<PAGE> 1
FILED PURSUANT TO RULE 424B3
REGISTRATION NO. 333-60741
CITIZENS BANCSHARES, INC. LOGO
10 EAST MAIN STREET
SALINEVILLE, OHIO 43945
August 7, 1998
To our Shareholders:
You are cordially invited to attend a special meeting of shareholders (the
"Special Meeting") of Citizens Bancshares, Inc. ("Bancshares"), to be held on
October 1, 1998, at 7 p.m., local time, at the Raymond T. Lowry Auditorium of
the Fred H. Johnson Building, 10 East Main Street, Salineville, Ohio 43945. The
accompanying Notice of the Special Meeting, Joint Proxy Statement/Prospectus and
Proxy Card set forth the formal business to be transacted at the Special
Meeting. I encourage you to review these materials and to attend the Special
Meeting.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve and adopt an Amended and Restated Agreement and Plan of
Merger, dated as of August 5, 1998 (the "Merger Agreement"), between Bancshares
and Mid Am, Inc., a bank holding company organized and existing under the laws
of Ohio ("Mid Am"), pursuant to which Bancshares and Mid Am will combine in a
merger of equals transaction. Pursuant to the Merger Agreement, Mid Am will be
merged with and into Bancshares (the "Merger") with Bancshares as the surviving
corporation under the name Sky Financial Group, Inc. ("Sky Financial"). The
Merger will create a combined organization with over $4 billion in assets, 145
branches and over 2,300 employees and will be one of the premier regional
banking organizations in Ohio.
The proposal to approve the Merger Agreement (the "Merger Proposal")
includes a proposal to amend the Fifth Amended Articles of Incorporation of
Bancshares (the "Bancshares Articles of Incorporation") as follows: (i) to
change the name of the corporation from Citizens Bancshares, Inc. to Sky
Financial Group, Inc.; (ii) to change the location of Bancshares' principal
office from Salineville, Ohio to Bowling Green, Ohio; (iii) to increase the
number of authorized shares of Bancshares common stock, no par value, from
36,000,000 to 150,000,000; (iv) to increase the number of authorized shares of
Bancshares serial preferred stock, par value $10.00 per share, from 200,000 to
10,000,000; (v) to eliminate cumulative voting in the election of directors; and
(vi) to reduce the shareholder vote required to approve various material
transactions of Bancshares, including certain mergers, consolidations and asset
sales, from 66 2/3% to a majority of the voting stock of the corporation.
In addition, the Merger Proposal includes a proposal to amend the Code of
Regulations of Bancshares to effect the following: (i) conform the list of
officers authorized to call a special meeting of the shareholders with the
additional officer positions provided for in the Merger Agreement; (ii) increase
the current size of the Board of Directors of Bancshares (the "Bancshares
Board") from fourteen (14) members to twenty-two (22) members and establish a
maximum board size of thirty-five (35) members; (iii) provide that for a period
of three years after the effective time of the Merger, the Sky Financial Board
of Directors will contain equal numbers of directors nominated by certain
Bancshares directors and by certain Mid Am directors; (iv) vest the power to
remove directors solely with the 80% vote of the Bancshares Board and then
solely upon a finding of cause; (v) provide that for a period of three years
after the effective time of the Merger, the Executive Committee of the
Bancshares Board, if established, would contain equal numbers of directors
elected by certain Bancshares directors and by certain Mid Am directors; (vi)
set forth a description of officer positions consistent with the provisions of
the Merger Agreement; and (vii) provide for the creation of a Management
Executive Committee to oversee management and operations of Sky Financial
post-Merger.
Upon consummation of the Merger, each share of common stock, without par
value of Mid Am ("Mid Am Common Stock") will be converted into 0.77 (the
"Exchange Ratio") shares of stock, without par value, of Sky Financial ("Sky
Financial Common Stock"). The original Exchange Ratio as stated in the Merger
Agreement was 0.385. The Exchange Ratio has been adjusted to 0.77 to reflect
Bancshares' June 1998 two-for-one stock split. The exchange of Mid Am Common
Stock for Sky Financial Common Stock is
<PAGE> 2
intended to qualify generally as tax-free to Bancshares, Mid Am and holders of
Mid Am Common Stock for federal income tax purposes. Each share of issued and
outstanding Bancshares Common Stock prior to the Merger will remain unchanged as
an issued and outstanding share of Sky Financial Common Stock.
Consummation of the Merger is subject to certain conditions, including but
not limited to, obtaining the requisite vote of the shareholders of Bancshares
and Mid Am and the receipt of certain regulatory approvals.
At the Special Meeting, you will also be asked to consider and vote upon
the following in contemplation of the Merger: (i) a proposal to amend the
Bancshares Articles of Incorporation to repeal the control share acquisition
provision set forth in Article Sixth thereof (the "Control Share Acquisition
Amendment"); (ii) a proposal to approve the Amended and Restated 1998
Non-Statutory Stock Option Plan for Non-Employee Directors (the "Director Stock
Option Plan"); and (iii) a proposal to approve the 1998 Stock Option Plan for
Employees of Sky Financial (the "Employee Stock Option Plan").
THE BANCSHARES BOARD OF DIRECTORS HAS UNANIMOUSLY CONCLUDED THAT THE MERGER
PROPOSAL, THE CONTROL SHARE ACQUISITION AMENDMENT, THE DIRECTOR STOCK OPTION
PLAN AND THE EMPLOYEE STOCK OPTION PLAN ARE IN THE BEST INTERESTS OF BANCSHARES
AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" APPROVAL
THEREOF.
Bancshares' financial advisor, Sandler O'Neill & Partners, L.P., has
rendered an opinion, dated August 5, 1998, to the Bancshares Board of Directors
to the effect that, as of that date, and based upon and subject to certain
matters stated in such opinion, the Exchange Ratio is fair to shareholders of
Bancshares from a financial point of view.
If the accompanying Proxy Card is executed properly and returned to
Bancshares in time to be voted at the Special Meeting, the shares represented
thereby will be voted in accordance with the instructions marked thereon.
Executed but unmarked proxies will be voted for approval of the Merger Proposal,
the Control Share Acquisition Amendment, the Director Stock Option Plan and the
Employee Stock Option Plan. The presence of a shareholder at the Special Meeting
will not automatically revoke such shareholder's proxy. A Bancshares shareholder
may, however, revoke a proxy at any time prior to its exercise by filing a
written notice of revocation with or delivering a duly executed proxy bearing a
later date to Tracey L. Reeder, Citizens Bancshares, Inc., 10 East Main Street,
Salineville, Ohio 43945 or by attending the Special Meeting and advising the
Secretary of the shareholder's intent to vote the shares.
Approval and adoption of the Merger Proposal requires the affirmative vote
of the holders of two-thirds of the outstanding common shares of Bancshares.
Approval and adoption of the Control Share Acquisition Amendment requires the
affirmative vote of 75% of the outstanding common shares of Bancshares. Approval
and adoption of the Director Stock Option Plan and the Employee Stock Option
Plan requires, in each case, the affirmative vote of a majority of the common
shares of Bancshares present in person or by proxy at the Special Meeting.
Accordingly, it is very important that your shares be represented at the
Bancshares Special Meeting. Approvals of the Control Share Acquisition
Amendment, the Director Stock Option Plan and the Employee Stock Option Plan are
not conditions to the Merger. We have engaged Morrow & Company, Inc. to assist
us with the proxy solicitation effort. You may receive a phone call from one of
their representatives reminding you to send in your proxy. I urge you to vote
FOR the Merger Proposal, the Control Share Acquisition Amendment, the Director
Stock Option Plan and the Employee Stock Option Plan and to sign, date and
return the accompanying Proxy Card as soon as possible, even if you plan to
attend the Special Meeting. This procedure will not prevent you from voting in
person, but will ensure that your vote is counted if you are unable to attend.
Sincerely,
/S/ MARTY E. ADAMS
Marty E. Adams
President and Chief Executive Officer
<PAGE> 3
MIDAM, INC. LOGO
221 SOUTH CHURCH STREET
BOWLING GREEN, OHIO 43402
August 7, 1998
Dear Shareholder:
You are cordially invited to attend a special meeting of shareholders (the
"Special Meeting") of Mid Am, Inc. ("Mid Am"), to be held on September 29, 1998,
at 4 p.m., local time, at The Toledo Club, Madison Avenue at 14th Street,
Toledo, Ohio. The accompanying Notice of the Special Meeting, Joint Proxy
Statement/Prospectus and Proxy Card set forth the formal business to be
transacted at the Special Meeting. I encourage you to review these materials and
to attend the Special Meeting.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve and adopt an Amended and Restated Agreement and Plan of
Merger, dated as of August 5, 1998 (the "Merger Agreement"), between Citizens
Bancshares, Inc., a bank holding company organized and existing under the laws
of Ohio ("Bancshares"), and Mid Am, pursuant to which Bancshares and Mid Am will
combine in a merger of equals transaction. Pursuant to the Merger Agreement, Mid
Am will be merged with and into Bancshares (the "Merger") with Bancshares as the
surviving corporation under the name Sky Financial Group, Inc. ("Sky
Financial"). The Merger will create a combined organization with over $4 billion
in assets, 145 branches and over 2,300 employees and be one of the premier
regional banking organizations in Ohio.
Upon consummation of the Merger, each share of common stock, without par
value of Mid Am ("Mid Am Common Stock"), will be converted into 0.77 (the
"Exchange Ratio") of a share of common stock, without par value, of Sky
Financial ("Sky Financial Common Stock"). The original Exchange Ratio as stated
in the Merger Agreement was 0.385. The Exchange Ratio has been adjusted to 0.77
to reflect Bancshares' June 1998 two-for-one stock split. The exchange of Mid Am
Common Stock for Sky Financial Common Stock is intended to qualify generally as
tax-free to Bancshares, Mid Am and holders of Mid Am Common Stock for federal
income tax purposes. Each share of issued and outstanding Bancshares Common
Stock prior to the Merger will remain unchanged as an issued and outstanding
share of Sky Financial Common Stock.
Consummation of the Merger is subject to certain conditions, including but
not limited to, obtaining the requisite vote of the shareholders of Bancshares
and Mid Am.
THE MID AM BOARD OF DIRECTORS HAS UNANIMOUSLY CONCLUDED THAT THE MERGER IS
IN THE BEST INTERESTS OF MID AM AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS
THAT YOU VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT AND THE MERGER.
Mid Am's financial advisor, McDonald & Company Securities, Inc., has
rendered an opinion, dated August 5, 1998, to the Mid Am Board of Directors to
the effect that, as of that date, and based upon and subject to certain matters
stated in such opinion, the Exchange Ratio is fair to shareholders of Mid Am
from a financial point of view.
If the accompanying Proxy Card is executed properly and returned to Mid Am
in time to be voted at the Special Meeting, the shares represented thereby will
be voted in accordance with the instructions marked thereon. Executed but
unmarked proxies will be voted for approval of the Merger Agreement and the
Merger. The presence of a shareholder at the Special Meeting will not
automatically revoke such shareholder's proxy. A shareholder may, however,
revoke a proxy at any time prior to its exercise by filing a written notice of
revocation with or delivering a duly executed proxy bearing a later date to
Marci L. Klumb, Mid Am, Inc., 221 South Church Street, Bowling Green, Ohio 43402
or by attending the Special Meeting and advising the Secretary of the
shareholder's intent to vote the shares.
Approval of the Merger Agreement and the Merger requires the affirmative
vote of the holders of at least a majority of the outstanding common shares of
Mid Am. Accordingly, it is very important that your shares be represented at the
Mid Am Special Meeting. We have engaged Georgeson & Company Inc. to assist us
with the proxy solicitation effort. You may receive a phone call from one of
their representatives reminding you to send in your proxy. I urge you to vote
FOR the Merger, and to sign, date and return the accompanying Proxy Card as soon
as possible, even if you plan to attend the Mid Am Special Meeting. This
procedure will not prevent you from voting in person, but will ensure that your
vote is counted if you are unable to attend.
Sincerely,
/S/ EDWARD J. REITER
Edward J. Reiter
Chairman of the Board
and Chief Executive Officer
<PAGE> 4
CITIZENS BANCSHARES, INC. LOGO
10 EAST MAIN STREET
SALINEVILLE, OHIO 43945
- --------------------------------------------------------------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 1, 1998
- --------------------------------------------------------------------------------
To the Shareholders of Citizens Bancshares, Inc.:
NOTICE IS HEREBY GIVEN that a special meeting of shareholders (including
any adjournments or postponements thereof, the "Special Meeting") of Citizens
Bancshares, Inc. will be held on October 1, 1998, at 7 p.m., local time, at
Raymond J. Lowry Auditorium of the Fred H. Johnson Building, 10 East Main
Street, Salineville, Ohio 43945. A Proxy Card and Joint Proxy
Statement/Prospectus for the Special Meeting are enclosed. The purpose of the
Special Meeting is to consider and vote upon the following matters:
1. A proposal (the "Merger Proposal") to approve and adopt the Amended
and Restated Agreement and Plan of Merger, dated as of August 5, 1998 (as
such agreement may be amended, supplemented or otherwise modified from time
to time, the "Merger Agreement"), between Bancshares and Mid Am, Inc. ("Mid
Am"), pursuant to which Bancshares and Mid Am will be combined in a merger
of equals transaction. Pursuant to the Merger Agreement, Mid Am will be
merged with and into Bancshares (the "Merger") with Bancshares as the
surviving corporation under the name Sky Financial Group, Inc. The Merger
Proposal also includes a proposal to amend the Articles of Incorporation of
Bancshares (the "Bancshares Articles Amendment") in order to (a) change the
name of the corporation from Citizens Bancshares, Inc. to Sky Financial
Group, Inc.; (b) change the location of Bancshares' principal office from
Salineville, Ohio to Bowling Green, Ohio; (c) increase the number of
authorized shares of Bancshares common stock, no par value, from 36,000,000
to 150,000,000; (d) increase the number of authorized shares of Bancshares
serial preferred stock, par value $10.00 per share, from 200,000 to
10,000,000; (e) eliminate cumulative voting in the election of directors;
and (f) reduce the shareholder vote required to approve various material
transactions of Bancshares, including certain mergers, consolidations and
asset sales, from 66 2/3% to a majority of the voting stock of the
corporation (collectively, the "Bancshares Articles Amendment"). In
addition, the proposal to approve the Merger Agreement includes a proposal
to amend the Code of Regulations of Bancshares to effect the following: (a)
conform the list of officers authorized to call a special meeting of the
shareholders with the additional officer positions provided for in the
Merger Agreement; (b) increase the current size of the Board of Directors
of Bancshares (the "Bancshares Board") from fourteen (14) members to
twenty-two (22) members and establish a maximum board size of thirty-five
(35) members; (c) provide that for a period of three years after the
effective time of the Merger, the Sky Financial Board of Directors will
contain equal numbers of directors nominated by certain Bancshares
directors and by certain Mid Am directors; (d) vest the power to remove
directors solely with the 80% vote of the Bancshares Board and then solely
upon a finding of cause; (e) provide that for a period of three years after
the effective time of the Merger, the Executive Committee of the Bancshares
Board, if established, would contain equal numbers of directors elected by
certain Bancshares directors and by certain Mid Am directors; (f) set forth
a description of officer positions consistent with the provisions of the
Merger Agreement; and (g) provide for the creation of a Management
Executive Committee to oversee management and operations of Sky Financial
post-Merger. A copy of the Merger Agreement is attached as Appendix A to
the accompanying Joint Proxy Statement/Prospectus.
<PAGE> 5
2. A proposal to amend the Bancshares Articles of Incorporation to
repeal the control share acquisition provision set forth in Article Sixth
thereof (the "Control Share Acquisition Amendment").
3. A proposal to approve and adopt the Amended and Restated 1998
Non-Statutory Stock Option Plan for Non-Employee Directors (the "Director
Stock Option Plan").
4. A proposal to approve and adopt the 1998 Stock Option Plan for
Employees (the "Employee Stock Option Plan").
5. A proposal to transact such other business as may properly come
before the Special Meeting or any adjournments or postponements thereof,
including without limitation, a motion to adjourn or postpone the Special
Meeting to another time and/or place for the purpose of soliciting
additional proxies in order to approve and adopt the Merger Proposal, the
Merger and the other matters set forth above.
THE BANCSHARES BOARD OF DIRECTORS HAS UNANIMOUSLY CONCLUDED THAT THE MERGER
PROPOSAL, THE CONTROL SHARE ACQUISITION AMENDMENT, THE DIRECTOR STOCK OPTION
PLAN AND THE EMPLOYEE STOCK OPTION PLAN ARE IN THE BEST INTERESTS OF BANCSHARES
AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR EACH OF THE
FOREGOING.
The Board of Directors of Bancshares has fixed the close of business on
August 5, 1998 as the record date (the "Record Date") for determination of the
shareholders of Bancshares entitled to notice of and to vote at the Special
Meeting. Only holders of record at the close of business on that date will be
entitled to notice of and to vote at the Special Meeting or any adjournments or
postponements thereof.
Approval and adoption of the Merger Proposal requires the affirmative vote
of at least two-thirds of the shares of Bancshares Common Stock outstanding on
the Record Date. Approval of the Control Share Acquisition Amendment requires
the affirmative vote of 75% of the shares of Bancshares Common Stock outstanding
on the Record Date. Approval and adoption of the Director Stock Option Plan and
the Employee Stock Option Plan requires, in each case, the affirmative vote of a
majority of the shares of Bancshares Common Stock present in person or by proxy
at the Special Meeting .
IF PASSED, AN EFFECT OF THE PROVISIONS IN THE BANCSHARES ARTICLES AMENDMENT
WILL BE TO DO THE FOLLOWING: (I) TO PERMIT A MAJORITY OF A QUORUM OF THE VOTING
POWER IN THE ELECTION OF DIRECTORS TO ELECT EVERY DIRECTOR; (II) TO ELIMINATE
CUMULATIVE VOTING AND (III) TO PRECLUDE A MINORITY OF A QUORUM OF THE VOTING
POWER IN THE ELECTION OR REMOVAL OF DIRECTORS FROM ELECTING OR PREVENTING THE
REMOVAL OF ANY DIRECTOR.
It is very important that your shares be represented at the Special
Meeting. You are urged to complete and sign the accompanying Proxy Card, which
is solicited by the Board of Directors of Bancshares, and to mail it promptly in
the enclosed envelope. All proxies are important, so whether or not you plan to
attend the Special Meeting, please complete each Proxy Card sent to you and
return it without delay in the enclosed postage-paid envelope provided. Your
proxy may be revoked in the manner described in the accompanying joint proxy
statement/prospectus at any time before it is voted at the Special Meeting.
By Order of the Board of Directors,
/S/ MARTY E. ADAMS
Marty E. Adams
President and
Chief Executive Officer
Salineville, Ohio
August 7, 1998
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR PROXY
- --------------------------------------------------------------------------------
<PAGE> 6
MIDAM, INC. LOGO
221 SOUTH CHURCH STREET
BOWLING GREEN, OHIO 43402
- --------------------------------------------------------------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 29, 1998
- --------------------------------------------------------------------------------
To the Shareholders of Mid Am, Inc.:
NOTICE IS HEREBY GIVEN that a special meeting of shareholders (including
any adjournments or postponements thereof, the "Special Meeting") of Mid Am,
Inc. ("Mid Am") will be held on September 29, 1998, at 4 p.m., local time, at
The Toledo Club, Madison Avenue at 14th Street, Toledo, Ohio. The purpose of the
Special Meeting is to consider and vote upon the following matters:
1. A proposal (the "Merger Proposal") to approve the Amended and
Restated Agreement and Plan of Merger, dated as of August 5, 1998, between
Citizens Bancshares, Inc. ("Bancshares") and Mid Am (as such agreement may
be amended, supplemented or otherwise modified from time to time, the
"Merger Agreement"), pursuant to which Mid Am will be merged with and into
Bancshares in a merger of equals transaction (the "Merger") with Bancshares
as the surviving corporation under the name Sky Financial Group, Inc. A
copy of the Merger Agreement is attached as Appendix A to the accompanying
Joint Proxy Statement/Prospectus.
2. A proposal to transact such other business as may properly come
before the Special Meeting or any adjournments or postponements thereof,
including, without limitation, a motion to adjourn or postpone the Special
Meeting to another time and/or place for the purpose of soliciting
additional proxies in order to approve and adopt the Merger Agreement and
the Merger.
THE MID AM BOARD OF DIRECTORS HAS UNANIMOUSLY CONCLUDED THAT THE MERGER
PROPOSAL IS IN THE BEST INTERESTS OF MID AM AND ITS SHAREHOLDERS AND UNANIMOUSLY
RECOMMENDS THAT YOU VOTE FOR THE MERGER PROPOSAL.
The Board of Directors of Mid Am has fixed the close of business on July
31, 1998, as the record date (the "Record Date") for determination of the
shareholders of Mid Am entitled to notice of and to vote at the Special Meeting.
Only holders of record at the close of business on that date will be entitled to
notice of and to vote at the Special Meeting or any adjournments or
postponements thereof.
Adoption of the Merger Proposal requires the affirmative vote of at least a
majority of the shares of Mid Am Common Stock outstanding on the Record Date.
It is very important that your shares be represented at the Special
Meeting. You are urged to complete and sign the accompanying Proxy Card, which
is solicited by the Board of Directors of Mid Am, and to mail it promptly in the
enclosed envelope. All proxies are important, so whether or not you plan to
attend the Special Meeting, please complete each Proxy Card sent to you and
return it without delay in the enclosed postage-paid envelope provided. Your
proxy may be revoked in the manner described in the accompanying joint proxy
statement/prospectus at any time before it is voted at the Special Meeting.
By Order of the Board of Directors,
MARCI L. KLUMB SIGNATURE
Marci L. Klumb
Secretary
Bowling Green, Ohio
August 7, 1998
YOUR VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR PROXY
<PAGE> 7
SKY FINANCIAL GROUP LOGO
MID AM, INC.
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 29, 1998
CITIZENS BANCSHARES, INC.
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 1, 1998
JOINT PROXY STATEMENT
------------------
CITIZENS BANCSHARES, INC.
(TO BE RENAMED SKY FINANCIAL GROUP, INC.)
PROSPECTUS
SHARES OF COMMON STOCK, WITHOUT PAR VALUE
------------------
This Joint Proxy Statement/Prospectus is being furnished to holders of
common stock, without par value ("Mid Am Common Stock"), of Mid Am, Inc., a bank
holding company organized and existing under the laws of Ohio ("Mid Am"), in
connection with the solicitation of proxies by the Board of Directors of Mid Am
(the "Mid Am Board") for use at a special meeting of shareholders to be held at
4 p.m., on September 29, 1998 at The Toledo Club, Madison Avenue at 14th Street,
Toledo, Ohio, and at any adjournments or postponements thereof (the "Mid Am
Special Meeting").
This Joint Proxy Statement/Prospectus is also being furnished to holders of
common stock, without par value ("Bancshares Common Stock," and after the
effective time of the Merger, "Sky Financial Common Stock"), of Citizens
Bancshares, Inc., a bank holding company organized and existing under the laws
of Ohio ("Bancshares"), in connection with the solicitation of proxies by the
Board of Directors of Bancshares (the "Bancshares Board") for use at a special
meeting of shareholders to be held at 7 p.m., on October 1, 1998, at Raymond J.
Lowry Auditorium of the Fred H. Johnson Building, 10 East Main Street,
Salineville, Ohio 43945, and at any adjournments or postponements thereof (the
"Bancshares Special Meeting"), and to holders of Mid Am Common Stock as a
prospectus with respect to shares of Sky Financial Common Stock issuable upon
consummation of the Merger (as hereinafter defined).
At the Mid Am Special Meeting in the case of holders of Mid Am Common Stock
and at the Bancshares Special Meeting in the case of holders of Bancshares
Common Stock, you will be asked to consider and vote upon a proposal to approve
and adopt an Amended and Restated Agreement and Plan of Merger, dated as of
August 5, 1998 (as amended from time to time, the "Merger Agreement"), between
Bancshares and Mid Am pursuant to which Bancshares and Mid Am will combine in a
merger of equals transaction. Pursuant to the Merger Agreement, Mid Am will be
merged with and into Bancshares (the "Merger") with Bancshares as the surviving
corporation under the name Sky Financial Group, Inc. ("Sky Financial"). The
Merger will create a combined organization with over $4 billion in assets, 145
branches and over 2,300 employees and will be one of the premier regional
banking organizations in Ohio.
The proposal to approve the Merger Agreement (the "Merger Proposal")
includes a proposal to amend the Fifth Amended Articles of Incorporation of
Bancshares (the "Bancshares Articles of Incorporation") as follows: (i) to
change the name of the corporation from Citizens Bancshares, Inc. to Sky
Financial Group, Inc.; (ii) change the location of Bancshares' principal office
from Salineville, Ohio to Bowling Green, Ohio; (iii) to increase the number of
authorized shares of Bancshares common stock, no par value, from 36,000,000 to
150,000,000; (iv) to increase the number of authorized shares of Bancshares
serial preferred stock, par value $10.00 per share (the "Bancshares Preferred
Stock"), from 200,000 to 10,000,000; (v) to eliminate cumulative voting in the
election of directors; and (vi) to reduce the shareholder vote required to
approve various material transactions of Bancshares, including certain mergers,
consolidations and asset sales, from 66 2/3% to a majority of the voting stock
of the corporation (the "Bancshares Articles Amendment"). In addition, the
Merger Proposal includes a proposal to amend the Code of Regulations of
Bancshares to effect the following: (i) conform the list of officers authorized
to call a special meeting of the shareholders with the additional officer
positions provided for in the Merger Agreement; (ii) increase the current size
of the Bancshares Board from fourteen (14) members to twenty-two (22) members
and establish a maximum board size of thirty-five (35) members; (iii) provide
that for a period of three years after the effective time of the Merger (the
"Effective Time", and the date thereof, the "Effective Date"), the Sky Financial
Board of Directors will contain equal numbers of directors nominated by certain
Bancshares directors and by certain Mid Am directors; (iv) vest the power to
remove directors solely with the 80% vote of the Bancshares Board and then
solely upon a finding of cause; (v) provide that for a period of three years
after the Effective Time the Executive Committee of the Bancshares Board, if
established, would contain equal numbers of directors elected by certain
Bancshares directors and by certain Mid Am directors; (vi) set forth a
description of officer positions consistent with the provisions of the Merger
Agreement; and (vii) provide for the creation of a Management Executive
Committee to oversee management and operations of Sky Financial post-Merger
(collectively, the "Bancshares Code of Regulations Amendment").
In contemplation of the Merger, at the Bancshares Special Meeting
shareholders of Bancshares will also be asked to consider and vote upon the
following: (i) a proposal to amend the Bancshares Articles of Incorporation to
repeal the control share acquisition provision set forth in Article Sixth
thereof (the "Control Share Acquisition Amendment"); (ii) a proposal to approve
the Amended and Restated 1998 Stock Option Plan for Non-Employee Directors (the
"Director Stock Option Plan"); and (iii) a proposal to approve the 1998 Stock
Option Plan for Employees (the "Employee Stock Option Plan"). Approval of these
proposals is not a condition to the consummation of the Merger.
Upon consummation of the Merger, each share of Mid Am Common Stock issued
and outstanding immediately prior to the Merger shall cease to be outstanding
and each such share (excluding certain shares held by Mid Am or its
subsidiaries, Bancshares or its subsidiaries and dissenting shareholders of Mid
Am and Bancshares, Mid Am, Bancshares or their subsidiaries) shall be converted
into 0.77 (the "Exchange Ratio") of a share of Sky Financial Common Stock,
subject to adjustment as provided in the Merger Agreement and as described
herein, with cash paid in lieu of fractional shares. The original Exchange Ratio
as stated in the Merger Agreement was 0.385. The Exchange Ratio has been
adjusted to 0.77 to reflect Bancshares' June 1998 two-for-one stock split. The
exchange of Mid Am Common Stock for Sky Financial Common Stock is intended to
qualify generally as tax-free to Bancshares, Mid Am and holders of Mid Am Common
Stock for federal income tax purposes. Each share of Bancshares Common Stock
issued and outstanding immediately prior to the Effective Time, will remain
unchanged as an issued and outstanding share of Sky Financial Common Stock. The
Merger Agreement also provides for the conversion upon consummation of the
Merger of all stock options to acquire Mid Am Common Stock (the "Mid Am Stock
Options") into options to acquire shares of Sky Financial Common Stock,
appropriately adjusted to reflect the Exchange Ratio. See "The Merger."
Based on the 23,358,898 shares of Mid Am Common Stock outstanding on the Mid
Am Record Date (as hereinafter defined)and the 1,361,829 shares issuable upon
exercise of outstanding Mid Am Stock Options and estimated to be issued under
certain employee benefit plans of Mid Am and the Exchange Ratio of 0.77, up to
approximately 19,170,700 shares of Bancshares Common Stock will be issuable upon
consummation of the Merger. The shares of Mid Am Common Stock and Bancshares
Common Stock are listed for quotation and traded on The Nasdaq Stock Market Inc.
(the "Nasdaq Stock Market"). On May 20, 1998, the last business day prior to
public announcement of the execution of the Merger Agreement, the last reported
sale prices per share of Mid Am Common Stock and of Bancshares Common Stock on
the Nasdaq Stock Market were $27.00 and $72.75 ($36.38 after giving effect to
the June 1998 two-for-one stock split), respectively, and on August 5, 1998, the
last practicable date prior to the mailing of this Joint Proxy
Statement/Prospectus, the last reported sale prices per share were $23.625 and
$30.00, respectively. Because the market price of Bancshares Common Stock is
subject to fluctuation, the value of the shares of Bancshares Common Stock that
holders of Mid Am Common Stock will receive in the Merger may increase or
decrease prior to and after the Merger.
THE SECURITIES TO BE ISSUED PURSUANT TO THIS JOINT PROXY STATEMENT/PROSPECTUS
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 JOINT PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------
THE SHARES OF BANCSHARES COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS,
DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL
AGENCY.
------------------
The date of this Joint Proxy Statement/Prospectus is August 7, 1998, and it
is first being mailed or otherwise delivered to Bancshares and Mid Am
shareholders on or about the same time.
<PAGE> 8
TABLE OF CONTENTS
<TABLE>
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AVAILABLE INFORMATION....................................... iv
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE........... v
SUMMARY..................................................... 1
Parties to the Merger..................................... 1
Bancshares............................................. 1
Mid Am................................................. 1
Recent Developments.................................... 2
Reasons for the Merger; Recommendations of the Board...... 3
Opinions of Financial Advisors............................ 3
Bancshares............................................. 3
Mid Am................................................. 3
Terms of the Merger....................................... 3
General................................................ 3
Effective Time......................................... 3
Exchange Ratio......................................... 4
Effects on Bancshares Shareholders..................... 4
Board of Directors and Management Following the
Merger................................................ 4
Dissenters' Rights..................................... 5
NASDAQ Listing......................................... 5
Conditions............................................. 5
Termination of the Merger Agreement.................... 5
Stock Option Agreements................................ 5
Tax and Accounting Treatment........................... 6
Interest of Certain Persons in the Merger.............. 6
Dividends.............................................. 6
Bancshares Articles Amendment and Bancshares Code of
Regulations Amendment.................................. 6
Bancshares Articles Amendment.......................... 6
Bancshares Code of Regulations Amendment............... 7
Control Share Acquisition Amendment....................... 7
Director Stock Option Plan................................ 7
Employee Stock Option Plan................................ 8
Shareholder Meetings...................................... 8
Date, Time and Place................................... 8
Purpose of Meetings.................................... 8
Shares Outstanding and Entitled to Vote, Record Date... 8
Votes Required......................................... 8
Shares Owned by Directors, Executive Officers and
Certain Subsidiaries of Bancshares and Mid Am......... 9
COMPARATIVE STOCK PRICES AND DIVIDENDS...................... 10
COMPARISON OF CERTAIN UNAUDITED PER SHARE DATA.............. 11
SELECTED FINANCIAL DATA OF BANCSHARES (HISTORICAL).......... 12
SELECTED FINANCIAL DATA OF MID AM (HISTORICAL).............. 14
BANCSHARES AND MID AM UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL DATA............................... 16
INTRODUCTION................................................ 17
PARTIES TO THE MERGER....................................... 17
Bancshares................................................ 17
Mid Am.................................................... 18
Recent Developments....................................... 19
</TABLE>
i
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<TABLE>
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SPECIAL MEETINGS OF BANCSHARES AND MID AM................... 20
Time and Place of Special Meetings........................ 20
Record Date, Solicitation and Revocability of Proxies..... 21
Votes Required............................................ 22
Matters to be Considered at the Bancshares Special
Meeting................................................ 23
Matters to be Considered at the Mid Am Special Meeting.... 24
Recommendation of Bancshares Board of Directors........... 24
Recommendation of Mid Am Board of Directors............... 24
Expenses.................................................. 24
THE MERGER.................................................. 25
General................................................... 25
Background of the Merger.................................. 25
Reasons for the Merger.................................... 26
Opinion of Bancshares Financial Advisor................... 28
Opinion of Mid Am Financial Advisor....................... 31
Effective Time............................................ 35
Distribution of Sky Financial Certificates................ 35
Fractional Shares......................................... 36
Stock Options............................................. 36
Federal Income Tax Consequences........................... 36
Board of Directors, Management and Operations after the
Merger................................................. 38
Post-acquisition Compensation and Benefits................ 39
Interests of Certain Persons in the Merger................ 40
Conditions to Consummation................................ 43
Representations and Warranties............................ 44
Regulatory Approval....................................... 44
Amendment, Waiver and Termination......................... 44
Acquisition Proposals..................................... 44
Conduct of Business Pending the Merger.................... 45
Dividends................................................. 46
Expenses and Fees......................................... 46
Accounting Treatment...................................... 46
Dissenters' Rights........................................ 47
NASDAQ Listing of Sky Financial Common Stock.............. 47
Resales of Sky Financial Common Stock..................... 47
CERTAIN RELATED AGREEMENTS.................................. 48
Stock Option Agreements................................... 48
RIGHTS OF DISSENTING SHAREHOLDERS........................... 52
Rights of Dissenting Bancshares Shareholders.............. 52
Rights of Dissenting Mid Am Shareholders.................. 52
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS................................................ 54
DESCRIPTION OF SKY FINANCIAL CAPITAL STOCK.................. 61
General................................................... 61
Control Share Acquisition Provision....................... 61
Shareholders Rights Plan.................................. 63
COMPARISON OF CERTAIN RIGHTS OF HOLDERS OF COMMON STOCK OF
SKY FINANCIAL, MID AM AND BANCSHARES...................... 66
Authorized Shares......................................... 66
Amendments to Articles of Incorporation or Code of
Regulations............................................ 66
Special Meetings of Shareholders.......................... 67
Number of Directors; Classified Board of Directors........ 67
Removal of Directors...................................... 68
</TABLE>
ii
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Advance Notice of Director Nominations.................... 68
Cumulative Voting......................................... 69
Control Share Acquisitions................................ 69
Business Combination Provisions........................... 70
Vote Required to Approve Merger, Consolidation, Sale of
Substantially All Assets............................... 71
Indemnification........................................... 71
Shareholders Rights Plan.................................. 72
AMENDMENTS TO THE BANCSHARES ARTICLES OF INCORPORATION AND
THE BANCSHARES CODE OF REGULATIONS........................ 73
General................................................... 73
Bancshares Articles Amendment............................. 73
Control Share Acquisition Amendment....................... 74
Bancshares Code of Regulations Amendment.................. 75
APPROVAL OF THE AMENDED AND RESTATED 1998 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS................................ 77
Purpose................................................... 77
Summary of the Director Stock Option Plan................. 77
Federal Income Tax Consequences........................... 78
Recommendation and Vote................................... 78
APPROVAL OF 1998 STOCK OPTION PLAN FOR EMPLOYEES............ 79
Purpose................................................... 79
Summary of the Employee Stock Option Plan................. 79
Federal Income Tax Consequences........................... 80
Recommendation and Vote................................... 81
EXPERTS..................................................... 82
VALIDITY OF SHARES.......................................... 82
PROPOSALS FOR 1999 ANNUAL MEETINGS.......................... 82
</TABLE>
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APPENDIX A Amended and Restated Agreement and Plan of Merger, dated as
of August 5, 1998, between Citizens Bancshares, Inc. and Mid
Am, Inc., including the Form of Stock Option Agreements
APPENDIX B Amendment to the Articles of Incorporation of Citizens
Bancshares, Inc. (including as an Attachment A thereto the
text of the Control Share Acquisition provision contained in
Article Sixth of the Bancshares Articles of Incorporation)
APPENDIX C Amendment to the Code of Regulations of Citizens Bancshares,
Inc.
APPENDIX D Opinion of Sandler O'Neill & Partners, L.P.
APPENDIX E Opinion of McDonald & Company Securities, Inc.
APPENDIX F Section 1701.85 of the Ohio General Corporation Law
APPENDIX G Amended and Restated 1998 Stock Option Plan for Non-Employee
Directors
APPENDIX H 1998 Stock Option Plan for Employees
</TABLE>
iii
<PAGE> 11
AVAILABLE INFORMATION
Each of Mid Am and Bancshares is subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). The reports, proxy
statements and other information filed by Mid Am and Bancshares with the
Commission can be inspected and copied at the Commission's public reference room
located at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549, and at the public reference facilities in the Commission's regional
offices located at: 7 World Trade Center, 13th Floor, New York, New York 10048,
and Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661. Copies of such material can be obtained at prescribed rates by
writing to the Securities and Exchange Commission, Public Reference Section, 450
Fifth Street, N.W., Washington, D.C. 20549. The Commission maintains a Website
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission, which
registrants include Mid Am and Bancshares. The address of such site is
http://www.sec.gov. The shares of Mid Am Common Stock and Bancshares Common
Stock are traded on the NASDAQ National Market System. As such, the periodic
reports, proxy statements and other information filed with the Commission by Mid
Am and Bancshares may be inspected at the offices of the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington D.C. 20006.
This Joint Proxy Statement/Prospectus does not contain all of the
information set forth in the Registration Statement on Form S-4 of which this
Joint Proxy Statement/Prospectus is a part, and the exhibits thereto (together
with any amendments thereto, the "Registration Statement"), which has been filed
by Bancshares with the Commission under the Securities Act of 1933, as amended,
and the rules and regulations thereunder (the "Securities Act"), certain
portions of which have been omitted pursuant to the rules and regulations of the
Commission and which portions may be inspected and copied as set forth above.
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.
This Joint Proxy Statement/Prospectus contains statements describing the
material provisions of certain documents included herein as Appendices or filed
or incorporated by reference as exhibits to the Registration Statement. Such
descriptions are not necessarily complete, and all such statements contained in
this Joint Proxy Statement/Prospectus are qualified in their entirety by
reference to the full text of such documents.
All information contained herein with respect to Bancshares and its
subsidiaries has been supplied by Bancshares, and all information with respect
to Mid Am and its subsidiaries has been supplied by Mid Am.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY BANCSHARES OR MID AM.
NEITHER THE DELIVERY OF THIS JOINT PROXY STATEMENT/PROSPECTUS NOR ANY
DISTRIBUTION OF THE SECURITIES TO WHICH THIS JOINT PROXY STATEMENT/PROSPECTUS
RELATES SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF BANCSHARES, MID AM, OR ANY OF THEIR RESPECTIVE
SUBSIDIARIES SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. THIS JOINT PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO PURCHASE, ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT
RELATES OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO PURCHASE THE
SECURITIES OFFERED BY THIS JOINT PROXY STATEMENT/PROSPECTUS IN ANY JURISDICTION
IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT LAWFUL.
iv
<PAGE> 12
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed with the Commission by Bancshares (File No.
0-18209) under Section 13(a) or 15(d) of the Exchange Act are hereby
incorporated by reference in this Joint Proxy Statement/ Prospectus:
(1) Bancshares' Annual Report on Form 10-K for the year ended December
31, 1997 (the "1997 Bancshares 10-K");
(2) the portions of Bancshares' Proxy Statement for the Annual Meeting
of Shareholders held on May 11, 1998 (the "1998 Bancshares Proxy
Statement") that have been incorporated by reference into the 1997
Bancshares 10-K;
(3) Bancshares' Quarterly Report on Form 10-Q for the three months
ended March 31, 1998 (the "Bancshares 10-Q");
(4) Bancshares' Current Reports on Form 8-K, dated January 2, 1998,
February 12, 1998, May 21, 1998, June 2, 1998, June 25, 1998, July 24, 1998
and July 29, 1998 and on Form 8-K/A, dated June 25, 1998; and
(5) the description of the Bancshares Common Stock contained in
Bancshares' registration statements filed pursuant to Section 12 of the
Exchange Act (and any amendment or report filed for the purpose of updating
such description).
The following documents filed with the Commission by Mid Am (File No.
0-10585) under Section 13(a) or 15(d) of the Exchange Act are hereby
incorporated by reference in this Joint Proxy Statement/ Prospectus:
(1) Mid Am's Annual Report on Form 10-K for the year ended December
31, 1997 (the "1997 Mid Am 10-K");
(2) the portions of Mid Am's Proxy Statement for the Annual Meeting of
Shareholders held on April 24, 1998 that have been incorporated by
reference into the 1997 Mid Am 10-K;
(3) Mid Am's Quarterly Report on Form 10-Q for the three months ended
March 31, 1998 (the "Mid Am 10-Q"); and
(4) Mid Am's Current Reports on Form 8-K, dated January 28, 1998, May
7, 1998, May 21, 1998 and August 3, 1998.
All documents filed by Bancshares and Mid Am pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Joint
Proxy Statement/Prospectus and prior to the Special Meetings are hereby
incorporated by reference into this Joint Proxy Statement/Prospectus and shall
be deemed a part hereof from the date of filing of such document.
In addition to the foregoing, the Bancshares and Mid Am Schedules 13D, each
dated May 29, 1998, and the Bancshares Schedule 13D, dated July 10, 1998, are
incorporated herein by reference.
Any statement contained herein, in any supplement hereto or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Joint Proxy Statement/Prospectus
and the registration statement on Form S-4 of which this Proxy Statement/
Prospectus forms a part (the "Registration Statement") to the extent that a
statement contained herein, in any supplement hereto 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 such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of the Registration Statement, this Joint Proxy
Statement/Prospectus, or any supplement hereto.
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE CERTAIN
DOCUMENTS WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS
ARE AVAILABLE WITHOUT CHARGE UPON REQUEST FROM: CITIZENS BANCSHARES, INC., 10
EAST MAIN STREET, SALINEVILLE, OHIO 43945, (330) 679-2328, ATTENTION: TRACEY L.
v
<PAGE> 13
REEDER, ASSISTANT CORPORATE SECRETARY, AS TO BANCSHARES DOCUMENTS; AND MID AM,
INC., 221 SOUTH CHURCH STREET, BOWLING GREEN, OHIO 43402, (419) 327-6300,
ATTENTION: SECRETARY, AS TO MID AM DOCUMENTS. IN ORDER TO ENSURE TIMELY DELIVERY
OF THE DOCUMENTS, ANY REQUEST TO BANCSHARES SHOULD BE MADE BY SEPTEMBER 24,
1998, AND ANY REQUEST TO MID AM SHOULD BE MADE BY SEPTEMBER 22, 1998.
THIS JOINT PROXY STATEMENT/PROSPECTUS CONTAINS OR INCORPORATES BY REFERENCE
CERTAIN FORWARD-LOOKING STATEMENTS WITH RESPECT TO THE FINANCIAL CONDITION,
RESULTS OF OPERATIONS, EXPECTED CASH DIVIDEND LEVELS, AND BUSINESS OF EACH OF
BANCSHARES, MID AM AND SKY FINANCIAL. THESE FORWARD-LOOKING STATEMENTS INVOLVE
CERTAIN RISKS AND UNCERTAINTIES. THE RISKS AND UNCERTAINTIES THAT MAY AFFECT THE
OPERATIONS, PERFORMANCE, DEVELOPMENT, GROWTH PROJECTIONS AND RESULTS OF THE
COMBINED COMPANY'S BUSINESS INCLUDE, BUT ARE NOT LIMITED TO, THE STATE OF THE
ECONOMY, INTEREST RATE MOVEMENTS, TIMELY DEVELOPMENT BY THE COMBINED COMPANY OF
TECHNOLOGY ENHANCEMENTS FOR ITS PRODUCTS AND OPERATING SYSTEMS, THE IMPACT OF
COMPETITIVE PRODUCTS, SERVICES AND PRICING, CUSTOMER BUSINESS REQUIREMENTS,
CONGRESSIONAL LEGISLATION, ACQUISITION COST SAVINGS AND REVENUE ENHANCEMENTS AND
SIMILAR MATTERS. READERS OF THIS REPORT ARE CAUTIONED NOT TO PLACE UNDUE
RELIANCE ON FORWARD-LOOKING STATEMENTS WHICH ARE SUBJECT TO INFLUENCE BY THE
NAMED RISK FACTORS AND UNANTICIPATED FUTURE EVENTS. ACTUAL RESULTS, ACCORDINGLY,
MAY DIFFER MATERIALLY FROM MANAGEMENT EXPECTATIONS.
vi
<PAGE> 14
SUMMARY
The following summary of certain information contained elsewhere in this
Joint Proxy Statement/ Prospectus does not purport to be complete and is
qualified in its entirety by reference to the full text of this Joint Proxy
Statement/Prospectus, including the Appendices attached hereto and the documents
incorporated herein by reference. The information contained in this Joint Proxy
Statement/Prospectus with respect to Bancshares has been provided by Bancshares,
and the information with respect to Mid Am has been provided by Mid Am.
PARTIES TO THE MERGER
Bancshares. Bancshares is a bank holding company organized and existing
under the laws of the State of Ohio and registered with the Board of Governors
of the Federal Reserve System (the "Federal Reserve Board") pursuant to the Bank
Holding Company Act of 1956, as amended (the "BHC Act"). Bancshares is a holding
company for (i) The Citizens Banking Company, a wholly owned commercial bank
subsidiary organized and existing under the banking laws of the State of Ohio
("Citizens"); (ii) First National Bank of Chester, a wholly owned commercial
bank subsidiary organized under the laws of the United States ("FNB"); (iii)
Century National Bank and Trust Company, a wholly owned commercial bank
subsidiary organized under the laws of the United States ("CNB"); (iv) Freedom
Express, Inc., a wholly owned courier company; and (v) Freedom Financial Life
Insurance Company, a wholly owned reinsurance company. As of the close of
business on July 18, 1998, FNB was merged with and into Citizens.
At June 30, 1998, Bancshares had total consolidated assets of approximately
$1.8 billion and total shareholders' equity of approximately $159 million. For
the year ended December 31, 1997, Bancshares' return on average total assets and
return on average common shareholders' equity was 1.34% and 15.23%, respectively
(all amounts are restated to reflect UniBank's March 1998 merger with and into
Citizens and the May 1998 merger of Century Financial Corporation ("Century")
with and into Bancshares). Bancshares Common Stock is traded on the Nasdaq
National Market System under the symbol "CICS."
On May 12, 1998, Century was merged with and into Bancshares, and its
wholly owned banking subsidiary, CNB, became a subsidiary of Bancshares. CNB
engages in full service commercial and consumer banking and trust services
through thirteen branch offices in Southwestern Pennsylvania.
The mailing address of Bancshares' principal executive offices is 10 East
Main Street, Salineville, Ohio 43945, and its telephone number is (330)
679-2328.
Mid Am. Mid Am is a bank holding company organized and existing under the
laws of the State of Ohio and registered with the Federal Reserve Board pursuant
to the BHC Act. Mid Am is a holding company for five bank subsidiaries with a
total of 83 banking offices located in western Ohio along the Interstate 75
corridor and in southern Michigan. Mid Am also owns seven financial services
subsidiaries which engage in lines of business which are closely related to
banking. Through its bank subsidiaries, Mid Am offers a wide range of lending,
depository, trust, and related financial services to individual and business
customers. Through its financial services subsidiaries, Mid Am offers speciality
lending, investment, trust, collection and related financial services to
individual and business customers. Mid Am's market area is economically diverse,
with a base of manufacturing, service industries, transportation and
agriculture, and is not dependent upon any single industry or employer.
At June 30, 1998, Mid Am had total consolidated assets of approximately
$2.3 billion and total shareholders' equity of approximately $163 million. For
the year ended December 31, 1997, Mid Am's return on average total assets and
return on average common shareholders' equity was 1.42% and 17.58%,
respectively. Mid Am Common Stock is traded on the Nasdaq National Market System
under the symbol "MIAM."
The mailing address of Mid Am's principal executive offices is 221 South
Church Street, Bowling Green, Ohio 43402, and its telephone number is (419)
327-6300.
1
<PAGE> 15
RECENT DEVELOPMENTS
Bancshares Results for the Six Months Ended June 30, 1998. Bancshares'
operating income for the six months ended June 30, 1998 was $13.7 million, an
increase of 13.2%, as compared to $12.1 million for the same period of 1997. Net
income for the quarter and the six months ended June 30, 1998 included
nonrecurring after tax income and operating expenses. The nonrecurring after tax
income and expenses included a $3.6 million charge related to two acquisitions,
a $1.3 million additional provision for loan losses related to an acquisition,
and gains on the sales of loans and securities of $309,000. Bancshares' net
income, as a result of the after tax financial impact of the nonrecurring items,
for the first six months of 1998 was $9.2 million, a 24.3% decline from the
$12.1 million earned in the comparable period in 1997. Basic and diluted
earnings per share were both $0.52 for the first six months of 1998 compared to
basic earnings per share of $0.69 and diluted earnings per share of $0.68 for
the same period in 1997. Excluding the after tax effect of the nonrecurring
expenses and income items discussed above, for the six months ended June 31,
1998 return on average shareholders' equity was 17.62% and return on average
assets was 1.54%.
Mid Am's Results for the Six Months Ended June 30, 1998. Core earnings for
the six months ended June 30, 1998 were $14.47 million (excluding a pre-tax
$1.48 million favorable legal settlement), an 8.7% increase from $13.31 million
core earnings reported for the same period of the prior year (excluding an $8.5
million pre-tax gain related to the sale of various branch offices, $2.0 million
pre-tax charges relating to the branch sales, and a $1.0 million pre-tax
increase in the provision for credit losses). Return on shareholders' equity
relating to core earnings was 17.67%, while return on average assets was 1.30%
for the six months ended June 30, 1998. This compares to ratios based on core
earnings of 14.39% and 1.24%, respectively, for the same period of the prior
year. Including non-recurring items for all comparable periods, net income for
the six months ended June 30, 1998 was $15.89 million, a 5% decline from the
$16.73 million earned in the same period of 1997. Basic earnings per share were
$.67 and diluted earnings per share were $.66 for the first half of 1998, as
compared to $.69 and $.65, respectively, for the same period in the prior year.
Return on shareholders' equity and return on average assets were 19.37% and
1.43%, respectively, for the six months ended June 30, 1998, compared to 18.01%
and 1.56%, respectively, for the same period of the prior year.
Ohio Bank Transaction. On July 22, 1998, Bancshares and The Ohio Bank
("Ohio Bank"), a state banking association organized and existing under the
banking laws of the State of Ohio and headquartered in Findlay, Ohio, entered
into a definitive Agreement and Plan of Merger (the "Ohio Bank Agreement"),
which provides for the affiliation of Ohio Bank with Bancshares (and ultimately
Sky Financial) in a transaction expected to be accounted for as a pooling of
interests. As of June 30, 1998, Ohio Bank had total consolidated assets of
$599.5 million, deposits of $531 million and shareholders' equity of $52.6
million. Ohio Bank had net income of $3.6 million for the six months ended June
30, 1998 and net income of $6 million for the year ended December 31, 1997. Ohio
Bank has 17 banking offices located in the Ohio counties of Seneca, Hancock,
Putnam, Cuyahoga, Wyandot and Franklin. The Ohio Bank Agreement provides that
the affiliation will be effected by means of a merger (the "Ohio Bank Merger")
of an interim Ohio bank formed by Bancshares with and into Ohio Bank. In the
Ohio Bank Merger, each outstanding share of Ohio Bank Class A and Class B common
stock, par value $50 per share (other than those common shares, if any, with
respect to which dissenter's rights are exercised), will be converted into 63.25
shares of Bancshares Common Stock in a tax-free exchange. Bancshares expects to
issue 5,249,750 shares in the Ohio Bank Merger. In connection with the
transactions contemplated by the Ohio Bank Agreement, Bancshares and Ohio Bank
entered into a Stock Option Agreement whereby Bancshares may purchase up to
5.42% of Ohio Bank common shares under certain circumstances. Shareholders of
Ohio Bank holding in excess of the number of votes necessary to approve the Ohio
Bank Merger have agreed to vote in favor of the Ohio Bank Merger.
Pursuant to the terms of the Ohio Bank Agreement, three directors of Ohio
Bank will be invited to join the Board of Directors of Sky Financial, one of
whom will be designated for membership on the Board's executive committee, if
any such committee is formed. In addition, Bancshares will designate an officer
of Ohio Bank to serve on the Management Executive Committee of Sky Financial.
2
<PAGE> 16
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARD
The Board of Directors of each of Mid Am and Bancshares has determined that
the Merger would place the combined company in an improved competitive position
in the financial markets because of each board's respective belief that the
Merger combines two financially sound institutions with complementary businesses
and business strategies, thereby creating a stronger combined institution with
greater size, flexibility, breadth of services, efficiency, capital resources,
profitability and potential for expansion than either party would possess on a
stand-alone basis.
THE BANCSHARES BOARD HAS UNANIMOUSLY APPROVED THE MERGER PROPOSAL AND HAS
DETERMINED THAT THE MERGER IS IN THE BEST INTERESTS OF BANCSHARES AND ITS
SHAREHOLDERS. THE BANCSHARES BOARD, THEREFORE, UNANIMOUSLY RECOMMENDS THAT
BANCSHARES' SHAREHOLDERS VOTE "FOR" THE ADOPTION AND APPROVAL OF THE MERGER
PROPOSAL.
THE MID AM BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND HAS
DETERMINED THAT THE MERGER IS IN THE BEST INTERESTS OF MID AM AND ITS
SHAREHOLDERS. THE MID AM BOARD, THEREFORE, UNANIMOUSLY RECOMMENDS THAT MID AM'S
SHAREHOLDERS VOTE "FOR" THE ADOPTION AND APPROVAL OF THE MERGER AGREEMENT.
In deciding to adopt the Merger Agreement and approve the transactions
contemplated therein, the Mid Am Board and the Bancshares Board each considered
a number of factors, including the financial condition, results of operations,
and future prospects of Mid Am and Bancshares. See "The Merger -- Background of
The Merger," "The Merger -- Reasons for the Merger" and "The Merger -- Interest
of Certain Persons in the Merger."
OPINIONS OF FINANCIAL ADVISORS
Bancshares. Sandler O'Neill & Partners, L.P. ("Sandler O'Neill") has served
as financial advisor to Bancshares in connection with the Merger and has
rendered a written opinion to the Bancshares Board that, as of August 5, 1998,
the Exchange Ratio is fair to the shareholders of Bancshares from a financial
point of view. The opinion of Sandler O'Neill is attached as Appendix D to this
Joint Proxy Statement/Prospectus. Shareholders are urged to read such opinion in
its entirety for a description of the procedures followed, assumptions made,
matters considered, and the qualifications and limitations on the review
undertaken in connection therewith. See "The Merger -- Opinion of Bancshares
Financial Advisor."
Mid Am. McDonald & Company Securities, Inc. ("McDonald & Company") has
served as financial advisor to Mid Am in connection with the Merger and has
rendered a written opinion to the Mid Am Board that, as of August 5, 1998, the
Exchange Ratio is fair from a financial point of view to shareholders of Mid Am.
The opinion of McDonald & Company is attached as Appendix E to this Joint Proxy
Statement/ Prospectus. Shareholders are urged to read such opinion in its
entirety for a description of the procedures followed, assumptions made and
matters considered, and the qualifications and limitations of the review
undertaken in connection therewith. See "The Merger -- Opinion of Mid Am
Financial Advisor."
TERMS OF THE MERGER
General. Pursuant to the Merger Agreement, Mid Am will be merged with and
into Bancshares, with Bancshares as the surviving corporation under the name of
Sky Financial Group, Inc. The Merger has been structured as a merger-of-equals
transaction with Mid Am shareholders and Bancshares shareholders owning 50.9%
and 49.1%, respectively, of Sky Financial immediately after the Effective Time.
The combined company will have over $4 billion in assets, 145 branches and over
2,300 employees. The headquarters of Sky Financial will be the current
headquarters of Mid Am in Bowling Green, Ohio. Sky Financial will maintain
substantial operating facilities in Salineville, Ohio, the current headquarters
of Bancshares. See "The Merger -- General."
Effective Time. The Merger is expected to be consummated during the second
half of 1998, although the timing is subject to the satisfaction of various
closing conditions, including, without limitation, approval by the shareholders
of Bancshares and Mid Am of the Merger Agreement and the transactions
contemplated therein, including, in the case of Bancshares, the proposals to
approve various amendments to the Bancshares Articles
3
<PAGE> 17
of Incorporation and the Bancshares Code of Regulations Amendment. The time and
date on which the Merger is consummated is referred to herein as the "Effective
Time." See "The Merger -- Effective Time," "The Merger -- Conditions to
Consummation" and "The Merger -- Regulatory Approvals."
Exchange Ratio. At the Effective Time, each outstanding share of Mid Am
Common Stock will be converted into 0.77 shares of Sky Financial Common Stock,
with cash paid in lieu of issuing fractional shares of Sky Financial Common
Stock. At the Effective Time, each option to purchase Mid Am Common Stock will
be automatically converted into an option to purchase such number of shares of
Sky Financial Common Stock that is equal to the number of shares of Mid Am
Common Stock issuable under the options multiplied by the Exchange Ratio. See
"The Merger -- General," "The Merger -- Stock Options." MID AM SHAREHOLDERS
SHOULD NOT SURRENDER THEIR STOCK CERTIFICATES FOR EXCHANGE UNTIL THEY RECEIVE A
LETTER OF TRANSMITTAL AND INSTRUCTIONS FROM SKY FINANCIAL, WHICH WILL BE
DISTRIBUTED AS SOON AS REASONABLY PRACTICABLE AFTER CONSUMMATION OF THE MERGER.
For information on how Mid Am shareholders will be able to exchange their
certificates representing shares of Mid Am Common Stock, see "The
Merger -- Distribution of Sky Financial Certificates."
Effects on Bancshares Shareholders. At the Effective Time, each share of
Bancshares Common Stock then issued and outstanding will continue unchanged as
one share of Sky Financial Common Stock, and without any action required on the
part of Bancshares shareholders. BANCSHARES SHAREHOLDERS ARE NOT BEING ASKED TO
SURRENDER THEIR STOCK CERTIFICATES FOR EXCHANGE.
Board of Directors and Management Following the Merger. At the Effective
Time, the Board of Directors of Sky Financial will consist of twenty-two (22)
members. Eleven (11) directors will be nominated by Bancshares, and eleven (11)
directors will be nominated by Mid Am. Mr. Edward J. Reiter, Chairman of the
Board and Chief Executive Officer of Mid Am, will become the Senior Chairman of
the Board of Directors of Sky Financial. Mr. David R. Francisco, President and
Chief Operating Officer of Mid Am, will become Chairman of the Board of
Directors and Chief Executive Officer of Sky Financial, and Mr. Marty E. Adams,
President and Chief Executive Officer of Bancshares, will become the President
and Chief Operating Officer of Sky Financial. In addition, certain officers of
Sky Financial will sit on a management executive committee consisting of at
least eight (8) persons, one-half of whom will be selected by the Chairman of
the Board and Chief Executive Officer of Mid Am and one-half of whom will be
selected by the President and Chief Executive Officer of Bancshares. Mr. Reiter
will serve as a chairman of the management executive committee. If an Executive
Committee of the Board of Directors of Sky Financial is formed within three
years after the Effective Time it will contain equal numbers of members selected
by directors of Bancshares, and selected by directors of Mid Am. See "The
Merger -- Interest of Certain Persons in the Merger" and "Board of Directors,
Management and Operations After the Merger."
In his capacity as Chairman and Chief Executive Officer, Mr. Francisco will
render executive, policy and other management services to Sky Financial of the
type customarily performed by persons serving in a similar executive officer
capacity. Mr. Francisco will report to the Sky Financial Board of Directors and
will perform such related duties as the Sky Financial Board of Directors may
from time to time reasonably direct or request. Unless otherwise determined by a
majority of the entire Board of Directors of Sky Financial, on the fifth
anniversary of the Effective Date Mr. Francisco will relinquish his position as
Chief Executive Officer but will continue in his role as Chairman.
As President and Chief Operating Officer of Sky Financial, Mr. Adams will
be the second highest ranking officer of Sky Financial and will render executive
policy and other management services to Sky Financial. In addition, Mr. Adams
will have primary responsibility for the commercial banking operations of Sky
Financial, including related acquisitions. He will also participate in all
aspects of other merger and acquisition activity engaged in by Sky Financial.
Unless otherwise determined by a majority of the Board of Directors of Sky
Financial, Mr. Adams will become the President and Chief Executive Officer of
Sky Financial on the earlier of (i) the fifth anniversary of the Effective Date
or (ii) the date that Mr. Francisco ceases to serve as the Chief Executive
Officer of Sky Financial. Mr. Adams will then become the highest ranking officer
of Sky Financial.
4
<PAGE> 18
Dissenters' Rights. Holders of Bancshares Common Stock and holders of Mid
Am Common Stock, by complying with Section 1701.85 of the Ohio General
Corporation Law (the "OGCL"), may exercise dissenters' rights. Failure to comply
precisely with the requirements of Section 1701.85 of the OGCL will result in
the loss of dissenters' rights. See "Rights of Dissenting Shareholders." HOLDERS
OF BANCSHARES COMMON STOCK AND HOLDERS OF MID AM COMMON STOCK WHO WANT TO
EXERCISE THEIR DISSENTERS' RIGHTS MUST NOT VOTE IN FAVOR OF THE MERGER AT THE
BANCSHARES SPECIAL MEETING OR THE MID AM SPECIAL MEETING, AS THE CASE MAY BE,
AND MUST SEND A WRITTEN DEMAND FOR PAYMENT FOR THEIR SHARES WITHIN TEN DAYS
AFTER THE BANCSHARES SPECIAL MEETING OR THE MID AM SPECIAL MEETING, AS THE CASE
MAY BE.
NASDAQ Listing. At the Effective Time, the shares of Sky Financial Common
Stock issuable as a result of the Merger will be accepted for quotation on the
Nasdaq National Market System. See "The Merger -- NASDAQ Listing of Sky
Financial Common Stock."
Conditions. Consummation of the Merger is subject to various mutual
conditions including, among others, receipt of the shareholder approvals for the
Merger Proposal solicited hereby; receipt by each party of a favorable tax
opinion from its legal counsel; receipt of letters from each of Crowe, Chizek
and Company LLP and PricewaterhouseCoopers LLP to the effect that the Merger
qualifies for pooling of interests accounting treatment as of the Effective
Time; the continuing accuracy of the representations and warranties of each
party; and performance of specified obligations by each party. See "The Merger
- -- Conditions to Consummation."
Termination of the Merger Agreement. The Merger Agreement may be
terminated, and the Merger abandoned, prior to the Effective Time, whether
before or after its adoption by the shareholders of Bancshares and Mid Am (i) by
the respective majority votes of the Boards of Directors of both Bancshares and
Mid Am; or (ii) by either Board of Directors under certain specified
circumstances, including if the Merger shall not have been consummated by March
31, 1999. See "The Merger -- Amendment, Waiver and Termination."
Stock Option Agreements. As an inducement to the willingness of Bancshares
to continue to pursue the transactions contemplated in the Merger Agreement, Mid
Am and Bancshares entered into a Stock Option Agreement, dated as of May 21,
1998 (the "Mid Am Stock Option Agreement"), pursuant to which Mid Am granted
Bancshares an option (the "Mid Am Option") to purchase from Mid Am up to 19.9%
of Mid Am Common Stock outstanding as of May 20, 1998 (without giving effect to
the exercise of the option), or 4,648,726 shares of Mid Am Common Stock, at a
price of $27.00 per share (the closing price of Mid Am Common Stock on May 20,
1998). Bancshares may exercise the Mid Am Option only upon the occurrence of
certain events (none of which has occurred) and upon obtaining any regulatory
approvals necessary for the acquisition of the Mid Am Common Stock subject to
the Mid Am Option. At the request of Bancshares, under limited circumstances
(none of which has occurred), Mid Am will repurchase for a formula price the Mid
Am Option and any shares of Mid Am Common Stock purchased upon exercise of the
Mid Am Option and beneficially owned by Bancshares at that time. See "Certain
Related Agreements -- Stock Option Agreements."
As an inducement to the willingness of Mid Am to continue to pursue the
transactions contemplated in the Merger Agreement, Bancshares and Mid Am entered
into a Bancshares Stock Option Agreement, dated as of May 21, 1998 (the
"Bancshares Stock Option Agreement" and, together with the Mid Am Stock Option
Agreement, the "Stock Option Agreements"), pursuant to which Bancshares granted
Mid Am an option (the "Bancshares Option") to purchase from Bancshares up to
19.9% of Bancshares Common Stock outstanding as of May 20, 1998 (without giving
effect to the exercise of the option), or 3,522,616 shares of Bancshares Common
Stock, at a price of $36.375 per share (the closing price of Bancshares Common
Stock on May 20, 1998 as adjusted for its June 1998 two-for-one stock split).
Mid Am may exercise the Bancshares Option only upon the occurrence of certain
events (none of which has occurred) and upon obtaining any regulatory approvals
necessary for the acquisition of the Bancshares Common Stock subject to the
Bancshares Option. At the request of Mid Am, under limited circumstances (none
of which has occurred), Bancshares will repurchase for a formula price the
Bancshares Option and any shares of Bancshares Common Stock purchased upon
exercise of the Bancshares Option and beneficially owned by Mid Am at that time.
See "Certain Related Agreements -- Stock Option Agreements."
5
<PAGE> 19
The terms of the Mid Am Stock Option Agreement and the Bancshares Stock
Option Agreement are identical in all material respects. The Stock Option
Agreements are intended to increase the likelihood that the Merger will be
consummated in accordance with the terms of the Merger Agreement and to
compensate the option holder if the Merger is not consummated. Consequently,
certain aspects of the Stock Option Agreements may have the effect of
discouraging persons who might now or prior to the Effective Time be interested
in acquiring all or a significant interest in either Bancshares or Mid Am from
considering or proposing such an acquisition, even if such persons were prepared
to pay a higher price per share for Mid Am Common Stock than the price per share
implicit in the Exchange Ratio.
Tax and Accounting Treatment. It is intended that the Merger be treated as
a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"). Generally, no gain or loss will be
recognized for federal income tax purposes by shareholders of Mid Am who
exchange all of their Mid Am Common Stock solely for Sky Financial Common Stock
pursuant to the Merger (except with respect to any cash received in lieu of
fractional share interests). A condition to consummation of the Merger is the
receipt by each of Mid Am and Bancshares of an opinion from its respective legal
counsel as to the qualification of the Merger as a reorganization within the
meaning of Section 368(a) of the Code. The Merger is intended to be accounted
for under the pooling-of-interests accounting method. It is a condition to
closing that Mid Am and Bancshares shall have each received as of the Effective
Time from its respective independent accountants a letter stating that the
Merger qualifies for pooling-of-interests accounting treatment. See "The Merger
- -- Federal Income Tax Consequences" and "The Merger -- Accounting Treatment."
Interest of Certain Persons in the Merger. Certain members of the
respective managements and boards of directors of Bancshares and Mid Am may be
deemed to have interests in the Merger in addition to their interests as
shareholders of Bancshares and Mid Am, respectively. Following the Merger, the
Board of Directors of Sky Financial will contain equal numbers of directors from
each of Bancshares and Mid Am. In addition, the Merger Agreement provides that
Sky Financial will indemnify all persons serving as officers and directors of
Mid Am or Bancshares for a period of six years following the Effective Time for
all damages or losses suffered or incurred in their capacity as officers or
directors, as the case may be. At the Effective Time, Mr. Francisco will become
the Chairman and Chief Executive Officer of Sky Financial, Mr. Adams will become
President and Chief Operating Officer of Sky Financial and Mr. Reiter will
become Senior Chairman of Sky Financial. If the Merger is consummated, new
employment agreements between Sky Financial and each of Messrs. Reiter,
Francisco and Adams (the "Employment Agreements") will become effective. Upon
consummation of the Merger, Mr. Koch, an Executive Vice President of Bancshares,
may receive certain payments and benefits pursuant to the terms of an employment
agreement between him and Bancshares. Directors of Mid Am and Bancshares who do
not serve on the Board of Directors of Sky Financial will be eligible to serve
on Sky Financial's Advisory Board. See "The Merger -- Interest of Certain
Persons in the Merger." Each of the Bancshares and Mid Am Boards was aware of
these interests and considered them, among others, in unanimously approving the
Merger Agreement and the transactions contemplated therein.
Dividends. Mid Am and Bancshares have agreed that until the Effective Time
each may pay quarterly dividends at a rate not to exceed $0.16 per share per
quarter in the case of Mid Am and $0.16 per share per quarter in the case of
Bancshares. Mid Am and Bancshares will coordinate the declaration of any
dividends to ensure that no shareholder of Mid Am or Bancshares will receive two
dividends or fail to receive a dividend, if declared, in respect of shares for
any quarter. Sky Financial expects to pay dividends at an annual rate of $0.21
per share per quarter. This is equivalent to Mid Am's current dividend rate.
There can be no guarantee, however, that such dividend will be paid at all or
will be paid in a manner consistent with the past dividend payments of either
Mid Am or Bancshares. See "The Merger -- Dividends."
BANCSHARES ARTICLES AMENDMENT AND BANCSHARES CODE OF REGULATIONS AMENDMENT
Bancshares Articles Amendment. At the Effective Time, the Bancshares
Articles of Incorporation will be amended in order to (i) change the name of the
corporation from Citizens Bancshares, Inc. to Sky Financial Group, Inc.; (ii)
change the location of Bancshares' principal office from Salineville, Ohio to
Bowling Green, Ohio; (iii) increase the number of authorized shares of
Bancshares Common Stock from 36,000,000 to
6
<PAGE> 20
150,000,000; (iv) increase the number of authorized shares of Bancshares
Preferred Stock from 200,000 to 10,000,000; (v) eliminate cumulative voting in
the election of directors; and (vi) reduce the shareholder vote required to
approve various material transactions of Bancshares, including certain mergers,
consolidations and asset sales. Most of the foregoing amendments are being made
in connection with the Merger to accommodate the Merger and to conform various
provisions in the Bancshares Articles of Incorporation to provisions in the Mid
Am Articles of Incorporation. The Bancshares Articles Amendment is included in
this Joint Proxy Statement/Prospectus as Appendix B. See "Amendments to the
Bancshares Articles of Incorporation and the Bancshares Code of Regulations."
Bancshares Code of Regulations Amendment. At the Effective Time, the Code
of Regulations of Bancshares will be amended to effect the following: (i)
conform the list of officers authorized to call a special meeting of the
shareholders with the additional officer positions provided for in the Merger
Agreement; (ii) increase the current size of the Bancshares Board from fourteen
(14) members to twenty-two (22) members and establish a maximum board size of
thirty-five (35) members; (iii) provide that for a period of three years after
the Effective Time, the Sky Financial Board of Directors will contain equal
numbers of directors nominated by certain Bancshares directors and by certain
Mid Am directors; (iv) vest the power to remove directors solely with the 80%
vote of the Bancshares Board and then solely upon a finding of cause; (v)
provide that for a period of three years after the Effective Time, the Executive
Committee of the Bancshares Board, if established, would contain equal numbers
of directors to be elected by certain Bancshares directors and by certain Mid Am
directors; (vi) set forth a description of officer positions consistent with the
provisions of the Merger Agreement; and (vii) provide for the creation of a
Management Executive Committee to oversee management and operations of Sky
Financial post-Merger. The Bancshares Code of Regulations Amendment is included
in this Joint Proxy Statement/Prospectus as Appendix C. Most of the foregoing
amendments are being made in connection with the Merger to accommodate the
Merger and to conform various provisions in the Bancshares Code of Regulations
to provisions in the Mid Am Code of Regulations. See "Amendments to the
Bancshares Articles of Incorporation and the Bancshares Code of Regulations."
CONTROL SHARE ACQUISITION AMENDMENT
At the Bancshares Special Meeting, shareholders of Bancshares will also be
asked to approve and adopt the removal of the control share acquisition
provision currently set forth in Article Sixth of the Bancshares Articles of
Incorporation. The full text of Article Sixth is included together with the
Bancshares Articles Amendment in this Joint Proxy Statement/Prospectus as
Appendix B. THE BANCSHARES BOARD RECOMMENDS THAT THE BANCSHARES SHAREHOLDERS
VOTE "FOR" THE APPROVAL OF THE CONTROL SHARE ACQUISITION AMENDMENT. THE
AFFIRMATIVE VOTE OF THE HOLDERS OF 75% OF THE SHARES OF BANCSHARES COMMON STOCK
OUTSTANDING IS REQUIRED TO APPROVE THE CONTROL SHARE ACQUISITION AMENDMENT. The
adoption of the Control Share Acquisition Amendment is not a condition to the
consummation of the Merger. As the foregoing proposal, however, is being made in
connection with the Merger, if the Merger does not occur, Bancshares does not
expect to adopt such proposal.
