As filed with the Securities and Exchange Commission on _____________, 1996
Registration No. 333-__________
===========================================================================
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 (Primary Standard (IRS Employer
Jurisdiction of Industrial Classification Identification No.)
Incorporation or Code Number)
Organization)
ONE VANDENBERG CENTER
GRAND RAPIDS, MICHIGAN 49503
(616) 771-5000
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
ALBERT T. POTAS IT IS REQUESTED THAT COPIES OF
OLD KENT FINANCIAL CORPORATION COMMUNICATIONS BE SENT TO:
ONE VANDENBERG CENTER
GRAND RAPIDS, MICHIGAN 49503 GORDON R. LEWIS
(616) 771-1931 WARNER NORCROSS & JUDD LLP
900 OLD KENT BUILDING
111 LYON STREET, N.W.
GRAND RAPIDS, MICHIGAN 49503-2489
(616) 752-2752
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
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
TITLE OF EACH AMOUNT TO PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
CLASS OF SECURITIES BE REGISTERED OFFERING PRICE AGGREGATE OFFERING REGISTRATION
TO BE REGISTERED PER SHARE<F1> PRICE<F1> FEE<F1>
Common Stock, $1.00 par value 2,382,100 shares $16.69 $39,749,000 $13,706.56
<FN>
<F1> The registration fee has been computed pursuant to Rule 457(f)(2)
based on the aggregate book value of Common Stock, $1.00 par value, of
Seaway Financial Corporation as of June 30, 1996. 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.
</FN>
________________
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.
===========================================================================
PROSPECTUS AND PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS OF
SEAWAY FINANCIAL CORPORATION
IN CONNECTION WITH AN OFFERING OF UP TO
2,382,100 SHARES
OLD KENT FINANCIAL CORPORATION
COMMON STOCK, $1.00 PAR VALUE
The board of directors of Seaway Financial Corporation ("Seaway") is
furnishing this Prospectus and Proxy Statement on or about ______________,
1996, to solicit proxies to vote at the special meeting of Seaway
shareholders to be held on _______________, 1996, and at any adjournment of
that meeting. At the special meeting, the shareholders will consider and
vote upon approval of an Agreement and Plan of Merger (the "Plan of
Merger") pursuant to which Seaway would become affiliated with Old Kent
Financial Corporation ("Old Kent") through the merger of Seaway 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, $1.00 par value. This
offering is made only to the holders of Seaway Common Stock, $1.00 par
value. (See "The Merger.")
If the Merger is consummated, each share of Seaway 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 Seaway shareholder will be based on an Exchange Ratio,
subject to payment in cash for fractional shares and adjustment under
certain circumstances. The Exchange Ratio will be equal to $43.9057 (the
"Purchase Price Per Share") divided by the average of the per share closing
prices of Old Kent Common Stock reported on The NASDAQ Stock Market during
the 10 consecutive trading days ending on the tenth 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 Ratio (the
"Calculation Price") will not be more than $38.4524 per share nor less than
$34.6429 per share unless certain conditions exist, Seaway requests a
decrease in the Calculation Price and Old Kent agrees to such decrease. In
no event will the Calculation Price be less than $31.0655. (See "The
Merger--Stock Price Condition.") The Exchange Ratio is also subject to
upward or downward adjustment upon the occurrence of certain events
specified in the Plan of Merger. (See "The Merger.") THE CALCULATION
PRICE AND THE EXCHANGE RATIO WILL BE DETERMINED BASED ON DATES AND EVENTS
OCCURRING AFTER THE SPECIAL MEETING OF SHAREHOLDERS AND AFTER THE DATE OF
THIS PROSPECTUS AND PROXY STATEMENT. (SEE "THE MERGER.")
Austin Financial Services, Inc. ("AFSI"), Seaway's financial adviser,
has rendered its written opinion to the board of directors of Seaway, dated
the date of this Prospectus and Proxy Statement, that, as of such date, the
terms of the Merger are fair, from a financial point of view, to the holders
of Seaway Common Stock. (See "The Merger--Opinion of Financial Adviser.")
Consummation of the Merger is subject to Seaway shareholder 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 SEAWAY COMMON STOCK VOTE FOR
APPROVAL OF THE PLAN OF MERGER. WHETHER OR NOT YOU EXPECT TO ATTEND THE
MEETING IN PERSON, PLEASE SIGN AND DATE THE ENCLOSED PROXY CARD 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. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus and Proxy Statement is dated ___________, 1996.
AVAILABLE INFORMATION
Old Kent is subject to informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files applicable 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 (Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661). 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 files such materials with the Commission electronically
through the EDGAR system. The Commission maintains a Web site that
contains such materials regarding companies that file electronically with
the Commission at http://www.sec.gov.
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,
Seaway 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 MARY E. TUUK, SECRETARY, OLD KENT
FINANCIAL CORPORATION, ONE VANDENBERG CENTER, GRAND RAPIDS, MICHIGAN 49503,
TELEPHONE NUMBER (616) 771-5272. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY REQUEST SHOULD BE MADE BY ___________, 1996. [INSERT DATE
FIVE BUSINESS DAYS BEFORE DATE OF SHAREHOLDER MEETING]
Old Kent undertakes to provide without charge to each person,
including any beneficial owner, to whom this 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 this 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 this Prospectus and
Proxy Statement incorporates). Any such request should be directed to the
individual identified in the paragraph above.
II - 2
SEAWAY FINANCIAL CORPORATION
200 SOUTH RIVERSIDE AVENUE
ST. CLAIR, MICHIGAN 48079
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of Seaway Financial Corporation:
A special meeting of shareholders of Seaway Financial Corporation will
be held at the main office of Seaway Financial Corporation, 200 South
Riverside Avenue, St. Clair, Michigan, on ___________, 1996, at __________
p.m., local time, for the following purposes:
1. To consider and vote upon a proposal to approve an Agreement and
Plan of Merger between Seaway Financial Corporation 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 ___________,
1996, as the record date for the determination of shareholders entitled to
notice of and to vote at the meeting and any adjournment of the meeting.
By Order of the Board of Directors,
Donald L. Osterland, Secretary
___________, 1996
YOUR VOTE IS IMPORTANT. EVEN IF YOU PLAN TO
ATTEND THE MEETING, PLEASE SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD PROMPTLY.
II - 3
PROSPECTUS AND PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS OF
SEAWAY FINANCIAL CORPORATION
200 SOUTH RIVERSIDE AVENUE
ST. CLAIR, MICHIGAN 48079
(810) 329-2244
TO APPROVE
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) 771-5000
INTRODUCTION AND SUMMARY
INTRODUCTION
Old Kent Financial Corporation ("Old Kent") and Seaway Financial
Corporation ("Seaway") are furnishing this Prospectus and Proxy Statement
and the accompanying form of proxy on or about ______________, 1996, to
holders of record of Seaway Common Stock, $1.00 par value ("Seaway Common
Stock"), at the close of business on __________, 1996. The board of
directors of Seaway is soliciting proxies to vote at the special meeting of
Seaway shareholders to be held on ___________, 1996, and at any adjournment
of that meeting. The shareholders' meeting will be held at the main office
of Seaway, 200 South Riverside Avenue, St. Clair, Michigan, at __________
p.m., local time.
The purpose of the special meeting of Seaway shareholders is to
consider and vote on approval 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 Seaway with and
into Old Kent (the "Merger"). Approval of the Plan of Merger requires the
affirmative vote of the holders of a majority of the outstanding shares of
Seaway Common Stock. (See "The Merger.") Seaway does not anticipate that
any other matter will come before the special meeting.
Seaway's board of directors unanimously voted to adopt the Plan of
Merger at its July 30, 1996, meeting. (See "Voting and Management
Information--Interests of Certain Persons.")
THE BOARD OF DIRECTORS OF SEAWAY UNANIMOUSLY RECOMMENDS A VOTE
FOR APPROVAL 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, 1996, Old Kent on a consolidated basis had
assets of $12.2 billion, deposits of $9.8 billion, a net loan portfolio of
$7.7 billion and shareholders' equity of $1 billion. Old Kent's principal
banking subsidiaries, Old Kent Bank (Michigan) ("OKB-MI") and Old Kent Bank
(Illinois) ("OKB-IL"), serve their communities through 190 banking offices
in Michigan and 26 banking offices in Illinois. Old Kent also has 9
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 encompass a wide spectrum of banking,
financial and fiduciary services. These services include commercial and
retail loans, business and personal checking accounts, savings and
individual retirement accounts, time deposit instruments, automated
transaction machine services, bank credit cards, debit cards, money
transfer services, safe deposit facilities, cash management, electronic
banking services, real estate and lease financing, equipment leasing,
international banking services, credit life insurance, insurance agency
services, personal investment and securities brokerage, corporate and
personal trust services and other banking 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 those communities. The Grand
Rapids market is the source of a substantial portion of Old Kent's
business, representing 38 percent of total deposits and 36 percent of total
loans at June 30, 1996. 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 OKB-MI. At June 30, 1996, OKB-MI had
assets of $10.1 billion, deposits of $8.1 billion and a net loan portfolio
of $6.5 billion. At June 30, 1996, OKB-MI's assets represented 82 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. OKB-MI serves an area
consisting primarily of Western, Central and Southeastern Michigan.
OKB-MI's subsidiary, Old Kent Mortgage Company, originates residential
mortgages and conducts a traditional retail and wholesale mortgage banking
business in one- to four-family residential mortgage loans. Substantially
all mortgages originated are 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.
-2-
Old Kent's second largest subsidiary is OKB-IL. At June 30, 1996,
OKB-IL had assets of $2.1 billion, deposits of $1.7 billion and a net loan
portfolio of $1.2 billion. At June 30, 1996, OKB-IL's assets represented
17 percent of Old Kent's consolidated assets. OKB-IL is headquartered in
Chicago, Illinois, and conducts a general commercial banking business with
individuals and corporate and government entities. OKB-IL serves an area
consisting primarily of Cook, DuPage and Kane Counties in Illinois.
SEAWAY FINANCIAL CORPORATION
Seaway is a bank holding company located in St. Clair, Michigan. At
June 30, 1996, Seaway on a consolidated basis had assets of $361.9 million,
deposits of $320.8 million, a net loan portfolio of $203.6 million and
shareholders' equity of $39.8 million. Seaway is the parent company of The
Commercial and Savings Bank of St. Clair County, a Michigan banking
corporation ("Commercial"), located in St. Clair, Michigan, which operates
9 banking offices and one trust office in St. Clair County, Michigan.
Seaway is also the parent company of The Algonac Savings Bank, a Michigan
banking corporation ("Algonac"), located in Algonac, Michigan, which
operates 5 banking offices in St. Clair County, Michigan. Commercial and
Algonac are collectively referred to as the "Banks" in this Prospectus and
Proxy Statement.
Seaway and the Banks are engaged in the business of commercial banking
and other related activities. The services offered by Seaway and the Banks
include taking deposits, making secured and unsecured loans, financing
commercial transactions and performing corporate services.
Seaway's principal market for financial services is St. Clair County,
Michigan, and the communities within St. Clair County. Seaway has no
material foreign assets or operations.
SUMMARY OF CERTAIN ASPECTS OF THE MERGER
Seaway shareholders 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 January, 1996, Seaway's board of
directors determined that Seaway should consider the feasibility and merits
of the sale of the organization in light of the then existing merger and
acquisition environment. Seaway engaged Austin Financial Services, Inc.
("AFSI") as its exclusive financial adviser with respect to Seaway's
strategic alternatives, including its possible sale, merger, consolidation
or other business combination. In developing these strategic alternatives,
AFSI contacted Old Kent and several other regional bank holding companies
to determine if they were interested in affiliating with a then
unidentified organization. AFSI received 11 requests for additional
-3-
information. After providing comprehensive disclosures about Seaway to
the interested holding companies, AFSI received 4 written indications of
interest by April 19, 1996, the due date imposed by Seaway. After
reviewing these proposals, Seaway's board of directors decided to proceed
with negotiations with Old Kent. Following these negotiations, Old Kent
and Seaway entered into a letter of intent dated June 3, 1996, and,
thereafter, the Plan of Merger on August 21, 1996. The Plan of Merger is
included as Appendix A to this Prospectus and Proxy Statement. Old
Kent's and Seaway's management, and their respective representatives,
negotiated the purchase price and other terms of the Plan of Merger on
an arm's-length basis.
The board of directors of Seaway has determined that the proposed
Merger is in the best interests of Seaway and its shareholders. The board
believes that the Merger provides to Seaway shareholders an opportunity to
have an interest in a larger and more diversified financial organization
and one whose stock is traded on The NASDAQ Stock Market. The board
believes that the Merger will assist the Banks in becoming more effective
competitors in their markets through access to greater financial and
managerial resources, and the ability to offer additional new services that
complement those presently offered by each 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, Seaway will be merged with and into Old Kent. The surviving
corporation will be Old Kent. The surviving corporation will own the Banks
and all of the other assets of Seaway.
Each share of Seaway Common Stock outstanding at the time the Merger
becomes effective will be converted into the number of shares of Old Kent
Common Stock, $1.00 par value ("Old Kent Common Stock"), equal to the
"Exchange Ratio." The Exchange Ratio will be equal to $43.9057 (the
"Purchase Price Per Share") divided by the average of the per share closing
prices of Old Kent Common Stock reported on The NASDAQ Stock Market during
the 10 consecutive trading days ending on the tenth business day before the
date of the closing (the "Pricing Period") as reported in the DOW JONES
NEWS/RETRIEVAL system, or other equally reliable means (as so calculated,
the "Final OKEN Stock Price"). Notwithstanding this calculation of the
Final OKEN Stock Price, the per share price of Old Kent Common Stock to be
used in calculating the Exchange Ratio (the "Calculation Price") will not
be more than $38.4524 per share nor less than $34.6429 per share unless
certain conditions exist, Seaway 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 Seaway
may request a decrease in the Calculation Price. In no event will the
Calculation Price be less than $31.0655. (See "The Merger--Stock Price
-4-
Condition.") The Exchange Ratio 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 Seaway Common
Stock outstanding and certain other events that could otherwise affect the
nature or amount of the consideration to be received by Seaway shareholders
in exchange for their shares of Seaway Common Stock. (See "The
Merger--Conversion of Seaway Shares.")
The following table shows a range of hypothetical Final OKEN Stock
Prices and the Exchange Ratio corresponding to each Final OKEN Stock Price.
The Exchange Ratios listed in the following table assume that the
conditions that could cause Seaway to request a decrease in the Calculation
Price do not exist.
AVERAGE EXCHANGE
PRICE RATIO
At or Above $38.4524 1.1418
37.5001 1.1708
36.5477 1.2013
35.5953 1.2335
At or Below 34.6429 1.2674
The following table shows the closing sale price of Old Kent Common
Stock on the dates listed and the corresponding Exchange Ratio that would
apply if the closing sale price shown was the average price of Old Kent
Common Stock during the Pricing Period:
CLOSING EXCHANGE
DATE SALE PRICE RATIO
June 3, 1996 <F1> $36.9643 1.1878
_______________, 1996 $_______ ______
__________________________
<FN>
<F1> The last trading day before public announcement of the proposed
Merger, as adjusted to reflect a 5 percent stock dividend paid in
July 1996.
