First Michigan as to how such shareholder should vote at any
meeting held in connection with the Merger.
In arriving at the First Michigan Fairness Opinion, Merrill Lynch, among
other things: (i) reviewed First Michigan's Annual Reports on Form 10-K and
related audited financial information for the three fiscal years ended December
31, 1996, and First Michigan's Report on Form 10-Q and related unaudited
financial information for the quarter ended March 31, 1997; (ii) reviewed
Huntington's Annual Reports on Form 10-K and related audited financial
information for the three fiscal years ended December 31, 1996, and Huntington's
Report on Form 10-Q and related unaudited financial information for the quarter
ended March 31, 1997; (iii) reviewed certain financial information,
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including financial forecasts, relating to the respective business, earnings,
assets, liabilities, and prospects of First Michigan and Huntington furnished to
Merrill Lynch by senior management of First Michigan and Huntington as well as
projected cost savings and related expenses expected to result from the Merger
(the "Expected Savings") furnished to Merrill Lynch by senior management of
Huntington; (iv) conducted discussions with members of senior management of
First Michigan and Huntington concerning respective financial condition,
businesses, earnings, assets, liabilities, operations, regulatory condition,
financial forecasts, contingencies, and prospects of First Michigan and
Huntington, and their respective views as to the future financial performance of
First Michigan, Huntington, and the combined entity, as the case may be,
following the Merger; (v) reviewed the historical market prices and trading
activity for First Michigan Common Stock and Huntington Common Stock and
compared them with that of certain publicly traded companies which Merrill Lynch
deemed to be relevant; (vi) compared the respective results of operations of
First Michigan and Huntington with those of certain publicly traded companies
which Merrill Lynch deemed to be relevant; (vii) compared the proposed financial
terms of the Merger contemplated by the Merger Documents with the financial
terms of certain other mergers and acquisitions which Merrill Lynch deemed to be
relevant; (viii) reviewed the amount and timing of the Expected Savings for
First Michigan and Huntington following the Merger as prepared, and discussed
with Merrill Lynch, by the senior management of Huntington; (ix) considered,
based upon information provided by Huntington's senior management, the pro forma
impact of the transaction on the earnings and book value per share, consolidated
capitalization, and certain balance sheet and profitability ratios of
Huntington; (x) reviewed the Merger Documents and the Warrant Purchase
Agreement; and (xi) reviewed such other financial studies and analyses and
performed such other investigations and took into account such other matters as
Merrill Lynch deemed appropriate.
In preparing the First Michigan Fairness Opinion, with First Michigan's
consent, Merrill Lynch assumed and relied on the accuracy and completeness of
all information supplied or otherwise made available to it by First Michigan and
Huntington, including that contemplated in the foregoing paragraph, and Merrill
Lynch did not assume responsibility for independently verifying such information
or undertake an independent evaluation or appraisal of the assets or
liabilities, contingent or otherwise, of First Michigan or Huntington or any of
their subsidiaries, nor was Merrill Lynch furnished with any such evaluation or
appraisal. Merrill Lynch is not expert in the evaluation of allowances for loan
losses and, with First Michigan's consent, Merrill Lynch did not make an
independent evaluation of the adequacy of the allowance for loan losses of First
Michigan or Huntington, nor did Merrill Lynch review any individual credit files
relating to Huntington or First Michigan and, with First Michigan's consent,
Merrill Lynch assumed that the aggregate allowance for loan losses for both
Huntington and First Michigan is adequate to cover such losses and will be
adequate on a pro forma basis for the combined entity. In addition, Merrill
Lynch did not conduct any physical inspection of the properties or facilities of
First Michigan or Huntington. With First Michigan's consent, Merrill Lynch also
assumed and relied upon the senior management of First Michigan and Huntington
as to the reasonableness and achievability of the financial forecasts (and the
assumptions and bases therefor) provided to, and discussed with, Merrill Lynch.
In that regard, Merrill Lynch, assumed and relied, with First Michigan's
consent, that such forecasts, including without limitation financial forecasts,
evaluations of contingencies, Expected Savings, and operating synergies
resulting from the Merger, future economic conditions, and results of
operations, reflect the best currently available estimates, allocations, and
judgments of the senior management of First Michigan and Huntington as to the
future financial performance of First Michigan, Huntington, or the combined
entity, as the case may be. The First Michigan Fairness Opinion is predicated on
the Merger receiving the tax and accounting treatment contemplated in the Merger
Documents. Each of Merrill Lynch's opinions was necessarily based on economic,
market, and other conditions as in effect on, and the information made available
to Merrill Lynch as of, the date thereof. No limitations were imposed by First
Michigan on the scope of Merrill Lynch's investigation or on the procedures
followed by Merrill Lynch in rendering its opinions.
For purposes of rendering its opinions, Merrill Lynch assumed, in all
respects material to its analysis, that the representations and warranties of
each party to the Merger Documents and all related documents and instruments
(collectively, the "Documents") contained therein are true and correct, that
each party to the Documents had performed and would perform all of the covenants
and agreements required to be performed by such party under such Documents, and
that all conditions to the consummation of the Merger would be satisfied without
waiver thereof. The First Michigan Fairness Opinion was rendered without regard
for the necessity for, or level of, any restrictions, obligations, undertakings,
or divestitures which may be imposed or required in the course of obtaining any
regulatory approval for the Merger. Certain internal management forecasts,
projections, and estimates were furnished to Merrill Lynch in
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connection with its analysis of the Merger. As a matter of policy, First
Michigan does not publicly disclose forecasts, projections, and estimates of
this type and such forecasts, projections, and estimates were not prepared with
a view towards public disclosure. These forecasts, projections, and estimates
were based on numerous variables and assumptions which are inherently uncertain
and which may not be within the control of management, including, without
limitation, general economic, financial market, regulatory, and competitive
conditions. Accordingly, actual results could vary materially from those set
forth in such forecasts, projections, and estimates.
In connection with rendering its May 5, 1997, opinion to the First
Michigan Board, Merrill Lynch performed a variety of financial analyses. The
summary set forth below does not purport to be a complete description of the
analyses performed by Merrill Lynch in this regard, although it describes the
material analyses performed by Merrill Lynch. The preparation of a fairness
opinion is a complex process involving various subjective determinations as to
the most appropriate and relevant methods of financial analysis and the
application of these methods to the particular circumstances, and, therefore,
such an opinion is not readily susceptible to a partial analysis or summary
description. Accordingly, notwithstanding the separate factors summarized below,
Merrill Lynch believes that its analyses must be considered in their entirety
and that selecting portions of its analyses and factors considered by it,
without considering all analyses and factors, or attempting to ascribe relative
weights to some or all such analyses and factors, could create an incomplete
view of the evaluation process underlying Merrill Lynch's opinion. In addition,
Merrill Lynch may have given various analyses more or less weight than the other
analyses, it may have used them for different purposes and may have deemed
various assumptions more or less probable than other assumptions, so that the
ranges of valuations resulting from any particular analysis described below
should not be taken to be Merrill Lynch's view of the actual value of First
Michigan or Huntington. The fact that any specific analysis has been referred to
in the summary below is not meant to indicate that such analysis was given more
weight than any other analysis.
In performing its analyses, Merrill Lynch made numerous assumptions with
respect to industry performance, general business and economic conditions, and
other matters, all of which are beyond the control of Merrill Lynch, First
Michigan, and Huntington. The analyses performed by Merrill Lynch are not
necessarily indicative of actual values or actual future results, which may be
significantly more or less favorable than suggested by such analyses. In
addition, the analyses do not purport to be appraisals or to reflect the prices
at which any securities of First Michigan or Huntington may trade at the present
time or at any time in the future. Such analyses were prepared solely as part of
Merrill Lynch's analysis of the fairness of the Conversion Ratio to the
shareholders of First Michigan from a financial point of view and were provided
to the First Michigan Board in connection with the delivery of Merrill Lynch's
opinion dated May 5, 1997. With respect to the comparison of selected companies
and transactions analyses summarized below, no public company or transaction
utilized as a comparison is identical to First Michigan or Huntington or to the
proposed Merger, as the case may be, and such analyses necessarily involve
complex considerations and judgments concerning the differences in financial and
operating characteristics of the companies, and the financial and other terms of
the prior transactions, and other factors that could affect the public trading
values of the companies concerned or that affected the financial terms of prior
transactions.
The following is a summary of the material analyses presented by Merrill
Lynch to the First Michigan Board in connection with its May 5, 1997, opinion.
(a) Offer Evaluation. Merrill Lynch reviewed the terms of the proposed
Merger, including the Conversion Ratio and the aggregate transaction value. Each
of Merrill Lynch's calculations as to this and the other analyses performed in
connection with its May 5, 1997, opinion was based upon the Conversion Ratio
prior to any antidilution adjustment pursuant to the Merger Documents, including
in connection with the 1997 Huntington 10% Stock Dividend. Merrill Lynch
reviewed the implied value of the consideration offered based upon the closing
share price of Huntington Common Stock of $30.00 on May 2, 1997 (the last
trading day prior to the May 5, 1997, meeting of the First Michigan Board of
Directors) (the "Huntington Stock Price"), which indicated that the implied
value of the consideration offered in the Huntington proposal was approximately
$31.50 per share of First Michigan Stock, representing a 2.44% premium to the
May 2, 1997, First Michigan Common Stock closing market price of $30.75 per
share (the "First Michigan May 2 Closing Price "), a 12.12% premium to the
closing price of First Michigan Common Stock on April 2, 1997, a 9.33% premium
to the closing price of First Michigan Common Stock on February 28, 1997, a
13.58% premium to the closing price of First Michigan Common Stock on January
31, 1997, and a 14.03% premium to the closing price of First Michigan Common
Stock on January 2, 1997. Merrill Lynch further calculated the
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premiums implied by the Conversion Ratio to the First Michigan May 2 Closing
Price based on the high price of Huntington Common Stock between January 2,
1997, and May 2, 1997 (16.29%), and the low price of Huntington Common Stock in
the same period (-4.45%). Merrill Lynch also noted that, based on the Huntington
Stock Price, the Conversion Ratio represented a total transaction value of
approximately $893 million on a fully diluted basis (including the effect of the
issuance of additional shares of First Michigan Common Stock pursuant to the
1997 First Michigan 5% Stock Dividend).
(b) Pro Forma Merger Analysis. Based on earnings estimates as reported by
First Call, projected cost savings and revenue enhancements provided by
Huntington, and an estimated restructuring charge for the Merger, Merrill Lynch
analyzed certain pro forma effects expected to result from the Merger. First
Call is a data service that monitors and publishes compilations of earnings
estimates by selected research analysts regarding companies of interest to
institutional investors. This analysis indicated that the transaction would be
slightly accretive to estimated earnings per share of Huntington Common Stock in
1998 and accretive to estimated earnings per share of Huntington Common Stock in
1999, and that the Merger would be dilutive to Huntington's book value per share
and tangible book value per share. Merrill Lynch's analysis also indicated that
the transaction would be accretive to First Michigan's dividends, as well as to
1998 estimated and 1999 estimated earnings per share of First Michigan Common
Stock.
(c) Contribution Analysis. Merrill Lynch reviewed the relative
contributions to be made by First Michigan and Huntington to the combined
entity. The financial and operating information reviewed in such analysis
included total assets, loans (net of unearned income), deposits, common equity,
common equity less goodwill, market capitalization on a fully diluted basis, net
income for the 12 month period ended March 31, 1997, and estimated net income
for 1997 and 1998 on a fully diluted basis. This analysis showed that, based
upon the Conversion Ratio, the shareholders of First Michigan would own
approximately 17.03% of the outstanding shares of common stock of the combined
company immediately following the Merger and that First Michigan would be
contributing 14.16% of total assets, 14.83% of loans (net of unearned income),
17.87% of deposits, 15.10% of common equity, 16.85% of common equity less
goodwill, 16.69% of market capitalization on a fully diluted basis, 14.02% of
net income for the 12-month period ended March 31, 1997, and 14.15% and 13.99%
of estimated net income, on a fully diluted basis, for 1997 and 1998,
respectively.
(d) Discounted Dividend Stream Analysis. Using a discounted dividend
stream analysis, Merrill Lynch estimated the net present value of the future
streams of after-tax cash flows that First Michigan could produce on a
stand-alone basis from 1997 through 2001 and distribute to First Michigan's
shareholders ("Dividendable Net Income"). In this analysis, Merrill Lynch
assumed that First Michigan performed in accordance with earnings projections as
reported by First Call and projected the maximum dividends that would permit
First Michigan's tangible common equity ratio to be maintained at a minimum
7.90% level. Merrill Lynch calculated the sum of (i) the terminal values per
share of First Michigan Common Stock based on assumed multiples of First
Michigan's projected 2001 earnings ranging from 13.5x to 16.5x plus (ii) the
projected 1997-2001 five-year Dividendable Net Income streams per share, in each
case, discounted to present values at assumed discount rates ranging from 13.00%
to 15.00%. This discounted dividend stream analysis indicated a reference range
of $21.87 to $28.32 per share of First Michigan. As indicated above, this
analysis did not purport to be indicative of actual future results and did not
purport to reflect the prices at which shares of First Michigan Common Stock may
trade. Discounted cash flow analysis was included because it is a widely used
valuation methodology, but the results of such methodology are highly dependent
upon the numerous assumptions that must be made, including earnings growth
rates, dividend payout rates, terminal values and discount rates.
Merrill Lynch also estimated the present value of the Dividendable Net
Income that Huntington could produce on a stand-alone basis from 1997 through
2001. In this analysis, Merrill Lynch assumed that Huntington performed in
accordance with the earnings projections as published by First Call and Zack's
for 1997 and 1998 (and increasing at 9.00% per year thereafter), that
Huntington's assets would grow at an annual rate of 7% and that earnings in
excess of those required to be retained to maintain a tangible common equity
ratio of 6.07% were dividendable. (Zack's is a data service that monitors and
publishes compilations of earnings estimates and projected earnings growth rates
by selected research analysts regarding companies of interest to institutional
investors.) Merrill Lynch calculated the sum of (i) the terminal values per
share of Huntington Common Stock based on assumed multiples of Huntington's
projected 2001 earnings ranging from 13.5x to 16.5x plus (ii) the projected
1997-2001 five-year Dividendable Net
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Income streams per share, in each case, discounted to present values at assumed
discount rates ranging from 13.00% to 15.00%. This discounted dividend stream
analysis indicated a reference range of $25.60 to $32.39 per share of Huntington
Common Stock. As indicated above, this analysis did not purport to be indicative
of actual future results and did not purport to reflect the prices at which
shares of Huntington Common Stock may trade before or after the Merger.
(e) Analysis of Selected Acquisition Transactions. Merrill Lynch reviewed
publicly available information regarding selected bank acquisitions in the
United States with a value of between $500 million and $1.5 billion which had
been announced since January 1, 1996 (including Allied Irish Banks/Dauphin
Deposit Corporation, Banc One Corporation/Liberty Bancorp, Inc., Southern
National Corporation/United Carolina Bancshares Corporation, Mercantile
Bancorporation/Mark Twain Bancshares, Inc. and Crestar Financial
Corporation/Citizens Bancorp). Merrill Lynch calculated the premium represented
by the purchase price paid in such acquisitions to market price, last twelve
months' earnings per share, book value per share, tangible book value per share,
as well as the deposit premium paid (defined as the difference between the
transaction value and the tangible book value of the acquired company, divided
by total deposits), which Merrill Lynch determined resulted in relevant ranges
of premiums of (i) with respect to market price, 1.17x to 1.68x, with a mean of
1.44x and a median of 1.37x (resulting in imputed values per share of First
Michigan Common Stock of $35.98, $51.66, $44.22, and $42.13, respectively); (ii)
with respect to last twelve months' earnings per share, 16.27x to 21.12x, with a
mean of 19.46x and a median of 20.19x (resulting in imputed values per share of
First Michigan Stock of $24.95, $32.38, $29.83, and $30.96, respectively); (iii)
with respect to book value per share, 2.00x to 2.89x, with a mean of 2.48x and a
median of 2.36x (resulting in imputed values per share of First Michigan Stock
of $20.08, $29.01, $24.94, and $23.69, respectively); (iv) with respect to
tangible book value per share, 2.05x to 2.98x, with a mean of 2.54x and a median
of 2.42x (resulting in imputed values per share of First Michigan Common Stock
of $19.94, $28.99, $24.71, and $23.54, respectively); and (v) with respect to
total deposits, 11.50% to 22.52%, with a mean of 16.92% and a median of 16.25%
(resulting in imputed values per share of First Michigan Common Stock of $22.28,
$34.30, $28.19, and $27.46, respectively). In performing the above analysis,
Merrill Lynch used results for First Michigan as of or for the period ended
March 31, 1997, except with respect to the market price of First Michigan Common
Stock, which was as of May 2, 1997.
No company or transaction used in the above analysis as a comparison is
identical to First Michigan or the contemplated transaction. Accordingly, an
analysis of the results of the foregoing necessarily involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and other factors that could affect the value
of the companies and the value of the companies to which they are being
compared. Mathematical analysis (such as determining the mean or median) is not,
in itself, a meaningful method of using comparable data.
(f) Comparison of Selected Companies. Merrill Lynch reviewed and compared
certain financial information, ratios, and public market multiples relating to
Huntington to the publicly available corresponding data for a peer group of
selected banks which Merrill Lynch deemed to be relevant. The group of selected
banks (the "Huntington Selected Banks") held assets of between $12 billion and
$30 billion and consisted of Crestar Financial Corporation, Fifth Third Bancorp,
First of America Bank Corporation, Firstar Corp, First Tennessee National
Corporation, Marshall & Ilsley Corporation, Mercantile Bancorporation, Old Kent
Financial Corporation, and Union Planters Corporation.
Based on a review of such information for the Huntington Selected Banks,
Merrill Lynch determined (in each case based on company data as of March 31,
1997, and, where applicable, closing stock prices as of May 2, 1997): (i) that,
with respect to the ratio of non-performing assets to total assets, analysis of
the Huntington Selected Banks showed a low of 0.22%, a mean of 0.44%, and a high
of 0.53%, compared to 0.38% for Huntington; (ii) that, with respect to the ratio
of non-performing loans to total loans, analysis of the Huntington Selected
Banks showed a low of 0.32%, a mean of 0.56%, and a high of 0.69%, compared to
0.41% for Huntington; (iii) that, with respect to the ratio of loan loss
reserves to non-performing loans, analysis of the Huntington Selected Banks
showed a low of 231.37%, a mean of 304.94%, and a high of 465.52%, compared to
340.98% for Huntington; (iv) that, with respect to the ratio of loan loss
reserves to non-performing assets, analysis of the Huntington Selected Banks
showed a low of 210.06%, a mean of 259.65%, and a high of 418.44%, compared to
257.49% for Huntington; (v) that, with respect to the ratio of equity to total
assets, analysis of the Huntington Selected Banks showed a low of 6.49%, a mean
of 8.25%, and a
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high of 9.49%, compared to 7.26% for Huntington; (vi) that, with respect to the
ratio of tangible equity to tangible assets, analysis of the Huntington Selected
Banks showed a low of 5.62%, a mean of 7.45%, and a high of 9.00%, compared to
6.07% for Huntington; (vii) that, with respect to the Tier 1 capital ratio, the
Huntington Selected Banks had a low of 9.03%, a mean of 11.33%, and a high of
15.29%, compared to 8.92% for Huntington; (viii) that, with respect to the total
capital ratio, the Huntington Selected Banks had a low of 11.75%, a mean of
14.00%, and a high of 18.32%, compared to 12.34% for Huntington; (ix) that, with
respect to return on average assets, the Huntington Selected Banks had a low of
1.04%, a mean of 1.36%, and a high of 1.75%, compared to 1.31% for Huntington;
(x) that, with respect to return on average equity, the Huntington Selected
Banks had a low of 12.42%, a mean of 16.02%, and a high of 20.22%, compared to
17.74% for Huntington; (xi) that, with respect to net interest margin, the
Huntington Selected Banks had a low of 3.99%, a mean of 4.36%, and a high of
4.59%, compared to 4.19% for Huntington; (xii) that, with respect to efficiency
ratio, the Huntington Selected Banks had a low of 41.19%, a mean of 57.81%, and
a high of 66.00%, compared to 55.13% for Huntington; (xiii) that, with respect
to the ratio of stock price to earnings per share for the twelve month period
ended March 31, 1997, the Huntington Selected Banks had a low of 14.44x, a mean
of 17.18x, and a high of 23.05x, compared to 16.22x for Huntington; (xiv) that,
with respect to the multiple of stock price to estimated earnings per share for
each of 1997 and 1998, the Huntington Selected Banks (based on projected
earnings per share for the applicable year as reported by First Call) had a low
of 12.82x and 11.66x, a mean of 14.84x and 13.28x, and a high of 20.17x and
17.55x, respectively, compared to 15.00x and 13.57x, respectively, for
Huntington; (xv) that, with respect to the multiple of stock price to book
value, the Huntington Selected Banks had a low of 2.25x, a mean of 2.74x, and a
high of 4.07x, compared to 2.77x for Huntington; (xvi) that, with respect to the
multiple of stock price to tangible book value, the Huntington Selected Banks
showed a low of 2.37x, a mean of 3.13x, and a high of 4.78x, compared to 3.36x
for Huntington; and (xvii) that, with respect to dividend yield, the Huntington
Selected Banks showed a low of 1.53%, a mean of 2.60%, and a high of 3.31%,
compared to 2.67% for Huntington.
Merrill Lynch also calculated a range of imputed values for a share of
Huntington Common Stock based on certain of the ratios for the Huntington
Selected Banks specified above, including the ratio of the closing price of the
common stock on May 2, 1997, to each of book value, tangible book value,
earnings per share for the twelve months ended March 31, 1997, and estimated
earnings per share for 1997 and 1998, in each case as reported by First Call.
This analysis resulted in a range of imputed values for Huntington Common Stock
of between $21.13 and $44.06.
Merrill Lynch reviewed and compared certain financial information, ratios,
and public market multiples relating to First Michigan to the publicly available
corresponding data for a peer group of selected banks which Merrill Lynch deemed
to be relevant. The group of selected banks (the "First Michigan Selected
Banks") consisted of Associated Banc-Corp, CNB Bancshares, Inc., Citizens
Banking Corporation, Chemical Financial Corporation, Firstbank of Illinois Co.,
First Financial Bancorp, First Midwest Bancorp Inc., Fort Wayne National Corp.,
and Mid Am, Inc.
Based on a review of such information for the First Michigan Selected
Banks, Merrill Lynch determined (in each case based on company data as or for
the twelve months ended December 31, 1996 (except that data for First Michigan,
Citizens Banking Corporation, and CNB Bankshares Inc. was as of or for the
twelve months ended March 31, 1997), and, where applicable, closing stock prices
as of May 2, 1997): (i) that, with respect to the ratio of non-performing assets
to total assets, analysis of the First Michigan Selected Banks showed a low of
0.12%, a mean of 0.41%, and a high of 0.60% compared to 0.24% for First
Michigan; (ii) that, with respect to the ratio of non-performing loans to total
loans, analysis of the First Michigan Selected Banks showed a low of 0.17%, a
mean of 0.54%, and a high of 0.84 %, compared to 0.31% for First Michigan; (iii)
that, with respect to the ratio of loan loss reserves to non-performing loans,
analysis of the First Michigan Selected Banks showed a low of 165.15%, a mean of
255.03%, and a high of 394.98%, compared to 409.57% for First Michigan; (iv)
that, with respect to the ratio of loan loss reserves to non-performing assets,
analysis of the First Michigan Selected Banks showed a low of 150.32%, a mean of
288.80%, and a high of 816.07%, compared to 387.83% for First Michigan; (v)
that, with respect to the ratio of equity to total assets, analysis of the First
Michigan Selected Banks showed a low of 7.46%, a mean of 9.52%, and a high of
12.20%, compared to 7.83% for First Michigan; (vi) that, with respect to the
ratio of tangible equity to tangible assets, analysis of the First Michigan
Selected Banks showed a low of 6.96%, a mean of 8.82%, and a high of 11.98%,
compared to 7.60% for First Michigan; (vii) that, with respect to Tier 1 capital
ratio, the First Michigan Selected Banks had a low of 9.39%, a mean of 12.06%,
and a high of 15.94%, compared to 9.92% for First Michigan; (viii) that, with
respect
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to total capital ratio, the First Michigan Selected Banks had a low of 10.64%, a
mean of 13.30%, and a high of 17.19%, compared to 11.22% for First Michigan;
(ix) that, with respect to return on average assets, the First Michigan Selected
Banks had a low of 0.99%, a mean of 1.25%, and a high of 1.58%, compared to
1.30% for First Michigan; (x) that, with respect to return on average equity,
the First Michigan Selected Banks had a low of 10.92%, a mean of 13.15%, and a
high of 15.39%, compared to 16.35% for First Michigan; (xi) that, with respect
to net interest margin, the First Michigan Selected Banks had a low of 4.13%, a
mean of 4.49%, and a high of 5.25%, compared to 4.76% for First Michigan; (xii)
that, with respect to efficiency ratio, the First Michigan Selected Banks had a
low of 52.85%, a mean of 58.13%, and a high of 65.81%, compared to 57.79% for
First Michigan; (xiii) that, with respect to the ratio of stock price to
earnings per share for the twelve month period ended December 31, 1996, or March
31, 1997, as the case may be, the First Michigan Selected Banks had a low of
12.11x, a mean of 15.91x, and a high of 21.92x, compared to 20.05x for First
Michigan; (xiv) that, with respect to the multiple of stock price to estimated
earnings per share for each of 1997 and 1998, the First Michigan Selected Banks
(based on projected earnings per share for the applicable year as reported by
First Call) had a low of 11.88x and 10.38x, a mean of 14.34x and 12.95x, and a
high of 18.31x and 16.12x, respectively, compared to 18.24x and 16.71x,
respectively, for First Michigan; (xv) that, with respect to the multiple of
stock price to book value, the First Michigan Selected Banks had a low of 1.41x,
a mean of 2.02x, and a high of 2.77x, compared to 3.06x for First Michigan;
(xvi) that, with respect to the multiple of stock price to tangible book value,
the First Michigan Selected Banks showed a low of 1.76x, a mean of 2.22x, and a
high of 3.00x, compared to 3.16x for First Michigan and (xvii) that, with
respect to dividend yield, the First Michigan Selected Banks showed a low of
1.98%, a mean of 2.85%, and a high of 3.65%, compared to 2.23% for First
Michigan.
Merrill Lynch also calculated a range of imputed values for a share of
First Michigan Common Stock based on certain of the ratios for the First
Michigan Selected Banks specified above, including the ratio of the closing
price of the common stock on May 2, 1997, to each of book value, tangible book
value, earnings per share for the twelve months ended December 31, 1996, or
March 31, 1997, as the case may be, and estimated earnings per share for 1997
and 1998, in each case as reported by First Call. This analysis resulted in a
range of imputed values for First Michigan Common Stock of between $14.16 and
$33.61.
In connection with its opinion dated the date of this Joint Proxy
Statement/Prospectus, Merrill Lynch performed procedures to update, as
necessary, certain of the analyses described above and reviewed the assumptions
on which such analyses described above were based and the factors considered in
connection therewith. Merrill Lynch did not perform any analyses in addition to
those described in updating its May 5, 1997, opinion.
Merrill Lynch was retained by the First Michigan Board as an independent
contractor to act as financial advisor to First Michigan with respect to the
Merger and will receive a fee for its services, a significant portion of which
is contingent upon the consummation of the Merger. Merrill Lynch is a nationally
recognized investment banking firm which, among other things, regularly engages
in the valuation of businesses and securities, including banking institutions,
in connection with mergers and acquisitions. Merrill Lynch in the past has
provided financial advisory, investment banking, and other services to First
Michigan and has received customary fees for the rendering of such services. In
addition, in the ordinary course of its securities business, Merrill Lynch may
actively trade debt and/or equity securities of First Michigan and Huntington,
and their respective affiliates, for its own account and the accounts of its
customers, and Merrill Lynch, therefore, may from time to time hold a long or
short position in such securities.
First Michigan and Merrill Lynch entered into a letter agreement, dated
November 1, 1996, relating to the services to be provided by Merrill Lynch in
connection with a merger or other business combination involving First Michigan.
First Michigan agreed to compensate Merrill Lynch as follows: (i) a fee of
$150,000, which was paid in cash upon execution of the letter agreement; (ii) an
additional fee of $700,000, which was paid in cash upon execution of the Merger
Agreement; (iii) an additional fee of $700,000, contingent upon and payable upon
mailing to the shareholders of First Michigan of this Joint Proxy
Statement/Prospectus; and (iv) a fee of 0.8% of the aggregate purchase price
paid in the Merger (or certain other business combinations involving First
Michigan occurring or agreed upon during Merrill Lynch's engagement or within
two years thereafter), payable upon consummation of the Merger or such other
business combination, from which fee will be deducted any amounts previously
paid pursuant to clauses (i), (ii), and (iii). First Michigan also agreed to
reimburse Merrill Lynch for its reasonable out-of-pocket expenses incurred in
connection with its advisory work, including the reasonable fees and
disbursements of its legal counsel
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(provided that such expenses will not exceed $30,000 without the prior written
consent of First Michigan), and to indemnify Merrill Lynch against certain
liabilities relating to or arising out of the Merger, including liabilities with
might arise under the federal securities laws.
EFFECTIVE TIME OF THE MERGER
The Merger will be effective at 11:59 p.m., local Ohio time (the
"Effective Time"), on the "Effective Date," which shall be the latest of (i) the
day on which Articles of Merger with respect to the Merger have been filed with
the Maryland State Department of Assessments and Taxation in accordance with the
requirements of the laws of the State of Maryland, (ii) the day on which a
Certificate of Merger with respect to the Merger has been filed with the
Administrator of the Corporation, Securities and Land Development Bureau of the
Michigan Department of Consumer and Industry Services, in accordance with the
requirements of the laws of the State of Michigan, or (iii) such later date as
may be specified in such Articles and Certificate of Merger; provided, however,
that the Effective Date shall not be earlier than the date of the expiration of
the last required waiting period following receipt of the last regulatory
approval required in order to consummate the Merger. Unless Huntington and First
Michigan otherwise agree, the Effective Date shall be the date that is five
business days after the last of the conditions specified in the Supplemental
Agreement shall have been satisfied or waived. It is anticipated that, if the
shareholders of Huntington and First Michigan approve the Merger and the Merger
Documents, respectively, and if the necessary regulatory approvals are received,
and if the other conditions to the consummation of the Merger are satisfied, the
Effective Date will occur late in mid to late September 1997.
TERMS OF THE MERGER
The Merger Documents provide for the merger of First Michigan into
Huntington pursuant to the applicable provisions of the laws of the States of
Maryland and Michigan. Upon the effectiveness of the Merger, Huntington will be
the surviving entity and the separate existence of First Michigan will cease.
The charter and bylaws of the surviving entity will be those of Huntington as in
effect immediately prior to the Effective Time until otherwise amended or
repealed.
At the Effective Time, by virtue of the Merger, each share of First
Michigan Common Stock issued and outstanding immediately prior to the Effective
Time (other than shares held by First Michigan, Huntington, or any subsidiary of
Huntington or First Michigan, in each case other than in a fiduciary capacity or
as a result of debts previously contracted, which will be canceled and retired
at the Effective Time) will cease to be outstanding and will be converted into
the right to receive 1.155 shares of Huntington Common Stock, subject to certain
limitations. (The original conversion ratio provided in the Merger Agreement was
1.05 shares of Huntington Common Stock for each share of First Michigan Common
Stock. This ratio was adjusted automatically, pursuant to the terms of the
Merger Agreement, to give effect to the 1997 Huntington 10% Stock Dividend.)
Cash will be paid in lieu of the issuance of any fractional shares of Huntington
Common Stock. No interest will be payable with respect to any cash payments to
be received by any First Michigan shareholder.
If both (i) the average of the closing sale prices per share of Huntington
Common Stock as reported on the Nasdaq National Market for the five trading days
immediately preceding the date that is five trading days prior to the date on
which the Effective Time occurs, is less than $20.78 (such amount having been
adjusted for the 1997 Huntington 10% Stock Dividend), and (ii) the quotient
obtained by dividing the average of the Standard & Poors Regional Bank Stock
Index for the Determination Period by 355.87 is greater than the quotient
obtained by dividing the Average Closing Sale Price by $25.98 (such amount
having been adjusted for the 1997 Huntington 10% Stock Dividend), and the
difference between such quotients is greater than 0.15, then Huntington and
First Michigan are required to use their best efforts to renegotiate the
Conversion Ratio, and if they are unable to agree on a revised Conversion Ratio,
then the Merger Documents will be terminated and the Merger will be abandoned.
In addition, if the sum of the number of shares of First Michigan Common
Stock outstanding at the Effective Time plus the number of shares of First
Michigan Common Stock that are subject to outstanding stock options
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previously granted by First Michigan as of the Effective Time differs from
28,848,791 shares, the Conversion Ratio will be automatically adjusted (to the
nearest hundredth of a share of Huntington Common Stock) by multiplying the
original Conversion Ratio by the quotient obtained by dividing 28,848,791 by the
sum of the number of shares of First Michigan Common issued and outstanding on
the Effective Date plus the number of shares subject to the outstanding First
Michigan Stock Options on the Effective Date.
At the Effective Time, each outstanding option to purchase shares of First
Michigan Common Stock shall be converted into an option to acquire the same
number of shares of Huntington Common Stock as the holder would have been
entitled to receive pursuant to the Merger in exchange for such shareholder's
shares of First Michigan Common Stock if such holder had exercised such option
in full prior to the Effective Time. The per share exercise price for each such
option will be adjusted to be equal to the aggregate exercise price for the
shares of First Michigan Common Stock purchasable pursuant to such option
immediately prior to the Effective Time divided by the number of shares of
Huntington Common Stock purchasable pursuant to such option immediately after
the Effective Time. The directors of First Michigan have each executed
agreements with Huntington terminating the options previously granted to them,
effective immediately prior to the Effective Time. In addition, Messrs.
Fredricks, Ondersma, Prins, and Stream have executed an agreement with
Huntington whereby each of such persons has agreed that he will not exercise any
limited share appreciation rights provided under any current option to purchase
shares of First Michigan Common Stock.
EXCHANGE OF CERTIFICATES
HNB, a wholly owned subsidiary of Huntington, is the transfer agent for
Huntington Common Stock and has been designated by Huntington to act as the
exchange agent (the "Exchange Agent") in connection with the Merger. Approval of
the Merger Documents by the shareholders of First Michigan will constitute
ratification of the appointment of HNB or its assigns as the Exchange Agent.
As promptly as practicable after the Effective Date but not later than ten
business days after the Effective Date, Huntington shall cause the Exchange
Agent to prepare and mail to each holder of record on the Effective Date of any
shares of First Michigan Common Stock a letter of transmittal containing
instructions for the surrender of all certificates for shares of First Michigan
Common Stock. Upon the surrender by such holder of a certificate or certificates
for shares of First Michigan Common Stock standing in such holder's name to the
Exchange Agent in accordance with the instructions set forth in the letter of
transmittal, such holder shall be entitled to receive in exchange therefor a
certificate representing the number of whole shares of Huntington Common Stock
into which the shares represented by the certificate or certificates so
surrendered shall have been converted and, if applicable, a check payable to
such holder in the amount necessary to pay for any fractional shares of
Huntington Common Stock which such holder would otherwise have been entitled to
receive. Huntington shall deliver to the Exchange Agent such share certificates
for whole shares of Huntington Common Stock and the amount of cash necessary to
pay for all fractional shares of Huntington Common Stock in order to permit the
Exchange Agent to promptly deliver such certificates and cash to the holders of
shares of First Michigan Common Stock upon its receipt of certificates
representing shares of First Michigan Common Stock. No interest shall be payable
with respect to either the whole shares of Huntington Common Stock or the cash
payable in lieu of fractional shares. Immediately after the third anniversary of
the Effective Date, the Exchange Agent shall deliver to Huntington any unclaimed
balance of cash owing with respect to fractional shares and such cash shall be
retained by, and become the property of the Surviving Corporation, free and
clear of any claims whatsoever.
Neither Huntington nor the Exchange Agent shall be obligated to deliver a
certificate for Huntington Common Stock or a check for cash in lieu of
fractional shares to a former shareholder of First Michigan until such former
shareholder surrenders the certificate or certificates representing shares of
First Michigan Common Stock standing in such former shareholder's name or, if
such former shareholder is unable to locate such certificate or certificates, an
appropriate affidavit of loss and indemnity agreement and bond as may be
required by Huntington. Until so surrendered, each outstanding certificate for
shares of First Michigan Common Stock shall be deemed for all corporate purposes
(except the payment of dividends) to evidence ownership of the number of whole
shares of Huntington Common Stock into which the shares of First Michigan Common
Stock represented thereby shall have been converted.
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After the Effective Date, no dividends or distributions payable to holders
of record of Huntington Common Stock shall be paid to any holder of an
outstanding certificate or certificates formerly representing shares of First
Michigan Common Stock until such certificate(s) are surrendered by such holder
in accordance with the terms of the Merger Agreement. Promptly upon surrender of
such outstanding certificate(s), there shall be paid to such holder of the
certificate or certificates for Huntington Common Stock issued in exchange
therefor the amount of dividends and other distributions, if any, which
theretofore became payable with respect to such full shares of Huntington Common
Stock, but which have not theretofore been paid on such stock. No interest shall
be payable with respect to the payment of any dividends or other distributions.
All such dividends or other distributions unclaimed at the end of three years
from the Effective Date shall, to the extent such dividends have been previously
paid to the Exchange Agent, be repaid by the Exchange Agent to Huntington, and
thereafter the holders of such outstanding certificates for First Michigan
Common Stock shall look, subject to applicable escheat, unclaimed funds, and
other laws, only to Huntington as general creditors for payment thereof.
The stock transfer books of First Michigan shall be closed as of the close
of business on the day that is one business day prior to the Effective Date.
After such date, there shall be no further registration on the records of First
Michigan of transfers of outstanding certificates formerly representing shares
of First Michigan Common Stock.
Huntington is empowered to adopt additional reasonable rules and
regulations with respect to the matters described above not inconsistent with
the provisions of the Merger Agreement.
TERMS OF THE WARRANT
First Michigan has granted the Warrant to Huntington pursuant to the
Warrant Purchase Agreement and the Merger Documents. Under the terms of the
Warrant, Huntington has the right to purchase up to 5,534,317 shares of First
Michigan Common Stock (such number of shares having been adjusted for the 1997
First Michigan 5% Stock Dividend and subject to certain further adjustments),
which represents 19.9% of the outstanding shares of First Michigan Common Stock,
for a purchase price of $29.275 per share (subject to certain adjustments),
under certain circumstances.
Huntington may not exercise the Warrant unless it has obtained all
required approvals, if any, of appropriate regulatory authorities having
jurisdiction, including the Federal Reserve Board, pursuant to all applicable
laws and regulations. Further, subject to the terms and conditions set forth in
the Warrant and in the Warrant Purchase Agreement and the provisions of
applicable law, Huntington may not exercise the Warrant without the written
consent of First Michigan except upon the occurrence of any of the following
events (a "Triggering Event"):
(i) any material, willful, and intentional breach of the
Merger Documents by First Michigan that would permit
Huntington to terminate the Merger Documents (A) occurring
after the receipt by First Michigan of a proposal to
engage in an "Acquisition Transaction" (as defined below),
(B) occurring after the announcement by any other person,
group of persons, or entity of an intention to engage in
an Acquisition Transaction, or (C) in anticipation and for
the purpose of engaging in an Acquisition Transaction;
(ii) (A) a proposal to engage in an Acquisition Transaction is
submitted to and approved by the shareholders of First
Michigan at any time prior to May 31, 1999, or (B) a
"Tender Offer" (as defined below) is commenced and the
transactions contemplated in the Tender Offer are
completed in such a manner that the person, group of
persons, or entity making the Tender Offer acquires
beneficial ownership of more than 20% of the capital stock
or any other class of voting securities of First Michigan,
and the Merger is not consummated prior to May 31, 1999;
(iii)(A) a proposal to engage in an Acquisition Transaction is
received by First Michigan or a Tender Offer is made
directly to the shareholders of First Michigan or the
intention of making an Acquisition Transaction or Tender
Offer is announced at any time prior to the
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holding of the First Michigan Special Meeting; (B) the
Board of Directors of First Michigan (1) fails to
recommend to the shareholders of First Michigan that they
vote their shares of First Michigan Common Stock in favor
of the approval of the Merger, (2) withdraws such
recommendation previously made, (3) fails to solicit
proxies of shareholders of First Michigan to approve the
Merger, or (4) fails to hold the First Michigan Special
Meeting; and (C) the Merger is not consummated by May 31,
1999.
Notwithstanding the foregoing, the Warrant will not be exercisable in the
event of the failure to consummate the Merger solely as a result of any of the
following: (i) the failure of the shareholders of Huntington to approve the
Merger; (ii) the failure of any applicable regulatory authority to provide any
required approval or consent to the Merger, which failure was not the result of
the existence of a proposal to engage in an Acquisition Transaction or a breach
by First Michigan of any of its obligations under any of the Merger Documents;
or (iii) the Merger Documents are terminated pursuant to Section 9.1 of the
Supplemental Agreement, unless the event giving rise to the right to terminate
is preceded by a Triggering Event or the receipt by First Michigan of a proposal
to engage in an Acquisition Transaction, or the announcement by another person,
group of persons, or entity of a proposal to engage in an Acquisition
Transaction.
For purposes of the Warrant, a "Tender Offer" means a tender or exchange
offer made by any person, group of persons, or entity other than Huntington or
an affiliate of Huntington to acquire equity securities of First Michigan if,
upon the completion of the transactions proposed in such offer, such person,
group of persons, or entity would own or have the right to acquire beneficial
ownership of more than 20% of the capital stock or any other class of voting
securities of First Michigan. A Tender Offer which is contingent upon the
expiration of the Warrant is deemed to commence when it is announced. An
"Acquisition Transaction" means a transaction involving (A) the sale or other
disposition of more than 20% of the shares of the capital stock or any other
class of voting securities of First Michigan, including, but not limited to, a
Tender Offer, involving any person, group of persons, or entity other than
Huntington or an affiliate of Huntington, (B) the sale or other disposition of
15% or more of the consolidated assets or deposits of First Michigan or of the
First Michigan Banking Subsidiaries, in the aggregate, to any person or entity
other than Huntington or an affiliate of Huntington, or (C) a merger or
consolidation involving First Michigan and any person, group of persons, or
entity other than Huntington or an affiliate of Huntington, other than a
transaction pursuant to which First Michigan will be the surviving corporation
and the current shareholders of First Michigan will be the owners of a majority
of the stock of the surviving corporation following the transaction.