DIRECTOR STOCK OPTION PLAN
The Bancshares shareholders are being asked to consider and approve the
Director Stock Option Plan, which would permit the granting of stock options to
all non-employee directors of Sky Financial and its subsidiaries. The Director
Stock Option Plan would provide for the issuance of non-statutory options to
purchase, in the aggregate, up to two percent (2%) of the issued and outstanding
shares of Sky Financial Common Stock. See "Approval of the Amended and Restated
1998 Stock Option Plan for Non-Employee Directors." THE BANCSHARES BOARD
RECOMMENDS THAT THE BANCSHARES SHAREHOLDERS VOTE "FOR" THE APPROVAL OF THE
DIRECTOR STOCK OPTION PLAN. THE AFFIRMATIVE VOTE OF THE HOLDERS OF AT LEAST A
MAJORITY OF THE SHARES OF BANCSHARES COMMON STOCK PRESENT IN PERSON OR BY PROXY
AT THE BANCSHARES SPECIAL MEETING IS REQUIRED TO APPROVE THE DIRECTOR STOCK
OPTION PLAN. The adoption of the Director Stock Option Plan is not a condition
to
7
<PAGE> 21
the consummation of the Merger. As the foregoing proposal, however, is being
made in connection with the Merger, if the Merger does not occur, Bancshares
does not expect to adopt such proposal.
EMPLOYEE STOCK OPTION PLAN
The Bancshares shareholders are being asked to consider and approve the
Employee Stock Option Plan, which would become effective upon consummation of
the Merger. Current and future employees of Sky Financial would be eligible to
participate in the Employee Stock Option Plan, which would permit grants of both
non-statutory and incentive stock options with respect to, in the aggregate, up
to five and one-half percent (5 1/2%) of the outstanding common stock of Sky
Financial on the Effective Date of the Merger. If the Employee Stock Option Plan
is approved and becomes effective, no further options would be granted under
either the Bancshares or Mid Am employee stock option plans currently in effect.
See "Approval of 1998 Stock Option Plan for Employees." THE BANCSHARES BOARD
RECOMMENDS THAT SHAREHOLDERS OF BANCSHARES VOTE "FOR" THE APPROVAL OF THE
EMPLOYEE STOCK OPTION PLAN. THE AFFIRMATIVE VOTE OF THE HOLDERS OF AT LEAST A
MAJORITY OF THE SHARES OF BANCSHARES COMMON STOCK PRESENT IN PERSON OR BY PROXY
AT THE BANCSHARES SPECIAL MEETING IS REQUIRED TO APPROVE THE EMPLOYEE STOCK
OPTION PLAN. The adoption of the Employee Stock Option Plan is not a condition
to the consummation of the Merger. As the foregoing proposal, however, is being
made in connection with the Merger, if the Merger does not occur, Bancshares
does not expect to adopt such proposal.
SHAREHOLDER MEETINGS
Date, Time and Place. The Bancshares Special Meeting will be held on
October 1, 1998, at 7 p.m., local time, at Raymond J. Lowry Auditorium of the
Fred H. Johnson Building, 10 East Main Street, Salineville, Ohio 43945. The Mid
Am Special Meeting will be held on September 29, 1998, at 4 p.m., local time, at
The Toledo Club, Madison Avenue at 14th Street, Toledo, Ohio. See "Special
Meetings of Bancshares and Mid Am."
Purpose of Meetings. The purpose of both the Bancshares Special Meeting and
the Mid Am Special Meeting is to vote on the adoption of the Merger Agreement
providing for the Merger of Mid Am into Bancshares in a merger-of-equals
transaction under the name Sky Financial Group, Inc. In addition, pursuant to
the terms of the Merger Agreement, the adoption of the Merger Proposal by
Bancshares shareholders will constitute the adoption of the Merger Agreement, as
well as the adoption of various amendments to the Bancshares Articles of
Incorporation and the Bancshares Code of Regulations. In the case of the
Bancshares Special Meeting, in addition to the approval of the Merger Proposal
shareholders of Bancshares are also being asked to approve the Control Share
Acquisition Amendment, the Director Stock Option Plan and the Employee Stock
Option Plan. See "Special Meetings of Bancshares and Mid Am."
Shares Outstanding and Entitled to Vote, Record Date. August 5, 1998, is
the record date for the Bancshares Special Meeting (the "Bancshares Record
Date") and July 31, 1998, is the record date for the Mid Am Special Meeting (the
"Mid Am Record Date"). 17,748,688 Bancshares shares were outstanding on the
Bancshares Record Date, and 23,358,898 Mid Am shares were outstanding on the Mid
Am Record Date. Shares of Bancshares Common Stock outstanding as of the
Bancshares Record Date are the only shares entitled to vote at the Bancshares
Special Meeting and shares of Mid Am Common Stock outstanding as of the Mid Am
Record Date are the only shares entitled to vote at the Mid Am Special Meeting.
See "Special Meetings of Bancshares and Mid Am."
Votes Required. The affirmative vote of two-thirds of the shares of
Bancshares Common Stock outstanding on the Bancshares Record Date is required to
approve and adopt the Merger Proposal. The affirmative vote of 75% of the shares
of Bancshares Common Stock outstanding on the Bancshares Record Date is required
to approve and adopt the Control Share Acquisition Amendment. The affirmative
vote of a majority of the shares of Bancshares Common Stock present in person or
by proxy at the Bancshares Special Meeting is required to approve and adopt each
of the Director Stock Option Plan and the Employee Stock Option Plan. The
affirmative vote of the majority of the shares of the Mid Am Common Stock
outstanding on the Mid Am Record Date is required to approve and adopt the
Merger Agreement and the transactions
8
<PAGE> 22
contemplated therein. A vote of the majority of shareholders represented at the
Bancshares Special Meeting, whether or not a quorum is present, may adjourn the
Bancshares Special Meeting from time to time. A vote of the majority of
shareholders represented at the Mid Am Special Meeting, whether or not a quorum
is present, may adjourn the Mid Am Special Meeting from time to time. See
"Special Meetings of Bancshares and Mid Am."
Shares Owned by Directors, Executive Officers and Certain Subsidiaries of
Bancshares and Mid Am. As of the Bancshares Record Date, Bancshares directors,
executive officers and their affiliates owned or were entitled to vote 1,484,967
shares of Bancshares Common Stock, which represent 8.37% of the total number of
shares of Bancshares Common Stock entitled to vote at the Bancshares Special
Meeting, and all such persons have indicated a present intent to vote their
shares for approval and adoption of the Merger Agreement, the Control Share
Acquisition Amendment, the Director Stock Option Plan and the Employee Stock
Option Plan. The trustee of the Citizens Bancshares, Inc. Employee Stock
Ownership Plan will vote the unallocated shares of Bancshares Common Stock in
such manner as the trustee shall determine in its sole discretion, subject to
compliance with the provisions of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"). There are currently an aggregate of 14,938
unallocated shares of Bancshares Common Stock, representing .08% of the
outstanding shares of Bancshares Common Stock in the Citizens Bancshares, Inc.
Employee Stock Ownership Plan.
As of the Mid Am Record Date, Mid Am directors, executive officers and
their affiliates owned or were entitled to vote 1,442,025 shares of Mid Am
Common Stock, which represent 6.2% of the total number of shares of Mid Am
Common Stock entitled to vote at the Mid Am Special Meeting, and all such
persons have indicated a present intent to vote their shares for approval and
adoption of the Merger Agreement. The trustee of the Mid Am Employee Stock
Ownership Pension Plan and the Mid Am Employee Stock Ownership and Savings Plan
will vote the unallocated shares in their respective accounts and the allocated
shares not voted by the plan participants in accordance with the instructions
received from the plan administrator, subject to compliance with the provisions
of ERISA. There are currently an aggregate of 327,402 unallocated shares of Mid
Am Common Stock, representing 1.4% of the outstanding shares of Mid Am Common
Stock entitled to vote at the Special Meeting, in the Mid Am Employee Stock
Ownership Pension Plan and the Mid Am Employee Stock Ownership and Savings Plan.
See "Special Meetings of Bancshares and Mid Am."
9
<PAGE> 23
COMPARATIVE STOCK PRICES AND DIVIDENDS
The shares of Bancshares Common Stock and Mid Am Common Stock are each
traded on the Nasdaq National Market System. Bancshares is traded under the
symbol "CICS" and Mid Am is traded under the symbol "MIAM." The following table
sets forth the high and low sale prices of shares of Bancshares and Mid Am, and
the quarterly dividends declared per share, for the periods indicated.
<TABLE>
<CAPTION>
MID AM
BANCSHARES DIVIDENDS
SALES PRICE* BANCSHARES MID AM SALES PRICE PER SHARE
FISCAL -------------------- DIVIDENDS -------------------- ---------
QUARTER HIGH LOW PER SHARE* HIGH LOW
------- ---- --- ---------- ---- ---
<S> <C> <C> <C> <C> <C> <C>
1996:
First......................... $14.625 $13.938 $0.095 $ 15.29 $ 13.54 $0.130
Second........................ 16.250 14.125 0.095 15.50 15.08 0.130
Third......................... 15.500 14.375 0.100 16.59 15.18 0.140
Fourth........................ 16.625 15.250 0.125 16.59 15.45 0.145
1997:
First......................... 19.875 16.250 0.135 15.80 15.00 0.145
Second........................ 27.875 18.125 0.135 16.93 15.11 0.145
Third......................... 27.500 25.750 0.135 20.25 16.70 0.150
Fourth........................ 38.000 26.125 0.155 25.75 19.50 0.160
1998:
First......................... 34.625 38.125 0.160 28.00 25.50 0.160
Second........................ 37.500 31.500 0.160 29.00 24.125 0.160
Third (through August 5,
1998)....................... 36.375 30.000 N.A. 27.938 23.250 N.A.
</TABLE>
- -------------------------
* Amounts have been adjusted to reflect the two-for-one stock split of June 1,
1998.
The following table sets forth the last reported sales price for the
Bancshares Common Stock and the Mid Am Common Stock on May 20, 1998, the last
trading day before announcement of the Merger, and on August 5, 1998, the last
practicable trading date before the printing of this Joint Proxy
Statement/Prospectus, and pro forma equivalent per share values of the Mid Am
Common Stock as of such dates based on the prices of the Bancshares Common
Stock.
<TABLE>
<CAPTION>
BANCSHARES MID AM EQUIVALENT PER
COMMON STOCK COMMON STOCK SHARE(1)
------------ ------------ --------------
<S> <C> <C> <C>
May 20, 1998......................................... $36.375 $ 27.00 $28.009
August 5, 1998....................................... $30.000 $23.625 $23.100
</TABLE>
- -------------------------
(1) The equivalent price per share of Mid Am Common Stock at the specified dates
represents the last sale price of a share of Bancshares Common Stock on such
date multiplied by the Exchange Ratio of 0.77.
Shareholders are advised to obtain current market quotations for Bancshares
Common Stock. The market price of Bancshares Common Stock will fluctuate between
the date of this Joint Proxy Statement/ Prospectus and the Effective Time.
Fluctuations in the market price of Bancshares Common Stock will result in an
increase or decrease in the market value of the consideration to be received by
holders of Mid Am Common Stock in the Merger. The number of shares of Sky
Financial Common Stock to be received for each share of Mid Am Common Stock has
been fixed at 0.77 and will not be changed. Accordingly, an increase in the
market value of Bancshares Common Stock will increase the market value of the
consideration to be received by Mid Am Shareholders in the Merger, and a
decrease in the market value of Bancshares Common Stock will have the opposite
effect. The market value of the consideration at the time of the Merger will
depend upon the market value of a share of Bancshares Common Stock at such time.
No assurance can be given as to the market price of the Bancshares Common Stock
at the time of the Merger or at any other future date.
10
<PAGE> 24
COMPARISON OF CERTAIN UNAUDITED PER SHARE DATA
The following summary presents selected comparative unaudited per share
data for Bancshares and Mid Am on an historical basis, on a pro forma combined
basis, and with respect to Mid Am, on an equivalent pro forma combined basis,
assuming the Merger had been effective during the periods presented and
accounted for under the pooling-of-interests accounting method. Pro forma data
is derived accordingly. The information shown below should be read in
conjunction with the historical financial data and statements of Bancshares and
Mid Am incorporated by reference herein, including the respective notes thereto.
See "Available Information," "Incorporation of Certain Information by
Reference," "-- Selected Financial Data of Bancshares (Historical)," "--
Selected Financial Data of Mid Am (Historical)" and "The Merger -- Accounting
Treatment."
The per share data set forth herein are presented for comparative purposes
only and are not necessarily indicative of the future combined financial
position, the results of the future operations or the actual results or combined
financial position of Sky Financial that would have been achieved had the Merger
been consummated as of the dates or for the periods indicated. While no
assurance can be given, Sky Financial expects that it will achieve substantial
benefits from the Merger, including operating cost savings and revenue
enhancements. However, the pro forma comparative unaudited per share data do not
reflect any direct costs, potential savings or revenue enhancements which are
expected to result from the consolidation of operations of Mid Am and Bancshares
and, therefore, do not purport to be indicative of the results of future
operations of Sky Financial. Results for the interim periods are not necessarily
indicative of results which may be expected for any other interim or annual
period.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEARS ENDED
MARCH 31, DECEMBER 31,
-------------- -----------------------
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Income Per Common Share
Historical
Bancshares
Basic............................................. $0.23 $0.34 $1.27 $1.23 $1.06
Diluted........................................... 0.23 0.33 1.26 1.22 1.06
Mid Am
Basic............................................. 0.31 0.40 1.27 1.04 0.96
Diluted........................................... 0.31 0.37 1.22 0.98 0.92
Pro forma combined
Basic............................................. 0.32 0.43 1.46 1.29 1.15
Diluted........................................... 0.32 0.41 1.43 1.25 1.13
Equivalent amount of Mid Am(A)
Basic............................................. 0.25 0.33 1.12 0.99 0.89
Diluted........................................... 0.25 0.32 1.10 0.96 0.87
Dividends Per Common Share
Historical
Bancshares.......................................... $0.16 $0.12 $0.56 $0.42 $0.25
Mid Am.............................................. 0.16 0.15 0.60 0.55 0.52
Pro forma equivalent amount of Mid Am(A)............... 0.12 0.09 0.43 0.32 0.19
Book Value Per Common Share
Historical
Bancshares.......................................... $8.89 $7.98 $8.84 $7.89 $7.16
Mid Am.............................................. 6.94 7.19 7.45 7.12 6.95
Pro forma combined..................................... 8.96 8.66 9.27 8.56 8.08
Equivalent amount of Mid Am (A)........................ 6.90 6.67 7.14 6.59 6.22
</TABLE>
- -------------------------
(A) The equivalent pro forma per share data for Mid Am are computed by
multiplying Bancshares' pro forma information by 0.77, the Exchange Ratio.
11
<PAGE> 25
SELECTED FINANCIAL DATA OF BANCSHARES (HISTORICAL)
The following table sets forth selected historical financial data of
Bancshares and has been derived from its financial statements. Such selected
historical financial data should be read in conjunction with Bancshares' audited
consolidated financial statements, including the respective notes thereto, and
unaudited interim financial information, in each case incorporated herein by
reference. The interim financial information has been derived from unaudited
financial statements of Bancshares, which, in the opinion of management, include
all adjustments, consisting only of normal recurring adjustments, necessary for
fair statement of the results for the unaudited interim periods. Results for the
interim periods are not necessarily indicative of results which may be expected
for any other interim or annual period. See "Incorporation of Certain
Information by Reference."
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED
MARCH 31: FOR THE YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income............... $ 34,350 $ 30,598 $ 131,667 $ 117,982 $ 110,791 $ 98,948 $ 94,893
Interest expense.............. 16,998 14,083 63,209 51,417 48,623 39,985 40,163
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income........... 17,352 16,515 68,458 66,565 62,168 58,963 54,730
Provision for loan losses..... 695 613 4,335 2,279 2,504 2,895 5,418
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income after
provision for loan losses... 16,657 15,902 64,123 64,286 59,664 56,068 49,312
Other income.................. 2,974 2,308 10,991 8,735 7,531 7,184 7,956
Other expenses................ 14,075 9,631 43,228 41,737 40,172 40,560 40,284
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes.... 5,556 8,579 31,886 31,284 27,023 22,692 16,984
Income taxes.................. 1,428 2,656 9,466 9,554 8,229 6,746 4,442
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Income.................... $ 4,128 $ 5,923 $ 22,420 $ 21,730 $ 18,794 $ 15,946 $ 12,542
========== ========== ========== ========== ========== ========== ==========
Cash dividends declared....... $ 2,692 $ 2,212 $ 9,462 $ 7,503 $ 5,472 $ 3,570 $ 2,891
========== ========== ========== ========== ========== ========== ==========
Per share data(1):
Basic net income............ $ 0.23 $ 0.34 $ 1.27 $ 1.23 $ 1.06 $ 0.90 $ 0.71
Diluted net income.......... $ 0.23 $ 0.33 $ 1.26 $ 1.22 $ 1.06 $ 0.90 $ 0.71
Cash dividends declared..... $ 0.16 $ 0.12 $ 0.56 $ 0.42 $ 0.25 $ 0.15 $ 0.09
Book value at period-end.... $ 8.89 $ 7.98 $ 8.84 $ 7.89 $ 7.16 $ 6.01 $ 5.69
Weighted average shares
outstanding basic......... 17,699 17,657 17,671 17,708 17,783 17,783 17,783
Weighted average shares
outstanding diluted....... 17,808 17,726 17,778 17,768 17,806 17,788 17,783
Shares outstanding at
period-end................ 17,718 17,770 17,721 17,684 17,796 17,785 17,779
Balance Sheet Data:
Total assets................ $1,785,680 $1,625,018 $1,791,023 $1,543,029 $1,441,695 $1,360,022 $1,317,368
Securities available for
sale...................... $ 461,448 $ 399,169 $ 432,306 $ 334,024 $ 331,505 $ 160,424 $ 142,045
Securities held to
maturity.................. 60,815 90,052 87,207 88,371 74,851 256,373 291,251
Loans, net of unearned
income.................... 1,146,419 1,027,434 1,127,846 1,002,454 927,014 855,685 784,610
Allowance for loan losses... 18,373 15,774 18,276 15,629 14,856 15,693 14,715
Deposits.................... 1,401,966 1,257,868 1,380,313 1,232,344 1,179,399 1,113,959 1,112,830
Federal Home Loan Bank
advances.................. 128,805 80,391 160,765 60,923 96,380 87,932 60,198
Total shareholders' equity
at period-end............. 157,577 141,206 156,667 139,461 127,425 106,891 101,123
Average Balances:
Total assets................ $1,793,693 $1,567,759 $1,674,298 $1,469,112 $1,398,458 $1,337,933 $1,262,090
Total earning assets........ 1,678,187 1,479,602 1,582,715 1,399,017 1,332,638 1,271,933 1,195,927
Deposits.................... 1,597,324 1,239,718 1,294,597 1,205,123 1,156,198 1,120,987 1,098,863
Net loans................... 1,115,589 997,018 1,054,380 941,848 866,871 802,484 743,248
Shareholders' equity........ 157,785 142,152 147,166 132,138 118,074 104,601 95,505
</TABLE>
12
<PAGE> 26
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED
MARCH 31: FOR THE YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Significant Ratios:
Return on average assets.... 0.93% 1.53% 1.34% 1.48% 1.34% 1.19% 0.99%
Return on average
shareholders' equity...... 10.61 16.90 15.23 16.44 15.92 15.24 13.13
Average shareholders' equity
to average assets......... 8.80 9.07 8.79 8.99 8.44 7.82 7.57
Average loans as a percent
of average deposits....... 70.99 81.70 82.74 80.21 77.12 73.60 68.72
Shareholders' equity as a
percent of period-end
assets.................... 8.82 8.69 8.75 9.04 8.84 7.86 7.68
Allowance for loan losses as
a percent of loans........ 1.60 1.54 1.62 1.56 1.60 1.83 1.88
Net charge-offs a percent of
average loans............. 0.21 0.17 0.16 0.16 0.38 0.23 0.25
Dividends declared as a
percent of net income..... 65.21 37.35 42.20 34.53 29.12 22.39 23.05
Net interest margin, fully
taxable equivalent........ 4.28 4.61 4.47 4.91 4.80 4.76 4.71
Nonperforming loans to total
loans..................... 0.60 0.58 0.59 0.32 0.49 1.23 0.92
Nonperforming assets to
total assets.............. 0.39 0.38 0.38 0.31 0.45 0.92 0.87
Allowance for loan losses to
nonperforming loans....... 268.41 265.51 274.87 483.72 326.08 149.13 202.94
Noninterest expenses as a
percent of average
assets.................... 3.14 2.46 2.58 2.84 2.87 3.03 3.19
Operating efficiency
ratio..................... 67.33 49.77 52.86 53.87 56.11 60.06 63.60
</TABLE>
- -------------------------
(1) Per share data has been restated to reflect the 1998 two-for-one stock
split, the 1995 three-for-two stock split and all acquisitions accounted for
as poolings of interests.
13
<PAGE> 27
SELECTED FINANCIAL DATA OF MID AM (HISTORICAL)
The following table sets forth selected historical financial data of Mid Am
and has been derived from its financial statements. Such selected historical
financial data should be read in conjunction with Mid Am's audited consolidated
financial statements, including the respective notes thereto, and unaudited
interim financial information, in each case incorporated herein by reference.
The interim financial information has been derived from unaudited financial
statements of Mid Am, which, in the opinion of management, include all
adjustments, consisting only of normal recurring adjustments, necessary for fair
statement of the results for the unaudited interim periods. Results for the
interim periods are not necessarily indicative of results which may be expected
for any other interim or annual period. See "Incorporation of Certain
Information by Reference."
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED
MARCH 31, FOR THE YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT SHARES, PER SHARE AND RATIO DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement of
Earnings Data
Interest income............... $ 43,408 $ 41,544 $ 171,202 $ 164,983 $ 162,543 $ 140,571 $ 139,387
Interest expense.............. 20,884 19,599 81,676 80,069 80,316 59,564 61,057
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income........... 22,524 21,945 89,526 84,914 82,227 81,007 78,330
Provision for credit losses... 1,017 1,885 5,527 4,537 3,002 1,224 3,991
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income after
provision for credit
losses...................... 21,507 20,060 83,999 80,377 79,225 79,783 74,339
Non-interest and other
income...................... 18,634 19,918 66,569 49,501 35,955 32,554 34,002
Non-interest and other
expense..................... 28,924 25,201 104,052 91,419 78,416 78,579 72,962
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes.... 11,217 14,777 46,516 38,459 36,764 33,758 35,379
Applicable income taxes....... 3,774 5,210 15,635 12,467 11,797 10,505 10,698
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income.................... $ 7,443 $ 9,567 $ 30,881 $ 25,992 $ 24,967 $ 23,253 $ 24,681
========== ========== ========== ========== ========== ========== ==========
Net income available to common
shareholders................ $ 7,443 $ 9,151 $ 30,276 $ 23,585 $ 22,216 $ 20,336 $ 21,763
========== ========== ========== ========== ========== ========== ==========
Consolidated Statement of
Condition Data (Year End)
Total assets.................. $2,239,113 $2,165,890 $2,191,875 $2,180,974 $2,204,751 $2,078,789 $2,067,371
Securities available for
sale........................ $ 405,427 $ 379,563 $ 385,961 $ 432,791 $ 461,997 $ 212,437 $ 238,125
Investment and mortgage-backed
securities.................. $ 0 $ 0 $ 0 $ 0 $ 0 $ 252,009 $ 270,623
Loans held for sale........... $ 11,209 $ 4,54 $ 11,376 $ 7,927 $ 12,642 $ 12,963 $ 88,131
Loans, net of unearned
income...................... $1,609,918 $1,591,557 $1,619,895 $1,574,880 $1,475,651 $1,433,289 $1,265,945
Allowance for credit losses... $ 18,450 $ 16,752 $ 17,625 $ 5,672 $ 14,859 $ 14,722 $ 15,157
Total deposits................ $1,781,482 $1,747,997 $1,760,312 $1,832,909 $1,860,142 $1,736,492 $1,769,083
Debt and FHLB Advances........ $ 175,060 $ 57,468 $ 122,604 $ 42,247 $ 48,405 $ 65,434 $ 28,070
Shareholders' equity.......... $ 163,231 $ 190,890 $ 180,760 $ 193,204 $ 194,838 $ 185,252 $ 183,425
Weighted average common shares
outstanding -- basic........ 23,756,000 23,081,000 23,836,000 22,734,000 23,070,000 23,009,000 22,610,000
Weighted average common shares
outstanding -- diluted...... 24,337,000 25,981,000 25,227,000 26,554,000 27,241,000 27,356,000 26,965,000
Per Common Share Data
Cash dividends declared....... $ 0.16 $ 0.145 $ 0.60 $ 0.55 $ 0.52 $ 0.49 $ 0.45
Shareholders' equity.......... 6.94 7.19 7.45 7.12 6.95 6.29 6.41
Basic:
Net income.................... $ 0.31 $ 0.40 $ 1.27 $ 1.04 $ 0.96 $ 0.88 $ 0.96
Diluted:
Net income.................... 0.31 0.37 1.22 0.98 0.92 0.85 0.92
Selected Financial Ratios
Return on average total
assets...................... 1.36% 1.79% 1.42% 1.20% 1.17% 1.14% 1.23%
Return on average common
shareholders' equity........ 17.87 22.51 17.58 15.01 14.51 13.88 16.39
Net interest margin........... 4.51 4.49 4.50 4.32 4.23 4.38 4.30
</TABLE>
14
<PAGE> 28
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED
MARCH 31, FOR THE YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT SHARES, PER SHARE AND RATIO DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Average loans to average
deposits.................... 92.15 89.15 91.99 82.75 81.11 76.94 71.54
Leverage ratio................ 8.13 8.55 9.06 8.44 8.37 8.19
Average total shareholders'
equity to average total
assets...................... 7.63 8.78 8.38 8.82 8.93 9.16 8.65
Allowance for credit losses to
period end loans............ 1.15 1.05 1.09 0.36 1.01 1.03 1.20
Allowance for credit losses to
total non-performing
loans....................... 329.23 266.92 387.70 85.64 173.22 231.99 170.67
Non-performing loans to period
end loans................... 0.35 0.39 0.28 0.42 0.58 0.44 0.70
Net charge-offs to average
loans....................... 0.05 0.20 0.22 0.25 0.20 0.12 0.41
</TABLE>
15
<PAGE> 29
BANCSHARES AND MID AM UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected unaudited pro forma condensed
consolidated financial data of Bancshares and Mid Am giving effect to the Merger
as of the beginning of the earliest period presented, after giving effect to the
pro forma adjustments described in the Notes to Unaudited Pro Forma Condensed
Combined Financial Statements contained elsewhere in this Joint Proxy
Statement/Prospectus. The Merger is expected to be accounted for as a
pooling-of-interests. Such selected unaudited pro forma financial data should be
read in conjunction with the Bancshares and Mid Am Unaudited Pro Forma Condensed
Combined Financial Information, including the notes thereto. The Unaudited Pro
Forma Condensed Combined Balance Sheet is not necessarily indicative of the
actual financial position that would have existed had the Merger been
consummated as of the beginning of the earliest period presented below, or that
may exist in the future. The Unaudited Pro Forma Condensed Combined Income
Statements are not necessarily indicative of the results that would have
occurred had the Merger been consummated on the date indicated or that may be
achieved in the future. See "Incorporation of Certain Information by Reference"
and "Unaudited Pro Forma Condensed Combined Financial Statements."
<TABLE>
<CAPTION>
FOR THE QUARTER
ENDED MARCH 31, FOR THE YEAR ENDED DECEMBER 31,
------------------------- ---------------------------------------
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT SHARES, PER SHARE AND RATIO DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net interest income........................ $ 39,876 $ 38,460 $ 157,985 $ 151,479 $ 144,395
Provision for loan losses.................. 1,712 2,498 9,862 6,816 5,506
Net income................................. 11,571 15,490 53,301 47,722 43,761
Net income available to common
shareholders............................. 11,571 15,074 52,696 45,315 41,010
PER COMMON SHARE DATA:
Net income -- basic........................ $ 0.32 $ 0.43 $ 1.46 $ 1.29 $ 1.15
Net income -- diluted...................... $ 0.32 $ 0.41 $ 1.43 $ 1.25 $ 1.13
Book value at period end................... $ 8.96 $ 8.66 $ 9.27 $ 8.56 $ 8.08
Weighted average shares outstanding --
basic.................................... 35,991 35,429 36,025 35,213 35,547
Weighted average shared outstanding --
diluted.................................. 36,547 37,731 37,203 38,215 38,782
BALANCE SHEET DATA (AT PERIOD-END):
Total assets............................... $4,031,794 $3,790,907 $3,982,898 $3,724,003 $3,646,436
Net loans.................................. 2,730,723 2,591,014 2,723,216 2,553,960 2,385,592
Total deposits............................. 3,183,448 3,005,865 3,140,625 3,065,253 3,039,541
Total shareholders' equity................. 302,809 332,095 337,427 332,665 322,263
RATIOS:
Return on average assets................... 1.17% 1.68% 1.38% 1.31% 1.24%
Return on average common equity............ 14.36 19.91 16.53 15.67 15.12
Average total equity to average assets..... 8.15 8.90 8.54 8.89 8.74
</TABLE>
16
<PAGE> 30
INTRODUCTION
This Joint Proxy Statement/Prospectus is being furnished to holders of
Bancshares Common Stock in connection with the solicitation of proxies by the
Board of Directors of Bancshares for use at the Bancshares Special Meeting. This
Joint Proxy Statement/Prospectus is also being furnished to the holders of Mid
Am Common Stock in connection with the solicitation of proxies by the Board of
Directors of Mid Am for use at the Mid Am Special Meeting. This Joint Proxy
Statement/Prospectus also serves as a prospectus for Sky Financial Common Stock
which will be issued upon the effectiveness of the Merger.
At the Bancshares Special Meeting and the Mid Am Special Meeting, the
shareholders of Bancshares and Mid Am, respectively, will be asked to approve
and adopt the Merger Proposal. In addition, at the Bancshares Special Meeting,
Bancshares shareholders will also be asked to consider and vote upon the
following: (i) a proposal to approve the Control Share Acquisition Amendment;
(ii) a proposal to approve the Director Stock Option Plan; and (iii) a proposal
to approve the Employee Stock Option Plan. Adoption of these additional
proposals is not a condition to the Merger.
All information contained in this Joint Proxy Statement/Prospectus relating
to Bancshares has been furnished by Bancshares. All information contained in
this Joint Proxy Statement/Prospectus relating to Mid Am has been furnished by
Mid Am.
PARTIES TO THE MERGER
BANCSHARES
Bancshares is a bank holding company organized in 1982 under the laws of
the State of Ohio and is registered with the Federal Reserve Board pursuant to
the BHC Act and engaged in the business of commercial and retail banking. These
activities account for substantially all of Bancshares' revenue, operating
income and assets. Bancshares is a holding company for two wholly owned
subsidiary banks, a wholly owned reinsurance company and a wholly owned courier
company. Citizens, owned by Bancshares since 1982, was organized and chartered
under the banking laws of the State of Ohio in 1902. Citizens is an insured bank
under the Federal Deposit Insurance Act ("FDIA"). This subsidiary accounts for
approximately 72% of Bancshares' consolidated assets. The primary market area
for Citizens is eastern Ohio and consists of all of Columbiana County, all of
Carroll County, portions of Stark and Mahoning Counties and the northern 75% of
Jefferson County. A secondary market is the southern portion of Jefferson
County, the panhandle of West Virginia north of Follansbee, and a smaller
portion of Pennsylvania south of Beaver and west of Darlington to the Ohio
border. Citizens competes not only with locally-owned commercial banks and
savings and loans, but also with larger regional financial institutions in
offering consumer and commercial financial service products. FNB, owned by
Bancshares since January 1, 1990, was organized and chartered as a national
banking association under the laws of the United States on December 29, 1969 and
formally opened for business on January 2, 1970. FNB is insured under the FDIA
and accounts for less than two percent of Bancshares' consolidated assets. FNB's
primary market area is Hancock County, West Virginia, with overlap in the East
Liverpool, Ohio market. FNB competes with locally-owned commercial banks, credit
unions and savings and loan associations. Application was made to the Federal
Reserve Board and the Ohio Department of Commerce, Division of Financial
Institutions to merge FNB with and into Citizens and the conversion/merger was
consummated as of the close of business on July 18, 1998. On May 12, 1998,
Bancshares acquired Century, and CNB became a wholly owned commercial bank
subsidiary of Bancshares organized under the laws of the United States. CNB
engages in full service commercial and consumer banking and trust services
through thirteen branch offices in southwestern Pennsylvania. CNB accounts for
approximately 25% of Bancshares' consolidated assets. Freedom Financial Life
Insurance Company ("Freedom Financial"), owned by Bancshares since August 1985,
was organized and chartered under the laws of the State of Arizona in that same
year. Freedom Financial provides credit life and accident and health insurance
coverage to Citizens' and FNB's loan customers. Freedom Financial accounts for
less than one percent of Bancshares' consolidated assets. Freedom Express, Inc.
("Freedom Express"), owned by Bancshares since August 5, 1994, was organized and
chartered under the laws of the State of Ohio in 1984. Freedom Express
transports papers and documents between and among Ohio, Pennsylvania and West
Virginia. Freedom Express accounts for less
17
<PAGE> 31
than one percent of Bancshares' consolidated assets. On August 1, 1997, Citizens
acquired ValueNet, Inc., an Internet access company. This is the first step in a
plan to offer Internet banking to all of Bancshares' customers during 1998. A
part of Bancshares' long term strategy is to be an active acquiror of financial
institutions so as to leverage its operations and position itself to enhance
shareholder value. Since 1984, Bancshares has made 15 acquisitions totaling
approximately $1.3 billion in assets. As of December 31, 1997 and December 31,
1996, Bancshares had total consolidated assets of approximately $1.79 billion
and $1.54 million and total shareholders' equity of $156.7 million and $139.5
million, respectively.
Bancshares is continually evaluating acquisition opportunities and
frequently conducts due diligence activities in connection with possible
acquisitions. As a result, acquisition discussions and, in some cases,
negotiations frequently take place and future acquisitions involving cash, debt
or equity securities can be expected. Acquisitions typically involve the payment
of a premium over book and market values and, therefore, some dilution of
Bancshares' book value and net income per common share may occur in connection
with any future transactions.
Bancshares' principal executive offices are located at 10 East Main Street,
Salineville, Ohio 43945. The telephone number of Bancshares' executive offices
is (330) 679-2328.
Year 2000. The Year 2000 issue deals with the fact that many computer
applications, if not corrected, could fail or create erroneous results by or at
the year 2000 because many existing computer programs use only two digits to
identify a year in the date field and these programs were not designed or
developed while considering the impact of the upcoming change in the century. In
order to assess the Year 2000 issue, Bancshares has established a project group
that represents functional areas to be affected by Year 2000 changes. The Year
2000 project group meets regularly to review Bancshares' progress. All data
processing systems have been identified and all major systems and most lesser
systems have been assessed for Year 2000 compliance. This assessment indicates
that there will be no material impact of Bancshares' operations or budgets to
bring systems into compliance by year end 1998. Most security and environmental
systems have also been assessed with no material impact indicated. Regardless of
the Year 2000 compliance of the corporation's systems, there is not complete
assurance that Bancshares will not be adversely affected to the extent other
entities not affiliated with Bancshares, such as vendors, services suppliers and
loan and other counterparties are unsuccessful in properly addressing this
issue.
The Office of the Comptroller of the Currency (the "OCC") has conducted an
examination of Century and found certain deficiencies in its planning for Year
2000. On May 6, 1998, the OCC provided Century with a report from its
examination. A written response to the report has been filed by Century, along
with a letter from Bancshares advising that the Century transaction was
consummated on May 12, 1998, and that Bancshares would be devoting resources to
manage the Century Year 2000 matter to insure a satisfactory condition.
For additional information regarding Bancshares and its business reference
is made to the 1997 Bancshares 10-K and the Form 8-K, dated June 25, 1998, which
are incorporated by reference to the Joint Proxy Statement/Prospectus. For
information regarding the voting securities and principal holders thereof of
Bancshares, please see the portions of the 1998 Proxy Statement of Bancshares
incorporated by reference to the 1997 Bancshares 10-K.
MID AM
Mid Am is a bank holding company organized in 1988 under the laws of the
State of Ohio and is registered with the Federal Reserve Board pursuant to the
BHC Act. Mid Am serves as a holding company for five commercial banking
subsidiaries and seven financial services subsidiaries. Mid Am's commercial
banks provide a wide range of lending, depository, trust and related banking
services to individual and business customers through 83 branch facilities
throughout its primary market area, which is comprised of northwestern and west
central Ohio and southeastern Michigan. This market area is considered
economically diverse with a wide range of manufacturing and service industries,
transportation and agriculture, and is not dependent upon any single industry or
employer. Mid Am's commercial banks compete with a variety of financial
institutions, including several local, regional and national commercial banks,
savings and loan associations,
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credit unions and national providers of financial services products. Four of the
Mid Am banks are national banking associations, regulated by the OCC, and one of
the banks is a state-chartered bank, regulated by the Michigan Financial
Institutions Bureau. All of the Mid Am banks are insured under the FDIA to the
fullest extent provided by law. Mid Am's financial services affiliates are
comprised of specialty lending units, including financing for health care
professionals and non-conforming mortgage financing, investment brokerage and
insurance services, trust services, collection and account billing services. The
financial services companies consider their market area to be the continental
United States, and compete with a variety of local and national providers of
services in their respective industries. Several of the financial services
companies are regulated by or subject to licensing requirements in various
states in which they conduct business. Mid Am's brokerage subsidiary is also
regulated by the Commission and the National Association of Securities Dealers
(the "NASD"). Mid Am's specialty trust subsidiary is regulated by the OCC. The
financial services companies are regulated, directly or indirectly, by the
Federal Reserve Board by virtue of the BHC Act.
Mid Am is continually evaluating acquisition opportunities and frequently
conducts due diligence activities in connection with possible acquisitions. As a
result, acquisition discussions and, in some cases, negotiations frequently take
place and future acquisitions involving cash, debt or equity securities can be
expected. Acquisitions typically involve the payment of a premium over book and
market values and, therefore, some dilution of Mid Am's book value and net
income per common share may occur in connection with any future transactions.
At June 30, 1998 and June 30, 1997, Mid Am had total consolidated assets of
$2.3 billion and $2.2 billion, respectively, and total shareholders' equity of
$163 million and $174 million, respectively.
Mid Am's principal executive offices are located at 221 South Church
Street, Bowling Green, Ohio 43402, and its telephone number is (419) 327-6300.
Year 2000. Mid Am has initiated a company-wide assessment, remediation and
conversion program to address the effect of the year 2000 on Mid Am's
information systems and application software. Mid Am's Year 2000 Readiness
Project contains assessment, renovation, validation and implementation phases. A
substantial majority of the significant application software utilized by Mid Am
is licensed from a third-party vendor and management is working with the vendor
to ensure that the software will operate properly in the year 2000. At this
time, the estimated cost to remediate Mid Am's Year 2000 issues is not expected
to be material. Regardless of the Year 2000 compliance of the corporation's
systems, there is not complete assurance that MidAm will not be adversely
affected to the extent other entities not affiliated with MidAm, such as
vendors, services suppliers and loan and other counterparties are unsuccessful
in properly addressing this issue.
For additional information regarding Mid Am and its business reference is
made to the 1997 Mid Am 10-K, which is incorporated by reference to this Joint
Proxy Statement/Prospectus. For information regarding the voting securities and
principal holders thereof of Mid Am, please see the portions of the 1998 Proxy
Statement of Mid Am incorporated by reference to the 1997 Mid Am 10-K.
RECENT DEVELOPMENTS
On July 22, 1998, Bancshares and The Ohio Bank ("Ohio Bank"), a state
banking association organized and existing under the banking laws of the State
of Ohio and headquartered in Findlay, Ohio, entered into a definitive Agreement
and Plan of Merger (the "Ohio Bank Agreement"), which provides for the
affiliation of Ohio Bank with Bancshares (and ultimately Sky Financial) in a
transaction expected to be accounted for as a pooling of interests. As of June
30, 1998, Ohio Bank had total consolidated assets of $599.5 million, deposits of
$531.0 million and shareholders' equity of $52.6 million. Ohio Bank had net
income of $3.6 million for the six months ended June 30, 1998 and net income of
$6.0 million for the year ended December 31, 1997. Ohio Bank has 17 banking
offices located in the Ohio counties of Seneca, Hancock, Putnam, Cuyahoga,
Wyandot and Franklin. The Ohio Bank Agreement provides that the affiliation will
be effected by means of a merger (the "Ohio Bank Merger") of an interim Ohio
bank formed by Bancshares with and into Ohio Bank. In the Ohio Bank Merger, each
outstanding share of Ohio Bank Class A and Class B common stock, par value $50
per share (other than those common shares, if any, with respect to which
dissenter's rights are exercised), will
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be converted into 63.25 shares of Bancshares Common Stock in a tax-free
exchange. Bancshares expects to issue 5,249,750 shares in the Ohio Bank Merger.
In connection with the transactions contemplated by the Ohio Bank Agreement,
Bancshares and Ohio Bank entered into a Stock Option Agreement whereby
Bancshares may purchase up to 5.42% of Ohio Bank common shares under certain
circumstances. Shareholders of Ohio Bank holding in excess of a majority of
votes necessary to approve the Ohio Bank Merger have agreed to vote in favor of
the Ohio Bank Merger.
Pursuant to the terms of the Ohio Bank Agreement, three directors of Ohio
Bank will be invited to join the Board of Directors of Sky Financial, one of
whom will be designated for membership on the Board's executive committee, if
any such committee is formed. In addition, Bancshares will designate an officer
of the Ohio Bank to serve on the Management Executive Committee of Sky
Financial. The Ohio Bank Agreement further provides that following the Ohio Bank
Merger, no Ohio Bank employee will be terminated, other than for cause, for a
six-month period after consummation of the Ohio Bank Merger.
The Ohio Bank Agreement may only be terminated: (i) with the mutual consent
of Bancshares and Ohio Bank, (ii) by Bancshares or Ohio Bank during the 30 day
period following execution thereof by the parties in the event their respective
due diligence investigations (and in the case of Bancshares, the disclosure
schedules delivered to it by Ohio Bank) disclose one or more matters that are
deemed to have a "material adverse effect" (as that term is defined in the Ohio
Bank Agreement), or deviate(s) materially and adversely from the financial
statements of Bancshares or the Ohio Bank (as the case may be) for the year
December 31, 1998 or the period ended March 31, 1998, respectively, (iii) by
either party in the event of a material breach or if the transactions
contemplated by the Ohio Bank Agreement are not consummated by March 31, 1999,
or (iv) by the Bank, if the "NMS Closing Price" (as defined in the Ohio Bank
Agreement) is less than $26.00 and a revised offer by Bancshares is not accepted
by Ohio Bank. The consummation of the Ohio Bank Merger is contingent upon
approval of the Ohio Bank Agreement by the shareholders of Ohio Bank, (and if
the merger of equals transaction with Mid Am is not consummated, by the
shareholders of Bancshares), and upon the approval of certain regulatory
authorities.
Assuming the consummation of the Mid Am transaction, as soon as reasonably
practicable after the Ohio Bank merger and following the receipt of all
necessary regulatory approvals, two of Sky Financial's banking affiliates,
specifically, American Community Bank, N.A. and Amerifirst Bank, N.A. will be
merged with and into Ohio Bank. In addition, two other banking affiliates,
specifically, First National Bank Northwest Ohio and Mid American National Bank
& Trust Company will merge with one another, with Mid American National Bank &
Trust Company as the resulting bank.
SPECIAL MEETINGS OF BANCSHARES AND MID AM
TIME AND PLACE OF SPECIAL MEETINGS
Bancshares. The Bancshares Special Meeting will be held at 7 p.m., on
October 1, 1998, at Raymond T. Lowry Auditorium of the Fred H. Johnson Building,
10 East Main Street, Salineville, Ohio 43945 and at any adjournments and
postponements thereof to consider and vote upon a proposal to approve the Merger
Proposal. In addition, Bancshares shareholders will also be asked to consider
and vote upon the following: (i) a proposal to amend the Bancshares Articles of
Incorporation to repeal the control share acquisition provision set forth in
Article Sixth thereof; (ii) a proposal to approve the Director Stock Option
Plan; and (iii) a proposal to approve the Employee Stock Option Plan.
Mid Am. The Mid Am Special Meeting will be held at The Toledo Club, Madison
Avenue at 14th Street, Toledo, Ohio, at 4 p.m., on September 29, 1998, and at
any adjournments and postponements thereof to consider and vote upon proposals
to approve the Merger Proposal.
This Joint Proxy Statement/Prospectus is being furnished to the
shareholders of Bancshares and Mid Am in connection with the solicitation of
proxies by the Bancshares Board and the Mid Am Board for use at the Bancshares
Special Meeting and the Mid Am Special Meeting, respectively.
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RECORD DATE, SOLICITATION AND REVOCABILITY OF PROXIES
Bancshares. The Bancshares Board has fixed the close of business on August
5, 1998 as the record date for determining the Bancshares shareholders entitled
to receive notice of and to vote at the Bancshares Special Meeting. Only holders
of record of Bancshares Common Stock at the close of business on the Bancshares
Record Date are entitled to notice of and to vote at the Special Meeting. As of
the Bancshares Record Date, 17,748,688 shares of Bancshares Common Stock were
issued and outstanding and held by 3,480 record holders. Holders of Bancshares
Common Stock are entitled to one vote on each matter considered and voted on at
the Bancshares Special Meeting for each share of Bancshares Common Stock held of
record at the close of business on the Bancshares Record Date. The presence, in
person or by properly executed proxy, of the holders of a majority of the shares
of Bancshares Common Stock entitled to vote at the Bancshares Special Meeting is
necessary to constitute a quorum at the Bancshares Special Meeting. For purposes
of determining the presence of a quorum, abstentions and shares represented by a
proxy from a broker or nominee indicating that such person has not received
instructions from the beneficial owner or other person entitled to vote shares
("broker non-votes") will be counted as shares present. Neither abstentions nor
broker non-votes will be counted as votes cast for purposes of determining
whether a proposal has received sufficient votes for approval. However, because
approval of the Merger Proposal requires the affirmative vote of at least
two-thirds of the outstanding shares of Bancshares Common Stock, and because
approval of the Control Share Acquisition Amendment requires the affirmative
vote of at least 75% of the outstanding shares of Bancshares Common Stock, and
because approval of the Director Stock Option Plan and the Employee Stock Option
Plan requires, in each case, the approval of a majority of the shares of
Bancshares Common Stock present in person or by proxy, abstentions and broker
non-votes will have the effect of votes against each of the Merger Proposal, the
Control Share Acquisition Amendment, the Director Stock Option Plan and the
Employee Stock Option Plan.
Proxies in the form delivered to Bancshares shareholders with this Joint
Proxy Statement/Prospectus are being solicited by the Bancshares Board. Shares
of Bancshares Common Stock represented by properly executed proxies, if such
proxies are received in time and are not revoked, will be voted in accordance
with the instructions indicated on the proxies. If no instructions are
indicated, such proxies will be voted "FOR" approval of the Merger Proposal, the
Control Share Acquisition Amendment, the Director Stock Option Plan and the
Employee Stock Option Plan, and in the discretion of the individuals named as
proxies as to any other matter that may come before the Bancshares Special
Meeting or any adjournment or postponement thereof including, among other
things, a motion to adjourn or postpone the Bancshares Special Meeting to
another time and/or place, for the purpose of soliciting additional proxies or
otherwise; provided, however, that no proxy which is voted against the proposal
to approve the Merger Proposal will be voted in favor of any such adjournment or
postponement.
A Bancshares shareholder who has given a proxy may revoke it at any time
prior to its exercise at the Bancshares Special Meeting by (i) giving written
notice of revocation to the Secretary of Bancshares, (ii) properly submitting to
Bancshares a duly executed proxy bearing a later date, or (iii) voting in person
at the Bancshares Special Meeting. All written notices of revocation and other
communications with respect to revocation of proxies should be addressed to
Bancshares as follows: Tracey L. Reeder, Citizens Bancshares, Inc., 10 East Main
Street, Salineville, Ohio 43945. A proxy appointment will not be revoked by
death or supervening incapacity of the shareholder executing the proxy unless,
before the shares are voted, notice of such death or incapacity is filed with
Bancshares' Secretary or other person responsible for tabulating votes on behalf
of Bancshares.
Bancshares has retained Morrow & Co., Inc. to assist Bancshares in
connection with its communications with its shareholders with respect to, and to
provide other services to Bancshares in connection with, the Bancshares Special
Meeting. Morrow & Co., Inc. will receive a fee of $10,000 for its services and
reimbursement of out-of-pocket expenses in connection therewith.
Mid Am. The Mid Am Board has fixed the close of business on July 31, 1998,
as the record date for determining the Mid Am shareholders entitled to receive
notice of and to vote at the Mid Am Special Meeting. Only holders of record of
Mid Am Common Stock as of the Mid Am Record Date are entitled to
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notice of and to vote at the Mid Am Special Meeting. As of the Mid Am Record
Date, 23,358,898 shares of Mid Am Common Stock were issued and outstanding and
held by 8,315 record holders. Holders of Mid Am Common Stock are entitled to one
vote on each matter considered and voted on at the Mid Am Special Meeting for
each share of Mid Am Common Stock held of record at the close of business on the
Mid Am Record Date. The presence, in person or by properly executed proxy, of
the holders of a majority of the shares of Mid Am Common Stock entitled to vote
at the Mid Am Special Meeting is necessary to constitute a quorum at the Mid Am
Special Meeting. For purposes of determining the presence of a quorum,
abstentions and broker non-votes will be counted as shares present but broker
non-votes will not be counted as shares present. Neither abstentions nor broker
non-votes will be counted as votes cast for purposes of determining whether a
proposal has received sufficient votes for approval. However, because approval
of the Merger Agreement requires the affirmative vote of at least a majority of
the outstanding shares of Mid Am Common Stock, abstentions and broker non-votes
will have the effect of votes against the Merger Agreement.
Proxies in the form delivered to Mid Am Shareholders with this Joint Proxy
Statement/Prospectus are being solicited by the Mid Am Board. Shares of Mid Am
Common Stock represented by properly executed proxies, if such proxies are
received in time and are not revoked, will be voted in accordance with the
instructions indicated on the proxies. If no instructions are indicated, such
proxies will be voted "FOR" approval of the Merger and consummation of the
transactions contemplated therein, and in the discretion of the individuals
named as proxies as to any other matter that may come before the Mid Am Special
Meeting or any adjournment or postponement thereof including, among other
things, a motion to adjourn or postpone the Mid Am Special Meeting to another
time and/or place, for the purpose of soliciting additional proxies or
otherwise; provided, however, that no proxy which is voted against the proposal
to approve the Merger Proposal will be voted in favor of any such adjournment or
postponement.
A Mid Am shareholder who has given a proxy may revoke it at any time prior
to its exercise at the Mid Am Special Meeting by (i) giving written notice of
revocation to the Secretary of Mid Am, (ii) properly submitting to Mid Am a duly
executed proxy bearing a later date, or (iii) voting in person at the Mid Am
Special Meeting. All written notices of revocation and other communications with
respect to revocation of proxies should be addressed to Mid Am as follows: Mid
Am, Inc., 221 South Church Street, Bowling Green, Ohio 43402, Attention:
Secretary, Marci L. Klumb. A proxy appointment will not be revoked by death or
supervening incapacity of the shareholder executing the proxy unless, before the
shares are voted, notice of such death or incapacity is filed with Mid Am's
Secretary or other person responsible for tabulating votes on behalf of Mid Am.
Mid Am has retained Georgeson & Co., Inc. to assist Mid Am in connection
with its communications with its shareholders with respect to, and to provide
other services to Mid Am in connection with, the Special Meeting. Georgeson &
Co., Inc. will receive a fee of $8,500 for its services and reimbursement of
out-of-pocket expenses in connection therewith.
VOTES REQUIRED
Bancshares. Approval of the Merger Proposal requires the affirmative vote
of the holders of at least two-thirds of the shares of Bancshares Common Stock
outstanding as of the Bancshares Record Date. Approval of the Control Share
Acquisition Amendment requires the affirmative vote of the holders of 75% of the
shares of Bancshares Common Stock outstanding as of the Bancshares Record Date.
Approval of the Director Stock Option Plan and the Employee Stock Option Plan
requires, in each case, the affirmative vote of the holders of a majority of the
shares of Bancshares Common Stock present in person or by proxy at the
Bancshares Special Meeting.
As of the Bancshares Record Date, Bancshares directors and executive
officers and their affiliates held approximately 8.37% of the outstanding shares
of Bancshares Common Stock entitled to vote at the Bancshares Special Meeting
and such persons have indicated a present intent to vote their shares for
approval and adoption of the Merger Proposal, the Control Share Acquisition
Amendment, the Director Stock Option Plan and the Employee Stock Option Plan. As
of the Bancshares Record Date, Mid Am held no shares of Bancshares Common Stock
and none of its directors and executive officers or their affiliates held any
shares of
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Bancshares Common Stock. The trustee of the Citizens Bancshares, Inc. Employee
Stock Ownership Plan will vote the unallocated shares of Bancshares Common Stock
in such manner as the trustee shall determine in its sole discretion, subject to
compliance with the provisions of ERISA. There are currently an aggregate of
14,938 unallocated shares of Bancshares Common Stock, representing .08% of the
outstanding shares of Bancshares Common Stock in the Citizens Bancshares, Inc.
Employee Stock Ownership Plan. See "The Merger -- Interest of Certain Persons in
the Merger."
Mid Am. Approval of the Merger Agreement and consummation of the
transaction contemplated therein requires the affirmative vote of a majority of
the outstanding shares of Mid Am Common Stock as of the Mid Am Record Date.
As of the Mid Am Record Date, Mid Am directors and executive officers and
their affiliates held approximately 6.2% of the outstanding shares of Mid Am
Common Stock entitled to vote at the Mid Am Special Meeting and such persons
have indicated a present intent to vote their shares for approval and adoption
of the Merger Agreement. As of the Mid Am Record Date, Bancshares held no shares
of Mid Am Common Stock and none of its directors and executive officers or their
affiliates held any shares of Mid Am Common Stock. The trustee of the Mid Am
Employee Stock Ownership Pension Plan and the Mid Am Employee Stock Ownership
and Savings Plan will vote the unallocated shares in the respective accounts and
the allocated shares not voted by the plan participants in accordance with the
instructions received from the plan administrator, subject to compliance with
the provisions of ERISA. There are currently an aggregate of 327,402 unallocated
shares of Mid Am Common Stock, representing 1.4% of the outstanding shares of
Mid Am Common Stock entitled to vote at the Special Meeting, in the Mid Am
Employee Stock Ownership Pension Plan and the Mid Am Employee Stock Ownership
and Savings Plan. See "The Merger -- Interest of Certain Persons in the Merger."
MATTERS TO BE CONSIDERED AT THE BANCSHARES SPECIAL MEETING
At the Bancshares Special Meeting, Bancshares shareholders will be asked to
consider and vote upon a proposal to approve the Merger Proposal, which includes
the following amendments to the Bancshares Articles of Incorporation: (i) change
the name of the corporation from Citizens Bancshares, Inc. to Sky Financial
Group, Inc.; (ii) change the location of Bancshares' principal office from
Salineville, Ohio to Bowling Green, Ohio; (iii) increase the number of
authorized shares of Bancshares Common Stock; (iv) increase the number of
authorized shares of Bancshares Preferred Stock from 200,000 to 10,000,000; (v)
eliminate cumulative voting in the election of directors; and (vi) reduce the
shareholder vote required to approve various material transactions of
Bancshares, including certain mergers, consolidations and asset sales.
In addition, the Merger Proposal includes a proposal to amend the Code of
Regulations of Bancshares to effect the following: (i) conform the list of
officers authorized to call a special meeting of the shareholders with the
additional officer positions provided for in the Merger Agreement; (ii) increase
the current size of the Bancshares Board from fourteen (14) members to
twenty-two (22) members and establish a maximum board size of thirty-five (35)
members; (iii) provide that for a period of three years after the Effective
Time, the Sky Financial Board of Directors will contain equal numbers of
directors nominated by certain Bancshares directors and by certain Mid Am
directors; (iv) vest the power to remove directors solely with the 80% vote of
the Bancshares Board and then solely upon a finding of cause; (v) provide that
for a period of three years after the Effective Time, the Executive Committee of
the Bancshares Board, if established, would contain equal numbers of directors
elected by certain Bancshares directors and by certain Mid Am directors; (vi)
set forth a description of officer positions consistent with the provisions of
the Merger Agreement; and (vii) provide for the creation of a Management
Executive Committee to oversee management and operations of Sky Financial
post-Merger.
At the Special Meeting, Bancshares shareholders will also be asked to
consider and vote upon the following: (i) a proposal to approve the Control
Share Acquisition Amendment; (ii) a proposal to approve the Director Stock
Option Plan; and (iii) a proposal to approve the Employee Stock Option Plan. See
"Amendments to the Bancshares Articles of Incorporation and the Bancshares Code
of Regulations," "Approval of the Amended and Restated 1998 Non-Statutory Stock
Option Plan for Non-Employee Directors" and "Approval of 1998 Stock Option Plan
for Employees."
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MATTERS TO BE CONSIDERED AT THE MID AM SPECIAL MEETING
At the Mid Am Special Meeting, Mid Am shareholders will be asked to
consider and vote upon a proposal to approve and adopt the Merger Agreement.
RECOMMENDATION OF BANCSHARES BOARD OF DIRECTORS
For the reasons described in the section of this Joint Proxy
Statement/Prospectus entitled "The Merger -- Reasons for the Merger," the
Bancshares Board has unanimously adopted the Merger Proposal and believes that
the Merger is in the best interests of Bancshares and its shareholders and
unanimously recommends that shareholders of Bancshares vote "FOR" approval of
the Merger Proposal. In addition, in contemplation of the Merger, the Bancshares
Board has unanimously adopted the Control Share Acquisition Amendment, the
Director Stock Option Plan and the Employee Stock Option Plan and unanimously
recommends that shareholders of Bancshares vote "FOR" approval thereof. See "The
Merger -- Background of the Merger," "The Merger -- Reasons for the Merger,"
"The Merger -- Interest of Certain Persons in the Merger," "Approval of the
Amended and Restated 1998 Non-Statutory Stock Option Plan for Non-Employee
Directors" and "Approval of 1998 Stock Option Plan for Employees."
RECOMMENDATION OF MID AM BOARD OF DIRECTORS
For the reasons described in the section of this Joint Proxy
Statement/Prospectus entitled "The Merger -- Reasons for the Merger," the Mid Am
Board has unanimously approved the Merger Agreement and believes the Merger
Agreement is in the best interests of Mid Am and its shareholders and
unanimously recommends that shareholders of Mid Am vote "FOR" approval of the
Merger Agreement. See "The Merger -- Background of the Merger" and "The
Merger -- Reasons for the Merger."
EXPENSES
The expense of soliciting proxies for the Bancshares Special Meeting and
the Mid Am Special Meeting will be paid for by Bancshares and Mid Am,
respectively. Pursuant to the Merger Agreement, Mid Am has agreed to share
equally with Bancshares all filing fees and printing expenses payable in
connection with the Registration Statement and this Joint Proxy
Statement/Prospectus. In addition to the solicitation of shareholders of record
by mail, telephone or personal contact, Bancshares and Mid Am and their
appropriate agents will be contacting brokers, dealers, banks and voting
trustees or their nominees who can be identified as record holders of Bancshares
and Mid Am Common Stock, respectively; such holders, after inquiry by Bancshares
and Mid Am, respectively, will provide information concerning quantity of proxy
and other materials needed to supply such materials to beneficial owners, and
Bancshares and Mid Am, respectively, will reimburse them for the expense of
mailing the proxy materials to such persons.
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THE MERGER
The following information describes certain information pertaining to the
Merger. This description does not purport to be complete and is qualified in its
entirety by reference to the Appendices hereto, including the Merger Agreement,
which is attached as Appendix A and incorporated herein by reference. All
shareholders are urged to read the Appendices in their entirety.
GENERAL
The Merger Agreement provides for a merger-of-equals transaction whereby
Mid Am will be merged with and into Bancshares under the name Sky Financial
Group, Inc. At the Effective Time, each share of issued and outstanding Mid Am
Common Stock will cease to be outstanding and each such share (other than
certain shares held by Mid Am, Bancshares or their subsidiaries, if any) will be
converted into 0.77 of a share of Sky Financial Common Stock. Each issued and
outstanding share of Bancshares Common Stock immediately prior to the Merger
will remain unchanged as an issued and outstanding share of Sky Financial Common
Stock. Following the consummation of the Merger, the former shareholders of Mid
Am and the former shareholders of Bancshares will own approximately 50.9% and
49.1%, respectively, of Sky Financial. Upon their mutual agreement, and subject
to the terms of the Merger Agreement, Bancshares and MidAm may at any time prior
to the Effective Time change the method of effecting the combination between
Bancshares and MidAm.
The Merger Agreement provides that the articles of incorporation of
Bancshares, as amended by the Bancshares Articles Amendment, will be the
Articles of Incorporation of Sky Financial, which will be named Sky Financial
Group, Inc., and the Code of Regulations of Bancshares, as amended by the
Bancshares Code of Regulations Amendment, will be the Code of Regulations of Sky
Financial. At the Effective Time, the headquarters of Sky Financial will be at
221 South Church Street, Bowling Green, Ohio, the current headquarters of Mid
Am.
BACKGROUND OF THE MERGER
In February 1998, Mr. Marty E. Adams, President and Chief Executive Officer
of Bancshares, and Mr. David R. Francisco, President and Chief Operating Officer
of Mid Am, commenced preliminary discussions regarding the possibility of a
strategic business combination involving Bancshares and Mid Am. Although no
specific terms were discussed, Messrs. Adams and Francisco agreed that, in view
of the competitive environment in the banking and financial services industry in
the Midwest and generally, and in view of the trend toward consolidation taking
place, a strategic business combination between the two companies would
strengthen the competitive position of the combined institution, generate
significant cost savings and enhance acquisition and other opportunities. These
discussions continued in March 1998 and were principally focused on the
operating philosophies of the two companies. The discussions became more focused
in early May 1998 when the executives discussed a range of non-financial issues,
including a possible management structure for the combined institution.
Based on these meetings, Messrs. Adams and Francisco concluded that their
respective institutions shared similar operating philosophies and strategic
plans and were engaged in compatible businesses. At that time, the parties
agreed that each would engage a financial advisor with a view toward determining
whether an exchange ratio could be agreed upon in connection with a potential
business combination transaction involving the two companies. In mid May, Mid Am
engaged the services of McDonald & Company as its financial advisor and
Bancshares engaged Sandler O'Neill as its financial advisor. On May 18, 1998,
the two companies reached preliminary agreement on a proposed exchange ratio of
0.385 (0.77 following a Bancshares two-for-one stock split) shares of Bancshares
Common Stock for each share of Mid Am Common Stock.
On the evening of May 17, 1998, a special meeting of the Mid Am Board was
held, with representatives of McDonald & Company and Mid Am's legal advisors
present, to consider the terms of a possible strategic business combination with
Bancshares. McDonald & Company made a presentation on the financial aspects of
the proposal and indicated that it was prepared to render a fairness opinion,
assuming there were no material changes in the facts and circumstances.
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After an extensive discussion, the Mid Am Board unanimously determined,
based upon consideration of the various factors discussed below, that the
proposed strategic combination of Mid Am and Bancshares was in the best interest
of Mid Am's shareholders. The Mid Am Board unanimously approved the Merger
Agreement and the related transactions contemplated therein and authorized Mid
Am's senior management to move expeditiously to sign a definitive agreement for
the Merger of Mid Am and Bancshares substantially on the terms presented at the
meeting, including pricing, the Stock Option Agreements, the Employment
Agreements, termination provisions, standard representations, warranties and
covenants and customary closing conditions.
On May 18, Messrs. Francisco, Adams and Reiter met to review the terms of a
merger.
On May 19 and 20, 1998, a special meeting of the Bancshares Board was held,
with legal advisors present, to consider the terms of a potential merger with
Mid Am. Sandler O'Neill made a presentation on the financial aspects of the
Merger and rendered its oral opinion, subsequently confirmed in writing, that,
as of such date, the Exchange Ratio was fair to the shareholders of Bancshares
from a financial point of view.
After an extensive discussion, the Bancshares Board unanimously determined,
based upon consideration of the various factors discussed below, that the
proposed strategic combination of Mid Am and Bancshares was in the best interest
of Bancshares and its shareholders. The Bancshares Board unanimously approved
the Merger Proposal and the related transactions contemplated therein.
The Merger Agreement was executed by representatives of Mid Am and
Bancshares shortly after the Bancshares Board meeting was adjourned. On May 21,
1998, representatives of Mid Am and Bancshares executed the Stock Option
Agreements. Mid Am and Bancshares issued a joint press release announcing the
Merger Agreement on May 21, 1998.
REASONS FOR THE MERGER
THE BANCSHARES BOARD HAS UNANIMOUSLY APPROVED THE MERGER PROPOSAL AND HAS
DETERMINED THAT THE MERGER IS IN THE BEST INTERESTS OF BANCSHARES AND BANCSHARES
SHAREHOLDERS. THE BANCSHARES BOARD, THEREFORE, UNANIMOUSLY RECOMMENDS THAT
BANCSHARES SHAREHOLDERS VOTE FOR THE ADOPTION AND APPROVAL OF THE MERGER
PROPOSAL.
THE MID AM BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND HAS
DETERMINED THAT THE MERGER IS IN THE BEST INTERESTS OF MID AM AND MID AM
SHAREHOLDERS. THE MID AM BOARD, THEREFORE, UNANIMOUSLY RECOMMENDS THAT MID AM
SHAREHOLDERS VOTE FOR THE ADOPTION AND APPROVAL OF THE MERGER AGREEMENT.
In reaching their determinations that the Merger Proposal is in the best
interests of Mid Am and the Mid Am shareholders and Bancshares and the
Bancshares shareholders, as the case may be, each of the Mid Am Board and the
Bancshares Board considered a number of factors, both from a short-term and
long-term perspective, including, without limitation, the following:
(i) the consistency of the Merger with Mid Am's and Bancshares'
strategic objectives;
(ii) each of the Mid Am Board's and the Bancshares Board's familiarity
with and review of its and the other's business, financial condition,
results of operations and prospects, including but not limited to its
potential growth, development, productivity and profitability;
(iii) the current and prospective environment in which each of Mid Am
and Bancshares operates, including national and local conditions, the
competitive environment for banks and other financial institutions
generally, the increased regulatory burden on financial institutions
generally and the trend toward consolidation and increased competition in
the financial services industry both in the Midwest and elsewhere;
(iv) each Board's review, based in part on presentations by their
respective management and advisors, of the business, financial condition,
results of operations and management of the other party, and the recent
performance of the Mid Am Common Stock and the Bancshares Common Stock on
both an historical and prospective basis, the strategic fit between the
parties, the enhanced opportunities for operating efficiencies that could
result from the Merger (including cost savings of approximately 8% to
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10% of combined non-interest expense or $16 to $20 million) and the
respective contributions the parties would bring to a combined institution;
(v) the belief that the Merger would further the respective strategic
plans of Mid Am and Bancshares;
(vi) the structure of the Merger as a merger of equals whereby each
company would have substantial input with respect to the control and future
plans of the combined company;
(vii) the opportunity that the Merger provides to strengthen and
deepen the management team of the combined entity by integrating the
already strong management teams at both Mid Am and Bancshares;
(viii) the expectation that the Merger will generally be a tax-free
transaction to Mid Am and its shareholders and to Bancshares and its
shareholders and will qualify for pooling-of-interests accounting treatment
(see "-- Federal Income Tax Considerations" and "-- Accounting Treatment");
(ix) the recognition of various financial benefits accompanying the
Merger, including the belief that the Merger would be accretive to earnings
per share to both shareholder groups in the first full year of post-Merger
operations, that Sky Financial would be well capitalized and have strong
asset quality and that Sky Financial may have a higher potential for
earnings and book value multiples expansion;
(x) the recognition of the complementary nature of the markets served
and the products offered by Mid Am and Bancshares and the expectation that
the Merger would provide economies of scale, expanded product offerings,
expanded opportunities for cross-selling, cost savings opportunities and
enhanced opportunities for growth, including an expanded pool of
acquisition targets;
(xi) the similarity between Mid Am's and Bancshares' philosophy and
commitments to their respective employees, suppliers, creditors and
customers, and the effect of the Merger on those constituencies and other
community and societal considerations;
(xii) the review by each of the Mid Am Board and the Bancshares Board
with its respective legal and financial advisors of the provisions of the
Merger Agreement and the Stock Option Agreements;
(xiii) the financial presentation and opinion of McDonald & Company,
in the case of Mid Am, and Sandler O'Neill, in the case of Bancshares,
rendered to the Mid Am Board and the Bancshares Board, respectively, as to
the fairness, from a financial point of view, of the Exchange Ratio to Mid
Am shareholders and Bancshares shareholders, respectively; and
(xiv) the belief of the Mid Am Board and the Bancshares Board, after
consultation with its respective legal counsel, that the regulatory
approvals necessary to consummate the Merger could be obtained (see
"-- Regulatory Approvals").
The Board of Directors of each of Mid Am and Bancshares determined that the
Merger would place the combined company in an improved competitive position in
the financial markets because of each board's respective belief that the Merger
combines two financially sound institutions with complementary businesses and
business strategies, thereby creating a stronger combined institution with
greater size, flexibility, breadth of services, efficiency, capital resources,
profitability and potential for expansion than either party would possess on a
stand-alone basis. The boards of directors of Mid Am and Bancshares believe that
each institution is currently well-managed and possesses management philosophies
and strategic focus compatible with those of the other, that each institution
will contribute complementary business strengths resulting in a well-diversified
combined institution, and that the strong capitalization and diversification of
the combined institution will allow it to take advantage of future opportunities
for growth, including appropriate acquisitions. The boards of directors of Mid
Am and Bancshares also believe that the Merger will allow the combined
institution to compete effectively in the rapidly changing marketplace for
banking and financial services and to take advantage of opportunities for growth
and diversification that may not be available to either institution on its own.
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In reaching its determination to approve and recommend the Merger, neither
the Mid Am Board nor the Bancshares Board assigned any relative or specific
weights to the various factors considered by it, and individual directors may
have given differing weights to different factors.
OPINION OF BANCSHARES FINANCIAL ADVISOR
Pursuant to a letter agreement dated as of May 19, 1998 (the "Sandler
O'Neill Agreement"), Bancshares retained Sandler O'Neill as an independent
financial advisor in connection with Bancshares' consideration of a possible
business combination with Mid Am. Sandler O'Neill is a nationally recognized
investment banking firm whose principal business specialty is banks and savings
institutions. In the ordinary course of its investment banking business, Sandler
O'Neill is regularly engaged in the valuation of such businesses and their
securities in connection with mergers and acquisitions and other corporate
transactions.
Pursuant to the terms of the Sandler O'Neill Agreement, Sandler O'Neill
acted as financial advisor to Bancshares in connection with the Merger. In
connection therewith, the Bancshares Board requested Sandler O'Neill to render
its opinion as to the fairness of the Exchange Ratio to the shareholders of
Bancshares from a financial point of view. On May 20, 1998, Sandler O'Neill
delivered to the Bancshares Board its oral opinion, subsequently confirmed in
writing, that, as of such date, the Exchange Ratio was fair to the holders of
shares of Bancshares Common Stock from a financial point of view. Sandler
O'Neill has also delivered to Bancshares' Board a written opinion dated August
5, 1998, (the "Sandler O'Neill Fairness Opinion") which is substantially
identical to the May 20, 1998 opinion. THE FULL TEXT OF THE SANDLER O'NEILL
FAIRNESS OPINION, WHICH SETS FORTH THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE,
MATTERS CONSIDERED AND QUALIFICATIONS AND LIMITATIONS ON THE REVIEW UNDERTAKEN
IN CONNECTION WITH RENDERING SUCH OPINION, IS ATTACHED AS APPENDIX D TO THIS
JOINT PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE. THE
DESCRIPTION OF THE OPINION SET FORTH HEREIN IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO APPENDIX D. BANCSHARES' SHAREHOLDERS ARE URGED TO READ THE SANDLER
O'NEILL FAIRNESS OPINION IN ITS ENTIRETY IN CONNECTION WITH THEIR CONSIDERATION
OF THE PROPOSED MERGER.
THE SANDLER O'NEILL FAIRNESS OPINION WAS PROVIDED TO THE BANCSHARES BOARD
FOR ITS INFORMATION AND IS DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT
OF VIEW, OF THE EXCHANGE RATIO TO THE HOLDERS OF SHARES OF BANCSHARES COMMON
STOCK. IT DOES NOT ADDRESS THE UNDERLYING BUSINESS DECISION OF BANCSHARES TO
ENGAGE IN THE MERGER OR ANY OTHER ASPECT OF THE MERGER AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY HOLDER OF SHARES OF BANCSHARES COMMON STOCK AS TO HOW SUCH
SHAREHOLDER SHOULD VOTE AT THE BANCSHARES SPECIAL MEETING WITH RESPECT TO THE
MERGER OR ANY OTHER MATTER RELATED THERETO.
