As filed with the Securities and Exchange Commission on _____________, 1994
Registration No. 33-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
OLD KENT FINANCIAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Michigan 6711 38-1986608
(State or Other Jurisdiction (Primary Standard Industrial (IRS Employer
of Incorporation or Organization) Classification Code Number)Identification No.)
One Vandenberg Center
Grand Rapids, Michigan 49503
(616) 774-5000
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
Richard W. Wroten
Old Kent Financial Corporation
One Vandenberg Center
Grand Rapids, Michigan 49503
(616) 774-5808
(Name, Address, Including Zip Code, and Telephone Number, Including Area
Code, of Agent for Service)
It is requested that copies of communications be sent to:
Gordon R. Lewis Jerome M. Schwartz
Warner Norcross & Judd LLP Dickinson, Wright, Moon, Van Dusen & Freeman
One Vandenberg Center 500 Woodward Avenue, #4000
Grand Rapids, Michigan 49503 Detroit, Michigan 48226
(616) 752-2752 (313) 223-3628
Approximate date of commencement of proposed sale of the securities
to the public:
As soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box: ____
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Title of Maximum Maximum
Each Class of Offering Aggregate Amount of
Securities to Amount to Price per Offering Registration
be Registered be Registered Share(1) Price(1) Fee(1)
Common Stock, 3,103,779 $26.63 $82,649,558 $28,499.85
$1 par value
<FN>
(1)The registration fee has been computed pursuant to Rule 457(f)(1) based
on the average of the high and low prices for shares of the Common Stock,
$3.125 par value, of First National Bank Corp. reported on the NASDAQ
National Market System on November 4, 1994 ($32.25), and the maximum
aggregate number of such shares (2,562,777) which may be exchanged for the
securities being registered as a result of the proposed merger. The
proposed maximum offering price per share is determined by dividing the
proposed maximum aggregate offering price by the number of shares to be
registered.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration
statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
OLD KENT FINANCIAL CORPORATION
Cross-Reference Sheet
FORM S-4
Heading in Prospectus
Item of Form S-4 and Proxy Statement
1. Forepart of Registration Statement Outside Front Cover Page of
and Outside Front Cover Page of Prospectus
Prospectus
2. Inside Front and Outside Back Cover Inside Front Cover Page of
Pages of Prospectus Prospectus; Outside Back
Prospectus Cover Page of Prospectus
3. Risk Factors, Ratio of Earnings to Introduction and Summary
Fixed Charges, and Other
Information
4. Terms of the Transaction The Merger
5. Pro Forma Financial Information The Merger--Pro Forma Condensed
Combined Financial Statements
6. Material Contacts with the Company The Merger--Background of the
being Acquired Merger,--Merger Recommendation
and Reasons for the
Transaction,--FNBC Stock
Options and ESOP Shares, and--
Agreements of Affiliates
7. Additional Information Required for Not Applicable
Reoffering by Persons and Parties
deemed to be Underwriters
8. Interests of Named Experts The Merger--Opinion of Financial
and Counsel Adviser; General Information--
Independent Public
Accountants, and--Legal
Opinions
9. Disclosure of Commission Position Not Applicable
on Indemnification for Securities
Act Liabilities
10. Information with respect to S-3 Introduction and Summary--Old
Registrants Kent Financial Corporation
11. Incorporation of Certain General Information--
Information by Reference Incorporation by Reference
Heading in Prospectus
Item of Form S-4 and Proxy Statement
12. Information with respect to S-2 Not Applicable
or S-3 Registrants
13. Incorporation of Certain Not Applicable
Information by Reference
14. Information with respect to Not Applicable
Registrants other than S-2
or S-3 Registrants
15. Information with respect to S-3 Not Applicable
Companies
16. Information with respect to S-2 Introduction and Summary--First
or S-3 Companies National Bank Corp.; Voting
and Management Information--
Executive Officers; General
Information--Incorporation by
Reference; Appendices B and C
17. Information with respect to Not Applicable
Companies other than S-2 or
S-3 Companies
18. Information if Proxies, Consents Outside Front Cover Page of
or Authorizations are to be Prospectus; Introduction and
Solicited Summary--Introduction; General
Meeting Information; No
Appraisal Rights; Voting and
Management Information;
General Information--
Incorporation by Reference,
and--Stockholder Proposals
19. Information if Proxies, Consents Not Applicable
or Authorizations are not to be
Solicited, or in an Exchange Offer
PROSPECTUS AND PROXY STATEMENT
Special Meeting of Stockholders of
FIRST NATIONAL BANK CORP.
In Connection with an Offering of up to
3,103,779 Shares
OLD KENT FINANCIAL CORPORATION
Common Stock, $1.00 Par Value
The Board of Directors of First National Bank Corp. ("FNBC") is
furnishing this Prospectus and Proxy Statement to solicit proxies to vote
at the special meeting of FNBC's stockholders to be held on December __,
1994, and at any adjournment of that meeting. At the special meeting, the
stockholders will consider and vote upon the adoption of an Agreement and
Plan of Merger (the "Plan of Merger") pursuant to which FNBC would become
affiliated with Old Kent Financial Corporation ("Old Kent") through the
merger of FNBC with and into Old Kent (the "Merger").
This Prospectus and Proxy Statement is a prospectus of Old Kent
relating to an offering of Old Kent Common Stock, $1 par value. This
offering is made only to the holders of FNBC Common Stock, $3.125 par
value. (See "The Merger.")
If the Merger is consummated, each share of FNBC Common Stock that is
outstanding immediately prior to the effective time of the Merger will be
converted into shares of Old Kent Common Stock. The number of shares to be
received by each FNBC stockholder will be based on an Exchange Rate,
subject to payment in cash for fractional shares and adjustment under
certain circumstances. The Exchange Rate will be equal to $35.00 (the
"Purchase Price Per Share") divided by the average of the per share closing
prices of Old Kent Common Stock reported on the NASDAQ National Market
System during the 20 consecutive trading days ending on the sixth business
day before the date of the closing. Notwithstanding such average, the per
share price of Old Kent Common Stock to be used in calculating the Exchange
Rate (the "Calculation Price") will not be more than $36.00 per share nor
less than $32.00 per share unless certain conditions exist, FNBC requests a
decrease in the Calculation Price, and Old Kent agrees to such decrease.
In no event will the Calculation Price be less than $28.90. (See "The
Merger--Stock Price Condition.") The Purchase Price Per Share may be
reduced by up to $.40 under certain circumstances. (See "The Merger--
Purchase Price Contingency.") The Exchange Rate is also subject to upward
or downward adjustment upon the occurrence of certain events specified in
the Plan of Merger. (See "The Merger.") The Purchase Price Per Share, the
Calculation Price, and the Exchange Rate will be determined based on dates
and events occurring after the special meeting of stockholders and after
the date of this Prospectus and Proxy Statement. (See "The Merger.")
M. A. Schapiro & Co., Inc. ("M. A. Schapiro"), FNBC's financial
adviser, has rendered its written opinion to the board of directors of FNBC,
dated the date of this Prospectus and Proxy Statement, that, as of such
date, the consideration to be received in the Merger is fair, from a
financial point of view, to the holders of FNBC Common Stock. (See
"The Merger--Opinion of Financial Adviser.")
Consummation of the Merger is subject to FNBC stockholder and
regulatory approvals and certain other conditions. (See "The Merger--
Conditions to the Merger and Abandonment.")
Your vote is important. The Merger cannot occur unless the holders of
a majority of the outstanding shares of FNBC Common Stock vote FOR adoption
of the Plan of Merger. Whether or not you expect to attend the meeting in
person, please sign and date the enclosed Proxy and mail it promptly in the
enclosed envelope.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS AND PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus and Proxy Statement is dated November __, 1994.
AVAILABLE INFORMATION
Old Kent and FNBC are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and in
accordance therewith file reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). These
materials can be inspected and copied at the Public Reference Section of
the Commission (Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549),
and at the Commission's Regional Offices in New York (7 World Trade Center,
Suite 1300, New York, New York 10048) and Chicago (500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511). Copies of such material can
also be obtained from the Public Reference Section of the Commission (450
Fifth Street, N.W., Washington, D.C. 20549) at prescribed rates.
Old Kent has filed a Registration Statement under the Securities Act of
1933, as amended (the "Securities Act") with the Commission relating to the
Old Kent Common Stock offered in connection with the proposed Merger
described in this Prospectus and Proxy Statement. This Prospectus and
Proxy Statement does not contain all of the information set forth in the
Registration Statement, certain portions of which are omitted in accordance
with the rules and regulations of the Commission. Reference is made to the
Registration Statement and exhibits for further information about Old Kent,
FNBC and their respective securities. Any person may inspect the
Registration Statement without charge at the Public Reference Section of
the Commission and may obtain copies of all or any part of it from the
Commission at prescribed rates.
This Prospectus and Proxy Statement incorporates documents by reference
which are not presented herein or delivered herewith. These documents are
available upon request from Martin J. Allen, Jr., Senior Vice President and
Secretary, Old Kent Financial Corporation, One Vandenberg Center, Grand
Rapids, Michigan 49503, telephone number (616) 774-5440. In order to
ensure timely delivery of the documents, any request should be made by
_____________________, 1994. [Insert date 5 business days before date of
stockholders' meeting].
Old Kent undertakes to provide without charge to each person, including
any beneficial owner, to whom a Prospectus and Proxy Statement is
delivered, upon written or oral request, a copy of any and all information
that has been incorporated by reference in the Prospectus and Proxy
Statement (not including exhibits to the information that is incorporated
by reference unless such exhibits are specifically incorporated by
reference into the information that the Prospectus and Proxy Statement
incorporates). Any such request should be directed to the individual
identified in the paragraph above.
FIRST NATIONAL BANK CORP.
18800 Hall Road
Mount Clemens, Michigan 48046
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To the Stockholders of First National Bank Corp.:
A special meeting of stockholders of First National Bank Corp. will be
held at First National Bank Corp. Headquarters, 18800 Hall Road, Mount
Clemens, Michigan, on December __, 1994, at _____ a.m., local time, for
the following purposes:
1. To consider and vote upon a proposal to adopt an Agreement and Plan
of Merger between First National Bank Corp. and Old Kent Financial
Corporation.
2. To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on November __,
1994, as the record date for the determination of stockholders entitled to
notice of and to vote at the meeting and any adjournment of the meeting. A
list of stockholders entitled to receive notice of and vote at the special
meeting of stockholders will be available for examination by FNBC
stockholders at First National Bank Corp. Headquarters during ordinary
business hours for the ten-day period before the meeting.
By Order of the Board of Directors,
Celestina Giles, Secretary
November __, 1994
YOUR VOTE IS IMPORTANT. EVEN IF YOU PLAN TO
ATTEND THE MEETING, PLEASE SIGN, DATE AND
RETURN THE ENCLOSED PROXY PROMPTLY.
PROSPECTUS AND PROXY STATEMENT
Special Meeting of Stockholders of
FIRST NATIONAL BANK CORP.
18800 Hall Road
Mount Clemens, Michigan 48046
(810) 465-2400
To adopt
an Agreement and Plan of Merger
involving an Offering of Common Stock,
$1.00 par value, of
OLD KENT FINANCIAL CORPORATION
One Vandenberg Center
Grand Rapids, Michigan 49503
(616) 774-5000
INTRODUCTION AND SUMMARY
Introduction
Old Kent Financial Corporation ("Old Kent") and First National Bank
Corp. ("FNBC") are furnishing this Prospectus and Proxy Statement and the
accompanying form of proxy to record holders of FNBC Common Stock, $3.125
par value ("FNBC Common Stock"). The board of directors of FNBC is
soliciting proxies to vote at the special meeting of FNBC stockholders to
be held on December __, 1994, and at any adjournment of that meeting. The
stockholders' meeting will be held at FNBC's Headquarters, 18800 Hall Road,
Mount Clemens, Michigan, at ______ a.m., local time.
The purpose of the special meeting of FNBC stockholders is to consider
and vote on the adoption of the Agreement and Plan of Merger (the "Plan of
Merger") attached as Appendix A to this Prospectus and Proxy Statement.
The Plan of Merger provides for the merger of FNBC with and into Old Kent
(the "Merger"). The adoption of the Plan of Merger requires the
affirmative vote of the holders of a majority of the outstanding shares of
FNBC Common Stock. (See "The Merger.") FNBC does not anticipate that any
other matter will come before the special meeting.
FNBC's board of directors unanimously voted to approve the Plan of
Merger at its August 24, 1994, meeting. (See "Voting and Management
Information--Interests of Certain Persons.")
This Prospectus and Proxy Statement has been released for mailing to
FNBC stockholders on or about November __, 1994.
THE BOARD OF DIRECTORS OF FNBC UNANIMOUSLY RECOMMENDS A VOTE
FOR ADOPTION OF THE PLAN OF MERGER.
Old Kent Financial Corporation
Old Kent is a bank holding company with its headquarters in Grand
Rapids, Michigan. At June 30, 1994, Old Kent on a consolidated basis had
assets of $10.4 billion, deposits of $8.4 billion, a net loan portfolio of
$5.7 billion and shareholders' equity of $847 million. Old Kent is the
parent company of 21 commercial banks that operate 220 banking offices in
Michigan and Illinois communities. Old Kent also has 6 non-bank
subsidiaries.
Old Kent and its subsidiaries are engaged in the business of commercial
banking and other related activities. The services offered by Old Kent and
its subsidiaries cover a wide spectrum of banking and fiduciary services.
These include commercial and retail loans, business and personal checking
accounts, savings and individual retirement accounts, time deposit
instruments, automated transaction machine services, credit cards, money
transfer services, safe deposit facilities, cash management, real estate
and lease financing, international banking services, credit life insurance,
personal investment and brokerage services, and corporate and personal
trust services.
Old Kent's principal markets for financial services presently are the
Michigan and Illinois communities in which Old Kent subsidiaries are
located and the areas immediately surrounding these communities. The Grand
Rapids market is the source of a substantial portion of Old Kent's
business, representing 39 percent of total deposits and 41 percent of total
loans as of June 30, 1994. The foreign activities of Old Kent's
subsidiaries primarily involve time deposits with banks and placements for
domestic customers of the banks.
Old Kent's largest subsidiary is Old Kent Bank and Trust Company ("OKB-
MI"). At June 30, 1994, OKB-MI had assets of $4.2 billion, deposits of
$3.3 billion and a net loan portfolio of $2.2 billion. At June 30, 1994,
OKB-MI's assets represented 40 percent of Old Kent's consolidated assets.
OKB-MI is headquartered in Grand Rapids, Michigan, and conducts a general
commercial banking business with individuals and corporate and governmental
entities through 60 offices in the Grand Rapids area. OKB-MI serves an
area consisting primarily of Kent, Ingham, Montcalm, Newaygo and eastern
Ottawa Counties.
OKB-MI's subsidiary, Old Kent Mortgage Company, originates residential
mortgages through its offices located in Grand Rapids, suburban Chicago,
Illinois, Central and Southern Florida, Minnesota and Ohio. OKB-MI's
residential mortgage lending activities were transferred to Old Kent
Mortgage Company in 1993 to facilitate multi-state operations. On March 1,
1994, this subsidiary acquired Princeton Financial Corp. headquartered in
Orlando with 12 other Florida offices. The acquisition was treated as a
purchase for accounting purposes and, accordingly, results of operations of
Princeton Financial Corp. subsidiaries are included from the date of
purchase. Old Kent Mortgage Company conducts a traditional retail and
wholesale mortgage banking business in one- to four-family residential
-2-
mortgage loans. Substantially all mortgage production is sold into the
secondary market with servicing retained. Mortgage servicing for all of
Old Kent's subsidiaries and independent investors is performed by OKB-MI's
subsidiary, Old Kent Mortgage Services, Inc.
Old Kent's 20 other subsidiary banks ranged in size from $31 million to
$1.6 billion in total assets as of June 30, 1994.
On or about January 1, 1995, Old Kent expects to consolidate its 15
Michigan bank subsidiaries into a single bank, OKB-MI, that will operate
under the name "Old Kent Bank." Regulatory applications seeking approval
of the consolidation are filed and pending. When consolidated, OKB-MI will
have 193 branches in communities primarily located in Western, Central and
Southeastern Michigan. On a pro forma basis, at June 30, 1994, the
consolidated bank would have had assets of $8.1 billion, deposits of
$6.8 billion and a net loan portfolio of $4.6 billion.
On October 14, 1994, Old Kent consolidated four of its six Illinois
bank subsidiaries into a single bank, Old Kent Bank ("OKB-IL"), under the
name "Old Kent Bank." OKB-IL has 25 branches primarily serving Cook,
DuPage and Kane Counties. On a pro forma basis, at June 30, 1994, the
consolidated bank would have had assets of $1.9 billion, deposits of
$1.4 billion and a net loan portfolio of $0.9 billion.
On May 2, 1994, Old Kent completed its acquisition of EdgeMark
Financial Corporation, headquartered in Chicago, Illinois. The acquisition
was treated as a purchase for accounting purposes and, accordingly, results
of operations of EdgeMark subsidiaries are included from the date of
purchase.
First National Bank Corp.
FNBC is a bank holding company located in Mount Clemens, Michigan. At
June 30, 1994, FNBC on a consolidated basis had assets of $518 million,
deposits of $472 million, a net loan portfolio of $335 million and
stockholders' equity of $39 million. FNBC is the parent company of First
National Bank in Macomb County, a national banking association (the
"Bank"), located in Macomb County, Michigan, that operates 16 banking
offices in Macomb County, Michigan. FNBC is also the parent company of
Banker's Fund Life Insurance Company (the "Insurance Company"), a non-bank,
life insurance subsidiary. FNBC has begun the action necessary to
liquidate the Insurance Company and intends to have completed the
liquidation before the effective time of the Merger.
FNBC and its subsidiaries are engaged in the business of commercial
banking and other related activities. The services offered by FNBC include
taking deposits, making secured and unsecured loans, financing commercial
transactions, and performing corporate services.
-3-
FNBC's principal market for financial services is Macomb County,
Michigan, and the communities within Macomb County. FNBC has no material
foreign assets or operations.
Summary of Certain Aspects of the Merger
FNBC stockholders should consider the following summary in conjunction
with the more detailed information appearing elsewhere in this Prospectus
and Proxy Statement.
Background of the Transaction. In May, 1994, Old Kent was contacted by
M.A. Schapiro & Co., Inc. ("M. A. Schapiro"), FNBC's financial adviser, to
determine whether Old Kent would be interested in exploring a possible
business affiliation. In response to Old Kent's potential interest, FNBC's
board of directors determined that FNBC should explore the possibility of
a business combination with a larger company and engaged M. A. Schapiro as
its exclusive financial adviser with respect to FNBC's strategic alternatives
and possible sale, merger or other business combination. In developing
these strategic alternatives, M. A. Schapiro contacted several other
regional bank holding companies to determine if they were interested in
affiliating with FNBC. Thereafter, M. A. Schapiro received three written
indications of interest by late July of 1994. After reviewing these
proposals and revised proposals submitted by Old Kent and another company
at FNBC's request, FNBC's board of directors decided to proceed with
negotiations with Old Kent. Following these negotiations, Old Kent and
FNBC entered into the Plan of Merger on August 24, 1994. Old Kent's
management and FNBC's management, and their respective representatives,
negotiated the purchase price and other terms of the Plan of Merger on an
arms-length basis.
The board of directors of FNBC has determined that the proposed Merger
is in the best interests of FNBC and its stockholders. The board believes
that the Merger provides to FNBC stockholders an opportunity to have an
interest in a larger and more diversified financial organization. The board
believes that the Merger will assist the Bank in becoming a more effective
competitor in its markets through access to greater financial and managerial
resources, and the ability to offer additional new services that complement
those presently offered by the Bank. The board also believes that the
Merger will permit achievement of greater economies of scale in the areas
of regulatory compliance, holding company management, capital formation and
data processing. See "The Merger--Background of the Merger and --Merger
Recommendation and Reasons for the Transaction."
Consideration to be Received in the Merger. If the Merger is
consummated, FNBC will be merged with and into Old Kent. The surviving
corporation will be Old Kent. The surviving corporation will own both
subsidiaries (if liquidation of the Insurance Company has not been
completed) and all of the other assets of FNBC.
Each share of FNBC Common Stock outstanding at the time the Merger
becomes effective will be converted into the number of shares of Old Kent
-4-
Common Stock equal to the "Exchange Rate." The Exchange Rate will be equal
to $35.00 (the "Purchase Price Per Share") divided by the average of the
per share closing prices of Old Kent Common Stock reported on the NASDAQ
National Market System during the 20 consecutive trading days ending on the
sixth business day before the date of the closing (the "Reference Period")
as reported in the Dow Jones News/Retrieval system, or other equally
reliable means (as so calculated, the "Final Stock Price").
Notwithstanding such average, the per share price of Old Kent Common Stock
to be used in calculating the Exchange Rate (the "Calculation Price") will
not be more than $36.00 per share nor less than $32.00 per share unless
certain conditions exist, FNBC requests a decrease in the Calculation
Price, and Old Kent agrees to such decrease. See "The Merger--Stock Price
Condition" for a discussion of the conditions that must exist before FNBC
may request a decrease in the Calculation Price. In no event will the
Calculation Price be less than $28.90. (See "The Merger--Stock Price
Condition.") The Purchase Price Per Share may be reduced by up to $.40
under certain circumstances. See "The Merger--Purchase Price Contingency"
for a discussion of the circumstances in which the Purchase Price Per Share
could be reduced. The Exchange Rate is subject to upward or downward
adjustment upon the occurrence of certain events specified in the Plan of
Merger which result in changes in the number of shares of FNBC Common Stock
outstanding and certain other events that could otherwise affect the nature
or amount of the consideration to be received by FNBC stockholders in
exchange for their shares of FNBC Common Stock. See "The
Merger--Conversion of FNBC Shares."
The following table shows a range of hypothetical Final Stock Prices,
and the Exchange Rate corresponding to each Final Stock Price. The
Exchange Rates listed in the following table assume that the conditions
that could cause FNBC to request a decrease in the Calculation Price do not
exist and that there is no reduction in the Purchase Price Per Share.
Average Exchange
Price Rate
At or Above $36.00 0.9722
35.00 1.0000
34.00 1.0294
33.00 1.0606
At or Below 32.00 1.0938
Below 28.90 1.2111
(subject to cer-
tain conditions)
The following table shows the closing sale price of Old Kent Common
Stock on the dates listed and the corresponding Exchange Rate that would
apply if the closing sale price shown was the average price of Old Kent
Common Stock during the Reference Period.
-5-
Closing Exchange
Date Sale Price Rate
August 23, 1994 (1) $34.25 1.0219
___________, 1994
______________________
<FN>
(1) The last trading day before public announcement of the Plan of Merger.
The Purchase Price Per Share of $35.00, which is divided by the
Calculation Price to yield the Exchange Rate that determines the amount of
Old Kent Common Stock to be received by FNBC's stockholders, and the limits
on the range of the Exchange Rate, were determined through the parties'
negotiation of the Plan of Merger (see "The Merger--Merger Recommendation
and Reasons for the Transaction"). These terms reflect FNBC's and Old
Kent's judgment as to the value of the shares of FNBC Common Stock relative
to the historical and anticipated market price of Old Kent Common Stock.
See "The Merger--Purchase Price Contingency" for a discussion of the
circumstances under which the Purchase Price Per Share could be reduced by
up to $.40 per share.
The limits of the range of the Exchange Rate (0.9722 and 1.0938) are
intended to limit the extent to which the amount of Old Kent Common Stock
to be received by FNBC's stockholders in the Merger is adjusted based on
extraordinary fluctuations in the market price of Old Kent Common Stock
that may be unrelated to Old Kent's financial condition or operations. See
"The Merger--Stock Price Condition" for a discussion of FNBC's ability to
either request a decrease in the Calculation Price or avoid consummating
the Merger in the event of an extraordinary downward movement in the market
price of Old Kent Common Stock which is disproportionate to a selected
group of stocks.
Old Kent will not issue fractional shares of Old Kent Common Stock in
the Merger. An FNBC stockholder who would otherwise be entitled to receive
a fraction of a share of Old Kent Common Stock in the Merger will receive
instead an amount of cash determined by multiplying that fraction by the
actual Final Stock Price.
Opinion of Financial Adviser. FNBC's financial adviser, M. A.
Schapiro, has rendered an opinion to the board of directors of FNBC,
dated as of the date of this Prospectus and Proxy Statement, to the
effect that, as of such date, the consideration to be received in the
Merger is fair, from a financial point of view, to the holders of FNBC
Common Stock. The opinion of M. A. Schapiro is attached as Appendix D.
Shareholders are urged to read that opinion in its entirety for a
description of the procedures followed, assumptions made, matters
considered and qualifications on the review undertaken by M. A.
Schapiro in connection with that opinion. For a more detailed
-6-
description of this opinion, see "The Merger--Opinion of Financial
Adviser."
Consummation of the Merger. Consummation of the Merger is subject to
certain conditions, including among others that the stockholders of FNBC
adopt the Plan of Merger, that necessary regulatory approvals are obtained,
that no proceeding seeking to prevent the Merger is pending or threatened,
and that Old Kent and FNBC obtain various ancillary certificates, opinions
and agreements. FNBC will not be obligated to consummate the Merger at any
time when both of the following conditions exist: (i) the Final Stock Price
is less than $28.90 per share, subject to certain adjustments provided in
the Plan of Merger; and (ii) the percentage determined by dividing the
Final Stock Price by $34 is more than 15 percentage points less than the
percentage determined by dividing the aggregate price per share of certain
comparison stocks (as defined in the Plan of Merger) on the last day of the
Reference Period by the aggregate price per share of those comparison
stocks on August 19, 1994, subject to certain adjustments as provided in
the Plan of Merger. At any time prior to the effective time of the Merger,
the boards of directors of Old Kent and FNBC may by mutual consent abandon
the Merger. Also, for certain specified reasons the board of directors of
either Old Kent or FNBC may abandon the Merger. (See "The
Merger--Conditions to the Merger and Abandonment.")
Under certain circumstances involving the acquisition of control of
FNBC by a party other than Old Kent, FNBC is required under the Plan of
Merger to pay to Old Kent a termination fee. The termination fee is
payable only upon the occurrence of certain events specified in the Plan of
Merger. The effect of this provision of the Plan of Merger may be to
discourage other persons from seeking an acquisition of FNBC. (See "The
Merger--Termination Fee.")
It is expected that the closing of the Merger will occur, and the
Merger will become effective, during the first quarter of 1995.
Vote Required. Pursuant to Delaware law, the affirmative vote of the
holders of a majority of the outstanding shares of FNBC Common Stock
entitled to vote on the Plan of Merger is required to adopt the Plan of
Merger. Failures to vote, abstentions, and broker non-votes will have the
same effect as votes against adoption of the Plan of Merger. As of
October 31, 1994, FNBC's directors and executive officers and their
affiliates were sole or shared beneficial owners of 17.16 percent of the
outstanding shares of FNBC Common Stock. (See "Voting and Management
Information--Interests of Certain Persons.") As of October 17, 1994,
Old Kent's directors and executive officers and their affiliates did not
hold any shares of FNBC Common Stock. No approval by Old Kent's shareholders
is required.
Regulatory Approval. Consummation of the Merger is subject to the
approval of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"). Old Kent filed its application for approval of
the Merger with the Federal Reserve Board on November 4, 1994. The
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Merger cannot be consummated for a period of 15 days after receipt of the
Federal Reserve Board's approval. During this 15-day period, the United
States Department of Justice may review the competitive effects of the
Merger to determine whether it will take action to block the Merger.
If the liquidation of the Insurance Company is not completed by the
effective time of the Merger, then the Merger will also be subject to the
approval of the State of Arizona with respect to the change of control of
the Insurance Company. As of the date of this Prospectus and Proxy
Statement, Old Kent has not filed an application for such approval with the
State of Arizona.
Appraisal Rights. Holders of FNBC Common Stock are not entitled to
appraisal rights under the Delaware General Corporation Law in connection
with the Merger.
Federal Income Tax Consequences. As a condition precedent to
consummation of the Merger, Old Kent and FNBC must each receive an opinion
from Old Kent's counsel regarding the federal income tax consequences of
the Merger. The opinion of Old Kent's counsel must be substantially to the
effect, among other matters, that FNBC stockholders will not recognize
taxable income or loss by reason of receiving shares of Old Kent Common
Stock in the Merger and that shares of Old Kent Common Stock received by
FNBC stockholders in the Merger will have the same basis and holding period
as the respective shares of FNBC Common Stock surrendered in exchange for
them. Cash received in lieu of fractional shares of Old Kent Common Stock
will be taxable. (See "The Merger--Federal Income Tax Consequences.")
Due to the complexities of federal, state and local income tax laws,
it is strongly recommended that FNBC stockholders consult their own tax
advisers concerning the federal, state and local tax consequences of the
Merger.
Accounting Treatment. Old Kent expects to account for the Merger
under the pooling of interests method of accounting.
Market Value of Shares
Old Kent Common Stock and FNBC Common Stock are both traded in the
over-the-counter market and are quoted on the NASDAQ National Market System
under the symbols OKEN and MTCL, respectively. The following table sets
forth the per share closing prices for Old Kent Common Stock and FNBC
Common Stock reported on the NASDAQ National Market System on August 23,
1994 (the last trading date before public announcement of the signing of
the Plan of Merger), and the equivalent per share market value for FNBC
Common Stock giving effect to the Merger as of the same date.
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Old Kent
Common Stock FNBC Common Stock
Equivalent
Date Actual Price Actual Price Per Share(1)
August 23, 1994 $ 34.25 $ 34.00 $ 35.00
______________________
<FN>
(1) The equivalent per share price of FNBC Common Stock is the market
value of Old Kent Common Stock that would be received for each share
of FNBC Common Stock if the average price of Old Kent Common Stock
during the Reference Period used to determine the Exchange Rate was
the same as the actual price of Old Kent Common Stock as of the dates
indicated.
As of October 31, 1994, there were 40,553,814 shares of Old Kent
Common Stock issued and outstanding held by 13,090 holders of record. As
of October 31, 1994, there were 2,438,562 shares of FNBC Common Stock
issued and outstanding held by 1,291 holders of record.
Old Kent and FNBC urge each FNBC stockholder to obtain a current
market quote on Old Kent Common Stock and FNBC Common Stock.
Selected Financial Data
The following unaudited table presents selected historical financial
information and selected pro forma combined financial information for Old
Kent and FNBC. This information should be read in conjunction with the
financial statements and notes thereto included elsewhere in or
incorporated by reference into this Prospectus and Proxy Statement. The
pro forma combined financial information gives effect to the Merger. The
pro forma combined financial information may not be indicative of the
results that actually would have occurred if the Merger had been in effect
on the dates indicated or that may be attained in the future. The pro
forma combined financial information has been prepared on the assumption
that the Merger will be accounted for under the pooling of interests method
of accounting. See Appendices E and F for more recent preliminary
unaudited financial information concerning FNBC and Old Kent, respectively,
for the quarters ended September 30, 1994
-9-
Six Months
Ended
Year Ended December 31, June 30,
1989 1990 1991 1992 1993 1994
(Dollars in thousands)
OLD KENT FINANCIAL CORPORATION
Income Statement Data:
Net Interest Income $ 289,630 $ 311,253 $ 339,198 $ 385,608 $ 406,740 $ 209,971
Provision for Credit Losses 24,110 32,097 39,812 57,712 33,997 10,785
Net Income Before Cumulative
Effects of Changes in
Accounting Principles 85,397 87,476 92,981 111,091 127,902 67,191
Balance Sheet Data (period end):
Assets $8,127,210 $8,205,041 $8,826,139 $8,698,574 $9,855,704 $10,404,929
Deposits 6,780,206 6,960,865 7,313,979 7,253,540 7,971,152 8,408,693
Loans 4,927,935 5,186,627 5,173,142 4,724,124 5,016,686 5,836,788
Long-term Debt 87,550 80,937 74,734 16,217 1,215 1,172
Shareholders' Equity 600,102 607,636 672,610 726,277 812,767 847,008
FIRST NATIONAL BANK CORP.
Income Statement Data:
Net Interest Income $ 13,470 $ 15,261 $ 16,876 $ 18,214 $ 21,122 $ 11,097
Provision for Credit Losses 680 1,275 1,875 1,275 825 350
Net Income Before Cumulative
Effects of Changes in
Accounting Principles 2,707 2,756 3,007 3,123 4,605 2,553
Balance Sheet Data (period end):
Assets $ 373,216 $ 412,348 $ 424,513 $ 453,622 $ 484,333 $ 517,651
Deposits 332,129 369,786 382,073 410,936 440,052 471,564
Loans 249,218 286,013 286,896 317,216 328,026 339,785
Long-term Debt 9,900 9,900 9,597 8,348 -- --
Stockholders' Equity 24,602 25,519 27,507 29,409 37,272 38,883
-10-
Year Ended December 31, Six Months Ended
1991 1992 1993 June 30, 1994
(Dollars in thousands)
PRO FORMA COMBINED
Income Statement Data:
Net Interest Income $ 356,074 $ 403,822 $ 427,862 $ 221,068
Provision for Credit Losses 41,687 58,987 34,822 11,135
Net Income Before Cumulative
Effects of Changes in
Accounting Principles 95,988 114,214 132,507 69,744
Balance Sheet Data (period end):
Assets $9,250,652 $9,152,196 $10,340,037 $10,922,580
Deposits 7,696,052 7,664,476 8,411,204 8,880,257
Loans 5,460,038 5,041,340 5,344,712 6,176,573
Long-term Debt 84,331 24,565 1,215 1,172
Shareholders' Equity 700,117 755,686 850,039 885,891
________________________
<FN>
(1) Under the "risk-based" capital guidelines presently in effect for banks and bank holding companies, minimum capital levels
are based on the perceived risk in the various asset categories. Certain off-balance-sheet instruments such as loan
commitments and letters of credit require capital allocations. Bank holding companies are required to maintain minimum
risk-based capital ratios. Old Kent's ratios are above the regulatory minimum guidelines and each of its subsidiary banks
met the regulatory criteria to be categorized as "well capitalized" institutions at June 30, 1994. FNBC met the regulatory
criteria to be categorized as a "well-capitalized" institution at June 30, 1994. The "well capitalized" classification may
permit financial institutions to minimize the cost of FDIC insurance assessments by being charged a lesser rate than those
that do not meet this definition. Designation as a "well capitalized" institution does not constitute a recommendation by
federal bank regulators. The following table shows capital ratios and requirements as of June 30, 1994.
Risk-based Capital
Leverage Tier 1 Total
Old Kent's capital ratios 7.23% 11.04% 12.30%
FNBC's capital ratios 7.53 10.68 11.93
Pro forma combined capital ratios 7.24 11.02 12.28
Regulatory capital ratios - "well capitalized" definition 5.0 6.0 10.0
Regulatory capital ratios - minimum requirement 3.0 4.0 8.0
(2) The pro forma combined balance sheet data assumes the issuance of 2,504,000 shares of Old Kent Common Stock in exchange for
all of the outstanding shares of FNBC Common Stock. This assumes an Exchange Rate of 1.0294 shares of Old Kent Common Stock
for each share of FNBC Common Stock. This Exchange Rate assumes a Purchase Price Per Share of $35 (without any reduction
that could occur as described in "The Merger--Purchase Price Contingency") and a Calculation Price of $34, which is midway
between the $36 upper limit and the $32 lower limit (assuming the nonexistence of the conditions that could cause the
Calculation Price to be decreased to $28.90).
(3) Old Kent's financial statements include EdgeMark Financial Corporation from May 2, 1994, its date of acquisition, and
Princeton Financial Corp. from March 1, 1994, its date of acquisition.
-11-
Comparative Per Share Data
The following unaudited table sets forth certain historical and pro
forma combined per common share information for Old Kent, and certain
historical and equivalent pro forma combined per common share information
for FNBC. The data are derived from financial statements of Old Kent and
FNBC incorporated by reference or included elsewhere in this Prospectus and
Proxy Statement. The pro forma data do not purport to be indicative of the
results of future operations or the actual results that would have occurred
had the Merger been consummated at the beginning of the period presented.
The pro forma financial data have been included in accordance with the rules
of the Securities and Exchange Commission and are provided for comparative
purposes only. The pro forma combined per common share information for Old
Kent and the equivalent pro forma combined per common share information for
FNBC are stated as if the Merger had taken place on the first day of each
period presented. The information presented below has been restated to
reflect stock dividends and stock splits. See Appendices E and F for more
recent preliminary unaudited financial information concerning FNBC and Old
Kent, respectively, for the quarters ended September 30, 1994.
Six Months Ended
Year Ended December 31, June 30, 1994
1989 1990 1991 1992 1993
HISTORICAL PER SHARE DATA
Old Kent Financial Corporation
Net Income per Common Share:
Primary $ 2.15 $ 2.19 $ 2.31 $ 2.75 $ 3.14 $ 1.66
Fully Diluted 1.93 2.08 2.21 2.71 3.14 1.66
Cash Dividends per
Common Share 0.64 0.72 0.79 0.90 1.07 0.58
Book Value per Common
Share (at period end):
Primary 14.93 15.22 16.75 17.96 20.05 20.86
Fully Diluted 14.05 15.21 16.74 17.96 20.05 20.86
First National Bank Corp.
Net Income per Common Share
Before Cumulative Effects of
Changes in Accounting Principles:
Primary $ 1.38 $ 1.42 $ 1.62 $ 1.64 $ 2.05 $ 1.03
Fully Diluted 1.32 1.29 1.43 1.46 1.94 1.02
Cash Dividends per
Common Share 0.47 0.49 0.54 0.67 0.71 0.37
Book Value per Common
Share (at period end):
Primary 12.55 13.71 14.96 15.64 15.33 15.99
Fully Diluted 12.55 13.56 14.44 15.04 15.33 15.96
-12-
PRO FORMA PER SHARE DATA
Pro Forma Combined (per Old Kent share)
Net Income per Common Share:
Primary $ 2.28 $ 2.70 $ 3.08 $ 1.62
Fully Diluted 2.17 2.63 3.07 1.62
Cash Dividends per
Common Share(1) 0.79 0.90 1.07 0.58
Book Value per Common
Share (at period end):
Primary 16.65 17.83 19.75 20.55
Fully Diluted 16.59 17.76 19.75 20.55
Year Ended December 31, Six Months Ended
1991 1992 1993 June 30, 1994
Equivalent Pro Forma Combined
Per FNBC Share(2)
Net Income per Common Share:
Primary $ 2.35 $ 2.78 $ 3.17 $ 1.67
Fully Diluted 2.23 2.71 3.16 1.67
Cash Dividends per
Common Share 0.81 0.93 1.10 0.60
Book Value per Common
Share (at period end):
Primary 17.14 18.35 20.33 21.15
Fully Diluted 17.08 18.28 20.33 21.15
_________________________
<FN>
(1) For the purposes of this presentation, the pro forma combined cash dividends paid per common share are assumed to be the same
as the cash dividends paid per common share by Old Kent on a historical basis during the periods indicated.
(2) The FNBC equivalent pro forma combined per common share information is calculated by multiplying the Old Kent pro forma
combined per common share data by the Exchange Rate of 1.0294 shares of Old Kent Common Stock for each share of FNBC Common
Stock. This Exchange Rate assumes a Purchase Price Per Share of $35.00 (without any reduction that could occur as described
in "The Merger--Purchase Price Contingency") and a Calculation Price of $34, which is midway between the $36 upper limit and
the $32 lower limit for that value provided under the Plan of Merger (assuming the nonexistence of the conditions that could
cause the Calculation Price to be decreased to $28.90).
GENERAL MEETING INFORMATION
Purpose
The special meeting will be held for the purpose of considering and
voting upon a proposal to adopt the Plan of Merger and to transact any and
all other business that may properly come before the meeting, or any
adjournment of that meeting.
-13-
Voting by Proxy
If an FNBC stockholder properly executes and returns a proxy in the
form distributed by FNBC, the proxies named will vote the shares
represented by that proxy at the special meeting of stockholders of FNBC,
and at any adjournment of that meeting. Where a stockholder specifies a
choice, the proxy will be voted in accordance with the stockholder's
specification. If no specific direction is given, the proxies will vote
the shares in favor of adoption of the Plan of Merger.
FNBC's management does not currently know of any other matter to be
presented at the special meeting. If other matters are presented, the
shares for which proxies have been received will be voted in accordance
with the discretion of the proxies.
A stockholder may revoke a proxy at any time prior to its exercise by
written notice delivered to the corporate secretary of FNBC or by attending
the special meeting of stockholders and voting in person.
Proxy Solicitation
The board of directors and management of FNBC will initially solicit
proxies by mail. If they deem it advisable, officers, directors and
employees of FNBC and its subsidiaries may also solicit proxies in person
or by telephone without additional compensation. In addition, nominees and
other fiduciaries may also solicit proxies. Such persons may at the
request of FNBC's management mail material to or otherwise communicate with
the beneficial owners of shares held by them. Although it does not
presently plan to do so, FNBC's management may request officers, directors
and employees of Old Kent and its subsidiaries to assist in the proxy
solicitation. If management makes such a request, such persons may also
solicit proxies of FNBC stockholders by mail, telephone and personal
interview without additional compensation.
Voting Rights and Record Date
Only stockholders of record of FNBC Common Stock at the close of
business on _____________, 1994 (the "Record Date"), are entitled to notice
of and to vote at the special meeting or at any adjournment of that
meeting. At the close of business on the Record Date, _____________ shares
of FNBC Common Stock were issued and outstanding. As of October 31, 1994,
437,938 shares, or 17.16 percent of the outstanding shares of FNBC Common
Stock, were beneficially owned by directors and executive officers of FNBC
and their affiliates. These individuals have agreed that they will use
reasonable efforts to cause the Plan of Merger to be adopted by the
stockholders of FNBC and consummated according to its terms. Each holder
of record of FNBC Common Stock on the Record Date will be entitled to one
vote for each share registered in his or her name on each matter presented
-14-
to a vote of the stockholders at the special meeting. The Merger must be
adopted by the affirmative vote of the holders of a majority of the
outstanding shares of FNBC Common Stock. For the purpose of counting votes
on this proposal, failures to vote, abstentions and broker non-votes will
have the same effect as votes against adoption of the Plan of Merger.
Expenses
Old Kent will pay all printing expenses and filing fees pertaining to
the Registration Statement. FNBC will pay all expenses associated with
printing and mailing this Prospectus and Proxy Statement, including all
expenses for postage, labor and materials. Except in the case of certain
intentional breaches of the Plan of Merger by Old Kent or FNBC, if the Plan
of Merger is terminated before the Merger becomes effective, Old Kent and
FNBC each will pay its own fees and expenses incident to preparing for,
entering into and carrying out the Plan of Merger, and procuring any
necessary approvals, including fees and expenses of its own legal counsel,
accountants and other experts.
THE MERGER
The respective boards of directors of Old Kent and FNBC have approved
an Agreement and Plan of Merger dated as of August 24, 1994 (the "Plan of
Merger").
The following discussion summarizes certain provisions of the Plan of
Merger and aspects of the Merger. This summary discussion is not intended
to be a complete description of the Merger and is qualified in its entirety
by reference to the Plan of Merger. The Plan of Merger is attached as
Appendix A and incorporated by reference in this Prospectus and Proxy
Statement.
Background of the Merger
In May of 1994, M. A. Schapiro contacted Old Kent and asked whether
Old Kent would be interested in discussing a possible business affiliation.
After receiving a verbal indication of interest from Old Kent, Mr. Guldemond
discussed the matter with FNBC's board of directors. The board decided that
it would be appropriate for several of the directors to meet with
representatives of Old Kent.
Several of FNBC's directors, with M. A. Schapiro, met with officers of
Old Kent on June 1, 1994. On June 8, 1994, FNBC's board of directors met
to discuss this meeting and consider FNBC's alternatives and the potential
advantages of each. The board discussed FNBC's local marketplace,
increased competition from both bank and non-bank sources, and the best
-15-
interests of FNBC's stockholders, employees and customers. The board
concluded that it should explore the possibility of a business affiliation
with a larger company to determine if such an affiliation would be in the
best interests of the FNBC's stockholders, employees and customers.
The board of directors engaged M. A. Schapiro to act as its exclusive
financial adviser with respect to FNBC's strategic alternatives and the
possible sale, merger or other business combination of FNBC. The board
instructed M. A. Schapiro to prepare a package of preliminary financial
information regarding FNBC and to make preliminary contact with several
other regional bank holding companies to determine if any of them would
also have an interest in affiliating with FNBC.
At FNBC's July 27, 1994 meeting of the board of directors, M. A.
Schapiro reported that it had contacted several other bank holding
companies as the board had requested. Packages containing FNBC financial
information had been provided to each, and to Old Kent, and confidentiality
agreements had been obtained as a condition of their receiving the
financial packages. Each of these bank holding companies, including Old
Kent, had been asked to provide M. A. Schapiro with a written expression of
interest if it wanted to pursue discussions with FNBC regarding a possible
affiliation. Two of the other bank holding companies that M. A. Schapiro
had contacted, and Old Kent, delivered written expressions of interest.
M. A. Schapiro presented to the board, and the board discussed, each
expression of interest. Of the three expressions of interest that had been
received, one contemplated a transaction that was significantly less
favorable to FNBC's stockholders than the other two. After consideration,
the board of directors determined to focus on the two more favorable
expressions of interest. One of the two had been submitted by Old Kent.
Both of them contemplated mergers with FNBC, and a stock for stock exchange
rate based on the same purchase price per share of FNBC Common Stock. The
board asked M. A. Schapiro to invite the two bank holding companies to meet
with members of FNBC's management and refine their proposals.
On August 10, 1994, FNBC's board of directors met again. At that
meeting, M. A. Schapiro presented to the board revised expressions of
interest that had been received from the two bank holding companies since
the prior board meeting. The revised expression of interest submitted by
Old Kent included an increase in the exchange rate that it had previously
proposed that was greater than the increase proposed by the other bank
holding company. M. A. Schapiro also presented to the board certain financial
information regarding each bank holding company. The directors discussed
recent meetings that had occurred between members of FNBC's management and
representatives of the two bank holding companies, as well as the expected
effects on FNBC's stockholders, employees and customers if FNBC was to
merge with either of them. The board of directors determined to continue
discussions with Old Kent, focusing on the proposal contained in Old Kent's
revised expression of interest. The board selected the Old Kent proposal
over that of the other bank holding company primarily because Old Kent's
proposal included an exchange rate based on a larger purchase price per
-16-
share of FNBC Common Stock and the board believed that a merger with Old
Kent would favorably impact competition and customer service in FNBC's
market area and adversely affect fewer FNBC employees. FNBC's board
requested M. A. Schapiro, with FNBC's legal counsel, Dickinson, Wright,
Moon, Van Dusen & Freeman, to proceed to negotiate a definitive plan of
merger with Old Kent based upon Old Kent's revised expression of interest,
with modifications to include certain terms suggested by the board.
On August 24, 1994, the board of directors met to discuss the Plan of
Merger that had been negotiated with Old Kent. M. A. Schapiro and
Dickinson, Wright, Moon, Van Dusen & Freeman were present at the meeting
and reviewed the proposed Plan of Merger with the board. M. A. Schapiro
delivered an oral opinion to the board that the consideration to be received
in the proposed Merger was fair to FNBC's stockholders from a financial point
of view. The board discussed the proposed Plan of Merger. After the board's
discussion, it invited two officers of Old Kent into the meeting to discuss
the proposed Plan of Merger and to answer questions involving the proposed
merger between FNBC and Old Kent and its expected impact on FNBC's
stockholders, employees and customers. Following the discussion, FNBC's
board of directors voted unanimously to approve the Plan of Merger, and
authorized its execution by FNBC and submission to FNBC's stockholders for
adoption. Prior to the opening of business on the same day, FNBC and Old
Kent executed the Plan of Merger and issued a joint press release
announcing the Plan of Merger.
Merger Recommendation and Reasons for the Transaction
The terms of the Merger and the Plan of Merger, including the Exchange
Rate, were the result of arms-length negotiations between FNBC and Old Kent
and their respective representatives. In the course of reaching its
decision to approve the Plan of Merger, the board of directors of FNBC
consulted with its legal and financial advisers as well as with management
of FNBC and, without assigning any relative or specific weights, considered
numerous factors, including, without limitation, the following:
1. The transaction would result in a tax deferred gain to
FNBC's stockholders;
2. The Plan of Merger provided for a conversion ratio,
including a floating exchange rate, that contemplated an upper
and lower collar which would set a minimum and maximum number of
shares to be issued and a "walk-away" right that would permit
FNBC to request an adjustment in the conversion ratio or
terminate the Merger if the per share price of Old Kent Common
Stock declined more rapidly than a comparable group of stocks;
-17-
3. A business combination with a larger bank holding
company, such as Old Kent, was expected to provide both greater
short-term and long-term value to FNBC's stockholders than other
alternatives available and to enhance the Bank's competitiveness
and its ability to serve its depositors, customers and the
communities in which it operates;
4. Old Kent's significant long-term experience in
integrating the operations of banks and bank holding companies;
5. The economic conditions and prospects for the market in
which FNBC operates, and competitive pressures in the financial
services industry in general and the banking industry in
particular;
6. The Merger was expected to offer FNBC's stockholders
the prospect for higher dividends, a higher current trading value
for their shares, greater liquidity for their shares and better
prospects for future growth than if FNBC were to remain
independent;
7. The bank regulatory environment in general;
8. The business, results of operations, asset quality and
financial condition of Old Kent, the future growth prospects of
Old Kent and the Bank following the Merger, and the potential
synergies and costs savings expected to be realized from the
Merger; and
9. The presentations of FNBC's financial adviser, M. A.
Schapiro, and the opinion rendered by M. A. Schapiro to the
effect that the terms of the Merger were fair, from a financial
point of view, to the holders of FNBC Common Stock. See "The
Merger--Opinion of Financial Adviser."
Old Kent believes the proposed Merger will enable Old Kent to improve
its geographic diversification by expanding Old Kent's presence into the
Macomb County, Michigan, area. Old Kent believes that the Merger will
permit the achievement of certain economies of scale with respect to Old
Kent's business conducted in Southeast Michigan.
As of October 31, 1994, the directors and executive officers of FNBC,
together with their affiliates and associates, as a group, were entitled to
vote approximately 437,938 shares of FNBC Common Stock representing
approximately 17.16 percent of the shares outstanding. These persons will
be entitled to receive the same consideration for their shares as any other
FNBC stockholder at the effective time of the Merger. Under the terms of
Affiliates' Agreements, these directors and executive officers have agreed
to use reasonable efforts to cause the Plan of Merger to be adopted by
FNBC's stockholders and consummated according to its terms. (See "The
-18-
Merger--Agreements of Affiliates.") After the Merger, FNBC's directors and
executive officers as a group will own approximately one percent of the
shares of Old Kent Common Stock outstanding.
FNBC'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
THE STOCKHOLDERS OF FNBC VOTE FOR ADOPTION OF THE PLAN OF MERGER
Opinion of Financial Adviser
FNBC retained M. A. Schapiro to provide an opinion as to the fairness
of the consideration to be received in the Merger, from a financial point of
view, to FNBC and its stockholders. FNBC selected M. A. Schapiro as its
financial adviser because of its reputation and because M. A. Schapiro has
substantial experience in transactions such as the Merger. M. A. Schapiro
has, from time to time, provided other financial advisory services to FNBC,
including advising FNBC with respect to mergers and acquisitions.
M. A. Schapiro is a nationally recognized investment banking firm
specializing in the banking and financial services industry. M. A. Schapiro
is continually engaged in the valuation of businesses and securities in
connection with mergers and acquisitions, negotiated underwritings, private
placements, competitive bidding, secondary distributions of listed and unlisted
securities, and valuations for estate, corporate and other purposes. In the
ordinary course of its business, M. A. Schapiro may from time to time have
long or short positions in, and buy or sell, debt and equity securities or
options on securities of Old Kent and FNBC. M. A. Schapiro has, during
the past two years, provided financial advisory services to FNBC and has
received fees for the rendering of these services.
M. A. Schapiro has delivered its written opinion to the FNBC Board
that, as of the date of this Prospectus and Proxy Statement, the consideration
to be received in the Merger was fair, from a financial point of view, to
the stockholders of FNBC. No limitations were imposed by the board of
directors of FNBC upon M. A. Schapiro with respect to the investigations
made or procedures followed by M. A. Schapiro in rendering its opinion.
The full text of the opinion of M. A. Schapiro dated the date of this
Prospectus and Proxy Statement, which sets forth assumptions made, matters
considered and limits on the review undertaken by M. A. Schapiro, is
attached as Appendix D. FNBC stockholders are urged to read this opinion
in its entirety. M. A. Schapiro's opinion is directed only to the consideration
to be received in the Merger and does not constitute a recommendation to any
FNBC stockholder as to how such stockholder should vote at the special meeting
of FNBC's stockholders or any other matter. The summary of the opinion of
M. A. Schapiro set forth in this Prospectus and Proxy Statement is qualified
in its entirety by reference to the full text of such opinion.
In connection with its opinion, M. A. Schapiro reviewed, among other
things: (i) the Plan of Merger; (ii) this Prospectus and Proxy Statement,
(iii) publicly available reports filed with the Commission by FNBC and Old
Kent; (iv) certain other publicly available financial and other information
-19-
concerning FNBC and Old Kent; (v) certain other internal information,
including projections, relating to FNBC and Old Kent prepared by the
managements of FNBC and Old Kent and furnished to M. A. Schapiro for
purposes of its analysis; and (vi) publicly available information
concerning certain other banks and bank holding companies, the trading
markets for their securities and the nature and terms of certain other
merger and acquisition transactions believed relevant to its inquiry.
M. A. Schapiro also met with certain officers and representatives of FNBC
and Old Kent to discuss the foregoing as well as other matters relevant to
its inquiry, including the past and current business operations, results of
regulatory examinations, financial condition, current loan quality and
trends, and future prospects of FNBC and Old Kent, both separately and on a
combined basis. In addition, M. A. Schapiro reviewed the reported price
and trading activity for FNBC Common Stock and Old Kent Common Stock,
compared certain financial and stock market information for FNBC and Old
Kent with similar information for certain other companies the securities of
which are publicly traded, reviewed the financial terms of certain recent
business combinations in the commercial banking industry and performed such
other studies and analyses as it considered appropriate. M. A. Schapiro
also discussed with the independent auditors of FNBC and Old Kent their
review of such company's financial and accounting affairs. M. A. Schapiro
also took into account its assessment of general economic, market and
financial conditions and its experience in other transactions, as well as
its experience in securities valuation and its knowledge of the banking
industry generally. M. A. Schapiro's opinion was necessarily based upon
conditions as they existed and could be evaluated on the date of the
opinion and the information made available to M. A. Schapiro through that
date.
In conducting its review and in arriving at its opinion, M. A.
Schapiro relied upon and assumed the accuracy and completeness of the
financial and other information provided to it or publicly available and
did not attempt independently to verify such accuracy and completeness.
M. A. Schapiro relied upon the accuracy of the representations made by Old
Kent and FNBC in the Plan of Merger. M. A. Schapiro relied upon the
managements of Old Kent and FNBC as to the reasonableness and achievability
of the projections (and the assumptions and bases therefor) provided to
M. A. Schapiro and assumed that such projections reflected the best
currently available estimates and judgments of such managements and that
such projections would be realized in the amounts and in the time periods
estimated. M. A. Schapiro also assumed, without independent verification,
that the aggregate allowances for credit losses for FNBC and Old Kent were
adequate to cover such losses. M. A. Schapiro did not make or obtain any
evaluations or appraisals of the property of FNBC or Old Kent. M. A.
Schapiro was retained by the board of directors of FNBC to express an
opinion as to the fairness, from a financial point of view, of the consideration
to be received in the Merger to FNBC's stockholders. M. A. Schapiro did not
address FNBC's underlying business decision to proceed with the Merger and
did not make any recommendations to FNBC's board with respect to any
approval of the Merger.
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In connection with rendering its opinion to FNBC's board, M. A.
Schapiro performed a variety of financial analyses which are summarized
below. The summary of such analyses set forth in this Prospectus and Proxy
Statement does not purport to be a complete description of such analyses.
M. A. Schapiro believes that its analyses and the summary set forth
in this Prospectus and Proxy Statement 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 the process underlying M. A. Schapiro's
opinion. The preparation of a fairness opinion is a complex process
involving subjective judgments and is not necessarily susceptible to
partial analysis or summary description. In its analyses, M. A. Schapiro
made numerous assumptions with respect to industry performance, business
and economic conditions, and other matters, many of which are beyond
the control of FNBC and Old Kent. Any estimates contained in M. A. Schapiro's
analyses are not necessarily indicative of future results or value, which
may be significantly more or less favorable than such estimates.
Estimates of values of companies do not purport to be appraisals or
necessarily reflect the price at which companies or their securities
actually may be sold. No company or transaction utilized in M. A. Schapiro's
analyses was identical to FNBC or Old Kent or the Merger. Accordingly,
such analyses are not based solely on arithmetic calculations; rather,
they involve complex considerations and judgments concerning differences
in financial and operating characteristics of the relevant companies, the
timing of the relevant transactions and prospective buyer interest, as well
as other factors that could affect the public trading markets of the company
or companies to which they are being compared. None of the analyses
performed by M. A. Schapiro was assigned a greater significance by M. A.
Schapiro than any other.
The projections reviewed by M. A. Schapiro were prepared by the
managements of FNBC and Old Kent. Neither FNBC nor Old Kent publicly
discloses internal management projections of the type provided to FNBC's
board and M. A. Schapiro in connection with the review of the Plan of
Merger. Such projections were not prepared with a view towards public
disclosure. The projections were based upon numerous variables and
assumptions which are inherently uncertain, including without limitation
factors related to general economic and competitive conditions, as well as
trends in asset quality. Accordingly, actual results could vary
significantly from those set forth in such projections.