</FN>
-5-
The Purchase Price Per Share of $43.9057, which is divided by the
Calculation Price to yield the Exchange Ratio that determines the amount of
Old Kent Common Stock to be received by Seaway shareholders, and the limits
on the range of the Exchange Ratio were determined through the parties'
negotiation of the Plan of Merger. (See "The Merger--Merger Recommendation
and Reasons for the Transaction") These terms reflect Seaway's and Old
Kent's judgment as to the value of the shares of Seaway Common Stock
relative to the historical and anticipated market price of Old Kent Common
Stock.
The limits of the range of the Exchange Ratio (1.1418 and 1.2674) are
intended to limit the extent to which the amount of Old Kent Common Stock
to be received by Seaway shareholders 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 Seaway'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
comparison stocks.
Old Kent will not issue fractional shares of Old Kent Common Stock in
the Merger. A Seaway shareholder 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 OKEN Stock Price.
OPINION OF FINANCIAL ADVISER. Seaway's financial adviser, AFSI, has
rendered an opinion to the board of directors of Seaway, dated as of the
date of this Prospectus and Proxy Statement, to the effect that, as of such
date, the terms of the Merger are fair, from a financial point of view, to
the holders of Seaway Common Stock. The opinion of AFSI is attached as
Appendix B to this Prospectus and Proxy Statement. 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 AFSI in connection with that opinion. For a more
detailed 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 shareholders of Seaway
approve 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 Seaway obtain various ancillary
certificates, opinions and agreements. Seaway will not be obligated to
consummate the Merger at any time when both of the following conditions
exist: (i) the Final OKEN Stock Price is less than $31.0655 per share,
subject to certain adjustments provided in the Plan of Merger; and (ii) the
percentage determined by dividing the Final OKEN Stock Price by $36.5476 is
-6-
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 Pricing Period by the
aggregate price per share of those comparison stocks on May 14, 1996,
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 Seaway may by mutual consent abandon the Merger. Also, for
certain specified reasons the board of directors of either Old Kent or
Seaway may abandon the Merger. (See "The Merger--Conditions to the Merger
and Abandonment.")
Under certain circumstances involving the acquisition of control of
Seaway by a party other than Old Kent, Seaway 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 Seaway. (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 1997.
VOTE REQUIRED. Pursuant to the Michigan Business Corporation Act, the
affirmative vote of the holders of a majority of the outstanding shares of
Seaway Common Stock entitled to vote on the Plan of Merger is required to
approve the Plan of Merger. Failures to vote, abstentions and broker non-
votes will have the same effect as votes against approval of the Plan of
Merger. As of August 31, 1996, Seaway's directors and executive officers
and their affiliates held 25.9 percent of the outstanding shares of Seaway
Common Stock, although Franklin H. Moore, Jr. disclaims beneficial owner-
ship of 330,613 shares held by trusts of which he is a beneficiary. (See
"Voting and Management Information--Interests of Certain Persons.") As of
August 31, 1996, Old Kent's directors and executive officers and their
affiliates did not hold any shares of Seaway Common Stock. No approval
by Old Kent 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 ________________, 1996. The
Merger cannot be consummated for a period of 30 days after receipt of the
Federal Reserve Board's final approval unless the Federal Reserve Board has
not received any adverse comments from the United States Department of
Justice during the first 15 days following final approval, in which case
the Merger may be consummated on or after the fifteenth day after the final
approval by the Federal Reserve Board. During this 15- or 30-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.
-7-
DISSENTERS' RIGHTS. Holders of Seaway Common Stock are not entitled
to dissenters' rights under the Michigan Business Corporation Act in
connection with the Merger.
FEDERAL INCOME TAX CONSEQUENCES. As a condition precedent to
consummation of the Merger, Old Kent and Seaway 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 that, among other matters, Seaway shareholders
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 Seaway shareholders in the Merger will have the same
basis and holding period as the respective shares of Seaway Common Stock
surrendered in exchange for them. Cash received in lieu of fractional
shares of Old Kent Common Stock will be taxable. The opinion of Old Kent's
counsel will be based on one or more certificates or affidavits of fact
provided by Old Kent and/or Seaway. (See "The Merger--Federal Income Tax
Consequences.")
Due to the complexities of federal, state and local income tax laws,
it is strongly recommended that Seaway shareholders 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 purchase method of accounting. (See "The Merger--Accounting
Treatment.")
MARKET VALUE OF SHARES
Old Kent Common Stock is traded in the over-the-counter market and is
quoted on The NASDAQ Stock Market under the symbol OKEN. Seaway Common
Stock is not actively traded, although occasional transactions occur
informally between individuals and local and regional brokerage firms. The
prices at which such transactions are effected are only occasionally
reported to Seaway. The last transaction effected in Seaway Common Stock
for which price information is known to Seaway was effected on August 23,
1996, when 337 shares traded at a price of $41.00 per share. The last
transaction prior to June 3, 1996 (the day immediately prior to public
announcement of the proposed Merger) effected in Seaway Common Stock for
which price information is known to Seaway was effected on May 28,
1996, when 1,000 shares traded at a price of $36.50 per share. The
following table sets forth the per share closing price for Old Kent Common
Stock reported on The NASDAQ Stock Market on June 3, 1996 (the last trading
date prior to public announcement of the Plan of Merger), and the estimated
value of Old Kent Common Stock to be received for each share of Seaway
Common Stock on an equivalent per share basis:
-8-
OLD KENT SEAWAY
COMMON STOCK COMMON STOCK
LAST REPORTED
SALE PRICE PRIOR EQUIVALENT
DATE ACTUAL PRICE TO JUNE 3, 1996 PER SHARE<F1>
June 3, 1996 $36.9643 $36.50 $43.9062
<FN>
_____________________
<F1> The equivalent per share price of Seaway Common Stock is the estimated
market value of Old Kent Common Stock to be received in the Merger by
Seaway shareholders for each share of Seaway Common Stock if the
average price of Old Kent Common Stock during the Pricing Period used
to determine the Exchange Ratio was the same as the actual price of
Old Kent Common Stock as of the date indicated.
</FN>
As of August 31, 1996, there were 46,206,472 shares of Old Kent Common
Stock issued and outstanding held by 14,646 holders of record. As of
August 31, 1996, there were 1,685,430 shares of Seaway Common Stock issued
and outstanding held by 486 holders of record.
Old Kent and Seaway urge each Seaway shareholder to obtain a current
market quote on Old Kent Common Stock.
-9-
SELECTED FINANCIAL DATA
The following unaudited table presents selected historical financial
information and selected PRO FORMA combined financial information for Old
Kent and Seaway. 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 purchase method of
accounting.
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
1991 1992 1993 1994 1995 JUNE 30, 1996
(dollars in thousands)
OLD KENT FINANCIAL CORPORATION
(HISTORICAL)
Income Statement Data:
Net interest income $ 356,074 $ 403,821 $ 427,587 $ 455,635 $ 476,693 $ 243,143
Provision for credit losses 41,687 58,987 34,822 22,465 21,666 15,975
Net income 95,988 114,445 131,324 137,084 141,814 76,795
Balance Sheet Data (period end):
Assets $9,250,652 $9,152,196 $10,340,037 $11,477,723 $12,003,084 $12,235,803
Deposits 7,696,052 7,664,476 8,411,203 9,429,337 9,357,366 9,823,149
Loans 5,398,264 5,224,845 5,344,712 6,854,849 7,430,552 7,835,636
Long-term and subordinated debt 84,331 24,565 1,215 1,119 101,023 100,970
Shareholders' equity 700,117 755,686 850,040 895,997 1,015,936 1,006,469
SEAWAY FINANCIAL CORPORATION
(HISTORICAL)
Income Statement Data:
Net interest income $ 11,754 $ 13,088 $ 13,159 $ 13,297 $ 14,129 $ 7,332
Provision for credit losses 417 319 58 19 189 167
Net income 3,565 3,906 4,022 3,907 4,061 2,172
Balance Sheet Data (period end):
Assets $ 329,581 $ 330,819 $ 349,781 $ 337,820 $ 347,829 $ 361,887
Deposits 293,302 290,828 295,477 282,291 306,376 320,755
Loans 163,597 175,300 170,453 178,894 192,283 206,038
Long-term and subordinated debt 100 -- -- -- -- --
Shareholders' equity 30,328 32,574 35,243 34,945 39,031 39,749
-10-
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1995 JUNE 30, 1996
(dollars in thousands)
PRO FORMA COMBINED<F1>
Income Statement Data:
Net interest income $ 490,822 $ 250,475
Provision for credit losses 21,855 16,142
Net income 145,875 78,967
Balance Sheet Data (period end)<F2>:
Assets $12,350,913 $12,597,690
Deposits 9,663,742 10,143,904
Loans 7,622,835 8,041,674
Long-term debt 101,023 100,970
Shareholders' equity 1,054,967 1,046,218
________________________
<FN>
<F1> 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, 1996. Seaway met the
regulatory criteria to be categorized as a "well-capitalized"
institution at June 30, 1996. The "well-capitalized" classification
may permit financial institutions to minimize the cost of Federal
Deposit Insurance Corporation 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, 1996:
RISK-BASED CAPITAL
LEVERAGE TIER 1 TOTAL
Old Kent's capital ratios 7.77% 10.44% 12.81%
Seaway's capital ratios 11.27 19.29 20.48
PRO FORMA combined capital ratios 7.32 9.83 12.17
Regulatory capital ratios - "well-capitalized" definition 5.00 6.00 10.00
Regulatory capital ratios - minimum requirement 3.00 4.00 8.00
<F2> The PRO FORMA combined balance sheet data assumes the issuance of
2,024,707 shares of Old Kent Common Stock in exchange for all of the
outstanding shares of Seaway Common Stock. This assumes an Exchange
-11-
Ratio of 1.2013 shares of Old Kent Common Stock for each share of
Seaway Common Stock. This Exchange Ratio assumes a Purchase Price Per
Share of $43.9057 and a Calculation Price of $36.5477, which is midway
between the $38.4524 upper limit and the $34.6429 lower limit
(assuming the nonexistence of the conditions that could cause the
Calculation Price to be decreased to $31.0655).
<F3> Seaway adopted SFAS No. 115 on December 31, 1993.
</FN>
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 Seaway. The data are derived from financial statements of Old Kent and
Seaway incorporated by reference into 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 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 Seaway 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.
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
1991 1992 1993 1994 1995 JUNE 30, 1996
HISTORICAL PER SHARE DATA
Old Kent Financial Corporation<F1>
Net Income per Common Share:
Primary $ 2.07 $ 2.45 $ 2.76 $ 2.88 $ 2.96 $ 1.61
Fully Diluted 1.97 2.39 2.76 2.88 2.96 1.61
Cash Dividends per
Common Share .71 .82 .97 1.07 1.16 .61
Book Value per Common
Share (at period end):
Primary 15.07 16.13 17.86 18.82 21.32 21.46
Fully Diluted 14.35 15.36 17.86 18.82 21.32 21.46
-12-
Seaway Financial Corporation<F2>
Net Income per Common Share:
Primary $ 2.12 $ 2.32 $ 2.39 $ 2.32 $ 2.41 $ 1.29
Fully Diluted 2.12 2.32 2.39 2.32 2.41 1.29
Cash Dividends per
Common Share .93 .99 1.07 1.09 1.18 .64
Book Value per Common
Share (at period end):
Primary 17.99 19.33 20.91 20.73 23.16 23.58
Fully Diluted 17.99 19.33 20.91 20.73 23.16 23.58
PRO FORMA PER SHARE DATA
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1995 JUNE 30, 1996
PRO FORMA Combined (per Old Kent share)
Net Income per Common Share:
Primary $ 2.92 $ 1.59
Fully Diluted 2.92 1.59
Cash Dividends per
Common Share<F3> 1.16 .61
Book Value per Common
Share (at period end):
Primary 21.24 21.38
Fully Diluted 21.24 21.38
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1995 JUNE 30, 1996
Equivalent PRO FORMA Combined
Per Seaway Share<F4>
Net Income per Common Share:
Primary $ 3.51 $ 1.91
Fully Diluted 3.51 1.91
Cash Dividends per
Common Share 1.39 .73
Book Value per Common
Share (at period end):
Primary 25.52 25.68
Fully Diluted 25.52 25.68
_____________________________
<FN>
<F1> Adjusted for 5 percent stock dividends paid in 1996 and 1995.
-13-
<F2> Adjusted for a 10 percent stock dividend paid in 1995 and a 20 percent
stock dividend paid in 1993.
<F3> For the purposes of this presentation, the PRO FORMA combined cash
dividends declared 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.
<F4> The Seaway 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 Ratio of 1.2013 shares of Old Kent
Common Stock for each share of Seaway Common Stock. This Exchange
Ratio assumes a Purchase Price Per Share of $43.9057 and a Calculation
Price of $36.5477, which is midway between the $38.4524 upper limit
and the $34.6429 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 $31.0655).
</FN>
GENERAL MEETING INFORMATION
PURPOSE
The special meeting of Seaway shareholders will be held for the
purpose of considering and voting upon a proposal to approve 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.
VOTING BY PROXY
If a Seaway shareholder properly executes and returns a proxy in the
form distributed by Seaway, the proxies named will vote the shares
represented by that proxy at the special meeting of shareholders of Seaway,
and at any adjournment of that meeting. Where a shareholder specifies a
choice, the proxy will be voted in accordance with the shareholder's
specification. If no specific direction is given, the proxies will vote
the shares in favor of approval of the Plan of Merger.
Seaway'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 shareholder may revoke a proxy at any time prior to its exercise by
written notice delivered to the corporate secretary of Seaway or by
attending the special meeting of shareholders and voting in person.
-14-
PROXY SOLICITATION
The board of directors, officers and employees of Seaway will
initially solicit proxies by mail. If they deem it advisable, directors,
officers and employees of Seaway and the Banks 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 Seaway'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, Seaway's management may request that
directors, officers and employees of Old Kent and its subsidiaries assist
in the proxy solicitation. If management makes such a request, such
persons may also solicit proxies of Seaway shareholders by mail, telephone
and personal interview without additional compensation. All expenses of
solicitation of proxies will be paid by Seaway.
VOTING RIGHTS AND RECORD DATE
Only shareholders of record of Seaway Common Stock at the close of
business on ________________, 1996 (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
Seaway Common Stock were issued and outstanding. As of August 31, 1996,
437,086 shares, or 25.9 percent of the outstanding shares of Seaway Common
Stock, were beneficially owned by directors and executive officers of
Seaway and their affiliates, although Franklin H. Moore, Jr. disclaims
beneficial ownership of 330,613 shares held by trusts of which he is a
beneficiary. These individuals have agreed that they will use their best
efforts to cause the Plan of Merger to be approved by the shareholders
of Seaway and consummated according to its terms. Each holder of record
of Seaway 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
for a vote of the shareholders at the special meeting. The Merger must be
approved by the affirmative vote of the holders of a majority of the
outstanding shares of Seaway 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 approval of the Plan of Merger.
EXPENSES
Old Kent will pay all printing expenses and filing fees pertaining to
the Registration Statement. Seaway 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
breaches of the Plan of Merger by Old Kent or Seaway, if the Plan of Merger
is terminated before the Merger becomes effective, Old Kent and Seaway 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,
-15-
including fees and expenses of its own legal counsel, accountants and other
experts.
THE MERGER
The respective boards of directors of Old Kent and Seaway have adopted
an Agreement and Plan of Merger dated as of August 21, 1996 (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 January of 1996, with authority of the board of directors, Mr.