Under the terms of the Warrant Purchase Agreement, First Michigan will
repurchase from Huntington (or any subsequent holder of the Warrant), at a price
based on the highest price paid for shares of First Michigan Common Stock in
connection with certain transactions involving a merger, business combination,
or other acquisition transaction relating to First Michigan, the Warrant and all
shares of First Michigan Common Stock purchased pursuant to an exercise of the
Warrant at the request of Huntington (or any subsequent holder) at any time
within one year of the occurrence of such merger, business combination, or other
transaction.
THE SUBSIDIARY MERGERS
As soon as practicable after the consummation of the Merger, it is
anticipated that all of the First Michigan Banking Subsidiaries will be merged
into HNB, under the charter of HNB, and the separate existence of the First
Michigan Banking Subsidiaries shall cease. The consummation of the Subsidiary
Mergers is not a condition to the consummation of the Merger.
COVENANTS OF THE PARTIES
The Merger Documents provide, among other things, that First Michigan,
Huntington, and their respective subsidiaries are required to use reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper, or advisable under applicable law to
consummate and make effective the Merger, subject to the terms and conditions of
the Merger Documents. Each of First Michigan and Huntington is required to
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keep the other party advised of all material developments relevant to its
business and the consummation of the Merger and to permit the other party to
make reasonable investigation of its business and properties.
The Merger Documents provide that, unless the prior written consent of
Huntington to do otherwise is obtained, First Michigan will operate its business
in the usual, regular, and ordinary course; will preserve intact its business
organization and assets and maintain its rights and franchises; and will take no
action which would adversely affect the ability of First Michigan or Huntington
to obtain any consent from any regulatory agency or other person required for
the Merger without the imposition of a condition or restriction that renders the
consummation of the Merger inadvisable for either First Michigan or Huntington
or would materially adversely affect the ability of First Michigan or Huntington
to perform its covenants and agreements under the Merger Documents.
In addition, the Merger Documents provide that, without the prior written
consent of Huntington (which consent will not be unreasonably withheld), First
Michigan cannot do, or agree or commit to do, any of the following: (i) amend
its Articles of Incorporation, By-laws, or other governing instruments; (ii)
engage in any acquisition, or take any other action, that adversely affects the
ability of First Michigan to consummate the Merger; (iii) incur any additional
debt obligation except in the ordinary course of business consistent with past
practices or impose, or suffer the imposition, on any asset of First Michigan of
any lien or other encumbrance, or permit any such lien or other encumbrance to
exist (subject to certain exceptions as specified in the Merger Documents); (iv)
repurchase, redeem, or otherwise acquire or exchange (other than in the ordinary
course under employee benefit plans) any shares, or securities convertible into
any shares, of the capital stock of First Michigan, or declare or pay any
dividend, or make any other distribution in respect to First Michigan's capital
stock, except as described below; (v) except as previously disclosed to
Huntington, issue, sell, pledge, or permit to become outstanding any additional
shares of First Michigan Common Stock or any other capital stock or rights
related thereto; (vi) adjust, split, combine, or reclassify any capital stock or
issue or authorize the issuance of any other securities in respect of shares of
First Michigan Common Stock or sell, lease, mortgage, or otherwise dispose of
any asset other than in the ordinary course of business for reasonable and
adequate consideration; (vii) purchase any securities or make any material
investments, except as provided for in the Merger Documents; (viii) except as
previously disclosed to Huntington, grant any increase in compensation or
benefits to its employees or officers except as in accordance with past
practice, pay any severance or termination pay or any bonus other than pursuant
to written policies or contracts in effect on the date of the Merger Documents,
enter into or amend any severance agreements with officers, grant any increase
in compensation or benefits to directors, voluntarily accelerate the vesting of
any employee benefits, or grant any stock appreciation rights, cash awards, or
any rights to acquire any First Michigan securities under any First Michigan
stock option plan; (ix) enter into or amend any employment contract, other than
as required by law or as previously disclosed to Huntington, that First Michigan
does not have the unconditional right to terminate without liability at any
time; (x) adopt any new employee benefit plan, or terminate, withdraw from, or
make any material change to an existing employee benefit plan, other than as
required by law or deemed advisable by counsel to maintain the tax qualified
status of such plan or as previously disclosed to Huntington, or make any
distributions from such employee benefit plans except as required by law, the
terms of such plan, or consistent with past practice; (xi) make any significant
change in any tax or accounting method or system of internal accounting
controls, except as may be appropriate to conform with changes in the tax laws,
regulatory accounting requirements, or generally accepted accounting principles;
(xii) commence any litigation other than in accordance with past practice or
settle certain material litigation; and (xiii) enter into, modify, amend, or
terminate any material contract or waive, release, compromise, or assign any
material rights or claims, except in the ordinary course of business.
Notwithstanding the above, First Michigan may, but is not obligated to,
declare and pay its customary quarterly cash dividends on shares of First
Michigan Common Stock not in excess of $0.18 per share of First Michigan Common
Stock, with usual and regular record and payment dates in accordance with past
practices; provided that Huntington and First Michigan will coordinate with each
other to ensure that the holders of First Michigan Common Stock will receive at
least one dividend, but not more than one, for each calendar quarter through the
Effective Time.
The Merger Documents provide that Huntington will take no action which, to
its knowledge at the time of such action, would materially adversely affect the
ability of First Michigan or Huntington to obtain any consent from any
regulatory agency or other person required for the Merger without the imposition
of a condition or restriction that renders the consummation of the Merger
inadvisable for any party or would materially adversely affect the ability of
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any party to perform its covenants and agreements under the Merger Documents. In
addition, Huntington, without the prior written consent of First Michigan (which
consent cannot be unreasonably withheld), may not amend its Articles of
Incorporation, Bylaws, or the "Huntington Shareholder Rights Plan" (as described
herein) in any manner adverse to the First Michigan shareholders as compared to
the rights of the Huntington shareholders as of the date of the Merger Documents
(see "EFFECT OF THE MERGER ON SHAREHOLDERS' RIGHTS - RIGHTS PLANS").
Each of First Michigan and Huntington is required to give prompt written
notice to the other party upon becoming aware of the occurrence or impending
occurrence of any event or circumstance relating to it or any of its
subsidiaries which is reasonably likely to have a material adverse effect on it
or would cause or constitute a material breach of any of its representations,
warranties, or covenants contained in the Merger Documents and to use reasonable
efforts to prevent or remedy the same. The Merger Documents provide that First
Michigan, Huntington, and their respective subsidiaries will file all reports
required to be filed with the applicable regulatory authorities; that the
financial statements contained in all such reports will be prepared in
accordance with the laws applicable to such reports; and that all such reports
filed with the Commission will comply with all applicable securities laws and
will not contain an untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
Under the Merger Documents, each of First Michigan and Huntington will,
and will cause its agents and advisors to: (i) maintain the confidentiality of
all confidential information furnished to it by the other party; (ii) not use
such information other than in furtherance of the transactions contemplated by
the Merger Documents; and (iii) promptly return or certify the destruction of
all documents and work papers containing confidential information received from
the other party if the Merger Documents are terminated prior to the Effective
Time.
The Merger Documents provide that neither First Michigan nor any affiliate
or other person representing First Michigan will directly or indirectly solicit,
encourage, or, except to the extent necessary to comply with the fiduciary
duties of First Michigan's Board of Directors, as advised by counsel, entertain
any proposal to engage in an "Acquisition Transaction," which term has the same
meaning as provided in the Warrant, as described under "TERMS OF THE WARRANT"
above. Except to the extent necessary to comply with the fiduciary duties of
First Michigan's Board of Directors, as advised by counsel, First Michigan shall
not fail to recommend that First Michigan shareholders vote in favor of the
Merger or withdraw such a recommendation previously made, fail to solicit
proxies of the shareholders of First Michigan, or fail to hold the First
Michigan Special Meeting, or shall furnish any non-public information that it is
not legally obligated to furnish in connection with, negotiate with respect to,
or enter into any agreement with respect to, any Acquisition Transaction, but
First Michigan may communicate and disclose information about such a proposal to
engage in an Acquisition Transaction to its shareholders if and to the extent
that it is required to do so in order to comply with its legal obligations as
advised by counsel. First Michigan is required to notify Huntington orally and
in writing in the event that it receives any inquiry or proposal relating to any
Acquisition Transaction.
Prior to the Effective Time, First Michigan and Huntington are required to
consult with each other as to the form and substance of any press release or
other public disclosure materially related to transactions contemplated by the
Merger Documents. First Michigan and Huntington are required to use reasonable
efforts to cause the Merger to qualify as a reorganization within the meaning of
the applicable tax law.
In addition, Huntington is to provide certain benefits and indemnification
to certain present and former directors, officers, employees, and agents of
First Michigan. See "THE MERGER - INTERESTS OF MANAGEMENT."
CONDITIONS TO CONSUMMATION OF THE MERGER
The Merger and the other transactions contemplated thereby will occur only
if the Merger is approved by the holders of two-thirds of the outstanding shares
of Huntington Common Stock at the Huntington Special Meeting and if the Merger
Documents are approved by the holders of two-thirds of the outstanding shares of
First Michigan Common Stock at the First Michigan Special Meeting. In addition,
the obligations of First Michigan and Huntington to consummate the Merger are
subject to the satisfaction of certain other conditions, including: (i) the
receipt of all required approvals of the Merger by the applicable regulatory
authorities and the expiration of any applicable waiting
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periods, with no such approval conditioned or restricted in a manner which would
materially impact the economic or business assumptions of the transactions
contemplated by the Merger Documents so as to render inadvisable the
consummation of the Merger (see "THE MERGER - REGULATORY APPROVALS"); (ii) the
receipt of any and all third-party consents required in order to consummate the
Merger or prevent any material default under any contract, permit, or other
instrument of First Michigan or Huntington which, if not received or made, is
reasonably likely to have a material adverse effect on such party, with no such
consent conditioned or restricted in a manner which would materially impact the
economic or business assumptions of the transactions contemplated by the Merger
Documents so as to render inadvisable the consummation of the Merger; (iii) the
absence of any law, regulation, reporting or licensing requirement,
administrative decision, decree, judgment, order, or any other action by any
court or regulatory authority having jurisdiction which prohibits, restricts, or
makes illegal the consummation of the transactions contemplated by the Merger
Documents; (iv) the shares of Huntington Common Stock to be issued in the Merger
having been approved for quotation on the Nasdaq National Market; (v) the
receipt by First Michigan and Huntington of an opinion of counsel for Huntington
regarding certain tax aspects of the Merger (see "THE MERGER - FEDERAL INCOME
TAX CONSEQUENCES").
The obligations of Huntington to consummate the Merger are further
conditioned upon the following conditions precedent: (i) the representations and
warranties of First Michigan set forth in the Merger Documents being true and
correct in all material respects as of the date of the Merger Documents and at
the Effective Time; (ii) the agreements and covenants of First Michigan to be
performed pursuant to the Merger Documents prior to the Effective Time having
been performed in all material respects; (iii) the receipt by Huntington of a
certificate signed by First Michigan to the effect that all such obligations of
First Michigan have been satisfied and a certified copy of resolutions duly
adopted by the Board of Directors and shareholders of First Michigan with
respect to the approval of the Merger Documents; (iv) the receipt by Huntington
of an opinion rendered by legal counsel to First Michigan as to certain matters
set forth in the Merger Documents; (v) the receipt by Huntington from First
Michigan's auditors of a letter or letters with respect to certain financial
information regarding First Michigan; (vi) the receipt by Huntington from each
affiliate of First Michigan of an agreement providing that such person will not
sell, pledge, transfer, or otherwise dispose of the shares of First Michigan
Common Stock held by such person except as provided for in the Merger Documents
or the shares of Huntington Common Stock to be received in the Merger except as
permitted under applicable law; (vii) the shareholders' equity of First Michigan
as of the end of the last fiscal quarter preceding the Effective Date being not
less than 95% of First Michigan's shareholders' equity as of December 31, 1996;
and (viii) the receipt by Huntington of an opinion of Morgan Stanley, dated not
more than five days prior to the date of this Joint Proxy Statement/Prospectus,
stating that the Merger is fair, from a financial point of view, to Huntington.
The obligations of First Michigan to consummate the Merger are further
conditioned upon the following conditions precedent: (i) the representations and
warranties of Huntington set forth in the Merger Documents being true and
correct in all material respects as of the date of the Merger Documents and at
the Effective Time; (ii) the agreements and covenants of Huntington to be
performed pursuant to the Merger Documents prior to the Effective Time having
been performed in all material respects; (iii) the receipt by First Michigan of
a certificate signed by Huntington to the effect that all such obligations of
Huntington have been satisfied and a certified copy of resolutions duly adopted
by the Board of Directors and shareholders of Huntington with respect to the
approval of the Merger; (iv) the receipt by First Michigan of an opinion
rendered by counsel to Huntington as to certain matters set forth in the Merger
Documents; and (v) the receipt by First Michigan of an opinion of Merrill Lynch,
dated not more than five business days prior to the date of this Joint Proxy
Statement/Prospectus, stating that the consideration to be received by the First
Michigan shareholders in connection with the Merger is fair, from a financial
point of view, to such shareholders.
Huntington and First Michigan may waive compliance by the other party with
any of the conditions, covenants, and agreements contained in the Merger
Documents, except any condition which, if not satisfied, would result in the
violation of any law.
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AMENDMENT
The Merger Documents may be amended, to the extent permitted by law, by a
subsequent writing signed by First Michigan and Huntington and authorized by
their respective Boards of Directors, whether before or after shareholder
approval of the Merger Documents has been obtained, provided, that, after any
such approval by the shareholders of Huntington or First Michigan, there will be
no amendment that under Maryland or Michigan law, as applicable, requires
further approval by such shareholders without first obtaining such further
shareholder approval.
TERMINATION AND TERMINATION FEE
The Merger Documents may be terminated and the Merger abandoned at any
time prior to the Effective Time as follows: (i) by mutual consent of the Board
of Directors of Huntington and the Board of Directors of First Michigan; (ii) by
the Board of Directors of either party in the event of an inaccuracy of any
representation or warranty of the other party or the material breach of any
covenant or agreement, in any case which cannot be or has not been cured within
30 days after the giving of written notice to the breaching party of the breach
and which, in the case of the inaccuracy of any representation or warranty,
would provide the other party the ability to refuse to consummate the Merger
(provided that the terminating party is not then in material breach of any
representation, warranty, covenant, or other agreement); (iii) by the Board of
Directors of either party in the event any required consent of any regulatory
authority is denied or the shareholders of First Michigan fail to vote their
approval of the Merger (provided that the terminating party is not then in
material breach of any representation, warranty, covenant or other agreement);
(iv) by the Board of Directors of either party in the event the Merger fails to
have been consummated by May 31, 1998, if such failure is not caused by any
breach of the Merger Documents by the party electing to terminate; (v) by the
Board of Directors of either party in the event that any of the conditions
precedent to the obligations of such party cannot be fulfilled or satisfied by
May 31, 1998 (provided that the terminating party is not then in material breach
of any representation, warranty, covenant or other agreement); and (vi) by
Huntington, in the event that the Board of Directors of First Michigan fails to
reaffirm its approval of the Merger or resolves not to reaffirm the Merger, or
affirms, recommends, or authorizes entering into any other Acquisition
Transaction or other transaction involving a merger, share exchange,
consolidation, or transfer of substantially all of the assets of First Michigan.
In the event of the termination and abandonment of the Merger Documents,
the Merger Documents will become void and the respective representations,
warranties, obligations, covenants, and agreements of the parties will not
survive such termination, except for certain provisions which will remain in
effect under the express terms of the Merger Documents.
The Supplemental Agreement provides that First Michigan will pay to
Huntington a termination fee in the amount of the sum of $22,000,000 plus the
direct costs and expenses incurred by or on behalf of Huntington in connection
with the transactions contemplated under the Merger Documents, but in no event
to exceed $1,000,000, if any of certain "Triggering Events" occurs. For purposes
of the Supplemental Agreement, "Triggering Events" shall have the same meaning
as provided in the Warrant, as described under "TERMS OF THE WARRANT" above.
Notwithstanding the foregoing, the termination fee will not be payable upon a
failure to consummate the Merger solely as a result of any of the following: (i)
the failure of the shareholders of Huntington to approve the Merger; (ii) the
failure of any applicable regulatory authority to provide any required approval
or consent to the Merger, which failure was not the result of the existence of a
proposal to engage in an Acquisition Transaction or a breach by First Michigan
of any of its obligations under any of the Merger Documents; or (iii) the Merger
Documents are terminated pursuant to Section 9.1 of the Supplemental Agreement,
unless the event giving rise to the right to terminate is preceded by a
Triggering Event or the receipt by First Michigan of a proposal to engage in an
Acquisition Transaction, or the announcement by another person, group of
persons, or entity of a proposal to engage in an Acquisition Transaction.
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NO DISSENTING SHAREHOLDERS' RIGHTS
Under applicable law, neither the holders of Huntington Common Stock
nor the holders of First Michigan Common Stock are entitled to dissenting
shareholders' rights in connection with the consummation of the Merger.
INTERESTS OF MANAGEMENT
First Michigan has entered into certain Management Continuity
Agreements (the "Continuity Agreements") with each of the following individuals
listed below which provide for salary continuation and benefit continuation for
various terms in the event of a termination of employment, reduction in salary,
change in location, and certain other events occurring following a change of
control of First Michigan: David M. Ondersma (currently a director and the
Chairman and Chief Executive Officer of First Michigan), Stephen A. Stream
(currently a director and the President and Chief Operating Officer of First
Michigan), Larry D. Fredricks (currently the Executive Vice President and Chief
Financial Officer of First Michigan), and Merle J. Prins (currently the
Executive Vice President of First Michigan), each providing for three years of
compensation continuation, five other senior executive officers of First
Michigan or affiliates of First Michigan providing for two years of compensation
continuation, and one additional senior executive officer of an affiliate of
First Michigan providing for one year of compensation continuation. The
consummation of the Merger will constitute such a change of control for purposes
of the Continuity Agreements. Huntington has agreed to assume the obligations of
First Michigan under the Continuity Agreements. In addition, Huntington has
agreed to offer employment to Messrs. Ondersma, Stream, Fredricks, and Prins
(collectively, the "Executives") until December 31, 1999, on such terms as are
agreed between such Executives and Huntington. Huntington has also agreed that,
if the employment of any of the Executives with Huntington is terminated for any
reason prior to December 31, 1999, such Executive will be entitled to the
benefits under his respective Continuity Agreement. Huntington and First
Michigan have agreed that the amounts payable under the terms of the Continuity
Agreements for the Executives upon the occurrence of a trigger event, in
accordance with the terms of the agreements, is $3,465,089 for Mr. Ondersma,
$2,296,471 for Mr. Stream, $2,075,052 for Mr. Prins, and $1,983,463 for Mr.
Fredricks.
Upon consummation of the Merger, it is Huntington's intention to
appoint David M. Ondersma, currently the Chairman and Chief Executive Officer of
First Michigan, to serve as Chairman of the Huntington Michigan Region, and
Stephen A. Stream, currently President of First Michigan, to serve as President
of the Huntington Western Michigan Region.
Upon consummation of the Merger, Huntington has agreed to provide
generally to the officers and employees of First Michigan who become officers or
employees of any Huntington affiliate after the Effective Time employee benefits
under Huntington benefit plans, including stock option plans, currently provided
generally by Huntington and its affiliates to their similarly situated officers
and employees. For purposes of participation and vesting under such Huntington
employee benefits plans, the service of First Michigan employees prior to the
Effective Time will be treated as service with Huntington or one of its
subsidiaries participating in such plans. Huntington has also agreed to provide
severance benefits consistent with Huntington's Transition Pay Plan as in effect
as of the Effective Time, which benefits will not be less than those provided
under such plan as of the date of the Merger Documents, to all persons who are
employed by First Michigan immediately prior to the Effective Time and whose
employment is subsequently terminated by Huntington or an affiliate of
Huntington at any time after the Effective Time; provided, however, that (i)
Huntington will assume the obligations of First Michigan under the Continuity
Agreements, and (ii) for a period of one year following the Effective Date,
Huntington has agreed to provide severance benefits in accordance with First
Michigan's severance benefits in effect as of the date of the Merger Documents
to all First Michigan Subsidiary Bank presidents and certain key First Michigan
corporate and affiliate department heads (a total of 31 persons in all).
Huntington has also agreed that, for a period of six years after the
Effective Date, Huntington and its affiliates will indemnify the present and
former directors, officers, employees, and agents of First Michigan and its
affiliates against certain liabilities arising at or prior to the Effective Time
to the fullest extent permitted under applicable law or by such companies'
Articles of Incorporation or Bylaws, in accordance with the terms of the Merger
Documents. Huntington has also agreed, for a period of six years after the
Effective Date, to use reasonable efforts to procure and
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maintain that portion of directors' and officers' liability insurance that
serves to reimburse the persons who are serving as officers or directors of
First Michigan on the date of the Merger Documents with respect to claims
against such persons arising from facts or events which occurred prior to the
Effective Time, with the same coverages and amounts, and terms no less
advantageous, as that coverage currently provided by First Michigan to such
persons; provided, however, that Huntington will not be required to expend more
than $300,000 to procure and maintain such insurance.
Huntington has agreed that the First Michigan bonus pool, which shall
mean the estimated aggregate dollar amount that would be or become payable under
the First Michigan Bonus Plan upon the achievement of certain defined goals, as
in effect on the date of the Merger Documents, for the entire 1997 calendar
year, in the agreed amount of $3,400,000, multiplied by a fraction, the
numerator of which is the number of days between January 1, 1997, and the
Effective Date (inclusive), and the denominator of which is 365, shall be
allocated among all employees of First Michigan who are participants in the
First Michigan Bonus Plan on the Effective Date, in accordance with the terms of
the plan as of the Effective Time, and Huntington shall pay any and all such
allocated bonus payments to such participants on or before February 28, 1998.
All participants in the First Michigan Bonus Plan shall be eligible to
participate in the Huntington Management Incentive Compensation Plan beginning
as of the Effective Date, to the extent that any such employee is eligible under
the terms of such Huntington plan.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain material United States federal
income tax consequences of the Merger. This summary is based on the Internal
Revenue Code of 1986, as amended (the "Code"), and is for general information
only. This summary is not a complete description of all the possible tax
consequences of the Merger and the tax treatment of a particular shareholder
will depend upon such shareholder's particular situation. Special tax
considerations not discussed herein may be applicable to particular classes of
taxpayers, such as foreign citizens, broker-dealers, certain retirement plans,
tax-exempt entities, financial institutions, or insurance companies, or to any
shareholder who acquired First Michigan Common Stock through the exercise of an
employee stock option or otherwise as compensation. All shareholders should
consult with their own tax advisors as to particular tax consequences of the
Merger to them, including the applicability and effect of state, local, and
foreign tax laws and possible changes in the tax law.
Consummation of the Merger is dependent upon receipt by Huntington and
First Michigan of an opinion of Porter, Wright, Morris & Arthur, counsel to
Huntington, substantially to the effect that, for federal income tax purposes,
the Merger will constitute a reorganization within the meaning of Section 368(a)
of the Code and will result in the tax consequences described below. In
rendering such opinion, Porter, Wright, Morris & Arthur is entitled to rely upon
certain assumptions and representations of the parties and their respective
officers, directors, and shareholders, which representations will not be
independently investigated or verified by Porter, Wright, Morris & Arthur and
will be assumed to be true as of the Effective Time.
Assuming that the Merger constitutes a reorganization within the
meaning of Section 368(a) and that First Michigan and Huntington will each be a
party to the reorganization within the meaning of Section 368(b) of the Code,
the following is a summary of the tax consequences which will result:
(a) No gain or loss will be recognized by a First Michigan
shareholder upon such shareholder's receipt of shares of
Huntington Common Stock solely in exchange for such
shareholder's shares of First Michigan Common Stock, except to
the extent that such shareholder receives any cash in lieu of
the issuance of fractional shares.
(b) The tax basis of the Huntington Common Stock so received will be
the same as the tax basis of the First Michigan Common Stock
surrendered in exchange therefor (reduced by any amount
allocated to a fractional share of Huntington Common Stock with
respect to which cash is received.).
(c) The holding period for tax purposes of the Huntington Common
Stock to be received by First Michigan shareholders will include
the holding period of the shares of First Michigan Common Stock
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surrendered in exchange therefor, provided that First Michigan
Common Stock was held as a capital asset in the hands of the
First Michigan shareholder on the Effective Date.
(d) The payment of cash in lieu of fractional share interests of
Huntington Common Stock will be treated for federal income tax
purposes as if the fractional shares were distributed as part of
the exchange and then redeemed by Huntington. These cash
payments will be treated as having been received as
distributions in full payment in exchange for the stock redeemed
subject to the conditions and limitations of Section 302 of the
Code.
(e) No gain or loss will be recognized by either Huntington or First
Michigan (except for the inclusion in income of amounts
resulting from any required changes in accounting methods or
similar items) as a result of the consummation of the Merger.
The foregoing discussion is based on currently existing provisions of
the Code, existing and proposed treasury regulations thereunder, and current
administrative rulings and court decisions. The opinion of counsel described
above is not binding on the Internal Revenue Service and no rulings of the
Internal Revenue Service will be sought or obtained in relation to the Merger.
There can be no assurance that the Internal Revenue Service will agree with the
tax consequences of the Merger described above. All of the foregoing discussion
is subject to change and any such change could affect the continuing validity of
such discussion.
Payments made in lieu of the issuance of fractional shares of
Huntington Common Stock may be subject to information reporting to the Internal
Revenue Service and to a 31% backup withholding tax. Backup withholding will not
apply, however, to a payment to a First Michigan shareholder or other payee if
such shareholder or payee completes and signs the substitute Form W-9 that will
be included as part of the transmittal letter or otherwise proves to Huntington
and the Exchange Agent that it is exempt from backup withholding.
EACH FIRST MICHIGAN SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX
ADVISOR CONCERNING THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO SUCH
SHAREHOLDER, INCLUDING THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL,
AND OTHER TAX LAWS AND ANY PROPOSED CHANGES IN SUCH TAX LAWS.
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for by Huntington
as a pooling of interests. The consummation of the Merger is conditioned on the
receipt by Huntington and First Michigan of a letter from Huntington's
independent certified public accountants regarding the appropriateness of
pooling-of-interests accounting for the Merger if consummated in accordance with
the Merger Documents.
REGULATORY APPROVALS
It is anticipated that the Merger will qualify for expedited action by
the Federal Reserve Board under its recently adopted streamlined procedures for
applications for bank holding company mergers. These procedures allow a
"well-capitalized" and "well-managed" holding company, as defined by the Federal
Reserve Board, to file a notice of a merger with another bank holding company in
lieu of a full application. Huntington believes it meets the Federal Reserve
Board's definition of a well-capitalized and well-managed bank holding company,
and that it will be eligible to use the streamlined procedures. The required
notice was submitted to the Reserve Bank on July 1, 1997, and is expected to be
acted upon by the Reserve Bank under authority delegated to it by the Federal
Reserve Board.
The Subsidiary Mergers are subject to the Bank Merger Act and must be
approved by the OCC and, in the case of FMB-Trust, by the FDIC. Applications to
the OCC and the FDIC were filed on July 1, 1997. Approvals by the OCC and the
FDIC require that the criteria of the Bank Merger Act be met. In conducting
their review of any application under the Bank Merger Act, the OCC and the FDIC
are required to take into consideration the financial and managerial resources
(including the competence, experience, and integrity of the officers, directors,
and principal
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shareholders), the future prospects of the existing and proposed institutions,
and the convenience and needs of the communities to be served. In considering
financial resources and future prospects, the OCC and the FDIC will, among other
things, evaluate the adequacy of the capital levels of the parties to a proposed
transaction.
The Bank Merger Act also prohibits the OCC and the FDIC from approving
a merger if it would result in a monopoly or be in furtherance of any
combination or conspiracy to monopolize or to attempt to monopolize the business
of banking in any part of the United States, or if its effect in any section of
the country would be substantially to lessen competition or tend to create a
monopoly, or if it would in any other manner result in a restraint of trade,
unless the OCC or FDIC finds that the anti-competitive effects of a merger are
clearly outweighed in the public interest by the probable effect of the
transaction in meeting the convenience and needs of the communities to be
served. In addition, under the Community Reinvestment Act of 1977, as amended,
the OCC must take into account the record of performance of the existing
depository institutions in meeting the credit needs of the entire community,
including low- and moderate-income neighborhoods, served by such institutions.
The Bank Merger Act provides for the publication of notice of, and the
opportunity for administrative hearings relating to, the application for
approval noted and described above. Interested parties may intervene in the
approval proceedings. If an interested party intervenes, such intervention could
substantially delay the regulatory approvals required for consummation of the
Subsidiary Mergers. Any merger approved by the OCC or the FDIC is subject to a
statutory waiting period of 15 to 30 days, during which time the United States
Department of Justice may challenge a merger on antitrust grounds. The
commencement of an antitrust action would stay the effectiveness of the
regulatory agency's approval unless a court specifically ordered otherwise.
The Michigan Financial Institutions Bureau (the "Michigan FIB")
requires only that notice of the proposed transactions be provided to it at the
time of filing of the required federal applications. Huntington filed the
required notice with the Michigan FIB on July 1, 1997.
The managements of Huntington and First Michigan believe that the
Federal Reserve Board will approve the notice given to it under its streamlined
procedures, that the OCC and the FDIC will approve the applications filed with
them, and that the Subsidiary Mergers will not be subject to challenge by the
Department of Justice under the antitrust laws. However, no assurance can be
provided that such approvals will be obtained, that the Department of Justice
will not challenge the Subsidiary Mergers under the antitrust laws, or that the
approvals by the OCC and the FDIC will not contain conditions unacceptable to
either Huntington or First Michigan. The consummation of the Subsidiary Mergers
is not a condition to the consummation of the Merger. See "THE MERGER -
CONDITIONS TO CONSUMMATION OF THE MERGER."
RESALES OF HUNTINGTON COMMON STOCK
Although the Huntington Common Stock to be issued upon consummation of
the Merger has been registered under the Securities Act of 1933, as amended,
certain directors and officers of First Michigan and other persons deemed to be
affiliates of First Michigan and their affiliates may not resell or otherwise
dispose of the shares of Huntington Common Stock received by them in connection
with the Merger unless such sales are made pursuant to an effective registration
under the Securities Act of 1933, as amended, or pursuant to Rule 145
promulgated by the Commission or another exemption from registration under such
Act. Huntington has obtained from each of such persons a written undertaking to
the effect that no sale, transfer, or other disposition will be made of any
Huntington Common Stock received in the Merger except in accordance with the
above restrictions.
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EFFECT OF THE MERGER ON SHAREHOLDERS' RIGHTS
At the Effective Time, the First Michigan shareholders will
automatically become Huntington shareholders, and their rights as shareholders
will be determined by Maryland General Corporation Law and by Huntington's
Charter and Bylaws. The rights of First Michigan shareholders differ in some
respects from the rights they would have as shareholders of Huntington. The
following is a brief summary of the material differences in the rights of First
Michigan shareholders from the rights of shareholders of Huntington; however,
this summary does not purport to be a complete description of such differences.
CAPITAL STOCK
First Michigan's Articles of Incorporation authorize the issuance of
50,000,000 shares of common stock, $1.00 par value per share ("First Michigan
Common Stock"), and 1,000,000 shares of preferred stock, without par value
("First Michigan Preferred Stock"). First Michigan's Board of Directors has the
authority to cause the preferred stock to be issued in one or more series, with
such designations and such relative voting, dividend, liquidation, and other
rights, preferences, and limitations as may be authorized by the Board of
Directors of First Michigan. There are currently no shares of First Michigan
Preferred Stock designated or outstanding.
Huntington's Charter authorizes the issuance of 306,617,808 shares of
capital stock, of which 300,000,000 shares are common stock, without par value,
and 6,617,808 shares are serial preferred stock, without par value ("Huntington
Preferred Stock"). Huntington's Board of Directors has the authority to classify
and reclassify any unissued shares of Huntington Preferred Stock in one or more
series with such preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, terms or conditions
of redemption, or other rights as may be authorized by the Board of Directors of
Huntington and stated in articles supplementary or other charter documents
providing for the issuance of such Huntington Preferred Stock. Huntington Common
Stock is subject to all of the terms and provisions of the Huntington Preferred
Stock as fixed by the Board of Directors. There are currently no shares of
Huntington Preferred Stock designated or outstanding.
Neither First Michigan shareholders nor Huntington shareholders have
any preemptive rights to purchase additional shares of stock upon an offering or
sale for cash or otherwise of such stock.
NOMINATION, ELECTION, AND REMOVAL OF DIRECTORS
First Michigan's Bylaws provide that one-third of the directors will be
elected each year to three year terms (or until their successors are duly
elected and qualified or their resignation or removal). First Michigan's
Articles of Incorporation set forth specific procedures for the nomination of
persons for election to the Board of Directors of First Michigan, and no person
will be eligible for election as a director unless nominated either by the Board
of Directors or by a shareholder in accordance with Article VIII of the Articles
of Incorporation. Article VIII requires a shareholder desiring to nominate a
person for the Board of Directors of First Michigan to provide written notice to
First Michigan of such intent to make a nomination. The notice must contain
certain information about the shareholder and the nominee, and such notice must
be received by First Michigan, (a) with respect to an election to be held at an
annual meeting of shareholders, not later than 60 nor more than 90 days prior to
the first anniversary of the preceding year's annual meeting (or, if the date of
the annual meeting is changed by more than 20 days from such anniversary date,
within 10 days after the date First Michigan mails or otherwise gives notice of
the date of such meeting), and (b) with respect to an election to be held at a
special meeting of shareholders called for that purpose, not later than the
close of business on the tenth day following the date on which notice of the
special meeting was first mailed to the shareholders of First Michigan.
First Michigan's Articles of Incorporation provide that the number of
directors shall be fixed by the affirmative vote of at least two-thirds of the
Board of Directors and a majority of the Continuing Directors (directors
unaffiliated with an interested shareholder which is the beneficial owner,
directly or indirectly, of 10% of the voting power of First
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Michigan). There are currently 12 directors serving on First Michigan's Board of
Directors. Michigan law permits cumulative voting in elections of directors if
provided for in a corporation's articles of incorporation. First Michigan's
Articles of Incorporation do not provide for cumulative voting. Under First
Michigan's Articles, any one or more directors may be removed, with or without
cause, but only by either (i) the affirmative vote of a majority of the
Continuing Directors and at least two-thirds of the Board of Directors, or (ii)
the affirmative vote, at a meeting of shareholders expressly called for that
purpose, of the holders of at least two-thirds of the voting power of the then
outstanding shares of capital stock entitled to vote generally in the election
of directors voting together as a class.
Huntington's Bylaws provide that, in order for a person to be eligible
for election as a director of Huntington, such person must be nominated by or at
the direction of Huntington's Board of Directors or by a shareholder entitled to
vote for the election of directors in accordance with certain specified
procedures. Shareholder nominations must be made pursuant to timely written
notice to the Secretary of Huntington. In most cases, a shareholder's notice, to
be timely, must be received at the principal executive offices of Huntington not
less than 30 days nor more than 60 days prior to the date of a shareholders'
meeting. The notice must set forth certain specified information about the
shareholder giving the notice and the shareholder's proposed nominee.
Huntington's Bylaws provide that the number of directors may be fixed
or changed by resolution of a majority of the entire Board of Directors to not
more than 25 nor fewer than three directors. The Board of Directors has
currently set the number of directors at 11. There are no residency requirements
for Huntington's Directors. Huntington's Charter provides for the division of
the Board of Directors into three classes. Each class must consist, as nearly as
possible, of one-third of the total number of directors. At each annual meeting
of shareholders, successors to the class of directors whose term expires at that
annual meeting are elected for a three-year term. If the number of directors is
changed, any increase or decrease must be apportioned among the classes so as to
maintain the number of directors in each class as nearly equal as possible. A
director holds office until the annual meeting for the year in which his term
expires and until his successor is elected and qualified. Neither Huntington's
Charter nor its Bylaws provide for cumulative voting. Under Huntington's
Charter, the shareholders of Huntington may remove a director with cause by the
affirmative vote of two-thirds of all shareholders entitled to vote at the
election of directors. No director may be removed by the shareholders of
Huntington without cause.
SHAREHOLDER PROPOSALS
In general, at any meeting of the shareholders of either Huntington or
First Michigan, only business that has been properly brought before such meeting
may be acted upon at such meeting. Huntington's Bylaws provide further that, in
order to be properly brought before a meeting of shareholders of Huntington,
business must be brought by or at the direction of the Board of Directors or
otherwise by a shareholder in accordance with certain specified procedures. A
shareholder proposing business must give timely written notice thereof to the
Secretary of Huntington. In most cases, a shareholder's notice, to be timely,
must be received at the principal executive offices of Huntington not less than
30 days nor more than 60 days prior to the date of a shareholders' meeting. The
notice must set forth certain specified information about the shareholder
proposing such business and the shareholder's proposal. Neither the Articles of
Incorporation nor Bylaws of First Michigan contain comparable provisions.
SPECIAL VOTING REQUIREMENTS FOR CERTAIN TRANSACTIONS
In general, Michigan law requires the corporation to obtain the
affirmative vote of the holders of the majority of the shares entitled to vote
to effect amendments to the articles of incorporation which would create
dissenters' rights, a merger, sale of assets other than in the ordinary course
of business, or dissolution of the corporation. Article VII of First Michigan's
Articles of Incorporation requires the affirmative vote of not less than
two-thirds of its outstanding shares with respect to a merger or consolidation
as a result of which First Michigan would not be the surviving corporation, the
sale of all or substantially all of First Michigan's assets, the voluntary
dissolution of First Michigan, or an amendment to or deletion of Article VII.
Further, the affirmative vote of not less than two-thirds of the voting power of
the then outstanding shares is required to amend, repeal, or adopt any
provisions inconsistent with, Articles VII and VIII of the Articles of
Incorporation of First Michigan.
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Maryland law requires the affirmative vote of the holders of two-thirds
of the outstanding shares of Huntington stock entitled to vote to effect
material amendments to the charter, a merger, consolidation, sale of assets
other than in the ordinary course of business, or dissolution of the
corporation. Maryland law also requires a "super majority" vote, in addition to
any vote otherwise required by law or Huntington's Charter, for certain business
combinations. Unless certain value and other standards are met or an exemption
is available, any business combination between Huntington and any interested
person (defined generally as a 10% shareholder or an affiliate of such
shareholder) must be recommended by the Board of Directors and approved by the
affirmative vote of at least 80% of the votes entitled to be cast by holders of
Huntington voting stock, voting together as a single class, and two-thirds of
the votes entitled to be cast by holders of voting stock other than voting stock
beneficially owned by an interested shareholder who is a party to the business
combination, voting together as a single class.
Both Maryland and Michigan law provide certain limitations with respect
to "control shares." "Control shares" are generally defined under Maryland and
Michigan law as shares of a corporation which would, if aggregated with all
other shares of that corporation owned by a person, entitle that person,
directly or indirectly, to exercise or direct the exercise of voting power
within specified ranges. "Control-share acquisition" is generally defined by
Maryland and Michigan law as an acquisition (other than an acquisition
specifically exempted from the definition of control share acquisition, such as
an acquisition pursuant to certain mergers), directly or indirectly, by any
person of ownership of, or the power to direct the exercise of voting power with
respect to, issued and outstanding control shares. Under Maryland law, control
shares acquired in a control share acquisition have no voting rights except to
the extent such rights are approved by the shareholders of the corporation by
the affirmative vote of two-thirds of all votes entitled to be cast on the
matter, excluding all interested shares. Under Michigan law, shareholders or
investors cannot vote any shares beyond the control shares unless they are
granted voting rights by a majority vote of all disinterested shareholders
(shareholders excluding the bidders or owners of control shares and the
corporation's management). If the shareholders do not elect to grant voting
rights to control shares, under certain circumstances, the control shares may
become subject to redemption by the corporation.
Additionally, both Maryland and Michigan law have "fair price"
provisions which impose additional voting requirements for business combinations
with "interested shareholders" (generally, persons holding more than 10% of the
corporation's voting stock). Under these provisions, except in cases in which
certain minimum price, form of consideration, and procedural requirements are
satisfied or for certain transactions that may be approved in advance by the
board of directors, higher than normal voting requirements are imposed. Under
Maryland law, transactions to which the higher voting requirements apply require
the recommendation of the board of directors of the corporation and must be
approved by at least 80% of the votes entitled to be cast, voting together as a
single group, and by at least two-thirds of the votes, other than the votes of
the interested shareholder (and affiliates of such interested shareholder),
voting together as a single group. Under Michigan law, transactions to which the
higher voting requirements apply require an advisory statement from the board of
directors and must be approved by not less than 90% of the votes of each class
of stock entitled to vote and by not less than two-thirds of the votes, other
than the votes of the interested shareholder (and affiliates of the interested
shareholder), of each class entitled to vote.
The super majority vote, control share, and fair price provisions of
Maryland law may deter or render more difficult attempts by third parties to
obtain control of Huntington if such attempts are not supported by Huntington's
Board of Directors. Similarly, Michigan's control share and fair price statutes
may deter or render more difficult attempts by third parties to obtain control
of First Michigan if such attempts are not supported by First Michigan's Board
of Directors. In addition, both Huntington and First Michigan have adopted
certain shareholder rights plans that give the shareholders of the respective
companies certain rights to purchase additional shares in the event that a
person or group of persons acquires a specified percentage of the outstanding
shares of the company or announces an intention to acquire such shares. These
plans have certain anti-takeover effects. See "EFFECT OF THE MERGER ON
SHAREHOLDERS' RIGHTS - RIGHTS PLANS."
EVALUATION OF MERGERS AND CONSOLIDATIONS
Article Ninth of Huntington's Charter provides that, in connection with
the exercise of its judgment in determining what is in the best interest of
Huntington when evaluating a merger or consolidation of Huntington (among
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other things), the Board of Directors must, in addition to considering the
adequacy of the amount to be paid in connection with any such transaction,
consider all of the following factors and any other factors which it deems
relevant: (i) the interests of the shareholders, including the relation of the
consideration offered in the then proposed transaction to the then current
market price of Huntington's stock and also the current value of Huntington in a
freely negotiated transaction and in relation to the Board of Directors'
estimate of the future value of Huntington as an independent entity or as the
subject of a future merger or consolidation, (ii) the interests of depositors of
banks affiliated with Huntington and of other creditors of Huntington, and (iii)
any other factors that the Board of Directors determines to be relevant,
including, among other factors, the social, legal, and economic effects upon
employees, suppliers, customers, and the business of Huntington and on the
communities in which Huntington operates.
Neither Michigan law nor First Michigan's Articles of Incorporation
contain provisions similar to the foregoing provisions contained in Huntington's
Charter.
SPECIAL MEETINGS
First Michigan's Bylaws provide that special meetings of the
shareholders for any purpose will be held when called by the President or the
Secretary and shall be called by either of them pursuant to resolution therefor
by the Board of Directors or when requested in writing by the holders of not
less than a majority of all the shares entitled to vote at the meeting.