The following is a brief summary of the analyses performed by M. A.
Schapiro in connection with its opinion as described to FNBC's board of
directors by M. A. Schapiro:
Summary. M. A. Schapiro summarized the terms of the Merger, including
the conversion of each share of FNBC Common Stock into the right to receive
$35 of Old Kent Common Stock, subject to adjustment and provided that the
Exchange Rate will be no less than 0.9722 nor more than 1.0938 (assuming
the nonexistence of the conditions that could cause the Exchange Rate to be
1.2111) shares of Old Kent Common Stock for each share of FNBC Common
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Stock. M. A. Schapiro also analyzed the competitive and economic factors
in Michigan as they affect financial institutions, earnings sensitivity,
pricing comparability and earnings per share estimates for the pro forma
company.
Analysis of Other Merger Transactions. M. A. Schapiro analyzed
certain other bank merger and acquisition transactions in the Midwest
(including the states of Michigan, Illinois, Indiana, Ohio and Wisconsin)
involving commercial banks with assets between $200 million and $800
million. M. A. Schapiro compared the multiples produced by the Old Kent
offer with the median transaction multiples for all included transactions.
This analysis compared price/earnings, price/fully diluted book value and
price/fully diluted tangible book value multiples of the Old Kent offer to
the median multiples for the transactions analyzed. Set forth below are
the median transaction multiples presented to FNBC's board:
Selected
Midwest Bank Old Kent/
Acquisitions FNBC
Price/Earnings 15.8 17.1
Price/Book Value 181.1% 218.9%
Price/Tangible Book Value 185.0% 218.9%
M. A. Schapiro's analysis showed that the range of implied valuations
of FNBC, applying the median transaction multiples described above to
FNBC's earnings, book value and tangible book value, was $28.95 to
$32.29 per share. The results produced in this analysis do not
purport to be indicative of actual values or expected values of FNBC or
shares of FNBC Common Stock.
The bank acquisition transactions for the Midwest during the period
after January 1, 1991 included in the above multiples are:
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State State
of of Selected
Buyer Target Buyer Target
MO IL Commerce Bancshares, Inc. Peoples Mid-Illinois Corporation
MI MI Citizens Banking Corporation 4 Banc One Banks in Michigan
MO IL Mercantile Bancorporation, Inc. Wedge Bank
OH IN KeyCorp First Citizens Bancorp of Indiana
MI IL First of America Bank Corporation First Park Ridge Corporation
WI WI Firstar Corporation First Southeast Banking Corporation
OH IL Banc One Corporation American Holding Company
MI IL Old Kent Financial Corporation EdgeMark Financial Corporation
PR IL BanPonce Corporation Pioneer Bancorp
IL IL Investor Group Indecorp, Inc.
OH WI Banc One Corporation Pioneer Bancorp
IN IN Old National Bancorp DCB Corporation
IL IL Premier Financial Services, Inc. First Northbrook Bancorp
OH IL Banc One Corporation First Community Bancorp
IL IL Coal City Corp. Manufacturers National Corporation
IN IL Old National Bancorp Palmer Bancorp, Inc.
OH IL Banc One Corporation Jefferson Bancorp, Inc.
IL IL AMCORE Financial, Inc. Dixon Bancorp, Inc.
MO IL Commerce Bancshares, Inc. First Peoria Corp.
IN IN CNB Bancshares, Inc. Indiana Bancshares
WI WI Associated Banc-Corp. F&M Financial Services Corporation
IL IL Firstbank of Illinois Corp. Central Banc System, Inc.
Discounted Cash Flow. M. A. Schapiro performed a discounted cash flow
analysis of FNBC. The scenario assumed annual earnings and cash dividend
appreciation of FNBC of 7.5 percent, discount rates from 12 percent to 16
percent, and different terminal price multiples ranging from 12.5 to 17.5 to
apply to 1998 estimated earnings. This scenario showed a range of present
values per share of FNBC Common Stock from $20.12 to $31.99. The results
produced in this analysis do not purport to be indicative of the actual
values or expected values of FNBC or shares of FNBC Common Stock.
Analysis of the Combined Company. M. A. Schapiro analyzed certain
balance sheet and income statement data for FNBC and Old Kent on both a
historical and pro forma basis. This analysis reviewed the profitability,
capital, credit quality, and market niches of Old Kent, and the ranking and
competitiveness within the Michigan banking market. The analysis showed,
among other things, that the pro forma company would be nearly $11 billion
in assets with nearly $886 million in shareholders' equity. Profitability
was analyzed from the assumption of realizing no-expense savings.
Exchange Rate Analysis. M. A. Schapiro considered the effect of the
limitations on the Exchange Rate contained in the Plan of Merger. The
effect of such limitations is that the stockholders of FNBC could receive
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Old Kent Common Stock valued at less than $35 per share of FNBC Common
Stock if the average per share closing price of Old Kent Common Stock is
below $32 during the Reference Period set forth in the Plan of Merger. If
the average per share closing price of Old Kent Common Stock during the
Reference Period is less than $28.90 and certain other conditions exist,
then FNBC may, among other things, request a decrease in the Calculation
Price or terminate the Plan of Merger and abandon the Merger.
Analysis of Comparable Companies. M. A. Schapiro examined the
operating and trading performance of FNBC in comparison to selected
publicly traded bank holding companies located in the Midwest with total
assets of between $400 million and $700 million. The group of companies
included:
Pinnacle Financial Services CoBancorp, Inc.
Franklin Bank, N.A. Ambanc Corp.
Peoples Bank Corporation of IN First Oak Brook Bancshares
Princeton National Bancorp Premier Financial Services
ANB Corporation Shoreline Financial Corp.
Northwest Illinois Bancorp Old Second Bancorp, Inc.
First-Knox Banc Corporation First Merchants Corp.
Merchants Bancorp, Inc. Citizens Bancshares
Peoples Bancorp Inc. Second Bancorp, Inc.
Independent Bank Corporation
M. A. Schapiro analyzed the relative performance and outlook for
FNBC by comparing certain financial and trading market information of FNBC
with the group of comparable banks. M. A. Schapiro compared FNBC with the
comparable banks based upon selected operating statistics, including
capitalization, profitability and credit quality. Using data at, or for
the 12 months ended, June 30, 1994, and pricing data as of November 3,
1994, the multiple of median market price to latest 12 months earnings was
12.6 for the comparable banks and 16.3 for FNBC. The median price to
stated book value was 148.6 percent for the comparable banks and 209.5
percent for FNBC. The median price to tangible book value was 155.4
percent for the comparable banks and 209.5 percent for FNBC. The implied
market trading values for FNBC derived from such comparable company
analysis utilizing the resulting median valuation ratios ranged from
approximately $23.76 to $25.87 per share.
M. A. Schapiro examined the operating and trading performance of
Old Kent in comparison to selected publicly traded commercial bank holding
companies. The group of companies included:
-24-
Integra Financial Corp. Star Banc Corp.
Huntington Bancshares, Inc. AmSouth Bancorporation
First Tennessee National Corp. Meridian Bancorp, Inc.
Firstar Corporation Mercantile Bancorporation, Inc.
Fifth Third Bancorp Crestar Financial Corporation
First of America Bank Corporation Commerce Bancshares, Inc.
Regions Financial Corp. Michigan National Corporation
Marshall & Ilsey Corporation
M. A. Schapiro also analyzed the relative performance and outlook for
Old Kent by comparing certain financial and trading market information of
Old Kent with the group of comparable commercial banks. M. A. Schapiro
compared Old Kent with the comparable commercial banks based upon selected
operating statistics, including capitalization, profitability and credit
quality. Using data at, or for the 12 months ended June 30, 1994, and
pricing data as of November 4, 1994, the multiple of median market price
to latest 12 months earnings was 9.6 for the comparable commercial banks
and 9.9 for Old Kent. The median price to stated book value was 147.9
percent for the comparable commercial banks and 152.2 percent for Old Kent.
The median price to tangible book value was 165.4 percent for the
comparable commercial banks and 177.5 percent for Old Kent. The median
capitalization levels for the comparable commercial banks was 8.37 percent
for common equity to assets, 7.71 percent for tangible common equity to
assets, and 10.93 percent for Tier 1 risk-based capital. Old Kent's ratios
for these measures were 8.14 percent, 7.06 percent and 11.03 percent,
respectively. The median return on average common equity was 15.93 percent
for the comparable commercial banks and 16.18 percent for Old Kent. The
median ratio of non-performing assets to loans and other real estate owned
was 1.24 percent for the comparable commercial banks and 1.26 percent for
Old Kent. The median ratio of reserves to non-performing assets was 148.9
percent for the comparable commercial banks and 215.6 percent for Old Kent,
while reserves to loans was 1.83 percent for the comparable commercial banks
and 2.72 percent for Old Kent.
FNBC and M. A. Schapiro have entered into a letter agreement, dated
June 8, 1994 (the "M. A. Schapiro Engagement Letter"), relating to the
services to be provided by M. A. Schapiro in connection with the Merger.
FNBC has agreed to pay M. A. Schapiro a fee (the "Fee") for its services
equal to one percent of the value of the consideration received by FNBC and
its stockholders which, based upon a projected $35 equivalent price for
each share of FNBC Common Stock, will equal $839,894. The Fee, which will
be paid in cash, will be paid according to the following schedule: $25,000
was paid upon the execution of the M. A. Schapiro Engagement Letter,
$225,000 was paid upon the execution of the Plan of Merger, and the
remaining balance will be paid at the effective time of the Merger. All
such payments are non-refundable. For purposes of the M. A. Schapiro
Engagement Letter, the value of the consideration received by FNBC and its
stockholders means the fair market value of Old Kent Common Stock based on
the average closing price as reported on NASDAQ National Market System for
-25-
the 10 trading days prior to the effective time of the Merger. In the
M. A. Schapiro Engagement Letter, FNBC also has agreed to indemnify M. A.
Schapiro against certain liabilities, including liabilities under the
federal securities laws.
M. A. Schapiro's opinion does not constitute a recommendation to any
FNBC stockholder as to how such stockholder should vote on the Merger
proposal.
Conversion of FNBC Shares
Pursuant to the Plan of Merger, FNBC is soliciting proxies from FNBC's
stockholders for the purpose of adopting the Plan of Merger. The
affirmative vote of the holders of a majority of the outstanding shares of
FNBC Common Stock is required to adopt the Plan of Merger.
At the time the Merger becomes effective, FNBC will be merged with and
into Old Kent. The surviving corporation will be Old Kent and will own
both of the subsidiaries (if liquidation of the Insurance Company has not
been completed) and all of the other assets of FNBC. The Articles of
Incorporation of the surviving corporation will be the Articles of
Incorporation of Old Kent without change from the Articles of Incorporation
in effect immediately prior to the effective time of the Merger. The
Bylaws of the surviving corporation will be the Bylaws of Old Kent as in
effect immediately prior to the effective time of the Merger.
At the time the Merger becomes effective, each of the then issued and
outstanding shares of FNBC Common Stock will be converted into the number
of shares of Old Kent Common Stock equal to the "Exchange Rate." The
Exchange Rate will be equal to $35.00 (the "Purchase Price Per Share")
divided by the average of the per share closing prices of Old Kent Common
Stock reported on the NASDAQ National Market System during the 20
consecutive trading days ending on the sixth business day before the date
of the closing (the "Reference Period") as reported in the Dow Jones
News/Retrieval system, or other equally reliable means (as so calculated,
the "Final Stock Price"). Notwithstanding that average, the per share
price of Old Kent Common Stock to be used in calculating the Exchange Rate
(the "Calculation Price") will not be more than $36 per share nor less than
$32 per share unless certain conditions exist, FNBC requests a decrease in
the Calculation Price, and Old Kent agrees to such decrease. For a
description of the conditions that must exist before FNBC may request such
a decrease in the Calculation Price, see "The Merger--Stock Price
Condition." In no event will the Calculation Price be less than $28.90.
(See "The Merger--Stock Price Condition.") The Purchase Price Per Share
may be reduced by up to $.40 under certain circumstances. See "The
Merger--Purchase Price Contingency" for a discussion of the circumstances
in which the Purchase Price Per Share could be reduced.
The following table shows a range of hypothetical Final Stock Prices,
and the Exchange Rate corresponding to each Final Stock Price. The
Exchange Rates listed in the following table assume that none of the
-26-
conditions exist that could cause FNBC to request a decrease in the
Calculation Price and that there is no reduction in the Purchase Price Per
Share.
Average Exchange
Price Rate
At or Above $36.00 0.9722
35.00 1.0000
34.00 1.0294
33.00 1.0606
At or Below 32.00 1.0938
Below 28.90 1.2111
(subject to cer-
tain conditions)
The following table shows the closing sale price of Old Kent Common
Stock on the dates listed and the corresponding Exchange Rate that would
apply if the closing sale price shown were the average price of Old Kent
Common Stock during the Reference Period.
Closing Exchange
Date Sale Price Rate
August 23, 1994 (1) $ 34.25 1.0219
[Date Proximate to
Effective Date]
____________________
<FN>
(1) The last trading day before public announcement of the Plan of Merger.
The Purchase Price Per Share of $35.00, which is divided by the
Calculation Price to yield the Exchange Rate that determines the amount of
Old Kent Common Stock to be received by FNBC's stockholders, and the limits
on the range of the Exchange Rate, were determined through the parties'
negotiation of the Plan of Merger (see "The Merger--Merger Recommendation
and Reasons for the Transaction"). These terms reflect FNBC's and Old
Kent's judgment as to the value of the shares of FNBC Common Stock relative
to the historical and anticipated market price of Old Kent Common Stock.
See "The Merger--Purchase Price Contingency" for a discussion of the
circumstances under which the Purchase Price Per Share could be reduced by
up to $.40.
The limits of the range of the Exchange Rate (0.9722 and 1.0938) are
intended to limit the extent to which the amount of Old Kent Common Stock
to be received by FNBC's stockholders in the Merger is adjusted based on
extraordinary fluctuations in the market price of Old Kent Common Stock
that may be unrelated to Old Kent's financial condition or operations. See
-27-
"The Merger--Stock Price Condition" for a discussion of FNBC's ability to
either request a decrease in the Calculation Price or avoid consummating
the Merger in the event of an extraordinary downward movement in the market
price of Old Kent Common Stock which is disproportionate to a group of
comparable stocks.
The Exchange Rate is subject to upward or downward adjustment upon the
occurrence of or the setting of a record date for certain events between
the date of the Plan of Merger and the effective time of the Merger that
result in or would result in changes in the number of shares of Old Kent
Common Stock or FNBC Common Stock outstanding, as the case may be. The
purpose of any such adjustment to the Exchange Rate would be to prevent
dilution of the interests of the respective shareholders and stockholders
of Old Kent and FNBC upon the occurrence of certain events listed in the
Plan of Merger. It is expected that none of these events will occur and
that no adjustment of the Exchange Rate will be necessary.
Old Kent will not issue fractional shares of Old Kent Common Stock in
the Merger. An FNBC stockholder who would otherwise be entitled to receive
a fraction of a share of Old Kent Common Stock in the Merger will receive
instead an amount of cash determined by multiplying that fraction by the
actual Final Stock Price.
Stockholders of FNBC are not entitled to appraisal rights under the
Delaware General Corporation Law in connection with the Merger. (See "No
Appraisal Rights.")
Stock Price Condition
FNBC will not be obligated to consummate the Merger at any time when
both of the following conditions exist: (i) the Final Stock Price is less
than $28.90, subject to certain adjustments; and (ii) the percentage
determined by dividing the Final Stock Price by $34 is more than 15
percentage points less than the percentage determined by dividing the sum
of the closing prices of a group of comparison stocks (as defined in the
Plan of Merger) on the last day of the Reference Period by the sum of the
closing prices of those comparison stocks on August 19, 1994. The
comparison stocks used for this purpose include the publicly traded common
stocks of a group of 15 regional bank holding companies listed in the Plan
of Merger.
The effect of this provision is that FNBC need not consummate the
Merger at a time when the price of Old Kent Common Stock has declined
substantially from the price prevailing when FNBC's board of directors
approved the Merger and that decline has been disproportionate to any
decline in the average price of the comparison stocks.
If both of these conditions exist, FNBC will have the right until the
second business day after the last day of the Reference Period (the
"Exercise Period") to either: (i) abandon the Merger and terminate the
Plan of Merger; (ii) proceed with the Merger on the basis of the Exchange
-28-
Rate without adjustment; or (iii) request Old Kent to increase the Exchange
Rate (an "Increase Notice") for each share of FNBC Common Stock to that
number of shares of Old Kent Common Stock determined by dividing the
Purchase Price Per Share by $28.90 (the "Adjusted Rate"). If Old Kent
receives an Increase Notice, Old Kent may either accept or decline the
Adjusted Rate. If Old Kent accepts the Adjusted Rate, the Plan of Merger
will remain in effect except that the Exchange Rate will be equal to the
Adjusted Rate. If Old Kent declines the Adjusted Rate, the Merger will be
abandoned; provided, that if Old Kent declines the Adjusted Rate, FNBC may
elect to proceed with the Merger on the basis of the Exchange Rate without
any adjustment.
Purchase Price Contingency
In the Plan of Merger, Old Kent and FNBC have agreed to use all
reasonable efforts to negotiate an agreement to terminate the Data
Processing Services Agreement dated as of December 31, 1993 (the "M & I
Agreement"), between M & I Data Services, Inc. ("M & I"), and the Bank on
terms reasonably acceptable to Old Kent and FNBC at the lowest practicable
cost and at the earliest practicable time. For purposes of the Plan of
Merger, the M & I Agreement will not be considered to be terminated unless
and until Old Kent and FNBC have expressly agreed upon the amount of the
aggregate combined cost to Old Kent and FNBC in cash, fair market value of
contract concessions, and fair market value of other consideration
(together, the "Termination Cost") to be incurred to terminate the M & I
Agreement, or that the Termination Cost is less than $250,000. The
Purchase Price Per Share to be used in calculating the Exchange Rate will
be adjusted, depending on the results of such negotiation, if and as
follows:
(i) If the M & I Agreement is terminated on terms reasonably
acceptable to both Old Kent and FNBC at a Termination Cost of $250,000
or less, then there will be no adjustment to the Purchase Price Per
Share on account of the M & I Agreement;
(ii) If the M & I Agreement is terminated on terms reasonably
acceptable to both Old Kent and FNBC at a Termination Cost in excess
of $250,000, then the Purchase Price Per Share will be reduced by the
lesser of (a) an amount determined by dividing (x) two-thirds of the
difference between the Termination Cost and $250,000, by
(y) 2,434,060; or (b) $.40; and
(iii) If, as of the close of business on the day before the
date of the closing, the M & I Agreement has not been terminated on
terms reasonably acceptable to both Old Kent and FNBC, then the
Purchase Price Per Share will be reduced by $.40.
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Distribution of Old Kent Common Stock
As of the effective time of the Merger, holders of FNBC Common Stock
outstanding immediately prior to the effective time of the Merger will
cease to be stockholders of FNBC and will have no rights as FNBC
stockholders. Certificates that represented shares of FNBC Common Stock
outstanding immediately prior to the effective time of the Merger ("Old
Certificates") will then represent the right to receive shares of Old Kent
Common Stock having all of the voting and other rights of shares of Old
Kent Common Stock and the right to receive cash in lieu of fractional
shares, as provided in the Plan of Merger, except that no former
stockholder of FNBC shall be entitled to receive a distribution of any
dividend payable to holders of record of Old Kent Common Stock after the
effective time of the Merger until the physical exchange of that
stockholder's Old Certificates for new Old Kent Common Stock certificates
shall have been effected.
As soon as practicable after the Merger becomes effective, Old Kent
will send to record holders of FNBC Common Stock transmittal materials to
be used to exchange Old Certificates for stock certificates representing
shares of Old Kent Common Stock. The transmittal materials will contain
instructions with respect to the surrender of Old Certificates.
As soon as practicable after the Merger becomes effective, Old Kent
will deliver the number of shares of Old Kent Common Stock issuable and the
amount of cash payable for fractional shares in the Merger to Old Kent Bank
and Trust Company, or such other bank or trust company as Old Kent may
designate for such purpose (the "Exchange Agent").
Promptly after receipt of the proper transmittal documents and Old
Certificates from an FNBC stockholder, the Exchange Agent will issue and
deliver new stock certificates to the stockholder. The Exchange Agent will
issue and deliver certificates in the name and to the address appearing on
FNBC's stock records as of the effective time of the Merger, or in such
other name or to such other address as the holder of record may specify in
the transmittal documents received by the Exchange Agent. The Exchange
Agent will not be required to issue and deliver certificates to a
stockholder until it has received all of the Old Certificates held of
record by that stockholder, or an affidavit of loss and indemnity bond for
such certificate or certificates, together with properly executed
transmittal materials. Such Old Certificates, transmittal materials and
affidavits must be in a form and condition reasonably acceptable to Old
Kent and the Exchange Agent.
The Exchange Agent will have discretion to determine reasonable rules
and procedures relating to the issuance and delivery of certificates of Old
Kent Common Stock into which shares of FNBC Common Stock are converted in
the Merger and governing the payment for fractional shares.
The declaration of a dividend on Old Kent Common Stock payable to
shareholders of record of Old Kent as of a record date at or after the
effective time of the Merger will include dividends on all shares of Old
-30-
Kent Common Stock issuable under the Plan of Merger. However, no former
stockholder of FNBC will be entitled to receive a distribution of such
dividends until physical exchange of that stockholder's Old Certificates
shall have been effected. Upon physical exchange of that stockholder's Old
Certificates, he or she will be entitled to receive from Old Kent an amount
equal to all such dividends (without interest and less the amount of taxes,
if any, which may have been imposed or paid) declared and paid with respect
to those shares.
At or after the effective time of the Merger, Old Kent and FNBC will
not transfer on the stock transfer books of FNBC any shares of FNBC Common
Stock that were issued and outstanding immediately prior to the effective
time of the Merger. If, after the effective time of the Merger, a
stockholder properly presents Old Certificates to Old Kent for transfer,
Old Kent will cancel and exchange the Old Certificates for stock
certificates representing shares of Old Kent Common Stock as provided in
the Plan of Merger. After the effective time of the Merger, ownership of
shares represented by Old Certificates may be transferred only on the stock
transfer records of Old Kent.
Effective Time of the Merger
The Merger shall be consummated at the close of business on the date
specified in certificates of merger filed in accordance with the Delaware
General Corporation Law and the Michigan Business Corporation Act. If the
stockholders of FNBC adopt the Plan of Merger at the special meeting of
FNBC stockholders, and the other conditions to the Merger set forth in the
Plan of Merger and summarized under "The Merger--Conditions to the Merger
and Abandonment" in this Prospectus and Proxy Statement are satisfied, the
effective time of the Merger is anticipated to be during the first quarter
of 1995, provided that the Plan of Merger has not been terminated prior to
such time. The Merger may not be consummated until receipt of approval
from the Federal Reserve Board or its delegate and expiration of the
required 15-day waiting period following such approval, and until receipt
of approval from the State of Arizona with respect to the change of control
of the Insurance Company if the Insurance Company has not been liquidated
by the effective time of the Merger. An application for prior approval of
the Merger was submitted to the Federal Reserve Board on November __, 1994.
As of the date of this Prospectus and Proxy Statement, no application for
approval of the Merger with respect to the change of control of the
Insurance Company had been submitted to the State of Arizona. Although
such approvals are anticipated, there can be no assurance when or if such
approvals will be granted, or when or if any other condition to the Merger
will be satisfied.
Business of FNBC Pending the Merger
The Plan of Merger also contains covenants to which FNBC has agreed.
The covenants remain in effect until the effective time of the Merger or
until the Plan of Merger has been terminated, and include, among others, an
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agreement that FNBC and each of its subsidiaries: (i) will conduct its
business and manage its property only in the usual, regular and ordinary
course; (ii) will not enter into any employment agreement that is not
terminable, without cost or penalty, on 60 days' or less notice; (iii) will
not issue any capital stock or any security convertible into capital stock,
or grant any warrant or option to acquire capital stock, or otherwise alter
its capital structure, other than as required by outstanding FNBC stock
options; (iv) will not make any material changes in any policies or
procedures applicable to the conduct of its business; (v) will not sell,
mortgage, pledge, encumber or otherwise dispose of any property or assets,
except in the ordinary course of business, having a market value of $50,000
or more; (vi) except to reelect persons who are then incumbent directors
and officers at annual meetings, not increase the number of directors or
fill any vacancy on the board of directors or elect or appoint any person
to an executive office; (vii) except for certain exceptions listed in the
Plan of Merger, not increase the salary or compensation payable to or agree
to pay any bonus to any director or officer, or any class or group of
employees as a class or group, and not introduce or change any employee
benefit plan or program of any kind for the benefit of its employees unless
required by law or the Plan of Merger; and (viii) not borrow money except
in the ordinary course of business.
Nothing contained in the Plan of Merger will preclude FNBC from
declaring and paying cash dividends on FNBC Common Stock quarterly at a
rate not to exceed $.20 per share in a manner, on dates, and with respect
to record dates consistent with its past practice; provided, that FNBC must
adjust the record date for its regularly scheduled dividend with respect to
the period in which the Merger becomes effective if necessary to assure
that FNBC stockholders receive only one dividend payable in the quarter in
which the Merger becomes effective with respect to shares of FNBC Common
Stock or Old Kent Common Stock received in the Merger. The board of
directors of FNBC is under no obligation to pay dividends on FNBC Common
Stock. Nothing in the Plan of Merger will preclude FNBC from liquidating
or selling the Insurance Company for a price not less than the
stockholders' equity of the Insurance Company or such other price to which
Old Kent may agree.
Redemption of FNBC Rights
Under the Plan of Merger, the board of directors of FNBC must take all
action necessary to redeem the common share purchase rights (the "FNBC
Rights") outstanding under a Rights Agreement dated as of November 28,
1990, as amended, between FNBC and State Street Bank and Trust Company (the
"FNBC Rights Agreement") that are represented by and transferable only with
shares of FNBC Common Stock at a redemption price of $.01 per FNBC Right in
cash, which redemption must become effective immediately prior to the
effective time of the Merger. Following the redemption, FNBC will have no
obligation under the FNBC Rights or the FNBC Rights Agreement and the
holders will have no rights under the FNBC Rights or the FNBC Rights
Agreement after that time, except, in each case, with respect to payment of
the redemption price.
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FNBC Stock Options and ESOP Shares
Before the effective time of the Merger, each outstanding employee
stock option entitling the holder to purchase shares of FNBC Common Stock
will be amended, if necessary, so that it will become, if and when the
Merger becomes effective, an option to purchase, for an equivalent price,
that number of shares of Old Kent Common Stock that the holder would have
acquired pursuant to the Merger had the holder exercised the option
immediately prior to the effective time of the Merger. At the closing, Old
Kent will grant to each non-employee director of FNBC then serving on
FNBC's board of directors replacement options to purchase, for an
equivalent price and subject to the same vesting requirements with respect
to service as a director of the Bank or as a director or advisory director
of any successor to the Bank, the number of shares of Old Kent Common Stock
that would have been acquired if his or her options to acquire FNBC Common
Stock (including shares as to which his or her options are not then vested)
had been exercised immediately prior to the effective time of the Merger,
in consideration for the written waiver executed by each such non-employee
director of FNBC of any rights that he or she may have under then
outstanding options issued by FNBC to purchase shares of FNBC Common Stock.
The options will in all other respects contain the same terms and
conditions as they do presently.
As of October 31, 1994, there were employee stock options and non-
employee director stock options outstanding to purchase an aggregate of
212,672 shares of FNBC Common Stock.
Shares of FNBC Common Stock held by or through the ESOP will be
converted into shares of Old Kent Common Stock in the Merger at the same
Exchange Rate applicable to all other outstanding shares of FNBC Common
Stock. The ESOP will be terminated effective as of the closing. Prior to
its termination, the ESOP will be amended to provide that no employees of
Old Kent will be eligible to participate, that there will be no new
participants in the plan on or after the closing, that upon termination the
Trustee will pay off the outstanding loan balance owed by the ESOP, and
that any assets left in the suspense account after repayment of the loan
will be allocated among the participants of the ESOP in accordance with the
terms of the ESOP in a manner consistent with federal tax laws. Upon
receipt of a favorable determination letter from the IRS with respect to
the termination, the participants in the ESOP will have the option to
transfer or roll over their ESOP accounts into the Old Kent Thrift Plan.
Management After the Merger
Upon the consummation of the Merger, the directors and officers of Old
Kent will be the persons who were directors and officers of Old Kent
immediately prior to the effective time of the Merger. The directors,
officers and employees of FNBC's subsidiaries will continue immediately
after the effective time of the Merger as directors, officers and employees
of the same subsidiaries.
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Conditions to the Merger and Abandonment
The obligations of Old Kent and FNBC to consummate the Merger are
subject to the fulfillment of certain conditions, including, without
limitation, the following:
1. An affirmative vote of the holders of a majority of the
outstanding shares of FNBC Common Stock is required to adopt the Plan
of Merger.
2. The Federal Reserve Board must approve the Merger and the
State of Arizona must approve the Merger with respect to the change of
control of the Insurance Company if it has not been liquidated.
3. Old Kent and FNBC must comply with their respective
covenants, and their respective representations and warranties must be
true in all material respects each as set forth in the Plan of Merger.
(See "The Merger--Business of FNBC Pending the Merger.")
4. Old Kent and FNBC must receive certain opinions of counsel.
5. FNBC must obtain waivers of all material rights and waivers
of the loss of all material rights that could be triggered by the
change in control of FNBC resulting from the Merger, other than rights
under the Bank's Supplemental Executive Retirement Plan.
6. Neither Old Kent nor FNBC must be subject to any order,
decree or injunction of a court or agency enjoining or prohibiting the
Merger.
7. There must not be any suit or proceeding pending or
threatened that could result in any liability that could have a
material adverse effect on FNBC and its subsidiaries on a consolidated
basis or that challenges the Merger.
8. Old Kent must receive reasonably satisfactory assurance from
its independent public accountants that the Merger will be treated as
a pooling of interests for accounting purposes, subject to the
satisfaction of post-Merger conditions.
9. FNBC must deliver to Old Kent such consents, amendments, or
supplemental agreements, all in form and substance reasonably
satisfactory to Old Kent, necessary or advisable to confirm that
neither the execution of the Plan of Merger nor consummation of the
Merger will result in any default, penalty, or acceleration of the
indebtedness of the ESOP to Bankers' Bank of Illinois or under any
related pledge agreement, security agreement, note, or other
agreement.
Either Old Kent or FNBC, whichever is entitled to the benefit of the
foregoing conditions, may waive one or more of those conditions except
where satisfaction of the condition is required by law. The Plan of Merger
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contains various other conditions to the respective obligations of Old Kent
and FNBC that have been satisfied.
The boards of directors, or duly authorized committees thereof, of
FNBC and Old Kent may by mutual consent terminate the Plan of Merger and
abandon the Merger at any time before the effective time of the Merger.
Either FNBC or Old Kent may terminate the Plan of Merger and abandon
the Merger on its own action upon the occurrence of certain events
specified in the Plan of Merger, including, among others, the following
events:
1. Old Kent or FNBC discovers that one or more of the other
party's representations and warranties is or has become untrue, and
the cumulative effect of all such untrue representations and
warranties is material to the other party's business, income or
financial condition on a consolidated basis;
2. Old Kent or FNBC commits one or more breaches of any
provision of the Plan of Merger which would in the aggregate be
material and such breach or breaches are not cured after notice;
3. There occurs a materially adverse change in the financial
condition of Old Kent or FNBC and their respective subsidiaries on a
consolidated basis;
4. The Merger is not effective on or before July 31, 1995;
5. A court of competent jurisdiction issues a final
unappealable injunction or other judgment restraining or prohibiting
consummation of the Merger;
6. The stockholders of FNBC fail to adopt the Plan of Merger;
or
7. The Federal Reserve Board refuses to approve the Merger or
the State of Arizona refuses to grant any necessary approval to the
change of control of the Insurance Company.
Old Kent may terminate the Plan of Merger and abandon the Merger if an
environmental assessment indicates any environmental conditions which are
contrary to FNBC's representations and warranties and Old Kent has notified
FNBC in writing of such conditions within the time permitted for such
notice in the Plan of Merger, and the parties are unable to agree on a
course of action for further investigation of the environmental condition
and/or a mutually acceptable modification to the Plan of Merger within the
30-day period specified for that purpose in the Plan of Merger, or any
extension of that period, and the environmental condition is not one for
which it can be determined to a reasonable degree of certainty that the
risk and expense to which Old Kent would be subject as the owner of the
property can be quantified or limited to an immaterial amount; provided,
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that Old Kent notifies FNBC of its intent to terminate the Plan of Merger
within such 30-day period or any extension of that period.
Old Kent may terminate the Plan of Merger and abandon the Merger if
FNBC or its subsidiaries, or any of their respective directors, officers,
employees, investment bankers, representatives, or agents, solicits,
encourages, or negotiates with any party other than Old Kent any proposals,
offers, or expressions of interest concerning any tender offer, exchange
offer, merger, consolidation, sale of shares, sale of assets, or assumption
of liabilities not in the ordinary course, or other business combination
involving FNBC or any of its subsidiaries.
Old Kent may terminate the Plan of Merger and abandon the Merger at
any time if its independent public accountants shall have advised Old Kent
that the Merger is unlikely to qualify as a pooling of interests for
accounting purposes.
Termination Fee
Under certain circumstances involving the acquisition of control of
FNBC by a party other than Old Kent, FNBC is required under the Plan of
Merger to pay Old Kent a "Termination Fee." The Termination Fee is payable
only if, while the Plan of Merger is in effect: (i) a party other than Old
Kent directly or indirectly acquires control (as defined in the Federal
Bank Holding Company Act using 25 percent) of FNBC, or its successor by
merger or consolidation, or acquires 25 percent or more of the consolidated
assets of FNBC and FNBC's subsidiaries; or (ii) FNBC solicits, invites,
negotiates, or enters into an agreement with a party other than Old Kent to
acquire such control or such assets, or FNBC or such other party publicly
announces an intention to do so, and within one year of the date of such
solicitation, invitation, negotiation, agreement, or announcement (whether
or not the Plan of Merger is then in effect) the party acquires such
control or such assets.
The Termination Fee would be the greater of: (i) $1,500,000; or
(ii) an amount equal to 15 percent of the excess of the "Acquisition Price"
of FNBC Common Stock over the Purchase Price Per Share, multiplied by the
number of shares of FNBC Common Stock outstanding immediately prior to the
acquisition of such control or assets of FNBC. For purposes of the
Termination Fee, the "Acquisition Price" of FNBC Common Stock is generally
the value of the consideration received by FNBC stockholders from the party
acquiring such control or assets of FNBC.
Old Kent will not be entitled to receive the Termination Fee
if: (i) the Merger is consummated; (ii) the Plan of Merger is terminated
and the Merger is abandoned by mutual consent of Old Kent and FNBC; (iii)
the Plan of Merger is terminated and the Merger is abandoned by FNBC by
reason of a breach of Old Kent's warranties or covenants, an injunction
prohibiting consummation of the Merger, a refusal by any regulatory
authority to approve the Merger, or the occurrence of a materially adverse
change in the financial condition of Old Kent. In addition, Old Kent will
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not be entitled to receive the Termination Fee if the Plan of Merger is
terminated and the Merger is abandoned by FNBC because the Merger has not
yet become effective on July 31, 1995, if Old Kent has failed to satisfy
certain conditions precedent to FNBC's obligations under the Plan of
Merger, or because the price of Old Kent Common Stock is below $28.90 per
share and the decrease in such price is more substantial than the decrease
in the aggregate prices of a group of comparable stocks. Old Kent will
not be entitled to receive the Termination Fee if the Plan of Merger is
terminated and the Merger is abandoned by Old Kent because of the existence
of an environmental condition that is contrary to FNBC's representations
and warranties and for which the parties are unable to agree upon a course
for further investigation or remediation of the condition and/or a mutually
acceptable modification to the Plan of Merger.
Description of Old Kent Capital Stock
Old Kent's authorized capital stock consists of 150,000,000 shares of
common stock, $1 par value ("Common Stock"), and 25,000,000 shares of
preferred stock, no par value ("Preferred Stock"), of which 3,000,000
shares are designated Series A Preferred Stock and 300,000 shares are
designated Series B Preferred Stock. As of October 31, 1994, Old Kent had
outstanding 40,553,814 shares of Common Stock and no shares of Preferred
Stock. Old Kent expects to issue no more than 3,093,128 shares of Common
Stock in the Merger.
Common Stock. Holders of Old Kent Common Stock are entitled to
dividends out of funds legally available for that purpose when, as and if
declared by the board of directors. The dividend rights of Old Kent Common
Stock are subject to the rights of Old Kent Preferred Stock which has been
or may be issued. Each holder of Old Kent Common Stock is entitled to one
vote for each share held on each matter presented for shareholder action.
Old Kent Common Stock has no preemptive rights, cumulative voting rights,
conversion rights or redemption provisions.
In the case of any liquidation, dissolution or winding up of the
affairs of Old Kent, holders of Old Kent Common Stock will be entitled to
receive, pro rata, any assets distributable to common shareholders in
respect of the number of shares held by them. The liquidation rights of
Old Kent Common Stock are subject to the rights of holders of any Old Kent
Preferred Stock which has been or may be issued.
All outstanding shares of Old Kent Common Stock are, and all shares to
be issued pursuant to the Plan of Merger will when issued be, fully paid
and nonassessable.
Preferred Stock Purchase Rights. Each share of Old Kent Common Stock
has, and each share of Old Kent Common Stock to be issued in the Merger
will have, attached to it the number of Series B Preferred Stock Purchase
Rights ("Old Kent Rights") issued pursuant to a Rights Agreement dated as
of December 19, 1988, between Old Kent and Old Kent Bank and Trust Company
(the "Old Kent Rights Agreement") represented by each share of Old Kent
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Common Stock, as long as the Old Kent Rights are not separately
transferable. As of the date of this Prospectus and Proxy Statement, each
share of Old Kent Common Stock represents two-thirds of an Old Kent Right.
The number of Old Kent Rights represented by each share of Old Kent Common
Stock is subject to adjustment upon the occurrence of certain events set
forth in the Old Kent Rights Agreement. See "The Merger--Provisions
Affecting Control" for a more detailed discussion of Old Kent Rights.
Preferred Stock. Old Kent is authorized to issue shares of Preferred
Stock from time to time in one or more series. Preferred Stock may have
such designations, powers, preferences and relative participating, optional
or other rights and such qualifications, limitations or restrictions as may
be provided for the issue of such series by resolution adopted by the Old
Kent board of directors. Such Preferred Stock may have priority over Old
Kent Common Stock as to dividends and as to distribution of Old Kent's
assets upon any liquidation, dissolution or winding up of Old Kent. Such
Preferred Stock may be redeemable for cash, property or rights of Old Kent,
may be convertible into shares of Old Kent Common Stock, and may have
voting rights entitling the holder to not more than one vote per share on
each matter submitted for shareholder action.
Provisions Affecting Control
The Michigan Business Corporation Act and Old Kent's shareholder
rights plan contain provisions that could be utilized to impede efforts to
acquire control of Old Kent.
Shareholder Rights Plan. The Board of Directors of Old Kent has
adopted a shareholder rights plan. This plan is designed to protect the
shareholders of Old Kent against unsolicited attempts to acquire control of
Old Kent in a manner that does not offer a fair price to all of the
shareholders. Currently under this plan, two-thirds of an "Old Kent Right"
is associated with each outstanding share of Old Kent Common Stock. Each
full Old Kent Right entitles a shareholder of Old Kent to purchase one
one-hundredth of a share of Series B Preferred Stock from Old Kent at a price
of $80. The Old Kent Rights become exercisable if a person or group (an
"Acquiring Person") has acquired, or has obtained the right to acquire,
20 percent or more of the outstanding shares of Old Kent Common Stock or
has commenced a tender offer or exchange offer that would result in the
Acquiring Person owning 25 percent or more of the outstanding shares of Old
Kent Common Stock. If Old Kent were the surviving corporation in a merger
with an Acquiring Person and Old Kent Common Stock is not changed or
exchanged, an Acquiring Person were to become the beneficial owner of more
than 25 percent of the outstanding shares of Old Kent Common Stock, or an
Acquiring Person were to engage in one or more "self-dealing" transactions
deemed to be unfair to Old Kent, each holder of an Old Kent Right would
have the right to receive, upon exercise, Old Kent Common Stock having a
value equal to two times the exercise price of the Old Kent Right. In
addition, after an Acquiring Person has acquired, or obtained the right to
acquire, 20 percent or more of the outstanding shares of Old Kent Common
Stock and the Acquiring Person causes Old Kent to merge into the Acquiring
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Person or causes 50 percent or more of Old Kent's assets to be sold or
transferred, each holder of an Old Kent Right would have the right to
receive, upon exercise, common stock of the Acquiring Person having a value
equal to two times the exercise price of the Old Kent Right. Old Kent is
entitled to redeem the Old Kent Rights at $.01 per Old Kent Right at any
time until ten days following the public announcement that an Acquiring
Person has acquired, or has obtained the right to acquire, 20 percent or
more of the outstanding shares of Old Kent Common Stock.
Michigan Fair Price Act. Certain provisions of the Michigan Business
Corporation Act (the "Fair Price Act") establish a statutory scheme similar
to the supermajority and fair price provisions found in many corporate
charters. The Fair Price Act provides that a supermajority vote of 90
percent of the shareholders and no less than two-thirds of the votes of
noninterested shareholders must approve a "business combination." The Fair
Price Act defines a "business combination" to encompass any merger,
consolidation, share exchange, sale of assets, stock issue, liquidation, or
reclassification of securities involving an "interested shareholder" or
certain "affiliates." An "interested shareholder" is generally any person
who owns 10 percent or more of the outstanding voting shares of the
corporation. An "affiliate" is a person who directly or indirectly
controls, is controlled by, or is under common control with a specified
person.
The supermajority vote required by the Fair Price Act does not apply
to business combinations that satisfy certain conditions. These conditions
include, among others, that: (i) the purchase price to be paid for the
shares of the corporation in the business combination is at least equal to
the highest of either (a) the market value of the shares or (b) the highest
per share price paid by the interested shareholder within the preceding
two-year period or in the transaction in which the shareholder became an
interested shareholder, whichever is higher; and (ii) once becoming an
interested shareholder, the person does not become the beneficial owner of
any additional shares of the corporation except as part of the transaction
which resulted in the interested shareholder becoming an interested
shareholder or by virtue of proportionate stock splits or stock dividends.
The requirements of the Fair Price Act do not apply to business
combinations with an interested shareholder that the board of directors has
approved or exempted from the requirements of the Fair Price Act by
resolution prior to the time that the interested shareholder first became
an interested shareholder.
Control Share Act. Michigan law regulates the acquisition of "control
shares" of large public Michigan corporations (the "Control Share Act").
The Control Share Act applies to Old Kent and its shareholders.
The Control Share Act establishes procedures governing "control share
acquisitions." A control share acquisition is defined as an acquisition of
shares by an acquirer which, when combined with other shares held by that
person or entity, would give the acquirer voting power at or above any of
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the following thresholds: 20 percent, 33-1/3 percent or 50 percent. Under
the Control Share Act, an acquirer may not vote "control shares" unless the
corporation's disinterested shareholders (defined to exclude the acquiring
person, officers of the target corporation, and directors of the target
corporation who are also employees of the corporation) vote to confer
voting rights on the control shares. The Control Share Act does not affect
the voting rights of shares owned by an acquiring person prior to the
control share acquisition.
The Control Share Act entitles corporations to redeem control shares
from the acquiring person under certain circumstances. In other cases, the
Control Share Act confers dissenters' right upon all of a corporation's
shareholders except the acquiring person.
Comparison of Rights of Old Kent Shareholders and
FNBC Stockholders
Old Kent is a Michigan corporation. If the Merger is consummated, the
present stockholders of FNBC will become shareholders of Old Kent. FNBC is
a Delaware corporation. The Michigan Business Corporation Act is similar
to the Delaware General Corporation Law. However, there are a number of
differences between the two laws.
Appraisal Rights. Under both Michigan and Delaware law, a holder of
shares of stock who does not vote in favor of certain corporate actions may
have the right to obtain an appraisal of those shares in certain
circumstances, and the right to receive cash in exchange for those shares
(called appraisal rights or rights of dissent). The Michigan Business
Corporation Act recognizes rights of dissent in connection with certain
amendments to the articles of incorporation, mergers, consolidations, sales
or other dispositions of all or substantially all of the assets of a
corporation, certain acquisitions for stock, and approval of a control
share acquisition. Under Delaware law, appraisal rights are available for
the shares of any stock of a constituent corporation in certain mergers.
Unless the corporate charter otherwise provides, appraisal rights are not
available under Delaware law as a result of an amendment to a corporation's
certificate of incorporation or the sale of all or substantially all of the
assets of the corporation. Under Delaware law, absent certain specified
conditions, appraisal rights are generally not available to holders of FNBC
Common Stock in connection with a merger or consolidation because FNBC
Common Stock is designated as a national market system security on an
interdealer quotation system by the NASD. Under Michigan law, rights of
dissent are generally not available to holders of Old Kent Common Stock in
connection with mergers, consolidations or sales of assets because shares
of Old Kent Common Stock are held by more than 2,000 persons.
However, Old Kent's Articles of Incorporation provide that any Old
Kent shareholder may dissent from any plan of merger or consolidation to
which Old Kent is a party or any sale, lease, exchange, or other
disposition of all or substantially all of the assets of Old Kent not in
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the usual or regular course of business, in the manner, with the rights,
and subject to the requirements applicable to dissenting shareholders as
provided in the Michigan Business Corporation Act, without regard to the
exception to a shareholder's right to dissent provided in Section 762 of
that act. This right of dissent does not apply to any corporate action
that is approved by: (i) an affirmative vote of at least 50 percent of the
entire board of directors of Old Kent; and (ii) an affirmative vote of
50 percent of the Continuing Directors. "Continuing Director" means a
member of the board of directors of Old Kent who was either: (i) first
elected or appointed as a director prior to April 17, 1989; or
(ii) subsequently elected or appointed as a director if such director was
nominated or appointed by a majority of the then Continuing Directors.
Limitation of Director Liability. The Michigan Business Corporation
Act and the Delaware General Corporation Law both permit corporations to
limit the personal liability of their directors in certain circumstances.
Old Kent's Articles of Incorporation and FNBC's Certificate of
Incorporation both provide that directors of the respective corporation
shall not be liable to the corporation or its shareholders or stockholders
for monetary damages for breaches of fiduciary duty, except to the extent
that such a limitation of liability contravenes the respective state's law.
These provisions eliminate the personal liability of directors of Old Kent
and FNBC in their capacity as directors (but not in their capacity as
officers) to the respective corporation and its shareholders or
stockholders to the full extent permitted by Michigan or Delaware law, as
the case may be.
Evaluation of Proposed Offers. Old Kent's Articles of Incorporation
provide that Old Kent's board of directors will not approve, adopt, or
recommend any proposal of any party other than Old Kent to make a tender or
exchange offer for any equity security of Old Kent, or engage in any merger
or consolidation of Old Kent with or into another entity, any sale,
exchange, lease, mortgage, pledge, transfer, or other disposition of all or
substantially all of Old Kent's assets, any liquidation or dissolution of
Old Kent, or any reorganization or recapitalization of Old Kent which would
result in a change of control of Old Kent, unless it has first evaluated
the proposal and determined, in its judgment, that the proposal would be in
substantial compliance with all applicable laws. If Old Kent's board of
directors determines, in its judgment, that a proposal would be in
substantial compliance with all laws, the board of directors will then
evaluate the proposal and determine whether the proposal is in the best
interests of Old Kent and its shareholders. In evaluating a proposed offer
to determine whether it would be in the best interests of the corporation
and its shareholders, the board of directors, in exercising its judgment,
may consider all facts which it deems relevant including, without
limitation: (i) the fairness of the consideration to be received by its
shareholders under the proposed offer; (ii) the possible economic and
social impact of the proposed offer and its consummation on Old Kent and
its subsidiaries and their employees, customers, and depositors; (iii) the
possible economic and social impact of the proposed offer and its
consummation on the communities in which Old Kent and its subsidiaries
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operate or are located; (iv) the business, financial condition, safety,
soundness, and earning prospects of the offering party; (v) the competence,
experience, and integrity of the offering party and its management; and
(vi) the intentions of the offering party regarding the use of the assets
of Old Kent to finance the transaction.
Supermajority Voting. FNBC's Certificate of Incorporation requires
the affirmative vote of the holders of 66-2/3 percent of the voting stock
of FNBC for approval of certain business combinations with or involving an
"interested stockholder." This requirement does not apply to transactions
that do not involve an "interested stockholder." Because Old Kent is not
an "interested stockholder" and the Merger would not involve any other
"interested stockholder," the normal requirements of the Delaware General
Corporation Law apply and, accordingly, only a majority vote of the
stockholders is required.
Agreements of Affiliates
The shares of Old Kent Common Stock to be issued to FNBC stockholders
pursuant to the Plan of Merger have been registered under the Securities
Act of 1933. That registration, however, does not cover resales by FNBC
stockholders who may be deemed to control or be controlled by, or be under
common control with, FNBC at the time of the special meeting of
stockholders ("Affiliates").
Each director and executive officer of FNBC, all of whom have been
identified by FNBC as Affiliates of FNBC, has agreed that he or she will
not sell, transfer or otherwise dispose of shares of Old Kent Common Stock
received in the Merger in a manner which would result in violation of the
Securities Act of 1933 or applicable rules and regulations or prior to
publication of financial results of the post-Merger combined operations of
Old Kent covering a period of at least 30 days. Old Kent may place a
legend reflecting such transfer restrictions on the certificates
representing such shares of Old Kent Common Stock. In addition, each
director and executive officer of FNBC has agreed not to voluntarily sell
or dispose of any shares of FNBC Common Stock without Old Kent's written
consent (except as may be necessary to discharge a fiduciary duty, by gift
made for estate planning purposes, or upon death by will or the laws of
descent and distribution).
Each director and executive officer of FNBC has agreed that he or she
will use reasonable efforts to cause the Plan of Merger to be adopted by
the stockholders of FNBC and consummated according to its terms. Each such
person has also agreed not to solicit, encourage, or negotiate with any
other party any proposals, offers, or expressions of interest concerning
any tender offer, exchange offer, merger, consolidation, sale of shares,
sale of assets, or assumption of liabilities not in the ordinary course, or
other business combination involving FNBC or any of FNBC's subsidiaries
other than the Merger.
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Federal Income Tax Consequences
As a condition precedent to the Merger, Old Kent and FNBC must receive
opinions of Old Kent's legal counsel substantially to the effect that
(among other issues) for federal income tax purposes:
1. No gain or loss will be recognized by the stockholders of
FNBC who receive shares of Old Kent Common Stock in exchange for all
of their shares of FNBC Common Stock, except to the extent of any cash
received in lieu of a fractional share of Old Kent Common Stock;
2. The basis of the Old Kent Common Stock to be received by
stockholders of FNBC will, in each instance, be the same as the basis
of the respective shares of FNBC Common Stock surrendered in exchange
therefor; and
3. The holding period of the Old Kent Common Stock received by
stockholders of FNBC will, in each instance, include the period during
which the FNBC Common Stock surrendered in exchange therefor was held,
provided that the FNBC Common Stock was, in each instance, held as a
capital asset in the hands of the stockholder of FNBC at the effective
time of the Merger.
EACH STOCKHOLDER OF FNBC SHOULD CONSULT A PROFESSIONAL TAX ADVISER ON
THE TAX CONSEQUENCES OF THE MERGER TO SUCH STOCKHOLDER. THE TAX AND OTHER
MATTERS DESCRIBED IN THIS PROSPECTUS AND PROXY STATEMENT DO NOT CONSTITUTE
LEGAL OR TAX ADVICE.
Accounting Treatment
Old Kent expects to treat the Merger as a pooling of interests for
accounting purposes. Under generally accepted accounting principles
governing pooling of interests accounting, Old Kent would carry forward to
its accounts the assets and liabilities of FNBC in the amounts reported by
FNBC. If the Merger does not qualify for the pooling of interests
accounting method, Old Kent may terminate the Plan of Merger and abandon
the Merger.
Pro Forma Condensed Combined Financial Statements
The following unaudited Pro Forma Condensed Combined Balance Sheets as
of June 30, 1994, and the unaudited Pro Forma Condensed Combined Statements
of Income for each of the three years in the period ended December 31,
1993, and for the six-month period ended June 30, 1994, give effect to the
Merger. The pro forma information is based on the historical financial
statements of Old Kent and FNBC, giving effect to the proposed transaction
under the pooling of interests method of accounting.
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The pro forma financial statements may not be indicative of the
results that actually would have occurred if the Merger had been in effect
on the dates indicated or that may be attained in the future. The pro
forma financial statements should be read in conjunction with the financial
statements and notes thereto of Old Kent and FNBC incorporated by reference
into or included elsewhere in this Prospectus and Proxy Statement.
The pro forma financial statements were prepared using an estimated
Exchange Rate of 1.0294 shares of Old Kent Common Stock for each share of
FNBC Common Stock. This Exchange Rate assumes a Purchase Price Per Share
of $35 (without any reduction that could occur as described in "The Merger-
- -Purchase Price Contingency") and a Calculation Price of $34, which is
midway between the $36 upper limit and the $32 lower limit (assuming the
nonexistence of the conditions that could cause the Calculation Price to be
decreased to $28.90).
The results of EdgeMark Financial Corporation ("EdgeMark") have been
included in Old Kent's historical results since May 2, 1994 (the effective
date of Old Kent's acquisition of EdgeMark). After considering the pro
forma effects of Old Kent's share repurchases in an amount approximating
those issued as part of the acquisition of EdgeMark and the additional
amortization associated with the allocation of excess purchase price, the
acquisition of EdgeMark does not materially enhance or dilute the pro forma
combined results for the six months ended June 30, 1994, or the year ended
December 31, 1993.
The results of Princeton Financial Corp. have been included in Old
Kent's historical results since March 1, 1994 (the effective date of its
acquisition by Old Kent), and are not material to the pro forma combined
results for the six months ended June 30, 1994, or the year ended
December 31, 1993.
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PRO FORMA CONDENSED COMBINED BALANCE SHEETS
(Unaudited)
June 30, 1994
(Dollars in Thousands)
Pro Forma Pro Forma
Old Kent FNBC Adjustments Combined
ASSETS:
Cash and due from banks: $ 401,913 $ 29,150 $ $ 431,063
Federal funds sold and resale agreements 260,075 6,400 266,475
Total cash and cash equivalents 661,988 35,550 697,538
Other interest-earning assets 241,723 -- 241,723
Securities available-for-sale 1,181,000 7,017 1,188,017
Securities held-to-maturity 2,141,690 114,825 2,256,515
Loans 5,836,788 339,785 6,176,573
Less allowance for credit losses 158,580 4,816 163,396
Net loans 5,678,208 334,969 6,013,177
Leasehold improvements,
premises and equipment 154,254 15,243 169,497
Other assets 346,066 10,047 356,113
Total assets $10,404,929 $ 517,651 $ $ 10,922,580
LIABILITIES AND
SHAREHOLDERS' EQUITY:
LIABILITIES:
Deposits:
Non-interest bearing $ 1,261,777 $ 93,824 $ $ 1,355,601
Interest bearing 6,997,146 377,740 7,374,886
Foreign-interest bearing 149,770 149,770
Total deposits 8,408,693 471,564 8,880,257
Short-term and Long-term borrowed funds 1,025,257 1,100 1,026,357
Other liabilities 123,971 6,104 130,075
Total liabilities 9,557,921 478,768 10,036,689
SHAREHOLDERS' EQUITY:
Preferred stock -- -- --
Common stock 40,612 7,600 (5,097)(1) 43,115
Capital surplus 120,973 17,958 (17,958)(1) 120,973
Retained earnings 695,709 13,420 23,055 (1) 732,184
Valuation adjustment of
securities available-for-sale (10,286) (95) (10,381)
Total shareholders' equity 847,008 38,883 885,891
Total liabilities
and shareholders' equity $10,404,929 $ 517,651 $ $ 10,922,580
_________________________
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<FN>
(1) The unaudited Pro Forma Condensed Combined Balance Sheets assume the issuance of 2,504,000 shares of Old Kent Common Stock,
par value $1 per share, in the Merger in exchange for all of the outstanding shares of FNBC Common Stock, par value $3.125
per share. The Pro Forma Adjustments reflect the effect of the issuance of 2,504,000 shares of Old Kent Common Stock and the
cancellation of 2,432,000 shares of FNBC Common Stock.