Franklin H. Moore, Jr., Chairman and Chief Executive Officer of
Seaway, contacted AFSI, in Toledo, Ohio, to discuss and consider the
feasibility and merits of the sale of the organization in light of the
then existing merger and acquisition environment. Mr. Moore contacted AFSI
because of its experience in handling similar bank sale transactions in the
state of Michigan and throughout the Midwest. On February 2, 1996,
Seaway engaged AFSI to act as its exclusive financial adviser with
respect to strategic alternatives including the possible sale, merger,
consolidation or other business combination involving Seaway. Following
its engagement, AFSI prepared and delivered to the board of directors a
valuation of the fair value of Seaway on a sale basis. The board
of directors accepted the findings of the valuation report in February
of 1996 and authorized AFSI to solicit preliminary offers.
On March 8, 1996, AFSI prepared and mailed a description of Seaway to
approximately 37 organizations AFSI believed would be interested in
acquiring Seaway. The description provided current and historical
financial performance trends and key aspects of the structure of Seaway.
At that time Seaway was not disclosed as the subject organization in the
material. Respondents were requested to complete and return a
confidentiality statement indicating their interest in receiving a full
package of information on the as yet unreferenced organization. Of the
original 37 letters mailed, 11 banking organizations signed and returned
the confidentiality agreement.
On March 27, 1996, extensive financial and other information about
Seaway was forwarded to each organization which signed and returned the
confidentiality agreement. AFSI received written indications of interest
-16-
in affiliating with Seaway from 4 regional multi-bank holding companies.
On April 25, 1996, Seaway's board met with representatives of AFSI to
assist the board in evaluating these indications of interest. At this
meeting, the board of directors, with the assistance of AFSI, reviewed the
financial and nonfinancial terms of each purchase offer. Of the 4 purchase
offers received, one was significantly lower than the other 3 offers.
After consideration, the board determined to focus its efforts on reviewing
the remaining 3 indications of interest. As such, all 3 organizations were
provided the opportunity to discuss their offer and their organization at a
meeting with Seaway's board. Old Kent met with the Seaway board on April 30,
1996, to discuss its offer. One of the other offers was withdrawn so that
the organization could pursue other opportunities.
On May 10, 1996, the board of directors of Seaway and AFSI met with
the other bidder. On May 16, 1996, the board of directors met again via
telephone conference. At this time the board reviewed amended purchase
offers received from Old Kent and the other institution. The board
determined, with the assistance of AFSI, that Old Kent was the preferred
bidder due (in no specific priority) to the cultural differences with the
other offeror, current lower and anticipated lesser volatility in the price
of Old Kent Common Stock, the uncertainty as to the status of the trust
department from the other institution, and a perception that the management
style and stability of Old Kent would result in a better long-term future
for the shareholders of Seaway. As a result of these discussions, the
board instructed AFSI to pursue negotiations with Old Kent.
After considerable negotiations, a letter of intent was reached with
Seaway and Old Kent on June 3, 1996, and a joint press release announcing
the proposed transaction was released. Negotiation of the definitive
agreement was initiated. On July 24, 1996, the board met to review and
consider the definitive agreement between Old Kent and Seaway. As a result
of this review, several additional items were identified for further
negotiation. On July 30, 1996, the Seaway board of directors unanimously
voted to adopt the Plan of Merger. On August 21, 1996, the Plan of Merger
between Seaway and Old Kent was signed and a joint press release was issued
announcing the execution of the Plan of Merger.
MERGER RECOMMENDATION AND REASONS FOR THE TRANSACTION
The terms of the Plan of Merger, including the Exchange Ratio, were
the result of arm's-length negotiations between Seaway 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 Seaway consulted
with its special legal and financial advisers, as well as with management
of Seaway. Without assigning any relative or specific weights, the board
considered numerous factors, including but not limited to the following:
(i) The transaction will result in no immediate gain or loss,
for tax purposes, to Seaway's shareholders;
-17-
(ii) The Plan of Merger provides for a floating Exchange Ratio
that contemplates an upper and lower limit which sets a minimum and
maximum number of shares to be issued and a "walkaway" right that
would permit Seaway to request an adjustment in the Exchange Ratio or
terminate the Plan of Merger if the per share price of Old Kent Common
Stock declined more rapidly than a comparable group of stocks;
(iii) 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 Seaway shareholders than other alternatives
available and would enhance Seaway's competitiveness and its ability
to serve its depositors, customers and the communities in which it
operates;
(iv) Old Kent's significant long-term experience in integrating
the operations of banks and bank holding companies;
(v) The economic conditions and prospects for the market in
which Seaway operates, and competitive pressures in the financial
services industry in general and the banking industry in particular;
(vi) The Merger was expected to offer Seaway shareholders greater
liquidity for their shares and prospects for continued growth than if
Seaway were to remain independent;
(vii) The bank regulatory environment in general;
(viii) The business, results of operations, asset quality and
financial condition of Old Kent, the perceived future growth prospects
of Old Kent and Seaway following the Merger and the potential
synergies and cost savings expected to be realized from the Merger;
and
(ix) The presentations of Seaway's financial adviser, AFSI, and
the opinion rendered by AFSI to the effect that the terms of the Plan
of Merger were fair, from a financial point of view, to the holders of
Seaway Common Stock. (See "The Merger--Opinion of Financial
Adviser.")
As of August 31, 1996, the directors and executive officers of Seaway,
together with their affiliates and associates, as a group, were entitled to
a vote of approximately 437,086 shares of Seaway Common Stock representing
approximately 25.9 percent of the shares outstanding, although Franklin H.
Moore, Jr. disclaims beneficial ownership of 330,613 shares held by trusts
of which he is a beneficiary. These persons will be entitled to receive
the same consideration for their shares as any other Seaway shareholder
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 approved by Seaway
shareholders and consummated according to its terms. (See "The Merger--
-18-
Agreements of Affiliates.") After the Merger, Seaway's directors,
executive officers, affiliates and associates as a group will own
approximately .90 percent of the shares of Old Kent Common Stock
outstanding.
Old Kent believes the proposed Merger will enable Old Kent to improve
its geographic diversification by expanding Old Kent's presence into the
St. Clair County, Michigan, area. In addition, 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.
SEAWAY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS OF SEAWAY VOTE FOR APPROVAL OF THE PLAN OF MERGER.
OPINION OF FINANCIAL ADVISER
Seaway's board of directors retained AFSI to act as exclusive
financial adviser with respect to a review of Seaway's strategic
alternatives and the possible sale or merger, involving all or a
substantial amount of the business, securities or assets of Seaway.
Seaway selected AFSI as its financial adviser because of its reputation
and because AFSI has significant experience in transactions similar to
that contemplated by the Plan of Merger. As part of its services, AFSI
analyzed Seaway and its operations, historical performance and future
prospects, identified and contacted selected bank holding companies
acceptable to the Seaway board of directors to solicit indications of
interest in a possible business combination with Seaway, participated
in negotiations concerning the financial aspects of the Plan of Merger
under the guidance of the Seaway board of directors, and provided an
opinion as to the fairness, from a financial point of view, of the
terms of the Plan of Merger to the holders of Seaway Common Stock.
AFSI is a nationally recognized investment banking firm specializing
in the banking and financial services industry. AFSI is continually
engaged in the valuation of businesses and securities in connection with
mergers and acquisitions and valuations for estate, corporate and other
purposes. In the past 10 years, AFSI has not provided professional
services and/or products to Old Kent or Seaway in the ordinary course of
business. Furthermore, AFSI does not contemplate any future business with
Seaway and/or Old Kent arising from this engagement, nor has its opinion
concerning the fairness, from a financial point of view, of the terms of
the Plan of Merger been subject to indications of future business with
either Seaway or Old Kent.
AFSI has rendered a written opinion to the Seaway board of directors
to the effect that, as of the date of this Prospectus and Proxy Statement,
the terms of the Plan of Merger are fair, from a financial point of view,
to the shareholders of Seaway. No limitations were imposed by the board of
-19-
directors of Seaway upon AFSI with respect to the investigations made or
procedures followed by AFSI in rendering its opinion. The full text of the
opinion of AFSI dated the date of this Prospectus and Proxy Statement,
which sets forth assumptions made, matters considered and limits on the
review undertaken by AFSI, is included as Appendix B to this Prospectus and
Proxy Statement. SEAWAY SHAREHOLDERS ARE URGED TO READ THIS OPINION IN ITS
ENTIRETY.
AFSI's opinion is directed only to the fairness, from a financial
point of view, of the terms of the Plan of Merger and does not constitute a
recommendation to any Seaway shareholder as to how such shareholder should
vote at the special meeting of Seaway shareholders on any matter.
In connection with its opinion, AFSI reviewed and analyzed material
and information bearing upon the financial operating condition of Seaway
and Old Kent including, but not limited to: (i) audited financial
statements of Seaway and Old Kent for the years ending 1990-1995; (ii)
financial statements of Seaway and Old Kent for June 30, 1996; (iii)
certain other public information on Seaway and Old Kent; (iv) other
internal financial and operating information which was provided to AFSI
by Seaway and Old Kent; (v) 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; (vi) discussed
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 Seaway and Old Kent, both separately and on a
combined basis with certain officers and representatives of Seaway and
Old Kent; (vii) the reported price and trading activity for Seaway
Common Stock and Old Kent Common Stock, and compared certain financial and
stock market information for Seaway and Old Kent with similar information
for certain other companies the securities of which are publicly traded;
(viii) the financial terms of certain recent business combinations
in the financial institution industry and performed such other studies and
analyses as it considered appropriate; (ix) the Plan of Merger; and
(x) this Prospectus and Proxy Statement. AFSI 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. AFSI'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
AFSI through that date.
AFSI relied upon and assumed without independent verification the
accuracy and completeness of all of the financial and other information
provided to it by Seaway and Old Kent or from public sources. AFSI has not
made an independent evaluation of the assets of Seaway or Old Kent, but has
relied upon the books, records and audited financial statements of Seaway
and Old Kent, as presented to AFSI. In addition, AFSI did not independently
-20-
verify and relied on and assumed that the aggregate allowances for loan
losses set forth in the balance sheet of each of Seaway and Old Kent at
June 30, 1996, were adequate to cover such losses and complied fully with
applicable law, regulatory policy and sound banking practice as of the
date of such financial statements. Furthermore, AFSI did not independently
verify the carrying values of other real estate owned and loans classified
as in-substance foreclosures of each of Seaway and Old Kent in their
respective June 30, 1996, balance sheets, and AFSI assumed that such
carrying values complied fully with applicable law, regulatory policy and
sound banking practice as of such date. AFSI was not retained to and did
not conduct a physical inspection of any of the properties or facilities
of Seaway or Old Kent, nor did AFSI make any independent evaluation or
appraisal of the assets, liabilities or prospects of Seaway or Old Kent,
was not furnished with any such evaluation or appraisal and did not review
any individual credit files. AFSI also assumed that the Plan of Merger is,
and will be, in compliance with all laws and regulations that are applicable
to Seaway and Old Kent.
In connection with rendering its opinion to Seaway's board, AFSI
performed a variety of financial analyses which are summarized below.
AFSI's summary of such analyses as set forth in this Prospectus and Proxy
Statement does not purport to be a complete description of such analyses.
AFSI 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 AFSI's opinion. The
preparation of a fairness opinion is a complex process involving AFSI's
subjective judgments and is not necessarily susceptible to partial analysis
or summary description. In its analyses, AFSI made numerous assumptions
with respect to industry performance, business and economic conditions and
other matters, many of which are beyond the control of Seaway and Old Kent.
Any estimates contained in AFSI's analyses are not necessarily indicative
of future results or value, which may be significantly more or less
favorable than such estimates. AFSI's 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 AFSI's analyses was identical to Seaway or Old Kent
or the Plan of Merger. Accordingly, such analyses are not based solely on
arithmetic calculations; rather, they involve complex considerations and
judgments by AFSI 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 AFSI was
assigned a greater significance by AFSI than any other.
The following is a brief description of the analyses performed by AFSI
in connection with its opinion as described to Seaway's board of directors
by AFSI:
-21-
SUMMARY. The terms of the Plan of Merger between Old Kent and Seaway
provide that each share of Seaway Common Stock will be exchanged for Old
Kent Common Stock under the Exchange Ratio described in the Plan of Merger.
The Exchange Ratio shall be equal to the purchase price of $43.9057 divided
by the average of the closing prices per share of Old Kent Common Stock
reported on The NASDAQ Stock Market during the 10 consecutive trading days
ending on the tenth business day prior to the closing date of the
transaction ("Closing Price") subject to the following: (i) if the Closing
Price is greater than $38.4524 ("Ceiling Price") then the Exchange Ratio
shall be determined by dividing the Purchase Price Per Share by the Ceiling
Price; (ii) if the Closing Price is less than $34.6429 ("First Floor
Price") then the Exchange Ratio shall be determined by dividing the
Purchase Price Per Share by the First Floor Price; and (iii) an adjustment,
only upon agreement by Seaway and acceptance by Old Kent, if Old Kent's
Closing Price drops below $31.0655 and by dividing the Closing Price by
$36.5476 is more than 15 percentage points less than the percentage
determined by dividing the sum of the closing prices per share of a group
of comparison stocks at the closing date of the transaction by the same as
of May 14, 1996. Based on September __, 1996 data, the Closing Price at
$___ still remained above the $38.4524 Ceiling Price.
DISCOUNTED CASH FLOW. Using a discounted cash flow analysis, AFSI
projected the Banks' earnings from December 31, 1996 through December 31,
2000, assuming a minimum equity capital to asset ratio of 6 percent.
The present value per fully diluted share of Seaway Common Stock resulting
from this analysis was $32.31.
ADJUSTED BOOK VALUE. AFSI restated, where appropriate, the Banks'
assets and liabilities to their fair market values. The value per fully
diluted share of Seaway Common Stock resulting from this analysis was
$35.76.
WEIGHTED VALUE. AFSI used the same percentage weight (75 percent
weight for the discounted cash flow value and 25 percent weight for the
adjusted book value) to assign the results of each relevant valuation
technique for each Bank. AFSI then added together the weighted values of
each Bank resulting in a weighted average single value. Finally, AFSI
substituted the weighted average single value in the parent company only
balance sheet of Seaway to derive an aggregate fair value of Seaway. No
other adjustments to Seaway's parent company only balance sheet were deemed
necessary. The present value per fully diluted share of Seaway Common
Stock resulting from this analysis was $33.94.
ANALYSIS OF OTHER MERGER TRANSACTIONS. AFSI analyzed certain other
mergers and acquisitions in the Midwest (including the states of Michigan,
Ohio and Indiana) involving financial institutions with assets between
$200 million and $600 million. AFSI compared the multiples produced by the
Old Kent offer to the median multiples for the transactions analyzed.
AFSI's analysis showed that the range of implied valuations of Seaway,
-22-
applying the median transaction multiples described above to Seaway's
earnings and book value was $47.18 to $34.43 per share. The results
produced in this analysis do not purport to be indicative of actual values
or expected values of Seaway or shares of Seaway Common Stock.
ANALYSIS OF COMPARABLE COMPANIES. AFSI examined the operating and
trading performance of Seaway in comparison to selected publicly traded
bank/bank holding companies located in the Midwest with total assets of
between $200 million and $600 million. AFSI analyzed the relative
performance and outlook for Seaway by comparing certain financial and
trading market information of Seaway with the group of comparable banks.
AFSI compared Seaway 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, 1996, the
multiple of median market price to latest 12 months earnings was 11.78 for
the comparable banks. The median price to stated book value was 154.10
percent for the comparable banks. The implied market trading values for
Seaway derived from such comparable company analysis utilizing the
resulting median valuation ratios ranged from approximately $29.21 to
$36.06 per share.