In connection with rendering its May 20, 1998 opinion, Sandler O'Neill
performed a variety of financial analyses. The following is a summary of such
analyses, but does not purport to be a complete description of all the analyses
underlying Sandler O'Neill's opinion. The preparation of a fairness opinion is a
complex process involving subjective judgments and is not necessarily
susceptible to a partial analysis or summary description. Sandler O'Neill
believes that its analyses must be considered as a whole and that selecting
portions of such analyses and the factors considered therein, without
considering all factors and analyses, could create an incomplete view of the
analyses and processes underlying its opinion. In performing its analyses,
Sandler O'Neill made numerous assumptions with respect to industry performance,
business and economic conditions and various other matters, many of which cannot
be predicted and are beyond the control of Bancshares, Mid Am and Sandler
O'Neill. Any estimates contained in Sandler O'Neill's analyses are not
necessarily indicative of future results or values, which may be significantly
more or less favorable than such estimates. Estimates on the values of companies
do not purport to be appraisals or necessarily reflect the prices at which
companies or their securities may actually be sold. Because such estimates are
inherently subject to uncertainty, none of Bancshares, Mid Am or Sandler O'Neill
assumes responsibility for their accuracy.
Summary of Proposal. Sandler O'Neill reviewed the financial terms of the
proposed transaction. Sandler O'Neill noted that the negotiated Exchange Ratio
was designed to approximate a market for market exchange of common stock. Based
on the closing price of Bancshares Common Stock on May 18, 1998 of $35.63 and an
Exchange Ratio of 0.77, Sandler O'Neill calculated an implied transaction value
per share of Mid Am of $27.43. Based on the closing price of Mid Am Common Stock
on May 18, 1998 of $26.38, Mid Am Common
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Stock was trading at a price to last twelve months' earnings multiple of 22.80x,
a price to last quarter annualized earnings multiple of 21.40x, a price to book
value multiple of 382% and a price to tangible book value multiple of 403%.
Based on the closing price of Bancshares Common Stock on May 18, 1998 of $35.63,
Bancshares Common Stock was trading at a price to last twelve months' earnings
multiple of 26.19x, a price to last quarter annualized earnings multiple of
23.07x, a price to book value multiple of 400% and a price to tangible book
value multiple of 424%.
Stock Trading History. Sandler O'Neill reviewed the history of the reported
trading prices and volume of Bancshares Common Stock and Mid Am Common Stock,
and the relationship between the movements in the prices of Bancshares Common
Stock and Mid Am Common Stock, respectively, to movements in certain stock
indices, including Standard & Poor's 500 Index, the Nasdaq Banking Index and a
selected composite group of publicly traded commercial banks (identified below).
Comparable Company Analysis. Sandler O'Neill used publicly available
information to compare selected financial and market trading information,
including balance sheet composition, asset quality ratios, loan loss reserve
levels, profitability, capital adequacy, dividends and trading multiples, for
Bancshares, Mid Am and two groups of selected institutions. The first group
consisted of Bancshares and Mid Am and the following four publicly traded Ohio
commercial banks (the "Regional Group"): First Financial Bancorp, Park National
Corp., FirstFederal Financial Services and BancFirst Ohio Corp. Sandler O'Neill
also compared Bancshares and Mid Am to a group of eighteen publicly traded
commercial banks which had a return on equity (based on last twelve months'
earnings) of greater than 17.50% and a price-to-tangible book value of greater
than 290% (the "Highly-Valued Group"). The Highly-Valued Group was comprised of
Bancshares, National Commerce Bancorp, Commerce Bancorp Inc., FirstBank Puerto
Rico, HUBCO Inc., Silicon Valley Bancshares, TrustCo Bank Corp., Park National
Corp., Chittenden Corp., Santa Barbara Bancorp, GBC Bancorp, Irwin Financial
Corp, Westernbank Puerto Rico, Hamilton Bancorp Inc., Mississippi Valley
Bancshares, CVB Financial Corp., Sterling Bancshares and U.S.B. Holding Co. Inc.
The analysis compared publicly available financial information for Bancshares
and Mid Am and the median data for each of the Regional Group and the
Highly-Valued Group as of and for each of the years ended December 31, 1993
through December 31, 1997 and as of and for the twelve months ended March 31,
1998.
Discounted Dividend Stream and Terminal Value Analysis. Sandler O'Neill
also performed an analysis which estimated the future stream of after-tax
dividend flows of Mid Am through the year 2002 under various circumstances,
assuming Mid Am performed in accordance with the earnings forecasts of its
management and certain variations thereof. To approximate the terminal value of
Mid Am Common Stock at December 31, 2002, Sandler O'Neill applied price to
earnings multiples ranging from 14x to 32x and applied multiples of tangible
book value ranging from 150% to 600%. The dividend income streams and terminal
values were then discounted to present values using different discount rates
(ranging from 9% to 14%) chosen to reflect different assumptions regarding
required rates of return of holders or prospective buyers of Mid Am Common
Stock. This analysis, assuming the current dividend payout ratio and
management's earnings forecasts, indicated an imputed range of values per share
of Mid Am Common Stock of between $16.58 and $42.34 when applying the price to
earnings multiples, and an imputed range of values per share of Mid Am Common
Stock of between $11.13 and $44.84 when applying multiples of tangible book
value. In connection with its analysis, Sandler O'Neill used sensitivity
analyses to consider the effects changes in the underlying assumptions
(including variations with respect to the growth rate of assets, net interest
spread, non-interest income, non-interest expenses and dividend payout ratio)
would have on the resulting present value.
Sandler O'Neill also performed a similar analysis which estimated the
future stream of after-tax dividend flows of Bancshares through 2002 under
various circumstances, assuming Bancshares performed in accordance with the
earnings forecasts of its management and certain variations thereof. To
approximate the terminal value of Bancshares Common Stock at December 31, 2002,
Sandler O'Neill applied price to earnings multiples ranging from 14x to 32x and
applied multiples of tangible book value ranging from 150% to 600%. The dividend
income streams and terminal values were then discounted to present values using
different discount rates (ranging from 9% to 14%) chosen to reflect different
assumptions regarding required rates of return of holders or prospective buyers
of Bancshares Common Stock. This analysis, assuming the current dividend payout
ratio and management's earnings forecasts, indicated an imputed range of values
per share of
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Bancshares Common Stock of between $20.93 and $54.51 when applying the price to
earnings multiples, and an imputed range of values per share of Bancshares
Common Stock of between $14.21 and $59.77 when applying multiples of tangible
book value. In connection with its analysis, Sandler O'Neill extensively used
sensitivity analyses to consider the effects changes in the underlying
assumptions (including variations with respect to the levels of assets, net
interest spread, non-interest income, non-interest expense and dividend payout
ratio) would have on the resulting present value.
Sandler O'Neill noted that the discounted dividend stream and terminal
value analysis is a widely used valuation methodology, but the results of such
methodology are highly dependent upon the numerous assumptions that must be
made, and the results thereof are not necessarily indicative of actual values or
actual future results.
Pro Forma Merger Analysis. Sandler O'Neill analyzed certain potential pro
forma effects of the Merger on the combined company, based upon an Exchange
Ratio of 0.77, Bancshares' and Mid Am's current and projected income statements
and balance sheets, and assumptions regarding the economic environment,
accounting and tax treatment of the Merger, charges associated with the Merger,
operating efficiencies and other adjustments discussed with the senior
managements of Bancshares and Mid Am. This analysis indicated that the Merger
would be accretive to Bancshares' earnings per share in all periods analyzed,
and slightly dilutive to tangible book value per share of Bancshares' Common
Stock in the anticipated closing period ending December 31, 1998 and accretive
in each of the periods analyzed thereafter. The actual results achieved by the
combined company may vary from projected results and the variations may be
material.
Contribution Analysis. Sandler O'Neill reviewed the relative contributions
to, among other things, total assets, total securities, total net loans, total
deposits, total borrowings, total equity and last quarter annualized ("LQA") net
income to be made by Bancshares and Mid Am to the combined institution based on
data at and for the quarter ended March 31, 1998. This analysis indicated that
Mid Am's implied contribution was 55.6% of total assets, 46.3% of total
securities, 58.5% of total net loans, 56.0% of total deposits, 56.1% of total
borrowings, 50.9% of total equity and 52.0% of LQA net income. Based upon an
Exchange Ratio of .77, holders of the Mid Am Common Stock would own
approximately 50.9% of the outstanding shares of the combined institution.
In connection with rendering its May 20, 1998 opinion, Sandler O'Neill
reviewed, among other things: (i) the Merger Agreement and exhibits thereto;
(ii) the Stock Option Agreements; (iii) certain publicly available financial
statements of Bancshares and other historical financial information provided by
Bancshares that Sandler O'Neill deemed relevant; (iv) certain publicly available
financial statements of Mid Am and other historical financial information
provided by Mid Am that Sandler O'Neill deemed relevant; (v) certain financial
analyses and forecasts of Bancshares prepared by and reviewed with management of
Bancshares and the views of senior management of Bancshares regarding
Bancshares' past and current business operations, results thereof, financial
condition and future prospects; (vi) certain financial analyses and forecasts of
Mid Am prepared by and reviewed with management of Mid Am and the views of
senior management of Mid Am regarding Mid Am's past and current business
operations, results thereof, financial condition and future prospects; (vii) the
pro forma impact of the Merger; (viii) the publicly reported historical price
and trading activity for Bancshares' and Mid Am's common stock, including a
comparison of certain financial and stock market information for Bancshares and
Mid Am with similar publicly available information for certain other companies
the securities of which are publicly traded; (ix) the financial terms of recent
business combinations in the banking industry, to the extent available; (x) the
current market environment generally and the banking environment in particular;
and (xi) such other information, financial studies, analyses and investigations
and financial, economic and market criteria as it considered relevant.
In connection with rendering the Sandler O'Neill Fairness Opinion, Sandler
O'Neill confirmed the appropriateness of its reliance on the analyses used to
render its May 20, 1998 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.
In performing its reviews and analyses, Sandler O'Neill assumed and relied
upon, without independent verification, the accuracy and completeness of all the
financial information, analyses and other information
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that was publicly available or otherwise furnished to, reviewed by or discussed
with it, and Sandler O'Neill does not assume any responsibility or liability
therefor. Sandler O'Neill did not make an independent evaluation or appraisal of
the specific assets, the collateral securing assets or the liabilities
(contingent or otherwise) of Bancshares or Mid Am or any of their subsidiaries,
or the collectibility of any such assets, nor was it furnished with any such
evaluations or appraisals. Sandler O'Neill is not an expert in the evaluation of
allowances for loan losses and it has not made an independent evaluation of the
adequacy of the allowance for loan losses of Bancshares or Mid Am, nor has it
reviewed any individual credit files relating to Bancshares or Mid Am. With
Bancshares' consent, Sandler O'Neill has assumed that the respective aggregate
allowances for loan losses for both Bancshares and Mid Am are adequate to cover
such losses and will be adequate on a pro forma basis for the combined entity.
In addition, Sandler O'Neill has not conducted any physical inspection of the
properties or facilities of Bancshares or Mid Am. With respect to all financial
information and projections reviewed with each company's management, Sandler
O'Neill assumed that they had been reasonably prepared on bases reflecting the
best currently available estimates and judgments of the respective managements
of the respective future financial performances of Bancshares and Mid Am and
that such performances will be achieved. Sandler O'Neill expressed no opinion as
to such financial projections or the assumptions on which they were based.
Sandler O'Neill's opinion was necessarily based upon market, economic and
other conditions as they existed on, and could be evaluated as of, the date of
such opinion. Sandler O'Neill assumed, in all respects material to its analysis,
that all of the representations and warranties contained in the Merger Agreement
and all related agreements are true and correct, that each party to such
agreements will perform all of the covenants required to be performed by such
party under such agreements and that the conditions precedent in the Merger
Agreement are not waived. Sandler O'Neill also assumed, with Bancshares'
consent, that there has been no material change in Bancshares' and Mid Am's
assets, financial condition, results of operations, business, or prospects since
the date of the last financial statements made available to them, that the
Merger will be accounted for using the pooling of interests method of
accounting, that Bancshares and Mid Am will remain as going concerns for all
periods relevant to its analyses and that the Merger will qualify as a tax-free
reorganization for federal income tax purposes.
Under the Sandler O'Neill Agreement, Bancshares will pay Sandler O'Neill a
transaction fee in connection with the Merger, a substantial part of which is
contingent upon the consummation of the Merger. Under the terms of the Sandler
O'Neill Agreement, Bancshares will pay Sandler O'Neill a transaction fee equal
to 0.27% of the aggregate value of the consideration received by Mid Am
shareholders in the transaction. Based on the closing price of Bancshares Common
Stock on August 3, 1998, Bancshares would pay Sandler O'Neill a transaction fee
of approximately $1.7 million, of which approximately $450,000 has been paid and
the balance will be paid when the Merger is consummated. Bancshares has also
agreed to indemnify Sandler O'Neill and its affiliates and their respective
partners, directors, officers, employees, agents and controlling persons against
certain expenses and liabilities, including liabilities under securities laws.
Sandler O'Neill has in the past provided and may in the future provide
other financial advisory services to Bancshares and has received and will
receive compensation for such services. Sandler O'Neill acted as financial
adviser to Bancshares in connection with the pending Ohio Bank Merger and will
be separately compensated for such services. In the ordinary course of its
business, Sandler O'Neill may actively trade the debt or equity securities of
Bancshares and Mid Am and their respective affiliates for its own account and
for the accounts of customers and, accordingly, may at any time hold a long or
short position in such securities.
OPINION OF MID AM FINANCIAL ADVISOR
Merger -- General. Pursuant to an engagement letter dated May 15, 1998
between Mid Am and McDonald & Company, Mid Am retained McDonald & Company to act
as its sole financial advisor in connection with the Merger and related matters.
As part of its engagement, McDonald & Company agreed, if requested by Mid Am, to
render an opinion with respect to the fairness, from a financial point of view,
to Mid Am shareholders of the consideration to be received in the Merger.
McDonald & Company is a nationally recognized specialist in the financial
services industry, in general, and in midwestern banks and thrifts in
particular. McDonald & Company is regularly engaged in evaluations of similar
businesses and in advising
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institutions with regard to mergers and acquisitions, as well as raising debt
and equity capital for such institutions. Mid Am selected McDonald & Company as
its financial advisor based upon its qualifications, expertise and reputation in
such capacity.
On May 20, 1998, McDonald & Company delivered its oral opinion,
subsequently confirmed in writing that the consideration to be received by Mid
Am in the Merger (the amount of which was determined by Mid Am and Bancshares on
the basis of arm's-length negotiation between Mid Am and Bancshares), was fair
to Mid Am shareholders, from a financial point of view, as of May 20, 1998 (the
"McDonald & Company Opinion"). McDonald & Company also delivered to the Mid Am
Board a written opinion dated August 5, 1998, confirming its oral opinion as of
such date. No limitations were imposed by Mid Am on McDonald & Company with
respect to the investigations made or the procedures followed in rendering its
opinion.
THE FULL TEXT OF MCDONALD & COMPANY'S WRITTEN OPINION TO THE MID AM BOARD,
DATED AUGUST 5, 1998, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED
AND EXTENT OF REVIEW BY MCDONALD & COMPANY, IS ATTACHED HERETO AS APPENDIX E AND
IS INCORPORATED HEREIN BY REFERENCE AND SHOULD BE READ CAREFULLY AND IN ITS
ENTIRETY IN CONJUNCTION WITH THIS JOINT PROXY STATEMENT/PROSPECTUS. THE
FOLLOWING SUMMARY OF MCDONALD & COMPANY'S OPINION IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO THE FULL TEXT OF THE OPINION. MCDONALD & COMPANY'S OPINION IS
ADDRESSED TO THE MID AM BOARD AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY
SHAREHOLDER OF MID AM AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE MID AM
SPECIAL MEETING.
In connection with its opinion, McDonald & Company has, among other things:
(i) reviewed the Merger Agreement and related documents and this Joint Proxy
Statement/Prospectus; (ii) reviewed certain historical business and financial
information relating to Mid Am and Bancshares; (iii) reviewed other pertinent
internally generated reports with regard to the separate businesses and
prospects of Mid Am and Bancshares including, among other things: the strategic
objectives of each corporation and the potential benefits which might be
realized through consummation of the Merger; (iv) participated in senior
management discussions between Mid Am and Bancshares with regard to said
strategic objectives which might be realized through consummation of the Merger;
(v) reviewed public information regarding other selected comparable publicly
traded companies deemed relevant to the proposed business combination; (vi)
reviewed the financial terms and data of selected comparable combinations
between banks and bank or thrift holding companies deemed relevant to the
proposed business combination; (vii) reviewed the historical market performance
and trading volume of Mid Am Common Stock and Bancshares Common Stock; (viii)
reviewed and evaluated the current stock distribution and ownership of Mid Am
Common Stock and Bancshares Common Stock, as well as the pro forma distribution
and ownership following consummation of the Merger, based upon the contribution
of, among other things, Mid Am's assets, liabilities, shareholders' equity and
earnings to the combined entity; and (ix) conducted such other financial
studies, analyses and investigations as McDonald & Company deemed appropriate.
The oral and written opinions provided by McDonald & Company to Mid Am were
necessarily based upon economic, monetary, financial market and other relevant
conditions as of the dates thereof.
In connection with its review and arriving at its opinion, McDonald &
Company relied upon the accuracy and completeness of the financial information
and other pertinent information provided by Mid Am to McDonald & Company for
purposes of rendering its opinion. McDonald & Company did not assume any
obligation to independently verify any of the provided information as being
complete and accurate in all material respects. With regard to the financial
forecasts established and developed for Mid Am and Bancshares with the input of
the respective managements, as well as projections of cost savings, revenue
enhancements and operating synergies, McDonald & Company assumed that these
materials had been reasonably prepared on bases reflecting the best available
estimates and judgments of Mid Am and Bancshares as to the future performance of
the separate and combined entities and that the projections provided a
reasonable basis upon which McDonald & Company could formulate its opinion.
Neither Mid Am nor Bancshares publicly discloses such internal management
projections of the type utilized by McDonald & Company in connection with
McDonald & Company's role as financial advisor to Mid Am with respect to review
of the Merger. Therefore, such projections cannot be assumed to have been
prepared with a view towards public disclosure. The projections were based upon
numerous variables and assumptions that are
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inherently uncertain, including, but notwithstanding, factors relative to the
general economic and competitive conditions facing Mid Am and Bancshares.
Accordingly, actual results could vary significantly from those set forth in the
respective projections.
McDonald & Company does not claim to be an expert in the evaluation of loan
portfolios or the allowance for loan losses with respect thereto and therefore
assumes that such allowances for Mid Am and Bancshares are adequate to cover
such losses. In addition, McDonald & Company does not assume responsibility for
the review of individual credit files, did not make an independent evaluation,
appraisal or physical inspection of the assets or individual properties of Mid
Am or Bancshares, nor was McDonald & Company provided with such appraisals.
Furthermore, McDonald & Company assumes that the Merger will be consummated in
accordance with the terms set forth in the Merger Agreement, without any waiver
of any material terms or conditions by Mid Am and that obtaining the necessary
regulatory approvals for the Merger will not have an adverse effect on either
separate institution or combined entity. Moreover, in each analysis that
involves per share data for Mid Am, McDonald & Company adjusted the data to
reflect full dilution, i.e., the exercise of all outstanding options and/or
warrants (utilizing the treasury stock method). In particular, McDonald &
Company assumes that the Merger will be recorded as a pooling-of-interests in
accordance with generally accepted accounting principles.
In connection with rendering its opinion to the Mid Am Board, McDonald &
Company performed a variety of financial and comparative analyses which are
briefly summarized below. Such summary of analyses does not purport to be a
complete description of the analyses performed by McDonald & Company. Moreover,
McDonald & Company believes that these analyses must be considered as a whole
and that selecting portions of such analyses and the factors considered by it,
without considering all such analyses and factors, could create an incomplete
understanding of the scope of the process underlying the analyses and, more
importantly, the opinion derived from them. The preparation of a financial
advisor's opinion is a complex process involving subjective judgments and is not
necessarily susceptible to partial analyses or a summary description of such
analyses. In its full analysis, McDonald & Company also accounted for the
assessment of general economic, financial market and other financial conditions.
Furthermore, McDonald & Company drew from its past experience in similar
transactions, as well as its experience in the valuation of securities and its
general knowledge of the banking industry as a whole. Any estimates in McDonald
& Company's analyses were not necessarily indicative of future results or values
which may significantly diverge more or less favorably from such estimates.
Estimates of company valuations do not purport to be appraisals or necessarily
reflect the prices at which companies or their respective securities actually
may be sold. Most notably, none of the analyses performed by McDonald & Company
were assigned a greater significance by McDonald & Company than any other in
deriving its opinion.
Comparable Company Analysis: McDonald & Company reviewed and compared
actual stock market data and actual and estimated selected financial information
for Mid Am and Bancshares with corresponding information for 15 publicly traded
banks with assets between $1 billion and $5 billion, equity to assets less than
9.00% and return on assets greater than 1.25% (the "Peer Group"). The Peer Group
included: BancFirst Corp., Oklahoma City, OK; Cathay Bancorp Inc., Los Angeles,
CA; Chittenden Corp., Burlington, VT; CVB Financial Corp., Ontario, CA; Hamilton
Bancorp Inc., Miami, FL; HUBCO Inc., Mahwah, NJ; Irwin Financial Corp.,
Columbus, IN; Mississippi Valley Bancshares, St. Louis, MO; National Commerce
Bancorp, Memphis, TN; National Penn Bancshares Inc., Boyertown, PA; Santa
Barbara Bancorp, Santa Barbara, CA; Sterling Bancshares Inc., Houston, TX;
TrustCo Bank Corp. of NY, Schenectady, NY; U.S. Trust Corp., New York, NY; and
West Coast Bancorp, Lake Oswego, OR.
The analysis of the Peer Group indicated, among other things, that, based
on market prices as of May 14, 1998 and the latest publicly available financial
data based on March 31, 1998: (i) the mean and median multiples of price to
respective last twelve months' earnings were 21.58x and 20.51x, respectively, as
compared to 23.04x for Mid Am and 25.30x for Bancshares; (ii) the mean and
median multiples of price to estimated 1998 earnings were 19.89x and 19.15x,
respectively, as compared to 21.20x for Mid Am and 23.40x for Bancshares, based
on consensus estimates; (iii) the mean and median multiples of price to
estimated 1999 earnings were 17.55x and 16.97x, respectively, as compared to
18.93x for Mid Am and 20.86x for Bancshares, based on consensus estimates; (iv)
the mean and median multiples of price to book value were 372% and
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354%, respectively, as compared to 382% for Mid Am and 410% for Bancshares; (v)
the mean and median multiples of price to tangible book value were 389% and
376%, respectively, as compared to 403% for Mid Am and 430% for Bancshares; (vi)
the mean and median dividend yields were 1.54% and 1.45%, respectively, as
compared to 2.42% for Mid Am and 1.70% for Bancshares; (vii) the mean and median
return on average assets (ROAA) for the last twelve months were 1.47% and 1.42%,
respectively, as compared to 1.31% for Mid Am and 1.43% for Bancshares; (viii)
the mean and median return on average equity for the last twelve months were
18.73% and 18.60%, respectively, as compared to 16.23% for Mid Am and 16.22% for
Bancshares; (ix) the mean and median ratios of tangible equity to tangible
assets were 7.28% for both, as compared to 6.93% for Mid Am and 8.29% for
Bancshares; (x) the mean and median ratios of non-performing assets to assets
were 0.53% and 0.47%, as compared to 0.27% for Mid Am and 0.29% for Bancshares;
(xi) the mean and median ratios of loan loss reserves to non-performing loans
were 248% and 207%, respectively, as compared to 329% for Mid Am and 366% for
Bancshares; and (xii) the mean and median efficiency ratios for the last twelve
months were 55.43% and 57.07%, respectively, as compared to 67.52% for Mid Am
and 54.03% for Bancshares.
Contribution Analysis: McDonald & Company analyzed the contribution of each
of Mid Am and Bancshares to the pro forma assets, total loans, deposits, equity,
tangible equity, earnings for the last twelve months, 1998 estimated earnings,
1999 estimated earnings and current market value. This analysis demonstrated
that Mid Am contributed approximately 55.7% of assets, 58.4% of total loans,
56.0% of deposits, 51.1% of total equity, 51.2% of tangible equity, 55.5% of
earnings for the last twelve months, 52.7% of 1998 estimated earnings, 51.9% of
1999 estimated earnings and 48.9% of the combined current market value of the
two companies on May 14, 1998. The Exchange Ratio implies that Mid Am
shareholders will own approximately 50.9% of pro forma shares outstanding upon
completion of the Merger.
Accretion/Dilution Analysis: On the basis of financial projections and
estimates of on-going cost savings accruing to the pro forma company provided to
McDonald & Company by management, as well as estimated one-time costs related to
the transaction, McDonald & Company compared pro forma equivalent earnings, cash
dividends, book value and tangible book value to the stand-alone projections of
Mid Am.
The accretion/dilution analysis demonstrated, among other things, that the
Merger would result in (i) accretion to earnings for Mid Am shareholders in each
year of the analysis; (ii) no accretion or dilution to cash dividends assuming
the dividends paid remain as estimated for Mid Am on a stand-alone basis, (iii)
dilution to book value for Mid Am shareholders in each year of the analysis; and
(iv) dilution to tangible book value to Mid Am shareholders in each year of the
analysis.
In addition, the accretion/dilution analysis demonstrated, among other
things, that the Merger would result in (i) accretion to earnings for Bancshares
shareholders in each year of the analysis; (ii) accretion to estimated cash
dividends for Bancshares shareholders in each year of the analysis; (iii)
accretion to book value for Bancshares shareholders in each year of the
analysis; and (iv) zero dilution to tangible book value for Bancshares
shareholders in 1998 and accretion to tangible book value in the subsequent
years of the analysis.
Discounted Cash Flow Analysis: McDonald & Company performed a discounted
cash flow analysis with regard to Mid Am on a stand-alone basis. This analysis
utilized a discount rate of 15% and a range of earnings terminal multiples of
18.0x to 26.0x. The analysis resulted in a range of present values of $22.35 to
$31.25 per share for Mid Am on a stand-alone basis and a range of present values
of $27.55 to $38.63 per share for Bancshares on a stand-alone basis.
This analysis is not necessarily indicative of actual value or actual
future results and does not purport to reflect the prices at which any
securities may trade at the present or at any time in the future. McDonald &
Company advised the Board of Directors that the discounted cash flow analysis
was included because it is a widely-used valuation methodology, but noted that
the results of such methodology are dependent upon the numerous assumptions that
must be made, including earnings growth rates, dividend payout rates, terminal
values and discount rates.
Other Analyses: McDonald & Company also reviewed certain other information
including selected pro forma industry rankings, pro forma estimated balance
sheet composition and pro forma financial performance.
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NO OTHER COMPANY USED AS A COMPARISON IN THE ABOVE ANALYSES IS IDENTICAL TO
MID AM, BANCSHARES OR THE COMBINED ENTITY AND NO OTHER TRANSACTION IS IDENTICAL
TO THE MERGER. ACCORDINGLY, AN ANALYSIS OF THE RESULTS OF THE FOREGOING IS NOT
PURELY MATHEMATICAL; RATHER, IT INVOLVES COMPLEX CONSIDERATIONS AND JUDGMENTS
CONCERNING DIFFERENCES IN FINANCIAL MARKET AND OPERATING CHARACTERISTICS OF THE
COMPANIES AND OTHER FACTORS THAT COULD AFFECT THE PUBLIC TRADING VOLUME OF THE
COMPANIES TO WHICH MID AM, BANCSHARES AND THE COMBINED ENTITY ARE BEING
COMPARED.
IN CONNECTION WITH THE MCDONALD & COMPANY OPINION (DATED AS OF THE DATE OF
THIS JOINT PROXY STATEMENT/PROSPECTUS), MCDONALD & COMPANY 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. MCDONALD & COMPANY DID NOT PERFORM
ANY ANALYSES IN ADDITION TO THOSE DESCRIBED ABOVE IN UPDATING THE MCDONALD &
COMPANY OPINION.
Under an agreement with McDonald & Company, Mid Am will pay McDonald &
Company a transaction fee in connection with the Merger, a substantial part of
which is contingent upon the consummation of the Merger. Under the terms of such
agreement, Mid Am will pay McDonald & Company a transaction fee equal to 0.27%
of the aggregate value of shares of Sky Financial received by holders of Mid Am
Common Stock in the transaction. Based on the closing price of Bancshares Common
Stock on August 3, 1998, Mid Am would pay McDonald & Company a transaction fee
of approximately $1.7 million, of which approximately $250,000 has been paid and
the balance will be paid when the Merger is consummated. Mid Am has also agreed
to reimburse McDonald & Company for all reasonable out-of-pocket expenses and
indemnify McDonald & Company and its affiliates and their respective directors,
officers, employees, agents and controlling persons against certain expenses and
liabilities, including liabilities under securities laws.
McDonald & Company is a member of all principal securities exchanges in the
United States and its conduct of its broker-dealer activities has from time to
time purchased securities from, and sold securities to, Mid Am and/or
Bancshares. As a market maker, McDonald & Company may also have purchased and
sold the securities of Mid Am or Bancshares for McDonald & Company's own account
and for the accounts of its customers. McDonald & Company in the past, from time
to time, has provided financial advisory and investment banking services to Mid
Am and Bancshares, for which services McDonald & Company has received customary
fees.
EFFECTIVE TIME
If the Merger Proposal is approved by the requisite vote of Bancshares
shareholders and the Mid Am shareholders, all required governmental and other
consents and approvals are obtained and the other conditions to the obligations
of the parties to consummate the Merger are either satisfied or waived (as
permitted), the Merger will be consummated and will become effective on the
Closing Date and at the Effective Time. Subject to the conditions to the
obligations of the parties to effect the Merger, the parties have agreed to
cause the Closing Date to occur on the Tenth business day to occur after the
last of the conditions to the consummation of the Merger have been satisfied or
waived or such other date to which the parties may agree in writing. Mid Am and
Bancshares each has the right, acting unilaterally, to terminate the Merger
Agreement should the Merger not be consummated on or before March 31, 1999. See
"The Merger -- Amendment, Waiver and Termination."
DISTRIBUTION OF SKY FINANCIAL CERTIFICATES
Promptly after the Effective Time, Sky Financial will send or cause to be
sent transmittal materials to each record holder of Mid Am Common Stock for use
in exchanging such holder's certificates for the shares of Sky Financial Common
Stock to which such shareholder is entitled as a result of the Merger. MID AM
SHAREHOLDERS SHOULD NOT SURRENDER THEIR CERTIFICATES FOR EXCHANGE UNTIL THEY
RECEIVE THE LETTER OF TRANSMITTAL AND INSTRUCTIONS WHICH WILL BE SENT AS SOON AS
REASONABLY PRACTICABLE AFTER CONSUMMATION OF THE MERGER. Sky Financial will
cause the certificates for Sky Financial Common Stock and/or any check in
respect of any fractional share interests or dividends or distributions which a
holder of Mid Am Common Stock will be entitled to receive to be delivered upon
surrender to the exchange agent, of certificates representing such
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shares of Mid Am Common Stock owned by such shareholder. No party will be liable
to a holder of Mid Am Common Stock for any property delivered in good faith to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
After the Effective Time, no dividend or other distribution payable after
the Effective Time with respect to Sky Financial Common Stock will be paid to
the holder of any unsurrendered certificate for Mid Am Common Stock, and no such
unsurrendered shares will be entitled to vote following 90 days after the
Effective Date, until the holder duly surrenders such certificate. Upon such
surrender, all undelivered dividends and other distributions and, if applicable,
a check for the amount to be paid in lieu of any fractional share interest will
be delivered to such shareholder, in each case without interest.
In the event of a lost certificate, the Mid Am shareholder shall provide,
in lieu of the lost certificate, (i) a request for a replacement certificate,
(ii) an indemnity agreement and (iii) other reasonable items (including an
affidavit and a surety bond).
In the event of a transfer of ownership of Mid Am Common Stock that is not
registered in the transfer records of Mid Am, a certificate representing the
proper number of shares of Sky Financial Common Stock may be issued to a
transferee if the Mid Am certificate representing such Mid Am Common Stock is
presented to the Exchange Agent, accompanied by all documents required by Sky
Financial to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid.
At the Effective Time, there will be no transfers of shares of Mid Am
Common Stock.
FRACTIONAL SHARES
Pursuant to the terms of the Merger Agreement, each holder of shares of Mid
Am Common Stock exchanged pursuant to the Merger who would otherwise have been
entitled to receive a fraction of a share of Sky Financial Common Stock shall
receive, in lieu thereof, cash (without interest) in an amount determined by
multiplying such fraction by the last reported sale price of Bancshares Common
Stock, as reported by the Nasdaq National Market System (as reported in The Wall
Street Journal or, if not reported therein, in another authoritative source), on
the last trading day immediately preceding the Closing Date. No such holder will
be entitled to dividends, voting rights, or any other rights as a shareholder
with respect to any fractional shares.
STOCK OPTIONS
At the Effective Time, by virtue of the Merger and without any action on
the part of the holders of Mid Am options, each option previously granted by Mid
Am to purchase Mid Am Common Stock that is outstanding and unexercised, whether
vested or unvested, immediately prior to the Effective Time, will be converted
into an option to purchase such number of shares of Sky Financial Common Stock
that is equal to the number of shares of Mid Am Common Stock purchasable under
the original Mid Am option multiplied by the Exchange Ratio with a per share
exercise price equal to the exercise price per share of the original Mid Am
option divided by the Exchange Ratio.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material anticipated U.S. federal income
tax consequences of the Merger to Mid Am shareholders who hold Mid Am Common
Stock as a capital asset. The summary is based on the Code, its legislative
history, existing and proposed regulations thereunder, published rulings and
judicial decisions in effect as of the date hereof, all of which are subject to
change at any time, possibly with retroactive effect. This summary is not a
complete description of all of the consequences of the Merger and, in
particular, may not address U.S. federal income tax considerations applicable to
shareholders subject to special treatment under U.S. federal income tax law such
as financial institutions, insurance companies, tax-exempt organizations,
broker-dealers, traders in securities that elect to mark to market, persons that
hold Mid Am Common Stock as part of a hedge, straddle or conversion transaction,
persons who are not citizens or residents of the United States and shareholders
who acquired their shares of Mid Am Common Stock through
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the exercise of an employee stock option or otherwise as compensation. In
addition, no information is provided herein with respect to the tax consequences
of the Merger under applicable foreign, state or local laws. MID AM SHAREHOLDERS
ARE URGED TO CONSULT WITH THEIR TAX ADVISORS REGARDING THE TAX CONSEQUENCES OF
THE MERGER TO THEM, INCLUDING THE EFFECTS OF U.S. FEDERAL, STATE AND LOCAL,
FOREIGN, AND OTHER TAX LAWS.
In connection with the filing of the Registration Statement, Mid Am has
received an opinion of Sullivan & Cromwell, special counsel to Mid Am, and
Bancshares has received an opinion of Skadden, Arps, Slate, Meagher & Flom LLP,
special counsel to Bancshares, in each case dated the date hereof, addressing
the U.S. federal income tax consequences of the Merger as described in this
paragraph. Such opinions are rendered on the basis of facts, representations and
assumptions set forth or referred to in such opinions which are consistent with
the expected state of facts existing as of the Effective Time. In rendering
these opinions, Sullivan & Cromwell and Skadden, Arps, Slate, Meagher & Flom LLP
have assumed that representations and covenants, including those contained in
certificates of officers of Mid Am and Bancshares which Sullivan & Cromwell and
Skadden, Arps, Slate, Meagher & Flom LLP have received before the mailing of
this Joint Proxy Statement/Prospectus, are correct and accurate. The opinions
are to the effect that, for U.S. federal income tax purposes, the Merger will be
treated as a reorganization within the meaning of Section 368(a) of the Code and
that each of Bancshares and Mid Am will be a party to that reorganization within
the meaning of Section 368(b) of the Code and, in the case of the opinion of
Sullivan & Cromwell, also to the effect that no gain or loss will be recognized
by the Mid Am shareholders who exchange all of their Mid Am Common Stock solely
for Sky Financial Common Stock pursuant to the Merger except with respect to
cash received in lieu of a fractional share interest in Sky Financial Common
Stock.
Mid Am's obligation to consummate the Merger is conditioned upon the
receipt of a further opinion of Sullivan & Cromwell, and Bancshares' obligation
to consummate the Merger is conditioned upon the receipt of a further opinion of
Skadden, Arps, Slate, Meagher and Flom LLP, in each case dated as of the
Effective Date, opining as to the same U.S. federal income tax consequences
discussed in the immediately preceding paragraph and as further described under
the caption "-- Conditions to Consummation." None of the tax opinions to be
delivered to the parties in connection with the Merger as described herein are
binding on the Internal Revenue Service (the "IRS") or the courts, and the
parties do not intend to request a ruling from the IRS with respect to the
Merger. Accordingly, there can be no assurances that the IRS will not challenge
the conclusions reflected in such opinions or that a court will not sustain such
challenge.
In accordance with the tax opinions discussed above regarding the treatment
of the Merger as a reorganization within the meaning of Section 368(a) of the
Code, subject to the assumptions, limitations, qualifications and other
considerations described below under "-- Conditions to Consummation," the U.S.
federal income tax consequences of the Merger can be summarized as follows: (i)
no gain or loss will be recognized by the Mid Am shareholders who exchange all
of their Mid Am Common Stock solely for Sky Financial Common Stock pursuant to
the Merger (except with respect to cash received in lieu of a fractional share
interest in Sky Financial Common Stock); (ii) the aggregate tax basis of Sky
Financial Common Stock received by Mid Am shareholders who exchange all of their
Mid Am Common Stock solely for Sky Financial Common Stock pursuant to the Merger
will be the same as the aggregate tax basis of the Mid Am Common Stock
surrendered in exchange therefor (reduced by any amount allocable to a
fractional share interest for which cash is received); and (iii) the holding
period for shares of Sky Financial Common Stock received in exchange for shares
of Mid Am Common Stock pursuant to the Merger will include the holding period of
the shares of Mid Am Common Stock surrendered in exchange therefor.
Additionally, cash received by a Mid Am shareholder in lieu of a fractional
share interest in Sky Financial Common Stock will be treated as received in
redemption of such fractional share interest, and a Mid Am shareholder should
generally recognize capital gain or loss for U.S. federal income tax purposes
measured by the difference between the amount of cash received and the portion
of the tax basis of the share of Mid Am Common Stock allocable to such
fractional share interest. Such capital gain or loss would be long-term capital
gain or loss if the holding period for such share of Mid Am Common Stock is
greater than one year at the Effective Time. Under current law, long-term
capital gain of a non-corporate United States holder is generally subject to a
maximum tax rate of 20% in respect of property held for more than one year.
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BOARD OF DIRECTORS, MANAGEMENT AND OPERATIONS AFTER THE MERGER
Board of Directors. Pursuant to the Merger Agreement, at the Effective
Time, the directors of Sky Financial will consist of twenty-two (22) members,
eleven (11) of whom shall be selected by the Chairman of the Board and Chief
Executive Officer of Mid Am (the "Mid Am Directors") and eleven (11) of whom
will be selected by the Bancshares Board (the "Bancshares Directors") and which
will be allocated among the three classes of directors of Bancshares by the
agreement of the Chairman of the Board and Chief Executive Officer of Mid Am and
the Chief Executive Officer of Bancshares so that each class will have equal
numbers of Mid Am Directors and Bancshares Directors. For a period of three
years after the Effective Time, in the event that a Mid Am Director or a
Bancshares Director or a director otherwise nominated pursuant to the procedure
set forth in the Merger Agreement will resign, no longer be able to serve or not
stand for reelection, (i) if such director is a Mid Am Director or a nominee of
the Mid Am Directors, then the Mid Am Directors and nominees of the Mid Am
Directors serving as directors will have the exclusive right to nominate an
individual to fill such vacancy and the entire Board of Directors will either
elect such person a director or nominate such person for election as a director
and (ii) if such director is a Bancshares Director or a nominee of the
Bancshares Directors, then the Bancshares Directors and nominees of the
Bancshares Directors serving as directors will have the exclusive right to
nominate an individual to fill such vacancy and the entire Board of Directors
will either elect such person a director or nominate such person for election as
a director. With the exceptions of Messrs. Reiter, Francisco and Adams, as of
the date of this Proxy Statement/Prospectus, it has not yet been determined who
shall be nominated to serve on the Sky Financial Board of Directors.
Executive Committee. In addition, the directors of Sky Financial may elect
from their number an Executive Committee which shall consist of four (4) or more
directors of Sky Financial, each of whom will hold office during the pleasure of
the directors of Sky Financial. In the event that an Executive Committee is
formed at any time during the three year period after the Effective Time, the
Executive Committee shall contain an even number of directors, one-half of whom
shall be selected by the Mid Am Directors (the "Mid Am Executive Committee
Members") and one-half of whom shall be selected by the Bancshares Directors
(the "Bancshares Executive Committee Members"). For a period of three years
after the Effective Time, in the event that a Mid Am Executive Committee Member
or a Bancshares Executive Committee Member or a member of the Executive
Committee otherwise selected as set forth herein resigns or is no longer able to
serve, (i) if such member is a Mid Am Executive Committee Member or a nominee of
the Mid Am Directors, then the Mid Am Directors and nominees of the Mid Am
Directors serving as directors will have the exclusive right to select an
individual to fill such vacancy and (ii) if such member is a Bancshares
Executive Committee Member or a nominee of the Bancshares Directors, then the
Bancshares Directors and nominees of the Bancshares Directors serving as
directors will have the exclusive right to select an individual to fill such
vacancy.
Management. The Merger Agreement also provides that at the Effective Time,
Edward J. Reiter will become the Senior Chairman of the Board of Directors of
Sky Financial, David R. Francisco will become the Chairman of the Board of
Directors and Chief Executive Officer of Sky Financial. Marty E. Adams will
become President and Chief Operating Officer of Sky Financial and James C.
McBane will become Vice Chairman of Sky Financial. Messrs. Reiter, Francisco and
Adams are parties to employment agreements with respect to their management
positions with Sky Financial.
In his capacity as Chairman and Chief Executive Officer, Mr. Francisco will
render executive, policy and other management services to Sky Financial of the
type customarily performed by persons serving in a similar executive officer
capacity. Mr. Francisco will report to Sky Financial Board of Directors and will
perform such related duties as Sky Financial Board of Directors may from time to
time reasonably direct or request. Unless otherwise determined by a majority of
the entire Board of Directors of Sky Financial, on the fifth anniversary of the
Effective Date, Mr. Francisco will relinquish his position as Chief Executive
Officer but will continue in his role as Chairman.
As President and Chief Operating Officer of Sky Financial, Mr. Adams will
be the second highest ranking officer of Sky Financial and will render executive
policy and other management services to New
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Company. In addition, Mr. Adams will have primary responsibility for the
commercial banking operations of Sky Financial, including related acquisitions.
He will also participate in all aspects of other merger and acquisition activity
engaged in by Sky Financial. Unless otherwise determined by a majority of the
Board of Directors, Mr. Adams will become the President and Chief Executive
Officer of Sky Financial on the earlier to occur of (i) the fifth anniversary of
the Effective Date or (ii) the date that Mr. Francisco ceases to serve as the
Chief Executive Officer of Sky Financial. Mr. Adams will then become the highest
ranking officer of Sky Financial.
Management Executive Committee. At the Effective Time, a management
executive committee of Sky Financial (the "Management Executive Committee") will
be formed and will consist of at least eight (8) members, one-half of whom will
be selected by the Chairman of the Board and Chief Executive Officer of Mid Am
(the "Mid Am Management Executive Committee Members") and one-half of whom shall
be selected by the President and Chief Executive Officer of Bancshares (the
"Bancshares Management Executive Committee Members"). For a period of three
years after the Effective Time, in the event that a Mid Am Management Executive
Committee Member or a Bancshares Management Executive Committee Member or a
member of the management executive committee otherwise selected as set forth
herein resigns or no longer is able to serve, (i) if such member is a Mid Am
Management Executive Committee Member, then the Mid Am Directors and nominees of
the Mid Am Directors serving as directors will have the exclusive right to
select an individual to fill such vacancy and (ii) if such member is a
Bancshares Management Executive Committee Member, then the Bancshares Directors
and nominees of the Bancshares Directors serving as directors will have the
exclusive right to select an individual to fill such vacancy. Mid Am Directors
and the nominees of Mid Am Directors serving as directors will have the
exclusive right to remove any Mid Am Management Executive Committee Member.
Bancshares Directors and the nominees of Bancshares Directors serving as
directors will have the exclusive right to remove any Bancshares Management
Executive Committee Member. Mr. Reiter will serve as the chairman of the
Management Executive Committee. It is currently contemplated that the activities
of the Management Executive Committee will include, but not be limited to, such
matters as facilitating the integration of Bancshares and Mid Am and their
respective operating philosophies; making recommendations, as appropriate, with
respect to Sky Financial's management structure and operations; engaging in
strategic planning activities; and reviewing recommendations of employee
committees regarding employee benefits, shareholder services and data processing
operations. With the exceptions of Messrs. Reiter, Francisco and Adams as of the
date of this Proxy Statement/Prospectus, it has not yet been determined who
shall be nominated to serve on the Management Executive Committee.
As Senior Chairman and Vice Chairman of Sky Financial, Messrs. Reiter and
McBane, respectively, will render executive, policy and other management
services to Sky Financial of the type customarily performed by persons serving
in similar executive officer capacities. See "Interests of Certain Persons in
the Merger."
It is contemplated that, in furtherance of the merger of equals philosophy,
key management positions of Sky Financial will be made up of both Bancshares and
Mid Am employees.
Headquarters. The headquarters of Sky Financial will be the current
headquarters of Mid Am, at 221 South Church Street, Bowling Green, Ohio 43402.
Sky Financial will maintain substantial operating facilities in Salineville,
Ohio, the current headquarters of Bancshares.
POST-ACQUISITION COMPENSATION AND BENEFITS
Bancshares and Mid Am have agreed that prior to the Effective Date they
will cooperate in reviewing, evaluating and analyzing the Bancshares benefit
plans and Mid Am benefit plans with a view towards either developing appropriate
new benefit plans or amending, supplementing or modifying existing benefit plans
of Bancshares or Mid Am.
Committees comprised of an equal number of employee representatives of
Bancshares and Mid Am have been established to evaluate and make recommendations
to Sky Financial Board of Directors and/or the Management Executive Committee as
appropriate, with respect to the employee welfare benefits and stock ownership
plan and programs which should be available to Sky Financial employees, with the
goal of providing
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such employees, in the aggregate, with a cost effective program including a
range of employee benefits and stock ownership opportunities.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Bancshares' management and the Bancshares Board and
certain members of Mid Am management and the Mid Am Board may be deemed to have
certain interests in the Merger that are in addition to their interest as
Bancshares or Mid Am shareholders, as the case may be. Each of the Bancshares
Board of Directors and the Mid Am Board of Directors was aware of these
interests in approving the Merger Agreement.
Sky Financial Board of Directors. Eleven members from the current Board of
Directors of Bancshares and eleven members from the current Mid Am Board of
Directors will serve as directors of Sky Financial. In addition, certain
existing directors of the Boards of Directors of Mid Am and Bancshares will be
invited to serve in an advisory capacity on the Advisory Board of Directors of
Sky Financial. See "Board of Directors, Management and Operations after the
Merger."
Sky Financial Executive Officers. At the Effective Time of the Merger,
pursuant to the Merger Agreement, David R. Francisco will become the Chairman
and Chief Executive Officer of Sky Financial and Marty E. Adams will become the
President and Chief Operating Officer of Sky Financial. In addition, Edward J.
Reiter will become the Senior Chairman of Sky Financial and James C. McBane will
become Vice Chairman of Sky Financial. See "Board of Directors, Management and
Operations after the Merger."
Indemnification and Insurance. The Merger Agreement provides that following
the Effective Time, Sky Financial will indemnify and hold harmless (including
the advancement of expenses as incurred) each present and former director and
officer of Mid Am and Bancshares and their subsidiaries for a period of six
years after the Effective Time, against any costs or expenses (including
reasonable attorneys' fees), judgments, fines, losses, claims, damages or
liabilities incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to matters existing or occurring at or prior to the
Effective Time, whether asserted or claimed prior to, at or after the Effective
Time, to the fullest extent permitted under applicable law.
The Merger Agreement also provides that Sky Financial will cause the
persons serving as officers and directors of Mid Am and Bancshares immediately
prior to the Effective Time to be covered for a period of six years after the
Effective Time by the directors' and officers' liability insurance policy
currently maintained by Bancshares with respect to acts or omissions occurring
prior to the Effective Time which were committed by such officers and directors
in their capacity as such. Sky Financial, however, will not be required to
expend more than 200% of the amount currently expended by Mid Am to maintain or
procure insurance coverage to existing Mid Am and Bancshares officers and
directors.
In addition, the current directors of Mid Am who will become directors of
Sky Financial at the Effective Time are expected to enter into indemnification
agreements with Sky Financial substantially identical to the existing
indemnification agreements between current Bancshares directors and Bancshares.
Employment Agreements. In connection with the Merger Agreement, Bancshares
entered into an employment agreement with Edward J. Reiter. The agreement
provides that Mr. Reiter shall serve as Senior Chairman of the Board for a term
beginning at the Effective Time and ending upon his reaching age 65. Under the
agreement, Mr. Reiter's annual base salary will be $250,000, and he will be
eligible to receive an annual target bonus equal to at least 40% of such base
salary. The agreement also provides for payment of $2.5 million to Mr. Reiter in
exchange for, among other consideration, relinquishing all of his rights under
his existing change of control agreement with Mid Am and agreeing not to engage
in competitive activity with Sky Financial. If Mr. Reiter's employment is
terminated without "Cause," or if he voluntarily terminates for "Good Reason"
(as such terms are defined in his employment contract), he shall receive a lump
sum payment equal to the sum of his annual base salary plus targeted annual
bonus multiplied by the number of whole years remaining in the term, plus his
unpaid prorated annual base salary and unpaid prorated targeted annual bonus for
the year of termination. In addition, if such an event were to occur, all stock
options granted to Mr. Reiter
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following the effective date of the Merger will immediately vest, and the
Company would provide continued welfare benefits for the remainder of the term.
If any payments made to Mr. Reiter pursuant to the agreement or otherwise would
be subject to any excise tax under Section 4999 of the Internal Revenue Code,
the Company will provide him with an additional payment such that he retains a
net amount equal to the payments he would have retained if such excise tax had
not applied.
Bancshares also entered into employment agreements with Mr. Francisco and
Mr. Adams. The agreements are for initial five year terms and automatically
renew for an additional one year upon each anniversary of the Effective Time
commencing with the third such anniversary, unless prior notice not to renew is
given. Pursuant to the agreements, Mr. Francisco will serve initially as
Chairman and Chief Executive Officer of Sky Financial and Mr. Adams will serve
as President and Chief Operating Officer, each until the fifth anniversary of
the Effective Time and thereafter unless otherwise determined by a majority of
the Board of Directors of Sky Financial, Mr. Francisco will serve as Chairman of
Sky Financial and Mr. Adams will succeed Mr. Francisco as Chief Executive
Officer of Sky Financial and become the highest ranking officer of Sky
Financial. The agreements provide that each executive will be nominated for
election to the Board at each election of directors at which his term thereon
would expire, unless a majority of the Board determines otherwise. The
agreements provide for initial base salaries of $600,000 for Mr. Francisco and
$500,000 for Mr. Adams which may not be reduced during the term of the
agreements. Both Mr. Francisco and Mr. Adams are eligible to receive an annual
target bonus equal to at least 40% of such base salary.
Each agreement provides for payments upon the executive's termination
without "Cause" or for "Good Reason" (as such terms are defined in the
agreements) , or if the agreement is not renewed by Sky Financial, equal to the
greater of (x) the sum of the executive's annual base salary plus targeted
annual bonus (hereinafter, "Annual Cash Compensation") multiplied by the number
of whole and partial years remaining in the term as it existed immediately
preceding the executive's termination and (y) three times Annual Cash
Compensation, (two times for Mr. Francisco if he is then serving solely as
Chairman of the Board). Welfare benefit continuation will be provided for the
remainder of the term. If such termination occurs during the two-year period
following a "Change in Control" (as defined), the executive would receive the
greater of the termination payment described above, or three times the sum of
his highest annual rate of base salary and his highest annual bonus during the
three year period immediately prior to the date of termination, and continued
welfare benefits for the longer of three years or the remaining period of the
term as it existed immediately prior to termination. Upon any such termination
all stock options granted after the Effective Time shall vest and become
immediately exercisable in full. For purposes of the agreements, "cause" means
(i) the willful and continued failure by the executive to substantially perform
his duties which is detrimental to Sky Financial after a written demand for
substantial performance is made by the Board, or (ii) the willful engagement by
executive in gross misconduct materially and demonstrably injurious to Sky
Financial. For purposes of the agreement, "good reason" means (i) for the period
prior to or more than two years after a change in control: removal of, or
failure to reappoint executive to his initial position, removal of, or failure
to appoint or reappoint executive to his subsequent position after the fifth
anniversary of the Effective Time, reduction in base salary, bonus, or benefits,
change in responsibilities, or relocation of the executive's office base of more
than 30 miles, and (ii) for the period two years after a change in control: the
events described in (i) above, requiring the executive to travel on Sky
Financial business to a substantially greater extent than he did immediately
prior to the change in control, refusal to permit executive to engage in
non-business activities which he was permitted to engage in prior to the change
in control, termination which does not comply with notice provisions under the
agreement, or failure of Sky Financial to cause its successor or transferee to
assume the agreement. In addition, the executives may voluntarily terminate
their employment with Sky Financial during the thirty day period commencing one
year after a change in control, and such voluntary termination will be
considered "good reason" under the agreements.
If any payments pursuant to the agreements or otherwise would be subject to
any excise tax under Section 4999 of the Internal Revenue Code, Sky Financial
will provide an additional payment such that the executive retains a net amount
equal to the payments he would have retained if such excise tax had not applied.
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Each of Mr. Francisco and Mr. Adams is subject to a one year non-compete
provision if he voluntarily terminates employment under circumstances which do
not constitute Good Reason or is terminated by the Company for Cause.
In November 1993, Bancshares entered into an employment agreement (the
"Agreement") with Frank J. Koch, Executive Vice President, which contains change
in control provisions which will be triggered as a result of the Merger. The
Agreement provides, that upon a change in control of Bancshares', Mr. Koch is to
continue to be employed by Bancshares in an executive position until the earlier
of: (i) normal retirement; or (ii) 24 months, during which time he shall receive
(i) his annual salary, for the first twelve-months, at least equal to his
highest base salary for any month during the twelve-month period preceding the
change in control, and for the second twelve months, at least equal to his
salary of the subsequent year plus a pay increase calculated in a manner at
least as favorable as the manner in which the pay increases for other Bancshares
executives are calculated; (ii) an annual bonus calculated in a manner at least
as favorable as the manner in which the last annual bonus paid to the him prior
to the change in control was calculated, or the annual bonus paid to him by the
Company in the immediately preceding year, whichever is greater; (iii) continued
insurance and health benefits; and (iv) continued participation in the
Bancshares Profit Sharing Plan and Trust (the "Profit Sharing Plan"). Following
a change in control, if Mr. Koch's employment with Bancshares is terminated by
Bancshares for any reason, including death or disability (but excluding
misconduct) or by Mr. Koch for cause (as that term is defined in the Agreement),
Mr. Koch shall receive, for a twenty-four (24) month period from the date of the
change in control an amount equal to: (i) monthly salary at the level of the
highest monthly salary received during the twelve months immediately preceding
the change in control; (ii) a contribution to the Profit Sharing Plan, if
possible; and (iii) the greater of the average of the annual bonuses received by
Mr. Koch from Bancshares during the three (3) calendar years immediately
preceding (a) the change in control or (b) his termination; reduced by any
amount received during such year pursuant to the Bancshares long-term disability
policy. Mr. Koch may elect to receive this amount in equal monthly installments,
or if elected within sixty days following his termination, in a single lump sum
payment. In addition, Mr. Koch will be entitled to receive continued welfare
benefits. In the event Mr. Koch terminates his employment within six months of a
change in control, he shall be entitled to receive one year's salary plus a
bonus prorated to the date of termination of employment. It is anticipated that
Mr. Koch will enter into a new employment agreement.
In January 1997, Bancshares and Citizens entered into an employment
agreement with Patrick A. Sebastiano, Senior Vice President and Trust Officer,
which contains change in control provisions which will be triggered as a result
of the Merger. Mr. Sebastiano's employment agreement provides, that upon a
change in control of Bancshares and Citizens, if Mr. Sebastiano voluntarily
terminates his employment with Bancshares and Citizens, he is entitled to
receive two (2) years salary, medical benefits and life insurance. In addition,
in connection with the merger of Century with and into Bancshares, Bancshares
and Citizens entered into an employment agreement with Joseph Tosh, President
and Chief Executive Officer of CNB which provides that in the event that Mr.
Tosh ceases to be a director of either Bancshares or Citizens after a change in
control, such as the Merger, he is entitled to receive an amount equal to the
director fees he would have received if he had served up to the age of
sixty-five, based upon the fee payable to non-employee directors during the
preceding year.
Under the terms of the Bancshares 1995 Non-Statutory Stock Option and Stock
Appreciation Rights Plan (the "Bancshares Stock Option Plan") the vesting of all
outstanding stock options and SARs, consisting in the aggregate of 130,812
options to purchase shares of Bancshares common stock, will be accelerated at
the Effective Time, and all outstanding stock options and SARs will remain
exercisable for the length of their terms. Executive officers and directors of
Bancshares hold a total of 161,499 options and SARs under the Bancshares Stock
Option Plan.
Under the terms of the Mid Am 1992 Stock Option Plan (the "Stock Plan") the
vesting of all outstanding options will be accelerated at the Effective Time,
and all outstanding options will remain exercisable for the length of their
terms. Pursuant to the Merger Agreement, each Mid Am option that is outstanding
and unexercised, whether vested or unvested, will be converted into an option to
purchase such number of shares of Sky Financial Common Stock that is equal to
the number of shares of Mid Am Common
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Stock purchasable under the original Mid Am option multiplied by the Exchange
Ratio with a per share exercise price equal to the exercise price per share of
the original Mid Am option divided by the Exchange Ratio. Executive officers and
directors of Mid Am held a total of 753,601 options under the Stock Plan.
CONDITIONS TO CONSUMMATION
The obligations of Bancshares and Mid Am to consummate the Merger are
subject to the satisfaction or written waiver of the following conditions: (i)
the Merger Agreement shall have been approved by requisite vote of the
shareholders of Bancshares and Mid Am and the Bancshares Articles Amendment and
Bancshares Code of Regulations Amendment shall have been approved by the
requisite vote of the shareholders of Bancshares; (ii) the required regulatory
approvals described under "Regulatory Approvals" below shall have been received,
generally without any conditions, restrictions or requirements which the Mid Am
Board or the Bancshares Board reasonably determines would following the
Effective Time, have a material adverse effect on Sky Financial and its
subsidiaries taken as a whole; (iii) the required consents or approvals of third
parties (other than regulatory approvals described under "Regulatory Approvals"
below) shall have been received, unless the failure to obtain such consent or
approval is not reasonably likely to have, individually or in the aggregate, a
material adverse effect on the financial condition or results of operations of
Sky Financial; (iv) no court or regulatory authority shall have taken any action
prohibiting the consummation of the transactions contemplated by the Merger
Agreement; (v) the Registration Statement of which this Joint Proxy
Statement/Prospectus is a part shall have been declared effective by the
Commission and shall not be subject to a stop order or any threatened stop
order; (vi) the shares of Bancshares Common Stock issuable in connection with
the Merger shall have been qualified, registered or otherwise approved for
exchange under the securities laws of the various states in which such
qualification, registration or approval is required; (vii) the shares of
Bancshares Common Stock issuable pursuant to the Merger shall have been approved
for quotation on the Nasdaq Stock Market; (viii) Bancshares shall have received
an opinion of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to
Bancshares, dated the Effective Date, substantially to the effect that, on the
basis of the facts, representations and assumptions set forth in such opinion
which are consistent with the state of facts existing at the Effective Time, the
Merger will be treated as a "reorganization" within the meaning of Section
368(a) of the Code and that each of Bancshares and Mid Am will be a party to
that reorganization within the meaning of Section 368(b) of the Code (in
rendering its opinion, Skadden, Arps, Slate, Meagher & Flom LLP may require and
rely upon representations and covenants, including those contained in
certificates of officers of Bancshares, Mid Am and others, reasonably
satisfactory in form and substance to such counsel); (ix) Mid Am shall have
received an opinion of Sullivan & Cromwell, special counsel to Mid Am, dated the
Effective Date, to the effect that, on the basis of facts, representations and
assumptions set forth in such opinion, (a) the Merger will be treated as a
reorganization within the meaning of Section 368(a) of the Code and that each of
Bancshares and Mid Am will be a party to that reorganization within the meaning
of Section 368(b) of the Code and (b) no gain or loss will be recognized by
stockholders of Mid Am who exchange all of their Mid Am Common Stock for Sky
Financial Common Stock pursuant to the Merger, except with respect cash received
in lieu of a fractional share interest in Sky Financial Common Stock (in
rendering its opinion, Sullivan & Cromwell may require and rely upon
representations contained in letters from Mid Am, Bancshares and others
reasonably satisfactory in form and substance to such counsel); (x) the other
party's representations and warranties shall remain accurate and each party
shall have performed in all material respects all of the obligations required to
be performed by it pursuant to the Merger Agreement, and shall have delivered
certificates confirming satisfaction of the foregoing requirements; and (xi)
each of Bancshares and Mid Am shall have received from their respective
independent auditors, letters, dated as of the Effective Time, stating its
opinion that the Merger shall qualify for pooling-of-interests accounting
treatment.
No assurances can be provided as to when or if all of the conditions
precedent to the Merger can or will be satisfied or waived by the appropriate
party. As of the date of this Joint Proxy Statement/Prospectus, the parties have
no reason to believe that any of the conditions set forth above will not be
satisfied.
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The conditions to consummation of the Merger may generally be waived, in
whole or in part, to the extent permissible under applicable law, by the party
for whose benefit the condition has been imposed, without the approval of the
Mid Am or Bancshares shareholders. See "-- Amendment, Waiver and Termination."
The foregoing disclosure regarding conditions to the Merger represents and
includes all material conditions to the consummation thereof.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains representations and warranties by the parties
regarding, among other things, their respective organization and qualification,
subsidiaries, capitalization, authority to enter into the Merger Agreement,
governmental and regulatory filings, financial statements, representation of the
absence of certain changes and events, compliance with applicable laws and
regulations, tax compliance, insurance coverage, labor matters, employee
benefits, environmental matters, ratings under the Community Reinvestment Act,
contractual obligations, knowledge, fairness opinions, brokers and finders, risk
management instruments and preparation for year 2000. These representations and
warranties will not survive consummation of the Merger.
REGULATORY APPROVAL
The Merger is subject to prior approval by the Federal Reserve Board under
Section 3 of the BHC Act. This approval was received on July 30, 1998.
AMENDMENT, WAIVER AND TERMINATION
To the extent permitted by law, Bancshares and Mid Am may amend the Merger
Agreement by written agreement at any time. Prior to or at the Effective Time,
either Bancshares or Mid Am, acting through its respective board of directors,
chief executive officer or other authorized officer, may waive any default in
the performance of any term of the Merger Agreement by the other party, may
waive or extend the time for the fulfillment by the other party of any of its
obligations under the Merger Agreement, and may waive any of the conditions
precedent to the obligations of such party under the Merger Agreement, except
any condition that, if not satisfied, would result in the violation of an
applicable law or governmental regulation.
The Merger Agreement may be terminated, and the Merger abandoned, at any
time prior to the Effective Time by mutual consent of Mid Am and Bancshares. In
addition, the Merger Agreement may be terminated, and the Merger abandoned,
prior to the Effective Time by either Mid Am or Bancshares if: (i) the other
party breaches, and does not timely cure any breach of, a representation,
warranty, covenant or other agreement contained in the Merger Agreement; (ii)
any consent or approval of certain regulatory authorities is denied or the
permanent withdrawal of the application has been requested; (iii) the Bancshares
shareholders or the Mid Am shareholders fail to approve the Merger Agreement, or
the Bancshares shareholders fail to approve the Bancshares Articles Amendment or
the Bancshares Code of Regulations Amendment; (iv) the Merger has not been
consummated by March 31, 1999; or (v) the other party's board of directors has
failed to recommend approval of the Merger, withdrawn such recommendation or
materially modified or changed such recommendation.
In the event of the termination of the Merger Agreement by either
Bancshares or Mid Am, neither Bancshares nor Mid Am will have any further
obligations thereunder except (i) for certain specified provisions of the Merger
Agreement relating to confidentiality and expenses, and (ii) that no party will
be relieved or released from any liabilities or damages arising out of its
willful breach of any provision of the Merger Agreement.
ACQUISITION PROPOSALS
The Merger Agreement provides that neither Bancshares nor Mid Am nor any of
their respective subsidiaries nor any of their respective officers and directors
or the officers and directors of their respective subsidiaries shall, and
Bancshares and Mid Am shall direct and use all reasonable best efforts to cause
their
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respective employees and agents, including any investment banker, attorney or
accountant retained by it or any of its subsidiaries not to, initiate, solicit
or encourage, directly or indirectly, any inquiries or the making or
implementation of any proposal or offer with respect to a merger, acquisition,
consolidation or similar transaction involving, or any purchase of, all or any
substantial part of its assets, deposits or any equity securities of either Mid
Am or Bancshares or any of their material subsidiaries, other than as expressly
contemplated by the Merger Agreement, or engage in any negotiations concerning,
or provide any confidential information or data to, or have any discussions
with, any person relating to any such proposals or otherwise facilitate any
effort or attempt to implement or make any such proposal. Bancshares will notify
Mid Am, and Mid Am will notify Bancshares, immediately if any such inquiries or
proposals are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with, it and
any developments with respect thereto.
CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the Merger Agreement, each of Mid Am and Bancshares has agreed,
as to itself and its subsidiaries, that, except insofar as the other party shall
otherwise consent in writing or except as otherwise expressly contemplated by
the Merger Agreement or the Stock Option Agreements or as set forth in a
disclosure letter delivered to the other party:
(i) The business of it and its subsidiaries will be conducted only in
the ordinary and usual course and, to the extent consistent therewith, it
and its subsidiaries will use all reasonable best efforts to preserve
intact their business organizations and assets and maintain their rights,
franchises and existing relations with customers, suppliers, employees and
business associates and to take no action that would (i) adversely affect
the ability of any of them to obtain any regulatory approval, the
accountants' pooling-of-interest letters, or the opinions of tax counsel,
or (ii) adversely affect its ability to perform its obligations under the
Merger Agreement or the Stock Option Agreements.
(ii) It will not sell or pledge any stock owned by it or any of its
material subsidiaries; amend or restate its articles of incorporation or
code of regulations; split, combine or reclassify any outstanding capital
stock; declare, set aside or pay any dividend or distribution payable in
cash, stock or other property with respect to any of its capital stock; or
repurchase, redeem or otherwise acquire, or permit any subsidiary to
purchase or otherwise acquire, directly or indirectly, any shares of its
capital stock or any securities convertible into or exercisable for any
shares of its capital stock.
(iii) Neither it nor any of its subsidiaries will issue, sell, pledge,
dispose of or encumber any shares of its capital stock of, any class,
except pursuant to the Merger Agreement, the Stock Option Agreements, or in
connection with acquisitions announced prior to the date hereof; transfer,
lease, license, guarantee, sell, mortgage, pledge or dispose of any other
material property or assets or encumber any property or assets other than
to a direct or indirect wholly owned subsidiary of it; cancel, release,
assign or modify any material amount of indebtedness of any other
individual, bank, corporation, partnership, trust, association or other
entity or organization other than in the ordinary and usual course of
business consistent with past practice; or authorize capital expenditures
other than in the ordinary and usual course of business.
(iv) Except for internal reorganizations involving existing
subsidiaries, or in satisfaction of debts previously contracted in good
faith, neither it nor any of its subsidiaries will make any material
acquisition of, or investment in, assets or stock of any other person.
(v) Other than in the ordinary course of business consistent with past
practice, it will not incur or permit any of its subsidiaries to incur any
indebtedness for borrowed money or assume, guarantee, endorse or otherwise
as an accommodation become responsible for the obligations of any other
person or make any loan or advance.
(vi) Neither it nor any of its subsidiaries will grant any increase in
compensation or benefits to its employees, except for normal increases
consistent with past practice or as required by law; pay any bonus except
as consistent with past practice; grant any severance or termination pay to
any director or employee except as consistent with past practice; enter
into or amend any employment or severance
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agreement with any director or employee; grant any increase in fees or
other increases in compensation or other benefits to any of its present or
former directors; or effect any material change in retirement benefits for
any class of its employees.
(vii) Neither it nor any of its subsidiaries will establish, adopt,
enter into or make any new, or amend any existing, collective bargaining,
bonus, profit sharing, thrift, compensation, stock option, restricted
stock, pension, retirement, employee stock ownership, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any directors or
employees.
(viii) Neither it nor any of its subsidiaries will implement or adopt
any change in its accounting principles, practices or methods, other than
as may be required by generally accepted accounting principles or
regulatory accounting principles.
(ix) Except in the ordinary course of business consistent with past
practice, settle any claim, action or proceeding against it, except for any
claim, action or proceeding which involves solely money damages in an
amount, individually or in the aggregate for all such settlements, that is
not material to Bancshares or Mid Am and each of their respective
subsidiaries, taken as a whole, and that does not involve or create
precedent for claims, actions or proceedings that are reasonably likely to
be material to Bancshares or Mid Am and each of their respective
subsidiaries taken as a whole.
(x) Neither it nor any of its subsidiaries will authorize or enter
into an agreement to take any of the actions described above.
DIVIDENDS
Each of Mid Am and Bancshares has agreed that until the Effective Time each
may pay quarterly dividends on outstanding shares of Mid Am Common Stock and
Bancshares Common Stock, respectively, at a rate not to exceed $0.16 per share
per quarter. Bancshares and Mid Am have agreed to coordinate the declaration of
dividends (and the record and payment dates therefor), it being the intention of
the parties that holders of Bancshares Common Stock or Mid Am Common Stock shall
not receive two dividends, or fail to receive one dividend, for any quarter with
respect to their shares of Bancshares Common Stock and/or Mid Am Common Stock
and any shares of Sky Financial Common Stock any such holder receives in the
Merger. Consummation of the Merger is expected to occur after each of Mid Am and
Bancshares pays its third quarter dividend. After the Effective Time, Sky
Financial expects to pay dividends at the annual rate of $0.21 per share per
quarter. This is equivalent to Mid Am's current dividend rate. There can be no
guarantee, however, that such dividend will be paid at all or will be paid in a
manner consistent with the past dividend payments of either Mid Am or
Bancshares.
EXPENSES AND FEES
The Merger Agreement provides that each party shall be responsible for all
expenses incurred by it in connection with the negotiation and consummation of
the transactions contemplated by the Merger Agreement, except that Mid Am and
Bancshares have agreed to share equally all Commission filing fees and all
printing expenses payable in connection with the Registration Statement and this
Joint Proxy Statement/ Prospectus.
ACCOUNTING TREATMENT
Consummation of the Merger is conditioned upon the receipt by each of
Bancshares and Mid Am of a letter from its respective independent public
accountants, Crowe, Chizek and Company LLP and PricewaterhouseCoopers LLP, as of
the Effective Time, indicating their concurrence that the Merger qualifies for
"pooling-of-interests" accounting treatment if consummated in accordance with
the terms of the Merger Agreement. Under the pooling-of-interests method of
accounting, the historical basis of the assets and liabilities of Mid Am and
Bancshares will be combined at the Effective Date and carried forward at their
previously recorded amounts and the shareholders' equity accounts of Bancshares
and Mid Am will be
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combined on Bancshares' consolidated balance sheet. Income and other financial
statements of Bancshares issued after consummation of the Merger will be
restated retroactively to reflect the consolidated operations of Mid Am and
Bancshares as if the Merger had taken place prior to the periods covered by such
financial statements. In order for the Merger to qualify for
pooling-of-interests accounting treatment, substantially all (90% or more) of
the outstanding Mid Am Common Stock must be exchanged for Sky Financial Common
Stock with substantially similar terms. Other criteria must also be satisfied in
order for the Merger to qualify as a pooling of interests, some of which
criteria cannot be satisfied until after the Effective Time. Neither Mid Am nor
Bancshares currently expects to consummate the Merger in the event
pooling-of-interests accounting treatment is unavailable. See "Unaudited Pro
Forma Condensed Combined Financial Statements."
DISSENTERS' RIGHTS
The Merger Agreement provides that shareholders of both Bancshares and Mid
Am who do not vote in favor of the Merger Agreement (or, in the case of
Bancshares, the Merger Proposal) will be entitled to their rights as dissenting
shareholders in accordance with the provisions of the OGCL. See "Rights of
Dissenting Shareholders."
NASDAQ LISTING OF SKY FINANCIAL COMMON STOCK
The shares of Sky Financial Common Stock to be issued to the holders of Mid
Am Common Stock in the Merger will be listed for quotation on the Nasdaq Stock
Market, subject to notice of official issuance.
RESALES OF SKY FINANCIAL COMMON STOCK
The shares of Sky Financial Common Stock issued in connection with the
Merger will be freely transferable under the Securities Act, except for shares
issued to any shareholder who may be deemed to be an "affiliate" (generally
including, without limitation, directors, certain executive officers, and
beneficial owners of 10% or more of any class of capital stock) of Bancshares or
Mid Am for purposes of Rule 145 under the Securities Act as of the date of the
Bancshares Special Meeting or the Mid Am Special Meetings, as the case may be.