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
(Unaudited)
(Dollars in Thousands, Except Per Share Data)
Six Months Ended June 30, 1994
Pro Forma
Old Kent FNBC Combined
Interest Income $ 339,324 $ 16,816 $ 356,140
Interest Expense 129,353 5,719 135,072
Net Interest Income 209,971 11,097 221,068
Provision for Credit Losses 10,785 350 11,135
Net Interest Income After Provision
for Credit Losses 199,186 10,747 209,933
Other Income:
Trust Income 21,044 -- 21,044
Service Charges on Deposits 15,936 1,320 17,256
Mortgage Banking Gains 5,652 -- 5,652
Other 32,497 793 33,290
Total Other Income 75,129 2,113 77,242
Other Expense:
Salary and Benefits 79,425 4,118 83,543
Occupancy and Equipment 23,103 1,709 24,812
Other 70,908 3,694 74,602
Total Other Expenses 173,436 9,521 182,957
Income Before Income Taxes and Cumulative Effects
of Changes in Accounting Principles 100,879 3,339 104,218
Income Taxes 33,688 786 34,474
Income Before Cumulative Effects
of Changes in Accounting Principles $ 67,191 $ 2,553 $ 69,744
Earnings per Common Share:
Primary $1.66 $1.03 $1.62
Fully Diluted $1.66 $1.02 $1.62
Average Shares Outstanding:
Primary 40,441,000 2,475,000 42,989,000
Fully Diluted 40,441,000 2,495,000 43,009,000
-46-
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
(Unaudited)
(Dollars in Thousands, Except Per Share Data)
Year Ended December 31,
1993 1992 1991
Pro Forma Pro Forma Pro Forma
Old Kent FNBC Combined Old Kent FNBC Combined Old Kent FNBC Combined
Interest Income $ 660,020 $ 32,403 $ 692,423 $ 687,194 $ 32,272 $ 719,466 $ 749,007 $ 36,593 $ 785,600
Interest Expense 253,280 11,281 264,561 301,586 14,058 315,644 409,809 19,717 429,526
Net Interest Income 406,740 21,122 427,862 385,608 18,214 403,822 339,198 16,876 356,074
Provision for Credit 33,997 825 34,822 57,712 1,275 58,987 39,812 1,875 41,687
Losses
Net Interest Income
After Provision for
Credit Losses 372,743 20,297 393,040 327,896 16,939 344,835 299,386 15,001 314,387
Other Income:
Trust Income 40,305 -- 40,305 38,472 -- 38,472 35,346 -- 35,346
Service Charges on
Deposits 29,972 2,790 32,762 26,516 2,430 28,946 25,233 2,182 27,415
Mortgage Banking 20,763 -- 20,763 14,651 -- 14,651 6,496 -- 6,496
Gains
Other 55,750 1,009 56,759 48,407 1,404 49,811 46,392 2,387 48,779
Total Other Income 146,790 3,799 150,589 128,046 3,834 131,880 113,467 4,569 118,036
Other Expense:
Salary and Benefits 145,914 7,758 153,672 132,467 7,300 139,767 129,672 6,738 136,410
Occupancy and
Equipment 40,986 3,274 44,260 36,717 3,445 40,162 37,698 3,039 40,737
Other 139,080 7,136 146,216 122,801 6,603 129,404 112,112 6,451 118,563
Total Other Expenses 325,980 18,168 344,148 291,985 17,348 309,333 279,482 16,228 295,710
Income Before Income
Taxes and Cumulative
Effects of Changes
in Accounting
Principles 193,553 5,928 199,481 163,957 3,425 167,382 133,371 3,342 136,713
Income Taxes 65,651 1,323 66,974 52,866 302 53,168 40,390 335 40,725
Income Before Cumulative
Effects of Changes in
Accounting Principles $ 127,902 $ 4,605 $ 132,507 $ 111,091 $ 3,123 $ 114,214 $ 92,981 $ 3,007 $ 95,988
Earnings per Common
Share:
Primary $3.14 $2.05 $3.08 $2.75 $1.64 $2.70 $2.31 $1.62 $2.28
Fully Diluted $3.14 $1.94 $3.07 $2.71 $1.46 $2.63 $2.21 $1.43 $2.17
-47-
Average Shares
Outstanding:
Primary 40,748,000 2,244,000 43,058,000 40,357,000 1,908,000 42,321,000 40,245,000 1,858,000 42,157,000
Fully Diluted 40,748,000 2,452,000 43,272,000 41,098,000 2,389,000 43,557,000 43,101,000 2,389,000 45,560,000
NO APPRAISAL RIGHTS
Holders of FNBC Common Stock are not entitled to appraisal rights
under the Delaware General Corporation Law in connection with the Merger.
VOTING AND MANAGEMENT INFORMATION
Voting Securities and Principal Stockholders of FNBC
Holders of record of shares of FNBC Common Stock at the close of
business on November __, 1994, will be entitled to vote at the annual
meeting. As of November __, 1994, there were ____________ shares of FNBC
Common Stock outstanding. Each share of FNBC Common Stock is entitled to
one vote.
The following table sets forth information concerning the number of
shares of FNBC Common Stock held by each stockholder who is known to FNBC's
management to be the beneficial owner of more than five percent of the
outstanding shares as of October 31, 1994:
Amount and Nature of Beneficial
Ownership of FNBC Common Stock (1)
Shared
Sole Voting Voting or Old Kent Common
Name and Address of and Invest- Investment Percent Stock to be Received
Beneficial Owner ment Power Power(3) Total of Class in the Merger(2)
First National Bank
in Macomb County
Employees' Stock Ownership Plan
49 Macomb Place
Mount Clemens, Michigan 48043 92,549 73,384 165,933 6.8% 170,811
The following table sets forth certain information concerning the
number of shares of FNBC Common Stock held as of October 31, 1994, by each
of FNBC's directors and executive officers and by all of FNBC's directors
and executive officers as a group:
-48-
Amount and Nature of Beneficial
Ownership of FNBC Common Stock (1)
Shared Unvested
Sole Voting Voting or Vested Stock Old Kent Common
and Invest-Investment ESOP Stock Options Percent Stock to be Received
Name of Beneficial Owner ment Power Power(3) Account (4) Options (Memo)(5) Total(6) of Class in the Merger(2)
Harold W. Allmacher 43,441 105 594 -- 33,042 44,140 1.73% 45,437
Raymond M. Contesti 6,716 -- -- 8,820 5,880 15,536 * 15,992
James T. Cresswell 7,394 7,855 -- 8,820 8,820 24,069 * 24,776
Celestina Giles 756 1,279 594 -- -- 2,629 * 2,706
Arie Guldemond 50,421 12,303 -- 8,820 8,820 71,544 2.80% 73,647
Frank E. Jeannette -- 28,599 -- 8,820 5,880 37,419 1.47% 38,519
David A. McKinnon 594 3,316 -- 8,820 5,880 12,730 * 13,104
Robert D. Morrison -- 6,699 -- 5,880 5,880 12,579 * 12,948
John J. Mulso 29,275 6,565 -- 8,820 5,880 44,660 1.75% 45,973
Glen D. Schmidt 6,177 99,633 -- 8,820 5,880 114,630 4.49% 118,000
Paul G. Irwin -- 291 421 7,350 -- 8,062 * 8,299
Brian P. Kimball -- 9,002 594 19,314 -- 28,910 1.13% 29,759
Richard J. Miller -- 655 594 19,781 5,434 21,030 * 21,648
All directors and exec
officers as a group 144,774 176,302 2,797 114,065 91,396 437,938 17.16% 450,813
_____________________________
<FN>
* Less than 1 percent.
(1) The numbers of shares stated are based on information furnished by the persons listed and include shares personally owned of
record by each person and shares that, under applicable regulations, are deemed to be otherwise beneficially owned by each
person. Under these regulations, a beneficial owner of a security includes any person who, directly or indirectly, through
any contract, arrangement, understanding, relationship or otherwise has or shares voting power or investment power with
respect to the security. Voting power includes the power to vote or direct the voting of the security. Investment power
includes the power to dispose or direct the disposition of the security. A person is also considered the beneficial owner of
a security if the person has a right to acquire beneficial ownership of the security within 60 days.
(2) Based on an assumed Exchange Rate of 1.0294 shares of Old Kent Common Stock for each share of FNBC Common Stock. (See
"Introduction and Summary--Comparative Per Share Data.") The numbers of shares set forth in this column do not assume
conversion of shares of FNBC Common Stock that are subject to unvested stock options. No named FNBC stockholder will
beneficially own one percent or more of the outstanding shares of Old Kent Common Stock after the Merger.
(3) These numbers include shares as to which the listed person or entity is legally entitled to share voting or investment power
by reason of joint ownership, trust or other contract or property right, and shares held by spouses and children over whom
the listed person may have substantial influence by reason of relationship. In some instances the listed person disclaims
beneficial ownership of these shares. Shares held in fiduciary capacities by the Bank are not included.
(4) This column reflects shares held for the vested account of the named person under the ESOP. The named person has sole voting
power, but no investment power, over the listed shares. The board of directors of FNBC has, subject to fiduciary duties and
-49-
limitations imposed by the instruments and laws governing the ESOP, sole voting and limited investment power over a total of
92,540 shares held in the unallocated account of the ESOP trust and limited investment power over 73,384 shares allocated to
the accounts of participants in the ESOP trust. The members of the board of directors of FNBC disclaim beneficial ownership
of these shares, and they are not listed as beneficially owned by members in the above table.
(5) This column is a memo entry that lists unvested stock options which are not expected to become exercisable within 60 days
after the indicated date. These options will be replaced by comparable options to purchase shares of Old Kent Common Stock
as of the effective time of the Merger (see "The Merger--FNBC Stock Options and ESOP Shares"). Under applicable regulations
they are not considered to be beneficially owned by the named person and are not included in the totals in the above table.
They do, however, represent an interest in the proposed Merger and are shown for the purpose of complete disclosure.
(6) This column includes vested stock options.
Executive Officers
The following is a list of the executive officers of FNBC, together
with their ages, their present positions, and the positions that they have
held with FNBC and the Bank during the past five years. Each of the
executive officers of FNBC has been employed as an officer or employee of
FNBC or the Bank for more than five years. Executive officers of FNBC are
elected annually by FNBC's board of directors to serve for the following
year and until their successors are elected and qualified.
Name and Position Position Held Since Age
Harold W. Allmacher 55
Vice Chairman, President and
Chief Executive Officer of FNBC 1987 - present
Chief Executive Officer of the Bank 1986 - present
President of the Bank 1983 - present
Brian P. Kimball 38
Vice President of FNBC 1990 - present
Executive Officer of FNBC 1989 - present
Senior Vice President and Senior Loan
Officer of the Bank 1989 - present
Vice President and Senior Loan Officer
of the Bank 1987 - 1989
Paul G. Irwin 30
Vice President of FNBC 1993 - present
Vice President and Loan Review Officer
of the Bank 1990 - present
Commercial Loan Officer of the Bank 1989 - 1990
Management Trainee of the Bank 1988 - 1989
-50-
Richard J. Miller 36
Vice President of FNBC 1993 - present
Vice President and Controller of the Bank 1991 - present
Treasurer of FNBC 1989 - present
Acting Controller of the Bank 1989 - 1991
Interests of Certain Persons
As of October 31, 1994, directors and executive officers of FNBC are
or may be deemed to be the beneficial owners of a total of 437,938 shares,
or 17.16 percent of the outstanding shares, of FNBC Common Stock. (See
"Voting and Management Information--Voting Securities and Principal
Stockholders of FNBC.")
As of October 31, 1994, certain individuals, including directors and
officers of FNBC and its subsidiaries, held stock options to acquire
205,461 shares of FNBC Common Stock. (See "Voting and Management
Information--Voting Securities and Principal Stockholders of FNBC.")
Before the Merger becomes effective, FNBC will amend the terms of all
employee stock options, if they have not been exercised and if they are
still in effect, so that they will become, if and when the Merger becomes
effective, options to acquire, for an equivalent price, the number of
shares of Old Kent Common Stock that would have been acquired if the
options to acquire FNBC Common Stock had been exercised immediately before
the effective time of the Merger. At the closing, Old Kent will grant to
each non-employee director of FNBC then serving on FNBC's board of
directors replacement options to purchase, for an equivalent price and
subject to the same vesting requirements with respect to service as a
director of the Bank or as a director or advisory director of any successor
to the Bank, the number of shares of Old Kent Common Stock that would have
been acquired if his or her options to purchase shares of FNBC Common Stock
(including shares as to which his or her options are not then vested) had
been exercised immediately before the effective time of the Merger, in
consideration for the written waiver signed by each such non-employee
director of FNBC of any rights that he or she may have under then
outstanding options issued by FNBC to purchase shares of FNBC Common Stock.
The options will in all other respects contain the same terms and
conditions as they do presently. See "Voting and Management Information--
Voting Securities and Principal Stockholders of FNBC" for more information
concerning the number of options held by each individual.
Executive officers of FNBC participate in the ESOP. For the number of
shares of FNBC Common Stock allocated to the ESOP accounts of executive
officers of FNBC, see "Voting and Management Information--Voting Securities
and Principal Stockholders of FNBC." Shares of FNBC Common Stock held by
or through the ESOP will be converted into shares of Old Kent Common Stock
in the Merger at the same Exchange Rate applicable to all other outstanding
shares of FNBC Common Stock. The ESOP will be terminated effective as of
-51-
the date of the closing. Before its termination, the ESOP will be amended
to provide that no employees of Old Kent will be eligible to participate,
that there will be no participants in the ESOP on or after the date of the
closing, that upon termination the Trustee of the ESOP will pay off the
outstanding loan balance owed by the ESOP, and that any assets left in the
suspense account after repayment of the loan will be allocated among the
participants of the ESOP in accordance with the terms of the ESOP and in a
manner consistent with federal tax laws. Upon receipt of a favorable
determination letter from the IRS concerning the termination, participants
in the ESOP will have the option to transfer or roll over their ESOP
accounts into the Old Kent Thrift Plan.
No director or executive officer of FNBC owns any shares of Old Kent
Common Stock. No director or executive officer of Old Kent owns any shares
of FNBC Common Stock or has any personal interest in the Merger other than
by reason of his or her holdings of Old Kent Common Stock. Except as
otherwise described in this Prospectus and Proxy Statement, there are no
material relationships among the executive officers, directors and
principal stockholders of FNBC and the executive officers, directors and
principal shareholders of Old Kent.
GENERAL INFORMATION
Incorporation by Reference
The following documents and information are incorporated by reference
into this Prospectus and Proxy Statement:
Old Kent's Annual Report on Form 10-K filed with the Commission
for the year ended December 31, 1993.
The following reports filed by Old Kent pursuant to Section 13(a)
or 15(d) of the Exchange Act since December 31, 1993:
1. Old Kent's Quarterly Report on Form 10-Q filed
with the Commission for the quarterly period ended March 31,
1994;
2. Old Kent's Report by Issuer of Securities Quoted
on NASDAQ Interdealer Quotation System filed pursuant to
Section 13 of the Securities Exchange Act of 1934 and
Rule 13a-17 thereunder on Form 10-C filed with the
Commission on May 5, 1994; and
3. Old Kent's Quarterly Report on Form 10-Q filed
with the Commission for the quarterly period ended June 30,
1994.
-52-
The description of Old Kent Common Stock contained in Old Kent's
Form 8-B filed with the Commission on May 31, 1984, and all amendments
and reports filed for the purpose of updating such description.
All other reports Old Kent files with the Commission subsequent
to the date of this Prospectus and Proxy Statement, but prior to the
date of the special meeting of FNBC stockholders, pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act.
FNBC's Annual Report on Form 10-K filed with the Commission for
the year ended December 31, 1993.
The following reports filed by FNBC pursuant to Section 13(a) or
15(d) of the Exchange Act since December 31, 1993:
1. FNBC's Quarterly Report on Form 10-Q filed with
the Commission for the quarterly period ended March 31,
1994; and
2. FNBC's Quarterly Report on Form 10-Q filed with
the Commission for the quarterly period ended June 30, 1994.
A copy of FNBC's 1993 Annual Report to Stockholders is attached as
Appendix B to this Prospectus and Proxy Statement. This Prospectus and
Proxy Statement incorporates by reference the following portions of FNBC's
1993 Annual Report to Stockholders:
Market Price of and Dividends on FNBC Common Stock and Related
Stockholder Matters. The information under the captions "Consolidated
Financial Highlights" and "Stockholder Information" on pages 1 and 36,
respectively, of FNBC's 1993 Annual Report to Stockholders.
Selected Financial Data and Supplementary Financial Data. The
information under the captions "Selected Financial Data" and "Selected
Quarterly Financial Information" on pages 28 and 35, respectively, of
FNBC's 1993 Annual Report to Stockholders.
Consolidated Financial Statements. The Consolidated Balance
Sheets, Consolidated Statements of Income, Consolidated Statements of
Changes in Stockholders' Equity, Consolidated Statements of Cash Flow,
Notes to Consolidated Financial Statements, and Independent Auditors'
Report on pages 10 through 27 of FNBC's 1993 Annual Report to
Stockholders.
Management's Discussion and Analysis of Financial Condition and
Results of Operations. The information under the caption
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" on pages 29 through 34 of FNBC's 1993 Annual
Report to Stockholders.
-53-
FNBC's 1993 Annual Report to Stockholders is not deemed to be filed with
the Commission and is not part of this Prospectus and Proxy Statement
except and only to the extent of the sections of that report listed above
which are expressly incorporated by reference in this Prospectus and Proxy
Statement.
Any statement contained in a document incorporated or deemed to be
incorporated by reference in this Prospectus and Proxy Statement shall be
deemed to be modified or superseded for purposes of this Prospectus and
Proxy Statement to the extent that a statement contained herein or in any
other subsequently filed document which also is or is deemed to be
incorporated by reference in this Prospectus and Proxy Statement modifies
or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a
part of this Prospectus and Proxy Statement.
Independent Public Accountants
The consolidated financial statements and schedules of Old Kent and
its subsidiaries incorporated by reference in this Prospectus and Proxy
Statement and elsewhere in this registration statement to the extent and
for the periods indicated in their reports have been audited by Arthur
Andersen LLP, independent public accountants, and are incorporated herein
in reliance upon the authority of said firm as experts in giving said
reports.
The consolidated financial statements of FNBC and its subsidiaries
used in this Prospectus and Proxy Statement, incorporated by reference in
FNBC's Annual Report on Form 10-K for the year ended December 31, 1993, and
appearing in the Annual Report to Stockholders of FNBC for the year ended
December 31, 1993 (Appendix B to this Prospectus and Proxy Statement which
is part of this Registration Statement) have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report included herein
and have been so used in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
Stockholder Proposals
In the event that the FNBC stockholders adopt the Plan of Merger and
the Merger is consummated, there will be no annual meeting of FNBC
stockholders in 1995. If the Merger is not consummated, proposals of
stockholders intended to be presented at the annual meeting of stockholders
in 1995 must be received by FNBC for consideration for inclusion in its
proxy statement and form of proxy relating to that meeting a reasonable
time before the proxy solicitation is made for that meeting. Stockholders
should make their proposals in accordance with Rule 14a-8 issued under the
Securities Exchange Act of 1934, as amended.
-54-
Legal Opinions
Certain legal matters in connection with the proposed Merger will be
passed upon for Old Kent by its general counsel, Warner Norcross & Judd LLP
of Grand Rapids, Michigan, and for FNBC by its counsel, Dickinson, Wright,
Moon, Van Dusen & Freeman of Detroit, Michigan.
As of October 7, 1994, partners in and attorneys employed by or
associated with Warner Norcross & Judd LLP and their associates were
beneficial owners of a total of 198,600 shares of Old Kent Common Stock
having an aggregate market value of $6,102,750 as of that date. Shares
reported as beneficially owned include all shares as to which such persons
have direct or indirect, sole or shared, power to direct voting or
disposition, including personal shares as well as shares held in fiduciary
capacities.
As of November 4, 1994, partners in and attorneys employed by or
associated with Dickinson, Wright, Moon, Van Dusen & Freeman and their
associates who have participated on behalf of such firm in the representation
of FNBC in connection with the registration of the Old Kent Common Stock
to be issued in connection with the Merger were beneficial owners of a total
of 2,762 shares of FNBC Common Stock having an aggregate market value of
$89,075 as of that date. Shares reported as beneficially owned include all
shares as to which such persons have direct or indirect, sole or shared,
power to direct voting or disposition, including personal shares as
well as shares held in fiduciary capacities.
Sources of Information
The information contained in this Prospectus and Proxy Statement
relating to Old Kent and FNBC has been furnished by each of them for
inclusion in this Prospectus and Proxy Statement. FNBC has relied upon Old
Kent with respect to the accuracy and completeness of the information
concerning Old Kent, and Old Kent has relied upon FNBC with respect to the
accuracy and completeness of the information concerning FNBC.
-55-
APPENDIX A
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER
Between
FIRST NATIONAL BANK CORP.
and
OLD KENT FINANCIAL CORPORATION
Dated as of August 24, 1994
TABLE OF CONTENTS
Page
ARTICLE I - THE TRANSACTION . . . . . . . . . . . . . . . . . . . . . A-2
1.1 Adoption of Plan of Merger . . . . . . . . . . . . . . . . A-2
1.2 The Closing . . . . . . . . . . . . . . . . . . . . . . . A-2
1.3 Effective Time of the Merger . . . . . . . . . . . . . . . A-3
1.4 Merger of FNBC with and into Old Kent . . . . . . . . . . A-3
1.5 Effect of the Merger . . . . . . . . . . . . . . . . . . . A-3
1.6 Additional Actions . . . . . . . . . . . . . . . . . . . . A-3
1.7 Surviving Corporation . . . . . . . . . . . . . . . . . . A-4
ARTICLE II - CONVERSION AND EXCHANGE OF SHARES . . . . . . . . . . . A-4
2.1 Conversion of Shares . . . . . . . . . . . . . . . . . . . A-4
2.2 Upset Provisions . . . . . . . . . . . . . . . . . . . . . A-6
2.3 No Fractional Securities . . . . . . . . . . . . . . . . . A-8
2.4 Adjustments . . . . . . . . . . . . . . . . . . . . . . . A-8
2.5 Cessation of Shareholder Status . . . . . . . . . . . . . A-10
2.6 Surrender of Old Certificates and Distribution of Old
Kent Common Stock . . . . . . . . . . . . . . . . . . . . A-10
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF OLD KENT . . . . . . A-12
3.1 Authorization, No Conflicts, Etc. . . . . . . . . . . . . A-12
3.2 Organization and Good Standing . . . . . . . . . . . . . . A-13
3.3 Capital Stock . . . . . . . . . . . . . . . . . . . . . . A-13
3.4 Financial Statements . . . . . . . . . . . . . . . . . . . A-14
3.5 Absence of Undisclosed Liabilities . . . . . . . . . . . . A-14
3.6 Absence of Material Adverse Change . . . . . . . . . . . . A-15
3.7 Absence of Litigation . . . . . . . . . . . . . . . . . . A-15
3.8 Conduct of Business . . . . . . . . . . . . . . . . . . . A-15
3.9 Absence of Defaults Under Contracts . . . . . . . . . . . A-15
3.10 Employee Benefit Plans . . . . . . . . . . . . . . . . . . A-15
3.11 Environmental Matters . . . . . . . . . . . . . . . . . . A-16
3.12 SEC and Other Filings . . . . . . . . . . . . . . . . . . A-16
3.13 Registration Statement, Etc. . . . . . . . . . . . . . . . A-16
3.14 Investment Bankers and Brokers . . . . . . . . . . . . . . A-17
3.15 Old Kent Common Stock . . . . . . . . . . . . . . . . . . A-17
3.16 True and Complete Information . . . . . . . . . . . . . . A-17
3.17 Truth and Completeness of Representations and Warranties . A-17
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF FNBC . . . . . . . . . A-18
4.1 Authorization, No Conflicts, Etc. . . . . . . . . . . . . A-18
4.2 Organization and Good Standing . . . . . . . . . . . . . . A-19
4.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . A-20
A-i
TABLE OF CONTENTS -- Continued
Page
4.4 Capital Stock . . . . . . . . . . . . . . . . . . . . . . A-21
4.5 Redemption of FNBC Rights . . . . . . . . . . . . . . . . A-22
4.6 Financial Statements . . . . . . . . . . . . . . . . . . . A-22
4.7 Absence of Undisclosed Liabilities . . . . . . . . . . . . A-22
4.8 Absence of Material Adverse Change . . . . . . . . . . . . A-23
4.9 Absence of Litigation . . . . . . . . . . . . . . . . . . A-23
4.10 Conduct of Business . . . . . . . . . . . . . . . . . . . A-23
4.11 Absence of Defaults Under Contracts . . . . . . . . . . . A-23
4.12 SEC and Other Filings . . . . . . . . . . . . . . . . . . A-23
4.13 Registration Statement, Etc. . . . . . . . . . . . . . . . A-24
4.14 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . A-24
4.15 Title to Properties . . . . . . . . . . . . . . . . . . . A-25
4.16 Condition of Real Property . . . . . . . . . . . . . . . . A-25
4.17 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . A-26
4.18 Licenses, Permits, Etc. . . . . . . . . . . . . . . . . . A-26
4.19 Certain Employment Matters . . . . . . . . . . . . . . . . A-27
4.20 Employee Benefit Plans . . . . . . . . . . . . . . . . . . A-28
4.21 Environmental Matters . . . . . . . . . . . . . . . . . . A-30
4.22 Duties as Fiduciary . . . . . . . . . . . . . . . . . . . A-31
4.23 Investment Bankers and Brokers . . . . . . . . . . . . . . A-32
4.24 Related Persons . . . . . . . . . . . . . . . . . . . . . A-32
4.25 Change in Business Relationships . . . . . . . . . . . . . A-32
4.26 Insurance . . . . . . . . . . . . . . . . . . . . . . . . A-32
4.27 Books and Records . . . . . . . . . . . . . . . . . . . . A-33
4.28 Loan Guarantees . . . . . . . . . . . . . . . . . . . . . A-33
4.29 Events Since December 31, 1993 . . . . . . . . . . . . . . A-33
4.30 Anticipated Changes . . . . . . . . . . . . . . . . . . . A-34
4.31 Reserve for Loan Losses . . . . . . . . . . . . . . . . . A-34
4.32 Loan Origination and Servicing . . . . . . . . . . . . . . A-34
4.33 Public Communications; Securities Offering . . . . . . . . A-34
4.34 No Insider Trading . . . . . . . . . . . . . . . . . . . . A-34
4.35 Continuity of Interest . . . . . . . . . . . . . . . . . . A-35
4.36 Pooling of Interests Accounting Qualification . . . . . . A-35
4.37 True and Complete Information . . . . . . . . . . . . . . A-35
4.38 Truth and Completeness of Representations and Warranties . A-35
ARTICLE V - CERTAIN COVENANTS . . . . . . . . . . . . . . . . . . . . A-36
5.1 FNBC Disclosure Statement . . . . . . . . . . . . . . . . A-36
5.2 Old Kent Disclosure Statement . . . . . . . . . . . . . . A-41
5.3 Conduct of Business Pending the Effective Time of the
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . A-41
5.4 Regular Dividends and Compensation Adjustments . . . . . . A-44
5.5 Data Processing Arrangements . . . . . . . . . . . . . . . A-45
5.6 Affiliates . . . . . . . . . . . . . . . . . . . . . . . . A-46
5.7 Maintenance of Insurance . . . . . . . . . . . . . . . . . A-46
5.8 Competing Proposals . . . . . . . . . . . . . . . . . . . A-46
A-ii
TABLE OF CONTENTS -- Continued
Page
5.9 Redemption of Rights . . . . . . . . . . . . . . . . . . . A-47
5.10 Insurance Company . . . . . . . . . . . . . . . . . . . . . A-47
ARTICLE VI - ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . A-47
6.1 Registration Statement . . . . . . . . . . . . . . . . . . A-47
6.2 Other Filings . . . . . . . . . . . . . . . . . . . . . . A-48
6.3 Press Releases . . . . . . . . . . . . . . . . . . . . . . A-48
6.4 Indemnification . . . . . . . . . . . . . . . . . . . . . A-48
6.5 Miscellaneous Agreements and Consents . . . . . . . . . . A-48
6.6 Stock Options . . . . . . . . . . . . . . . . . . . . . . A-48
6.7 ESOP . . . . . . . . . . . . . . . . . . . . . . . . . . . A-49
6.8 Exchange of Financial Information . . . . . . . . . . . . A-49
6.9 Investigation . . . . . . . . . . . . . . . . . . . . . . A-50
6.10 Environmental Investigation . . . . . . . . . . . . . . . A-52
6.11 Pooling Qualification . . . . . . . . . . . . . . . . . . A-53
ARTICLE VII - CONDITIONS PRECEDENT TO OLD KENT'S OBLIGATIONS . . . . A-54
7.1 Renewal of Representations and Warranties, Etc. . . . . . A-54
7.2 Opinion of Legal Counsel . . . . . . . . . . . . . . . . . A-54
7.3 Required Approvals . . . . . . . . . . . . . . . . . . . . A-57
7.4 Order, Decree, Etc. . . . . . . . . . . . . . . . . . . . A-57
7.5 Proceedings . . . . . . . . . . . . . . . . . . . . . . . A-57
7.6 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . A-58
7.7 Registration Statement . . . . . . . . . . . . . . . . . . A-58
7.8 Certificate as to Outstanding Shares . . . . . . . . . . . A-58
7.9 Change of Control Waivers . . . . . . . . . . . . . . . . A-58
7.10 Pooling of Interests Accounting . . . . . . . . . . . . . A-59
7.11 No Default under Bank Stock Loan Agreement . . . . . . . . A-59
7.12 Estoppel Certificates . . . . . . . . . . . . . . . . . . A-59
ARTICLE VIII - CONDITIONS PRECEDENT TO FNBC'S OBLIGATIONS . . . . . . A-59
8.1 Renewal of Representations and Warranties, Etc. . . . . . A-59
8.2 Opinion of Legal Counsel . . . . . . . . . . . . . . . . . A-60
8.3 Required Approvals . . . . . . . . . . . . . . . . . . . . A-62
8.4 Order, Decree, Etc. . . . . . . . . . . . . . . . . . . . A-62
8.5 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . A-62
8.6 Registration Statement . . . . . . . . . . . . . . . . . . A-63
8.7 Fairness Opinion . . . . . . . . . . . . . . . . . . . . . A-63
A-iii
TABLE OF CONTENTS -- Continued
Page
ARTICLE IX - ABANDONMENT OF MERGER . . . . . . . . . . . . . . . . . A-63
9.1 Mutual Abandonment Prior to Effective Time of the Merger . A-63
9.2 Old Kent's Rights to Terminate . . . . . . . . . . . . . . A-63
9.3 FNBC's Rights to Terminate . . . . . . . . . . . . . . . . A-65
ARTICLE X - AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . . A-67
10.1 Amendment . . . . . . . . . . . . . . . . . . . . . . . . A-67
10.2 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . A-67
10.3 Specific Enforcement . . . . . . . . . . . . . . . . . . A-67
ARTICLE XI - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . A-67
11.1 Termination Fee . . . . . . . . . . . . . . . . . . . . . A-67
11.2 Liability After Termination . . . . . . . . . . . . . . . A-69
11.3 Termination of Representations and Warranties. . . . . . A-70
11.4 Expenses . . . . . . . . . . . . . . . . . . . . . . . . A-70
11.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . A-70
11.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . A-71
11.7 Method of Consent or Waiver . . . . . . . . . . . . . . . A-71
11.8 Entire Agreement . . . . . . . . . . . . . . . . . . . . A-71
11.9 No Assignment . . . . . . . . . . . . . . . . . . . . . . A-71
11.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . A-71
11.11 Further Assurances; Privileges . . . . . . . . . . . . . A-71
11.12 Headings, Etc. . . . . . . . . . . . . . . . . . . . . . A-72
11.13 Severability . . . . . . . . . . . . . . . . . . . . . . A-72
A-iv
DEFINITIONS
Page
401(k) Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-43
Acceptance Period . . . . . . . . . . . . . . . . . . . . . . . . . . A-7
Acquisition Price . . . . . . . . . . . . . . . . . . . . . . . . . . A-68
Adjusted Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-7
Aggregate Price Per Share of the Comparison Stocks . . . . . . . . . A-6
Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-20
Bank Stock Loan Agreement . . . . . . . . . . . . . . . . . . . . . . A-49
Business Combination . . . . . . . . . . . . . . . . . . . . . . . . A-46
Call Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-22
Ceiling Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-4
CERCLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-30
Certificates of Merger . . . . . . . . . . . . . . . . . . . . . . . A-3
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-2
Comparison Stocks . . . . . . . . . . . . . . . . . . . . . . . . . . A-6
Comparison Stocks Base Price Per Share . . . . . . . . . . . . . . . A-6
Constituent Corporation . . . . . . . . . . . . . . . . . . . . . . . A-3
Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-20
Delaware Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Document . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-16
Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . A-3
Employee Benefit Plan . . . . . . . . . . . . . . . . . . . . . . . . A-16
Employment-Related Payments . . . . . . . . . . . . . . . . . . . . . A-27
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . A-30
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-16
ESOP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-2
Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . A-10
Exchange Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-4
Exercise Period . . . . . . . . . . . . . . . . . . . . . . . . . . . A-7
FDIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-20
Federal Bank Holding Company Act . . . . . . . . . . . . . . . . . . A-1
Federal Reserve Board . . . . . . . . . . . . . . . . . . . . . . . . A-1
Final Stock Price . . . . . . . . . . . . . . . . . . . . . . . . . . A-4
First Floor Price . . . . . . . . . . . . . . . . . . . . . . . . . . A-5
Fixing Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-6
FNBC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
FNBC Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
FNBC Disclosure Statement . . . . . . . . . . . . . . . . . . . . . . A-18
FNBC Related Person . . . . . . . . . . . . . . . . . . . . . . . . . A-32
FNBC Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-21
FNBC Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . A-21
FNBC's Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . A-20
Hazardous Substance . . . . . . . . . . . . . . . . . . . . . . . . . A-30
Increase Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . A-7
Insurance Company . . . . . . . . . . . . . . . . . . . . . . . . . . A-20
Internal Revenue Code . . . . . . . . . . . . . . . . . . . . . . . . A-16
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-25
M & I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-45
A-v
DEFINITIONS -- Continued
Page
M & I Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . A-45
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . A-5
Michigan Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Old Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . A-8
Old Kent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Old Kent Common Stock . . . . . . . . . . . . . . . . . . . . . . . . A-1
Old Kent Disclosure Statement . . . . . . . . . . . . . . . . . . . . A-12
Old Kent Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . A-5
Old Kent Rights Agreement . . . . . . . . . . . . . . . . . . . . . . A-5
PBGC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-29
Phase I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-52
Plan of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-30
Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-47
Prospectus and Proxy Statement . . . . . . . . . . . . . . . . . . . A-16
Purchase Price Per Share . . . . . . . . . . . . . . . . . . . . . . A-4
Reference Period . . . . . . . . . . . . . . . . . . . . . . . . . . A-4
Registration Statement . . . . . . . . . . . . . . . . . . . . . . . A-16
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-16
Second Floor Price . . . . . . . . . . . . . . . . . . . . . . . . . A-6
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . A-46
Securities Exchange Act . . . . . . . . . . . . . . . . . . . . . . . A-35
Stockholders' Meeting . . . . . . . . . . . . . . . . . . . . . . . . A-2
Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . A-3
Termination Cost . . . . . . . . . . . . . . . . . . . . . . . . . . A-45
Termination Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . A-68
Unaffiliated Person . . . . . . . . . . . . . . . . . . . . . . . . . A-67
Upset Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . A-6
A-vi
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Plan of Merger") is made
as of August 24, 1994, between FIRST NATIONAL BANK CORP., a Delaware
corporation ("FNBC"), and OLD KENT FINANCIAL CORPORATION, a Michigan
corporation ("Old Kent"), One Vandenberg Center, Grand Rapids, Michigan.
Old Kent and FNBC desire that FNBC become affiliated with Old
Kent. The affiliation would be effected through the merger of FNBC with
and into Old Kent in accordance with this Plan of Merger and in accordance
with the General Corporation Law of the State of Delaware, as amended (the
"Delaware Law") and the Business Corporation Act of the State of Michigan,
as amended (the "Michigan Act"). The transactions contemplated by and
described in this Plan of Merger are referred to as the "Merger."
Old Kent is a bank holding company registered as such with the
Board of Governors of the Federal Reserve System (the "Federal Reserve
Board") under the Bank Holding Company Act of 1956, as amended (the
"Federal Bank Holding Company Act"). Old Kent has authorized capital stock
consisting of 175,000,000 shares, divided into two classes: 150,000,000
shares of common stock, $1 par value ("Old Kent Common Stock"); and
25,000,000 shares of preferred stock, without par value, of which 3,000,000
shares are designated Series A Preferred Stock and 300,000 shares are
designated Series B Preferred Stock. Each share of Old Kent Common Stock
is entitled to one vote on all matters submitted for a vote of the
shareholders. As of August 19, 1994, there were 40,684,878 shares of Old
Kent Common Stock issued and outstanding, and 2,609,700 shares of Old Kent
Common Stock were reserved for issuance in connection with employee stock
option and benefit plans. As of the date of this Plan of Merger, no shares
of preferred stock were issued and outstanding. The number of issued and
outstanding shares of Old Kent Common Stock is subject to change before the
Effective Time of the Merger (as defined in Section 1.3 (Effective Time of
the Merger)) by reason of the issuance of additional shares of Old Kent
Common Stock upon the exercise of employee stock options and the grant or
sale of shares to, or for the account of, employees and directors pursuant
to other benefit plans, and the issuance of additional shares if and as
authorized by Old Kent's Board of Directors.
FNBC is a bank holding company registered as such with the
Federal Reserve Board under the Federal Bank Holding Company Act. FNBC has
authorized capital stock consisting of 10,000,000 shares, divided into two
classes: 8,000,000 shares of common stock, $3.125 par value ("FNBC Common
Stock"); and 2,000,000 shares of preferred stock, $.01 par value. Each
share of FNBC Common Stock is entitled to one vote on all matters submitted
for a vote of the stockholders. As of the date of this Plan of Merger,
there were 2,434,060 shares of FNBC Common Stock issued and outstanding,
and 220,204 shares of FNBC Common Stock were reserved for issuance in
connection with director and employee stock option plans. As of the date
of this Plan of Merger, no shares of preferred stock were issued and
outstanding. The number of issued and outstanding shares of FNBC Common
Stock is subject to change before the Effective Time of the Merger (as
A-1
defined in Section 1.3 (Effective Time of the Merger)) by reason of the
issuance of additional shares of FNBC Common Stock upon the exercise of
director and employee stock options.
The respective Boards of Directors of FNBC and Old Kent each deem
the Merger advisable and in the best interests of its corporation and its
respective stockholders and shareholders. FNBC and Old Kent have each
approved, adopted, and authorized the execution, delivery, and performance
of this Plan of Merger by resolutions duly adopted by their respective
Boards of Directors or duly authorized committees thereof. The Board of
Directors of FNBC has directed that this Plan of Merger be submitted to
FNBC's stockholders for adoption and approval.
Therefore, in consideration of the premises and the
representations, warranties, and covenants contained in this Plan of
Merger, the parties agree:
ARTICLE I
THE TRANSACTION
Subject to the terms and conditions of this Plan of Merger, the
Merger of FNBC with and into Old Kent shall be carried out in the following
manner:
1.1 Adoption of Plan of Merger. As soon as practicable after this
Plan of Merger has been executed and delivered and the Registration
Statement (as described in Section 3.13.1 (Document)) has become effective,
FNBC shall submit this Plan of Merger to its stockholders at a meeting
properly called, noticed, and held for that purpose (the "Stockholders'
Meeting"). At the Stockholders' Meeting, and in any proxy materials used
in connection with the meeting, the Board of Directors of FNBC shall
recommend that its stockholders vote for adoption of this Plan of Merger.
All actions taken in connection with the solicitation of proxies for and
the voting of shares of FNBC Common Stock held by or through the First
National Bank in Macomb County Employee Stock Ownership Plan ("ESOP") shall
be done in a manner that complies with all standards and guidelines issued
by the United States Department of Labor. No shares of Old Kent Common
Stock shall be entitled to vote on approval of this Plan of Merger.
1.2 The Closing. The Merger shall be consummated as promptly as
possible after a closing (the "Closing"). The Closing shall be held at
such time and location as may be mutually agreed by the parties. In the
absence of such agreement, the Closing shall be held at the offices of
Warner, Norcross & Judd, 900 Old Kent Building, 111 Lyon Street, N.W.,
Grand Rapids, Michigan, on such date and at such time as may be mutually
agreed by the parties, or in the absence of such agreement, on a date
specified by either party upon 10 business days' written notice after the
last to occur of the following events: (i) the receipt of all consents and
approvals of government regulatory authorities as legally required to
A-2
consummate the Merger and the expiration of all statutory waiting periods;
and (ii) the requisite approval of this Plan of Merger by the stockholders
of FNBC. Scheduling or commencing the Closing shall not, however,
constitute a waiver of the conditions precedent of either Old Kent or FNBC
as set forth in Articles VII and VIII, respectively. Upon completion of
the Closing, FNBC and Old Kent shall execute and deliver appropriate
certificates of merger in the forms and as required by the Delaware Law and
the Michigan Act (the "Certificates of Merger").
1.3 Effective Time of the Merger. Subject to the terms and
conditions of this Plan of Merger, the Merger shall be consummated as
promptly as possible following the Closing by filing the Certificates of
Merger in the manner required by law. The "Effective Time of the Merger"
shall be the close of business on a date to be specified in the
Certificates of Merger, which shall be as soon as practicable, but not
later than 3 business days, after the Closing.
1.4 Merger of FNBC with and into Old Kent. FNBC shall be merged
with and into Old Kent (each sometimes being referred to as a "Constituent
Corporation" prior to the Merger) upon the filing of the Certificates of
Merger with the administrators authorized by law to administer the Delaware
Law and the Michigan Act. At the Effective Time of the Merger, the
Constituent Corporations shall become a single corporation, which shall be
Old Kent (the "Surviving Corporation"). The Surviving Corporation shall
have all of the rights, privileges, immunities, and powers, and shall be
subject to all of the duties and liabilities, of a corporation organized
under the Michigan Act.
1.5 Effect of the Merger. From and after the Effective Time of the
Merger, the effect of the Merger upon each of the Constituent Corporations
and the Surviving Corporation shall be as provided in Chapter Seven of the
Michigan Act and as provided in Subchapter Nine of the Delaware Law with
respect to the merger of a domestic and a foreign corporation where the
surviving corporation will be subject to the laws of the State of Michigan.
1.6 Additional Actions. If, at any time after the Effective Time of
the Merger, the Surviving Corporation shall determine that any further
assignments or assurances or any other acts are necessary or desirable to
vest, perfect, or confirm, of record or otherwise, in the Surviving
Corporation its rights, title, or interest in, to, or under any of the
rights, properties, or assets of FNBC acquired or to be acquired by the
Surviving Corporation as a result of, or in connection with, the Merger, or
to otherwise carry out the purposes of this Plan of Merger, then FNBC shall
be deemed to have granted to the Surviving Corporation an irrevocable power
of attorney to execute and deliver all such proper deeds, assignments, and
assurances in law and to do all acts necessary or proper to vest, perfect,
or confirm title to and possession of such rights, properties, or assets in
the Surviving Corporation and to otherwise carry out the purposes of this
Plan of Merger. The proper officers and directors of the Surviving
Corporation are fully authorized in the name of FNBC to take any and all
such action as may be contemplated by this Article.
A-3
1.7 Surviving Corporation. Immediately after the Effective Time of
the Merger, the Surviving Corporation shall have the following attributes
until they are subsequently changed in the manner provided by law:
1.7.1 Name. The name of the Surviving Corporation shall be "Old
Kent Financial Corporation."
1.7.2 Articles of Incorporation. The Articles of Incorporation
of the Surviving Corporation shall be the Articles of Incorporation of
Old Kent without change from the Articles of Incorporation in effect
immediately prior to the Effective Time of the Merger.
1.7.3 Bylaws. The Bylaws of the Surviving Corporation shall be
the Bylaws of Old Kent as in effect immediately prior to the Effective
Time of the Merger.
1.7.4 Directors. The directors of the Surviving Corporation
shall be the persons who were directors of Old Kent immediately prior
to the Effective Time of the Merger.
1.7.5 Officers. The officers of the Surviving Corporation shall
be the persons who were officers of Old Kent immediately prior to the
Effective Time of the Merger.
ARTICLE II
CONVERSION AND EXCHANGE OF SHARES
2.1 Conversion of Shares. At the Effective Time of the Merger, by
virtue of the Merger:
2.1.1 Conversion of FNBC Common Stock. Subject to the
provisions of Sections 2.2 (Upset Provisions), 2.3 (No Fractional
Securities), 2.4 (Adjustments), and 5.5 (Data Processing Arrangements)
hereof, each share of FNBC Common Stock outstanding immediately prior
to the Effective Time of the Merger shall be converted into that
number (the "Exchange Rate") of validly issued, fully paid, and
nonassessable shares of Old Kent Common Stock, rounded to the nearest
ten thousandth of a share, determined by dividing $35.00 (the
"Purchase Price Per Share") by the average of the per share closing
prices of Old Kent Common Stock reported on the NASDAQ National Market
System during the 20 consecutive trading days ending on the sixth
business day prior to the date of the Closing (the "Reference Period")
as reported in the Dow Jones News/Retrieval system, or other equally
reliable means (as so calculated, the "Final Stock Price"); provided
that:
(a) if the Final Stock Price shall be greater than $36.00
(the "Ceiling Price"), then the Exchange Rate shall be determined
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by dividing the Purchase Price Per Share by the Ceiling Price;
and
(b) if the Final Stock Price shall be less than $32.00 (the
"First Floor Price"), then the Exchange Rate shall be determined
by dividing the Purchase Price Per Share by the First Floor
Price.
2.1.2 Old Kent Rights. Each share of Old Kent Common Stock to
be issued in the Merger will have attached to it the number of Series
B Preferred Stock Purchase Rights ("Old Kent Rights") issued pursuant
to a Rights Agreement dated as of December 19, 1988 between Old Kent
and Old Kent Bank and Trust Company (the "Old Kent Rights Agreement")
then represented by each share of Old Kent Common Stock at the
Effective Time of the Merger, as long as the Old Kent Rights are not
then separately transferable. As of the date of this Plan of Merger,
each share of Old Kent Common Stock represents two-thirds (2/3rds) of
an Old Kent Right. The number of Old Kent Rights represented by each
share of Old Kent Common Stock is subject to adjustment upon the
occurrence of certain events set forth in the Old Kent Rights
Agreement.
2.1.3 Conversion of Old Kent Common Stock. Each share of Old
Kent Common Stock outstanding immediately prior to the Effective Time
of the Merger shall continue to be outstanding without any change.
Each shareholder of the Surviving Corporation whose shares were
outstanding immediately before the Effective Time of the Merger will
hold the same number of shares, with identical designations,
preferences, limitations, and relative rights, immediately after the
Effective Time of the Merger.
2.1.4 Treasury Stock and Stock Held by Old Kent. Each share of
FNBC Common Stock held by FNBC as a treasury share, if any, shall be
canceled and no Old Kent Common Stock or other consideration shall be
issuable or payable with respect to any such share. Each share of
FNBC Common Stock, if any, held by Old Kent or any of Old Kent's
subsidiaries for its own account and not in a fiduciary capacity for a
person other than Old Kent or any of Old Kent's subsidiaries shall be
canceled and no consideration shall be issuable or payable with
respect to any such share.
2.1.5 FNBC Common Stock No Longer Outstanding. Each share of
FNBC Common Stock outstanding immediately prior to the Effective Time
of the Merger shall be deemed to be no longer outstanding and to
represent solely the right to receive shares of Old Kent Common Stock
as provided in Section 2.1.1 (Conversion of FNBC Common Stock) (the
"Merger Consideration"), together with any dividends and other
distributions payable as provided in Section 2.6.4 (Dividends Pending
Surrender), but subject to the payment of cash in lieu of fractional
shares as provided in Section 2.3 (No Fractional Securities).
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2.2 Upset Provisions.
2.2.1 Upset Condition. The "Upset Condition" shall exist if,
after the Closing is properly called pursuant to Section 1.2 (The
Closing), both of the following conditions exist:
(a) The Final Stock Price is less than $28.90 (the "Second
Floor Price"), subject to adjustment under Section 2.4
(Adjustments); and
(b) The percentage determined by dividing the Final Stock
Price by $34.00 (the "Fixing Price") is more than 15 percentage
points less than the percentage determined by dividing the
Aggregate Price Per Share of the Comparison Stocks on the last
day of the Reference Period by the Aggregate Price Per Share of
the Comparison Stocks on August 19, 1994 (the "Comparison Stocks
Base Price Per Share"), subject to adjustment under Section 2.4
(Adjustments).
The "Aggregate Price Per Share of the Comparison Stocks" means the sum
of the closing prices of all of the Comparison Stocks as reported in
the Dow Jones News/Retrieval system, or other equally reliable means,
for each day in question. The "Comparison Stocks" mean the most
widely held class of common stock of each of the following
corporations (the closing price and trading symbol of each stock on
August 19, 1994, are listed below for reference purposes only):
Trading Closing
Corporation Symbol Price
Integra Financial Corp. ITG $ 47.625
Huntington Bancshares, Inc. HBAN 20.625
First Tennessee National Corp. FTEN 46.25
Firstar Corporation FSR 32.125
Fifth Third Bancorp FITB 51.00
First of America Bank Corporation FOA 36.00
Regions Financial Corp. RGBK 35.8125
Marshall & Ilsley Corporation MRIS 20.375
Star Banc Corp. STB 42.375
AmSouth Bancorporation ASO 32.50
Meridian Bancorp, Inc. MRDN 32.625
Mercantile Bancorporation, Inc. MTL $ 38.875
Crestar Financial Corporation CF 48.00
Commerce Bancshares, Inc. CBSH 32.375
Michigan National Corporation MNCO 78.25
Aggregate Price Per Share of
Comparison Stocks (subject to adjustment) $594.8125
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provided, however, that any of these corporations shall be excluded
from this definition and from the comparison described in
Section 2.2.1(b) if between August 19, 1994, and the end of the
Reference Period there is publicly announced a proposed merger,
acquisition, or business combination of that corporation, or a tender
offer or exchange offer for, or other transaction involving the
acquisition of a majority of, that corporation's common stock or
assets.
2.2.2 FNBC's Rights in Upset Condition. If the Upset
Condition shall then exist, FNBC shall have the right, exercisable at
any time prior to 5 p.m. Grand Rapids, Michigan time on the second
business day after the last day of the Reference Period (the "Exercise
Period"), to either (i) abandon the Merger and terminate this Plan of
Merger (by delivering to Old Kent within the Exercise Period written
notice of its decision to do so) and, upon the delivery of such notice
by FNBC, the Merger shall be abandoned and this Plan of Merger shall
immediately terminate; (ii) proceed with the Merger on the basis of
the Exchange Rate determined pursuant to Section 2.1.1 (Conversion of
FNBC Common Stock) (by delivering to Old Kent within the Exercise
Period written notice of its decision to do so or by failing to
deliver any notice to Old Kent pursuant to this Section 2.2.2 (FNBC's
Rights in Upset Condition) during the Exercise Period); or
(iii) request Old Kent to increase the Exchange Rate (by delivering to
Old Kent within the Exercise Period written notice to such effect (an
"Increase Notice")) for each share of FNBC Common Stock to that number
of shares of Old Kent Common Stock determined by dividing the Purchase
Price Per Share by the Second Floor Price (the "Adjusted Rate").
2.2.3 Old Kent's Rights in Upset Condition. If the Upset
Condition occurs and Old Kent receives an Increase Notice pursuant to
Section 2.2.2 (FNBC's Rights in Upset Condition), Old Kent shall
either accept or decline the Adjusted Rate by delivering written
notice of its decision to FNBC at or before 5 p.m. Grand Rapids,
Michigan time on the third business day after the expiration of the
Exercise Period (the "Acceptance Period"). If Old Kent accepts the
Adjusted Rate within the Acceptance Period, this Plan of Merger shall
remain in effect in accordance with its terms except that the Exchange
Rate shall be equal to the Adjusted Rate. If Old Kent declines the
Adjusted Rate within the Acceptance Period or fails to deliver written
notice of its decision to accept or decline the Adjusted Rate within
the Acceptance Period, the Merger shall be abandoned and this
Agreement shall thereupon terminate without further action by FNBC or
Old Kent effective as of 5 p.m. Grand Rapids, Michigan time on the
second business day following the expiration of the Acceptance Period;
provided, however, that if Old Kent so declines the Adjusted Rate or
so fails to deliver written notice of its decision to accept or
decline the Adjusted Rate within the Acceptance Period, FNBC may, by
written notice delivered to Old Kent at or before 5 p.m. Grand Rapids,
Michigan time on the second business day following the expiration of
the Acceptance Period, elect to proceed with the Merger and the
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transactions contemplated by this Plan of Merger on the basis of the
Exchange Rate determined pursuant to Section 2.1.1 (Conversion of FNBC
Common Stock) and, upon such election, no abandonment of the Merger or
termination of this Plan of Merger shall be deemed to have occurred,
this Plan of Merger shall remain in effect in accordance with its
terms and the Closing shall thereafter occur in accordance with the
terms of this Plan of Merger.
2.3 No Fractional Securities. Notwithstanding any other provision
of this Agreement, no certificates or scrip representing fractional shares
of Old Kent Common Stock shall be issued upon the surrender for exchange of
certificates which represented shares of FNBC Common Stock outstanding
immediately prior to the Effective Time of the Merger ("Old Certificates")
(taking into account all Old Certificates surrendered for exchange by a
particular FNBC stockholder) pursuant to Section 2.6 (Surrender of Old
Certificates and Distribution of Old Kent Common Stock) and no Old Kent
dividend or other distribution or stock split shall relate to any
fractional shares of Old Kent Common Stock, and such fractional interests
shall not entitle the owner thereof to vote or to any rights of a
shareholder of Old Kent. In lieu of any such fractional shares, each
holder of an Old Certificate who would otherwise have been entitled to a
fraction of a share of Old Kent Common Stock upon surrender of such Old
Certificate for exchange pursuant to Section 2.6 (Surrender of Old
Certificates and Distribution of Old Kent Common Stock) will be paid an
amount in cash (without interest) equal to such fraction of a share
multiplied by the Final Stock Price.
2.4 Adjustments. The Exchange Rate and related amounts and related
computations described in Sections 2.1 (Conversion of Shares) and 2.2
(Upset Provisions) shall be adjusted in the manner provided in this
Section 2.4 (Adjustments) upon the occurrence of any of the following
events:
2.4.1 Stock Dividends and Distributions. If Old Kent
declares a stock dividend, stock split, or other general distribution
of Old Kent Common Stock to holders of Old Kent Common Stock and the
ex-dividend or ex-distribution date for such stock dividend, stock
split, or distribution occurs prior to the beginning of the Reference
Period, then the Fixing Price, Ceiling Price, First Floor Price, and
Second Floor Price shall be adjusted by multiplying them by that ratio
(i) the numerator of which shall be the total number of shares of Old
Kent Common Stock outstanding immediately prior to such dividend,
split, or distribution; and (ii) the denominator of which shall be the
total number of shares of Old Kent Common Stock outstanding
immediately after such dividend, split, or distribution.
2.4.2 Other Action Affecting Old Kent Common Stock. If there
occurs, other than as described in the preceding subsection, any
merger, business combination, recapitalization, reclassification,
subdivision, or combination which would substantially change the
number and value of outstanding shares of Old Kent Common Stock; a
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distribution of warrants or rights with respect to Old Kent Common
Stock; or any other transaction which would have a substantially
similar effect; then the nature or amount of the consideration to be
received by the stockholders of FNBC in exchange for their shares of
FNBC Common Stock and the Exchange Rate shall be adjusted in such
manner and at such time as shall be equitable under the circumstances.
It is intended that in the event of a reclassification of outstanding
shares of Old Kent Common Stock or a consolidation or merger of Old
Kent with or into another corporation, other than a merger in which
Old Kent is the surviving corporation and which merger does not result
in any reclassification of Old Kent Common Stock, holders of FNBC
Common Stock would receive, in lieu of each share of Old Kent Common
Stock to be issued in exchange for FNBC Common Stock, the kind and
amount of shares of Old Kent stock, other securities, money, and/or
property receivable upon such reclassification, consolidation, or
merger by holders of Old Kent Common Stock with respect to each share
of Old Kent Common Stock outstanding immediately prior to such
reclassification, consolidation, or merger.
2.4.3 Postponement of Closing. Old Kent and FNBC agree not
to convene the Closing at any time which would result in there being
an ex-dividend or ex-distribution date for any transaction described
in Subsections 2.4.1 or 2.4.2 at any time after the beginning of the
Reference Period.
2.4.4 Employee Stock Options, Etc. Notwithstanding the
foregoing subsections of this Section 2.4 (Adjustments), no adjustment
shall be made in the event of the issuance of additional shares of Old
Kent Common Stock pursuant to Old Kent's Dividend Reinvestment Plan,
pursuant to the exercise of stock options under stock option plans of
Old Kent, or upon the grant or sale of shares to, or for the account
of, Old Kent directors or employees pursuant to restricted stock,
deferred stock compensation, thrift, employee stock purchase, and
other benefit plans of Old Kent so long as such grants or sales of
shares are substantially consistent with Old Kent's past practice or
not materially dilutive to Old Kent's shareholders.
2.4.5 Authorized but Unissued Shares. Notwithstanding the
other provisions of this Section 2.4 (Adjustments), no adjustment
shall be made in the event of the issuance of additional shares of Old
Kent Common Stock or other securities pursuant to a public offering,
private placement, or an acquisition of one or more banks,
corporations, or business assets for consideration which the Board of
Directors of Old Kent, or a duly authorized committee thereof,
determines to be fair and reasonable.
2.4.6 Changes in Capital. Subject only to making any
adjustment to the Purchase Price Per Share and related computations
prescribed by this Section 2.4 (Adjustments), nothing contained in
this Plan of Merger is intended to preclude Old Kent from amending its
articles of incorporation to change its capital structure or from
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issuing additional shares of Old Kent Common Stock, preferred stock,
shares of other capital stock, or securities which are convertible
into shares of capital stock.