Pursuant to Maryland law and Huntington's Bylaws, a special meeting of
shareholders may be called by the Board of Directors, the Chairman, or the
President of Huntington and must be called by the Secretary upon written request
of the holders of not less than 25% of the outstanding shares entitled to vote
at the meeting. Any shareholder request must state the purpose or purposes of
such meeting and the matters proposed to be acted on thereat. The Secretary must
inform such shareholders of the reasonably estimated cost of preparing and
mailing the notice of the meeting, and upon payment to Huntington of such costs,
the Secretary must give notice of such meeting, except that no special meeting
need be called upon the request of the holders of less than a majority of all
votes entitled to be cast at such meeting to consider any matter which is
substantially the same as a matter voted upon at any special meeting of the
shareholders held during the preceding twelve months.
DIRECTORS' AND SHAREHOLDERS' RIGHTS TO ADOPT, ALTER, OR REPEAL THE BYLAWS
As provided in First Michigan's Bylaws, the Bylaws may be amended or
repealed or new Bylaws may be adopted by either the affirmative vote of a
majority of the Board of Directors or the affirmative vote of a majority of the
outstanding voting stock of First Michigan shareholders.
Under Maryland law, the power to adopt, alter, and repeal the bylaws of
a corporation is vested in the shareholders, except to the extent that the
charter or bylaws vest it in the board of directors. Huntington's Charter and
Bylaws provide that Huntington's Bylaws may be adopted, amended, or repealed by
the affirmative vote of two-thirds of the votes entitled to be cast by the
outstanding shares of Huntington's voting stock or by the Board of Directors at
any regular or special meeting.
PERSONAL LIABILITY OF OFFICERS AND DIRECTORS TO SHAREHOLDERS
First Michigan's Articles of Incorporation provides that a director
shall not be personally liable to First Michigan for a breach of fiduciary duty
as a director, except for liability: (a) for any breach of the director's duty
of loyalty to First Michigan or its shareholders; (b) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law; (c) resulting from a violation of Section 551(1) of the Michigan Business
Corporation Act, relating to the declaration of a prohibited dividend or
distribution to shareholders or the making of a prohibited loan to a director,
officer, or employee; (d) for any transaction from which the director derived an
improper personal benefit; or (e) any act or omission occurring prior to March
1, 1987. In the event the Michigan
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Business Corporation Act is amended to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director of First Michigan shall be eliminated or limited to the fullest
extent permitted by the Michigan Business Corporation Act, as so amended.
Huntington's Charter provides that no director or officer will be
personally liable to the corporation or its shareholders for money damages to
the fullest extent permitted by Maryland statutory or decisional law. The effect
of this provision under Maryland law is that neither Huntington nor its
shareholders will be able to recover money damages against a director or officer
of Huntington unless Huntington or its shareholders is able to prove that (i)
the director or officer actually received an improper benefit in money,
property, or services (in which case recovery is limited to the actual amount of
such improper benefit), or (ii) the action, or failure to act, by the director
or officer was the result of active and deliberate dishonesty which was material
to the cause of action adjudicated in the proceeding.
RIGHTS PLANS
Huntington
In 1990, the Board of Directors of Huntington entered into the Rights
Agreement, which was amended on August 16, 1995 (the "Huntington Rights
Agreement"). Pursuant to the Huntington Rights Agreement, each Huntington
shareholder received one "Right" for each outstanding share of Huntington Common
Stock held by that shareholder. In addition, Huntington has and will continue to
issue one Right with each newly-issued share of Huntington Common Stock so that
each outstanding share of Huntington Common Stock (including the shares of
Huntington Common Stock to be to issued to First Michigan shareholders in
connection with the Merger) will have a Right attached.
The Rights currently have no value, are represented by the certificates
evidencing shares of Huntington Common Stock, and until the Distribution Date
(as defined below), trade only with such stock. The Rights will separate from
the Huntington Common Stock and become exercisable only if a person or group (an
"Acquiror") acquires beneficial ownership of 10% or more of the outstanding
Huntington Common Stock or announces a tender offer that would result in
ownership of 10% or more of the outstanding Huntington Common Stock (the
"Distribution Date"). The Huntington Rights Agreement provides that, at the
Distribution Date, each Right will entitle the holder to purchase for $66.12
(which price has been adjusted for stock dividends, as appropriate, including
the 1997 Huntington 10% Stock Dividend) (the "Exercise Price"), subject to
further adjustment from time to time for additional stock dividends, stock
splits, and other changes in capitalization, one one-hundredth of a share of
Series A Junior Participating Stock of Huntington (the "Series A Preferred
Shares"). Each such fractional Series A Preferred Share is intended to be the
practical equivalent of one share of Huntington Common Stock.
In the event an Acquiror acquires 10% or more of the then outstanding
shares of Huntington Common Stock (a "Triggering Event"), each Right held by the
Acquiror (or any affiliate or associate thereof) will become null and void and
each Right held by all other Huntington shareholders will entitle its holder to
purchase for the Exercise Price that number of Huntington Series A Preferred
Shares having a value (based upon the market value of Huntington Common Stock at
the time of the Triggering Event) equal to twice the Exercise Price. In the
event Huntington is acquired in a merger or other business combination or a
significant portion of its assets are sold, leased, exchanged, or otherwise
transferred to (i) a publicly traded Acquiror, each Right will entitle its
holder to purchase, for the Exercise Price, that number of shares of the
Acquiror which at the time of the transaction would have a market value of twice
the Exercise Price, or alternatively, (ii) an Acquiror that is not a publicly
traded corporation, each Right will entitle its holder to purchase, for the
Exercise Price, at such holder's option, (a) that number of shares of the
Acquiror (or, at such holder's option, of the surviving corporation in such
acquisition, which could be Huntington) which at the time of the transaction
would have a book value of twice the Exercise Price, or (b) if such Acquiror has
an affiliate that has publicly traded common shares, that number of common
shares of such affiliate which at the time of the transaction would have a
market value of twice the Exercise Price.
The number of Series A Preferred Shares or other securities or property
issuable upon exercise of a Right, and the Exercise Price are subject to
adjustment upon the occurrence of certain events including, for example, a stock
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dividend or split payable in Huntington Common Stock or Series A Preferred
Shares. The number of Rights may also be adjusted upon the occurrence of certain
events including, for example, a reverse stock split. The Rights are not
exercisable until the Distribution Date and will expire on August 16, 2005,
unless earlier redeemed by Huntington. Huntington may redeem the Rights for $.01
per Right under certain circumstances.
As with the super majority vote and control share provisions of
Maryland law, the Rights have certain anti-takeover effects. See "EFFECT OF THE
MERGER ON SHAREHOLDERS' RIGHTS - SPECIAL VOTING REQUIREMENTS FOR CERTAIN
TRANSACTIONS." The Rights may cause substantial dilution to a person or group
that attempts to acquire Huntington, except pursuant to an offer conditioned on
the Rights being redeemed or a substantial number of Rights being acquired. The
Rights, however, should not interfere with any merger or other business
combination approved by the Huntington Board of Directors due to the Board's
ability to redeem the Rights. Huntington's Board recognizes that a takeover
might in some circumstances be beneficial to Huntington's shareholders. Neither
the Rights Plan nor the Maryland law provisions described in this Joint Proxy
Statement/Prospectus are designed to preclude an acquisition of Huntington, but
rather will give the Huntington Board of Directors adequate opportunity to
evaluate whether an acquisition offer is in the best interest of Huntington and
to protect its shareholders from coercive acquisition methods.
The description and terms of the Rights are set forth in the Huntington
Rights Agreement, a copy of which is attached as Exhibit 1 to Huntington's
registration statement on Form 8-A, filed with the SEC on February 20, 1990, as
amended by an Amendment to Huntington Rights Agreement, a copy of which was
filed with the SEC on a Form 8-K dated August 16, 1995, both of which are
incorporated herein by reference. See "INFORMATION INCORPORATED BY REFERENCE."
The foregoing summary description of the Rights does not purport to be complete
and is qualified in its entirety by reference to the Huntington Rights
Agreement.
First Michigan
Effective October 11, 1990, the Board of Directors of First Michigan
adopted a Shareholder Protection Rights Plan (the "First Michigan Rights Plan").
The First Michigan Rights Plan is designed to protect the shareholders of First
Michigan against unsolicited attempts to acquire control of First Michigan in a
manner that does not offer a fair price to all of the shareholders. The First
Michigan Rights Plan provides for the distribution of one "Right" as a dividend
on each outstanding share of Common Stock. Each Right entitles a shareholder of
First Michigan to buy one one-hundredth of a share of Preferred Stock from First
Michigan at a specified exercise price. The Rights become exercisable only if a
person or group acquires 15% or more of First Michigan Common Stock or announces
a tender offer which would result in such ownership. Upon the acquisition of 15%
or more of First Michigan Common Stock by such a person or group, each Right is
adjusted so that it entitles the holder to purchase, for the exercise price,
shares of First Michigan Common Stock having a market value of twice the
exercise price. In addition, if any person or group acquires between 15% and 50%
of the Common Stock of First Michigan, the Board of Directors of First Michigan
may elect to exchange one share of First Michigan Common Stock or one
one-hundredth of a share of preferred stock for each Right. First Michigan is
entitled to redeem the Rights at $.01 per Right at any time before any person or
group acquires 15% or more of the Common Stock of First Michigan. In addition,
under the First Michigan Rights Plan, if First Michigan merges with a
shareholder holding 15% or more of First Michigan Common Stock, or such
shareholder engages in certain "self dealing" transactions, or causes 50% or
more of the assets of First Michigan to be sold or transferred, and upon certain
other events, holders of the Rights will be entitled to purchase stock in the
acquiring entity at half of the market value of such securities. On May 5, 1997,
the Board of Directors of First Michigan amended the plan to exclude Huntington
from the definition of "Acquiring Person" so that the consummation of the Merger
will not trigger any Rights under the First Michigan Rights Plan.
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<PAGE> 57
HUNTINGTON BANCSHARES INCORPORATED
GENERAL
Huntington, incorporated in Maryland in 1966, is a multi-state bank
holding company headquartered in Columbus, Ohio. At March 31, 1997, Huntington
had total assets of approximately $21.6 billion and total deposits of
approximately $13.9 billion.
Huntington's affiliates conduct a full service commercial and consumer
banking business, engage in mortgage banking, lease financing, trust services,
discount brokerage services, underwriting credit life and disability insurance,
and issuing commercial paper guaranteed by Huntington, and provide other
financial products and services. At March 31, 1997, Huntington's affiliates
operated 202 banking offices in Ohio and Northern Kentucky, 43 banking offices
in West Virginia, 43 banking offices in Michigan, 43 banking offices in Florida,
24 banking offices in Indiana, and one foreign office in the Cayman Islands. In
addition, Huntington's mortgage company affiliate has loan origination offices
throughout the Midwest and East Coast. Foreign banking activities, in total or
with any individual country, are not significant to the operations of
Huntington. At March 31, 1997, Huntington and its subsidiaries had approximately
8,135 full-time equivalent employees.
Competition in the form of price and service from other banks and
financial companies, such as savings and loans, credit unions, finance
companies, and brokerage firms, is intense in most of the markets served by
Huntington and its subsidiaries. Mergers between and the expansion of financial
institutions both within and outside Ohio have provided significant competitive
pressure in major markets. Since September 1995, when federal interstate banking
legislation became effective that made it permissible for bank holding companies
in any state to acquire banks in any other state, actual or potential
competition in each of Huntington's markets has been intensified. The same
federal legislation permits further competition through interstate branching
beginning in mid-1997, subject to certain limitations by individual states.
Huntington completed the acquisition of Peoples Bank of Lakeland, a
$551 million Florida state-chartered bank headquartered in Lakeland, Florida, in
January 1996 and the acquisition of Citi-Bancshares, Inc., a $548 million bank
holding company headquartered in Leesburg, Florida, in February 1997. On May 22,
1997, Huntington entered into an Agreement and Plan of Merger with The Bank of
Winter Park ("Winter Park"), a Florida state-chartered bank located in Winter
Park, Florida. As of March 31, 1997, Winter Park operated four banking offices,
had total assets of $90 million, and total deposits of $82.5 million. Other than
the Winter Park acquisition and the pending acquisition of First Michigan, as of
the date of this Joint Proxy Statement/Prospectus, Huntington has no
acquisitions pending; however, Huntington continues to explore other
opportunities to acquire banking and non-banking companies, both interstate and
intrastate.
THE HUNTINGTON NATIONAL BANK
Effective as of June 30, 1997, all but one of Huntington's banking
subsidiaries were merged into HNB. As of March 31, 1997, after giving effect to
the Huntington Reorganization, HNB operated 43 banking offices in Michigan, with
total assets in Michigan of $2.1 billion, and total deposits in its Michigan
banking offices of $1.9 billion. The principal executive offices of HNB are
located at Huntington Center, 41 South High Street, Columbus, Ohio 43287
(telephone number 614-480-8300). The principal executive offices of the
Huntington Michigan Region are located at 801 West Big Beaver Road, Troy,
Michigan 48099-5823 (telephone number 248-362-5000).
After consummation of the Merger, Huntington, through HNB, will have
134 banking offices, with approximately $6 billion in assets, in Michigan.
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<PAGE> 58
DIVIDENDS AND PRICE RANGE OF HUNTINGTON COMMON STOCK
Huntington Common Stock is traded on the Nasdaq National Market under
the symbol "HBAN" and is listed as "HuntgBcshr" or "HuntBanc" in most
newspapers. The following table sets forth the cash dividends declared and the
high and low last sale prices for Huntington Common Stock on the Nasdaq National
Market during the periods indicated. The dividends and price ranges have been
adjusted to reflect stock dividends and stock splits, as appropriate, including
the 1997 Huntington 10% Stock Dividend.
<TABLE>
<CAPTION>
PRICE RANGE
DIVIDENDS -------------------------------
PER SHARE HIGH LOW
------------- ------------- -------------
<S> <C> <C> <C>
1995:
First Quarter $ 0.15 $14(15/16) $13(5/16)
Second Quarter 0.15 16(5/8) 14(3/16)
Third Quarter 0.16 19(9/16) 16(5/16)
Fourth Quarter 0.16 20(15/16) 18(1/2)
1996:
First Quarter $ 0.16 $20(1/8) $18(5/8)
Second Quarter 0.16 20(7/8) 19(9/16)
Third Quarter 0.18 21(3/8) 19(5/16)
Fourth Quarter 0.18 26(1/4) 20(13/16)
1997:
First Quarter $ 0.18 $28(7/8) $22(3/4)
Second Quarter 0.18 27(1/4) 23(5/8)
</TABLE>
On May 2, 1997, the last trading day prior to the public announcement
of the proposed Merger, the high and low sales prices per share of Huntington
Common Stock on the Nasdaq National Market (adjusted for the 1997 Huntington 10%
Stock Dividend) were $27(5/8) and $25(13/16), respectively. On July 10, 1997,
such prices were $27(13/16) and $27(5/8) , respectively.
Huntington has declared regular cash dividends on Huntington Common
Stock in each quarter since Huntington was organized in 1966 and has increased
its cash dividend every year since that time. The Board of Directors of
Huntington presently intends to continue to consider the payment of regular
quarterly cash dividends on Huntington Common Stock. The amount and timing of
any future dividends will depend upon the earnings of Huntington and its
subsidiaries, their financial condition, need for funds, and other relevant
factors, however, Huntington has announced its intention to continue to pay
regularly quarterly dividends at a level of $0.20 per share subsequent to the
distribution of the 1997 Huntington 10% Stock Dividend. Huntington has also
issued either a stock dividend or stock split every year for 24 straight years.
See "GOVERNMENT REGULATION - DIVIDEND RESTRICTIONS" and "INCORPORATION OF
CERTAIN INFORMATION BY REFERENCE."
OTHER INFORMATION
Huntington Common Stock is actively traded in the over-the-counter
market under the Nasdaq symbol "HBAN." Because information regarding Huntington
is readily available to investors, the law permits this document to be
abbreviated by incorporating certain information regarding Huntington by
reference to certain reports and other documents filed with the SEC. See
"INFORMATION INCORPORATED BY REFERENCE." Other than as described herein, there
have been no material changes in the affairs of Huntington since the filing of
its Annual Report
- 52 -
<PAGE> 59
on Form 10-K for the year ended December 31, 1996, that have not been described
in a subsequent report filed with the SEC pursuant to the Securities and
Exchange Act of 1934, as amended.
FIRST MICHIGAN BANK CORPORATION
GENERAL
First Michigan, a bank holding company incorporated under the laws of
Michigan in 1973, is headquartered in Holland, Michigan, and has over 90 banking
offices, all in Michigan. Its primary markets are Grand Rapids, Holland, and
Muskegon which represent approximately 80% of the bank's deposits. At March 31,
1997, First Michigan was the fifth largest bank holding company headquartered in
Michigan based on total consolidated assets. At that date, First Michigan and
its subsidiaries had total assets of approximately $3.6 billion and total
deposits of $3.0 billion.
First Michigan owns, either directly or indirectly, all of the
outstanding stock of fifteen Michigan state-chartered banks: FMB-First Michigan
Bank (Zeeland), FMB-Lumberman's Bank (Muskegon), FMB-Community Bank (Dowagiac),
FMB-Oceana Bank (Hart), FMB-State Savings Bank (Lowell), FMB-Reed City Bank
(Reed City), FMB-Commercial Bank (Greenville), FMB-First Michigan Bank-Grand
Rapids (Grand Rapids), FMB-Maynard Allen Bank (Portland), FMB-Northwestern Bank
(Boyne City), FMB-Security Bank (Manistee), FMB-Old State Bank (Fremont),
FMB-Sault Bank (Sault Ste. Marie) (through First Michigan's ownership of
Superior Financial Corporation, a wholly owned subsidiary bank holding company),
FMB-Arcadia Bank (Kalamazoo), and FMB-Trust. First Michigan also has four
nonbank subsidiaries: (i) First Michigan Life Insurance Company, incorporated in
Arizona, which underwrites credit life and credit disability insurance in
connection with the extension of credit by the First Michigan Subsidiary Banks;
(ii) FMB-Brokerage Services, Inc., doing business as FMB Investment Services,
which provides retail securities brokerage services to customers of First
Michigan's Subsidiary Banks and others and through FMB-Trust; (iii)
FMB-Insurance Agency, Inc., which engages in the sale of various insurance
products through qualified licensed brokers employed by the First Michigan
Subsidiary Banks; and (iv) FMB Title Services, Inc., which provides title
insurance agency services in connection with mortgage loans made by the First
Michigan Subsidiary Banks. Underwriting of title insurance policies is provided
through Investors Title of North Carolina, an unaffiliated title insurance
company.
Except for FMB-Trust, the First Michigan Subsidiary Banks are engaged
in the business of general commercial, retail, and mortgage banking and,
indirectly through other subsidiaries, the businesses of trust services,
brokerage and investment services, underwriting credit and disability insurance,
and providing title insurance services. Financial services and products are
delivered through a network of full service branches, specialized offices,
automatic teller machines, telephones, and on-line banking. Commercial and
retail banking activities entail offering to businesses, individuals, and
governmental units a variety of deposit products including checking accounts,
savings accounts, and time deposits and short term deposits. The First Michigan
Subsidiary Banks conduct lending activities in the commercial and consumer
marketplaces, offering the following types of credits - secured and unsecured
business and personal loans; commercial, residential, and home equity mortgage
loans; construction financing; letters of credit; consumer installment loans
(automobiles and recreational vehicles and equipment); personal, home equity,
and overdraft protection lines of credit; and credit cards. FMB-Trust provides
trust services for all of the First Michigan Subsidiary Banks. FMB-Trust
maintains Employee Benefit, Personal Trust, Corporate Trust, Investment
Management, and Operational Groups.
Over the last few years, First Michigan has expanded in and into
existing and new markets through acquisitions. In 1995, First Michigan acquired
Superior Financial Corporation and its subsidiary, FMB-Sault Bank, and in 1996,
First Michigan acquired Arcadia Financial Corporation and its subsidiary,
FMB-Arcadia Bank.
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<PAGE> 60
DIVIDENDS AND PRICE RANGE OF FIRST MICHIGAN COMMON STOCK
First Michigan Common Stock is traded on the Nasdaq National Market
under the symbol "FMBC." The following table sets forth the cash dividends
declared and the high and low last sales prices for First Michigan Common Stock
on the Nasdaq National Market during the periods indicated. The dividends and
price ranges have been adjusted to reflect stock dividends and stock splits, as
appropriate, including the 1997 First Michigan 5% Stock Dividend.
<TABLE>
<CAPTION>
PRICE RANGE
DIVIDENDS --------------------------------
PER SHARE HIGH LOW
------------- ------------- --------------
<S> <C> <C> <C>
1995:
First Quarter $ 0.12 $16(11/16) $15(1/2)
Second Quarter 0.12 17(11/16) 16(3/16)
Third Quarter 0.13 18 16(1/2)
Fourth Quarter 0.14 20(7/16) 17(9/16)
1996:
First Quarter $ 0.14 $20(9/16) $18(11/16)
Second Quarter 0.15 22(11/16) 20(1/4)
Third Quarter 0.15 24(5/16) 21(7/16)
Fourth Quarter 0.17 28(1/4) 23(5/16)
1997:
First Quarter $ 0.17 $30 $26(3/16)
Second Quarter 0.17 30(3/4) 27
</TABLE>
On May 2, the last trading day prior to the announcement of the
proposed Merger, the high and low sales prices per share of First Michigan
Common Stock on the Nasdaq National Market were $30(3/4) and $29(1/2),
respectively. On July 10, 1997, such prices were $32 and $31, respectively.
OTHER INFORMATION
First Michigan Common Stock is actively traded in the over-the-counter
market under the Nasdaq symbol "FMBC." Because information regarding First
Michigan is readily available to investors, the law permits this document to be
abbreviated by incorporating certain information regarding First Michigan by
reference to certain reports and other documents filed with the SEC. See
"INFORMATION INCORPORATED BY REFERENCE." Other than as described herein, there
have been no material changes in the affairs of First Michigan since the filing
of its Annual Report on Form 10-K for the year ended December 31, 1996, that
have not been described in a subsequent report filed with the SEC pursuant to
the Securities and Exchange Act of 1934, as amended.
GOVERNMENT REGULATION
To the extent that the following information describes statutory or
regulatory provisions, it is qualified in its entirety by reference to such
statutory or regulatory provisions.
- 54 -
<PAGE> 61
GENERAL
As registered bank holding companies, Huntington and First Michigan are
subject to the supervision of the Federal Reserve Board and are required to file
with the Federal Reserve Board reports and other information regarding their
business operations and the business operations of their subsidiaries. Each of
them is also subject to examination by the Federal Reserve Board and required
(subject to the availability of the expedited notice procedure) to obtain
Federal Reserve Board approval prior to acquiring, directly or indirectly,
ownership or control of voting shares of any bank, if, after such acquisition,
it would own or control more than 5% of any class of voting stock of such bank.
In addition, pursuant to federal law and regulations promulgated by the Federal
Reserve Board, both Huntington and First Michigan may only engage in, or own or
control companies that engage in, activities deemed by the Federal Reserve Board
to be so closely related to banking as to be a proper incident thereto. Under
additional Federal Reserve regulations, both Huntington and First Michigan may,
in most cases, commence permissible new non-banking business activities de novo
with only subsequent notice to the Federal Reserve Board and may acquire smaller
companies that engage in permissible non-banking activities under an expedited
procedure requiring only 12 business days notice to the Federal Reserve Board.
The bank subsidiaries of both Huntington and First Michigan have
deposits insured by the Bank Insurance Fund ("BIF") of the FDIC and are subject
to supervision, examination, and regulation by the OCC, if a national bank, or
by state banking authorities and the FDIC if a state-chartered bank. Certain
deposits of certain of Huntington's bank subsidiaries were acquired from savings
associations and are insured by the Savings Association Insurance Fund ("SAIF")
of the FDIC. The nonbank subsidiaries of Huntington and First Michigan are also
subject to supervision, examination, and regulation by the Federal Reserve Board
and examination by applicable federal and state banking agencies. In addition to
the impact of federal and state supervision and regulation, the subsidiaries of
Huntington and First Michigan are affected significantly by the actions of the
Federal Reserve Board as it attempts to control the money supply and credit
availability in order to influence the economy.
HOLDING COMPANY STRUCTURE
The depository institution subsidiaries of both Huntington and First
Michigan are subject to affiliate transaction restrictions under federal law
which limit the transfer of funds by the subsidiary banks to their parent and
any nonbank subsidiaries of the parent, whether in the form of loans, extensions
of credit, investments, or asset purchases. Such transfers by any subsidiary
bank to its parent corporation or to any nonbank subsidiary of the parent are
limited in amount to 10% of the institution's capital and surplus and, with
respect to such parent and all such nonbank subsidiaries of the parent, to an
aggregate of 20% of any such institution's capital and surplus. Furthermore,
such loans and extensions of credit are required to be secured in specified
amounts. In addition, all affiliate transactions must be conducted on terms and
under circumstances that are substantially the same as such transactions with
unaffiliated entities. Under applicable regulations, at March 31, 1997,
approximately $193 million was available for loans to Huntington from its
subsidiary banks and approximately $13.6 million was available for loans to
First Michigan from its subsidiary banks.
The Federal Reserve Board has a policy to the effect that a bank
holding company is expected to act as a source of financial and managerial
strength to each of its subsidiary banks and to commit resources to support each
such subsidiary bank. Under the source of strength doctrine, the Federal Reserve
Board may require a bank holding company to make capital injections into a
troubled subsidiary bank, and may charge the bank holding company with engaging
in unsafe and unsound practices for failure to commit resources to such a
subsidiary bank. This capital injection may be required at times when either
Huntington or First Michigan may not have the resources to provide it. Any loans
by a holding company to any of its subsidiary banks are subordinate in right of
payment to deposits and to certain other indebtedness of such subsidiary bank.
Moreover, in the event of a bank holding company's bankruptcy, any commitment by
such holding company to a federal bank regulatory agency to maintain the capital
of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to a
priority of payment.
In 1989, the United States Congress passed comprehensive financial
institutions legislation known as the Financial Institutions Reform, Recovery,
and Enforcement Act ("FIRREA"). Among other things, FIRREA established
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<PAGE> 62
a new principle of liability on the part of depository institutions insured by
the FDIC for any losses incurred by, or reasonably expected to be incurred by,
the FDIC after August 9, 1989, in connection with (i) the default of a commonly
controlled FDIC-insured depository institution, or (ii) any assistance provided
by the FDIC to a commonly controlled FDIC-insured depository institution in
danger of default. "Default" is defined generally as the appointment of a
conservator or receiver and "in danger of default" is defined generally as the
existence of certain conditions indicating that a "default" is likely to occur
in the absence of regulatory assistance. Accordingly, in the event that any
insured bank subsidiary of Huntington or First Michigan causes a loss to the
FDIC, other bank subsidiaries of Huntington or First Michigan, respectively,
could be required to compensate the FDIC by reimbursing to it the amount of such
loss, and such reimbursement could cause a loss of Huntington's or First
Michigan's investments in such other subsidiaries. (At present, Huntington has
only one other subsidiary depository institution besides its lead bank.)
Federal law permits the OCC to order the pro rata assessment of
shareholders of a national bank whose capital stock has become impaired, by
losses or otherwise, to relieve a deficiency in such national bank's capital
stock. This statute also provides for the enforcement of any such pro rata
assessment of shareholders of such national bank to cover such impairment of
capital stock by sale, to the extent necessary, of the capital stock of any
assessed shareholder failing to pay the assessment. Similarly, the laws of
certain states provide for such assessment and sale with respect to the
subsidiary banks chartered by such states. Huntington and First Michigan, as the
sole shareholder of their respective subsidiary banks, are subject to such
provisions. Moreover, under legislation that became effective August 10, 1993,
the claims of a receiver of an insured depository institution for administrative
expenses and the claims of holders of deposit liabilities of such an institution
are accorded priority over the claims of general unsecured creditors of such an
institution, including the holders of the institution's note obligations, in the
event of liquidation or other resolution of such institution. As a result of
such legislation, claims of a receiver for administrative expenses and claims of
holders of deposit liabilities of Huntington's and First Michigan' respective
depository subsidiaries (including the FDIC, as subrogee of such holders) would
receive priority over the holders of notes and other senior debt of such
subsidiaries in the event of liquidation or other resolution and over the
interests of Huntington and First Michigan as sole shareholders of their
respective subsidiaries.
DIVIDEND RESTRICTIONS
Dividends from subsidiary banks are a significant source of funds for
payment of dividends to the shareholders of bank holding companies. There are,
however, statutory limits on the amount of dividends a depository institution
subsidiary can pay to its parent without regulatory approval.
Federal and state banking laws and regulations place certain
restrictions on the amount of dividends that a bank may pay or loans that it may
make to its parent company or companies. A subsidiary bank of Huntington may
not, without prior regulatory approval, pay a dividend in an amount greater than
such bank's undivided profits. In addition, the prior approval of the OCC is
required for the payment of a dividend by a national bank if the total of all
dividends declared by the bank in a calendar year would exceed the total of its
net income for the year combined with its retained net income for the two
preceding years. Under these provisions and in accordance with the
above-described formula, as of March 31, 1997, Huntington's subsidiary banks
have declared dividends to Huntington in 1997 of approximately $60 million and,
without regulatory approval, could declare additional dividends of approximately
$104.0 million during the balance of 1997, plus an additional amount equal to
their aggregate net income through the date of declaration. Under Michigan law
and applicable regulations, the First Michigan Subsidiary Banks could, without
regulatory approval, declare aggregate dividends in 1997 of approximately $125
million plus an additional amount equal to its net income during 1997.
If, in the opinion of the applicable regulatory authority, a bank under
its jurisdiction is engaged in or is about to engage in an unsafe or unsound
practice (which, depending on the financial condition of the bank, could include
the payment of dividends), such authority may require, after notice and hearing,
that such bank cease and desist from such practice. The Federal Reserve Board,
the OCC, and the FDIC have issued policy statements which provide that insured
banks and bank holding companies should generally only pay dividends out of
current operating earnings.
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<PAGE> 63
FDIC INSURANCE
The FDIC is mandated by law to assess deposit insurance premiums on
depository institutions sufficient, but no more than sufficient, to achieve and
maintain a target reserve level (also referred to as a designated reserve ratio
or DRR) for both the BIF and the SAIF of 1.25% of insured deposits. The BIF
achieved its target reserve level in mid-1995, and the SAIF did so in late 1996
by means of a special assessment on savings associations and banks that acquired
SAIF-insured deposits on or prior to March 31, 1995.
The FDIC has employed a risk-based insurance assessment system for both
insurance funds since 1994, under which it places each insured depository
institution in one of nine risk categories based on its level of capital and
other relevant information (such as supervisory evaluations). The insured
depository subsidiaries of Huntington and First Michigan are all BIF members and
are subject to this risk-based system.
In the light of the current financial situation of the funds and the
current low level of depository institution failure, the FDIC has established
adjusted schedules of BIF and SAIF assessments with annual premium rates ranging
from 0% to 0.27% of insured deposits, depending on the assessment risk
classification of the assessed institution. The 0% rate is available to
well-capitalized institutions having one of the two best supervisory ratings.
All Huntington and First Michigan depository subsidiaries are currently eligible
for the 0% rate. Unless the loss experience of the BIF in the future requires
the FDIC to make an upward adjustment of the assessment schedules, or a
Huntington or First Michigan depository subsidiary ceases to be well capitalized
or fails to obtain one of the two best supervisory ratings, all such
subsidiaries will continue to be able to obtain deposit insurance without
payment of premium.
CAPITAL REQUIREMENTS
The Federal Reserve Board has issued risk-based capital ratio and
leverage guidelines for bank holding companies, such as Huntington and First
Michigan. The risk-based capital ratio guidelines establish a systematic
analytical framework that makes regulatory capital requirements more sensitive
to differences in risk profiles among banking organizations, takes off-balance
sheet exposures into explicit account in assessing capital adequacy, and
minimizes disincentives to holding liquid, low-risk assets. Under the guidelines
and related policies, bank holding companies must maintain capital sufficient to
meet both a risk-based asset ratio test and leverage ratio test on a
consolidated basis. The risk-based ratio is determined by allocating assets and
specified off-balance sheet commitments into four weighted categories, with
higher weighting being assigned to categories perceived as representing greater
risk. A bank holding company's capital (as described below) is then divided by
total risk-weighted assets to yield the risk-based ratio. The leverage ratio is
determined by relating core capital (as described below) to total assets
adjusted as specified in the guidelines. Each of Huntington's and First
Michigan' subsidiary banks is subject to substantially similar capital
requirements adopted by applicable regulatory agencies.
Generally, under the applicable guidelines, a financial institution's
capital is divided into two tiers. "Tier 1", or core capital, includes common
equity, noncumulative perpetual preferred stock (excluding auction rate issues),
and minority interests in equity accounts of consolidated subsidiaries, less
goodwill and, with certain limited exceptions, all other intangible assets. Bank
holding companies, however, may include cumulative perpetual preferred stock in
their Tier 1 capital, up to a limit of 25% of such Tier 1 capital. "Tier 2", or
supplementary capital, includes, among other things, cumulative perpetual and
limited-life preferred stock, hybrid capital instruments, mandatory convertible
securities, qualifying subordinated debt, and the allowance for loan losses,
subject to certain limitations. "Total capital" is the sum of Tier 1 and Tier 2
capital.
The Federal Reserve Board and the other federal banking regulators
require that intangible assets, with certain exceptions, be deducted from Tier 1
capital. Under the Federal Reserve Board's rules, the only types of intangible
assets that may be included in (i.e., not deducted from) a bank holding
company's capital are originated mortgage servicing rights ("OMSRs"), readily
marketable purchased mortgage servicing rights ("PMSRs"), and purchased credit
card relationships ("PCCRs"), provided that, in the aggregate, the total amount
of OMSRs, PMSRs, and PCCRs included in capital does not exceed 50% of Tier 1
capital. PCCRs are subject to a separate sublimit of 25% of Tier 1 capital. The
amount of OMSRs, PMSRs, and PCCRs that a bank holding company may include in its
capital is limited
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<PAGE> 64
to the lesser of (i) 90% of such assets' fair market value (as determined under
the guidelines), or (ii) 100% of such assets' book value, each determined
quarterly. Identifiable intangible assets (i.e., intangible assets other than
goodwill) other than OMSRs, PMSRs, and PCCRs, including core deposit
intangibles, acquired on or before February 19, 1992 (the date the Federal
Reserve Board issued its original proposal for public comment), generally will
not be deducted from capital for supervisory purposes, although they will
continue to be deducted for purposes of evaluating applications filed by bank
holding companies.
Under the risk-based guidelines, financial institutions are required to
maintain a risk-based ratio (total capital to risk-weighted assets) of 8%, of
which 4% must be Tier 1 capital. The appropriate regulatory authority may set
higher capital requirements when an institution's circumstances warrant.
Under the leverage guidelines, financial institutions are required to
maintain a leverage ratio (Tier 1 capital to adjusted total assets, as specified
in the guidelines) of at least 3%. The 3% minimum ratio is applicable only to
financial institutions that meet certain specified criteria, including excellent
asset quality, high liquidity, low interest rate exposure, and the highest
regulatory rating. Financial institutions not meeting these criteria are
required to maintain a leverage ratio which exceeds 3% by a cushion of at least
100 to 200 basis points.
The guidelines also provide that financial institutions experiencing
internal growth or making acquisitions will be expected to maintain strong
capital positions substantially above the minimum supervisory levels.
Furthermore, the Federal Reserve Board's guidelines indicate that the Federal
Reserve Board will continue to consider a "tangible Tier 1 leverage ratio" in
evaluating proposals for expansion or new activities. The tangible Tier 1
leverage ratio is the ratio of an institution's Tier 1 capital, less all
intangibles, to total assets, less all intangibles.
Failure to meet applicable capital guidelines could subject the
financial institution to a variety of enforcement remedies available to the
federal regulatory authorities, including limitations on the ability to pay
dividends, the issuance by the regulatory authority of a capital directive to
increase capital, and the termination of deposit insurance by the FDIC, as well
as to the measures described below under "FEDERAL DEPOSIT INSURANCE CORPORATION
IMPROVEMENT ACT OF 1991" as applicable to undercapitalized institutions.
As of March 31, 1997, the Tier 1 risk-based capital ratios, total
risk-based capital ratios, and Tier 1 leverage ratios for Huntington and First
Michigan were as follows:
<TABLE>
<CAPTION>
HUNTINGTON
--------------------------
PRO FIRST
REQUIREMENT HISTORICAL FORMA(1) MICHIGAN
------------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
Tier 1 Risk-Based Capital Ratio......... 4.00% 8.92% 8.92% 9.80%
Total Risk-Based Capital Ratio.......... 8.00% 12.34% 12.05% 11.11%
Tier 1 Leverage Ratio................... 3.00% 7.60% 7.52% 7.73%
</TABLE>
- -------------------------
(1) Includes Huntington and First Michigan on a pro forma combined basis.
As of March 31, 1997, all of Huntington's and First Michigan's bank
subsidiaries had capital in excess of the minimum requirements.
FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991
In December 1991, Congress enacted the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA"), which substantially revised the
bank regulatory and funding provisions of the Federal Deposit Insurance Act and
made revisions to several other federal banking statutes.
- 58 -
<PAGE> 65
Among other things, FDICIA requires federal banking regulatory
authorities to take "prompt corrective action" with respect to depository
institutions that do not meet minimum capital requirements. For these purposes,
FDICIA establishes five capital tiers: "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized," and
"critically undercapitalized."
The federal banking regulatory agencies have adopted regulations to
implement the prompt corrective action provisions of FDICIA. Among other things,
the regulations define the relevant capital measures for the five capital
categories. An institution is deemed to be "well capitalized" if it has a total
risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of
6% or greater, and a leverage ratio of 5% or greater and is not subject to a
regulatory order, agreement, or directive to meet and maintain a specific
capital level for any capital measure. An institution is deemed to be
"adequately capitalized" if it has a total risk-based capital ratio of 8% or
greater, a Tier 1 risk-based capital ratio of 4% or greater, and, generally, a
leverage ratio of 4% or greater and the institution does not meet the definition
of a "well capitalized" institution. An institution that does not meet one or
more of the "adequately capitalized" tests is deemed to be "undercapitalized".
If the institution has a total risk-based capital ratio that is less than 6%, a
Tier 1 risk-based capital ratio that is less than 3%, or a leverage ratio that
is less than 3%, it is deemed to be "significantly undercapitalized". Finally,
an institution is deemed to be "critically undercapitalized" if it has a ratio
of tangible equity (as defined in the regulations) to total assets that is equal
to or less than 2%.
FDICIA generally prohibits a depository institution from making any
capital distribution (including payment of a cash dividend) or paying any
management fee to its holding company if the depository institution would
thereafter be undercapitalized. Undercapitalized institutions are subject to
growth limitations and are required to submit a capital restoration plan. If any
depository institution subsidiary is required to submit a capital restoration
plan, its parent company would be required to provide a limited guarantee
regarding compliance with the plan as a condition of approval of such plan by
the appropriate federal banking agency. If an undercapitalized institution fails
to submit an acceptable plan, it is treated as if it is significantly
undercapitalized. Significantly undercapitalized institutions may be subject to
a number of requirements and restrictions, including orders to sell sufficient
voting stock to become adequately capitalized, requirements to reduce total
assets, and cessation of receipt of deposits from correspondent banks.
Critically undercapitalized institutions may not, beginning 60 days after
becoming critically undercapitalized, make any payment of principal or interest
on their subordinated debt. In addition, critically undercapitalized
institutions are subject to appointment of a receiver or conservator within 90
days of becoming critically undercapitalized.
Under FDICIA, a depository institution that is not well capitalized is
generally prohibited from accepting brokered deposits and offering interest
rates on deposits higher than the prevailing rate in its market. Huntington
expects that the FDIC's brokered deposit rule will not adversely affect the
ability of its depository institution subsidiaries to accept brokered deposits.
Under the regulatory definition of brokered deposits, as of March 31, 1997,
Huntington's bank subsidiaries had an immaterial amount of brokered deposits.
First Michigan's bank subsidiaries had aggregate brokered deposits of $26.7
million as of the same date.
FDICIA, as amended, directs that each federal banking regulatory agency
prescribe standards, by regulation or guideline, for depository institutions
relating to internal controls, information systems, internal audit systems, loan
documentation, credit underwriting, interest rate exposure, asset growth,
compensation, asset quality, earnings, and stock valuation. The Federal Reserve
Board has adopted a regulation in the form of guidelines covering most of these
items, and the other federal banking regulatory agencies are expected to adopt
identical regulations. Huntington and First Michigan believe that the
regulations and guidelines will not have a material effect on the operations of
their respective depository institution subsidiaries.
INTERSTATE BRANCHING AND CONSOLIDATIONS
The Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994, enacted in September 1994, provides for nationwide interstate banking and
branching. Under the law, interstate acquisitions of banks or bank holding
companies in any state by bank holding companies in any other state became
permissible as of September 29, 1995. Interstate branching and consolidations of
existing bank subsidiaries in different states became permissible on
- 59 -
<PAGE> 66
June 1, 1997. The permissibility of consolidations and branching was allowed to
be accelerated by "opt-ins" by individual states until that date. States were
also, until June 1, 1997, permitted to adopt legislation to "opt-out" of
interstate branching and consolidations, but in that event the state's own banks
became ineligible to branch into, or consolidate their operations, in other
states. On June 30, 1997, Huntington availed itself of the interstate branching
authority and merged all of its subsidiary banks except The Huntington State
Bank, into its principal bank, The Huntington National Bank, and consolidated
all of its subsidiary holding companies, except Huntington Bancshares Florida,
Inc. into Huntington. Huntington Bancshares Florida, Inc. will not be merged or
liquidated in the foreseeable future into Huntington, pursuant to a private
letter ruling obtained from the Internal Revenue Service in connection with a
prior merger.
OTHER APPLICABLE REGULATIONS
The Riegle Community Development and Regulatory Improvement Act of
1994, also enacted in September 1994, made several changes in existing law
affecting bank holding companies, including a reduction in the minimum
post-approval antitrust review waiting period for depository institution mergers
and acquisitions, and the substitution of a notice for an application when a
bank holding company proposes to engage in, or acquire a company to engage in,
nonbank activities.
The Economic Growth and Regulatory Paperwork Reduction Act of 1996,
enacted in September 1996, provided, in addition to arrangements for the
recapitalization of the SAIF, regulatory relief for bank holding companies in
several significant areas. Bank holding companies that also owned savings
associations and were therefore subject to regulation by the Office of Thrift
Supervision ("OTS") as savings and loan holding companies were relieved of such
duplicative regulation, and neither future acquisitions of savings associations
by bank holding companies nor mergers of savings associations into banks will
any longer require application to and approval by the OTS. Acquisitions by
well-capitalized and well-managed bank holding companies of companies engaging
in permissible nonbanking activities (other than savings associations) may now
be made with only 12 days prior notice to the Federal Reserve Board, and de novo
engagement in such activities by such bank holding companies may be commenced
without prior notice and with only subsequent notice to the Federal Reserve
Board. The same legislation gave regulatory relief to banks in regard to
corporate governance, branching, disclosure, and other operational areas.