Such affiliates may not sell their shares of Sky Financial Common Stock acquired
in connection with the Merger except pursuant to an effective registration
statement under the Securities Act or other applicable exemption from the
registration requirements of the Securities Act. Commission guidelines regarding
qualifying for the pooling-of-interests method of accounting also limit sales of
shares of the acquiring and acquired company by affiliates of either company in
a business combination. Commission guidelines also indicate that the
pooling-of-interests method of accounting will generally not be challenged on
the basis of sales by affiliates of the acquiring or acquired company if they do
not dispose of any of the shares of the corporation they own or shares of a
corporation they receive in connection with a merger during the period beginning
30 days before the Merger and ending when financial results covering at least 30
days of post-Merger operations of the combined operations have been published.
Each of Mid Am and Bancshares has agreed in the Merger Agreement to use its
reasonable best efforts to cause each person who may be deemed to be an
"affiliate" of such party to execute and deliver to Mid Am and Bancshares,
respectively, an agreement pursuant to which such person agrees, among other
things, not to offer to sell, transfer or otherwise dispose of any of the shares
of Sky Financial Common Stock distributed to them pursuant to the Merger except
(i) with respect to affiliates of Bancshares, in compliance with Rule 145 under
the Securities Act, or in a transaction that, in the opinion of counsel
reasonably satisfactory to Mid Am, is otherwise exempt from the registration
requirements of the Securities Act, or in an offering which is registered under
the Securities Act, and (ii) with respect to affiliates of each of Bancshares
and Mid Am, in compliance with Commission guidelines regarding qualifying for
pooling-of-interests accounting treatment. Sky Financial shall place restrictive
legends on certificates representing Sky Financial Common Stock issued to all
persons who are deemed to be "affiliates" of Mid Am under Rule 145. This Joint
Proxy Statement/Prospectus does not cover resales of Sky Financial Common Stock
received by any person who may be deemed to be an affiliate of Mid Am.
47
<PAGE> 61
CERTAIN RELATED AGREEMENTS
STOCK OPTION AGREEMENTS
As an inducement to the other party's willingness to pursue the
transactions contemplated by the Merger Agreement, on May 21, 1998, Mid Am
granted to Bancshares an option pursuant to the Mid Am Stock Option Agreement
and Bancshares granted to Mid Am an option pursuant to the Bancshares Stock
Option Agreement. Arrangements such as the Stock Option Agreements are
customarily entered into in connection with corporate mergers and acquisitions
in an effort to increase the likelihood that the transactions will be
consummated in accordance with their terms, and to compensate the grantee for
the efforts undertaken and the expenses, losses and opportunity costs incurred
by it in connection with the transactions if they are not consummated under
certain circumstances involving an acquisition or potential acquisition of the
option issuer by a third party. The Stock Option Agreements were entered into to
accomplish these objectives. The Stock Option Agreements may have the effect of
discouraging offers by third parties to acquire Mid Am or Bancshares prior to
the Merger, even if such persons were prepared to offer to pay consideration to
Bancshares or Mid Am shareholders which has a higher current market price than
the consideration holders would receive pursuant to the Merger Agreement. The
following description of the Stock Option Agreements is qualified in its
entirety by reference to the text of such Stock Option Agreements, the form of
which is attached as Annex 1 to the Merger Agreement and is incorporated herein
by reference.
Pursuant to the Bancshares Stock Option Agreement, Bancshares granted Mid
Am an option which permits Mid Am to purchase up to 3,522,616 shares of
Bancshares Common Stock, subject to adjustment in certain cases as described
below but in no event exceeding 19.9% of the number of shares of Bancshares
Common Stock outstanding immediately prior to the exercise of such option. The
exercise price of such option is $36.375 per share (the closing price of
Bancshares Common Stock on May 20, 1998 as adjusted for its June 1998
two-for-one stock split), subject to adjustment under specified circumstances.
Pursuant to the Mid Am Stock Option Agreement, Mid Am granted Bancshares an
option which permits Bancshares to purchase up to 4,648,726 shares of Mid Am
Common Stock, subject to adjustments in certain cases as described below but in
no event exceeding 19.9% of the number of shares of Mid Am Common Stock
outstanding immediately prior to the exercise of such option. The exercise price
of the such option is $27.00 per share, subject to adjustment under specified
circumstances.
The Bancshares Stock Option Agreement and the Mid Am Stock Option Agreement
are fully reciprocal and the following description is equally applicable to each
of the Stock Option Agreements. As used in the following description the term
"Issuer" refers to the party granting the option under the respective Stock
Option Agreement, and the term "Grantee" refers to the grantee under the
respective Stock Option Agreement. In addition, the term "Option Shares" refers
to shares of Bancshares Common Stock or Mid Am Common Stock, as the case may be,
issued upon total or partial exercise of the option granted by the respective
Stock Option Agreement, and the term Option Price means, with respect to the
Bancshares Stock Option Agreement, $36.375 per share of Bancshares Common Stock,
and with respect to the Mid Am Stock Option Agreement, $27.00 per share of Mid
Am Common Stock, in each case subject to adjustment.
The option will become exercisable in whole or in part if both an "Initial
Triggering Event" and a "Subsequent Triggering Event" occur with respect to the
Issuer prior to the occurrence of an "Exercise Termination Event," as such terms
are defined below. The purchase of any shares of the Issuer Common Stock
pursuant to the option is subject to compliance with applicable law, including
the receipt of necessary approvals under the BHC Act.
The Stock Option Agreements generally define the term "Initial Triggering
Event" to mean any of the following events or transactions:
(i) The Issuer, without the Grantee's prior written consent, enters
into an agreement to engage in an "Acquisition Transaction" (as defined
below) with a third party or the Issuer recommends that the shareholders of
the Issuer approve or accept any Acquisition Transaction, other than as
contemplated by the Merger Agreement;
48
<PAGE> 62
(ii) A third party shall have acquired beneficial ownership or the
right to acquire beneficial ownership of 10% or more of the outstanding
shares of the Issuer Common Stock;
(iii) The shareholders of the Issuer shall have voted and failed to
approve the Merger Agreement at the Issuer's shareholder meeting or such
meeting has not been held in violation of the Merger Agreement or has been
canceled prior to termination of the Merger Agreement if, prior to such
shareholder meeting (or if such shareholder meeting shall not have been
held or shall have been canceled, prior to such termination), it shall have
been publicly announced that any third party shall have made, or publicly
disclosed an intention to make, a proposal to engage in an Acquisition
Transaction with respect the Issuer;
(iv) The Issuer's Board withdraws or modifies (or publicly announces
its intention to withdraw or modify) in any manner adverse to the Grantee
its recommendation that the shareholders of the Issuer approve the Merger
Agreement at the Issuer's shareholder meeting, or the Issuer, without the
Grantee's prior written consent, authorizes, recommends or proposes (or
publicly announces its intention to authorize, recommend or propose) an
agreement to engage in an Acquisition Transaction with a third party;
(v) A third party makes a proposal to the Issuer or its shareholders
to engage in an Acquisition Transaction and such proposal shall have been
publicly announced;
(vi) A third party shall have filed with the Commission a registration
statement with respect to a potential exchange offer that would constitute
an Acquisition Transaction (or filed a preliminary proxy statement with the
Commission with respect to a potential vote by its shareholders to approve
the issuance of shares to be offered in such an exchange offer);
(vii) The Issuer willfully breaches any covenant or obligation
contained in the Merger Agreement in anticipation of engaging in an
Acquisition Transaction, and following such breach the Grantee would be
entitled to terminate the Merger Agreement (whether immediately or after
the giving of notice or passage of time or both); or
(viii) A third party files an application or notice with the Federal
Reserve Board or other federal or state bank regulatory or antitrust
authority, which application or notice has been accepted for processing,
for approval to engage in an Acquisition Transaction.
As used in the Stock Option Agreements, the term "Acquisition Transaction'
means (x) a merger or consolidation, or any similar transaction, involving
Issuer or any Issuer Subsidiary or group of Issuer Subsidiaries (other than
mergers, consolidations or similar transactions (i) involving solely Issuer
and/or one or more wholly owned Subsidiaries of the Issuer or (ii) after which
the common shareholders of the Issuer immediately prior thereto in the aggregate
own or continue to own at least 65% of the common stock of the Issuer or the
publicly held surviving or successor corporation immediately following
consummation thereof; provided, that any such transaction is not entered into in
violation of the terms of the Merger Agreement), (y) a purchase, lease or other
acquisition of all or any substantial part of the assets or deposits of Issuer
or any Issuer Subsidiary or group of Issuer Subsidiaries that is, or would on an
aggregate basis constitute, a Significant Subsidiary (as defined in Rule 1-02 of
Regulation S-X), or (z) a purchase or other acquisition (including by way of
merger, consolidation, share exchange or otherwise) of securities representing
10% or more of the voting power of Issuer or any Issuer Subsidiary or group of
Issuer Subsidiaries that is, or would on an aggregate basis constitute, a
Significant Subsidiary.
The Stock Option Agreements generally define the term "Subsequent
Triggering Event" to mean any of the following events or transactions: (i) the
acquisition by a third party of beneficial ownership of 20% or more of the then
outstanding Issuer Common Stock or (ii) the Issuer, without having received the
prior written consent of the Grantee, enters into an agreement to engage in an
Acquisition Transaction with a third party or the Issuer's Board recommends that
the shareholders of the Issuer approve or accept any Acquisition Transaction,
other than as contemplated by the Merger Agreement; provided, that for purposes
of the definition of "Subsequent Triggering Event," the percentage referred to
in clause (z) of the definition of "Acquisition Transaction" above shall be 20%
rather than 10%.
49
<PAGE> 63
The Stock Option Agreements define the term "Exercise Termination Event" to
mean any of (i) the Effective Time; (ii) termination of the Merger Agreement in
accordance with its terms, if such termination occurs prior to the occurrence of
an Initial Triggering Event, except a termination by the Grantee if the Issuer
breaches, and does not timely cure any breach of, a representation, warranty,
covenant or other agreement contained in the Merger Agreement; or (iii) the
passage of 18 months, subject to extension in order to obtain required
regulatory approvals, to comply with applicable regulatory waiting periods or to
avoid liability under Section 16(b) of the Exchange Act, after termination of
the Merger Agreement if such termination is concurrent with or follows the
occurrence of an Initial Triggering Event or is a termination by the Grantee if
the Issuer breaches, and does not timely cure any breach of, a representation,
warranty, covenant or other agreement contained in the Merger Agreement.
Notwithstanding anything to the contrary contained in a Stock Option Agreement,
the option may not be exercised at any time when the Grantee is in breach of any
of its covenants or agreements contained in the Merger Agreement such that the
Issuer shall be entitled to terminate the Merger Agreement pursuant to the terms
thereof as a result of a material breach, and such Stock Option Agreement shall
automatically terminate upon the termination of the Merger Agreement by the
Issuer pursuant to the terms thereof as a result of a breach by the Grantee of
its covenants or agreements contained therein.
If an option becomes exercisable, it may be exercised in whole or in part
within six months following the applicable Subsequent Triggering Event. The
Grantee's right to exercise the option and certain other rights under the
corresponding Stock Option Agreement are subject to an extension in order to
obtain required regulatory approvals and comply with applicable regulatory
waiting periods and to avoid liability under Section 16(b) of the Exchange Act.
The Option Price and the number of shares issuable under the option are subject
to adjustment in the event of specified changes in the capital stock of the
Issuer.
Upon the occurrence of a Subsequent Triggering Event that occurs prior to
an Exercise Termination Event, the Issuer will have certain registration rights
with respect to the shares of Bancshares Common Stock issued or issuable
pursuant to the option.
The Stock Option Agreements also provide that at any time after the
occurrence of a "Repurchase Event" (as defined below), upon request, the Grantor
shall be obligated to repurchase the option and all or any part of the Option
Shares. Such repurchase of the option shall be at a price per share equal to the
amount by which the "Market/Offer Price" (as defined below) exceeds the Option
Price (as adjusted). A repurchase of Option Shares shall be at a price per share
equal to the Market/Offer Price. The term "Market/Offer Price" means the highest
of (i) the price per share at which a tender or exchange offer has been made for
the Grantor Common Stock, (ii) the price per share of the Grantor Common Stock
that any third party is to pay pursuant to an agreement with the Grantor, (iii)
the highest closing price per share of the Grantor Common Stock within the
six-month period immediately preceding the date that notice to repurchase is
given or (iv) in the event of a sale of all or substantially all of the
Grantor's assets or deposits, the sum of the price paid for such assets or
deposits and the current market value of the remaining assets (as determined by
a nationally recognized investment banking firm), divided by the number of
shares of the Grantor Common Stock outstanding at the time of such sale. The
term "Repurchase Event" is defined to mean (i) the acquisition by any third
party of beneficial ownership of 50% or more of the outstanding shares of the
Grantor Common Stock or (ii) the consummation of an Acquisition Transaction;
provided, that for purposes of the definition of "Repurchase Event," the
percentage referred to in clause (z) of the definition of "Acquisition
Transaction" above shall be 50% rather than 10%.
The Stock Option Agreement also provides that the Issuer may, at any time
following a Repurchase Event and prior to an Exercise Termination Event,
surrender the option (and any Option Shares obtained upon the exercise thereof
and still held by the Issuer) for a cash surrender fee (the "Surrender Fee")
equal to $25 million (i) plus, if applicable, the Issuer's purchase price with
respect to any Option Shares and (ii) minus, if applicable, any net cash
received pursuant to the sale of Option Shares to any third party (less the
purchase price of such Option Shares). The Issuer may not exercise its right to
surrender the option and receive the Surrender Fee if Bancshares has previously
repurchased the option (or any portion thereof) or any Option Shares as
described in the preceding paragraph.
50
<PAGE> 64
Pursuant to the terms of the Stock Option Agreement, in the event that,
prior to an Exercise Termination Event, the Grantor enters into certain
transactions in which the Grantor is not the surviving corporation, certain
fundamental changes in the capital stock of the Grantor occur or the Grantor
sells all or substantially all of its or certain of its subsidiaries' assets,
the option will be converted into a substitute option, with terms similar to
those of the previous option, to purchase capital stock of the entity that is
the effective successor to the Grantor.
The Stock Option Agreement provides that neither the Issuer nor the Grantor
may assign any of its rights or obligations thereunder without the written
consent of the other party, except that in the event an Initial Triggering Event
occurs prior to an Exercise Termination Event, the Issuer may, subject to
certain limitations, assign its rights and obligations thereunder in whole or in
part (subject to extension in certain cases).
To the best knowledge of Mid Am and Bancshares, no event giving rise to the
right to exercise an option under the Stock Option Agreements has occurred as of
the date of this Joint Proxy Statement/Prospectus.
51
<PAGE> 65
RIGHTS OF DISSENTING SHAREHOLDERS
RIGHTS OF DISSENTING BANCSHARES SHAREHOLDERS
Shareholders of Bancshares are entitled to certain dissenters' rights
pursuant to Section 1701.85 of the OGCL. Section 1701.85 generally provides that
shareholders of Bancshares will not be entitled to such rights absent compliance
with Section 1701.85 and failure to take any one of the required steps may
result in the termination or waiver of such rights. Specifically, any Bancshares
shareholder who is a record holder of shares of Bancshares Common Stock on the
Record Date and whose shares are not voted in favor of the Merger may be
entitled to be paid the "fair cash value" of such shares of Bancshares Common
Stock (the "Dissenting Bancshares Shares") after the Effective Time. To be
entitled to such payment, a shareholder must deliver a written demand for
payment therefor to Bancshares on or before the tenth day following the
Bancshares Special Meeting and must otherwise comply with Section 1701.85. Any
written demand must specify the shareholder's name and address, the number and
class of shares held by him or her on the Record Date, and the amount claimed as
the "fair cash value" of the Dissenting Bancshares Shares. See the text of
Section 1701.85 of the OGCL attached as Appendix F to this Joint Proxy
Statement/Prospectus for specific information on the procedure to be followed in
exercising dissenters' rights.
If Sky Financial or Bancshares, as the case may be, so requests, dissenting
shareholders must submit their share certificates to Bancshares within fifteen
days of such request, for endorsement thereon by Bancshares that demand for
appraisal has been made and failure to comply with such request could terminate
the dissenting shareholders rights. Such certificates will be promptly returned
to the dissenting shareholders by Bancshares. If Bancshares and any dissenting
shareholder cannot agree upon the "fair cash value" of the Dissenting Bancshares
Shares, either may, within three months after service of demand by the
shareholder, file a petition in the Court of Common Pleas of Columbiana County,
Ohio (the "Court") for a determination of the "fair cash value" of such
Dissenting Bancshares Shares. The Court may appoint one or more appraisers to
determine the "fair cash value" and if the Court approves the appraisers'
report, judgment will be entered therefor, and the costs of the proceedings,
including reasonable compensation of the appraisers, will be assessed or
apportioned as the Court considers equitable.
If more than ten percent or a lesser percentage, if applicable, of
shareholders perfect their rights as dissenting shareholders, the ability of the
Merger, if completed as proposed, to qualify as a pooling of interests for
accounting and financial reporting purposes may be adversely affected. The
qualification of the Merger for pooling of interests accounting is a condition
of the respective obligations of Mid Am and Bancshares to effect the Merger.
BECAUSE A PROXY CARD WHICH DOES NOT CONTAIN VOTING INSTRUCTIONS WILL,
UNLESS REVOKED, BE VOTED FOR ADOPTION OF THE MERGER PROPOSAL, A BANCSHARES
SHAREHOLDER WHO WISHES TO EXERCISE HIS DISSENTERS' RIGHTS MUST EITHER NOT SIGN
OR NOT RETURN HIS PROXY CARD OR, IF HE SIGNS AND RETURNS HIS PROXY CARD, VOTE
AGAINST OR ABSTAIN FROM VOTING ON THE ADOPTION OF THE MERGER PROPOSAL.
RIGHTS OF DISSENTING MID AM SHAREHOLDERS
Shareholders of Mid Am are entitled to certain dissenters' rights pursuant
to Section 1701.84 and Section 1701.85 of the OGCL. Section 1701.85 generally
provides that shareholders of Mid Am will not be entitled to such rights absent
compliance with Section 1701.85 and failure to take any one of the required
steps may result in the termination or waiver of such rights. Specifically, any
Mid Am shareholder who is a record holder of shares of Mid Am Common Stock on
the Record Date and whose shares are not voted in favor of the Merger may be
entitled to be paid the "fair cash value" of such shares of Mid Am Common Stock
(the "Dissenting Mid Am Shares") after the Effective Time. To be entitled to
such payment, a shareholder must deliver a written demand for payment therefor
to Mid Am on or before the tenth day following the Mid Am Special Meeting and
must otherwise comply with Section 1701.85. Any written demand must specify the
shareholder's name and address, the number and class of shares held by him or
her on the Record Date, and the amount claimed as the "fair cash value" of the
Dissenting Mid Am Shares. See the text of Section 1701.85 of the OGCL attached
as Appendix F to this Joint Proxy Statement/Prospectus for specific information
on the procedure to be followed in exercising dissenters' rights.
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<PAGE> 66
If Mid Am so requests, dissenting shareholders must submit their share
certificates to Mid Am within fifteen days of such request, for endorsement
thereon by Mid Am that demand for appraisal has been made and failure to comply
with such request could terminate the dissenting shareholders rights. Such
certificates will be promptly returned to the dissenting shareholders by Mid Am.
If Mid Am and any dissenting shareholder cannot agree upon the "fair cash value'
of the Dissenting Mid Am Shares, either may, within three months after service
of demand by the shareholder, file a petition in the Court of Common Pleas of
Columbiana County, Ohio (the "Court") for a determination of the "fair cash
value" of such Dissenting Mid Am Shares. The Court may appoint one or more
appraisers to determine the "fair cash value" and if the Court approves the
appraisers' report, judgment will be entered therefor, and the costs of the
proceedings, including reasonable compensation of the appraisers, will be
assessed or apportioned as the Court considers equitable.
If more than ten percent or a lesser percentage, if applicable, of
shareholders perfect their rights as dissenting shareholders, the ability of the
Merger, if completed as proposed, to qualify as a pooling of interests for
accounting and financial reporting purposes may be adversely affected. The
qualification of the Merger for pooling of interests accounting is a condition
of the respective obligations of Mid Am and Bancshares to effect the Merger.
BECAUSE A PROXY CARD WHICH DOES NOT CONTAIN VOTING INSTRUCTIONS WILL,
UNLESS REVOKED, BE VOTED FOR ADOPTION OF THE MERGER AGREEMENT, A MID AM
SHAREHOLDER WHO WISHES TO EXERCISE HIS DISSENTERS' RIGHTS MUST EITHER NOT SIGN
OR NOT RETURN HIS PROXY CARD OR, IF HE SIGNS AND RETURNS HIS PROXY CARD, VOTE
AGAINST OR ABSTAIN FROM VOTING ON THE ADOPTION OF THE MERGER AGREEMENT.
53
<PAGE> 67
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined balance sheet as of
March 31, 1998, and the pro forma condensed combined income statements for the
three-month periods ended March 31, 1998 and 1997 and for each of the three
years in the period ended December 31, 1997, give effect to the Merger, to be
accounted for as a pooling of interests. The pro forma information is based on
the historical consolidated financial statements of Bancshares and Mid Am and
their subsidiaries under the assumptions and adjustments set forth in the
accompanying notes to the pro forma condensed combined financial statements.
The pro forma condensed combined financial statements have been prepared by
the managements of Bancshares and Mid Am based on their respective consolidated
financial statements. Pro forma per share amounts are based on the conversion
rate of 0.77 of a share of Bancshares Common Stock for each share of Mid Am
Common Stock. The pro forma condensed combined financial statements include
results of operations as if the Merger had been consummated as of the beginning
of the earliest period presented. The pro forma condensed combined balance sheet
reflects preliminary estimates by Bancshares and Mid Am of Merger-related
charges to be incurred in connection with the consummation of the Merger;
however, the pro forma condensed combined income statements do not reflect these
charges nor the cost savings anticipated to result from the Merger. The current
estimate of Merger-related charges is considered preliminary based on the due
diligence that has been performed to date by management in connection with the
Merger and is subject to change; the actual charges incurred may be higher or
lower than what is currently estimated. Merger-related charges are contingent
upon consummation of the Merger and would be recognized in the period in which
the Merger closes.
The pro forma condensed combined financial statements should be read in
conjunction with the historical consolidated financial statements and notes
thereto of Bancshares and Mid Am and the supplemental consolidated financial
statements and notes thereto of Bancshares, incorporated by reference herein.
Pro forma financial statements are presented for informational purposes only and
are not necessarily indicative of the results of operations or combined
financial position that would have resulted had the Merger been consummated as
of the beginning of the earliest period indicated, nor are they necessarily
indicative of future results of operations or combined financial position.
54
<PAGE> 68
BANCSHARES AND MID AM
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
MARCH 31, 1998
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
BANCSHARES(A) MID AM ADJUSTMENTS COMBINED
------------- ------ ----------- ---------
(IN THOUSANDS, EXCEPT FOOTNOTES)
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks.................. $ 42,428 $ 94,066 $ 136,494
Federal funds sold and interest-bearing
deposits............................... 10,882 43,257 54,139
Securities held to maturity.............. 60,815 -- $(60,815)(B) --
Securities available for sale............ 461,449 405,427 60,815(B) 927,691
Loans, net............................... 1,128,046 1,602,677 2,730,723
Premises and equipment................... 29,707 53,581 83,288
Accrued interest receivable and other
assets................................. 52,354 40,105 7,000(C) 99,459
---------- ---------- -------- ----------
Total assets........................... $1,785,681 $2,239,113 $ 7,000 $4,031,794
========== ========== ======== ==========
LIABILITIES
Deposits................................. $1,401,966 $1,781,482 $3,183,448
Federal funds purchased and repurchase
agreements............................. 82,016 95,616 177,632
Other debt and Federal Home Loan Bank
advances............................... 128,836 175,060 303,896
Accrued interest payable and other
liabilities............................ 15,285 23,724 $ 25,000(C) 64,009
---------- ---------- -------- ----------
Total liabilities...................... 1,628,103 2,075,882 25,000 3,728,985
SHAREHOLDERS' EQUITY..................... 157,578 163,231 (18,000)(C) 302,809
---------- ---------- -------- ----------
Total liabilities and shareholders'
equity.............................. $1,785,681 $2,239,113 $ 7,000 $4,031,794
========== ========== ======== ==========
</TABLE>
- -------------------------
(A) Restated to reflect the March 1998 merger of UniBank with and into
Bancshares and the May 1998 merger of Century Financial Corporation with and
into Bancshares, each of which was accounted for as a pooling-of-interests.
(B) Reclassification of Bancshares' held-to-maturity securities to available for
sale to maintain a consistent interest rate risk position. The fair value of
such securities does not differ materially from the carrying value. The
future accounting will be at fair value with unrealized gains or losses
reflected as a component of shareholders' equity.
(C) Preliminary estimate of Merger-related charges. As a result, an estimated $7
million current and deferred tax asset is reflected herein.
55
<PAGE> 69
BANCSHARES AND MID AM
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
FOR THE THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
PRO FORMA
BANCSHARES(A) MID AM COMBINED
------------- ------ ---------
(IN THOUSANDS)
<S> <C> <C> <C>
INTEREST INCOME
Loans, including fees....................................... $25,739 $37,147 $62,886
Securities and other........................................ 8,611 6,261 14,872
------- ------- -------
Total interest income.................................. 34,350 43,408 77,758
------- ------- -------
INTEREST EXPENSE
Deposits.................................................... 13,841 17,095 30,936
Borrowings.................................................. 3,157 3,789 6,946
------- ------- -------
Total interest expense................................. 16,998 20,884 37,882
------- ------- -------
NET INTEREST INCOME......................................... 17,352 22,524 39,876
PROVISION FOR LOAN LOSSES................................... 695 1,017 1,712
------- ------- -------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES......... 16,657 21,507 38,164
OTHER INCOME................................................ 2,974 18,634 21,608
OTHER EXPENSES.............................................. 14,075 28,924 42,999
------- ------- -------
INCOME BEFORE INCOME TAXES.................................. 5,556 11,217 16,773
INCOME TAXES................................................ 1,428 3,774 5,202
------- ------- -------
NET INCOME.................................................. $ 4,128 $ 7,443 $11,571
======= ======= =======
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS................. $ 4,128 $ 7,443 $11,571
======= ======= =======
EARNINGS PER COMMON SHARE
Basic..................................................... $ 0.23 $ 0.31 $ 0.32
======= ======= =======
Diluted................................................... $ 0.23 $ 0.31 $ 0.32
======= ======= =======
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic..................................................... 17,699 23,756 35,991
======= ======= =======
Diluted................................................... 17,808 24,337 36,547
======= ======= =======
</TABLE>
- -------------------------
(A) Restated to reflect the March 1998 merger of UniBank with and into
Bancshares, the May 1998 merger of Century Financial Corporation with and
into Bancshares and the June 1998 two-for-one stock split in the form of a
100% stock dividend.
56
<PAGE> 70
BANCSHARES AND MID AM
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
PRO FORMA
BANCSHARES(A) MID AM COMBINED
------------- ------ ---------
(IN THOUSANDS)
<S> <C> <C> <C>
INTEREST INCOME
Loans, including fees....................................... $23,288 $34,942 $58,230
Securities and other........................................ 7,310 6,602 13,912
------- ------- -------
Total interest income.................................. 30,598 41,544 72,142
------- ------- -------
INTEREST EXPENSE
Deposits.................................................... 11,862 17,417 29,279
Borrowings.................................................. 2,221 2,182 4,403
------- ------- -------
Total interest expense................................. 14,083 19,599 33,682
------- ------- -------
NET INTEREST INCOME......................................... 16,515 21,945 38,460
PROVISION FOR LOAN LOSSES................................... 613 1,885 2,498
------- ------- -------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES......... 15,902 20,060 35,962
OTHER INCOME................................................ 2,308 19,918 22,226
OTHER EXPENSES.............................................. 9,631 25,201 34,832
------- ------- -------
INCOME BEFORE INCOME TAXES.................................. 8,579 14,777 23,356
INCOME TAXES................................................ 2,656 5,210 7,866
------- ------- -------
NET INCOME.................................................. $ 5,923 $ 9,567 $15,490
======= ======= =======
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS................. $ 5,923 $ 9,151 $15,074
======= ======= =======
EARNINGS PER COMMON SHARE(A)
Basic..................................................... $ 0.34 $ 0.40 $ 0.43
======= ======= =======
Diluted................................................... $ 0.33 $ 0.37 $ 0.41
======= ======= =======
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic..................................................... 17,657 23,081 35,429
======= ======= =======
Diluted................................................... 17,726 25,981 37,731
======= ======= =======
</TABLE>
- -------------------------
(A) Restated to reflect the March 1998 merger of UniBank with and into
Bancshares, the May 1998 merger of Century Financial Corporation with and
into Bancshares and the June 1998 two-for-one stock split in the form of a
100% stock dividend.
57
<PAGE> 71
BANCSHARES AND MID AM
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRO FORMA
BANCSHARES(A) MID AM COMBINED
------------- ------ ---------
(IN THOUSANDS)
<S> <C> <C> <C>
INTEREST INCOME
Loans, including fees....................................... $ 99,188 $146,266 $245,454
Securities and other........................................ 32,480 24,936 57,416
-------- -------- --------
Total interest income................................ 131,668 171,202 302,870
INTEREST EXPENSE
Deposits.................................................... 51,253 69,301 120,554
Borrowings.................................................. 11,956 12,375 24,331
-------- -------- --------
Total interest expense............................... 63,209 81,676 144,885
-------- -------- --------
NET INTEREST INCOME......................................... 68,459 89,526 157,985
PROVISION FOR LOAN LOSSES................................... 4,335 5,527 9,862
-------- -------- --------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES......... 64,124 83,999 148,123
OTHER INCOME................................................ 10,991 66,569 77,560
OTHER EXPENSES.............................................. 43,229 104,052 147,281
-------- -------- --------
INCOME BEFORE INCOME TAXES.................................. 31,886 46,516 78,402
INCOME TAXES................................................ 9,466 15,635 25,101
-------- -------- --------
NET INCOME.................................................. $ 22,420 $ 30,881 $ 53,301
======== ======== ========
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS................. $ 22,420 $ 30,276 $ 52,696
======== ======== ========
EARNINGS PER COMMON SHARE
Basic..................................................... $ 1.27 $ 1.27 $ 1.46
======== ======== ========
Diluted................................................... $ 1.26 $ 1.22 $ 1.43
======== ======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic..................................................... 17,671 23,836 36,025
======== ======== ========
Diluted................................................... 17,778 25,227 37,203
======== ======== ========
</TABLE>
- -------------------------
(A) Restated to reflect the March 1998 merger of UniBank with and into
Bancshares, the May 1998 merger of Century Financial Corporation with and
into Bancshares and the June 1998 two-for-one stock split in the form of a
100% stock dividend.
58
<PAGE> 72
BANCSHARES AND MID AM
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRO FORMA
BANCSHARES(A) MID AM COMBINED
------------- ------ ---------
(IN THOUSANDS)
<S> <C> <C> <C>
INTEREST INCOME
Loans, including fees................................... $ 90,656 $134,721 $225,377
Securities and other.................................... 27,326 30,262 57,588
-------- -------- --------
Total interest income................................. 117,982 164,983 282,965
INTEREST EXPENSE
Deposits................................................ 45,158 73,128 118,286
Borrowings.............................................. 6,259 6,941 13,200
-------- -------- --------
Total interest expense................................ 51,417 80,069 131,486
-------- -------- --------
NET INTEREST INCOME..................................... 66,565 84,914 151,479
PROVISION FOR LOAN LOSSES............................... 2,279 4,537 6,816
-------- -------- --------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES..... 64,286 80,377 144,663
OTHER INCOME............................................ 8,735 49,501 58,236
OTHER EXPENSES.......................................... 41,737 91,419 133,156
-------- -------- --------
INCOME BEFORE INCOME TAXES.............................. 31,284 38,459 69,743
INCOME TAXES............................................ 9,554 12,467 22,021
-------- -------- --------
NET INCOME.............................................. $ 21,730 $ 25,992 $ 47,722
======== ======== ========
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS............. $ 21,730 $ 23,585 $ 45,315
======== ======== ========
EARNINGS PER COMMON SHARE
Basic................................................. $ 1.23 $ 1.04 $ 1.29
======== ======== ========
Diluted............................................... $ 1.22 $ 0.98 $ 1.25
======== ======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic................................................. 17,708 22,734 35,213
======== ======== ========
Diluted............................................... 17,768 26,554 38,215
======== ======== ========
</TABLE>
- -------------------------
(A) Restated to reflect the March 1998 merger of UniBank with and into
Bancshares, the May 1998 merger of Century Financial Corporation with and
into Bancshares and the June 1998 two-for-one stock split in the form of a
100% stock dividend.
59
<PAGE> 73
BANCSHARES AND MID AM
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRO FORMA
BANCSHARES(A) MID AM COMBINED
------------- ------ ---------
(IN THOUSANDS)
<S> <C> <C> <C>
INTEREST INCOME
Loans, including fees...................................... $ 83,127 $130,300 $213,427
Securities and other....................................... 27,664 32,243 59,907
-------- -------- --------
Total interest income.................................... 110,791 162,543 273,334
INTEREST EXPENSE
Deposits................................................... 42,413 72,527 114,940
Borrowings................................................. 6,210 7,789 13,999
-------- -------- --------
Total interest expense................................... 48,623 80,316 128,939
-------- -------- --------
NET INTEREST INCOME........................................ 62,168 82,227 144,395
PROVISION FOR LOAN LOSSES.................................. 2,504 3,002 5,506
-------- -------- --------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES........ 59,664 79,225 138,889
OTHER INCOME............................................... 7,531 35,955 43,486
OTHER EXPENSES............................................. 40,172 78,416 118,588
-------- -------- --------
INCOME BEFORE INCOME TAXES................................. 27,023 36,764 63,787
INCOME TAXES............................................... 8,229 11,797 20,026
-------- -------- --------
NET INCOME................................................. $ 18,794 $ 24,967 $ 43,761
======== ======== ========
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS................ $ 18,794 $ 22,216 $ 41,010
======== ======== ========
EARNINGS PER COMMON SHARE
Basic.................................................... $ 1.06 $ 0.96 $ 1.15
======== ======== ========
Diluted.................................................. $ 1.06 $ 0.92 $ 1.13
======== ======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic.................................................... 17,783 23,070 34,547
======== ======== ========
Diluted.................................................. 17,806 27,241 38,782
======== ======== ========
</TABLE>
- -------------------------
(A) Restated to reflect the March 1998 merger of UniBank with and into
Bancshares, the May 1998 merger of Century Financial Corporation with and
into Bancshares and the June 1998 two-for-one stock split in the form of a
100% stock dividend.
60
<PAGE> 74
DESCRIPTION OF SKY FINANCIAL CAPITAL STOCK
The following description of the capital stock of Sky Financial does not
purport to be complete and is qualified in its entirety by reference to the
description of the Bancshares Common Stock in the Bancshares registration
statements which are incorporated by reference into this Joint Proxy/Statement
Prospectus and to the Bancshares Articles Amendment, the Control Share
Acquisition Amendment and the Bancshares Code of Regulations Amendment which are
attached to this Joint Proxy Statement Prospectus as Appendices B and C. See
"Incorporation of Certain Information by Reference."
GENERAL
Bancshares has currently authorized 36,000,000 shares of Bancshares Common
Stock of which 17,748,688 shares are issued and outstanding and 9,571 are held
in treasury. Following the consummation of the Merger and the adoption of the
Bancshares Articles Amendment, Sky Financial will have authorized 150,000,000
shares of Sky Financial Common Stock. At the Effective Time, Bancshares will be
the surviving corporation in the Merger and the existing Articles of
Incorporation of Bancshares, as amended by the Bancshares Articles Amendment,
will remain as the Articles of Incorporation of Sky Financial. See "Amendments
to the Bancshares Articles of Incorporation and the Bancshares Code of
Regulations." The following discussion of the Bancshares Common Stock applies to
Sky Financial Common Stock to be issued in the Merger and should be read in
conjunction with the Bancshares Articles Amendment and the Bancshares Code of
Regulations Amendment. For a further discussion of the rights of holders of Sky
Financial Common Stock, see "Comparison of Certain Rights of Holders of Common
Stock of Bancshares, Mid Am and Sky Financial."
Each outstanding share of Bancshares Common Stock is, and each share of Sky
Financial Common Stock issued in the Merger will be, validly issued, fully paid
and nonassessable. Bancshares Common Stock has no par value. With the exception
of certain rights issued pursuant to a shareholders' rights plan and more fully
described under "Shareholder Rights Plan" below, holders of Bancshares Common
Stock have no preemptive rights, subscription rights or conversion rights. The
holders of shares of Bancshares Common Stock have one vote per share on each
matter on which shareholders are entitled to vote. Holders of Sky Financial
common stock will not have the right to cumulate their votes in the election of
directors. Directors are elected for staggered three-year terms. Specifically,
the Board is divided into three classes, one of which is elected annually. Upon
liquidation or dissolution of Bancshares, the holders of Bancshares Common Stock
are entitled to share ratably in such assets as remain after creditors have been
paid.
In addition, Bancshares has authorized 200,000 shares of serial preferred
stock ("Sky Financial Preferred Stock"), none of which are currently
outstanding. Following the consummation of the Merger and the adoption of the
Bancshares Articles Amendment, Sky Financial will have authorized 10,000,000
shares of Sky Financial Preferred Stock. The terms of Sky Financial Preferred
Stock are to be established by Bancshares' Board of Directors; therefore, if
Bancshares were to issue Sky Financial Preferred Stock in the future, holders
thereof might have preferences over the holders of Bancshares Common Stock.
Bancshares' Board of Directors determines whether to declare dividends and
the amount of any dividends declared. Such determinations by the Board of
Directors take into account Bancshares' financial condition, results of
operations and other relevant factors. While management expects to maintain its
policy of paying regular cash dividends, no assurances can be given that any
dividends will be declared, or, if declared, what the amount of such dividends
will be.
Bancshares is the transfer agent and registrar for Bancshares Common Stock.
CONTROL SHARE ACQUISITION PROVISION
OGCL. Unless the articles of incorporation or code of regulations of the
issuing public Ohio corporation provide otherwise, Section 1701.831 of the OGCL
provides that any control share acquisition of an issuing public Ohio
corporation, such as Bancshares, can only be made with the prior authorization
of the shareholders of such corporation in accordance with Ohio law. The
Bancshares Articles of Incorporation
61
<PAGE> 75
provide that the control share acquisition provisions of the OGCL are not
applicable to Bancshares. See "Approval of the Control Share Acquisition
Amendment" and "Comparison of Certain Rights of Holders of Common Stock of
Bancshares, Mid Am and Sky Financial -- Control Share Acquisitions."
Bancshares Articles of Incorporation. Currently, the Bancshares' Articles
of Incorporation contain a provision (the "Control Share Acquisition Provision")
which restricts certain acquisitions of Bancshares Common Stock without prior
approval of the shareholders and generally operates to make the non-negotiated
acquisition of control of Bancshares through a tender or exchange offer more
difficult. As discussed in "Amendments to the Bancshares Articles of
Incorporation and the Bancshares Code of Regulations -- Control Share
Acquisition Amendment," Bancshares is proposing that the Control Share
Acquisition Provision be eliminated.
A Control Share Acquisition is defined as the acquisition, directly or
indirectly, by any person, of Bancshares Common Stock that, when added to all
other shares of Bancshares in respect of which such person may exercise or
direct the exercise of voting power, would entitle such person, immediately
after such acquisition, directly or indirectly, to exercise or direct the
exercise of the voting power in the election of directors within any of the
following ranges of such voting power:
(i) One-fifth or more but less than one-third of such voting power;
(ii) One-third or more but less than a majority of such voting power;
(iii) A majority or more of such voting power.
The provision provides for certain exceptions to this definition, such as
good faith acquisitions not for the purpose of circumventing the Bancshares
Articles of Incorporation, bequests, inheritances and gifts, pledges or other
security interests created in good faith and not for the purpose of
circumventing the Bancshares Articles of Incorporation, or pursuant to certain
shareholder-approved mergers, consolidations or majority share acquisitions. If
an acquisition of Bancshares Common Stock qualifies as a Control Share
Acquisition, authorization for such transaction must be obtained at a special
shareholder meeting held in accordance with procedures contained in the Articles
of Incorporation. If these procedures are violated, the person making such
acquisition loses certain shareholder rights.
In order to obtain authorization for a Control Share Acquisition, the
person proposing to make such acquisition must deliver a notice to Bancshares
(the "Notice") including the following information:
(i) The identity of the person who is giving the Notice;
(ii) A statement that the Notice is given pursuant to the Articles of
Incorporation;
(iii) The number and class of shares of Bancshares owned, directly or
indirectly, by the person who gives the Notice;
(iv) The range of voting power under which the proposed Control Share
Acquisition would, if consummated, fall;
(v) A description in reasonable detail of the terms of the proposed
Control Share Acquisition; and
(vi) Reasonable evidence that the proposed Control Share Acquisition,
if consummated, would not be contrary to law and that the person
who is giving the Notice has the financial capacity to make the
proposed Control Share Acquisition.
Within ten days of receiving the Notice, the Board of Directors must call a
special meeting of shareholders to be held not later than 50 days after receipt
of the Notice. The purpose of the special meeting of shareholders is to consider
the proposed Control Share Acquisition; provided, that the Board of Directors
shall have no obligation to call such meeting if it makes a determination within
ten days after receipt of the Notice (i) that the Notice was not given in good
faith, (ii) that the proposed Control Share Acquisition would not be in the best
interests of Bancshares and its shareholders (the "Best Interests Standard"), or
(iii) that the proposed Control Share Acquisition could not be consummated for
financial or legal reasons. The Board of Directors of Bancshares, however, may
not fail to call such special meeting of shareholders under the Best Interests
62
<PAGE> 76
Standard if the Control Share Acquisition described in the request is for any
and all shares of Bancshares at a price higher than 175% of the book value of
the Bancshares Common Stock as of the close of the immediately preceding fiscal
year and all the other relevant conditions are satisfied.
The Person who delivered the Notice may make the proposed Control Share
Acquisition if both of the following occur: (i) the shareholders authorize such
acquisition at the special meeting called by the Board of Directors for that
purpose, at which a quorum is present, by an affirmative vote of a majority of
the shares entitled to vote in the election of directors ("Voting Shares")
represented by such meeting in person or by proxy and by a majority of the
portion of such Voting Shares represented at such meeting in person or by proxy
excluding the votes of "Interested Shares"; and (ii) such acquisition is
consummated, in accordance with the terms so authorized, not later than 360 days
following shareholder authorization of the Control Share Acquisition.
"Interested Shares" are Voting Shares with respect to which any of the following
persons may exercise or direct the exercise of the voting power:
(i) Any person whose Notice prompted the calling of the meeting of
shareholders;
(ii) Any officer of Bancshares elected or appointed by the directors
of Bancshares; and
(iii) Any employee of Bancshares who is also a director of Bancshares.
Bancshares Common Stock issued or transferred to any person in violation of
this restriction are valid only with respect to such amount of shares as does
not result in a violation of the Articles of Incorporation, and such issuance or
transfer is null and void with respect to the remainder of such shares. Any such
remainder of shares is called "Excess Shares." Excess Shares are not entitled to
any voting rights, are not considered to be outstanding for quorum or voting
purposes, and are not entitled to receive dividends, interest or any other
distribution with respect to the Excess Shares. Any person who receives
dividends, interest or any other distribution with respect to Excess Shares
holds the distribution as agent for Bancshares and, following a permitted
transfer, for the transferee. Any holder of Excess Shares may transfer the
Excess Shares (together with any distributions thereon) to any person who,
following such transfer, would not own shares in violation of the Articles of
Incorporation. Upon a permitted transfer, Bancshares will pay or distribute to
the transferee any distributions on the Excess Shares not previously paid or
distributed.
SHAREHOLDERS RIGHTS PLAN
On July 21, 1998, the Bancshares Board declared a dividend distribution of
one right (a "Right") for each share of Bancshares Common Stock to shareholders
of record at the close of business on July 21, 1998. Each Right entitles the
registered holder to purchase from Bancshares one one-hundredth of a share of
Series A Participating Preferred Stock, $10.00 par value (the "Preferred
Stock"), at a Purchase Price of $150 per one one-hundredth of a share, subject
to adjustment. The description and terms of the Rights are set forth in the
Rights Agreement (the "Rights Agreement") between Bancshares and Citizens, as
Rights Agent.
Initially, the Rights will be attached to all Bancshares Common Stock
certificates representing shares then outstanding, and no separate Rights
Certificates will be distributed. The Rights will separate from the Bancshares
Common Stock upon the earlier of (i) ten business days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired, or obtained the right to acquire, beneficial
ownership of 10% or more of the outstanding shares of Bancshares Common Stock
(the "Stock Acquisition Date"), or (ii) ten business days (or such later date as
the Board of Directors shall determine) following the commencement of a tender
offer or exchange offer that would result in a person or group beneficially
owning 10% or more of such outstanding shares of Bancshares Common Stock (the
earlier of (i) and (ii) being referred to herein as the "Distribution Date").
Until the Distribution Date, (i) the Rights will be evidenced by the Bancshares
Common Stock certificates and will be transferred with and only with such
Bancshares Common Stock certificates, (ii) new Bancshares Common Stock
certificates issued after July 21, 1998 will contain a notation incorporating
the Rights Agreement by reference, and (iii) the surrender for transfer of any
certificates for Bancshares Common Stock
63
<PAGE> 77
outstanding will also constitute the transfer of the Rights associated with the
Bancshares Common Stock represented by such certificates. Pursuant to the Rights
Agreement, Bancshares reserves the right to require prior to the occurrence of a
Triggering Event (as defined below) that, upon any exercise of Rights, a number
of Rights be exercised so that only whole shares of Preferred Stock will be
issued.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on July 20, 2008 unless earlier redeemed by Bancshares
as described below.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Bancshares Common Stock as of the
close of business on the Distribution Date and thereafter, the separate Rights
Certificates alone will represent the Rights. Except as otherwise determined by
the Board of Directors, only shares of Bancshares Common Stock outstanding prior
to the Distribution Date will be issued with Rights.
The events described in this paragraph and the following paragraph are
referred to herein as the "Triggering Events." In the event that an Acquiring
Person becomes the beneficial owner of 10% or more of the then outstanding
shares of Bancshares Common Stock (unless such acquisition is made pursuant to a
tender or exchange offer for all outstanding shares of Bancshares, upon terms
and conditions determined by at least two-thirds (2/3) of the Board of Directors
of Bancshares to be in the best interests of Bancshares and its shareholders (a
"Qualifying Offer")), each holder of a Right will thereafter have the right to
receive, upon exercise, Bancshares Common Stock (or, in certain circumstances,
cash, property or other securities of Bancshares), having a value equal to two
times the Exercise Price of the Right. The "Exercise Price" is the Purchase
Price times the number of shares of Bancshares Common Stock associated with each
Right (initially, one). Notwithstanding any of the foregoing, following the
occurrence of the event set forth in this paragraph, all Rights that are or
(under certain circumstances specified in the Rights Agreement) were
beneficially owned by any Acquiring Person will be null and void.
Following the Stock Acquisition Date, in the event that the Acquiring
Person giving rise to the Stock Acquisition Date controls the Board of Directors
of Bancshares and (i) Bancshares is acquired in a merger or business combination
transaction in which Bancshares is not the surviving corporation (other than a
merger consummated pursuant to a Qualifying Offer); (ii) Bancshares is the
surviving corporation in a consolidation or merger pursuant to which all or part
of the outstanding shares of Bancshares Common Stock are changed or exchanged
for stock or other securities of any other person or cash or any other property;
or (iii) more than 50% of the combined assets or earning power is sold or
transferred (in each case other than certain consolidations with, mergers with
and into, or sales of assets or earning power by or to subsidiaries of
Bancshares as specified in the Rights Agreement), each holder of a Right (except
Rights which have previously been voided as set forth above) shall thereafter
have the right to receive, upon exercise thereof, common stock of the acquiring
company having a value equal to two times the Exercise Price of the Right.
The Purchase Price payable, the number and kind of shares covered by each
Right and the number of Rights outstanding are subject to adjustment from time
to time to prevent dilution (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the Preferred Stock, (ii) if
holders of the Preferred Stock are granted certain rights or warrants to
subscribed-for Preferred Stock or securities convertible into Preferred Stock at
less than the current market price of the Preferred Stock, or (iii) upon the
distribution to holders of the Preferred Stock of evidences of indebtedness,
cash (excluding regular quarterly cash dividends), assets (other than dividends
payable in Preferred Stock) or subscription rights or warrants (other than those
referred to in (ii) immediately above).
With certain exceptions, no adjustments in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional shares of Preferred Stock are required to be issued (other
than fractions which are integral multiples of one one hundredth of a share of
Preferred Stock) and, in lieu thereof, Bancshares may make an adjustment in cash
based on the market price of the Preferred Stock on the last trading date prior
to the date of exercise.
At any time until ten business days following the Stock Acquisition Date,
Bancshares may redeem the Rights in whole, but not in part, at a price of $.01
per Right (payable in cash, shares of Bancshares Common
64
<PAGE> 78
Stock or other consideration deemed appropriate by the Bancshares Board).
Immediately upon the action of the Bancshares Board ordering redemption of the
Rights, the Rights will terminate and the only right of the holders of Rights
will be to receive the $.01 redemption price. In addition, the Board of
Directors of Bancshares may at its option at any time after the occurrence of a
Stock Acquisition Date exchange all or part of the then outstanding Rights for
shares of Bancshares Common Stock or common stock equivalents.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of Bancshares, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to shareholders or to Bancshares, shareholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Bancshares Common Stock (or other consideration) as set forth
above or in the event that the Rights are redeemed.
Bancshares and the Rights Agent may from time to time supplement or amend
the Rights Agreement without the approval of any holders of Rights (i) at any
time when the Rights are redeemable in any respect and (ii) thereafter, to make
any changes that Bancshares may deem necessary or desirable and which shall not
materially adversely affect the interests of the holders of Rights generally or
in order to cure any ambiguity or to correct or supplement any provision
contained herein which may be inconsistent with any other provisions herein or
otherwise defective. The Rights Agent will duly execute and deliver any
supplement or amendment hereto requested by Bancshares which satisfies the terms
of the preceding sentence.
The Rights will not prevent a takeover of Bancshares. However, the Rights
may cause substantial dilution to a person or group that acquires 10% or more of
the Bancshares Common Stock unless the Rights are first redeemed by the
Bancshares Board. Nevertheless, the Rights should not interfere with a
transaction that is in the best interests of Bancshares and its stockholders
because the Rights can be redeemed on or prior to the Stock Acquisition Date,
before the consummation of such transaction.
65
<PAGE> 79
COMPARISON OF CERTAIN RIGHTS OF HOLDERS OF
COMMON STOCK OF SKY FINANCIAL, MID AM AND BANCSHARES
If the Merger is consummated, at the Effective Time all shareholders of Mid
Am (other than shareholders of Mid Am who perfect their dissenters' rights under
the OGCL) will become shareholders of Sky Financial and all shareholders of
Bancshares (other than shareholders of Bancshares who perfect their dissenters'
rights under the OGCL) will remain shareholders of Sky Financial. Mid Am and
Bancshares are corporations organized under the OGCL. Following the Merger,
Bancshares, as the surviving corporation under the name of Sky Financial Group,
Inc., will remain an Ohio corporation. The rights of the holders of Sky
Financial Common Stock will continue to be governed by the OGCL. The differences
among the rights of the holders of Mid Am Common Stock, Bancshares Common Stock
and Sky Financial Common Stock are governed by the Articles of Incorporation and
Code of Regulations of Mid Am, Bancshares and Sky Financial, respectively. At
the Effective Time, the Articles of Incorporation of Bancshares, as amended by
the Bancshares Articles Amendment, and the Code of Regulations of Bancshares, as
amended by the Bancshares Code of Regulations Amendment and, if adopted, the
Control Share Acquisition Amendment, will be the Articles of Incorporation and
Code of Regulations of Sky Financial. THE FOLLOWING SUMMARY IS NECESSARILY
GENERAL AND DOES NOT PURPORT TO BE A COMPLETE DISCUSSION OF, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO, THE OGCL AND THE EXISTING ARTICLES OF
INCORPORATION AND CODE OF REGULATIONS OF BANCSHARES AND MID AM AND THE
BANCSHARES ARTICLES AMENDMENT, THE CONTROL SHARE ACQUISITION AMENDMENT AND THE
BANCSHARES CODE OF REGULATIONS AMENDMENT.
AUTHORIZED SHARES
Sky Financial. The Sky Financial Articles of Incorporation will provide for
150,000,000 shares of Sky Financial Common Stock, without par value, and
10,000,000 shares of Sky Financial Preferred Stock, par value $10.00 per share.
If Sky Financial Serial Preferred Shares were to be issued, the rights of
holders of Sky Financial Common Stock would be subordinated in certain respects
to the rights of the holders of Sky Financial Serial Preferred Shares. See
"Amendments to the Bancshares Articles of Incorporation and the Bancshares Code
of Regulations."
Mid Am. The Mid Am Amended Articles of Incorporation provide for 35,000,000
shares of Mid Am Common Stock, without par value, and 2,000,000 shares of
preferred stock, without par value. No shares of preferred stock are currently
outstanding.
Bancshares. The Bancshares Articles of Incorporation provide for 36,000,000
shares of Bancshares Common Stock, without par value, and 200,000 Serial
Preferred Shares, par value $10.00 per share. No Serial Preferred Shares are
currently outstanding.
AMENDMENTS TO ARTICLES OF INCORPORATION OR CODE OF REGULATIONS
Sky Financial. Except for specific provisions relating to an amendment with
respect to Sky Financial Serial Preferred Shares, an amendment to Sky Financial
Articles of Incorporation will require the approval of a majority vote of the
outstanding shares of Sky Financial voting as a class. Notwithstanding the
foregoing, any amendment or addition to Sky Financial Articles of Incorporation
which is inconsistent with or would have the effect of amending certain sections
of Sky Financial Code of Regulations, including provisions governing the number,
classification, election or term of office of directors or removal of directors,
would require the same affirmative vote of shareholders as would be required if
such provision were being amended or revised under Sky Financial Code of
Regulations.
The Sky Financial Code of Regulations will provide for amendments thereto
upon the affirmative vote of the holders of a majority of the shares entitled to
vote; provided, however, that any amendment with respect to the number,
classification, election or term of office of directors or the removal of
directors will require the affirmative vote of at least 75% of the shares
entitled to vote, unless such amendment has been recommended by at least
two-thirds of the Sky Financial Board of Directors.
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<PAGE> 80
Mid Am. A vote of the holders of Mid Am capital stock entitled to exercise
a majority of the voting power is required to effect amendments to the Mid Am
Articles of Incorporation; provided, however, that the repeal or amendment of
Mid Am's "fair price/supermajority" provisions requires the affirmative vote of
holders representing 80 percent of the voting power, unless two-thirds of Mid
Am's continuing directors approve the measure.
Bancshares. The provisions of the Bancshares Articles of Incorporation and
Code of Regulations governing amendments thereto in effect before the Merger are
the same as the provisions in effect for Sky Financial after the Merger.
SPECIAL MEETINGS OF SHAREHOLDERS
Sky Financial. The Sky Financial Code of Regulations will provide that a
special meeting of the shareholders of Sky Financial may be called by any of the
Chairman, Chief Executive Officer, the President, the Chief Operating Officer,
any Executive Vice President and the majority of directors. In addition, holders
representing at least 50% of the outstanding shares entitled to vote at the
special meeting will have the authority to call such meeting.
Mid Am. The Mid Am Code of Regulations provides that the Chairman,
President or the majority of the directors may call a special meeting of
shareholders of Mid Am. In addition, three or more shareholders owning at least
25% of the capital stock of Mid Am may call a special meeting of Mid Am
shareholders.
Bancshares. The provision governing special meetings of shareholders under
the Bancshares Code of Regulations provides that a special meeting of
shareholders of Bancshares may be called by any of the Chairman, the President,
any Vice President and the majority of directors. In addition, holders
representing at least 50% of the outstanding shares entitled to vote at the
special meeting will have the authority to call such meeting.
NUMBER OF DIRECTORS; CLASSIFIED BOARD OF DIRECTORS
Sky Financial. The Sky Financial Code of Regulations will provide that the
number of directors shall not be less than five (5) nor more than thirty-five
(35), with the exact number of directors to be determined from time to time by
an 80% majority vote of the directors then in office. Furthermore, until
otherwise determined in accordance with the Code of Regulations, the Sky
Financial Board of Directors will consist of 22 directors. The Sky Financial
Code of Regulations provides for a classified board of directors, such that
approximately one-third of the members of the Sky Financial Board of Directors
are elected each year; consequently, two annual meetings are effectively
required for Sky Financial's shareholders to change a majority of the members of
the Sky Financial Board of Directors.
For a period of three years after the Effective Time, in the event that a
Mid Am Director or a Bancshares Director or a director otherwise elected or
nominated pursuant to the Merger Agreement resigns, is no longer able to serve
or does not stand for reelection, (i) if such director is a Mid Am Director or a
nominee of the Mid Am Directors, then the Mid Am Directors and nominees of the
Mid Am Directors serving as directors will have the exclusive right to select an
individual to fill such vacancy and (ii) if such director is a Bancshares
Director or a nominee of the Bancshares Directors, then the Bancshares Directors
and nominees of the Bancshares Directors serving as directors will have the
exclusive right to nominate an individual to fill such vacancy and the entire
Board of Directors of Sky Financial will either elect such person as a director
or nominate such person for election as a director.
Any amendment or repeal of the foregoing provisions of Sky Financial Code
of Regulations will require the affirmative vote of at least 75% of the
outstanding shares eligible to vote for the election of directors unless such
amendment or repeal has been recommended by the affirmative vote of at least
two-thirds of the entire Sky Financial Board of Directors, in which case only a
majority vote of the outstanding shares eligible to vote will be required.
Mid Am. The Mid Am Code of Regulations provides that the number of
directors shall not be less than five nor more than 25, with the exact number of
directors to be determined from time to time by an 80% vote
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of the directors then in office. The Mid Am Board has fixed the number at 18
directors. The provision of the Mid Am Code of Regulations setting forth the
number of directors may be amended at a meeting of Mid Am shareholders by the
affirmative vote of the holders representing a majority of the outstanding Mid
Am capital stock entitled to vote thereon, or by the written consent of the
holders representing two-thirds of the capital stock entitled to vote thereon.
The Mid Am Board is divided into three classes, such that approximately
one-third of the members of the Mid Am Board are elected each year.
Consequently, two annual meetings are effectively required for Mid Am's
shareholders to change a majority of the members of the Mid Am Board. The
affirmative vote of the holders representing at least 80% of the outstanding Mid
Am Common Stock entitled to vote thereon is required to amend the classified
board provision of the Mid Am Code of Regulations.
Bancshares. The Bancshares Code of Regulations provides that the number of
directors shall not be less than nine nor more than 21, with the exact number of
directors to be determined from time to time by a majority vote of the directors
then in office or by the shareholders of Bancshares. The Bancshares shareholders
have fixed the number at 14 directors. The Bancshares Code of Regulations
provides for a classified board of directors, such that approximately one-third
of the members of the Bancshares Board are elected each year; consequently, two
annual meetings are effectively required for Bancshares' shareholders to change
a majority of the members of the Bancshares Board.
Any amendment or repeal of the foregoing provisions of the Bancshares Code
of Regulations requires the affirmative vote of at least 75% of the outstanding
shares eligible to vote for the election of directors unless such amendment or
repeal has been recommended by the affirmative vote of at least two-thirds of
the entire Bancshares Board, in which case only a majority of the outstanding
shares eligible to vote thereon is required.
REMOVAL OF DIRECTORS
Sky Financial. The Sky Financial Code of Regulations will provide that a
director may be removed only for cause and only by the affirmative vote of 80%
of the entire the Sky Financial Board of Directors. Amendment or repeal of the
foregoing provision requires the vote of holders representing at least than 75%
of the outstanding capital stock entitled to vote for the election of directors,
unless such amendment has been recommended by at least two-thirds of the Sky
Financial Board of Directors then in office, in which case only a majority vote
of the outstanding shares eligible to vote is required.
Mid Am. The Mid Am Code of Regulations provides that a director may be
removed only for cause and only by the affirmative vote of 80% of the entire Mid
Am Board. Amendment or repeal of the foregoing provision of the Mid Am Code of
Regulations requires the vote of holders representing no less than 80% of the
outstanding capital stock of Mid Am or the consent of 80% of the voting power of
Mid Am.
Bancshares. The Bancshares Code of Regulations provides that a director may
be removed without cause by the affirmative vote the holders representing no
less than 75% of the outstanding capital stock entitled to vote for the election
of directors. Because shareholders of Bancshares may exercise cumulative voting
rights, no individual director may be removed if the votes of a sufficient
number of shares are cast against such director's removal such that, if
cumulatively voted at an election of all the directors, such votes would be
sufficient to elect at least one director.
ADVANCE NOTICE OF DIRECTOR NOMINATIONS
Sky Financial. The Sky Financial Code of Regulations will provide that
nominations for election to the Sky Financial Board of Directors may be made by
the Sky Financial Board of Directors or by any holders of shares of the capital
stock of Sky Financial entitled to vote for the election of directors.
Nominations other than those made by or on behalf of the Sky Financial Board of
Directors must be made in writing delivered to or mailed and received at the
principal executive offices of Sky Financial no less than 60 days nor more than
90 days prior to the meeting of shareholders at which directors are to be
elected. However, if notice of the meeting is mailed or public disclosure is
made to shareholders less than 75 days before the meeting date, the nomination
must be received no later than the close of business on the 15th day following
the day on which
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notice of the meeting was mailed or public disclosure made. Such notice must be
accompanied by the written consent of each proposed nominee to serve as a
director of Sky Financial, if elected.
Mid Am. Mid Am's Code of Regulations provides that director nominations by
a shareholder must be made in writing and delivered or mailed not less than 14
days nor more than 50 days prior to the meeting of shareholders at which
directors are to be elected, except that if less than 21 days' notice of the
meeting is given to shareholders, notification of the nomination must be mailed
or delivered to the President of Mid Am not later than the close of business on
the seventh day following the date on which the notice of meeting was mailed.
Bancshares. Provisions dealing with the nomination of directors to the
Bancshares Board are identical to the provisions set forth in Sky Financial Code
of Regulations.
CUMULATIVE VOTING
Sky Financial. The Sky Financial Articles of Incorporation will provide
that no shareholder of Sky Financial may cumulate his or her voting power in the
election of directors.
Mid Am. Under the terms of the Mid Am Articles of Incorporation,
shareholders of Mid Am have no right to vote cumulatively for the election of
directors.
Bancshares. Under the OGCL, every shareholder of Bancshares has the right
to vote cumulatively for the election of directors, provided such shareholder
first serves timely written notice upon Bancshares. Cumulative voting allows
each shareholder to give one candidate as many votes as the number of directors
to be elected multiplied by the number of voting shares held by such
shareholder, or to distribute his votes on the same principle among two or more
candidates.
CONTROL SHARE ACQUISITIONS
Sky Financial. The State of Ohio has passed a control share acquisition
statute (the "Control Share Acquisition Statute") designed to make the
non-negotiated acquisition of control of an Ohio corporation through a tender
offer more difficult. The Sky Financial Articles of Incorporation will specify
that the Control Share Acquisition Statute is not applicable to Sky Financial.
See "Description of Sky Financial Common Stock -- Control Share Acquisition
Provision" and "Approval of the Control Share Acquisition Amendment."
Mid Am. Mid Am is subject to the Control Share Acquisition Statute. Under
the Control Share Acquisition Statute, the acquisition by any person (as used in
this section, an "acquiring person") of shares of voting stock of Mid Am giving
the acquiring person voting power of Mid Am within any of the following ranges
would constitute a "control share acquisition": (a) one-fifth or more but less
than one-third of such voting power; (b) one-third or more but less than a
majority of such voting power; or (c) a majority or more of such voting power.
An acquiring person may make a control share acquisition only if (1) the
shareholders of Mid Am who hold shares entitling them to vote in the election of
directors authorize such acquisition at a special meeting held for that purpose
at which a quorum is present by an affirmative vote of a majority of the voting
power of Mid Am in the election of directors represented at such meeting in
person or by proxy, and of a majority of the portion of such voting power
excluding the voting power of "interested shares" (as defined below). A quorum
shall be deemed to be present at such special meeting if at least a majority of
the voting power of Mid Am in the election of directors, and a majority of the
portion of such voting power excluding the voting power of interested shares,
are represented at such meeting in person or by proxy; and (2) such acquisition
is consummated, in accordance with the terms so authorized, no later than 360
days following shareholder authorization of the control share acquisition.
"Interested shares" means the shares of Mid Am in respect of which any of the
following persons may exercise or direct the exercise of the voting power of Mid
Am in the election of directors: (a) the acquiring person; (b) any officer of
Mid Am elected or appointed by the directors of Mid Am; or (c) any employee of
Mid Am who is also a director of Mid Am. "Interested shares" also means any
shares of Mid Am acquired, directly or indirectly, by any person from the holder
or holders thereof for a valuable consideration during the period beginning with
the date of the first public
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disclosure of a proposed control share acquisition of Mid Am or any proposed
merger, consolidation, or other transaction that would result in a change in
control of Mid Am or all or substantially all of its assets and ending on the
date of any special meeting of Mid Am's shareholders held thereafter for the
purpose of voting on a control share acquisition proposed by an acquiring person
if either of the following applies: (a) the aggregate consideration paid or
given by the person who acquired the shares, and any other persons acting in
concert with him, for all such shares exceeds two hundred fifty thousand
dollars; (b) the number of shares acquired by the person who acquired the
shares, and any other persons acting in concert with him, exceeds one-half of
one percent of the outstanding shares entitled to vote in the election of
directors. Mid Am has not taken any corporate action to opt-out of the Control
Share Acquisition Statute.
Bancshares. The Articles of Incorporation of Bancshares expressly opt out
of the Control Share Acquisition Statute. In its place, the Bancshares Articles
of Incorporation contain a similar provision which may also make the
non-negotiated acquisition of Bancshares through a tender offer more difficult.
BUSINESS COMBINATION PROVISIONS
Sky Financial. Under Section 1704 of the OGCL, which is applicable to Sky
Financial as well as to Mid Am and Bancshares, a corporation is prohibited from
entering into a "Chapter 1704 transaction" (as defined herein) with the direct
or indirect beneficial owner of 10% or more of the shares of the corporation (a
"10% shareholder") for at least three years after the shareholder attains his
10% ownership unless the board of directors of the corporation approves, before
the shareholder attains his 10% ownership, either the transaction or the
purchase of shares resulting in his 10% ownership. A "Chapter 1704 transaction"
is broadly defined to include, among other things, a merger or consolidation
involving the corporation and the 10% shareholder, a sale or purchase of
substantial assets between the corporation and the 10% shareholder, a
reclassification, recapitalization, or other transaction proposed by the 10%
shareholder that results in an increase in the proportion of shares beneficially
owned by the 10% shareholder, and the receipt by the 10% shareholder of a loan,
guarantee, other financial assistance, or tax benefit not received
proportionately by all shareholders. Even after the three-year period, Ohio law
restricts these transactions between the corporation and the 10% shareholder. At
that time, such a transaction may proceed only if (a) the board of directors of
the corporation had approved the purchase of shares that gave the shareholder
his 10% ownership, (b) the transaction is approved by the holders of shares of
the corporation with at least two-thirds of the voting power of the corporation
(or a different proportion set forth in the articles of incorporation),
including at least a majority of the outstanding shares after excluding shares
held or controlled by the 10% shareholder, or (c) the business combination
results in shareholders, other than the 10% shareholder, receiving a prescribed
fair price plus interest for their shares.
Mid Am. In addition to being subject to Chapter 1704 of the OGCL, Article
Eighth of Mid Am's Amended Articles of Incorporation contains a provision (the
"Fair Price Provision") which, in certain circumstances, requires a business
combination between Mid Am and a 10% shareholder to meet specified criteria as
to price and procedural requirements which may have the effect of making such
business combination prohibitively expensive for an acquiror. Subject to certain
exceptions, a business combination with a 10% shareholder must provide that the
shareholders of Mid Am receive a price for their shares at least equal to the
highest price per share paid by such 10% shareholder to acquire beneficial
ownership of any Mid Am Common Stock during the two-year period immediately
prior to the date such 10% shareholder acquired 10% or more of Mid Am's capital
stock entitled to vote generally in the election of directors. The foregoing
conditions must be met unless the business combination is approved by (i) the
holders of not less than 80% of the total capital stock entitled to vote on the
matter, or (ii) two-thirds of the continuing directors of the Mid Am Board.
In evaluating a proposed business combination or tender offer, the Mid Am
Board is required pursuant to the Fair Price Provision to consider, in addition
to the adequacy of consideration to be paid in the business combination, the
social and economic effects of the transaction on Mid Am, its subsidiaries,
employees, depositors, loan and other customers, creditors and other elements of
the communities in which Mid Am and its subsidiaries operate or are located; the
business and financial condition and earnings prospects of the acquiring party;
and the competence, experience and integrity of the acquiring entity.
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Bancshares. Bancshares is currently subject to Section 1704 of the OGCL.
VOTE REQUIRED TO APPROVE MERGER, CONSOLIDATION, SALE OF SUBSTANTIALLY ALL ASSETS
Sky Financial. Except as otherwise provided by the Sky Financial Articles
of Incorporation or the Sky Financial Code of Regulations, and subject to
Section 1704 of the OGCL, Sky Financial Articles of Incorporation will provide
that notwithstanding any provision of the OGCL which requires a two-thirds vote,
or any other proportion, of the voting power of Sky Financial, any amendments to
the Sky Financial Articles of Incorporation may be made from time to time, and
any proposal or proposition requiring the action of shareholders, including the
merger, consolidation of Sky Financial with another corporation, or sale of
substantially all of the assets of Sky Financial, may be authorized from time to
time by the affirmative vote of the holders of shares entitling them to exercise
a majority of the voting power of Sky Financial.
Mid Am. Except as otherwise provided by the Mid Am Articles of
Incorporation and the Mid Am Code of Regulations, and subject to Section 1704 of
the OGCL, the Mid Am Articles of Incorporation provides that notwithstanding any
provision of the OGCL which requires a two-thirds vote, or any other proportion,
of the voting power of Mid Am, any amendments to the Mid Am Articles of
Incorporation may be made from time to time, and any proposal or proposition
requiring the action of shareholders, including the merger or consolidation of
Mid Am with another corporation, or sale of substantially all of the assets of
Mid Am, may be authorized from time to time by the affirmative vote of the
holders of shares entitling them to exercise a majority of the voting power of
Mid Am.
Bancshares. The Bancshares Articles of Incorporation currently requires the
affirmative vote of holders representing at least two-thirds of the outstanding
capital stock of Bancshares entitled to vote in the election of directors for
the adoption of a plan of merger or consolidation, or for the sale of
substantially all of the assets of Bancshares.
INDEMNIFICATION
Sky Financial. The Sky Financial Code of Regulations will provide that Sky
Financial shall indemnify any director or officer and any former director or
officer and any such director or officer who is or has served at the request of
Sky Financial as a director, officer or trustee of another corporation,
partnership, joint venture, trust or other enterprise (and his heirs, executors
and administrators) against expenses, including attorney's fees, judgments,
fines and amounts paid in settlement, actually and reasonably incurred by him by
reason of the fact that he is or was such director, officer or trustee in
connection with any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative to the full extent
permitted by applicable law. Such indemnification will not be deemed to restrict
the power of Sky Financial (i) to indemnify employees, agents and others to the
extent not prohibited by law, (ii) to purchase and maintain insurance or furnish
similar protection on behalf of or for any person who is or was a director,
officer or employee of Sky Financial, or any person who is or was serving at the
request of Sky Financial as a director, officer, trustee, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him or incurred by him in any such
capacity or arising out of his status as such, and (iii) to enter into
agreements with persons of the class identified in clause (ii) above
indemnifying them against any and all liabilities (or such lesser
indemnification as may be provided in such agreements) asserted against or
incurred by them in such capacities.
In addition, Sky Financial will have indemnification agreements with each
of its directors and executive officers which expand such indemnitees' rights in
the event that the OGCL and Sky Financial's Regulations are changed. Pursuant to
the agreements, indemnitees would receive the highest available of the
following: (i) the benefits provided by Sky Financial's Regulations as of the
date of the agreement; (ii) the benefits provided by Sky Financial's Regulations
in effect at the time that indemnification expenses are incurred; (iii) the
benefits allowable under the OGCL which is in effect on the date of the
agreement; (iv) the benefits allowable under the law of the jurisdiction under
which Sky Financial exists at the time indemnifiable expenses are incurred; (v)
the benefits available under liability insurance obtained by Sky Financial; (vi)
the benefits which would have been available to the indemnitees under a
Bancshares insurance policy which was
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in effect prior to and expired on May 8, 1986; or (vii) such other benefits are
or may be otherwise available to the indemnitees. The indemnification rights
available under the agreements are subject to certain exclusions, including a
provision that no indemnification shall be made if a court determines by clear
and convincing evidence that the indemnitee has acted or failed to act with
deliberate intent to cause injury to, or with reckless disregard for the best
interests of, Sky Financial.