2.4.7 Increase in Outstanding Shares of FNBC Common Stock.
In the event that the number of shares of FNBC Common Stock
outstanding is greater than 2,434,060 for any reason whatsoever
(whether or not such increase constitutes a breach of this Plan of
Merger), other than the issuance of not more than 220,204 shares upon
the exercise of FNBC stock options identified in Section 4.4.2 (No
Other Capital Stock), then the Purchase Price Per Share shall be
adjusted to that price determined by multiplying the Purchase Price
Per Share by a fraction (i) the numerator of which shall be 2,434,060
(the total number of shares of FNBC Common Stock outstanding as of the
date of this Plan of Merger); and (ii) the denominator of which shall
be the total number of shares of FNBC Common Stock outstanding as of
the Effective Time of the Merger, excluding not more than 220,204
shares, if any, issued after the date of this Plan of Merger upon the
exercise of FNBC stock options identified in Section 4.4.2 (No Other
Capital Stock).
2.5 Cessation of Shareholder Status. As of the Effective Time of
the Merger, record holders of Old Certificates shall cease to be
stockholders of FNBC and shall have no rights as FNBC stockholders. Such
Old Certificates shall then represent the right to receive shares of Old
Kent Common Stock and the right to receive cash in lieu of fractional
shares, all as provided in this Plan of Merger.
2.6 Surrender of Old Certificates and Distribution of Old Kent
Common Stock. After the Effective Time of the Merger, Old Certificates
shall be exchangeable by the holders thereof for new stock certificates
representing the number of shares of Old Kent Common Stock to which such
holders shall be entitled in the following manner:
2.6.1 Transmittal Materials. As soon as practicable after the
Effective Time of the Merger, Old Kent shall send or cause to be sent
to each record holder of FNBC Common Stock as of the Effective Time of
the Merger transmittal materials for use in exchanging that holder's
Old Certificates for Old Kent Common Stock certificates. The
transmittal materials will contain instructions with respect to the
surrender of Old Certificates.
2.6.2 Exchange Agent. As soon as practicable after the
Effective Time of the Merger, Old Kent will deliver to Old Kent Bank
and Trust Company, or such other bank or trust company as Old Kent may
designate (the "Exchange Agent"), the number of shares of Old Kent
Common Stock issuable and the amount of cash payable for fractional
shares in the Merger. The Exchange Agent shall not be entitled to
vote or exercise any rights of ownership with respect to such shares
of Old Kent Common Stock, except that it shall receive and hold all
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dividends or other distributions paid or distributed with respect to
such shares for the account of the persons entitled to such shares.
2.6.4 Delivery of New Certificates. Old Kent shall cause the
Exchange Agent to promptly issue and deliver stock certificates in the
names and to the addresses that appear on FNBC's stock records as of
the Effective Time of the Merger, or in such other name or to such
other address as may be specified by the holder of record in
transmittal documents received by the Exchange Agent; provided, that:
(a) Receipt of Old Certificates. With respect to each FNBC
stockholder, the Exchange Agent shall have received all of the
Old Certificates held by that stockholder, or an affidavit of
loss and indemnity bond for such certificate or certificates,
together with properly executed transmittal materials; and
(b) Satisfactory Form. Such certificates, transmittal
materials, affidavits, and bonds are in a form and condition
reasonably acceptable to Old Kent and the Exchange Agent.
2.6.4 Dividends Pending Surrender. Whenever a dividend is
declared by Old Kent on Old Kent Common Stock which is payable to
shareholders of record of Old Kent as of a record date on or after the
Effective Time of the Merger, the declaration shall include dividends
on all shares issuable under this Plan of Merger. No former
stockholder of FNBC shall be entitled to receive a distribution of any
such dividend until the physical exchange of that stockholder's Old
Certificates for new Old Kent Common Stock certificates shall have
been effected. Upon the physical exchange of that stockholder's Old
Certificates, that stockholder shall be entitled to receive from Old
Kent an amount equal to all such dividends (without interest thereon
and less the amount of taxes, if any, which may have been imposed or
paid thereon) declared and paid with respect to the shares of Old Kent
Common Stock represented thereby.
2.6.5 Stock Transfers. On or after the Effective Time of the
Merger, there shall be no transfers on the stock transfer books of
FNBC of the shares of FNBC Common Stock which were issued and
outstanding immediately prior to the Effective Time of the Merger.
If, after the Effective Time of the Merger, Old Certificates are
properly presented for transfer, then they shall be canceled and
exchanged for stock certificates representing shares of Old Kent
Common Stock as provided in this Plan of Merger. After the Effective
Time of the Merger, ownership of such shares as are represented by any
Old Certificates may be transferred only on the stock transfer records
of Old Kent.
2.6.6 Exchange Agent's Discretion. The Exchange Agent shall
have discretion to determine reasonable rules and procedures relating
to the issuance and delivery of certificates of Old Kent Common Stock
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into which shares of FNBC Common Stock are converted in the Merger and
governing the payment for fractional shares of FNBC Common Stock.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF OLD KENT
Old Kent represents and warrants to FNBC that, except as
otherwise set forth in a disclosure statement (the "Old Kent Disclosure
Statement"), which will be delivered to FNBC within 30 days after the date
of the execution of this Plan of Merger:
3.1 Authorization, No Conflicts, Etc.
3.1.1 Authorization of Agreement. The execution, delivery, and
performance of this Plan of Merger by Old Kent have been duly
authorized and approved by all necessary corporate action. This Plan
of Merger is legally binding on and enforceable against Old Kent in
accordance with its terms.
3.1.2 No Conflict, Breach, Violation, Etc. The execution,
delivery, and performance of this Plan of Merger by Old Kent, and the
consummation of the Merger, do not and will not violate, conflict
with, or result in a breach of:
(a) Articles or Bylaws. Any provision of Old Kent's
Articles of Incorporation or Bylaws; or
(b) Statutes, Judgments, Etc. Any statute, code,
ordinance, rule, regulation, judgment, order, writ, arbitral
award, decree, or injunction applicable to Old Kent or Old Kent's
subsidiaries, assuming the timely receipt of each of the
approvals referred to in Section 3.1.4 (Required Approvals).
3.1.3 No Contractual Breach, Default, Liability, Etc. The
execution, delivery, and performance of this Plan of Merger by Old
Kent, and the consummation of the Merger, do not and will not:
(a) Agreements, Etc. Violate, conflict with, result in a
breach of, constitute a default under, require any consent,
approval, waiver, extension, amendment, authorization, notice or
filing under, or extinguish any material contract right of Old
Kent or any of Old Kent's subsidiaries under any agreement,
mortgage, lease, commitment, indenture, other instrument, or
obligation to which Old Kent or any of Old Kent's subsidiaries is
a party or by which they are bound or affected:
(1) Which is material to the business, income, or
financial condition of Old Kent and its subsidiaries on a
consolidated basis; or
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(2) The violation or breach of which could prevent Old
Kent from consummating the Merger;
(b) Regulatory Restrictions. Violate, conflict with,
result in a breach of, constitute a default under, or require any
consent, approval, waiver, extension, amendment, authorization,
notice, or filing under, any memorandum of understanding or
similar regulatory consent agreement to which Old Kent is a party
or subject, or by which it is bound or affected; or
(c) Tortious Interference. Subject FNBC or FNBC's
Subsidiaries to liability for tortious interference with
contractual rights.
3.1.4 Required Approvals. No notice to, filing with,
authorization of, exemption by, or consent or approval of, any public
body or authority is necessary for the consummation of the Merger by
Old Kent other than in connection or compliance with the provisions of
the Michigan Act and the Delaware Law, compliance with federal and
state securities laws, bylaws and rules of the National Association of
Securities Dealers, Inc., and the consents, authorizations, or
approvals required under the Federal Bank Holding Company Act and any
approvals by the State of Arizona required in connection with the
acquisition of the Insurance Company.
3.2 Organization and Good Standing. Old Kent is a corporation duly
organized, validly existing, and in good standing under the laws of the
State of Michigan. Old Kent possesses all requisite corporate power and
authority to own, operate, and lease its properties and to carry on its
business as it is now being conducted in all material respects. Old Kent
is a bank holding company duly registered and in good standing with the
Federal Reserve Board under the Federal Bank Holding Company Act. Old Kent
is qualified or admitted to conduct business as a foreign corporation in
each state in which such qualification or admission is material to its
business.
3.3 Capital Stock.
3.3.1 Classes and Shares. The authorized capital stock of Old
Kent consists of 175,000,000 shares divided into two classes as
follows: (i) 150,000,000 shares of common stock, $1 par value, of
which, as of August 19, 1994, a total of 40,684,878 shares were
legally issued and outstanding; and (ii) 25,000,000 shares of
preferred stock, without par value, of which 3,000,000 shares are
designated Series A Preferred Stock and 300,000 shares are designated
Series B Preferred Stock, none of which were issued and outstanding
as of the date of this Plan of Merger.
3.3.2 No Other Capital Stock. As of the execution of this Plan
of Merger:
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(a) Other than Old Kent Common Stock, there is no security
or class of securities issued and outstanding which represents or
is convertible into capital stock of Old Kent; and
(b) There are no outstanding subscriptions, options,
warrants, or rights to acquire any capital stock of Old Kent, or
agreements to which Old Kent is a party or by which it is bound
to issue capital stock, except as set forth in, or as
contemplated by, this Plan of Merger, and except (i) the Old Kent
Rights (which as of the date of this Plan of Merger are
represented by and transferable only with certificates
representing shares of Old Kent Common Stock); (ii) stock options
awarded pursuant to stock option plans; and (iii) provisions for
the grant or sale of shares to, or for the account of, employees
and directors pursuant to restricted stock, deferred stock
compensation, and other benefit plans.
3.3.3 Issuance of Shares. Between August 19, 1994, and the
execution of this Plan of Merger, no additional shares of capital
stock have been issued by Old Kent, except as set forth in, or as
contemplated by, this Plan of Merger, except pursuant to the exercise
of employee stock options under employee stock option plans, and
except upon the grant or sale of shares to, or for the account of,
employees and directors pursuant to restricted stock, deferred stock
compensation, or other benefit plans.
3.3.4 Voting Rights. Neither Old Kent nor any of Old Kent's
subsidiaries has outstanding any security or issue of securities:
(a) The holder or holders of which have the right to vote
on the approval of the Merger or this Plan of Merger; or
(b) Which entitle the holder or holders to consent to, or
withhold consent on, the Merger or this Plan of Merger.
3.4 Financial Statements. The consolidated financial statements of
Old Kent and Old Kent's subsidiaries as of and for the year ended December
31, 1993, as reported on by Old Kent's independent accountants, Arthur
Andersen & Co., and the unaudited consolidated financial statements of Old
Kent and Old Kent's subsidiaries as of and for the quarter ended June 30,
1994, including all schedules and notes relating to such statements, as
previously delivered to FNBC, are correct and complete in all material
respects. These statements fairly present Old Kent's and Old Kent's
subsidiaries' financial condition and results of operations on a
consolidated basis on the dates and for the periods indicated, and have
been prepared in conformity with generally accepted accounting principles
applied consistently throughout the periods indicated (except as otherwise
noted in such financial statements or the notes thereto).
3.5 Absence of Undisclosed Liabilities. Except as and to the extent
reflected or reserved against in the consolidated balance sheet of Old Kent
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as of December 31, 1993, and the notes thereto, as of that date neither Old
Kent nor any of its subsidiaries had liabilities or obligations, secured or
unsecured (whether accrued, absolute, or contingent) which were, or as to
which there is a reasonable probability that they could be, materially
adverse to the business, income or financial condition of Old Kent and its
subsidiaries on a consolidated basis.
3.6 Absence of Material Adverse Change. Since December 31, 1993,
there has been no material adverse change in the business, income, or
financial condition of Old Kent and its subsidiaries on a consolidated
basis. No facts or circumstances have been discovered from which it
reasonably appears that there is a significant risk and reasonable
probability that there will occur a material adverse change in the
business, income, or financial condition of Old Kent and Old Kent's
subsidiaries on a consolidated basis for reasons specific to Old Kent and
not applicable to the banking industry in general.
3.7 Absence of Litigation. There is no action, suit, proceeding,
claim, arbitration, or investigation pending or threatened by any person,
including without limitation any governmental or regulatory agency, against
Old Kent or any of its subsidiaries, or the assets or business of Old Kent
or any of its subsidiaries, any of which has or may have a material adverse
effect on the business, income, or financial condition of Old Kent and its
subsidiaries on a consolidated basis. There is no factual basis known to
Old Kent which presents a reasonable potential for any such action, suit,
proceeding, claim, arbitration, or investigation.
3.8 Conduct of Business. Old Kent and its subsidiaries have
conducted their respective businesses and used their respective properties
substantially in compliance with all federal, state, and local laws, civil
or common, ordinances and regulations, including without limitation
applicable federal and state laws and regulations concerning banking,
securities, truth-in-lending, truth-in-savings, mortgage origination and
servicing, usury, fair credit reporting, consumer protection, occupational
safety, civil rights, employee protection, fair employment practices, fair
labor standards, and insurance; and Environmental Laws (as defined in
Section 4.21.2 Environmental Laws)); except for violations which would not
have a material adverse effect on the business, income, or financial
condition of Old Kent and its subsidiaries on a consolidated basis.
3.9 Absence of Defaults Under Contracts. There is no existing
default by Old Kent, any of Old Kent's subsidiaries, or any other party,
under any contract or agreement to which Old Kent or any of its
subsidiaries is a party, or by which they are bound, which would have a
material adverse effect on the business, income, or financial condition of
Old Kent and its subsidiaries on a consolidated basis.
3.10 Employee Benefit Plans. With respect to any "employee welfare
benefit plan," any "employee pension benefit plan," or any "employee
benefit plan" within the respective meanings of Sections 3(1), 3(2), and
3(3) of the Employee Retirement Income Security Act of 1974, as amended
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("ERISA") (each referred to as an "Employee Benefit Plan"), maintained by
or for Old Kent or to which Old Kent has made payments or contributions on
behalf of its employees, Old Kent and each Employee Benefit Plan is in
substantial compliance with applicable sections of ERISA and the Internal
Revenue Code of 1986, as amended (the "Internal Revenue Code"), except to
the extent that noncompliance is not material to the business, income, or
financial condition of Old Kent and its subsidiaries on a consolidated
basis.
3.11 Environmental Matters. Old Kent and its subsidiaries have
complied with all Environmental Laws (as defined in Section 4.21.2
(Environmental Laws)), except to the extent that noncompliance is not
material to the business, income, or financial condition of Old Kent and
its subsidiaries on a consolidated basis.
3.12 SEC and Other Filings. In the last five years:
3.12.1 SEC Filings. Old Kent has filed, and will continue to
file, in a timely manner all required filings with the Securities and
Exchange Commission (the "SEC"), including without limitation all
reports on Form 10-K and Form 10-Q;
3.12.2 Regulatory Filings. Old Kent has filed in a timely
manner all other material filings with other regulatory bodies for
which filings are required; and
3.12.3 Complete and Accurate. All such filings, as amended,
were complete and accurate in all material respects as of the dates of
such filings, and there were no misstatements or omissions therein
which, as of the making of this representation and warranty, would be
material to the business, income, or financial condition of Old Kent
and its subsidiaries on a consolidated basis.
3.13 Registration Statement, Etc.
3.13.1 "Document." The term "Document," when capitalized in
this Plan of Merger, shall collectively mean: (i) the registration
statement to be filed by Old Kent with the SEC (the "Registration
Statement") in connection with the Old Kent Common Stock to be issued
in the Merger; (ii) the prospectus and proxy statement (the
"Prospectus and Proxy Statement") to be mailed to FNBC stockholders in
connection with the Stockholders' Meeting; and (iii) any other
documents to be filed with the SEC, the Federal Reserve Board, the
State of Michigan, the State of Delaware, the State of Arizona, or any
other regulatory agency in connection with the transactions
contemplated by this Plan of Merger.
3.13.2 Accurate Information. None of the information to be
supplied by Old Kent for inclusion, or included, in any Document will:
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(a) Be false or misleading with respect to any material
fact, or omit to state any material fact necessary to make the
statements therein not misleading (i) at the respective times
such Documents are filed; (ii) with respect to the Registration
Statement, when it becomes effective; and (iii) with respect to
the Prospectus and Proxy Statement, when it is mailed.
(b) With respect to the Registration Statement and the
Prospectus and Proxy Statement, as either may be amended or
supplemented, at the time of the Stockholders' Meeting, be false
or misleading with respect to any material fact, or omit to state
any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of any
proxy for the Stockholders' Meeting.
3.13.3 Compliance of Filings. All documents that Old Kent is
responsible for filing with the SEC or any regulatory agency in
connection with the Merger will comply as to form in all material
respects with the provisions of applicable law.
3.14 Investment Bankers and Brokers. Old Kent has not employed any
broker, finder, or investment banker in connection with the Merger. Old
Kent has no express or implied agreement with any other person or company
relative to any commission or finder's fee payable with respect to the
Merger.
3.15 Old Kent Common Stock. The shares of Old Kent Common Stock to
be issued in the Merger in accordance with this Plan of Merger have been
duly authorized and, when issued as contemplated by this Plan of Merger,
will be legally issued, fully paid, and nonassessable shares.
3.16 True and Complete Information. No schedule, statement, list,
certificate, or other information furnished or to be furnished by Old Kent
in connection with this Plan of Merger, including the Old Kent Disclosure
Statement, contains or will contain any untrue statement of a material
fact, or omits or will omit to state a material fact necessary to make the
statements contained therein, in light of the circumstances in which they
are made, not misleading.
3.17 Truth and Completeness of Representations and Warranties.
3.17.1 True at the Closing. Old Kent further warrants that its
representations and warranties in this Plan of Merger will be true in
all material respects at the Closing. All of such representations and
warranties made with respect to specified dates or events shall still
be true at the Closing in all material respects with respect to such
dates or events.
3.17.2 Untrue Representations and Warranties. During the term
of this Plan of Merger, if Old Kent becomes aware of any facts or of
the occurrence or impending occurrence of any event which would cause
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one or more of Old Kent's representations and warranties contained in
this Plan of Merger to become untrue, or would have caused one or more
of such representations and warranties (except in the case of
representations and warranties expressly made only as of the execution
of this Plan of Merger) to be untrue had such facts been known or had
such event occurred prior to the execution of this Plan of Merger,
then:
(a) Notice. Old Kent shall immediately give detailed
written notice thereof to FNBC; and
(b) Remedy Unless Waived. Old Kent shall use all
reasonable efforts to change such facts or events to make such
representations and warranties true, unless the same shall have
been waived in writing by FNBC.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF FNBC
FNBC represents and warrants to Old Kent that, except as
otherwise set forth in a disclosure statement (the "FNBC Disclosure
Statement"), which will be delivered to Old Kent within 30 days after the
date of the execution of this Plan of Merger:
4.1 Authorization, No Conflicts, Etc.
4.1.1 Authorization of Agreement. The execution, delivery, and
performance of this Plan of Merger by FNBC have been duly authorized
and approved by all necessary corporate action. When executed and
delivered, this Plan of Merger will be legally binding on and
enforceable against FNBC in accordance with its terms, except that the
consummation of the Merger is subject to the approval of FNBC's
stockholders as described in Section 1.1 (Adoption of Plan of Merger).
4.1.2 No Conflict, Breach, Violation, Etc. The execution,
delivery, and performance of this Plan of Merger by FNBC, and the
consummation of the Merger, do not and will not violate, conflict
with, or result in a breach of:
(a) Certificate or Bylaws. Any provision of FNBC's
Certificate of Incorporation or Bylaws; or
(b) Statutes, Judgments, Etc. Any statute, code,
ordinance, rule, regulation, judgment, order, writ, arbitral
award, decree, or injunction applicable to FNBC or FNBC's
Subsidiaries as defined in Section 4.3.1 (Ownership of
Subsidiaries), assuming the timely receipt of each of the
approvals referred to in Section 4.1.4 (Required Approvals).
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4.1.3 No Contractual Breach, Default, Liability, Etc. The
execution, delivery, and performance of this Plan of Merger by FNBC,
and the consummation of the Merger, do not and will not:
(a) Agreements, Etc. Violate, conflict with, result in a
breach of, constitute a default under, require any consent,
approval, waiver, extension, amendment, authorization, notice or
filing under, or extinguish any material contract right of FNBC
or any of FNBC's Subsidiaries under any agreement, mortgage,
lease, commitment, indenture, other instrument, or obligation to
which FNBC or any of FNBC's Subsidiaries is a party or by which
they are bound or affected:
(1) Which is material to the business, income, or
financial condition of FNBC or any of FNBC's Subsidiaries;
or
(2) The violation or breach of which could prevent
FNBC from consummating the Merger;
(b) Regulatory Restrictions. Violate, conflict with,
result in a breach of, constitute a default under, or require any
consent, approval, waiver, extension, amendment, authorization,
notice, or filing under, any memorandum of understanding or
similar regulatory consent agreement to which FNBC or any of
FNBC's Subsidiaries is a party or subject, or by which it is
bound or affected; or
(c) Tortious Interference. Subject Old Kent or Old Kent's
subsidiaries to liability for tortious interference with
contractual rights.
4.1.4 Required Approvals. No notice to, filing with,
authorization of, exemption by, or consent or approval of, any public
body or authority is necessary for the consummation of the Merger by
FNBC other than in connection or compliance with the provisions of the
Michigan Act and the Delaware Law, compliance with federal and state
securities laws, and the consents, authorizations, approvals, or
exemptions required under the Federal Bank Holding Company Act and any
approvals by the State of Arizona required in connection with the
acquisition of the Insurance Company.
4.2 Organization and Good Standing. FNBC is a corporation duly
organized, validly existing, and in good standing under the laws of the
State of Delaware. FNBC possesses all requisite corporate power and
authority to own, operate, and lease its properties and to carry on its
business as it is now being conducted in all material respects. FNBC is a
bank holding company duly registered and in good standing with the Federal
Reserve Board under the Federal Bank Holding Company Act. FNBC is duly
qualified to conduct business in the State of Michigan as a foreign
corporation. FNBC is not required to be qualified or admitted to conduct
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business as a foreign corporation in any other state in which such
qualification or admission would be material to its business.
4.3 Subsidiaries.
4.3.1 Ownership of Subsidiaries. Except for any directors'
qualifying shares as to which enforceable repurchase agreements exist
(which are identified in the FNBC Disclosure Statement), FNBC owns all
of the issued and outstanding shares of capital stock of First
National Bank in Macomb County (the "Bank") and Bankers Fund Life
Insurance Company (the "Insurance Company"), free and clear of all
claims, security interests, pledges, or liens of any kind. The Bank
and the Insurance Company shall be collectively referred to as "FNBC's
Subsidiaries" in this Plan of Merger. Each of FNBC's Subsidiaries is
duly organized, validly existing, and in good standing under the laws
of the United States of America or the State of Arizona, as the case
may be. FNBC does not have "Control" (as defined in Section 2(a)(2)
of the Federal Bank Holding Company Act, using 5 percent rather than
25 percent), either directly or indirectly, of any corporation engaged
in an active trade or business or which holds any significant assets
other than as stated in this Section 4.3 (Subsidiaries).
4.3.2 Rights to Capital Stock. There are no outstanding
subscriptions, options, warrants, rights to acquire, or any other
similar agreements pertaining to the capital stock of FNBC's
Subsidiaries.
4.3.3 Qualification and Power. Each of FNBC's Subsidiaries:
(a) Foreign Qualification. Is qualified or admitted to
conduct business in the State of Michigan and any other state in
which such qualification or admission would be material to its
business; and
(b) Corporate Power. Has full corporate power and
authority to carry on its business as and where now being
conducted.
4.3.4 FDIC; Insurance Assessments. The Bank maintains in full
force and effect deposit insurance through the Bank Insurance Fund of
the Federal Deposit Insurance Corporation ("FDIC"). The Bank has
fully paid to the FDIC as and when due all assessments with respect to
its deposits as are required to maintain such deposit insurance in
full force and effect.
4.3.5 Regulatory Fees and Charges. Each of FNBC's Subsidiaries
has paid as and when due all material fees, charges, assessments, and
the like to each and every governmental or regulatory agency having
jurisdiction as required by law, regulation, or rule.
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4.3.6 Assets Used in Business. All nonfinancial assets that are
material to the conduct of the business of FNBC and FNBC's
Subsidiaries are owned, leased, or licensed by FNBC and FNBC's
Subsidiaries and are adequate to carry on such business as presently
conducted. All of FNBC's and FNBC's Subsidiaries' nonfinancial assets
and properties are in good operating condition, in a good state of
maintenance and repair, and in the possession of FNBC or FNBC's
Subsidiaries.
4.4 Capital Stock.
4.4.1 Classes and Shares. The authorized capital stock of FNBC
consists of 10,000,000 shares divided into two classes as follows:
(i) 8,000,000 shares of common stock, $3.125 par value, of which, as
of the date and time of the execution of this Plan of Merger,
2,434,060 shares were issued and outstanding and 220,204 shares were
reserved for issuance pursuant to outstanding director and employee
stock options, of which options on 119,923 shares were exercisable as
of the execution of this Plan of Merger in accordance with their
terms; and (ii) 2,000,000 shares of preferred stock, $.01 par value,
none of which were issued and outstanding as of the date of this Plan
of Merger.
4.4.2 No Other Capital Stock. There is no security or class of
securities authorized or issued which represents or is convertible
into capital stock of FNBC except as described in this Section 4.4
(Capital Stock). As of the execution of this Plan of Merger, there
are no outstanding subscriptions, options, warrants, or rights to
acquire any capital stock of FNBC, or agreements to which FNBC is a
party or by which it is bound to issue capital stock except for
(i) common share purchase rights (the "FNBC Rights") issued pursuant
to a Rights Agreement dated as of November 28, 1990, as amended,
between FNBC and State Street Bank and Trust Company (the "FNBC Rights
Agreement") represented by and transferable only with certificates
representing shares of FNBC Common Stock; and (ii) options to purchase
a total of 220,204 shares awarded under stock option plans, of which
options on 119,923 shares may be exercised as of the execution of this
Plan of Merger.
4.4.3 Issuance of Shares. After the execution of this Plan of
Merger, the number of issued and outstanding shares of FNBC Common
Stock is subject to change before the Effective Time of the Merger
only by reason of the issuance of additional shares of FNBC Common
Stock upon exercise of director and employee stock options described
in Section 4.4.2 (No Other Capital Stock).
4.4.4 Voting Rights. Other than the shares of FNBC Common Stock
described in this Section 4.4 (Capital Stock), neither FNBC nor any of
FNBC's Subsidiaries has outstanding any security or issue of
securities:
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(a) The holder or holders of which have the right to vote
on the approval of the Merger or this Plan of Merger; or
(b) Which entitle the holder or holders to consent to, or
withhold consent on, the Merger or this Plan of Merger.
4.5 Redemption of FNBC Rights. The FNBC Rights issued to the
stockholders of FNBC that are evidenced, as of the date of this Plan of
Merger, by shares of FNBC Common Stock may be redeemed by FNBC upon a
resolution therefor by the Board of Directors of FNBC at a redemption price
of $.01 per FNBC Right in cash. Neither the execution of this Plan of
Merger by FNBC nor any of the provisions of this Plan of Merger will
adversely affect in any way the ability of FNBC to redeem the FNBC Rights
as described in this Section 4.5 (Redemption of FNBC Rights).
4.6 Financial Statements.
4.6.1 Financial Statements. The consolidated financial
statements of FNBC and FNBC's Subsidiaries as of and for the each of
three years ended December 31, 1991, 1992, and 1993, as reported on by
FNBC's independent accountants, Deloitte & Touche, and the unaudited
consolidated financial statements of FNBC and FNBC's Subsidiaries as
of and for each of the quarters ended March 31, 1994 and June 30,
1994, including all schedules and notes relating to such statements,
as previously delivered to Old Kent, are correct and complete in all
material respects. These statements fairly present FNBC's and FNBC's
Subsidiaries' financial condition and results of operations on a
consolidated basis on the dates and for the periods indicated, and
have been prepared in conformity with generally accepted accounting
principles applied consistently throughout the periods indicated
(except as otherwise noted in such financial statements or the notes
thereto).
4.6.2 Call Reports. The consolidated reports of condition and
income of the Bank as of and for each of the years ended December 31,
1991, 1992, and 1993, and as of and for the each of the quarters ended
March 31, 1994, and June 30, 1994, as filed with the FDIC, and the
consolidated reports of condition and income of FNBC and FNBC's
Subsidiaries to be filed with the FDIC prior to the Effective Time of
the Merger, including all schedules and notes relating to such reports
(collectively, the "Call Reports"), are correct and complete and will
be correct and complete in all material respects. The Call Reports
which have been filed were prepared, and the Call Reports to be filed
will be prepared, in conformity with applicable regulatory accounting
principles applied consistently throughout the periods indicated
(except as otherwise noted in such reports).
4.7 Absence of Undisclosed Liabilities. Except as and to the extent
reflected or reserved against in the consolidated balance sheet of FNBC and
FNBC's Subsidiaries as of December 31, 1993, and the notes thereto, neither
FNBC nor any of FNBC's Subsidiaries had, as of such date, liabilities or
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obligations, secured or unsecured (whether accrued, absolute, or
contingent) which are, or as to which there is a reasonable probability
that they could be, materially adverse to the income or financial condition
of FNBC or any of FNBC's Subsidiaries.
4.8 Absence of Material Adverse Change. Since December 31, 1993,
there has been no material adverse change in the business, income, or
financial condition of FNBC or any of FNBC's Subsidiaries. No facts or
circumstances have been discovered from which it reasonably appears that
there is a significant risk and reasonable probability that there will
occur a material adverse change in the business, income, or financial
condition of FNBC or any of FNBC's Subsidiaries for reasons specific to
FNBC and not applicable to the banking industry in general.
4.9 Absence of Litigation. There is no action, suit, proceeding,
claim, arbitration, or investigation pending or threatened by any person,
including without limitation any governmental or regulatory agency, against
FNBC, any of FNBC's Subsidiaries, or the assets or business of FNBC or any
of FNBC's Subsidiaries, any of which has or may have a material adverse
effect on the business, income, or financial condition of FNBC or any of
FNBC's Subsidiaries. There is no factual basis known to FNBC which
presents a reasonable potential for any such action, suit, proceeding,
claim, arbitration, or investigation.
4.10 Conduct of Business. FNBC and FNBC's Subsidiaries have
conducted their respective businesses and used their respective properties
substantially in compliance with all federal, state, and local laws, civil
or common, ordinances and regulations, including without limitation
applicable federal and state laws and regulations concerning banking,
securities, truth-in-lending, truth-in-savings, mortgage origination and
servicing, usury, fair credit reporting, consumer protection, occupational
safety, civil rights, employee protection, fair employment practices, fair
labor standards, and insurance; and Environmental Laws (as defined in
Section 4.21.2 (Environmental Laws)); except for violations that would not
have a material adverse effect on the business, income, or financial
condition of FNBC or any of FNBC's Subsidiaries.
4.11 Absence of Defaults Under Contracts. There is no existing
default by FNBC or any of FNBC's Subsidiaries, or any other party, under
any contract or agreement to which FNBC or any of FNBC's Subsidiaries is a
party, or by which they are bound, which could have a material adverse
effect on the business, income, or financial condition of FNBC or any of
FNBC's Subsidiaries.
4.12 SEC and Other Filings. In the last five years:
4.12.1 SEC Filings. FNBC has filed, and will continue to file,
in a timely manner all required filings with the SEC, including
without limitation all reports on Form 10-K and Form 10-Q;
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4.12.2 Regulatory Filings. FNBC has filed in a timely manner
all other filings with other regulatory bodies for which filings are
required;
4.12.3 Complete and Accurate. All such filings, as amended,
were complete and accurate in all material respects as of the dates of
such filings, and there were no misstatements or omissions therein
which, as of the making of this representation and warranty, would be
material to the business, income, or financial condition of FNBC and
FNBC's Subsidiaries on a consolidated basis; and
4.12.4 Compliance with Regulations. All such filings complied
in all material respects with all regulations, forms, and guidelines
applicable to such filings.
4.13 Registration Statement, Etc.
4.13.1 Accurate Information. None of the information to be
supplied by FNBC for inclusion, or included, in any Document will:
(a) Be false or misleading with respect to any material
fact, or omit to state any material fact necessary to make the
statements therein not misleading (i) at the respective times
such Documents are filed; (ii) with respect to the Registration
Statement, when it becomes effective; and (iii) with respect to
the Prospectus and Proxy Statement, when it is mailed.
(b) With respect to the Registration Statement and the
Prospectus and Proxy Statement, as either may be amended or
supplemented, at the time of the Stockholders' Meeting, be false
or misleading with respect to any material fact, or omit to state
any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of any
proxy for the Stockholders' Meeting.
4.13.2 Compliance of Filings. All documents which FNBC is
responsible for filing with the SEC and any regulatory agency in
connection with the Merger will comply as to form in all material
respects with the provisions of applicable law.
4.14 Tax Matters.
4.14.1 Tax Returns. FNBC and FNBC's Subsidiaries have duly and
timely filed all material tax returns which they have by law been
required to file, including without limitation those with respect to
income, withholding, social security, unemployment, franchise, real
property, personal property, and intangibles taxes. Each such tax
return, report, and statement, as amended, is correct and complies in
all material respects with all applicable laws and regulations.
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4.14.2 Tax Assessments and Payments. All taxes and assessments,
including any penalties, interest, and deficiencies relating to those
taxes and assessments, due and payable by FNBC and FNBC's Subsidiaries
have been paid in full as and when due. The provisions made for taxes
on the consolidated balance sheet of FNBC and FNBC's Subsidiaries as
of December 31, 1993, are sufficient for the payment of all federal,
state, county, and local taxes of FNBC and FNBC's Subsidiaries accrued
but unpaid as of the date indicated, whether or not disputed, with
respect to all periods through December 31, 1993.
4.14.3 Tax Audits. None of the federal consolidated income tax
returns of FNBC and FNBC's Subsidiaries filed for any tax year after
1988 have been audited by the Internal Revenue Service (the "IRS").
There is no tax audit or legal or administrative proceeding for
assessment or collection of taxes pending or, to FNBC's knowledge,
threatened with respect to FNBC or any of FNBC's Subsidiaries. No
claim for assessment or collection of taxes has been asserted with
respect to FNBC or any of FNBC's Subsidiaries. No waiver of any
limitations statute or extension of any assessment or collection
period has been executed by or on behalf of FNBC or any of FNBC's
Subsidiaries.
4.15 Title to Properties. FNBC and FNBC's Subsidiaries have good,
sufficient, and marketable title to all of their properties and assets,
whether real, personal, or a combination thereof, reflected in their books
and records as being owned (including those reflected in the consolidated
balance sheet of FNBC and FNBC's Subsidiaries as of December 31, 1993,
except as since disposed of in the ordinary course of business), free and
clear of all liens and encumbrances, except:
4.15.1 Reflected on Balance Sheet. As reflected on the
consolidated balance sheet of FNBC and FNBC's Subsidiaries as of
December 31, 1993, and the notes thereto;
4.15.2 Normal to Business. Liens for current taxes not yet
delinquent, and liens or encumbrances which are normal to the business
of FNBC and FNBC's Subsidiaries and which are not material in relation
to the business, income, or financial condition of FNBC or any of
FNBC's Subsidiaries; and
4.15.3 Immaterial Imperfections. Such imperfections of title,
easements, and encumbrances, if any, as are not material in character,
amount, or extent, and do not materially detract from the value, or
materially interfere with the present use, of the properties subject
thereto or affected thereby, or which would not otherwise be material
to the business, income, or financial condition of FNBC or any of
FNBC's Subsidiaries.
4.16 Condition of Real Property. No building or improvement on any
real property owned, leased, or used by FNBC or any of FNBC's Subsidiaries
encroaches on any easement or property owned by another, and no building or
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property owned by another encroaches on any real property owned, leased, or
used by FNBC or any of FNBC's Subsidiaries or on any easement the benefit
of which runs to real property owned, leased, or used by FNBC or any of
FNBC's Subsidiaries. None of the boundaries of any parcel of real property
owned, leased, or used by FNBC or any of FNBC's Subsidiaries deviates
substantially from those shown on the survey of such parcel, if any,
attached to the FNBC Disclosure Statement or from what they appear to be
through visual inspection. Neither FNBC nor any of FNBC's Subsidiaries is
in material violation of any zoning regulation, building restriction,
restrictive covenant, ordinance, or other law, order, regulation, or
requirement relating to any real property that FNBC or any of FNBC's
Subsidiaries owns, leases, or uses and that is material to the conduct of
the business of FNBC and FNBC's Subsidiaries. All buildings and
improvements that FNBC or any of FNBC's Subsidiaries owns, leases, or uses
and that are material to the conduct of the business of FNBC and FNBC's
Subsidiaries are in good condition (normal wear and tear excepted), are
structurally sound and not in need of material repairs, are fit for their
intended purposes, and are adequately serviced by all utilities necessary
for the effective operation of FNBC's and FNBC's Subsidiaries' business as
presently conducted. None of the real property owned, leased, or used by
FNBC or any of FNBC's Subsidiaries and that are material to the conduct of
the business of FNBC and FNBC's Subsidiaries is the subject of any
condemnation action and there is, to the best of FNBC's knowledge, no
proposal under consideration by any public or governmental authority or
entity to use any of such properties for some other purpose.
4.17 Leases. All leases pursuant to which FNBC or any of FNBC's
Subsidiaries, as lessee, lease real or personal property which is material
to the business of FNBC or any of FNBC's Subsidiaries are valid, effective,
and enforceable against the lessor in accordance with their respective
terms. There is no existing default under any such lease, or any event
which with notice or lapse of time, or both, would constitute a default
with respect to FNBC or any of FNBC's Subsidiaries or, to the best
knowledge of FNBC, any other party. No such lease contains a prohibition
against assignment by FNBC or any of FNBC's Subsidiaries, by operation of
law or otherwise, or any other provision which would preclude the Surviving
Corporation or any of its direct or indirect subsidiaries from possessing
and using the leased premises for the same purposes and upon the same
rental and other terms upon consummation of the Merger as are applicable to
the possession and use by FNBC or any of FNBC's Subsidiaries as of the date
of this Plan of Merger.
4.18 Licenses, Permits, Etc.
4.18.1 All Licenses, Permits, Etc. FNBC and FNBC's Subsidiaries
hold all licenses, certificates, permits, franchises, and rights from
all appropriate federal, state, and other public authorities necessary
for the conduct of their businesses as presently conducted, the lack
of which would have a material adverse effect on the business, income,
or financial condition of FNBC or any of FNBC's Subsidiaries.
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4.18.2 Regulatory Action. Neither FNBC nor any of FNBC's
Subsidiaries:
(a) Has within the last 5 years been charged with, or to
the best of FNBC's knowledge is under governmental investigation
with respect to, any actual or alleged violation of any statute,
ordinance, rule, regulation, guideline, or standard; or
(b) Is the subject of any pending or, to FNBC's knowledge,
threatened proceeding by any regulatory authority having
jurisdiction over its business, properties, or operations.
4.19 Certain Employment Matters.
4.19.1 Employment Policies, Programs, and Procedures. The
policies, programs and practices of FNBC and FNBC's Subsidiaries
relating to equal opportunity and affirmative action, wages, hours of
work, and other terms and conditions of employment are in compliance
in all material respects with applicable laws, orders, regulations,
and ordinances governing employment and terms and conditions of
employment.
4.19.2 Record of Payments. There are no existing or outstanding
obligations of FNBC or any of FNBC's Subsidiaries, whether arising by
operation of law, civil or common, by contract, or by past custom, for
Employment-Related Payments (as defined in Section 4.19.3 (Employment-
Related Payments)) to trusts or other funds or to any governmental
agency or to any present or former director, officer, employee, or
agent (or his or her heirs, survivors, legatees, or legal
representatives) which have not been duly recorded on the books and
records of FNBC or FNBC's Subsidiaries and paid when due or duly
accrued as a liability, except for obligations to the two officers of
the Bank under the First National Bank in Macomb County Supplemental
Executive Retirement Plan.
4.19.3 "Employment-Related Payments." For purposes of this Plan
of Merger, "Employment-Related Payments" include any payment to be
made with respect to any contract for employment, unemployment
compensation benefits, profit sharing, pension or retirement benefits
or social security benefits, or for fringe benefits, including
vacation or holiday pay, bonuses and other forms of compensation, or
for medical insurance or medical expenses, which are payable to
present or former directors, officers, employees, or agents, or their
survivors, heirs, legatees, or legal representatives.
4.19.4 Employment Claims. There are no disputes, claims, or
charges, pending or threatened alleging breach of any express or
implied employment contract or commitment, or breach of any applicable
law, order, regulation, public policy or ordinance relating to
employment or terms and conditions of employment, and there is no
basis for any valid claim or charge with regard to such matters.
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4.19.5 Disclosure of Agreements. There is no written or oral,
express or implied:
(a) Employment contract or agreement, or guarantee of job
security, made with or to any past or present employee of FNBC or
any of FNBC's Subsidiaries which is not terminable by FNBC or
FNBC's Subsidiaries upon 60 days' or less notice without penalty
or obligation;
(b) Plan, contract, arrangement, understanding, or practice
providing for bonuses, pensions, options, stock purchases,
deferred compensation, retirement payments, retirement benefits
of the type described in Statement of Financial Accounting
Standard No. 106, or profit sharing; or
(c) Plan, agreement, arrangement, or understanding with
respect to payment of medical expenses, insurance (except
insurance continuation limited to that required under provisions
of the Consolidated Omnibus Budget Reconciliation Act), or other
benefits for any former employee or any spouse, child, member of
the same household, estate, or survivor of any employee.
4.20 Employee Benefit Plans. With respect to any Employee Benefit
Plan (as defined in Section 3.10 (Employee Benefit Plans)) maintained by or
for the benefit of FNBC or any of FNBC's Subsidiaries or to which FNBC or
any of FNBC's Subsidiaries have made payments or contributions on behalf of
its employees:
4.20.1 ERISA Compliance. FNBC and each of FNBC's Subsidiaries,
each Employee Benefit Plan, and all trusts created thereunder are in
substantial compliance with ERISA, including Sections 601-608
concerning continuation of health care coverage, and all other
applicable laws and regulations insofar as such laws and regulations
apply to such plans and trusts.
4.20.2 Internal Revenue Code Compliance. FNBC and each of
FNBC's Subsidiaries, each Employee Benefit Plan which is intended to
be a qualified plan under Section 401(a) of the Internal Revenue Code,
and all trusts created thereunder are in substantial compliance with
the applicable provisions of the Internal Revenue Code, including
Section 4980B concerning continuation of health care coverage.
4.20.3 Prohibited Transactions. No Employee Benefit Plan and no
trust created thereunder has been involved, subsequent to June 30,
1974, in any nonexempt "prohibited transaction" as defined in Section
4975 of the Internal Revenue Code and in Sections 406, 407, and 408 of
ERISA.
4.20.4 Plan Termination. No Employee Benefit Plan which is a
qualified plan under Section 401(a) of the Internal Revenue Code and
no trust created thereunder has been terminated, partially terminated,
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curtailed, discontinued, or merged into another plan or trust after
January 1, 1985, except in compliance with notice and disclosure to
the Internal Revenue Service and the Pension Benefit Guaranty
Corporation (the "PBGC"), where applicable, as required by the
Internal Revenue Code and ERISA. With respect to each such
termination, all termination procedures have been completed and there
are no pending or potential liabilities to the PBGC, to the plans, or
to participants under such terminated plans. Each such termination,
partial termination, curtailment, discontinuance, or consolidation has
been accompanied by the issuance of a current favorable determination
letter by the IRS and, where applicable, has been accompanied by plan
termination proceedings with and through the PBGC.
4.20.5 Multiemployer Plan. No Employee Benefit Plan is a
"multiemployer plan" within the meaning of Section 3(37)(A) of ERISA.
4.20.6 Defined Benefit Plan. No Employee Benefit Plan in effect
as of December 31, 1993, is a "defined benefit plan" within the
meaning of Section 3(35) of ERISA.
4.20.7 Payment of Contributions. FNBC and each of FNBC's
Subsidiaries has made when due all contributions required under any
Employee Benefit Plan and under applicable laws and regulations.
4.20.8 Payment of Benefits. There are no payments which have
become due from any Employee Benefit Plan, the trusts created
thereunder, or from FNBC or any of FNBC's Subsidiaries which have not
been paid through normal administrative procedures to the plan
participants or beneficiaries entitled thereto, except for claims for
benefits for which administrative claims procedures under such plan
have not been exhausted.
4.20.9 Accumulated Funding Deficiency. No Employee Benefit Plan
which is intended to be a qualified plan under Section 401(a) of the
Internal Revenue Code and no trust created thereunder has incurred,
subsequent to June 30, 1974, an "accumulated funding deficiency" as
defined in Section 412(a) of the Internal Revenue Code and Section 302
of ERISA (whether or not waived).
4.20.10 Filing of Reports. FNBC has filed or caused to be
filed, and will continue to file or cause to be filed, in a timely
manner all filings pertaining to each Employee Benefit Plan with the
IRS, the United States Department of Labor, and the PBGC as prescribed
by the Internal Revenue Code or ERISA, or regulations issued
thereunder. All such filings, as amended, were complete and accurate
in all material respects as of the dates of such filings, and there
were no misstatements or omissions in any such filing which, as of the
making of this representation and warranty, would be material to the
financial condition, net income, business, properties, operations, or
prospects of FNBC or any of FNBC's Subsidiaries.
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4.21 Environmental Matters.
4.21.1 Hazardous Substances. For purposes of this Plan of
Merger, "Hazardous Substance" has the meaning set forth in Section
9601 of the Comprehensive Environmental Response Compensation and
Liability Act of 1980, as amended, 42 U.S.C.A. 9601 et seq.
("CERCLA"), and also includes any substance now or in the future
regulated by or subject to any Environmental Law (as defined below)
and any other pollutant, contaminant, or waste, including, without
limitation, petroleum, asbestos, radon, and polychlorinated biphenyls.
4.21.2 Environmental Laws. For purposes of this Plan of Merger,
"Environmental Laws" means all laws (civil or common), ordinances,
rules, regulations, guidelines, and orders that: (i) regulate air,
water, soil, or solid waste management, including the generation,
release, containment, storage, handling, transportation, disposal, or
management of Hazardous Substances; (ii) regulate or prescribe
requirements for air, water, or soil quality; (iii) are intended to
protect public health or the environment; or (iv) establish liability
for the investigation, removal, or cleanup of, or damage caused by,
any Hazardous Substance.
4.21.3 Owned or Operated Property. With respect to: (i) the
real estate owned or leased by FNBC or any of FNBC's Subsidiaries or
used in the conduct of their businesses; (ii) other real estate owned
by the Bank; (iii) real estate held and administered in trust by the
Bank; and (iv) to FNBC's knowledge, any real estate formerly owned or
leased by FNBC or any of FNBC's Subsidiaries (for purposes of this
Section, properties described in any of (i) through (iv) are
collectively referred to as "Premises"):
(a) Construction and Content. None of the Premises is
constructed of, or contains as a component part, any material
which (either in its present form or as it may reasonably be
expected to change through aging or normal use) releases or may
release any substance, whether gaseous, liquid, or solid, that is
a Hazardous Substance or is known to be (either by single
exposure or by repeated or prolonged exposure) injurious or
hazardous to the health of persons occupying the Premises.
Without limiting the generality of this Section, the Premises
are, and during all applicable limitation periods have been, free
of asbestos except to the extent properly sealed or encapsulated
in compliance with all applicable Environmental Laws and all
workplace safety and health laws and regulations.
(b) Uses of Premises. No part of the Premises has been
used for the generation, manufacture, handling, storage,
disposal, or management of Hazardous Substances.
(c) Underground Storage Tanks. The Premises do not
contain, and have never contained, any underground storage tanks.
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With respect to any underground storage tank listed in the FNBC
Disclosure Statement as an exception to the foregoing, each such
underground storage tank presently or previously located on
Premises is or has been maintained or removed, as applicable, in
compliance with all applicable Environmental Laws, and has not
been the source of any release of a Hazardous Substance to the
environment which has not been remediated.
(d) Absence of Contamination. The Premises do not contain
and are not contaminated by any reportable quantity, or any
quantity in excess of applicable cleanup standards, of a
Hazardous Substance from any source.
(e) Environmental Suits and Proceedings. There is no
action, suit, investigation, liability, inquiry, or other
proceeding, ruling, order, notice of potential liability, or
citation involving FNBC or any of FNBC's Subsidiaries pending,
threatened, or previously asserted under, or as a result of any
actual or alleged failure to comply with any requirement of, any
Environmental Law. Without limiting the generality of this
Section, there is no basis for any claim against or involving
FNBC or any of FNBC's Subsidiaries, or any of their respective
properties or assets, under Section 107 of CERCLA or any similar
provision of any other Environmental Law.
4.21.4 Loan Portfolio. With respect to any real estate securing
any outstanding loan or related security interest and any owned real
estate acquired in full or partial satisfaction of a debt previously
contracted:
(a) Investigation. FNBC and each of FNBC's Subsidiaries
have complied in all material respects with their policies (as
such policies may have been in effect from time to time and as
disclosed in the FNBC Disclosure Statement), and all applicable
laws and regulations, concerning the investigation of each such
property to determine whether or not there exists or is
reasonably likely to exist any Hazardous Substance on, in, or
under such property and whether or not a release of a Hazardous
Substance has occurred at or from such property.
(b) No Known Contamination. To FNBC's knowledge, no such
property contains or is contaminated by any quantity of any
Hazardous Substance from any source.
4.22 Duties as Fiduciary. The Bank has performed all of its duties
in any capacity as trustee, executor, administrator, registrar, guardian,
custodian, escrow agent, receiver, or other fiduciary in a fashion that
complies in all material respects with all applicable laws, regulations,
orders, agreements, wills, instruments, and common law standards, the
violation of which would be material to its business, income, or financial
condition.
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4.23 Investment Bankers and Brokers. FNBC has employed the
investment banking firm of M. A. Schapiro & Co., Inc. FNBC's only
financial obligation with respect to investment banking firms is the
payment of fees and expenses as described in the FNBC Disclosure Statement.
FNBC has not employed any other broker, finder, or investment banker in
connection with the Merger. FNBC has no express or implied agreement with
any other person or company relative to any commission or finder's fee
payable with respect to the Merger.
4.24 Related Persons. For purposes of this Plan of Merger, the term
"FNBC Related Person" shall mean any director or executive officer of FNBC
or any of FNBC's Subsidiaries, their spouses and children, any person who
is a member of the same household as such persons, and any corporation,
partnership, proprietorship, trust, or other entity of which any such
persons, alone or together, have Control.
4.24.1 Control of Material Assets. Other than in a capacity as
a shareholder, director, or executive officer of FNBC or any of FNBC's
Subsidiaries, no FNBC Related Person owns or controls any material
assets or properties which are used in the business of FNBC or any of
FNBC's Subsidiaries.
4.24.2 Contractual Relationships. Other than ordinary and
customary banking relationships, no FNBC Related Person has any
contractual relationship with FNBC or any of FNBC's Subsidiaries.
4.24.3 Loan Relationships. No FNBC Related Person has any
outstanding loan or loan commitment from, or on whose behalf an
irrevocable letter of credit has been issued by, FNBC or any of FNBC's
Subsidiaries in a principal amount of $50,000 or more.
4.25 Change in Business Relationships. Neither FNBC nor any of
FNBC's Subsidiaries has notice, whether on account of the Merger or
otherwise, that (i) any customer, agent, representative, or supplier of
FNBC or any of FNBC's Subsidiaries intends to discontinue, diminish, or
change its relationship with FNBC or any of FNBC's Subsidiaries, the effect
of which would be material to the business of FNBC or any of FNBC's
Subsidiaries; or (ii) any executive officer of FNBC or any of FNBC's
Subsidiaries intends to terminate his or her employment.
4.26 Insurance. The FNBC Disclosure Statement contains true copies
of each policy of insurance presently in force with respect to the assets,
properties, premises, operations, and personnel of FNBC and each of FNBC's
Subsidiaries. FNBC and each of FNBC's Subsidiaries maintains in full force
and effect insurance on its assets, properties, premises, operations, and
personnel in such amounts and against such risks and losses as are
customary and adequate for comparable entities engaged in the same business
and industry. There is no unsatisfied claim of $25,000 or more under such
insurance as to which the insurance carrier has denied liability. During
the last five years, no insurance company has canceled or refused to renew
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a policy of insurance covering FNBC's or any of FNBC's Subsidiaries'
assets, properties, premises, operations, or personnel.
4.27 Books and Records. The minutes contained in corporate minute
books and files of FNBC and each of FNBC's Subsidiaries (since it was
acquired by FNBC) properly and accurately record in all material respects
all actions actually taken by its shareholders, directors, and committees
of directors. The books, accounts, and records of FNBC and each of FNBC's
Subsidiaries reflect only actual transactions and have been maintained in
all material respects in the usual and regular manner, in accordance with
generally accepted accounting principles consistently applied, and in
compliance with all applicable laws and regulations.
4.28 Loan Guarantees. All guarantees of indebtedness owed to any of
FNBC's Subsidiaries, including but not limited to those of the Federal
Housing Administration, the Small Business Administration, and other state
and federal agencies, are valid and enforceable, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium, or
other similar laws affecting creditors' rights, and by the exercise of
judicial discretion in accordance with general principles applicable to
equitable and similar remedies, and except as would not be material to FNBC
or any of FNBC's Subsidiaries.
4.29 Events Since December 31, 1993. Neither FNBC nor any of FNBC's
Subsidiaries has, since December 31, 1993:
4.29.1 Business in Ordinary Course. Conducted its business
other than in the ordinary course, or incurred or become subject to
any liability or obligation, except liabilities incurred in the
ordinary course of business, and except for any single liability or
for the aggregate of any group of related liabilities which do not
exceed $50,000.
4.29.2 Strikes or Labor Trouble. Experienced or, to the best
knowledge of FNBC, been threatened by any strike, work stoppage,
organizational effort, or other labor trouble, or any other event or
condition of any similar character which has been or could reasonably
be expected to be materially adverse to the business, income, or
financial condition of FNBC or any of FNBC's Subsidiaries.
4.29.3 Discharge of Obligations. Discharged or satisfied any
lien or encumbrance, or paid any obligation or liability other than
those shown on FNBC's December 31, 1993, consolidated financial
statements or incurred after that date, other than in the ordinary
course of business, except for such liens, encumbrances, liabilities,
and obligations that do not in the aggregate exceed $50,000.
4.29.4 Mortgage of Assets. Mortgaged, pledged, or subjected to
lien, charge, or other encumbrance any of its assets, or sold or
transferred any such assets, except in the ordinary course of
business, except for such mortgages, pledges, liens, charges, and
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encumbrances for indebtedness that do not in the aggregate exceed
$50,000.
4.29.5 Extraordinary Transactions. Entered into any transaction
involving more than $50,000 in the aggregate, other than in the
ordinary course of business, or incurred any other liabilities,
obligations, liens, or encumbrances for indebtedness that in the
aggregate exceed $50,000.
4.29.6 Contract Amendment or Termination. Made or permitted any
amendment or termination of any contract to which it is a party and
which is material to the business, income, or financial condition of
FNBC or any of FNBC's Subsidiaries, except as expressly provided in
this Plan of Merger.
4.30 Anticipated Changes. No facts or circumstances specific to FNBC
and FNBC's Subsidiaries and not applicable to the banking industry in
general have been discovered from which it appears that there is a risk
that there will occur a materially adverse change in the financial
condition, net income, business, properties, operations, or prospects of
FNBC or any of FNBC's Subsidiaries.
4.31 Reserve for Loan Losses. The reserve for loan losses reflected
in FNBC's and FNBC's Subsidiaries' audited consolidated financial
statements for the period ended December 31, 1993, and Call Reports for the
quarters ended March 31, 1994 and June 30, 1994, was adequate to meet all
reasonably anticipated loan losses, net of recoveries related to loans
previously charged off.
4.32 Loan Origination and Servicing. In originating, underwriting,
servicing, and discharging loans, mortgages, land contracts, and other
contractual obligations, either for its own account or for the account of
others, the Bank has complied with all applicable terms and conditions of
such obligations and with all applicable laws, regulations, rules,
contractual requirements, and procedures with respect to such servicing,
except for incidents of noncompliance that would not, individually or in
the aggregate, have a material effect on the business, income, or financial
condition of FNBC or any of FNBC's Subsidiaries.
4.33 Public Communications; Securities Offering. No annual report,
quarterly report, proxy material, press release, or other communication
previously sent or released by FNBC or any of FNBC's Subsidiaries to FNBC's
stockholders or the public since January 1, 1991, was false or misleading
with respect to any material fact, or omitted to state any material fact
necessary to make the statements therein not misleading.
4.34 No Insider Trading. FNBC has reviewed its stock transfer
records since December 31, 1993, and has questioned its directors and
executive officers concerning known stock transfers since that date. Based
upon that investigation, to the best of FNBC's knowledge, no director or
officer of FNBC or any of FNBC's Subsidiaries and no person related to any
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uch director or officer by blood or marriage and residing in the same
household has since December 31, 1993, purchased or sold, or caused to be
purchased or sold, any shares of FNBC Common Stock of which such director,
officer, or related person is or was the record or beneficial owner as
determined according to Rule 13d-3 issued under the Securities Exchange Act
of 1934, as amended (the "Securities Exchange Act"), during any period when
FNBC was in possession of material nonpublic information.