EXPERTS
The consolidated financial statements of Huntington included in
Huntington's Annual Report on Form 10-K for the year ended December 31, 1996,
incorporated by reference herein have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report included therein and
incorporated herein by reference. Such financial statements audited by Ernst &
Young LLP are incorporated by reference herein in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of First Michigan included in
First Michigan's Annual Report on Form 10-K for the year ended December 31,
1996, incorporated by reference herein, have been audited by BDO Seidman, LLP,
independent auditors, as set forth in their report included therein and
incorporated herein by reference. Such financial statements audited by BDO
Seidman, LLP, are incorporated by reference herein in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
- 60 -
<PAGE> 67
LEGAL OPINIONS
The validity of the Huntington Common Stock to be issued to First
Michigan shareholders pursuant to the Merger and certain other legal matters in
connection with the Merger will be passed upon for Huntington by Porter, Wright,
Morris & Arthur, Columbus, Ohio. As of March 31, 1997, members of such firm
participating in the representation of Huntington on this matter beneficially
owned an aggregate of 23,200 shares of Huntington Common Stock. Certain
legal matters in connection with the Merger will be passed on for First Michigan
by Varnum, Riddering, Schmidt & Howlett LLP, Grand Rapids, Michigan.
OTHER MATTERS
As of the date of this Joint Proxy Statement/Prospectus, management of
Huntington knows of no business other than that described in this Joint Proxy
Statement/Prospectus that will come before the Huntington Special Meeting and
management of First Michigan knows of no business other than that described in
this Joint Proxy Statement/Prospectus that will come before the First Michigan
Special Meeting. Should any other matters properly come before the Huntington
Special Meeting, the enclosed proxy confers upon the person or persons
designated to vote the shares discretionary authority to vote the same with
respect to any such other matter in accordance with their judgment, except that
no proxy that is voted against the approval of the Merger will be voted in favor
of any adjournment or postponement of the meeting for the purpose of soliciting
additional proxies. Should any other matters properly come before the First
Michigan Special Meeting, the enclosed proxy confers upon the person or persons
designated to vote the shares discretionary authority to vote the same with
respect to any such other matter in accordance with their judgment, except that
no proxy that is voted against the approval of the Merger Documents will be
voted in favor of any adjournment or postponement of the meeting for the purpose
of soliciting additional proxies.
- 61 -
<PAGE> 68
INDEX TO FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Introduction to Pro Forma Consolidated Financial Statements .............. F-1
Pro Forma Consolidated Balance Sheet as of March 31, 1997 ................ F-2
Pro Forma Consolidated Statement of Income for the three months ended
March 31, 1997 ....................................................... F-3
Pro Forma Consolidated Statement of Income for the year ended December 31,
1996 ................................................................. F-4
Pro Forma Consolidated Statement of Income for the year ended December 31,
1995 ................................................................. F-5
Pro Forma Consolidated Statement of Income for the year ended December 31,
1994 ................................................................. F-6
Notes to Pro Forma Consolidated Financial Statements ..................... F-7
</TABLE>
- 62 -
<PAGE> 69
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The unaudited pro forma consolidated financial statements give effect to the
Merger to be accounted for as a pooling of interests. The consolidated
financial statements on the following pages present (i) the historical
consolidated balance sheets of both Huntington and First Michigan at March 31,
1997, and the pro forma consolidated balance sheet as of March 31, 1997, giving
effect to the Merger as if it had occurred on that date; and (ii) the
historical consolidated statements of income of both Huntington and First
Michigan for the three months ended March 31, 1997, and for each of the three
years in the period ended December 31, 1996, and the pro forma consolidated
statements of income for the three months ended March 31, 1997, and for each of
the three years in the period ended December 31, 1996, giving effect to the
Merger as if it had been effected for all periods presented.
The pro forma balance sheet gives effect to nonrecurring charges related to the
Merger and assumes each of the outstanding shares of First Michigan Common
Stock is converted into 1.155 shares of Huntington Common Stock (as adjusted
for the 1997 Huntington 10% stock dividend). However, the pro forma
consolidated financial statements exclude the estimated effect of revenue
enhancements and expense savings associated with the consolidation of
operations of Huntington and First Michigan.
The pro forma consolidated financial statements are intended for informational
purposes and may not be indicative of the combined financial position or
results of operations that actually would have occurred had the transaction
been consummated during the periods or as of the dates indicated, or which will
be attained in the future. The pro forma consolidated financial statements
should be read in conjunction with the 1996 Annual Reports on Form 10-K and the
Quarterly Reports on Form 10-Q for the quarterly period ended March 31, 1997,
of Huntington and First Michigan.
F-1
<PAGE> 70
HUNTINGTON BANCSHARES INCORPORATED
Pro forma Consolidated Balance Sheet (Unaudited)
At March 31, 1997
(In Thousands)
<TABLE>
<CAPTION>
FIRST
HUNTINGTON MICHIGAN
BANCSHARES BANK PRO FORMA
INCORPORATED CORPORATION ADJUSTMENTS PRO FORMA
------------ ----------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks........................ $ 834,960 $ 134,266 $ 969,226
Interest bearing deposits in banks............. 1,219 2,216 3,435
Trading account securities..................... 2,856 2,856
Federal funds sold and securities purchased
under resale agreements...................... 10,143 801 10,944
Mortgages held for sale........................ 106,761 106,761
Securities available for sale - at fair value.. 4,897,160 476,097 5,373,257
Investment securities.......................... 59,662 258,561 318,223
Total loans.................................... 14,869,139 2,589,899 17,459,038
Less allowance for loan losses.............. 208,763 32,884 241,647
----------- ---------- -----------
Net loans...................................... 14,660,376 2,557,015 17,217,391
----------- ---------- -----------
Premises and equipment......................... 320,835 68,201 389,036
Customers' acceptance liability................ 59,247 59,247
Accrued income and other assets................ 650,259 67,186 $ 12,250 (A) 729,695
----------- ---------- --------- -----------
Total assets.................................... $21,603,478 $3,564,343 $ 12,250 $25,180,071
=========== ========== ========= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Total deposits................................. $13,940,274 $3,033,493 $16,973,767
Short-term borrowings.......................... 3,709,118 181,396 3,890,514
Bank acceptances outstanding................... 59,247 59,247
Long-term debt................................. 1,909,869 29,537 1,939,406
Accrued expenses and other liabilities......... 415,894 40,848 $ 35,000 (A) 491,742
----------- ---------- --------- -----------
Total liabilities............................ 20,034,402 3,285,274 35,000 23,354,676
----------- ---------- --------- -----------
Shareholders' Equity
Common stock................................. 1,264,664 26,407 1,291,071
Treasury stock............................... (154,822) (154,822)
Surplus...................................... 253,319 165,547 418,866
Retained earnings............................ 266,839 89,350 (22,750)(A) 333,439
Net unrealized gains/(losses) on securities
available for sale......................... (60,924) (2,235) (63,159)
----------- ---------- --------- -----------
Total Shareholders' Equity..................... 1,569,076 279,069 (22,750) 1,825,395
----------- ---------- --------- -----------
Total Liabilities and Shareholders' Equity...... $21,603,478 $3,564,343 $ 12,250 $25,180,071
=========== ========== ========= ===========
</TABLE>
See Notes to Pro Forma Consolidated Financial Statements.
F - 2
<PAGE> 71
HUNTINGTON BANCSHARES INCORPORATED
Pro forma Consolidated Statement of Income
For the Three Months Ended March 31, 1997 (Unaudited)
(In Thousands, except per share)
<TABLE>
<CAPTION>
FIRST
HUNTINGTON MICHIGAN
BANCSHARES BANK PRO FORMA
INCORPORATED CORPORATION (B)
------------ ----------- ---------
<S> <C> <C> <C>
Interest income
Loans ............................... $324,897 $59,210 $384,107
Securities .......................... 78,199 11,746 89,945
Other ............................... 2,088 397 2,485
-------- ------- --------
Total interest income ........... 405,184 71,353 476,537
-------- ------- --------
Interest expense
Deposits ............................ 116,376 31,997 148,373
Short-term borrowings ............... 50,868 2,163 53,031
Long-term debt ...................... 26,420 499 26,919
-------- ------- --------
Total interest expense .......... 193,664 34,659 228,323
-------- ------- --------
Net interest income ............. 211,520 36,694 248,214
-------- ------- --------
Provision for loan losses .............. 18,892 3,488 22,380
-------- ------- --------
Net interest income after
provision for loan losses .... 192,628 33,206 225,834
-------- ------- --------
Total non-interest income .............. 65,801 10,646 76,447
Total non-interest expense ............. 155,315 28,925 184,240
-------- ------- --------
Income before income taxes ...... 103,114 14,927 118,041
Provision for income taxes ............. 36,664 4,198 40,862
-------- ------- --------
Net income ...................... $ 66,450 $10,729 $ 77,179
======== ======= ========
Net income per Common Share (1) ........ $ 0.42 $ 0.38 $ 0.41
Average Common Shares Outstanding (1)... 157,103 28,228 189,706
</TABLE>
(1) Adjusted for the 1997 Huntington 10% stock dividend and the 1997 First
Michigan 5% stock dividend.
See Notes to Pro Forma Consolidated Financial Statements.
F - 3
<PAGE> 72
HUNTINGTON BANCSHARES INCORPORATED
Pro forma Consolidated Statement of Income
For the Year Ended December 31, 1996 (Unaudited)
(In Thousands, except per share)
<TABLE>
<CAPTION>
FIRST
HUNTINGTON MICHIGAN
BANCSHARES BANK PRO FORMA
INCORPORATED CORPORATION (B)
------------ ----------- ----------
<S> <C> <C> <C>
Interest income
Loans ............................... $1,193,896 $221,856 $1,415,752
Securities .......................... 304,794 45,143 349,937
Other ............................... 11,774 2,472 14,246
---------- -------- ----------
Total interest income ............ 1,510,464 269,471 1,779,935
---------- -------- ----------
Interest expense
Deposits ............................ 459,514 121,172 580,686
Short-term borrowings ............... 178,721 6,911 185,632
Long-term debt ...................... 113,405 1,008 114,413
---------- -------- ----------
Total interest expense ........... 751,640 129,091 880,731
---------- -------- ----------
Net interest income .............. 758,824 140,380 899,204
---------- -------- ----------
Provision for loan losses .............. 65,050 11,321 76,371
---------- -------- ----------
Net interest income after
provision for loan losses ..... 693,774 129,059 822,833
---------- -------- ----------
Total non-interest income .............. 272,993 37,737 310,730
Total non-interest expense ............. 567,946 108,349 676,295
---------- -------- ----------
Income before income taxes ....... 398,821 58,447 457,268
Provision for income taxes ............. 136,720 16,279 152,999
---------- -------- ----------
Net income ....................... $ 262,101 $ 42,168 $ 304,269
========== ======== ==========
Net income per Common Share (1) ........ $ 1.63 $ 1.50 $ 1.58
Average Common Shares Outstanding (1)... 160,553 28,118 193,029
</TABLE>
(1) Adjusted for the 1997 Huntington 10% stock dividend and the 1997 First
Michigan 5% stock dividend.
See Notes to Pro Forma Consolidated Financial Statements.
F - 4
<PAGE> 73
HUNTINGTON BANCSHARES INCORPORATED
Pro forma Consolidated Statement of Income
For the Year Ended December 31, 1995 (Unaudited)
(In Thousands, except per share)
<TABLE>
<CAPTION>
First
Huntington Michigan
Bancshares Bank Pro Forma
Incorporated Corporation (B)
------------ ----------- ----------
<S> <C> <C> <C>
Interest income
Loans ............................... $1,156,446 $202,395 $1,358,841
Securities .......................... 289,732 43,200 332,932
Other ............................... 15,718 3,002 18,720
---------- -------- ----------
Total interest income ............ 1,461,896 248,597 1,710,493
---------- -------- ----------
Interest expense
Deposits ............................ 425,631 113,037 538,668
Short-term borrowings ............... 212,110 5,793 217,903
Long-term debt ...................... 99,592 697 100,289
---------- -------- ----------
Total interest expense ........... 737,333 119,527 856,860
---------- -------- ----------
Net interest income .............. 724,563 129,070 853,633
---------- -------- ----------
Provision for loan losses .............. 28,721 7,991 36,712
---------- -------- ----------
Net interest income after
provision for loan losses ..... 695,842 121,079 816,921
---------- -------- ----------
Total non-interest income .............. 243,009 31,141 274,150
Total non-interest expense ............. 560,403 101,584 661,987
---------- -------- ----------
Income before income taxes ....... 378,448 50,636 429,084
Provision for income taxes ............. 133,959 13,324 147,283
---------- -------- ----------
Net income ....................... $ 244,489 $ 37,312 $ 281,801
========== ======== ==========
Net income per Common Share (1) ........ $ 1.47 $ 1.33 $ 1.42
Average Common Shares Outstanding (1)... 166,524 27,985 198,847
</TABLE>
(1) Adjusted for the 1997 Huntington 10% stock dividend and the 1997 First
Michigan 5% stock dividend.
See Notes to Pro Forma Consolidated Financial Statements.
F - 5
<PAGE> 74
HUNTINGTON BANCSHARES INCORPORATED
Pro forma Consolidated Statement of Income
For the Year Ended December 31, 1994 (Unaudited)
(In Thousands, except per share)
<TABLE>
<CAPTION>
First
Huntington Michigan
Bancshares Bank Pro Forma
Incorporated Corporation (B)
------------ ----------- ----------
<S> <C> <C> <C>
Interest income
Loans ............................... $ 975,604 $156,755 $1,132,359
Securities .......................... 212,257 42,435 254,692
Other ............................... 31,860 1,051 32,911
---------- -------- ----------
Total interest income ............ 1,219,721 200,241 1,419,962
---------- -------- ----------
Interest expense
Deposits ............................ 294,780 77,957 372,737
Short-term borrowings ............... 106,646 4,395 111,041
Long-term debt ...................... 62,245 857 63,102
---------- -------- ----------
Total interest expense ........... 463,671 83,209 546,880
---------- -------- ----------
Net interest income .............. 756,050 117,032 873,082
---------- -------- ----------
Provision for loan losses .............. 15,284 6,670 21,954
---------- -------- ----------
Net interest income after
provision for loan losses ..... 740,766 110,362 851,128
---------- -------- ----------
Total non-interest income .............. 213,865 29,462 243,327
Total non-interest expense ............. 588,157 95,321 683,478
---------- -------- ----------
Income before income taxes ....... 366,474 44,503 410,977
Provision for income taxes ............. 123,881 10,776 134,657
---------- -------- ----------
Net income ....................... $ 242,593 $ 33,727 $ 276,320
========== ======== ==========
Net income per Common Share (1) ........ $ 1.47 $ 1.21 $ 1.40
Average Common Shares Outstanding (1)... 164,814 27,975 197,125
</TABLE>
(1) Adjusted for the 1997 Huntington 10% stock dividend and the 1997 First
Michigan 5% stock dividend.
See Notes to Pro Forma Consolidated Financial Statements.
F - 6
<PAGE> 75
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(A) A liability of $35 million has been recorded in the pro forma
consolidated balance sheet to reflect management's estimate of
nonrecurring charges related to the Merger. The special charge also
resulted in an after-tax adjustment to retained earnings of $22.75
million. These expenses will be recognized upon consummation of the
Merger and are expected to consist generally of the following (shown
pre-tax and in millions):
<TABLE>
<S> <C>
Personnel Related...................... $21
Facilities and Equipment............... 6
Systems Integration.................... 5
Other.................................. 3
---
$35
===
</TABLE>
Personnel related costs consist primarily of estimated amounts to effect
the settlement of obligations under existing employment contracts,
severance pay for involuntary terminations, and associated employee
benefits. The remaining costs identified above are related to the
consolidation of bank operations and systems and include amounts
resulting from elimination of redundant operational facilities, lease
terminations, and write-offs of computer hardware and software due to
incompatibility or duplication. Management continues to review these
charges and there can be no assurance that such expenses will not exceed
the amounts described above.
(B) The pro forma consolidated statements of income do not give effect to
anticipated nonrecurring charges related to the Merger or the estimated
benefit of revenue enhancements and expense savings associated with the
consolidation of the operations of Huntington and First Michigan.
Earnings per common share amounts for Huntington and First Michigan are
based on the historical average number of common shares outstanding for
each company during the period, as adjusted for the 1997 Huntington 10%
Stock Dividend and the 1997 First Michigan 5% Stock Dividend,
respectively. The dilutive effects of unexercised stock options are not
significant. For purposes of the pro forma earnings per share
computation, the common shares of First Michigan have been adjusted to
the equivalent shares of Huntington for each period.
F-7
<PAGE> 76
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made as of May
5, 1997, between HUNTINGTON BANCSHARES INCORPORATED, a Maryland Corporation
("Huntington"), and FIRST MICHIGAN BANK CORPORATION, a Michigan corporation
("First Michigan"). (Huntington and First Michigan are collectively referred to
herein as the "Constituent Corporations.")
RECITALS:
A. Huntington is a corporation organized and existing under the laws
of the State of Maryland and its principal office in the State of Maryland is
located in Baltimore County.
B. Huntington is authorized to issue a total of 306,617,808 shares of
capital stock, consisting of (i) 300,000,000 shares of common stock, without par
value ("Huntington Common"), of which 144,739,081 shares were issued and
outstanding on April 22, 1997 (exclusive of treasury shares), all of which
shares are entitled to vote on the "Merger," as such term is defined in Article
1 hereof, and (ii) 6,617,808 shares of serial preferred stock, without par
value, none of which was issued and outstanding on April 22, 1997.
C. First Michigan was incorporated under the Michigan Business
Corporation Act on August 15, 1973, and currently exists as a corporation under
the laws of Michigan.
D. First Michigan is authorized to issue 51,000,000 shares of capital
stock, consisting of (i) 50,000,000 shares of common stock, $1.00 par value per
share ("First Michigan Common"), for an aggregate par value of $50,000,000, of
which 26,475,960 shares were issued and outstanding on April 30, 1997
(approximately 27,799,758 shares as adjusted to give effect to a stock dividend
that is payable on May 30, 1997, to holders of First Michigan Common of record
on April 30, 1997) (the "First Michigan 1997 Stock Dividend"), all of which
shares are entitled to vote on the "Merger," as such term is defined in Article
1 hereof, with an additional 999,079 shares of such stock, in the aggregate,
being subject to outstanding stock options previously granted (approximately
1,049,033 shares as adjusted for the First Michigan 1997 Stock Dividend)
(collectively, the "First Michigan Stock Options" and individually, a "First
Michigan Stock Option") under the First Michigan Stock Compensation Plan, the
First Michigan 1997 Director Stock Option Plan, and the First Michigan 1987
Stock Option Plan (collectively, the "First Michigan Stock Option Plans"), and
(ii) 1,000,000 shares of preferred stock, without par value, none of which was
issued and outstanding on April 30, 1997.
E. The respective Boards of Directors of Huntington and First
Michigan have approved the merger of First Michigan into Huntington upon and
subject to the terms and conditions contained herein.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing recitals, which shall
constitute a part of this Agreement, and the mutual promises contained herein,
the parties agree as follows:
ARTICLE 1
THE MERGER
Subject to the terms and conditions hereof, and the terms and
conditions contained in a certain Supplemental Agreement, of even date herewith,
among Huntington and First Michigan (the "Supplemental Agreement"), which is
incorporated herein by reference, at the "Effective Time" (as such term is
defined in Article 2 hereof), First Michigan
A-1
<PAGE> 77
shall be merged into Huntington (the "Merger"). Huntington shall be the
surviving corporation in the Merger (the "Surviving Corporation"), which shall
continue its corporate existence under the laws of Maryland following the
consummation of the Merger. At the Effective Time, the separate existence and
corporate organization of First Michigan shall cease.
ARTICLE 2
EFFECTIVE TIME
The Merger shall be effective at 11:59 p.m., local Ohio time (the
"Effective Time"), on the "Effective Date," which date shall be the latest of
(i) the day on which Articles of Merger with respect to the Merger have been
filed with the Maryland State Department of Assessments and Taxation in
accordance with the requirements of the laws of the State of Maryland, (ii) the
day on which a Certificate of Merger with respect to the Merger has been filed
with the Administrator of the Corporation, Securities and Land Development
Bureau of the Michigan Department of Consumer and Industry Services, in
accordance with the requirements of the laws of the State of Michigan, or (iii)
such later date as may be specified in such Articles and Certificate of Merger;
provided, however, that the Effective Date shall not be earlier than the date of
the expiration of the last required waiting period following receipt of the last
regulatory approval required in order to consummate the Merger. Unless the
parties shall hereafter agree otherwise in writing, the Effective Date shall be
the same day as the "Closing Date," as such term is defined in the Supplemental
Agreement.
ARTICLE 3
EFFECT OF THE MERGER
3.1 NAME. The name of the Surviving Corporation shall be "Huntington
Bancshares Incorporated."
3.2 ARTICLES OF INCORPORATION. The Articles of Incorporation of
Huntington in effect at the Effective Time shall be the articles of
incorporation of the Surviving Corporation, until amended in accordance with
law.
3.3 SEPARATE CORPORATE EXISTENCE; ASSETS; LIABILITIES. At the
Effective Time, the effect of the Merger shall be as provided by the applicable
provisions of the laws of Maryland. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, (i) the separate
existence of First Michigan shall cease; (ii) all assets and property then owned
by each Constituent Corporation, or which would inure to either of them,
including all real, personal, and mixed property, tangible and intangible
assets, choses in action, rights, and credits, and any legacies which either
such Constituent Corporation would have been capable of taking, shall
immediately, by operation of law, transfer to, vest in, and devolve upon the
Surviving Corporation, without any conveyance or further act or deed; (iii) the
Surviving Corporation shall be liable for all the debts and obligations of each
Constituent Corporation; and (iv) the rights of creditors and any liens on the
property or assets of either Constituent Corporation shall not be impaired.
3.4 FURTHER ACTIONS. From time to time, as and when requested by the
Surviving Corporation or by its successors, the officers and directors of First
Michigan in office at the Effective Time shall execute and deliver such
instruments and shall take or cause to be taken such further or other action as
shall be necessary in order to vest or perfect in the Surviving Corporation, or
to confirm of record or otherwise, title to, and possession of, all the assets,
property, interests, rights, privileges, immunities, powers, franchises, and
authority of First Michigan and otherwise to carry out the purposes of this
Agreement.
ARTICLE 4
CONVERSION OF SHARES
4.1 HUNTINGTON COMMON. All shares of Huntington Common that are
issued and outstanding immediately prior to the Effective Time shall continue to
be issued and outstanding shares of Huntington Common at and after the Effective
Time.
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4.2 FIRST MICHIGAN COMMON.
(a) At the Effective Time, the shares of First Michigan Common
issued and outstanding immediately prior to the Effective Time shall be
converted, by virtue of the Merger and without further action on the part of the
holders thereof (collectively, the "First Michigan Shareholders" and,
individually, a "First Michigan Shareholder"), into the right to receive shares
of the Huntington Common, as follows:
(i) Subject to adjustment in accordance with subparagraph
(ii) below, each outstanding share of First Michigan Common shall be
converted into the right to receive 1.05 shares of Huntington Common
(the "Conversion Ratio"); provided, however, that if both (A) the
average of the closing sale prices for a share of Huntington Common on
the five trading days immediately preceding the date that is five
trading days prior to the Effective Date (the "Determination Period"),
as reported on the Nasdaq National Market (the "Average Closing Sale
Price"), is less than $22.86 (the "Huntington Floor Price"), and (B)
the quotient obtained by dividing the average of the "Standard & Poors
Regional Bank Stock Index" (the "S&P Index") for the Determination
Period by 355.87 is greater than the quotient obtained by dividing the
Average Closing Sale Price by $28.575 (the "Huntington Base Price"),
and the difference between such quotients is greater than 0.15, then
the Constituent Corporations shall use their best efforts to
renegotiate the Conversion Ratio, and if the Constituent Corporations
are unable to agree on a revised Conversion Ratio, then this Agreement
and the Supplemental Agreement shall be terminated in accordance with
the terms of the Supplemental Agreement.
(ii) If the sum of the number of shares of First Michigan
Common outstanding at the Effective Time plus the number of shares of
First Michigan Common that are subject to outstanding First Michigan
Stock Options as of the Effective Time differs from 28,848,791 shares,
the Conversion Ratio will be automatically adjusted by multiplying the
original Conversion Ratio by the quotient obtained by dividing
28,848,791 by the sum of the number of shares of First Michigan Common
issued and outstanding on the Effective Date plus the number of shares
subject to the outstanding First Michigan Stock Options on the
Effective Date; provided, however, that, in performing any such
adjustment, the Conversion Ratio will be rounded to the nearest
hundredth of a share of Huntington Common.
(iii) In the event that Huntington changes (or establishes
a record date for changing) the number of shares of Huntington Common
issued and outstanding as a result of a stock dividend, stock split,
recapitalization, or similar transaction with respect to the
outstanding shares of Huntington Common (collectively, a "Huntington
Recapitalization"), and the record date therefor shall be after the
date of this Agreement and prior to the Effective Time, then the
Conversion Ratio shall be adjusted appropriately. In the event of a
reclassification of the outstanding shares of Huntington Common or a
consolidation or merger of Huntington with or into another corporation,
other than a merger in which Huntington is the surviving corporation
and which does not result in any reclassification, conversion, or
exchange of shares of Huntington Common, holders of First Michigan
Common shall receive, in lieu of each share of Huntington Common to be
issued in exchange for each share or portion of a share of First
Michigan Common pursuant to the terms hereof, the kind and amount of
securities, money, property, or other consideration receivable upon
such reclassification, consolidation, or merger by holders of
Huntington Common with respect to shares of Huntington Common
outstanding immediately prior to such reclassification, consolidation,
or merger.
(iv) In the event that a Huntington Recapitalization
occurs, or Huntington establishes a record date for such a Huntington
Recapitalization, prior to the expiration of the Determination Period,
the Huntington Floor Price and the Huntington Base Price set forth in
the subparagraph (i) above shall also be adjusted appropriately.
(v) No fractional shares of Huntington Common shall be
issued. Each holder of First Michigan Common who would otherwise be
entitled to receive a fractional part of a share of
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Huntington Common shall instead be entitled to receive cash in an
amount equal to the product resulting from multiplying such fraction
by the Average Closing Sale Price. No interest shall be payable with
respect to such cash payment.
(b) Any and all shares of First Michigan Common held by First
Michigan, Huntington, or any direct or indirect majority-owned subsidiary of
either of them, in each case other than in a fiduciary capacity or as a result
of debts previously contracted, shall be canceled and retired at the Effective
Time and no consideration shall be issued in exchange therefor.
(c) Each unexercised First Michigan Stock Option that is
outstanding immediately prior to the Effective Time shall be converted
automatically at the Effective Time into an option to purchase shares of
Huntington Common under the Huntington 1994 Stock Option Plan or similar
Huntington plan (a "Huntington Stock Option"), with the number of shares of
Huntington Common to be subject to a particular Huntington Stock Option to be
determined by converting the number of shares of First Michigan Common subject
to the First Michigan Stock Option into a number of Huntington Common shares in
accordance with the procedure for converting outstanding First Michigan Common
shares into Huntington Common shares as set forth in paragraph 4.2(a) hereof,
except that all fractional shares will be rounded to the nearest whole share,
and with the exercise price for each share of Huntington Common subject to a
particular Huntington Stock Option to be equal to the exercise price per First
Michigan Common share under the First Michigan Stock Option divided by the
Conversion Ratio determined in accordance with paragraph 4.2(a)(i) above;
provided, however, that, in the case of any First Michigan Stock Option to which
Section 421 of the Internal Revenue Code of 1986, as amended (the "Code"),
applies by reason of its qualification under Section 422 of the Code, the terms
of the Huntington Stock Option into which such First Michigan Stock Option is to
be converted, including the option price, the number of shares of Huntington
Common purchasable pursuant to such option, and the terms and conditions of
exercise of such option, shall be determined so as to comply with Section 424(a)
of the Code. Upon such conversion, all rights under any and all stock options
and stock option plans previously granted or adopted by First Michigan shall
terminate. The Constituent Corporations understand and acknowledge that the
First Michigan Stock Options granted pursuant to the First Michigan Stock
Compensation Plan and the First Michigan 1987 Stock Option Plan will all be
fully vested at or prior to the Effective Time, either by their terms or by
operation of the First Michigan Stock Option Plans as a result of the
consummation of the Merger and effective as of the Effective Time.
ARTICLE 5
EXCHANGE OF CERTIFICATES
(a) As promptly as practicable after the Effective Date but not
later than ten (10) business days after the Effective Date, Huntington shall
cause The Huntington National Bank (the "Exchange Agent") to prepare and mail to
each holder of record on the Effective Date of any shares of First Michigan
Common a letter of transmittal containing instructions for the surrender of all
certificates for shares of First Michigan Common. Upon the surrender by such
holder of a certificate or certificates for shares of First Michigan Common
standing in such holder's name to the Exchange Agent in accordance with the
instructions set forth in the letter of transmittal, such holder shall be
entitled to receive in exchange therefor a certificate representing the number
of whole shares of Huntington Common into which the shares represented by the
certificate or certificates so surrendered shall have been converted and, if
applicable, a check payable to such holder in the amount necessary to pay for
any fractional shares of Huntington Common which such holder would otherwise
have been entitled to receive, in accordance with subsection 4.2(a)(v) hereof.
Huntington shall deliver to the Exchange Agent such share certificates for whole
shares of Huntington Common and the amount of cash necessary to pay for all
fractional shares of Huntington Common in accordance with subsection 4.2(a)(v)
hereof in order to permit the Exchange Agent to promptly deliver such
certificates and cash to the holders of shares of First Michigan Common upon its
receipt of certificates representing shares of First Michigan Common. No
interest shall be payable with respect to either the whole shares of Huntington
Common or the cash payable in lieu of fractional shares. Immediately after the
third anniversary of the Effective Date, the Exchange Agent shall deliver to the
Surviving Corporation any unclaimed balance of cash owing with respect to
fractional shares and such cash shall be retained by, and become the property of
the Surviving Corporation, free and clear of any claims whatsoever.
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(b) Neither the Surviving Corporation nor the Exchange Agent
shall be obligated to deliver a certificate for Huntington Common or a check for
cash in lieu of fractional shares to a former shareholder of First Michigan
until such former shareholder surrenders the certificate or certificates
representing shares of First Michigan Common standing in such former
shareholder's name or, if such former shareholder is unable to locate such
certificate or certificates, an appropriate affidavit of loss and indemnity
agreement and bond as may be required by Huntington. Until so surrendered, each
outstanding certificate for shares of First Michigan Common shall be deemed for
all corporate purposes (except the payment of dividends) to evidence ownership
of the number of whole shares of Huntington Common into which the shares of
First Michigan Common represented thereby shall have been converted.
(c) After the Effective Date, no dividends or distributions
payable to holders of record of Huntington Common shall be paid to any holder of
an outstanding certificate or certificates formerly representing shares of First
Michigan Common until such certificate(s) are surrendered by such holder in
accordance with the terms of this Agreement. Promptly upon surrender of such
outstanding certificate(s), there shall be paid to such holder of the
certificate or certificates for Huntington Common issued in exchange therefor
the amount of dividends and other distributions, if any, which theretofore
became payable with respect to such full shares of Huntington Common, but which
have not theretofore been paid on such stock. No interest shall be payable with
respect to the payment of any dividends or other distributions. All such
dividends or other distributions unclaimed at the end of three years from the
Effective Date shall, to the extent such dividends have been previously paid to
the Exchange Agent, be repaid by the Exchange Agent to Huntington, and
thereafter the holders of such outstanding certificates for First Michigan
Common shall look, subject to applicable escheat, unclaimed funds, and other
laws, only to Huntington as general creditors for payment thereof.
(d) The stock transfer books of First Michigan shall be closed
as of the close of business on the day that is one business day prior to the
Effective Date. After such date, there shall be no further registration on the
records of First Michigan of transfers of outstanding certificates formerly
representing shares of First Michigan Common.
(e) Huntington is empowered to adopt additional reasonable
rules and regulations with respect to the matters referred to in this Article 5
not inconsistent with the provisions of this Agreement.
(f) Adoption of this Agreement by the shareholders of First
Michigan shall constitute ratification of the appointment of the Exchange Agent.
ARTICLE 6
SHAREHOLDER APPROVAL
This Agreement shall be submitted to the shareholders of Huntington and
First Michigan for approval in accordance with applicable law and their
respective Governing Documents as soon as reasonably practicable following the
execution of this Agreement.
ARTICLE 7
MISCELLANEOUS PROVISIONS
7.1 AMENDMENT. At any time prior to the Effective Time, the parties
hereto may amend, modify, or supplement this Agreement by mutual agreement
authorized by their respective boards of directors, whether before or after the
shareholders of First Michigan have adopted this Agreement, provided that the
number of shares of Huntington Common into which shares of First Michigan Common
are to be converted as determined in paragraph 4.2(a) hereof shall not be
changed after the shareholders of First Michigan have adopted this Agreement
without the approval of such shareholders in the same manner as required for the
adoption of this Agreement; and provided, further, that this Agreement may not
be amended, modified, or supplemented, except by an instrument in writing
executed and delivered by each of the parties hereto.
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7.2 TERMINATION. Unless extended by the mutual agreement of the
parties hereto, this Agreement may be terminated, notwithstanding the adoption
thereof by the shareholders of Huntington or First Michigan in the manner and
under the circumstances set forth in the Supplemental Agreement.
7.3 ENTIRE AGREEMENT. This Agreement, together with the Supplemental
Agreement and any exhibits hereto or thereto, constitutes the entire agreement
among the parties with respect to the subject matter hereof and thereof and
supersedes all prior agreements and understandings, oral or written, among the
parties with respect to such subject matter and no party shall be liable or
bound to the others in any manner by any covenants, representations, or
warranties except as specifically set forth herein or therein.
7.4 CAPTIONS. The captions used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
7.5 ASSIGNMENT. Neither this Agreement nor any rights, interests, or
obligations hereunder shall be assigned or transferred by operation of law or
otherwise by any of the parties hereto without the prior written consent of the
other parties.
7.6 BENEFIT. Nothing in this Agreement, express or implied, is
intended to confer upon any person or entity other than the parties hereto and
their successors in interest any rights or remedies under or by reason of this
Agreement.
7.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original for all purposes, but
such counterparts taken together shall constitute one and the same instrument.
7.8 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Ohio without regard to its conflict of
laws principles, except to the extent that Maryland law governs certain aspects
of the Merger as it relates to Huntington or Michigan law governs certain
aspects of the Merger as it relates to First Michigan.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
HUNTINGTON BANCSHARES INCORPORATED
By: /s/ Frank Wobst
-------------------------------------------
Frank Wobst, Chairman and Chief Executive
Officer
FIRST MICHIGAN BANK CORPORATION
By: /s/ David M. Ondersma
-------------------------------------------
David M. Ondersma, Chairman and Chief
Executive Officer
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EXHIBIT B
SUPPLEMENTAL AGREEMENT
BETWEEN
HUNTINGTON BANCSHARES INCORPORATED
AND
FIRST MICHIGAN BANK CORPORATION
DATED MAY 5, 1997
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 1 - DEFINITIONS ..................................................................... B-6
1.1 Definitions Contained Elsewhere in this Agreement............................. B-6
1.2 Definitions Contained in the Merger Agreement................................. B-7
1.3 Additional Definitions........................................................ B-7
1.4 Interpretations............................................................... B-13
ARTICLE 2 - REPRESENTATIONS AND WARRANTIES OF FIRST MICHIGAN.................................... B-13
2.1 Organization, Standing, and Power............................................. B-13
2.2 Authority; No Breach By Agreement............................................. B-14
2.3 Capital Stock................................................................. B-14
2.4 First Michigan Subsidiaries................................................... B-15
2.5 Financial Statements.......................................................... B-15
2.6 Absence of Undisclosed Liabilities............................................ B-15
2.7 Absence of Certain Changes or Events.......................................... B-15
2.8 Tax Matters................................................................... B-16
2.9 [Reserved].................................................................... B-17
2.10 Assets and Insurance.......................................................... B-17
2.11 Environmental Matters......................................................... B-18
2.12 Compliance with Laws.......................................................... B-18
2.13 Labor Relations............................................................... B-19
2.14 Employee Benefit Plans........................................................ B-19
2.15 Material Contracts............................................................ B-21
2.16 Legal Proceedings............................................................. B-21
2.17 Reports ..................................................................... B-22
2.18 Statements True and Correct................................................... B-22
2.19 Tax, Regulatory, and Pooling Matters.......................................... B-22
</TABLE>
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<TABLE>
<S> <C>
2.20 State Takeover Laws........................................................... B-22
2.21 Charter Provisions............................................................ B-22
2.22 Compliance with Certain Laws.................................................. B-22
2.23 Community Reinvestment Act Compliance......................................... B-23
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF HUNTINGTON........................................ B-23
3.1 Organization, Standing, and Power............................................. B-23
3.2 Authority; No Breach By Agreement............................................. B-23
3.3 Capital Stock................................................................. B-24
3.4 Huntington Subsidiaries....................................................... B-24
3.5 Financial Statements.......................................................... B-24
3.6 Absence of Undisclosed Liabilities............................................ B-25
3.7 Absence of Certain Changes or Events.......................................... B-25
3.8 Tax Matters................................................................... B-25
3.9 Assets and Insurance.......................................................... B-25
3.10 Compliance with Laws ........................................................ B-26
3.11 Employee Benefit Plans........................................................ B-26
3.12 Legal Proceedings............................................................. B-27
3.13 Reports ..................................................................... B-27
3.14 Statements True and Correct................................................... B-27
3.15 Tax, Regulatory, and Pooling Matters.......................................... B-28
3.16 Community Reinvestment Act Compliance......................................... B-28
ARTICLE 4 - MUTUAL COVENANTS OF THE PARTIES..................................................... B-28
4.1 Adverse Changes in Condition.................................................. B-28
4.2 Reports ..................................................................... B-28
4.3 Registration Statement; Proxy Statements; Shareholder Approval................ B-28
4.4 Applications.................................................................. B-29
4.5 Agreement as to Efforts to Consummate......................................... B-29
</TABLE>
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<TABLE>
<S> <C>
4.6 Investigation and Confidentiality............................................. B-29
4.7 Press Releases................................................................ B-30
4.8 Tax and Accounting Treatment.................................................. B-30
4.9 No Rights Triggered........................................................... B-30
ARTICLE 5 - COVENANTS OF FIRST MICHIGAN......................................................... B-30
5.1 Conduct of the Business....................................................... B-30
5.2 Negative Covenants of First Michigan.......................................... B-30
5.3 Certain Actions............................................................... B-32
5.4 Agreements with Respect to Affiliates......................................... B-32
5.5 Certain Policies of First Michigan............................................ B-33
5.6 Agreements with Respect to First Michigan Stock Option Plans.................. B-33
ARTICLE 6 - COVENANTS OF HUNTINGTON............................................................. B-33
6.1 Negative Covenants of Huntington.............................................. B-33
6.2 Nasdaq Listing................................................................ B-34
6.3 Employee Benefits and Contracts............................................... B-34
6.4 Indemnification of Directors and Officers..................................... B-34
6.5 Stock Options................................................................. B-35
ARTICLE 7 - CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE................................... B-36
7.1 Conditions to Obligations of Each Party....................................... B-36
7.2 Conditions to Obligations of Huntington....................................... B-37
7.3 Conditions to Obligations of First Michigan................................... B-38
ARTICLE 8 - CLOSING ..................................................................... B-38
ARTICLE 9 - TERMINATION ..................................................................... B-39
9.1 Termination................................................................... B-39
9.2 Effect of Termination......................................................... B-40
9.3 Non-Survival of Representations and Covenants................................. B-40
</TABLE>
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<TABLE>
<S> <C>
ARTICLE 10 - MISCELLANEOUS...................................................................... B-40
10.1 Expenses...................................................................... B-40
10.2 Termination Fee............................................................... B-40
10.3 Brokers and Finders........................................................... B-41
10.4 Entire Agreement.............................................................. B-41
10.5 Amendments.................................................................... B-41
10.6 Waivers ..................................................................... B-41
10.7 Assignment.................................................................... B-42
10.8 Notices ..................................................................... B-42
10.9 Governing Law................................................................. B-43
10.10 Counterparts.................................................................. B-43
10.11 Captions...................................................................... B-43
10.12 Interpretations............................................................... B-43
10.13 Enforcement of Agreement...................................................... B-43
10.14 Severability.................................................................. B-43
10.15 Benefit ..................................................................... B-44
EXHIBITS:
1 Warrant Purchase Agreement.................................................... B-45
2 Matters as to which Varnum, Riddering, Schmidt & Howlett LLP Shall Opine...... B-56
3 Matters as to which Porter, Wright, Morris & Arthur Shall Opine............... B-57
</TABLE>
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SUPPLEMENTAL AGREEMENT
THIS SUPPLEMENTAL AGREEMENT (this "Agreement") is made and entered into
as of May 5, 1997, by and among FIRST MICHIGAN BANK CORPORATION ("First
Michigan"), a Michigan corporation having its principal office located in
Holland, Michigan; and HUNTINGTON BANCSHARES INCORPORATED ("Huntington"), a
Maryland corporation having its principal office located in Columbus, Ohio.
RECITALS:
A. Huntington is a registered bank holding company under the BHC Act.
B. First Michigan is a registered bank holding company under the BHC
Act.
C. Concurrently with the execution and delivery of this Agreement, the
Parties are entering into (i) an Agreement and Plan of Merger (the "Merger
Agreement"), which provides for the merger of First Michigan into Huntington in
accordance with the terms and conditions contained in the Merger Agreement and
in this Agreement (the "Merger"), (ii) a certain Warrant Purchase Agreement, in
the form attached as Exhibit 1 hereto (the "Warrant Purchase Agreement"), and
(iii) a certain Warrant, in the form attached as Attachment A to the Warrant
Purchase Agreement (the "Warrant"). (This Agreement, together with the Merger
Agreement, the Warrant Purchase Agreement, and the Warrant are sometimes
hereinafter collectively referred to as the "Merger Documents.")
D. The Parties desire to enter into this Agreement for the purpose of
setting forth certain representations, warranties, and covenants made by each
party as an inducement to the other parties to execute and deliver the Merger
Agreement and to consummate the Merger and to set forth certain additional terms
and conditions applicable to the Merger.