Mid Am. Article Tenth of the Mid Am Articles of Incorporation provides Mid
Am with the power to indemnify present and past directors, officers, employees
and agents and, to the full extent permitted under OGCL, such other persons as
permitted under the OGCL. Upon the affirmative vote of a majority of Mid Am
directors, Mid Am may also purchase insurance for the purpose of indemnifying
its directors, officers, employees and agents to the full extent allowable under
Article Tenth of the Mid Am Articles of Incorporation.
Bancshares. Bancshares' current indemnification program, including a
provision in the Bancshares Code of Regulations and the protections offered by
indemnification agreements, individual directors and executive officers is
identical to Sky Financial program described above.
SHAREHOLDERS RIGHTS PLAN
Sky Financial. Sky Financial will have a shareholder rights plan. This plan
may make it more difficult for a potential acquiror to effect a non-negotiated
business combination with Sky Financial. See "Description of Sky Financial
Capital Stock -- Shareholders Rights Plan."
Mid Am. Mid Am has no shareholder rights plan.
Bancshares. Bancshares implemented a shareholder's rights plan on July 21,
1998. The Shareholder Rights Plan is not affected by the consummation of the
Merger or the other transactions contemplated in the Merger Agreement.
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AMENDMENTS TO THE BANCSHARES ARTICLES OF INCORPORATION
AND THE BANCSHARES CODE OF REGULATIONS
The following description of the Bancshares Articles Amendment, the Control
Share Acquisition Amendment and the Bancshares Code of Regulations Amendment
does not purport to be complete and is qualified in its entirety by the form of
the Bancshares Articles Amendment and Control Share Acquisition Amendment and
the form of the Bancshares Code of Regulations Amendment set forth in Appendices
B and C, respectively, to this Joint Proxy Statement/Prospectus.
GENERAL
In accordance with the provisions of the Merger Agreement, the Merger is
contingent upon the approval by Bancshares shareholders of the Bancshares
Articles Amendment and the Bancshares Code of Regulations Amendment. In
accordance with the provisions of applicable law, the approval and adoption of
the Merger Proposal will constitute an approval and adoption of such amendments
to the Bancshares Articles of Incorporation and the Bancshares Code of
Regulations. In addition to such amendments, Bancshares shareholders are also
being asked to consider and approve the Control Share Acquisition Amendment
although repealing the Control Share Acquisition Provision is not a condition to
the Merger.
BANCSHARES ARTICLES AMENDMENT
The following description of the Bancshares Articles Amendment is intended
to highlight certain important provisions of the Bancshares Articles Amendment.
It is not intended to be complete and is qualified in its entirety by the text
of the Bancshares Articles Amendment, a copy of which is attached as Appendix B
hereto.
Change in Name. The Bancshares Articles Amendment changes the name of
Bancshares to Sky Financial Group, Inc.
Principal Office. The Bancshares Articles Amendment changes the principal
office of Bancshares from Salineville, Ohio to Bowling Green, Ohio.
Number of Shares of Authorized Stock. The Bancshares Articles Amendment
authorizes an increase in the authorized shares of Bancshares Common Stock from
36,000,000 shares to 150,000,000 shares and of Sky Financial Preferred Stock
from 200,000 shares to 10,000,000 shares and reads in its entirety as follows:
FOURTH: The total number of shares of all classes which the
Corporation shall have authority to issue is one hundred sixty million
(160,000,000) shares, divided into two classes as follows: 10,000,000
Serial Preferred Shares, par value $10.00 (Ten Dollars) per share
(hereinafter called the "Serial Shares"), and 150,000,000 Common Shares,
without par value (hereinafter called the "Common Shares").
Of the 150,000,000 shares of Sky Financial Common Stock authorized under
the Bancshares Articles Amendment, approximately 17,748,688 shares are currently
issued as Bancshares Common Stock, approximately 19,170,700 shares are expected
to be issued in connection with the Merger in respect of Mid Am Common Stock. In
addition, approximately 5,249,750 shares are reserved for issuance in the Ohio
Bank Merger.
Therefore, upon consummation of the Merger, Sky Financial will have no more
than approximately 107,262,344 shares of Sky Financial Common Stock available
for issuance from time to time as may be necessary in connection with future
financings, acquisitions of other companies, stock dividends, stock splits,
other distributions, or other corporate purposes. The Boards of Directors of
Bancshares and Mid Am believe that it is advisable to have authorization for
such additional shares in order to enable Sky Financial, as the need may arise,
to take prompt advantage of market conditions and favorable business
opportunities without the delay and expense of holding a special meeting of Sky
Financial shareholders.
The issuance in future acquisitions or other transactions of the additional
shares that would be authorized under the Bancshares Articles Amendment may
dilute the present equity ownership position of current
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holders of Bancshares Common Stock and Mid Am Common Stock, and could have a
dilutive effect on the book value and earnings per share of Sky Financial Common
Stock. Further, additional shares could be issued by Sky Financial in a private
placement to a holder that would, among other things, vote against a business
combination. The effect of issuing shares to a holder that would vote against a
business combination could be to dilute the ownership of a person attempting to
gain control of Sky Financial. Accordingly, a theoretical effect of adoption of
the Bancshares Articles Amendment may be to deter potential acquirors from
attempts to take control of Sky Financial.
The express terms of Sky Financial Common Stock are discussed under the
headings "Description of Sky Financial Common Stock" and "Comparison of Certain
Rights of Holders of Common Stock of Bancshares, Mid Am and Sky Financial."
Cumulative Voting. The Bancshares Articles Amendment eliminates the right
of shareholders of Sky Financial to cumulate their votes in the election of
directors. This change is being made in connection with the Merger to conform
the Bancshares Articles of Incorporation to provisions in the Mid Am Articles of
Incorporation. Cumulative voting allows each shareholder to give one candidate
as many votes as the number of directors to be elected multiplied by the number
of voting shares held by such shareholder, or to distribute votes on the same
principle among two or more candidates. The elimination of cumulative voting has
the effect of permitting a majority of a quorum to elect every director and to
preclude a minority of a quorum to elect or prevent the removal of any director.
Therefore, the elimination of cumulative voting may make it more difficult for a
minority shareholder to obtain representation on the Sky Financial Board of
Directors.
Shareholder Vote Required to Approve Mergers, Consolidations, Sale of
Substantially All Assets. The Bancshares Articles Amendment provides that
notwithstanding any provision of the OGCL which requires the vote of two-thirds,
or any other proportion, of the voting power of Sky Financial, and subject only
to whatever supermajority provisions are otherwise required by Sky Financial
Articles of Incorporation or Sky Financial Code of Regulations, any proposal or
proposition requiring the action of shareholders of Sky Financial may be
authorized upon the affirmative vote of a majority of the voting power thereof.
This change is being made in connection with the Merger to conform the
Bancshares Articles of Incorporation to provisions in the Mid Am Articles of
Incorporation. Subject to Section 1704 of the OGCL, the decreased voting
requirement has the effect of necessitating the affirmative vote of only a
majority of the outstanding shares entitled to vote in approving mergers and
consolidations of Sky Financial with another corporation. Similarly, only a
majority vote will be required to approve the sale of substantially all of Sky
Financial's assets.
The Board of Directors of Sky Financial believes that the reduced
shareholder approval requirement will provide the Sky Financial Board of
Directors with increased flexibility in consummating future acquisitions and
other significant transactions. In addition, in the event the Board of Directors
decides that a sale of Sky Financial is in the best interest of Sky Financial
and its shareholders, the reduced voting requirement will make it easier for an
acquiror approved by the Sky Financial Board of Directors to consummate a merger
with or purchase of Sky Financial.
CONTROL SHARE ACQUISITION AMENDMENT
The Control Share Acquisition Amendment provides for the repeal of the
control share acquisition provision currently set forth in Article Sixth of the
Bancshares Articles of Incorporation. See "Description of Sky Financial Capital
Stock -- Control Share Acquisition Provision" and Appendix B to this Joint Proxy
Statement/Prospectus. The Control Share Acquisition provision restricts certain
acquisitions of Bancshares Common Stock without prior approval of the
shareholders and generally makes the non-negotiated acquisition of control of
Bancshares through a tender or exchange offer more difficult. This provision
effectively precludes a person from acquiring in most cases more than 20% of
Bancshares Common Stock (a "Control Share Acquisition") without receiving the
prior approval of the shareholders of Bancshares at a meeting of shareholders.
The vote required for such approval is (i) a majority of the shares entitled to
vote for the election of directors and (ii) a majority of such shares
represented at the meeting in person or by proxy excluding Interested Shares (as
defined therein). Under this provision, the Board of Bancshares, within ten days
after receipt of a written request, is obligated to call a special meeting of
shareholders to be held not later than 50 days after receipt of a request to
consider any proposed Control Share Acquisition; provided that the
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Board of Directors has no obligation to call such meeting if it makes a
determination within ten days after receipt of such request (i) that the request
was not given in good faith, (ii) that the proposed Control Share Acquisition
would not be in the best interests of the Corporation and its shareholders (the
"Best Interest Standard"), or (iii) that the proposed Control Share Acquisition
could not be consummated for financial or legal reasons. The Board of Directors
of Bancshares, however, may not refuse to call such special meeting of
shareholders under the Best Interests Standard if the Control Share Acquisition
described in the request is for any and all shares of Bancshares Common Stock at
a price higher than 175% of the book value of the common shares as of the close
of the immediately preceding fiscal year. Although the Bancshares Board believes
that restrictions on acquisitions of sizable blocks of voting stock are
appropriate and necessary from a shareholder protection point of view, it
believes that any necessary protection can be obtained from the recently adopted
Rights Plan. Furthermore, it does not believe that it is in the best interests
of the Corporation or its shareholders for non-shareholders or small groups of
shareholders to have the right to force a special shareholders meeting at any
time and at no expense to such persons, and without regard to the strategic
objectives and plans of Bancshares, to consider a change in control or
acquisition of Bancshares. The Bancshares Board believes in the first instance
that such matters should first be considered by the Board of Directors and that
annual shareholders meetings present appropriate opportunities for shareholders
to express their views. An effect of the repeal of the Control Share Acquisition
Provision would be to remove the ability of a person proposing to make an
acquisition of 100% of the Bancshares Common Stock with an offer valued in
excess of 175% of the book value of Bancshares Common Stock as of the end of the
immediately preceding fiscal year and that otherwise met all relevant conditions
to force the Board of Directors of Bancshares to call a special meeting of
shareholders to consider such proposal. Adoption of the Control Share
Acquisition Amendment requires the affirmative vote of 75% of the outstanding
Bancshares Common Stock. Approval of the Control Share Acquisition Amendment is
not a condition to the consummation of the Merger.
BANCSHARES CODE OF REGULATIONS AMENDMENT
The following description of the Bancshares Code of Regulations Amendment
is intended to highlight certain important provisions of the Bancshares Code of
Regulations. It is not intended to be complete and is qualified in its entirety
by the text of the Bancshares Code of Regulations Amendment, a copy of which is
attached as Appendix C hereto.
Number of Directors. The Bancshares Code of Regulations Amendment increases
the size of the board of directors to twenty-two (22), from the current fourteen
(14). This Bancshares Code of Regulations Amendment also increases the range of
possible board compositions, from between nine (9) and twenty-one (21)
directors, to between five (5) and thirty-five (35). Subject to other provisions
in the Code of Regulations and Articles of Incorporation, including restrictions
on removal of directors without cause, the size of the board may vary through
the affirmative vote of 80 percent of the directors then in office. Under the
current Bancshares Code of Regulations, a simple majority of the directors then
in office is sufficient to vary the size of the Bancshares Board within the
specified range. This change is being made in connection with the Merger in part
to accommodate a combination of a significant portion of each of the Mid Am and
Bancshares Boards of Directors and to provide for the appointment of additional
directors, including in connection with the Ohio Bank Merger.
In accordance with the terms of the Merger Agreement and in connection with
the Merger, the Bancshares Code of Regulations Amendment also provides that at
the Effective Time, the board of directors will consist of twenty-two (22)
members, eleven (11) of which will have been appointed by Bancshares and eleven
(11) of which will have been appointed by Mid Am. See "The Merger -- Board of
Directors, Management and Operations after the Merger."
Nominations. Pursuant to the terms of the Merger Agreement and in
connection with the transactions, for a period of three years after the
Effective Time, Mid Am Directors and nominees thereof will have the exclusive
right to nominate individuals to fill vacancies on the Board of Directors of Sky
Financial which were created by the resignation or other departure of one or
more Mid Am Directors or nominees of Mid Am Directors. Bancshares Directors and
nominees thereof will have an identical right with respect to vacancies
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created by the resignation or other departure of one or more Bancshares
Directors or nominees of Bancshares Directors. See "The Merger -- Board of
Directors, Management and Operations after the Merger."
Removal. An amendment to the Bancshares Code of Regulations provision
governing the removal of directors is included in the Bancshares Code of
Regulations Amendment. The amendment provides that directors may only be removed
for cause, and only by the affirmative vote of not less than 80% of the entire
Board of Directors of Sky Financial. This change is being made in connection
with the Merger to conform the Bancshares Code of Regulations to provisions in
the Mid Am Code of Regulations. Under the current Bancshares Code of
Regulations, directors may be removed with or without cause and only by the
affirmative vote of at least 75% of the shares entitled to vote at an election
of directors and present in person or by proxy at the meeting duly called for
the purpose of acting on such removal. Because the foregoing provision will bar
shareholders from removing directors of Sky Financial, such provision may make
it more difficult for a potential acquiror to obtain control of the Board of
Directors of Sky Financial. Therefore, such provision may have an antitakeover
effect.
Officers. The Bancshares Code of Regulations Amendment incorporates certain
revisions in the descriptions of Sky Financial officer positions to more
accurately reflect the management and organization of Sky Financial.
Descriptions of the office of Senior Chairman, Vice Chairman, Chief Executive
Officer and Chief Operating Officer have been added and the description of the
office of President has been revised to more accurately reflect New Citizen's
management structure. See "The Merger -- Board of Directors, Management and
Operations after the Merger."
Special Meetings. In keeping with the changes to be effected to the
management positions of Sky Financial, the Bancshares Code of Regulations
Amendment incorporates a conforming change to the provision governing the
calling of special meetings of shareholders. Special meetings of the
shareholders may be called by the Chairman of the Board, the Chief Executive
Officer, the President or the Chief Operating Officer.
Management Executive Committee. An amendment to the Bancshares Code of
Regulations also provides that at the Effective Time, Sky Financial will
establish the Management Executive Committee. For a discussion of the Management
Executive Committee please see "The Merger -- Board of Directors, Management and
Operations after the Merger."
For a discussion of the how the amended Code of Regulations will differ
from Bancshares' current Code of Regulations and from the Mid Am Code of
Regulations see "Comparison of Certain Rights of Holders of Common Stock of Sky
Financial, Mid Am and Bancshares."
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APPROVAL OF THE AMENDED AND RESTATED 1998 STOCK
OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
The Bancshares' Director Stock Option Plan is being submitted by the
Bancshares Board for approval by the shareholders of Bancshares and would become
effective upon consummation of the Merger. The following description of the
Director Stock Option Plan does not purport to be complete and is qualified in
its entirety by reference to the text of such Director Stock Option Plan
attached as Appendix G to this Joint Proxy Statement/Prospectus.
PURPOSE
In connection with the proposed Merger, the Bancshares Board believes that
it is appropriate to amend and restate the Director Stock Option Plan, which
will permit the granting of awards of stock options to non-employee directors of
Sky Financial and its subsidiaries as a method of enhancing its ability to
attract and retain experienced and knowledgeable directors with a proprietary
interest in Sky Financial's success and progress. If the Director Stock Option
Plan is approved and becomes effective, no further options would be granted to
non-employee directors under either the Bancshares or Mid Am option plans
currently in effect.
SUMMARY OF THE DIRECTOR STOCK OPTION PLAN
Plan Administration. The Director Stock Option Plan will be administered by
a committee (the "DSOP Committee") comprised of not less than two (2)
disinterested members of Sky Financial Board of Directors and consisting of an
equal number of former Mid Am Directors and directors other than Mid Am
Directors. The DSOP Committee will have the sole authority to (i) grant options
under the Director Stock Option Plan, (ii) determine the provisions of the
options to be granted, (iii) interpret the terms of the Director Stock Option
Plan and the options granted thereunder, (iv) correct any defect, supply any
omission and reconcile any inconsistency in the Director Stock Option Plan, (v)
determine whether, to what extent and under what circumstances shares of common
stock payable with respect to an award shall be deferred either automatically or
at the election of the holder thereof or of the DSOP Committee, (vi) amend the
Director Stock Option Plan and (vii) generally administer it as the DSOP
Committee determines necessary and advisable.
Eligibility and Participation. All current non-employee directors of Sky
Financial and its subsidiaries would be eligible to participate in the Director
Stock Option Plan. Future non-employee directors of Sky Financial or its
subsidiaries would also be eligible to participate in the Director Stock Option
Plan.
Common Shares Available; Restrictions on Transferability. The Director
Stock Option Plan provides that two percent (2%) of the total issued and
outstanding shares of Sky Financial Common Stock as of the Effective Date of the
Merger will be reserved for issuance in connection with the grant of stock
options. The number of common shares subject to the Director Stock Option Plan
will be proportionately and equitably adjusted to reflect stock dividends, stock
splits, recapitalizations, mergers, consolidations or other corporate
reorganizations. In the event that a stock option is forfeited, terminates or is
cancelled, the shares of Sky Financial Common Stock relating thereto will again
become available for issuance under the Director Stock Option Plan. Unless
otherwise determined by the DSOP Committee, stock options are not transferable
by the participant, other than by will or by the laws of descent and
distribution.
Stock Option Awards. On an annual basis during the term of the Director
Stock Option Plan, the DSOP Committee will (i) establish performance goals and
criteria in its discretion, and (ii) subject to the terms of the Director Stock
Option Plan, determine the aggregate number of stock options to be granted based
upon such goals and criteria. It is anticipated that grants of stock options to
non-employee directors will be made on an annual basis, but in no event will any
grants be made before December 1998.
Exercise Price of Stock Options. The exercise price for the purchase of Sky
Financial Common Stock subject to stock options shall not be less than 100% of
the fair market value of Sky Financial Common Stock on the date of the grant.
For purposes of the Director Stock Option Plan, the fair market value of a share
of Sky Financial Common Stock shall be the closing bid quotation as reported on
the Nasdaq Stock Market on
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the date of grant by the National Association of Securities Dealers, Inc., or if
no such quotations are available, as determined by the DSOP Committee.
Exercise and Term of Stock Options. Stock options granted pursuant to the
Director Stock Option Plan shall become exercisable as determined by the DSOP
Committee (provided, however, that a change in control of Sky Financial, as
defined in the Director Stock Option Plan, will accelerate the exercise period
of options that are not otherwise exercisable) and shall be for a term
determined by the DSOP Committee from time to time; provided, however, that in
no event shall the term be longer than ten years from the date of grant.
Expiration of Stock Options. Stock options are not exercisable by a
participant after ninety (90) days from the date that an optionee ceases to
serve as a non-employee director of Sky Financial or its subsidiaries, except
that in the event of a termination of service by reason of death or permanent
disability, all stock options shall become exercisable for a one-year period
thereafter; but in no event later than the expiration date of stock options.
Effective Date; Termination and Amendment of Option and Plan. The Director
Stock Option Plan will not become effective unless and until the later of (i)
the date on which it is approved by the shareholders of Bancshares or (ii) the
Effective Date of the Merger. The Director Stock Option Plan will continue until
May 11, 2008. The Board of Directors of Sky Financial may suspend or discontinue
the Director Stock Option Plan and the DSOP Committee may amend the Director
Stock Option Plan from time to time in any respect whatsoever, but no amendment
shall be made that, without the approval of the holder of an option theretofore
granted, would materially impair any rights or materially increase any
obligations under any award made under the Director Stock Option Plan, except as
otherwise specified in the Director Stock Option Plan. Shareholder approval of
any amendment would be obtained to the extent necessary to comply with
applicable laws and regulations.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of the federal income tax consequences
of the grant and exercise of stock options under the Director Stock Option Plan.
This summary is not intended to provide tax advice to recipients and holders of
awards.
Generally, the grant of stock options does not result in taxable income to
the holder of the stock option and Sky Financial is not entitled to a
corresponding deduction from its income taxes.
With respect to non-qualified stock options, the option holder will realize
ordinary income equal to the difference between the fair market value of the
option shares upon exercise over the exercise price thereof. Sky Financial will
be entitled to a corresponding deduction in an amount equal to the amount of
ordinary income realized by the option holder. Upon the subsequent disposition
of the option shares, any gain (loss) will be taxed as short-term or long-term
capital gain (loss), as the case may be.
RECOMMENDATION AND VOTE
The Bancshares Board of Directors recommends that the Bancshares
shareholders vote "FOR" the approval of the Director Stock Option Plan. The
affirmative vote of the holders of at least a majority of the shares of
Bancshares Common Stock present in person or by proxy at the Bancshares Special
Meeting is required to approve the Director Stock Option Plan.
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APPROVAL OF 1998 STOCK OPTION PLAN FOR EMPLOYEES
The Employee Stock Option Plan is being submitted by the Bancshares Board
for approval by the shareholders of Bancshares at the Bancshares Special Meeting
and would become effective upon consummation of the Merger. The following
description of the Employee Stock Option Plan does not purport to be complete
and is qualified in its entirety by reference to the text of such Employee Stock
Option Plan attached as Appendix H to this Joint Proxy Statement/Prospectus.
PURPOSE
In connection with the proposed Merger, the Board of Directors believes
that it is appropriate for Bancshares to have a new Employee Stock Option Plan
to aid Sky Financial and its subsidiaries in attracting, securing, and retaining
key employees of outstanding ability and to provide additional motivation to
such employees to exert their best efforts on behalf of Sky Financial and its
subsidiaries. If the Employee Stock Option Plan is approved and becomes
effective, no further options would be granted to employees under the Bancshares
or Mid Am stock option plans currently in effect.
SUMMARY OF THE EMPLOYEE STOCK OPTION PLAN
Plan Administration. The Employee Stock Option Plan will be administered by
a committee (the "SOP Committee") comprised of not less than two (2)
disinterested members of the Sky Financial Board of Directors and consisting of
an equal number of former Mid Am Directors and directors other than Mid Am
Directors. The SOP Committee will have the sole authority to (i) grant options
under the Employee Stock Option Plan; (ii) determine the provisions of the
options to be granted; (iii) interpret the terms of the Employee Stock Option
Plan and the options granted thereunder; (iv) correct any defect, supply any
omission and reconcile any inconsistency in the Employee Stock Option Plan; (v)
determine whether, to what extent and under what circumstances shares of common
stock payable with respect to an award shall be deferred either automatically or
at the election of the holder thereof or of the SOP Committee; (vi) amend the
Employee Stock Option Plan and (vii) generally administer it as the SOP
Committee determines necessary and advisable.
Eligibility and Participation. All current and future key employees,
including officers, of Sky Financial and its subsidiaries, who are from time to
time responsible for the management, growth and protection of the business of
Sky Financial and its subsidiaries will be eligible for options under the
Employee Stock Option Plan. The SOP Committee will select from the pool of
eligible employees, in its discretion, those employees who shall receive options
under the Employee Stock Option Plan. The SOP Committee will determine, in
accordance with the terms of the Employee Stock Option Plan, the number of
shares each eligible employee will be granted. The Employee Stock Option Plan
specifically provides that, unless otherwise determined by the SOP Committee, to
the extent options are granted by the SOP Committee during the first two years
of the Employee Stock Option Plan, the aggregate number of options granted to
Sky Financial employees formerly employed by Mid Am shall be equal to the
aggregate number of options granted to Sky Financial employees previously
employed by Bancshares.
Common Shares Available; Restrictions on Transferability. The Employee
Stock Option Plan provides that five and one-half percent (5 1/2%) of the total
issued and outstanding shares of Sky Financial as of the Effective Date will be
reserved for issuance in connection with the grant of stock options. The number
of shares of Sky Financial Common Stock subject to the Employee Stock Option
Plan will be proportionately and equitably adjusted to reflect stock dividends,
stock splits, recapitalizations, mergers, consolidations or other corporate
reorganizations. In the event a stock option is forfeited, terminates or is
cancelled, the common shares relating thereto will again become available for
issuance under the Employee Stock Option Plan. Unless otherwise determined by
the SOP Committee, the options are not transferable by the participant, other
than by will or by the laws of decent and distribution.
Exercise Price of Stock Options. The option price for the purchase of Sky
Financial common shares subject to stock options shall not be less than 100% of
the fair market value on the date of grant. Fair market value of a common share
of Sky Financial Common Stock on a particular date will be the closing bid price
for
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such date of the shares of Sky Financial Common Stock (or the last day shares of
Sky Financial Common Stock were traded prior to the grant date) as quoted on the
Nasdaq Stock Market, or if no such quotations are available, as determined by
the SOP Committee.
Time of Exercise Option. Unless otherwise determined by the SOP Committee,
each option will be exercisable during and over a period ending not later than
ten (10) years from the date it was granted. Unless otherwise determined by the
SOP Committee or as otherwise required by the Employee Stock Option plan, the
options shall be exercisable as follows:
<TABLE>
<CAPTION>
TIME AMOUNT EXERCISABLE
---- ------------------
<S> <C>
After Second Anniversary of Date of Grant................... 40%
After Third Anniversary of Date of Grant.................... 60%
After Fourth Anniversary of Date of Grant................... 80%
After Fifth Anniversary of Date of Grant.................... 100%
</TABLE>
Certain events, however, will accelerate the above vesting schedule. These
events include the optionee's death, retirement or permanent disability, or a
change in control of Sky Financial as defined in the Employee Stock Option Plan.
Termination of Employees for Cause; Activities Harmful to Sky Financial. In
the event an employee is terminated for cause, the optionee's option shall
terminate and no options shall thereafter be exercisable. Furthermore, if an
optionee within one (1) year of the date on which an optionee exercises an
option (i) is terminated for cause by Sky Financial or a subsidiary, or (ii)
engages in any activity determined in the discretion of the SOP Committee to be
in competition with any activity, or otherwise inimical, contrary or harmful to
the interest of Sky Financial or any subsidiary, then an amount of cash equal to
any gain realized by the optionee from the exercise of the option shall be paid
by the optionee to Sky Financial immediately upon notice from Sky Financial.
Designation of Certain Options as Incentive Stock Options. Options or
portions of options granted to employees under the Employee Stock Option Plan
may, in the discretion of the SOP Committee, be designated as "incentive stock
options" ("ISOs") within the meaning of Section 422 of the Code. In addition to
the terms and conditions otherwise set forth in the Employee Stock Option Plan,
options designated as incentive stock options shall also be subject to the
certain aggregate fair market value limitations as may be imposed from time to
time under Section 422 of the Code. To the extent such options do not otherwise
comply with Section 422, the options will be treated as nonqualified stock
options.
Effective Date; Termination and Amendment. The Employee Stock Option Plan
will not become effective unless and until the later of (i) the date on which it
is approved by the shareholders of Bancshares or (ii) the Effective Date. The
Employee Stock Option Plan will continue for a period of ten (10) years after
the effective date thereof. The Board of Directors of Sky Financial may suspend
or discontinue the Employee Stock Option Plan and the SOP Committee may amend
the Employee Stock Option Plan from time to time in any respect whatsoever, but
no amendment shall be made that, without the approval of the holder of an option
theretofore granted, would materially impair any rights or materially increase
any obligations under any award made under the Employee Stock Option Plan,
except as otherwise specified in the Employee Stock Option Plan. Shareholder
approval of any amendment would be obtained to the extent necessary to comply
with applicable laws and regulations.
FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING IS A GENERAL SUMMARY OF THE FEDERAL INCOME TAX CONSEQUENCES
OF THE GRANT AND EXERCISE OF OPTIONS UNDER THE EMPLOYEE STOCK OPTION PLAN. THIS
SUMMARY IS NOT INTENDED TO PROVIDE TAX ADVICE TO RECIPIENTS AND HOLDERS OF
AWARDS.
Generally, the grant of options does not result in taxable income to the
option holder and Sky Financial is not entitled to a corresponding deduction
from its income taxes.
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In the case of ISOs, generally there will be no taxable income for the
option holder upon exercise. In addition, if an option holder does not dispose
of the shares acquired upon exercise of the ISO until the later of two years
from the date of grant or one year from the date of exercise (a "disqualifying
disposition"), any gain or loss realized by the option holder upon disposition
will be taxed as long-term capital gain or loss, as the case may be. Sky
Financial will not be entitled to a tax deduction upon the grant or exercise of
ISOs or the disposition of ISO shares. However, if a disqualifying disposition
occurs, then the option holder will realize ordinary income in the year of
disposition in an amount equal to the excess, if any, of the fair market value
of the option shares at the time of exercise (or, if less, the amount realized
on the disqualifying disposition) over the exercise price thereof. Sky Financial
will be entitled to deduct an amount equal to the ordinary income realized by
the option holder upon a disqualifying disposition.
With respect to non-qualified stock options, the option holder will realize
ordinary income equal to the difference between the fair market value of the
option shares upon exercise over the exercise price thereof. Sky Financial will
be entitled to a corresponding deduction in an amount equal to the amount of
ordinary income realized by the option holder. Upon the subsequent disposition
of the option shares, any gain (loss) will be taxed as short-term or long-term
capital gain (loss), as the case may be.
RECOMMENDATION AND VOTE
THE BANCSHARES BOARD RECOMMENDS THAT SHAREHOLDERS OF BANCSHARES VOTE "FOR"
THE APPROVAL OF THE EMPLOYEE STOCK OPTION PLAN. THE AFFIRMATIVE VOTE OF THE
HOLDERS OF AT LEAST A MAJORITY OF THE SHARES OF BANCSHARES COMMON STOCK PRESENT
IN PERSON OR BY PROXY AT THE BANCSHARES SPECIAL MEETING IS REQUIRED TO APPROVE
THE EMPLOYEE STOCK OPTION PLAN.
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EXPERTS
The consolidated financial statements and supplemental consolidated
financial statements of Bancshares at December 31, 1997 and 1996, and for the
years ended December 31, 1997, 1996, and 1995, incorporated by reference in this
Joint Proxy Statement/Prospectus and Registration Statement have been audited by
Crowe, Chizek and Company LLP, as set forth in its reports thereon incorporated
by reference herein. The financial statements audited by Crowe, Chizek and
Company LLP have been incorporated by reference herein in reliance upon such
report given upon their authority as experts in accounting and auditing.
The consolidated financial statements of Century incorporated in this Joint
Proxy Statement/Prospectus by reference to Century's Annual Report on Form 10-K
for the year ended December 31, 1997, included in Bancshares Form 8-K/A, have
been so incorporated in reliance on the report of S. R. Snodgrass, A. C., given
upon the authority of such firm as experts in accounting and auditing.
The financial statements of Mid Am incorporated in this Joint Proxy
Statement/Prospectus by reference to Mid Am's Annual Report on Form 10-K for the
year ended December 31, 1997 have been so incorporated in reliance on the report
of PricewaterhouseCoopers LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.
VALIDITY OF SHARES
The validity of the Bancshares Common Stock and the associated Rights to be
issued pursuant to the Merger will be passed upon for Bancshares by Squire,
Sanders & Dempsey L.L.P.
PROPOSALS FOR 1999 ANNUAL MEETINGS
The Bancshares 1999 Annual Meeting of Shareholders is scheduled to be held
on or about March 25, 1999. Any proposals of shareholders of Bancshares intended
to be presented at that meeting must be received by October 28, 1998, for
inclusion in Bancshares' proxy statement and form of proxy relating to the 1999
Annual Meeting of Shareholders.
The date for the Mid Am 1999 Annual Meeting of Shareholders has not yet
been scheduled pending the consideration by the Mid Am shareholders of the
transactions described in this Joint Proxy Statement/ Prospectus. In the event
that the Mid Am 1999 Annual Meeting of Shareholders is held, shareholder
proposals intended to be presented at such meeting must have been received by
November 4, 1998 for inclusion in Mid Am's proxy statement and form of proxy
relating to the 1999 Annual Meeting of Shareholders.
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APPENDIX A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
DATED AS OF MAY 20, 1998
AS AMENDED AND RESTATED
AS OF AUGUST 5, 1998
BY AND BETWEEN
MID AM, INC.
AND
CITIZENS BANCSHARES, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 97
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
RECITALS
A. Mid Am...................................................... A-1
B. Bancshares.................................................. A-1
C. The Stock Option Agreements................................. A-1
D. Intention of the Parties.................................... A-1
E. Approvals................................................... A-1
ARTICLE I
THE MERGER
1.1 The Merger.................................................. A-1
1.2 Effective Time.............................................. A-2
1.3 Closing..................................................... A-2
ARTICLE II
GOVERNING DOCUMENTS OF THE
SURVIVING CORPORATION
2.1 Articles of Incorporation of the Surviving Corporation...... A-2
2.2 Code of Regulations of the Surviving Corporation............ A-2
2.3 Headquarters of the Surviving Corporation................... A-2
2.4 Name of the Surviving Corporation........................... A-2
2.5 Articles Amendments......................................... A-2
2.6 Amendments to the Code of Regulations....................... A-2
ARTICLE III
DIRECTORS AND OFFICERS
3.1 Directors of the Surviving Corporation...................... A-2
3.2 Management Executive Committee.............................. A-3
3.3 Executive Committee......................................... A-3
3.4 Officers of the Surviving Corporation....................... A-4
ARTICLE IV
CONVERSION OR CANCELLATION OF SHARES
4.1 Conversion or Cancellation of Shares........................ A-4
(a) Mid Am Common Stock..................................... A-4
(b) Bancshares Common Stock................................. A-4
(c) Cancellation of Old Shares.............................. A-4
4.2 Fractional Shares........................................... A-4
4.3 Exchange of Old Certificates for New Certificates........... A-5
(a) Appointment of Exchange Agent........................... A-5
(b) Exchange Procedures..................................... A-5
(c) Distributions with Respect to Unexchanged Shares........ A-5
(d) Transfers............................................... A-5
(e) Lost, Stolen or Destroyed Certificates.................. A-5
4.4 Adjustment of Exchange Ratio................................ A-6
4.5 Dissenting Shareholders..................................... A-6
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Disclosure Letters.......................................... A-7
5.2 Standards................................................... A-7
5.3 Representations and Warranties of Mid Am and Bancshares..... A-7
(a) Corporate Organization and Qualification................ A-7
(b) Subsidiaries............................................ A-7
</TABLE>
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<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
(c) Capital Stock........................................... A-8
(d) Corporate Authority and Action.......................... A-9
(e) Governmental Filings; No Violations..................... A-9
(f) Reports and Financial Statements........................ A-9
(g) Absence of Certain Events and Changes................... A-10
(h) Compliance with Laws.................................... A-10
(i) Litigation.............................................. A-10
(j) Taxes................................................... A-11
(k) Insurance............................................... A-11
(l) Labor Matters........................................... A-11
(m) Employee Benefits....................................... A-11
(n) Environmental Matters................................... A-12
(o) Community Reinvestment Act.............................. A-13
(p) Agreements.............................................. A-13
(q) Knowledge as to Conditions.............................. A-13
(r) Fairness Opinions....................................... A-13
(s) Brokers and Finders..................................... A-13
(t) Risk Management Instruments............................. A-13
(u) Year 2000............................................... A-13
(v) Employment Agreements................................... A-14
ARTICLE VI
COVENANTS
6.1 Conduct of Business Pending the Effective Time.............. A-14
6.2 Dividends................................................... A-15
6.3 Acquisition Proposals....................................... A-15
6.4 Shareholder Approval........................................ A-16
6.5 Filings; Other Actions...................................... A-16
6.6 Information Supplied........................................ A-17
6.7 Access and Investigations................................... A-17
6.8 Certain Modifications; Restructuring Charges................ A-18
6.9 Takeover Laws............................................... A-18
6.10 Options..................................................... A-18
(a) Conversion of Options................................... A-18
(b) Assumption by Bancshares................................ A-18
6.11 Benefit Plans............................................... A-18
6.12 Indemnification and Insurance............................... A-19
6.13 Affiliate Agreements........................................ A-19
6.14 Publicity................................................... A-20
6.15 Reasonable Best Efforts..................................... A-20
6.16 Notification of Certain Matters............................. A-20
6.17 Expenses.................................................... A-20
ARTICLE VII
CONDITIONS
Conditions to Each Party's Obligation to Effect the
7.1 Merger...................................................... A-20
(a) Shareholder Approval.................................... A-20
(b) Governmental and Regulatory Consents.................... A-20
(c) Third Party Consents.................................... A-20
(d) No Prohibitions......................................... A-20
(e) Registration Statement.................................. A-21
(f) Blue Sky Approvals...................................... A-21
(g) Accountants' Pooling Letters............................ A-21
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
(h) Nasdaq Listing.......................................... A-21
7.2 Conditions to Obligation of Mid Am.......................... A-21
(a) Representations and Warranties.......................... A-21
(b) Performance of Obligations of Bancshares................ A-21
(c) Opinion of Tax Counsel.................................. A-21
7.3 Conditions to Obligation of Bancshares...................... A-22
(a) Representations and Warranties.......................... A-22
(b) Performance of Obligations of Mid Am.................... A-22
(c) Opinion of Tax Counsel.................................. A-22
ARTICLE VIII
TERMINATION
8.1 Termination by Mutual Consent............................... A-22
8.2 Termination by Either Mid Am or Bancshares.................. A-22
8.3 Termination by Bancshares................................... A-22
8.4 Termination by Mid Am....................................... A-23
8.5 Effect of Termination and Abandonment....................... A-23
ARTICLE IX
MISCELLANEOUS
9.1 Survival.................................................... A-24
9.2 Modification or Amendment................................... A-24
9.3 Waiver of Conditions........................................ A-24
9.4 Counterparts................................................ A-24
9.5 Governing Law............................................... A-24
9.6 Notices..................................................... A-24
9.7 Entire Agreement, Etc. ..................................... A-25
Definition of "subsidiary"; Covenants with Respect to
9.8 Subsidiaries................................................ A-25
9.9 Interpretation; Effect...................................... A-25
9.10 Severability................................................ A-25
9.11 No Third Party Beneficiaries................................ A-25
ANNEXES
1. Form of Stock Option Agreement (Recital C)
2. Amendment to Bancshares Articles of Incorporation (Section 2.5)
3. Amendment to Bancshares Regulations (Section 2.6)
4. Form of Mid Am Affiliate Agreement (Section 6.13)
5. Form of Bancshares Affiliate Agreement (Section 6.13)
</TABLE>
iii
<PAGE> 100
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
LOCATION OF
TERM DEFINITION
---- -----------
<S> <C>
Acquisition Proposal........................................ 6.3
Affiliates.................................................. 6.13(a)
Articles Amendments......................................... 2.5
Articles of Incorporation................................... 2.1
BHC Act..................................................... 5.3(e)(i)
Certificate of Merger....................................... 1.2(a)
Bancshares.................................................. Preamble
Bancshares Common Stock..................................... Recital B
Bancshares Directors........................................ 3.1
Bancshares Dissenting Shares................................ 4.5(b)
Bancshares Management Executive Committee Members........... 3.2
Bancshares Meeting.......................................... 6.4(b)
Bancshares Preferred Stock.................................. Recital B
Bancshares Stock Option Agreement........................... Recital C
Closing..................................................... 1.3
Closing Date................................................ 1.3
Code Amendments............................................. 2.6
Code of Regulations......................................... 2.2
Compensation Plans.......................................... 5.3(m)(i)
Contracts................................................... 5.3(e)(ii)
Disclosure Letter........................................... 5.1
Effective Time.............................................. 1.2(a)
Employees................................................... 5.3(m)(i)
Environmental Laws.......................................... 5.3(n)
ERISA....................................................... 5.3(m)(i)
ERISA Affiliate............................................. 5.3(m)(iii)
ERISA Affiliate Plan........................................ 5.3(m)(iii)
Exception Shares............................................ 4.1(a)
Exchange Act................................................ 5.3(e)(i)
Exchange Agent.............................................. 4.3(a)
Exchange Ratio.............................................. 4.1(a)
Federal Reserve Board....................................... 5.3(e)(i)
Financial Statements........................................ 5.3(f)(iii)
Governmental Entity......................................... 5.3(e)(i)
Internal Revenue Code....................................... Recital D
Joint Proxy Statement/Prospectus............................ 6.5(a)
Liens....................................................... 5.3(c) (E)
Management Executive Committee.............................. 3.2
Material Adverse Effect..................................... 5.2(b)
Maximum Amount.............................................. 6.12(b)
Merger...................................................... 1.1(a)
Mid Am...................................................... Preamble
Mid Am Common Stock......................................... Recital A
Mid Am Directors............................................ 3.1
Mid Am Dissenting Shares.................................... 4.5(a)
Mid Am Management Executive Committee Members............... 3.2
Mid Am Meeting.............................................. 6.4(a)
Mid Am Option............................................... 6.10(a)
Mid Am Preferred Stock...................................... Recital A
</TABLE>
iv
<PAGE> 101
<TABLE>
<CAPTION>
LOCATION OF
TERM DEFINITION
---- -----------
<S> <C>
Mid Am Stock Option Agreement............................... Recital C
Nasdaq...................................................... 4.2
New Certificate............................................. 4.1(c)
New Option.................................................. 6.10(a)
New Shares.................................................. 4.1(c)
OGCL........................................................ 1.1(b)
Old Certificate............................................. 4.1(c)
Old Share................................................... 4.1(c)
Pension Plan................................................ 5.3(m)(ii)
Person...................................................... 6.1(c)
Plan........................................................ Preamble
Registration Statement...................................... 6.5(a)
Regulatory Approvals........................................ 5.3(e)(i)
Reports..................................................... 5.3(f)(i)
Representatives............................................. 6.3
Rights...................................................... 5.3(c)(D)
Risk Management Instruments................................. 5.3(t)
SEC......................................................... 5.3(f)(i)
Securities Act.............................................. 5.3(e)(i)
Securities Laws............................................. 5.3(e)(i)
Stock Option Agreements..................................... Recital C
Surviving Corporation....................................... 1.1(a)
Takeover Laws............................................... 5.3(d)(ii)
Tax......................................................... 5.3(j)
Termination Date............................................ 8.2
</TABLE>
v
<PAGE> 102
AGREEMENT AND PLAN OF MERGER, dated as of May 20, 1998, and amended and
restated as of August 5, 1998 (this "Plan"), by and between Mid Am, Inc. ("Mid
Am") and Citizens Bancshares, Inc. ("Bancshares").
RECITALS
A. Mid Am. Mid Am is an Ohio corporation with its principal executive
offices located in Bowling Green, Ohio. As of the date hereof, Mid Am has (i)
100,000,000 authorized shares of common stock, without par value ("Mid Am Common
Stock"), of which not more than 23,360,430 shares are outstanding, and (ii)
2,000,000 authorized shares of preferred stock, without par value ("Mid Am
Preferred Stock"), of which no shares are designated or outstanding.
B. Bancshares. Bancshares is an Ohio corporation with its principal
executive offices located in Salineville, Ohio. As of the date hereof,
Bancshares has (i) 36,000,000 authorized shares of common stock, without par
value ("Bancshares Common Stock"), of which not more than 8,850,796 shares are
outstanding, and (ii) 200,000 authorized shares of preferred stock, par value
$10.00 per share ("Bancshares Preferred Stock"), of which no shares are
designated or outstanding.
C. The Stock Option Agreements. As an inducement to the willingness of
Bancshares to continue to pursue the transactions contemplated by this Plan, Mid
Am expects (but is not obligated) to grant to Bancshares an option pursuant to a
stock option agreement in substantially the form of Annex 1 to this Plan (the
"Mid Am Stock Option Agreement"). As an inducement to the willingness of Mid Am
to continue to pursue the transactions contemplated by this Plan, Bancshares
expects (but is not obligated) to grant to Mid Am an option pursuant to a stock
option agreement in substantially the form of Annex 1 to this Plan (the
"Bancshares Stock Option Agreement" and, together with the Mid Am Stock Option
Agreement, the "Stock Option Agreements").
D. Intention of the Parties. It is the intention of the parties to this
Plan that the Merger (as hereinafter defined) (i) shall be accounted for as a
"pooling of interests" under generally accepted accounting principles and (ii)
shall qualify as a tax free reorganization under Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Internal Revenue Code") and that this
Plan shall constitute a "plan of reorganization" for purposes of Section 368 of
the Internal Revenue Code.
E. Approvals. The Board of Directors of each of Mid Am and Bancshares has
(i) determined that this Plan and the transactions contemplated hereby are in
the best interests of Mid Am and Bancshares, respectively, and in the best
long-term interests of their respective shareholders, (ii) determined that this
Plan and the transactions contemplated hereby are consistent with, and in
furtherance of, its respective business strategies and (iii) approved, at
meetings of each of such Boards of Directors, this Plan.
NOW, THEREFORE, in consideration of their mutual promises and obligations,
the parties hereto approve, adopt and make this Plan and prescribe the terms and
conditions hereof and the manner and basis of carrying it into effect, which
shall be as follows:
ARTICLE I
THE MERGER
1.1 The Merger. (a) Subject to the terms and conditions of this Plan, at
the Effective Time (as hereinafter defined), Mid Am shall merge with and into
Bancshares (the "Merger"), and the separate corporate existence of Mid Am shall
thereupon cease. Bancshares shall be the surviving corporation in the Merger
(sometimes hereinafter referred to as the "Surviving Corporation") and shall
continue to be governed by the laws of the State of Ohio. Upon their mutual
agreement, Bancshares and Mid Am may at any time prior to the Effective Time
change the method of effecting the combination of Bancshares and Mid Am
(including, without limitation, the provisions of this Article I) if and to the
extent they both deem such change to be necessary, appropriate or desirable;
provided, however, that no such change shall (i) alter or change the Exchange
Ratio (as hereinafter defined), (ii) adversely affect the tax treatment of Mid
Am's
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shareholders or Bancshares' shareholders pursuant to this Plan, (iii) adversely
affect the tax treatment of Bancshares, Mid Am or any affiliate of Bancshares or
Mid Am or (iv) materially impede or delay consummation of the transactions
contemplated by this Plan.
(b) The Merger shall have the effects specified in this Plan and the Ohio
General Corporation Law (the "OGCL").
1.2 Effective Time. (a) Subject to the terms and conditions of this Plan,
the parties to this Plan will cause a certificate of merger to be filed with the
Office of the Secretary of State of the State of Ohio as provided in Section
1701.78 of the OGCL (the "Certificate of Merger"). The Merger shall become
effective at such time as the Certificate of Merger has been filed, or at such
other time as may be specified therein. The date and time when the Merger shall
become effective is herein referred to as the "Effective Time".
(b) Mid Am and Bancshares each will use reasonable best efforts to cause
the Effective Time to occur on or prior to the tenth business day immediately
following the date on which the satisfaction or waiver of the last of the
conditions specified in Sections 7.1(a), (b), (c), (e) and (g) of this Plan has
occurred. Notwithstanding anything to the contrary in this Section 1.2(b), Mid
Am and Bancshares may cause the Effective Time to occur on such earlier or later
day following the satisfaction or waiver of such conditions as they may agree in
writing, consistent with the provisions of the OGCL.
1.3 Closing. The closing of the Merger (the "Closing") shall take place at
such time and place as Mid Am and Bancshares shall agree, on the date when the
Effective Time is to occur (the "Closing Date").
ARTICLE II
GOVERNING DOCUMENTS OF THE SURVIVING CORPORATION
2.1 Articles of Incorporation of the Surviving Corporation. At the
Effective Time, the amended articles of incorporation of Bancshares, as in
effect on the date hereof and as amended in accordance with Section 2.5, shall
be the articles of incorporation of the Surviving Corporation (the "Articles of
Incorporation").
2.2 Code of Regulations of the Surviving Corporation. At the Effective
Time, the Code of Regulations of Bancshares, as in effect on the date hereof and
as amended in accordance with Section 2.6, shall be the Code of Regulations of
the Surviving Corporation (the "Code of Regulations").
2.3 Headquarters of the Surviving Corporation. At the Effective Time, the
headquarters of the Surviving Corporation shall be the headquarters on the date
hereof of Mid Am.
2.4 Name of the Surviving Corporation. The name of the Surviving
Corporation shall be Sky Financial Group, Inc.
2.5 Articles Amendments. Prior to the Effective Time, Bancshares shall duly
execute and deliver for filing and file, in accordance with the OGCL, with the
Secretary of State of the State of Ohio, a certificate of amendment
substantially in the form set forth in Annex 2 (the "Articles Amendments").
2.6 Amendments to the Code of Regulations. At the Effective Time, the Code
of Regulations shall be amended substantially in the form set forth in Annex 3
(the "Code Amendments").
ARTICLE III
DIRECTORS AND OFFICERS
3.1 Directors of the Surviving Corporation. At the Effective Time, the
directors of the Surviving Corporation shall consist of 22 members, 11 of whom
shall be selected by the Chairman of the Board and Chief Executive Officer of
Mid Am (the "Mid Am Directors") and 11 of whom shall be selected by the Board of
Directors of Bancshares (the "Bancshares Directors") and which shall be
allocated among the three classes of directors of Bancshares by the agreement of
the Chairman of the Board and Chief Executive Officer of Mid Am and the Chief
Executive Officer of Bancshares so that each class shall (to the extent
practicable) have an
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equal number of Mid Am Directors and Bancshares Directors. For a period of three
years after the Effective Time, in the event that a Mid Am Director or a
Bancshares Director or a director otherwise elected or nominated as set forth in
this Section 3.1 shall resign, no longer be able to serve or not stand for
reelection, (i) if such director shall be a Mid Am Director or a nominee of the
Mid Am Directors, then the Mid Am Directors and nominees of the Mid Am Directors
serving as directors shall have the exclusive right to nominate an individual to
fill such vacancy and the entire Board of Directors shall either elect such
person a director or nominate such person for election as a director and (ii) if
such director shall be a Bancshares Director or a nominee of the Bancshares
Directors, then the Bancshares Directors and nominees of the Bancshares
Directors serving as directors shall have the exclusive right to nominate an
individual to fill such vacancy and the entire Board of Directors shall either
elect such person a director or nominate such person for election as a director.
Each director will hold office in accordance with the Articles of Incorporation
and Code of Regulations until the earlier of their resignation or removal or
until their respective successors are duly elected and qualified, as the case
may be.
3.2 Management Executive Committee. At the Effective Time, a management
executive committee (the "Management Executive Committee") of the Surviving
Corporation will be formed and will consist of at least eight members, one-half
of whom shall be selected by the Chairman of the Board and Chief Executive
Officer of Mid Am (the "Mid Am Management Executive Committee Members") and
one-half of whom shall be selected by the President and Chief Executive Officer
of Bancshares (the "Bancshares Management Executive Committee Members"). For a
period of three years after the Effective Time, in the event that a Mid Am
Management Executive Committee Member or a Bancshares Management Executive
Committee Member or a member of the Management Executive Committee otherwise
selected as set forth herein or by the Mid Am Directors or Bancshares Directors
set forth herein shall resign or no longer serve, (i) if such member shall be a
Mid Am Management Executive Committee Member or selected by the Mid Am
Directors, then the Mid Am Directors and nominees of the Mid Am Directors
serving as directors shall have the exclusive right to select an individual to
fill such vacancy and (ii) if such member shall be a Bancshares Management
Executive Committee Member or selected by of the Bancshares Directors, then the
Bancshares Directors and nominees of the Bancshares Directors serving as
directors shall have the exclusive right to select an individual to fill such
vacancy. Mid Am Directors and the nominees of Mid Am Directors serving as
directors shall have the exclusive right to remove any Mid Am Management
Executive Committee Member or any member of the Management Executive Committees
they have selected. Bancshares Directors and the nominees of Bancshares
Directors serving as directors shall have the exclusive right to remove any
Bancshares Management Executive Committee member or any member of the Management
Executive Committee they have selected. Members of the Management Executive
Committee shall either be members of the Board of Directors or employees of the
Surviving Corporation or its subsidiaries. After the Effective Time, the Board
of Directors may appoint additional members to the Management Executive
Committee other than as set forth in the preceding sentences and the Board of
Directors shall have the exclusive right to remove any such member it has
selected.
3.3 Executive Committee. The directors, at any time, may elect from their
number an executive committee ("Executive Committee") which shall consist of
four or more directors of the Surviving Corporation, each of whom shall hold
office during the pleasure of the directors and may be removed at any time, with
or without cause, by vote thereof. In the event that an Executive Committee is
formed at any time during the three year period after the Effective Time, the
Executive Committee shall consist of an even number of directors, one-half of
whom shall (the "Mid Am Executive Committee Members") be selected by the Mid Am
Directors and nominees of Mid Am Directors serving as directors and one-half of
whom (the "Bancshares Executive Committee Members") shall be selected by the
Bancshares Directors and nominees of the Bancshares Directors serving as
directors plus such additional directors as a majority of the directors who
become directors as a result of or pursuant to Section 3.1 shall determine.
Vacancies occurring in the Executive Committee may be filled by the directors;
provided however, that for a period of three years after the Effective Time, in
the event that a Mid Am Executive Committee Member or a Bancshares Executive
Committee Member or a member of the Executive Committee otherwise selected as
set forth herein by the Mid Am Directors or Bancshares Directors shall resign or
no longer serve, (i) if such member shall be a Mid Am Executive Committee Member
or shall have been selected by the Mid Am Directors and nominees of the
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Mid Am Directors serving as directors, then the Mid Am Directors and nominees of
the Mid Am Directors serving as directors shall have the exclusive right to
select an individual to fill such vacancy and (ii) if such member shall be a
Bancshares Executive Committee Member or shall have been selected by the
Bancshares Directors and nominees of the Bancshares Directors serving as
directors, then the Bancshares Directors and nominees of the Bancshares
Directors serving as directors shall have the exclusive right to select an
individual to fill such vacancy.
3.4 Officers of the Surviving Corporation. At the Effective Time, Edward J.
Reiter shall become the Senior Chairman of the Board of Directors of the
Surviving Corporation, David R. Francisco shall become the Chairman of the Board
of Directors and Chief Executive Officer of the Surviving Corporation, Marty E.
Adams shall become President and Chief Operating Officer of the Surviving
Corporation and James C. McBane shall become Vice Chairman of the Board of
Directors of the Surviving Corporation. Subject to the terms of an employment
agreement between Mr. Adams and Bancshares entered into in connection with the
Merger, unless otherwise determined by a majority of the Board of Directors of
the Surviving Corporation, Mr. Adams will become the Chief Executive Officer of
the Surviving Corporation on the earlier to occur of (i) the fifth anniversary
of the Effective Date or (ii) the date that Mr. Francisco ceases to serve as the
Chief Executive Officer of the Surviving Corporation.
ARTICLE IV
CONVERSION OR CANCELLATION OF SHARES
4.1 Conversion or Cancellation of Shares. At the Effective Time, by virtue
of the Merger and without any action on the part of any shareholder:
(a) Mid Am Common Stock. Each share of Mid Am Common Stock issued and
outstanding immediately prior to the Effective Time, other than Exception
Shares (as hereinafter defined) and Mid Am Dissenting Shares (as
hereinafter defined), shall be converted into 0.385 of a share of
Bancshares Common Stock (subject to Section 4.4, the "Exchange Ratio").
"Exception Shares" means shares of Mid Am Common Stock owned or held, other
than in a bona fide fiduciary capacity or in satisfaction of a debt
previously contracted in good faith, by Mid Am or a subsidiary (as
hereinafter defined) of Mid Am or held by Bancshares in treasury or by a
subsidiary of Bancshares.
(b) Bancshares Common Stock. Each share of Bancshares Common Stock
outstanding immediately prior to the Effective Time, other than Bancshares
Dissenting Shares (as hereinafter defined), shall remain outstanding.
(c) Cancellation of Old Shares. Each Exception Share shall cease to be
outstanding, shall be canceled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor. Each share of Mid Am
Common Stock issued and outstanding immediately prior to the Effective
Time, other than Exception Shares and Dissenting Shares, is hereinafter
defined as an "Old Share". Old Shares shall cease to be outstanding, shall
be canceled and retired and shall cease to exist, and each holder of a
certificate (an "Old Certificate") formerly representing Old Shares shall
thereafter cease to have any rights with respect to such shares, except the
right to receive, without interest, upon exchange of such Old Certificate
in accordance with Section 4.3, a certificate (a "New Certificate")
representing the shares of Bancshares Common Stock ("New Shares") and any
payment to which such holder is entitled pursuant to this Article IV.
4.2 Fractional Shares Notwithstanding any other provision of this Article
IV, no fractional shares of Bancshares Common Stock will be issued in exchange
for shares of Mid Am Common Stock hereunder and any former holder of Mid Am
Common Stock that would be entitled hereunder to receive fractional interests in
shares of Bancshares Common Stock but for this Section 4.2 will be entitled
hereunder to receive instead a cash payment, without interest, in an amount
equal to the product of (i) the fraction of a share to which such holder would
otherwise have been entitled and (ii) the last reported sale price per share of
Bancshares Common Stock on the trading day most recently preceding the Closing
Date as reported on the Nasdaq
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National Market System (the "Nasdaq") (as published in The Wall Street Journal
or, if not therein, in another authoritative source).
4.3 Exchange of Old Certificates for New Certificates. (a) Appointment of
Exchange Agent. Until the first anniversary of the Effective Time, Bancshares
shall make available or cause to be made available to an exchange agent agreed
upon by Bancshares and Mid Am (the "Exchange Agent"), New Certificates and cash
in amounts sufficient to allow the Exchange Agent to make all deliveries of New
Certificates and payments that may be required in exchange for Old Certificates
pursuant to this Article IV. Upon such anniversary, any such New Certificates
and cash remaining in the possession of the Exchange Agent (together with any
dividends or earnings in respect thereof) shall be delivered to Bancshares. Any
former holder of Old Shares who has not theretofore exchanged his or her Old
Certificates for New Certificates and cash pursuant to this Article IV shall
thereafter be entitled to look exclusively to Bancshares, and only as a general
creditor thereof, for the New Shares and/or cash to which he or she may be
entitled upon exchange of such Old Certificates pursuant to this Article IV.
Notwithstanding the foregoing, neither the Exchange Agent nor any party hereto,
shall be liable to any former holder of Old Shares for any amount properly
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
(b) Exchange Procedures. Promptly after the Effective Time, Bancshares
shall cause the Exchange Agent to mail or deliver to each Person (as hereinafter
defined) who was, immediately prior to the Effective Time, a holder of record of
Old Shares a form of letter of transmittal containing instructions for use in
effecting the surrender of Old Certificates in exchange for New Certificates and
any payments pursuant to this Article IV. Upon surrender to the Exchange Agent
of an Old Certificate for cancellation together with such letter of transmittal,
duly executed and completed in accordance with the instructions thereto, the
holder of such Old Certificate shall be entitled to receive in exchange therefor
a New Certificate representing the New Shares and a check in the amount, if any,
to which such holder is entitled pursuant to this Article IV, and the Old
Certificate so surrendered shall forthwith be canceled. No interest will accrue
or be paid with respect to any property to be delivered upon surrender of Old
Certificates. If any New Certificate is to be issued, or cash payment made, in a
name other than that in which the Old Certificate surrendered in exchange
therefor is registered, it shall be a condition of such exchange that the Person
requesting such exchange shall pay any transfer or other taxes required by
reason of the issuance of such New Certificate or the making of such cash
payment in a name other than that of the registered holder of the Old
Certificate surrendered, or shall establish to the satisfaction of Bancshares
that any such taxes have been paid or are not applicable. An Affiliate (as
hereinafter defined) of Mid Am or Bancshares shall not be entitled to receive
any New Certificate or payment pursuant to this Article IV until such Affiliate
shall have duly executed and delivered an appropriate agreement described in
Section 6.13.
(c) Distributions with Respect to Unexchanged Shares. Notwithstanding any
other provision of this Plan, in the absence of an election to the contrary by
Bancshares, no dividends or other distributions with a record date following the
90th day after the Effective Time shall be paid, to any Person holding an Old
Certificate with respect to the New Shares until such Old Certificate has been
surrendered for exchange as provided herein. Subject to the effect of applicable
laws, (i) there shall be paid, to each former holder of Old Shares, the amount
of dividends or other distributions with a record date after the Effective Time
but on or before the 90th day following the Effective Time payable with respect
to the New Shares, into which such Old Shares have been converted pursuant to
Section 4.1 and (ii) following surrender of any such Old Certificates, there
shall be paid to the holder of the New Certificates issued in exchange therefor,
without interest, at the time of such surrender, the amount of dividends or
other distributions with a record date after such 90-day period theretofore
payable with respect to the New Shares represented thereby.
(d) Transfers. At or after the Effective Time, there shall be no transfers
on the stock transfer books of the Surviving Corporation of Old Shares.
(e) Lost, Stolen or Destroyed Certificates. If any Old Certificate shall
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the Person claiming such Old Certificate to be lost, stolen or destroyed
and, if required by Bancshares, the posting by such Person of a bond in such
reasonable amount as Bancshares may direct as indemnity against any claim that
may be made against it with respect to
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such Old Certificate, Bancshares shall, in exchange for such lost, stolen or
destroyed Old Certificate, issue or cause to be issued a New Certificate and pay
or cause to be paid the amounts, if any, deliverable in respect to the Old
Shares formerly represented by such Old Certificate pursuant to this Article IV.
4.4 Adjustment of Exchange Ratio. In the event that, subsequent to the date
of this Plan but prior to the Effective Time, the shares of Bancshares Common
Stock issued and outstanding shall, through a reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split or other
similar change in the capitalization of Bancshares, increase or decrease in
number or be changed into or exchanged for a different kind or number of
securities, then an appropriate and proportionate adjustment shall be made to
the Exchange Ratio including, in the case of the previously announced stock
split or stock dividend by Bancshares of one share for each existing share, an
adjustment in the Exchange Ratio of an additional 0.385 shares of Bancshares
Common Stock for each share of Mid Am Common Stock.
4.5 Dissenting Shareholders. (a) Notwithstanding anything in this Plan to
the contrary, shares of Mid Am Common Stock which are issued and outstanding
immediately prior to the Effective Time and which are held by shareholders who
did not vote in favor of the adoption of this Plan, who are entitled to demand
the fair cash value of such shares of Mid Am Common Stock under Section 1701.84
of the OGCL, and who comply with all of the relevant provisions of such Section
(the "Mid Am Dissenting Shares") shall be converted into the right to receive
payment for the fair cash value of such shares upon strict compliance with the
applicable provisions of the OGCL (unless and until such holders shall have
failed to perfect or shall have effectively withdrawn or lost their dissenters'
rights under the OGCL). If any such holder shall have failed to perfect or shall
have effectively withdrawn or lost such dissenters' rights, such holder's shares
of Mid Am Common Stock shall thereupon cease to be outstanding, shall be
canceled and retired, shall cease to exist and shall otherwise be treated as Old
Shares and each holder of a certificate formerly representing such Old Shares
shall have the right to receive, without interest, upon exchange of such
holder's Old Certificate in accordance with Section 4.3, a New Certificate
representing the New Shares and any payment to which such holder is entitled
pursuant to this Article IV. Mid Am shall give Bancshares (i) prompt notice of
any written demands for payment for any Mid Am Common Stock under Section
1701.85 of the OGCL, attempted withdrawals of such demands, and any other
instruments served pursuant to the OGCL and received by Mid Am relating to
dissenters' rights, and (ii) the opportunity to participate in all negotiations
and proceedings with respect to the exercise of dissenters' rights under the
OGCL. Mid Am shall not, except with the prior written consent of Bancshares,
voluntarily make any payment with respect to any demands for payments for Mid Am
Common Stock under Section 1701.84 of the OGCL, offer to settle or settle any
such demands or approve any withdrawal of any such demands.
(b) Notwithstanding anything in this Plan to the contrary, shares of
Bancshares Common Stock which are issued and outstanding immediately prior to
the Effective Time and which are held by shareholders who did not vote in favor
of the adoption of this Plan, who are entitled to demand the fair cash value of
such shares of Bancshares Common Stock under Section 1701.84 of the OGCL, and
who comply with all of the relevant provisions of such Section (the "Bancshares
Dissenting Shares") shall be converted into the right to receive payment for the
fair cash value of such shares upon strict compliance with the applicable
provisions of the OGCL (unless and until such holders shall have failed to
perfect or shall have effectively withdrawn or lost their dissenters' rights
under the OGCL). If any such holder shall have failed to perfect or shall have
effectively withdrawn or lost such dissenters' rights, all rights of such holder
with respect to such holder's shares of Bancshares Common Stock in question
shall be restored, all distributions which, but for the suspension of rights
with respect to such holder's shares of Bancshares Common Stock in question,
would have been made shall be made to the holder of record of the shares of
Bancshares Common Stock in question at the time of termination, and the effect
of any recapitalization contemplated by the Articles Amendments which, but for
the suspension of rights with respect to such holder's shares of Bancshares
Common Stock in question, would have been effected shall be effected as to such
shares. Prior to the Effective Time, Bancshares shall give Mid Am (i) prompt
notice of any written demands for payment for any Bancshares Common Stock under
Section 1701.84 of the OGCL, attempted withdrawals of such demands, and any
other instruments served pursuant to the OGCL and received by Bancshares
relating to dissenters' rights, and (ii) the opportunity to participate in all
negotiations and proceedings with respect to the exercise of dissenters' rights
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under the OGCL. Prior to the Effective Time, Bancshares shall not, except with
the prior written consent of Mid Am, voluntarily make any payment with respect
to any demands for payments for Bancshares Common Stock under Section 1701.84 of
the OGCL, offer to settle or settle any such demands or approve any withdrawal
of any such demands.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Disclosure Letters. Prior to the execution and delivery hereof,
Bancshares has delivered to Mid Am, and Mid Am has delivered to Bancshares, a
letter (as the case may be, its "Disclosure Letter") setting forth, among other
things, items the disclosure of which is necessary or appropriate either in
response to an express disclosure requirement contained in a provision hereof or
as an exception to one or more of such party's representations or warranties
contained in Section 5.3 or to one or more of its covenants contained in Article
VI; provided, that (a) no such item is required to be set forth in the
Disclosure Letter as an exception to a representation or warranty if its absence
would not result in the related representation or warranty being deemed untrue
or incorrect under the standard established by Section 5.2, and (b) the mere
inclusion of an item in a Disclosure Letter as an exception to a representation
or warranty shall not be deemed an admission by a party that such item
represents a material exception or fact, event or circumstance or that such item
is reasonably likely to result in a Material Adverse Effect (as hereinafter
defined) with respect to either Bancshares or to Mid Am, respectively.
5.2 Standards. (a) No representation or warranty of Bancshares or Mid Am
contained in Section 5.3 (other than the representations and warranties in
Sections 5.3(c), 5.3(d), 5.3(f)(ii) and 5.3(o) which shall be true and correct
in all material respects) shall be deemed untrue or incorrect, and no party
hereto shall be deemed to have breached a representation or warranty, as a
consequence of the existence or absence of any fact, circumstance or event
unless such fact, circumstance or event, individually or taken together with all
other facts, circumstances or events inconsistent with any representation or
warranty contained in Section 5.3, has had or is reasonably likely to have a
Material Adverse Effect.
(b) The term "Material Adverse Effect" means an effect which (A) is
materially adverse to the business, properties, financial condition or results
of operations of Mid Am or Bancshares, as the context may dictate, and its
subsidiaries taken as a whole, (B) materially impairs the ability of Mid Am or
Bancshares, as the context may dictate, to consummate the Merger or (C) enables
any Person to prevent the consummation by Mid Am or Bancshares of the Merger;
provided, however, that in determining whether a Material Adverse Effect has
occurred there shall be excluded any effect the proximate cause of which is (i)
any change in banking and similar laws of general applicability or
interpretations thereof by courts or governmental authorities, (ii) any change
in generally accepted accounting principles or regulatory accounting
requirements applicable to banks and bank holding companies generally and (iii)
the effects of the actions contemplated by Section 6.8.
5.3 Representations and Warranties of Mid Am and Bancshares. Subject to and
giving effect to Sections 5.1 and 5.2 and except as set forth in the relevant
Disclosure Letter referred to therein, Mid Am hereby represents and warrants to
Bancshares, and Bancshares hereby represents and warrants to Mid Am, that:
(a) Corporate Organization and Qualification. It is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Ohio and is duly qualified to do business in each jurisdiction where the
properties owned, leased or operated or the business conducted by it require
such qualification. It has the requisite corporate power and authority to carry
on its businesses as they are now being conducted. It has made available to the
other party hereto a complete and correct copy of its articles of incorporation
and code of regulations, each as amended to date and currently in full force and
effect.
(b) Subsidiaries. Each of its subsidiaries is duly organized, and (to the
extent applicable) validly existing, and in good standing under the laws of the
jurisdiction of incorporation or organization of such subsidiary, and is duly
qualified to do business in each jurisdiction where the property owned, leased
or
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operated, or the business conducted, by such subsidiary requires such
qualification. Each of its subsidiaries has the requisite corporate power and
authority to own or lease its properties and assets and to carry on its business
as it is now being conducted.
(c) Capital Stock. (i) In the case of the representations and warranties
made by Bancshares:
(A) The information in Recital A is true and correct.
(B) As of the date hereof, 82,690 shares of Bancshares Common Stock
were held in treasury by Bancshares or otherwise owned by Bancshares or its
subsidiaries for its own account. No shares of Bancshares Preferred Stock
were held in treasury by Bancshares or otherwise owned by Bancshares or its
subsidiaries for its own account.
(C) All the outstanding shares of Bancshares Common Stock have been
duly authorized and validly issued and are fully paid and nonassessable and
were not issued in violation of any preemptive or similar rights.
(D) As of the date hereof, except as set forth in this Plan or the
Bancshares Stock Option Agreement, Bancshares does not have any Rights
issued or outstanding with respect to any of its capital stock and
Bancshares does not have any commitment to authorize, issue or sell any
shares of its capital stock or Rights. As used herein, "Rights" means, with
respect to any Person, securities or obligations convertible into or
exercisable or exchangeable for, or giving any person any right to
subscribe for or acquire, or any options, calls or commitments relating to,
or any stock appreciation right or other instrument the value of which is
determined in whole or in part by reference to the market price or value
of, shares of capital stock of such Person.
(E) All the outstanding shares of capital stock of each of Bancshares'
subsidiaries owned by Bancshares or a subsidiary of Bancshares have been
duly authorized and validly issued and are fully paid and (except, with
respect to bank subsidiaries, as provided in 12 U.S.C. sec. 55 and
comparable state laws) nonassessable, and are owned by Bancshares or a
subsidiary of Bancshares free and clear of all liens, pledges, security
interests, claims, proxies, preemptive or subscriptive rights or other
encumbrances or restrictions of any kind or Rights ("Liens").
(F) The shares of Bancshares Common Stock to be issued in the Merger,
when so issued in accordance with this Plan, will have been duly authorized
and validly issued and will be fully paid and nonassessable and not subject
to any preemptive rights or other Liens established by Bancshares.
(ii) In the case of the representations and warranties made by Mid Am:
(A) The information in Recital B is true and correct.
(B) As of the date hereof, 1,103,720 shares of Mid Am Common Stock
were held in treasury by Mid Am or otherwise owned by Mid Am or its
subsidiaries for its own account. No shares of Mid Am Preferred Stock were
held in treasury by Mid Am or otherwise owned by Mid Am or its subsidiaries
for its own account.
(C) All the outstanding shares of Mid Am Common Stock have been duly
authorized and validly issued and are fully paid and nonassessable and were
not issued in violation of any preemptive or similar rights.
(D) As of the date hereof, except as set forth in this Plan or the Mid
Am Stock Option Agreement, Mid Am does not have any Rights issued or
outstanding with respect to any of its capital stock and Mid Am does not
have any commitment to authorize, issue or sell any shares of its capital
stock or Rights.
(E) All the outstanding shares of capital stock of each of Mid Am's
subsidiaries owned by Mid Am or a subsidiary of Mid Am have been duly
authorized and validly issued and are fully paid and (except, with respect
to bank subsidiaries, as provided in 12 U.S.C. sec. 55 and comparable state
laws) nonassessable, and are owned by Mid Am or a subsidiary of Mid Am free
and clear of all Liens.
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(d) Corporate Authority and Action. (i) It has the requisite corporate
power and authority and has taken all corporate action necessary (including in
the case of Mid Am, the approval of this Plan and the transactions contemplated
herein by the affirmative vote of at least two-thirds of the Board of Directors
of Mid Am) in order to authorize the execution and delivery of and performance
of its obligations under, this Plan and, subject only to receipt of the
requisite approval of (A) in the case of Bancshares, at least two-thirds of the
votes entitled to be cast by the holders of the outstanding shares of Bancshares
Common Stock and (B) in the case of Mid Am, a majority of the votes entitled to
be cast by the holders of the outstanding shares of Mid Am Common Stock, to
consummate the Merger. This Plan is a valid and legally binding agreement of it
enforceable in accordance with the terms hereof.
(ii) It has taken all action required to be taken by it in order to exempt
this Plan and the Stock Option Agreement under which it is the issuer and the
transactions contemplated hereby and thereby, from, and this Plan and such Stock
Option Agreement and the transactions contemplated hereby and thereby are exempt
from (A) the requirements of any "moratorium," "control share," "fair price,"
"supermajority," "affiliate transactions", "business combination" or other state
antitakeover laws and regulations (collectively, "Takeover Laws"), including
section 1701.831 chapter 1704 of the OGCL and (B) in the case of Mid Am, the
requirements of Paragraph 2(i) of Article 8 of Bancshares' restated articles of
incorporation, as amended.