4.35 Continuity of Interest. To the best of FNBC's knowledge, there
is no plan or intention by the stockholders of FNBC who own FNBC Common
Stock to sell, exchange, or otherwise dispose of a number of shares of Old
Kent Common Stock received in the transaction that would reduce the FNBC
stockholders' ownership of Old Kent Common Stock to a number of shares
having a value, as of the Effective Time of the Merger, of less than
50 percent of the value of all of the formerly outstanding FNBC Common
Stock as of the same time. For purposes of this representation, shares of
FNBC Common Stock exchanged for cash in lieu of fractional shares will be
treated as outstanding FNBC Common Stock at the Effective Time of the
Merger. Shares of FNBC Common Stock and shares of Old Kent Common Stock
held by FNBC stockholders and otherwise sold, redeemed, or disposed of
before or after the transaction will be considered in making this
representation.
4.36 Pooling of Interests Accounting Qualification. Neither FNBC nor
any of FNBC's Subsidiaries owns any shares of Old Kent Common Stock, any
securities convertible into such stock, or any rights to acquire such
stock, except for any which may be held in a fiduciary capacity for a
customer as to which FNBC or any of FNBC's Subsidiaries has no beneficial
interest. Neither FNBC nor any of FNBC's Subsidiaries has during the past
2 years acquired any shares of FNBC Common Stock, any securities
convertible into such stock, or any other rights to acquire such stock,
except for any which may be held in a fiduciary capacity for a customer as
to which FNBC or any of FNBC's Subsidiaries has no beneficial interest, and
except as permitted for purposes other than a business combination under
the pooling of interests method of accounting, and no more than a normal
number of shares have been acquired for such permissible purposes.
4.37 True and Complete Information. No schedule, statement, list,
certificate, or other information furnished or to be furnished by FNBC in
connection with this Plan of Merger, including the FNBC Disclosure
Statement, contains or will contain any untrue statement of a material
fact, or omits or will omit to state a material fact necessary to make the
statements contained therein, in light of the circumstances in which they
are made, not misleading.
4.38 Truth and Completeness of Representations and Warranties.
4.38.1 True at the Closing. FNBC further warrants that its
representations and warranties in this Plan of Merger will be true in
all material respects at the Closing. All of such representations and
warranties made with respect to specified dates or events shall still
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be true at the Closing in all material respects with respect to such
dates or events.
4.38.2 Untrue Representations and Warranties. During the term
of this Plan of Merger, if FNBC becomes aware of any facts or of the
occurrence or impending occurrence of any event which would cause one
or more of FNBC's representations and warranties contained in this
Plan of Merger to become untrue, or would have caused one or more of
such representations and warranties (except in the case of
representations and warranties expressly made only as of the execution
of this Plan of Merger) to be untrue had such facts been known or had
such event occurred prior to the execution of this Plan of Merger,
then:
(a) Notice. FNBC shall immediately give detailed written
notice thereof to Old Kent; and
(b) Remedy Unless Waived. FNBC shall use all reasonable
efforts to change such facts or events to make such
representations and warranties true, unless the same shall have
been waived in writing by Old Kent.
ARTICLE V
CERTAIN COVENANTS
5.1 FNBC Disclosure Statement. FNBC shall prepare the FNBC
Disclosure Statement, which shall be certified with respect to Section 4.37
(True and Complete Information) on behalf of FNBC by its chief executive
officer and its chief financial officer, and shall deliver two copies of
the FNBC Disclosure Statement to Old Kent not later than 30 days after the
execution of this Plan of Merger. The FNBC Disclosure Statement shall
contain appropriate references and cross-references with respect to
disclosures, and appropriate identifying markings with respect to
documents, which pertain to one or more sections or articles of this Plan
of Merger. In addition to any exceptions to FNBC's representations set
forth in Article IV, the FNBC Disclosure Statement shall contain true and
correct copies of each and every document specified below. Not less than 5
days prior to the Closing, FNBC shall deliver to Old Kent an update to the
FNBC Disclosure Statement describing any material changes and containing
any new or amended documents, as specified below, which are not contained
in the FNBC Disclosure Statement as initially delivered. The update to the
FNBC Disclosure Statement shall be certified with respect to Section 4.37
(True and Complete Information) on behalf of FNBC by its chief executive
officer and its chief financial officer. The FNBC Disclosure Statement and
the update, as of the dates they are delivered, shall contain:
5.1.1 Compensation Plans. All plans, policies or contracts
providing for bonuses, pensions, all sales commission schedules,
options, stock purchases, deferred compensation, severance or
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termination pay, retirement payments, profit sharing, or retirement
savings, any summary plan description relating thereto, and, to the
extent applicable, the last two annual reports on Form 5500 for each
such plan or contract.
5.1.2 Labor Agreements. All collective bargaining or other
contracts or agreements with any labor union or employee group
concerning employees of FNBC or any of FNBC's Subsidiaries.
5.1.3 Employment Agreements. All employment agreements not
terminable by FNBC or any of FNBC's Subsidiaries upon 60 days' or less
notice without penalty or obligation.
5.1.4 Affirmative Action Programs. All affirmative action plans
or programs covering employees of FNBC or any of FNBC's Subsidiaries.
5.1.5 Employment Policies. All employee handbooks, policy
manuals, rules and standards of employment promulgated by FNBC or any
of FNBC's Subsidiaries with regard to their employees and presently in
effect.
5.1.6 Judgments, Orders or Settlement Agreements. All
judgments, orders, injunctions, court decrees or settlement agreements
arising out of or relating to the labor and employment practices or
decisions of FNBC or any of FNBC's Subsidiaries which, by their terms,
continue to bind or affect FNBC or any of FNBC's Subsidiaries.
5.1.7 Defaulted Contracts. Excepting any ordinary and customary
banking relationship, all material agreements, contracts, mortgages,
deeds of trust, leases, commitments, indentures, notes, or other
instruments:
(a) Under which FNBC or any of FNBC's Subsidiaries is in
material default; or
(b) Under which, to the best of FNBC's knowledge, another
party is in material default under its obligations to FNBC or any
of FNBC's Subsidiaries.
5.1.8 Loan Delinquencies. A list of loans or extensions of
credit on the books of the Bank with a principal balance of $50,000 or
more and which are more than 60 days contractually delinquent.
5.1.9 Letters of Credit and Loan Contingencies. A listing of
all letters of credit and obligations to make loans or extend credit
which any of FNBC's Subsidiaries cannot reject or terminate without
advance notice or penalty in its sole discretion, and upon which any
of FNBC's Subsidiaries may be or may become liable without action or
omission of any of FNBC's Subsidiaries after the Closing, identifying
and describing such letters of credit and obligations in reasonable
detail and excepting (if FNBC chooses to except them) any such letter
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of credit or obligation with respect to which FNBC's Subsidiaries'
obligation does not exceed $50,000.
5.1.10 Related Person Contracts. All agreements, contracts,
mortgages, deeds of trust, leases, commitments, indentures, notes, or
other instruments, which are, to the best of FNBC's knowledge, with
any FNBC Related Person, excepting any ordinary and customary banking
relationship.
5.1.11 Related Person Loans. A list of all outstanding loans or
loan commitments from, and all irrevocable letters of credit issued
by, FNBC or any of FNBC's Subsidiaries in a principal amount of
$50,000 or more to any FNBC Related Person.
5.1.12 Retired Employee Expenses. All plans, agreements,
arrangements, or understandings concerning payment of medical
expenses, insurance, or other benefits with respect to any former
employee, or any spouse or child, member of the same household,
estate, or survivor of a former employee.
5.1.13 Deeds and Titles. All deeds, titles, or other evidences
of title to real estate, as well as copies, to the extent in the
possession of FNBC or any of FNBC's Subsidiaries, of all surveys,
abstracts, and environmental assessments thereof and title insurance
policies relating thereto, and complete and correct lists of each and
every item of personal property which had a book value in excess of
$50,000 as of December 31, 1993, reflected in the books and records of
FNBC or any of FNBC's Subsidiaries as being owned (including those
reflected in the consolidated balance sheet of FNBC and FNBC's
Subsidiaries as of December 31, 1993), except as since disposed of in
the ordinary course of business.
5.1.14 Lease Agreements. All leases or other agreements
pursuant to which FNBC or any of FNBC's Subsidiaries, as lessee or
lessor, lease real or personal property, excepting any lease as to
personal property under which the aggregate lease payments with
respect to that lease do not exceed $50,000 during any year or
$250,000 in the aggregate.
5.1.15 Other Agreements.
(a) All contracts or agreements to which FNBC or any of
FNBC's Subsidiaries is a party or subject which call for
aggregate payments in excess of $50,000 with respect to
individual items or individual agreements, excepting any ordinary
and customary banking relationship.
(b) All data processing agreements, service agreements,
consulting agreements, or any similar arrangements not terminable
by FNBC or any of FNBC's Subsidiaries upon 60 days' or less
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notice without penalty, excepting any agreement which does not
require aggregate payments in excess of $50,000.
(c) All contracts or agreements, whether existing or
proposed, for the purchase of equipment, supplies, other personal
or real property, or services which call for aggregate payments
in excess of $50,000.
(d) All loan servicing agreements pursuant to which FNBC or
any of FNBC's Subsidiaries services loans for others.
(e) All mortgage forward commitments and similar agreements
pursuant to which FNBC or any of FNBC's Subsidiaries sells to
others mortgages which it originates.
(f) All interest rate swap agreements and other agreements
relating to hedging interest rate risks.
5.1.16 Insurance Policies. All policies of insurance maintained
by FNBC or any of FNBC's Subsidiaries with respect to assets,
properties, premises, operations, and personnel, and copies of the
most recent insurance audit, review, or report (if any).
5.1.17 Charter Documents and Bylaws. The certificate of
incorporation or articles of incorporation, as the case may be, and
bylaws of FNBC and each of FNBC's Subsidiaries, including all
amendments to date.
5.1.18 Stockholder List. A stockholder list as of the most
recent date available identifying each stockholder, indicating the
number of shares held, and providing the stockholder's record address.
5.1.19 Employee Benefit Plans. All Employee Benefit Plans,
including amendments, the latest determination letter issued by the
IRS with respect to each Employee Benefit Plan which is a qualified
plan under Section 401(a) of the Internal Revenue Code and any
determination letter issued with respect to each amendment to each
such Employee Benefit Plan, any summary plan description relating
thereto, and all administrative forms for each Employee Benefit Plan.
5.1.20 Executive Employment and Compensation. Definitive
statements identifying and describing in a summary manner each and
every written or oral, express or implied contract, agreement, or
arrangement pertaining to the employment or compensation of FNBC's and
each of FNBC's Subsidiaries' directors, officers, or employees who in
1993 received, or in 1994 are contractually entitled to receive,
aggregate compensation of $50,000 or more. Each definitive statement
shall be separately signed and acknowledged as being true, correct,
and complete by each such person.
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5.1.21 Bonus Payments. A list of all bonuses paid to all
directors and officers of FNBC and FNBC's Subsidiaries since
December 31, 1992, including the amount paid to each recipient, the
name of the recipient, and the date of payment.
5.1.22 Management Letters. Copies of any letters or memoranda
to management or special reports received during each of the last
three years by FNBC or any of FNBC's Subsidiaries from FNBC's
independent public accountants which set forth criticisms of, or
advice, suggestions, or recommendations for improvements in, any
aspect of the accounting for or operation of FNBC or any of FNBC's
Subsidiaries.
5.1.23 Change of Control. Copies of agreements, contracts,
loans, mortgages, deeds of trust, leases, commitments, indentures,
notes, or other instruments which may be accelerated, terminated, or
otherwise materially affected by virtue of the change of control of
FNBC upon consummation of the Merger.
5.1.24 Long-term Debt. Copies of any loan agreements, notes,
indentures, security agreements, mortgages, pledge receipts,
guaranties, and related documents with respect to all long-term
indebtedness of FNBC or any of FNBC's Subsidiaries.
5.1.25 Regulatory Orders. Copies of any order, decree,
memorandum, agreement, or understanding with regulatory agencies
binding upon or affecting the operations of FNBC or any of FNBC's
Subsidiaries or their respective directors or officers in their
capacities as such.
5.1.26 Patents, Trademarks, and Copyrights. All trademarks,
trade names, service marks, patents, or copyrights, whether or not
registered or the subject of an application for registration, which
are owned by FNBC or any of FNBC's Subsidiaries or licensed from a
third party.
5.1.27 Board and Environmental Investigation Policies. Copies
of all policies formally adopted by the Board of Directors of FNBC and
each of FNBC's Subsidiaries as currently in effect and, with respect
to environmental matters, copies of all policies that have been in
effect during the last 10 years regarding the performance of
environmental investigations of properties accepted as collateral for
loans or accepted in trust, including the effective dates of all such
policies.
5.1.28 Litigation. A list of all suits, actions, and
proceedings (legal, administrative, arbitral, or otherwise), and all
claims, investigations, and inquiries (by an administrative agency,
governmental body, or otherwise) to which FNBC or any of FNBC's
Subsidiaries, or any of their respective businesses or properties, is
a party as plaintiff or defendant or is subject, together with copies
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of the complaint, answer, and all material motions and orders filed or
entered in connection therewith, except for routine collection
proceedings filed by FNBC or any of FNBC's Subsidiaries in which no
counterclaims have been asserted, and except for garnishment actions.
5.1.29 MESC Form 1027. A completed and executed copy of MESC
Form 1027, Business Transferor's Notice of Unemployment Tax Liability
and Rate.
5.2 Old Kent Disclosure Statement. Old Kent shall prepare the Old
Kent Disclosure Statement, which shall be certified with respect to
Section 3.16 (True and Complete Information) on behalf of Old Kent by its
chief executive officer and its chief financial officer, and shall deliver
two copies of the Old Kent Disclosure Statement to FNBC not later than
30 days after the execution of this Plan of Merger. The Old Kent
Disclosure Statement shall contain appropriate references and cross-
references with respect to disclosures, and appropriate identifying
markings with respect to documents, which pertain to one or more sections
or articles of this Plan of Merger. Not less than 5 days prior to the
Closing, Old Kent shall deliver to FNBC an update to the Old Kent
Disclosure Statement describing any material changes and containing any new
or amended documents which are not contained in the Old Kent Disclosure
Statement as initially delivered. The update to the Old Kent Disclosure
Statement shall be certified with respect to Section 3.16 (True and
Complete Information) on behalf of Old Kent by its chief executive officer
and its chief financial officer.
5.3 Conduct of Business Pending the Effective Time of the
Merger. From the execution of this Plan of Merger until the Effective Time
of the Merger, FNBC agrees that, except as consented to in writing by Old
Kent or as otherwise provided in this Plan of Merger, FNBC shall, and it
shall cause each of FNBC's Subsidiaries to:
5.3.1 Ordinary Course. Conduct its business and manage its
property only in the usual, regular, and ordinary course and not
otherwise, in substantially the same manner as prior to the execution
of this Plan of Merger, and not make any substantial change to its
methods of management or operation in respect of such business or
property.
5.3.2 No Inconsistent Actions. Take no action which would be
inconsistent with or contrary to the representations, warranties, and
covenants made by FNBC in this Plan of Merger, and take no action
which would cause FNBC's representations and warranties to become
untrue except as and to the extent required by applicable laws and
regulations or regulatory agencies having jurisdiction.
5.3.3 Compliance. Comply in all material respects with all
laws, regulations, agreements, court orders, and administrative orders
applicable to the conduct of its business unless the application of
such laws, regulations, or orders is being contested in good faith and
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Old Kent has been notified of such contest, and except where
noncompliance is unintentional and not material to the business,
income, or financial condition of FNBC or any of FNBC's Subsidiaries.
5.3.4 No Amendments. Make no change in its certificate of
incorporation, articles of association, articles of incorporation, or
charter, as the case may be, or its bylaws.
5.3.5 Books and Records. Maintain its books, accounts, and
records in the usual and regular manner, and in material compliance
with all applicable laws and accounting standards.
5.3.6 No Change in Stock. Except as contemplated by this Plan
of Merger, make no change in the number of shares of its capital stock
issued and outstanding; grant no warrant, option, or commitment
relating to its capital stock; enter into no agreement relating to its
capital stock; and issue no securities convertible into its capital
stock.
5.3.7 Maintenance. Use all reasonable efforts to maintain its
property and assets in their present state of repair, order and
condition, reasonable wear and tear and damage by fire or other
casualty excepted.
5.3.8 Preservation of Goodwill. Use all reasonable efforts to
preserve its business organization intact, to keep available the
services of its present officers and employees, and to preserve the
goodwill of its customers and others having business relations with
it.
5.3.9 Insurance Policies. Use all reasonable efforts to
maintain and keep in full force and effect insurance coverage, so long
as such insurance is reasonably available, on its assets, properties,
premises, operations, and personnel in such amounts, against such
risks and losses, and with such self-insurance requirements as are
presently in force.
5.3.10 Charge-Offs. Charge off loans and maintain its reserve
for loan losses, in each case in a manner in conformity with the prior
practices of FNBC and each of FNBC's Subsidiaries and applicable
industry, regulatory, and accounting standards.
5.3.11 Policies and Procedures. Make no material change in any
policies and procedures applicable to the conduct of its business,
including without limitation any loan and underwriting policies, loan
loss and charge-off policies, investment policies, and employment
policies, except as and to the extent required by law or regulatory
agencies having jurisdiction.
5.3.12 New Directors or Officers. Except to reelect persons who
are then incumbent officers and directors at annual meetings, not:
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(a) Increase the number of directors or fill any vacancy on
the board of directors; or
(b) Elect or appoint any person to an executive office.
5.3.13 Compensation and Benefits.
(a) Not increase, or agree to increase, the salary, or
other compensation payable to, or fringe benefits of, or pay or
agree to pay any bonus to, any officer or director, or any other
class or group of employees as a class or group, except for (i)
increases, agreements or payments which are reasonable in amount
and consistent with the prior year and which are announced or
made only after first consulting with Old Kent, provided, that
bonuses equal in amounts to bonuses paid during 1993 may be paid
at the end of 1994 if FNBC's net income for 1994 (without
deducting any expenses related to the Merger) is equal to or
exceeds FNBC's net income for 1993; and (ii) if and to the extent
set forth in the FNBC Disclosure Statement, bonuses that do not
in the aggregate exceed $100,000 payable on the date of the
Closing to senior officers of FNBC or the Bank who remain in the
employ of FNBC or the Bank (as applicable) on the date of the
Closing; and
(b) Not introduce, change, or agree to introduce or change,
any pension, profit-sharing, or employee benefit plan, fringe
benefit program, or other plan or program of any kind for the
benefit of its employees unless required by law or this Plan of
Merger, except for (i) changes that are necessary or advisable,
in the opinion of counsel, to maintain any tax qualified status;
and (ii) changes to the ESOP and the First National Bank in
Macomb County Employee Salary Reduction (401(k)) Plan (the
"401(k) Plan") that are necessary or advisable, in the opinion of
counsel, to preserve the exempt status of transactions in such
plans under Rule 16b-3 issued under the Securities Exchange Act.
5.3.14 New Employment Agreements. Not enter into any employment
agreement which is not terminable by FNBC or any of FNBC's
Subsidiaries without cost or penalty upon 60 days' or less notice.
5.3.15 Dividends. With respect to FNBC only, not declare or pay
any dividends, nor make any other distribution, in respect of any
shares of its capital stock except as permitted by Section 5.4
(Regular Dividends and Compensation Adjustments).
5.3.16 Borrowing. Not borrow money except in the ordinary
course of business.
5.3.17 Mortgaging Assets. Not sell, mortgage, pledge, encumber,
or otherwise dispose of, or agree to sell, mortgage, pledge, encumber,
or otherwise dispose of, any of its property or assets, except in the
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ordinary course of business, except for property or assets, or any
group of related properties or assets, which have a fair market value
of less than $50,000.
5.3.18 Notice of Actions. Notify Old Kent of the threat or
commencement of any action, suit, proceeding, claim, arbitration, or
investigation against or relating to: (i) FNBC or any of FNBC's
Subsidiaries; (ii) FNBC's or any of FNBC's Subsidiaries' directors,
officers, or employees in their capacities as such; (iii) FNBC's or
any of FNBC's Subsidiaries' assets, liabilities, businesses, or
operations; or (iv) the Merger or this Plan of Merger.
5.3.19 Cooperation. Take such reasonable actions as may be
necessary to cooperate in effecting the Merger.
5.3.20 Large Expenditures. Not pay, agree to pay, or incur any
liability, excepting such liabilities which have been accrued on its
books as of the execution of this Plan of Merger, for the purchase or
lease of any item of real property, fixtures, equipment, or other
capital asset in excess of $50,000 individually or in excess of
$100,000 in the aggregate with respect to FNBC and all of FNBC's
Subsidiaries, excepting pursuant to prior commitments or plans made by
FNBC or any of FNBC's Subsidiaries that are disclosed in the FNBC
Disclosure Statement.
5.3.21 New Service Arrangements. Not enter into, or commit to
enter into, any agreement for trust, consulting, professional, data
processing, or other services to FNBC or any of FNBC's Subsidiaries
which is not terminable by FNBC or any of FNBC's Subsidiaries without
penalty upon 60 days' or less notice, except for contracts for
services under which the aggregate required payments do not exceed
$10,000.
5.3.22 Capital Improvements. Not open, enlarge, or materially
remodel any bank or other facility, and not lease, purchase, or
otherwise acquire any real property for use as a branch bank, or apply
for regulatory approval of any new branch bank, excepting pursuant to
prior commitments or plans made by FNBC or any of FNBC's Subsidiaries
that are disclosed in the FNBC Disclosure Statement.
5.4 Regular Dividends and Compensation Adjustments. FNBC may
declare and pay cash dividends upon Common Stock quarterly at a rate not to
exceed $.20 per share in a manner, on dates, and with respect to record
dates consistent with its past practice. However, FNBC shall adjust the
record date for its regularly scheduled dividend, if any (otherwise
permissible under this Section 5.4 (Regular Dividends and Compensation
Adjustments)), with respect to the period in which the Effective Time of
the Merger occurs if necessary to assure that FNBC stockholders receive one
and only one dividend payable in, or with a record date occurring in, the
quarter in which the Effective Time of the Merger occurs, whether with
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respect to FNBC Common Stock or Old Kent Common Stock received in the
Merger.
5.5 Data Processing Arrangements.
5.5.1 M & I Agreement. Old Kent and FNBC agree to use all
reasonable efforts to negotiate an agreement to terminate the Data
Processing Services Agreement dated as of December 31, 1993 (the "M &
I Agreement"), between M & I Data Services, Inc. ("M & I"), and the
Bank on terms reasonably acceptable to Old Kent and FNBC at the lowest
practicable cost and at the earliest practicable time. Any
termination agreement may be conditioned upon consummation of the
Merger. For the purposes of this Section 5.5 (Data Processing
Arrangements) the M & I Agreement shall not be considered to be
terminated unless and until Old Kent and FNBC shall have expressly
agreed upon the amount of the aggregate combined cost to Old Kent and
FNBC in cash, fair market value of contract concessions, and fair
market value of other consideration (together, the "Termination Cost")
to be incurred to terminate the M & I Agreement, or that the
Termination Cost is less than $250,000. The Purchase Price Per Share
as set forth in Section 2.1.1 (Conversion of FNBC Common Stock) shall
be adjusted, depending on the results of such negotiation, if and as
set forth below:
(a) If the M & I Agreement is terminated on terms
reasonably acceptable to both Old Kent and FNBC at a Termination
Cost of $250,000 or less, then there shall be no adjustment to
the Purchase Price Per Share on account of the M & I Agreement.
(b) If the M & I Agreement is terminated on terms
reasonably acceptable to both Old Kent and FNBC at a Termination
Cost in excess of $250,000, then the Purchase Price Per Share
shall be reduced by the lesser of (i) an amount determined by
dividing (x) two-thirds of the difference between the Termination
Cost and $250,000, by (y) 2,434,060; or (ii) $.40.
(c) If, as of the close of business on the day preceding
the date of the Closing, the M & I Agreement has not been
terminated on terms reasonably acceptable to both Old Kent and
FNBC, then the Purchase Price Per Share shall be reduced by $.40.
5.5.2 Other Arrangements. Until the Effective Time of the
Merger, FNBC shall advise Old Kent of all anticipated renewals or
extensions of existing data processing services agreements with
independent vendors. FNBC agrees to cooperate with Old Kent in
negotiating with those vendors the length of any extension or renewal
term of those agreements, which, unless otherwise agreed with Old
Kent, shall not exceed one year from the date of renewal. FNBC agrees
to send to each vendor, as and when due, such notices of nonrenewal as
may be necessary or appropriate under the terms of the applicable
agreements to prevent those agreements from automatically renewing for
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a term of more than one year from the date of renewal, except as
otherwise agreed between FNBC and Old Kent.
5.6 Affiliates. The FNBC Disclosure Statement and the update to the
FNBC Disclosure Statement shall identify every person who may, to FNBC's
reasonable knowledge, be deemed to be an "affiliate" of FNBC for purposes
of Rule 145 under the Securities Act of 1933, as amended (the "Securities
Act"). FNBC shall cause its counsel to deliver to each person who is
identified as an affiliate, on or prior to the Effective Time of the
Merger, advice with respect to such person's obligations under the
Securities Act and the regulations issued thereunder with respect to
disposition of securities of Old Kent. Further, FNBC shall use all
reasonable efforts to cause each person who is identified as an affiliate
to deliver to Old Kent on or prior to the Effective Time of the Merger a
written agreement, satisfactory to Old Kent, that such person shall not
offer to sell or otherwise dispose of any shares of Old Kent Common Stock
issued to such person pursuant to the Merger in violation of the Securities
Act or the regulations thereunder, or prior to publication of financial
results of the post-Merger combined operations of Old Kent covering a
period of at least 30 days.
5.7 Maintenance of Insurance. FNBC shall use all reasonable efforts
to obtain renewal of the directors' and officers' liability and corporation
reimbursement insurance in effect on the execution of this Plan of Merger
on terms and conditions reasonably agreeable to FNBC. FNBC shall consult
with Old Kent regarding any renewals of, and the premiums to be paid for,
such insurance prior to taking any action to renew or terminate such
insurance. If FNBC's directors and officers liability insurance policy is
canceled or not renewed by the issuer during the term of this Plan of
Merger, FNBC shall, at Old Kent's option, purchase the discovery period
offered under the policy.
5.8 Competing Proposals. Neither FNBC nor any of FNBC's
Subsidiaries, nor any of their directors, officers, employees, investment
bankers, representatives, or agents, shall take any action inconsistent
with the intent to consummate the Merger upon the terms and conditions of
this Plan of Merger. Without limiting the foregoing:
5.8.1 No Solicitation. Neither FNBC nor any of FNBC's
Subsidiaries, nor any of their respective directors, officers,
employees, investment bankers, representatives, or agents, shall
solicit, encourage, or negotiate with any other party, any proposals,
offers, or expressions of interest concerning any tender offer,
exchange offer, merger, consolidation, sale of shares, sale of assets,
or assumption of liabilities not in the ordinary course, or other
business combination involving FNBC or any of FNBC's Subsidiaries
other than the Merger (a "Business Combination").
5.8.2 Communication of Other Proposals. FNBC shall cause
written notice to be delivered to Old Kent promptly upon receipt of
any solicitation, offer, proposal, or expression of interest (a
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"Proposal") concerning a Business Combination. Such notice shall
contain the material terms and conditions of the Proposal to which
such notice relates or shall contain a copy of FNBC's unequivocal
rejection of the Proposal in the form actually delivered to the person
from whom the Proposal was received. Thereafter, FNBC shall promptly
notify Old Kent of any material changes in the terms, conditions, and
status of any Proposal.
5.8.3 Furnishing Information. Neither FNBC nor any of FNBC's
Subsidiaries, nor any of their respective directors, officers,
employees, investment bankers, representatives, or agents, shall
furnish any nonpublic information concerning FNBC or any of FNBC's
Subsidiaries to any person who is not affiliated or under contract
with FNBC or Old Kent, except as required by applicable law or
regulations.
5.9 Redemption of Rights. The Board of Directors of FNBC shall take
all action necessary to redeem the FNBC Rights outstanding under the FNBC
Rights Agreement at a redemption price of $.01 per FNBC Right in cash,
which redemption shall become effective immediately prior to the Effective
Time of the Merger. Following such redemption, FNBC shall have no
obligation under the FNBC Rights or the FNBC Rights Agreement and the
holders shall have no rights under the FNBC Rights or the FNBC Rights
Agreement following such time, except, in each case, with respect to the
payment of the redemption price.
5.10 Insurance Company. Notwithstanding any other provision of this
Plan of Merger, FNBC may liquidate or sell the Insurance Company for a
price not less than the stockholders' equity of the Insurance Company or
such other price to which Old Kent may reasonably agree.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Registration Statement. As soon as is reasonably practical, Old
Kent agrees to prepare and file with the SEC under the Securities Act the
Registration Statement and the related Prospectus and Proxy Statement
included as a part thereof covering the issuance by Old Kent of the shares
of Old Kent Common Stock as contemplated by this Plan of Merger, together
with such amendments as may reasonably be required for the Registration
Statement to become effective. Old Kent agrees to provide FNBC with the
opportunity to review and comment upon the Registration Statement, each
amendment to the Registration Statement, and each form of the Prospectus
and Proxy Statement before filing. Old Kent will make such amendments and
file such supplements thereto as FNBC may reasonably request. Old Kent
agrees to provide FNBC with copies of all correspondence received from the
SEC with respect to the Registration Statement and its amendments and with
all responsive correspondence to the SEC. Old Kent agrees to notify FNBC
of any stop orders or threatened stop orders with respect to the
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Registration Statement. FNBC agrees to provide all necessary information
pertaining to FNBC and FNBC's Subsidiaries promptly upon request, and to
use its best efforts to obtain the cooperation of FNBC's independent
accountants and attorneys, in connection with the preparation of the
Registration Statement.
6.2 Other Filings. Old Kent agrees to prepare and file, as soon as
is reasonably practical, with the Federal Reserve Board, the State of
Michigan, the State of Delaware, the State of Arizona, and other regulatory
agencies all documents in connection with the transactions contemplated by
this Plan of Merger. Old Kent agrees to provide FNBC with the opportunity
to review and comment upon such documents before filing and to make such
amendments and file such supplements thereto as FNBC may reasonably
request. Old Kent shall provide FNBC with copies of all correspondence
received from these agencies and all responsive correspondence sent to
these agencies.
6.3 Press Releases. FNBC and Old Kent shall consult with each other
with respect to the form and substance of any press release, Form 8-K, or
other public disclosure of matters related to this Plan of Merger.
6.4 Indemnification. Old Kent acknowledges that any and all rights
to indemnification now existing in favor of the employees, agents,
directors and officers of FNBC and each of FNBC's Subsidiaries under their
respective certificates or articles of incorporation, charters, articles of
association or bylaws shall survive the Merger and shall continue with
respect to acts or omissions occurring prior to the Effective Time of the
Merger with the same force and effect as prior to the Effective Time of the
Merger. In the event of any claim or litigation giving rise to such
indemnification, Old Kent will provide the indemnified party with access to
and the right to copy all documents and other information reasonably
required for the defense of the litigation, subject to reasonable
precautions to prevent inappropriate use or disclosure of such documents
and information, and will reasonably cooperate in the defense of such
litigation.
6.5 Miscellaneous Agreements and Consents. Subject to the terms and
conditions of this Plan of Merger, each of the parties agrees to use all
reasonable efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, all things necessary, proper, or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Plan of Merger. Old Kent and FNBC will
use all reasonable efforts to obtain consents of all third parties and
governmental bodies necessary or desirable for the consummation of the
Merger.
6.6 Stock Options. Before the Effective Time of the Merger, FNBC
will amend, if necessary and subject to employee consent, the terms of all
of its outstanding employee stock options identified in Section 4.4.2 (No
Other Capital Stock) so that they will become, if and when the Merger
becomes effective, options to acquire, for an equivalent price, the number
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of shares of Old Kent Common Stock that would have been acquired if the
options to acquire FNBC Common Stock had been exercised immediately prior
to the Effective Time of the Merger. At the Closing, Old Kent will grant
to each non-employee director of FNBC then serving on FNBC's Board of
Directors replacement options to purchase, for an equivalent price and
subject to the same vesting requirements with respect to service as a
director of the Bank or as a director or advisory director of any successor
to the Bank, the number of shares of Old Kent Common Stock that would have
been acquired if his or her options to acquire FNBC Common Stock (including
shares as to which his or her options are not then vested) had been
exercised immediately prior to the Effective Time of the Merger, in
consideration for the written waiver executed by each such non-employee
director of FNBC of any rights that he or she may have under then
outstanding options issued by FNBC to purchase shares of FNBC Common Stock.
The options shall in all other respects contain substantially the same
terms and conditions as they do presently. Old Kent agrees to honor the
options according to their terms and to register the options and the shares
acquired upon their exercise with the SEC on Form S-8, if and to the extent
that they are eligible for registration under that form.
6.7 ESOP. The ESOP shall be terminated effective as of the Closing.
Prior to its termination, the ESOP shall be amended to provide that no
employees of Old Kent shall be eligible to participate, that there shall be
no new participants in the plan on or after the Closing, that upon
termination the Trustee shall pay off the outstanding balance owed by the
ESOP under the Bank Stock Loan Agreement dated as of June 7, 1994, between
the ESOP, FNBC, and Bankers' Bank of Illinois (the "Bank Stock Loan
Agreement"), and that any assets left in the suspense account after
repayment of the loan will be allocated among the participants of the ESOP
in accordance with the terms of the ESOP in a manner consistent with the
Internal Revenue Code. Upon receipt of a favorable IRS determination
letter with respect to the termination, the participants in the ESOP will
have the option to transfer or roll over their ESOP accounts into the Old
Kent Thrift Plan.
6.8 Exchange of Financial Information. Subject to Section 6.9
(Investigation):
6.8.1 Quarterly Information. FNBC and Old Kent shall each, as
promptly as practicable, deliver to the other copies of each quarterly
consolidated financial statement prepared for distribution to
stockholders or shareholders, respectively, after the date of this
Plan of Merger.
6.8.2 FNBC Information. After the execution of this Plan of
Merger until the Effective Time of the Merger, FNBC shall promptly
deliver to Old Kent copies of:
(a) Each monthly internal financial report prepared with
respect to FNBC and each of FNBC's Subsidiaries on a consolidated
or unconsolidated basis. FNBC represents and warrants that such
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information shall be consistent with the fundamental information
as used for internal purposes by FNBC in the management of its
consolidated business; and
(b) Each financial report or statement submitted to
regulatory authorities for FNBC and each of FNBC's Subsidiaries.
6.8.3 SEC Filings. After the execution of this Plan of Merger
until the Effective Time of the Merger, Old Kent and FNBC shall each
promptly deliver to the other copies of all reports on Form 10-K and
Form 10-Q, and all other reports filed with the SEC.
6.9 Investigation.
6.9.1 Old Kent's Access to Information. For the purpose of
permitting an examination of FNBC by such of Old Kent's officers,
attorneys, accountants, and representatives as have a "need to know"
for the purposes of Old Kent's evaluation of the Merger, provided that
Old Kent shall cause such parties to agree to maintain the
confidentiality of the information as provided in this Plan of Merger,
while this Plan of Merger is in effect, FNBC shall:
(a) Permit, and shall cause each of FNBC's Subsidiaries to
permit, full access to their respective properties, books, and
records at reasonable times;
(b) Use reasonable efforts to cause its and each of FNBC's
Subsidiaries' officers, directors, employees, accountants, and
attorneys to cooperate fully, for the purpose of permitting a
complete and detailed examination of such matters by Old Kent's
officers, attorneys, accountants, and representatives; and
(c) Furnish to Old Kent, upon request, any information
reasonably requested respecting its and each of FNBC's
Subsidiaries' properties, assets, business, and affairs.
6.9.2 Consent to Disclose. Old Kent acknowledges that certain
information may not be disclosed by FNBC or FNBC's Subsidiaries
without the prior written consent of persons not affiliated with FNBC
or any of FNBC's Subsidiaries. If such information is requested by
Old Kent, then FNBC shall use, or cause each of FNBC's Subsidiaries to
use, reasonable efforts to obtain such prior consent and shall not be
required to disclose such information unless and until such prior
consent has been obtained.
6.9.3 FNBC's Access to Information. For the purpose of
permitting an examination of Old Kent by such of FNBC's officers,
attorneys, accountants, and representatives as have a "need to know"
for the purposes of FNBC's evaluation of the Merger, provided that
FNBC shall cause such parties to agree to maintain the confidentiality
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of the information as provided in this Plan of Merger, while this Plan
of Merger is in effect, Old Kent shall:
(a) Permit reasonable access to its properties, books, and
records at reasonable times;
(b) Use reasonable efforts to cause its officers,
directors, employees, accountants, and attorneys to cooperate
fully; and
(c) Furnish to FNBC, upon request, any information
reasonably requested respecting its properties, assets, business,
and affairs.
6.9.4 Confidentiality. Except as provided in Section 6.9.6
(Other Information), while this Plan of Merger is in effect and at all
times thereafter, Old Kent and FNBC each agree to treat as strictly
confidential and agree not to divulge to any other person, natural or
corporate (other than employees of, and attorneys, accountants, and
financial advisers for, such party who are reasonably believed to have
a need for such information in connection with the Merger), and not to
make any business use not related to the Merger of, any financial
statements, schedules, contracts, agreements, instruments, papers,
documents, or other information relating to the other party and the
other party's subsidiaries which it may come to know as a direct
result of a disclosure by the other party or the other party's
subsidiaries, or which may come into its possession directly as a
result of and during the course of such investigation.
6.9.5 Return of Materials. Upon the termination of this Plan of
Merger, Old Kent and FNBC each agree to promptly return to the other
party or to destroy all written materials furnished to it by the other
party and the other party's subsidiaries, and all notes and summaries
of such written materials, in connection with such investigation,
including any and all copies of any of the foregoing. Old Kent and
FNBC each agree to preserve intact all such materials which are
returned to them and to make such materials reasonably available upon
request or subpoena for a period of not less than five years from the
termination of this Plan of Merger or such longer or shorter period of
time as they may mutually agree.
6.9.6 Other Information. The provisions of this Section 6.9
(Investigation) shall not preclude Old Kent or FNBC, or their
respective subsidiaries, from using or disclosing information which
is: (i) readily ascertainable from public information or trade
sources; (ii) known by it before the commencement of discussions
between the parties or subsequently developed by it or its
subsidiaries independent of any investigation under this Plan of
Merger or received from a third party not under any obligation to FNBC
or Old Kent, or their respective subsidiaries, to keep such
information confidential; or (iii) reasonably required to be included
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in any filing or application required by any governmental or
regulatory agency, including without limitation Old Kent's application
or applications to the Federal Reserve Board, Old Kent's or FNBC's
reports on Form 10-K and Form 10-Q filed with the SEC, and Old Kent's
or FNBC's annual report and proxy statement. Old Kent shall permit
FNBC to review Old Kent's application or applications to the Federal
Reserve Board and the State of Arizona with respect to the purchase of
the Insurance Company prior to filing and FNBC may reasonably request
that sensitive or competitive information be separately filed as
confidential in accordance with instructions, rules, and regulations
promulgated by such agencies.
6.9.7 Insider Trading. Old Kent and FNBC shall take responsible
steps to assure that any person who receives nonpublic information
concerning the other party pursuant to this Section 6.9
(Investigation) will not buy or sell, or advise other persons to buy
or sell, the other party's stock until such information is disclosed
to the public.
6.10 Environmental Investigation. Old Kent shall engage a mutually
acceptable environmental consultant to conduct a preliminary ("Phase I")
environmental assessment of each of the parcels of real estate used in the
operation of FNBC's or any of FNBC's Subsidiaries' businesses and, at Old
Kent's option, any other real estate owned. FNBC and FNBC's Subsidiaries
shall provide reasonable assistance, including site access, to the
consultant for purposes of conducting the Phase I assessments. The fees
and expenses of the consultant with respect to the Phase I assessments
shall be paid by Old Kent. The consultant shall complete and deliver a
report of the Phase I assessments not later than 60 days after the date of
this Plan of Merger. Old Kent shall have a period of 20 business days from
the date it receives the report of the consultant to consider the report
and to notify FNBC in writing if any environmental conditions are found or
indicated by the report which may be contrary to the representations and
warranties set forth in Section 4.21 (Environmental Matters), without
regard to any exceptions that may be contained in the FNBC Disclosure
Statement. With respect to any conditions identified by Old Kent in its
notice to FNBC, Old Kent shall obtain from one or more mutually acceptable
consultants or contractors, as appropriate, an estimate of the cost of any
further environmental investigation, sampling, analysis, remediation, or
other follow-up work that may be necessary to address those conditions in
accordance with applicable Environmental Laws. Old Kent shall forward
copies of any such estimates to FNBC upon receipt.
6.10.1 Mutual Agreement. Upon receipt of the estimate of the
costs of all follow-up work to the Phase I assessments, the parties
shall have a period of 30 days in which they shall attempt to agree
upon a course of action for further investigation and remediation of
any environmental condition found to exist or indicated by the report
of the consultant. All work plans for any post-Phase I assessment
activities, or any removal or remediation actions that may be
performed, shall be mutually satisfactory to Old Kent and FNBC. If
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the work plans or removal or remediation actions would entail a
material cost to complete, Old Kent and FNBC shall discuss a mutually
acceptable modification to this Plan of Merger. Old Kent and FNBC
shall cooperate in the review, approval, and implementation of all
work plans. The Board of Directors of FNBC may, at its option, extend
the period of time set forth in this Section 6.10.1 (Mutual Agreement)
for the parties to attempt to agree upon a course of action and/or
discuss a mutually acceptable modification to this Plan of Merger.
6.10.2 Old Kent's Right to Abandon. If the parties are unable
to agree upon a course of action for further investigation and
remediation of an environmental condition or issue raised by an
environmental assessment and/or a mutually acceptable modification to
this Plan of Merger, and the condition or issue is not one for which
it can be determined to a reasonable degree of certainty that the risk
and expense to which Old Kent and its subsidiaries would be subject as
an owner or operator of the property involved can be quantified and
limited to an immaterial amount, then Old Kent may abandon this Plan
of Merger at any time during such 30-day period or any extension
thereof pursuant to Section 9.2.10 (Environmental Conditions).
6.11 Pooling Qualification. Old Kent and FNBC each agree that,
except as expressly provided in this Plan of Merger, while this Plan of
Merger is in effect, it shall not take or fail to take, or cause to be
taken or fail to cause to be taken, any action if the result would be to
present a material risk that the Merger would become disqualified for the
pooling of interests method of accounting by Old Kent, including without
limitation:
6.11.1 No Stock Purchases. Neither Old Kent nor any of Old
Kent's subsidiaries, nor FNBC nor any of FNBC's Subsidiaries,
respectively, shall acquire any shares of Old Kent Common Stock, FNBC
Common Stock, any securities convertible into such stock or any other
rights to acquire such stock, except in a fiduciary capacity for a
customer as to which it has no beneficial interest, and except as
permitted for purposes other than a business combination under the
pooling of interests method of accounting and provided that no more
than a permitted number of shares have been acquired for such
permissible purposes; and
6.11.2 No Change of Equity Interest. Neither Old Kent nor FNBC,
respectively, shall in any manner change the equity interest of Old
Kent Common Stock or FNBC Common Stock, respectively, between the date
of this Plan of Merger and the consummation of the Merger, including
without limitation distributions (other than ordinary and customary
cash dividends) to shareholders and stockholders and additional
issuances, exchanges, and retirements of securities.
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ARTICLE VII
CONDITIONS PRECEDENT TO OLD KENT'S OBLIGATIONS
All obligations of Old Kent under this Plan of Merger are subject
to the fulfillment (or waiver in writing by a duly authorized officer of
Old Kent), prior to or at the Closing, of each of the following conditions:
7.1 Renewal of Representations and Warranties, Etc.
7.1.1 Representations and Warranties. FNBC's representations
and warranties shall then be true in all material respects or, if one
or more representations or warranties shall then be untrue, the
cumulative effect of all untrue representations and warranties shall
not then be material relative to the business, income, or financial
condition of FNBC and FNBC's Subsidiaries on a consolidated basis.
For purposes of this Section 7.1.1 (Representations and Warranties),
representations and warranties made with respect to specified dates or
events need only to have been true in all material respects as of such
dates or events. Any representation or warranty which becomes untrue
because of any change intended by this Plan of Merger shall not be
considered to be a breach of this Plan of Merger because of such
change.
7.1.2 Compliance with Agreements. FNBC and FNBC's Subsidiaries
shall have performed and complied with all agreements, conditions, and
covenants required by this Plan of Merger to be performed or complied
with by FNBC and FNBC's Subsidiaries prior to or at the Closing in all
material respects.
7.1.3 Certificates. Compliance with Sections 7.1.1
(Representations and Warranties) and 7.1.2 (Compliance with
Agreements) shall be evidenced by one or more certificates signed by
appropriate officers of FNBC and, with respect to agreements,
conditions, and covenants pertaining to FNBC's Subsidiaries, by
appropriate officers of FNBC's Subsidiaries, dated as of the date of
the Closing, certifying the foregoing in such detail as Old Kent may
reasonably request, describing any exceptions to such compliance in
such certificates.
7.2 Opinion of Legal Counsel. FNBC shall have delivered to Old Kent
an opinion of Dickinson, Wright, Moon, Van Dusen & Freeman, counsel for
FNBC, or, as to matters concerning the laws of the State of Arizona, other
counsel reasonably satisfactory to Old Kent, dated as of the date of the
Closing and reasonably satisfactory to counsel for Old Kent, substantially
to the effect that:
7.2.1 Due Authorization. This Plan of Merger, the execution,
delivery, and performance of this Plan of Merger, and the consummation
of the Merger as provided herein by FNBC have been duly authorized,
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approved, and adopted by all requisite action of FNBC's Board of
Directors and its stockholders.
7.2.2 Organization. FNBC is a corporation duly incorporated,
validly existing, and in good standing under the laws of the State of
Delaware. FNBC is duly qualified to do business in, and is in good
standing with, the State of Michigan as a foreign corporation. To the
best of counsel's knowledge, FNBC is not required to be qualified in
any other state. FNBC is a bank holding company registered as such
with the Federal Reserve Board, and such registration is in full force
and effect.
7.2.3 Capital Stock. The authorized capital stock of FNBC as of
the close of business on the day preceding the Closing consists of
10,000,000 shares divided into two classes as follows:
(a) 8,000,000 shares of common stock, $3.125 par value, of
which the number of shares specified in the opinion are then
legally issued and outstanding, and non-assessable; and
(b) 2,000,000 shares of preferred stock, $.01 par value,
none of which are issued and outstanding.
7.2.4 Issuance of Shares. Except as disclosed in such opinion,
to counsel's knowledge:
(a) Since the date and time of the execution of this Plan
of Merger, no additional shares of capital stock have been
authorized for issuance or issued by FNBC.
(b) There are no other outstanding subscriptions, options,
warrants, rights to acquire any capital stock of FNBC, or
agreements to which FNBC is a party or by which it is bound to
issue capital stock, except as set forth in the FNBC Disclosure
Statement or in such opinion.
7.2.5 Organization of Subsidiaries. First National Bank in
Macomb County and Bankers Fund Life Insurance Company are each duly
incorporated, validly existing, and in good standing under the laws of
the United States of America and the State of Arizona, respectively.
Each of FNBC's Subsidiaries possesses all corporate authority to
conduct and carry on its business, substantially where and as it
conducts it, under all applicable federal and state laws. Each of
FNBC's Subsidiaries is qualified or admitted to conduct its business
in the State of Michigan. To the best of counsel's knowledge, neither
of FNBC's Subsidiaries is required to be qualified in any other state.
7.2.6 Ownership of Subsidiaries. FNBC owns all of the issued
and outstanding shares of capital stock of First National Bank in
Macomb County and Bankers Fund Life Insurance Company, free and clear
of all perfected security interests. To the best of counsel's
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knowledge, FNBC does not have Control, either directly or indirectly,
of any corporation engaged in an active trade or business or which
holds any significant assets other than as stated in this
Section 7.2.6. To the best of counsel's knowledge, there are no
outstanding subscriptions, options, warrants, or rights to acquire any
capital stock of FNBC's Subsidiaries, or agreements to which FNBC or
any of FNBC's Subsidiaries is a party or by which it is bound to issue
capital stock of any of FNBC's Subsidiaries.
7.2.7 Valid and Binding. This Plan of Merger constitutes the
valid and binding obligation of FNBC, enforceable in accordance with
its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium, or other similar laws
affecting creditors' rights, and by the exercise of judicial
discretion in accordance with general principles applicable to
equitable and similar remedies.
7.2.8 All Approvals Received. To the best of counsel's
knowledge, all approvals, consents, authorizations, or modifications
as may be required to permit the performance by FNBC of its
obligations under this Plan of Merger have been obtained, except as
may be required to comply with the registration or qualification
requirements of the blue sky laws of any state with respect to (i) the
issuance of Old Kent Common Stock pursuant to this Plan of Merger; and
(ii) the registration or qualification of securities brokers, dealers,
or agents.
7.2.9 All Actions Taken. All other actions and proceedings
required by law or, to the best of counsel's knowledge, this Plan of
Merger to be taken by FNBC and FNBC's Subsidiaries at or prior to the
Closing in connection with this Plan of Merger have been duly and
validly taken.
7.2.10 No Conflict, Breach, or Violation. The execution,
delivery, and performance of this Plan of Merger by FNBC, and the
consummation by FNBC of the transactions contemplated by this Plan of
Merger, will not, except as disclosed in such opinion, conflict with
or result in any breach or violation of, or default under (i) any
provision of the Certificate of Incorporation or Bylaws of FNBC;
(ii) any statute, code, ordinance, rule, or regulation; (iii) to the
best of counsel's knowledge, any judgment, order, writ, arbitral
award, decree, or injunction applicable to FNBC or any of FNBC's
Subsidiaries; or (iv) to the best of counsel's knowledge, any
mortgage, agreement, lease, commitment, indenture, or other instrument
applicable to FNBC or any of FNBC's Subsidiaries which has been
provided to counsel in connection with this Plan of Merger. All
consents and approvals of the transactions contemplated by this Plan
of Merger which, to the best of counsel's knowledge, are required from
any person pursuant to any contract or agreement to which FNBC or any
of FNBC's Subsidiaries is a party or subject, or by which FNBC or any
of FNBC's Subsidiaries is bound, and which has been provided to
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counsel in connection with this Plan of Merger, have been obtained,
except as disclosed in the FNBC Disclosure Statement or in such
opinion.
7.2.11 No Litigation. Except as disclosed in the FNBC
Disclosure Statement or in such opinion, counsel does not know of any
action, suit, proceeding, claim, counterclaim, arbitration, or
investigation pending or threatened against or relating to (i) the
directors or officers of FNBC or any of FNBC's Subsidiaries in their
capacities as such; or (ii) FNBC or FNBC's Subsidiaries, or its or
their respective properties or businesses, which challenges the
Merger, or which may result in any liability to FNBC or any of FNBC's
Subsidiaries which may exceed $100,000 and which would have a material
adverse effect on the business, income, or financial condition of FNBC
or any of FNBC's Subsidiaries.
In rendering its opinion, counsel may rely on certificates of
governmental officials and officers of FNBC or FNBC's Subsidiaries,
certificates of FNBC's transfer agent, and opinions of other counsel as to
the laws of jurisdictions in which counsel is not licensed to practice law,
and such other evidence as counsel for FNBC may reasonably deem necessary
or desirable. Any certificates (other than those of governmental
officials) or legal opinions upon which FNBC's counsel may rely shall also
be addressed to Old Kent and Old Kent shall be entitled to rely thereon.
As to each matter with respect to which FNBC's counsel relies upon a legal
opinion rendered by other counsel, FNBC's counsel shall state that FNBC's
counsel has no knowledge of any fact or circumstance that would render such
other counsel's opinion incorrect or misleading. In addition, Old Kent
may, in its reasonable discretion, require opinions from other legal
counsel who have represented FNBC or any of FNBC's Subsidiaries with
respect to the matters described in Section 7.2.11 (No Litigation).
7.3 Required Approvals. Old Kent shall have received:
7.3.1 Regulatory. All such approvals, consents, authorizations,
and licenses of all regulatory and other governmental authorities
having jurisdiction as may be required to permit the performance by
FNBC and Old Kent of their respective obligations under this Plan of
Merger and the consummation of the Merger.
7.3.2 Stockholder. Evidence reasonably satisfactory to Old Kent
of the requisite approval of the stockholders of FNBC of this Plan of
Merger and the Merger.
7.4 Order, Decree, Etc. Neither Old Kent nor FNBC shall be subject
to any order, decree or injunction of a court or agency of competent
jurisdiction which enjoins or prohibits the consummation of the Merger.
7.5 Proceedings. There shall not be any action, suit, proceeding,
claim, arbitration, or investigation pending or threatened: (i) against
or relating to FNBC or any of FNBC's Subsidiaries or its or their
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respective properties or businesses which may result in any liability to
FNBC or any of FNBC's Subsidiaries which could have a material adverse
effect on the financial condition, net income, business, properties,
operations, or prospects of FNBC and FNBC's Subsidiaries on a consolidated
basis; or (ii) which challenges the Merger or this Plan of Merger.
7.6 Tax Matters. Old Kent shall have received an opinion of its
counsel, reasonably satisfactory in form and substance, which Old Kent
shall use reasonable efforts to obtain, substantially to the effect that:
7.6.1 The Merger of FNBC with and into Old Kent will
constitute a reorganization within the meaning of Section 368(a)(1)(A)
of the Internal Revenue Code, and Old Kent and FNBC will each be a
"party to a reorganization" within the meaning of Section 368(b) of
the Internal Revenue Code.
7.6.2 The basis of the FNBC assets in the hands of Old Kent
will be the same as the basis of those assets in the hands of FNBC
immediately prior to the Merger.
7.6.3 No gain or loss will be recognized to Old Kent on the
receipt by Old Kent of the assets of FNBC in exchange for Old Kent
Common Stock and the assumption by Old Kent of the liabilities of
FNBC.
7.6.4 The holding period of the assets of FNBC in the hands
of Old Kent will include the holding period during which such assets
were held by FNBC.
7.7 Registration Statement. The Registration Statement shall have
been declared effective by the SEC and shall not be subject to a stop order
or any threatened stop order.
7.8 Certificate as to Outstanding Shares. Old Kent shall have
received one or more certificates signed by the secretary of FNBC on behalf
of FNBC, and by the transfer agent for FNBC Common Stock, certifying (i)
the total number of shares of capital stock of FNBC issued and outstanding
as of the close of business on the day immediately preceding the Closing;
and (ii) with respect to the secretary's certification, the number of
shares subject to options to purchase FNBC Common Stock in effect as of the
execution of this Plan of Merger and as of the time of the Closing, all in
such form as Old Kent may reasonably request.
7.9 Change of Control Waivers. Old Kent shall have received
evidence of the waiver of any material rights and the waiver of the loss of
any material rights which may be triggered by the change of control of FNBC
upon consummation of the Merger under any agreements, contracts, mortgages,
deeds of trust, leases, commitments, indentures, notes, or other
instruments described in Section 5.1.23 (Change of Control), all in form
and substance reasonably satisfactory to Old Kent, except with respect to
rights under the Bank's Supplemental Executive Retirement Plan.
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7.10 Pooling of Interests Accounting. Old Kent shall have received
such assurance from Arthur Andersen & Co. as shall be reasonably
satisfactory in form and substance to Old Kent, which Old Kent shall use
reasonable efforts to obtain, that the Merger will be treated as a pooling
of interests for accounting purposes, subject to satisfaction of post-
Merger conditions.
7.11 No Default under Bank Stock Loan Agreement. FNBC shall have
obtained and delivered to Old Kent such consents, amendments, or
supplemental agreements, all in form and substance reasonably satisfactory
to Old Kent, necessary or advisable to confirm that neither the execution
of this Plan of Merger nor consummation of the Merger will result in any
default, penalty, or acceleration of indebtedness under the Bank Stock Loan
Agreement, or any related pledge agreement, security agreement, note, or
other agreement.
7.12 Estoppel Certificates. FNBC shall have obtained and delivered
to Old Kent, in form and substance reasonably satisfactory to Old Kent,
estoppel certificates from all landlords under leases pursuant to which
FNBC or any of FNBC's Subsidiaries leases real property as lessee.
ARTICLE VIII
CONDITIONS PRECEDENT TO FNBC'S OBLIGATIONS
All obligations of FNBC under this Plan of Merger are subject to
the fulfillment (or waiver in writing by a duly authorized officer of
FNBC), prior to or at the Closing, of each of the following conditions:
8.1 Renewal of Representations and Warranties, Etc.
8.1.1 Representations and Warranties. Old Kent's
representations and warranties shall then be true in all material
respects or, if one or more representations or warranties shall then
be untrue, the cumulative effect of all untrue representations and
warranties shall not then be material to Old Kent and its subsidiaries
on a consolidated basis. For purposes of this Section 8.1.1
(Representations and Warranties), representations and warranties made
with respect to specified dates or events need only to have been true
in all material respects as of such dates or events. Any
representation or warranty which becomes untrue because of any change
intended by this Plan of Merger shall not be considered to be a breach
of this Plan of Merger because of such change.
8.1.2 Compliance with Agreements. Old Kent shall have performed
and complied with all agreements, conditions, and covenants required
by this Plan of Merger to be performed or complied with by Old Kent
prior to or at the Closing in all material respects.
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8.1.3 Certificates. Compliance with Sections 8.1.1
(Representations and Warranties) and 8.1.2 (Compliance with
Agreements) shall be evidenced by one or more certificates signed by
appropriate officers of Old Kent, dated as of the date of the Closing,
certifying the foregoing in such detail as FNBC may reasonably
request, describing any exceptions to such compliance in such
certificates.