AGREEMENT:
NOW, THEREFORE, in consideration of the above recitals and the mutual
warranties, representations, covenants, and agreements set forth herein, the
Parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS CONTAINED ELSEWHERE IN THIS AGREEMENT. For purposes of
this Agreement, the following terms shall have the meanings ascribed to them in
the Preamble or Recitals of this Agreement:
this "AGREEMENT";
"FIRST MICHIGAN";
"HUNTINGTON";
the "MERGER";
the "MERGER AGREEMENT";
the "MERGER DOCUMENTS";
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the "WARRANT";
the "WARRANT PURCHASE AGREEMENT";
1.2 DEFINITIONS CONTAINED IN THE MERGER AGREEMENT. For purposes of this
Agreement, the following terms shall have the meanings ascribed to them in the
Merger Agreement:
the "EFFECTIVE DATE";
the "EFFECTIVE TIME";
"FIRST MICHIGAN COMMON";
the "FIRST MICHIGAN 1997 STOCK DIVIDEND";
the "FIRST MICHIGAN STOCK OPTION PLANS";
the "FIRST MICHIGAN STOCK OPTIONS";
"HUNTINGTON COMMON"; and
the "SURVIVING CORPORATION";
1.3 ADDITIONAL DEFINITIONS. For purposes of this Agreement, the
following terms shall have the following meanings:
"ACQUISITION TRANSACTION" shall mean a transaction involving
(A) the sale or other disposition of more than 20 percent of the shares
of the capital stock or any other class of voting securities of First
Michigan, including, but not limited to, a Tender Offer, involving any
Person other than Huntington or a Huntington Affiliate, (B) the sale or
other disposition of 15 percent or more of the consolidated assets or
deposits of First Michigan or of the banks owned by First Michigan, in
the aggregate, to any Person other than Huntington or a Huntington
Affiliate, or (C) a merger or consolidation involving First Michigan
and any Person other than Huntington or a Huntington Affiliate, other
than a transaction pursuant to which First Michigan will be the
surviving corporation and the current shareholders of First Michigan
will be the owners of a majority of the stock of the surviving
corporation following the transaction.
"AFFILIATE" of a Person shall mean: (i) any other Person
directly, or indirectly through one or more intermediaries,
controlling, controlled by or under common control with such Person;
(ii) any officer, director, partner, employer, or direct or indirect
beneficial owner of any 10% or greater equity or voting interest of
such Person; or (iii) any other Person for which a Person described in
clause (ii) acts in any such capacity.
"ASSETS" of a Person shall mean all of the assets, properties,
businesses and rights of such Person of every kind, nature, character
and description, whether real, personal or mixed, tangible or
intangible, accrued or contingent, or otherwise relating to or utilized
in such Person's business, directly or indirectly, in whole or in part,
whether or not carried on the books and records of such Person, and
whether or not owned in the name of such Person or any Affiliate of
such Person and wherever located.
"BHC ACT" shall mean the federal Bank Holding Company Act of
1956, as amended.
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"CERCLA" shall mean the Comprehensive Environmental Response
Compensation and Liability Act, as amended, 42 U.S.C. 9601, et seq.
"CONSENT" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"CONTRACT" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding or undertaking of
any kind or character, or other document to which any Person is a party or
that is binding on any Person or its capital stock, Assets, or business.
"DEFAULT" shall mean (i) any breach or violation of or default under
any Contract, Order or Permit, (ii) any occurrence of any event that with
the passage of time or the giving of notice or both would constitute a
breach or violation of or default under any Contract, Order or Permit, or
(iii) any occurrence of any event that with or without the passage of time
or the giving of notice would give rise to a right to terminate or revoke,
change the current terms of, or renegotiate, or to accelerate, increase, or
impose any Liability under, any Contract, Order or Permit, where, in any
such event, such Default is reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on a Party.
"DISCLOSURE MEMORANDUM" shall mean the written information entitled
"Disclosure Memorandum" delivered by First Michigan to Huntington prior to
the date of this Agreement identifying the matters contained therein and,
with respect to each disclosure made therein, specifically referencing each
Section of this Agreement under which such disclosure is being made.
Information disclosed with respect to one Section shall not be deemed to be
disclosed for purposes of any other Section not specifically referenced
with respect thereto.
"EMPLOYEE BENEFIT PLAN" of a Party shall mean any and all employee
benefit plans of such Party as defined in ERISA, including, but not limited
to, and all pension, retirement, profit-sharing, deferred compensation,
stock option, employee stock ownership, severance pay, vacation, bonus, or
other incentive plans, all other written employee programs, arrangements,
or agreements, all medical, vision, dental, or other health plans, all life
insurance plans, and all other employee benefit plans or fringe benefit
plans, currently adopted, maintained by, sponsored in whole or in part by,
or contributed to by a Party or any Subsidiary thereof for the benefit of
employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries and under which employees, retirees,
dependents, spouses, directors, independent contractors, or other
beneficiaries are eligible to participate.
"ENVIRONMENTAL LAWS" shall mean all Laws relating to pollution or
protection of human health or the environment (including ambient air,
surface water, ground water, land surface or subsurface strata) and which
are administered, interpreted or enforced by the United States
Environmental Protection Agency and state and local agencies with
jurisdiction over, and including common law in respect of, pollution or
protection of the environment, including CERCLA, RCRA, and other Laws
relating to emissions, discharges, releases or threatened releases of any
Hazardous Substance, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
any Hazardous Substance.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA AFFILIATE" shall have the meaning provided in Section 2.14 of
this Agreement.
"ERISA PLAN" of a Party shall mean an Employee Benefit Plan of that
Party or any Subsidiary of such Party which is an "employee pension benefit
plan," as that term is defined in Section 3(2) of ERISA
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"EXHIBITS" 1 through 3, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof, and may be
referred to in this Agreement and any other related instrument or document
without being attached hereto.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"FIRST MICHIGAN BONUS PLAN" shall mean the First Michigan Management
Bonus Plan, as in effect as of the date of this Agreement.
"FIRST MICHIGAN BONUS PLAN PARTICIPANTS" shall mean all employees of
First Michigan who are participants in the First Michigan Bonus Plan on the
Effective Date, in accordance with the terms of the First Michigan Bonus
Plan.
"FIRST MICHIGAN BONUS POOL" shall mean the estimated aggregate dollar
amount that would be or become payable under the First Michigan Bonus Plan
for the entire 1997 calendar year, in the agreed amount of $3,400,000
(which amount was calculated without regard to any accounting or accrual
adjustments that may be required under or resulting from the Merger
Documents or the transactions contemplated thereby), multiplied by a
fraction, the numerator of which is the number of days between January 1,
1997, and the Effective Date (inclusive), and the denominator of which is
365.
"FIRST MICHIGAN COMPANIES" shall mean, collectively, First Michigan and
all First Michigan Subsidiaries.
"FIRST MICHIGAN FINANCIAL STATEMENTS" shall mean (i) the consolidated
balance sheets of First Michigan (including related notes and schedules, if
any) as of December 31, 1996 and 1995, and the related statements of
income, changes in shareholders' equity, and cash flows (including related
notes and schedules, if any) for each of the three years ended December 31,
1996, 1995, and 1994, with the report thereon of BDO Seidman, LLP, as filed
by First Michigan in SEC Documents, and (ii) the unaudited consolidated
balance sheets of First Michigan (including related notes and schedules, if
any), and the related statements of income, changes in shareholders'
equity, and cash flows (including related notes and schedules, if any)
included in SEC Documents filed by First Michigan with respect to periods
ended subsequent to December 31, 1996.
"FIRST MICHIGAN RIGHTS AGREEMENT" shall mean the Shareholder Protection
Rights Agreement of First Michigan Bank Corporation dated October 11, 1990,
as amended.
"FIRST MICHIGAN SUBSIDIARIES" shall mean the Subsidiaries of First
Michigan, which shall include the First Michigan Subsidiaries described in
Section 2.4 of the Disclosure Memorandum and any corporation, bank, savings
association, or other organization acquired as a Subsidiary of First
Michigan after the date of this Agreement and owned by First Michigan at
the Effective Time.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"GOVERNING DOCUMENTS" of a Person shall mean, collectively, the
charter, articles of incorporation, certificate of incorporation, bylaws,
and regulations, as applicable, of such Person and any and all other
documents governing the internal affairs of such Person.
"HAZARDOUS SUBSTANCE" shall mean (i) any hazardous substance, hazardous
material, hazardous waste, regulated substance or toxic substance (as those
terms are defined by any applicable Environmental Laws) and (ii) any
chemicals, pollutants, contaminants, petroleum, petroleum
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products, or oil (and specifically shall include asbestos requiring
abatement, removal or encapsulation pursuant to the requirements of
governmental authorities and any polychlorinated biphenyls).
"HSR ACT" shall mean Section 7A of the Clayton Act, as added by Title
II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder.
"HUNTINGTON CAPITAL STOCK" shall mean, collectively, the Huntington
Common, the Huntington Preferred Stock and any other class or series of
capital stock of Huntington.
"HUNTINGTON COMPANIES" shall mean, collectively, Huntington and all
Huntington Subsidiaries.
"HUNTINGTON FINANCIAL STATEMENTS" shall mean (i) the consolidated
balance sheets of Huntington (including related notes and schedules, if
any) as of December 31, 1996 and 1995, and the related statements of
income, changes in shareholders' equity, and cash flows (including related
notes and schedules, if any) for each of the three years ended December 31,
1996, 1995, and 1994, with the report thereon of Ernst & Young LLP, as
filed by Huntington in SEC Documents, and (ii) the unaudited consolidated
balance sheets of Huntington (including related notes and schedules, if
any) and related statements of income, changes in shareholders' equity, and
cash flows (including related notes and schedules, if any) included in SEC
Documents filed with respect to periods ended subsequent to December 31,
1996.
"HUNTINGTON PREFERRED STOCK" shall mean the "blank" serial preferred
stock of Huntington, without par value.
"HUNTINGTON RIGHTS" shall mean the preferred stock purchase rights
issued pursuant to the Huntington Rights Agreement.
"HUNTINGTON RIGHTS AGREEMENT" shall mean that certain Rights Agreement;
dated as of February 22, 1990, as amended, between Huntington and The
Huntington Trust Company, N.A., as Rights Agent.
"HUNTINGTON SUBSIDIARIES" shall mean the Subsidiaries of Huntington,
whether currently a Subsidiary of Huntington or acquired as a Subsidiary of
Huntington after the date of this Agreement and owned by Huntington at the
Effective Time.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
"KNOWLEDGE" as used with respect to a Person (including references to
such Person being aware of a particular matter) shall mean those facts that
are known or should reasonably have been known by the Chairman, President,
Chief Financial Officer, Chief Accounting Officer, Chief Credit Officer,
("in-house") General Counsel, any ("in-house") Assistant or Deputy General
Counsel, or any Senior or Executive Vice President of such Person.
"LAW" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable to a Person or its
Assets, Liabilities or business, including those promulgated, interpreted
or enforced by any Regulatory Authority.
"LIABILITY" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including
costs of investigation, collection and defense), claim, deficiency,
guaranty or endorsement of or by any Person (other than endorsements of
notes, bills, checks, and drafts presented for collection or deposit in the
ordinary course of business) of any type,
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whether accrued, absolute or contingent, liquidated or unliquidated,
matured or unmatured, or otherwise.
"LIEN" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title
retention or other security arrangement, or any adverse right or interest,
charge, or claim of any nature whatsoever of, on, or with respect to any
property or property interest, other than (i) Liens for current property
Taxes not yet due and payable, (ii) for depository institution Subsidiaries
of a Party, pledges to secure deposits and other Liens incurred in the
ordinary course of banking business, and (iii) Liens which are not
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on a Party.
"LITIGATION" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution, governmental or other examination
or investigation, hearing, inquiry, administrative or other proceeding, by
any Person alleging potential Liability, but shall not include regular,
periodic examinations of depository institutions and their Affiliates by
Regulatory Authorities.
"LOAN PROPERTY" shall mean any property owned by the Party in question
or by any of its Subsidiaries or in which such Party or Subsidiary holds a
security interest, and, where required by the context, includes the owner
or operator of such property, but only with respect to such property.
"MATERIAL" for purposes of this Agreement shall be determined in light
of the facts and circumstances of the matter in question; provided that any
specific monetary amount stated in this Agreement shall determine
materiality in that instance.
"MATERIAL ADVERSE EFFECT" on a Party shall mean an event, change or
occurrence which, individually or together with any other event, change or
occurrence, has a material adverse impact on (i) the financial position,
business, or results of operations of such Party and its Subsidiaries,
taken as a whole, or (ii) the ability of such Party to perform its
obligations under the Merger Documents or to consummate the Merger or the
other transactions contemplated thereby, provided that "material adverse
impact" shall not be deemed to include the impact of (x) changes in banking
and similar Laws of general applicability or interpretations thereof by
courts or governmental authorities, (y) changes in generally accepted
accounting principles or regulatory accounting principles generally
applicable to banks and their holding companies, and (z) the Merger and
compliance with the provisions of the Merger Documents on the operating
performance of the Parties.
"MERGER AGREEMENT" shall mean the Agreement and Plan of Merger,
including the Exhibits delivered pursuant hereto and incorporated herein by
reference.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ NATIONAL MARKET" shall mean the National Market System of the
National Association of Securities Dealers Automated Quotations System.
"1933 ACT" shall mean the Securities Act of 1933, as amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as amended.
"OCC" shall mean the Office of the Comptroller of the Currency.
"OPERATIONAL REAL PROPERTY" shall mean the Real Property owned or
leased by any First Michigan Company and used in the operation of its
business.
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"ORDER" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or
writ of any federal, state, local or foreign or other court, arbitrator,
mediator, tribunal, administrative agency or Regulatory Authority.
"PARTICIPATION FACILITY" shall mean any facility or property in which
the Party in question or any of its Subsidiaries participates in the
"management," as such term is defined in CERCLA, and, where required by the
context, said term means the owner or operator of such facility or
property, but only with respect to such facility or property.
"PARTY" shall mean either First Michigan or Huntington, and "Parties"
shall mean both First Michigan and Huntington.
"PENSION PLAN" of a Party shall mean any ERISA Plan of that Party or
any Subsidiary of such Party which is also a "defined benefit plan" (as
defined in Section 414(j) of the Internal Revenue Code).
"PERMIT" shall mean any federal, state, local, and foreign governmental
approval, authorization, certificate, easement, filing, franchise, license,
notice, permit, or right to which any Person is a party or that is or may
be binding upon or inure to the benefit of any Person or its securities,
Assets or business.
"PERSON" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting
in a representative capacity.
"PROXY STATEMENT" shall mean the proxy statement used by First Michigan
or Huntington respectively to solicit the approval of its shareholders of
the transactions contemplated by the Merger Documents which, in the case of
First Michigan, shall include the prospectus of Huntington relating to the
issuance of shares of Huntington Common to holders of shares of First
Michigan Common.
"RCRA" shall mean the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. 6901, et seq.
"REAL PROPERTY" shall mean any and all real property owned or leased by
any First Michigan Company.
"REGISTRATION STATEMENT" shall mean the Registration Statement on Form
S-4, or other appropriate form, including any pre-effective or
post-effective amendments or supplements thereto, filed with the SEC by
Huntington under the 1933 Act with respect to the shares of Huntington
Common to be issued to the shareholders of First Michigan in the Merger.
"REGULATORY AUTHORITIES" shall mean, collectively, the United States
Department of Justice, the Board of the Governors of the Federal Reserve
System, the FDIC, the OCC, the Michigan Financial Institutions Bureau, all
other state regulatory agencies having jurisdiction over the Parties and
their respective Subsidiaries, the NASD, and the SEC.
"REPRESENTATIVE" shall mean any investment banker, financial advisor,
attorney, accountant, consultant, or other representative of a Person.
"RIGHTS" shall mean all arrangements, calls, commitments, Contracts,
options, rights to subscribe to, scrip, understandings, warrants, or other
binding obligations of any character whatsoever relating to, or securities
or rights convertible into or exchangeable for, shares of the capital stock
of
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a Person or by which a Person is or may be bound to issue additional shares
of its capital stock or other Rights.
"SEC" shall mean the Securities and Exchange Commission.
"SEC DOCUMENTS" shall mean all forms, proxy statements, registration
statements, reports, schedules, and other documents filed, or required to
be filed, by a Party or any of its Subsidiaries with any Regulatory
Authority pursuant to the Securities Laws.
"SECURITIES LAWS" shall mean the 1933 Act, the 1934 Act, the Investment
Company Act of 1940, as amended, the Investment Advisors Act of 1940, as
amended, the Trust Indenture Act of 1939, as amended, and the rules and
regulations of any Regulatory Authority promulgated thereunder, and the
blue sky, securities, or similar laws of the various states, as applicable.
"SHAREHOLDERS' MEETING" of a Party shall mean the meeting of the
shareholders of such Party to be held pursuant to Section 4.3 of this
Agreement, including any adjournment or adjournments thereof.
"SUBSIDIARIES" of a Party shall mean all those corporations, banks,
associations, or other entities of which the Party owns or controls 50% or
more of the outstanding equity securities either directly or through an
unbroken chain of entities as to each of which 50% or more of the
outstanding equity securities is owned directly or indirectly by its
parent; provided, there shall not be included any such entity acquired
through foreclosure or any such entity the equity securities of which are
owned or controlled in a fiduciary capacity.
"TAX" or "TAXES" shall mean any federal, state, county, local, or
foreign income, profits, franchise, gross receipts, payroll, sales,
employment, use, property, withholding, excise, occupancy, and other taxes,
assessments, charges, fares, or impositions, including interest, penalties,
and additions imposed thereon or with respect thereto.
"TENDER OFFER" shall mean a tender or exchange offer made by any Person
other than Huntington or an Affiliate of Huntington to acquire equity
securities of First Michigan if, upon the completion of the transactions
proposed in such offer, such Person would own or have the right to acquire
beneficial ownership of more than 20 percent of the capital stock or any
other class of voting securities of First Michigan.
1.4 INTERPRETATIONS. Any singular term in this Agreement shall be deemed to
include the plural, and any plural term the singular. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed followed by the words "without limitation."
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF FIRST MICHIGAN
First Michigan hereby represents and warrants to Huntington as follows:
2.1 ORGANIZATION, STANDING, AND POWER.
(a) First Michigan is duly registered as a bank holding company under
the BHC Act. Each of the First Michigan Companies is organized, validly
existing, and in good standing under the Laws of the United States or its
respective state of incorporation or formation and has the corporate power and
authority necessary to carry on its business as now conducted and to own, lease,
and operate its material Assets. Each First Michigan Company is duly qualified
or licensed to transact business as a foreign corporation in good standing in
the States of the United States and foreign jurisdictions where the character of
its Assets or the nature or conduct of its business requires it to be so
qualified
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or licensed, except for such jurisdictions in which the failure to be so
qualified or licensed is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on First Michigan.
(b) The Disclosure Memorandum contains true and complete copies of all
of the Governing Documents of First Michigan.
(c) The minute books of First Michigan accurately reflect in all
material respects all corporate meetings held or actions taken since January 1,
1996, by the shareholders or Board of Directors of First Michigan.
2.2 AUTHORITY; NO BREACH BY AGREEMENT.
(a) First Michigan has the corporate power and authority necessary to
execute, deliver, and perform its obligations under the Merger Documents and to
consummate the transactions contemplated thereby. The execution, delivery, and
performance of the Merger Documents and the consummation of the transactions
contemplated therein, including the Merger, have been duly and validly
authorized by all necessary corporate action in respect thereof on the part of
First Michigan, subject to the approval of the Merger Agreement and this
Agreement by a two-thirds majority of the outstanding shares of First Michigan
Common, which is the only shareholder vote required for approval of the Merger
Documents and the consummation of the Merger by First Michigan. Subject to such
requisite shareholder approval, the Merger Documents represent the legal, valid,
and binding obligations of First Michigan, enforceable against First Michigan in
accordance with their respective terms (except in all cases as such
enforceability may be limited by applicable bankruptcy, insolvency,
receivership, conservatorship, reorganization, moratorium, or similar Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding may
be brought).
(b) Except as disclosed in Section 2.2 of the Disclosure Memorandum,
neither the execution and delivery of the Merger Documents by First Michigan nor
the consummation by First Michigan of the transactions contemplated thereby, nor
compliance by First Michigan with any of the provisions thereof, will (i)
conflict with or result in a breach of any provision of First Michigan's
Governing Documents, or (ii) constitute or result in a Default under, or require
any Consent pursuant to, or result in the creation of any Lien on any Asset of
any First Michigan Company, under any material Contract or Permit of any First
Michigan Company, or (iii) subject to receipt of the requisite approvals
referred to in Section 7.1(a) and (b) of this Agreement, violate any Law or
Order applicable to any First Michigan Company or any of their respective
material Assets.
(c) Other than in connection or compliance with the provisions of
applicable state corporate and Securities Laws and rules of the NASD, and other
than Consents required from Regulatory Authorities, and other than notices to or
filings with the Internal Revenue Service or the Pension Benefit Guaranty
Corporation with respect to any Employee Benefit Plans, or under the HSR Act, no
notice to, filing with, or Consent of, any public body or authority is necessary
for the consummation by First Michigan of the Merger and the other transactions
contemplated in the Merger Documents.
2.3 CAPITAL STOCK.
(a) The authorized capital stock of First Michigan consists of
50,000,000 shares of First Michigan Common, 26,475,960 of which are issued and
outstanding as of the date of this Agreement (approximately 27,799,758 shares as
adjusted to give effect to the First Michigan 1997 Stock Dividend) and 1,000,000
shares of preferred stock, without par value, none of which was outstanding on
the date of this Agreement. All of the issued and outstanding shares of First
Michigan Common are duly and validly issued and outstanding and are fully paid
and nonassessable. None of the outstanding shares of capital stock of First
Michigan has been issued in violation of any preemptive rights of the current or
past shareholders of First Michigan. First Michigan has reserved 1,139,079
shares of First Michigan Common for issuance under the First Michigan Stock
Option Plans (approximately 1,196,033 shares as adjusted to give effect to the
First Michigan 1997 Stock Dividend), pursuant to which options to purchase not
more than 999,079 shares (approximately 1,049,033 shares as adjusted to give
effect to the First Michigan 1997 Stock Dividend) of First Michigan Common are
outstanding.
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(b) Except for the Warrant, the Warrant Purchase Agreement, and the
First Michigan Rights Agreement, and except as set forth in Section 2.3(a) of
this Agreement or as disclosed in Section 2.3 of the Disclosure Memorandum,
there are no shares of capital stock or other equity securities of First
Michigan outstanding and no outstanding Rights relating to the capital stock of
First Michigan. The execution and delivery of the Merger Documents does not, and
the consummation of the Merger and the other transactions contemplated by the
Merger Documents will not (i) result in the grant of any Rights to any Person
under the First Michigan Rights Agreement, (ii) result in separation from the
shares of First Michigan Common of the Rights granted under the First Michigan
Rights Agreement, (iii) permit any holder of any of the Rights under the First
Michigan Rights Agreement to exercise any such Rights, or (iv) give any Person
any Right to purchase any securities issued by Huntington, including, without
limitation, any Rights as a result of a "Flip-over Transaction or Event" under
Section 3.2 of the First Michigan Rights Agreement. First Michigan and FMB-First
Michigan Bank and FMB-Trust, as Rights Agents, have properly authorized and
executed a certain Amendment to Shareholder Protection Rights Agreement, dated
as of the date of this Agreement, but executed prior to the execution of this
Agreement, a copy of which has been furnished to Huntington.
2.4 FIRST MICHIGAN SUBSIDIARIES. Section 2.4 of the Disclosure Memorandum
contains a true and complete list of all of the First Michigan Subsidiaries as
of the date of this Agreement. Fifteen of the First Michigan Subsidiaries are
state banks chartered under Michigan Law (the "First Michigan Banks"). Except as
disclosed in Section 2.4 of the Disclosure Memorandum, First Michigan or one of
its Subsidiaries owns all of the issued and outstanding shares of capital stock
of each First Michigan Subsidiary. No equity securities of any First Michigan
Subsidiary are or may become required to be issued by reason of any Rights, and
there are no Contracts by which any First Michigan Subsidiary is bound to issue
additional shares of its capital stock or Rights. There are no Contracts
relating to the rights of any First Michigan Company to vote or to dispose of
any shares of the capital stock of any First Michigan Subsidiary. All of the
shares of capital stock of each First Michigan Subsidiary held by a First
Michigan Company are fully paid and, except pursuant to Section 201 of the
Michigan Banking Code in the case of the First Michigan Banks, are owned by the
First Michigan Company free and clear of any Lien. Each of the First Michigan
Banks except FMB-Trust is an "insured institution," as defined in the Federal
Deposit Insurance Act and applicable regulations thereunder, and the deposits in
which are insured by the Bank Insurance Fund.
2.5 FINANCIAL STATEMENTS. First Michigan has delivered to Huntington copies
of all First Michigan Financial Statements for periods ended prior to the date
hereof and will deliver to Huntington copies of all First Michigan Financial
Statements prepared subsequent to the date hereof. The First Michigan Financial
Statements (as of the dates thereof and for the periods covered thereby) (i)
are, or if dated after the date of this Agreement, will be, in accordance with
the books and records of First Michigan, which are or will be, as the case may
be, complete and correct in all material respects and which have been or will
have been, as the case may be, maintained in accordance with good business
practices, and (ii) present or will present, as the case may be, fairly the
consolidated financial position of First Michigan as of the dates indicated and
the consolidated results of operations, changes in shareholders' equity, and
cash flows of First Michigan for the periods indicated, in accordance with GAAP
or regulatory accounting principles applicable to bank holding companies
generally (subject to any exceptions as to consistency specified therein or as
may be indicated in the notes thereto or, in the case of interim financial
statements, subject to normal recurring year-end and audit adjustments that are
not material in amount or effect).
2.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in Section 2.6
of the Disclosure Memorandum, as of December 31, 1996, no First Michigan Company
had any Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on First Michigan, except Liabilities which
were accrued or reserved against in the consolidated balance sheets of First
Michigan as of December 31, 1996, included in the First Michigan Financial
Statements. Except as disclosed in Section 2.6 of the Disclosure Memorandum, no
First Michigan Company has incurred or paid any Liability since December 31,
1996, except for (i) such Liabilities incurred or paid in the ordinary course of
business consistent with past business practice and which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
First Michigan, (ii) such Liabilities that are expressly permitted hereunder,
and (iii) such Liabilities incurred in connection with the negotiation and
consummation of the transactions contemplated hereunder.
2.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the First
Michigan Financial Statements delivered prior to the date of this Agreement or
as disclosed in Section 2.7 of the Disclosure Memorandum,
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since December 31, 1996, (i) there have been no events, changes, or occurrences
which have had, or are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on First Michigan, and (ii) First Michigan
has not taken any action, or failed to take any action, prior to the date of
this Agreement, which action or failure, if taken or occurring after the date of
this Agreement, would represent or result in a material breach or violation of
any of the covenants or agreements of First Michigan provided in this Agreement.
Specifically, but without in any way limiting the foregoing, except as described
in Section 2.7 of the Disclosure Memorandum, since December 31, 1996, no First
Michigan Company has:
(a) merged with any other corporation or bank, or permitted any other
corporation or bank to merge into or consolidate with it; acquired control over
any other firm, bank, corporation, or organization;
(b) incurred any indebtedness, obligations, or liabilities, whether
absolute, accrued, contingent, or otherwise, including, without limitation,
liabilities as guarantor under any guaranty, other than indebtedness,
obligations, and liabilities incurred in the ordinary course of its business or
incurred under the contracts and commitments referred to in Section 2.15 hereof;
(c) forgiven or cancelled any indebtedness or contractual obligation,
other than in the ordinary course of business;
(d) purchased, sold, transferred, liquidated, or otherwise acquired or
disposed of any material Assets or properties, or entered into any contract for
any such purchase, sale, transfer, liquidation, acquisition, or disposition,
other than in the ordinary course of business;
(e) entered into any material lease of real or personal property other
than in the ordinary course of business;
(f) declared, paid, made, or set apart any sum or property for, any
dividend or other distribution, or otherwise paid or transferred any funds or
property to its shareholders, other than the First Michigan 1997 Stock Dividend,
a cash dividend in the amount of $0.18 per share, paid on January 31, 1997, to
holders of First Michigan Common of record on December 31, 1996, and a cash
dividend in the amount of $0.18 per share, paid on April 30, 1997, to holders of
First Michigan Common of record on March 31, 1997;
(g) made any loans or loan commitments, other than in the ordinary
course of business, to any Affiliate of First Michigan (or any person or
business entity controlled by or affiliated with such an Affiliate);
(h) entered into any transaction involving the expenditure of more than
$200,000, other than in the ordinary course of business, except pursuant to and
in accordance with the terms of the contracts and commitments referred to in
Section 2.15 hereof;
(i) adopted any change in any accounting policy or method, except as
appropriate to conform to changes in Tax Laws or regulatory accounting
requirements or GAAP; or
(j) revalued any asset or adjusted any reserve other than in the
ordinary course of business.
2.8 TAX MATTERS. Except as may be disclosed in Section 2.8 of the
Disclosure Memorandum:
(a) All Tax returns required to be filed by or on behalf of any of the
First Michigan Company have been timely filed or requests for extensions have
been timely filed, granted, and have not expired for periods ended on or before
December 31, 1996, and on or before the date of the most recent fiscal year end
immediately preceding the Effective Time and all returns filed are complete and
accurate, except for failures, if any, which, taken together, would not have a
Material Adverse Effect on First Michigan. All Taxes shown on filed returns have
been paid or adequate provision therefor has been made in the First Michigan
Financial Statements. As of the date of this Agreement, there is no audit
examination, deficiency, or refund Litigation with respect to any Taxes that is
reasonably likely to result in a determination that would have, individually or
in the aggregate, a Material Adverse Effect on First Michigan, except
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as reserved against in the First Michigan Financial Statements delivered prior
to the date of this Agreement or as disclosed in Section 2.8 of the Disclosure
Memorandum. All Taxes and other Liabilities due with respect to completed and
settled Tax examinations or concluded Tax Litigation have been paid or adequate
provision therefor has been made in the First Michigan Financial Statements.
(b) None of the First Michigan Companies has executed an extension or
waiver of any statute of limitations on the assessment or collection of any Tax
due (excluding such statutes that relate to years currently under examination by
the Internal Revenue Service or other applicable taxing authorities) that is
currently in effect.
(c) Adequate provision for any Taxes due or to become due for any of
the First Michigan Companies for the period or periods through and including the
date of the respective First Michigan Financial Statements has been made and is
reflected on such First Michigan Financial Statements in accordance with GAAP.
(d) Deferred Taxes of the First Michigan Companies have been provided
for in accordance with GAAP.
(e) Each of the First Michigan Companies is in material compliance
with, and its records contain all information and documents (including properly
completed IRS Forms W-9) necessary to comply with, all applicable information
reporting and Tax withholding requirements under federal, state, and local Tax
Laws, and such records identify with specificity all accounts subject to backup
withholding under Section 3406 of the Internal Revenue Code.
(f) Except as disclosed in Section 2.8 of the Disclosure Memorandum,
First Michigan has not received any notification of an audit of its federal
income tax returns for any tax years since 1988.
2.9 [RESERVED]
2.10 ASSETS AND INSURANCE.
(a) Except as disclosed in Section 2.10 of the Disclosure Memorandum or
as disclosed or reserved against in the First Michigan Financial Statements
delivered prior to the date of this Agreement, First Michigan has good and
marketable title, free and clear of all Liens, to all of its Assets which are
material to the operation of its business. All Assets which are material to
First Michigan's business and that are held under leases or subleases by First
Michigan, are held under valid Contracts enforceable in accordance with their
respective terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other Laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceedings may be brought), and
each such Contract is in full force and effect.
(b) To its Knowledge, First Michigan currently maintains insurance and
blanket bonds (collectively, "Insurance") similar in amounts, scope, and
coverage to that customarily maintained by other bank organizations comparable
in size and operation to First Michigan. First Michigan has not received notice
from any Insurance carrier that (i) such Insurance will be canceled or that
coverage thereunder will be reduced or eliminated, or (ii) premium costs with
respect to such policies of insurance will be substantially increased. Except as
set forth in Section 2.16 of the Disclosure Memorandum, there are presently no
material claims pending under such policies of Insurance and no notices have
been given by First Michigan under such policies with respect to any material
potential or actual claims and First Michigan has no Knowledge of any events
that require any such notice to be given. All premiums due under the policies of
Insurance have been paid and First Michigan has not failed to give any notice or
to present a material claim in due and timely fashion under any such policy of
Insurance.
(c) Section 2.10 of the Disclosure Memorandum sets forth a list of the
addresses all Operational Real Property. To the Knowledge of First Michigan, the
Operational Real Property and the use of such Operational Real Property by First
Michigan does not violate zoning, land use laws, governmental regulations or
restrictive covenants, except where such violation would not have a Material
Adverse Effect on First Michigan. To the Knowledge of First Michigan, (i) the
Operational Real Property and the use thereof by First Michigan do not encroach
upon any property
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owned by any other person, and (ii) no property owned by any other person
encroaches upon any of the Operational Real Property, except where such
encroachment would not have a Material Adverse Effect on First Michigan.
2.11 ENVIRONMENTAL MATTERS. Except as disclosed in Section 2.11 of the
Disclosure Memorandum:
(a) To the Knowledge of First Michigan, each First Michigan Company's
Participation Facilities, and its Loan Properties are, and have been, in
compliance with all Environmental Laws, except for violations which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on First Michigan.
(b) There is no Litigation pending or, to the Knowledge of First
Michigan, threatened before any court, governmental agency, or authority or
other forum in which any First Michigan Company or any of its Participation
Facilities has been or, with respect to threatened Litigation, may be named as a
defendant (i) for alleged noncompliance (including by any predecessor) with any
Environmental Law or (ii) relating to the release into the environment of any
Hazardous Substance, whether or not occurring at, on, under, or involving a site
owned, leased, or operated by any First Michigan Company or any of its
Participation Facilities, except for such Litigation, pending or threatened,
that, if a judgment adverse to a First Michigan Company were to be rendered in
such Litigation, would not have, individually or in the aggregate, a Material
Adverse Effect on First Michigan.
(c) There is no Litigation pending or, to the Knowledge of First
Michigan, threatened before any court, governmental agency, or board or other
forum in which any First Michigan Company or any of its Loan Properties has been
or, with respect to threatened Litigation, may be named as a defendant or
potentially responsible party (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the release into the
environment of any Hazardous Substance, whether or not occurring at, on, under,
or involving a Loan Property, except for such Litigation, pending or threatened,
that, if a judgment adverse to a First Michigan Company were to be rendered in
such Litigation, would not have, individually or in the aggregate, a Material
Adverse Effect on First Michigan.
(d) To the Knowledge of First Michigan, there is no reasonable basis
for any Litigation of a type described in subsections (b) or (c) above, except
such as is not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on First Michigan.
(e) During the period of (i) any First Michigan Company's ownership or
operation of any of their respective current properties, (ii) any First Michigan
Company's participation in the management of any Participation Facility, or
(iii) to the Knowledge of First Michigan, any First Michigan Company's holding
of a security interest in a Loan Property, there have been no releases of
Hazardous Substance in, on, under, or affecting such properties, except such as
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on First Michigan. Prior to the period of (i) any First Michigan
Company's ownership or operation of any of their respective current properties,
(ii) any First Michigan Company's participation in the management of any
Participation Facility, or (iii) any First Michigan Company's holding of a
security interest in a Loan Property, to the Knowledge of First Michigan, there
were no releases of Hazardous Substance in, on, under, or affecting any such
property, Participation Facility or Loan Property, except such as are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on First Michigan.1
(f) (i) No claims have been made or, to the Knowledge of First
Michigan, threatened at any time by any third Person against any First Michigan
Company relating to damage, contribution, cost recovery, compensation, loss, or
injury resulting from any Hazardous Substance; (ii) none of the Real Property
has been used by any First Michigan Company for the storage or disposal of
Hazardous Substances, except in compliance with applicable Law, nor, to the
Knowledge of First Michigan, is any of the Real Property contaminated by any
Hazardous Substance; and (iii) to the Knowledge of First Michigan, none of the
Real Property has in the past contained or presently contains any underground
storage tanks; except to the extent that any of the matters set forth in items
(i), (ii), and (iii) above would not have a Material Adverse Effect on First
Michigan.
2.12 COMPLIANCE WITH LAWS. Each First Michigan Company has in effect all
Permits necessary for it to own, lease, or operate its material Assets and to
carry on its business as now conducted, except for those Permits, the
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absence of which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on First Michigan, and there has occurred
no Default under any such Permit, other than Defaults which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
First Michigan. Except as disclosed in Section 2.12 of the Disclosure
Memorandum, no First Michigan Company:
(a) is in Default under its Governing Documents;
(b) is in violation of any Laws, Orders, or Permits applicable to its
business or employees conducting its business, except for violations which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on First Michigan;
(c) has received any notification or communication from any agency or
department of federal, state, or local government or any Regulatory Authority or
the staff thereof (i) asserting that any such entity is not in compliance with
any of the Laws or Orders which such governmental authority or Regulatory
Authority enforces, where such noncompliance is reasonably likely to have a
Material Adverse Effect on First Michigan, (ii) threatening to revoke any
Permits, the revocation of which is reasonably likely to have a Material Adverse
Effect on First Michigan, or (iii) requiring any such entity to enter into or
consent to the issuance of a cease and desist order, supervisory letter, formal
agreement, directive, commitment, or memorandum of understanding, or to adopt
any resolution of the Board of Directors of such entity or similar undertaking,
which restricts materially the conduct of its business, or in any manner relates
to its capital adequacy, its credit or reserve policies, its management, or the
payment of dividends, and is subject to any such agreement under, letter of
understanding; or
(d) directly or indirectly engages in any material activity prohibited
to be conducted by such entity, or owns any material Assets prohibited to be
held by such entity.
2.13 LABOR RELATIONS. Except as set forth in Section 2.13 of the Disclosure
Memorandum, no First Michigan Company is the subject of any Litigation asserting
that it has committed an unfair labor practice (within the meaning of the
National Labor Relations Act or comparable state law) or seeking to compel it to
bargain with any labor organization as to wages or conditions of employment, nor
is there any strike or other labor dispute involving any First Michigan Company,
pending or, to the Knowledge of First Michigan, threatened, or, to the Knowledge
of First Michigan, is there any activity involving any First Michigan Company's
employees seeking to certify a collective bargaining unit or engaging in any
other organization activity.
2.14 EMPLOYEE BENEFIT PLANS.
(a) First Michigan has disclosed in Section 2.14 of the Disclosure
Memorandum, and has delivered or made available to Huntington prior to the
execution of this Agreement copies in each case of, all First Michigan Benefit
Plans.
(b) No First Michigan Pension Plan is or has been a "multiemployer
plan" within the meaning of Section 3(37) of ERISA.
(c) Except as disclosed in Section 2.14 of the Disclosure Memorandum,
all First Michigan Benefit Plans are in compliance with the applicable terms of
ERISA, the Internal Revenue Code, including the 1986 amendments thereto, and any
other applicable Laws, the breach or violation of which are reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on First
Michigan.
(d) Except as disclosed in Section 2.14 of the Disclosure Memorandum,
each First Michigan ERISA Plan which is intended to be qualified under Section
401(a) of the Internal Revenue Code has received a favorable determination
letter which takes into account the Tax Reform Act of 1986 and subsequent
legislation for which a determination letter is available from the Internal
Revenue Service, and First Michigan is not aware of any circumstances likely to
result in revocation of any such favorable determination letter. To the
Knowledge of First Michigan, no First Michigan Company has engaged in a
transaction with respect to any First Michigan Benefit Plan that, assuming the
taxable period of such transaction expired as of the date hereof, would subject
any First Michigan
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Company to a Tax imposed by either Section 4975 of the Internal Revenue Code or
Section 502(i) of ERISA in amounts which are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on First Michigan.
(e) Except as disclosed in Section 2.14 of the Disclosure Memorandum,
no First Michigan Pension Plan has any "unfunded current liability," as that
term is defined in Section 302(d)(8)(A) of ERISA, and the fair market value of
the assets of any such plan exceeds the plan's "benefit liabilities," as that
term is defined in Section 4001(a)(16) of ERISA, when determined under actuarial
factors that would apply if the plan terminated in accordance with all
applicable legal requirements and assuming the adoption of interest rates and
mortality tables described in Section 417(e)(3)(A)(i) and the use of such
interest rates published in January 1997, and assuming that all participants
take a lump sum distribution of their vested accrued benefits on January 1,
1997.
(f) Except as disclosed in Section 2.14 of the Disclosure Memorandum,
since the date of the most recent actuarial valuation, there has been (i) no
material change in the financial position of any First Michigan Pension Plan,
(ii) no change in the actuarial assumptions with respect to any First Michigan
Pension Plan, and (iii) no increase in benefits under any First Michigan Pension
Plan as a result of plan amendments or changes in applicable Law which is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on any First Michigan Company or materially adversely affect the funding
status of any such plan.
(g) Except as disclosed in Section 2.14 of the Disclosure Memorandum,
neither any First Michigan Pension Plan nor any "single-employer plan," within
the meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by
any First Michigan Company, or the single-employer plan of any entity which is
considered one employer with First Michigan under Section 4001 of ERISA or
Section 414 of the Internal Revenue Code or Section 302 of ERISA (whether or not
waived) (an "ERISA Affiliate") has an "accumulated funding deficiency" within
the meaning of Section 412 of the Internal Revenue Code or Section 302 of ERISA.
No First Michigan Company has provided, or is required to provide, security to a
First Michigan Pension Plan or to any single-employer plan of an ERISA Affiliate
pursuant to Section 401(a)(29) of the Code.
(h) Except as disclosed in Section 2.14 of the Disclosure Memorandum,
within the six-year period preceding the Effective Time, no Liability under
Subtitle C or D of Title IV of ERISA has been or is expected to be incurred by
any First Michigan Company with respect to any ongoing, frozen, or terminated
single-employer plan or the single-employer plan of any ERISA Affiliate, which
Liability is reasonably likely to have a Material Adverse Effect on First
Michigan. No First Michigan Company has incurred any withdrawal Liability with
respect to a multi-employer plan under Subtitle B of Title IV of ERISA
(regardless of whether based on contributions of an ERISA Affiliate), which
Liability is reasonably likely to have a Material Adverse Effect on First
Michigan. No notice of a "reportable event," within the meaning of Section 4043
of ERISA for which the 30-day reporting requirement has not been waived, has
been required to be filed for any First Michigan Pension Plan or by any ERISA
Affiliate within the 12-month period ending on the date hereof.
(i) Except as disclosed in Section 2.14 of the Disclosure Memorandum,
no First Michigan Company has any Liability for retiree health and life benefits
under any of the First Michigan Benefit Plans and there are no restrictions on
the rights of such First Michigan to amend or terminate any such Plan without
incurring any Liability thereunder, which Liability is reasonably likely to have
a Material Adverse Effect on First Michigan.