Seaway and AFSI have entered into a letter agreement, dated
February 2, 1996 (the "AFSI Engagement Letter"), relating to the services
to be provided by AFSI in connection with the Plan of Merger. Seaway has
agreed to pay AFSI a fee (the "Fee") for its services equal to .50 percent
of the value of the consideration received by Seaway and its shareholders
which, based upon a projected $43.9057 equivalent price for each share of
Seaway Common Stock, will equal $370,000. 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 AFSI Engagement Letter, AFSI's billing charges
above the initial $25,000 were paid on a monthly basis, and the remaining
balance will be paid at the effective time of the Plan of Merger. All such
payments are non-refundable. In the AFSI Engagement Letter, Seaway also
has agreed to indemnify AFSI and its officers, directors, shareholders,
employees and agents for all of its time, expenses, and any liability
incurred as a result of AFSI's proposed engagement by means of legal
action, administrative proceedings or threat thereof, unless such action,
pending or threat thereof is caused by AFSI's own unlawful conduct, breach
of duty or negligence during the course of performing AFSI's services.
AFSI, in rendering its opinion, has assumed that the transaction will
be a tax-free reorganization with no material adverse tax consequences to
any of the parties involved, or to Seaway shareholders receiving Old Kent
Common Stock. In addition, AFSI has assumed that in the course of
obtaining the necessary regulatory approvals for the transaction, no
condition will be imposed upon Seaway or Old Kent that will have a
materially adverse impact on the contemplated benefits of the proposed
transaction to Seaway and Old Kent and their shareholders.
-23-
CONVERSION OF SEAWAY SHARES
Pursuant to the Plan of Merger, Seaway is soliciting proxies from
Seaway shareholders for the purpose of approving the Plan of Merger. The
affirmative vote of the holders of a majority of the outstanding shares of
Seaway Common Stock is required to approve the Plan of Merger.
At the time the Merger becomes effective, Seaway will be merged with
and into Old Kent. The surviving corporation will be Old Kent and will own
both Banks and all of the other assets of Seaway. The articles of
incorporation of the surviving corporation will be the Restated Articles of
Incorporation of Old Kent without change from the Restated 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 Seaway Common Stock will be converted into the number
of shares of Old Kent Common Stock equal to the "Exchange Ratio." The
Exchange Ratio will be equal to $43.9057 (the "Purchase Price Per Share")
divided by the average of the per share closing prices of Old Kent Common
Stock reported on The NASDAQ Stock Market during the 10 consecutive trading
days ending on the tenth business day before the date of the closing (the
"Pricing Period") as reported in the DOW JONES NEWS/RETRIEVAL system, or
other equally reliable means (as so calculated, the "Final OKEN Stock
Price"). Notwithstanding that average, the per share price of Old Kent
Common Stock to be used in calculating the Exchange Ratio (the "Calculation
Price") will not be more than $38.4524 per share nor less than $34.6429 per
share unless certain conditions exist. If such conditions exist, Seaway
may request a decrease in the Calculation Price and Old Kent may agree to
such decrease. Only if a decrease in the Calculation Price is requested
and agreed to will the Calculation Price be less than $34.6429. For a
description of the conditions that must exist before Seaway 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 $31.0655.
(See "The Merger--Stock Price Condition.")
The Exchange Ratio 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 Seaway Common Stock outstanding, as the case may be.
The purpose of any such adjustment to the Exchange Ratio would be to
prevent dilution of the interests of the respective shareholders of Old
Kent and/or Seaway upon the occurrence of certain dilutive events listed in
the Plan of Merger. It is expected that none of these events will occur
and that no adjustment of the Exchange Ratio for any such event will be
necessary.
-24-
Old Kent will not issue fractional shares of Old Kent Common Stock in
the Merger. A Seaway shareholder 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 OKEN Stock Price.
Shareholders of Seaway are not entitled to dissenters' rights under
the Michigan Business Corporation Act in connection with the Merger. (See
"No Dissenters' Rights.")
STOCK PRICE CONDITION
Seaway will not be obligated to consummate the Merger at any time when
both of the following conditions exist: (i) the Final OKEN Stock Price is
less than $31.0655, subject to certain adjustments; and (ii) the percentage
determined by dividing the Final OKEN Stock Price by $36.5476 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 Pricing Period by the sum of the
closing prices of those comparison stocks on May 14, 1996. 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 Seaway need not consummate the
Merger at a time when the price of Old Kent Common Stock has declined
substantially from the price prevailing when Seaway's board of directors
approved the Merger and the price decline has been disproportionate to any
decline in the average price of the comparison stocks.
If both of these conditions exist, Seaway will have the right until
the third business day after the last day of the Pricing Period (the
"Exercise Period") to: (i) abandon the Merger and terminate the Plan of
Merger; (ii) proceed with the Merger on the basis of the Exchange Ratio
without adjustment; or (iii) request Old Kent to increase the Exchange
Ratio (an "Increase Notice") for each share of Seaway Common Stock to that
number of shares of Old Kent Common Stock determined by dividing the
Purchase Price Per Share by $31.0655 (the "Adjusted Exchange Ratio"). If
Old Kent receives an Increase Notice, Old Kent may either accept or decline
the Adjusted Exchange Ratio. If Old Kent accepts the Adjusted Exchange
Ratio, the Plan of Merger will remain in effect except that the Exchange
Ratio will be equal to the Adjusted Exchange Ratio. If Old Kent declines
the Adjusted Exchange Ratio, the Merger will be abandoned; provided, that
if Old Kent declines the Adjusted Exchange Ratio, Seaway may elect to
proceed with the Merger on the basis of the Exchange Ratio without any
adjustment.
-25-
DISTRIBUTION OF OLD KENT COMMON STOCK
As of the effective time of the Merger, holders of Seaway Common Stock
outstanding immediately prior to the effective time of the Merger will
cease to be shareholders of Seaway and consequently will have no rights as
Seaway shareholders. Certificates that represented shares of Seaway 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
shareholder of Seaway shall receive dividends payable to holders of record
of Old Kent Common Stock after the effective time of the Merger until the
physical exchange of that shareholder's Old Certificates for new Old Kent
Common Stock certificates shall have been effected. Upon physical exchange
of that shareholder'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 any taxes, if any, which may have been
imposed or paid) declared and paid with respect to those shares.
As soon as practicable after the Merger becomes effective, Old Kent
will send to record holders of Seaway 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, 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 a Seaway shareholder, the Exchange Agent will issue and
deliver new stock certificates to the shareholder. The Exchange Agent will
issue and deliver certificates in the name and to the address appearing on
Seaway'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
shareholder until it has received all of the Old Certificates held of
record by that shareholder, 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.
-26-
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 Seaway 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
Kent Common Stock issuable under the Plan of Merger. However, no former
shareholder of Seaway will be entitled to receive a distribution of such
dividends until physical exchange of that shareholder's Old Certificates
shall have been effected. Upon physical exchange of that shareholder's Old
Certificates, he or she will 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 Seaway will
not transfer on the stock transfer books of Seaway any shares of Seaway
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 shareholder 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 a certificate of merger filed in accordance with the Michigan
Business Corporation Act. If the shareholders of Seaway approve the Plan
of Merger at the special meeting of Seaway shareholders, 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 1997, provided that
the Plan of Merger has not been terminated prior to such time. The Merger
may not be consummated for a period of 30 days after receipt of the Federal
Reserve Board's final approval unless the Federal Reserve Board has not
received any adverse comments from the United States Department of Justice
during the first 15 days following final approval, in which case the Merger
may be consummated on or after the fifteenth day after the final approval
by the Federal Reserve Board. An application for prior approval of the
Merger was submitted to the Federal Reserve Board on ________________,
1996. Although such approval is anticipated, there can be no assurance
when or if such approval will be granted, or when or if any other condition
to the Merger will be satisfied.
-27-
BUSINESS OF SEAWAY PENDING THE MERGER
The Plan of Merger contains covenants to which Seaway 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
agreement that Seaway and each of its subsidiaries will: (i) conduct its
business and manage its property only in the usual, regular and ordinary
course; (ii) not enter into any employment agreement which is not
terminable, without cost or penalty, on 60 days' or less notice; (iii) 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; (iv) not make any material changes in any policies
or procedures applicable to the conduct of its business; (v) 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; (viii) not borrow money except in
the ordinary course of business; and (ix) not change its articles of
incorporation or its bylaws.
Nothing contained in the Plan of Merger will preclude Seaway from
declaring and paying cash dividends on Seaway Common Stock quarterly at a
rate not to exceed $.32 per share in a manner, on dates and with respect to
record dates consistent with its past practice, subject to maintaining
capital ratios not less than as reported at December 31, 1995; provided,
that Seaway 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 Seaway shareholders receive only one dividend
payable in the quarter in which the Merger becomes effective with respect
to shares of Seaway Common Stock or Old Kent Common Stock received in the
Merger. The board of directors of Seaway is under no obligation to pay
dividends on Seaway Common Stock.
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 Commercial and Algonac who were engaged
immediately prior to the effective time of the Merger will continue
immediately after the effective time of the Merger as directors, officers
and employees of Commercial and Algonac.
-28-
CONDITIONS TO THE MERGER AND ABANDONMENT
The obligations of Old Kent and Seaway to consummate the Merger are
subject to the fulfillment of certain conditions, including, without
limitation, the following:
(i) An affirmative vote of the holders of a majority of the
outstanding shares of Seaway Common Stock is required to approve the
Plan of Merger.
(ii) The Federal Reserve Board must approve the Merger.
(iii) Old Kent and Seaway 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 Seaway Pending the Merger.")
(iv) Old Kent and Seaway must receive certain opinions of
counsel.
(v) Seaway 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 Seaway resulting from the Merger.
(vi) Neither Old Kent nor Seaway must be subject to any order,
decree or injunction of a court or agency enjoining or prohibiting the
Merger.
(vii) 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 the financial condition, income, expenses,
business, properties, operations or prospects of Seaway and its
subsidiaries on a consolidated basis or that challenges the Merger.
Either Old Kent or Seaway, 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
contains various other conditions to the respective obligations of Old Kent
and Seaway that have been satisfied.
The boards of directors, or duly authorized committees thereof, of
Seaway 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.
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:
-29-
(i) Old Kent discovers that one or more of Seaway's
representations and warranties is or has become untrue and the
cumulative effect of all such untrue representations and warranties
is material relative to the financial condition, income, expenses,
business, properties, operations or prospects of Seaway and its
subsidiaries on a consolidated basis;
(ii) There occurs a materially adverse change in the financial
condition, income, expenses, business, properties, operations or
prospects of Seaway or any of its subsidiaries on a consolidated basis
for reasons unique to Seaway or its subsidiaries and not the banking
industry as a whole;
(iii) An environmental assessment indicates any environmental
conditions which Old Kent in its discretion believes could potentially
pose a current or future risk of a material liability, interference
with use or diminution of value of the property, Old Kent has notified
Seaway of such conditions and Seaway has not cured such conditions to
Old Kent's reasonable satisfaction within the 30-day period specified
for that purpose in the Plan of Merger, or any extension of that
period; or
(iv) Seaway or its subsidiaries, or any of their respective
directors, officers, employees, investment bankers, representatives or
agents, solicit, encourage or negotiate 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 Seaway or its
subsidiaries.
Seaway 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:
(i) Seaway discovers that one or more of Old Kent's
representations and warranties is or has become untrue and the
cumulative effect of all such untrue representations and warranties is
material to the financial condition, income, expenses or business of
Old Kent and its subsidiaries on a consolidated basis; or
(ii) There occurs a materially adverse change in the financial
condition, income, expenses or business of Old Kent and its
subsidiaries on a consolidated basis for reasons unique to Old Kent
and its subsidiaries and not the banking industry as a whole.
Either Seaway 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:
-30-
(i) Old Kent or Seaway 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;
(ii) The Merger is not effective on or before March 31, 1997;
(iii) A court of competent jurisdiction issues a final
unappealable injunction or other judgment restraining or prohibiting
consummation of the Merger;
(iv) The shareholders of Seaway fail to approve the Plan of
Merger; or
(v) The Federal Reserve Board or its delegate refuses to approve
the Merger.
See "The Merger--Stock Price Condition" for a description of the
conditions under which Old Kent or Seaway may terminate the Plan of Merger
and abandon the Merger following a decline in the value of Old Kent Common
Stock that is disproportionate to a change in the value of a group of
comparison stocks.
TERMINATION FEE
Under certain circumstances involving the acquisition of control of
Seaway by a party other than Old Kent, Seaway is required under the Plan of
Merger to pay Old Kent a "Termination Fee." Seaway shall pay to Old Kent a
Termination Fee of $7,400,000 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 Seaway, or its successor by merger or consolidation, or
acquires 25 percent or more of the consolidated assets of Seaway and the
Banks; or (ii) Seaway solicits, invites, negotiates or enters into an
agreement with a party other than Old Kent to acquire such control or such
assets, or Seaway 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.
DESCRIPTION OF OLD KENT CAPITAL STOCK
Old Kent's authorized capital stock consists of 150,000,000 shares of
common stock, $1.00 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 July 26, 1996, Old Kent had
-31-
outstanding 46,041,003 shares of Common Stock and no shares of Preferred
Stock. Old Kent expects to issue no more than 2,382,100 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
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 .605 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 Old
Kent's 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.
-32-
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, .605 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 was the surviving corporation in a merger
with an Acquiring Person and Old Kent Common Stock was not changed or
exchanged, an Acquiring Person was to become the beneficial owner of more
than 25 percent of the outstanding shares of Old Kent Common Stock or an
Acquiring Person was 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 2 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
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 2 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 10 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 establish a statutory scheme similar to the supermajority
and fair price provisions found in many corporate charters (the "Fair Price
Act"). 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
-33-
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: (i) the purchase price to be paid for the shares of
the corporation in the business combination must be at least equal to the
highest of either (a) the market value of the shares or (b) the highest per
share price paid by an 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 may 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. The Michigan Business Corporation Act 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
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.
-34-
COMPARISON OF RIGHTS OF OLD KENT SHAREHOLDERS AND SEAWAY SHAREHOLDERS
If the Merger is consummated, a person holding a given percent of the
outstanding shares of Seaway Common Stock will hold a lesser percent of the
outstanding shares of Old Kent Common Stock after the Merger. In addition,
because Old Kent is a larger entity than Seaway, the number of other
financial institutions and companies that have the resources to acquire Old
Kent will be smaller than for Seaway.
Seaway Common Stock is not listed on a securities exchange or
quotation system. Old Kent's shareholders enjoy a broader and more active
market for Old Kent Common Stock than has historically existed for Seaway
Common Stock. Listing on The NASDAQ Stock Market provides market
quotations which are useful in resolving questions of fair valuation.
Old Kent is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Although
Seaway is presently subject to a number of these reporting requirements, it
is not subject to all of the reporting requirements applicable to Old Kent.
Seaway's shareholders will therefore benefit from Old Kent's registration
under the Exchange Act which will provide Seaway's shareholders with more
current and detailed information regarding Old Kent than presently exists
with respect to Seaway.
As bank holding companies, both Old Kent's and Seaway's corporate
affairs are governed by the Michigan Business Corporation Act. Therefore,
persons who receive shares of Old Kent Common Stock in the Merger will have
similar rights to those they presently possess as shareholders of Seaway,
subject to the following.