8.2 Opinion of Legal Counsel. Old Kent shall have delivered to FNBC
an opinion of Warner, Norcross & Judd, counsel for Old Kent, dated as of
the date of the Closing and reasonably satisfactory to counsel for FNBC, to
the effect that:
8.2.1 Due Authorization. This Plan of Merger, the execution,
delivery, and performance of this Plan of Merger, and the issuance of
shares of Old Kent Common Stock pursuant to this Plan of Merger have
been duly authorized, approved, and adopted by all requisite action of
Old Kent's Board of Directors.
8.2.2 Organization. Old Kent is a corporation duly
incorporated, validly existing, and in good standing under the laws of
the State of Michigan.
8.2.3 Capital Stock. The authorized capital stock of Old Kent
as of August 19, 1994, consists of 175,000,000 shares divided into two
classes as follows:
(a) 150,000,000 shares of common stock, $1 par value, of
which a total of 40,684,878 shares were legally issued and
outstanding; and
(b) 25,000,000 shares of preferred stock, without par
value, none of which were issued and outstanding.
8.2.4 Issuance of Shares. Since August 19, 1994, except as set
forth in such opinion, to counsel's knowledge:
(a) No additional shares of capital stock have been issued
by Old Kent, except for shares issued pursuant to the exercise of
employee stock options under employee stock option plans, and
except for shares issued in connection with the grant or sale of
shares to, or for the account of, directors and employees
pursuant to restricted stock, deferred stock compensation, or
other benefit plans.
(b) There are no outstanding subscriptions, options,
warrants, or rights to acquire any capital stock of Old Kent, or
agreements to which Old Kent is a party or by which it is bound
to issue capital stock, except as set forth in, or as
contemplated by, this Plan of Merger, and except (i) the Old Kent
Rights; (ii) stock options awarded pursuant to employee stock
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option plans; (iii) provisions for the grant or sale of shares
to, or for the account of, directors and employees pursuant to
restricted stock, deferred stock compensation, and other benefit
plans; and (iv) as set forth in the Old Kent Disclosure Statement
or in such opinion.
8.2.5 Valid and Binding. This Plan of Merger constitutes the
valid and binding obligation of Old Kent, enforceable in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium, or other similar laws
affecting creditors' rights, and by the exercise of judicial
discretion in accordance with general principles applicable to
equitable and similar remedies.
8.2.6 All Approvals Received. To the best of counsel's
knowledge, all such approvals, consents, authorizations, or
modifications as may be required to permit the performance by Old Kent
of its obligations under this Plan of Merger have been obtained.
8.2.7 All Actions Taken. All other actions and proceedings
required by law or, to the best of counsel's knowledge, this Plan of
Merger to be taken by Old Kent and Old Kent's subsidiaries at or prior
to the Closing in connection with this Plan of Merger have been duly
and validly taken.
8.2.8 No Conflict, Breach, or Violation. The execution,
delivery and performance of this Plan of Merger by Old Kent, and the
consummation by Old Kent of the transactions contemplated by this Plan
of Merger, will not, except as disclosed in such opinion, conflict
with or result in any breach or violation of, or default under (i) any
provision of the Articles of Incorporation or Bylaws of Old Kent;
(ii) any statute, code, ordinance, rule, or regulation; (iii) to the
best of counsel's knowledge, any judgment, order, writ, arbitral
award, decree, or injunction applicable to Old Kent; or (iv) to the
best of counsel's knowledge, any mortgage, agreement, lease,
commitment, indenture, or other instrument applicable to Old Kent
which has been provided to counsel in connection with this Plan of
Merger. All consents and approvals of the transactions contemplated
by this Plan of Merger which, to the best of counsel's reasonable
knowledge, are required from any person pursuant to any contract or
agreement to which Old Kent or any of Old Kent's subsidiaries is a
party or subject, or by which Old Kent or any of Old Kent's
subsidiaries is bound, and which has been provided to counsel in
connection with this Plan of Merger, have been obtained, except as
disclosed in the Old Kent Disclosure Statement or in such opinion.
8.2.9 No Litigation. Except as disclosed in the Old Kent
Disclosure Statement or in such opinion, counsel does not know of any
action, suit, proceeding, claim, arbitration, or investigation pending
or threatened against or relating to Old Kent, or its properties or
businesses, which challenges the Merger, or which may result in any
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liability to Old Kent which may exceed $100,000 and which would have a
material adverse effect on the business, income, or financial
condition of Old Kent and its subsidiaries on a consolidated basis.
8.2.10 Issuance of Shares Authorized. The shares of Old Kent
Common Stock to be issued by Old Kent as contemplated by this Plan of
Merger, and to be delivered to the stockholders of FNBC, are duly
authorized, and, when issued, will be legally issued, fully paid, and
nonassessable.
In rendering its opinion, Warner, Norcross & Judd may rely on
certificates of governmental officials and officers of Old Kent and Old
Kent's subsidiaries, certificates of Old Kent's transfer agent, and
opinions of other counsel as to the laws of jurisdictions in which counsel
is not licensed to practice law, and such other evidence as counsel for Old
Kent may reasonably deem necessary or desirable. Any certificates (other
than those of governmental officials) or legal opinions upon which Warner,
Norcross & Judd may rely shall also be addressed to FNBC and FNBC shall be
entitled to rely on them. As to each matter with respect to which Warner,
Norcross & Judd relies upon a legal opinion rendered by other counsel,
Warner, Norcross & Judd shall state that Warner, Norcross & Judd has no
knowledge of any fact or circumstance that would render such other
counsel's opinion incorrect or misleading.
8.3 Required Approvals. FNBC or Old Kent shall have received:
8.3.1 Regulatory Approvals. All such approvals, consents,
authorizations, and licenses of all regulatory and other governmental
authorities having jurisdiction as may be required to permit the
performance by FNBC and Old Kent of their respective obligations under
this Plan of Merger and the consummation of the Merger.
8.3.2 FNBC Stockholders. The requisite approval of the
stockholders of FNBC of this Plan of Merger and the Merger.
8.4 Order, Decree, Etc. Neither Old Kent nor FNBC shall be subject
to any applicable order, decree, or injunction of a court or agency of
competent jurisdiction which enjoins or prohibits the consummation of the
Merger.
8.5 Tax Matters. FNBC shall have received an opinion of counsel for
Old Kent, reasonably satisfactory in form and substance to FNBC's counsel,
substantially to the effect that:
8.5.1 No gain or loss will be recognized by the stockholders of
FNBC who receive shares of Old Kent Common Stock in exchange for all
of their shares of FNBC Common Stock, except to the extent of any cash
received in lieu of a fractional share of Old Kent Common Stock.
8.5.2 The basis of the Old Kent Common Stock to be received by
stockholders of FNBC will, in each instance, be the same as the basis
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of the respective shares of FNBC Common Stock surrendered in exchange
therefor.
8.5.3 The holding period of the Old Kent Common Stock received
by stockholders of FNBC will, in each instance, include the period
during which the FNBC Common Stock surrendered in exchange therefor
was held, provided that the FNBC Common Stock was, in each instance,
held as a capital asset in the hands of the stockholder of FNBC at the
Effective Time of the Merger.
8.6 Registration Statement. The Registration Statement shall have
been declared effective by the SEC and shall not be subject to a stop order
or any threatened stop order.
8.7 Fairness Opinion. FNBC shall have received an opinion from
M. A. Schapiro & Co., Inc., or another financial expert reasonably
acceptable to FNBC, dated approximately the date of the Prospectus and
Proxy Statement, to the effect that the terms of the Merger are fair to
FNBC's stockholders from a financial point of view as of that date and such
opinion shall not have been subsequently withdrawn.
ARTICLE IX
ABANDONMENT OF MERGER
This Plan of Merger may be terminated and the Merger abandoned at
any time prior to the Effective Time of the Merger (notwithstanding that
approval of this Plan of Merger by the stockholders of FNBC may have
previously been obtained) as follows:
9.1 Mutual Abandonment Prior to Effective Time of the Merger. This
Plan of Merger may be terminated and the Merger abandoned by mutual consent
of the Boards of Directors, or duly authorized committees thereof, of Old
Kent and FNBC.
9.2 Old Kent's Rights to Terminate. This Plan of Merger may be
terminated and the Merger abandoned by the Board of Directors, or a duly
authorized committee thereof, of Old Kent under any of the following
circumstances:
9.2.1 FNBC Disclosure Statement; Preclosing Investigation,
Etc. Old Kent shall have reasonably determined that:
(a) Any exception to FNBC's representations and warranties
or any other information set forth in the FNBC Disclosure
Statement is material to the transaction and reasonably
unacceptable to Old Kent;
(b) Based upon Old Kent's preclosing investigation of FNBC,
there exists any set of facts or circumstances materially adverse
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to the financial condition, net income, business, properties,
operations, or prospects of FNBC or any of FNBC's Subsidiaries;
or
(c) FNBC or any of FNBC's Subsidiaries is exposed to risks
or the Merger would expose Old Kent to risks that in the
reasonable judgment of Old Kent are not acceptable economic and
business risks;
provided that Old Kent notifies FNBC of such abandonment and
termination not later than the last to occur of (i) 21 business days
after Old Kent receives the FNBC Disclosure Statement, and
(ii) 30 business days after the date of the execution of this Plan of
Merger.
9.2.2 Breach of Warranty. One or more of the representations
and warranties made by FNBC in this Plan of Merger shall have been
discovered to be or to have become untrue and the cumulative effect of
all such untrue representations and warranties is material relative to
the business, income, or financial condition of FNBC and FNBC's
Subsidiaries on a consolidated basis.
9.2.3 Breach of Covenant. FNBC shall have committed one or more
breaches of any provision of this Plan of Merger which would in the
aggregate be material; provided, that, if such breach or breaches can
be cured, Old Kent shall have given FNBC specific notice of the breach
or breaches in writing and FNBC shall have not cured such breach or
breaches to the reasonable satisfaction of Old Kent within 30 days of
receipt of such notice.
9.2.4 Upset Date. The Merger has not yet become effective on or
before July 31, 1995.
9.2.5 Injunction. A final unappealable injunction or other
judgment shall have been issued by a court of competent jurisdiction
restraining or prohibiting consummation of the Merger.
9.2.6 No Stockholder Approval. The stockholders of FNBC have
failed to ultimately adopt this Plan of Merger at an annual or special
meeting or adjournments thereof, called and held for that purpose, and
such meeting has been finally adjourned.
9.2.7 No Regulatory Approval. The Federal Reserve Board or its
delegate shall have refused to approve the Merger, or the State of
Arizona shall have refused to grant any necessary approval to the
change in control of the Insurance Company.
9.2.8 Adverse Change. There has occurred any change from that
which existed on December 31, 1993, in the financial condition of FNBC
or any of FNBC's Subsidiaries which is materially adverse to the
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business, income, or financial condition of FNBC and FNBC's
Subsidiaries on a consolidated basis.
9.2.9 Affiliate Agreements. FNBC fails to obtain from each
person who is or becomes an affiliate of FNBC on or after the date of
this Plan of Merger a duly authorized and executed Affiliate
Agreement, substantially in the form previously provided to FNBC by
Old Kent or otherwise reasonably acceptable to Old Kent, to be
delivered to Old Kent (i) within 60 days of the date of this Plan of
Merger with respect to all persons who are affiliates of FNBC on the
date of this Plan of Merger; and (ii) within 60 days of the date on
which a person becomes an affiliate of FNBC with respect to all
persons who become affiliates after the date of this Plan of Merger.
If Old Kent in its discretion considers any person to be an affiliate
of FNBC, and FNBC did not consider such person to be an affiliate of
FNBC, then FNBC shall have a period of 60 days in which to obtain and
deliver to Old Kent a duly authorized and executed Affiliate Agreement
from such person after receipt of written notice from Old Kent
identifying such person as an affiliate.
9.2.10 Environmental Conditions. If Old Kent has notified FNBC
of any environmental conditions found or indicated or issues raised by
the Phase I environmental assessments pursuant to Section 6.10
(Environmental Investigation) and the parties are unable to agree upon
a course of action for further investigation and remediation of such
environmental condition or issue raised by an environmental assessment
and/or a mutually acceptable modification to this Plan of Merger
within the 30-day period set forth in Section 6.10.1 (Mutual
Agreement), or any extension thereof, and the condition or issue is
not one for which it can be determined to a reasonable degree of
certainty that the risk and expense to which Old Kent and its
subsidiaries would be subject as an owner or operator of the property
involved can be quantified and limited to an immaterial amount;
provided, that Old Kent gives FNBC written notice of its intent to
terminate this Plan of Merger pursuant to this Section 9.2.10
(Environmental Conditions) within the 30-day period set forth in
Section 6.10.1 (Mutual Agreement), or any extension thereof.
9.2.11 Pooling Qualification. At any time after Arthur
Andersen & Co. shall have advised Old Kent that the Merger is unlikely
to qualify for treatment as a pooling of interests for accounting
purposes.
9.3 FNBC's Rights to Terminate. This Plan of Merger may be
terminated and the Merger abandoned by the Board of Directors, or a duly
authorized committee thereof, of FNBC under any of the following
circumstances:
9.3.1 Breach of Warranty. One or more of the representations
and warranties made by Old Kent in this Plan of Merger shall have been
discovered to be or to have become untrue and the cumulative effect of
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all such untrue representations and warranties is material to the
business, income, or financial condition of Old Kent and its
subsidiaries on a consolidated basis.
9.3.2 Breach of Covenant. Old Kent shall have committed one or
more breaches of any provision of this Plan of Merger which would in
the aggregate be material; provided, that, if such breach or breaches
can be cured, FNBC shall have given Old Kent specific notice of the
breach or breaches in writing and Old Kent shall have not cured such
breach or breaches to the reasonable satisfaction of FNBC within 30
days of receipt of such notice.
9.3.3 Upset Date. The Merger has not yet become effective on or
before July 31, 1995.
9.3.4 Injunction. A final unappealable injunction or other
judgment shall have been issued by a court of competent jurisdiction
restraining or prohibiting consummation of the Merger.
9.3.5 No Stockholder Approval. The stockholders of FNBC have
failed to adopt this Plan of Merger at an annual or special meeting,
or adjournments thereof, called and held for that purpose, or that
purpose and other purposes, at which the holders of not less than
70 percent of the outstanding shares of FNBC Common Stock are present
in person or represented by proxy, and such meeting has been finally
adjourned.
9.3.6 No Regulatory Approval. The Federal Reserve Board or its
delegate shall have refused to approve the Merger; provided, that Old
Kent shall have first had the opportunity to initiate and fully pursue
its rights to appeal from, or seek judicial review of, any such
refusal. In the event of such appeal or review, and if such appeal or
review results in a substantial affirmance of such refusal, then for
purposes of this Section 9.3.6 such refusal shall be deemed not to
have been made until the termination of such appeal or review.
9.3.7 Adverse Change. There has occurred any change from that
which existed on December 31, 1993, in the financial condition of Old
Kent which is materially adverse to the business, income, or financial
condition of Old Kent and its subsidiaries on a consolidated basis.
9.3.8 Old Kent Disclosure Statement. The cumulative effect of
any exceptions to Old Kent's representations and warranties or any
other information set forth in the Old Kent Disclosure Statement shall
be materially adverse to the business, financial condition, or income
of Old Kent and its subsidiaries on a consolidated basis; provided
that FNBC notifies Old Kent of such abandonment and termination not
later than the last to occur of (i) 21 business days after FNBC
receives the Old Kent Disclosure Statement, and (ii) 30 business days
after the date of the execution of this Plan of Merger.
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ARTICLE X
AMENDMENT AND WAIVER
10.1 Amendment. Subject to applicable law, this Plan of Merger may
be amended, modified, or supplemented by, and only by, written agreement of
Old Kent and FNBC, or by the respective officers thereunto duly authorized,
at any time prior to the Effective Time of the Merger.
10.2 Waiver. Any of the terms or conditions of this Plan of Merger
may be waived at any time by whichever of the parties is, or the
shareholders or stockholders (as the case may be) of which are, entitled to
the benefit thereof, by action taken by the board of directors of such
party, or a duly authorized committee thereof. The failure of any party at
any time or times to require performance of any provision hereof shall in
no manner affect such party's right at a later time to enforce the same.
No waiver by any party of any condition, or of the breach of any term,
covenant, representation, or warranty contained in this Plan of Merger,
whether by conduct or otherwise, in any one or more instances shall be
deemed to be or construed as a further or continuing waiver of any such
condition or breach, or as a waiver of any other condition or of the breach
of any other term, covenant, representation, or warranty.
10.3 Specific Enforcement. The parties each agree that, consistent
with the terms and conditions of this Plan of Merger, in the event of a
breach by a party to this Plan of Merger, money damages will be inadequate
and not susceptible of computation because of the unique nature of FNBC,
FNBC's Subsidiaries and the Merger. Therefore, the parties each agree that
a federal or state court of competent jurisdiction shall have authority,
subject to the rules of law and equity, to specifically enforce the
provisions of this Plan of Merger by injunctive order or such other
equitable means as may be determined in the court's discretion.
ARTICLE XI
MISCELLANEOUS
11.1 Termination Fee. In recognition of the efforts, expenses,
other opportunities foregone by Old Kent while pursuing the Merger, and
unascertainable losses that may be incurred by Old Kent in the event that
the Merger is not consummated, and in recognition of Old Kent's potential
role in attracting the interest of Unaffiliated Persons (as defined below),
the parties agree that Old Kent shall, subject to the terms and conditions
set forth in this Section 11.1 (Termination Fee), be entitled to receive
the Termination Fee (as defined below) in the event of a Business
Combination by an Unaffiliated Person. For the purposes of this Plan of
Merger, an "Unaffiliated Person" shall mean any individual, corporation,
partnership, entity, group, or "person" as defined in Section 13(d)(3) of
the Securities Exchange Act and the regulations issued thereunder, other
than Old Kent, Old Kent's subsidiaries and affiliates, and their respective
A-67
directors, officers, employees, representatives, and agents. FNBC and Old
Kent agree that the Termination Fee is reasonable and just compensation
under such circumstances.
11.1.1 Definitions. For purposes of this Plan of Merger:
(a) "Acquisition Price." The "Acquisition Price" per share
of FNBC Common Stock shall mean (i) in the event of a merger or
consolidation, the market value per share of consideration to be
received by holders of FNBC Common Stock in the transaction,
determined as of the effective time of such transaction; (ii) in
the event of a tender offer, the price per share paid to holders
of FNBC Common Stock at the conclusion of such offer; (iii) in
the event of an exchange offer or share exchange, the market
value per share received by holders of FNBC Common Stock in the
transaction; or (iv) in the event of any other form of Business
Combination, the average price per share at which FNBC Common
Stock was acquired by the party making the Business Combination
between the date of this Plan of Merger and the date on which the
Termination Fee is paid.
(b) "Termination Fee." The "Termination Fee" shall be the
greater of (i) $1,500,000, or (ii) an amount which is equal to
15 percent of the excess, if any, of the Acquisition Price per
share of FNBC Common Stock over the Purchase Price Per Share (as
defined in Section 2.1.1), multiplied by the number of shares of
FNBC Common Stock outstanding immediately prior to the Business
Combination.
11.1.2 Rights to the Termination Fee. Old Kent shall be paid
the Termination Fee in the manner provided in Section 11.1.3 (Manner
of Payment) if, while this Plan of Merger is in effect (i) any
Unaffiliated Person directly or indirectly, or acting through one or
more intermediaries, acquires Control (calculated using 25 percent) of
FNBC, or its successor by merger or consolidation, or acquires
25 percent or more of the consolidated assets of FNBC and FNBC's
Subsidiaries; or (ii) FNBC solicits, invites, negotiates, or enters
into an agreement with an Unaffiliated Person to acquire such Control
or such assets, or either FNBC or an Unaffiliated Person publicly
announces an intention to do so, and within one year of the date of
such solicitation, invitation, negotiation, agreement or announcement
(whether or nor this Plan of Merger is then in effect) the
Unaffiliated Person acquires such Control or such assets.
11.1.3 Manner of Payment. The Termination Fee shall be paid to
Old Kent by wire transfer or by cashier's check of immediately
available funds. Old Kent shall be paid the Termination Fee:
(a) In the event of a merger, consolidation, or share
exchange, at or after the consummation of the transaction upon
Old Kent's written demand; or
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(b) In any other case, upon termination of this Plan of
Merger, after Old Kent becomes entitled to the Termination Fee.
11.1.4 Failure of a Condition Precedent. Old Kent shall not be
entitled to receive the Termination Fee if:
(a) The Merger is consummated;
(b) This Plan of Merger is terminated and the Merger is
abandoned by mutual consent of the parties;
(c) This Plan of Merger is terminated and the Merger is
abandoned by FNBC pursuant to Section 9.3.1 (Breach of Warranty),
9.3.2 (Breach of Covenant), 9.3.4 (Injunction), 9.3.6 (No
Regulatory Approval), 9.3.7 (Adverse Change), or 9.3.8 (Old Kent
Disclosure Statement);
(d) This Plan of Merger is terminated and the Merger is
abandoned by FNBC pursuant to Section 9.3.3 (Upset Date) if Old
Kent has failed to satisfy or, with respect to Sections 8.2 and
8.5 tender performance of, the conditions precedent provided in
Sections 8.1 (Renewal of Representations and Warranties, etc.),
8.2 (Opinion of Legal Counsel), 8.3.1 (Regulatory Approvals), 8.4
(Order, Decree, Etc.), 8.5 (Tax Matters) (provided, however, that
FNBC has supplied all necessary cooperation, information,
representations, and consents, on its part), or 8.6 (Registration
Statement) (provided, however, that FNBC has supplied all
necessary cooperation, information, and consents, on its part),
or pursuant to Section 2.2 (Upset Provisions); or
(e) This Plan of Merger is terminated and the Merger is
abandoned by Old Kent pursuant to Section 9.2.1 (FNBC Disclosure
Statement; Preclosing Investigation, Etc.) or Section 9.2.10
(Environmental Conditions).
11.2 Liability After Termination. In the event the Merger is not
consummated and this Plan of Merger is terminated and the Merger is
abandoned pursuant to Article IX:
11.2.1 Continuing Obligations. The obligations of Old Kent and
FNBC under Sections 6.9.4 (Confidentiality), 6.9.5 (Return of
Materials), 11.1 (Termination Fee), and 11.4 (Expenses) shall
continue.
11.2.2 Liability. Neither Old Kent nor FNBC shall incur any
liability whatsoever under, or pursuant to, this Plan of Merger,
except for damages for breach of Sections 5.8 (Competing Proposals),
6.9.4 (Confidentiality) or 6.9.5 (Return of Materials), and except for
reimbursement of costs and expenses, if any, provided under
Section 11.4 (Expenses) and payment of the fee, if any, provided under
Section 11.1 (Termination Fee).
A-69
11.2.3 Damages for Breach. Neither Old Kent nor FNBC shall have
any liability for damages or otherwise for breach of a representation
and warranty unless such breach was intentional, and in no event shall
either party be liable for consequential damages.
11.2.4 Termination Fee. If Old Kent is entitled to be paid, and
is paid, the Termination Fee, such fee shall be in lieu of all other
remedies Old Kent may have under this Plan of Merger, except for
damages for breach of Sections 6.9.4 (Confidentiality) and 6.9.5
(Return of Materials). If there has been a breach of Section 5.8
(Competing Proposals), Old Kent shall be entitled to damages for
breach of that Section or the Termination Fee, whichever is greater,
but not both.
11.3 Termination of Representations and Warranties. All
representations and warranties contained in this Plan of Merger shall
expire with, and be terminated and extinguished by either (i) the
consummation of the Merger at the Effective Time of the Merger; or (ii) the
termination of this Plan of Merger at the time of termination.
11.4 Expenses. Except as otherwise provided in this Plan of Merger,
FNBC and Old Kent shall each pay its own expenses incident to preparing
for, entering into, and carrying out this Plan of Merger, and incident to
the consummation of the Merger. Each party shall pay the fees and expenses
of any investment banker engaged by that party. The costs of printing and
all filing fees pertaining to the Registration Statement shall be paid by
Old Kent. The costs of printing and mailing the Prospectus and Proxy
Statement shall be paid by FNBC.
11.5 Notices. Except as otherwise provided herein, all notices,
requests, demands, and other communications under this Plan of Merger shall
be in writing and shall be deemed to have been duly given if delivered or
sent and received by facsimile transmission, express delivery service (all
fees prepaid) or United States mail (first class, postage prepaid) as
follows:
If to Old Kent:
Old Kent Financial Corporation Warner, Norcross & Judd
Attention: B. P. Sherwood III, Attention: Gordon R. Lewis
Vice Chairman and Treasurer 900 Old Kent Building
One Vandenberg Center 111 Lyon Street, N.W.
Grand Rapids, Michigan 49503 Grand Rapids, Michigan 49503
Facsimile: (616) 771-4378 Facsimile: (616) 752-2500
A-70
If to FNBC:
First National Bank Corp. Dickinson, Wright, Moon
Attention: Harold W. Allmacher, Van Dusen & Freeman
Vice-Chairman, President, and Attention: Jerome M. Schwartz
Chief Executive Officer 500 Woodward Avenue, #4000
18800 Hall Road Detroit, Michigan 48226
P.O. Box 248 Facsimile: (313) 223-3598
Mount Clemens, Michigan 48046-0248
Facsimile: (810) 228-3820
11.6 Governing Law. This Plan of Merger shall be governed,
construed, and enforced in accordance with the laws of the State of
Michigan.
11.7 Method of Consent or Waiver. Any consent hereunder or any
waiver of conditions or covenants as may be herein provided for, subject to
all of the other requirements contained in this Plan of Merger, shall be
evidenced in writing, properly executed by the Chairman, the President, or
one of the Vice Presidents of the party so electing hereunder, and such
documents shall be attested to by the Secretary or an Assistant Secretary
of the party so electing under this Plan of Merger.
11.8 Entire Agreement. Except as otherwise expressly provided
herein, this Plan of Merger and the related agreements referred to in this
Plan of Merger contain the entire agreement between the parties with
respect to the transactions contemplated hereunder, and such agreements
supersede all prior arrangements or understandings with respect thereto,
written or oral. The parties have not relied upon any statements or
representations pertaining to the other, whether oral or written, other
than as provided for in this Plan of Merger, the FNBC Disclosure Statement,
or the Old Kent Disclosure Statement. The terms and conditions of this
Plan of Merger shall inure to the benefit of and be binding upon the
parties hereto and their respective successors. Nothing in this Plan of
Merger, express or implied, is intended to confer upon any person other
than the parties hereto any rights, remedies, obligations, or liabilities
under or by reason of this Plan of Merger.
11.9 No Assignment. Neither party may assign any of its rights or
obligations under this Plan of Merger to any other person.
11.10 Counterparts. This Plan of Merger may be executed in one or
more counterparts, each of which together shall constitute one and the same
instrument.
11.11 Further Assurances; Privileges. Either party to this Plan of
Merger shall, at the request of the other party, execute and deliver such
additional documents and instruments and take such other actions as may be
reasonably requested to carry out the terms and provisions of this Plan of
Merger. Each party shall use reasonable efforts to preserve for itself and
the other party each available legal privilege with respect to
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confidentiality of their negotiations and related communications, including
the attorney-client privilege.
11.12 Headings, Etc. The article headings and section headings
contained in this Plan of Merger are inserted for convenience only and
shall not affect in any way the meaning or interpretation of this Plan of
Merger.
11.13 Severability. If any term, provision, covenant, or restriction
contained in this Plan of Merger is held by a final and unappealable order
of a court of competent jurisdiction to be invalid, void, or unenforceable,
then the remainder of the terms, provisions, covenants, and restrictions
contained in this Plan of Merger shall remain in full force and effect, and
shall in no way be affected, impaired, or invalidated unless the effect
would be to cause this Plan of Merger to not achieve its essential
purposes.
IN WITNESS WHEREOF, the undersigned parties hereto have duly
executed and acknowledged this Plan of Merger as of the date first written
above.
OLD KENT FINANCIAL CORPORATION
By s/ John C. Canepa
John C. Canepa, Chairman and Chief
Executive Officer
FIRST NATIONAL BANK CORP.
By s/ Harold W. Allmacher
Harold W. Allmacher, Vice Chairman,
President, and Chief Executive Officer
A-72
APPENDIX B
FIRST NATIONAL BANK CORP.
ANNUAL REPORT TO STOCKHOLDERS
FOR THE YEAR ENDED DECEMBER 31, 1993
Appendix B is a complete facsimile of First National Bank Corp.'s
Annual Report to Stockholders for the year ended December 31, 1993, as
previously distributed to stockholders. The Annual Report to Stockholders
included in this Appendix B is not a part of the Prospectus and Proxy
Statement except as expressly incorporated by reference in the Prospectus
and Proxy Statement.
1993 ANNUAL REPORT
FNBC
FIRST NATIONAL BANK CORP.
CONSOLIDATED FINANCIAL HIGHLIGHTS
Year Ended December 31,
1993 1992 Change
OPERATING RESULTS
Net interest income (including loan fees) $21,121,882 $18,213,617 16.0%
Provision for loan and lease losses 825,000 1,275,000 (35.3)
Noninterest income 3,798,922 3,834,022 (0.9)
Noninterest expense 18,167,959 17,347,477 4.7
Cumulative effects of changes in accounting principles (1,183,000) 231,000 N.M.
Net income 3,421,845 3,354,162 2.0
PER COMMON SHARE (1)
Primary income before cumulative effects of changes
in accounting principles $2.15 $1.72 25.0%
Primary net income 1.60 1.85 (13.5)
Fully diluted income before cumulative effects of
changes in accounting principles 2.04 1.53 33.3
Fully diluted net income 1.53 1.63 (6.1)
Cash dividends 0.74 0.71 4.2
Book value, end of period 16.10 16.43 (2.0)
Market value (2) 22.75 18.75 21.3
AT YEAR END
Total assets $484,332,777 $453,621,626 6.8%
Total securities 87,572,300 83,005,869 5.5
Total loans and lease financing 328,025,619 317,215,680 3.4
Deposits 440,051,495 410,936,118 7.1
Stockholders' equity 37,272,367 29,409,199 26.7
Shares outstanding (1) 2,315,671 1,790,488 29.3
AVERAGE BALANCES
Total assets $465,241,735 $438,937,127 6.0%
Total securities 84,587,447 94,558,513 (10.5)
Total loans and lease financing 327,137,063 295,491,975 10.7
Deposits 420,994,293 395,229,723 6.5
Stockholders' equity 33,855,196 28,794,095 17.6
Weighted average shares outstanding (1) 2,102,602 1,769,337 18.8
FINANCIAL RATIOS
Return on average total assets 0.74% 0.76% (2.6%)
Return on average equity 10.11 11.65 (13.2)
Tier I capital to risk-based assets 10.55 8.63 22.2
Total capital to risk-based assets 11.80 12.35 (4.5)
Average equity to average assets 7.28 6.56 11.0
Dividend payout ratio 46.88 37.33 25.6
B-1
OTHER
Number of employees (full time equivalent) 244 247 (1.2%)
Number of stockholders 1,284 1,232 4.2
<FN>
(1) Restated for 5% stock dividend and 4-for-3 stock split during 1993
(2) Source: The Nasdaq Stock Market
N.M. Not meaningful
[GRAPH] [GRAPH] [GRAPH] [GRAPH]
B-2
FIRST NATIONAL BANK CORP.
DEAR SHAREHOLDERS:
1993 WAS AN OUTSTANDING YEAR for First National Bank Corp. We posted record
earnings, improved key ratios, increased the dividend payout, strengthened our
balance sheet, increased stockholders' equity and raised core deposits.
Additionally, we developed noticeably as a cohesive team with renewed purpose
and ability to serve our customers.
OUR EARNINGS HIT A RECORD HIGH -- reaching $3,422,000, or $1.53 per share on a
fully diluted basis, compared with $3,354,000, or $1.63 per share in 1992. This
was accomplished despite a one-time charge of $1,183,000 for the cumulative
effect of a change in accounting principle related to postretirement health
benefit expenses. The 1992 results benefited from a one-time credit of $231,000
for an accounting change related to income taxes.
Based on the strong performance and positive outlook, the Board of Directors
increased the dividend payout to $.74 per share, and authorized the payment of
our sixth consecutive 5% stock dividend. Our stock price aptly reflected this
strong performance, rising 21%, to $22.75 at the close of the year, from an
opening price of $18.75, adjusted for November's four-for-three stock split.
OUR KEY RATIOS moved in a positive direction as a result of concerted efforts
by management. Noninterest expense increased by less than 5%. Return on
average assets rose to 0.99%, from 0.71%, when accounting changes are
discounted. Our net interest margin increased by 32 basis points to 5.29%.
We saw noteworthy accomplishments over and above the excellent operating
results.
First, we opened a full service branch in Romeo, Michigan. At 2,700 square
feet, the branch is among our largest and most efficient.
We completed expansion and renovations of two branches. Our Harper branch --
one of our busiest -- underwent a complete transformation. The Clemens Center
branch, likewise, was expanded and totally remodeled.
On the subject of marketing, we formally adopted "Making Your Life Easier" as
our marketing themeline. The themeline appears in ads, and on brochures,
mailers, signs and specialty items.
We customarily launch one or two new products each year. In 1993 we began
marketing a new commercial lease product for the public sector and businesses
of all sizes. The new commercial lease program is designed for manufacturing
equipment, large computer systems or to aid a municipality in acquiring a
capital item such as a fire truck.
A LOOK AT 1994 We fully expect the Macomb County economy to continue its
robust growth with strong loan demand. We should be aided by substantially
flat interest rates, enabling us to maintain, or improve, net interest margins.
B-3
NEW BRANCH RENOVATIONS. In response to customer demand, we are planning to
expand the Chesterfield branch by adding two additional drive-up lanes. The
Chesterfield branch is extremely popular among customers. Volume there has
nearly overwhelmed our service capabilities in the short time that the branch
has been open. Subsequent to year-end, we completed floor-to-ceiling remodeling
of the North Avenue branch, which serves downtown Mount Clemens.
NEW PRODUCTS. 1994 is off to a successful start. We have introduced a new
Increasing Rate CD which guarantees holders three interest rate increases over
a two-year term. The CD was introduced to respond to depositors' concerns about
lower-interest rate payouts on long-term flat-rate CDs. 1994 will see our first
offering of mutual funds and annuities for customers who seek investment
alternatives to CDs. These products will enable us to generate fees from funds
which otherwise would be lost to brokerage firms. A third marketing push for
1994 will be a Loan-By-Phone campaign, aimed at boosting consumer loan volume.
1994 ANOTHER PROFITABLE YEAR We feel we have positioned our assets --
financial, facilities and people -- to take full advantage of the positive
trends. Our focus will be on building core deposits, continuing to improve
asset quality, ongoing monitoring and management of costs -- particularly
noninterest expense and the aggressive fostering of a customer oriented sales
culture. We fully expect our marketshare to improve and 1994 earnings growth to
equal -- or to exceed -- 1993's performance.
On behalf of the Board of Directors, we extend our sincere thanks to our
employees for their dedication and extraordinary efforts during the past year
and commitment to the coming year. We also extend our thanks to you, our
shareholders, for your continued support, confidence and trust.
/s/ ARIE GULDEMOND /s/ HAROLD W. ALLMACHER
Arie Guldemond Harold W. Allmacher
Chairman of the Board Vice Chairman,
President & CEO
Full page - First National Bank provides construction and mortgage loans for a
new subdivision in Clinton Township. Marcello Iannucci, President and owner of
Suncrest Homes, Inc. and David Girodat, FNB's Vice President and Regional
Commercial Loan Officer, inspect a home under construction.
Right - Mitchell Buick Honda will relocate its dealership to a new showroom next
to FNB's Hall Road Financial Center. Talking about the move are Jerry Tsudis,
Co-owner of Mitchell Buick Honda; FNB Vice President & Commercial Loan Division
Manager Andrew Tassopoulos; and Gordon (Ky) Voog, Co-owner of Mitchell Buick
Honda.
Left - Boating is big business in Macomb County. Michael Lambert, President and
owner of Land's End Marina in Harrison Township, talks about the busy boating
season with FNB Assistant Vice President - Consumer Lending Sam Millard.
[Photos]
B-4
MACOMB COUNTY -- GOLDEN ERA OF GROWTH
THE LIST OF COMPANIES moving to -- or expanding in -- Macomb County reads like
a who's who of corporate America: Chrysler Corporation, Ford Motor Company,
Home Depot, Target, Fretter, Inc., F & M Discount Stores, DuPont Corporation,
TRW, Bendix, Kmart and AMP Industries, to name a few. American companies
invested more than $2.2 billion in Macomb County between 1990 and 1992.
Growth isn't limited to U.S. firms either. Seven major Canadian firms opened
plants in Macomb County during last year alone. Canadian firms are discovering
what their U.S. counterparts have known for years: Macomb County is one of the
midwest's best places to do business.
THE HEARTY NATURE of Macomb's business economy translates directly into jobs,
high employment and a financially-sound consumer segment among the county's
717,000 residents. Median household income is about $39,000, and median family
income exceeds $44,000. "That means strong, growing loan demand for homes,
cars, boats and other consumer items," notes FNB President and CEO, Harold W.
Allmacher.
FIRST NATIONAL BANK is an integral part of the county's continuous growth and
success. In fact, FNB plays a leadership role in Macomb's planned growth. Mr.
Allmacher is the chairman of the Macomb County Community Growth Alliance -- a
quasipublic organization which plans, nurtures and oversees Macomb's growth.
Numerous FNB board members, officers, and managers are members of similar
organizations.
Commercial banking for small and medium-sized companies is one of FNB's
principal market niches, and accounts for close to 50% of our deposit and
lending activities. Among the bank's better-known local customers in this
category are: Bavarian Village Ski Shops, Bill Lee Oldsmobile, Mitchell Buick,
Concord Tool Co., Clover Tool Co. Inc., Greystone Golf Course, C.J. Barrymores,
Mirage Banquet Hall and Trinity Land Development. Further, FNB counts most of
the county's municipalities among its clients.
A unique facet of Macomb County's extraordinary growth is that progress seems
to be everywhere -- not just pockets of building and economic activity. Look
out any window of FNB's Financial Center at Romeo Plank and Hall Road to see
the future coming. Hall Road is undergoing a massive transformation, as some
$200 million is being invested to widen the road to six to eight lanes over a
12-mile section, running nearly the width of the county.
Hall Road aptly has been designated the "Golden Corridor," because of the
tremendous growth it has spawned along its route. In addition to hundreds of
stores at the upscale, always-busy Lakeside Mall, current or planned Hall Road
retailers include Kmart, Builders' Square, Meijer's, Target, Sports Authority,
Office Max, PetCare Superstore, Best Buy and Home Quarters.
B-5
WHY MACOMB COUNTY? "Planning is the key," says Mr. Allmacher. "The foundation
for today's growth was set more than a decade ago, by far-sighted
organizations like the Macomb County Board of Commissioners and Community
Growth Alliance, in concert with the local Chambers and other business and
community groups.
"FNB participated actively in this planning over the past 15 to 20
years. The success of our Branch network relates directly to the data and
business forecast models generated by these groups. FNB and a lot of other
companies were able to see exactly where commercial and consumer development
would take place.
"WE STRATEGICALLY positioned our branches to serve those growing needs. A lot
of companies -- us included-- who believed in long-range planning and kept
their eyes to the horizon are years ahead of competition because of the
farsightedness," Mr. Allmacher concludes.
Full page - Harold W. Allmacher, Vice Chairman, President & CEO; Arie Guldemond,
Chairman of the Board
Left - the new Romeo Branch is one of FNB's largest and most efficient. The
new Branch team includes Gabe Makhlouf, Assistant Vice President & Romeo
Regional Loan Officer; Nancy Christian, Vice President - Branch Administration &
Bank Operations; and Mary Berckley, Branch Manager.
Right - The busy Harper Branch was expanded and completely renovated in 1993.
Seated is Genie Watters, FNB Teller and Pete Batistoni, Harper Branch Officer.
[Photos]
FNB: COMMUNITY INVOLVEMENT
COMMUNITY COMMITMENT
WHY IS FNB SO INVOLVED in community activities? FNB President and CEO Harold W.
Allmacher: "Community banking only works when employees, directors, and bank
officers play a leadership role in the community. Involvement is the foundation
to building a solid reputation for integrity, competence, commitment and
personal service."
First National Bank is REALLY involved in the communities it serves with
hands-on active participation on boards or advisory committees of about 60
community groups and financial support for another 50 organizations. The
interests cover the gamut: Chambers of Commerce, The Art Center, Friends of the
Clinton River, Macomb YMCA, Cancer Society, educational institutions, sports
organizations, Operation Headstart, Boy Scouts of America, AMVETS, and Macomb
County Historical Society.
FNB IS BEST KNOWN for its sponsorship of six key community events and programs:
B-6
FOURTH OF JULY FIREWORKS DISPLAY -- The annual July 4th fireworks is Macomb
County's biggest, brightest, noisiest fun event. Enjoyed by an estimated
100,000 people each year, the fireworks spectacular is second only to the
International Fireworks Display held about 25 miles south in downtown Detroit.
SANTA CLAUS PARADE -- The Mount Clemens Santa Claus Parade attracts kids young
and old from across Macomb and adjoining counties. FNB rescued the
financially-troubled parade by assuming sponsorship in 1989 and has kept things
going and growing ever since. This year, FNB was joined by co-sponsor Mount
Clemens General Hospital to create the largest parade to date. Scores of
officials and dignitaries -- including Santa himself -- and 120 parade groups
dance, prance, walk and roll through downtown Mount Clemens. The parade is
broadcast on area cable television as well. Last year's parade marked the first
appearance of papier mache characters.
MACOMB YMCA CORPORATE OLYMPICS -- FNB serves on the board of the Macomb YMCA
and has been a major co-sponsor of the Y's annual community-wide Health and
Fitness contest.
CLASSICS & KEEPSAKES is a popular Mount Clemens summer event. The city-wide
weekend of activities attended by thousands includes more than a dozen
different events: Classic Car Exhibit, Antique Boat Show, History Fair, Antique
Fashion Show, Historic Home Tour, Restoration Workshops and more.
THE MOUNT CLEMENS ART CENTER -- FNB is actively involved with the Art Center as
a member of its Board of Trustees and Chair of Corporate Development. FNB
sponsors and supports exhibits and several key events each year on behalf of
the Art Center. These include the Michigan Annual Holiday Fair and Have A Heart
annual fund raising extravaganza.
MEALS ON WHEELS -- Several teams of FNB employees have been involved with
Holiday Home Delivery of Meals on Wheels since 1990. This important program
provides a hot meal and snack for hundreds of home-bound senior citizens on
Easter, the Fourth of July, Thanksgiving and Christmas.
FNB'S COMMUNITY INVOLVEMENT also extends to other important arenas: During
1993, the bank sponsored nine seminars and workshops for low- and
moderate-income home buyers and aspiring business entrepreneurs.
[photo]
FNB's close ties to the community have resulted in many valuable
relationships. During 1993, the Bank received the second of two gifts from
the Estate of James E. Neely, a former stockholder and director. Mr. Neely's
generosity epitomizes the respect that our bank generates among the community.
He provided all of us with a reminder that our community involvement is an
inseparable part of our existence. Mr. Neely was President of the Armada
State Bank, which merged with FNB in 1970, and served on our Board of
Directors from 1975 until his retirement in 1983. Mr. Neely is fondly
remembered for his service and dedication to FNB and to the community.
B-7
Full page - FNB is the principal sponsor of the annual Santa Claus Parade.
Santa's helpers are:
Ralph LaGro, Mount Clemens General Hospital President & CEO; Mark "Doc" Andrews
of WKQI Q95-FM, the Parade's M.C.; John Torre, FNB Marketing Director, as
Pinnochio; Harold W. Allmacher, FNB President & CEO.; and Michelle Semple,
Mount Clemens General Hospital Media and Community Relations Coordinator,
as Santa's elf.
Left - The Art Center in downtown Mt. Clemens is one of more than 100 community
organizations supported by FNB. Andrew Tassopoulos, FNB Vice President &
Commercial Loan Division Manager is a member of The Art Center Board. Shown
with him getting ready for a new exhibit is The Art Center's Executive
Director Jo-Anne Wilke.
Right - Commitment and investment are making downtown Mt. Clemens a showcase for
urban revitalization. Principals of Mt. Clemens success include Harold W.
Allmacher, FNB President and CEO; Gebran S. Anton, Mt. Clemens-based real estate
developer; and Ralph Leach, President and owner of the Art-O-Craft store.
[Photos]
BOARD OF DIRECTORS
[Photos]
B-8
[Photos]
Robert D. Morrison
Retired Dentist
Frank E. Jeannette
Attorney
John J. Mulso
Retired Undersheriff
Macomb County
Sheriff's Dept.
Celestina Giles
Bank Officer
Executive Department
Raymond M. Contesti
Superintendent, Clintondale
Community Schools
David A. McKinnon
Attorney
Glen D. Schmidt
President
International Star Corporation
James T. Cresswell
President
Oakland General Underwriters
B-9
CONSOLIDATED BALANCE SHEETS
December 31,
Assets 1993 1992
Cash and due from banks (Note 2) $25,382,444 $24,389,706
Federal funds sold 22,900,000 9,700,000
Cash and Cash Equivalents 48,282,444 34,089,706
Securities available for sale (Note 3) 7,506,395 5,061,088
Investment securities - at amortized cost (market value of
$82,355,000 in 1993 and $80,230,000 in 1992)(Note 3)
United States Treasury 9,229,318 9,424,009
United States Government agencies 37,117,468 31,437,433
Municipal obligations 33,161,969 36,524,589
Other securities 557,150 558,750
Total Investment Securities 80,065,905 77,944,781
Loans and Leases (Note 5)
Residential real estate 60,361,529 65,437,839
Commercial 212,035,383 195,133,213
Installment 55,628,707 56,495,469
Lease financing ---- 149,159
Total Loans and Leases 328,025,619 317,215,680
Allowance for loan and lease losses (Note 6) (4,597,547) (4,585,032)
Net Loans and Leases 323,428,072 312,630,648
Property and equipment (net of depreciation)(Note 7) 15,595,828 14,709,269
Accrued interest receivable 2,600,192 2,640,537
Other real estate 3,289,714 3,440,562
Other assets 3,564,227 3,105,035
Total Assets $484,332,777 $453,621,626
B-10
CONSOLIDATED BALANCE SHEETS
December 31,
Liabilities and Stockholders' Equity 1993 1992
Deposits
Demand
Noninterest bearing $76,343,088 $68,279,153
Interest bearing 121,543,868 126,151,330
Savings 88,466,900 82,859,540
Time 153,697,639 133,646,095
Total Deposits 440,051,495 410,936,118
Short term borrowings 1,100,000 944,360
Other liabilities 5,908,915 3,983,949
Long term debt (Note 8) ---- 8,348,000
Total Liabilities 447,060,410 424,212,427
Stockholders' Equity (Note 9)
Common stock - $3.125 par value; 8,000,000 shares authorized;
2,315,671 shares issued and outstanding in 1993;
1,303,520 shares issued and 1,278,920 shares
outstanding in 1992 7,236,472 4,073,500
Additional paid-in capital 15,658,658 11,034,426
Retained earnings 14,377,237 14,899,574
Treasury stock - 24,600 shares in 1992 ---- (598,301)
Total Stockholders' Equity 37,272,367 29,409,199
Total Liabilities and Stockholders' Equity $484,332,777 $453,621,626
The accompanying notes are an integral part of the financial statements.
B-11
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
1993 1992 1991
Interest Income
Loans and leases (including fees) $27,160,470 $26,089,028 $29,691,092
Securities
Securities available for sale (Note 3) 370,646 -------- --------
United States Treasury 545,310 741,367 460,184
United States Government agencies 1,934,201 2,573,888 3,315,943
Municipal obligations 2,114,586 2,731,931 2,869,966
Other securities 33,279 38,100 71,998
Federal funds sold 244,347 98,133 183,952
Total Interest Income 32,402,839 32,272,447 36,593,135
Interest Expense
Deposits 10,973,681 13,172,775 18,664,898
Federal funds purchased 13,789 33,849 79,306
Short term borrowings 42,651 51,734 84,656
Long term debt 250,836 800,472 888,021
Total Interest Expense 11,280,957 14,058,830 19,716,881
Net Interest Income 21,121,882 18,213,617 16,876,254
Provision for loan and lease losses (Note 6) 825,000 1,275,000 1,875,000
Net Interest Income after Provision
for Loan and Lease Losses 20,296,882 16,938,617 15,001,254
Noninterest Income
Service charges on deposit accounts 2,790,213 2,429,838 2,182,376
Net security gains (losses) (Notes 3, 11) (1,259) 638,621 262,363
Other income (Note 4) 1,009,968 765,563 2,124,127
Total Noninterest Income 3,798,922 3,834,022 4,568,866
Noninterest Expense
Salaries, benefits, and payroll taxes (Note 13) 7,758,181 7,299,948 6,737,661
Occupancy 1,716,431 1,766,465 1,511,227
Equipment 1,557,941 1,678,850 1,527,346
Other operating expense (Note 10) 7,135,406 6,602,214 6,451,625
Total Noninterest Expense 18,167,959 17,347,477 16,227,859
Income Before Taxes and Cumulative Effects
of Changes in Accounting Principles 5,927,845 3,425,162 3,342,261
Income tax expense (Note 11) 1,323,000 302,000 335,000
B-12
Income Before Cumulative Effects of Changes
in Accounting Principles 4,604,845 3,123,162 3,007,261
Cumulative effects of changes in accounting
principles (Notes 11, 13) (1,183,000) 231,000 ----
Net Income $3,421,845 $3,354,162 $3,007,261
Per share data (Note 9):
Primary Income Before Cumulative
Effects of Changes in Accounting Principles $2.15 $1.72 $1.70
Cumulative effects of changes in
accounting principles (0.55) 0.13 ----
Primary Net Income $1.60 $1.85 $1.70
Fully Diluted Income Before Cumulative
Effects of Changes in Accounting Principles $2.04 $1.53 $1.50
Cumulative effects of changes
in accounting principles (0.51) 0.10 ----
Fully Diluted Net Income $1.53 $1.63 $1.50
Cash Dividends $0.74 $0.71 $0.57
The accompanying notes are an integral part of the financial statements.
B-13
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Additional Total
Common Paid-in Retained Treasury Stockholders'
Stock Capital Earnings Stock Equity
BALANCE JANUARY 1, 1991 $3,777,456 $9,159,123 $13,598,403 ($1,016,411) $25,518,571
Net income for 1991 -------- -------- 3,007,261 -------- 3,007,261
Cash dividends paid - $0.57 per share -------- -------- (1,005,680) -------- (1,005,680)
Stock dividend (44) (229) (971,625) 960,228 (11,670)
Employee Stock Ownership Plan
loan guarantee (Note 13) -------- -------- 148,803 -------- 148,803
Repurchase of 24,849 common shares -------- -------- -------- (527,066) (527,066)
Conversion of debentures (Note 8) 17,606 97,384 -------- -------- 114,990
Exercise of equity contracts (Note 9) 7,447 42,548 -------- -------- 49,995
Exercise of stock options (Note 13) 8,663 50,242 (58,889) -------- 16
Bequest from Estate (Note 9) -------- 211,684 -------- -------- 211,684
BALANCE DECEMBER 31, 1991 3,811,128 9,560,752 14,718,273 (583,249) 27,506,904
Net income for 1992 -------- -------- 3,354,162 -------- 3,354,162
Cash dividends paid - $0.71 per share -------- -------- (1,251,943) -------- (1,251,943)
Stock dividend 45,447 281,771 (1,310,236) 974,264 (8,754)
Employee Stock Ownership Plan
loan guarantee (Note 13) -------- -------- (510,586) -------- (510,586)
Repurchase of 41,600 common shares -------- -------- -------- (989,316) (989,316)
Conversion of debentures (Note 8) 154,184 826,586 -------- -------- 980,770
Exercise of equity contracts (Note 9) 50,100 277,844 -------- -------- 327,944
Exercise of stock options (Note 13) 12,641 87,473 (100,096) -------- 18
BALANCE DECEMBER 31, 1992 4,073,500 11,034,426 14,899,574 (598,301) 29,409,199
Net income for 1993 -------- -------- 3,421,845 -------- 3,421,845
Cash dividends paid - $0.74 per share -------- -------- (1,604,221) -------- (1,604,221)
Stock dividend 84,575 646,152 (1,810,117) 1,068,517 (10,873)
Stock split 1,704,862 (2,609,092) -------- 894,153 (10,077)
Employee Stock Ownership Plan
loan guarantee (Note 13) -------- -------- (432,161) -------- (432,161)
Repurchase of 50,044 common shares -------- -------- -------- (1,364,369) (1,364,369)
Conversion of debentures (Note 8) 928,683 4,216,113 -------- -------- 5,144,796
Exercise of equity contracts (Note 9) 424,636 2,146,527 -------- -------- 2,571,163
Exercise of stock options (Note 13) 20,216 110,817 (97,683) -------- 33,350
Bequest from Estate (Note 9) -------- 113,715 -------- -------- 113,715
BALANCE DECEMBER 31, 1993 $7,236,472 $15,658,658 $14,377,237 -------- $37,272,367
The accompanying notes are an integral part of the financial statements.
B-14
CONSOLIDATED STATEMENTS OF CASH FLOW
Year Ended December 31,
1993 1992 1991
OPERATING ACTIVITIES
Net income $ 3,421,845 $ 3,354,162 $ 3,007,261
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan and lease losses 825,000 1,275,000 1,875,000
Depreciation expense 1,202,834 1,205,500 1,054,374
Gain on sale of property and equipment (34,583) (62,500) (205,894)
Decrease (increase) in net deferred income taxes 103,000 (505,000) (398,000)
Net amortization of security premiums 1,201,026 910,572 565,682
Net security losses (gains) 1,259 (638,621) (262,363)
Decrease in interest receivable 40,345 301,419 126,300
Decrease in interest payable (265,990) (586,618) (440,040)
Decrease (increase) in other assets (914,956) 794,506 (1,621,444)
Increase (decrease) in other liabilities 1,758,795 (176,393) (165,289)
Net Cash Provided by Operating Activities 7,338,575 5,872,027 3,535,587
INVESTING ACTIVITIES
Proceeds from sales of securities -- 26,682,211 17,971,855
Proceeds from maturities and calls of securities 22,565,078 25,830,267 19,064,330
Purchases of securities (28,799,450) (43,400,686) (41,645,623)
Net decrease (increase) in residential real
estate loans 5,086,310 (1,931,764) 2,251,910
Net increase in commercial loans (17,162,552) (33,387,660) (14,262,532)
Net decrease in installment loans 770,315 4,087,764 9,653,049
Net decrease in lease financing 149,159 183,485 93,655
Purchases of property and equipment (2,089,393) (2,344,535) (4,735,385)
Proceeds from sales of property and equipment 34,583 141,400 708,090
Net Cash Used in Investing Activities (19,445,950) (24,139,518) (10,900,651)
FINANCING ACTIVITIES
Net increase (decrease) in noninterest
bearing demand deposits 8,063,935 8,261,254 (9,193,986)
Net increase (decrease) in interest bearing
demand deposits (4,607,462) 26,667,030 16,092,188
Net increase in savings deposits 5,607,360 14,132,927 4,173,026
Net increase (decrease) in time deposits 20,051,544 (20,198,261) 1,216,319
Net increase (decrease) in short term borrowings 155,640 (155,640) (1,053,625)
Cash dividends (1,604,221) (1,251,943) (1,005,680)
Repurchase of common stock (1,364,369) (989,316) (527,066)
Payments for fractional shares (22,353) (9,022) (11,670)
Proceeds from exercise of equity
contracts and stock options 183,324 60,000 --
B-15
Cash paid for debt and equity
contract redemption (277,000) -- --
Repurchase of debentures -- -- (138,000)
Bequest from estate (Note 9) 113,715 -- 211,684
Net Cash Provided by Financing Activities 26,300,113 26,517,029 9,763,190
Increase (Decrease) in Cash and Cash Equivalents 14,192,738 8,249,538 2,398,126
Cash and Cash Equivalents at the Beginning
of the Year 34,089,706 25,840,168 23,442,042
Cash and Cash Equivalents at the End of
the Year $ 48,282,444 $ 34,089,706 $ 25,840,168
Supplemental Disclosures of Cash Flow Information:
Total interest paid $ 11,546,947 $ 14,645,448 $ 20,156,921
Total income taxes paid $ 1,269,000 $ 880,000 $ 365,000
The accompanying notes are an integral part of the financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of First National Bank Corp. (the
Corporation) are in conformity with generally accepted accounting principles.
The following summarizes the more significant policies.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements of the
Corporation include the accounts of First National Bank Corp. (separately, the
Parent) and its wholly owned subsidiaries, First National Bank in Macomb County
(the Bank) and Bankers Fund Life Insurance Co.
All material intercompany accounts and transactions have been eliminated in
consolidation.
CASH AND CASH EQUIVALENTS: For purposes of reporting cash flow, cash and cash
equivalents include cash on hand, amounts due from banks, and federal funds
sold. Generally, federal funds are purchased or sold for one day periods.
SECURITIES: Investment securities for which management has the intent and the
Corporation has the ability to hold to maturity are stated at cost, adjusted
for amortization of premium and accretion of discount. If such securities are
subsequently sold, gains or losses are determined on the specific
identification method using the amortized cost of the security sold.
Securities that will be held for indefinite periods of time are classified as
available for sale, and reported at the lower of amortized cost or market.
B-16
INTEREST AND FEE INCOME ON LOANS: Interest on loans is accrued and credited to
operations based on the principal amount outstanding. Loan fees and loan
origination costs are recognized on a constant yield method over the life of
the loan. The general policy of the Corporation is to discontinue accrual of
interest income on loans where reasonable doubt exists with respect to the
timely collectibility of such interest, and any accrued but unpaid interest on
such loans previously accrued is reversed against interest income of the
current period. Loans are returned to an accrual status when factors
indicating doubtful collectibility no longer exist.