(j) Except as disclosed in Section 2.14 of the Disclosure Memorandum,
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated by the Merger Documents, will (i) result in any
payment (including severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any director or any employee of any First Michigan
Company from any First Michigan Company under any First Michigan Benefit Plan or
otherwise, (ii) increase any benefits otherwise payable under any First Michigan
Benefit Plan, or (iii) result in any acceleration of the time of payment or
vesting of any such benefit.
(k) All liabilities under any First Michigan Benefit Plan, other than
benefits accrued pursuant to funded retirement plans subject to the provisions
of Section 412 of the Internal Revenue Code or Section 302 of ERISA, have been
fully reflected on the audited First Michigan Financial Statements to the extent
required by and in accordance with GAAP.
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2.15 MATERIAL CONTRACTS.
(a) The Disclosure Memorandum contains a complete and correct list of
all material Contracts to which any First Michigan Company is a party, by which
any First Michigan Company or any of its property is bound, or which has been
authorized by any such First Michigan Company, of the following types
(collectively, the "First Michigan Contracts"):
(i) promissory notes, guaranties, mortgages, security
agreements, or other evidences of indebtedness of First Michigan, other
than (A) Contracts evidencing deposit liabilities, purchases of federal
funds, secured repurchase agreements, Federal Reserve Bank advances,
Federal Home Loan Bank advances, trade payables incurred in the
ordinary course of business, (B) Contracts relating to borrowings or
guarantees made in the ordinary course of business, or (D) Contracts
that are terminable without penalty on 60 or fewer days' notice or that
involve less than $200,000 in the aggregate;
(ii) employment, bonus, compensation, severance, or consulting
agreements, other than any such Contracts that are terminable without
penalty on 60 or fewer days' notice or that involve less than $200,000
in the aggregate;
(iii) any Rights plan of First Michigan, including any stock
option plan, stock appreciation rights plan, restricted stock option
plan or stock purchase plan;
(iv) collective bargaining agreements or other agreement with
or to a labor union or guild;
(v) any contract, arrangement, commitment or understanding
which is a "material contract" as such term is defined in Item
601(b)(10) of the Regulation S-K of the Securities and Exchange
Commission; and
(vi) any contract, arrangement, commitment, or understanding
which would prohibit or materially delay the consummation of the Merger
or any of the transactions contemplated by the Merger Documents.
With respect to each First Michigan Contract and except as disclosed in Section
2.15 of the Disclosure Memorandum: (i) the Contract is in full force and effect;
(ii) First Michigan is not in Default thereunder, other than Defaults which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on First Michigan; (iii) First Michigan has not repudiated or
waived any material provision of any such Contract; and (iv) no other party to
any such Contract is, to the knowledge of First Michigan, in Default in any
respect, other than Defaults which are not reasonable likely to have,
individually or in the aggregate, a Material Adverse Effect on First Michigan,
or has repudiated or waived any material provision thereunder.
2.16 LEGAL PROCEEDINGS. Except as disclosed in Section 2.16 of the
Disclosure Memorandum, there is no Litigation instituted or pending or, to the
Knowledge of First Michigan, threatened (or unasserted but considered probable
of assertion and which, if asserted, would have at least a reasonable
probability of an unfavorable outcome) against any First Michigan Company, or
against any Asset, interest, or right of any of them, that seeks to enjoin,
delay, or prevent the execution, delivery, or performance of the Merger
Documents or the completion of the transactions contemplated therein or herein,
or that, if a judgment adverse to a First Michigan Company were to be rendered
in such Litigation, would have, individually or in the aggregate, a Material
Adverse Effect on First Michigan, nor are there any Orders of any Regulatory
Authorities, other governmental authorities, or arbitrators outstanding against
any First Michigan Company that would have, individually, or in the aggregate, a
Material Adverse Effect on First Michigan. Section 2.16 of the Disclosure
Memorandum contains a copy of each audit letter response received by First
Michigan from attorneys for any First Michigan Company in connection with the
preparation of the Financial Statements of First Michigan or otherwise since
December 31, 1996, relating to any Litigation pending as of the date of this
Agreement to which any First Michigan Company is a party and which names any
First Michigan Company as a defendant or cross-defendant, and a brief summary
report of any such Litigation that is not discussed in such audit letter
responses.
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2.17 REPORTS. Since January 1, 1991, or the date of organization if later,
each First Michigan Company has timely filed all material reports and
statements, together with any amendments required to be made with respect
thereto, that it was required to file with any applicable federal or state
securities or bank authorities, except failures to file which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
First Michigan. As of their respective dates, each of such reports and
documents, including the financial statements, exhibits, and schedules thereto,
complied in all material respects with all applicable Laws. As of its respective
date, each such report and document did not, in all material respects, contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading.
2.18 STATEMENTS TRUE AND CORRECT. None of the information supplied or to be
supplied by any First Michigan Company or any Affiliate thereof for inclusion in
the Registration Statement to be filed by Huntington with the SEC will, when the
Registration Statement becomes effective, be false or misleading with respect to
any material fact, or omit to state any material fact necessary to make the
statements therein not misleading. None of the information supplied or to be
supplied by any First Michigan Company or any Affiliate thereof for inclusion in
the Proxy Statement to be mailed to First Michigan's shareholders in connection
with the First Michigan Shareholders' Meeting or the Proxy Statement to be
mailed to Huntington's shareholders in connection with the Huntington
Shareholders' Meeting, and any other documents to be filed by a First Michigan
or any Affiliate thereof with the SEC or any other Regulatory Authority in
connection with the transactions contemplated by the Merger Documents, will, at
the respective time such documents are filed, and with respect to the Proxy
Statements, when first mailed to the respective shareholders of First Michigan
and Huntington, be false or misleading with respect to any material fact, or
omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, or, in
the case of the Proxy Statements or any amendment thereof or supplement thereto,
at the time of the First Michigan or Huntington Shareholders' Meeting, as
applicable, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for the First
Michigan or Huntington Shareholders' Meeting. All documents that any First
Michigan Company or any Affiliate thereof is responsible for filing with any
Regulatory Authority in connection with the transactions contemplated by the
Merger Documents will comply as to form in all material respects with the
provisions of applicable Law.
2.19 TAX, REGULATORY, AND POOLING MATTERS. No First Michigan Company nor,
to the Knowledge of First Michigan, any Affiliate thereof, has taken any action
or has any Knowledge of any fact or circumstance that is reasonably likely to
(i) prevent the transactions contemplated by the Merger Documents, including the
Merger, from qualifying as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code, (ii) materially impede or delay receipt of any
Consents of Regulatory Authorities referred to in Section 7.1(b) of this
Agreement or result in the imposition of a condition or restriction of the type
referred to in the last sentence of such Section, or (iii) prevent Huntington
from accounting for the Merger as a pooling of interests in accordance with GAAP
and applicable SEC regulations.
2.20 STATE TAKEOVER LAWS. Each First Michigan Company has taken all
necessary steps to exempt the transactions contemplated by the Merger Documents
from any applicable state takeover Law.
2.21 CHARTER PROVISIONS. First Michigan has taken all action so that the
entering into of the Merger Documents and the consummation of the Merger and the
other transactions contemplated by the Merger Documents do not and will not
result in the grant of any rights to any Person under the Governing Documents of
any First Michigan Company or restrict or impair the ability of Huntington or
any of its Subsidiaries to vote, or otherwise to exercise the rights of a
shareholder with respect to, shares of First Michigan that may be directly or
indirectly acquired or controlled by Huntington or any of its Subsidiaries.
2.22 COMPLIANCE WITH CERTAIN LAWS. Except as disclosed in Section 2.22 of
the Disclosure Memorandum, First Michigan is in compliance with all currently
applicable capital requirements and guidelines prescribed by all appropriate
federal or state Regulatory Authorities.
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2.23 COMMUNITY REINVESTMENT ACT COMPLIANCE. No First Michigan Company has
received any notice of non-compliance with the applicable provisions of the CRA
and the regulations promulgated thereunder, and First Michigan has received a
CRA rating of satisfactory or better from the FDIC. First Michigan knows of no
fact or circumstance or set of facts or circumstances which would cause First
Michigan to fail to comply with such provisions or to cause the CRA rating of
First Michigan to fall below satisfactory.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF HUNTINGTON
Huntington hereby represents and warrants to First Michigan as follows:
3.1 ORGANIZATION, STANDING, AND POWER. Huntington is duly registered as
a bank holding company under the BHC Act. Huntington is a corporation duly
organized, validly existing, and in good standing under the Laws of the State of
Maryland, and has the corporate power and authority to carry on its business as
now conducted and to own, lease and operate its material Assets. Huntington is
duly qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Huntington.
3.2 AUTHORITY; NO BREACH BY AGREEMENT.
(a) Huntington has the corporate power and authority necessary to
execute, deliver and perform its obligations under the Merger Documents and to
consummate the transactions contemplated thereby. The execution, delivery and
performance of the Merger Documents and the consummation of the transactions
contemplated herein and therein, including the Merger, have been duly and
validly authorized by all necessary corporate action in respect thereof on the
part of Huntington, subject to the approval of this Agreement by a two-thirds
majority of the outstanding shares of Huntington Common which is the only
shareholder vote required for approval of the Merger Documents and the
consummation of the Merger by Huntington. Subject to the requisite shareholder
approval, the Merger Documents represent the legal, valid, and binding
obligations of Huntington, enforceable against Huntington in accordance with
their respective terms (except in all cases as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium, or
similar Laws affecting the enforcement of creditors' rights generally and except
that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceeding may be brought).
(b) Neither the execution and delivery of the Merger Documents by
Huntington, nor the consummation by Huntington of the transactions contemplated
thereby, nor compliance by Huntington with any of the provisions thereof or
hereof, will (i) conflict with or result in a breach of any provision of
Huntington's Governing Documents, or (ii) constitute or result in a Default
under, or require any Consent pursuant to, or result in the creation of any Lien
on any Asset of any Huntington Company under, any Contract or Permit of any
Huntington Company, where such Default or Lien, or any failure to obtain such
Consent, is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Huntington, or, (iii) subject to receipt of the
requisite approvals referred to in Section 7.1(a) and (b) of this Agreement,
violate any Law or Order applicable to any Huntington Company or any of their
respective material Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and Securities Laws, and rules of
the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit plans,
and other than Consents, filings, or notifications which, if not obtained or
made, are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Huntington, no notice to, filing with, or Consent of,
any public body or authority is necessary for the consummation by Huntington of
the Merger and the other transactions contemplated in the Merger Documents.
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3.3 CAPITAL STOCK.
(a) The authorized capital stock of Huntington consists of (i)
300,000,000 shares of Huntington Common, of which 144,739,081 shares were issued
and outstanding as of April 22, 1997, and (ii) 6,617,808 shares of Huntington
Preferred Stock, none of which are designated, issued or outstanding. All of the
issued and outstanding shares of Huntington Common are, and all of the shares of
Huntington Common to be issued in exchange for shares of First Michigan Common
upon consummation of the Merger, when issued in accordance with the terms of
this Agreement, will be, duly and validly issued and outstanding and fully paid
and nonassessable. None of the outstanding shares of Huntington Capital Stock
has been, and none of the shares of Huntington Common to be issued in exchange
for shares of First Michigan Common upon consummation of the Merger will be,
issued in violation of any preemptive rights of the current or past shareholders
of Huntington.
(b) There are no Rights relating to the outstanding shares of
Huntington Common other than those provided under the Huntington Rights
Agreement and each outstanding share of Huntington Common, including those to be
issued to the shareholders of First Michigan in the Merger will have the Rights
provided under the Huntington Rights Agreement. The execution and delivery of
the Merger Documents does not, and the consummation of the Merger and the other
transactions contemplated by the Merger Documents will not, (i) result in the
grant of any Rights to any Person under the Huntington Rights Agreement, (ii)
result in separation from the shares of Huntington Common of the Rights granted
under the Huntington Rights Agreement, (iii) permit any holder of any of the
Rights under the Huntington Rights Agreement to exercise any such Rights, or
(iv) give any Person any Right to purchase any securities issued by Huntington
(other than to First Michigan's shareholders as contemplated in the Merger
Agreement).
(c) Huntington has taken all corporate action necessary to reserve for
issuance a sufficient number of shares of Huntington Common for delivery upon
the exercise of the First Michigan Stock Options to be converted in accordance
with the terms of the Merger Agreement, and the shares of Huntington Common
issuable upon the exercise of the First Michigan Stock Options so converted
shall be included under an existing effective registration statement with
respect to such shares of Huntington Common.
3.4 HUNTINGTON SUBSIDIARIES. Huntington or one of its Subsidiaries owns all
of the issued and outstanding shares of capital stock of each Huntington
Subsidiary. No equity securities of any Huntington Subsidiary are or may become
required to be issued by reason of any Rights, and there are no Contracts by
which any Huntington Subsidiary is bound to issue additional shares of its
capital stock or Rights. There are no Contracts relating to the rights of any
Huntington Company to vote or to dispose of any shares of the capital stock of
any Huntington Subsidiary. All of the shares of capital stock of each Huntington
Subsidiary held by a Huntington Company are fully paid and, except pursuant to
12 U.S.C. Section 55 in the case of national banks and comparable provisions of
applicable state Laws, if any, in the case of any state-chartered depository
institutions, are owned by a Huntington Company free and clear of any Lien. Each
Huntington Subsidiary is a corporation, national bank, state-chartered bank, or
other federal or state depository institution and is duly organized, validly
existing, and (as to corporations) in good standing under the Laws of the
jurisdiction in which it is incorporated or organized, and has the corporate
power and authority necessary for it to own, lease, and operate its Assets and
to carry on its business as now conducted. Each Huntington Subsidiary is duly
qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Huntington. Each of the
Huntington Subsidiaries that is a depository institution is an "insured
institution," as defined in the Federal Deposit Insurance Act and applicable
regulations thereunder, and the deposits in which are insured by the Bank
Insurance Fund.
3.5 FINANCIAL STATEMENTS. Huntington has delivered to First Michigan all
Huntington Financial Statements and will deliver to First Michigan copies of all
Huntington Financial Statements prepared subsequent to the date hereof. The
Huntington Financial Statements (as of the dates thereof and for the periods
covered thereby) (i) are in accordance with the books and records of the
Huntington Companies, which are or will be, as the case may be, complete and
correct and which have been or will have been, as the case may be, maintained in
accordance with good business practices, and (ii) present or will present, as
the case may be, fairly the consolidated financial position of the Huntington
Companies as of the dates indicated and the consolidated results of operations,
changes in shareholders' equity, and cash flows of the Huntington Companies for
the periods indicated, in accordance with GAAP (subject to
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exceptions as to consistency specified therein or as may be indicated in the
notes thereto or, in the case of interim financial statements, to normal
recurring year-end adjustments that are not material in amount or effect).
3.6 ABSENCE OF UNDISCLOSED LIABILITIES. No Huntington Company has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Huntington, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of Huntington as
of December 31, 1996, included in the Huntington Financial Statements delivered
prior to the date of this Agreement or reflected in the notes thereto.
3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
Huntington Financial Statements delivered prior to the date of this Agreement,
since December 31, 1996, (i) there have been no events, changes or occurrences
which have had, or are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Huntington, and (ii) Huntington has not
taken any action, or failed to take any action, prior to the date of this
Agreement, which action or failure, if taken or occurring after the date of this
Agreement, would represent or result in a material breach or violation of any of
the covenants or agreements of Huntington provided in this Agreement.
3.8 TAX MATTERS.
(a) All Tax returns required to be filed by or on behalf of any of the
Huntington Company have been timely filed or requests for extensions have been
timely filed, granted, and have not expired for periods ended on or before
December 31, 1996, and on or before the date of the most recent fiscal year end
immediately preceding the Effective Time and all returns filed are complete and
accurate, except for failures, if any, which, taken together, would not have a
Material Adverse Effect on Huntington. All Taxes shown on filed returns have
been paid or adequate provision therefor has been made in the Huntington
Financial Statements. As of the date of this Agreement, there is no audit
examination, deficiency, or refund Litigation with respect to any Taxes that is
reasonably likely to result in a determination that would have, individually or
in the aggregate, a Material Adverse Effect on Huntington, except as reserved
against in the Huntington Financial Statements. All Taxes and other Liabilities
due with respect to completed and settled Tax examinations or concluded Tax
Litigation have been paid or adequate provision therefor has been made in the
Huntington Financial Statements.
(b) None of the Huntington Companies has executed an extension or
waiver of any statute of limitations on the assessment or collection of any Tax
due (excluding such statutes that relate to years currently under examination by
the Internal Revenue Service or other applicable taxing authorities) that is
currently in effect.
(c) Adequate provision for any Taxes due or to become due for any of
the Huntington Companies for the period or periods through and including the
date of the respective Huntington Financial Statements has been made and is
reflected on such Huntington Financial Statements.
(d) Deferred Taxes of the Huntington Companies have been provided for
in accordance with GAAP.
(e) Each of the Huntington Companies is in material compliance with,
and its records contain all information and documents (including properly
completed IRS Forms W-9) necessary to comply with, all applicable information
reporting and Tax withholding requirements under federal, state, and local Tax
Laws, and such records identify with specificity all accounts subject to backup
withholding under Section 3406 of the Internal Revenue Code.
3.9 ASSETS AND INSURANCE. Except to the extent that an exception to any of
the matters described below would not be reasonably likely to have a Material
Adverse Effect on Huntington:
(a) Except as disclosed or reserved against in the Huntington Financial
Statements, Huntington has good and marketable title, free and clear of all
Liens, to all of its Assets which are material to the operation of its business.
All Assets which are material to Huntington's business and that are held under
leases or subleases by Huntington, are held under valid Contracts enforceable in
accordance with their respective terms (except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium, or other Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific
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performance or injunctive relief is subject to the discretion of the court
before which any proceedings may be brought), and each such Contract is in full
force and effect.
(b) To its Knowledge, Huntington currently maintains insurance and
blanket bonds (collectively, "Insurance") similar in amounts, scope, and
coverage to that customarily maintained by other bank organizations comparable
in size and operation to Huntington. Huntington has not received notice from any
Insurance carrier that (i) such Insurance will be canceled or that coverage
thereunder will be reduced or eliminated, or (ii) premium costs with respect to
such policies of insurance will be substantially increased. All premiums due
under the policies of Insurance have been paid.
3.10 COMPLIANCE WITH LAWS. Each Huntington Company has in effect all
Permits necessary for it to own, lease or operate its material Assets and to
carry on its business as now conducted, except for those Permits the absence of
which are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Huntington, and there has occurred no Default under
any such Permit, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Huntington. No
Huntington Company:
(a) is in Default under its Governing Documents;
(b) is in violation of, or in Default under, any Laws, Order or Permits
applicable to its business or employees conducting its business, except for
violations which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Huntington;
(c) has received any notification or communication from any agency or
department of federal, state, or local government or any Regulatory Authority or
the staff thereof (i) asserting that any Huntington Company is not in compliance
with any of the Laws or Orders, including CRA, which such governmental authority
or Regulatory Authority enforces, where such noncompliance is reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on
Huntington or which would prevent or delay the consummation of the transactions
contemplated under the Merger Documents, (ii) threatening to revoke any Permits,
the revocation of which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Huntington, (iii) requiring any
Huntington Company to enter into or consent to the issuance of a cease and
desist order, formal agreement, directive, commitment or memorandum of
understanding, or to adopt any resolution of the Board of Directors of such
entity, or similar undertaking, which restricts materially the conduct of its
business, or in the payment of dividends, or which are reasonably likely to
delay or prevent the consummation of the transactions contemplated herein; or
(d) directly or indirectly engages in any material activity prohibited
to be conducted by such entity, or owns any material Assets prohibited to be
held by such entity.
3.11 EMPLOYEE BENEFIT PLANS.
(a) Huntington has delivered or made available to First Michigan prior
to the execution of this Agreement copies of all Huntington Benefit Plans
currently adopted, maintained by, sponsored in whole or in part by, or
contributed to by any Huntington Company.
(b) No Huntington Pension Plan is or has been a "multiemployer plan"
within the meaning of Section 3(37) of ERISA.
(c) All Huntington Benefit Plans are in compliance with the applicable
terms of ERISA, the Internal Revenue Code including the 1986 amendments thereto
and any other applicable Laws, the breach or violation of which are reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Huntington.
(d) Each Huntington ERISA Plan which is intended to be qualified under
Section 401(a) of the Internal Revenue Code has received a favorable
determination letter which takes into account the Tax Reform Act of 1986 and
subsequent legislation for which a determination letter is available from the
Internal Revenue Service, and Huntington is not aware of any circumstances
likely to result in revocation of any such favorable determination letter.
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To the Knowledge of Huntington, no Huntington Company has engaged in a
transaction with respect to any Huntington Benefit Plan that, assuming the
taxable period of such transaction expired as of the date hereof, would subject
any Huntington Company to a Tax imposed by either Section 4975 of the Internal
Revenue Code or Section 502(i) of ERISA in amounts which are reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on
Huntington.
(e) As of the date of the most recent actuarial valuation, no
Huntington Pension Plan had any "unfunded current liability," as that term is
defined in Section 302(d)(8)(A) of ERISA, and the fair market value of the
assets of any such plan exceeds the plan's "benefit liabilities," as that term
is defined in Section 4001(a)(16) of ERISA, when determined under actuarial
factors that would apply if the plan terminated in accordance with all
applicable legal requirements and assuming the adoption of interest rates and
mortality tables described in Section 417(e)(3)(A)(i) and the use of such
interest rates published in January 1997, and assuming that all participants
take a lump sum distribution of their vested accrued benefits on January 1,
1997.
(f) Since the date of the most recent actuarial valuation, there has
been (i) no material change in the financial position of any Huntington Pension
Plan, (ii) no change in the actuarial assumptions with respect to any Huntington
Pension Plan, and (iii) no increase in benefits under any Huntington Pension
Plan as a result of plan amendments or changes in applicable Law which is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on any Huntington Company or materially adversely affect the funding
status of any such plan.
(g) All liabilities under any Huntington Benefit Plan, other than
benefits accrued pursuant to funded retirement plans subject to the provisions
of Section 412 of the Internal Revenue Code or Section 302 of ERISA, have been
fully reflected on the audited Huntington Financial Statements to the extent
required by and in accordance with GAAP.
3.12 LEGAL PROCEEDINGS. There is no Litigation instituted or pending or, to
the Knowledge of Huntington, threatened (or unasserted but considered probable
of assertion and which if asserted would have at least a reasonable probability
of an unfavorable outcome) against any Huntington Company, or against any Asset,
interest, or right of any of them, that seeks to enjoin, delay or prevent the
execution, delivery, or performance of the Merger Documents or the completion of
the transactions contemplated therein, or that, if a judgment adverse to a
Huntington Company were to be rendered in such Litigation, would have,
individually or in the aggregate, a Material Adverse Effect on Huntington, nor
are there any Orders of any Regulatory Authorities, other governmental
authorities, or arbitrators outstanding against any Huntington Company, that
would have, individually, or in the aggregate, a Material Adverse Effect on
Huntington.
3.13 REPORTS. Since January 1, 1992, Huntington has filed all reports and
statements, together with any amendments required to be made with respect
thereto, that it was required to file with (i) the SEC, including, but not
limited to, Forms 10-K, Forms 10-Q, Forms 8-K, and proxy statements, (ii) other
Regulatory Authorities, and (iii) any applicable state securities or bank
authorities (except, in the case of state securities authorities, failures to
file which are not reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on Huntington). As of their respective dates, each of
such reports and documents, including the financial statements, exhibits, and
schedules thereto, complied in all material respects with all applicable Laws.
As of its respective date, each such report and document did not, contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made therein, in light of
the circumstances under which they were made, not misleading.
3.14 STATEMENTS TRUE AND CORRECT. None of the information supplied or to be
supplied by Huntington or any Affiliate thereof for inclusion in the
Registration Statement to be filed by Huntington with the SEC, will, when the
Registration Statement becomes effective, be false or misleading with respect to
any material fact, or omit to state any material fact necessary to make the
statements therein not misleading. None of the information supplied or to be
supplied by Huntington or any Affiliate thereof for inclusion in the Proxy
Statement to be mailed to Huntington's shareholders in connection with the
Huntington Shareholders' Meeting or the Proxy Statement to be mailed to First
Michigan's shareholders in connection with the First Michigan Shareholders'
Meeting, and any other documents to be filed by Huntington or any Affiliate
thereof with the SEC or any other Regulatory Authority in connection with the
transactions contemplated by the Merger Documents, will, at the respective time
such documents are filed, and with
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respect to the Proxy Statements, when first mailed to the respective
shareholders of Huntington and First Michigan, be false or misleading with
respect to any material fact, or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, or, in the case of the Proxy Statements or any amendment
thereof or supplement thereto, at the time of the Huntington or First Michigan
Shareholders' Meeting, as applicable, be false or misleading with respect to any
material fact, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of any
proxy for the Huntington or First Michigan Shareholders' Meeting. All documents
that Huntington or any Affiliate thereof is responsible for filing with any
Regulatory Authority in connection with the transactions contemplated by the
Merger Documents will comply as to form in all material respects with the
provisions of applicable Law.
3.15 TAX, REGULATORY, AND POOLING MATTERS. No Huntington Company or any
Affiliate thereof has taken any action or has any Knowledge of any fact or
circumstance that is reasonably likely to (i) prevent the transactions
contemplated by the Merger Documents, including the Merger, from qualifying as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, or (ii) materially impede or delay receipt of any Consents of Regulatory
Authorities referred to in Section 7.1(b) of this Agreement or result in the
imposition of a condition or restriction of the type referred to in the last
sentence of such Section, or (iii) prevent Huntington from accounting for the
Merger as a pooling of interests in accordance with GAAP and applicable SEC
regulation.
3.16 COMMUNITY REINVESTMENT ACT COMPLIANCE. No Huntington Company has
received any notice of non-compliance with the applicable provisions of the CRA
and the regulations promulgated thereunder, and Huntington has received a CRA
rating of satisfactory or better from the FDIC. Huntington knows of no fact or
circumstance or set of facts or circumstances which would cause Huntington to
fail to comply with such provisions or to cause the CRA rating of Huntington to
fall below satisfactory.
ARTICLE 4
MUTUAL COVENANTS OF THE PARTIES
4.1 ADVERSE CHANGES IN CONDITION. Each Party agrees to give written notice
promptly to the other Party upon becoming aware of the occurrence or impending
occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (ii) would cause or constitute a
material breach of any of its representations, warranties, or covenants
contained herein, and to use its reasonable efforts to prevent or promptly to
remedy the same.
4.2 REPORTS. Each Party and its Subsidiaries shall file all reports
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and shall deliver to the other Party copies of
all such reports promptly after the same are filed. If financial statements are
contained in any such reports filed with the SEC, such financial statements will
fairly present the consolidated financial position of the entity filing such
statements as of the dates indicated and the consolidated results of operations,
changes in shareholders' equity, and cash flows for the periods then ended in
accordance with GAAP (subject in the case of interim financial statements to
normal recurring year-end and audit adjustments that are not material). As of
their respective dates, such reports filed with the SEC will comply in all
material respects with the Securities Laws and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Any financial
statements contained in any other reports to another Regulatory Authority shall
be prepared in accordance with Laws applicable to such reports.
4.3 REGISTRATION STATEMENT; PROXY STATEMENTS; SHAREHOLDER APPROVAL. As soon
as practicable after execution of this Agreement, Huntington shall file the
Registration Statement with the SEC, and shall use its reasonable efforts to
cause the Registration Statement to become effective under the 1933 Act and take
any action required to be taken under the applicable state Blue Sky or
Securities Laws in connection with the issuance of the shares of Huntington
Common upon consummation of the Merger. First Michigan shall furnish all
information concerning it and the holders of its capital stock as Huntington may
reasonably request in connection with such action. First Michigan and Huntington
shall each call Shareholders' Meetings, to be held as soon as reasonably
practicable after the Registration Statement is declared effective by the SEC,
for the purpose of voting upon approval of the Merger Documents, the
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Merger, and such other related matters as it deems appropriate. In connection
with the Shareholders' Meetings, (i) First Michigan and Huntington shall
prepare, as part of the Registration Statement filed with the SEC, Proxy
Statements and mail such Proxy Statements to First Michigan shareholders and
Huntington shareholders following the review and clearance of such Proxy
Statements and related proxy materials by the Regulatory Authorities, (ii) the
Parties shall furnish to each other all information concerning them that they
may reasonably request in connection with such Proxy Statements, (iii) the
respective Boards of Directors of First Michigan and Huntington shall recommend
(subject to compliance with their fiduciary duties as advised by counsel) to
First Michigan's shareholders and Huntington's shareholders respectively, the
approval of the Merger Documents, and (iv) the respective Boards of Directors
and officers of First Michigan and Huntington shall (subject to compliance with
their fiduciary duties as advised by counsel) use their reasonable efforts to
obtain such shareholders' approval.
4.4 APPLICATIONS. Huntington shall promptly prepare and file, and First
Michigan shall cooperate in the preparation and, where appropriate, the filing
of, applications with all Regulatory Authorities having jurisdiction over the
transactions contemplated by the Merger Documents, seeking the requisite
Consents necessary to consummate the transactions contemplated by the Merger
Documents.
4.5 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the terms and
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws to consummate and make effective, as soon as
practicable after the date of this Agreement, the transactions contemplated by
the Merger Documents, including using its reasonable efforts to lift or rescind
any Order adversely affecting its ability to consummate such transactions and to
cause to be satisfied the conditions referred to in Article 7 of this Agreement;
provided, that nothing herein shall preclude either Party from exercising its
rights under this Agreement. Each Party shall use, and shall cause each of its
Subsidiaries to use, its reasonable efforts to obtain all Consents necessary or
desirable for the consummation of the transactions contemplated by the Merger
Documents. The Parties shall deliver to each other, copies of all filings,
correspondence, and orders to and from all Regulatory Authorities in connection
with the transactions contemplated by the Merger Documents.
4.6 INVESTIGATION AND CONFIDENTIALITY.
(a) Prior to the Effective Time, each Party shall keep the other Party
advised of all material developments relevant to its business and to
consummation of the Merger and shall permit the other Party to make or cause to
be made such investigation of the business and properties of it and its
Subsidiaries and of their respective financial and legal conditions as the other
Party reasonably requests, provided that such investigation shall be made after
reasonable prior notice and during regular business hours, shall be reasonably
related to the transactions contemplated by the Merger Documents, and shall not
interfere unnecessarily with normal operations. No investigation by a Party
shall affect the representations and warranties of the other Party.
(b) Each Party shall, and shall cause its advisers and agents to,
maintain the confidentiality of all confidential information furnished to it by
the other Party concerning its and its Subsidiaries' businesses, operations, and
financial positions and shall not use such information for any purpose except in
furtherance of the transactions contemplated by the Merger Documents. If this
Agreement is terminated prior to the Effective Time, each Party shall promptly
return or certify the destruction of all documents and copies thereof, and all
work papers containing confidential information received from the other Party.
(c) Each Party agrees to give the other Party notice as soon as
practicable after any determination by it of any fact or occurrence relating to
the other Party which it has discovered through the course of its investigation
and which represents, or is reasonably likely to represent, either a material
breach of any representation, warranty, covenant or agreement of the other Party
or which has had or is reasonably likely to have a Material Adverse Effect on
the other Party.
(d) Promptly after the execution of this Agreement, First Michigan will
use its best efforts to make available to Huntington complete and correct copies
of all deeds and leases in the possession of any First Michigan Company relating
to the Real Property.
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4.7 PRESS RELEASES. Prior to the Effective Time, First Michigan and
Huntington shall consult with each other as to the form and substance of any
press release or other public disclosure materially related to the Merger
Documents or any other transaction contemplated thereby; provided, that nothing
in this Section 4.7 shall be deemed to prohibit any Party from making any
disclosure which its counsel deems necessary or advisable in order to satisfy
such Party's disclosure obligations imposed by Law.
4.8 TAX AND ACCOUNTING TREATMENT. Each of the Parties undertakes and agrees
to use its reasonable efforts to cause the Merger, and to take no action which
would cause the Merger not, to qualify for treatment as a "reorganization"
within the meaning of Section 368(a) of the Internal Revenue Code for federal
income tax purposes and as a "pooling of interests" for accounting treatment.
4.9 NO RIGHTS TRIGGERED. Each Party shall take all reasonable steps
necessary to ensure that entering into the Merger Documents and the consummation
of the transactions contemplated thereby do not and will not (i) result in the
grant of any Rights to any Person under its respective Governing Documents, (ii)
result in the grant of any Rights to any Person under the First Michigan Rights
Agreement or the Huntington Rights Agreement, (ii) result in separation from the
shares of First Michigan Common of the Rights granted under the First Michigan
Rights Agreement or separation from the shares of Huntington Common of the
Rights granted under the Huntington Rights Agreement, (iii) permit any holder of
any of the Rights under the First Michigan Rights Agreement or the Huntington
Rights Agreement to exercise any such Rights, or (iv) give any Person any Right
to purchase any securities issued by Huntington, including, without limitation,
any Rights as a result of a "Flip-over Transaction or Event" under Section 3.2
of the First Michigan Rights Agreement.
ARTICLE 5
COVENANTS OF FIRST MICHIGAN
5.1 CONDUCT OF THE BUSINESS. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, unless the
prior written consent of Huntington shall have been obtained, and except as
otherwise expressly contemplated herein, First Michigan shall and shall cause
each of its Subsidiaries to (i) operate its business only in the usual, regular,
and ordinary course, and (ii) preserve intact its business organization and
Assets and maintain its rights and franchises.
5.2 NEGATIVE COVENANTS OF FIRST MICHIGAN. From the date of this Agreement
until the earlier of the Effective Time or the termination of this Agreement,
First Michigan covenants and agrees that it will not do or agree or commit to
do, or permit any of its Subsidiaries to do or agree or commit to do, any of the
following without the prior written consent of the chief executive officer,
president, or chief financial officer of Huntington, which consent shall not be
unreasonably withheld:
(a) take any action which to its Knowledge at the time of such action,
would (i) materially adversely affect the ability of any Party to consummate the
transactions contemplated under the Merger Documents, (ii) materially adversely
affect the ability of any Party to obtain any Consents required for the
consummation of the transactions contemplated under the Merger Documents without
imposition of a condition or restriction of the type referred to in the last
sentences of Section 7.1(b) or 7.1(c) of this Agreement, or (iii) materially
adversely affect the ability of any Party to perform its covenants and
agreements under the Merger Documents.
(b) amend the Governing Documents of any First Michigan Company;
(c) engage in any acquisition, or take any other action, that adversely
affects the ability of First Michigan to consummate the transactions
contemplated by the Merger Documents;
(d) take any action that is intended to result in or actually results
in (i) any of its representations and warranties set forth in this Agreement
being or becoming untrue in any material respect at any time prior to the
Effective Time, (ii) any of the conditions to the Merger set forth in Article 7
hereof not being satisfied, or (iii) a violation of any provisions of the Merger
Documents, except, in every case, as may be required by applicable Law.
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(e) incur any additional debt obligation or other obligation for
borrowed money except in the ordinary course of the business of First Michigan
and its Subsidiaries consistent with past practices (which shall include
creation of deposit liabilities, purchases of federal funds, advances from the
Federal Reserve Bank or Federal Home Loan Bank, and entry into repurchase
agreements fully secured by U.S. government or agency securities), or impose, or
suffer the imposition, on any Asset of First Michigan of any Lien or permit any
such Lien to exist (other than in connection with deposits, repurchase
agreements, bankers acceptances, "treasury tax and loan" accounts established in
the ordinary course of business, the satisfaction of legal requirements in the
exercise of trust powers, and Liens in effect as of the date hereof that are
disclosed in the Disclosure Memorandum);
(f) repurchase, redeem, or otherwise acquire or exchange (other than
purchases or exchanges in the ordinary course under employee benefit plans),
directly or indirectly, any shares, or any securities convertible into any
shares, of the capital stock of First Michigan, or declare or pay any dividend,
in cash or in any other property of any kind, including, but not limited to,
shares of the capital stock of any class of any First Michigan Company, or make
any other distribution in respect of First Michigan's capital stock, provided
that First Michigan may (to the extent legally and contractually permitted to do
so), but is not obligated hereunder to do so, declare and pay its regular
quarterly cash dividends on the shares of First Michigan Common, in an amount or
amounts not in excess of $0.18 per share of First Michigan Common per quarter,
with usual and regular record and payment dates in accordance with past
practices, as disclosed in the First Michigan Financial Statements or in Section
5.2(f) of the Disclosure Memorandum; provided that Huntington and First Michigan
shall coordinate with each other regarding the declaration of any dividends in
respect of shares of First Michigan Common and Huntington Common, and the record
and payment dates relating thereto, so that the holders of First Michigan Common
shall receive at least one dividend, but not more than one dividend, for any
calendar quarter with respect to their shares of First Michigan Common or the
shares of Huntington Common to be issued in exchange for such shares of First
Michigan Common in the Merger.
(g) except pursuant to the exercise of the First Michigan Stock Options
outstanding as of the date hereof, the exercise price of which has been
established and provided to Huntington prior to the date hereof, and pursuant to
the terms thereof in existence on the date hereof, and except for the First
Michigan 1997 Stock Dividend, issue, sell, pledge, encumber, authorize the
issuance of, enter into any Contract to issue, sell, pledge, encumber, or
authorize the issuance of, or otherwise permit to become outstanding, any
additional shares of First Michigan Common or any other capital stock of any
First Michigan Company, or any Rights with respect thereto;
(h) adjust, split, combine, or reclassify any capital stock of any
First Michigan Company, or issue or authorize the issuance of any other
securities in respect of or in substitution for shares of First Michigan Common,
or sell, lease, mortgage or otherwise dispose of any Asset (other than Assets
acquired as a result of debts previously contracted) other than in the ordinary
course of business for reasonable and adequate consideration;
(i) except for purchases of U.S. Treasury securities or U.S. Government
agency securities, which in either case have maturities of three years or less,
purchase any securities or make any material investment, either by purchase of
stock of securities, contributions to capital, Asset transfers, or purchase of
any Assets, in any Person other than a wholly owned First Michigan Subsidiary,
or otherwise acquire direct or indirect control over any Person, other than in
connection with (i) foreclosures in the ordinary course of business, (ii)
acquisitions of control by a depository institution Subsidiary in its fiduciary
capacity, or (iii) the creation of new wholly owned subsidiaries organized to
conduct and continue activities otherwise permitted by this Agreement;
(j) (i) grant any increase in compensation or benefits to the employees
or officers of any First Michigan Company, except as made in the ordinary course
of business and not inconsistent with past practices or as required by Law; (ii)
pay any severance or termination pay or any bonus other than pursuant to written
policies or written Contracts in effect on the date of this Agreement, except as
disclosed in Section 5.2(j) of the Disclosure Memorandum; (iii) enter into or
amend any severance agreements with officers of First Michigan; (iv) grant any
increase in fees or other increases in compensation or other benefits to the
directors of First Michigan; (v) voluntarily accelerate the vesting of any
employee benefits, other than pursuant to written policies or written Contracts
in effect on the date of this Agreement; or (vi) grant any stock appreciation
rights, cash awards, or any Rights to acquire First Michigan securities under
any First Michigan Stock Option Plan;
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(k) enter into or amend any employment Contract between First Michigan
and any Person (unless such amendment is required by Law) that First Michigan
does not have the unconditional right to terminate without Liability (other than
Liability for services already rendered), at any time on or after the Effective
Time;
(l) adopt any new First Michigan Benefit Plan for any First Michigan
Company or terminate or withdraw from, or make any material change in or to, any
existing First Michigan Benefit Plan other than any such change that is required
by Law or that, in the opinion of counsel, is necessary or advisable to maintain
the tax qualified status of any such plan, or make any distributions from or
contribution or payment to such First Michigan Benefit Plans except as required
by Law or the terms of such plans and consistent with First Michigan's past
practice;
(m) make any significant change in any Tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to conform
to changes in Tax Laws or regulatory accounting requirements or GAAP;
(n) commence any Litigation other than in the ordinary course of
business in accordance with past practice, settle any Litigation involving any
Liability of First Michigan for material money damages or restrictions upon the
operations of First Michigan;
(o) except in the ordinary course of business and consistent with past
practice, (i) enter into, modify, amend or terminate any material Contract (ii)
waive, release, compromise or assign any material rights or claims, or (iii)
incur any capital expenditures, obligations or liabilities;
(p) enter into any agreement or commitment of the character referred to
in Section 2.7 hereof; or
(q) take or permit to be taken any action of a character which is
otherwise listed in Section 2.15 hereof.
5.3 CERTAIN ACTIONS. Except with respect to the Merger Documents and the
transactions contemplated thereby, neither First Michigan nor any Affiliate or
any Representatives thereof retained by First Michigan shall directly or
indirectly solicit, encourage, or, except to the extent necessary to comply with
the fiduciary duties of First Michigan's Board of Directors, as advised by
counsel, entertain, any proposal to engage in an Acquisition Transaction by any
Person. Except to the extent necessary to comply with the fiduciary duties of
First Michigan's Board of Directors, as advised by counsel, neither First
Michigan nor any Affiliate or Representative thereof shall fail to recommend
that First Michigan shareholders vote in favor of the Merger or withdraw such as
recommendation previously made, fail to solicit proxies of the shareholders of
First Michigan, or fail to hold the First Michigan Shareholders' Meeting, or
shall furnish any non-public information that it is not legally obligated to
furnish in connection with, negotiate with respect to, or enter into any
Contract with respect to, any Acquisition Transaction, but First Michigan may
communicate and disclose information about such a proposal to engage in an
Acquisition Transaction to its shareholders if and to the extent that it is
required to do so in order to comply with its legal obligations as advised by
counsel. First Michigan shall promptly notify Huntington orally and in writing
in the event that it receives any inquiry or proposal relating to any
Acquisition Transaction. First Michigan shall (i) immediately cease and cause to
be terminated any existing activities, discussions, or negotiations with any
Persons conducted heretofore with respect to any of the foregoing, and (ii)
direct and use its reasonable efforts to cause all of its Representatives not to
engage in any of the foregoing. Notwithstanding anything contained in the Merger
Documents to the contrary, any action taken by First Michigan or its Affiliates
or Representatives which is permitted under this Section 5.3 by virtue of such
action being necessary to comply with the fiduciary duties of First Michigan's
Board of Directors, as advised by counsel, shall not constitute a breach of any
of the Merger Documents by First Michigan.
5.4 AGREEMENTS WITH RESPECT TO AFFILIATES. First Michigan has disclosed in
Section 5.4 of the Disclosure Memorandum all Persons whom it reasonably believes
is an "affiliate" of First Michigan for purposes of Rule 145 under the 1933 Act.