DISSENTERS' RIGHTS. Under Michigan 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 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 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 Restated 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 the usual or regular course of business, in the manner, with the rights
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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 permits corporations to limit the personal liability of their directors
in certain circumstances. Old Kent's Restated Articles of Incorporation
and Seaway's Articles of Incorporation both provide that directors of the
respective corporation shall not be liable to the corporation or its
shareholders for monetary damages for breaches of fiduciary duty, except to
the extent that such a limitation of liability contravenes Michigan law.
These provisions eliminate the personal liability of directors of Old Kent
and Seaway in their capacity as directors (but not in their capacity as
officers) to the respective corporation and its shareholders to the full
extent permitted by Michigan law.
EVALUATION OF PROPOSED OFFERS. Old Kent's Restated 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 that it deems relevant including,
without limitation: (i) the fairness of the consideration to be received
by Old Kent's 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
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subsidiaries 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.
AGREEMENTS OF AFFILIATES
The shares of Old Kent Common Stock to be issued to Seaway
shareholders pursuant to the Plan of Merger have been registered under the
Securities Act of 1933. That registration, however, does not cover resales
by Seaway shareholders who may be deemed to control or be controlled by, or
be under common control with, Seaway at the time of the special meeting of
shareholders ("Affiliates").
Each director and executive officer of Seaway, all of whom have been
identified by Seaway as Affiliates of Seaway, 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, as amended (the "Securities Act"), or applicable
rules and regulations. 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 Seaway has agreed
not to voluntarily sell or dispose of any shares of Seaway Common Stock
without Old Kent's written consent (except as may be necessary to discharge
a fiduciary duty or by gift made for estate planning purposes).
Each director and executive officer of Seaway has agreed that he or
she will use his or her best efforts to cause the Plan of Merger to be
approved by the shareholders of Seaway and consummated according to its
terms. Each such person has also agreed not to solicit, negotiate, discuss,
accept or approve any offers or proposals from, or enter into any agreement
with, any third party concerning a tender offer, merger, consolidation,
share exchange or other business combination involving Seaway or concerning
the offer, sale or disposition of any material assets of Seaway (other than
asset dispositions in the ordinary course of business).
FEDERAL INCOME TAX CONSEQUENCES
As a condition precedent to the Merger, Old Kent and Seaway must
obtain an opinion of Warner Norcross & Judd LLP substantially to the effect
that (among other issues) for federal income tax purposes:
(i) The Merger of Seaway with and into Old Kent will constitute
a reorganization within the meaning of Section 368(a)(1)(A) of the
Internal Revenue Code of 1986, as amended (the "Internal Revenue
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Code"), and Old Kent and Seaway will each be a "party to a
reorganization" within the meaning of Section 368(b) of the Internal
Revenue Code;
(ii) The basis of the Seaway assets in the hands of Old Kent will
be the same as the basis of those assets in the hands of Seaway
immediately prior to the Merger;
(iii) No gain or loss will be recognized to Old Kent on the
receipt by Old Kent of the assets of Seaway in exchange for Old Kent
Common Stock and the assumption by Old Kent of the liabilities of
Seaway;
(iv) The holding period of the assets of Seaway in the hands of
Old Kent will include the holding period during which such assets were
held by Seaway;
(v) No gain or loss will be recognized by the shareholders of
Seaway who receive shares of Old Kent Common Stock in exchange for all
of their shares of Seaway Common Stock, except to the extent of any
cash received in lieu of a fractional share of Old Kent Common Stock;
(vi) The basis of the Old Kent Common Stock to be received by
shareholders of Seaway will, in each instance, be the same as the
basis of the respective shares of Seaway Common Stock surrendered in
exchange for them; and
(vii) The holding period of the Old Kent Common Stock received by
shareholders of Seaway will, in each instance, include the period
during which the Seaway Common Stock surrendered in exchange for them
was held, provided that the Seaway Common Stock was, in each instance,
held as a capital asset in the hands of the shareholder of Seaway at
the effective time of the Merger.
The opinion of Warner Norcross & Judd LLP will be based on one or more
certificates or affidavits of fact provided by Old Kent and/or Seaway.
EACH SHAREHOLDER OF SEAWAY SHOULD CONSULT A PROFESSIONAL TAX ADVISER
ON THE TAX CONSEQUENCES OF THE MERGER TO SUCH SHAREHOLDER. 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 purchase for accounting
purposes. Under generally accepted accounting principles governing
purchase accounting, Old Kent would record the assets and liabilities of
Seaway at their fair market value at the effective time of the Merger.
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SEAWAY FINANCIAL CORPORATION
BUSINESS
Seaway, a bank holding company, was incorporated in Michigan on
February 1, 1988. On September 30, 1988, Seaway acquired all of the stock
of Commercial, a Michigan banking corporation chartered in 1871, and all of
the stock of Algonac, a Michigan banking corporation chartered in 1912.
The Banks provide a full range of commercial banking products and
services to individuals, commercial businesses and light industrial
businesses in their respective service areas. The Banks maintain
diversified loan portfolios, including loans to individuals for home
mortgages, automobiles, home improvements and other personal expenditures
and loans to business entities for current operating needs, as well as
asset acquisition needs. Both Banks offer a wide variety of checking,
savings, money market accounts, as well as individual retirement accounts
and certificates of deposit. Commercial operates a full service trust
department which offers a full line of trust services. These include
personal trusts, estates, conservatorships, employee benefit plans, estate
planning, tax planning and preparation, as well as a number of mutual fund
products, full brokerage services through an agreement with Prime Vest and
both fixed rate and variable rate annuities. Commercial currently provides
trust services on a contract basis to several other banks in Southeastern
Michigan.
Seaway relies solely upon the Banks for its revenues. On a
consolidated basis, income from interest on loans and fees on loans
accounted for 59 percent of Seaway's total revenues in 1995, 54.9 percent
in 1994 and 55.9 percent in 1993. Interest on investment securities
accounted for 27.8 percent of total revenues in 1995, 30.7 percent in 1994
and 28.4 percent in 1993. Fiduciary fees and other service fees accounted
for 13.2 percent of total revenues in 1995, 14.4 percent in 1994 and 15.5
percent in 1993.
Seaway enjoyed strong earnings for 1995, a new record high. Net
income at $4.061 million was a 4 percent increase from the $3.907 million
recorded in 1994 and above the previous record year of 1993 with $4.022
million. Total assets increased by $10 million to end the year at $347.8
million. Total assets for 1994 and 1993 were $337.8 and $349.8,
respectively.
As of year-end 1995, Seaway and the Banks had 275 employees including
part-time staff.
Seaway is a bank holding company which, through the Banks, is engaged
in the business of commercial banking. The business of commercial banking
in Seaway's marketplace is highly competitive. In addition to competition
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from other commercial banks, banks face significant competition from
savings and loan associations, credit unions, finance companies, insurance
companies and investment and brokerage firms. The principal methods of
competition for financial services are price (interest rates paid on
deposits, interest rates charged on borrowings and fees charged for
services) and service (convenience and quality of services rendered to
customers). The principal market for the Banks is St. Clair County,
Michigan. Commercial services the areas in Northern and Western St. Clair
County through its offices located in Emmett, Yale, Wadhams, Krafft Road,
Marysville, Memphis, Fort Gratiot, Port Huron and St. Clair, Michigan.
Algonac serves the Southern area of St. Clair County through its offices
located in Marine City, Algonac, Pearl Beach, Fair Haven and Harsens
Island, Michigan. Neither Bank has any significant out of state or foreign
assets. Two major regional banks dominate the market and there are also 5
smaller commercial banks in the market. Twelve credit unions are active
competitors for consumer deposits and consumer loans in St. Clair County.
One strong savings and loan association that has recently converted to
a savings bank competes aggressively with Seaway's offices all across St.
Clair County. There are also numerous brokerage houses and insurance
companies offering financial services and products within St. Clair County.
Banks and bank holding companies are extensively regulated. Commercial
and Algonac are each chartered under state law and are supervised, examined
and regulated by the Financial Institutions Bureau of the Michigan
Department of Consumer and Industry Services and the Federal Deposit
Insurance Corporation ("FDIC") which insures the deposits of each institution.
Federal and state laws which govern banks significantly limit their
business activities in a number of respects. Prior approval of the Federal
Reserve Board, and in some cases various other government agencies, is
required for Seaway to acquire control of any additional banks or other
operating subsidiaries. The business activities of Seaway, and Commercial
and Algonac, are limited to banking and other activities which are
determined by the Federal Reserve Board to be closely related to banking.
Seaway is a legal entity separate and distinct from Commercial and
Algonac. There are legal limitations on the extent to which Commercial and
Algonac can lend or otherwise supply funds to Seaway. In addition, payment
of dividends to Seaway by Commercial and Algonac is subject to various
state and federal regulatory limitations.
Under Federal Reserve Board policy, Seaway is expected to act as a
source of financial strength to Commercial and Algonac and to commit
resources to support them. Under federal law, the FDIC also has authority
to impose special assessments on insured depository institutions to repay
FDIC borrowings from the United States Treasury or other sources and to
establish semiannual assessment rates on Bank Insurance Fund ("BIF") member
banks to maintain the BIF at the designated reserve ratio required by law.
-40-
Banks are subject to a number of federal and state laws and
regulations which have a material impact on their business. These include,
among others, state usury laws, state laws relating to fiduciaries, the
Truth in Lending Act, the Truth in Savings Act, the Equal Credit
Opportunity Act, the Fair Credit Reporting Act, the Expedited Funds
Availability Act, the Community Reinvestment Act, electronic funds transfer
laws, redlining laws, antitrust laws, environmental laws and privacy laws.
The instruments of monetary policy of authorities such as the Federal
Reserve Board may influence the growth and distribution of bank loans,
investments and deposits, and may also affect interest rates on loans and
deposits. These policies may have a significant effect on the operating
results of banks.
Under the Riegle-Neal Interstate Banking and Branching Efficiency Act
of 1994 ("IBBEA"), adequately capitalized and managed bank holding
companies are permitted to acquire existing out-of-state banks, whether or
not the host state permits such acquisitions. In addition, effective June
1, 1997, adequately capitalized and managed bank holding companies will be
permitted to combine into a single bank their subsidiary banks located in
more than one state thereby creating an interstate branch system. Under
IBBEA, states are permitted to "opt out" of this latter interstate
branching authority by taking action prior to the effective date. States
may also "opt in" early (i.e., prior to June 1, 1997). Further, IBBEA
provides that states may act affirmatively to permit DE NOVO branching by
banking institutions across state lines.
The nature of the business of Commercial and Algonac is such that they
hold title, on a temporary or permanent basis, to a number of parcels of
real property. These include properties owned for branch offices and other
business purposes as well as properties taken in or in lieu of foreclosure to
satisfy loans in default. Under current federal laws, and current state
laws if certain conditions are not satisfied, present and past owners of
real property are exposed to liability for the cost of clean up of
contamination on or originating from those properties, even if they are
wholly innocent of the actions that caused the contamination. These
liabilities can be material and can exceed the value of the contaminated
property.
Additional statistical information describing the business of Seaway
appears in Appendix E to this Prospectus and Proxy Statement.
PROPERTIES
Seaway's corporate headquarters are located at 200 South Riverside
Avenue, St. Clair, Michigan 48079, in a building owned by Commercial. The
Operations Center, which includes the accounting, auditing, compliance,
data processing, loan processing, marketing and operations functions, is
located at 975 Michigan Avenue, Marysville, Michigan 48040. The Operations
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Center is owned by Commercial. The Banks operate out of the following
locations, which are all owned by the Banks except the Krafft Road branch
office:
ALGONAC SAVINGS BANK:
Main Office: 1117 St. Clair River Drive, Algonac, Michigan 48001
Marine City: 6770 S. River Road, Marine City, Michigan 48039
Pearl Beach Office: 5318 Pte. Tremble Road, Algonac, Michigan 48001
Fair Haven Office: 8920 Dixie Highway, Fair Haven, Michigan 48023
Harsens Island Office: 1721 North Channel, Harsens Island, Michigan 48038
THE COMMERCIAL AND SAVINGS BANK OF ST. CLAIR COUNTY:
Main Office: 200 South Riverside Avenue, St. Clair, Michigan 48079
Trust Office: 300 South Riverside Avenue, St. Clair, Michigan 48079
Fort Gratiot Office: 3846 Pine Grove Avenue, Fort Gratiot, Michigan 48059
Wadhams Office: 5314 Lapeer Road, Kimball, Michigan 48074
Emmett Office: 3119 Main Street, Emmett, Michigan 48022
Yale Office: 3 North Main Street, Yale, Michigan 48097
Marysville Office: 3300 Gratiot Boulevard, Marysville, Michigan 48040
Memphis Office: 81111 Main Street, Memphis, Michigan 48041
Krafft Road Branch: 2907 Krafft Road, Port Huron, Michigan 48060
MainStreet Port Huron: 400 Huron Avenue, Port Huron, Michigan 48060
LEGAL PROCEEDINGS
Neither Seaway, Commercial nor Algonac is involved in any material
pending legal proceeding other than ordinary routine litigation considered
to be incidental to its business.
MARKET PRICE AND DIVIDENDS
MARKET INFORMATION. There is no established public trading market for
Seaway Common Stock. Transactions in Seaway Common Stock are occasionally
effected by individuals on an informal basis. Some transactions are
effected through the involvement of local or regional brokerage firms. The
prices at which such transactions are effected are only occasionally
reported to Seaway. The last transaction effected in Seaway Common Stock
for which price information is known to Seaway was effected on August 23,
1996, when 337 shares traded at a price of $41.00 per share. The last
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transaction prior to June 3, 1996 (the day immediately prior to public
announcement of the proposed Merger) effected in Seaway Common Stock for
which price information is known to Seaway was effected on May 28, 1996,
when 1,000 shares traded at a price of $36.50 per share. As of
August 31, 1996, there were 486 record holders of shares of Seaway Common
Stock.
DIVIDENDS. Seaway has paid regular cash dividends every quarter since
its formation on September 30, 1988. The following table summarizes the
quarterly cash dividends paid to common shareholders during the last 2 full
years for which financial information is presented and the first 2 quarters
of 1996:
QUARTER 1996 1995<F*> 1994<F*>
1st $.32 $ .28 $ .27
2nd .32 .30 .27
3rd .30 .27
4th .30 .28
TOTAL $1.18 $1.09
<FN>
____________________
<F*> These amounts have been adjusted for the 10 percent stock dividend
declared in April 1995.
</FN>
Holders of Seaway Common Stock are entitled to receive dividends when,
as and if declared by Seaway's board of directors out of funds legally
available for that purpose. The earnings of Seaway are the principal
source of funds to pay cash dividends. Consequently, cash dividends are
dependent upon the earnings, capital needs, regulatory constraints and
other factors affecting Seaway. See "The Merger--Business of Seaway
Pending the Merger" for a discussion of certain restrictions on Seaway's
ability to pay future dividends contained in the Plan of Merger.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion is provided by Seaway management as its
analysis of Seaway's financial condition and results of operations. This
analysis should be read in conjunction with the separate historical
financial statements of Seaway and notes thereto included elsewhere in this
Prospectus and Proxy Statement.
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TWELVE MONTHS ENDED DECEMBER 31, 1995, 1994 AND 1993
Seaway acquired all of the stock of Commercial on September 30, 1988,
in a transaction accounted for as a pooling of interests. On that same
date it acquired all of the stock of Algonac in a purchase transaction.