(e) Governmental Filings; No Violations. (i) Other than the applications,
notices, reports and other filings required to be made by it in connection with
the approval of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") under the Bank Holding Company Act of 1956, as amended
(the "BHC Act"), and the approvals of federal, state and local, domestic and
foreign, authorities regulating financial institutions (the "Regulatory
Approvals") and other than as required under the Investment Company Act of 1940,
as amended, the Securities Exchange Act of 1934, as amended (including the rules
and regulations thereunder, the "Exchange Act"), the Securities Act of 1933, as
amended (including the rules and regulations thereunder, the "Securities Act"),
and state securities and "Blue Sky" laws (together with the Exchange Act and the
Securities Act, the "Securities Laws"), no applications, notices, reports or
other filings are required to be made by it with, nor are any consents,
registrations, approvals, permits or authorizations required to be obtained by
it from, any governmental or regulatory authority, agency, court, commission or
other entity, domestic or foreign ("Governmental Entity"), in connection with
the execution, delivery or performance of this Plan or the Mid Am Stock Option
Agreement or the Bancshares Stock Option Agreement, as the case may be, by it
and the consummation by it of the transactions contemplated hereby and thereby.
(ii) The execution, delivery and performance of this Plan does not and will
not, and the consummation by it of any of the transactions contemplated hereby
will not, constitute or result in (A) a breach or violation of, or a default
under, its articles of incorporation or code of regulations, or the comparable
governing instruments of any of its subsidiaries, or (B) a breach or violation
of, or a default under, or the acceleration of or the creation of a Lien (with
or without the giving of notice, the lapse of time or both) pursuant to, any
provision of any agreement, lease, contract, note, mortgage, indenture,
arrangement or other obligation ("Contracts") of it or any of its subsidiaries
or any law, rule, ordinance or regulation or judgment, decree, order, award or
governmental or non-governmental permit or license to which it or any of its
subsidiaries is subject, or any change in the rights or obligations of any party
under any of the Contracts.
(f) Reports and Financial Statements. (i) It has delivered to the other
party each registration statement, offering circular, report, definitive joint
proxy statement or information statement filed, used or circulated by it under
the Securities Act, the Exchange Act and state securities and "Blue Sky" laws
with respect to periods since January 1, 1998 through the date of this Plan and
will promptly deliver each such registration statement, offering circular,
report, definitive proxy statement or information statement filed, used or
circulated after the date hereof (collectively, whether filed before or after
the date hereof, its "Reports"), each in the form (including exhibits and any
amendments thereto) filed with the Securities and Exchange Commission (the
"SEC") (or if not so filed, in the form used or circulated).
(ii) As of their respective dates (and without giving effect to any
amendments or modifications filed after the date of this Plan), each of the
Reports, including the financial statements, exhibits and schedules thereto,
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filed, used or circulated prior to the date hereof complied (and each of the
Reports filed after the date of this Plan, will comply) in all material respects
with applicable Securities Laws and did not (or in the case of Reports filed
after the date of this Plan, will 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 the light of the circumstances
under which they were made, not misleading.
(iii) Each of its consolidated statements of condition or balance sheets
included in or incorporated by reference into its Reports, including the related
notes and schedules, fairly presented (or, in the case of Reports prepared after
the date of this Plan, will fairly present) the consolidated financial position
of it and its subsidiaries as of the date of such statement of condition or
balance sheet and each of the consolidated statements of income, cash flows and
shareholders' equity included in or incorporated by reference into its Reports,
including any related notes and schedules, fairly presented (or, in the case of
Reports prepared after the date of this Plan, will fairly present) the
consolidated results of operations, retained earnings and cash flows, as the
case may be, of it and its subsidiaries for the periods set forth therein
(subject, in the case of unaudited statements, to normal year-end audit
adjustments), in each case in accordance with generally accepted accounting
principles consistently applied during the periods involved, except as may be
noted therein. Collectively, its foregoing consolidated statements of condition
or balance sheets, statements of income, cash flows and shareholders' equity are
referred to as its "Financial Statements".
(g) Absence of Certain Events and Changes. (i) Since December 31, 1997, it
and its subsidiaries have conducted their respective businesses only in the
ordinary and usual course of such businesses and (ii) there has not been any
change or development or combination of changes or developments which,
individually or in the aggregate, has or resulted in or is reasonably likely to
result in a Material Adverse Effect.
(h) Compliance with Laws. It and each of its subsidiaries:
(i) is in compliance, in the conduct of its business, with all
applicable federal, state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders or decrees applicable thereto or to
the employees conducting such businesses, including, without limitation,
the Equal Credit Opportunity Act, the Fair Housing Act, the Community
Reinvestment Act, the Home Mortgage Disclosure Act, all other applicable
fair lending laws or other laws relating to discrimination and the Bank
Secrecy Act;
(ii) has all permits, licenses, franchises, certificates of authority,
orders, and approvals of, and has made all filings, applications, and
registrations with, Governmental Entities that are required in order to
permit it or such subsidiary to carry on its business as presently
conducted;
(iii) has received since December 31, 1995 no notification or
communication from any Governmental Entity (including the Federal Reserve
Board and any other bank, insurance or securities regulatory authority) (A)
asserting that it or any of its subsidiaries is not in compliance with any
statutes, regulations or ordinances, (B) threatening to revoke any permit,
license, franchise, certificate of authority or other governmental
authorization, or (C) threatening or contemplating revocation or limitation
of, or which would have the effect of revoking or limiting, FDIC deposit
insurance; or
(iv) is not a party to or subject to any order, decree, agreement,
memorandum of understanding or similar arrangement with, or a commitment
letter, supervisory letter or similar submission to, any Governmental
Entity charged with the supervision or regulation of depository
institutions or engaged in the insurance of deposits (including, the FDIC)
or the supervision or regulation of it or any of its subsidiaries and
neither it nor any of its subsidiaries has been advised by any such
Governmental Entity that such Governmental Entity is contemplating issuing
or requesting (or is considering the appropriateness of issuing or
requesting) any such order, decree, agreement, memorandum of understanding,
commitment letter, supervisory letter or similar submission.
(i) Litigation. There are no criminal or administrative investigations or
hearings of, before or by any Governmental Entity, or civil, criminal or
administrative actions, suits, claims or proceedings of, before or by any Person
(including any Governmental Entity) pending or, to its knowledge, threatened,
against or affecting it or any of its subsidiaries (including, without
limitation, under the Equal Credit Opportunity Act, the Fair
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Housing Act, the Community Reinvestment Act, the Home Mortgage Disclosure Act or
any other fair lending law or other law relating to discrimination).
(j) Taxes. All federal, state, local and foreign Tax (as hereinafter
defined) returns, including all information returns, required to be filed by or
on behalf of it or any of its subsidiaries have been timely filed or requests
for extensions have been timely filed and any such extension has been granted
and has not expired, and all such filed returns are complete and accurate in all
material respects. Except as disclosed in its Reports, all Taxes attributable to
it or any of its subsidiaries that are or were due or payable (without regard to
whether such Taxes have been assessed) have been paid in full or have been
adequately provided for on its consolidated balance sheet and consolidated
statement of earnings or income (in accordance with generally accepted
accounting principles). As of the date of this Plan and except as disclosed in
its Reports, there is no outstanding audit examination, deficiency, refund
litigation or outstanding waivers or agreements extending the applicable statute
of limitations for the assessment or collection of any Taxes for any period with
respect to any Taxes of it or its subsidiaries. All Taxes due with respect to
completed and settled examinations or concluded litigation relating to it or any
of its subsidiaries have been paid in full or have been recorded on its or such
subsidiary's balance sheet and consolidated statement of earnings or income (in
accordance with generally accepted accounting principles). Neither it nor any of
its subsidiaries is a party to a Tax sharing or similar agreement or any
agreement pursuant to which it or any of its subsidiaries has indemnified any
party (other than it or one of its subsidiaries) with respect to Taxes that has
been entered into in connection with the sale of a company or a business. The
proper and accurate amounts have been withheld from all employees (and timely
paid to the appropriate Governmental Entity or set aside in an account for such
purposes) for all periods through the Closing Date in compliance with all Tax
withholding provisions of applicable federal, state, local and foreign laws
(including, without limitation, income, social security and employment tax
withholding for all types of compensation). The term "Tax" includes any tax or
similar governmental charge, impost or levy (including, without limitation,
income taxes, franchise taxes, transfer taxes or fees, stamp taxes, sales taxes,
use taxes, excise taxes, ad valorem taxes, withholding taxes, employee
withholding taxes, worker's compensation, payroll taxes, unemployment insurance,
social security, minimum taxes or windfall profits taxes), together with any
related liabilities, penalties, fines, additions to tax or interest, imposed by
any federal, state or local, domestic or foreign government or subdivision or
agency thereof.
(k) Insurance. It and its subsidiaries are insured with reputable insurers
against such risks and in such amounts as its management reasonably has
determined to be prudent in accordance with industry practices.
(l) Labor Matters. Neither it nor any of its subsidiaries is a party to, or
is bound by, any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization, nor is it or any of its
subsidiaries the subject of any material proceeding asserting that it or any
such subsidiary has committed an unfair labor practice or seeking to compel it
or such subsidiary to bargain with any labor organization as to wages or
conditions of employment, nor is there any strike involving it or any of its
subsidiaries pending or, to its knowledge, threatened, nor is it aware of any
activity involving its or any of its subsidiaries' employees seeking to certify
a collective bargaining unit or engaging in any other organizational activity.
(m) Employee Benefits. (i) Paragraph 5.3(m) of its Disclosure Letter sets
forth a list of each "employee benefit plan", as such term is defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and each bonus, deferred compensation, pension, retirement,
profit-sharing, thrift, savings, employee stock ownership, stock bonus, stock
purchase, restricted stock and stock option plan, employment or severance
contract and all other employee benefit plans that cover current or former
officers or employees ("Employees") or current or former directors of it and its
subsidiaries (its "Compensation Plans").
(ii) All of its Compensation Plans other than Multiemployer Plans are in
compliance with all applicable laws, including ERISA and the Internal Revenue
Code. Each of its Compensation Plans which is an "employee pension benefit plan"
within the meaning of Section 3(2) of ERISA ("Pension Plan") and which is
intended to be qualified under Section 401(a) of the Internal Revenue Code has
received a favorable determination letter from the Internal Revenue Service with
respect to "TRA" (as defined in Section 1 of
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Rev. Proc. 93-39), and it is not aware of any circumstances likely to result in
revocation of any such favorable determination letter. There is no pending or,
to its knowledge, threatened litigation relating to its Compensation Plans.
Neither it nor any of its subsidiaries has engaged in a transaction with respect
to any Compensation Plan that, assuming the taxable period of such transaction
expired as of the date hereof, could subject it or any of its subsidiaries to a
tax or penalty imposed by either Section 4975 of the Internal Revenue Code or
Section 502(i) of ERISA.
(iii) No liability under Subtitle C or D of Title IV of ERISA (other than
payment of applicable premiums) has been or is expected to be incurred by it or
any of its subsidiaries with respect to any ongoing, frozen or terminated
"single-employer plan", within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any of them, or the single-employer plan of
any entity (an "ERISA Affiliate Plan") which is considered one employer with it
under Section 4001 of ERISA or Section 414 of the Internal Revenue Code (an
"ERISA Affiliate"). It and its subsidiaries and ERISA Affiliates have neither
contributed to nor been obligated to contribute to any "multiemployer plan"
within the meaning of Section 3(37) of ERISA, regardless of whether based on
contributions of an ERISA Affiliate. 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 of its Pension Plans
or by any of its ERISA Affiliates within the 12-month period ending on the date
hereof, or will be required to be filed as a result of the transactions
contemplated by this Plan. Neither it, its subsidiaries nor any of their
respective ERISA Affiliates has incurred or is aware of any facts that are
reasonably likely to result in any liability pursuant to Sections 4069 or 4204
of ERISA.
(iv) All contributions required to be made by it and its subsidiaries under
the terms of any of its Compensation Plans have been timely made or have been
reflected on its audited financial statements or preliminary financial
statements. Neither any of its Pension Plans nor any of its ERISA Affiliate
Plans has an "accumulated funding deficiency" (whether or not waived) within the
meaning of Section 412 of the Internal Revenue Code or Section 302 of ERISA.
None of it, its subsidiaries or its ERISA Affiliates has provided, or is
required to provide, security to any Pension Plan or to any ERISA Affiliate Plan
pursuant to Section 401(a)(29) of the Internal Revenue Code.
(v) Under each of its Pension Plans and any ERISA Affiliate Plans, as of
the last day of the most recent plan year ended prior to the date of this Plan,
the actuarially determined present value of all "benefit liabilities", within
the meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in the most recent actuarial valuation of such
Pension Plan or ERISA Affiliate Plan), did not exceed the then current value of
the assets of such Pension Plan or ERISA Affiliate Plan, and there has been no
change in the financial condition of such Pension Plan or ERISA Affiliate Plan
since the last day of the most recent plan year.
(vi) Neither it nor its subsidiaries have any obligations for retiree
health and life benefits and there are no restrictions on the rights of it or
its subsidiaries to amend or terminate any such Plan without incurring any
liability thereunder in addition to normal liabilities for benefits.
(vii) The transactions contemplated by this Plan and the Stock Option
Agreements will not result in the vesting or acceleration of any amounts under
any Compensation Plan, any increase in benefits under any Compensation Plan or
payment of any severance or similar compensation under any Compensation Plan.
(viii) No Compensation Plans covering current or former non-U.S. employees
of its subsidiaries have unfunded liabilities and all such Compensation Plans
are in substantial compliance with local law.
(n) Environmental Matters. Neither the conduct nor operation of it or its
subsidiaries nor any condition of any property presently or previously owned,
leased or operated by any of them (including, without limitation, in a fiduciary
or agency capacity), or on which any of them holds a Lien, violates or violated
Environmental Laws (as hereinafter defined) and no condition has existed or
event has occurred with respect to any of them or any such property that, with
notice or the passage of time, or both, is reasonably likely to result in
liability under Environmental Laws. Neither it nor any of its subsidiaries has
received any notice from any person or entity that it or its subsidiaries or the
operation or condition of any property ever owned, leased,
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operated, or held as collateral or in a fiduciary capacity by any of them are or
were in violation of or otherwise are alleged to have liability under
Environmental Law, including, but not limited to, responsibility (or potential
responsibility) for the cleanup or other remediation of any pollutants,
contaminants, or hazardous or toxic wastes, substances or materials at, on,
beneath, or originating from any such property. As used herein, "Environmental
Laws" means all applicable local, state and federal environmental, health and
safety laws and regulations, including, without limitation, the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response,
Compensation, and Liability Act, the Clean Water Act, the Federal Clean Air Act,
and the Occupational Safety and Health Act, each as amended, regulations
promulgated thereunder, and state counterparts.
(o) Community Reinvestment Act. Each of its banking subsidiaries which is
subject to the provisions of the Community Reinvestment Act has an assigned
rating of "satisfactory" or better under the provisions of the Community
Reinvestment Act and the regulations promulgated thereunder.
(p) Agreements. (i) As of the date of this Plan, except for (A) this Plan
and the Stock Option Agreements and (B) arrangements made after the date, and in
accordance with the terms, of this Plan, it and its subsidiaries are not bound
by (x) any material contract (as defined in Item 601(b)(10) of Regulation S-K
under the Securities Act) to be performed after the date hereof that has not
been filed with or incorporated by reference in its Reports filed on or prior to
the date hereof or (y) any Contract that restricts the conduct of business by it
or any of its subsidiaries.
(ii) None of it or any of its subsidiaries is in default under any material
Contract.
(q) Knowledge as to Conditions. As of the date of this Plan, it knows of no
reason, including the status of its efforts regarding "year 2000 issues," (i)
why the Regulatory Approvals should not be obtained, (ii) why the accountants'
letters referred to in Section 7.1(g) or the opinions of tax counsel referred to
in Section 7.2(c) will not be able to be obtained on the Closing Date, or (iii)
why the opinion of tax counsel referred to in Section 7.3(c) will not be able to
be obtained at the Effective Time.
(r) Fairness Opinions. It has received the opinion of, McDonald & Company
Securities, Inc. in the case of Mid Am, and Sandler O'Neill & Partners, L.P. in
the case of Bancshares, to the effect that as of the date hereof, the Exchange
Ratio is fair, from a financial point of view, to its shareholders.
(s) Brokers and Finders. None of it, its subsidiaries or any of their
officers, directors or employees has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finder's fees in connection
with the transactions contemplated herein, except that Mid Am has retained
McDonald & Company Securities, Inc. as its financial adviser and Bancshares has
retained Sandler O'Neill & Partners, L.P. as its financial adviser, the
arrangements with which have been set forth in its respective Disclosure Letter.
(t) Risk Management Instruments. All interest rate swaps, caps, floors,
option agreements, futures and forward contracts and other similar risk
management arrangements (collectively, the "Risk Management Instruments"),
whether entered into for its own account, or for the account of one or more of
its subsidiaries or its customers, were entered into (i) in accordance with
prudent business practices and all applicable laws, rules, regulations and
regulatory policies and (ii) with counterparties believed to be financially
responsible at the time; and each of the Risk Management Instruments constitutes
the valid and legally binding obligation of, in the case of representations and
warranties made by Mid Am, Mid Am or one of its subsidiaries or, in the case of
representations and warranties made by Bancshares, Bancshares or one of its
subsidiaries, enforceable in accordance with the terms of such Risk Management
Instrument (except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and similar laws of
general applicability relating to or affecting creditors' rights or by general
equity principles), and is in full force and effect.
(u) Year 2000. The computer software operated by it which is material to
the conduct of its business is capable of providing or is being adapted to
provide uninterrupted millennium functionality to record, store, process and
present calendar dates falling on or after January 1, 2000 in substantially the
same manner and with the same functionality as such software records, stores,
processes and presents such calendar dates falling
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on or before December 31, 1999. The costs of the adaptations referred to in this
clause will not have a Material Adverse Effect on it.
(v) Employment Agreements. In the case of Bancshares only, Bancshares has
entered into certain employment agreements with Edward J. Reiter, David R.
Francisco and Marty E. Adams, each of which has been duly authorized, executed
and delivered by Bancshares and none of which shall be modified, amended or
supplemented without the prior written consent of Mid Am.
ARTICLE VI
COVENANTS
6.1 Conduct of Business Pending the Effective Time. Each of Mid Am and
Bancshares agrees, as to itself and its subsidiaries, that, except insofar as
the other party shall otherwise consent in writing (such consent not to be
unreasonably withheld) or except as otherwise expressly contemplated by this
Plan or the Stock Option Agreements or as set forth in paragraph 6.1 of its
Disclosure Letter:
(a) The business of it and its subsidiaries will be conducted only in
the ordinary and usual course and, to the extent consistent therewith, it
and its subsidiaries will use all reasonable best efforts to preserve
intact their business organizations and assets and maintain their rights,
franchises and existing relations with customers, suppliers, employees and
business associates and to take no action that would (i) adversely affect
the ability of any of them to obtain (A) any Regulatory Approval, (B) the
accountants' letters referred to in Section 7.1(g) or (C) the opinions of
tax counsel referred to, in the case of Mid Am, in Section 7.2(c) and in
the case of Bancshares, in Section 7.3(c), or (ii) adversely affect its
ability to perform its obligations under this Plan or the Stock Option
Agreements.
(b) It will not (i) sell or pledge, agree to sell or pledge, or permit
any Lien to exist on, any stock owned by it or any of its material
subsidiaries; (ii) other than as contemplated by Section 2.5 and Section
2.6, amend or restate its articles of incorporation or code of regulations;
(iii) other than as referred to in Section 4.4, split, combine or
reclassify any outstanding capital stock; (iv) other than as permitted by
Section 6.2, declare, set aside or pay any dividend or distribution payable
in cash, stock or other property with respect to any of its capital stock;
or (v) except for acquisitions made by Mid Am National Bank and Trust
Company, as trustee under Mid Am's Employee Stock Ownership Pension Plan,
as amended and restated, and Mid Am's Employee Stock Ownership and Savings
Plan, as amended and restated, and by the trustee under Citizen's Employee
Stock Ownership Plan, as amended and restated, repurchase, redeem or
otherwise acquire, or permit any subsidiary to purchase or otherwise
acquire, directly or indirectly, any shares of its capital stock or any
securities convertible into or exercisable for any shares of its capital
stock.
(c) Neither it nor any of its subsidiaries will (i) issue, sell,
pledge, dispose of or encumber, or authorize or propose the issuance, sale,
pledge, disposition or encumbrance of, any shares of, or securities
convertible or exchangeable for, or options, warrants, calls, commitments
or rights of any kind to acquire, any shares of its capital stock of, any
class, except pursuant to this Plan, the Stock Option Agreements, or in
connection with acquisitions announced prior to the date hereof; (ii)
transfer, lease, license, guarantee, sell, mortgage, pledge or dispose of
any other material property or assets or encumber any property or assets
other than to a direct or indirect wholly owned subsidiary of it; (iii)
cancel, release, assign or modify any material amount of indebtedness of
any other individual, bank, corporation, partnership, trust, association or
other entity or organization (any of the foregoing, a "Person") other than
in the ordinary and usual course of business consistent with past practice;
or (iv) authorize capital expenditures other than in the ordinary and usual
course of business.
(d) Except for internal reorganizations involving existing
subsidiaries, or in satisfaction of debts previously contracted in good
faith, neither it nor any of its subsidiaries will make any material
acquisition of, or investment in, assets or stock of any other Person.
(e) Other than in the ordinary course of business consistent with past
practice, it will not incur or permit any of its subsidiaries to incur any
indebtedness for borrowed money or assume, guarantee,
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endorse or otherwise as an accommodation become responsible for the
obligations of any other Person or make any loan or advance.
(f) Neither it nor any of its subsidiaries will (i) grant any increase
in compensation or benefits to its Employees, except for normal increases
consistent with past practice or as required by law; (ii) pay any bonus
except as consistent with past practice; (iii) grant any severance or
termination pay to any director or Employee except as consistent with past
practice; (iv) enter into or amend any employment or severance agreement
with any director or Employee (provided that this clause (iv) shall not
prohibit either party from approving a renewal or other extension of an
existing employment or severance agreement in accordance with its terms and
in the ordinary course of business consistent with past practice); (v)
grant any increase in fees or other increases in compensation or other
benefits to any of its present or former directors; or (vi) effect any
material change in retirement benefits for any class of its Employees
(unless such change is required by applicable law or, in the opinion of
counsel, is necessary or advisable to maintain the tax qualification of any
plan under which the retirement benefits are provided) (provided that this
clause (vi) shall not prohibit Bancshares from entering into certain stock
option plans for employees and directors with the cooperation and consent
of Mid Am).
(g) Except as may be required to satisfy contractual obligations
existing as of the date hereof and the requirements of applicable law,
neither it nor any of its subsidiaries will establish, adopt, enter into or
make any new, or amend any existing, collective bargaining, bonus, profit
sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, employee stock ownership, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any directors or Employees.
(h) Neither it nor any of its subsidiaries will implement or adopt any
change in its accounting principles, practices or methods, other than as
may be required by generally accepted accounting principles or regulatory
accounting principles.
(i) Except in the ordinary course of business consistent with past
practice, settle any claim, action or proceeding against it, except for any
claim, action or proceeding which involves solely money damages in an
amount, individually or in the aggregate for all such settlements, that is
not material to Bancshares or Mid Am and each of their respective
subsidiaries, taken as a whole, and that does not involve or create
precedent for claims, actions or proceedings that are reasonably likely to
be material to Bancshares or Mid Am and each of their respective
subsidiaries taken as a whole.
(j) Neither it nor any of its subsidiaries will authorize or enter
into an agreement to take any of the actions referred to in paragraphs (a)
through (i) above.
6.2 Dividends. Each of Mid Am and Bancshares agrees that, from and after
the date hereof until the Effective Time, (i) direct and indirect wholly owned
subsidiaries of each of Mid Am and Bancshares may (to the extent legally and
contractually permitted to do so), but shall not be obligated to, declare and
pay dividends in cash, stock or other property and (ii) each may pay quarterly
dividends on outstanding shares of Mid Am Common Stock and Bancshares Common
Stock, respectively, at a rate not to exceed $0.16 per share per quarter in the
case of Mid Am and $0.31 per share per quarter in the case of Bancshares
(adjusted to $0.16 per share per quarter after the stock split or stock dividend
referred to in Section 4.4). Bancshares and Mid Am shall coordinate (on a
mutually agreeable basis that will not materially impair their ability to obtain
the letters referred to in Section 7.1(g)) the declaration of dividends (and the
record and payment dates therefor), it being the intention of the parties hereto
that holders of Bancshares Common Stock or Mid Am Common Stock shall not receive
two dividends, or fail to receive one dividend, for any quarter with respect to
their shares of Bancshares Common Stock and/or Mid Am Common Stock and any
shares of Bancshares Common Stock any such holder receives in the Merger.
6.3 Acquisition Proposals. Each of Mid Am and Bancshares agrees that
neither it nor any of its subsidiaries nor any of its respective officers and
directors or the officers and directors of its subsidiaries shall, and it shall
direct and use all reasonable best efforts to cause its employees and agents,
including any investment banker, attorney or accountant retained by it or any of
its subsidiaries (collectively, its
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"Representatives") not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making or implementation of any proposal or
offer with respect to a merger, acquisition, consolidation or similar
transaction involving, or any purchase of, all or any substantial part of its
assets, deposits or any equity securities of either Mid Am or Bancshares or any
of their material subsidiaries (any such proposal or offer in respect of either
Mid Am or Bancshares being hereinafter referred to as an "Acquisition
Proposal"), other than as expressly contemplated by this Plan, or engage in any
negotiations concerning, or provide any confidential information or data to, or
have any discussions with, any Person relating to an Acquisition Proposal or
otherwise facilitate any effort or attempt to implement or make an Acquisition
Proposal. Bancshares will notify Mid Am, and Mid Am will notify Bancshares,
immediately if any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with, it and any developments with respect
thereto.
6.4 Shareholder Approval. (a) Mid Am agrees to take, in accordance with
applicable law and its amended articles of incorporation and code of
regulations, all action necessary to convene a meeting of its shareholders
(including any adjournment or postponement, the "Mid Am Meeting"), as promptly
as practicable after the Registration Statement is declared effective to
consider and vote upon the adoption and approval of this Plan and the Merger.
The Board of Directors of Mid Am shall recommend such adoption and approval and
Mid Am will take all reasonable lawful action to solicit such adoption and
approval and authorization by its shareholders.
(b) Bancshares agrees to take, in accordance with applicable law and its
restated articles of incorporation, as amended, and code of regulations, all
action necessary to convene a meeting of its shareholders (including any
adjournment or postponement, the "Bancshares Meeting"), as promptly as
practicable after the Registration Statement is declared effective to consider
and vote upon the adoption and approval of this Plan and the Merger and the
other matters contemplated hereby. The Board of Directors of Bancshares shall
recommend such adoption and approval and Bancshares will take all reasonable
lawful action to solicit such adoption and approval by its shareholders.
6.5 Filings; Other Actions. (a) Each of Mid Am and Bancshares agrees to
cooperate in the preparation of a registration statement on Form S-4 (the
"Registration Statement") to be filed by Bancshares with the SEC in connection
with the issuance of Bancshares Common Stock in the Merger (including the joint
proxy statement and prospectus and other proxy solicitation materials of
Bancshares and Mid Am constituting a part thereof (the "Joint Proxy
Statement/Prospectus")). Bancshares agrees to use all reasonable efforts to
cause the Registration Statement to be declared effective under the Securities
Act as promptly as practicable after filing thereof. Bancshares also agrees to
use all reasonable best efforts to obtain all necessary state securities law or
"Blue Sky" permits and approvals required to carry out the transactions
contemplated by this Plan, and each of Bancshares and Mid Am agrees to furnish
all information concerning it and the holders of its capital stock as may be
reasonably requested in connection with any such action.
(b) Each of Mid Am and Bancshares agrees to cooperate with the other and,
subject to the terms and conditions set forth in this Plan, use reasonable best
efforts to promptly prepare and file all necessary documentation, to effect all
necessary applications, notices, petitions, filings and other documents, and to
obtain all necessary permits, consents, orders, approvals and authorizations of,
or any exemption by, all third parties and Governmental Entities necessary or
advisable to consummate the transactions contemplated by this Plan, including
without limitation the Regulatory Approvals. Each of Mid Am and Bancshares shall
have the right to review in advance, and to the extent practicable each will
consult with the other, in each case subject to applicable laws relating to the
exchange of information, with respect to all the material information relating
to the other party, and any of their respective subsidiaries, which appears in
any material filing made with, or written materials submitted to, any third
party or any Governmental Entity in connection with the transactions
contemplated by this Plan. In exercising the foregoing right, each of the
parties hereto agrees to act reasonably and as promptly as practicable. Each
party hereto agrees that it will consult with the other party hereto with
respect to the obtaining of all permits, consents, approvals and authorizations
of all third parties and Governmental Entities necessary or advisable to
consummate the transactions contemplated by this Plan and each party will keep
the other party apprized of the status of matters relating to completion of the
transactions contemplated hereby.
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(c) Each party agrees, upon request, to furnish the other party with all
information concerning itself, its subsidiaries, directors, officers and
shareholders and such other matters as may be reasonably necessary or advisable
in connection with the Registration Statement or Joint Proxy
Statement/Prospectus or any other statement, filing, notice or application made
by or on behalf of such other party or any of its subsidiaries to any
Governmental Entity in connection with the Merger and the other transactions
contemplated by this Plan.
(d) Each of Mid Am and Bancshares agrees to consult and cooperate with the
other in effecting actions and measures for the purpose of ensuring the orderly
consummation of the transactions contemplated hereby and the efficient conduct
of the combined businesses of Mid Am and Bancshares following the Merger.
Without limiting the foregoing, each of Mid Am and Bancshares agrees, to the
extent consistent with applicable law, to consult and cooperate with the other
in (i) developing a joint business plan for periods beginning at the Effective
Time and (ii) taking reasonable steps in an effort to result in the achievement
of the objectives stated in such joint business plan.
6.6 Information Supplied. Each of Bancshares and Mid Am agrees, as to
itself and its subsidiaries, that none of the information supplied or to be
supplied by it for inclusion or incorporation by reference in (a) the
Registration Statement will, at the time the Registration Statement and each
amendment and supplement thereto, if any, become effective under the Securities
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and (b) the Joint Proxy Statement/Prospectus and any
amendment or supplement thereto, at the date of mailing to shareholders and at
the times of the Bancshares Meeting and the Mid Am Meeting, will contain any
statement which, in the light of the circumstances under which such statement is
made, will be false or misleading with respect to any material fact, or will
omit to state any material fact necessary in order to make the statements
therein not false or misleading or necessary to correct any statement in any
earlier statement in the Joint Proxy Statement/Prospectus or any amendment or
supplement thereto. Neither the Joint Proxy Statement/Prospectus nor the
Registration Statement will be filed, and, prior to the termination of this
Plan, no amendment or supplement to the Joint Proxy Statement/Prospectus or the
Registration Statement shall be filed, by Mid Am or Bancshares without
consultation with the other party and its counsel.
6.7 Access and Investigations. (a) Upon reasonable notice and whether
during or after the due diligence periods provided for in Sections 8.3(a) and
8.4(a), each of Mid Am and Bancshares agrees to (and shall cause each of its
subsidiaries to) afford the other party's Representatives access, during normal
business hours throughout the period until the Closing Date, to its properties,
books, contracts and records and, during such period, shall (and shall cause
each of its subsidiaries to) furnish promptly to the other party all material
information concerning its business, properties and personnel as may reasonably
be requested. Neither Bancshares nor Mid Am nor any of their respective
subsidiaries shall be required to provide access to or to disclose information
where such access or disclosure would violate or prejudice the rights of such
party's customers, jeopardize the attorney-client privilege of the institution
in possession or control of such information or contravene any law, rule
regulation, order, judgment or decree or any binding agreement entered into
prior to the date of this Plan. The parties hereto will make appropriate
substitute disclosure arrangements under circumstances in which restrictions of
the preceding sentence apply.
(b) Each party agrees, and will cause its respective Representatives not
to, use any information obtained from the other party (or such other party's
affiliates or Representatives), pursuant to this Section 6.7 or otherwise, for
any purpose unrelated to the consummation of the transactions contemplated by
this Plan. Each party will keep, and will cause its Representatives to keep, all
information and documents obtained from the other party pursuant to this Section
6.7 or during the investigation leading up to the execution of this Plan
confidential unless such information (i) was already known to such party, (ii)
becomes available to such party from other sources not known by such party to be
bound by a confidentiality obligation, (iii) is disclosed with the prior written
approval of the party to which such information pertains or (iv) is or becomes
readily ascertainable from published information or trade sources. In the event
that this Plan is terminated or the transactions contemplated by this Plan shall
otherwise fail to be consummated, each party shall promptly cause all copies of
documents or extracts thereof containing information and data as to another
party hereto to be returned to the party which furnished the same.
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6.8 Certain Modifications; Restructuring Charges. Bancshares and Mid Am
agree to consult with respect to their loan, litigation and real estate
valuation policies and practices (including loan classifications and levels of
reserves) and shall make such modifications or changes to its policies and
practices, if any, and at such date prior to the Effective Time, as may be
mutually agreed upon. Bancshares and Mid Am shall also consult with respect to
the character, amount and timing of restructuring charges to be taken by each of
them in connection with the transactions contemplated hereby and shall take such
charges in accordance with generally accepted accounting principles, as may be
mutually agreed upon. No party's representations, warranties and covenants
contained in this Plan shall be deemed to be untrue or breached in any respect
for any purpose as a consequence of any modifications or changes to such
policies and practices which may be undertaken on account of this Section 6.8.
6.9 Takeover Laws. If any Takeover Law may become, or may purport to be,
applicable to the transactions contemplated hereby or by the Stock Option
Agreements, each of Mid Am and Bancshares and the members of their respective
Boards of Directors will grant such approvals and take such actions as are
necessary so that the transactions contemplated by this Plan or by the Stock
Option Agreements may be consummated as promptly as practicable on the terms
contemplated hereby and thereby and otherwise act to eliminate or minimize the
effects of any Takeover Law on any of the transactions contemplated by this
Plan.
6.10 Options. (a) Conversion of Options. At the Effective Time, by virtue
of the Merger and without any action on the part of any holder of an option,
each option granted by Mid Am to purchase shares of Mid Am Common Stock (any
such option to purchase shares of Mid Am Common Stock being referred to as a
"Mid Am Option") that is outstanding and unexercised, whether vested or
unvested, immediately prior thereto (excluding any such option the holder of
which is then entitled to receive cash or stock in satisfaction thereof under
the terms of such option or warrant) shall be converted into an option (each, a
"New Option") to purchase such number of shares of Bancshares Common Stock at an
exercise price determined as provided below (and otherwise having the same
duration and other terms as the original Mid Am Option):
(i) the number of shares of Bancshares Common Stock to be subject to
the New Option shall be equal to the product of (A) the number of shares of
Mid Am Common Stock purchasable upon exercise of the original Mid Am Option
and (B) the Exchange Ratio, the product being rounded, if necessary, up or
down, to the nearest whole share; and
(ii) the exercise price per share of Bancshares Common Stock under the
New Option shall be equal to (A) the exercise price per share of Mid Am
Common Stock under the original Mid Am Option divided by (B) the Exchange
Ratio, rounded, if necessary, up or down, to the nearest cent.
With respect to any Mid Am Options that are "incentive stock options" (as
defined in Section 422(b) of the Internal Revenue Code), the foregoing
adjustments shall be effected in a manner consistent with Section 424(a) of the
Internal Revenue Code.
(b) Assumption by Bancshares. At or prior to the Effective Time, Mid Am
shall make all necessary arrangements with respect to its plans to permit
assumption of the unexercised Mid Am Options by Bancshares pursuant to this
Section 6.10.
6.11 Benefit Plans. (a) Prior to the Effective Date, Bancshares and Mid Am
shall cooperate in reviewing, evaluating and analyzing the Bancshares benefit
plans and the Mid Am benefit plans with a view towards developing appropriate
new benefit plans or amending, supplementing or modifying existing benefit plans
of Bancshares or Mid Am. One or more committees comprised of an equal number of
employee representatives of Bancshares and Mid Am shall be established to
evaluate and make recommendations to the Board of Directors of the Surviving
Corporation or the Management Executive Committee formed pursuant to Section 3.2
of this Plan, as appropriate, with respect to the employee welfare benefits and
stock ownership plan and programs of the Surviving Corporation.
(b) The foregoing notwithstanding, Bancshares agrees to honor in accordance
with their terms all benefits vested under Mid Am's Compensation Plans.
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(c) It is the express understanding and intention of the parties that no
employee or other Person shall be deemed to be a third party beneficiary, or
have or acquire any right to enforce the provisions, of this Section 6.11, and
that nothing in this Plan shall be deemed to constitute a "plan" or an
"amendment to a plan."
6.12 Indemnification and Insurance. (a) Bancshares agrees to indemnify and
hold harmless (including the advancement of expenses as incurred) each present
and former director and officer of Mid Am and Bancshares and their subsidiaries
(each, an "Indemnified Party") for a period of six years after the Effective
Time, against any costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages or liabilities incurred in connection
with any claim, action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative, arising out of or pertaining to
matters existing or occurring at or prior to the Effective Time, whether
asserted or claimed prior to, at or after the Effective Time, to the fullest
extent permitted under applicable law. Bancshares' obligations under this
paragraph (a) shall continue in full force and effect for a period of six years
from the Effective Time, provided, however, that all rights to indemnification
in respect of any claim asserted or made within such period shall continue until
the final disposition of such claim.
(b) Bancshares shall cause the Persons serving as officers and directors of
Mid Am and Bancshares immediately prior to the Effective Time to be covered for
a period of six years after the Effective Time by the directors' and officers'
liability insurance policy currently maintained by Bancshares (provided that
Bancshares may substitute policies providing comparable or better coverage than
such policy) with respect to acts or omissions occurring prior to the Effective
Time which were committed by such officers and directors in their capacity as
such; provided, however, that in no event shall Bancshares be required to expend
more than 200% of the amount currently expended by Mid Am (the "Maximum Amount")
to maintain or procure insurance coverage pursuant hereto, and provided further
that, if Bancshares is unable to maintain or obtain the insurance called for by
this Section 6.12(b), Bancshares shall use its best efforts to obtain as much
comparable insurance as available for the Maximum Amount; provided, further,
that such Persons may be required to make application and provide customary
representations and warranties to Bancshares' insurance carrier for the purpose
of obtaining such insurance.
(c) Any Indemnified Party wishing to claim indemnification under Section
6.12(a), upon learning of any claim, action, suit, proceeding or investigation
described above, shall promptly notify Bancshares thereof; provided that the
failure so to notify shall not affect the obligations of Bancshares under
Section 6.12(a) unless and to the extent that Bancshares is actually prejudiced
as a result of such failure.
(d) If Bancshares or any of its successors or assigns shall consolidate
with or merge into any other entity and shall not be the continuing or surviving
entity of such consolidation or merger or shall transfer all or substantially
all of its assets to any entity, then and in each case, proper provision shall
be made so that the successors and assigns of Bancshares shall assume the
obligations set forth in this Section 6.12.
(e) The provisions of this Section 6.12 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party and his or her heirs and
representatives.
6.13 Affiliate Agreements. (a) As soon as practicable after the date
hereof, Mid Am shall identify to Bancshares and Bancshares shall identify to Mid
Am all Persons who are at the date hereof (or at another reasonably proximate
date) "affiliates" of Mid Am or Bancshares, respectively, as that term is used
in paragraphs (c) and (d) of Rule 145 under the Securities Act and/or Accounting
Series Releases 130 and 135, as amended, of the SEC ("Affiliates"). Each of Mid
Am and Bancshares shall use all reasonable best efforts to obtain a written
agreement in the form of, in the case of Mid Am, Annex 4 and, in the case of
Bancshares, Annex 5, from each Person who is so identified as a possible
Affiliate and shall deliver copies of such written agreements to the other party
as soon as practicable.
(b) As soon as practicable after the date of the Mid Am Meeting or
Bancshares Meeting, as applicable, Mid Am shall identify to Bancshares and
Bancshares shall identify to Mid Am all Persons who were, at the time of the Mid
Am Meeting or the Bancshares Meeting, Affiliates of Mid Am and Bancshares,
respectively, and who were not previously identified in accordance with Section
6.13(a). Each of Mid Am and Bancshares
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shall use all reasonable best efforts to obtain a written agreement in the form
specified in paragraph (a) from each Person who is so identified and shall
deliver copies of such written agreements to the other party as soon as
practicable.
6.14 Publicity. The initial press release relating hereto will be a joint
press release and thereafter Bancshares and Mid Am shall agree with each other
prior to issuing any press releases or otherwise making public statements with
respect to the transactions contemplated hereby and prior to making any filings
with any Governmental Entity.
6.15 Reasonable Best Efforts. Subject to the terms and conditions of this
Plan, each of Mid Am and Bancshares agrees to cooperate fully with each other
and to use reasonable best efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, all things necessary, proper or advisable to
consummate and make effective, at the time and in the manner contemplated by
this Plan, the Merger, including, without limitation, using reasonable best
efforts to lift or rescind any injunction or restraining order or other order
adversely affecting the ability of the parties to consummate the Merger.
6.16 Notification of Certain Matters. Each of Mid Am and Bancshares will
give prompt notice to the other upon its becoming aware of the occurrence or
existence of any fact, event or circumstance that (i) is reasonably likely to
result in any Material Adverse Effect with respect to it, or (ii) would cause or
constitute a material breach of any of its representations, warranties,
covenants or agreements contained herein.
6.17 Expenses. Each of the parties shall bear and pay all costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own financial or
other consultants, investment bankers, accountants and counsel, except that Mid
Am and Bancshares each shall bear and pay one-half of the following expenses:
(i) the costs (excluding the fees and disbursements of counsel and accountants)
incurred in connection with the preparation (including copying and printing) of
the Joint Proxy Statement/Prospectus and Registration Statement and applications
to Governmental Entities for the approval of the Merger and (ii) all listing,
filing or registration fees, including, without limitation, fees paid for filing
the Registration Statement and the Joint Proxy Statement/Prospectus with the SEC
and fees paid for filings with Governmental Entities.
ARTICLE VII
CONDITIONS
7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each of Mid Am and Bancshares to consummate the Merger
is subject to the fulfillment or written waiver by Mid Am and Bancshares prior
to the Effective Time of each of the following conditions:
(a) Shareholder Approval. This Plan and the Merger and the Articles
Amendments and the Code Amendments shall have been duly adopted and
approved by the requisite votes of the shareholders of Mid Am and the
shareholders of Bancshares.
(b) Governmental and Regulatory Consents. All regulatory approvals
required to consummate the transactions contemplated hereby, shall have
been obtained and shall remain in full force and effect and all statutory
waiting periods in respect thereof shall have expired and no such approvals
shall contain any conditions, restrictions or requirements which either of
the Bancshares Board of Directors or the Mid Am Board of Directors
reasonably determines would following the Effective Time, have a Material
Adverse Effect on the Surviving Corporation and its subsidiaries taken as a
whole.
(c) Third Party Consents. All consents or approvals of all Persons
(other than Governmental Entities) required for consummation of the Merger
shall have been obtained and shall be in full force and effect, unless the
failure to obtain any such consent or approval is not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on the
financial condition or results of operations of the Surviving Corporation.
(d) No Prohibitions. No United States or state court or other
Governmental Entity of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any law, statute, rule, regulation,
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judgment, decree, injunction or other order (whether temporary, preliminary
or permanent) which is in effect and prohibits consummation of the Merger.
(e) Registration Statement. The Registration Statement shall have
become effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the
SEC or any other Governmental Entity.
(f) Blue Sky Approvals. All permits and other authorizations under the
Securities Laws (other than that referred to in Section 7.1(e)) and other
authorizations necessary to consummate the Merger and to issue the shares
of Bancshares Common Stock to be issued in the Merger shall have been
received and be in full force and effect.
(g) Accountants' Pooling Letters. Each of Mid Am and Bancshares shall
have received letters, dated as of the mailing date of the Joint Proxy
Statement/Prospectus and the Effective Time, from Crowe, Chizek and Company
LLP and PricewaterhouseCoopers LLP, independent auditors, to the effect
that the Merger will qualify for pooling-of-interests accounting treatment
under Accounting Principles Board Opinion No. 16 and SEC Accounting Series
Releases 130 and 135, as amended, if consummated in accordance with this
Plan.
(h) Nasdaq Listing. The shares of Bancshares Common Stock that shall
be issued to the shareholders of Mid Am upon consummation of the Merger
shall have been authorized for listing on the Nasdaq subject to official
notice of issuance.
7.2 Conditions to Obligation of Mid Am. The obligation of Mid Am to
consummate the Merger is also subject to the fulfillment, or the written waiver
by Mid Am prior to the Effective Time of each of the following conditions:
(a) Representations and Warranties. The representations and warranties
of Bancshares set forth in this Plan shall be, giving effect to Sections
5.1 and 5.2, true and correct as of the date of this Plan and as of the
Effective Time as though made at and as of the Effective Time (except that
representations and warranties that by their terms speak specifically as of
the date of this Plan or some other date shall be true and correct as of
such date); and Mid Am shall have received a certificate, dated the Closing
Date, signed on behalf of Bancshares by the Chief Executive Officer and the
Chief Financial Officer of Bancshares to such effect.
(b) Performance of Obligations of Bancshares. Bancshares shall have
performed in all material respects all obligations required to be performed
by it under this Plan at or prior to the Effective Time, and Mid Am shall
have received a certificate, dated the Closing Date, signed on behalf of
Bancshares by the Chief Executive Officer and the Chief Financial Officer
of Bancshares to such effect.
(c) Opinion of Tax Counsel. Mid Am shall have received an opinion of
Sullivan & Cromwell, special counsel to Mid Am, dated the Closing Date and
in customary form, to the effect that the Merger will be treated for
Federal income tax purposes as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code, and that each of Bancshares
and Mid Am will be a party to that reorganization within the meaning of
Section 368(b) of the Internal Revenue Code. If Bancshares or an affiliate
of Bancshares is the surviving or acquiring corporation in the Merger, such
opinion shall include a statement to the effect that on the basis of the
assumptions set forth in such opinion, no gain or loss will be recognized
for Federal income tax purposes by the stockholders of Mid Am who exchange
all of their Mid Am Common Stock solely for Bancshares Common Stock
pursuant to the Merger (except with respect to cash received in lieu of a
fractional share interest in Bancshares Common Stock). In rendering its
opinion, Sullivan & Cromwell may require and rely upon representations and
covenants, including those contained in certificates of officers of
Bancshares, Mid Am and others, reasonably satisfactory in form and
substance to such counsel.
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7.3 Conditions to Obligation of Bancshares. The obligation of Bancshares to
consummate the Merger is also subject to the fulfillment, or the written waiver
by Bancshares prior to the Effective Time, of each of the following conditions:
(a) Representations and Warranties. The representations and warranties
of Mid Am set forth in this Plan shall be, giving effect to Sections 5.1
and 5.2, true and correct as of the date of this Plan and as of the
Effective Time as though made at and as of the Effective Time (except that
representations and warranties that by their terms speak specifically as of
the date of this Plan or some other date shall be true and correct as of
such date) and Bancshares shall have received a certificate, dated the
Closing Date, signed on behalf of Mid Am by the Chief Executive Officer and
the Chief Financial Officer of Mid Am to such effect.
(b) Performance of Obligations of Mid Am. Mid Am shall have performed
in all material respects all obligations required to be performed by it
under this Plan at or prior to the Effective Time; and Bancshares shall
have received a certificate, dated the Closing Date, signed on behalf of
Mid Am by the Chief Executive Officer and the Chief Financial Officer of
Mid Am to such effect.
(c) Opinion of Tax Counsel. Bancshares shall have received an opinion
from Skadden, Arps, Slate, Meagher & Flom LLP & Affiliates, special counsel
to Bancshares, dated the Effective Time, substantially to the effect that,
on the basis of the facts, representations and assumptions set forth in
such opinion which are consistent with the state of facts existing at the
Effective Time, the Merger will be treated as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code, and that each of
Bancshares and Mid Am will be a party to that reorganization within the
meaning of Section 368(b) of the Internal Revenue Code. If pursuant to
Section 1.1 of this Agreement the method of effecting the combination of
Bancshares and Mid Am is changed such that Mid Am or an affiliate of Mid Am
is the surviving or acquiring corporation in the Merger, such opinion shall
also include a statement substantially to the effect that no gain or loss
will be recognized for Federal income tax purposes by the stockholders of
Bancshares who exchange all of their Bancshares Common Stock solely for Mid
Am Common Stock pursuant to the Merger (except with respect to cash
received in lieu of a fractional share interest in Mid Am Common Stock). In
rendering its opinion, Skadden, Arps, Slate, Meagher & Flom LLP &
Affiliates may require and rely upon representations and covenants,
including those contained in certificates of officers of Bancshares, Mid Am
and others, reasonably satisfactory in form and substance to such counsel.
ARTICLE VIII
TERMINATION
8.1 Termination by Mutual Consent. This Plan may be terminated and the
Merger may be abandoned at any time prior to the Effective Time (whether or not
the shareholders of Bancshares Common Stock or Mid Am Common Stock have adopted
and approved this Plan), upon the mutual consent of Mid Am and Bancshares, by
action of their respective Boards of Directors.
8.2 Termination by Either Mid Am or Bancshares. This Plan may be terminated
and the Merger may be abandoned by action of the Board of Directors of either
Mid Am or Bancshares if (a) the Merger shall not have been consummated by March
31, 1999 (the "Termination Date"), (b) any required Regulatory Approval shall
have been denied by the relevant Governmental Entity or such Governmental Entity
shall have requested the permanent withdrawal of any application therefor, or
(c) the approval of the shareholders of Mid Am or Bancshares referred to in
Section 7.1(a) shall not have been obtained at the Mid Am Meeting or the
Bancshares Meeting, respectively (provided, that the terminating party is not
then in material breach of its obligations under Section 6.4).
8.3 Termination by Bancshares. This Plan may be terminated and the Merger
may be abandoned by action of the Board of Directors of Bancshares as follows:
(a) It is intended that Bancshares will continue its due diligence
review of Mid Am for up to 30 days after the date hereof. In the event that
Bancshares' due diligence investigation of Mid Am and its
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subsidiaries discloses one or more matters which either (i) Bancshares in
good faith believes in the reasonable judgment of the Board of Directors of
Bancshares to be inconsistent with any of the representations and
warranties of Mid Am and which constitute or have had or are reasonably
likely to have a Material Adverse Effect on Mid Am or (ii) in the
reasonable judgment of the Board of Directors of Bancshares either (A) is
of such significance as to constitute or have or be reasonably likely to
have a Material Adverse Effect on Mid Am and its subsidiaries, taken as a
whole, or (B) deviates materially and adversely from the financial
statements for the year ended December 31, 1997 or the three months ended
March 31, 1998, of Mid Am, the Board of Directors of Bancshares may elect
to terminate this Plan by giving notice of termination to Mid Am within or
at the end of the 30 day period following the date hereof;
(b) At any time prior to the Effective Time, if Mid Am shall have
breached any representation, warranty, covenant or agreement contained
herein that would result in the failure to satisfy the closing condition
set forth in Section 7.3(a) or 7.3(b) and such breach cannot be or has not
been cured within 30 days after the giving of a written notice to Mid Am of
such breach;
(c) At any time prior to the Mid Am Meeting, if the Board of Directors
of Mid Am shall have failed to make or shall have withdrawn, or materially
modified or changed, its approval or recommendation referred to in Section
6.4(a); or
(d) at any time prior to the close of business, Eastern Standard Time,
on May 21, 1997, if Mid Am shall have not executed and delivered the Mid Am
Stock Option Agreement to Bancshares.
8.4 Termination by Mid Am. This Plan may be terminated and the Merger may
be abandoned by action of the Board of Directors of Mid Am as follows:
(a) It is intended that Mid Am will continue its due diligence review
of Bancshares for up to 30 days after the date hereof. In the event that
Mid Am's due diligence investigation of Bancshares and its subsidiaries
discloses one or more matters which either (i) Mid Am in good faith
believes in the reasonable judgment of the Board of Directors of Mid Am to
be inconsistent with any of the representations and warranties of
Bancshares and which constitute or have had or are reasonably likely to
have a Material Adverse Effect on Bancshares or (ii) in the reasonable
judgement of the Board of Directors of Mid Am either (A) is of such
significance as to constitute or have or be reasonably likely to have a
Material Adverse Effect on Bancshares and its subsidiaries, taken as a
whole, or (B) deviates materially and adversely from the financial
statements for the year ended December 31, 1997 or the three months ended
March 31, 1998, of Bancshares, the Board of Directors of Mid Am may elect
to terminate this Plan by giving notice of termination to Bancshares within
or at the end of the 30 day period following the date hereof;
(b) At any time prior to the Effective Time, if Bancshares shall have
breached any representation, warranty, covenant or agreement contained
herein that would result in the failure to satisfy the closing condition
set forth in Section 7.2(a) or 7.2(b) and such breach cannot be or has not
been cured within 30 days after the giving of a written notice to
Bancshares of such breach;
(c) At any time prior to the Bancshares Meeting, if the Board of
Directors of Bancshares shall have failed to make, or shall have withdrawn,
or materially modified or changed, its approval or recommendation referred
to in Section 6.4(b); or
(d) at any time prior to the close of business, Eastern Standard Time,
on May 21, 1997, if Bancshares shall have not executed and delivered the
Bancshares Stock Option Agreement to Mid Am.
8.5 Effect of Termination and Abandonment. In the event of termination of
this Plan and the abandonment of the Merger pursuant to this Article VIII, (a)
no party to this Plan shall have any liability or further obligation to any
other party hereunder provided, however, termination will not relieve a
breaching party from liability for any willful breach giving rise to such
termination and (b) this Plan shall forthwith be void and of no further legal
effect, other than the provisions of this Section 8.5 and Sections 6.7(b) and
6.17
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and Article IX. Notwithstanding the foregoing, in the event of any termination
of this Plan, the Stock Option Agreements shall remain in full force and effect
in accordance with their respective terms.
ARTICLE IX
MISCELLANEOUS
9.1 Survival. Except for the agreements and covenants contained in Article
II, Article III, Article IV, Section 6.10, Section 6.11, Section 6.12 and this
Article IX, the representations and warranties, agreements and covenants
contained in this Plan shall be deemed only to be conditions of the Merger and
shall not survive the Effective Time.
9.2 Modification or Amendment. Subject to applicable law, at any time prior
to the Effective Time, the parties hereto may modify or amend this Plan, by
written agreement executed and delivered by duly authorized officers of the
respective parties.
9.3 Waiver of Conditions. The conditions to each party's obligation to
consummate the Merger are for the sole benefit of such party and may be waived
by such party as a whole or in part to the extent permitted by applicable law.
No waiver shall be effective unless it is in a writing signed by a duly
authorized officer of the waiving party that makes express reference to the
provision or provisions subject to such waiver.
9.4 Counterparts. For the convenience of the parties hereto, this Plan may
be executed in any number of separate counterparts, each such counterpart being
deemed to be an original instrument, and all such counterparts shall together
constitute the same agreement.
9.5 GOVERNING LAW. THIS PLAN SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF OHIO APPLICABLE TO CONTRACTS MADE AND
TO BE PERFORMED WITHIN SUCH STATE.
9.6 Notices. Any notice, request, instruction or other document to be given
hereunder by any party to the other shall be in writing and shall be deemed to
have been duly given (a) on the date of delivery if delivered personally, or by
telecopy or telefacsimile, upon confirmation of receipt, (b) on the first
business day following the date of dispatch if delivered by a recognized
next-day courier service, or (c) on the third business day following the date of
mailing if delivered by registered or certified mail, return receipt requested,
postage prepaid. All notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated in writing by the party
to receive such notice.
(a) If to Mid Am:
Mid Am, Inc.
221 South Church Street
Bowling Green, Ohio 43402
Attention: Edward J. Reiter
Telecopy: (419) 354-5263
with copies to:
and
W. Granger Souder, Esq. H. Rodgin Cohen, Esq.
Mid Am, Inc. Mark J. Menting, Esq.
221 South Church Street Sullivan & Cromwell
Bowling Green, Ohio 43402 125 Broad Street
Telecopy: (419) 354-5263 New York, New York 10004
Telecopy: (212) 558-3588
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(b) If to Bancshares:
Citizens Bancshares, Inc.
10 East Main Street
Salineville, Ohio 43945
Attention: Marty E. Adams
Telecopy: (330) 679-0523
with copies to:
and
Patricia Oliver, Esq. William S. Rubenstein, Esq.
Squire, Sanders & Dempsey L.L.P. Skadden, Arps, Slate, Meagher &
4900 Key Tower Flom & Affiliates
127 Public Square 919 Third Avenue
Cleveland, Ohio 44114 New York, New York 10022
Telecopy: (216) 479-8776 Telecopy: (212) 735-2000
9.7 Entire Agreement, Etc. This Plan (including the Annexes hereto and the
Disclosure Letters) and any Stock Option Agreements constitute the entire
agreement, and supersede all other prior agreements, understandings,
representations and warranties, both written and oral, between the parties, with
respect to the subject matter hereof and thereof, and this Plan shall not be
assignable by operation of law or otherwise (any attempted assignment in
contravention of this Section 9.7 being null and void).
9.8 Definition of "subsidiary"; Covenants with Respect to Subsidiaries. (a)
When a reference is made in this Plan to a subsidiary of a Person, the term
"subsidiary" means those other Persons that are controlled, directly or
indirectly, by such Person.
(b) Insofar as any provision of this Plan shall require a subsidiary of a
party to take or omit to take any action, such provision shall be deemed a
covenant by Mid Am or Bancshares, as the case may be, to cause such action or
omission to occur.
9.9 Interpretation; Effect. When a reference is made in this Plan to
Sections or Annexes, such reference shall be to a Section of, or Annex to, this
Plan unless otherwise indicated. The table of contents and headings contained in
this Plan are for reference purposes only and are not part of this Plan.
Whenever the words "include," "includes" or "including" are used in this Plan,
they shall be deemed to be followed by the words "without limitation." No
provision of this Plan shall require Mid Am or Bancshares or any of their
respective Subsidiaries, affiliates or directors to take any action which would
violate applicable law (whether statutory or common law), rule or regulation or
prevent any of them from taking any action the failure of which to take would
result in such a violation. As used herein, the term "as of the date hereof" or
any similar term shall mean May 20, 1998.
9.10 Severability. If any provision of this Plan or the application thereof
to any Person or circumstance is determined by a court of competent jurisdiction
to be invalid, void or unenforceable, the remaining provisions hereof, or the
application of such provision to Persons or circumstances other than those as to
which it has been held invalid or unenforceable, shall remain in full force and
effect and shall in no way be affected, impaired or invalidated thereby, so long
as the economic or legal substance of the transactions contemplated hereby is
not affected in any manner materially adverse to any party. Upon such
determination, the parties shall negotiate in good faith in an effort to agree
upon a suitable and equitable substitute provision to effect the original intent
of the parties.
9.11 No Third Party Beneficiaries. Nothing contained in this Plan,
expressed or implied, is intended to confer upon any Person, other than the
parties hereto, any benefit, right or remedies except that the provisions of
Section 6.12 shall inure to the benefit of the Persons referred to therein.
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IN WITNESS WHEREOF, this Plan has been duly executed and delivered by the
duly authorized officers of the parties hereto as of the date first above
written.
MID AM, INC.
BY: /s/ DAVID R. FRANCISCO
-----------------------------------
Name: David R. Francisco
Title: President and Chief
Operating Officer
CITIZENS BANCSHARES, INC.
BY: /s/ MARTY E. ADAMS
-----------------------------------
Name: Marty E. Adams
Title: President and Chief
Executive Officer
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ANNEX 1
FORM OF [MID AM] [CITIZENS] STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of May 21, 1998, between [Mid Am, Inc.
("Mid Am")] [Citizens Bancshares, Inc. (Citizens)], an Ohio corporation
("Grantee"), and [Citizens] [Mid Am], an Ohio corporation ("Issuer").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer are entering into an Agreement and Plan of
Merger (the "Merger Agreement");
WHEREAS, as a condition and an inducement to Grantee's entering into the
Merger Agreement, Issuer is granting Grantee the Option (as hereinafter defined)
and, as a condition and an inducement to Issuer's entering into the Merger
Agreement, Grantee is granting Issuer a Reciprocal Option (as hereinafter
defined) on terms and conditions substantially identical to those of this
Agreement; and
WHEREAS, the Board of Directors of Issuer has approved the grant of the
Option and the Merger Agreement prior to the date hereof;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable option
(the "Option") to purchase, subject to the terms hereof, up to an aggregate of
[IF MID AM IS GRANTOR -- 4,648,726][IF CITIZENS IS GRANTOR -- 1,761,308] fully
paid and nonassessable shares of the common stock, without par value, of Issuer
("Common Stock") at a price per share equal to [IF MID AM IS GRANTOR -- $27.00]
[IF CITIZENS IS GRANTOR -- $72.75], (such price, as adjusted if applicable, the
"Option Price"); provided, however, that in no event shall the number of shares
for which this Option is exercisable exceed 19.9% of the issued and outstanding
shares of Common Stock. The number of shares of Common Stock that may be
received upon the exercise of the Option and the Option Price are subject to
adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement and other than pursuant to an event described in
Section 5(a) hereof), the number of shares of Common Stock subject to the Option
shall be increased so that, after such issuance, such number together with any
shares of Common Stock previously issued pursuant hereto, equals 19.9% of the
number of shares of Common Stock then issued and outstanding without giving
effect to any shares subject or issued pursuant to the Option. Nothing contained
in this Section l(b) or elsewhere in this Agreement shall be deemed to authorize
Issuer to issue shares in breach of any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, if, but only if, both an Initial Triggering Event (as hereinafter
defined) and a Subsequent Triggering Event (as hereinafter defined) shall have
occurred prior to the occurrence of an Exercise Termination Event (as
hereinafter defined), provided that the Holder shall have sent the written
notice of such exercise (as provided in subsection (e) of this Section 2) within
six (6) months following such Subsequent Triggering Event (or such later period
as provided in Section 10). Each of the following shall be an Exercise
Termination Event: (i) the Effective Time of the Merger; (ii) termination of the
Merger Agreement in accordance with the provisions thereof if such termination
occurs prior to the occurrence of an Initial Triggering Event except a
termination by Grantee pursuant to Section [IF MID AM IS GRANTOR -- 8.4(b)][IF
CITIZENS IS GRANTOR -- 8.3(b) due to a willful breach by Issuer (a "Listed
Termination"); or (iii) the passage of eighteen (18) months (or such longer
period as provided in Section 10) after termination of the Merger Agreement if
such termination follows the occurrence of an Initial Triggering Event or is a
Listed Termination. Notwithstanding anything to the contrary contained herein,
(i) the Option may not be exercised at any time when Grantee shall be in
material breach of any of its covenants or agreements contained in the Merger
Agreement such that Issuer
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shall be entitled to terminate the Merger Agreement pursuant to Section [IF MID
AM IS GRANTOR -- 8.3(b)][IF CITIZENS IS GRANTOR -- 8.4(b)] thereof and (ii) this
Agreement shall automatically terminate upon the proper termination of the
Merger Agreement (A) by Issuer pursuant to Section [IF MID AM IS GRANTOR --
8.3(b)][IF CITIZENS IS GRANTOR -- 8.4(b)] thereof as a result of the material
breach by Grantee of its covenants or agreements contained in the Merger
Agreement or (B) pursuant to Section 8.3(a) or Section 8.4(a) unless the Grantor
is in willful and material breach of the Merger Agreement.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring on or after the date hereof:
(i) Issuer or any of its Subsidiaries (as defined in Rule 1-02 of
Regulation S-X promulgated by the Securities and Exchange Commission (the
"SEC")) (each an "Issuer Subsidiary"), without having received Grantee's
prior written consent, shall have entered into an agreement to engage in an
Acquisition Transaction (as hereinafter defined) with any person (the term
"person" for purposes of this Agreement having the meaning assigned thereto
in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and the rules and regulations thereunder) other
than Grantee or any of its Subsidiaries (each a "Grantee Subsidiary") or
the Board of Directors of Issuer (the "Issuer Board") shall have
recommended that the shareholders of Issuer approve or accept any
Acquisition Transaction other than as contemplated by the Merger Agreement.
For purposes of this Agreement, (a) "Acquisition Transaction" shall mean
(x) a merger or consolidation, or any similar transaction, involving Issuer
or any Issuer Subsidiary or group of Issuer Subsidiaries (other than
mergers, consolidations or similar transactions (i) involving solely Issuer
and/or one or more wholly-owned Subsidiaries of the Issuer or (ii) after
which the common shareholders of the Issuer immediately prior thereto in
the aggregate own or continue to own at least 65% of the common stock of
the Issuer or the publicly held surviving or successor corporation
immediately following consummation thereof, provided, that any such
transaction is not entered into in violation of the terms of the Merger
Agreement), (y) a purchase, lease or other acquisition of all or any
substantial part of the assets or deposits of Issuer or any Issuer
Subsidiary or group of Issuer Subsidiaries that is, or would on an
aggregate basis constitute, a Significant Subsidiary (as defined in Rule
1-02 of Regulation S-X), or (z) a purchase or other acquisition (including
by way of merger, consolidation, share exchange or otherwise) of securities
representing 10% or more of the voting power of Issuer or any Issuer
Subsidiary or group of Issuer Subsidiaries that is, or would on an
aggregate basis constitute, a Significant Subsidiary, provided, that
Acquisition Transaction shall not include any transaction specifically
disclosed in the Issuer's Reports filed prior to the date hereof, and (b)
"Subsidiary" shall have the meaning set forth in Rule 12b-2 under the 1934
Act;
(ii) Any person other than the Grantee or any Grantee Subsidiary or
any Issuer Subsidiary acting in a fiduciary capacity in the ordinary course
of business shall have acquired beneficial ownership or the right to
acquire beneficial ownership of 10% or more of the outstanding shares of
Common Stock (the term "beneficial ownership" for purposes of this
Agreement having the meaning assigned thereto in Section 13(d) of the 1934
Act, and the rules and regulations thereunder);
(iii) The shareholders of Issuer shall have voted and failed to
approve the Merger Agreement and the Merger at a meeting which has been
held for that purpose or any adjournment or postponement thereof, or such
meeting shall not have been held in violation of the Merger Agreement or
shall have been cancelled prior to termination of the Merger Agreement if,
prior to such meeting (or if such meeting shall not have been held or shall
have been cancelled, prior to such termination), it shall have been
publicly announced that any person (other than Grantee or any of its
Subsidiaries) shall have made, or disclosed an intention to make, a
proposal to engage in an Acquisition Transaction;
(iv) The Issuer Board shall have withdrawn or modified (or publicly
announced its intention to withdraw or modify) in any manner adverse in any
respect to Grantee its recommendation that the shareholders of Issuer
approve the transactions contemplated by the Merger Agreement, or Issuer or
any Issuer Subsidiary or group of Issuer Subsidiaries that is, or would on
an aggregate basis constitute, a Significant Subsidiary shall have
authorized, recommended, proposed (or publicly announced its
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intention to authorize, recommend or propose) an agreement to engage in an
Acquisition Transaction with any person other than Grantee or a Grantee
Subsidiary;
(v) Any person other than Grantee or any Grantee Subsidiary shall have
filed with the SEC a registration statement or tender offer materials with
respect to a potential exchange or tender offer that would constitute an
Acquisition Transaction (or filed a preliminary proxy statement with the
SEC with respect to a potential vote by its shareholders to approve the
issuance of shares to be offered in such an exchange offer);
(vi) Issuer shall have willfully breached any covenant or obligation
contained in the Merger Agreement in anticipation of engaging in an
Acquisition Transaction, and following such breach Grantee would be
entitled to terminate the Merger Agreement (whether immediately or after
the giving of notice or passage of time or both); or
(vii) Any person other than Grantee or any Grantee Subsidiary shall
have filed an application or notice with the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board") or other federal or
state bank regulatory or antitrust authority, which application or notice
has been accepted for processing, for approval to engage in an Acquisition
Transaction.
(c) The term "Subsequent Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) The acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 20% or more of the then outstanding
Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
clause (i) of subsection (b) of this Section 2, except that the percentage
referred to in clause (z) of the second sentence thereof shall be 20%.
(d) The term "Reciprocal Option" shall mean the option granted pursuant to
the option agreement dated the date hereof between the Grantee, as issuer of
such option, and Issuer, as grantee of such option.
(e) Issuer shall notify Grantee promptly in writing of the occurrence of
any Initial Triggering Event or Subsequent Triggering Event (together, a
"Triggering Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to exercise the
Option.
(f) In the event the Holder is entitled to and wishes to exercise the
Option (or any portion thereof), it shall send to Issuer a written notice (the
date of which being herein referred to as the "Notice Date") specifying (i) the
total number of shares it will purchase pursuant to such exercise and (ii) a
place and date not earlier than three business days nor later than 60 business
days from the Notice Date for the closing of such purchase (the "Closing Date");
provided, that if prior notification to or approval of the Federal Reserve Board
or any other regulatory or antitrust agency is required in connection with such
purchase, the Holder shall promptly file the required notice or application for
approval, shall promptly notify Issuer of such filing, and shall expeditiously
process the same and the period of time that otherwise would run pursuant to
this sentence shall run instead from the date on which any required notification
periods have expired or been terminated or such approvals have been obtained and
any requisite waiting period or periods shall have passed. Any exercise of the
Option shall be deemed to occur on the Notice Date relating thereto.
(g) At the closing referred to in subsection (f) of this Section 2, the
Holder shall (i) pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer and (ii)
present and surrender this Agreement to Issuer at its principal executive
offices, provided that the failure or refusal of the Issuer to designate such a
bank account or accept surrender of this Agreement shall not preclude the Holder
from exercising the Option.
(h) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (g) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part
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only, a new Option evidencing the rights of the Holder thereof to purchase the
balance of the shares purchasable hereunder.
(i) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is subject to
certain provisions of an agreement, dated as of , 199 , between
the registered holder hereof and Issuer and to resale restrictions arising
under the Securities Act of 1933, as amended. A copy of such agreement is
on file at the principal office of Issuer and will be provided to the
holder hereof without charge upon receipt by Issuer of a written request
therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act") in the above legend
shall be removed by delivery of substitute certificate(s) without such reference
if the Holder shall have delivered to Issuer a copy of a letter from the staff
of the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the 1933 Act; (ii) the reference to the provisions of this Agreement
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the shares have been sold or transferred in compliance
with the provisions of this Agreement and under circumstances that do not
require the retention of such reference in the opinion of Counsel to the Holder;
and (iii) the legend shall be removed in its entirety if the conditions in the
preceding clauses (i) and (ii) are both satisfied. In addition, such
certificates shall bear any other legend as may be required by law.
(j) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (f) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder. Issuer shall
pay all expenses, and any and all United States 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 2 in the name of the
Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock; (ii)
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 Issuer;
(iii) promptly to take all action as may from time to time be required
(including (x) complying with all applicable premerger notification, reporting
and waiting period requirements specified in 15 U.S.C. Section 18a and
regulations promulgated thereunder and (y) in the event, under the Bank Holding
Company Act of 1956, as amended (the "BHCA"), or the Change in Bank Control Act
of 1978, as amended, or any state or other federal banking law, prior approval
of or notice to the Federal Reserve Board or to any state or other federal
regulatory authority is necessary before the Option may be exercised,
cooperating fully with the Holder in preparing such applications or notices and
providing such information to the Federal Reserve Board or such state or other
federal regulatory authority as they may require) in order to permit the Holder
to exercise the Option and Issuer duly and effectively to issue shares of Common
Stock pursuant hereto; and (iv) promptly to take all action provided herein to
protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable, without
expense, at the option of the Holder, upon presentation and surrender of this
Agreement at the principal office of Issuer, for other Agreements providing for
Options of different denominations entitling the holder thereof to purchase, on
the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Agreements and
related Options for which this Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of
the loss, theft, destruction or
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mutilation of this Agreement, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification, and upon surrender and cancellation of
this Agreement, if mutilated, Issuer will execute and deliver a new Agreement of
like tenor and date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of Issuer, whether
or not the Agreement so lost, stolen, destroyed or mutilated shall at any time
be enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, the number of shares of Common Stock purchasable upon the exercise of
the Option and the Option Price shall be subject to adjustment from time to time
as provided in this Section 5.
(a) In the event of any change in, or distributions in respect of, the
Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of
shares or the like (including any stock dividend split-up or subdivision
announced prior to the date hereof but not yet effective), the type and
number of shares of Common Stock purchasable upon exercise hereof shall be
appropriately adjusted and proper provision shall be made so that, in the
event that any additional shares of Common Stock are to be issued or
otherwise become outstanding as a result of any such change (other than
pursuant to an exercise of the Option), the number of shares of Common
Stock that remain subject to the Option shall be increased so that, after
such issuance and together with shares of Common Stock previously issued
pursuant to the exercise of the Option (as adjusted on account of any of
the foregoing changes in the Common Stock), it equals 19.9% of the number
of shares of Common Stock then issued and outstanding.
(b) Whenever the number of shares of Common Stock purchasable upon
exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by multiplying the Option Price by a fraction, the
numerator of which shall be equal to the number of shares of Common Stock
purchasable prior to the adjustment and the denominator of which shall be
equal to the number of shares of Common Stock purchasable after the
adjustment.