First Michigan shall use its reasonable efforts to cause each such Person to
deliver to Huntington not later than 30 days prior to the Effective Time, a
written agreement, in a form reasonably satisfactory to both parties, providing
that such Person will not sell, pledge, transfer, or otherwise dispose of the
shares of First
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Michigan Common held by such Person except as contemplated by such agreement or
by the Merger Documents and will not sell, pledge, transfer, or otherwise
dispose of the shares of Huntington Common to be received by such Person upon
consummation of the Merger except in compliance with applicable provisions of
the 1933 Act.
5.5 CERTAIN POLICIES OF FIRST MICHIGAN. At the request of Huntington, First
Michigan shall use its best efforts to modify and change its loan, litigation,
and real estate valuation policies and practices (including loan classifications
and levels of reserves) prior to the Effective Time so as to be consistent on a
mutually satisfactory basis with those of Huntington and GAAP. First Michigan
shall not be required to modify or change any such policies or practices,
however, until such time as (i) satisfaction of the conditions set forth in
Sections 7.1(a), 7.1(b), and 7.1(c) of this Agreement, (ii) First Michigan and
Huntington agree that the Effective Time will occur prior to the public
disclosure of such modifications or changes in regular periodic earnings
releases or periodic reports filed with the Regulatory Authorities, and (iii)
Huntington acknowledges in writing that all conditions to its obligation to
consummate the Merger (and Huntington's rights to terminate this Agreement) have
been waived or satisfied; provided, that in all circumstances First Michigan
shall make such modifications and changes not later than immediately prior to
the Effective Time. First Michigan's representations, warranties, covenants, and
agreements contained in this Agreement shall not be deemed to be untrue or
breached in any respect for any purpose as a consequence of any modifications or
changes undertaken solely on account of this Section 5.5.
5.6 AGREEMENTS WITH RESPECT TO FIRST MICHIGAN STOCK OPTION PLANS. First
Michigan will take such action necessary to ensure that no options issued under
the First Michigan 1997 Director Stock Option Plan will be exercised and, prior
to the Effective Time, First Michigan will cancel all stock options previously
granted under the First Michigan 1997 Director Stock Option Plan for no
consideration to the holders thereof. Additionally, First Michigan shall cause
Messrs. David M. Ondersma, Stephen A. Stream, Larry D. Fredricks and Merle J.
Prins to not exercise any stock appreciation rights granted to such individuals
under any First Michigan Stock Option Plan and will use its reasonable efforts
to cause all other holders of stock appreciation rights granted under any First
Michigan Stock Option Plan to not exercise such stock appreciation rights. If
any such stock appreciation rights are exercised, First Michigan will cause the
payment to be made only in shares of First Michigan Common.
ARTICLE 6
COVENANTS OF HUNTINGTON
6.1 NEGATIVE COVENANTS OF HUNTINGTON. From the date of this Agreement until
the earlier of the Effective Time or the termination of this Agreement,
Huntington covenants and agrees that it will not do or agree or commit to do, or
permit any of its Subsidiaries to do or agree or commit to do, any of the
following without the prior written consent of the chief executive officer of
First Michigan, which consent shall not be unreasonably withheld:
(a) take any action which to its Knowledge at the time of such action,
would (i) materially adversely affect the ability of any Party to consummate the
transactions contemplated under the Merger Documents, (ii) materially adversely
affect the ability of any Party to obtain any Consents required to consummate
the transactions contemplated under the Merger Documents without imposition of a
condition or restriction of the type referred to in the last sentences of
Section 7.1(b) or 7.1(c) of this Agreement, or (iii) materially adversely affect
the ability of any Party to perform its covenants and agreements under the
Merger Documents;
(b) amend the Governing Documents of Huntington or the Huntington
Rights Agreement, in each case, in any manner adverse to the holders of First
Michigan Common as compared to rights of holders of Huntington Common generally
as of the date of this Agreement;
(c) engage in any acquisition, or take any other action, that adversely
affects the ability of Huntington to consummate the transactions contemplated by
the Merger Documents; or
(d) take any action that is intended or may reasonably be expected to
result in (i) any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect at any time prior to
the Effective Time, (ii) any of the conditions to the Merger set forth in
Article 7 hereof not being satisfied, or
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(iii) a violation of any provisions of the Merger Documents, except, in every
case, as may be required by applicable Law.
6.2 NASDAQ LISTING. Huntington shall use its reasonable efforts to provide,
prior to the Effective Time, for quotation on the Nasdaq National Market the
shares of Huntington Common to be issued to the holders of shares of First
Michigan Common pursuant to the Merger, and Huntington shall give all notices
and make all filings with the NASD, required in connection with the transactions
contemplated herein.
6.3 EMPLOYEE BENEFITS AND CONTRACTS.
(a) Except as set forth in this Agreement, or in Section 4.2(c) of the
Merger Agreement relating to the conversion of First Michigan Stock Options,
following the Effective Time, Huntington shall provide to officers and employees
of First Michigan who become officers or employees of any Huntington Company
after the Effective Time employee benefits under Huntington Benefit Plans, and
stock option and other plans involving the potential issuance of Huntington
Common Stock, on terms and conditions which when taken as a whole are
substantially similar to those currently provided generally by Huntington and
its Affiliates to their similarly situated officers and employees. For purposes
of participation and vesting under such Huntington Benefit Plans, the service of
the employees of the First Michigan Companies prior to the Effective Time shall
be treated as service with a Huntington Company participating in such Huntington
Benefit Plans. Furthermore, officers and employees of First Michigan Companies
(and their spouses and dependents, if applicable) may, upon the cessation of
their participation in a First Michigan Benefit Plan, immediately participate in
the corresponding Benefit Plan maintained by Huntington without regard to
pre-existing conditions or waiting periods. Benefit accruals under any
Huntington Pension Plan will not be offset by benefit accruals under any First
Michigan Pension Plan; however, in the event the First Michigan Pension Plan
merges with the Huntington Pension Plan, and if benefit accruals under the First
Michigan Pension Plan cease, the Huntington Pension Plan will provide future
benefit accruals under the Huntington Pension Plan that are no less than those
benefits that would accrue assuming the Huntington Pension Plan implements a
"fresh start formula without wear away" (as described in Treasury Regulation
Section 1.401(a)(4)-13(c)(4)(i)).
(b) Huntington undertakes and agrees to provide all persons who are
employed by First Michigan immediately prior to the Effective Time with
severance benefits consistent with Huntington's Transition Pay Plan as in effect
as of the Effective Time, which benefits will not be less than those provided
under such plan as of the date of this Agreement; provided, however, that (i)
Huntington will assume the obligations of First Michigan under certain
Continuity Agreements between First Michigan and the persons identified in
Section 6.3(b) of the Disclosure Memorandum, and (ii) for a period of one year
following the Effective Date, Huntington agrees to provide those First Michigan
employees identified in Section 6.3(b) of the Disclosure Memorandum (other than
those persons who are parties to such Continuity Agreements) with severance
benefits according to First Michigan's severance benefits as of the date of this
Agreement. If any benefits are paid to any former First Michigan employees under
such First Michigan severance policies (including, but not limited to, such
Continuity Agreements), such benefits shall be in lieu of any and all other
benefits that might otherwise be payable under the Huntington Transition Pay
Plan.
(c) Huntington agrees that the First Michigan Bonus Pool shall be
allocated among the First Michigan Bonus Plan Participants in accordance with
the terms of the First Michigan Bonus Plan as of the Effective Time and
Huntington shall pay any and all such allocated bonus payments to the First
Michigan Bonus Pool Participants on or before February 28, 1998. All First
Michigan Bonus Plan Participants shall be eligible to participate in the
Huntington Management Incentive Compensation Plan beginning as of the Effective
Date, to the extent that any such employee is eligible under the terms of such
Huntington plan.
6.4 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(a) For a period of six years after the Effective Time, to the fullest
extent permitted by applicable Law, Huntington shall, and shall cause its
Subsidiaries to, indemnify, defend, and hold harmless the present and former
directors, officers, employees, and agents of the First Michigan Companies
(each, an "Indemnified Party") against all Liabilities arising out of actions or
omissions arising out of the Indemnified Party's service or services as
directors, officers, employees, or agents of First Michigan or, at First
Michigan's request, of another corporation, partnership, joint
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venture, trust, or other enterprise occurring at or prior to the Effective Time
(including the transactions contemplated by the Merger Documents) consistent
with First Michigan's Governing Documents and Michigan Law as in effect on the
date hereof, whether or not any Huntington Company is insured against such
matter, including provisions relating to advances of expenses incurred in the
defense of any Litigation, with respect to any Liability, claim, demand, action,
or Litigation asserted or made prior to or at any time after the Effective Time.
All such rights to indemnification with respect to any such Liability, claim,
demand, or action shall continue until the final disposition of such Litigation
and/or Liability; provided, however, that nothing contained herein shall
increase or lengthen the duration of obligations with respect to such
indemnification by the Huntington or any other Huntington Company over that to
which First Michigan would have been subject had the Merger not been
consummated. All rights to exculpation from liability and limitation of
liability provided by Article IX of First Michigan's Articles of Incorporation
and the provisions of this Section 6.4 shall survive the Effective Time and the
consummation of the Merger. Without limiting the foregoing, in any case in which
approval by Huntington is required to effectuate any indemnification, Huntington
shall direct, at the election of the Indemnified Party, that the determination
of any such approval shall be made by independent counsel mutually agreed upon
between Huntington and the Indemnified Party.
(b) For a period of six years after the Effective Date, Huntington
shall use reasonable efforts to procure and maintain that portion of directors'
and officers' liability insurance that serves to reimburse the Persons who are
serving as officers or directors of First Michigan on the date of this Agreement
with respect to claims against such Persons arising from facts or events which
occurred prior to the Effective Time, which insurance shall provide at least the
same coverage and amounts, and contain terms and conditions no less
advantageous, as that coverage currently provided by First Michigan to such
Persons; provided, however, that in no event will Huntington be required to
expend more than $300,000 to procure or maintain such insurance; provided,
further, that if Huntington is unable to procure or maintain the insurance
called for in this paragraph (b), Huntington shall use reasonable efforts to
obtain as much comparable insurance as is available for $300,000; and provided,
further, that such Persons may be required to make application and provide
customary representations and warranties to Huntington's insurance carrier for
the purpose of obtaining such insurance.
(c) The provisions of this Section 6.4 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and each
Indemnified Party's heirs and representatives.
6.5 STOCK OPTIONS.
(a) At the Effective Time, each outstanding First Michigan Stock Option
shall be converted into an option to purchase shares of Huntington Common in
accordance with the terms of the Merger Agreement.
(b) As soon as practicable after the Effective Time, Huntington shall
deliver to the holders of such converted First Michigan Stock Options
appropriate notices setting forth such holders' rights pursuant to the
Huntington Stock Option Plan and the agreements evidencing such converted First
Michigan Stock Options and the original grants of such First Michigan Stock
Options shall continue in effect on the same terms and conditions (subject to
the adjustments required by this Section 6.5 after giving effect to the Merger
and the conversion as set forth in the Merger Agreement).
(c) Huntington shall use all reasonable efforts to maintain the
effectiveness of the registration statement(s) described in Section 3.3(c) for
so long as the First Michigan Stock Options to be converted under the terms of
the Merger Agreement to options to purchase shares of Huntington Common remain
outstanding. With respect to those individuals who subsequent to the Merger will
be subject to the reporting requirements under Section 16(a) of the Exchange
Act, where applicable, Huntington shall administer the Huntington Stock Option
Plan in a manner that complies with Rule 16-3 promulgated under the Exchange Act
to the extent the First Michigan Plan complied with such rule prior to the
Merger.
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ARTICLE 7
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
7.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective obligations of
each Party to perform this Agreement and consummate the Merger and the other
transactions contemplated by the Merger Documents are subject to the
satisfaction of the following conditions, unless waived by both Parties pursuant
to Section 10.6 of this Agreement:
(a) Shareholder Approval. The shareholders of First Michigan and
Huntington shall have approved this Agreement, and the consummation of the
transactions contemplated by the Merger Documents, including the Merger, as and
to the extent required by Law and by the provisions of any of their respective
Governing Documents.
(b) Regulatory Approvals. All Consents of, filings and registrations
with, and notifications to, all Regulatory Authorities required for consummation
of the Merger shall have been obtained or made and shall be in full force and
effect and all waiting periods required by Law shall have expired. No Consent
obtained from any Regulatory Authority which is necessary to consummate the
transactions contemplated by the Merger Documents shall be conditioned or
restricted in a manner (including requirements relating to the raising of
additional capital or the disposition of Assets) which in the reasonable
judgment of either Party would so materially adversely impact the economic or
business benefits of the transactions contemplated by the Merger Documents so as
to render inadvisable the consummation of the Merger.
(c) Consents and Approvals. Each Party shall have obtained any and all
Consents required for consummation of the Merger (other than those referred to
in Section 7.1(b) of this Agreement) or for the preventing of any Default under
any Contract or Permit of such Party which, if not obtained or made, is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on such Party. No Consent so obtained which is necessary to consummate
the transactions contemplated by the Merger Documents shall be conditioned or
restricted in a manner which in the reasonable judgment of either Party would so
materially adversely impact the economic or business benefits of the
transactions contemplated by the Merger Documents so as to render inadvisable
the consummation of the Merger.
(d) Legal Proceedings. No court or governmental authority or Regulatory
Authority of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any Law or Order (whether temporary, preliminary or
permanent) or taken any other action which prohibits, restricts or makes illegal
consummation of the transactions contemplated by the Merger Documents.
(e) Registration Statement. The Registration Statement shall be
effective under the 1933 Act, no stop orders suspending the effectiveness of the
Registration Statement shall have been issued, no action, suit, proceeding or
investigation by the SEC to suspend the effectiveness thereof shall have been
initiated and be continuing, and all necessary approvals under state securities
Laws or the 1933 Act or 1934 Act relating to the issuance or trading of the
shares of Huntington Common issuable pursuant to the Merger shall have been
received.
(f) Nasdaq National Market Listing. The shares of Huntington Common
issuable pursuant to the Merger shall have been approved for quotation on the
Nasdaq National Market.
(g) Tax Matters. Each Party shall have received a written opinion of
counsel from Huntington's Counsel, in form reasonably satisfactory to such
Parties (the "Tax Opinion"), to the effect that (i) the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, (ii) the exchange in the Merger of shares of First Michigan Common for
shares of Huntington Common will not give rise to gain or loss to the
shareholders of First Michigan with respect to such exchange (except to the
extent of any cash received), and (iii) neither First Michigan nor Huntington
will recognize gain or loss as a consequence of the Merger. In rendering such
Tax Opinion, such counsel shall be entitled to rely upon representations of
First Michigan's officers, directors, and shareholders holding in excess of five
percent (5%) of the outstanding shares of First Michigan Common and
representations of officers of Huntington, in each case reasonably satisfactory
in form and substance to such counsel.
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7.2 CONDITIONS TO OBLIGATIONS OF HUNTINGTON. The obligations of Huntington
to perform this Agreement and consummate the Merger and the other transactions
contemplated by the Merger Documents are subject to the satisfaction of the
following conditions, unless waived by Huntington pursuant to Section 10.6(a) of
this Agreement:
(a) Representations and Warranties. For purposes of this Section
7.2(a), the accuracy of the representations and warranties of First Michigan set
forth in this Agreement shall be assessed as of the date of this Agreement and
as of the Effective Time with the same effect as though all such representations
and warranties had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date). The representations and warranties of First
Michigan set forth in Article 2 of this Agreement shall be true and correct in
all material respects.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of First Michigan to be performed and complied with
pursuant to this Agreement and the other agreements contemplated by the Merger
Documents prior to the Effective Time shall have been duly performed and
complied with in all material respects.
(c) Certificates. First Michigan shall have delivered to Huntington (i)
a certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer and its chief financial officer, to the effect that the
conditions of its obligations set forth in Section 7.2(a) and 7.2(b) of this
Agreement have been satisfied, and (ii) certified copies of resolutions duly
adopted by First Michigan's Board of Directors and shareholders evidencing the
taking of all corporate action necessary to authorize the execution, delivery,
and performance of the Merger Documents and the consummation of the transactions
contemplated thereby, all in such reasonable detail as Huntington and its
counsel shall request.
(d) Opinion of Counsel. Huntington shall have received an opinion of
Varnum, Riddering, Schmidt & Howlett LLP, counsel to First Michigan, dated as of
the Effective Date, in form reasonably satisfactory to Huntington, as to the
matters set forth in Exhibit 2.
(e) Accountant's Letters. Huntington shall have received: (i) from
First Michigan's auditors letters dated not more than five days prior to the
date of the Huntington Proxy Statement with respect to certain financial
information regarding First Michigan, in form and substance reasonably
satisfactory to Huntington, which letters shall be based upon customary
specified procedures undertaken by such firm in accordance with Statement of
Auditing Standard No. 72; and (ii) from Ernst & Young an Opinion Letter to the
effect that the Merger will qualify for pooling of interests accounting
treatment if consummated in accordance with the Merger Documents.
(f) Affiliates' Agreements. Huntington shall have received from each
Affiliate of First Michigan the affiliate's agreement as and to the extent
specified in Section 5.4 of this Agreement.
(g) Shareholders' Equity. First Michigan's shareholders' equity as of
the end of last fiscal quarter preceding the Effective Date shall not be less
than 95% of First Michigan's shareholders' equity as of December 31, 1996,
excluding for purposes of the calculation of such shareholders' equity, the
effects of: (i) any reductions in First Michigan's shareholders' equity
resulting from any actions or changes in policies of First Michigan taken at the
request of Huntington, including those described in Section 5.5 of this
Agreement; and (ii) all costs, fees and charges, including fees and charges of
First Michigan's accountants, counsel and investment bankers, whether or not
accrued or paid, that are related to the negotiation and consummation of the
Merger.
(h) Warrant. First Michigan shall have executed and delivered to
Huntington the Warrant Purchase Agreement and the Warrant.
(i) Fairness Opinion. Huntington shall have received from Morgan
Stanley & Co. Incorporated or such other investment banking firm retained by
Huntington, a letter dated not more than five business days prior to the date of
the Huntington Proxy Statement, as to the fairness of the Merger to the
shareholders of Huntington from a financial point of view.
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7.3 CONDITIONS TO OBLIGATIONS OF FIRST MICHIGAN. The obligations of First
Michigan to perform this Agreement and consummate the Merger and the other
transactions contemplated by the Merger Documents are subject to the
satisfaction of the following conditions, unless waived by First Michigan
pursuant to Section 10.6(b) of this Agreement:
(a) Representations and Warranties. For purposes of this Section
7.3(a), the accuracy of the representations and warranties of Huntington set
forth in this Agreement shall be assessed as of the date of this Agreement and
as of the Effective Time with the same effect as though all such representations
and warranties had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date). The representations and warranties of Huntington
set forth in Article 3 of this Agreement shall be true and correct in all
material respects.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of Huntington to be performed and complied with
pursuant to this Agreement and the other agreements contemplated by the Merger
Documents prior to the Effective Time shall have been duly performed and
complied with in all material respects, and the Registration Statement shall
have been declared and shall remain effective.
(c) Certificates. Huntington shall have delivered to First Michigan (i)
a certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer and its chief financial officer, to the effect that the
conditions of its obligations set forth in Section 7.3(a) and 7.3(b) of this
Agreement have been satisfied, and (ii) certified copies of resolutions duly
adopted by Huntington's Board of Directors and shareholders evidencing the
taking of all corporate action necessary to authorize the execution, delivery
and performance of the Merger Documents and the consummation of the transactions
contemplated thereby, all in such reasonable detail as First Michigan and its
counsel shall request.
(d) Opinion of Counsel. First Michigan shall have received an opinion
of Porter, Wright, Morris & Arthur, counsel to Huntington, dated as of the
Effective Time, in form reasonably acceptable to First Michigan, as to the
matters set forth in Exhibit 3.
(e) Accountant's Letters. First Michigan shall have received from Ernst
& Young an Opinion Letter to the effect that the Merger will qualify for pooling
of interests accounting treatment if consummated in accordance with the Merger
Documents.
(f) Fairness Opinion. First Michigan shall have received a letter from
Merrill, Lynch & Co., dated not more than five business days prior to the date
of the First Michigan Proxy Statement, to the effect that, in the opinion of
such firm, the Conversion Ratio in connection with the Merger is fair, from a
financial point of view, to the shareholders of First Michigan.
ARTICLE 8
CLOSING
The closing of the Merger and the other transactions contemplated under the
Merger Documents shall take place at the offices of Porter, Wright, Morris &
Arthur, in Columbus, Ohio, at 10:00 a.m., local time, on the date that is five
business days after the last of the conditions specified in Article 7 hereof
shall have been satisfied or waived, in accordance with the terms of this
Agreement, or at such other place or time as the parties shall hereafter agree
in writing. Notwithstanding the foregoing, the Merger will become effective as
of the Effective Time.
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ARTICLE 9
TERMINATION
9.1 TERMINATION. Notwithstanding any other provision of this Agreement, and
notwithstanding the approval of the Merger Documents by the shareholders of
Huntington or First Michigan, this Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time:
(a) By mutual consent of the respective Boards of Directors of
Huntington and First Michigan;
(b) By the Board of Directors of either Party (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the event
of the inaccuracy of any representation or warranty contained in this Agreement
of the other Party which cannot be or has not been cured within 30 days after
the giving written notice to such other Party of such inaccuracy and which
inaccuracy would provide the terminating Party the ability to refuse to
consummate the Merger under the applicable standard set forth in Section 7.2(a)
of this Agreement in the case of any termination by Huntington and Section
7.3(a) of this Agreement in the case of any termination by First Michigan;
(c) By the Board of Directors of either Party (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the event
of a material breach by the other Party of any covenant or agreement contained
in this Agreement which cannot be or has not been cured within 30 days after the
giving of written notice to the breaching Party of such breach;
(d) By the Board of Directors of either Party (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the event
(i) any Consent of any Regulatory Authority required for consummation of the
Merger and the other transactions contemplated by the Merger Documents shall
have been denied by final nonappealable action of such authority or if any
action taken by such authority is not appealed within the time limit for appeal,
or (ii) the shareholders of Huntington or First Michigan fail to vote their
approval of this Agreement and the transactions contemplated by the Merger
Documents as required by the Laws of the States of Maryland and Michigan,
respectively, or by their respective Governing Documents, at the Shareholders'
Meetings where the transactions were presented to such shareholders for approval
and voted upon;
(e) By the Board of Directors of either Party in the event that the
Merger shall not have been consummated by May 31, 1998, if the failure to
consummate the transactions contemplated by the Merger Documents on or before
such date is not caused by any breach of this Agreement by the Party electing to
terminate pursuant to this Section 9.1(e);
(f) By the Board of Directors of either Party (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the event
that any of the conditions precedent to the obligations of such Party to
consummate the Merger cannot be satisfied or fulfilled by the date specified in
Section 9.1(e) of this Agreement;
(g) By Huntington, in the event that the Board of Directors of First
Michigan fails to recommend to the shareholders of First Michigan that they vote
their shares of First Michigan Common in favor of the Merger, or withdraws such
recommendation previously made, or fails to solicit proxies of shareholders of
First Michigan to approve the Merger, or shall have affirmed, recommended, or
authorized entering into any Acquisition Transaction or other transaction
involving a merger, share exchange, consolidation, or transfer of substantially
all of the Assets of First Michigan;
(h) By First Michigan, in the event that the Board of Directors of
Huntington fails to recommend to the shareholders of Huntington that they vote
their shares of Huntington Common in favor of the Merger, or withdraws such
recommendation previously made, or fails to solicit proxies of shareholders of
Huntington to approve the Merger;
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(i) By First Michigan, if the Board of Directors of First Michigan
determines, pursuant to the right provided First Michigan pursuant to Section
4.2(a)(i) of the Merger Agreement, that the Parties are unable to agree upon a
renegotiated Conversion Ratio.
9.2 EFFECT OF TERMINATION. In the event of the termination and abandonment
of this Agreement pursuant to Section 9.1 of this Agreement, the Merger
Agreement and this Agreement shall become void and have no effect, except that
(i) the provisions of this Section 9.2 and Articles 1 and 10 and Section 4.6(b)
of this Agreement shall survive any such termination and abandonment, and (ii) a
termination pursuant to Sections 9.1(b), 9.1(c), or 9.1(f) of this Agreement
shall not relieve the breaching Party from Liability for an uncured willful
breach of a representation, warranty, covenant, or agreement giving rise to such
termination. Upon a termination of this Agreement, the Warrant and the Warrant
Purchase Agreement shall terminate in accordance with the express provisions of
those documents.
9.3 NON-SURVIVAL OF REPRESENTATIONS AND COVENANTS. The respective
representations, warranties, obligations, covenants, and agreements of the
Parties shall not survive the Effective Time, except this Section 9.3 and
Articles 1 and 10 and Sections 4.6, 4.8, 5.4, 6.3, 6.4, and 6.5 of this
Agreement.
ARTICLE 10
MISCELLANEOUS
10.1 EXPENSES. Except as otherwise provided in Section 10.2, each of the
Parties shall bear and pay all direct costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
filing, registration and application fees, printing fees, and fees and expenses
of its own financial or other consultants, investment bankers, accountants, and
counsel, except that each of the Parties shall bear and pay one-half of the
filing fees payable in connection with the Registration Statement and the Proxy
Statements and printing costs incurred in connection with the printing of the
Registration Statement and the Proxy Statements.
10.2 TERMINATION FEE.
(a) If any of the following events (a "Triggering Event") occurs:
(i) any material, willful, and intentional breach of the
Merger Documents by First Michigan that would permit
Huntington to terminate the Merger Documents (A)
occurring after the receipt by First Michigan of a
proposal to engage in an Acquisition Transaction, (B)
occurring after the announcement by any other Person
of an intention to engage in an Acquisition
Transaction, or (C) in anticipation and for the
purpose of engaging in an Acquisition Transaction;
(ii) (A) a proposal to engage in an Acquisition
Transaction is submitted to and approved by the
shareholders of First Michigan at any time prior to
May 31, 1999, or (B) a Tender Offer is commenced and
the transactions contemplated in the Tender Offer are
completed in such a manner that the Person making the
Tender Offer acquires beneficial ownership of more
than 20 percent of the capital stock or any other
class of voting securities of First Michigan, and the
Merger is not consummated prior to May 31, 1999;
(iii) (A) a proposal to engage in an Acquisition
Transaction is received by First Michigan or a Tender
Offer is made directly to the shareholders of First
Michigan or the intention of making an Acquisition
Transaction or Tender Offer is announced at any time
prior to the holding of the First Michigan
Shareholders' Meeting; (B) the Board of Directors of
First Michigan (1) fails to recommend to the
shareholders of First Michigan
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that they vote their shares of First Michigan Common
in favor of the approval of the Merger, (2) withdraws
such recommendation previously made, (3) fails to
solicit proxies of shareholders of First Michigan to
approve the Merger, or (4) fails to hold the First
Michigan Shareholders' Meeting; and (C) the Merger is
not consummated by May 31, 1999;
First Michigan shall pay to Huntington an amount in cash equal to the sum of (i)
the direct costs and expenses or portion thereof referred to in Section 10.1,
incurred by or on behalf of Huntington in connection with the transactions
contemplated by the Merger Documents, but in no event to exceed $1 million in
the aggregate, and (ii) $22,000,000; which sum represents additional
compensation for Huntington's loss as the result of the transactions
contemplated by the Merger Documents not being consummated. The amounts shall be
an obligation of First Michigan and shall be paid by First Michigan promptly
upon notice to First Michigan by Huntington.
(b) Notwithstanding the foregoing, no amount will be due Huntington
pursuant to Section 10.2(a) in the event of the failure to consummate the Merger
solely as a result of any of the following: (i) the failure of the shareholders
of Huntington to approve the Merger; (ii) the failure of any Regulatory
Authority to provide any required Consent to the Merger, which failure was not
the result of the existence of a proposal to engage in an Acquisition
Transaction or a breach by First Michigan of any of its obligations under any of
the Merger Documents; or (iii) the Merger Documents are terminated pursuant to
Section 9.1, unless the event giving rise to the right to terminate is preceded
by a Triggering Event or the receipt by First Michigan of a proposal to engage
in an Acquisition Transaction, or the announcement by another Person of a
proposal involving an Acquisition Transaction.
(c) Nothing contained in this Section 10.2 shall constitute or shall be
deemed to constitute liquidated damages for the willful breach by a Party of the
terms of this Agreement or otherwise limit the rights of the nonbreaching Party.
10.3 BROKERS AND FINDERS. Except for Merrill, Lynch, & Co., as to First
Michigan, and Morgan Stanley & Co. Incorporated, as to Huntington, each of the
Parties represents and warrants that neither it nor any of its officers,
directors, employees, or Affiliates has employed any broker or finder or
incurred any Liability for any financial advisory fees, investment banker's
fees, brokerage fees, commissions, or finders' fees in connection with this
Agreement or the transactions contemplated by the Merger Documents. In the event
of a claim by any broker or finder based upon his or its representing or being
retained by or allegedly representing or being retained by First Michigan or
Huntington, each of First Michigan and Huntington, as the case may be, agrees to
indemnify and hold the other Party harmless of and from any Liability in respect
of any such claim.
10.4 ENTIRE AGREEMENT. Except as otherwise expressly provided herein, the
Merger Documents (including the documents and instruments referred to herein)
constitute the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersede all prior arrangements or
understandings with respect thereto, written or oral. Nothing in this Agreement
thereunder expressed or implied, is intended to confer upon any Person, other
than the Parties or their respective successors, any rights, remedies,
obligations, or liabilities under or by reason of the Merger Documents.
10.5 AMENDMENTS. To the extent permitted by Law, the Merger Documents may
be amended by a subsequent writing signed by each of the Parties upon the
approval of the Boards of Directors of each of the Parties, whether before or
after shareholder approval of the Merger Documents has been obtained; provided,
that after any such approval by the holders of shares of First Michigan Common
or Huntington Common, there shall be made no amendment that pursuant to Michigan
or Maryland Law requires further approval by such shareholders without the
further approval of such shareholders.
10.6 WAIVERS.
(a) Prior to or at the Effective Time, Huntington, acting through its
Board of Directors, chief executive officer or other authorized officer, shall
have the right to waive any Default in the performance of any term of this
Agreement by First Michigan, to waive or extend the time for the compliance or
fulfillment by First Michigan
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of any and all of its obligations under this Agreement, and to waive any or all
of the conditions precedent to the obligations of Huntington under this
Agreement, except any condition which, if not satisfied, would result in the
violation of any Law. No such waiver shall be effective unless in writing signed
by a duly authorized officer of Huntington.
(b) Prior to or at the Effective Time, First Michigan, acting through
its Board of Directors, chief executive officer or other authorized officer,
shall have the right to waive any Default in the performance of any term of this
Agreement by Huntington, to waive or extend the time for the compliance or
fulfillment by Huntington of any and all of its obligations under this
Agreement, and to waive any or all of the conditions precedent to the
obligations of First Michigan under this Agreement, except any condition which,
if not satisfied, would result in the violation of any Law. No such waiver shall
be effective unless in writing signed by a duly authorized officer of First
Michigan.
(c) The failure of any Party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
Party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained in
this Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
10.7 ASSIGNMENT. Except as expressly contemplated hereby, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the Parties and their respective successors and assigns.
10.8 NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage pre-paid, or by
courier or overnight carrier, to the persons at the addresses set forth below
(or at such other address as may be provided hereunder), and shall be deemed to
have been delivered as of the date so delivered:
<TABLE>
<S> <C>
First Michigan: First Michigan Bank Corporation
One Financial Plaza
10717 Adams Street
Holland Michigan 49423
Attention: David M. Ondersma, Chairman and Chief Executive Officer
Telecopy number: (616) 355-8608
Copy to Counsel: Varnum, Riddering, Schmidt & Howlett, LLP
Bridgewater Place
P.O. Box 352
333 Bridge Street, N.W.
Grand Rapids, Michigan 49501-0352 (49504 for deliveries)
Attention: Donald L. Johnson, Esq.
Telecopy number: (616) 336-7000
Huntington: Zuheir Sofia
President
Huntington Bancshares Incorporated
41 South High Street
Columbus, Ohio 43287
Telecopy number: (614) 480-5485
</TABLE>
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<TABLE>
<S> <C>
Copy to Counsel: Ralph K. Frasier, Esq.
General Counsel and Secretary
Huntington Bancshares Incorporated
41 South High Street
Columbus, Ohio 43287
Telecopy number: (614) 480-5485
Copy to Counsel: Michael T. Radcliffe, Esq.
Porter, Wright, Morris & Arthur
41 South High Street
Columbus, Ohio 43215
Telecopy number: (614) 227-2100
</TABLE>
10.9 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the Laws of the State of Ohio, without regard to any applicable
conflicts of Laws, except to the extent that Maryland law governs certain
aspects of the Merger as it relates to Huntington or Michigan law governs
certain aspects of the Merger as it relates to First Michigan..
10.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
10.11 CAPTIONS. The captions contained in this Agreement are for reference
purposes only and are not part of this Agreement.
10.12 INTERPRETATIONS. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against any party, whether under
any rule of construction or otherwise. No party to this Agreement shall be
considered the draftsman. The parties acknowledge and agree that this Agreement
has been reviewed, negotiated and accepted by all parties and their attorneys
and shall be construed and interpreted according to the ordinary meaning of the
words used so as fairly to accomplish the purposes and intentions of all parties
hereto.
10.13 ENFORCEMENT OF AGREEMENT. The Parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the Parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
10.14 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
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10.15 BENEFIT. Nothing in this Agreement, express or implied, is intended
to confer upon any Person other than the Parties and their successors in
interest any rights or remedies under or by reason of this Agreement.
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf and its corporate seal to be hereunto affixed and
attested by officers thereunto as of the day and year first above written.
ATTEST: FIRST MICHIGAN BANK CORPORATION
/s/ Stephen A. Stream By: /s/ David M. Ondersma
- ------------------------------- -------------------------------------
Stephen A. Stream, Secretary David M. Ondersma, Chairman and Chief
Executive Officer
[CORPORATE SEAL]
ATTEST: HUNTINGTON BANCSHARES INCORPORATED
/s/ Ralph K. Frasier By: /s/ Frank Wobst
- ------------------------------- -------------------------------------
Ralph K. Frasier, Secretary Frank Wobst, Chairman and Chief
Executive Officer
[CORPORATE SEAL]
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EXHIBIT 1 TO SUPPLEMENTAL AGREEMENT
WARRANT PURCHASE AGREEMENT
THIS WARRANT PURCHASE AGREEMENT (this "Agreement") is made as of May 5,
1997, between HUNTINGTON BANCSHARES INCORPORATED, a Maryland corporation
("Huntington"), and FIRST MICHIGAN BANK CORPORATION, a Michigan corporation
("First Michigan").
RECITALS:
A. Concurrently herewith, Huntington and First Michigan have entered
into (i) a certain Agreement and Plan of Merger, dated as of the date hereof
(the "Merger Agreement"), which provides for the merger of First Michigan into
Huntington (the "Merger"), and (ii) a certain Supplemental Agreement, dated as
of the date hereof, which contains certain additional terms and conditions
relating to the Merger (the "Supplemental Agreement"). (The Merger Agreement and
the Supplemental Agreement are sometimes hereinafter collectively referred to as
the "Merger Documents.") All capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to them in the Merger Documents.
B. As a condition to Huntington's entering into the Merger Agreement
and the Supplemental Agreement, and in consideration therefor, First Michigan
has agreed to issue to Huntington a warrant or warrants entitling Huntington to
purchase up to a total of 5,268,716 shares of First Michigan Common, on the
terms and conditions set forth herein.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein, the parties hereto agree as follows:
SECTION 1. ISSUANCE, DELIVERY, AND EXERCISE OF THE WARRANT.
Concurrently with the execution of the Merger Documents and this Agreement,
First Michigan shall execute a warrant in favor of Huntington in the form
attached as Attachment A hereto (the "Warrant") to purchase up to a total of
5,268,716 shares of First Michigan Common at a purchase price equal to $29.275
per share (the "Exercise Price"), subject to adjustments as provided in the
Warrant. (The holder of the Warrant from time to time is hereinafter referred to
as the "Holder.") The Warrant shall be exercisable in accordance with the terms
and conditions set forth therein.
SECTION 2. REGISTRATION RIGHTS. If, at any time after the Warrant
becomes exercisable in accordance with its terms, First Michigan shall receive a
written request therefor from the Holder, First Michigan shall prepare and file
a registration statement under the 1933 Act covering such number of shares of
First Michigan Common as the Holder shall specify in the request and shall use
its best efforts to cause such registration statement to become effective;
provided, however, that the Holder shall only have the right to request three
such registrations. Without the written consent of the Holder, neither First
Michigan nor any other holder of securities of First Michigan may include any
other securities in such registration.
SECTION 3. "PIGGYBACK" RIGHTS. If, at any time after the Warrant
becomes exercisable in accordance with its terms, First Michigan shall determine
to proceed with the preparation and filing of a registration statement under the
1933 Act in connection with the proposed offer and sale for money of any of its
securities (other than in connection with a dividend reinvestment, employee
stock purchase, stock option, or similar plan or a registration statement on
Form S-4) by it or any of its security holders, First Michigan shall give
written notice thereof to the Holder. Upon the written request of the Holder
given within ten days after receipt of any such notice from First Michigan,
First Michigan shall, except as herein provided, cause all shares of First
Michigan Common which the Holder shall request be included in such registration
statement to be so included; provided, however, that nothing herein shall
prevent First Michigan from
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abandoning or delaying any registration at any time; and provided, further, that
if First Michigan decides not to proceed with a registration after the
registration statement has been filed with the SEC and First Michigan's decision
not to proceed is primarily based upon the anticipated public offering price of
the securities to be sold by First Michigan, First Michigan shall promptly
complete the registration for the benefit of the Holder if the Holder agrees to
bear all additional and incremental expenses incurred by First Michigan as the
result of such registration after First Michigan has decided not to proceed. If
any registration pursuant to this Section shall be underwritten in whole or in
part, the Holder may require that any shares of First Michigan Common requested
for inclusion pursuant to this Section be included in the underwriting on the
same terms and conditions as the securities otherwise being sold through the
underwriters. In the event that the shares of First Michigan Common requested
for inclusion pursuant to this Section would constitute more than 25 percent of
the total number of shares to be included in a proposed underwritten public
offering, and if in the good faith judgment of the managing underwriter of such
public offering the inclusion of all of such shares would interfere with the
successful marketing of the shares of being offered by First Michigan, the
number of shares otherwise to be included in the underwritten public offering
hereunder may be reduced; provided, however, that after any such required
reduction, the shares of First Michigan Common to be included in such offering
for the account of the Holder shall constitute at least 25 percent of the total
number of shares to be included in such offering.
SECTION 4. OBLIGATIONS OF FIRST MICHIGAN IN CONNECTION WITH A
REGISTRATION. If and whenever First Michigan is required by the provisions of
Sections 2 or 3 hereof to effect the registration of any shares of First
Michigan Common under the 1933 Act, First Michigan shall:
(a) prepare and file with the SEC a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for such period as may be
reasonably necessary to effect the sale of such securities, not to exceed nine
months;
(b) prepare and file with the SEC such amendments to such
registration statement and supplements to the prospectus contained therein as
may be necessary to keep such registration statement effective for such period
as may be reasonably necessary to effect the sale of such securities, not to
exceed nine months;
(c) furnish to the Holder and to the underwriters of the
securities being registered such reasonable number of copies of the registration
statement, amendments thereto, preliminary prospectus, final prospectus, and
such other documents as the Holder or such underwriters may reasonably request
in order to facilitate the public offering of such securities;
(d) use its best efforts to register or qualify the securities
covered by such registration statement under such state securities or blue sky
laws of such jurisdictions as the Holder or such underwriters may reasonably
request; provided that First Michigan shall not be required by virtue hereof to
submit to the general jurisdiction of any state;
(e) notify the Holder, promptly after First Michigan shall
receive notice thereof, of the time when such registration statement or any
post-effective amendment thereof has become effective or a supplement to any
prospectus forming a part of such registration statement has been filed;
(f) notify the Holder promptly of any request by the SEC for
the amending or supplementing of such registration statement or prospectus or
for additional information;
(g) prepare and file with the SEC, promptly upon the request
of the Holder, any amendments or supplements to such registration statement or
prospectus which, in the opinion of counsel for the Holder (and concurred in by
counsel for First Michigan), is required under the 1933 Act or the rules and
regulations promulgated thereunder in connection with the distribution of the
shares of First Michigan Common by the Holder;
(h) prepare and promptly file with the SEC such amendment or
supplement to such registration statement or prospectus as may be necessary to
correct any statements or omissions if, at the time when a prospectus is
required to be delivered under the 1933 Act, any event shall have occurred as
the result of which such prospectus as
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then in effect would include an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances in which they were made, not misleading;
(i) advise the Holder, promptly after it shall receive notice
or obtain knowledge thereof, of the issuance of any stop order by the SEC
suspending the effectiveness of such registration statement or the initiation or
threatening of any proceeding for that purpose and promptly use its best efforts
to prevent the issuance of any stop order or to obtain its withdrawal if such
stop order should be issued; and
(j) at the request of the Holder, furnish on the date or dates
provided for in the underwriting agreement: (i) an opinion or opinions of the
counsel representing First Michigan for the purposes of such registration,
addressed to the underwriters and to the Holder, covering such matters as such
underwriters and the Holder may reasonably request and as are customarily
covered by issuer's counsel at that time; and (ii) a letter or letters from the
independent certified public accountants of First Michigan, addressed to the
underwriters and to the Holder, covering such matters as such underwriters or
the Holder may reasonably request, in which letters such accountants shall state
(without limiting the generality of the foregoing) that they are independent
certified public accountants within the meaning of the 1933 Act and that, in the
opinion of such accountants, the financial statements and other financial data
of First Michigan included in the registration statement or any amendment or
supplement thereto comply in all material respects with the applicable
accounting requirements of the 1933 Act.
SECTION 5. EXPENSES OF REGISTRATION. With respect to a registration
requested pursuant to Section 2 hereof and with respect to each inclusion of
shares of First Michigan Common in a registration statement pursuant to Section
3 hereof, First Michigan shall bear the following fees, costs, and expenses: all
registration, stock exchange listing, and NASD fees, printing expenses, fees and
disbursements of counsel and accountants for First Michigan, fees and
disbursements of counsel for the underwriter or underwriters of such securities
(if First Michigan and/or the Holder are required to bear such fees and
disbursements), and all legal fees and disbursements and other expenses of
complying with state securities or blue sky laws of any jurisdictions in which
the securities to be offered are to be registered or qualified. Fees and
disbursements of counsel and accountants for the Holder, underwriting discounts
and commissions and transfer taxes relating to the First Michigan Common being
sold for the Holder, and any other expenses incurred by the Holder not expressly
included above shall be borne by the Holder.
SECTION 6. INDEMNIFICATION.