Seaway is a bank holding company which conducts all of its business
activities through its 2 subsidiary banks: Algonac and Commercial. All
per share earnings are restated to reflect the declaration of a 20 percent
stock dividend in April 1993 as well as a 10 percent stock dividend in
April 1995.
The combined Banks use their funds primarily to support lending
activities. Loans increased by $13 million or 7.5 percent in 1995 and
increased by $8 million or 5 percent in 1994 with a fairly constant
percentage of 53 percent to 55 percent of total assets invested in loans.
The loan increase in 1995 was $4 million in the consumer loan (installment)
total, $3 million in the residential mortgage loan total and $6 million in
the commercial loan total. Effective January 1, 1995, Statement of
Financial Accounting Standard (SFAS) No. 114, "Accounting by Creditors for
Impairment of a Loan" was adopted. The adoption of this standard did not
have a significant impact on Seaway's financial position or results of
operations.
Seaway adopted Statement of Financial Accounting Standard (SFAS) No.
122, "Accounting for Mortgage Servicing Rights," effective January 1, 1996.
As a result of applying the new rules, servicing rights retained on
mortgage loans sold (or securitized) will be required to be recorded as a
separate asset. For loans with servicing rights retained, an allocation of
the cost of the mortgage loans is made between the mortgage servicing
rights and the loans (without mortgage servicing rights) based on their
relative fair values. Any subsequent impairments will be recognized
through a valuation allowance. Seaway does not expect the adoption of SFAS
No. 122 to have a material impact on Seaway's financial position or results
of operations.
Investment securities, another major use of funds, decreased in 1995.
Statement of Financial Accounting Standard (SFAS) No. 115 was adopted as of
December 31, 1993, and created a separate category, investment securities
available for sale, that are recorded at market value. The procedure of
recording the securities at market increased shareholders' equity, in a
separate component net of income taxes, by $93,000 in 1995. The unrealized
gain included in shareholders' equity increased $2,008,000 in 1995. Loans
increased $13 million in 1995. The Banks experienced an increase of $2
million in demand deposits during both 1995 and 1994. Federal funds sold
increased $11 million in 1995. Estimated market value of tax exempt
securities was $40,576,000 on December 31, 1995, and $38,876,000 on
December 31, 1994.
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Tax exempt securities continued to average approximately 11 percent of
total assets in 1995. In addition, investment securities represented 36
percent of total assets at December 31, 1995, and 41 percent of total
assets at December 31, 1994.
Seaway experienced a slight increase in combined deposits and
repurchase agreements during 1995 from almost $301 million at year-end 1994
to $307 million at year-end 1995. Interest bearing deposits increased $22
million in 1995. The percentage of total assets represented by non-interest
bearing deposits continued at 12 percent versus 12.1 percent last
year.
Total average deposits increased by 1 percent in 1995 to $290,032,000,
by less than 1 percent in 1994 to $286,667,000 and by 1 percent in 1993 to
$284,466,000. Average non-interest demand deposits increased to the
following: $32,931,000 in 1995, $31,077,000 in 1994 and $28,746,000 in
1993. Average interest bearing demand deposits decreased during 1995 to
the following: $87,128,000 in 1995, $89,986,000 in 1994 and $86,976,000
in 1993. Average savings deposits decreased during 1995 to the
following: $56,500,000 in 1995, $56,724,000 in 1994 and $53,173,000 in
1993. Average time deposits as a total increased during 1995 to the
following: $113,473,000 in 1995, $108,800,000 in 1994 and $115,571,000 in
1993.
In 1993, securities sold under agreements to repurchase were developed
as an alternative for certificates of deposit over $100,000. In 1995, with
the adjustment of the FDIC assessment, the advantage of utilizing the
repurchase agreements diminished. The balance at December 31 was $761,000
in 1995, $9,166,000 in 1994 and $17,162,000 in 1993. The weighted average
interest rate for 1995 was 5.83 percent, for 1994 was 5.44 percent and for
1993 was 3.19 percent. The year-end balance for certificates of deposit of
$100,000 and over increased to $28,827,000 in 1995 from $16,437,000 in 1994
and $20,821,000 in 1993. Both the repurchase agreements and certificates
of deposit of $100,000 and over are matched against a special group of
securities that are carefully managed to ensure that each repurchase
agreement or certificate results in a profitable transaction for the Banks.
These funds are obtained from the local communities and include excess
public funds, business funds and individual funds that are bid upon by the
various banks, savings institutions and credit unions in the area. Seaway
does not have any reverse repurchase agreements.
The major components of other liabilities are accrued interest payable
($866,000 in 1995 and $605,000 in 1994), accrued expenses payable ($330,000
in 1995 and $711,000 in 1994) and profit sharing and incentive compensation
payable ($366,000 in 1995 and $172,000 in 1994). Profit sharing and
incentive compensation represents a higher payout for 1995 than 1994. The
other individual components are not significant.
-45-
RESULTS OF OPERATIONS
Seaway reported net income of $4,061,000 in 1995 compared to
$3,907,000 in 1994 and $4,022,000 in 1993. Net income per common share,
adjusted for a stock dividend, was $2.41 or a 3.9 percent increase from
earnings per share of $2.32 in 1994 after adjustment for the 10 percent
stock dividend that was declared in April 1995. Earnings per share in 1993
were $2.39 as adjusted. Return on average shareholders' equity was 10.96
percent in 1995 compared to 11.09 percent in 1994 and 11.99 percent in
1993. The return on average total assets increased to 1.19 percent in 1995
compared to 1.14 percent in 1994 and 1.20 percent in 1993. Noninterest
income fell by $87,000 in 1995. The major decline in income was income
from fiduciary activities which declined from $1,631,000 in 1994 to
$1,458,000 in 1995. Income from fiduciary activities was $1,594,000 in
1993.
Net interest income is the difference between interest earned on
earning assets and interest paid on interest bearing liabilities
(principally deposits). Changes in the mix and volume of assets and
liabilities and the yields and rates earned or paid have a significant
impact on earnings. For example, an investment on loans at 10.66 percent
is more beneficial than those same funds invested in securities at 5.59
percent. Total interest earning assets yielded 7.66 percent and total
interest bearing liabilities yielded 3.84 percent which resulted in a net
yield on interest earning assets of 4.42 percent in 1995. Additional
detail is disclosed below in the Gross Margin Analysis in Table 1 of the
Statistical Information included as Appendix E in this Prospectus and
Proxy Statement. For the year ended December 31, 1995, net interest
income was $14,129,000 or a 6.3 percent increase in the 1994 net
interest income of $13,297,000. Net interest income for 1993 was
$13,159,000. Net interest margin was 4.42 percent in 1995, 4.14
percent in 1994 and 4.18 percent 1993.
As indicated in the Gross Margin Analysis, 1995 asset earning rates
increased by .67 percent from 1994 and 1995 interest bearing liabilities
increased by .50 percent from 1994. The result of the changes in the asset
earning rates and the interest bearing liabilities produced approximately
the same net interest income results. Market conditions were the main
factor in these results along with management's actions to maintain net
interest income.
The provision for loan losses reflects management's judgment of the
cost associated with the credit risk inherent in the loan portfolio. Past
experience, as well as an analysis of current economic conditions, is used
in making this judgment. All loans, or portions thereof, deemed to be
uncollectible are charged against the allowance for loan losses. Loan
losses net of recoveries for 1995, 1994 and 1993 were $77,000, $19,000 and
$54,000, respectively. Net loan losses as a percentage of average loans
were .04 percent, .01 percent and .03 percent in 1995, 1994 and 1993,
respectively.
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In applying past experience, the provision for loan losses for 1995
was considerably greater than 1994 because of the increase in the loan
portfolio and a lower amount of recoveries in 1995. Even though 1994 rates
of net charge-offs to average loans were less than 1995, the net charge-
offs to average loans for 1993, 1992 and 1991 were on a comparable basis.
It continues to be management policy to maintain a reserve for possible
loan losses that would equal 1.20 percent of total loans. Management is
not aware of any trend or reason to believe that exceptions should be made
to its policy calculations.
At December 31, 1995, the reserve for loan losses was $2,294,000 which
was 1.19 percent of total loans outstanding. At December 31, 1994, this
reserve account was $2,182,000 or 1.22 percent of total loans outstanding.
Allowance for loan loss reserves continues to be in compliance with
management's policy.
Non-accrual loans, loans 90 days past due and other real estate at
December 31, 1995, were $1,696,000 or 14.9 percent less than year-end 1994
and represented .90 percent of total loans outstanding. At December 31,
1994, these loans totaled $1,994,000 or 1.1 percent of total loans. At
December 31, 1993, these loans totaled $2,227,000 or 1.3 percent of total
loans. Asset quality remained strong. Nonperforming loans were $1.57
million, or .80 percent of loans at December 31, 1995, and $1.69 million, or
.90 percent of loans at December 31, 1994. At September 1995, Seaway's peer
group comparable percentage was 1.57 percent. Peer group statistics at
December 31, 1994, were 1.59 percent and at December 31, 1993, were 2.47
percent. Peer group statistics are taken from the Federal Reserve "Bank
Holding Company Performance Report" for the 7th District.
Other operating income decreased to $3,693,000 (2.3 percent) at
December 31, 1995, from $3,780,000 at December 31, 1994, which decreased
from $4,164,000 at December 31, 1993. The significant factors in this
reduction were (i) an 89.4 percent decrease in the income from fiduciary
activities totaling $173,000; and (ii) a 10.3 percent increase in service
charges on deposit accounts totaling $98,000. With the constant pressure
on interest margins, management is aware that other income must increase to
offset the continuing increases in the cost of doing business.
Total other expense increased by 2.2 percent in 1995 compared to 1994
for a total increase of $270,000. A major portion of this increase
represented salary and benefit expense which increased $365,000 or 5.2
percent above 1994 levels. The primary item in this increase was increased
pay for incentive bonuses and profit sharing as the Banks met predetermined
targets. A major reduction of $319,000 reflected the reduction in FDIC
assessment fees.
Seaway accounts for income taxes in accordance with the provisions of
SFAS No. 109, "Accounting for Income Taxes." Income tax expense is
significantly impacted by the relative amount of taxable income from the
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loan and securities portfolios versus tax-exempt income from obligations of
state and municipal entities. Deferred income tax reflects timing
differences in the recognition of the tax base for various assets and
liabilities. In 1995 current income tax expense increased to $890,000 from
$819,000 in 1994 and $973,000 in 1993.
Effective federal income tax rates were 21 percent for 1995; 19
percent for 1994 and 19 percent for 1993. These rates reflect the large
portion of tax exempt income received in all 3 years.
LIQUIDITY AND CAPITAL RESOURCES
The asset/liability management responsibility of the organization
rests with a committee ("ALCO") made up of senior officers of each of the
Banks. ALCO meets monthly to monitor liquidity, funding sources,
investment policies and overall interest rate sensitivity and interest rate
risk. The object of this process is to coordinate the balance sheets of
each Bank, their loan and deposit levels and investment portfolios in order
that maximum net interest income is achieved without sacrificing quality or
liquidity.
ALCO reviews monthly the maturity schedules of the earning assets and
interest bearing liabilities. A gap analysis of each Bank is reviewed in
detail to ascertain the degree to which each Bank shows a negative or
positive gap position. A positive gap position occurs when at a 1 year
time horizon the maturity of repricing opportunity of interest bearing
assets exceed the maturity or repricing opportunity of interest bearing
liabilities. The converse situation creates a negative gap position.
At December 31, 1995, and the 2 prior year-ends, Seaway was in a
negative gap position. Normally, this position will be beneficial to
earnings in a falling rate environment and detrimental to earnings in a
rising rate environment. As of December 31, 1995, management believes that
the gap position places Seaway in a desirable position given anticipated
movements in interest rates.
At December 31, 1995, 1994 and 1993 Seaway's net liquidity ratio was
43.4 percent, 35.7 percent and 38.1 percent, respectively. Net liquid
assets are comprised of investment securities that are not pledged, federal
funds sold, bankers acceptances, cash and due from banks and time deposits
in other banks less any reserve requirements and are expressed as a
percentage of total assets. This strong liquidity position allowed Seaway
to meet the increasing loan demand of its customers and to absorb any short
term decline in deposits which might be experienced.
At December 31, 1995, earning assets were $327,185,000 or 94.1 percent
of total assets. This compared to $317,168,000 in earning assets at
December 31, 1994, or 93.9 percent of total assets. The primary components
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in the increase ($10,017,000) are related to the increase in the total
deposits of the Banks totaling $24,085,000 and the increase in total loans
of the Banks totaling $13,389,000.
At December 31, 1995, interest bearing deposit liabilities totaled
$269,640,000 compared to $248,085,000 at year-end 1994. Interest bearing
deposit liabilities include regular savings, NOW accounts, money market
accounts, interest bearing checking accounts and certificates of deposit.
The interest bearing deposit accounts are used in funding loans and
investment securities.
Management's policy for returning a nonperforming loan to a performing
loan status is that the loan must be current (all principal and interest
payments made). Any loan that is returned to performing status is watched
closely. It is not Seaway's practice to divide loans.
Generally, the accrual of interest income on a loan is suspended when
the loan becomes 90 days past due unless the loan is fully collateralized
and is in the process of collection. A restructured loan is one that is
accruing interest, but on which concessions in the original terms of the
loan have been made due to a weakening in the financial strength of the
borrower.
Seaway is dedicated to maintaining a capital position in excess of 8
percent equity capital to total assets. Depositor and investor confidence
is necessary to continue to operate profitably. This also places Seaway in
a position to expand through new offices or acquisitions should these
opportunities arise. Seaway's primary capital ratio, which includes
shareholders' equity, net of the SFAS No. 115 component and loan loss
reserves was 11.9 percent at December 31, 1995, compared to 11.6 percent at
December 31, 1994 and 10.6 percent at December 31, 1993. Pure equity
capital at December 31, 1995, was 11.19 percent. This same ratio was
10.08 percent at December 31, 1994. Seaway and the Banks are in full
compliance with the current regulatory capital ratio requirements of 6
percent for primary capital and 8 percent for risk-based capital.
SUMMARY OF CAPITAL RATIOS
1995
ALGONAC COMMERCIAL SEAWAY
Primary Capital Ratio 11.86% 10.29% 11.85%
Equity Capital Ratio 11.86% 11.86% 11.19%
Risk-Based Capital Ratio 23.44% 23.44% 20.16%
Seaway has been able to increase internally generated equity in spite
of an aggressive dividend policy under which Seaway paid out in excess of
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40 percent of net earnings in each of the past 3 years. The dividend
policy is closely allied to the dedicated purpose of maintaining a strong
capital position.
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
The interim financial statements included as Appendix D to this
Prospectus and Proxy Statement include all adjustments which, in the
opinion of management, are necessary to reflect fair statements of the
results for the interim period presented and are recurring in nature.
RESULTS OF OPERATIONS
Seaway reported net income of $2,172,000 in the first 6 months of 1996
compared to $2,000,000 in the same period in 1995. Net income for the first
6 months of 1996 was $1.29 per share, or a 8.4 percent increase in earnings
per share, as compared to the first 6 months of 1995 at $1.19 after
adjusting for the 10 percent stock dividend declared April 13, 1996. On an
annualized basis, return on beginning shareholders' equity was 11.1 percent
in the first 6 months of 1996 versus 11.4 percent in the first 6 months of
1995. On an annualized basis, return on average assets was at 1.23 percent
in the first 6 months of 1996, from 1.17 percent in the same period for
1995. Earnings of $1,078,000 were recorded for the second quarter of 1996.
In the second quarter of 1996, earnings were down from the first quarter
results by 1.5 percent. Second quarter per share earnings were $.64
compared to second quarter 1995 earnings of $.61 per share after adjusting
for the 10 percent stock dividend declared on April 13, 1996.