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior
to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within twelve (12) months (or such later period as provided in Section
10) of such Subsequent Triggering Event (whether on its own behalf or on behalf
of any subsequent holder of this Option (or part thereof) or any of the shares
of Common Stock issued pursuant hereto), promptly prepare, file and keep current
a registration statement under the 1933 Act covering any shares issued and
issuable pursuant to this Option and shall use its reasonable best efforts to
cause such registration statement to become effective and remain current in
order to permit the sale or other disposition of any shares of Common Stock
issued upon total or partial exercise of this Option ("Option Shares") in
accordance with any plan of disposition requested by Grantee. Issuer will use
its reasonable best efforts to cause such registration statement promptly to
become effective and then to remain effective for such period not in excess of
180 days from the day such registration statement first becomes effective or
such shorter time as may be reasonably necessary to effect such sales or other
dispositions. Grantee shall have the right to demand two such registrations. The
Issuer shall bear the costs of such registrations (including, but not limited
to, Issuer's attorneys' fees, printing costs and filing fees, except for
underwriting discounts or commissions, brokers' fees and the fees and
disbursements of Grantee's counsel related thereto). The foregoing
notwithstanding, if, at the time of any request by Grantee for registration of
Option Shares as provided above, Issuer is in registration with respect to an
underwritten public offering by Issuer of shares of Common Stock, and if in the
good faith judgment of the managing underwriter or managing underwriters, or, if
none, the sole underwriter or underwriters, of such offering the offer and sale
of the Option Shares would interfere with the successful marketing of the shares
of Common Stock offered by Issuer, the number of Option Shares otherwise to be
covered in the registration statement contemplated hereby may be reduced;
provided, however, that after any such required reduction the number of Option
Shares to be included in such offering for the account of the Holder shall
constitute at least 25% of the total number of shares to be sold by the Holder
and Issuer in the aggregate; and provided further, however, that if such
reduction occurs, then Issuer shall file a registration statement for the
balance as promptly as practicable thereafter as to which no reduction pursuant
to this Section 6 shall be permitted or occur and the Holder shall thereafter be
entitled to one additional
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registration and the twelve (12) month period referred to in the first sentence
of this section shall be increased to twenty-four (24) months. Each such Holder
shall provide all information reasonably requested by Issuer for inclusion in
any registration statement to be filed hereunder. If requested by any such
Holder in connection with such registration, Issuer shall become a party to any
underwriting agreement relating to the sale of such shares, but only to the
extent of obligating itself in respect of representations, warranties,
indemnities and other agreements customarily included in such underwriting
agreements for Issuer. Upon receiving any request under this Section 6 from any
Holder, Issuer agrees to send a copy thereof to any other person known to Issuer
to be entitled to registration rights under this Section 6, in each case by
promptly mailing the same, postage prepaid, to the address of record of the
persons entitled to receive such copies. Notwithstanding anything to the
contrary contained herein, in no event shall the number of registrations that
Issuer is obligated to effect be increased by reason of the fact that there
shall be more than one Holder as a result of any assignment or division of this
Agreement.
7. (a) At any time after the occurrence of a Repurchase Event (as defined
below) (i) at the request of the Holder, delivered prior to an Exercise
Termination Event (or such later period as provided in Section 10), Issuer (or
any successor thereto) shall repurchase the Option from the Holder at a price
(the "Option Repurchase Price") equal to the amount by which (A) the
market/offer price (as defined below) exceeds (B) the Option Price, multiplied
by the number of shares for which this Option may then be exercised and (ii) at
the request of the owner of Option Shares from time to time (the "Owner"),
delivered prior to an Exercise Termination Event (or such later period as
provided in Section 10), Issuer (or any successor thereto) shall repurchase such
number of the Option Shares from the Owner as the Owner shall designate at a
price (the "Option Share Repurchase Price") equal to the market/offer price
multiplied by the number of Option Shares so designated. The term "market/offer
price" shall mean the highest of (i) the price per share of Common Stock at
which a tender or exchange offer therefor has been made, (ii) the price per
share of Common Stock to be paid by any third party pursuant to an agreement
with Issuer, (iii) the highest closing price for shares of Common Stock within
the six-month period immediately preceding the date the Holder gives notice of
the required repurchase of this Option or the Owner gives notice of the required
repurchase of Option Shares, as the case may be, or (iv) in the event of a sale
of all or any substantial part of Issuer's assets or deposits, the sum of the
net price paid in such sale for such assets or deposits and the current market
value of the remaining net assets of Issuer as determined by a nationally
recognized investment banking firm selected by the Holder or the Owner, as the
case may be, and reasonably acceptable to Issuer, divided by the number of
shares of Common Stock of Issuer outstanding at the time of such sale. In
determining the market/ offer price, the value of consideration other than cash
shall be determined by a nationally recognized investment banking firm selected
by the Holder or Owner, as the case may be, and reasonably acceptable to Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its right to
require Issuer to repurchase the Option and any Option Shares pursuant to this
Section 7 by surrendering for such purpose to Issuer, at its principal office, a
copy of this Agreement or certificates for Option Shares, as applicable,
accompanied by a written notice or notices stating that the Holder or the Owner,
as the case may be, elects to require Issuer to repurchase this Option and/or
the Option Shares in accordance with the provisions of this Section 7. As
promptly as practicable, and in any event within five business days after the
surrender of the Option and/or certificates representing Option Shares and the
receipt of such notice or notices relating thereto, Issuer shall deliver or
cause to be delivered to the Holder the Option Repurchase Price and/or to the
Owner the Option Share Repurchase Price therefor or the portion thereof that
Issuer is not then prohibited under applicable law and regulation from so
delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from repurchasing the
Option and/or the Option Shares in full, Issuer 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
Option Repurchase Price and the Option Share Repurchase Price, respectively,
that it is no longer prohibited from delivering, within five business days after
the date on which Issuer is no longer so prohibited; provided, however, that if
Issuer at any time after delivery of a notice of repurchase pursuant to
paragraph (b) of this Section 7 is prohibited under applicable
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law or regulation, or as a consequence of administrative policy, from delivering
to the Holder and/or the Owner, as appropriate, the Option Repurchase Price and
the Option Share Repurchase Price, respectively, in full (and Issuer hereby
undertakes to use its reasonable best efforts to obtain all required regulatory
and legal approvals and to file any required notices as promptly as practicable
in order to accomplish such repurchase), the Holder or Owner may revoke its
notice of repurchase of the Option and/or the Option Shares whether in whole or
to the extent of the prohibition, whereupon, in the latter case, Issuer shall
promptly (i) deliver to the Holder and/or the Owner, as appropriate, that
portion of the Option Repurchase Price and/or the Option Share Repurchase Price
that Issuer is not prohibited from delivering; and (ii) deliver, as appropriate,
either (A) to the Holder, a new Agreement evidencing the right of the Holder to
purchase that number of shares of Common Stock obtained by multiplying the
number of shares of Common Stock for which the surrendered Agreement was
exercisable at the time of delivery of the notice of repurchase by a fraction,
the numerator of which is the Option Repurchase Price less the portion thereof
theretofore delivered to the Holder and the denominator of which is the Option
Repurchase Price, and/or (B) to the Owner, a certificate for the Option Shares
it is then so prohibited from repurchasing. If an Exercise Termination Event
shall have occurred prior to the date of the notice by Issuer described in the
first sentence of this subsection (c), or shall be scheduled to occur at any
time before the expiration of a period ending on the thirtieth day after such
date, the Holder shall nonetheless have the right to exercise the Option until
the expiration of such 30-day period.
(d) For purposes of this Section 7, a "Repurchase Event" shall be deemed to
have occurred upon the occurrence of any of the following events or transactions
after the date hereof:
(i) the acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 50% or more of the then outstanding
Common Stock; or
(ii) the consummation of any Acquisition Transaction described in
Section 2(b)(i) hereof, except that the percentage referred to in clause
(z) shall be 50%.
8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or a Grantee Subsidiary, or engage in a plan of exchange with
any person, other than Grantee or a Grantee Subsidiary and Issuer shall not be
the continuing or surviving corporation of such consolidation or merger or the
acquirer in such plan of exchange, (ii) to permit any person, other than Grantee
or a Grantee Subsidiary, to merge into Issuer or be acquired by Issuer in a plan
of exchange and Issuer shall be the continuing or surviving or acquiring
corporation, but, in connection with such merger or plan of exchange, the then
outstanding shares of Common Stock shall be changed into or exchanged for stock
or other securities of any other person or cash or any other property or the
then outstanding shares of Common Stock shall after such merger or plan of
exchange represent less than 50% of the outstanding shares and share equivalents
of the merged or acquiring company, or (iii) to sell or otherwise transfer all
or a substantial part of its or the Issuer Subsidiary's assets or deposits to
any person, other than Grantee or a Grantee Subsidiary, then, and in each such
case, the agreement governing such transaction shall make proper provision so
that the Option shall, upon the consummation of any such transaction and upon
the terms and conditions set forth herein, be converted into, or exchanged for,
an option (the "Substitute Option"), at the election of the Holder, of either
(x) the Acquiring Corporation (as hereinafter defined) or (y) any person that
controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or surviving
person of a consolidation or merger with Issuer (if other than Issuer),
(ii) the acquiring person in a plan of exchange in which Issuer is
acquired, (iii) the Issuer in a merger or plan of exchange in which Issuer
is the continuing or surviving or acquiring person, and (iv) the transferee
of all or a substantial part of Issuer's assets or deposits (or the assets
or deposits of the Issuer Subsidiary).
(ii) "Substitute Common Stock" shall mean the common stock issued by
the issuer of the Substitute Option upon exercise of the Substitute Option.
(iii) "Assigned Value" shall mean the market/offer price, as defined
in Section 7.
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(iv) "Average Price" shall mean the average closing price of a share
of the Substitute Common Stock for 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 Stock on the day preceding
such consolidation, merger or sale; provided that if Issuer is the issuer
of the Substitute Option, the Average Price shall be computed with respect
to a share of common stock issued by the person merging into Issuer or by
any company which controls or is controlled by such person, as the Holder
may elect.
(c) Subject to paragraph (d) of this Section 8, the Substitute Option shall
have the same terms as the Option, provided that if the terms of the Substitute
Option cannot, for legal reasons, be the same as the Option, such terms shall be
as similar as possible and in no event less advantageous to the Holder. The
issuer of the Substitute Option shall also enter into an agreement with the then
Holder or Holders of the Substitute Option in substantially the same form as
this Agreement (after giving effect for such purpose to the provisions of
Section 9), which agreement shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option was exercisable
immediately prior to the event described in the first sentence of Section 8(a),
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option was exercisable immediately prior to the
event described in the first sentence of Section 8(a) and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option (the "Substitute Option Issuer")
shall make a cash payment to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause (e)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the Holder.
(f) Issuer shall not enter into any transaction described in subsection (a)
of this Section 8 unless the Acquiring Corporation and any person that controls
the Acquiring Corporation assume in writing all the obligations of Issuer
hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall repurchase the Substitute Option from the
Substitute Option Holder at a price (the "Substitute Option Repurchase Price")
equal to the amount by which (i) the Highest Closing Price (as hereinafter
defined) exceeds (ii) the exercise price of the Substitute Option, multiplied by
the number of shares of Substitute Common Stock for which the Substitute Option
may then be exercised, and at the request of the owner (the "Substitute Share
Owner") of shares of Substitute Common Stock (the "Substitute Shares"), the
Substitute Option Issuer shall repurchase the Substitute Shares at a price (the
"Substitute Share Repurchase Price") equal to the Highest Closing Price
multiplied by the number of Substitute Shares so designated. The term "Highest
Closing Price" shall mean the highest closing price for shares of Substitute
Common Stock within the six-month period immediately preceding the date the
Substitute Option Holder gives notice of the required repurchase of the
Substitute Option or the Substitute Share Owner gives notice of the required
repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective rights to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to
this Section 9 by surrendering for such purpose to the Substitute Option Issuer,
at its principal office, the agreement for such Substitute Option (or, in the
absence of such an agreement, a copy of this Agreement) and/or certificates for
Substitute Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may be,
elects to require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in accordance
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with the provisions of this Section 9. As promptly as practicable and in any
event within five business days after the surrender of the Substitute Option
and/or certificates representing Substitute Shares and the receipt of such
notice or notices relating thereto, the Substitute Option Issuer shall deliver
or cause to be delivered to the Substitute Option Holder the Substitute Option
Repurchase Price and/or to the Substitute Share Owner the Substitute Share
Repurchase Price therefor or the portion thereof which the Substitute Option
Issuer is not then prohibited under applicable law and regulation from so
delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation, or as a consequence of administrative policy, from
repurchasing the Substitute Option and/or the Substitute Shares in part or in
full, the Substitute Option Issuer shall immediately so notify the Substitute
Option Holder and/or the Substitute Share Owner and thereafter deliver or cause
to be delivered, from time to time, to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the portion of the Substitute Option
Repurchase Price and/or the Substitute Share Repurchase Price, respectively,
which it is no longer prohibited from delivering, within five (5) business days
after the date on which the Substitute Option Issuer is no longer so prohibited;
provided, however, that if the Substitute Option Issuer is at any time after
delivery of a notice of repurchase pursuant to subsection (b) of this Section 9
prohibited under applicable law or regulation, or as a consequence of
administrative policy, from delivering to the Substitute Option Holder and/or
the Substitute Share Owner, as appropriate, the Substitute Option Repurchase
Price and the Substitute Share Repurchase Price, respectively, in full (and the
Substitute Option Issuer shall use its reasonable best efforts to receive all
required regulatory and legal approvals as promptly as practicable in order to
accomplish such repurchase), the Substitute Option Holder and/or Substitute
Share Owner may revoke its notice of repurchase of the Substitute Option or the
Substitute Shares either in whole or to the extent of prohibition, whereupon, in
the latter case, the Substitute Option Issuer shall promptly (i) deliver to the
Substitute Option Holder or Substitute Share Owner, as appropriate, that portion
of the Substitute Option Repurchase Price or the Substitute Share Repurchase
Price that the Substitute Option Issuer is not prohibited from delivering; and
(ii) deliver, as appropriate, either (A) to the Substitute Option Holder, a new
Substitute Option evidencing the right of the Substitute Option Holder to
purchase that number of shares of the Substitute Common Stock obtained by
multiplying the number of shares of the Substitute Common Stock for which the
surrendered Substitute Option was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the Substitute
Option Repurchase Price less the portion thereof theretofore delivered to the
Substitute Option Holder and the denominator of which is the Substitute Option
Repurchase Price, and/or (B) to the Substitute Share Owner, a certificate for
the Substitute Option Shares it is then so prohibited from repurchasing. If an
Exercise Termination Event shall have occurred prior to the date of the notice
by the Substitute Option Issuer described in the first sentence of this
subsection (c), or shall be scheduled to occur at any time before the expiration
of a period ending on the thirtieth day after such date, the Substitute Option
Holder shall nevertheless have the right to exercise the Substitute Option until
the expiration of such 30-day period.
10. The 30-day, 6-month, 12-month, 18-month or 24-month periods for
exercise of certain rights under Sections 2, 6, 7, 9, 12, 14 and 15 shall be
extended: (i) to the extent necessary to obtain all regulatory approvals for the
exercise of such rights (for so long as the Holder, Owner, Substitute Option
Holder or Substitute Share Owner, as the case may be, is using commercially
reasonable efforts to obtain such regulatory approvals), and for the expiration
of all statutory waiting periods; and (ii) to the extent necessary to avoid
liability under Section 16(b) of the 1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Issuer Board prior to the date hereof and no other corporate proceedings on the
part of Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer.
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(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant thereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
(c) The execution, delivery and performance of this Agreement, does not and
will not, and the consummation by it of any of the transactions contemplated
hereby will not constitute or result in (A) a breach or violation of, or a
default under, its articles of incorporation or code of regulations, or the
comparable governing instruments of any of its subsidiaries, or (B) a breach or
violation of, or a default under, or the acceleration of or the creation of a
lien (with or without the giving of notice, the lapse of time or both) pursuant
to, any provision of any agreement, lease, contract, note, mortgage, indenture,
arrangement or other obligation ("Contracts") of it or any of its subsidiaries
or any judgment, decree, order, award or governmental or non-governmental permit
or license to which it or any of its subsidiaries is subject.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party, except that in
the event a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may assign
in whole or in part its rights and obligations hereunder; provided, however,
that until the date 15 days following the date on which the Federal Reserve
Board has approved an application by Grantee to acquire the shares of Common
Stock subject to the Option, Grantee may not assign its rights under the Option
except in (i) a widely dispersed public distribution, (ii) a private placement
in which no one party acquires the right to purchase in excess of 2% of the
voting shares of Issuer, (iii) an assignment to a single party (e.g., a broker
or investment banker) for the purpose of conducting a widely dispersed public
distribution on Grantee's behalf or (iv) any other manner approved by the
Federal Reserve Board.
13. Each of Grantee and Issuer will use its reasonable best efforts to make
all filings with, and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement, including, without limitation, applying to the Federal Reserve
Board under the BHCA for approval to acquire the shares issuable hereunder, but
Grantee shall not be obligated to apply to state banking authorities for
approval to acquire the shares of Common Stock issuable hereunder until such
time, if ever, as it deems appropriate to do so.
14. (a) Grantee may, at any time following a Repurchase Event and prior to
the occurrence of an Exercise Termination Event (or such later period as
provided in Section 10), relinquish the Option (together with any Option Shares
issued to and then owned by Grantee) to Issuer in exchange for a cash fee equal
to the Surrender Price; provided, however, that Grantee may not exercise its
rights pursuant to this Section 14 if Issuer has repurchased the Option (or any
portion thereof) or any Option Shares pursuant to Section 7. The "Surrender
Price" shall be equal to $25 million (i) plus, if applicable, Grantee's purchase
price with respect to any Option Shares being so relinquished and (ii) minus, if
applicable, the sum of (1) the excess of (A) the net cash amounts, if any,
received by Grantee pursuant to the arms' length sale of Option Shares (or any
other securities into which such Option Shares were converted or exchanged) to
any unaffiliated party, over (B) Grantee's purchase price of such Option Shares,
and (2) the net cash amounts, if any, received by Grantee pursuant to an arms'
length sale of any portion of the Option sold.
(b) Grantee may exercise its right to relinquish the Option and any Option
Shares pursuant to this Section 14 by surrendering to Issuer, at its principal
office, a copy of this Agreement together with certificates for Option Shares,
if any, accompanied by a written notice stating (i) that Grantee elects to
relinquish the Option and Option Shares, if any, in accordance with the
provisions of this Section 14 and (ii) the Surrender Price. The Surrender Price
shall be payable in immediately available funds on or before the second business
day following receipt of such notice by Issuer.
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(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from paying the
Surrender Price to Grantee in full, Issuer shall immediately so notify Grantee
and thereafter deliver or cause to be delivered, from time to time, to Grantee,
the portion of the Surrender Price that it is no longer prohibited from paying,
within five business days after the date on which Issuer is no longer so
prohibited; provided, however, that if Issuer at any time after delivery of a
notice of surrender pursuant to paragraph (b) of this Section 14 is prohibited
under applicable law or regulation, or as a consequence of administrative
policy, from paying to Grantee the Surrender Price in full, (i) Issuer shall (A)
use its reasonable best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in order
to make such payments, (B) within five days of the submission or receipt of any
documents relating to any such regulatory and legal approvals, provide Grantee
with copies of the same, and (c) keep Grantee advised of both the status of any
such request for regulatory and legal approvals, as well as any discussions with
any relevant regulatory or other third party reasonably related to the same and
(ii) Grantee may revoke such notice of surrender by delivery of a notice of
revocation to Issuer and, upon delivery of such notice of revocation, the
Exercise Termination Date shall be extended to a date six months from the date
on which the Exercise Termination Date would have occurred if not for the
provisions of this Section 14(c) (during which period Grantee may exercise any
of its rights hereunder, including any and all rights pursuant to this Section
14).
15. (a) In the event that any Person who has participated in a Subsequent
Triggering Event enters into any agreement or understanding with Grantee with
respect to Grantee's exercise of, or its election not to exercise, any of
Grantee's rights set forth in Section 2, 7 or 14 of this Agreement, Issuer may,
by written notice to Grantee, require that Grantee sell to Issuer, and Grantee
shall sell to Issuer, (i) the Option and (ii) all (but not less than all) Option
Shares purchased by Grantee pursuant hereto and with respect to which Grantee
then has beneficial ownership; provided, however, that any such exercise by the
Issuer shall not operate to limit Grantee's rights pursuant to Sections 7 and 14
hereof. The date of Grantee's written notice referred to above is referred to as
the "Section 15 Notice Date." Such repurchase shall be at an aggregate price
(the "Section 15 Repurchase Consideration") equal to:
(i) the aggregate Purchase Price paid by Grantee for any Option Shares
acquired pursuant to the Option with respect to which Grantee then has
beneficial ownership; plus
(ii) the excess, if any, of (x) the market/offer price as of the
Section 15 Notice Date for a share of Common Stock over (y) the Option
Price (subject to adjustment pursuant to Section 5), multiplied by the
number of shares of Common Stock with respect to which the Option has not
been exercised; plus
(iii) the excess, if any, of the market/offer price as of the Section
15 Notice Date over the Option Price paid (or, in the case of Option Shares
with respect to which the Option has been exercised but the Closing Date
has not occurred, payable (subject to adjustment pursuant to Section 5)) by
Grantee for each Option Share with respect to which Grantee then has
beneficial ownership, multiplied by the number of such shares; plus
(iv) the amount of the documented reasonable out-of-pocket expenses
incurred by Grantee in connection with the Merger Agreement and this
Agreement and the transactions contemplated thereby and hereby, including
reasonable accounting, investment banking and legal fees.
(b) Issuer shall, within 2 business days of receiving the notice referred
to in Section 15(a) above, pay the Section 15 Repurchase Consideration in
immediately available funds, and Grantee shall surrender to Issuer the Option
and the certificates evidencing the Option Shares purchased hereunder with
respect to which Grantee then has beneficial ownership, and Grantee shall
warrant that it has sole record and beneficial ownership of such shares and that
the same are then free and clear of all liens, claims, charges and encumbrances
of any kind whatsoever. To the extent that Issuer is prohibited under applicable
law or regulation, or as a consequence of administrative policy, from
repurchasing the Option and/or the Option Shares in full, Issuer shall
immediately so notify Grantee and thereafter the rights and obligations of the
Issuer and the Grantee with respect thereto shall be the same as under Section
7(c).
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(c) If, prior to the date which is 18 months after the Section 15 Notice
Date, Issuer enters into, or is the subject of, any transaction which would have
constituted a Repurchase Event hereunder but for the prior repurchase by Issuer
of the Option and Option Shares under this Section 15, then concurrently with
the occurrence of such event, Issuer shall pay to Grantee, as additional
consideration for the Option and Option Shares purchased by Issuer pursuant to
this Section, an amount in immediately available funds equal to the excess, if
any, of (i) the Section 15 Repurchase Consideration calculated as if the Section
15 Notice Date had occurred on the date of such Repurchase Event over (ii) the
amount previously paid by Issuer to Grantee pursuant to this Section 15.
(d) In the event that Issuer is, as a result of law or regulation,
prohibited from performing any of its obligations under this Section 15, Issuer
shall not thereafter enter into any Acquisition Transaction unless the other
parties thereto agree to assume Issuer's obligations under this Section 15 to
the extent not previously performed. The foregoing sentence shall not operate to
limit or waive any remedies Grantee may have against Issuer for Issuer's failure
to perform its obligations under this Section 15.
16. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief. In connection therewith both
parties waive the posting of any bond or similar requirement.
17. Each of the Grantor and the Issuer hereby acknowledges and agrees that
no profit from the sale of the Common Stock acquired pursuant to the terms of
this Option shall be recoverable under Section 1707.043 of the Ohio General
Corporation Law.
18. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7, the full number of shares of Common Stock
provided in Section l(a) hereof (as adjusted pursuant to Section l(b) or Section
5 hereof), it is the express intention of Issuer to allow the Holder to acquire
or to require Issuer to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.
19. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
fax, telecopy, or by registered or certified mail (postage prepaid, return
receipt requested) at the respective addresses of the parties set forth in the
Merger Agreement.
20. This Agreement shall be governed by and construed in accordance with
the laws of the State of Ohio without regard to the conflict of law principles
thereof (except to the extent that mandatory provisions of Federal law are
applicable).
21. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
22. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
23. Except as otherwise expressly provided herein, in the Reciprocal Option
or in the Merger Agreement, this Agreement contains the entire agreement between
the parties with respect to the transactions contemplated hereunder and
supersedes all prior arrangements or understandings with respect thereof,
written or oral. The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assignees. Nothing in this Agreement, expressed or
implied, is intended to confer upon any party, other than the parties hereto,
and their respective successors except as assignees, any rights, remedies,
obligations or liabilities under or by reason of this Agreement, except as
expressly provided herein.
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24. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
CITIZENS BANCSHARES, INC.
By:
------------------------------------
Name:
Title:
MID AM, INC.
By:
------------------------------------
Name:
Title:
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ANNEX 2
CERTIFICATE OF AMENDMENT OT THE
FIFTH AMENDED ARTICLES OF INCORPORATION OF
CITIZENS BANCSHARES, INC.
(TO BE RENAMED SKY FINANCIAL GROUP, INC.)
Marty E. Adams, President of Citizens Bancshares, Inc., an Ohio corporation
(the "Corporation"), does hereby certify that a special meeting of the
shareholders was duly called and held on the 1st day of October, 1998, at which
meeting a quorum of the shareholders was present in person or by proxy, and by
the affirmative vote of the holders of shares entitling them to exercise more
than a majority of the voting power of the Corporation, as required by article
NINTH, Division B of the Fifth Amended Articles of Incorporation, the following
amendments to the Corporation's Fifth Amended Articles of Incorporation were
duly adopted:
1. Article FIRST of the Corporation's Fifth Amended Articles of
Incorporation is amended in its entirety to read as follows:
FIRST: The name of the Corporation shall be Sky Financial Group,
Inc.
2. Article SECOND of the Corporation's Fifth Amended Articles of
Incorporation is amended in its entirety to read as follows:
SECOND: The place in the State of Ohio where the principal office
of the Corporation will be located is in Bowling Green, Wood County, or
such other location as the Board of Directors may from time to time
determine.
3. The first two paragraphs introducing and preceding Division A of
Article FOURTH of the Corporation's Fifth Amended Articles of Incorporation
are amended in their entirety to read as follows and there is hereby added
a new third paragraph as follows:
FOURTH: The Total number of shares of all classes which the
Corporation shall have authority to issue is one hundred sixty million
(160,000,000) shares, divided into two classes as follows: 10,000,000
Serial Preferred Shares, par value $10.00 (Ten Dollars) per share
(hereinafter called the "Serial Shares") and 150,000,000 Common Shares,
without par value (hereinafter called the "Common Shares").
No holder of any class of shares of the Corporation shall, as such
holder, have any preemptive or preferential right to purchase or
subscribe to any shares of any class of stock of the Corporation,
whether now or hereafter authorized, whether unissued or in the
treasury, or to purchase any obligations convertible into shares of any
such class of stock of the Corporation, which at any time may be
proposed to be issued by the Corporation or subjected to the rights or
options to purchase granted by the Corporation.
No holder of any class of shares of the Corporation shall have the
right to cumulate his voting power in the election of the Board of
Directors, and the right to cumulate his voting power in the election of
Board of Directors, and the right to cumulate voting described in Ohio
Revised Code Section 1701.55 is hereby specifically denied to the
holders of any class of stock of the Corporation.
4. Article EIGHTH of the Corporation's Fifth Amended Articles of
Incorporation is amended in its entirety to read as follows:
EIGHTH: Except as otherwise required by these Articles of
Incorporation, but notwithstanding any provision of the Ohio Revised
Code now or hereafter in force requiring for any purpose the vote,
consent, waiver or release of the holders of shares entitling them to
exercise two-thirds, or any other proportion, of the voting power of the
Corporation or of any class or classes of shares thereof, any amendments
to the Articles of Incorporation may be made from time to time, and any
proposal or proposition requiring the action of shareholders may be
authorized from time to time by the affirmative vote of the holders of
shares entitling them to exercise a majority of the voting power of the
Corporation.
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5. Article NINTH of the Corporation's Fifth Amended Articles of
Incorporation is amended in its entirety to read as follows:
NINTH: Except to the extent that Article FOURTH and SIXTH otherwise
provide with respect to certain matters therein set forth, the
Corporation reserves the right to amend, alter, change or repeal any
provision contained in these Amended and Restated Articles of
Incorporation and to add new provision, in the manner now or hereafter
prescribed by statute, upon the affirmative vote of a majority of the
outstanding shares of the Corporation, voting as a class; and all
rights, privileges and preferences of whatsoever nature conferred upon
shareholders, directors and officers pursuant to these Amended and
Restated Articles of Incorporation in their present form or as hereafter
amended are granted subject to this reservation. Notwithstanding the
foregoing, the adoption of any amendment, alteration, change or repeal
to these Amended and Restated Articles of Incorporation as the same may
be in effect from time to time which is inconsistent with or would have
the effect of amending, altering, changing or repealing the provisions
of the Sections 7, 9 or 10 of the Regulations of the Corporation as the
same may be in effect from time to time shall require the same
affirmative vote of the shareholders as would be required under such
Regulations to adopt any amendment, alteration, change or repeal or said
Sections 7, 9 or 10 or to adopt any provisions inconsistent therewith.
IN WITNESS WHEREOF, Marty E. Adams, President of the Corporation, acting
for and on behalf of the Corporation has hereunto subscribed his name this th
day of , 1998.
CITIZENS BANCSHARES, INC.
By:
--------------------------------------
Marty E. Adams
President
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ANNEX 3
AMENDMENT TO THE CODE OF REGULATIONS
OF
CITIZENS BANCSHARES, INC.
In accordance with Section 37 of the Code of Regulations of Citizens
Bancshares, Inc., an Ohio corporation (the "Corporation"), the Board of
Directors recommended the following amendments to the Code of Regulations of the
Corporation by the affirmative vote of at least two-thirds of the Board of
Directors then in office at a duly called meeting held on the 21st day of July,
1998. A special meeting of the shareholders was duly called and held on the 1st
day of October, 1998, at which meeting a quorum of the shareholders was present
in person or by proxy, and by the affirmative vote of the holders of shares
entitling them to exercise more than a majority of the voting power of the
Corporation, as required by Section 37 of the Code of Regulations of the
Corporation, the following amendments to the Corporation's Code of Regulations
were adopted:
FIRST, Section 2 of the Corporation's Code of Regulations is amended in its
entirety to read as follows:
SECTION 2. SPECIAL MEETINGS.
Special meetings of the shareholders may be called at any time by the
Chairman of the Board, the Chief Executive Officer, the President, the
Chief Operating Officer or by the directors by action at a meeting or a
majority of the directors acting without a meeting or by shareholders
holding 50% or more of the outstanding shares entitled to vote thereat.
Such meetings may be held within or without the State of Ohio at such time
and place as may be specified in the notice thereof.
SECOND, Section 7 of the Corporation's Code of Regulations is amended in
its entirety to read as follows:
SECTION 7. NUMBER.
(a) The number of directors shall not be less than five (5) nor more
than thirty five (35), the exact number of directors to be determined from
time to time by an eighty (80) percent majority vote of the directors then
in office, and such exact number shall be twenty-two (22) until otherwise
so determined.
(b) At the effective time (the "Effective Time") of the merger with
Mid Am, Inc. ("Mid Am"), the directors of the Corporation shall consist of
twenty-two (22) members, eleven (11) of whom shall be selected by the
Chairman of the Board and Chief Executive Officer of Mid Am ("Mid Am
Directors") and eleven (11) of whom shall be selected by the Board of
Directors of the Corporation prior to the Effective Time ("Bancshares
Directors") and which shall be allocated among the three classes of
directors of the Corporation by the agreement of the Chairman of the Board
and Chief Executive Officer of Mid Am and the Board of Directors of the
Corporation so that each class shall have an equal number of Mid Am
Directors and Bancshares Directors.
THIRD, Section 8 of the Corporation's Code of Regulations is amended in its
entirety to read as follows:
SECTION 8. NOMINATIONS.
(a) Only persons who are nominated in accordance with the procedures
set forth in this Section 8 shall be eligible for election by shareholders
as directors. Nominations of persons for election as directors of the
Corporation may be made at a meeting of shareholders by or at the direction
of the directors by any nominating committee or person appointed by the
directors, including (i) pursuant to paragraph (b) of this Section 8 or
(ii) by any shareholder of the Corporation entitled to vote for the
election of directors at the meeting who complies with the notice
procedures set forth in paragraph (c) of this Section 8. No person shall be
eligible for election by shareholders as a director of the Corporation
unless nominated in accordance with the procedures set forth in this
Section 8.
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(b) For a period of three years after the Effective Time, in the event
that a Mid Am Director or a Bancshares Director or a director otherwise
nominated as set forth herein by the Mid Am Directors or Bancshares
Directors as set forth herein shall resign, no longer be able to serve or
not stand for reelection, (i) if such director shall be a Mid Am Director
or a nominee of the Mid Am Directors, then the Mid Am Directors and
nominees of the Mid Am Directors serving as directors shall have the
exclusive right to nominate an individual to fill such vacancy and (ii) if
such director shall be a Bancshares Director or a nominee of the Bancshares
Directors, then the Bancshares Directors and nominees of the Bancshares
Directors serving as directors shall have the exclusive right to nominate
an individual to fill such vacancy.
(c) Nominations other than those made by or at the direction of the
directors, shall be made only pursuant to timely notice in writing to the
Secretary of the Corporation. To be timely, a shareholder's notice shall be
delivered to or mailed and received at the principal executive offices of
the Corporation not less than sixty (60) days nor more than ninety (90)
days prior to the meeting; provided, however, that in the event that less
than seventy-five (75) days' notice or prior public disclosure of the date
of the meeting is given or made to shareholders, notice by the shareholder
to be timely must be so delivered or received not later than the close of
business on the fifteenth (15th) day following the earlier of the day on
which such notice of the date of the meeting was mailed or such public
disclosure was made. Such shareholder's notice shall set forth (a) as to
each person who is not an incumbent director whom the shareholder proposes
to nominate for election as a director, (i) the name, age, business address
and residence address of such person; (ii) the principal occupation or
employment of such person; (iii) the class and number of shares of the
Corporation which are beneficially owned by such person; and (iv) any other
information relating to such person that is required to be disclosed in
solicitations for proxies for election of directors pursuant to Regulation
14A under the Securities Exchange Act of 1934, as amended; and (b) as to
the shareholder giving the notice, (i) the name and record address of such
shareholder and (ii) the class and number of shares of the Corporation
which are beneficially owned by such shareholder. Such notice shall be
accompanied by the written consent of each proposed nominee to serve as a
director of the Corporation, if elected. The Chairman of the meeting shall,
if the facts warrant, determine and declare to the meeting that a
nomination was not made in accordance with the provisions of this Section
8, and, if he should so determine, the defective nomination shall be void
and ineffective and the person or persons so nominated shall not be
eligible for election.
FOURTH, Section 10 of the Corporation's Code of Regulations is amended in
its entirety to read as follows:
SECTION 10. REMOVAL.
Directors may only be removed for cause and only by the affirmative
vote of not less than 80 percent of the whole Board of Directors of the
Corporation.
FIFTH, Section 11 of the Corporation's Code of Regulations is amended in
its entirety to read as follows:
SECTION 11. VACANCIES.
Whenever any vacancy shall occur among the directors, the remaining
directors shall constitute the directors of the Corporation until such
vacancy is filled or until the number of directors is changed pursuant to
Section 7 hereof. Subject to Section 8(b), except in cases where a director
is removed as provided by law and these Regulations and his successor is
elected by the shareholders, the remaining directors may, by a vote of a
majority of their number, fill any vacancy for the unexpired term. A
majority of the directors then in office may also fill any vacancy that
results from an increase in the number of directors.
SIXTH, Section 17 of the Corporation's Code of Regulations is amended in
its entirety to read as follows:
SECTION 17. MEMBERSHIP AND ORGANIZATION.
(a) The directors, at any time, may elect from their number an
Executive Committee which shall consist of four or more directors of the
Corporation, each of whom shall hold office during the pleasure of
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the directors and may be removed at any time, with or without cause, by
vote thereof. In the event that an Executive Committee is formed at any
time during the three year period after the Effective Time, the Executive
Committee shall consist of an even number of directors, one-half of whom
shall (the "Mid Am Executive Committee Members") be selected by the Mid Am
Directors and nominees of Mid Am Directors serving as directors and
one-half of whom (the "Bancshares Executive Committee Members") shall be
selected by the Bancshares Directors and nominees of the Bancshares
Directors serving as directors plus such additional directors as a majority
of the directors who become directors as a result of or pursuant to Section
7(b) or 8(b) shall determine.
(b) Vacancies occurring in the Executive Committee may be filled by
the directors; provided however, that for a period of three years after the
Effective Time, in the event that a Mid Am Executive Committee Member or a
Bancshares Executive Committee Member or a member of the Executive
Committee otherwise selected as set forth herein by the Mid Am Directors or
Bancshares Directors shall resign or no longer serve, (i) if such member
shall be a Mid Am Executive Committee Member or shall have been selected by
the Mid Am Directors and nominees of the Mid Am Directors serving as
directors, then the Mid Am Directors and nominees of the Mid Am Directors
serving as directors shall have the exclusive right to select an individual
to fill such vacancy and (ii) if such member shall be a Bancshares
Executive Committee Member or shall have been selected by the Bancshares
Directors and nominees of the Bancshares Directors serving as directors,
then the Bancshares Directors and nominees of the Bancshares Directors
serving as directors shall have the exclusive right to select an individual
to fill such vacancy.
(c) In the event the directors have not designated a Chairman, the
Executive Committee shall appoint one of its own number as Chairman who
shall preside at all meetings and may also appoint a Secretary (who need
not be a member of the Executive Committee) who shall keep its records and
who shall hold office at the pleasure of the Executive Committee.
SEVENTH, Section 20 of the Corporation's Code of Regulations is amended in
its entirety to read as follows:
SECTION 20. OTHER COMMITTEES.
(a) The directors may elect other committees from among the directors
in addition to or in lieu of the Executive Committee and give to them any
of the powers which under the foregoing provisions could be vested in the
Executive Committee, provided, that in the event that any such committee is
formed at any time during the three year period after the Effective Time,
such committee shall consist of an even number of directors, one-half of
whom (the "Mid Am Committee Members") shall be selected by the Mid Am
Directors and nominees of the Mid Am Directors serving as directors and
one-half of whom (the "Bancshares Committee Members") shall be selected by
the Bancshares Directors and nominees of the Bancshares Directors serving
as directors plus such additional directors as a majority of the directors
who become directors as a result of or pursuant to Section 7(b) or 8(b)
shall determine.
(b) Vacancies occurring in any committee formed pursuant to Section
20(a) may be filled by the directors; provided that for a period of three
years after the Effective Time, in the event that a Mid Am Committee Member
or a Bancshares Committee Member or a member of such committee otherwise
selected as set forth herein by the Mid Am Directors or Bancshares
Directors shall resign or no longer serve, (i) if such member shall be a
Mid Am Committee Member or shall have been selected by the Mid Am Directors
and nominees of the Mid Am Directors serving as directors, then the Mid Am
Directors and nominees of the Mid Am Directors serving as directors shall
have the exclusive right to select an individual to fill such vacancy and
(ii) if such member shall be a Bancshares Committee Member or shall have
been selected by the Bancshares Directors and nominees of the Bancshares
Directors serving as directors, then the Bancshares Directors and nominees
of the Bancshares Directors serving as directors shall have the exclusive
right to select an individual to fill such vacancy.
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EIGHTH, Section 21 of the Corporation's Code of Regulations is amended in
its entirety to read as follows:
SECTION 21. OFFICERS DESIGNATED.
The directors, at their organization meeting or at a special meeting
held in lieu thereof or to the extent otherwise necessary shall elect, and
unless otherwise determined by the directors there shall be, a Chairman of
the Board, a Senior Chairman of the Board, a Chief Executive Officer, a
President, a Chief Operating Officer, a Vice Chairman of the Board, a
Secretary, a Treasurer and, in their discretion, one or more Vice
Presidents, an Assistant Secretary or Secretaries, an Assistant Treasurer
or Treasurers, and such other officers as the directors may deem
appropriate. From time to time, the directors may elect one or more
additional Vice Chairmen of the Board, in which case the Vice Chairman who
was initially elected as such will thereafter be designated by the
directors as the First Vice Chairman of the Board. Any two or more of such
offices other than that of President and Vice President, or Secretary and
Assistant Secretary, or Treasurer and Assistant Treasurer, may be held by
the same person, but no officer shall execute, acknowledge or verify any
instrument in more than one capacity if such instrument is required by law,
the Articles of Incorporation, these Regulations or any by-laws to be
executed, acknowledged, or verified by two or more officers.
NINTH, Sections 24 through 32, inclusive, of the Corporation's Code of
Regulations are renumbered as sections 26 through 34, respectively, and Sections
33 to 37, inclusive, are renumbered Sections 36 through 40 respectively.
TENTH, new Sections 24 and 25 to the Corporation's Code of Regulations are
added and newly designated Section 26 is restated to read in their entirety as
follows:
SECTION 24. SENIOR CHAIRMAN OF THE BOARD; CHAIRMAN OF THE BOARD; VICE
CHAIRMAN OF THE BOARD.
Each of the Senior Chairman of the Board, the Chairman of the Board
and the Vice Chairman of the Board, shall render policy and other
management services to the Corporation of the type customarily performed by
persons serving in a similar capacity.
SECTION 25. CHIEF EXECUTIVE OFFICER.
The Chief Executive Officer of the Corporation shall have general
supervision over its property, business and affairs, subject to the
directions of the Chairman of the Board and/or the directors. Unless
otherwise determined by the directors, he shall have authority to execute
all authorized deeds, mortgages, bonds, contracts and other instruments and
obligations in the name of the Corporation, and in the absence of the
Chairman of the Board shall preside at meetings of the shareholders and the
directors. He shall have such other powers and duties as may be prescribed
by the directors.
SECTION 26. PRESIDENT AND CHIEF OPERATING OFFICER.
The President and Chief Operating Officer of the Corporation shall be
the second highest ranking officer of the Corporation and shall render
executive, policy and other management services to the Corporation and have
primary responsibility for the commercial banking operations of the
Corporation and related acquisitions and, with respect to all other merger
and acquisition activity, shall have the right to participate fully in any
such process, including discussions and negotiations, and shall have such
other duties as the Board of Directors or the Chief Executive Officer of
the Corporation may from time to time reasonably direct or request.
ELEVENTH, new Section 35 to the Code of Regulations is added to read in its
entirety as follows:
SECTION 35. MANAGEMENT EXECUTIVE COMMITTEE.
(a) At the Effective Time, a Management Executive Committee of the
Corporation shall be established and shall consist of at least eight
members, one-half of whom shall be selected by the Chairman of the Board
and Chief Executive Officer of Mid Am immediately prior to the Effective
Time (the "Mid Am Management Executive Committee Members") and one-half of
whom shall be selected
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by the President and Chief Executive Officer of the Corporation immediately
prior to the Effective Time (the "Bancshares Management Executive Committee
Members"). For a period of three years after the Effective Time, in the
event that a Mid Am Executive Committee Member or a Bancshares Executive
Committee Member or a member of the Management Executive Committee
otherwise selected as set forth herein shall resign or no longer serve, (i)
if such member shall be a Mid Am Executive Committee Member or shall have
been selected by the Mid Am Directors and nominees of the Mid Am Directors
serving as directors, then the Mid Am Directors and nominees of the Mid Am
Directors serving as directors shall have the exclusive right to select an
individual to fill such vacancy and (ii) if such member shall be a
Bancshares Executive Committee Member or shall have been selected by the
Bancshares Directors and nominees of the Bancshares Directors serving as
directors, then the Bancshares Directors and nominees of the Bancshares
Directors serving as directors shall have the exclusive right to select an
individual to fill such vacancy. Mid Am Directors and the nominees of Mid
Am Directors serving as directors shall have the exclusive right to remove
any Mid Am Management Executive Committee Member or any member of the
Management Executive Committee they have selected. Bancshares Directors and
the nominees of Bancshares Directors serving as directors shall have the
exclusive right to remove any Bancshares Management Executive Committee
member or any member of the Management Executive Committee they have
selected. Members of the Management Executive Committee shall either be
members of the Board of Directors of the Corporation or employees of the
Corporation or its subsidiaries. After the Effective Time, the Board of
Directors may appoint additional members of the Management Executive
Committee other than as set forth in the preceding sentences and the Board
of Directors shall have the exclusive right to remove any such member it
has elected.
(b) Subject to the authority of the Board of Directors and the
officers of the Corporation, the activities of the Management Executive
Committee will include, but not be limited to, such matters as facilitating
the integration of the Corporation and Mid Am and their respective
operating philosophies; making recommendations, as appropriate, with
respect to the Corporation's management structure and operations; engaging
in strategic planning activities; and reviewing recommendations of employee
committees regarding employee benefits, shareholder services and data
processing operations. The Management Executive Committee may engage in
such other activities as the Board of Directors may from time to time
prescribe.
IN WITNESS WHEREOF, Marty E. Adams, President of the Corporation, acting
for and on behalf of the Corporation has hereunto subscribed his name this day
of , 1998.
A-46
<PAGE> 148
ANNEX 4
FORM OF AFFILIATE LETTER
, 1998
Mid Am, Inc.
221 South Church Street
Bowling Green, Ohio 43402
Citizens Bancshares, Inc.
10 East Main Street
Salineville, Ohio 43945
Attention:
Ladies and Gentlemen:
I have been advised that I may be deemed to be, but do not admit that I am,
an "affiliate" of Mid Am, Inc. an Ohio corporation ("Mid Am"), as that term is
defined in Rule 145 promulgated by the Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the "Securities Act"),
and/or SEC Accounting Series Releases 130 and 135. I understand that pursuant to
the terms of the Agreement and Plan of Merger, dated as of May 20, 1998 (the
"Merger Agreement"), by and between Mid Am and Citizens, an Ohio corporation
("Citizens"), Mid Am plans to merge with and into Citizens (the "Merger") and
that the Merger is intended to be accounted for under the "pooling of interest"
accounting method.
I further understand that as a result of the Merger, I may receive shares
of common stock, without par value, of Citizens ("Citizens Stock") (i) in
exchange for shares of common stock, without par value, of Mid Am ("Mid Am
Stock") or (ii) as a result of the exercise of Rights (as defined in the Merger
Agreement).
I have carefully read this letter and reviewed the Merger Agreement and
discussed their requirements and other applicable limitations upon my ability to
sell, transfer, or otherwise dispose of Citizens Stock and Mid Am Stock, to the
extent I felt necessary, with my counsel or counsel for Mid Am.
I represent, warrant and covenant with and to Citizens that in the event I
receive any Citizens Stock as a result of the Merger:
1. I shall not make any sale, transfer, or other disposition of such
Citizens Stock unless (i) such sale, transfer or other disposition has been
registered under the Securities Act, (ii) such sale, transfer or other
disposition is made in conformity with the provisions of Rule 145 under the
Securities Act (as such rule may be amended from time to time), or (iii) in
the opinion of counsel in form and substance reasonably satisfactory to
Citizens, or under a "no-action' letter obtained by me from the staff of
the SEC, such sale, transfer or other disposition will not violate or is
otherwise exempt from registration under the Securities Act.
2. I understand that Citizens is under no obligation to register the
sale, transfer or other disposition of shares of Citizens Stock by me or on
my behalf under the Securities Act or to take any other action necessary in
order to make compliance with an exemption from such registration
available.
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<PAGE> 149
3. I understand that stop transfer instructions will be given to
Citizens's transfer agent with respect to shares of Citizens Stock issued
to me as a result of the Merger and that there will be placed on the
certificates for such shares, or any substitutions therefor, a legend
stating in substance:
"The shares represented by this certificate were issued in a
transaction to which Rule 145 promulgated under the Securities Act
of 1933 applies. The shares represented by this certificate may be
transferred only in accordance with the terms of a letter
agreement, dated May , 1998, between the registered holder
hereof and ,Inc., a copy of which agreement is on file at
the principal offices of , Inc."
4. I understand that, unless transfer by me of the Citizens Stock
issued to me as a result of the Merger has been registered under the
Securities Act or such transfer is made in conformity with the provisions
of Rule 145(d) under the Securities Act, Citizens reserves the right, in
its sole discretion, to place the following legend on the certificates
issued to my transferee:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 and were acquired from
a person who received such shares in a transaction to which Rule
145 under the Securities Act of 1933 applies. The shares have been
acquired by the holder not with a view to, or for resale in
connection with, any distribution thereof within the meaning of
the Securities Act of 1933 and may not be offered, sold, pledged
or otherwise transferred except in accordance with an exemption
from the registration requirements of the Securities Act of 1933."
It is understood and agreed that the legends set forth in paragraphs (3)
and (4) above shall be removed by delivery of substitute certificates without
such legends if I shall have delivered to Citizens (i) a copy of a "no action"
letter from the staff of the SEC, or an opinion of counsel in form and substance
reasonably satisfactory to Citizens, to the effect that such legend is not
required for purposes of the Securities Act, or (ii) evidence or representations
satisfactory to Citizens that Citizens Stock represented by such certificates is
being or has been sold in conformity with the provisions of Rule 145(d).
I further represent, warrant and covenant with and to Citizens that I will
not sell, transfer or otherwise dispose of, or reduce my risk relative to, any
shares of Mid Am Stock or Citizens Stock (whether or not acquired by me in the
Merger) during the period commencing 30 days prior to effective date of the
Merger and ending at such time as Citizens notifies me that results covering at
least 30 days of combined operations of Mid Am and Citizens after the Merger
have been published by Citizens. I understand that Citizens is not obligated to
publish such combined financial results except in accordance with its normal
financial reporting practice.
I further understand and agree that this letter agreement shall apply to
all shares of Mid Am Stock and Citizens Stock that I am deemed to beneficially
own pursuant to applicable federal securities law.
I also understand that the Merger is intended to be treated as a "pooling
of interests" for accounting purposes, and I agree that if Mid Am or Citizens
advises me in writing that additional restrictions apply to my ability to sell,
transfer, or otherwise dispose of Mid Am Stock or Citizens Stock in order for
Citizens to be entitled to use the pooling of interests accounting method, I
will abide by such restrictions.
Very truly yours,
By
------------------------------------
Name:
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<PAGE> 150
Accepted this day of
, 1998.
MID AM, INC.
By
-----------------------------------------------------
Name:
Title:
CITIZENS BANCSHARES, INC.
By
-----------------------------------------------------
Name:
Title:
A-49
<PAGE> 151
ANNEX 5
FORM OF AFFILIATE LETTER
, 1998
Citizens Bancshares, Inc.
10 East Main Street
Salineville, Ohio 43945
Ladies and Gentlemen:
I have been advised that I may be deemed to be, but do not admit that I am,
an "affiliate" of Citizens, an Ohio corporation ("Citizens") as that term is
defined in the Securities and Exchange Commission's Accounting Series Releases
130 and 135. I understand that pursuant to the terms of the Agreement and Plan
of Merger, dated as of May 20, 1998 (the "Merger Agreement"), by and between Mid
Am, Inc., an Ohio corporation ("Mid Am"), and Citizens, Mid Am plans to merge
with and into Citizens (the "Merger") and that the merger is intended to be
accounted for under the "pooling of interests" accounting method.
I have carefully read this letter and reviewed the Merger Agreement and
discussed their requirements and other applicable limitations upon my ability to
sell, transfer, or otherwise dispose of common stock of Citizens and Mid Am, to
the extent I felt necessary, with my counsel or counsel for Citizens.
I hereby represent, warrant and covenant with and to Citizens that:
1. I will not sell, transfer or otherwise dispose of, or reduce my
risk relative to, any shares of common stock of Mid Am or Citizens (whether
or not acquired by me in the Merger) during the period commencing 30 days
prior to the effective date of the Merger and ending at such time as
Citizens notifies me that results covering at least 30 days of combined
operations of Mid Am and Citizens after the Merger have been published by
Citizens. I understand that Citizens is not obligated to publish such
combined financial results except in accordance with its normal financial
reporting practice.
2. I further understand and agree that this letter agreement shall
apply to all shares of common stock of Mid Am and Citizens that I am deemed
to beneficially own pursuant to applicable federal securities laws.
3. If Citizens advises me in writing that additional restrictions
apply to my ability to sell, transfer, or otherwise dispose of common stock
of Mid Am or Citizens in order for Citizens to be entitled to use the
"pooling of interests" accounting method, I will abide by such
restrictions.
Very truly yours,
By
------------------------------------
Name:
Accepted this day of
, 1998.
CITIZENS BANCSHARES, INC.
By
-------------------------------------------------
Name:
Title:
A-50
<PAGE> 152
APPENDIX B
CERTIFICATE OF AMENDMENT TO THE
FIFTH AMENDED ARTICLES OF INCORPORATION OF
CITIZENS BANCSHARES, INC.
(TO BE RENAMED SKY FINANCIAL GROUP, INC.)
Marty E. Adams, President of Citizens Bancshares, Inc., an Ohio corporation
(the "Corporation"), does hereby certify that a special meeting of the
shareholders was duly called and held on the 1st day of October, 1998, at which
meeting a quorum of the shareholders was present in person or by proxy, and by
the affirmative vote of the holders of shares entitling them to exercise more
than a majority of the voting power of the Corporation, as required by Article
NINTH, Division B, of the Fifth Amended Articles of Incorporation, the following
amendments to the Corporation's Fifth Amended Articles of Incorporation were
duly adopted:
1. Article FIRST of the Corporation's Fifth Amended Articles of
Incorporation is amended in its entirety to read as follows:
FIRST: The name of the Corporation shall be Sky Financial Group,
Inc.
2. Article SECOND of the Corporation's Fifth Amended Articles of
Incorporation is amended in its entirety to read as follows:
SECOND: The place in the State of Ohio where the principal office
of the Corporation will be located is in Bowling Green, Wood County,
or such other location as the Board of Directors may from time to
time determine.
3. The first two paragraphs introducing and preceding Division A of
Article FOURTH of the Corporation's Fifth Amended Articles of
Incorporation are amended in their entirety to read as follows and there
is hereby added a new third paragraph as follows:
FOURTH: The total number of shares of all classes which the
Corporation shall have authority to issue is one hundred sixty
million (160,000,000) shares, divided into two classes as follows:
10,000,000 Serial Preferred Shares, par value $10.00 (Ten Dollars)
per share (hereinafter called the "Serial Shares") and 150,000,000
Common Shares, without par value (hereinafter called the "Common
Shares").
No holder of any class of shares of the Corporation shall, as such
holder, have any preemptive or preferential right to purchase or
subscribe to any shares of any class of stock of the Corporation,
whether now or hereafter authorized, whether unissued or in the
treasury, or to purchase any obligations convertible into shares of
any such class of stock of the Corporation, which at any time may be
proposed to be issued by the Corporation or subjected to the rights
or options to purchase granted by the Corporation.
No holder of any class of shares of the Corporation shall have the
right to cumulate his voting power in the election of the Board of
Directors, and the right to cumulate his voting power in the election
of Board of Directors, and the right to cumulate voting described in
Ohio Revised Code Section 1701.55 is hereby specifically denied to
the holders of any class of stock of the Corporation.
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<PAGE> 153
[4. Article SIXTH of the Corporation's Fifth Amended Articles of
Incorporation is amended to read in its entirety as follows:
SIXTH: Intentionally omitted.]*
[4.][5.] Article EIGHTH of the Corporation's Fifth Amended Articles of
Incorporation is amended in its entirety to read as follows:
EIGHTH: Except as otherwise required by these Articles of
Incorporation, but notwithstanding any provision of the Ohio Revised
Code now or hereafter in force requiring for any purpose the vote,
consent, waiver or release of the holders of shares entitling them to
exercise two-thirds, or any other proportion, of the voting power of the
Corporation or of any class or classes of shares thereof, any amendments
to the Articles of Incorporation may be made from time to time, and any
proposal or proposition requiring the action of shareholders may be
authorized from time to time by the affirmative vote of the holders of
shares entitling them to exercise a majority of the voting power of the
Corporation.
[5.][6]. Article NINTH of the Corporation's Fifth Amended Articles of
Incorporation is amended in its entirety to read as follows:
NINTH: Except to the extent that Article FOURTH and Article SIXTH
otherwise provide with respect to certain matters therein set forth, the
Corporation reserves the right to amend, alter, change or repeal any
provision contained in these Amended and Restated Articles of
Incorporation and to add new provisions, in the manner now or hereafter
prescribed by statute, upon the affirmative vote of a majority of the
outstanding shares of the Corporation, voting as a class; and all
rights, privileges and preferences of whatsoever nature conferred upon
shareholders, directors and officers pursuant to these Amended and
Restated Articles of Incorporation in their present form or as hereafter
amended are granted subject to this reservation. Notwithstanding the
foregoing, the adoption of any amendment, alteration, change or repeal
to these Amended and Restated Articles of Incorporation as the same may
be in effect from time to time which is inconsistent with or would have
the effect of amending, altering, changing or repealing the provisions
of the Sections 7, 9 or 10 of the Regulations of the Corporation as the
same may be in effect from time to time shall require the same
affirmative vote of the shareholders as would be required under such
Regulations to adopt any amendment, alteration, change or repeal or said
Sections 7, 9 or 10 or to adopt any provisions inconsistent therewith.
IN WITNESS WHEREOF, Marty E. Adams, President of the Corporation, acting
for and on behalf of the Corporation has hereunto subscribed his name this
day of , 1998.
CITIZENS BANCSHARES, INC.
By:
------------------------------------
Marty E. Adams
President
- ---------------
* This provision will only be included if the Control Share Acquisition
Amendment is approved.
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<PAGE> 154
ATTACHMENT A
TO APPENDIX B
FULL TEXT OF ARTICLE SIXTH TO BE
REPEALED FROM THE ARTICLES OF INCORPORATION
OF CITIZENS BANCSHARES, INC.
SIXTH: No Person shall make a Control Share Acquisition without the prior
authorization of the Corporation's shareholders.
SECTION 1. PROCEDURE. In order to obtain authorization of a Control Share
Acquisition by the Corporation's shareholders, a Person shall deliver a notice
(the "Notice") to the Corporation at its principal place of business that sets
forth all of the following information:
1. The identity of the Person who is giving the Notice;
2. A statement that the Notice is given pursuant to this Article
SIXTH;
3. The number and class of shares of the Corporation owned, directly
or indirectly, by the Person who gives the Notice;
4. The range of voting power under which the proposed Control Share
Acquisition would, if consummated, fall;
5. A description in reasonable detail of the terms of the proposed
Control Share Acquisition; and
6. Reasonable evidence that the proposed Control Share Acquisition, if
consummated, would not be contrary to law and that the Person who is giving
the Notice has the financial capacity to make the proposed Control Share
Acquisition.
SECTION 2. CALL OF SPECIAL MEETING OF SHAREHOLDERS. The Board of Directors
of the Corporation shall, within ten days after receipt of such Notice by the
Corporation, call a special meeting of the shareholders to be held not later
than fifty (50) days after receipt of the Notice by the Corporation, unless the
Person who delivered the Notice agrees to a later date, to consider the proposed
Control Share Acquisition; provided that the Board of Directors has no
obligation to call such meeting if they make a determination within ten days
after receipt of the Notice (i) that the Notice was not given in good faith,
(ii) that the proposed Control Share Acquisition would not be in the best
interests of the Corporation and its shareholders, or (iii) that the proposed
Control Share Acquisition could not be consummated for financial or legal
reasons. Notwithstanding anything to the contrary contained in clause (ii) of
the immediately preceding sentence, the Board of Directors shall not determine
not to call such special meeting of shareholders for the reason stated in such
clause (ii) if the Control Share Acquisition described in the Notice is for any
and all shares of the Corporation at a price higher than 175% of the book value
of the Common Shares as of the close of the immediately preceding fiscal year.
The Board of Directors may adjourn such meeting if, prior to such meeting, the
corporation has received Notice from any other Person and the Board of Directors
has determined that the Control Share Acquisition proposed by such other Person
or a merger, consolidation or sale of assets of the Corporation should be
presented to shareholders at an adjourned meeting or at a special meeting held
at a later date.
For purposes of making a determination that a special meeting of
shareholders should not be called pursuant to this Section 3, no such
determination shall be deemed void or voidable with respect to the Corporation
merely because one or more of its directors or officers who participated in
making such determination may be deemed to be other than disinterested, if in
any such case the material facts of the relationship giving rise to a basis for
self-interest are known to the directors and the directors, in good faith
reasonably justified by the facts, make such determination by the affirmative
vote of a majority of the disinterested directors, even though the disinterested
directors constitute less than a quorum. For purpose of this paragraph,
"disinterested directors" shall mean directors whose material contracts with the
Corporation are limited principally to activities as a director or shareholder.
Persons who have substantial, recurring
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<PAGE> 155
business or professional contracts with the Corporation shall not be deemed to
be "disinterested directors" for purposes of this provision. A director shall
not be deemed to be other than a "disinterested director" merely because he
would no longer be a director if the proposed Control Share Acquisition were
approved and consummated.
SECTION 3. NOTICE OF SPECIAL MEETING. The Corporation shall give notice of
such special meeting to all shareholders of record as of the record date set for
such meeting as promptly as practicable. Such notice shall include or be
accompanied by a copy of the Notice and by a statement of the Corporation,
authorized by the Board of Directors, of its position or recommendation, or that
it is taking no position or making no recommendation, with respect to the
proposed Control Share Acquisition.
SECTION 4. REQUIREMENTS FOR APPROVAL. The Person who delivered the Notice
may make the proposed Control Share Acquisition if both of the following occur:
(i) the shareholders of the Corporation authorize such acquisition at the
special meeting called by the Board of Directors at which a quorum is present
and held for that purpose by an affirmative vote of a majority of the shares
entitled to vote in the election of directors ("Voting Shares") represented at
such meeting in person or by proxy and by a majority of the portion of such
Voting Shares represented at such meeting in person or by proxy excluding the
votes of Interested Shares; and (ii) such acquisition is consummated, in
accordance with the terms so authorized, not later than 360 days following
shareholder authorization of the Control Share Acquisition.
SECTION 5. VIOLATIONS OF RESTRICTION. Shares issued or transferred to any
Person in violation of this Article SIXTH shall be valid only with respect to
such amount of shares as does not result in a violation of this Article SIXTH,
and such issuance or transfer shall be null and void with respect to the
remainder of such shares, any such remainder of shares being hereinafter called
"Excess Shares." If the last clause of the foregoing sentence is determined to
be invalid by virtue of any legal decision, statute, rule or regulation, the
Person who holds Excess Shares shall be conclusively deemed to have acted as an
agent on behalf of the Corporation in acquiring the Excess Shares and to hold
such Excess Shares on behalf of the Corporation. As the equivalent of treasury
securities for such purposes, the Excess Shares shall not be entitled to any
voting right shall not be considered to be outstanding for quorum or voting
purposes, and shall not be entitled to receive dividends, interest or any other
distribution with respect to the Excess Shares. Any person who receives
dividends, interest or any other distribution in respect to Excess Shares shall
hold the same as agent for the Corporation and, following a permitted transfer,
of the transferee thereof. Notwithstanding the foregoing, any holder of Excess
Shares may transfer the same (together with any distributions thereon) to any
person who, following such transfer, would not own shares in violation of this
Article SIXTH. Upon such permitted transfer, the Corporation shall pay or
distribute to the transferee any distributions on the Excess Shares not
previously paid or distributed.
SECTION 6. DEFINITIONS. As used in this Article SIXTH:
1. "Person" includes, without limitation, an individual, a corporation
(whether nonprofit or for profit), a partnership, an unincorporated society
or association, and two or more persons having a joint or common interest.
2. (1) "Control Share Acquisition" means the acquisition, directly or
indirectly, by any Person of shares of the Corporation that, when added to
all other shares of the Corporation in respect of which such Person may
exercise or direct the exercise of voting power as provided in this Section
6B.(1), would entitle such Person, immediately after such acquisition,
directly or indirectly, to exercise or direct the exercise of the voting
power of the Corporation in the election of directors within any of the
following ranges of such voting power:
i. One-fifth or more but less than one-third of such voting power;
ii. One-third or more but less than a majority of such voting
power;
iii. A majority or more of such voting power.
A bank, broker, nominee, trustee, or other person who acquires shares
in the ordinary course of business for the benefit of others in good
faith and not for the purpose of circumventing this
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<PAGE> 156
Article SIXTH shall, however, be deemed to have voting power only of
shares in respect of which such person would be able to exercise or
direct the exercise of votes without further instruction from others
at a meeting of shareholders called under this Article SIXTH. For
purpose of this Article SIXTH, the acquisition of securities
immediately convertible into shares of the Corporation with voting
power in the election of directors shall be treated as an acquisition
of such shares.
b. The acquisition of any shares of the Corporation does not
constitute a Control Share Acquisition for the purpose of this Article
SIXTH if the acquisition is consummated in any of following circumstances:
i. By underwriters in good faith and not for the purpose of
circumventing this Article SIXTH in connection with an offering of
the securities of the Corporation to the public;
ii. By bequest or inheritance, by operation of law upon the death
of any individual, or by any other transfer without valuable
consideration, including a gift, that is made in good faith and not
for the purpose of circumventing this Article SIXTH;
iii. Pursuant to the satisfaction of a pledge or other security
interest created in good faith and not for the purpose of
circumventing this Article SIXTH;
iv. Pursuant to a merger or consolidation adopted, or a combination
or majority share acquisition authorized, by shareholder vote in
compliance with the provisions of Section 1701.78 or Section 1701.83
of the Ohio Revised Code if the Corporation is the surviving or new
corporation in the merger or consolidation or is the acquiring
corporation in the combination or majority share acquisition and if
the vote of the shareholders of the surviving, new, or acquiring
corporation is required by the provisions of Section 1701.78 or
1701.83 of the Ohio Revised Code;
v. Prior to March 11, 1985;
vi. Pursuant to a contract existing prior to March 31, 1985.
The acquisition by any Person of shares of the Corporation in a
manner described under this Section 6B.(2) shall be deemed to be a
Control Share Acquisition authorized pursuant to this Article SIXTH
within the range of voting power under Section 6B.(1)(a), (b) or (c)
of this Article SIXTH that such Person is entitled to exercise after
such acquisition, provided that, in the case of an acquisition in a
manner described under Section 6B.(2)(b) or (c), the transferor of
shares to such Person had previously obtained any authorization of
shareholders required under this Article SIXTH in connection with
such transferor's acquisition of shares of the Corporation.
c. The acquisition of shares of the Corporation in good faith and not
for the purpose of circumventing this Article SIXTH the acquisition of
which (a) had previously been authorized by shareholders in compliance with
this Article or (b) would have constituted a Control Share Acquisition but
for Section 6B.(2), does not constitute a Control Share Acquisition for the
purpose of this Article SIXTH unless such acquisition entitles any Person,
directly or indirectly, to exercise or direct the exercise of voting power
of the Corporation in the election of directors in excess of the range of
such voting power authorized pursuant to this Article SIXTH, or deemed to
be so authorized under Section 6B.(2).
3. "Interested Shares" means Voting Shares with respect to which any
of the following persons may exercise or direct the exercise of the voting
power:
a. any Person whose Notice prompted the calling of the meeting of
shareholders;
b. any officer of the Corporation elected or appointed by the
directors of the Corporation; and
c. any employee of the Corporation who is also a director of the
Corporation.
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<PAGE> 157
SECTION 7. PROXIES. No proxy appointed for or in connection with the
shareholder authorization of a Control Share Acquisition pursuant to this
Article SIXTH is valid if it provides that it is irrevocable. No such proxy is
valid unless it is sought, appointed, and received both:
1. in accordance with all applicable requirements of law; and
2. separate and apart from the sale or purchase, contract or tender
for sale or purchase, or request or invitation for tender for sale or
purchase, of shares of the Corporation.
SECTION 8. REVOCABILITY OF PROXIES. Proxies appointed for or in connection
with the shareholder authorization of a Control Share Acquisition pursuant to
this Article SIXTH shall be revocable at all times prior to the obtaining of
such shareholder authorization, whether or not coupled with an interest.
SECTION 9. AMENDMENTS. Notwithstanding any other provisions of these
Articles of Incorporation or the Regulations of the Corporation, as the same may
be in effect from time to time, or any provision of law that might otherwise
permit a lesser vote of the directors or the holders of any particular class or
series of shares required by law, the Articles of Incorporation or the
Regulations of the Corporation, as the same may be in effect from time to time,
the affirmative vote of at least seventy-five percent (75%) of the Voting Shares
shall be required to alter, amend or repeal this Article SIXTH or adopt any
provisions in the Articles of Incorporation or the Regulations of the
Corporation, as the same may be in effect form time to time, which are
inconsistent with the provisions of this Article SIXTH.
SECTION 10. LEGEND ON SHARE CERTIFICATES. Each certificate representing
shares of the Corporation's capital stock shall contain the following legend.
"Transfer of the shares represented by this Certificate is subject to
the provisions of Article SIXTH of the Corporation's Articles of
Incorporation as the same may be in effect from time to time. Upon written
request delivered to the Secretary of the Corporation at its principal
place of business, the Corporation will mail to the holder of this
Certificate a copy of such provisions without charge within five days after
receipt of written request therefor. By accepting this certificate the
holder hereof acknowledges that it is accepting the same subject to the
provisions of said Article SIXTH as the same may be in effect from time to
time and covenants with the Corporation and each shareholder thereof from
time to time to comply with the provisions of said Article SIXTH as the
same may be in effect from time to time."
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APPENDIX C
AMENDMENT TO THE CODE OF REGULATIONS
OF
CITIZENS BANCSHARES, INC.
In accordance with Section 37 of the Code of Regulations of Citizens
Bancshares, Inc., an Ohio corporation (the "Corporation"), the Board of
Directors recommended the following amendments to the Code of Regulations of the
Corporation by the affirmative vote of at least two-thirds of the Board of
Directors then in office at a duly called meeting held on the 21st day of July,
1998. A special meeting of the shareholders was duly called and held on the 1st
day of October, 1998, at which meeting a quorum of the shareholders was present
in person or by proxy, and by the affirmative vote of the holders of shares
entitling them to exercise more than a majority of the voting power of the
Corporation, as required by Section 37 of the Code of Regulations of the
Corporation, the following amendments to the Corporation's Code of Regulations
were adopted:
FIRST, Section 2 of the Corporation's Code of Regulations is amended in its
entirety to read as follows:
SECTION 2. SPECIAL MEETINGS.
Special meetings of the shareholders may be called at any time by the
Chairman of the Board, the Chief Executive Officer, the President, the
Chief Operating Officer or by the directors by action at a meeting or a
majority of the directors acting without a meeting or by shareholders
holding 50% or more of the outstanding shares entitled to vote thereat.
Such meetings may be held within or without the State of Ohio at such time
and place as may be specified in the notice thereof.
SECOND, Section 7 of the Corporation's Code of Regulations is amended in
its entirety to read as follows:
SECTION 7. NUMBER.
(a) The number of directors shall not be less than five (5) nor more
than thirty five (35), the exact number of directors to be determined from
time to time by an eighty (80) percent majority vote of the directors then
in office, and such exact number shall be twenty-two (22) until otherwise
so determined.
(b) At the effective time (the "Effective Time") of the merger with
Mid Am, Inc. ("Mid Am"), the directors of the Corporation shall consist of
twenty-two (22) members, eleven (11) of whom shall be selected by the
Chairman of the Board and Chief Executive Officer of Mid Am ("Mid Am
Directors") and eleven (11) of whom shall be selected by the Board of
Directors of the Corporation prior to the Effective Time ("Bancshares
Directors") and which shall be allocated among the three classes of
directors of the Corporation by the agreement of the Chairman of the Board
and Chief Executive Officer of Mid Am and the Board of Directors of the
Corporation so that each class shall have an equal number of Mid Am
Directors and Bancshares Directors.
THIRD, Section 8 of the Corporation's Code of Regulations is amended in its
entirety to read as follows:
SECTION 8. NOMINATIONS.
(a) Only persons who are nominated in accordance with the procedures
set forth in this Section 8 shall be eligible for election by shareholders
as directors. Nominations of persons for election as directors of the
Corporation may be made at a meeting of shareholders by or at the direction
of the directors by any nominating committee or person appointed by the
directors, including (i) pursuant to paragraph (b) of this Section 8 or
(ii) by any shareholder of the Corporation entitled to vote for the
election of directors at the meeting who complies with the notice
procedures set forth in paragraph (c) of this Section 8. No person shall be
eligible for election by shareholders as a director of the Corporation
unless nominated in accordance with the procedures set forth in this
Section 8.
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(b) For a period of three years after the Effective Time, in the event
that a Mid Am Director or a Bancshares Director or a director otherwise
nominated as set forth herein by the Mid Am Directors or Bancshares
Directors as set forth herein shall resign, no longer be able to serve or
not stand for reelection, (i) if such director shall be a Mid Am Director
or a nominee of the Mid Am Directors, then the Mid Am Directors and
nominees of the Mid Am Directors serving as directors shall have the
exclusive right to nominate an individual to fill such vacancy and (ii) if
such director shall be a Bancshares Director or a nominee of the Bancshares
Directors, then the Bancshares Directors and nominees of the Bancshares
Directors serving as directors shall have the exclusive right to nominate
an individual to fill such vacancy.