(a) First Michigan shall indemnify and hold harmless the
Holder, any underwriter (as defined in the 1933 Act) for the Holder, and each
person, if any, who controls the Holder or such underwriter within the meaning
of the 1933 Act, from and against any and all loss, damage, liability, cost, and
expense to which the Holder or any such underwriter or controlling person may
become subject under the 1933 Act or otherwise, insofar as such losses, damages,
liabilities, costs, or expenses are caused by any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
filed pursuant to Section 4 hereof, any prospectus or preliminary prospectus
contained therein, or any amendment or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they are made, not misleading; provided,
however, that First Michigan will not be liable in any such case to the extent
that any such loss, damage, liability, cost, or expense arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission so made in conformity with information furnished by the Holder,
such underwriter, or such controlling persons in writing specifically for use in
the preparation thereof.
(b) Promptly after receipt by an indemnified party pursuant to
the provisions of paragraph (a) of this Section 6 of notice of the commencement
of any action involving the subject matter of the foregoing indemnity
provisions, such indemnified party shall, if a claim thereof is to be made
against First Michigan pursuant to the provision of such paragraph (a), promptly
notify First Michigan of the commencement thereof; but the omission to so notify
First Michigan will not relieve it from any liability which it may have to any
indemnified party otherwise hereunder. In case such action is brought against
any indemnified party and such indemnified party notifies First Michigan of the
commencement thereof, First Michigan shall have the right to participate in and,
to the extent that it may wish to do so, to assume the defense thereof, with
counsel satisfactory to such indemnified party; provided, however, if the
defendants
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in any action include both the indemnified party and First Michigan and there is
a conflict of interest which would prevent counsel for First Michigan from also
representing the indemnified party, the indemnified party or parties shall have
the right to select one separate counsel to participate in the defense of such
action on behalf of such indemnified party or parties. After notice from First
Michigan to such indemnified party of its election so to assume the defense of
any such action, the indemnified party shall have the right to participate in
such action and to retain its own counsel, but First Michigan shall not be
required to indemnify and hold harmless the indemnified party pursuant to the
provisions of such paragraph (a) for any legal fees or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof, other than reasonable costs of investigation, unless (i) the
indemnified party shall have employed separate counsel in accordance with the
provisions of the preceding sentence of this paragraph (b), (ii) First Michigan
shall not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after the notice of the
commencement of the action, or (iii) First Michigan has authorized the
employment of counsel for the indemnified party at the expense of First
Michigan.
(c) If recovery is not available under the foregoing
indemnification provisions, for any reason other than as specified therein, the
parties entitled to indemnification by the terms thereof shall be entitled to
contribution to liabilities and expenses, except to the extent that contribution
is not permitted under Section 11(f) of the 1933 Act. In determining the amount
of contribution to which the respective parties are entitled, there shall be
considered the parties' relative knowledge and access to information concerning
the matter with respect to which the claim was asserted, the opportunity to
correct and prevent any statement or omission, and any other equitable
considerations appropriate under the circumstances.
SECTION 7. REPURCHASE RIGHTS.
(a) At any time after the Warrant becomes exercisable and
prior to the expiration of the Warrant, in accordance with the terms thereof:
(i) First Michigan may, and upon the written request
of the Holder, First Michigan shall, repurchase the Warrant
from the Holder at a price (the "Warrant Repurchase Price")
equal to the difference between the "Market/Offer Price" (as
defined in paragraph (b) below) and the Exercise Price,
multiplied by the number of shares for which the Warrant may
then be exercised, in the aggregate, but only if the
Market/Offer Price is greater than the Exercise Price; and
(ii) First Michigan may, and upon the written request
of the owner (the "Owner") of any shares of First Michigan
Common purchased pursuant to an exercise of the Warrant
("Warrant Stock"), First Michigan shall, repurchase all of the
shares of Warrant Stock held by such Owner at a price (the
"Warrant Stock Repurchase Price") equal to the number of
shares to be repurchased hereunder multiplied by the greater
of the Exercise Price and the Market/Offer Price.
(b) For purposes of paragraph (a) of this Section 7, the
"Market/Offer Price" shall mean the highest of (i) the price per share at which
a tender offer or exchange offer for shares of First Michigan Common has been
made, (ii) the price per share of First Michigan Common to be paid by any third
party pursuant to an agreement with First Michigan, and (iii) the highest
closing price for shares of First Michigan Common within the 4-month period
immediately preceding the date the Holder gives notice of the required
repurchase of the Warrant or the Owner gives notice of the required repurchase
of Warrant Stock, as appropriate. In the event that an exchange offer is made or
an agreement is entered into for a merger or consolidation involving
consideration other than cash, the value of the securities or other property
issuable or deliverable in exchange for First Michigan Common shall be
determined by a nationally recognized investment banking firm mutually
acceptable to the parties hereto.
(c) The Holder and the Owner may exercise their respective
rights to require First Michigan to repurchase the Warrant or the Warrant Stock
pursuant to this Section 7 by surrendering for such purpose to First Michigan,
at its principal office, the Warrant or certificates for shares of Warrant
Stock, as the case may be, free and clear of any liens, claims, encumbrances, or
rights of third parties of any kind, accompanied by a written notice or notices
stating that the Holder or the Owner, as the case may be, requests First
Michigan to repurchase such Warrant or Warrant Stock in accordance with the
provisions of this Section 7. Subject to the last proviso of paragraph 7(d)
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below, as promptly as practicable, and in any event within five business days
after the surrender of the Warrant or certificates representing shares of
Warrant Stock and the receipt of such notice or notices relating thereto, First
Michigan shall deliver or cause to be delivered to the Holder or Owner the
Warrant Repurchase Price or the Warrant Stock Repurchase Price therefor, as
applicable, or the portion thereof which First Michigan is not then prohibited
under applicable law and regulation from so delivering.
(d) To the extent that First Michigan is prohibited under
applicable law or regulation, or as a result of administrative or judicial
action, from repurchasing the Warrant and/or the Warrant Stock in full at any
time that it may be required to do so hereunder, First Michigan shall
immediately so notify the Holder and/or the Owner and thereafter deliver or
cause to be delivered, from time to time, to the Holder and/or the Owner, as
appropriate, the portion of the Warrant Repurchase Price and the Warrant Stock
Repurchase Price, respectively, which it is no longer prohibited from
delivering, within five business days after the date on which First Michigan is
no longer so prohibited. Upon receipt of such notice from First Michigan and for
a period of 15 days thereafter, the Holder and/or Owner may revoke its notice of
repurchase of the Warrant and/or Warrant Stock by written notice to First
Michigan at its principal office stating that the Holder and/or the Owner elects
to revoke its election to exercise its right to require First Michigan to
repurchase the Warrant and/or Warrant Stock, whereupon First Michigan will
promptly deliver to the Holder and/or Owner the Warrant and/or certificates
representing shares of Warrant Stock surrendered to First Michigan for purposes
of such repurchase. Whether or not such election is revoked, First Michigan
hereby agrees to use its best efforts to obtain all required legal and
regulatory approvals necessary to permit First Michigan to repurchase the
Warrant and/or the Warrant Stock as promptly as practicable.
SECTION 8. ASSUMPTION OF OBLIGATIONS UNDER THIS AGREEMENT. First
Michigan will not enter into any transaction described in paragraph 5(a) of the
Warrant unless the "Acquiring Corporation" (as that term is defined in the
Warrant) assumes in writing all the obligations of First Michigan hereunder.
SECTION 9. REMEDIES. Without limiting the foregoing or any remedies
available to the Holder, First Michigan specifically acknowledges that neither
Huntington nor any successor holder of the Warrant would have an adequate remedy
at law for any breach of this Warrant Purchase Agreement and First Michigan
hereby agrees that Huntington and any successor holder of the Warrant shall be
entitled to specific performance of the obligations of First Michigan hereunder
and injunctive relief against actual or threatened violations of the provisions
hereof.
SECTION 10. TERMINATION. This Agreement will terminate upon a
termination of the Warrant in accordance with Section 9 thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Warrant
Purchase Agreement as of the day and year first above written.
HUNTINGTON BANCSHARES INCORPORATED
By: _____________________________________
Frank Wobst, Chairman and Chief
Executive Officer
FIRST MICHIGAN BANK CORPORATION
By: _____________________________________
David M. Ondersma, Chairman and Chief
Executive Officer
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ATTACHMENT A TO WARRANT PURCHASE AGREEMENT
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR
QUALIFIED UNDER ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED WITHOUT BEING SO REGISTERED OR QUALIFIED UNLESS AN EXEMPTION OR
EXEMPTIONS FROM SUCH REGISTRATION OR QUALIFICATION REQUIREMENTS ARE AVAILABLE.
WARRANT
TO PURCHASE 5,268,716 COMMON SHARES
OF
FIRST MICHIGAN BANK CORPORATION
This is to certify that, for value received, HUNTINGTON BANCSHARES
INCORPORATED, a Maryland corporation ("Huntington"), is entitled to purchase
from FIRST MICHIGAN BANK CORPORATION, a Michigan corporation ("First Michigan"),
at any time on or after the date hereof, an aggregate of up to 5,268,716 common
shares, $1.00 par value per share, of First Michigan ("First Michigan Common"),
at a price of $29.275 per share (the "Exercise Price"), subject to the terms and
conditions of this Warrant and a certain Warrant Purchase Agreement, of even
date herewith, between Huntington and First Michigan (the "Warrant Purchase
Agreement"). The number of shares of First Michigan Common which may be received
upon the exercise of this Warrant and the Exercise Price are subject to
adjustment from time to time as hereinafter set forth. The terms and conditions
set forth in this Warrant and the Warrant Purchase Agreement shall be binding
upon the respective successors and assigns of both of the parties hereto. This
Warrant is issued in connection with a certain Agreement and Plan of Merger,
dated as of the date hereof, between Huntington and First Michigan (the "Merger
Agreement"), which provides for the merger of First Michigan into Huntington
(the "Merger"), and a certain Supplemental Agreement between Huntington and
First Michigan, which provides certain additional terms and conditions relating
to the Merger (the "Supplemental Agreement"). The Merger Agreement and the
Supplemental Agreement are sometimes hereinafter collectively referred to as the
"Merger Documents." All capitalized terms used herein and not otherwise defined
herein shall have the meanings ascribed to them in the Merger Documents. The
term "Holder" shall mean and refer to Huntington or any successor holder of this
Warrant.
SECTION 1. EXERCISE OF THE WARRANT.
(a) The Holder will not exercise this Warrant unless it has
obtained all required approvals, if any, of appropriate regulatory authorities
having jurisdiction, including the Federal Reserve Board, pursuant to all
applicable laws and regulations. Further, subject to the terms and conditions
set forth in this Warrant and in the Warrant Purchase Agreement and the
provisions of applicable law, the Holder will not exercise this Warrant without
the written consent of First Michigan except upon the occurrence of any of the
following events (a "Triggering Event"):
(i) any material, willful, and intentional breach of the
Merger Documents by First Michigan that would permit
Huntington to terminate the Merger Documents (A)
occurring after the receipt by First Michigan of a
proposal to engage in an Acquisition Transaction, (B)
occurring after the announcement by any other Person
of an intention to engage in an Acquisition
Transaction, or (C) in anticipation and for the
purpose of engaging in an Acquisition Transaction;
(ii) (A) a proposal to engage in an Acquisition
Transaction is submitted to and approved by the
shareholders of First Michigan at any time prior to
May 31, 1999, or (B) a Tender Offer is commenced and
the transactions contemplated in the Tender Offer are
completed in such a manner that the Person making the
Tender Offer acquires beneficial ownership of more
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than 20 percent of the capital stock or any other
class of voting securities of First Michigan, and
the Merger is not consummated prior to May 31,
1999;
(iii) (A) a proposal to engage in an Acquisition
Transaction is received by First Michigan or a
Tender Offer is made directly to the shareholders
of First Michigan or the intention of making an
Acquisition Transaction or Tender Offer is
announced at any time prior to the holding of the
First Michigan Shareholders' Meeting; (B) the
Board of Directors of First Michigan (1) fails to
recommend to the shareholders of First Michigan
that they vote their shares of First Michigan
Common in favor of the approval of the Merger, (2)
withdraws such recommendation previously made, (3)
fails to solicit proxies of shareholders of First
Michigan to approve the Merger, or (4) fails to
hold the First Michigan Shareholders' Meeting; and
(C) the Merger is not consummated by May 31, 1999;
(b) Notwithstanding the foregoing, this Warrant shall not be
exercisable in the event of the failure to consummate the Merger solely as a
result of any of the following: (i) the failure of the shareholders of
Huntington to approve the Merger; (ii) the failure of any Regulatory Authority
to provide any required Consent to the Merger, which failure was not the result
of the existence of the Acquisition Proposal or a breach by First Michigan of
any of its obligations under any of the Merger Documents; or (iii) the Merger
Documents are terminated pursuant to Section 9.1 of the Supplemental Agreement,
unless the event giving rise to the right to terminate is preceded by a
Triggering Event or the receipt by First Michigan of an Acquisition Transaction
proposal, or the announcement by another Person of a proposal involving an
Acquisition Transaction.
(c) An "Acquisition Transaction" shall mean a transaction
involving (A) the sale or other disposition of more than 20 percent of the
shares of the capital stock or any other class of voting securities of First
Michigan, including, but not limited to, a Tender Offer, (B) the sale or other
disposition of 15 percent or more of the consolidated assets or deposits of
First Michigan or of the banks owned by First Michigan, in the aggregate, or (C)
a merger or consolidation involving First Michigan other than a transaction
pursuant to which First Michigan will be the surviving corporation and the
current shareholders of First Michigan will be the owners of a majority of the
stock of the surviving corporation following the transaction. As used in this
Section 1, "person" or "group of persons" shall have the meanings assigned to
such terms by Section 13(d) of the 1934 Act. For purposes of this Section 1, a
Tender Offer which is contingent upon the expiration of the Warrant is deemed to
commence when it is announced.
(d) This Warrant shall be exercised by presentation and
surrender hereof to First Michigan at its principal office accompanied by (i) a
written notice of exercise for a specified number of shares of First Michigan
Common, (ii) payment to First Michigan, for the account of First Michigan, of
the Exercise Price for the number of shares specified in such notice, and (iii)
a certificate of the Holder indicating the Triggering Event that has occurred
which entitles the Holder to exercise this Warrant. The Exercise Price for the
number of shares of First Michigan Common specified in the notice shall be
payable in immediately available funds.
(e) Upon such presentation and surrender, First Michigan shall
issue promptly (and within three business days if requested by the Holder) to
the Holder, or any assignee, transferee, or designee permitted by subparagraph
(g) of this Section 1, the shares to which the Holder is entitled hereunder.
(f) If this Warrant should be exercised in part only, First
Michigan shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the rights of the Holder thereof to purchase
the balance of the shares purchasable hereunder. Upon receipt by First Michigan
of this Warrant, in proper form for exercise, the Holder shall be deemed to be
the holder of record of the shares of First Michigan Common issuable upon such
exercise, notwithstanding that the stock transfer books of First Michigan shall
then be closed or that certificates representing such shares of First Michigan
Common shall not then be actually delivered to the Holder. First Michigan shall
pay all expenses, and any and all federal, state, and local taxes and other
charges that may be payable in connection with the preparation, issue, and
delivery of stock certificates under this Section 1 in the name of the Holder or
of any assignee, transferee, or designee permitted by subparagraph (g) of this
Section 1.
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(g) This Warrant, once exercisable, or any warrant shares
acquired by the Holder by its exercise, may be sold or transferred in whole or
in part to any person, subject to the receipt by such person of approvals of
appropriate regulatory authorities having jurisdiction, including the Federal
Reserve Board, pursuant to all applicable laws and regulations, to the extent
required.
SECTION 2. CERTAIN COVENANTS AND REPRESENTATIONS OF FIRST MICHIGAN.
(a) First Michigan shall at all times maintain sufficient
authorized but unissued shares of First Michigan Common so that this Warrant may
be exercised without additional authorization of the holders of First Michigan
Common, after giving effect to all other options, warrants, convertible
securities, and other rights to purchase First Michigan Common.
(b) First Michigan represents and warrants to the Holder that
the shares of First Michigan Common issued upon an exercise of this Warrant will
be duly authorized, fully paid, non-assessable, and subject to no preemptive
rights.
(c) First Michigan agrees (i) that it will not, by charter
amendment or through reorganization, consolidation, merger, dissolution or sale
of assets, or by any other voluntary act, avoid or seek to avoid the observance
or performance of any of the covenants, stipulations, or conditions to be
observed or performed hereunder by First Michigan; (ii) promptly to take all
action as may from time to time be required, including, without limitation (A)
complying with all pre-merger notification, reporting, and waiting period
requirements specified in 15 U.S.C. Section 18a and regulations promulgated
thereunder, and (B) in the event, under the Bank Holding Company Act of 1956, as
amended (the "Bank Holding Company Act"), or the Change in Bank Control Act of
1978, or other statute, the prior approval of the Federal Reserve Board or other
regulatory agency (collectively, the "Agencies"), is necessary before the
Warrant may be exercised or transferred, cooperate fully with the Holder in
preparing such applications and providing such information to the Agencies as
the Agencies may require in order to permit the Holder to exercise or transfer
this Warrant and First Michigan duly and effectively to issue shares pursuant to
the exercise hereof; and (iii) promptly to take all action provided herein to
protect the rights of the Holder against dilution.
SECTION 3. FRACTIONAL SHARES. First Michigan shall not be required to
issue fractional shares of First Michigan Common upon an exercise of this
Warrant but shall pay for such fraction of a share in cash or by certified or
official bank check at the Exercise Price.
SECTION 4. EXCHANGE OR LOSS OF WARRANT. This Warrant is exchangeable,
without expense, at the option of the Holder, upon presentation and surrender
hereof at the principal office of First Michigan for other Warrants of different
denominations entitling the Holder thereof to purchase in the aggregate the same
number of shares of First Michigan Common purchasable hereunder. The term
"Warrant" as used herein includes any warrants for which this Warrant may be
exchanged. Upon receipt by First Michigan of evidence reasonably satisfactory to
it of the loss, theft, destruction, or mutilation of this Warrant, and (in the
case of loss, theft, or destruction) of reasonably satisfactory indemnification,
and upon surrender and cancellation of this Warrant, if mutilated, First
Michigan will execute and deliver a new Warrant of like tenor and date. Any such
new Warrant executed and delivered shall constitute an additional contractual
obligation on the part of First Michigan, whether or not the Warrant so lost,
stolen, destroyed, or mutilated shall at any time be enforceable by anyone.
SECTION 5. CERTAIN TRANSACTIONS.
(a) In case First Michigan shall (i) consolidate with or merge
into any Person, other than Huntington or one of its Affiliates, and shall not
be the continuing or surviving corporation of such consolidation or merger, (ii)
permit any Person, other than Huntington or one of its Affiliates, to merge into
First Michigan and First Michigan shall be the continuing or surviving
corporation, but, in connection with such merger, the then outstanding shares of
First Michigan Common shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property, or (iii) sell or
otherwise transfer all or substantially all of its assets to any Person, other
than Huntington or one of its Affiliates, then, and in any such case, the
agreement governing such transaction shall make proper provision so that this
Warrant shall, upon the consummation of any such transaction and upon the terms
and
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conditions set forth herein, be converted into, or exchanged for, a warrant, at
the option of the Holder, of either (A) the Acquiring Corporation (as
hereinafter defined), (B) any company which controls the Acquiring Corporation,
or (C) in the case of a merger described in clause (a)(ii) above, First
Michigan, in which case such warrant shall be a newly issued warrant (in any
such case, the "Substitute Warrant").
(b) For purposes of this Section 5, the following terms have
the meanings indicated:
(i) "Acquiring Corporation" shall mean (A) the
continuing or surviving corporation of a consolidation or
merger with First Michigan (if other than First Michigan), (B)
the corporation merging into First Michigan in a merger in
which First Michigan is the continuing or surviving person and
in connection with which the then outstanding shares of First
Michigan Common are changed into or exchanged for stock or
other securities of any other Person or cash or any other
property, or (C) the transferee of all or substantially all of
First Michigan's assets;
(ii) "Substitute Common" shall mean the common stock
issued by the issuer of the Substitute Warrant;
(iii) "Assigned Value" shall mean the Market/Offer
Price as determined pursuant to paragraph 7(b) of the Warrant
Purchase Agreement; provided, however, that in the event of a
sale of all or substantially all of First Michigan's assets,
the Assigned Value shall be the sum of the price paid in such
sale for such assets and the current market value of the
remaining assets of First Michigan as determined by a
recognized investment banking firm selected by the Holder,
divided by the number of shares of First Michigan Common
outstanding at the time of such sale;
(iv) "Average Price" shall mean the average closing
price of a share of Substitute Common for the one year
immediately preceding the consolidation, merger, or sale in
question, but in no event higher than the closing price of the
shares of Substitute Common on the day preceding such
consolidation, merger, or sale; provided that if First
Michigan is the issuer of the Substitute Warrant, the Average
Price shall be computed with respect to a share of the common
stock issued by the Person merging into First Michigan or by
any company which controls such Person, as the Holder may
elect;
(v) A "Person" shall mean any individual, firm,
corporation or other entity and include as well any syndicate
or group deemed to be a "person" by Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended; and
(vi) "Affiliate" shall have the meaning ascribed to
such term in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended.
(c) The Substitute Warrant shall have the same terms as this
Warrant, provided that, if the terms of the Substitute Warrant cannot, for legal
reasons, be the same as this Warrant, such terms shall be as similar as possible
and in no event less advantageous to the Holder. The issuer of the Substitute
Warrant shall also enter into an agreement with the then Holder of the
Substitute Warrant in substantially the same form as the Warrant Purchase
Agreement, which shall be applicable to the Substitute Warrant.
(d) The Substitute Warrant shall be exercisable for such
number of shares of Substitute Common as is equal to the Assigned Value
multiplied by the number of shares of First Michigan Common for which this
Warrant is then exercisable, divided by the Average Price. The exercise price of
the Substitute Warrant per share of Substitute Common shall be equal to the
Exercise Price multiplied by a fraction in which the numerator is the number of
shares of First Michigan Common for which this Warrant is then exercisable and
the denominator is the number of shares of Substitute Common for which the
Substitute Warrant is exercisable.
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SECTION 6. RIGHTS OF THE HOLDER; REMEDIES.
(a) The Holder shall not, by virtue hereof and prior to the
exercise hereof, be entitled to any rights of a holder of First Michigan Common.
(b) Without limiting the foregoing or any remedies available
to the Holder, First Michigan specifically acknowledges that neither Huntington
nor any successor Holder of this Warrant would have an adequate remedy at law
for any breach of this Warrant and First Michigan hereby agrees that Huntington
and any successor Holder shall be entitled to specific performance of the
obligations of First Michigan hereunder and injunctive relief against actual or
threatened violations of the provisions hereof.
SECTION 7. ANTIDILUTION PROVISIONS. The number of shares of First
Michigan Common purchasable upon the exercise hereof shall be subject to
adjustment from time to time as provided in this Section 7.
(a) In the event that First Michigan issues any additional
shares of First Michigan Common at any time after the date hereof (including
pursuant to stock option plans), the number of shares of First Michigan Common
which can be purchased pursuant to this Warrant shall be increased by an amount
equal to 19.9 percent of the additional shares so issued.
(b) (i) In the event that, after the date hereof, First
Michigan pays or makes a dividend or other distribution of any class of
capital stock of First Michigan in First Michigan Common (including,
but not limited to, the issuance of the First Michigan 1997 Stock
Dividend), the number of shares of First Michigan Common purchasable
upon exercise hereof shall be increased by multiplying such number of
shares by a fraction of which the denominator shall be the number of
shares of First Michigan Common outstanding at the close of business on
the day immediately preceding the date of such distribution and the
numerator shall be the sum of such number of shares and the total
number of shares constituting such dividend or other distribution, such
increase to become effective immediately after the opening of business
on the day following such distribution.
(ii) In the event that, after the date hereof,
outstanding shares of First Michigan Common are subdivided into a
greater number of shares of First Michigan Common, the number of shares
of First Michigan Common purchasable upon exercise hereof at the
opening of business on the day following the day upon which such
subdivision becomes effective shall be proportionately increased, and,
conversely, in the event that, after the date hereof, outstanding
shares of First Michigan Common are combined into a smaller number of
shares of First Michigan Common, the number of shares of First Michigan
Common purchasable upon exercise hereof at the opening of business on
the day following the day upon which such combination becomes effective
shall be proportionately decreased, such increase or decrease, as the
case may be, to become effective immediately after the opening of
business on the day following the day upon which such subdivision or
combination becomes effective.
(iii) The reclassification (including any reclassification
upon a merger in which First Michigan is the continuing corporation) of
First Michigan Common into securities including other than First
Michigan Common shall be deemed to involve a subdivision or
combination, as the case may be, of the number of shares of First
Michigan Common outstanding immediately prior to such reclassification
into the number of shares of First Michigan Common outstanding
immediately thereafter and the effective date of such reclassification
shall be deemed to be the day upon which such subdivision or
combination becomes effective, as the case may be, within the meaning
of clause (ii) above.
(c) Whenever the number of shares of First Michigan Common
purchasable upon exercise hereof is adjusted pursuant to paragraph (b) above,
the Exercise Price shall be adjusted by multiplying the Exercise Price by a
fraction the numerator of which is equal to the number of shares of First
Michigan Common purchasable prior to the adjustment and the denominator of which
is equal to the number of shares of First Michigan Common purchasable after
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the adjustment; provided, however, that no such adjustment of the Exercise Price
shall be made with respect to the adjustment in the number of shares purchasable
upon exercise hereof to be made pursuant to paragraph (b) above upon the
issuance of the First Michigan 1997 Stock Dividend.
(d) For the purpose of this Section 7, the term "First
Michigan Common" shall include any shares of First Michigan of any class or
series which has no preference or priority in the payment of dividends or in the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution, or winding up of First Michigan and which is not subject to
redemption by First Michigan.
SECTION 8. NOTICE.
(a) Whenever the number of shares of First Michigan Common for
which this Warrant is exercisable is adjusted as provided in Section 7 hereof,
First Michigan shall promptly compute such adjustment and mail to the Holder a
certificate, signed by a principal financial officer of First Michigan, setting
forth the number of shares of First Michigan Common for which this Warrant is
exercisable and the adjusted Exercise Price as a result of such adjustment, a
brief statement of the facts requiring such adjustment, the computation thereof,
and when such adjustment will become effective.
(b) Upon the occurrence of a Triggering Event First Michigan
shall (i) promptly notify the Holder and/or the "Owner" (as that term is defined
in the Warrant Purchase Agreement) of such event, (ii) promptly compute the
"Warrant Repurchase Price" and the "Warrant Stock Repurchase Price" (as such
terms are defined in the Warrant Purchase Agreement), and (iii) furnish to the
Holder and/or the Owner a certificate, signed by the chief financial officer of
First Michigan setting forth the Warrant Repurchase Price and/or the Warrant
Stock Repurchase Price and the basis and computation thereof.
(c) Upon the occurrence of an event which results in this
Warrant becoming convertible into, or exchangeable for, the Substitute Warrant,
as provided in Section 5 hereof, First Michigan and the Acquiring Corporation
shall promptly notify the Holder of such event; and, upon receipt from the
Holder of its choice as to the issuer of the Substitute Warrant, the Acquiring
Corporation shall promptly compute the number of shares of Substitute Common for
which the Substitute Warrant is exercisable and furnish to the Holder a
certificate, signed by a principal financial officer of the Acquiring
Corporation, setting forth the number of shares of Substitute Common for which
the Substitute Warrant is exercisable, the Substitute Warrant exercise price, a
computation thereof, and when such adjustment will become effective.
SECTION 9. TERMINATION. This Warrant and the rights conferred hereby
shall terminate upon the earliest of (i) six months after the occurrence of a
Triggering Event; (ii) the Effective Date of the Merger, (iii) the date of
termination of the Merger Documents unless the event giving rise to the right to
terminate is preceded by a Triggering Event or the receipt by First Michigan, or
the announcement by another person, of a proposal involving an Acquisition
Transaction or Tender Offer; or (iv) May 31, 1999.
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of
this _____ day of May, 1997.
ATTEST: FIRST MICHIGAN BANK CORPORATION
By:____________________________ By:_____________________________________
David M. Ondersma, Chairman and
Title:_________________________ Chief Executive Officer
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EXHIBIT 2 TO SUPPLEMENTAL AGREEMENT
MATTERS AS TO WHICH VARNUM, RIDDERING, SCHMIDT & HOWLETT LLP SHALL OPINE
1. First Michigan is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Michigan with full corporate
power and authority to carry on the business in which it is engaged as described
in the First Michigan Proxy Statement and to own and use its material Assets.
2. Each of the First Michigan Subsidiaries is duly organized, validly
existing, and in good standing under the Laws of the United States or its state
of incorporation, with full corporate power and authority to carry on the
business in which it is engaged as described in the First Michigan Proxy
Statement and to own and use its material Assets.
3. The execution and delivery of the Merger Documents and compliance
with their respective terms by First Michigan do not and will not violate or
contravene any provision of the Articles of Incorporation or Bylaws of First
Michigan nor, to our knowledge but without any independent investigation, any
Law, Order, Permit or Contract to which First Michigan is a party or by which
First Michigan or any of its material Assets is bound.
4. The Merger Documents have been duly and validly executed and
delivered by First Michigan and assuming valid authorization, execution and
delivery by Huntington, constitute the valid and binding agreements of First
Michigan enforceable in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization, or
similar laws affecting creditors' rights generally, provided, however, that we
express no opinion as to the availability of the equitable remedy of specific
performance.
5. First Michigan has the corporate power and authority to own its
properties and assets and to carry on its business within the State of Michigan.
To our Knowledge, First Michigan is not required to be qualified to do business
in any jurisdiction other than Michigan.
6. All corporate actions required to be taken by the directors and
shareholders of First Michigan to authorize the Merger Documents and the
transactions contemplated thereby have been taken.
7. All eligible accounts of deposit in all First Michigan Subsidiaries
that are depository institutions are insured by the Federal Deposit Insurance
Corporation to the fullest extent permitted by Law.
8. The Merger shall be exempted from the requirements of Section 780 of
Chapter 7A of the Michigan Business Corporation Act, as amended.
9. The execution and delivery of the Merger Documents does not, and the
consummation of the Merger and the other transactions contemplated by the Merger
Documents will not (i) result in the grant of any Rights to any Person under the
First Michigan Rights Agreement, (ii) result in separation from the shares of
First Michigan Common of the Rights granted under the First Michigan Rights
Agreement, (iii) permit any holder of any of the Rights under the First Michigan
Rights Agreement to exercise any such Rights, or (iv) give any Person any Right
to purchase any securities issued by Huntington, including, without limitation,
any Rights as a result of a "Flip-over Transaction or Event" under Section 3.2
of the First Michigan Rights Agreement. First Michigan and FMB-First Michigan
Bank and FMB-Trust, as Rights Agents, have properly authorized and executed a
certain Amendment to Shareholder Protection Rights Agreement, dated May 5, 1997,
a copy of which has been furnished to Huntington.
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EXHIBIT 3 TO SUPPLEMENTAL AGREEMENT
MATTERS AS TO WHICH PORTER, WRIGHT, MORRIS & ARTHUR SHALL OPINE
1. Huntington is a corporation duly organized, validly existing and in
good standing under the laws of the State of Maryland with full corporate power
and authority to carry on the business in which it is engaged as described in
the Huntington Proxy Statement and to own and use its material Assets.
2. The execution and delivery of the Merger Documents and compliance
with their respective terms by Huntington do not and will not violate or
contravene any provision of the Articles of Incorporation or Bylaws of
Huntington or, to our knowledge but without any independent investigation, any
Law, Order, or Permit to which Huntington is a party or by which Huntington is
bound.
3. The Merger Documents have been duly and validly executed and
delivered by Huntington and, assuming valid authorization, execution and
delivery by First Michigan, constitute the valid and binding agreements of
Huntington enforceable in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization, or
similar laws affecting creditors' rights generally, provided, however, that we
express no opinion as to the availability of the equitable remedy of specific
performance.
4. The shares of Huntington Common to be issued to the shareholders of
First Michigan as contemplated by the Merger Documents have been registered
under the Securities Act of 1933, as amended, and when properly issued and
delivered following consummation of the Merger will be duly authorized, validly
issued, fully paid and non-assessable under the Maryland Business Corporation
Act.
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EXHIBIT C
MORGAN STANLEY
MORGAN STANLEY & CO.
INCORPORATED
1585 BROADWAY
NEW YORK, NEW YORK
(212) 761-4000
July 11, 1997
Board of Directors
Huntington Bancshares Incorporated
Huntington Center
Columbus, OH 43287
Members of the Board:
We understand that Huntington Bancshares Incorporated ("Huntington"), and First
Michigan Bank Corporation ("First Michigan") have entered into an Agreement and
Plan of Merger, dated as of May 5, 1997 (the "Merger Agreement"), which
provides, among other things, for the merger of First Michigan into Huntington
(the "Merger"). Pursuant to the Merger, each issued and outstanding share of
common stock, par value $1.00 per share, of First Michigan (the "First Michigan
Common Stock"), other than shares held in treasury or held by Huntington or any
wholly owned subsidiary of Huntington or First Michigan, will be converted into
the right to receive 1.05 shares (the "Exchange Ratio") of common stock, no par
value per share, of Huntington (the "Huntington Common Stock"). The terms and
conditions of the Merger are more fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the Exchange Ratio pursuant to the
Merger Agreement is fair from a financial point of view to Huntington.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and
other information of First Michigan and Huntington,
respectively;
(ii) reviewed certain internal financial statements and other
financial and operating data concerning First Michigan and
Huntington prepared by the managements of First Michigan and
Huntington, respectively;
(iii) analyzed certain financial projections of First Michigan and
Huntington prepared by the managements of First Michigan and
Huntington, respectively;
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(iv) discussed the past and current operations and financial
condition and the prospects of First Michigan and Huntington
with senior executives of First Michigan and Huntington,
respectively;
(v) analyzed the pro forma impact of the Merger on Huntington's
earnings per share, consolidated capitalization and financial
ratios;
(vi) reviewed the reported prices and trading activity for the
First Michigan Common Stock and the Huntington Common Stock;
(vii) compared the financial performance of First Michigan and
Huntington and the prices and trading activity of the First
Michigan Common Stock and the Huntington Common Stock with
that of certain other comparable publicly-traded companies and
their securities;
(viii) discussed the results of regulatory examinations of First
Michigan with the senior management of First Michigan;
(ix) discussed the strategic objectives of the Merger and the plan
for the combined company with senior executives of First
Michigan and Huntington;
(x) reviewed and discussed with senior managements of First
Michigan and Huntington certain estimates of the cost savings
and revenue enhancements projected by Huntington for the
combined company and compared such amounts to those estimated
in certain precedent transactions;
(xi) reviewed the financial terms, to the extent publicly
available, of certain comparable precedent transactions;
(xii) reviewed the Merger Agreement and certain related documents;
and
(xiii) considered such other factors as we have deemed appropriate.
We have assumed and relied upon without independent verification the accuracy
and completeness of the information reviewed by us for the purposes of this
opinion. With respect to the financial projections, including the estimates of
cost savings and revenue enhancements expected to result from the Merger, we
have assumed that they have been reasonably prepared on bases reflecting the
best currently available estimates and judgments of the future financial
performance of First Michigan and Huntington. We have not made any independent
valuation or appraisal of the assets or liabilities of First Michigan and
Huntington, nor have we been furnished with any such appraisals and we have not
made any independent examination of the loan loss reserves or examined any
individual loan credit files of First Michigan or Huntington. In addition, we
have assumed the
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Merger will be consummated in accordance with the terms set forth in the Merger
Agreement. Our opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available to us as of, the
date hereof.
We have been engaged to provide this opinion to the Board of Directors of
Huntington in connection with this transaction and will receive a fee for our
services. In the past, Morgan Stanley & Co. Incorporated and its affiliates have
provided financial advisory and financing services for Huntington and have
received fees for the rendering of these services.
It is understood that this letter is for the information of the Board of
Directors of Huntington and may not be used for any other purpose without our
prior written consent, except that this opinion may be included in its entirety
in any filing with the Securities and Exchange Commission in connection with the
Merger. In addition, we express no opinion or recommendation as to how the
holders of Huntington Common Stock should vote at the shareholders' meeting held
in connection with the Merger.
Based on the foregoing, we are of the opinion on the date hereof that the
Exchange Ratio pursuant to the Merger Agreement is fair from a financial point
of view to Huntington.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Kirk R. Wilson
-------------------------
Kirk R. Wilson
Managing Director
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EXHIBIT D
Merrill Lynch
July 11, 1997
Board of Directors
First Michigan Bank Corporation
One Financial Plaza
10717 Adams Street
Holland, Michigan 49323
Members of the Board:
We understand that Huntington Bancshares Incorporated ("Huntington")
and First Michigan Bank Corporation ("First Michigan") have entered into an
Agreement and Plan of Merger and a Supplemental Agreement (together, the
"Agreement"), each dated May 5, 1997, pursuant to which First Michigan will be
merged with and into Huntington in a transaction (the "Merger") in which each
outstanding share of First Michigan's common stock, $1 par value (the "First
Michigan Shares"), will be converted into the right to receive 1.05 shares (the
"Conversion Ratio") of the common stock, no par value, of Huntington (the
"Huntington Shares"), all as set forth more fully in the Agreement. In
connection with the Merger, the parties have also entered into the Warrant
Purchase Agreement, dated May 5, 1997 (the "Warrant Agreement"), pursuant to
which First Michigan has granted to Huntington a warrant to acquire, under
certain circumstances, 19.9% of the outstanding First Michigan Shares, as set
forth more fully in the Warrant Agreement.
You have asked us whether, in our opinion, the proposed Conversion
Ratio in the Merger is fair to the shareholders of First Michigan from a
financial point of view.
In arriving at the opinion set forth below, we have, among other
things:
(1) Reviewed First Michigan's Annual Reports on Form 10-K and
related audited financial information for the three fiscal
years ended December 31, 1996, and First Michigan's Quarterly
Report on Form 10-Q and related unaudited financial
information for the quarterly period ended March 31, 1997;
(2) Reviewed Huntington's Annual Reports on Form 10-K and related
audited financial information for the three fiscal years ended
December 31, 1996, and Huntington's Quarterly Report on Form
10-Q and related unaudited financial information for the
quarterly period ended March 31, 1997;
(3) Reviewed certain financial information, including financial
forecasts, relating to the respective business, earnings,
assets, liabilities and prospects of First Michigan and
Huntington furnished to us by senior management of First
Michigan and Huntington as well as projected cost savings and
related expenses expected to result from the Merger (the
"Expected Savings") furnished to us by senior management of
Huntington;
(4) Conducted discussions with members of senior management of
First Michigan and Huntington concerning respective financial
condition, businesses, earnings, assets, liabilities,
operations, regulatory condition, financial forecasts,
contingencies and prospects, of First Michigan and Huntington
and their respective view as to the future financial
performance of First Michigan, Huntington and the combined
entity, as the case may be, following the Merger;
(5) Reviewed the historical market prices and trading activity for
the First Michigan Shares and the Huntington Shares and
compared them with that of certain publicly traded companies
which we deemed to be relevant;
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(6) Compared the respective results of operations of First
Michigan and Huntington with those of certain publicly traded
companies which we deemed to be relevant;
(7) Compared the proposed financial terms of the Merger
contemplated by the Agreement with the financial terms of
certain other mergers and acquisitions which we deemed to be
relevant;
(8) Reviewed the amount and timing of the Expected Savings for
First Michigan and Huntington following the Merger as
prepared, and discussed with us, by the senior management of
Huntington;
(9) Considered, based upon information provided by Huntington's
senior management, the pro forma impact of the transaction on
the earnings and book value per share, consolidated
capitalization and certain balance sheet and profitability
ratios of Huntington;
(10) Reviewed the Agreement and the Warrant Agreement; and
(11) Reviewed such other financial studies and analyses and
performed such other investigations and took into account such
other matters as we deemed appropriate.
In preparing our opinion, with your consent we have assumed and relied
on the accuracy and completeness of all information supplied or otherwise made
available to us by First Michigan and Huntington, including that contemplated in
the numbered items above, and we have not assumed responsibility for
independently verifying such information or undertaken an independent evaluation
or appraisal of the assets or liabilities, contingent or otherwise, of First
Michigan or Huntington or any of their subsidiaries, nor have we been furnished
any such evaluation or appraisal. We are not experts in the evaluation of
allowances for loan losses and, with your consent, we have not made an
independent evaluation of the adequacy of the allowance for loan losses of First
Michigan or Huntington, nor have we reviewed any individual credit files
relating to Huntington or First Michigan and, with your consent, we have assumed
that the aggregate allowance for loan losses for both Huntington and First
Michigan is adequate to cover such losses and will be adequate on a pro forma
basis for the combined entity. In addition, we have not conducted any physical
inspection of the properties or facilities of First Michigan or Huntington. With
your consent, we have also assumed and relied upon the senior management of
First Michigan and Huntington as to the reasonableness and achievability of the
financial forecasts (and the assumptions and bases therefor) provided to, and
discussed with, us. In that regard, we have assumed and relied with your consent
that such forecasts, including without limitation, financial forecasts,
evaluations of contingencies, Expected Savings and operating synergies resulting
from the Merger, future economic conditions and results of operations reflect
the best currently available estimates, allocations and judgments of the senior
management of First Michigan and Huntington as to the future financial
performance of First Michigan, Huntington or the combined entity, as the case
may be. Our opinion is predicated on te Merger receiving the tax and accounting
treatment contemplated in the Agreement. Our opinion is necessarily based on
economic, market and other conditions as in effect on, and the information made
available to us as of, the date hereof.
Our opinion has been rendered without regard to the necessity for, or
level of, any restrictions, obligations, undertakings or divestitures which may
be imposed or required in the course of obtaining regulatory approval for the
Merger.
We have been retained by the Board of Directors of First Michigan as an
independent contractor to act as financial advisor to First Michigan with
respect to the Merger and will receive a fee for our services. In addition,
First Michigan has agreed to indemnify us for certain liabilities arising out of
our engagement. We have in the past two years provided financial advisory,
investment banking and other services to First Michigan and Huntington and
received customary fees for the rendering of such services. In addition, in the
ordinary course of our securities business, we may actively trade debt and/or
equity securities of First Michigan and Huntington and their respective
affiliates for our own account and the accounts of our customers, and we
therefore may from time to time hold a long or short position in such
securities.
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Our opinion is directed to the Board of Directors of First Michigan and
does not constitute a recommendation to any shareholder of First Michigan as to
how such shareholder should vote at any shareholder meeting of First Michigan
held in connection with the Merger. This opinion is directed only to the
proposed Conversion Ratio.
On the basis of, and subject to, the foregoing, we are of the opinion
that the proposed Conversion Ratio in the Merger is fair to the shareholders of
First Michigan from a financial point of view.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
/s/ DAVID SHERWOOD
---------------------
Managing Director
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