ALLOWANCE FOR LOAN AND LEASE LOSSES: Management determines the adequacy of the
allowance based upon a continuing review of individual loans and leases, recent
loss experience, current economic conditions, the risk characteristics of the
various categories of loans and leases, and other pertinent factors.
PROPERTY AND EQUIPMENT: Property and equipment are stated at cost less
accumulated depreciation. Buildings and improvements are depreciated over
periods ranging from 10 to 45 years, and furniture and equipment are
depreciated over periods ranging from 5 to 7 years, using the straight-line
method.
OTHER REAL ESTATE: Other real estate, which represents either properties
acquired through legal foreclosure or properties accounted for as "in
substance" foreclosures, is recorded at the lower of the amount of the loan
outstanding or net realizable value. Declines in net realizable value
subsequent to acquisition are expensed. Costs related to improving the
property are capitalized when the total cost of the property, including
improvements, does not exceed net realizable value.
INCOME TAXES: During 1992, the Corporation adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109).
Net income for 1992 includes a credit for the cumulative effect of the
adoption. Prior years' financial statements have not been restated to reflect
the effects of SFAS No. 109. Deferred tax assets and liabilities reflect the
impact of "temporary" differences between the recognition of income and expense
for tax and financial reporting purposes.
RECLASSIFICATIONS: Certain reclassifications have been made to the 1992 and
1991 financial statements, to conform with the classifications used in 1993.
____________________________________________________________________________
(2) CASH AND DUE FROM BANKS
The Bank is required to maintain noninterest bearing deposits with the Federal
Reserve Bank based on a percentage of the Bank's deposits. At December 31,
1993 and 1992, the deposit balances were $3,024,000 and $2,526,000,
respectively.
B-17
(3) SECURITIES
The carrying value and estimated market value of investment securities as of
December 31, 1993 and 1992 are shown below:
December 31, 1993
Gross Unrealized
Carrying Estimated
Value Market Value Gains Losses
United States Treasury $ 9,229,318 $ 9,376,000 $ 146,682 --
United States Government agencies 37,117,468 37,324,000 375,774 $169,242
Municipal obligations 33,161,969 35,095,000 1,954,576 21,545
Other securities 557,150 560,000 2,850 --
Investment securities $80,065,905 $82,355,000 $2,479,882 $190,787
December 31, 1992
Gross Unrealized
Carrying Estimated
Value Market Value Gains Losses
United States Treasury $ 9,424,009 $ 9,626,000 $ 201,991 --
United States Government agencies 31,437,433 31,940,000 604,479 $101,912
Municipal obligations 36,524,589 38,103,000 1,614,228 35,817
Other securities 558,750 561,000 2,350 100
Investment securities $77,944,781 $80,230,000 $2,423,048 $137,829
B-18
The carrying value and estimated market value of securities available for sale
as of December 31, 1993 and 1992 are as follows:
December 31, 1993
Gross Unrealized
Carrying Estimated
Value Market Value Gains Losses
United States Treasury $5,047,282 $5,048,000 $718 --
United States Government agencies 2,459,113 2,460,000 887 --
Total securities available for sale $7,506,395 $7,508,000 $1,605 --
December 31, 1992
Gross Unrealized
Carrying Estimated
Value Market Value Gains Losses
United States Treasury $3,045,601 $3,164,000 $118,399 --
United States Government agencies 2,015,487 2,051,000 35,513 --
Total securities available for sale $5,061,088 $5,215,000 $153,912 --
At December 31, 1993, investment securities of $3,910,000 were pledged to
secure public funds on deposit and for other purposes required by law.
Proceeds from calls of securities during 1993 were $1,296,000. Gross gains of
$5,000 and gross losses of $6,000 were realized on those calls. No securities
were sold during 1993.
Interest income on securities available for sale in 1993 was comprised of
$274,000 from U.S. Treasury securities, and $97,000 from U.S. Government
agency securities.
The amortized cost and estimated market value of the security portfolio at
December 31, generally by contractual maturity, are shown below. Actual
maturities may differ from contractual maturities because borrowers may have
the right to call or repay obligations with or without call or prepayment
penalties. Securities which are not due at a single maturity date, such as
mortgage-backed securities, have been allocated to maturity groupings based on
average expected life. Average expected life is based on the best available
prepayment estimates as of year end.
B-19
December 31, 1993
Investment securities: Estimated
Carrying Market
Value Value
Due in one year or less $19,707,611 $19,872,000
Due after one year through five years 45,697,237 46,900,000
Due after five years through ten years 11,860,180 12,756,000
Due after ten years 2,800,877 2,827,000
Total investment securities $80,065,905 $82,355,000
December 31, 1993
Securities available for sale: Estimated
Carrying Market
Value Value
Due in one year or less $3,942,381 $3,943,000
Due after one year through five years 3,564,014 3,565,000
Due after five years through ten years -- --
Due after ten years -- --
Total securities available for sale $7,506,395 $7,508,000
(4) SALE OF CREDIT CARD PORTFOLIO
In 1991, the Corporation sold its credit card portfolio without recourse. The
sale included all accounts contractually less than 60 days past due. The cost
basis of the portfolio was $7,732,000, and the net gain on the transaction,
included in other income for 1991, was approximately $950,000.
_______________________________________________________________________________
(5) CONCENTRATIONS OF CREDIT RISK
The Corporation grants loans to customers who reside primarily in Macomb County
and metropolitan Detroit. Although the Corporation has a diversified loan
portfolio, a substantial portion of its debtors' ability to honor their
B-20
contracts is dependent upon the automotive industry. Additionally, at December
31, 1993, the Corporation had $60,362,000 in residential real estate loans
which were for one to four family homes secured by mortgages, and $128,649,000
in commercial loans which were secured by real estate mortgages.
_______________________________________________________________________________
(6) ALLOWANCE FOR LOAN AND LEASE LOSSES
Changes in the allowance for loan and lease losses for 1993, 1992 and 1991 are
summarized below:
1993 1992 1991
Balance, beginning of the year $ 4,585,032 $4,038,314 $3,544,845
Provision 825,000 1,275,000 1,875,000
Charge-offs (1,160,550) (969,529) (1,582,056)
Recoveries 348,065 241,247 200,525
Balance, end of year $ 4,597,547 $4,585,032 $4,038,314
_______________________________________________________________________________
(7) PROPERTY AND EQUIPMENT
A summary of property and equipment as of December 31 is as follows:
1993 1992
Land $ 3,844,677 $3,377,463
Buildings and improvements 9,917,017 8,972,768
Furniture and equipment 9,213,523 8,417,069
Construction in progress 318,986 458,320
23,294,203 21,225,620
Less accumulated depreciation 7,698,375 6,516,351
Net property and equipment $15,595,828 $14,709,269
B-21
Operating expenses include lease rentals covering buildings and land used as
bank premises and certain equipment in the amount of $616,000, $707,000, and
$677,000 for the years ended December 31, 1993, 1992 and 1991, respectively.
Following is a schedule of future minimum rental payments required under
operating leases that have remaining lease terms in excess of one year as of
December 31, 1993:
Year ending December 31:
1994 $ 584,000
1995 549,000
1996 521,000
1997 448,000
1998 434,000
Subsequent years 1,738,000
Total minimum rental payments $4,274,000
_______________________________________________________________________________
(8) LONG TERM DEBT
The following is a summary of long term debt at December 31, 1992:
9.5% Subordinated Notes, formerly
due June 1, 1997 $2,682,000
9.0% Convertible Subordinated
Notes, formerly due July 15, 2004 5,666,000
$8,348,000
The 9.5% Subordinated Notes were redeemed by the Corporation as of March 31,
1993. The redemption premium was 3% of the principal amount outstanding. The
majority of the holders of these notes also held equity contracts, which are
discussed in Note 9. During 1993 and 1992, holders of $2,558,000 and $268,000
of these notes, respectively, exercised equity contracts which they held, and
tendered the notes as payment for common stock of the Corporation. On the
redemption date, the remaining $124,000 of this issue was redeemed for cash.
The 9.0% Convertible Subordinated Notes were redeemed by the Corporation as of
July 15, 1993, at a redemption premium of 5% of outstanding principal. Prior
to the redemption date, a large volume of this issue was converted into common
stock of the Corporation by its holders. The amounts converted were $5,513,000
in 1993, and $981,000 in 1992. On the redemption date, the remaining $153,000
in principal amount was redeemed for cash.
B-22
(9) STOCKHOLDERS' EQUITY
In 1987, the Corporation issued Cancellable Mandatory Stock Purchase Contracts
(equity contracts) requiring the purchase of $3,150,000 in common stock not
later than June 1, 1996. As of December 31, 1992, $2,772,000 in face amount of
contracts had remained outstanding. In conjunction with the 9.5% debt
redemption, the equity contracts were canceled as of March 31, 1993. The
cancellation premium was 1% of the face amount outstanding. As discussed in
Note 8, the majority of equity contract holders also held 9.5% debt. A large
volume of equity contracts were exercised prior to the cancellation date, with
most holders tendering debt as payment. $64,000 in face amount of equity
contracts was canceled for cash, while $150,000 was received during 1993 for
cash exercises of contracts.
The Corporation repurchased 50,044 shares of its common stock in 1993, and
41,600 shares in 1992. At December 31, 1993, the Corporation has been
authorized by its Board of Directors to purchase up to an additional 100,000
shares of its common stock.
In 1990, the Board of Directors of the Corporation declared a dividend
distribution of one Right for each outstanding share of common stock, to
stockholders of record at the close of business on December 18, 1990. The
Rights entitle the registered holder to purchase from the Corporation shares of
Common Stock, $3.125 par value per share. The exercise price of each Right is
$38.87, subject to adjustment in certain circumstances. The description and
terms of the Rights are set forth in a Rights Agreement between the Corporation
and State Street Bank and Trust Company, as Rights Agent. The Rights will
expire on December 18, 1998.
During 1991, and again in 1993, the Corporation received a bequest from the
estate of a former director and stockholder. The amounts received were
$211,684 in 1991, and $113,715 in 1993. The amount was not included in income,
but rather was credited directly to additional paid-in capital.
The articles of incorporation authorize 2,000,000 shares of preferred stock, of
which none are issued.
Earnings per share amounts have been adjusted for the 5% stock dividends on
common stock in 1993, 1992, and 1991, and the 4-for-3 stock split in 1993. The
calculations are based on the weighted average number of shares outstanding
throughout the year. Primary and fully diluted per share amounts assume
conversion of the appropriate dilutive securities and common stock equivalents
of the Corporation, and the elimination of related after tax interest expense.
The Corporation is subject to capital adequacy requirements issued by the
Federal Reserve Board. These rules require the Corporation to maintain a ratio
of total capital to risk-based assets of 8%. Of this amount, 4% must be
B-23
comprised of Tier I capital. Tier I capital is defined to include
stockholders' equity, retained earnings, perpetual preferred stock, and
minority interest. Total capital is defined to include all of the components
of Tier I capital plus mandatory convertible securities, subordinated debt, and
the allowance for loan losses, up to certain limits. The loan loss reserve is
limited to 1.25% of risk-based assets. Under the risk-based capital
guidelines, the Corporation's on-balance sheet and off-balance sheet assets are
placed into one of four risk categories, based primarily on credit risk. As of
December 31, 1993, the Corporation's Tier I capital to risk-based assets was
10.55%, and total capital to risk-based assets was 11.80%.
_______________________________________________________________________________
(10) OTHER OPERATING EXPENSE
The following is a summary of significant components of other operating
expense, for each of the years indicated:
1993 1992 1991
(in thousands)
Data processing $1,049,082 $ 986,491 $ 882,155
Deposit insurance 928,600 878,251 788,791
Advertising, marketing, and public relations 727,000 571,936 430,536
Printing and supplies 564,586 680,050 634,772
State taxes 394,358 407,795 200,810
Other 3,471,780 3,077,691 3,514,561
$7,135,406 $6,602,214 $6,451,625
(11) TAXES ON INCOME
As discussed in Note 1, the Corporation adopted SFAS No. 109 as of January 1,
1992. The cumulative effect of the change is shown in the consolidated
statements of income. Except for the cumulative effect in 1992, the adoption
had no significant impact on the results of operations of the Corporation.
Income tax expense consists of the following:
1993 1992 1991
Current $1,220,000 $807,000 $733,000
Deferred 103,000 (505,000) (398,000)
Income Tax Expense $1,323,000 $302,000 $335,000
B-24
Deferred tax assets were also increased by $609,000 during 1993 for the tax
effect of adopting SFAS No. 106 (see Note 13). This amount did not affect 1993
tax expense since it is related to the cumulative effect of a change in
accounting principle. The temporary differences and carryforwards which
comprise deferred tax assets and liabilities at December 31 are as follows:
1993 1992
Deferred tax assets:
Provision for loan and lease losses $1,040,000 $1,036,000
Postretirement benefits 672,000 --
Alternative minimum tax credit carryforward 269,000 436,000
Gain on sale/leaseback 387,000 419,000
Deferred loan fees 171,000 200,000
Accrued expenses 28,000 --
Deferred tax assets $2,567,000 $2,091,000
Deferred tax liabilities:
Depreciation $ (111,000) ($71,000)
Leases -- (56,000)
Other (16,000) (30,000)
Deferred tax liabilities $ (127,000) ($157,000)
A reconciliation of the provision for income taxes, and the amount that would
be expected using statutory federal income tax rates applied to income before
taxes, is shown below:
1993 1992 1991
Expected tax expense $2,015,000 $1,165,000 $1,136,000
Tax-exempt interest (708,000) (862,000) (838,000)
Other 16,000 (1,000) 37,000
$1,323,000 $ 302,000 $ 335,000
Included in income tax expense is the tax effect of securities sales, which was
zero in 1993, $217,000 in 1992, and $89,000 in 1991.
_______________________________________________________________________________
B-25
(12) ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
Estimates of fair value of financial instruments have been determined using
available market information and appropriate valuation methods, as outlined
below. Considerable judgment is inherently required to interpret market data
to develop the estimates of fair value. Accordingly, the estimates presented
below do not necessarily represent amounts that the Corporation could realize
in a current market exchange. The following methods and assumptions were
used to estimate the fair value of financial instruments:
CASH AND CASH EQUIVALENTS: For these short term instruments, the carrying
amount is a reasonable estimate of fair value.
SECURITIES: For marketable debt securities held for investment or available
for sale, estimated fair values are based on quoted market prices or dealer
quotes.
LOANS: For variable rate loans with no significant change in credit risk since
loan origination, the carrying amount is a reasonable estimate of fair value.
For all other loans, including fixed rate loans, the fair value is estimated
using a discounted cash flow analysis, using interest rates currently offered
on similar loans to borrowers with similar credit ratings and for the same
remaining maturities. The resulting value is reduced by an estimate of losses
inherent in the portfolio.
DEPOSITS: The estimated fair value of demand deposits, certain money market
deposits, and savings deposits is the amount payable on demand at the reporting
date. The fair value of fixed maturity time deposits is estimated using the
rates currently offered for deposits of similar remaining maturities.
SHORT TERM BORROWINGS: For these short term instruments, the carrying amount
is a reasonable estimate of fair value.
LONG TERM DEBT: For these instruments, estimated fair value is based on quoted
market prices or dealer quotes.
COMMITMENTS: Commitments to extend credit and standby letters of credit are
not recorded on the balance sheet. The fair value of commitments is estimated
using the fees currently charged to enter into similar arrangements, taking
into account the remaining terms of the agreements and the present
creditworthiness of the counterparties. The fair value of letters of credit
is based on fees currently charged for similar agreements, or on the estimated
cost to terminate them or otherwise settle the obligations with the
counterparties at the reporting date.
The use of different market assumptions and/or estimation methods may have a
material effect on the estimated fair value amounts. The recorded carrying
amounts and estimated fair values of the Corporation's financial instruments at
December 31 are as follows:
B-26
1993 1992
Carrying Estimated Carrying Estimated
amount fair value amount fair value
Financial assets:
Cash and cash equivalents $ 48,282,000 $ 48,282,000 $ 34,090,000 $ 34,090,000
Securities 87,572,000 89,863,000 83,006,000 85,445,000
Loans, net of allowance 323,428,000 328,156,000 312,481,000 316,176,000
Financial liabilities:
Demand and savings deposits 286,354,000 286,354,000 277,290,000 277,290,000
Time deposits 153,698,000 153,755,000 133,646,000 133,690,000
Short term borrowings 1,100,000 1,100,000 944,000 944,000
Long term debt -- -- 8,348,000 10,216,000
Unrecognized financial instruments:
Commitments to extend credit N.A. 348,000 N.A. 320,000
Standby letters of credit N.A. 34,000 N.A. 36,000
The fair value estimates presented above are based on pertinent information
available to the Corporation as of December 31, 1993 and 1992. Although
management is not aware of any factors that would significantly affect the
estimated fair value amounts, these amounts have not been comprehensively
revalued for financial statement purposes since those dates. Current estimates
of fair value may therefore differ significantly from the amounts presented
above.
_______________________________________________________________________________
(13) EMPLOYEE BENEFIT PLANS
A summary of the Corporation's employee benefit plans is as follows:
DEFERRED COMPENSATION PLAN: In 1983, the Bank established an Employee Salary
Reduction (401(k)) Plan. All employees who have completed six months of
service and 1,000 hours of work with the Bank are eligible to participate. The
1993, 1992, and 1991 expense related to the plan was $168,000, $162,000, and
$138,000, respectively.
EMPLOYEE STOCK OWNERSHIP PLAN: In 1986, the Bank established an Employee Stock
Ownership Plan (ESOP). All salaried employees, after completing one year of
service (and 1,000 hours) with the Bank, and who have attained the age of 21,
are eligible to participate in the plan. During 1993, the ESOP had $646,000 in
additional borrowings under its $1,500,000 revolving line of credit from an
unrelated financial institution, while repayments were $214,000 during the
year. As of December 31, 1993, the ESOP owes $1,436,000 on the note, and owns
approximately 157,000 shares of the Corporation's stock. The revolving note,
B-27
which bears interest at 1/4% over prime, is to be paid on or before April 30,
1994. The Corporation has guaranteed repayment of the loan and is obligated to
contribute sufficient funds to the ESOP, which will enable the ESOP to repay
the loan principal and interest. Contributions by the Corporation totaled
$200,000 in 1993, $150,000 in 1992, and $180,000 in 1991. The loan guarantee
is recorded as a liability of the Corporation, with a corresponding reduction
in retained earnings.
INCENTIVE STOCK OPTION PLAN: In 1988, the Corporation established an Incentive
Stock Option Plan (the "Stock Option Plan"). The Stock Option Plan provides
for options to be granted to senior management and other key employees of the
Bank at a price per share that is not less than the fair market value of the
Common Stock of the Corporation on the date of grant. The determination of the
persons to receive options and the number of shares to be covered by an option
are based upon the present and potential contributions of each person to the
success of the Corporation and its affiliates, and such other factors as may be
deemed relevant. The duration of each option may not exceed seven years from
the date of grant. The aggregate fair market value, determined at the time
that the option is granted, of the Corporation's Common Stock with respect to
which options are exercisable for the first time by any employee during any
calendar year may not exceed $100,000.
The following is a summary of transactions involving the Stock Option Plan:
1993 1992 1991
Option Shares:
Outstanding January 1 56,480 46,526 53,633
Granted 35,000 29,400 14,700
Exercised (10,520) (19,446) (21,807)
Exercisable Dec. 31 80,960 56,480 46,526
Option Price $11.75-$18.57 $11.75-$16.07 $11.75-$13.28
At December 31, 1993, 37,000 shares were available for future grants under this
plan.
NONEMPLOYEE DIRECTOR STOCK OPTION PLAN: In 1992, the Corporation established
the Stock Option Plan for Nonemployee Directors (the "Director Option Plan").
The Director Option Plan, a nonqualified plan, provides for options to be
granted to outside directors of the Corporation. Options under the Director
Option Plan are granted at the fair market value of the Corporation's common
stock as of the grant date. Only a portion of options granted are immediately
exercisable, with the remainder becoming exercisable on the dates of successive
annual meetings of the Corporation. Unexercised options expire seven years
after the date of grant, or when grantee ceases to be a nonemployee director.
B-28
The following is a summary of transactions involving the Director Option Plan:
1993 1992
Option Shares:
Outstanding January 1 23,800 --
Became exercisable 23,800 23,800
Exercised (7,000) --
Exercisable Dec. 31 40,600 23,800
All options have an exercise price of $16.07. As of December 31, 1993, there
are 71,400 options granted but not yet exercisable, and no options are
available for future grants.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS: Effective January 1, 1993, the
Corporation adopted Statement of Financial Accounting Standards No. 106,
"Employer's Accounting for Postretirement Benefits Other Than Pensions" (SFAS
No. 106). The statement requires the accrual of expected costs for certain
postretirement benefits (such as health benefits) during the years an employee
provides services. The previous practice was to expense these costs as they
were paid.
The Corporation and its subsidiaries provide medical, dental, and
vision insurance for employees who retire after age 55, with a combined age and
years of experience of at least 75 years. This insurance, which can also
cover eligible dependents, is contributory with retiree contributions adjusted
periodically for increases in costs related to the coverage.
The Corporation elected to immediately recognize the prior years' accumulated
benefit obligation as of January 1, 1993, as a one-time charge against
earnings. This resulted in a reduction in 1993 earnings of $1,183,000, net of
a tax credit of $609,000. In addition, expense for 1993 related to
postretirement health benefits was $185,000 higher than it would have been
under the previous accounting method.
Net periodic postretirement health benefit costs for the
year ended December 31, 1993, were as follows:
Service cost $ 103,000
Interest cost 141,000
Net periodic postretirement health benefit cost $ 244,000
The following table details the accumulated postretirement benefit obligation,
reconciled with the amount shown in the Corporation's balance sheet at
December 31, 1993:
B-29
Accumulated postretirement benefit obligation (APBO):
Retirees $ 848,000
Fully eligible active plan participants 257,000
Other active plan participants 1,251,000
Accrued postretirement benefit liability 2,356,000
Unrecognized net loss from past experience
different from that assumed, and from
changes in assumptions (379,000)
Accrued postretirement benefit cost $1,977,000
Actual cash cost for 1993 $ 59,000
There are no "plan assets" specifically set aside to cover this obligation.
Postretirement benefit cost is determined using assumptions applicable at the
beginning of the year. The APBO is determined using the assumptions at the end
of the year. The Corporation used a weighted average discount rate of 7% to
determine the present value of the APBO as of December 31, 1993,
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
and a weighted average discount rate of 8% as of January 1, 1993. The
Corporation assumed a 12-13 percent annual rate of increase for 1993 in
the per person costs of covered health care benefits, with the rate trending
downward and remaining at 6% by 2017. This trend rate assumption has a
significant impact on the recorded liability. Increasing the assumed trend
rate by one percentage point in each year would have increased the APBO as of
December 31, 1993 by $497,000, and would have increased total 1993 net periodic
postretirement benefit cost by $58,000.
(14) LOANS TO RELATED PARTIES
Certain directors and executive officers of the Corporation, including families
and companies in which they are principal owners, were customers of the
Corporation during 1993 and 1992. Such transactions were made in the ordinary
course of business at normal terms and interest rates and did not represent
more than the normal risks. Total loans to these persons at December 31, 1993
and 1992 amounted to $2,093,000 and $2,111,000, respectively. During 1993, new
and renewed loans to related parties totaled $1,479,000, and repayments totaled
$1,497,000.
B-30
(15) RESTRICTIONS ON CASH FLOWS TO THE PARENT COMPANY
National and state banking laws and regulations place certain restrictions on
loans and advances made by the banking subsidiary to members of its affiliated
group, including the Parent, and also place restrictions on dividends paid by
the subsidiary Bank. At December 31, 1993, assets of the Bank not available
for dividends or loans to the Parent amounted to approximately $471,865,000.
In 1994, the Bank could distribute to the Parent (in addition to its 1994 net
income) approximately $4,448,000 in dividends without approval from regulatory
agencies.
(16) COMMITMENT AND CONTINGENCIES
A commitment to extend credit obligates the Corporation to advance funds to a
customer providing there is compliance with terms of the commitment.
Commitments generally have fixed expiration dates or other termination clauses,
permit the customer to borrow at a market rate of interest, and require payment
of a fee. These include commitments for new loans, existing commitments under
line of credit agreements, and standby letters of credit. Unused commitments
totaled $54,529,000 at December 31, 1993. Since many commitments typically
expire without being funded, the total does not necessarily represent future
cash requirements. A standby letter of credit is a conditional commitment
issued to guarantee contractual performance by a customer to a third party.
They are typically issued to back commercial paper, bond financing, and similar
transactions of public and private borrowers. Total standby letters of credit
outstanding at December 31, 1993, were $3,421,000. The Corporation does not
expect, in the normal course of business, to be required to fund these
commitments.
The Corporation uses the same credit policies in making the above commitments
and conditional obligations as it does for on-balance sheet instruments.
The Bank is a defendant in legal actions arising from normal business
activities. Management believes that those actions are without merit or that
the ultimate liability, if any, resulting from them will not materially affect
the Corporation's financial position, liquidity, or results of operations.
(17) FUTURE ACCOUNTING CHANGES
The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment
of a Loan." This statement will require that the value of certain impaired
loans be measured based on the present value of expected future cash flows,
discounted at the loan's effective interest rate. The statement is effective
for fiscal years beginning after December 15, 1994. The Corporation does not
expect the statement to have a material impact on its future earnings or
financial position.
B-31
The FASB has also issued Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" (SFAS No.
115). This statement will require the classification of debt and certain
equity securities into three categories as follows:
Debt securities that the Corporation has the positive intent
and ability to hold to maturity will be classified as "held to
maturity," and reported at amortized cost.
Debt and equity securities that are bought and held
principally to sell them in the near term would be classified
as "trading" securities, and reported at fair value.
Unrealized gains and losses would be included in earnings.
Debt and equity securities that are not classified as either
"held to maturity" or "trading" are classified as "available
for sale," and are reported at fair value. Unrealized gains
and losses will be excluded from earnings, but reported as a
separate component of stockholders' equity.
SFAS No. 115 is effective for fiscal years beginning after December 15, 1993,
and the Corporation will adopt it in the first quarter of 1994. Since the
Corporation does not engage in short term buying and resale of securities,
management does not expect to place any securities in the "trading" category.
Adoption of the statement is not expected to have a material impact on earnings
or financial position.
B-32
(18) PARENT-ONLY FINANCIAL STATEMENTS
Balance sheets as of December 31, 1993 and 1992, and statements of income and
cash flows for the years ended December 31, 1993, 1992 and 1991 for First
National Bank Corp. (the Parent only) are as follows:
BALANCE SHEETS
ASSETS 1993 1992
Cash $ 3,384,932 $ 6,543,214
Investment in bank subsidiary 32,524,794 30,497,077
Investment in non-bank subsidiary 199,726 223,518
Municipal securities 1,375,000 --
Land 1,169,462 1,169,462
Other assets 64,639 582,908
Total Assets $38,718,553 $39,016,179
LIABILITIES AND STOCKHOLDERS' EQUITY
Long term debt -- $ 8,348,000
Other liabilities $ 1,446,186 1,258,980
Total Liabilities 1,446,186 9,606,980
Stockholders' equity
Common stock 7,236,472 4,073,500
Additional paid-in capital 15,658,658 11,034,426
Retained earnings 14,377,237 14,899,574
Treasury stock -- (598,301)
Total Stockholders' Equity 37,272,367 29,409,199
Total Liabilities and Stockholders' Equity $38,718,553 $39,016,179
B-33
(18) PARENT-ONLY FINANCIAL STATEMENTS (continued)
STATEMENTS OF INCOME
Year Ended December 31,
1993 1992 1991
OPERATING INCOME
Dividends from bank subsidiary $ 1,727,107 $ 1,343,305 $ 1,151,405
Interest income on deposits 111,960 229,735 437,538
Interest income on securities 85,078 -- --
Other income 34,883 62,500 227,419
Total Operating Income 1,959,028 1,635,540 1,816,362
OPERATING EXPENSE
Interest on long term debt 250,836 800,472 888,021
Other expenses 321,557 308,347 346,920
Total Operating Expense 572,393 1,108,819 1,234,941
Income Before Taxes and Equity
in Undistributed Earnings of Subsidiaries 1,386,635 526,721 581,421
Income tax benefit 145,000 278,000 194,000
Income Before Equity in Undistributed
Earnings of Subsidiaries 1,531,635 804,721 775,421
Equity in undistributed earnings of
subsidiaries 1,890,210 2,549,441 2,231,840
Net Income $ 3,421,845 $ 3,354,162 $ 3,007,261
B-34
(18) PARENT-ONLY FINANCIAL STATEMENTS (continued)
STATEMENTS OF CASH FLOW
Year Ended December 31,
1993 1992 1991
OPERATING ACTIVITIES
Net income $ 3,421,845 $ 3,354,162 $ 3,007,261
Adjustments to reconcile net income to net cash
provided by operating activities:
Undistributed equity in subsidiaries (1,890,210) (2,549,441) (2,231,840)
Gain on sale of land (34,583) (62,500) (205,894)
Decrease in interest payable (254,955) (42,588) (12,557)
Decrease (increase) in other assets 14,657 559,761 (333,755)
Increase (decrease) in other liabilities 10,000 (23,782) 5,450
Net Cash Provided by Operating Activities 1,266,754 1,235,612 228,665
INVESTING ACTIVITIES
Purchases of securities (1,375,000) -- --
Purchases of land -- (58,869) (538,256)
Proceeds from land sales 34,583 141,400 708,090
Net Cash Provided by (Used in) Investing
Activities (1,340,417) 82,531 169,834
FINANCING ACTIVITIES
Cash dividends (1,604,221) (1,251,943) (1,005,680)
Repurchase of common stock (1,364,369) (989,316) (527,066)
Payments for fractional shares (22,353) (9,022) (11,670)
Proceeds from exercise of equity
contracts and stock options 183,324 60,000 --
Cash paid for debt and equity
contract redemption (277,000) -- --
Repurchase of debentures -- -- (138,000)
Net Cash Used in Financing Activities (3,084,619) (2,190,281) (1,682,416)
Decrease in Cash (3,158,282) (872,138) (1,283,917)
Cash at the Beginning of the Year 6,543,214 7,415,352 8,699,269
Cash at the End of the Year $ 3,384,932 $ 6,543,214 $ 7,415,352
Supplemental Disclosures of Cash Flow Information:
Total interest paid $ 505,791 $ 843,060 $ 900,578
Total income taxes paid (refunded) $ (145,000) $ (751,000) $ 276,600
B-35
INDEPENDENT AUDITORS' REPORT
DELOITTE & TOUCHE
Board of Directors and Stockholders
First National Bank Corp.
Clinton Township, Michigan
We have audited the accompanying consolidated balance sheets of First National
Bank Corp. and subsidiaries as of December 31, 1993 and 1992, and the related
consolidated statements of income, changes in stockholders' equity, and cash
flow, for each of the three years in the period ended December 31, 1993. These
financial statements are the responsibility of the Corporation's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the consolidated financial position of First National Bank Corp. and
subsidiaries at December 31, 1993 and 1992, and the results of their operations
and their cash flow for each of the three years in the period ended December
31, 1993, in conformity with generally accepted accounting principles.
As discussed in Note 12 to the consolidated financial statements, the
Corporation changed its accounting method for postretirement benefits other
than pensions in 1993, and as discussed in Note 1, the Corporation changed its
method of accounting for income taxes in 1992.
/s/ DELOITTE & TOUCHE
------------------
Deloitte & Touche
January 25, 1994
Detroit, Michigan
B-36
SELECTED FINANCIAL DATA
Certain financial data for the last five years is presented below. This
information should be read in conjunction with the financial statements and
related notes included elsewhere in this annual report. A more detailed
discussion and analysis of factors affecting the Corporation's financial
position and operating results is presented in the following pages of this
report.
Year Ended December 31,
1993 1992 1991 1990 1989
Interest income (including fees) $32,402,839 $32,272,447 $36,593,135 $36,984,513 $33,565,098
Interest expense 11,280,957 14,058,830 19,716,881 21,723,829 20,095,209
Net Interest Income 21,121,882 18,213,617 16,876,254 15,260,684 13,469,889
Provision for loan and
lease losses 825,000 1,275,000 1,875,000 1,275,000 680,000
Net Interest Income after
Provision for Loan and Lease
Losses 20,296,882 16,938,617 15,001,254 13,985,684 12,789,889
Noninterest income 3,798,922 3,834,022 4,568,866 3,025,319 2,400,769
Noninterest expense 18,167,959 17,347,477 16,227,859 13,827,850 12,022,527
Income Before Taxes and
Cumulative Effects of
Changes in Accounting
Principles 5,927,845 3,425,162 3,342,261 3,183,153 3,168,131
Income tax expense 1,323,000 302,000 335,000 427,000 461,000
Income Before Cumulative Effects
of Changes in Accounting
Principles 4,604,845 3,123,162 3,007,261 2,756,153 2,707,131
Cumulative effects of changes
in accounting principles (1,183,000) 231,000 -- -- --
Net Income $ 3,421,845 $ 3,354,162 $ 3,007,261 $ 2,756,153 $ 2,707,131
PER SHARE DATA:*
Average outstanding shares 2,102,602 1,769,337 1,760,316 1,847,863 1,866,614
Primary Income Before Cumulative
Effects of Changes in Accounting
Principles $ 2.15 $ 1.72 $ 1.70 $ 1.49 $ 1.45
Cumulative effects of changes in
accounting principles (0.55) 0.13 -- -- --
B-37
Primary Net Income $ 1.60 $ 1.85 $ 1.70 $ 1.49 $ 1.45
Fully Diluted Income Before Cumulative
Effects of Changes in Accounting
Principles $ 2.04 $ 1.53 $ 1.50 $ 1.35 $ 1.39
Cumulative effects of changes in
accounting principles (0.51) 0.10 -- -- --
Fully Diluted Net Income $ 1.53 $ 1.63 $ 1.50 $ 1.35 $ 1.39
Cash Dividends $ 0.74 $ 0.71 $ 0.57 $ 0.51 $ 0.49
<FN>
* Where applicable, per share data has been adjusted to give retroactive
effect to the 5% stock dividends in 1993, 1992, 1991, and 1990, and the
4-for-3 stock split in 1993.
Balance sheet data:
As of December 31,
1993 1992 1991 1990 1989
Total loans $328,025,619 $317,215,680 $286,895,787 $286,013,400 $249,217,650
Total assets 484,332,777 453,621,626 424,513,446 412,348,324 373,216,180
Deposits 440,051,495 410,936,118 382,073,168 369,785,621 332,128,514
Long term debt -- 8,348,000 9,597,000 9,900,000 9,900,000
Stockholders' equity 37,272,367 29,409,199 27,506,904 25,518,571 24,602,158
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following analysis of the Corporation's operating results and financial
condition for the years ended December 31, 1993, 1992, and 1991 should be read
in conjunction with the financial statements and statistical data presented
elsewhere.
NET INCOME
1993 net income was $3,422,000, a 2% increase over the prior year. Net
interest income increased over 1992 by 16%, to $21.1 million. Interest income
showed a modest increase, while interest expense declined by nearly 20% from
the previous year. The primary reason for this was a $27.1 million increase in
the average volume of interest earning assets. This volume effect was
augmented by a decrease in the average rates on interest bearing liabilities
which was proportionately faster than the decrease in rates on earning assets.
B-38
The provision for loan losses was decreased by 35% from the prior year, to
$825,000 in 1993, as the local economy continued to pick up steam. Noninterest
income fell by $35,000 from 1992, as increased service charge income was offset
by lower security gains. Noninterest expense rose by nearly 5%, to $18.2
million in 1993. Income before the cumulative effect of an accounting change
came in at an all-time high of $4.6 million. The record operating results in
1993 were hampered by a one-time charge of $1.2 million for postretirement
benefits, mandated by a new accounting standard.
Net income for 1992 was $3,354,000, an increase of $347,000, or nearly 12%,
over 1991. Net interest income increased by $1.3 million, to $18.2 million in
1992. As in the current year, this increase was the result of increased
volumes of earning assets, along with liability rates falling faster than asset
rates. The provision for loan losses was decreased by $600,000, to $1.3
million in 1992. Noninterest income decreased by $735,000 from 1991, while
noninterest expense increased by $1.1 million. Income for 1992 also included a
$231,000 gain from the cumulative effect of a change in an accounting
principle, as the Corporation changed its method of accounting for income
taxes.
NET INTEREST INCOME
Net interest income, which constitutes the principal source of income for the
Corporation, is the amount by which interest earned on assets exceeds the
interest paid on liabilities. The following table shows changes in the
Corporation's net interest income, and is presented on a fully tax-equivalent
(FTE) basis, whereby tax-exempt income is adjusted upward by an amount
equivalent to the federal income taxes that would have been paid if the income
had been fully taxable (assuming a 34% tax rate). The calculation is adjusted
for any interest expense deduction that is disallowed, according to current tax
law. All references to net interest income in the following discussion, unless
otherwise indicated, are presented on a FTE basis.
Year Ended December 31,
1993 1992 1991
(in thousands)
Interest income $33,476 $33,577 $37,813
Interest expense 11,281 14,059 19,717
Net interest income $22,195 $19,518 $18,096
B-39
Increase (Decrease) from Prior Year,
1993 1992
Amount % Amount %
Interest income $ (101) (0.30%) $ (4,236) (11.20%)
Interest expense (2,778) (19.76) (5,658) (28.70)
Net interest income $ 2,677 13.72% $ 1,422 7.86%
Changes in net interest income from period to period result from increases or
decreases in the average balances of interest earning assets and interest
bearing liabilities, and increases or decreases in the average rates earned and
paid on those assets and liabilities. These volume and rate changes result
from the Corporation's management of its earning asset portfolio, and the
availability and cost of particular sources of funds.
The following table, also presented on a FTE basis, details the dollar amount
of changes in net interest income for each major category of interest earning
asset and interest bearing liability, and the amount of change attributable to
changes in average balances (volume) or average rates. The variances that are
attributable to BOTH volume and rate changes have been allocated to the volume
component.
1993 vs. 1992 1992 vs. 1991
Increase (Decrease) Increase (Decrease)
Due to Changes In Due to Changes In
Total Volume Rate Total Volume Rate
(in thousands)
Earning Assets-Interest Income:
Federal funds sold $ 146 $ 161 $ (15) $ (86) $ (16) $ (70)
Securities
Securities available for sale 371 371 -- -- -- --
United States Treasury (196) (124) (72) 281 373 (92)
United States Government agencies (640) (184) (456) (742) (50) (692)
Municipal obligations (869) (935) 66 (89) (155) 66
Other securities (5) (5) -- (34) (28) (6)
Loans and leases 1,092 2,636 (1,544) (3,566) 717 (4,283)
Total (101) 1,920 (2,021) (4,236) 841 (5,077)
B-40
Deposits and Borrowed Funds-
Interest Expense:
Deposits
Demand-interest bearing (591) 117 (708) (823) 752 (1,575)
Savings (398) 232 (630) (764) 338 (1,102)
Time (1,210) 189 (1,399) (3,905) (1,157) (2,748)
Federal funds purchased (20) (18) (2) (45) (12) (33)
Short term borrowings (9) (2) (7) (33) 2 (35)
Long term debt (550) (426) (124) (88) (75) (13)
Total (2,778) 92 (2,870) (5,658) (152) (5,506)
Tax-Equivalent Net Interest Margin:
Interest income on earning assets
less interest cost of deposits
and borrowed funds $ 2,677 $1,828 $ 849 $ 1,422 $ 993 $ 429
Tax equivalent net interest income increased to $22.2 million in 1993, an
increase of $2.7 million over the previous year. Just as in the previous year,
a significant rise in the volume of earning assets ($27.1 million) combined
with a wider net interest margin to fuel the increase. The overall net
interest margin increased to 5.29% in 1993, from 4.97% in the previous year.
The largest contributor to the increased asset volume was loans and leases,
which were, on average, higher than 1992 levels by $31.6 million.
In 1992, FTE net interest income was $19.5 million, an increase of almost 8%,
or $1.4 million, over 1991. The main reason for this increase was a $10.5
million increase in the average volume of interest earning assets, led by an
$8.1 million increase in average loans and leases. Also contributing to the
higher level of net interest income was the effect of decreasing rates.
Average rates paid on interest bearing liabilities dropped by 184 basis points
from 1991, while average rates on earning assets fell by only 134 basis points.
AVERAGE BALANCE SHEETS
The following table shows the Corporation's consolidated average
balances of assets, liabilities, and stockholders' equity; the amount of
interest income or interest expense and the average yield or rate for each
category of interest earning asset and interest bearing liability; the
Corporation's net interest spread, and the Corporation's net interest margin.
Nonperforming loans are included in average loans. Interest on loans includes
loan fees. Tax-exempt income from securities and loans is presented on a
tax-equivalent basis, assuming a 34% federal tax rate.
B-41
1993 1992 1991
Average Average Average
Interest Rate Interest Rate Interest Rate
Average Income/ Earned/ Average Income/ Earned/ Average Income/ Earned/
Balance Expense Paid Balance Expense Paid Balance Expense Paid
Assets:
Federal funds sold $ 8,156,164 $ 244,347 3.00% $ 2,767,486 $ 98,133 3.55% $ 3,227,945 $ 183,952 5.70%
Securities
Securities available
for sale 5,677,208 370,646 6.53 -- -- -- -- -- --
United States Treasury 9,334,284 545,310 5.84 11,451,971 741,367 6.47 5,691,855 460,184 8.08
United States
Government agencies 35,771,647 1,934,201 5.41 39,166,249 2,573,888 6.57 39,919,251 3,315,943 8.31
Municipal obligations 33,249,152 3,094,663 9.31 43,300,908 3,963,370 9.15 44,993,478 4,052,740 9.01
Other securities 555,156 33,279 5.99 639,385 38,100 5.96 1,113,767 71,998 6.46
Loans and leases 327,137,063 27,253,342 8.33 295,491,975 26,161,566 8.85 287,388,090 29,728,112 10.34
Total Earning Assets/
Total Interest Income 419,880,674 33,475,788 7.97% 392,817,974 33,576,424 8.55% 382,334,386 37,812,929 9.89%
Cash and due from banks 25,201,286 25,663,739 21,902,088
All other assets 20,159,775 20,455,414 17,434,015
Total Assets $465,241,735 $438,937,127 $421,670,489
Liabilities and
Stockholders' Equity:
Deposits
Demand-interest bearing $115,214,683 2,969,291 2.58% $110,689,986 3,560,599 3.22% $ 87,306,035 4,383,871 5.02%
Savings 87,442,395 2,057,548 2.35 77,566,163 2,455,249 3.17 66,881,011 3,219,600 4.81
Time 145,819,256 5,946,842 4.08 141,190,369 7,156,927 5.07 164,018,165 11,061,427 6.74
Federal funds purchased 439,726 13,789 3.14 1,006,011 33,849 3.36 1,367,123 79,306 5.80
Short term borrowings 1,054,371 42,651 4.05 1,107,942 51,734 4.67 1,068,947 84,656 7.92
Long term debt 3,301,942 250,836 7.60 8,901,044 800,472 8.99 9,729,005 888,021 9.13
Total Interest Bearing
Liabilities/
Total
Interest Expense 353,272,373 11,280,957 3.19% 340,461,515 14,058,830 4.13% 330,370,286 19,716,881 5.97%
Noninterest bearing
demand deposits 72,517,959 65,783,205 59,951,911
All other liabilities 5,596,207 3,898,312 4,622,268
Stockholders' equity 33,855,196 28,794,095 26,726,024
Total Liabilities and
Stockholders' Equity $465,241,735 $438,937,127 $421,670,489
B-42
FTE Interest Spread
(Average Rate Earned
Minus Average Rate Paid) 4.78% 4.42% 3.92%
FTE Net Interest Income $22,194,831 $19,517,594 $18,096,048
FTE Net Interest Margin
(Net Interest Income/Total
Earning Assets) 5.29% 4.97% 4.73%
ALLOWANCE AND PROVISION FOR LOAN LOSSES
It is the Corporation's practice to maintain the allowance for loan losses at a
level adequate to provide for reasonably foreseeable losses. Management's
evaluation is based on a continuing review of the loan portfolio and includes,
but is not limited to, consideration of actual loss experience, the present and
prospective financial condition of borrowers, adequacy of collateral, industry
concentrations within the portfolio, and general economic conditions. As of
December 31, 1993 the Corporation's allowance for possible loan losses was
1.40% of outstanding loans.
In 1993, the provision for loan losses decreased by $450,000, to $825,000,
compared with a decrease of $600,000 in 1992. The primary reason for the
continuing decrease was the strength of the local economy and lower levels of
nonperforming loans throughout the year.
NONINTEREST INCOME
Noninterest income was $3.8 million in 1993, a decrease of less than 1% from
the prior year. Deposit account service charges increased by almost 15%, or
$360,000, while other customer service fees rose by more than 31%. These
increases were due to a new fee structure implemented early in the year. These
improvements were offset by a $640,000 decrease in security gains. The prior
year security gains had been unusually high, due to circumstances discussed
below.
In 1992, noninterest income was $3.8 million, a decrease of $735,000, or 16%,
from 1991. The primary reason for the decrease was 1991's $950,000 gain on
the sale of the Corporation's credit card portfolio. The sale also led to a
reduction in credit card fee income. Partially offsetting these decreases were
increases of $247,000 in service charge income, and $376,000 in net investment
securities gains. The increase in securities gains was primarily due to the
unprecedented decline in general interest rates, which pushed up the market
value of securities which were sold. The total volume of securities sales also
increased over the prior year; proceeds from sales were $26.7 million in 1992,
compared with $18.0 million in 1991. There were two main reasons for the
increased level of sales. First, the Corporation repositioned the security
portfolio for tax purposes, selling approximately $9.9 million of tax-exempt
municipal obligations, and reinvesting the proceeds in taxable instruments.
B-43
This was done to minimize the impact of the federal alternative minimum tax,
due to circumstances which were not foreseen when the municipal securities were
purchased. Second, the Corporation sold six large securities (proceeds of
approximately $11.1 million) during 1992. Four of these securities were to
mature within four months, and were sold to take advantage of reinvestment
opportunities. Management believes that these securities were held
substantially to maturity. The remaining two securities had call provisions.
At the time they were sold, the call appeared inevitable. The Corporation sold
them to avoid the possibility of a decline in value. The securities were, in
fact, called a short time after the sale.
NONINTEREST EXPENSE
Noninterest expense was $18.2 million in 1993, an increase of $820,000, or just
under 5%, over prior year levels. Salaries, benefits, and payroll taxes rose
by 6%, to $7.8 million in 1993. This reflects normal wage increases common in
a service intensive industry, even while staffing levels have remained fairly
constant. Occupancy decreased by nearly 3%, due to lower rent expense, and
equipment expenses fell by more than 7%, mostly due to lower repair and
maintenance costs. Other operating expenses were up by 8%, with the largest
increase coming in advertising and related costs. This was the result of the
Bank's successful "Making Your Life Easier" ad campaign, and promotional
expenses for the opening of the Bank's new branch in Romeo, Michigan.
For 1992, noninterest expense was $17.3 million, an increase of $1.1 million,
or 7%, over 1991. This increase was related to the growth of the Corporation
and expansion of the Bank's branch system. Payroll costs increased by $562,000
over 1991, while occupancy and equipment expenses rose by a combined $407,000.
Other operating expenses increased by $151,000, or 2%, over 1991.
INCOME TAXES
The provision for federal income taxes increased by $1.0 million, to $1.3
million in 1993. This was due to the record level of operating income,
combined with reduced tax-exempt municipal income. The Corporation also
recorded a tax credit of $609,000 for the postretirement benefit charge. This
credit does not reduce tax expense; rather, it is netted against the "before
tax" amount of the 1993 accounting change. In the previous year, federal tax
expense decreased by $33,000 to $302,000, compared with $335,000 in 1991.
LIQUIDITY AND ASSET/LIABILITY MANAGEMENT
The liquidity of a bank allows it to provide funds to meet loan requests, to
accommodate possible outflows in deposits, and to take advantage of other
investment opportunities. Funding of loan requests, providing for liability
outflows, and managing interest rate margins require continuous analysis in
order to match the maturities of specific categories of loans and investments,
with specific types of deposits and borrowings. Bank liquidity is thus
normally considered in terms of the nature and mix of the banking institution's
sources and uses of funds. For the Corporation, the major sources of liquidity
B-44
have been federal funds sold, and loans (including demand loans) and
securities maturing within one year. At December 31, 1993 and 1992, federal
funds sold amounted to $22.9 million and $9.7 million, respectively. Loans
(including demand loans) and securities maturing within one year amounted to
$113.1 million at December 31, 1993, and $99.9 million at December 31, 1992.
Additional liquidity is provided by two repurchase agreement lines of credit,
totaling $20.0 million, which could be drawn upon for short term liquidity
needs, if necessary. The Corporation has also identified certain securities as
"available for sale". These are securities that may be sold for liquidity or
other purposes. Management determined the adequacy of items so classified by
considering normal deposit fluctuations, expected loan demand, and the other
liquidity sources and needs discussed above. The Corporation's dependence on
large deposits which experience volatile rate changes is closely monitored.
These deposits consist mainly of time certificates of $100,000 and over, of
which the balance was $66.4 million and $57.7 million at December 31, 1993 and
1992, respectively.
Managing rates on earning assets and interest bearing liabilities focuses on
maintaining stability in the net interest spread, an important factor in
earnings growth and stability. Emphasis is placed on maintaining a controlled
rate sensitivity position, to avoid wide swings in spreads and to minimize risk
due to changes in interest rates.
The following table shows the maturity and repricing distribution of the
Corporation's interest earning assets and interest bearing liabilities as of
December 31, 1993, the interest rate sensitivity gap (i.e., interest rate
sensitive assets less interest rate sensitive liabilities), cumulative interest
rate sensitivity gap, the interest rate sensitivity gap ratio (i.e., interest
rate sensitive assets divided by interest rate sensitive liabilities), and the
cumulative interest rate sensitivity gap ratio. For the purposes of the
following table, an asset or liability is considered rate sensitive within a
period when it matures or could be repriced within such period, generally in
accordance with its contractual terms.
B-45
After Three After Six After One
Within Months But Months But Year But After
Three Within Within Within Five
Months Six Months One Year Five Years Years Total
(in thousands)
Interest earning assets:
Federal funds sold $22,900 -- -- -- -- $ 22,900
Securities 5,672 $ 9,983 $ 4,211 $ 35,202 $ 32,504 87,572
Loans 211,911 5,320 7,833 61,664 41,298 328,026
Total 240,483 15,303 12,044 96,866 73,802 438,498
Interest bearing liabilities:
Interest bearing demand deposits (1) 70,629 -- -- 50,915 -- 121,544
Savings (1) ------ -- -- 88,467 -- 88,467
Time > $100,000 54,444 6,072 1,504 4,276 100 66,396
Time < $100,000 22,236 15,376 7,046 39,360 3,284 87,302
Borrowed funds 1,100 -- -- -- -- 1,100
Total 148,409 21,448 8,550 183,018 3,384 364,809
Interest rate sensitivity gap 92,074 (6,145) 3,494 (86,152) 70,418 73,689
Cumulative interest rate
sensitivity gap $92,074 $85,929 $89,423 $ 3,271 $ 73,689 $ 73,689
Interest rate sensitivity gap ratio 1.62 0.71 1.41 0.53 21.81 1.20
Cumulative interest rate
sensitivity gap ratio 1.62 1.51 1.50 1.01 1.20 1.20
<FN>
(1) NOW account deposits of $50,915,000, and savings deposits of $88,467,000
are included in the "one to five year" category, due to the
Corporation's experience that the interest rates on (and balances
of) these accounts are relatively insensitive to interest rate
changes.
The table above indicates the time periods in which interest earning assets and
interest bearing liabilities will mature or may be repriced, generally in
accordance with their contractual terms. However, this table does not
necessarily indicate the impact of general interest rate movements on the
Corporation's net interest yield because the repricing of various categories of
assets and liabilities is discretionary and is subject to competitive and other
pressures. As a result, various assets and liabilities indicated as repricing
within the same period may in fact reprice at different times and at different
rate levels.
B-46
Based on the table above, the Corporation is considered to be asset sensitive
in the one-year maturity range at December 31, 1993. In a rising rate
environment, the Corporation might be able to increase prices on interest
earning assets faster than the increase in rates on interest bearing
liabilities.
The Corporation also uses a computer model to simulate the effects of possible
interest rate changes. As a general rule, estimated negative exposure to
changing interest rates is limited to 5% of net interest income. The exposure
estimate is based on a variety of assumptions built into the model, and assumed
interest rate changes of plus or minus 200 basis points. The results of this
analysis are reported to the Asset/Liability and Funds Management Committee, to
assist in the interest rate risk management process.
________________________________________________________________________________
SECURITY YIELDS AND MATURITIES
The following table is a summary of maturities and weighted average FTE yields
of the Corporation's security portfolio on December 31, 1993 and 1992. With
the exception of the U.S. Government and its agencies, no securities of a
single issuer exceed 10% of stockholders' equity at December 31, 1993.
December 31, 1993 December 31, 1992
U.S. Government Municipal and U.S. Government Municipal and
and agency (1) other (2) and agency (1) other (2)
Amount Yield Amount Yield Amount Yield Amount Yield
Maturities:
Within 1 year $19,237 6.20% $ 4,413 9.46% $ 4,518 7 .84% $ 5,373 9.31%
After 1 to 5 years 34,329 5.55 14,932 9.21 41,069 6 .28 16,225 9.39
After 5 to 10 years 287 5.10 11,573 8.58 336 4 .56 11,776 9.04
10 years and over -- -- 2,801 9.11 -- -- 3,709 9.16
Total $53,853 5.78% $ 33,719 9.02% $ 45,923 6 .43% $ 37,083 9.24%
Average maturity 1 yr. 5 mos. 4 yrs. 11 mos. 1 yr. 11 mos. 4 yrs. 11 mos.
<FN>
(1) Agency securities consist primarily of mortgage backed securities. The
maturity distribution of such securities is based on average expected life,
using available prepayment estimates.
(2) Fully taxable equivalent yield for municipal obligations is based on a 34
percent federal tax rate, and is adjusted for any interest expense
disallowance.
B-47
SELECTED QUARTERLY FINANCIAL INFORMATION *
1993 First Second Third Fourth
Quarter Quarter Quarter Quarter
Interest income $8,173,906 $8,113,553 $8,057,747 $8,057,633
Net interest income 5,179,501 5,240,026 5,376,419 5,325,936
Provision for loan and lease losses 225,000 225,000 225,000 150,000
Income before taxes and cumulative
effect of change in accounting principle 1,264,081 1,391,992 1,642,410 1,629,362
Income before cumulative effect of
change in accounting principle 1,019,081 1,092,992 1,258,410 1,234,362
Net income (loss) (163,919) 1,092,992 1,258,410 1,234,362
Primary earnings (loss) per share (1) (0.09) 0.54 0.55 0.53
Fully diluted earnings (loss) per share (1) (0.04) 0.49 0.55 0.53
1992 First Second Third Fourth
Quarter Quarter Quarter Quarter
Interest income $8,243,406 $8,053,767 $8,048,124 $7,927,150
Net interest income 4,255,125 4,325,255 4,709,210 4,924,027
Provision for loan and lease losses 400,000 225,000 225,000 425,000
Income before taxes and cumulative
effect of change in accounting principle 418,508 863,793 992,989 1,149,872
Income before cumulative effect of
change in accounting principle 512,508 787,793 870,989 951,872
Net income 743,508 787,793 870,989 951,872
Primary earnings per share (1) 0.42 0.43 0.48 0.52
Fully diluted earnings per share (1) 0.37 0.39 0.42 0.46
B-48
1991 First Second Third Fourth
Quarter Quarter Quarter Quarter
Interest income $9,227,274 $9,163,109 $9,460,723 $8,742,029
Net interest income 3,928,181 4,153,827 4,567,982 4,226,264
Provision for loan and lease losses 325,000 350,000 575,000 625,000
Income before taxes 796,142 869,641 892,565 783,913
Net income 723,142 780,641 784,565 718,913
Primary earnings per share 0.41 0.44 0.44 0.41
Fully diluted earnings per share 0.36 0.39 0.39 0.36
<FN>
(1) For the first quarter of 1993, the cumulative effect of the change in
accounting principle was ($0.63) per share primary, and ($0.52) per share
fully diluted. For the first quarter of 1992, the cumulative effect of the
change in accounting principle was $0.13 per share primary, and $0.10 per
share fully diluted.
* Where applicable, per share data has been restated to give retroactive effect
to the 5% stock dividends in 1993 and 1992, and the 4-for-3 stock split in
1993.
S.E.C. FORM 10-K
Copies of the Corporation's annual report on Form 10-K, as filed with the
Securities and Exchange Commission, including financial statements and
schedules, are available to stockholders without charge, upon written request.
Please mail requests to Richard J. Miller, Treasurer, First National Bank
Corp., 18800 Hall Road, P. O. Box 248, Mount Clemens, MI 48046-0248.
STOCK INFORMATION
The common stock of First National Bank Corp. is traded on The Nasdaq Stock
Market (NASDAQ) under the ticker symbol "MTCL", and is represented in the Wall
Street Journal as "FstNtlBkMI." At December 31, 1993, there were 1,284 holders
of the Corporation's common stock.