(c) Nominations other than those made by or at the direction of the
directors, shall be made only pursuant to timely notice in writing to the
Secretary of the Corporation. To be timely, a shareholder's notice shall be
delivered to or mailed and received at the principal executive offices of
the Corporation not less than sixty (60) days nor more than ninety (90)
days prior to the meeting; provided, however, that in the event that less
than seventy-five (75) days' notice or prior public disclosure of the date
of the meeting is given or made to shareholders, notice by the shareholder
to be timely must be so delivered or received not later than the close of
business on the fifteenth (15th) day following the earlier of the day on
which such notice of the date of the meeting was mailed or such public
disclosure was made. Such shareholder's notice shall set forth (a) as to
each person who is not an incumbent director whom the shareholder proposes
to nominate for election as a director, (i) the name, age, business address
and residence address of such person; (ii) the principal occupation or
employment of such person; (iii) the class and number of shares of the
Corporation which are beneficially owned by such person; and (iv) any other
information relating to such person that is required to be disclosed in
solicitations for proxies for election of directors pursuant to Regulation
14A under the Securities Exchange Act of 1934, as amended; and (b) as to
the shareholder giving the notice, (i) the name and record address of such
shareholder and (ii) the class and number of shares of the Corporation
which are beneficially owned by such shareholder. Such notice shall be
accompanied by the written consent of each proposed nominee to serve as a
director of the Corporation, if elected. The Chairman of the meeting shall,
if the facts warrant, determine and declare to the meeting that a
nomination was not made in accordance with the provisions of this Section
8, and, if he should so determine, the defective nomination shall be void
and ineffective and the person or persons so nominated shall not be
eligible for election.
FOURTH, Section 10 of the Corporation's Code of Regulations is amended in
its entirety to read as follows:
SECTION 10. REMOVAL.
Directors may only be removed for cause and only by the affirmative
vote of not less than 80 percent of the whole Board of Directors of the
Corporation.
FIFTH, Section 11 of the Corporation's Code of Regulations is amended in
its entirety to read as follows:
SECTION 11. VACANCIES.
Whenever any vacancy shall occur among the directors, the remaining
directors shall constitute the directors of the Corporation until such
vacancy is filled or until the number of directors is changed pursuant to
Section 7 hereof. Subject to Section 8(b), except in cases where a director
is removed as provided by law and these Regulations and his successor is
elected by the shareholders, the remaining directors may, by a vote of a
majority of their number, fill any vacancy for the unexpired term. A
majority of the directors then in office may also fill any vacancy that
results from an increase in the number of directors.
SIXTH, Section 17 of the Corporation's Code of Regulations is amended in
its entirety to read as follows:
SECTION 17. MEMBERSHIP AND ORGANIZATION.
(a) The directors, at any time, may elect from their number an
Executive Committee which shall consist of four or more directors of the
Corporation, each of whom shall hold office during the pleasure of
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the directors and may be removed at any time, with or without cause, by
vote thereof. In the event that an Executive Committee is formed at any
time during the three year period after the Effective Time, the Executive
Committee shall consist of an even number of directors, one-half of whom
shall (the "Mid Am Executive Committee Members") be selected by the Mid Am
Directors and nominees of Mid Am Directors serving as directors and
one-half of whom (the "Bancshares Executive Committee Members") shall be
selected by the Bancshares Directors and nominees of the Bancshares
Directors serving as directors plus such additional directors as a majority
of the directors who become directors as a result of or pursuant to Section
7(b) or 8(b) shall determine.
(b) Vacancies occurring in the Executive Committee may be filled by
the directors; provided however, that for a period of three years after the
Effective Time, in the event that a Mid Am Executive Committee Member or a
Bancshares Executive Committee Member or a member of the Executive
Committee otherwise selected as set forth herein by the Mid Am Directors or
Bancshares Directors shall resign or no longer serve, (i) if such member
shall be a Mid Am Executive Committee Member or shall have been selected by
the Mid Am Directors and nominees of the Mid Am Directors serving as
directors, then the Mid Am Directors and nominees of the Mid Am Directors
serving as directors shall have the exclusive right to select an individual
to fill such vacancy and (ii) if such member shall be a Bancshares
Executive Committee Member or shall have been selected by the Bancshares
Directors and nominees of the Bancshares Directors serving as directors,
then the Bancshares Directors and nominees of the Bancshares Directors
serving as directors shall have the exclusive right to select an individual
to fill such vacancy.
(c) In the event the directors have not designated a Chairman, the
Executive Committee shall appoint one of its own number as Chairman who
shall preside at all meetings and may also appoint a Secretary (who need
not be a member of the Executive Committee) who shall keep its records and
who shall hold office at the pleasure of the Executive Committee.
SEVENTH, Section 20 of the Corporation's Code of Regulations is amended in
its entirety to read as follows:
SECTION 20. OTHER COMMITTEES.
(a) The directors may elect other committees from among the directors
in addition to or in lieu of the Executive Committee and give to them any
of the powers which under the foregoing provisions could be vested in the
Executive Committee, provided, that in the event that any such committee is
formed at any time during the three year period after the Effective Time,
such committee shall consist of an even number of directors, one-half of
whom (the "Mid Am Committee Members") shall be selected by the Mid Am
Directors and nominees of the Mid Am Directors serving as directors and
one-half of whom (the "Bancshares Committee Members") shall be selected by
the Bancshares Directors and nominees of the Bancshares Directors serving
as directors plus such additional directors as a majority of the directors
who become directors as a result of or pursuant to Section 7(b) or 8(b)
shall determine.
(b) Vacancies occurring in any committee formed pursuant to Section
20(a) may be filled by the directors; provided that for a period of three
years after the Effective Time, in the event that a Mid Am Committee Member
or a Bancshares Committee Member or a member of such committee otherwise
selected as set forth herein by the Mid Am Directors or Bancshares
Directors shall resign or no longer serve, (i) if such member shall be a
Mid Am Committee Member or shall have been selected by the Mid Am Directors
and nominees of the Mid Am Directors serving as directors, then the Mid Am
Directors and nominees of the Mid Am Directors serving as directors shall
have the exclusive right to select an individual to fill such vacancy and
(ii) if such member shall be a Bancshares Committee Member or shall have
been selected by the Bancshares Directors and nominees of the Bancshares
Directors serving as directors, then the Bancshares Directors and nominees
of the Bancshares Directors serving as directors shall have the exclusive
right to select an individual to fill such vacancy.
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EIGHTH, Section 21 of the Corporation's Code of Regulations is amended in
its entirety to read as follows:
SECTION 21. OFFICERS DESIGNATED.
The directors, at their organization meeting or at a special meeting
held in lieu thereof or to the extent otherwise necessary shall elect, and
unless otherwise determined by the directors there shall be, a Chairman of
the Board, a Senior Chairman of the Board, a Chief Executive Officer, a
President, a Chief Operating Officer, a Vice Chairman of the Board, a
Secretary, a Treasurer and, in their discretion, one or more Vice
Presidents, an Assistant Secretary or Secretaries, an Assistant Treasurer
or Treasurers, and such other officers as the directors may deem
appropriate. From time to time, the directors may elect one or more
additional Vice Chairmen of the Board, in which case the Vice Chairman who
was initially elected as such will thereafter be designated by the
directors as the First Vice Chairman of the Board. Any two or more of such
offices other than that of President and Vice President, or Secretary and
Assistant Secretary, or Treasurer and Assistant Treasurer, may be held by
the same person, but no officer shall execute, acknowledge or verify any
instrument in more than one capacity if such instrument is required by law,
the Articles of Incorporation, these Regulations or any by-laws to be
executed, acknowledged, or verified by two or more officers.
NINTH, Sections 24 through 32, inclusive, of the Corporation's Code of
Regulations are renumbered as sections 26 through 34, respectively, and Sections
33 to 37, inclusive, are renumbered Sections 36 through 40 respectively.
TENTH, new Sections 24 and 25 to the Corporation's Code of Regulations are
added and newly designated Section 26 is restated to read in their entirety as
follows:
SECTION 24. SENIOR CHAIRMAN OF THE BOARD; CHAIRMAN OF THE BOARD; VICE
CHAIRMAN OF THE BOARD.
Each of the Senior Chairman of the Board, the Chairman of the Board
and the Vice Chairman of the Board, shall render policy and other
management services to the Corporation of the type customarily performed by
persons serving in a similar capacity.
SECTION 25. CHIEF EXECUTIVE OFFICER.
The Chief Executive Officer of the Corporation shall have general
supervision over its property, business and affairs, subject to the
directions of the Chairman of the Board and/or the directors. Unless
otherwise determined by the directors, he shall have authority to execute
all authorized deeds, mortgages, bonds, contracts and other instruments and
obligations in the name of the Corporation, and in the absence of the
Chairman of the Board shall preside at meetings of the shareholders and the
directors. He shall have such other powers and duties as may be prescribed
by the directors.
SECTION 26. PRESIDENT AND CHIEF OPERATING OFFICER.
The President and Chief Operating Officer of the Corporation shall be
the second highest ranking officer of the Corporation and shall render
executive, policy and other management services to the Corporation and have
primary responsibility for the commercial banking operations of the
Corporation and related acquisitions and, with respect to all other merger
and acquisition activity, shall have the right to participate fully in any
such process, including discussions and negotiations, and shall have such
other duties as the Board of Directors or the Chief Executive Officer of
the Corporation may from time to time reasonably direct or request.
ELEVENTH, new Section 35 to the Code of Regulations is added to read in its
entirety as follows:
SECTION 35. MANAGEMENT EXECUTIVE COMMITTEE.
(a) At the Effective Time, a Management Executive Committee of the
Corporation shall be established and shall consist of at least eight
members, one-half of whom shall be selected by the Chairman of the Board
and Chief Executive Officer of Mid Am immediately prior to the Effective
Time (the "Mid Am Management Executive Committee Members") and one-half of
whom shall be selected
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by the President and Chief Executive Officer of the Corporation immediately
prior to the Effective Time (the "Bancshares Management Executive Committee
Members"). For a period of three years after the Effective Time, in the
event that a Mid Am Executive Committee Member or a Bancshares Executive
Committee Member or a member of the Management Executive Committee
otherwise selected as set forth herein shall resign or no longer serve, (i)
if such member shall be a Mid Am Executive Committee Member or shall have
been selected by the Mid Am Directors and nominees of the Mid Am Directors
serving as directors, then the Mid Am Directors and nominees of the Mid Am
Directors serving as directors shall have the exclusive right to select an
individual to fill such vacancy and (ii) if such member shall be a
Bancshares Executive Committee Member or shall have been selected by the
Bancshares Directors and nominees of the Bancshares Directors serving as
directors, then the Bancshares Directors and nominees of the Bancshares
Directors serving as directors shall have the exclusive right to select an
individual to fill such vacancy. Mid Am Directors and the nominees of Mid
Am Directors serving as directors shall have the exclusive right to remove
any Mid Am Management Executive Committee Member or any member of the
Management Executive Committee they have selected. Bancshares Directors and
the nominees of Bancshares Directors serving as directors shall have the
exclusive right to remove any Bancshares Management Executive Committee
member or any member of the Management Executive Committee they have
selected. Members of the Management Executive Committee shall either be
members of the Board of Directors of the Corporation or employees of the
Corporation or its subsidiaries. After the Effective Time, the Board of
Directors may appoint additional members of the Management Executive
Committee other than as set forth in the preceding sentences and the Board
of Directors shall have the exclusive right to remove any such member it
has selected.
(b) Subject to the authority of the Board of Directors and the
officers of the Corporation, the activities of the Management Executive
Committee will include, but not be limited to, such matters as facilitating
the integration of the Corporation and Mid Am and their respective
operating philosophies; making recommendations, as appropriate, with
respect to the Corporation's management structure and operations; engaging
in strategic planning activities; and reviewing recommendations of employee
committees regarding employee benefits, shareholder services and data
processing operations. The Management Executive Committee may engage in
such other activities as the Board of Directors may from time to time
prescribe.
IN WITNESS WHEREOF, Marty E. Adams, President of the Corporation, acting
for and on behalf of the Corporation has hereunto subscribed his name this
day of , 1998.
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APPENDIX D
SANDLER O'NEILL LETTERHEAD
August 5, 1998
Board of Directors
Citizens Bancshares, Inc.
10 East Main Street
Salineville, OH 43945
Ladies and Gentlemen:
Citizens Bancshares, Inc. ("Bancshares") and Mid Am, Inc. ("Mid Am") have
entered into an Amended and Restated Agreement and Plan of Merger, dated as of
August 5, 1998 (the "Agreement"), pursuant to which Mid Am will be merged with
and into Bancshares (the "Merger"). Under the terms of the Agreement, upon
consummation of the Merger, each share of Mid Am common stock, without par
value, issued and outstanding immediately prior to the effective time of the
Merger, other than certain shares specified in the Agreement, will be converted
into the right to receive 0.77 shares (the "Exchange Ratio") of Bancshares
common stock, without par value. The terms and conditions of the Merger are more
fully set forth in the Agreement. You have requested our opinion as to the
fairness, from a financial point of view, of the Exchange Ratio to the holders
of shares of Bancshares common stock.
Sandler O'Neill & Partners, L.P., as part of its investment banking
business, is regularly engaged in the valuation of financial institutions and
their securities in connection with mergers and acquisitions and other corporate
transactions. In connection with this opinion, we have reviewed, among other
things: (i) the Agreement and exhibits thereto; (ii) the Stock Option
Agreements, dated as of May 21, 1998, by and between Bancshares and Mid Am;
(iii) certain publicly available financial statements of Bancshares and other
historical financial information provided by Bancshares that we deemed relevant;
(iv) certain publicly available financial statements of Mid Am and other
historical financial information provided by Mid Am that we deemed relevant; (v)
certain financial analyses and forecasts of Bancshares prepared by and reviewed
with management of Bancshares and the views of senior management of Bancshares
regarding Bancshares' past and current business operations, results thereof,
financial condition and future prospects; (vi) certain financial analyses and
forecasts of Mid Am prepared by and reviewed with management of Mid Am and the
views of senior management of Mid Am regarding Mid Am's past and current
business operations, results thereof, financial condition and future prospects;
(vii) the pro forma impact of the Merger; (viii) the publicly reported
historical price and trading activity for Bancshares' and Mid Am's common stock,
including a comparison of certain financial and stock market information for
Bancshares and Mid Am with similar publicly available information for certain
other companies the securities of which are publicly traded; (ix) the financial
terms of recent business combinations in the banking industry, to the extent
available; (x) the current market environment generally and the banking
environment in particular; and (xi) such other information, financial studies,
analyses and investigations and financial, economic and market criteria as we
considered relevant.
In performing our review, we have assumed and relied upon, without
independent verification, the accuracy and completeness of all the financial
information, analyses and other information that was publicly available or
otherwise furnished to, reviewed by or discussed with us, and we do not assume
any responsibility or liability therefor. We did not make an independent
evaluation or appraisal of the specific assets, the collateral securing assets
or the liabilities (contingent or otherwise) of Bancshares or Mid Am or any of
their
SANDLER O'NEILL LETTERHEAD
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subsidiaries, or the collectibility of any such assets, nor have we been
furnished with any such evaluations or appraisals. With respect to the financial
projections reviewed with management, we have assumed that they have been
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the respective managements of the respective future financial
performances of Bancshares and Mid Am and that such performances will be
achieved, and we express no opinion as to such financial projections or the
assumptions on which they are based. We have also assumed that there has been no
material change in Bancshares' or Mid Am's assets, financial condition, results
of operations, business or prospects since the date of the last financial
statements made available to us. We have assumed in all respects material to our
analysis that Bancshares and Mid Am will remain as going concerns for all
periods relevant to our analyses, that the Merger will be accounted for as a
pooling of interests, that all of the representations and warranties contained
in the Agreement and all related agreements are true and correct, that each
party to such agreements will perform all of the covenants required to be
performed by such party under such agreements and that the conditions precedent
in the Agreement are not waived.
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. Events occurring after the date hereof could materially affect this
opinion. We have not undertaken to update, revise or reaffirm this opinion or
otherwise comment upon events occurring after the date hereof. We are expressing
no opinion herein as to what the value of Bancshares' common stock will be when
issued to Mid Am's shareholders pursuant to the Agreement or the prices at which
Bancshares' or Mid Am's common stock will trade at any time.
We have acted as Bancshares' financial advisor in connection with the
Merger and will receive a fee for our services, a significant portion of which
is contingent upon consummation of the Merger. In the past, we have also
provided, and may in the future provide, certain other investment banking
services for Bancshares and have received, and will receive, compensation for
such services.
In the ordinary course of our business, we may actively trade the debt and
equity securities of Bancshares and Mid Am for our own account and for the
accounts of our customers and, accordingly, may at any time hold a long or short
position in such securities.
Our opinion is directed to the Board of Directors of Bancshares in
connection with its consideration of the Merger and does not constitute a
recommendation to any stockholder of Bancshares as to how such stockholder
should vote at any meeting of stockholders called to consider and vote upon the
Merger. Our opinion is not to be quoted or referred to, in whole or in part, in
a registration statement, prospectus, proxy statement or in any other document,
nor shall this opinion be used for any other purposes, without Sandler O'Neill's
prior written consent; provided, however, that we hereby consent to the
inclusion of this opinion as an appendix to Bancshares' and Mid Am's Joint Proxy
Statement/Prospectus to be dated as of August 7, 1998 and to the references to
this opinion therein.
Based upon and subject to the foregoing, it is our opinion, as of the date
hereof, that the Exchange Ratio is fair, from a financial point of view, to the
holders of shares of Bancshares common stock.
Very truly yours,
SANDLER O'NEILL & PARTNERS, L.P.
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APPENDIX E
MCDONALD COMPANY LOGO
August 5, 1998
Board of Directors
Mid Am, Inc.
221 South Church Street
Bowling Green, OH 43402
Attention: Mr. Edward J. Reiter
Chairman of the Board
Ladies and Gentlemen:
You have requested our opinion with respect to the fairness, from a
financial point of view, as of the date hereof, to the holders of the common
stock, no par value per share ("Mid Am Common"), of Mid Am, Inc. ("Mid Am"), of
the Exchange Ratio, as set forth in the Amended and Restated Agreement and Plan
of Merger (the "Agreement"), between Mid Am and Citizens Bancshares, Inc.
("Citizens").
The Agreement provides for the merger (the "Merger") of Mid Am with and
into Citizens, pursuant to which, among other things, at the Effective Time (as
defined in the Agreement), each outstanding share of Mid Am Common, other than
shares held in the treasury of Mid Am, will be converted in the right to receive
0.77 shares of the common stock, no par value ("Citizens Common") of Citizens,
as set forth in the Agreement. The terms and conditions of the Merger are more
fully set forth in the Agreement.
McDonald & Company Securities, Inc., as part of its investment banking
business, is customarily engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, secondary distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes.
We have acted as Mid Am's financial advisor in connection with, and have
participated in certain negotiations leading to, the Agreement. In connection
with rendering our opinion set forth herein, we have among other things:
(i) Reviewed Mid Am's Annual Reports to Shareholders and Annual
Reports on Form 10-K for each of the years ended December 31, 1997,
December 31, 1996 and December 31, 1995, including the audited financial
statements contained therein, and Mid Am's Quarterly Reports on Form 10-Q
for the first quarter of 1998, including the unaudited financial statements
contained therein;
(ii) Reviewed Citizens' Annual Reports to Shareholders and Annual
Reports on Form 10-K for each of the years ended December 31, 1997,
December 31, 1996 and December 31, 1995, including the audited financial
statements contained therein, and Citizens' Quarterly Reports on Form 10-Q
for the first quarter of 1998, including the unaudited financial statements
contained therein;
(iii) Reviewed certain other public and non-public information,
primarily financial in nature, relating to the respective businesses,
earnings, assets and prospects of Mid Am and Citizens provided to us or
publicly available;
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Board of Directors
August 5, 1998
Page 2
(iv) Participated in meetings and telephone conferences with members
of senior management of Mid Am and Citizens concerning the financial
condition, business, assets, financial forecasts and prospects of the
respective companies, as well as other matters we believed relevant to our
inquiry;
(v) Reviewed certain stock market information for Mid Am Common and
Citizens Common, and compared it with similar information for certain
companies, the securities of which are publicly traded;
(vi) Compared the results of operations and financial condition of Mid
Am and Citizens with that of certain companies which we deemed to be
relevant for purposes of this opinion;
(vii) Reviewed the financial terms, to the extent publicly available,
of certain acquisition transactions which we deemed to be relevant for
purposes of this opinion;
(viii) Reviewed the Agreement dated August 5, 1998 and its schedules
and exhibits and certain related documents; and
(ix) Performed such other reviews and analyses as we have deemed
appropriate.
In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and other
information reviewed by us and have relied upon the accuracy and completeness of
the representations, warranties and covenants of Mid Am and Citizens contained
in the Agreement. We have not been engaged to undertake, and have not assumed
any responsibility for, nor have we conducted, an independent investigation or
verification of such matters. We have not been engaged to and we have not
conducted a physical inspection of any of the assets, properties or facilities
of either Mid Am or Citizens, nor have we made or obtained or been furnished
with any independent valuation or appraisal of any of such assets, properties or
facilities or any of the liabilities of either Mid Am or Citizens. With respect
to financial forecasts used in our analysis, we have assumed that such forecasts
have been reasonably prepared or reviewed by management of Mid Am and Citizens,
as the case may be, on a basis reflecting the best currently available estimates
and judgments of the management of Mid Am and Citizens, as to the future
performance of Mid Am, Citizens, and Mid Am and Citizens combined, as the case
may be. We have not been engaged to and we have not assumed any responsibility
for, nor have we conducted any independent investigation or verification of such
matters, and we express no view as to such financial forecasts or the
assumptions on which they are based. We have also assumed that all of the
conditions to the consummation of the Merger, as set forth in the Agreement,
including the tax-free treatment of the Merger to the holders of Mid Am Common,
would be satisfied and that the Merger would be consummated on a timely basis in
the manner contemplated by the Agreement.
We will receive a fee for our services as financial advisor to Mid Am, a
substantial portion of which is contingent upon closing of the Merger. We will
also receive a fee for our services in rendering this opinion.
In the ordinary course of business, we may actively trade securities of
Citizens and Mid Am for our own account and for the accounts of customers and
accordingly, we may at any time hold a long or short position in such
securities.
This opinion is based on economic and market conditions and other
circumstances existing on, and information made available as of, the date
hereof. In addition, our opinion is, in any event, limited to the fairness, as
of the date hereof, from a financial point of view, of the Exchange Ratio, to
the holders of Mid Am Common, and does not address the underlying business
decision by Mid Am's Board of Directors to effect the Merger, does not compare
or discuss the relative merits of any competing proposal or any other terms of
the Merger, and does not constitute a recommendation to any Mid Am shareholder
as to how such shareholder should vote with respect to the Merger. This opinion
does not represent an opinion as to what the value of Mid Am Common or Citizens
Common may be at the Effective Time of the Merger or as to the prospects of Mid
Am's business or Citizens' business.
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Board of Directors
August 5, 1998
Page 3
This opinion is directed to the Board of Directors of Mid Am and may not be
reproduced, summarized, described or referred to or given to any other person
without our prior written consent. Notwithstanding the foregoing, this opinion
may be included in the proxy statement to be mailed to the holders of Mid Am
Common in connection with the Merger, provided that this opinion will be
reproduced in such proxy statement in full, and any description of or reference
to us or our actions, or any summary of the opinion in such proxy statement,
will be in a form reasonably acceptable to us and our counsel.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Exchange Ratio is fair to the holders of Mid Am Common from a
financial point of view.
Very truly yours,
MCDONALD & COMPANY SECURITIES, INC.
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APPENDIX F
SECTION 1701.85 OF THE OHIO GENERAL CORPORATION LAW
1701.85 QUALIFICATIONS OF AND PROCEDURES FOR DISSENTING SHAREHOLDERS.
(A)(1) A shareholder of a domestic corporation is entitled to relief as a
dissenting shareholder in respect of the proposals described in sections
1701.74, 1701.76, and 1701.84 of the Revised Code, only in compliance with this
section.
(2) If the proposal must be submitted to the shareholders of the
corporation involved, the dissenting shareholder shall be a record holder of the
shares of the corporation as to which he seeks relief as of the date fixed for
the determination of shareholders entitled to notice of a meeting of the
shareholders at which the proposal is to be submitted, and such shares shall not
have been voted in favor of the proposal. Not later than ten days after the date
on which the vote on the proposal was taken at the meeting of the shareholders,
the dissenting shareholder shall deliver to the corporation a written demand for
payment to him of the fair cash value of the shares as to which he seeks relief,
which demand shall state his address, the number and class of such shares, and
the amount claimed by him as the fair cash value of the shares.
(3) The dissenting shareholder entitled to relief under division (C) of
section 1701.84 of the Revised Code in the case of a merger pursuant to section
1701.80 of the Revised Code and a dissenting shareholder entitled to relief
under division (E) of section 1701.84 of the Revised Code in the case of a
merger pursuant to section 1701.801 of the Revised Code shall be a record holder
of the shares of the corporation as to which he seeks relief as of the date on
which the agreement of merger was adopted by the directors of that corporation.
Within twenty days after he has been sent the notice provided in section 1701.80
or 1701.801 of the Revised Code, the dissenting shareholder shall deliver to the
corporation a written demand for payment with the same information as that
provided for in division (A)(2) of this section.
(4) In the case of a merger or consolidation, a demand served on the
constituent corporation involved constitutes service on the surviving or the new
entity, whether the demand is served before, on, or after the effective date of
the Merger or consolidation.
(5) If the corporation sends to the dissenting shareholder, at the address
specified in his demand, a request for the certificates representing the shares
as to which he seeks relief, the dissenting shareholder, within fifteen days
from the date of the sending of such request, shall deliver to the corporation
the certificates requested so that the corporation may forthwith endorse on them
a legend to the effect that demand for the fair cash value of such shares has
been made. The corporation promptly shall return such endorsed certificates to
the dissenting shareholder. A dissenting shareholder's failure to deliver such
certificates terminates his rights as a dissenting shareholder, at the option of
the corporation, exercised by written notice sent to the dissenting shareholder
within twenty days after the lapse of the fifteen-day period, unless a court for
good cause shown otherwise directs. If shares represented by a certificate on
which such a legend has been endorsed are transferred, each new certificate
issued for them shall bear a similar legend, together with the name of the
original dissenting holder of such shares. Upon receiving a demand for payment
from a dissenting shareholder who is the record holder of uncertificated
securities, the corporation shall make an appropriate notation of the demand for
payment in its shareholder records. If uncertificated shares for which payment
has been demanded are to be transferred, any new certificate issued for the
shares shall bear the legend required for certificated securities as provided in
this paragraph. A transferee of the shares so endorsed, or of uncertificated
securities where such notations has been made, acquires only such rights in the
corporation as the original dissenting holder of such shares had immediately
after the service of a demand for payment of the fair cash value of the shares.
A request under this paragraph by the corporation is not an admission by the
corporation that the shareholder is entitled to relief under this section.
(B) Unless the corporation and the dissenting shareholder have come to an
agreement on the fair cash value per share of the shares as to which the
dissenting shareholder seeks relief, the dissenting shareholder or the
corporation, which in case of merger or consolidation may be the surviving or
new entity, within three months after the service of the demand by the
dissenting shareholder, may file a complaint in the court of
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common pleas of the county in which the principal office of the corporation that
issued the shares is located or was located when the proposal was adopted by the
shareholders of the corporation, or, if the proposal was not required to be
submitted to the shareholders, was approved by the directors. Other dissenting
shareholders, within that three-month period, may join as plaintiffs or may be
joined as defendants in any such proceeding, and any two or more such
proceedings may be consolidated. The complaint shall contain a brief statement
of the facts, including the vote and the facts entitling the dissenting
shareholder to the relief demanded. No answer to such a complaint is required.
Upon the filing of such a complaint, the court, on motion of the petitioner,
shall enter an order fixing a date for a hearing on the complaint and requiring
that a copy of the complaint and a notice of the filing and of the date for
hearing be given to the respondent or defendant in the manner in which summons
is required to be served or substituted service is required to be made in other
cases. On the day fixed for the hearing on the complaint or any adjournment of
it, the court shall determine from the complaint and from such evidence as is
submitted by either party whether the dissenting shareholder is entitled to be
paid the fair cash value of any shares and, if so, the number and class of such
shares. If the court finds that the dissenting shareholder is so entitled, the
court may appoint one or more persons as appraisers to receive evidence and to
recommend a decision on the amount of the fair cash value. The appraisers have
such power and authority as is specified in the order of their appointment. The
court thereupon shall make a finding as to the fair cash value of a share and
shall render judgement against the corporation for the payment of it, with
interest at such rate and from such date as the court considers equitable. The
costs of the proceeding, including reasonable compensation to the appraisers to
be fixed by the court, shall be assessed or apportioned as the court considers
equitable. The proceeding is a special proceeding and final orders in it may be
vacated, modified, or reversed on appeal pursuant to the Rules of Appellate
Procedure and, to the extent not in conflict with those rules. Chapter 2505 of
the Revised Code. If, during the pendency of any proceeding instituted under
this section, a suit or proceeding is or has been instituted to enjoin or
otherwise to prevent the carrying out of the action as to which the shareholder
has dissented, the preceding instituted under this section shall be stayed until
the final determination of the other suit or proceeding. Unless any provision in
division (d) of this section is applicable, the fair cash value of the shares
that is agreed upon by the parties or fixed under this section shall be paid
within thirty days after the date of final determination of such value under
this division, the effective date of the amendment to the articles, or the
consummation of the other action involved, whichever occurs last. Upon the
occurrence of the last such event, payment shall be made immediately to a holder
of uncertificated securities entitled to such payment. In the case of holders of
shares represented by certificates, payment shall be made only upon and
simultaneously with the surrender to the corporation of the certificates
representing the shares for which the payment is made.
(C) If the proposal was required to be submitted to the shareholders of the
corporation, fair cash value as to those shareholders shall be determined as of
the day prior to the day on which the vote by the shareholders was taken and, in
the case of a merger pursuant to section 1701.80 or 1701.801 of the Revised
Code, fair cash value as to shareholders of a constituent subsidiary corporation
shall be determined as of the day before the adoption of the agreement of merger
by the directors of the particular subsidiary corporation. The fair cash value
of a share for the purposes of this section is the amount that a willing seller
who is under no compulsion to sell would be willing to accept and that a willing
buyer who is under no compulsion to purchase would be willing to pay, but in no
event shall the fair cash value of a share exceed the amount specified in the
demand of the particular shareholder. In computing such fair cash value, any
appreciation or depreciation in market value resulting from the proposal
submitted to the directors or to the shareholders shall be excluded.
(D)(1) The right and obligation of a dissenting shareholder to receive such
fair cash value and to sell such shares as to which he seeks relief, and the
right and obligation of the corporation to purchase such shares and to pay the
fair cash value of them terminates if any of the following applies:
(a) The dissenting shareholder has not complied with this section,
unless the corporation by its directors waives such failure;
(b) The corporation abandons the action involved or is finally
enjoined or prevented from carrying it out, or the shareholders rescind
their adoption of the action involved;
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(c) The dissenting shareholder withdraws his demand, with the consent
of the corporation by its directors;
(d) The corporation and the dissenting shareholder have not come to an
agreement as to the fair cash value per share, and neither the shareholder
nor the corporation has filed or joined in a complaint under division (B)
of this section within the period provided in that division.
(2) For purposes of division (D)(1) of this section, if the Merger or
consolidation has become effective and the surviving or new entity is not a
corporation, action required to be taken by the directors of the corporation
shall be taken by the general partners of a surviving or new partnership of the
comparable representatives of any other surviving or new entity.
(E) From the time of the dissenting shareholder's giving of the demand
until either the termination of the rights and obligations arising from it nor
the purchase of the shares by the corporation, all other rights accruing from
such shares, including voting and divided or distribution rights, are suspended.
If during the suspension, any dividend or distribution is paid in money upon
shares of such class or any dividend, distribution, or interest is paid in money
upon any securities issued in extinguishment of or in substitution for such
shares, an amount equal to the dividend, distribution, or interest which, except
for the suspension, would have been payable upon such shares or securities,
shall be paid to the holder of record as a credit upon the fair cash value of
the shares. If the right to receive fair cash value is terminated other than by
the purchase of the shares by the corporation, all rights of the holder shall be
restored and all distributions which, except for the suspension, would have been
made shall be made to the holder of record of the shares at the time of
termination.
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APPENDIX G
CITIZENS BANCSHARES, INC.
AMENDED AND RESTATED 1998 STOCK OPTION PLAN
FOR NONEMPLOYEE DIRECTORS
1. PURPOSE. The purpose of this Citizens Bancshares, Inc. Amended and
Restated 1998 Stock Option Plan for Nonemployee Directors ("Plan") is to
increase the proprietary interest of the Nonemployee Directors in the success of
Citizens Bancshares, Inc. (the "Company") and to enhance the Company's ability
to retain and attract experienced and knowledgeable directors.
2. DEFINITION OF SELECTED TERMS. In addition to the definitions of certain
words and phrases that are provided in various sections of this Plan, the
following terms when used herein shall have the meanings set forth below.
(a) "AFFILIATE(S)" shall mean those corporations a majority of the
outstanding voting capital stock of which is directly or indirectly owned
by the Company.
(b) "BOARD OF DIRECTORS" shall mean the Board of Directors of the
Company.
(c) "FAIR MARKET VALUE PER SHARE" on a particular date shall mean (i)
if the Stock is quoted or reported on the National Association of
Securities Dealers Automated Quotation ("NASDAQ") System or the NASDAQ
National Market System, the closing bid price for such day of the Stock (or
if the relevant date does not fall on a day on which the Stock is trading
on NASDAQ, or the NASDAQ National Market System, the date on which Fair
Market Value per Share shall be established shall be the last day on which
the Stock was so traded prior to the relevant date), or (ii) if clause (i)
is inapplicable, a value determined in good faith by the Committee by any
fair and reasonable means prescribed by the Committee.
(d) "INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of
1986, as amended.
(e) "NONEMPLOYEE DIRECTOR(S)" shall mean those directors of the
Company and its Affiliates who are not employees of the Company or any
Affiliate.
(f) "OPTION" shall mean an option granted to a Nonemployee Director
under this Plan.
(g) "OPTIONEE" means any Nonemployee Director to whom an Option has
been granted or any other person who becomes a holder of an Option under
the provisions of this Plan.
3. ADMINISTRATION. This Plan shall be administered by a committee of not
less than two (2) disinterested members of the Board of Directors, appointed by
at least a majority of the Board of Directors and consisting of an equal number
of former Mid Am, Inc. directors and directors who were directors of the Company
prior to the effective time of its merger with Mid Am, Inc. (the "Committee").
The Committee shall, subject to the provisions of the Plan, have the sole
authority to grant Options under the Plan and, consistent with the Plan, to
determine the provisions of the Options to be granted; to interpret the Plan and
the Options granted under the Plan; to correct any defect, supply any omission
and reconcile any inconsistency in the Plan; to determine whether, to what
extent and under what circumstances shares of Stock payable with respect to an
award shall be deferred either automatically or at the election of the holder
thereof or of the Committee; to amend the Plan to reflect changes in applicable
law; to adopt, amend and rescind rules and regulations for the administration of
the Plan; and generally to administer the Plan and to make all determinations in
connection therewith which may be necessary or advisable and all such actions of
the Committee shall be binding upon all Optionees. Committee decisions and
selections shall be made by a majority of its members present at the meeting at
which a quorum is present, and shall be final. Any decision or selection reduced
to writing and signed by all of the members of the Committee shall be as fully
effective as if it had been made at a meeting duly held. No member of the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any Option granted thereunder. To the extent
required for transactions under the Plan to qualify for the exemptions available
under Rule 16b-3 (or any
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successor rule thereto) promulgated under the Securities Exchange Act of 1934
(the "1934 Act"), all actions relating to Options granted to persons subject to
Section 16 of the 1934 Act shall be taken by the Board of Directors unless each
person who serves on the Committee is a "non-employee director" within the
meaning of Rule 16b-3 or such actions are taken by a subcommittee of the
Committee (or the Board of Directors) comprised solely of "non-employee
directors."
Notwithstanding anything to the contrary contained herein, (a) until the
Board of Directors shall appoint the members of the Committee, the Plan shall be
administered by the Board of Directors, and (b) the Board of Directors may, in
its sole discretion, at any time and from time to time, grant Options or resolve
to administer the Plan. In either of the foregoing events, the Board of
Directors of the Company shall have all of the authority and responsibility
granted to the Committee herein.
4. STOCK SUBJECT TO THIS PLAN. The Stock to be issued under this Plan shall
be shares of common stock of the Company ("Stock"). The total number of shares
of Stock that may be issued under this Plan pursuant to Options granted
hereunder shall be two percent (2%) of the total issued and outstanding shares
of Stock the Company on the effective time of its merger with Mid Am, Inc.
(subject to adjustment in accordance with Section 10 hereof) which may consist
in whole or in part of unissued or treasury shares. If, after the Effective Date
of the Plan, any Option is forfeited or otherwise terminates or is cancelled
without the delivery of shares of Stock or shares of Stock owned by an Optionee
are tendered to pay the exercise price of Options granted under the Plan, then
the shares of Stock covered by such Option or to which such Option relates shall
again become available for transfer pursuant to Options granted or to be granted
under this Plan.
5. ELIGIBILITY. Each Nonemployee Director of the Company and its Affiliates
is eligible to participate in this Plan. The Nonemployee Directors who shall
receive Options under the Plan shall be selected from time to time by the
Committee in its sole discretion, from among those eligible.
6. GRANT AND EXERCISE OF OPTION.
(a) OPTION GRANTS. On an annual basis during the term of this Plan,
the Committee shall, in its sole discretion, from among those eligible,
select the Nonemployee Directors who shall receive Options and determine
the number of Options to be granted to each such Nonemployee Director. It
is anticipated that grants of Options hereunder will be made on an annual
basis; provided however, in no event will any grants be made until
December, 1998 at the earliest.
(b) SCHEDULE UNDER WHICH OPTIONS BECOME FULLY EXERCISABLE. The
Committee shall determine from time to time when Options granted under this
Plan become exercisable, but in no event shall an Option be exercisable
more than ten (10) years after the date it is granted.
(c) OPTION PRICE. The Option price for each share of Stock purchasable
under an Option shall be the Fair Market Value per Share on the date of
grant of such Option.
(d) OPTION AGREEMENT. Each Option granted under this Plan shall be
evidenced by a stock option agreement ("Stock Option Agreement") that is
duly executed on behalf of the Company and by the Nonemployee Director to
whom the Option is granted. Each Stock Option Agreement shall be subject to
the terms and conditions of this Plan and in such form, not inconsistent
with this Plan, as the Board of Directors or the Committee shall from time
to time approve.
(e) PAYMENT. Each Option may be exercised by the Optionee giving
written notice to the Company specifying the number of shares to be
purchased and accompanied by payment in full. Unless the applicable Stock
Option Agreement provides otherwise, an Option may be exercised from time
to time as to all or any part of the shares of Stock as to which such
Option is then exercisable (but in any event, only for whole shares). Such
payment shall be made: (i) in cash; or (ii) unless the applicable Stock
Option Agreement provides otherwise, by delivery of shares of Stock or
attestation of the fact of ownership thereof (which, if acquired pursuant
to exercise of an Option or under an award made under any compensatory plan
of the Company or its Affiliates, were acquired at least six months prior
to the Option exercise date) and having a fair market value (determined as
of the exercise date) equal to the Option
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exercise price; or (c) at the discretion of the Committee and to the extent
permitted by law, by cashless exercise through a broker or by such other
method as the Committee may from time to time prescribe.
(f) EXPIRATION OF OPTIONS. Prior to the expiration of ten (10) years
from the date the Option was granted, unless otherwise determined by the
Committee, the unexercised portion of each Option shall automatically and
without notice expire and become null and void at the time of the earliest
to occur of the following:
(i) the expiration of ninety (90) days after the Optionee ceases to
be a Nonemployee Director, other than by reason of permanent disability,
death, or for cause;
(ii) the expiration of one year following the death or permanent
disability of the Optionee; or
(iii) the termination of the Optionee's service as a Nonemployee
Director, if such termination is for cause (the Committee or the Board
of Directors shall have the right to determine what constitutes cause,
and such determination shall be conclusive and binding for all
purposes).
(g) OPTIONS ARE NONQUALIFIED. Each Option shall be a nonqualified
stock option which does not qualify as an incentive stock option within the
meaning of Section 422 of the Internal Revenue Code.
7. TRANSFERABILITY RESTRICTIONS. Unless otherwise determined by the
Committee, no option shall be transferable other than pursuant to the last will
and testament of the Optionee or by the laws of descent and distribution. During
the lifetime of an Optionee, the Option shall be exercisable only by the
Optionee personally or by the Optionee's legal representative unless otherwise
determined by the Committee.
8. NO RIGHT TO CONTINUE AS DIRECTOR. Neither this Plan nor the granting of
an Option, nor any other action taken pursuant to this Plan shall constitute or
be evidence of any agreement or understanding, express or implied, that the
Board of Directors will nominate any Nonemployee Director for re-election, or
that the Company or any Affiliate will retain a Nonemployee Director for any
period of time, or at any particular rate of compensation.
9. RIGHTS AS A SHAREHOLDER. An Optionee or a transferee of an Option
pursuant to Section 7 shall have no rights as a shareholder of the Company with
respect to any Stock that is the subject of either an unexercised or exercised
Option until the Optionee or such transferee shall have become the holder of
record of such Stock, and no adjustments shall be made for dividends in cash or
other property or other distributions or rights in respect of such Stock for
which the record date is prior to the date on which the Optionee or such
transferee shall have in fact become the holder of record of the Stock acquired
pursuant to the Option.
10. CHANGES IN CAPITAL. If the outstanding Stock of the Company subject to
the Plan shall at any time be changed or exchanged by declaration of a stock
dividend, stock split, combination of shares, recapitalization, merger,
consolidation or other corporate reorganization, the number and kind of shares
of Stock subject to this Plan and the Option prices, and the number of shares of
Stock available for awards under this Plan, shall be proportionately and
equitably adjusted.
11. USE OF PROCEEDS. The cash proceeds, if any, received by the Company
from the issuance of shares pursuant to Options under this Plan shall be used
for general corporate purposes and shall constitute general funds of the
Company.
12. EFFECTIVE DATE AND TERM OF THIS PLAN.
(a) This Plan shall become effective on the later of (i) the date on
which it is approved by the stockholders of the Company in the manner
required by Rule 16b-3, under the 1934 Act, or (ii) the effective date of
the merger of Mid Am, Inc. into the Company (the "Effective Date").
(b) Unless previously terminated in accordance with Section 13 of this
Plan, this Plan shall terminate at the close of business on May 11, 2008,
after which no Options shall be granted under this Plan. Such termination
shall not affect any Options granted prior to such termination.
13. AMENDMENTS. The Board of Directors may suspend or discontinue the Plan
and the Committee may amend the Plan from time to time in any respect
whatsoever, but no amendment shall be made which,
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without the approval of the holder of an Option theretofore granted, would
materially impair any rights or materially increase any obligations under any
award made under the Plan; provided, however, that any action of the Board of
Directors or the Committee that alters or affects the tax treatment of any
Option granted shall not be considered to materially impair any rights of an
Optionee; and provided further, that if the Committee after consulting with
management of the Company determines that application of an accounting standard
in compliance with any statement issued by the Financial Accounting Standards
Board concerning the treatment of stock options would have a significant adverse
effect on the Company's financial statements because of the fact that Options
granted before the issuance of such statement are then outstanding, then the
Committee in its absolute discretion may cancel and revoke all outstanding
Options to which such adverse effect is attributed and the holders of such
Options shall have no further rights in respect thereof; and, provided further,
that the Board or the Committee shall have full discretion to amend the Plan to
the extent necessary to permit the Company to utilize the pooling-of-interests
accounting method (and any outstanding plan agreement shall be deemed to be so
amended to the same extent) without obtaining the consent of any grantee (or,
after the grantee's death the person having the right to exercise the affected
award), without regard to whether such amendment at firstly affects grantee's
rights under such agreement. Such cancellation and revocation shall be effective
upon written notice by the Committee to the holders of such Options.
Subject to the first paragraph of this Section 13, the Committee may amend
any Stock Option Agreement, including without limitation, an amendment which
would accelerate the time or times at which the award may be exercised, or waive
or amend any goals, restrictions or conditions set forth in any Stock Option
Agreement.
14. LIMITATION ON ISSUE OR TRANSFER OF SHARES. Notwithstanding any
provisions of this Plan or the terms of any Option, the Company shall not be
required to issue any shares of Stock or transfer on its books and records any
shares of Stock if such issue or transfer would, in the judgment of the
Committee or of counsel for the Company, constitute a violation of any state or
federal law, or of the rules or regulations of any governmental regulatory body,
or any securities exchange or automated dealer quotation system. An Optionee
desiring to exercise an Option may be required by the Company, as a condition of
the effectiveness of any exercise of an Option, to agree in writing that all
securities to be acquired pursuant to such exercise shall be held for his or her
account without a view to any further distribution thereof, that the
certificates for such shares shall bear an appropriate legend to that effect,
and that such shares will not be transferred or disposed of except in compliance
with applicable federal and state securities laws.
15. CHANGE IN CONTROL. Notwithstanding any other provision of the Plan,
upon the occurrence of a Change in Control (as defined below), each holder of an
unexpired Option under the Plan shall have the right to exercise such Option in
whole or in part without regard to the date that such Option would be first
exercisable and such right shall continue with respect to any Nonemployee
Director whose status as a Nonemployee Director terminates following a Change in
Control, for a period ending on the earlier of the date of expiration of such
Option or the date which is ninety (90) days after such termination of status.
For purposes of the Plan, a "Change in Control" shall be deemed to have
occurred if at any time following the effective time of the merger of Mid Am,
Inc. into the Company:
(a) Individuals who constitute the Board of Directors immediately
after the effective time of the merger of Mid Am, Inc. and the Company (the
"Incumbent Directors") cease for any reason to constitute at least a
majority of the Board of Directors, provided that any person becoming a
director subsequent thereto whose election or nomination for election was
approved by a vote of at least two-thirds of the Incumbent Directors then
on the Board of Directors (either by a specific vote or by approval of the
proxy statement of the Company in which such person is named as a nominee
for director, without written objection to such nomination) shall be an
Incumbent Director; provided, however, that no individual initially elected
or nominated as a director of the Company as a result of an actual or
threatened election contest with respect to directors or as a result of any
other actual or threatened solicitation of proxies or consents by or on
behalf of any person other than the Board of Directors shall be deemed to
be an Incumbent Director;
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(b) Any "person" (as such term is defined in Section 3(a)(9) of the
1934 Act and as used in Sections 13(d)(3) and 14(d)(2) of the 1934 Act) is
or becomes a "beneficial owner" (as defined in Rule 13d-3 under the 1934
Act), directly or indirectly, of securities of the Company representing
twenty-five percent (25%) or more of the combined voting power of the
Company's then outstanding securities eligible to vote for the election of
the Board of Directors (the "Company Voting Securities"); provided,
however, that the event described in this Section 15(b) shall not be deemed
to be a Change in Control by virtue of any of the following acquisitions:
(i) by the Company or any subsidiary, (ii) by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any subsidiary or
(iii) by any underwriter temporarily holding securities pursuant to an
offering of such securities;
(c) The consummation of a merger, consolidation, statutory share
exchange or similar form of corporate transaction involving the Company or
any of its subsidiaries that requires the approval of the Company's
stockholders, whether for such transaction or the issuance of securities in
the transaction (a "Business Combination"), unless immediately following
such Business Combination: (i) more than sixty percent (60%) of the total
voting power of (x) the company resulting from such Business Combination
(the "Surviving Company"), or (y) if applicable, the ultimate parent
company that directly or indirectly has beneficial ownership of one hundred
percent (100%) of the voting securities eligible to elect directors of the
Surviving Company (the "Parent Company"), is represented by Company Voting
Securities that were outstanding immediately prior to such Business
Combination (or, if applicable, is represented by shares into which such
Company Voting Securities were converted pursuant to such Business
Combination), and such voting power among the holders thereof is in
substantially the same proportion as the voting power of such Company
Voting Securities among the holders thereof immediately prior to the
Business Combination; (ii) no person (other than any employee benefit plan
(or related trust) sponsored or maintained by the Surviving Company or the
Parent Company), is or becomes the beneficial owner, directly or
indirectly, of twenty-five percent (25%) or more of the total voting power
of the outstanding voting securities eligible to elect directors of the
Parent Company (or, if there is no Parent Company, the Surviving Company);
and (iii) at least fifty percent (50%) of the members of the board of
directors of the Parent Company (or, if there is no Parent Company, the
Surviving Company) following the consummation of the Business Combination
were Incumbent Directors at the time of the Board of Directors' approval of
the execution of the initial agreement providing for such Business
Combination; or
(d) The stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or a sale of all or substantially
all of the Company's assets or deposits.
Notwithstanding the foregoing, a Change in Control of the Company shall not
be deemed to occur solely because any person acquires beneficial ownership of
more than twenty-five percent (25%) of the Company Voting Securities as a result
of the acquisition of Company Voting Securities by the Company which reduces the
number of Company Voting Securities outstanding; provided, however, that if
after such acquisition by the Company such person becomes the beneficial owner
of additional Company Voting Securities that increases the percentage of
outstanding Company Voting Securities beneficially owned by such person, a
Change in Control of the Company shall then occur.
16. NO SEGREGATION OF CASH OR SHARES. The Company shall not be required to
segregate any shares of Stock that may at any time be represented by Options,
and the Plan shall constitute an "unfunded" plan of the Company. No Nonemployee
Director shall have rights with respect to shares of Stock prior to the delivery
of such shares. The Company shall not, by any provisions of the Plan, be deemed
to be a trustee of any Stock or any other property and the liabilities of the
Company to any Nonemployee Director pursuant to the Plan shall be those of a
debtor pursuant to such contract obligations as are created by or pursuant to
the Plan, and the rights of Nonemployee Director employee, former Nonemployee
Director or beneficiary under the Plan shall be limited to those of a general
creditor of the Company.
17. DELIVERY OF SHARES OF STOCK. No shares of stock shall be delivered
pursuant to any exercise of an Option under the Plan unless the requirements of
such laws and regulations as may be deemed by the Committee to be applicable
thereto are satisfied. All certificates for shares of Stock delivered under the
Plan shall be subject to such stock-transfer orders and other restrictions as
the Committee may deem
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advisable under the rules, regulations, and other requirements of the Securities
and Exchange Commission, any stock exchange upon which the Stock is then listed,
and any applicable federal or state securities law, and the Committee may cause
a legend or legends to be put on any such certificates to make appropriate
reference to such restrictions.
18. GOVERNING LAW. This Plan and all determinations made and actions taken
pursuant thereto shall be governed by the laws of the State of Ohio and
construed in accordance therewith.
19. SEVERABILITY. If any provision of the Plan, or any term or condition of
any Option granted thereunder, is invalid, such provision, term, condition or
application shall to that extent be void (or, in the discretion of the Board of
Directors, such provision, term or condition may be amended so as to avoid such
invalidity or failure), and shall not affect other provisions, terms or
conditions or applications thereof, and to this extent such provisions, terms
and conditions are severable.
20. COMPLIANCE WITH SECTION 16(B). The Plan is intended to comply with all
applicable conditions of Rule 16b-3 (and any successor rule thereto) under the
1934 Act. All transactions involving Nonemployee Directors are subject to such
conditions, regardless of whether the conditions are expressly set forth in the
Plan or the applicable Stock Option Agreement. Any provision of the Plan that is
contrary to a condition of Rule 16b-3 shall not apply to Nonemployee Directors.
* * *
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APPENDIX H
CITIZENS BANCSHARES, INC.
1998 STOCK OPTION PLAN FOR EMPLOYEES
1. PURPOSE OF PLAN. The purpose of the Citizens Bancshares, Inc. 1998 Stock
Option Plan for Employees (the "Plan") is to aid Citizens Bancshares, Inc. (the
"Company") and its subsidiaries in attracting, securing, and retaining key
employees of outstanding ability and to provide additional motivation to such
employees to exert their best efforts on behalf of the Company and its
subsidiaries. The Company expects that it will benefit from the added interest
which such employees will have in the welfare of the Company as a result of
their ownership or increased ownership of the Company's Common Stock.
2. STOCK SUBJECT TO THE PLAN. The total number of shares of common stock of
the Company ("Common Stock") that may be issued under the Plan pursuant to
options granted hereunder is five and one-half percent (5 1/2%) of the total
issued and outstanding shares of the Company on the effective time of the
Company's merger with Mid Am, Inc. (the "Effective Date") (subject to adjustment
as provided in Section 13), which may consist, in whole or in part, of unissued
shares or treasury shares. If, after the Effective Date of the Plan, any option
is forfeited or otherwise terminates or is cancelled without the delivery of
shares of Common Stock, shares of the Common Stock are surrendered or withheld
from any award to satisfy an optionee's income tax withholding obligations, or
shares of Common Stock owned by an optionee are tendered to pay the exercise
price of options granted under the Plan, then the shares covered by such option
or to which such option relates shall again become available for transfer
pursuant to options granted or to be granted under this Plan.
3. ADMINISTRATION. The Plan shall be administered by a committee of not
less than two (2) disinterested members of the Board of Directors of the Company
(the "Board of Directors") consisting of an equal number of former Mid Am, Inc.
directors and directors who were directors of the Company prior to the effective
time of its merger with Mid Am, Inc. (the "Committee").
The Committee shall (subject to the provisions of Section 4 pertaining to
options granted during the first two years of the Plan) have the sole authority
to grant options under the Plan and, consistent with the Plan, to determine the
provisions of the options to be granted, to interpret the Plan and the options
granted under the Plan; to correct any defect, supply any omission and reconcile
any inconsistency in the Plan; to determine whether, to what extent and under
what circumstances shares of Common Stock payable with respect to an award shall
be deferred either automatically or at the election of the holder thereof or of
the Committee; to amend the Plan to reflect changes in applicable law; to adopt,
amend and rescind rules and regulations for the administration of the Plan; and
generally to administer the Plan and to make all determinations in connection
therewith which may be necessary or advisable; and all such actions of the
Committee shall be binding upon all optionees. Committee decisions and
selections shall be made by a majority of its members present at the meeting at
which a quorum is present, and shall be final. Any decision or selection reduced
to writing and signed by all of the members of the Committee shall be as fully
effective as if it had been made at a meeting duly held. No member of the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any option granted thereunder. To the extent
required for transactions under the Plan to qualify for the exemptions available
under Rule 16b-3 promulgated under the Securities Exchange Act of 1934 (the
"1934 Act"), all actions relating to options granted to persons subject to
Section 16 of the 1934 Act shall be taken by the Board of Directors unless each
person who serves on the Committee is a "non-employee director" within the
meaning of Rule 16b-3 or such actions are taken by a subcommittee of the
Committee (or the Board of Directors) comprised solely of "non-employee
directors." To the extent required for compensation realized from options
granted under the Plan to be deductible by the Company pursuant to Section
162(m) of the Internal Revenue Code of 1986, as amended ("Code"), the members of
the Committee shall be "outside directors' within the meaning of Code Section
162(m).
Notwithstanding anything to the contrary contained herein, (a) until the
Board of Directors shall appoint the members of the Committee, the Plan shall be
administered by the Board of Directors, and (b) the Board of Directors may, in
its sole discretion, at any time and from time to time, grant options or resolve
to
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administer the Plan. In either of the foregoing events, the Board of Directors
of the Company shall have all of the authority and responsibility granted to the
Committee herein.
4. ELIGIBILITY. Unless otherwise determined by the Committee, key
employees, including officers, of the Company and its subsidiaries, including
prospective employees conditioned upon their becoming employees, who are from
time to time responsible for the management, growth and protection of the
business of the Company and its subsidiaries are eligible to be granted options
under the Plan. The employees who shall receive options under the Plan shall be
selected from time to time by the Committee in its sole discretion, from among
those eligible, and the Committee shall determine, in its sole discretion, the
number of shares to be covered by the option or options granted to each such
employee selected, subject to the maximum number of stock options which may be
granted to optionees under the Plan.
Notwithstanding the foregoing, unless otherwise determined by the
Committee, to the extent options are granted by the Committee during the first
two years of this Plan, the aggregate number of options granted to Company
employees formerly employed by Mid Am, Inc. shall be equal to the aggregate
number of options granted to Company employees employed by the Company prior to
the effective time of its merger with Mid Am, Inc.
5. LIMIT ON AWARDS. Unless otherwise determined by the Committee, no option
may be granted under the Plan after the ten (10) year anniversary of the
Effective Date, but options theretofore granted may extend beyond such date.
6. TERMS AND CONDITIONS OF STOCK OPTIONS. All options granted under this
Plan shall be subject to all the applicable provisions of the Plan, including
the following terms and conditions, and to such other terms and conditions nor
inconsistent therewith as the Committee shall determine.
(A) OPTION PRICE. The option price per share for options granted to
employees shall be determined by the Committee, but shall not be less than
one hundred percent (100%) of the fair market value at the time the option
is granted. The fair market value on the particular date on which the
option is granted shall, for all purposes of the Plan, be the closing bid
price for such day of the stock (or if the relevant date does not fall on a
day on which the stock is trading, the last day on which the stock was so
traded prior to the relevant date) as quoted or reported on the National
Association of Securities Dealers Automated Quotation ("NASDAQ") System or
the NASDAQ National Market System. In the event that the method of
determining the fair market value of the shares provided for in this
subsection (a) shall not be practicable, then the fair market value per
share shall be determined by such other reasonable method as the Committee
shall, in its discretion, select and apply at the time of the grant of such
option.
(B) TIME OF EXERCISE OF OPTION. Unless otherwise determined by the
Committee, each option shall be exercisable during and over such period
ending not later than ten (10) years from the date it was granted, as may
be determined by the Committee and stated in the option.
Unless otherwise determined by the Committee pursuant to Section 3 hereof
or required pursuant to Sections 6(d) or 13 of the Plan, no option shall be
exercisable except as provided in the following vesting schedule:
<TABLE>
<CAPTION>
TIME AMOUNT EXERCISABLE
---- ------------------
<S> <C>
After Second Anniversary of Date of Grant................... 40%
After Third Anniversary of Date of Grant.................... 60%
After Fourth Anniversary of Date of Grant................... 80%
After Fifth Anniversary of Date of Grant.................... 100%
</TABLE>
; provided, however, that in the event of an optionee's retirement in accordance
with Company policy, death or permanent disability or a "Change in Control" (as
hereafter defined), any option then outstanding shall become fully vested and
immediately exercisable unless the applicable stock option agreement provides
otherwise.
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(C) PAYMENT. Each option may be exercised by giving written notice to
the Company specifying the number of shares to be purchased and accompanied
by payment in full (including applicable taxes, if any). Unless the
applicable stock option agreement provides otherwise, an option may be
exercised from time to time as to all or any part of the shares as to which
such award is then exercisable (but in any event, only for whole shares).
Such payment shall be made: (i) in cash; or (ii) unless the applicable
stock option agreement provides otherwise, by delivery of shares of Common
Stock or attestation of the fact of ownership thereof (which, if acquired
pursuant to exercise of a stock option or under an award made under any
compensatory plan of the Company, were acquired at least six months prior
to the option exercise date) and having a fair market value (determined as
of the exercise date) equal to the option exercise price; or (c) at the
discretion of the Committee and to the extent permitted by law, by cashless
exercise through a broker or by such other method as the Committee may from
time to time prescribe. No optionee shall have any rights to dividends or
other rights of a stockholder with respect to shares subject to his or her
option until he or she has given written notice of exercise of his or her
option, paid in full for such shares, and, if requested, given the
representation described in subsection 10 of the Plan.
(D) RIGHTS AFTER TERMINATION OF EMPLOYMENT. Unless otherwise
determined by the Committee, if an optionee's employment by the Company or
a subsidiary terminates by reason of such person's retirement in accordance
with Company policy, the optionee's option may thereafter be exercised in
full but may not be exercised after the expiration of the period of
thirty-six (36) months from the date of such termination of employment due
to retirement or of the stated period of the option, whichever period is
the shorter; provided, however, that if the optionee dies within thirty-six
(36) months after such termination of employment, any unexercised option
may thereafter be exercised by the legal representative of the estate or by
the legatee of the option under the optionee's last will and testament for
a period of twelve (12) months from the date of the optionee's death or the
expiration of the stated period of the option, whichever period is shorter.
Unless otherwise determined by the Committee, if an optionee's employment
by the Company or a subsidiary terminates by reason of permanent disability, the
optionee's option may thereafter be exercised in full but may not be exercised
after the expiration of the period of twelve (12) months from the date of such
termination of employment or of the stated period of the option, whichever
period is the shorter; provided, however, that if the optionee dies within a
period of twelve (12) months after such termination of employment, any
unexercised option may thereafter be exercised by the legal representative of
the estate or by the legatee of the option under the optionee's last will and
testament for a period of twelve (12) months from the date of the optionee's
death or the expiration of the stated period of the option, whichever period is
the shorter.
Unless otherwise determined by the Committee, if an optionee's employment
by the Company or a subsidiary terminates by reason of the optionee's death, the
optionee's option may thereafter be immediately exercised in full by the legal
representative of the estate or by the legatee of the option under the
optionee's last will and testament for a period of twelve (12) months from the
date of the optionee's death or the expiration of the stated period of the
option, whichever period is the shorter.
Unless otherwise determined by the Committee or the provisions of this
Section 6(d) or Section 13 hereof are applicable, if an optionee's employment
terminates for any reason other than retirement or permanent disability, or
death, the optionee's option may thereafter be exercised to the extent to which
it was exercisable at the time of termination in accordance with the vesting
schedule set forth in Section 6(b) hereof, but may not be exercised after the
expiration of ninety (90) days from the date of such termination of employment
or the stated period of the option, whichever period is shorter.
Notwithstanding the foregoing, if an optionee's employment with the Company
or a subsidiary is terminated for cause, the optionee's option shall thereupon
terminate and no options shall thereafter be exercisable by such optionee. In
addition, if at any time within one (1) year of the date of which an optionee
exercises an option, the optionee (i) is terminated for cause by the Company or
a subsidiary, or (ii) engages in any activity determined in the discretion of
the Committee to be in competition with any activity, or otherwise inimical,
contrary or harmful to the interests of the Company or any subsidiary
(including, but not limited to,
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accepting employment with or serving as a consultant, advisor or in any other
capacity to an entity that is in competition with or acting against the
interests of the Company or any subsidiary), then an amount of cash equal to any
gain ("Gain") realized by the optionee from the exercise of the option shall be
paid by the optionee to the Company immediately upon notice from the Company.
Such Gain shall be determined as of the option exercise date, without regard to
any subsequent change in the fair market value of the Common Stock. The Company
shall have the right to offset such Gain against any amounts otherwise owed to
the optionee by the Company or any subsidiary (whether as wages, vacation pay,
or pursuant to any benefit plan or other compensatory arrangement).
(E) TAX WITHHOLDING. Each optionee shall, as a condition of exercising
an option, pay to the Company the amount, if any, required to satisfy
applicable federal, state and local income tax withholding requirements
("Withholding Taxes"). Withholding Taxes shall be payable as of the date
income from the exercise is included in an optionee's gross income for
federal income tax purposes (the "Tax Date"). An optionee may satisfy this
requirement by electing one of the following methods (or a combination),
which election is subject to the approval of the Company:
(i) remitting to the Company, in cash or by check, the amount of
the Withholding Taxes;
(ii) remitting to the Company a number of shares of Common Stock
(by either actual delivery of shares or attestation) having an aggregate
fair market value as of the trading day immediately preceding the Tax
Date equal to the amount of the Withholding Taxes;
(iii) electing to have the Company withhold from the distribution
the number of shares of Common Stock having an aggregate fair market
value as of the trading day immediately preceding the Tax Date equal to
the amount of the Withholding Taxes.
Any election by an optionee pursuant to clause (ii) and (iii) of this
Section 6(e) must be made in accordance with such conditions not inconsistent
with the terms of the Plan as the Committee may impose through the adoption of
rules or regulations or otherwise.
7. TRANSFERABILITY RESTRICTIONS. Unless otherwise determined by the
Committee, the option by its terms shall be personal and shall not be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution. During the lifetime of an optionee, the option shall be
exercisable only by the optionee, or by a duly appointed legal representative,
unless otherwise determined by the Committee.
8. DESIGNATION OF CERTAIN OPTIONS AS INCENTIVE STOCK OPTIONS. Options or
portions of options granted to Company employees hereunder may, in the
discretion of the Committee, be designated as "incentive stock options" within
the meaning of Code Section 422. In addition to the terms and conditions
contained in paragraph 6 hereof, options designated as incentive stock options
shall also be subject to the condition that the aggregate fair market value
(determined at the time the options are granted) of the Company's Common Stock
with respect to which incentive stock options are exercisable for the first time
by an individual employee during any calendar year (under this Plan and all
other similar plans of the Company and its subsidiaries) shall not exceed the
maximum limit (currently $100,000), if any, imposed from time to time under
Section 422 of the Code. To the extent that the aggregate fair market value
exceeds such maximum limit, or such options do not otherwise comply with Code
Section 422, such options shall be treated as nonqualified stock options.
9. STOCK OPTION AGREEMENT. Any grant of options pursuant to this Plan shall
be conditioned upon an employee's execution of a Stock Option Agreement in a
form prescribed by the Committee.
10. INVESTMENT REPRESENTATION. Upon any distribution of shares of Common
Stock of the Company pursuant to any provision of this Plan, the distributee may
be required to represent in writing that he or she is acquiring such shares for
his or her own account for investment and not with a view to, or for sale in
connection with, the distribution of any part thereof. The certificates for such
shares may include any legend which the Company deems appropriate to reflect any
restrictions or transfers.
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11. TRANSFER, LEAVE OF ABSENCE, ETC. For the purpose of the Plan: (a) a
transfer of an employee from the Company to a subsidiary, or vice versa, or from
one subsidiary to another, and (b) a leave of absence, duly authorized in
writing by the Company, shall not be deemed a termination of employment.
12. RIGHTS OF EMPLOYEES AND OTHERS.
(A) No person shall have any rights or claims under the Plan except in
accordance with the provisions of the Plan.
(B) Nothing contained in the Plan shall be deemed to give any employee
the right to be retained in the service of the Company or its subsidiaries.
13. CHANGES IN CAPITAL OR CONTROL. If the outstanding Common Stock of the
Company subject to the Plan shall at any time be changed or exchanged by
declaration of a stock dividend, stock split, combination of shares,
recapitalization, merger, consolidation or other corporate reorganization, the
number and kind of shares subject to this Plan and the option prices, and the
number of shares available for awards under this Plan, shall be proportionately
and equitably adjusted. Notwithstanding any other provision of the Plan, upon
the occurrence of a Change in Control, as hereinafter defined, each holder of an
unexpired option under the Plan shall have the right to exercise such option in
whole or in part without regard to the date that such option would be first
exercisable and such right shall continue, with respect to any such holder whose
employment with the Company or subsidiary terminates following a Change in
Control, for a period ending on the earlier of the date of expiration of such
option or the date which is twelve (12) months after such termination of
employment.
For purposes of the Plan a "Change in Control" of the Company shall be
deemed to have occurred if at any time following the effective time of the
merger of Mid Am, Inc. into the Company:
(A) Individuals who constitute the Board of Directors immediately
after the effective time of the merger of Mid Am, Inc. and the Company (the
"Incumbent Directors") cease for any reason to constitute at least a
majority of the Board of Directors, provided that any person becoming a
director subsequent thereto whose election or nomination for election was
approved by a vote of at least two-thirds of the Incumbent Directors then
on the Board of Directors (either by a specific vote or by approval of the
proxy statement of the Company in which such person is named as a nominee
for director, without written objection to such nomination) shall be an
Incumbent Director; provided, however, that no individual initially elected
or nominated as a director of the Company as a result of an actual or
threatened election contest with respect to directors or as a result of any
other actual or threatened solicitation of proxies or consents by or on
behalf of any person other than the Board of Directors shall be deemed to
be an Incumbent Director;
(B) Any "person" (as such term is defined in Section 3(a)(9) of the
1934 Act and as used in Sections 13(d)(3) and 14(d)(2) of the 1934 Act) is
or becomes a "beneficial owner" (as defined in Rule 13d-3 under the 1934
Act), directly or indirectly, of securities of the Company representing
twenty-five percent (25%) or more of the combined voting power of the
Company's then outstanding securities eligible to vote for the election of
the Board of Directors (the "Company Voting Securities"); provided,
however, that the event described in this Section 13(b) shall not be deemed
to be a Change in Control by virtue of any of the following acquisitions:
(i) by the Company or any subsidiary, (ii) by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any subsidiary or
(iii) by any underwriter temporarily holding securities pursuant to an
offering of such securities;
(C) The consummation of a merger, consolidation, statutory share
exchange or similar form of corporate transaction involving the Company or
any of its subsidiaries that requires the approval of the Company's
stockholders, whether for such transaction or the issuance of securities in
the transaction (a "Business Combination"), unless immediately following
such Business Combination: (i) more than sixty percent (60%) of the total
voting power of (x) the company resulting from such Business Combination
(the "Surviving Company"), or (y) if applicable, the ultimate parent
company that directly or indirectly has beneficial ownership of one hundred
percent (100%) of the voting securities eligible to elect directors of the
Surviving Company (the "Parent Company"), is represented by Company Voting
Securities that
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were outstanding immediately prior to such Business Combination (or, if
applicable, is represented by shares into which such Company Voting
Securities were converted pursuant to such Business Combination), and such
voting power among the holders thereof is in substantially the same
proportion as the voting power of such Company Voting Securities among the
holders thereof immediately prior to the Business Combination; (ii) no
person (other than any employee benefit plan (or related trust) sponsored
or maintained by the Surviving Company or the Parent Company), is or
becomes the beneficial owner, directly or indirectly, of twenty-five
percent (25%) or more of the total voting power of the outstanding voting
securities eligible to elect directors of the Parent Company (or, if there
is no Parent Company, the Surviving Company); and (iii) at least fifty
percent (50%) of the members of the board of directors of the Parent
Company (of, if there is no Parent Company, the Surviving Company)
following the consummation of the Business Combination were Incumbent
Directors at the time of the Board of Directors' approval of the execution
of the initial agreement providing for such Business Combination; or
(D) The stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or a sale of all or substantially
all of the Company's assets or deposits.
Notwithstanding the foregoing, a Change in Control of the Company shall not
be deemed to occur solely because any person acquires beneficial ownership of
more than twenty-five percent (25%) of the Company Voting Securities as a result
of the acquisition of Company Voting Securities by the Company which reduces the
number of Company Voting Securities outstanding; provided, however, that if
after such acquisition by the Company such person becomes the beneficial owner
of additional Company Voting Securities that increases the percentage of
outstanding Company Voting Securities beneficially owned by such person, a
Change in Control of the Company shall then occur.
14. USE OF PROCEEDS. Proceeds from the issuance of shares pursuant to
options granted under this Plan shall constitute general funds of the Company.
15. AMENDMENTS. The Board of Directors may suspend or discontinue the Plan
and the Committee may amend the Plan from time to time in any respect
whatsoever, but no amendment shall be made which, without the approval of the
holder of an option theretofore granted, would materially impair any rights or
materially increase any obligations under any award made under the Plan;
provided, however, that any action of the Board of Directors or the Committee
that alters or affects the tax treatment of any option granted shall not be
considered to materially impair any rights of an optionee; and provided further,
that if the Committee after consulting with management of the Company determines
that application of an accounting standard in compliance with any statement
issued by the Financial Accounting Standards Board concerning the treatment of
employee stock options would have a significant adverse effect on the Company's
financial statements because of the fact that options granted before the
issuance of such statement are then outstanding, then the Committee in its
absolute discretion may cancel and revoke all outstanding options to which such
adverse effect is attributed and the holders of such options shall have no
further rights in respect thereof; and, provided further, that the Board or the
Committee shall have full discretion to amend the Plan to the extent necessary
to permit the Company to utilize the pooling-of-interests accounting method (and
any outstanding plan agreement shall be deemed to be so amended to the same
extent) without obtaining the consent of any grantee (or, after the grantee's
death the person having the right to exercise the affected award), without
regard to whether such amendment at firstly affects grantee's rights under such
agreement. Such cancellation and revocation shall be effective upon written
notice by the Committee to the holders of such options.
Shareholder approval of any amendment shall be obtained to the extent
necessary to comply with Section 422 of the Code (relating to incentive stock
options) or other applicable law or regulation.
Subject to the first paragraph of this Section 15, the Committee may amend
any stock option agreement, including without limitation, an amendment which
would accelerate the time or times at which the award may be exercised, or waive
or amend any goals, restrictions or conditions set forth in any stock option
agreement.
16. EFFECTIVE DATE OF PLAN. The Plan was adopted by the Board of Directors
on , 1998 effective upon the Effective Date. Unless otherwise
determined by the Board of Directors, all awards under the Plan prior to
shareholder approval are subject in their entirety to such approval and if such
approval
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is not obtained prior to the first anniversary of the date of adoption of the
Plan, the Plan and all awards thereunder shall terminate on such date.
17. COMPLIANCE WITH SECTION 16(B). The Plan is intended to comply with all
applicable conditions of Rule 16b-3 of the General Rules and Regulations under
the Act. All transactions involving the Company's executive officers are subject
to such conditions, regardless of whether the conditions are expressly set forth
in the Plan. Any provision of the Plan that is contrary to a condition of Rule
16b-3 shall not apply to executive officers of the Company.
* * *
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MIDCM-PS-98