For the first 6 months of 1996, net interest income, after provision
for loan losses, was $7,165,000, a 4.7 percent increase from the first 6
months of 1995 net interest income after loan loss provision of $6,845,000.
The increase was due primarily to a 12.3 percent increase in the loan
portfolios of Commercial and Algonac. Deposits increased by $13,182,000 or
4 percent, after adding repurchase agreements, in the first 6 months of
1996 as compared to the first 6 months of 1995. With the decrease of mutual
fund growth, it is noted that additional funds are being added to the
various bank deposit accounts.
Total loans increased by $22,615,000 with an additional increase of
$1,147,000 in mortgages held for sale as compared to June 30, 1995. Loan
quality remains strong as nonperforming loans represent 1.1 percent of
total loans outstanding. Net loan charge-offs for the first 6 months were
in a net recovery position.
Total other income in the first 6 months of 1996 increased to
$1,910,000 from $1,891,000 in the first 6 months of 1995, representing an
increase of 1 percent. The 5 major factors were a 1.1 percent increase in
fiduciary income from trust operations totaling $9,000; an increase of
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$34,000 in service charges on deposit accounts; an increase of $42,000 in
brokerage fees; an increase of $24,000 in income from other real estate; a
decrease of $33,000 in security transactions and a decrease of $32,000 in
the sale of mortgage loans. With the constant pressure on interest margins,
management is very conscious that other income must be developed to offset
the continuing increase in the cost of doing business. Mortgages originated
and sold totaled $3,692,000 for the first 6 months of 1996 as compared to
$2,147,000 for the first 6 months of 1995.
LOANS HELD FOR SALE
YEAR-TO-DATE
(DOLLARS IN THOUSANDS)
JUNE 30, DECEMBER 31, JUNE 30,
1996 1995 1995
Loan originations sold for the period ending $3,692 $6,959 $2,147
Gains on loan originations sold for the period ending $ (10) $ 41 $ 6
Loans originated for sale - not yet sold $1,454 $ -- $ 307
SFAS No. 122, "Accounting for Mortgage Servicing Rights" was
implemented effective January 1, 1996. The calculation of the capitalized
amounts have not been material in either the first or second quarters of
1996.
Total other expenses increased by 1 percent or $72,000 in the first
6 months of 1996 compared to the first 6 months of 1995. Salary and
benefits expenses increased by $173,000 or 4.9 percent above 1995 levels.
If performance levels continue through the end of the year comparable to
the first 6 months of 1996, the Incentive Compensation and Profit Sharing
Plans should provide for a payout to participants in the plans. Accruals
have been established in the financial information for the anticipated
amounts as if the current financial performance is continued through the
end of year 1996. This handling of anticipated payout is consistent with
previous years. Net occupancy costs have increased by $111,000 or
12.4 percent above 1995 levels. Professional fee expense increased by
$21,000 and FDIC expense decreased by $317,000 below 1995 levels.
Marketing costs have increased by $45,000 above 1995 levels. Management
continues to look at ways to reduce operating costs.
Management of Commercial and Algonac monitors the adequacy of the
reserve on a quarterly basis with an in-depth review of all non-accrual
loans, other real estate, loans 90 days past due and all other loans where
the financial statements of the borrower reveal a deterioration in
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financial strength. After each review, specific sums in the loan loss
reserve are allocated to weak situations and the remaining balance is
tested for adequacy when measured by historical loss experience and
anticipated changes in the economic environment. At all times during the
past 3 years, the reserve accounts were deemed to be fully adequate to
cover the credit risks in each of the Banks' portfolios. A specific loan
loss reserve does not exist for potential losses on loan commitments. No
losses from loan commitments have occurred in 1996, 1995 or 1994.
Management is not aware of any loans classified for regulatory
purposes as loss, doubtful, substandard or special mention that have not
been disclosed under Item III of Industry Guide III that (i) represent or
result from trends or uncertainties which management reasonably expects
will materially impact future operating results, liquidity or capital
resources; or (ii) represent material credits about which management is
aware of any information which causes management to have serious doubts as
to the ability of such borrowers to comply with the loan repayment terms.
Management knows of no trends, events or uncertainties which presently
exist that are reasonably likely to have a material effect on liquidity,
capital resources or operations. The regulatory authorities have not made
any recommendations that would impact Seaway's liquidity, capital resources
or operations. SFAS No. 114, which is based on the analysis of expected
cash flows and collateral values, required no additional reserve for
possible loan losses for impaired loans as of June 30, 1996.
At June 30, 1996, the reserve account was $2,463,000 which represented
1.20 percent of total loans outstanding. Seaway's current goal is to
maintain the reserve for loan losses at 1.20 percent of total loans
outstanding. At June 30, 1995, this reserve account was $2,204,000 or
1.20 percent of total loans outstanding. At December 31, 1995, the reserve
for loan losses was $2,294,000 which was 1.19 percent of total loans
outstanding. Loan losses net of recoveries for the first 6 months of 1996
were a net recovery of $2,000 versus a net loss of $7,000 for the first
6 months of 1995. Loan quality continues to remain at a high level with
net loan charge-offs for the first 6 months being negligible.
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RESERVE FOR LOAN LOSSES
(DOLLARS IN THOUSANDS)
JUNE 30, DECEMBER 31, JUNE 30,
1996 1995 1995
Reserve for loan losses as a percentage of nonperforming
loans 108.5% 145.6% 124.2%
Reserve for loan losses as a percentage of nonperforming
assets 85.1% 135.3% 103.1%
Reserve for loan losses as a percentage of loans outstanding
at 6 months end 1.20% 1.19% 1.20%
Nonperforming assets are defined as nonaccrual, other real estate
owned and restructured loans. Generally, the accrual of interest income on
a loan is suspended when the loan becomes 90 days past due unless the loan
is fully collateralized and is in the process of collection. A
restructured loan is one that is accruing interest, but on which
concessions in the original terms of the loan have been made due to a
weakening in the financial strength of the borrower. Management's policy
for returning a nonperforming loan to a performing loan status is that the
loan must be current (all principal and interest payment made.) Any loan
that is returned to performing status is watched closely. It is not
Seaway's practice to divide loans.
NONPERFORMING ASSETS
(DOLLARS IN THOUSANDS)
JUNE 30, DECEMBER 31, JUNE 30,
1996 1995 1995
Impaired loans under SFAS No. 114 <F1> $1,753 $1,236 $ --
Non-accrual loans:
Restructured loans -- -- --
Original terms 200 130 646
Accruing loans past due 90 days or more 318 210 1,128
Total nonperforming loans $2,271 $1,576 $1,774
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Other real estate owned 623 120 364
Total nonperforming assets $2,894 $1,696 $2,138
Nonperforming loans as a percentage of total loans 1.10% .82% .97%
Nonperforming assets as a percentage of total loans
plus other real estate owned 1.40% .88% 1.16%
Nonperforming assets as a percentage of total assets .80% .49% .62%
<FN>
<F1> Seaway adopted SFAS No. 114 on January 1, 1995.
</FN>
Securities are recorded in accordance with Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," which requires an investment in a security to be classified
based on Seaway's intent with respect to holding securities. The following
summarizes the classification of securities held at June 30, 1996 and 1995
as well as December 31, 1995. The effect of SFAS No. 115 in the first
6 months of 1996 was a decrease in assets of $425,000 and a decrease in
equity of $283,000, net of deferred tax credits of $142,000.
INVESTMENT SECURITIES
JUNE 30, JUNE 30, DECEMBER 31,
1996 1995 1995
AMORTIZED MARKET AMORTIZED MARKET AMORTIZED MARKET
COST VALUE COST VALUE COST VALUE
U.S. Government agencies and
obligations available-for-sale $ 34,462 $ 34,273 $ 44,175 $ 43,875 $ 39,278 $ 39,316
U.S. Government agencies and
obligations held-to-maturity -- -- -- -- -- --
Municipal bonds held-to-maturity 39,144 39,825 37,910 39,018 38,136 39,462
Municipal bonds available-for-sale 1,090 1,096 222 225 1,097 1,114
Other securities available-for-sale 1,863 1,912 1,863 2,025 1,863 1,950
Other securities held-to-maturity 13,800 13,483 14,602 14,383 8,643 8,537
Mortgage backed securities
available-for-sale 36,226 35,935 36,966 36,742 35,044 35,043
Total investments $126,585 $126,524 $135,738 $136,268 $124,061 $125,422
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AVAILABLE FOR SALE
U.S. Government agencies and
obligations $ 34,273 $ 43,875 $ 39,316
Municipal bonds 1,096 225 1,114
Other securities 1,912 2,025 1,950
Mortgage-backed securities 35,935 36,742 35,043
Total $ 73,216 $ 82,867 $ 77,423
HELD TO MATURITY
U.S. Government agencies and
obligations $ -- $ -- $ --
Municipal bonds 39,144 37,910 38,136
Other securities 13,800 14,602 8,643
Mortgage-backed securities -- -- --
Total $ 52,944 $ 52,512 $ 46,779
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, Seaway's net liquidity ratio was 39.2 percent. At
December 31, 1995, this ratio was 35.7 percent and at June 30, 1995, it was
39.8 percent. Net liquid assets are comprised of investment securities
that are not pledged, federal funds sold, bankers' acceptances, cash and
due from banks and time deposits in other banks, less any reserve
requirements.
This strong liquidity position allows Seaway to meet any increasing
loan demands of its customers or to absorb any short-term decline in
deposits which might be experienced.
Seaway is dedicated to maintaining a capital position in excess of
8 percent equity capital to total assets. In light of the current
regulatory and banking environment, Seaway believes it is important to
maintain a ratio in excess of the required amount. Depositor and investor
confidence is necessary to continue to operate profitably. The higher
ratio also places Seaway in a position to expand through new offices or
acquisitions should these opportunities arise. Seaway's primary capital
ratio which includes shareholders' equity and loan reserves, at June 30,
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1996, was 11.7 percent, 11.6 percent at June 30, 1995 and 11.9 percent at
December 31, 1995. Return on equity capital at June 30, 1996, was
11.1 percent. This same ratio was 10.6 percent at June 30, 1995, and
11.2 percent at December 31, 1995.
SELECTED FINANCIAL DATA
Certain selected financial data for Seaway appears under the captions
"Introduction and Summary--Selected Financial Data" and "Introduction and
Summary--Comparative Per Share Data" in this Prospectus and Proxy
Statement.
FINANCIAL STATEMENTS
The Audited Consolidated Financial Statements of Seaway Financial
Corporation and Subsidiaries for the years ended December 31, 1995, 1994
and 1993, together with the report of Plante & Moran, LLP thereon dated
January 12, 1996 and notes thereto, are included as Appendix C to this
Prospectus and Proxy Statement. The Unaudited Financial Statements of
Seaway Financial Corporation and Subsidiaries for the three and six months
ended June 30, 1996 are included as Appendix D to this Prospectus and Proxy
Statement.
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NO DISSENTERS' RIGHTS
Holders of Seaway Common Stock are not entitled to dissenters' rights
under the Michigan Business Corporation Act in connection with the Merger.
VOTING AND MANAGEMENT INFORMATION
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS OF SEAWAY
Holders of record of shares of Seaway Common Stock at the close of
business on the Record Date will be entitled to vote at the special meeting
of Seaway shareholders. As of the Record Date, there were 1,685,430 shares
of Seaway Common Stock outstanding. Each share of Seaway Common Stock is
entitled to one vote.
The following table sets forth information concerning the number of
shares of Seaway Common Stock held by each shareholder who is known to
Seaway's management to be the beneficial owner of more than 5 percent of
the outstanding shares as of August 31, 1996:
OLD KENT COMMON
AMOUNT AND NATURE OF BENEFICIAL STOCK TO BE RECEIVED
OWNERSHIP OF SEAWAY COMMON STOCK <F1> IN THE MERGER<F2>
SHARED
SOLE VOTING VOTING OR TOTAL PERCENT
NAME AND ADDRESS OF AND INVEST- INVESTMENT PERCENT FOLLOWING OF
BENEFICIAL OWNER MENT POWER POWER<F3> TOTAL OF CLASS MERGER<F4> CLASS<F5>
Alice W. Moore Trust<F6>
730 N. Riverside Avenue
St. Clair, Michigan 48079 229,237 -- 229,237 13.6% 275,382 <F*>
Franklin H. and Alice W. Moore
Irrevocable Trust<F6>
200 S. Riverside Avenue
St. Clair, Michigan 48079 101,376 -- 101,376 6.01% 121,782 <F*>
_______________________________
(Footnotes begin on page 40.)
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The following table sets forth certain information concerning the
number of shares of Seaway Common Stock held as of August 31, 1996, by
each of Seaway's directors, each of Seaway's officers whose compensation
exceeded $100,000 in 1995 and all of Seaway's directors and executive
officers as a group:
OLD KENT COMMON
AMOUNT AND NATURE OF BENEFICIAL STOCK TO BE RECEIVED
OWNERSHIP OF SEAWAY COMMON STOCK <F1> IN THE MERGER<F2>
SHARED
SOLE VOTING VOTING OR TOTAL PERCENT
AND INVEST- INVESTMENT PERCENT FOLLOWING OF
NAME OF BENEFICIAL OWNER MENT POWER POWER<F3> TOTAL OF CLASS MERGER<F4> CLASS<F5>
Marshall J. Campbell 165 1,843 2,008 <F*> 2,412 <F*>
John M. Farr 38,721 -- 38,721 2.3% 45,974 <F*>
Glen E. McBride -- 2,012 2,012 <F*> 2,417 <F*>
Franklin H. Moore, Jr. 29,531 -- 29,531 1.75% 35,475 <F*>
Donald L. Osterland -- 21,560 21,560 1.28% 25,900 <F*>
I. Dale Sheldon 1,397 385 1,782 <F*> 2,140 <F*>
Charles W. Staiger -- 4,092 4,092 <F*> 4,915 <F*>
All directors and executive
officers as a group 69,814 36,659 106,473 6.32% 127,906 <F*>
_____________________________
<FN>
<F*> Less than 1 percent.
<F1> 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.
<F2> Based on an assumed Exchange Ratio of 1.2013 shares of Old Kent Common
Stock for each share of Seaway Common Stock. (See "Introduction and
Summary--Comparative Per Share Data.") No named Seaway shareholder
will beneficially own 1 percent or more of the outstanding shares of
Old Kent Common Stock after the Merger.
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<F3> 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, children and others 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 Banks are not
included.
<F4> This column reflects the number of shares of Old Kent Common Stock to
be issued to the specified person in exchange for the number of shares
of Seaway Common Stock shown in the "Total" column for such person.
<F5> This column reflects the percentage of the outstanding shares of Old
Kent Common Stock which the specified person will hold following
consummation of the Merger. These percentages were computed with
reference to a total of 48,231,179 shares of Old Kent Common Stock
outstanding, representing the sum of 46,206,472 shares outstanding as
of August 31, 1996, and 2,024,707 shares to be issued in the Merger.
The computation does not take fractional shares into account.