The following table shows the high and low market prices by quarter during the
last two years. The quotations reflect actual transactions as reported by
NASDAQ, and may or may not include retail mark-up, mark-down or dealer
commission. The table also shows the quarterly cash dividends declared and
paid during these two years. The market prices and dividends declared have
been adjusted for the 5% stock dividends in 1993 and 1992, and the 4-for-3
stock split in 1993.
B-49
1993 Market Prices
Cash
Dividends
Quarter High Low Declared
Fourth $23.50 $20.63 $0.19
Third 21.56 19.88 0.19
Second 22.13 18.75 0.19
First 20.00 17.50 0.18
1992 Market Prices
Cash
Dividends
Quarter High Low Declared
Fourth $18.75 $17.14 $0.18
Third 18.21 16.07 0.18
Second 17.50 14.97 0.18
First 15.99 14.63 0.17
Source: NASDAQ
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
The Corporation offers its stockholders a Dividend Reinvestment and Stock
Purchase Plan, which enables them to reinvest their dividends in First National
Bank Corp. common stock, and make optional cash payments without service
charges or brokerage commissions. At December 31, 1993, 31% of the
Corporation's stockholders had elected to participate.
Stockholders not yet enrolled in the Plan may receive a Plan Prospectus and
enrollment card by contacting Celestina Giles at (810) 307-8101, or by writing
her at 18800 Hall Road, P.O. Box 248, Mount Clemens, MI 48046-0248.
B-50
MARKET MAKERS
At December 31, 1993, the following firms were registered with NASDAQ as market
makers in First National Bank Corp. common stock:
Ryan, Beck & Co. The Chicago Corporation
80 Main Street 208 South LaSalle Street
West Orange, New Jersey 07052 Chicago, Illinois 60604
(800) 342-2325 (312) 855-7600
First of Michigan Corporation Roney and Co.
100 Renaissance Center, 26th Floor One Griswold
Detroit, Michigan 48243 Detroit, Michigan 48226
(313) 259-2600 (313) 963-6700
M.A. Schapiro & Co., Inc. Herzog, Heine, Geduld, Inc.
One Chase Manhattan Plaza, 58th floor 26 Broadway
New York, New York 10005 New York, New York 10004
(212) 425-6600 (212) 962-0300
STOCK REGISTRAR AND TRANSFER AGENT
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02101
INDEPENDENT AUDITORS
Deloitte & Touche
600 Renaissance Center, Suite 900
Detroit, Michigan 48243-1704
INFORMATION
News media representatives and those seeking additional information about the
Corporation should contact Richard J. Miller, Treasurer, at (810) 307-8140, or
by writing him at 18800 Hall Road, P. O. Box 248, Mount Clemens, MI
48046-0248.
ANNUAL MEETING
This year's Annual Meeting will be held at 8:30 A.M., EST, on Wednesday, April
27, 1994, at the FNB Financial Center, 18800 Hall Road, Clinton Township,
Michigan.
B-51
APPENDIX C
FIRST NATIONAL BANK CORP.
UNAUDITED FINANCIAL STATEMENTS AND
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Appendix C contains unaudited financial statements as of June 30,
1994, and December 31, 1993, and for the periods ended June 30, 1994 and
1993, and First National Bank Corp. management's discussion and analysis of
financial condition and results of operations at and as of those dates, in
the form that appeared in Part I to FNBC's Form 10-Q Quarterly Report for
the quarterly period ended June 30, 1994.
Part 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
The financial statements of First National Bank Corp. (the Corporation) include
the consolidation of its two subsidiaries; First National Bank in Macomb County
(the Bank) and Bankers Fund Life Insurance Co. (the Insurance Company).
The unaudited financial statements of the Corporation for the three and six
month periods ended June 30, 1994 and 1993, reflect all adjustments, consisting
of normal recurring items, which are, in the opinion of management, necessary
to present a fair statement of the results for the interim periods. The
operating results for the quarter and six months are not necessarily indicative
of results of operations for the entire year. Reference should be made to the
consolidated financial statements included with the Corporation's annual report
on Form 10-K for the year ended December 31, 1993.
Following are the Corporation's Consolidated Balance Sheet as of June 30, 1994,
December 31, 1993, and June 30, 1993; Consolidated Statement of Income for the
three and six month periods ended June 30, 1994 and 1993; and Statements of
Changes in Stockholders' Equity and Cash Flow for the six month periods ended
June 30, 1994 and 1993:
C-1
Consolidated Balance Sheet
(Unaudited)
June 30, December 31, June 30,
Assets 1994 1993 1993
(in thousands)
Cash and due from banks $29,150 $25,383 $25,276
Federal funds sold 6,400 22,900 500
Cash and Cash Equivalents 35,550 48,283 25,776
Securities available for sale (at fair value) (1) 7,017 7,506 5,084
Investment securities (at amortized cost) (2) 114,825 80,066 80,507
Loans
Residential real estate 62,851 60,362 67,140
Commercial 217,240 212,035 203,427
Installment 59,694 55,629 57,629
Total Loans 339,785 328,026 328,196
Allowance for loan losses (4,816) (4,598) (4,818)
Net Loans 334,969 323,428 323,378
Property and equipment (net of depreciation) 15,243 15,596 14,669
Accrued interest receivable 3,301 2,600 2,613
Other real estate 3,137 3,290 3,043
Other assets 3,609 3,564 3,864
Total Assets $517,651 $484,333 $458,934
(1) Amortized cost of $7.2 million at June 30, 1994. Prior to 1994, these
securities were reported at the lower of amortized cost or fair value.
(2) Fair value of $113.7 million at June 30, 1994; $82.4 million at December
31, 1993; and $83.1 million at June 30, 1993. Investment securities of
$3.3 million were pledged at June 30, 1994, to secure public funds on
deposit, and for other purposes required by law.
(continued)
C-2
Consolidated Balance Sheet, continued
(Unaudited)
June 30, December 31, June 30,
Liabilities and Stockholders' Equity 1994 1993 1993
(in thousands, except share data)
Deposits
Demand
Noninterest bearing $93,824 $76,343 $73,861
Interest bearing 114,478 121,544 108,128
Savings 89,933 88,467 89,564
Time 173,329 153,698 143,656
Total Deposits 471,564 440,052 415,209
Short term borrowings 1,100 1,100 1,100
Other liabilities 6,104 5,909 6,258
Long term debt ---- ---- 3,515
Total Liabilities 478,768 447,061 426,082
Stockholders' Equity
Common stock -- $3.125 par value; 8,000,000 shares
authorized; 2,432,060 shares issued and outstanding
at 6/30/94; 2,315,671 shares outstanding at 12/31/93;
and 1,561,960 shares outstanding at 6/30/93. 7,600 7,236 4,945
Additional paid-in capital 17,958 15,659 15,646
Retained earnings 13,420 14,377 12,833
Unrealized loss on securities
available for sale, net of tax (95) ---- ----
Treasury Stock -- 20,308 shares at 6/30/93 ---- ---- (572)
Total Stockholders' Equity 38,883 37,272 32,852
Total Liabilities and Stockholders' Equity $517,651 $484,333 $458,934
C-3
Consolidated Statement of Income
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
(in thousands)
Interest Income
Loans (including fees) $7,048 $6,826 $13,612 $13,586
Securities
Taxable 1,098 716 1,971 1,530
Tax-exempt 542 532 1,062 1,096
Federal funds sold 64 40 171 76
Total Interest Income 8,752 8,114 16,816 16,288
Interest Expense
Deposits 2,926 2,798 5,693 5,596
Short term borrowings 15 13 26 34
Long term debt ---- 63 ---- 238
Total Interest Expense 2,941 2,874 5,719 5,868
Net Interest Income 5,811 5,240 11,097 10,420
Provision for loan losses 200 225 350 450
Net Interest Income after Provision
for Loan Losses 5,611 5,015 10,747 9,970
Noninterest Income
Service charges on deposit accounts 657 719 1,320 1,350
Net realized security gains (losses) ---- 3 1 (1)
Other income 276 241 792 481
Total Noninterest Income 933 963 2,113 1,830
Noninterest Expense
Salaries, benefits, and payroll taxes 2,133 1,903 4,118 3,841
Occupancy and equipment 851 834 1,709 1,736
Other operating expense 1,758 1,849 3,694 3,567
Total Noninterest Expense 4,742 4,586 9,521 9,144
(continued)
C-4
Consolidated Statement of Income, continued
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
(in thousands, except per share data)
Income Before Taxes and Cumulative
Effect of Change in Accounting
Principle 1,802 1,392 3,339 2,656
Income tax expense 431 299 786 544
Income Before Cumulative Effect
of Change in Accounting Principle 1,371 1,093 2,553 2,112
Cumulative effect of change
in accounting principle ---- ---- ---- (1,183)
Net Income $1,371 $1,093 $2,553 $929
Per share data:
Primary Income Before Cumulative
Effect of Change in Accounting
Principle $0.55 $0.52 $1.03 $1.03
Cumulative effect of change in
accounting principle ---- ---- ---- (0.58)
Primary Net Income $0.55 $0.52 $1.03 $0.45
Fully Diluted Income Before Cumulative
Effect of Change in Accounting
Principle 0.55 $0.47 $1.02 $0.93
Cumulative effect of change in
accounting principle ---- ---- ---- (0.48)
Fully Diluted Net Income $0.55 $0.47 $1.02 $0.45
Cash Dividends $0.19 $0.18 $0.37 $0.35
C-5
Consolidated Statement of Changes in Stockholders' Equity
(Unaudited)
Six Months Ended
June 30,
1994 1993
(in thousands, except per share data)
Common Stock:
Balance, beginning of period $7,236 $4,074
Stock dividend (A)(B) 361 84
Exercise of stock options 3 1
Conversion of debentures ---- 361
Exercise of equity contracts ---- 425
Balance, end of period 7,600 4,945
Additional Paid-in Capital:
Balance, beginning of period 15,659 11,033
Stock dividend (A)(B) 2,278 646
Exercise of stock options 21 5
Conversion of debentures ---- 1,790
Exercise of equity contracts ---- 2,147
Bequest from estate ---- 25
Balance, end of period 17,958 15,646
Retained Earnings:
Balance, beginning of period 14,377 14,900
Net income 2,553 929
Cash dividends ($0.37 share in 1994,
$0.35 1993) (C) (902) (731)
Change in ESOP loan guarantee 44 (449)
Stock dividend (A)(B) (2,649) (1,810)
Exercise of stock options (3) (6)
Balance, end of period 13,420 12,833
Unrealized Security Gains (Losses):
Balance, beginning of period ---- ----
Change in unrealized gain or loss (95) ----
Balance, end of period (95) ----
C-6
Treasury Stock:
Balance, beginning of period ---- (598)
Repurchase of common stock ---- (1,042)
Stock dividend (B) ---- 1,068
Balance, end of period ---- (572)
Total Stockholders' Equity, End of Period $38,883 $32,852
<FN>
(A) On March 30, 1994, the Board of Directors of the Corporation declared a
5% stock dividend to stockholders of record on April 13, 1994, payable
May 4, 1994.
(B) On March 24, 1993, the Board of Directors of the Corporation declared a
5% stock dividend to stockholders of record on April 14, 1993, payable
May 5, 1993.
(C) Per share amounts of cash dividends have been adjusted to give effect to
the 5% stock dividends in 1994 and 1993, and the 4-for-3 stock split in
1993.
C-7
Consolidated Statement of Cash Flow Six Months Ended
(Unaudited) June 30,
1994 1993
(in thousands)
Operating Activities:
Net income $2,553 $929
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 350 450
Depreciation expense 613 687
Net gain on sales of property and equipment (244) (30)
Net amortization of security premiums 866 527
Net realized security losses (gains) (1) 1
(Decrease) increase in interest receivable (701) 27
Decrease in interest payable (63) (102)
Decrease (increase) in other assets 167 (497)
Increase in other liabilities 302 1,927
Net Cash Provided by Operating Activities 3,842 3,919
Investing Activities:
Proceeds from maturities and calls of securities
available for sale 3,579 2,000
Purchases of securities available for sale (3,339) (2,060)
Proceeds from maturities and calls of investment
securities 15,367 10,401
Purchases of investment securities (50,884) (13,454)
Net increase in residential real estate loans (2,489) (1,692)
Net increase in commercial loans (5,218) (8,347)
Net increase in installment loans (4,184) (1,158)
Purchases of property and equipment (991) (647)
Proceeds from sales of property and equipment 975 30
Net Cash Used in Investing Activities (47,184) (14,927)
Financing Activities:
Net increase in noninterest bearing demand deposits 17,481 5,582
Net decrease in interest bearing demand deposits (7,066) (18,023)
Net increase in savings deposits 1,466 6,704
Net increase in time deposits 19,631 10,010
Net increase in short term borrowings ---- 155
Cash dividends paid (902) (731)
Repurchase of common stock ---- (1,042)
Payments for fractional shares (10) (12)
C-8
Proceeds from exercise of equity contracts and
stock options 9 150
Cash paid for equity contract redemption ---- (124)
Bequest from estate ---- 25
Net Cash Provided by Financing Activities 30,609 2,694
Decrease in Cash and Cash Equivalents (12,733) (8,314)
Cash and Cash Equivalents at the Beginning
of the Period 48,283 34,090
Cash and Cash Equivalents at the End
of the Period $35,550 $25,776
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
(A) Analysis of Financial Condition
Total assets of the Corporation have increased by approximately 7%, or
$33.4 million, to $517.7 million at June 30, 1994, compared with $484.3 million
at December 31, 1993, and by 13%, or $58.7 million, over June 30, 1993.
During the first half of the year, total deposits rose by $31.5 million, while
loans increased by $11.8 million. Because of the tremendous deposit growth,
the Corporation purchased a large volume of securities during the period.
The following tables show the amortized cost and fair value of the
Corporation's security portfolios as of the dates indicated. On the balance
sheet, investment securities (i.e., those which the Corporation has the ability
and intent to hold to maturity) are stated at cost, adjusted for amortization
of premium and accretion of discount. Securities available for sale are
reported at fair value beginning January 1, 1994. Prior to that, securities
available had been carried at the lower of amortized cost or fair value.
C-9
June 30, 1994
Amortized Fair
Cost Value Variance
(in thousands)
Securities available for sale:
United States Treasury $2,027 $2,009 ($18)
United States Government agencies 5,132 5,008 (124)
Total securities available for
sale 7,159 7,017 (142)
Investment securities:
United States Treasury 21,785 21,452 (333)
United States Government agencies 51,272 49,890 (1,382)
Municipal obligations 39,830 40,378 548
Other securities 1,938 1,938 ----
Total investment securities 114,825 113,658 (1,167)
Total Securities $121,984 $120,675 ($1,309)
C-10
December 31, 1993
Amortized Fair
Cost Value Variance
(in thousands)
Securities available for sale:
United States Treasury $5,047 $5,048 $1
United States Government agencies 2,459 2,460 1
Total securities available for sale 7,506 7,508 2
Investment securities:
United States Treasury 9,229 9,376 147
United States Government agencies 37,118 37,324 206
Municipal obligations 33,162 35,095 1,933
Other securities 557 560 3
Total investment securities 80,066 82,355 2,289
Total Securities $87,572 $89,863 $2,291
C-11
June 30, 1993
Amortized Fair
Cost Value Variance
Securities available for sale:
United States Treasury $5,084 $5,167 $83
Total securities available for sale 5,084 5,167 83
Investment securities:
United States Treasury 9,328 9,593 265
United States Government agencies 37,722 38,175 453
Municipal obligations 32,903 34,730 1,827
Other securities 554 557 3
Total investment securities 80,507 83,055 2,548
Total Securities $85,591 $88,222 $2,631
Effective January 1, 1994, the Corporation adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." This statement requires the classification of debt and
equity securities into three categories; investment, trading, or available for
sale. As noted earlier, investment securities are carried at amortized cost,
and no gains or losses are recorded until realized. Securities available for
sale are carried at fair value. Unrealized gains and losses on securities
available are excluded from earnings, but are reported (net of tax) as a
separate component of stockholders equity. Securities that are bought and
held principally to sell them in the near term would be classified as trading
securities, and reported at fair value, with unrealized gains and losses
charged to earnings. Since the Corporation does not engage in the short term
buying and resale of securities, management has not placed any securities in
the trading category, and does not expect to do so in the future.
As of June 30, 1994 the Corporation has recorded an unrealized loss of $142,000
on securities available for sale. An after-tax reduction of $95,000 has been
recorded in the stockholders' equity section of the balance sheet.
C-12
During 1994, investment securities have increased by 43%, or $34.8 million, to
$114.8 million at June 30, 1994. The major increases during this period came
in the United States Treasury and Government agency categories, with increases
of $12.6 million and $14.2 million, respectively. These purchases were made
using uninvested funds from December 31, and as deposit growth outpaced loan
demand during the six month period. Investment securities have increased by
$34.3 million since the prior June 30.
Total loans increased by $11.8 million during the six months ended June 30,
1994, and increased by $11.6 million since June 30, 1993.
Residential real estate loans rose by $2.5 million during the first half of the
year, due to a pick up in home mortgage lending. During the twelve months
ended June 30, 1994, residential mortgage loans decreased by 6%, or $4.3
million. The overall decrease was due largely to prepayment and refinancing
activity in the second half of 1993.
Commercial loans have increased by $5.2 million during the six months, to
$217.2 million at June 30. Over the past year, commercial loans have increased
by 7%, or $13.8 million. For the six month period, the majority of the
increase came in fixed rate loans secured by commercial mortgages, and
tax-exempt fixed rate loans. For the year, the largest increase came from
variable rate commercial mortgages. Many of the commercial mortgage loans are
for working capital purposes, but for which the Bank has taken a mortgage as
security on the loan.
Installment loans increased by $4.1 million, or 7%, during the six months ended
June 30, 1994, to $59.7 million. The increases were primarily in auto and boat
lending, aided by the Bank s successful "Loans-By-Phone" campaign, launched in
the spring.
The following table shows the components of nonperforming loans as of the dates
indicated, as well as the ratios of such loans to the total loan portfolio:
June 30, December 31, June 30,
1994 1993 1993
(in thousands)
Nonaccrual loans $1,501 $961 $2,008
Loans over 90 days past due,
but still accruing 2,627 2,626 2,008
Total nonperforming loans $4,128 $3,587 $4,016
Nonperforming loans, as a percentage
of total loans at period end 1.21% 1.09% 1.22%
C-13
Loans are placed in nonaccrual status when, in the opinion of management,
uncertainty exists as to the ultimate collection of principal and interest.
For the six months ended June 30, 1994, $62,000 would have been recorded in
interest income for loans in nonaccrual status at June 30, 1994, assuming they
had been current in accordance with the original terms of the loans. Interest
received on nonaccrual loans is credited directly to income. Interest income
of $5,000 was collected and included in net income for the six months ended
June 30, for loans in nonaccrual status at period end.
Nonaccrual loans at June 30, 1994, includes loans totaling $866,000 which are
secured by a commercial property which is in foreclosure. The borrowers have
also personally guaranteed the loans. The borrowers are in possession of the
property, and are attempting to bring the loan current within the redemption
period, which expires in December. The Bank has bid on the property, and
expects to take possession if the loan is not brought back to current status.
Because of the uncertainty, it is difficult to estimate the size of any
potential losses. The amount of loss in excess of amounts already provided for
in the allowance, if any, is not expected to have a material effect on the
Corporation's operating results, liquidity, or capital resources.
In addition, management placed a commercial loan for $2.3 million in other real
estate on December 31, 1990, in accordance with accounting guidelines for
"in-substance" foreclosure loans. The loan is for a commercial construction
project on which the Bank holds a mortgage. The property is being carried at
the lower of the amount of the loan outstanding or net realizable value of the
property, which was $2.8 million at June 30, 1994. The Corporation charged
$200,000 to other real estate expense for this property during the first six
months of 1994. The property was sold by the borrower in 1991, and the new
owner is in the process of recruiting tenants and securing leases. The
construction is essentially complete, with specific improvements made as new
tenants move in. In accordance with accounting rules, the property will be
carried in other real estate and no interest income will be recognized until
the borrower has reached a cumulative investment in the property, which will be
10-20% of the sales value, depending on the borrower meeting certain
requirements.
In each quarter, or more frequently as necessary, management evaluates the
problems and potential losses in the loan portfolio. The results of this
evaluation are reflected in the allowance and periodic provision for loan
losses.
At June 30, 1994, there were no significant loans that are not disclosed above,
where known information about possible credit problems of borrowers causes
management to have serious doubts as to the ability of the borrower to comply
with present loan repayment terms and which, in management's judgment, may
result in disclosure of such loans in the discussion above. Furthermore,
management is not aware of any potential problem loans, except for those
described above, which could have a material effect on the Corporation's
operating results, liquidity, or capital resources.
C-14
The Bank grants loans to customers who live primarily in Macomb County and
metropolitan Detroit. Although the Bank has a diversified loan portfolio, a
substantial portion of its debtors' ability to honor their loan agreements is
dependent upon the automotive industry. Additionally, nearly all of the Bank's
residential real estate portfolio consists of loans for 1 to 4 family homes
located in Macomb County.
During the six months ended June 30, 1994, total deposits increased by 7%, or
$31.5 million, to $471.6 million. The increase was led by a $19.6 million
increase in time deposits, primarily from the new increasing rate certificates.
Noninterest bearing demand deposits increased by $17.5 million, primarily in
commercial accounts. For the twelve months ended June 30, 1994, total deposits
have increased by 14%, or $56.4 million. In this period, time deposits again
led the way with a $29.7 million increase, while total demand deposits
increased by $26.3 million. In time deposits, five year certificates had the
largest increase, rising by $25.0 million due to a special rate offering.
Total capital has increased over the previous June 30 by $6.0 million, while
long term debt decreased by $3.5 million. During this period, approximately
$3.4 million of new equity was created by the conversion of debentures. The
Corporation completed a redemption of its 9.0% Convertible Subordinated
Debentures as of July 15, 1993. The conversions were initiated by holders of
the debt prior to the redemption date.
On March 30, 1994, the Corporation's Board of Directors declared a 5% stock
dividend. Additional shares were distributed beginning May 4, to stockholders
of record April 13. Cash was paid in lieu of issuing any fractional shares.
The transaction has no effect on the total amount of capital, and the par value
of common stock remains at $3.125 per share.
Following are selected capital ratios for the Corporation as of the dates
indicated, along with the minimum regulatory requirement for each item:
June 30, December 31, June 30, Minimum
1994 1993 1993 Requirement
Leverage ratio (Tier 1 capital to assets) 7.53% 7.68% 7.12% 3.00%
Tier 1 capital to risk-based assets 10.68% 10.55% 9.49% 4.00%
Total capital to risk-based assets 11.93% 11.80% 11.76% 8.00%
C-15
(B) Analysis of Results of Operations
ANALYSIS OF CHANGES IN NET INTEREST INCOME
The following tables, presented on a fully tax-equivalent (FTE) basis, show the
dollar amount of changes in net interest income for each major category of
interest earning asset and interest bearing liability, and the amount of change
attributable to changes in average balances (volume) or average rates.
Variances that are attributable to BOTH volume and rate changes have been
allocated to the volume component.
Three Months Ended June 30,
1994 vs. 1993
Increase (Decrease)
Due to Changes In
Total Volume Rate
(in thousands)
Earning Assets - Interest Income:
Federal funds sold $24 $13 $11
Securities
United States Treasury 105 139 (34)
United States Government agencies 258 236 22
Municipal obligations 13 69 (56)
Other securities 19 19 ----
Loans 236 63 173
Total 655 539 116
Deposits and Borrowed Funds - Interest Expense:
Deposits
Demand - interest bearing (30) 48 (78)
Savings (148) 10 (158)
Time 306 192 114
Short term borrowings 2 (2) 4
Long term debt (63) (63) ----
Total 67 185 (118)
Tax-Equivalent Net Interest Margin:
Interest income on earning assets
less interest cost of deposits
and borrowed funds $588 $354 $234
C-16
Six Months Ended June 30,
1994 vs. 1993
Increase (Decrease)
Due to Changes In
Total Volume Rate
(in thousands)
Earning Assets - Interest Income:
Federal funds sold $95 $87 $8
Securities
United States Treasury 159 224 (65)
United States Government agencies 258 406 (148)
Municipal obligations (53) 37 (90)
Other securities 24 26 (2)
Loans 40 91 (51)
Total 523 871 (348)
Deposits and Borrowed Funds - Interest Expense:
Deposits
Demand - interest bearing (82) 61 (143)
Savings (273) 32 (305)
Time 452 368 84
Short term borrowings (8) (17) 9
Long term debt (238) (238) ----
Total (149) 206 (355)
Tax-Equivalent Net Interest Margin:
Interest income on earning assets
less interest cost of deposits
and borrowed funds $672 $665 $7
For the quarter ended June 30, 1994, net interest income, on a FTE basis
increased by 11%, or $588,000, over the same period one year ago. This was due
to a significant increase in the volume of interest earning assets, especially
in securities. On the liability side, an increase in deposit volumes was
partially offset by the absence of long term debt in the current year, and
sharply lower rates on deposits, especially savings. The larger asset volumes
were boosted somewhat by higher average rates on loans. The net interest
margin rose in the quarter, to 5.29%, compared with 5.21% for the same period
one year ago.
C-17
For the six months, FTE net interest income increased by $672,000, or 6%, over
the previous year-to-date. Once again, the main reason for the increase was a
large jump in the volume of earning assets. The largest increases were an $8.7
million increase in the average volume of Treasury securities, and a $15.7
million increase in average agency securities. Interest income from securities
rose significantly, in spite of lower average rates. As in the quarterly
comparison, net FTE interest was increased by the replacement of long term debt
with a less expensive financing source (deposits) in the current year.
AVERAGE STATEMENTS OF CONDITION
The following tables, also presented on a FTE basis, show the Corporation's
consolidated average balances of assets, liabilities, and stockholders' equity;
the amount of interest income or interest expense and the average yield or rate
for each category of interest earning asset and interest bearing liability; the
net interest spread, and the net interest margin, for the three and six month
periods ended June 30, 1994 and 1993. Average balances for securities in the
"available for sale" category are calculated using amortized cost.
Nonperforming loans are included in average loans. Interest on loans includes
loan fees. The tax-equivalent calculation for tax-exempt income on securities
and loans assumes a 34% federal tax rate, and is adjusted for any interest
expense deduction that would be disallowed, according to current tax law.
Three Months Ended June 30,
1994 1993
Average Average
Interest Rate Interest Rate
Average Income/ Earned/ Average Income/ Earned/
Balance Expense Paid Balance Expense Paid
(in thousands)
Assets:
Federal funds sold $6,798 $64 3.77% $5,418 $40 2.95%
Securities
United States Treasury 23,838 304 5.10 12,917 199 6.16
United States Government agencies 58,541 767 5.24 40,539 509 5.02
Municipal obligations 36,724 791 8.62 33,515 778 9.29
Other securities 1,943 27 5.56 554 8 5.78
Loans 333,249 7,085 8.50 330,292 6,849 8.29
Total Earning Assets/Total Interest
Income 461,093 9,038 7.84% 423,235 8,383 7.92%
Cash and due from banks 26,272 24,693
All other assets 20,157 20,188
Total Assets $507,522 $468,116
C-18
Liabilities and Stockholders' Equity:
Deposits
Demand-interest bearing $119,840 693 2.31% $111,493 723 2.59%
Savings 89,813 404 1.80 87,701 552 2.52
Time 169,027 1,829 4.33 151,278 1,523 4.03
Short term borrowings 1,220 15 4.92 1,401 13 3.71
Long term debt ---- ---- ---- 4,917 63 5.13
Total Interest Bearing Liabilities/Total
Interest Expense 379,900 2,941 3.10% 356,790 2,874 3.22%
Noninterest bearing demand deposits 82,917 73,177
All other liabilities 6,162 6,118
Stockholders' equity 38,543 32,031
Total Liabilities and Stockholders'
Equity $507,522 $468,116
FTE Interest Spread (Average Rate Earned
Minus Average Rate Paid) 4.74% 4.70%
FTE Net Interest Income $6,097 $5,509
FTE Net Interest Margin (Net Interest
Income/Total Earning Assets) 5.29% 5.21%
Six Months Ended June 30,
1994 1993
Average Average
Interest Rate Interest Rate
Average Income/ Earned/ Average Income/ Earned/
Balance Expense Paid Balance Expense Paid
(in thousands)
Assets:
Federal funds sold $10,293 $171 3.32% $5,050 $76 3.01%
Securities
United States Treasury 21,391 550 5.14 12,682 391 6.17
United States Government agencies 53,462 1,380 5.16 37,741 1,122 5.95
Municipal obligations 35,342 1,549 8.77 34,495 1,602 9.29
Other securities 1,529 41 5.36 556 17 6.12
Loans 330,065 13,672 8.28 327,878 13,632 8.32
C-19
Total Earning Assets/Total Interest
Income 452,082 17,363 7.68% 418,402 16,840 8.05%
Cash and due from banks 25,865 25,107
All other assets 20,487 20,048
Total Assets $498,434 $463,557
Liabilities and Stockholders' Equity:
Deposits
Demand-interest bearing $121,839 1,434 2.35% $116,652 1,516 2.60%
Savings 89,073 798 1.79 85,446 1,071 2.51
Time 163,248 3,461 4.24 145,932 3,009 4.12
Short term borrowings 1,155 26 4.50 1,917 34 3.55
Long term debt ---- ---- ---- 6,326 238 7.52
Total Interest Bearing Liabilities/Total
Interest Expense 375,315 5,719 3.05% 356,273 5,868 3.29%
Noninterest bearing demand deposits 78,829 71,017
All other liabilities 6,109 5,048
Stockholders' equity 38,181 31,219
Total Liabilities and Stockholders'
Equity $498,434 $463,557
FTE Interest Spread (Average Rate Earned
Minus Average Rate Paid) 4.63% 4.76%
FTE Net Interest Income $11,644 $10,972
FTE Net Interest Margin (Net Interest
Income/Total Earning Assets) 5.15% 5.24%
ANALYSIS OF INCOME STATEMENT ITEMS
Second quarter net interest income increased by 11% over the prior year, to
$5.8 million. Six month net interest income increased by more than 6%, to
$11.1 million in 1994. As discussed earlier, this was mostly due to larger
average balances of earning assets, and lower rates on interest bearing
liabilities. See the preceding analysis of changes in FTE net interest income
for more details.
The quarterly provision for loan losses decreased by $25,000 from 1993's second
quarter. This brought net interest income after the provision to $5.6 million
for the quarter, an increase of nearly 12% over the second quarter of 1993.
For the six months, the loan loss provision dropped by 22%, or $100,000. Year-
to-date net interest income after the provision increased by 8%, to $10.7
million.
C-20
Year-to-date noninterest income increased by $283,000 over the previous year,
primarily due to a $269,000 gain on the sale of a parcel of land.
Second quarter noninterest expense rose by 3%, to $4.7 million in 1994.
Noninterest expense for the six month period also rose modestly, by $377,000,
or 4%. The increases are mostly attributable to increased salaries and
benefits, common in a service-intensive industry.
For the quarter, income before taxes increased by nearly 30% over 1993's second
quarter. Net income was a record $1.4 million, a 25% increase over the
previous year. For the six months ended June 30, 1994, income before taxes and
the cumulative effect of an accounting change increased by almost 26%, or
$683,000, to $3.3 million. In early 1993, a one-time charge of $1.2 million
had been recorded for postretirement benefits, due to the implementation of
SFAS No. 106, "Employer's Accounting for Postretirement Benefits Other Than
Pensions." Income tax expense was $786,000 for the six months ended June 30,
1994, compared with $544,000 in 1993. These combined for a $1.6 million
increase in year-to-date net income, to a record $2.6 million.
LIQUIDITY AND ASSET/LIABILITY MANAGEMENT
The liquidity of a bank allows it to provide funds to meet loan requests, to
accommodate possible outflows in deposits, and to take advantage of other
investment opportunities. Funding of loan requests, providing for liability
outflows, and managing interest rate margins require continuous analysis to
match the maturities of specific categories of loans and investments with
specific types of deposits and borrowings. Bank liquidity is thus normally
defined by the mix of the banking institution's potential sources and uses of
funds. For the Corporation, the major sources of liquidity have been federal
funds sold, and loans (including demand loans) and securities maturing within
one year. At June 30, 1994 and 1993, federal funds sold amounted to $6.4
million and $500,000, respectively. Loans (including demand loans) and
securities maturing within one year amounted to $116.9 million at June 30,
1994, and $107.9 million at June 30, 1993. Additional liquidity is provided by
two repurchase agreement lines of credit with other banks, totaling $15.0
million, and a $25.0 million line of credit with the Federal Home Loan Bank
(FHLB). These lines could be drawn upon for short term liquidity needs, if
necessary. The FHLB line of credit would be collateralized with securities, if
drawn upon. The Corporation has also identified certain securities as
"available for sale," which may be sold for liquidity or other purposes.
Management determines the adequacy of items so classified by considering normal
deposit fluctuations, expected loan demand, and the other liquidity sources and
needs discussed above. The Corporation's dependence on large deposits that
experience volatile rate changes is closely monitored. These deposits consist
mainly of time certificates of deposit of $100,000 and over, of which the
balance was $69.8 million and $71.7 million at June 30, 1994 and 1993,
respectively.
C-21
Managing rates on earning assets and interest bearing liabilities focuses on
maintaining stability in the net interest spread, an important factor in
earnings growth and stability. Emphasis is placed on maintaining a controlled
rate sensitivity position, to avoid wide swings in spreads and to minimize risk
due to changes in general interest rates.
The following table shows the rate sensitivity of the Corporation's interest
earning assets and interest bearing liabilities as of June 30, 1994. This
table displays the interest rate sensitivity gap (i.e., interest rate sensitive
assets less interest rate sensitive liabilities), cumulative interest rate
sensitivity gap, the interest rate sensitivity gap ratio (i.e., interest rate
sensitive assets divided by interest rate sensitive liabilities), and
cumulative interest rate sensitivity gap ratio. For the purposes of this
table, an asset or liability is considered rate sensitive within a specified
period when it matures or could be repriced within such period, generally
according to its contractual terms.
AFTER THREE AFTER SIX AFTER ONE
WITHIN MONTHS BUT MONTHS BUT YEAR BUT AFTER
THREE WITHIN SIX WITHIN ONE WITHIN FIVE
MONTHS MONTHS YEAR FIVE YEARS YEARS TOTAL
(in thousands)
Interest earning assets:
Federal funds sold $6,400 ---- ---- ---- ---- $6,400
Securities (1) 6,786 $3,150 $21,054 $71,691 $19,303 121,984
Loans 203,812 4,917 11,925 73,508 45,623 339,785
Total 216,998 8,067 32,979 145,199 64,926 468,169
Interest bearing liabilities:
Interest bearing demand
deposits (2) 66,355 ---- ---- 48,123 ---- 114,478
Savings (2) ---- ---- ---- 89,933 ---- 89,933
Time > $100,000 57,064 3,615 3,276 5,309 500 69,764
Time < $100,000 23,349 18,686 11,136 45,247 5,147 103,565
Borrowed funds 1,100 ---- ---- ---- ---- 1,100
Total 147,868 22,301 14,412 188,612 5,647 378,840
Interest rate sensitivity
gap 69,130 (14,234) 18,567 (43,413) 59,279 $89,329
Cumulative interest rate
sensitivity gap $69,130 $54,896 $73,463 $30,050 $89,329
Interest rate sensitivity gap
ratio 1.47x 0.36x 2.29x 0.77x 11.50x 1.24x
Cumulative interest rate
sensitivity gap ratio 1.47x 1.32x 1.40x 1.08x 1.24x
C-22
<FN>
(1) Securities in the "available for sale" category are reported in
this table at amortized cost.
(2) Now account deposits of $48.1 million and savings deposits of
$89.9 million are included in the "one to five year" category,
due to the Corporation's experience that the interest rates on
(and balances of) these accounts are relatively insensitive to
interest rate changes.
The preceding table indicates the time periods in which interest earning assets
and interest bearing liabilities will mature or may be repriced, generally
according to their contractual terms. However, this table does not necessarily
indicate the impact that general interest rate movements would have on the
Corporation's net interest yield, because the repricing of various categories
of assets and liabilities is discretionary and is subject to competitive and
other pressures. As a result, various assets and liabilities indicated as
repricing within the same period may, in fact, price at different times and by
different increments.
At June 30, 1994, the Corporation is considered "asset sensitive" according to
the preceding table. In a rising rate environment, the Corporation might be
able to increase prices on earning assets faster than the increase in rates on
interest bearing liabilities.
The Corporation also uses a computer model to simulate the effects of possible
interest rate changes. As a guideline, estimated negative exposure to changing
rates within the ensuing year is limited to 5% of net interest income. The
exposure estimate is based on a variety of assumptions built into the model,
and assumed interest rate changes of plus or minus 200 basis points. The
results of this analysis are reported to the Asset/Liability and Funds
Management Committee, to assist in the interest rate risk management process.
SUMMARY OF LOAN LOSS EXPERIENCE
The following table shows changes (by loan category) in the allowance for loan
losses arising from loans charged off and recoveries on loans previously
charged off; additions to the allowance that were charged to expense; and
selected ratios:
C-23
Six Months Ended
June 30,
1994 1993
(in thousands)
Allowance for loan losses at
beginning of period $4,598 $4,585
Loans charged off:
Commercial 96 348
Installment 185 109
Total 281 457
Recoveries on loans previously charged off:
Residential real estate ---- 10
Commercial 83 145
Installment 66 85
Total 149 240
Net loans charged off 132 217
Provision charged to expense 350 450
Allowance for loan losses at end of period $4,816 $4,818
Annualized ratio of net charge-offs during
the period to average loans outstanding 0.08% 0.13%
Allowance for loan losses as a percentage
of loans and leases at period end 1.42% 1.47%
In each accounting period, the allowance for loan losses is adjusted by
management to the amount necessary to maintain the allowance at an adequate
level. Through its internal loan review department, management has attempted
to allocate specific portions of the allowance for loan losses based on
specifically identifiable problem loans. Management's evaluation of the
allowance is further based on consideration of actual loss experience, the
present and prospective financial condition of borrowers, adequacy of
collateral, industry concentrations within the portfolio, and general economic
conditions. Management believes that the present allowance is adequate, based
on the broad range of considerations listed above.
C-24
The primary risk element considered by management regarding each installment
and residential real estate loan is lack of timely payment. Management has a
reporting system that monitors past due loans and has adopted policies to
pursue its creditor's rights in order to preserve the Bank's position. The
primary risk elements concerning commercial loans are the financial condition
of the borrower, the sufficiency of collateral, and lack of timely payment.
Management has a policy of requesting and reviewing annual financial statements
from its commercial loan customers and periodically reviews existence of
collateral and its value.
Although management believes that the allowance for loan losses is adequate to
absorb losses as they arise, there can be no assurance that the Bank will not
sustain losses in any given period that could be substantial in relation to the
size of the allowance for loan losses.
Management is not aware of any factors that would cause future net loan
charge-offs, in total or by loan category, to significantly differ from those
experienced in the past.
C-25
APPENDIX D
OPINION OF M. A. SCHAPIRO & CO., INC.
[Filed in draft form. Original to be added by amendment.]
[THIS IS A DRAFT FORM OF OPINION]
Board of Directors
First National Bank Corp.
18800 Hall Road
Clinton Township, Michigan
Dear Sirs:
You have asked us to advise you with respect to the fairness to the
stockholders of First National Bank Corp. (the "FNBC"), from a financial
point of view, of the Consideration (as defined below) to be received by
the stockholders of FNBC pursuant to the Agreement and Plan of Merger,
dated August 24, 1994 (the "Agreement"), between FNBC and Old Kent
Financial Corporation ("Old Kent"). It is our understanding that, pursuant
to the Agreement, FNBC will be merged with and into Old Kent with Old Kent
continuing as the surviving corporation. If the Merger is consummated,
each share of FNBC Common Stock that is outstanding immediately prior to
the effective time of the Merger will be converted into the right to
receive that number of shares of Old Kent common stock (the
"Consideration") equal to the quotient of $35.00 (the "Purchase Price Per
Share") divided by the average of the per share closing prices of Old Kent
Common Stock reported on the NASDAQ National Market System during the 20
consecutive trading days ending on the sixth business day before the date
of the closing. Notwithstanding such average, the per share price of Old
Kent Common Stock to be used in such calculation will not be more than
$36.00 per share nor less than $32.00 per share unless certain conditions
exist, and the parties agree to use a different price. In no event will
the price used in such calculation be less than $28.90 per share of Old
Kent common stock. The Purchase Price Per Share may be reduced by up to
$0.40 under certain circumstances. The terms and conditions of the Merger
are more fully set forth in the Agreement and we have assumed for purposes
of this opinion that no such terms or conditions will be amended, modified
or waived in a manner adverse to the stockholders of FNBC prior to the
consummation of the Merger.
In arriving at our opinion, we have reviewed certain publicly
available business and financial information relating to FNBC and Old Kent.
We have also reviewed certain other information, including financial
forecasts, provided to us by FNBC and have met with the management and
representatives of FNBC and Old Kent to discuss their businesses and
prospects.
We have also considered certain financial and stock market data of
FNBC and Old Kent and we have compared that data with similar data for
other publicly held companies in businesses similar to that of FNBC, and we
have considered the financial terms of certain other business combinations
which have recently been effected. We also considered such other
information, financial studies, analyses and investigations and financial,
economic and market criteria which we deemed relevant.
D-1
First National Bank Corp.
Page 2
In connection with our review, we have not independently verified any
of the foregoing information and have relied on it being complete and
accurate in all material respects. With respect to the financial
forecasts, we have assumed (and have not independently verified) that they
have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of FNBC's management as to the future
financial performance of FNBC. In addition, we have not made an
independent evaluation or appraisal of the assets and liabilities of FNBC
or Old Kent, nor have we been furnished with any such evaluations or
appraisals. Our opinion herein is based upon circumstances existing and
disclosed to us as of the date hereof.
M. A. Schapiro & Co., Inc., as part of its investment banking
business, is continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate,
corporate and other purposes. In the past, we have provided financial
advisory services for FNBC and have received fees for rendering these
services.
It is understood that this letter is for the information of the Board
of Directors only and is not to be quoted or referred to, in whole or in
part, in any registration statement, prospectus, or proxy statement, or in
any other written document used in connection with the offering or sale of
securities nor shall this letter be used in any other purposes, without
M. A. Schapiro's prior written consent. The opinion expressed herein is
not intended to confer rights or remedies upon FNBC, any stockholder of
FNBC, or any other person.
Based upon the foregoing and subject to the various assumptions and
limitations set forth herein, it is our opinion that, as of the date
hereof, the Consideration to be received by the FNBC stockholders in the
Merger is fair from a financial point of view to the stockholders of FNBC.
Very truly yours,
M. A. SCHAPIRO & CO., INC.
D-2
APPENDIX E
FIRST NATIONAL BANK CORP. SUMMARY OF
RECENT FINANCIAL INFORMATION (UNAUDITED)
[To be added by amendment or Rule 424(b)]
APPENDIX F
OLD KENT FINANCIAL CORPORATION SUMMARY
OF RECENT FINANCIAL INFORMATION (UNAUDITED)
[To be added by amendment or Rule 424(b)]
No person is authorized to give any information or to make any
representation not contained in this Prospectus and Proxy Statement in
connection with the offering and solicitation made hereby. If given or
made, such information or representation should not be relied upon as
having been authorized. This Prospectus and Proxy Statement does not
constitute an offer to sell, or a solicitation of an offer to purchase, the
securities offered by this Prospectus and Proxy Statement, or the
solicitation of a proxy, in any jurisdiction to or from any person to whom
it is unlawful to make such offer, or solicitation of an offer, or proxy
solicitation in such jurisdiction. Neither the delivery of this Prospectus
and Proxy Statement nor any distribution of the securities this Prospectus
and Proxy Statement offers shall, under any circumstances, create any
implication that there has been no change in the information contained
herein or in the affairs of Old Kent or FNBC since the date hereof.
TABLE OF CONTENTS
Page
INTRODUCTION AND SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Old Kent Financial Corporation . . . . . . . . . . . . . . . . . . . . . . 2
First National Bank Corp.. . . . . . . . . . . . . . . . . . . . . . . . . 3
Summary of Certain Aspects of the Merger . . . . . . . . . . . . . . . . . 3
Market Value of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Selected Financial Data. . . . . . . . . . . . . . . . . . . . . . . . . . 8
Comparative Per Share Data . . . . . . . . . . . . . . . . . . . . . . . . 10
GENERAL MEETING INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . 11
Purpose. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Voting by Proxy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Proxy Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Voting Rights and Record Date. . . . . . . . . . . . . . . . . . . . . . . 12
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Background of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . 13
Merger Recommendation and Reasons for the Transaction. . . . . . . . . . . 14
Opinion of Financial Adviser . . . . . . . . . . . . . . . . . . . . . . . 15
Conversion of FNBC Shares. . . . . . . . . . . . . . . . . . . . . . . . . 19
Stock Price Condition. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Purchase Price Contingency . . . . . . . . . . . . . . . . . . . . . . . . 21
Distribution of Old Kent Common Stock. . . . . . . . . . . . . . . . . . . 22
Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . . . . 23
Business of FNBC Pending the Merger. . . . . . . . . . . . . . . . . . . . 23
Redemption of FNBC Rights. . . . . . . . . . . . . . . . . . . . . . . . . 24
FNBC Stock Options and ESOP Shares . . . . . . . . . . . . . . . . . . . . 24
Management After the Merger. . . . . . . . . . . . . . . . . . . . . . . . 25
Conditions to the Merger and Abandonment . . . . . . . . . . . . . . . . . 25
Termination Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Description of Old Kent Capital Stock. . . . . . . . . . . . . . . . . . . 27
Page
Provisions Affecting Control . . . . . . . . . . . . . . . . . . . . . . . 28
Comparison of Rights of Old Kent Shareholders and
FNBC Stockholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Agreements of Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . 30
Federal Income Tax Consequences. . . . . . . . . . . . . . . . . . . . . . 31
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Pro Forma Condensed Combined Financial Statements. . . . . . . . . . . . . 31
NO APPRAISAL RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
VOTING AND MANAGEMENT INFORMATION. . . . . . . . . . . . . . . . . . . . . . 36
Voting Securities and Principal Stockholders of FNBC . . . . . . . . . . . 36
Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Interests of Certain Persons . . . . . . . . . . . . . . . . . . . . . . . 38
GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Incorporation by Reference . . . . . . . . . . . . . . . . . . . . . . . . 39
Independent Public Accountants . . . . . . . . . . . . . . . . . . . . . . 40
Stockholder Proposals. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Legal Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Sources of Information . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Appendix A -- Agreement and Plan of Merger
Appendix B -- First National Bank Corp. Annual Report to Stockholders for
the Year Ended December 31, 1993
Appendix C -- First National Bank Corp. Unaudited Financial Statements and
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Appendix D -- Opinion of M. A. Schapiro & Co., Inc.
Appendix E -- First National Bank Corp. Summary of Recent Financial
Information (Unaudited)
Appendix F -- Old Kent Financial Corporation Summary of Recent Financial
Information (Unaudited)
[FNBC COMPANY LOGO]
PROSPECTUS AND
PROXY STATEMENT
Special Meeting of Stockholders of
FIRST NATIONAL BANK CORP.
In Connection with an Offering of up to
3,103,779 Shares
OLD KENT
FINANCIAL CORPORATION
COMMON STOCK, $1 PAR VALUE
[OLD KENT LOGO]
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Under Sections 561-571 of the Michigan Business Corporation Act (the
"Michigan Act"), directors and officers of a Michigan corporation may be
entitled to indemnification by the corporation against judgments, expenses,
fines, and amounts paid by the director or officer in settlement of claims
brought against them by third persons or by or in the right of the
corporation if those directors and officers acted in good faith and in a
manner reasonably believed to be in, or not opposed to, the best interests
of the corporation or its shareholders.
Old Kent is obligated under its Articles of Incorporation and Bylaws
to indemnify a present or former director or executive officer of Old Kent,
and may indemnify any other person, to the fullest extent now or in the
future permitted by law in connection with any actual or threatened civil,
criminal, administrative or investigative action, suit or proceeding
arising out of his or her past or future service to Old Kent or a subsidiary,
or to another organization at the request of Old Kent or a subsidiary.
The Michigan Act provides for indemnification of directors and
officers if they acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of Old Kent or its
shareholders (and, if a criminal proceeding, if they had no reasonable
cause to believe their conduct was unlawful) against: (i) expenses
(including attorneys' fees), judgments, penalties, fines, and amounts paid
in settlement actually and reasonably incurred in connection with any
threatened, pending, or completed action, suit, or proceeding (other than
an action by, or in the right of, Old Kent) arising out of a position with
Old Kent (or with some other entity at Old Kent's request); and (ii)
expenses (including attorneys' fees) and amounts paid in settlement
actually and reasonably incurred in connection with any threatened, pending,
or completed action, suit or proceeding by or in the right of Old Kent,
unless the director or officer is found liable to Old Kent and an appropriate
court determines that he or she is nevertheless fairly and reasonably
entitled to indemnity for reasonable expenses incurred. The Michigan Act
requires indemnification for expenses to the extent that a director or
officer is successful in defending against any such action, suit, or
proceeding, and otherwise requires in general that the indemnification
provided for in (i) and (ii) above be made only on a determination that the
director or officer met the applicable standard of conduct by a majority
vote of a quorum of the board of directors who were not parties or
threatened to be made parties to the action, suit, or proceeding, by a
majority vote of a committee of not less than two disinterested directors,
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by independent legal counsel, by all independent directors not parties or
threatened to be made parties to the action, suit, or proceeding, or by the
shareholders.
In certain circumstances, the Michigan Act further permits advances to
cover such expenses before a final determination that indemnification is
impermissible or required, upon receipt of a written affirmation by the
director or officer of his or her good faith belief that he or she has met
the applicable standard of conduct and an undertaking, which need not be
secured, by or on behalf of the director or officer to repay such amounts
if it shall ultimately be determined that he or she has not met the
applicable standard of conduct.
Indemnification under the Michigan Act is not exclusive of other
rights to indemnification to which a person may be entitled under the
Articles of Incorporation, Bylaws or a contractual agreement. However, the
total amount of expenses advanced or indemnified from all sources may not
exceed the amount of actual expenses incurred by the person seeking
indemnification or advancement of expenses. The indemnification provided
for under the Michigan Act continues as to a person who ceases to be a
director, officer, employee or agent.
The Michigan Act permits Old Kent to purchase insurance on behalf of
its directors and officers against liabilities arising out of their
positions with Old Kent, whether or not such liabilities would be within
the above indemnification provisions. Pursuant to this authority, Old Kent
maintains such insurance on behalf of its directors and officers.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits. The following exhibits are filed as part of this
Registration Statement.
Number Exhibit
2 Agreement and Plan of Merger. Attached as Appendix A to the
Prospectus and Proxy Statement.
3(a) Restated Articles of Incorporation. Previously filed as an
exhibit to the registrant's Form 10-Q Quarterly Report for the
quarter ended March 31, 1993. Here incorporated by reference.
3(b) Restated Bylaws. Previously filed as an exhibit to the
registrant's Form 10-K Annual Report for the year ended
December 31, 1993. Here incorporated by reference.
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Number Exhibit
4(a) Certificate of Designation, Preferences, and Rights of Series B
Preferred Stock. Previously filed as an exhibit to the
registrant's Form 8-A Registration Statement filed December 20,
1988. Here incorporated by reference.
(b) Long-term Debt. The registrant has outstanding several classes
of long-term debt instruments which at the time of this report do
not exceed 10% of the registrant's total consolidated assets.
The registrant agrees to furnish copies of the agreements
defining the rights of holders of such long-term indebtedness to
the Securities and Exchange Commission upon request.
5 Opinion of Warner Norcross & Judd LLP as to the Legality of the
Securities Being Registered.
8 Opinion of Warner Norcross & Judd LLP as to Certain Tax Matters.
13 First National Bank Corp. 1993 Annual Report to Stockholders.
Attached as Appendix B to the Prospectus and Proxy Statement.
23(a) Consent of Warner Norcross & Judd LLP.
(b) Consent of Arthur Andersen LLP.
(c) Consent of Deloitte & Touche LLP.
(d) Consent of M. A. Schapiro & Co., Inc. Contained in the Opinion of
M. A. Schapiro & Co., Inc. (to be filed by amendment and attached
as Appendix D to the Prospectus and Proxy Statement).
24 Powers of Attorney.
99(a) President's Letter.
(b) Form of Proxy.
(b) Financial Statement Schedules. Schedules have been omitted
because they are not required or because the information is set forth in
the financial statements and the notes thereto.
(c) Opinions of Financial Advisers. The opinion of M. A. Schapiro &
Co., Inc. (to be filed by amendment and attached as Appendix D to the
Prospectus and Proxy Statement).
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Item 22. Undertakings.
(a) The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each filing
of the registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(b) The undersigned registrant hereby undertakes to deliver or cause
to be delivered with the Prospectus and Proxy Statement, to each person to
whom the Prospectus and Proxy Statement is sent or given, the latest annual
report to security holders that is incorporated by reference in the
Prospectus and Proxy Statement and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act
of 1934; and, where interim financial information required to be presented
by Article 3 of Regulation S-X is not set forth in the Prospectus and Proxy
Statement, to deliver, or cause to be delivered to each person to whom the
Prospectus and Proxy Statement is sent or given, the latest quarterly
report that is specifically incorporated by reference in the Prospectus and
Proxy Statement to provide such interim financial information.
(c) (i) The undersigned registrant hereby undertakes as follows:
that prior to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this registration statement,
by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form.
(ii) The registrant undertakes that every prospectus: (i) that
is filed pursuant to Paragraph (c)(i) immediately preceding, or (ii) that
purports to meet the requirements of Section 10(a)(3) of the Securities Act
of 1933 and is used in connection with an offering of securities subject to
Rule 415, will be filed as a part of an amendment to the registration
statement and will not be used until such amendment is effective, and that,
for purposes of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(d) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
II-4
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of
such issue.
(e) The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the
Prospectus and Proxy Statement pursuant to Item 4, 10(b), 11 or 13 of this
form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(f) The undersigned registrant hereby undertakes to supply by means
of a post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject of
and included in the registration statement when it became effective.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Grand
Rapids, State of Michigan, on November 9, 1994.
OLD KENT FINANCIAL CORPORATION
(Registrant)
By s/Richard W. Wroten
Richard W. Wroten
Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
November 9, 1994 *s/John M. Bissell
John M. Bissell
Director
November 9, 1994 *s/John D. Boyles
John D. Boyles
Director
November 9, 1994 *s/John C. Canepa
John C. Canepa
Chairman of the Board, Chief
Executive Officer and Director
(Principal Executive Officer)
November 9, 1994 *s/Richard M. DeVos, Jr.
Richard M. DeVos, Jr.
Director
November 9, 1994 *s/Earl D. Holton
Earl D. Holton
Director
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November 9, 1994 *s/Michael J. Jandernoa
Michael J. Jandernoa
Director
November 9, 1994 *s/John P. Keller
John P. Keller
Director
November 9, 1994 *s/Jerry K. Myers
Jerry K. Myers
Director
November 9, 1994 *s/William U. Parfet
William U. Parfet
Director
November 9, 1994 *s/Percy A. Pierre
Percy A. Pierre
Director
November 9, 1994 *s/Robert L. Sadler
Robert L. Sadler
Vice Chairman of the Board and
Director
November 9, 1994 *s/Peter F. Secchia
Peter F. Secchia
Director
November 9, 1994 *s/B. P. Sherwood, III
B. P. Sherwood, III
Vice Chairman of the Board,
Treasurer, and Director
November 9, 1994 *s/David J. Wagner
David J. Wagner
President and Director
II-7
November 9, 1994 s/Richard W. Wroten
Richard W. Wroten
Executive Vice President and Chief
Financial Officer (Principal
Financial and Accounting Officer)
November 9, 1994 *s/Richard W. Wroten
Richard W. Wroten
Attorney-in-Fact
II-8
EXHIBIT INDEX
Number Exhibit
2 Agreement and Plan of Merger. Attached as Appendix A to the
Prospectus and Proxy Statement.
3(a) Restated Articles of Incorporation. Previously filed as an
exhibit to the registrant's Form 10-Q Quarterly Report for the
quarter ended March 31, 1993. Here incorporated by reference.
3(b) Restated Bylaws. Previously filed as an exhibit to the
registrant's Form 10-K Annual Report for the year ended
December 31, 1993. Here incorporated by reference.
4(a) Certificate of Designation, Preferences, and Rights of Series B
Preferred Stock. Previously filed as an exhibit to the
registrant's Form 8-A Registration Statement filed December 20,
1988. Here incorporated by reference.
(b) Long-term Debt. The registrant has outstanding several classes
of long-term debt instruments which at the time of this report do
not exceed 10% of the registrant's total consolidated assets.
The registrant agrees to furnish copies of the agreements
defining the rights of holders of such long-term indebtedness to
the Securities and Exchange Commission upon request.
5 Opinion of Warner Norcross & Judd LLP as to the Legality of the
Securities Being Registered.
8 Opinion of Warner Norcross & Judd LLP as to Certain Tax Matters.
13 First National Bank Corp. 1993 Annual Report to Stockholders.
Attached as Appendix B to the Prospectus and Proxy Statement.
23(a) Consent of Warner Norcross & Judd LLP.
(b) Consent of Arthur Andersen LLP.
(c) Consent of Deloitte & Touche LLP.
(d) Consent of M. A. Schapiro & Co., Inc. Contained in the Opinion of
M. A. Schapiro & Co., Inc. (to be filed by amendment and attached
as Appendix D to the Prospectus and Proxy Statement).
24 Powers of Attorney.
99(a) President's Letter.
(b) Form of Proxy.