<F6> Commercial Savings Bank is the Trustee of the Alice W. Moore Trust
and the Franklin H. and Alice W. Moore Irrevocable Trust. Franklin
H. Moore, Jr. and his 3 siblings are beneficiaries of each such
trust. No individual beneficiary has authority to direct the vote
or disposition of any shares held by either trust, but collectively
upon unanimous action the beneficiaries may direct the vote and/or
disposition of the shares held by the trusts under Commercial's
trust policies. Mr. Moore disclaims beneficial ownership of these
shares. Mr. Moore may, by reason of his officership and director-
ship, be in a position to influence the voting or disposition of
shares held in trust by Commercial to some degree, but disclaims
beneficial ownership of these shares.
</FN>
INTERESTS OF CERTAIN PERSONS
As of August 31, 1996, directors and executive officers of Seaway are
or may be deemed to be the beneficial owners of a total of 437,086 shares,
or 25.9 percent of the outstanding shares, of Seaway Common Stock, although
Mr. Moore disclaims beneficial ownership of 330,613 such shares. (See
"Voting and Management Information--Voting Securities and Principal
Shareholders of Seaway.")
Each director and executive officer of Seaway, all of whom have been
identified by Seaway as Affiliates of Seaway, 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
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the Securities Act of 1933 or applicable rules and regulations. 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 Seaway has agreed not to
voluntarily sell or dispose of any shares of Seaway Common Stock without
Old Kent's written consent (except as may be necessary to discharge a
fiduciary duty or by gift made for estate planning purposes).
Each director and executive officer of Seaway has agreed that he or
she will use his or her best efforts to cause the Plan of Merger to be
approved by the shareholders of Seaway and consummated according to its
terms. Each such person has also agreed not to solicit, negotiate, discuss,
accept or approve any offers or proposals from, or enter into any agreement
with, any third party concerning a tender offer, merger, consolidation,
share exchange or other business combination involving Seaway or concerning
the offer, sale or disposition of any material assets of Seaway (other than
asset dispositions in the ordinary course of business).
No director or executive officer of Seaway owns any shares of Old Kent
Common Stock. No director or executive officer of Old Kent owns any shares
of Seaway 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 shareholders of Seaway 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, 1995.
The following reports filed by Old Kent pursuant to Section 13(a)
or 15(d) of the Exchange Act since December 31, 1995:
(i) Old Kent's Current Report on Form 8-K filed with
the Commission on December 31, 1996.
(ii) Old Kent's Current Report on Form 8-K filed with
the Commission on February 23, 1996.
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(iii) Old Kent's Quarterly Report on Form 10-Q filed
with the Commission for the quarterly period ended March 31,
1996.
(iv) Old Kent's Quarterly Report on Form 10-Q filed
with the Commission for the quarterly period ended June 30,
1996.
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 Seaway shareholders, pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act.
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 in this Prospectus
and Proxy Statement 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 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 Seaway and its subsidiaries
included in this Prospectus and Proxy Statement have been audited by Plante
and Moran, LLP, independent auditors, as stated in their report, and have
been so used in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
SHAREHOLDER PROPOSALS
In the event that Seaway shareholders approve the Plan of Merger and
the Merger is consummated, Seaway shareholders will become Old Kent
shareholders and there will be no annual meeting of Seaway shareholders in
1997. If the Merger is not consummated, proposals of Seaway shareholders
-61-
intended to be presented at the annual meeting of shareholders in 1997 must
be received by Seaway 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. Shareholders
should make their proposals in accordance with Rule 14a-8 issued under the
Exchange Act.
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 Seaway by its counsel, Bischoff, Kenney
& Niehaus of Sylvania, Ohio.
As of September 23, 1996, partners in and attorneys employed by or
associated with Warner Norcross & Judd LLP and their associates were
beneficial owners of a total of 218,460 shares of Old Kent Common Stock
having an aggregate market value of $9,175,320 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 Seaway has been furnished by each of them for
inclusion in this Prospectus and Proxy Statement. Seaway has relied upon
Old Kent with respect to the accuracy and completeness of the information
concerning Old Kent, and Old Kent has relied upon Seaway with respect to
the accuracy and completeness of the information concerning Seaway.
-62-
APPENDIX A
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER
BETWEEN
SEAWAY FINANCIAL CORPORATION
AND
OLD KENT FINANCIAL CORPORATION
Dated as of August 21, 1996
TABLE OF CONTENTS
PAGE
ARTICLE I - THE TRANSACTION. . . . . . . . . . . . . . . . . . . . . . A-2
1.1 APPROVAL OF PLAN OF MERGER. . . . . . . . . . . . . . . . . A-2
1.2 THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . A-2
1.3 EFFECTIVE TIME OF THE MERGER. . . . . . . . . . . . . . . . A-2
1.4 MERGER OF SEAWAY WITH AND INTO OLD KENT . . . . . . . . . . A-2
1.5 EFFECTS OF THE MERGER . . . . . . . . . . . . . . . . . . . A-2
1.6 ADDITIONAL ACTIONS. . . . . . . . . . . . . . . . . . . . . A-3
1.7 SURVIVING CORPORATION . . . . . . . . . . . . . . . . . . . A-3
ARTICLE II - CONVERSION AND EXCHANGE OF SHARES . . . . . . . . . . . . A-3
2.1 CONVERSION OF SHARES. . . . . . . . . . . . . . . . . . . . A-3
2.2 UPSET PROVISIONS. . . . . . . . . . . . . . . . . . . . . . A-5
2.3 ADJUSTMENTS . . . . . . . . . . . . . . . . . . . . . . . . A-7
2.4 CESSATION OF SHAREHOLDER STATUS . . . . . . . . . . . . . . A-9
2.5 SURRENDER OF OLD CERTIFICATES AND DISTRIBUTION OF OLD
KENT COMMON STOCK . . . . . . . . . . . . . . . . . . . . . A-9
2.6 NO FRACTIONAL SHARES. . . . . . . . . . . . . . . . . . . . A-11
ARTICLE III - OLD KENT'S REPRESENTATIONS AND WARRANTIES. . . . . . . . A-11
3.1 AUTHORIZATION, NO CONFLICTS, ETC. . . . . . . . . . . . . . A-11
3.2 ORGANIZATION AND GOOD STANDING. . . . . . . . . . . . . . . A-12
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-14
3.7 ABSENCE OF LITIGATION . . . . . . . . . . . . . . . . . . . A-14
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 REGULATORY FILINGS. . . . . . . . . . . . . . . . . . . . . A-16
3.13 REGISTRATION STATEMENT, ETC.. . . . . . . . . . . . . . . . A-16
3.14 TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . A-17
3.15 INVESTMENT BANKERS AND BROKERS. . . . . . . . . . . . . . . A-17
3.16 OLD KENT COMMON STOCK . . . . . . . . . . . . . . . . . . . A-18
3.17 TRUE AND COMPLETE INFORMATION . . . . . . . . . . . . . . . A-18
3.18 REPRESENTATIONS AND WARRANTIES AT CLOSING . . . . . . . . . A-18
ARTICLE IV - SEAWAY'S REPRESENTATIONS AND WARRANTIES . . . . . . . . . A-18
4.1 AUTHORIZATION, NO CONFLICTS, ETC. . . . . . . . . . . . . . A-18
4.2 ORGANIZATION AND GOOD STANDING. . . . . . . . . . . . . . . A-19
4.3 SUBSIDIARIES. . . . . . . . . . . . . . . . . . . . . . . . A-20
4.4 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . A-21
4.5 FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . A-21
4.6 ABSENCE OF UNDISCLOSED LIABILITIES. . . . . . . . . . . . . A-22
4.7 ABSENCE OF MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . A-22
4.8 ABSENCE OF LITIGATION . . . . . . . . . . . . . . . . . . . A-22
A-i
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4.9 CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . . . . A-23
4.10 ABSENCE OF DEFAULTS UNDER CONTRACTS . . . . . . . . . . . . A-23
4.11 REGULATORY FILINGS. . . . . . . . . . . . . . . . . . . . . A-23
4.12 REGISTRATION STATEMENT, ETC.. . . . . . . . . . . . . . . . A-24
4.13 TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . A-24
4.14 TITLE TO PROPERTIES . . . . . . . . . . . . . . . . . . . . A-25
4.15 CONDITION OF REAL PROPERTY. . . . . . . . . . . . . . . . . A-25
4.16 REAL AND PERSONAL PROPERTY LEASES . . . . . . . . . . . . . A-26
4.17 REQUIRED LICENSES, PERMITS, ETC.. . . . . . . . . . . . . . A-26
4.18 CERTAIN EMPLOYMENT MATTERS. . . . . . . . . . . . . . . . . A-27
4.19 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . A-28
4.20 ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . A-29
4.21 DUTIES AS FIDUCIARY . . . . . . . . . . . . . . . . . . . . A-31
4.22 INVESTMENT BANKERS AND BROKERS. . . . . . . . . . . . . . . A-31
4.23 SEAWAY-RELATED PERSONS. . . . . . . . . . . . . . . . . . . A-31
4.24 CHANGE IN BUSINESS RELATIONSHIPS. . . . . . . . . . . . . . A-32
4.25 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . A-32
4.26 CHANGE OF CONTROL . . . . . . . . . . . . . . . . . . . . . A-32
4.27 BOOKS AND RECORDS . . . . . . . . . . . . . . . . . . . . . A-32
4.28 LOAN GUARANTEES . . . . . . . . . . . . . . . . . . . . . . A-33
4.29 EVENTS SINCE DECEMBER 31, 1995. . . . . . . . . . . . . . . A-33
4.30 RESERVE FOR LOAN LOSSES . . . . . . . . . . . . . . . . . . A-34
4.31 LOAN ORIGINATION AND SERVICING. . . . . . . . . . . . . . . A-34
4.32 PUBLIC COMMUNICATIONS; SECURITIES OFFERING. . . . . . . . . A-34
4.33 NO INSIDER TRADING. . . . . . . . . . . . . . . . . . . . . A-34
4.34 CONTINUITY OF INTEREST. . . . . . . . . . . . . . . . . . . A-34
4.35 TRUE AND COMPLETE INFORMATION . . . . . . . . . . . . . . . A-34
4.36 REPRESENTATIONS AND WARRANTIES AT CLOSING . . . . . . . . . A-35
ARTICLE V - COVENANTS PENDING CLOSING. . . . . . . . . . . . . . . . . A-35
5.1 SEAWAY DISCLOSURE STATEMENT . . . . . . . . . . . . . . . . A-35
5.2 OLD KENT DISCLOSURE STATEMENT . . . . . . . . . . . . . . . A-35
5.3 BREACHES OF REPRESENTATIONS . . . . . . . . . . . . . . . . A-36
5.4 CONDUCT OF BUSINESS PENDING THE EFFECTIVE TIME OF
THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . . A-36
5.5 REGULAR DIVIDENDS AND COMPENSATION ADJUSTMENTS. . . . . . . A-39
5.6 DATA PROCESSING AND RELATED CONTRACTS . . . . . . . . . . . A-40
5.7 AFFILIATES. . . . . . . . . . . . . . . . . . . . . . . . . A-40
5.8 MAINTENANCE OF INSURANCE. . . . . . . . . . . . . . . . . . A-40
5.9 COMPETING PROPOSALS . . . . . . . . . . . . . . . . . . . . A-40
5.10 REGISTRATION STATEMENT. . . . . . . . . . . . . . . . . . . A-41
5.11 OTHER FILINGS . . . . . . . . . . . . . . . . . . . . . . . A-41
5.12 MISCELLANEOUS AGREEMENTS AND CONSENTS . . . . . . . . . . . A-42
5.13 EXCHANGE OF FINANCIAL INFORMATION . . . . . . . . . . . . . A-42
5.14 INVESTIGATION . . . . . . . . . . . . . . . . . . . . . . . A-42
5.15 CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . A-43
A-ii
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5.16 ENVIRONMENTAL INVESTIGATION . . . . . . . . . . . . . . . . A-44
5.17 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . A-45
ARTICLE VI - CONDITIONS PRECEDENT TO OLD KENT'S OBLIGATIONS. . . . . . A-45
6.1 RENEWAL OF REPRESENTATIONS AND WARRANTIES, ETC. . . . . . . A-45
6.2 OPINION OF LEGAL COUNSEL. . . . . . . . . . . . . . . . . . A-46
6.3 REQUIRED APPROVALS. . . . . . . . . . . . . . . . . . . . . A-46
6.4 ORDER, DECREE, ETC. . . . . . . . . . . . . . . . . . . . . A-46
6.5 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . A-46
6.6 TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . A-46
6.7 REGISTRATION STATEMENT. . . . . . . . . . . . . . . . . . . A-47
6.8 CERTIFICATE AS TO OUTSTANDING SHARES. . . . . . . . . . . . A-47
6.9 CHANGE OF CONTROL WAIVERS . . . . . . . . . . . . . . . . . A-47
6.10 ESTOPPEL CERTIFICATES . . . . . . . . . . . . . . . . . . . A-47
6.11 ENVIRONMENTAL RISK. . . . . . . . . . . . . . . . . . . . . A-47
6.12 OTHER CLOSING TRANSACTION DOCUMENTS . . . . . . . . . . . . A-48
ARTICLE VII - CONDITIONS PRECEDENT TO SEAWAY'S OBLIGATIONS . . . . . . A-48
7.1 RENEWAL OF REPRESENTATIONS AND WARRANTIES, ETC. . . . . . . A-48
7.2 OPINION OF LEGAL COUNSEL. . . . . . . . . . . . . . . . . . A-48
7.3 REQUIRED APPROVALS. . . . . . . . . . . . . . . . . . . . . A-48
7.4 ORDER, DECREE, ETC. . . . . . . . . . . . . . . . . . . . . A-49
7.5 TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . A-49
7.6 REGISTRATION STATEMENT. . . . . . . . . . . . . . . . . . . A-49
7.7 FAIRNESS OPINION. . . . . . . . . . . . . . . . . . . . . . A-49
7.8 OTHER CLOSING TRANSACTION DOCUMENTS . . . . . . . . . . . . A-49
ARTICLE VIII - ABANDONMENT OF MERGER . . . . . . . . . . . . . . . . . A-50
8.1 MUTUAL ABANDONMENT PRIOR TO EFFECTIVE TIME OF THE
MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . A-50
8.2 OLD KENT'S RIGHTS TO TERMINATE. . . . . . . . . . . . . . . A-50
8.3 SEAWAY'S RIGHTS TO TERMINATE. . . . . . . . . . . . . . . . A-51
ARTICLE IX - LIABILITIES AND REMEDIES. . . . . . . . . . . . . . . . . A-52
9.1 TERMINATION FEE . . . . . . . . . . . . . . . . . . . . . . A-52
9.2 LIABILITY AFTER TERMINATION . . . . . . . . . . . . . . . . A-53
9.3 EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . A-54
9.4 SPECIFIC ENFORCEMENT. . . . . . . . . . . . . . . . . . . . A-54
9.5 JURISDICTION; VENUE; JURY . . . . . . . . . . . . . . . . . A-54
ARTICLE X - MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . A-54
10.1 AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . A-54
10.2 WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . . . A-54
10.3 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . A-55
10.4 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . A-55
10.5 ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . A-55
A-iii
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10.6 NO ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . A-55
10.7 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . A-56
10.8 FURTHER ASSURANCES; PRIVILEGES. . . . . . . . . . . . . . . A-56
10.9 HEADINGS, ETC.. . . . . . . . . . . . . . . . . . . . . . . A-56
10.10 CALCULATION OF DATES AND DEADLINES. . . . . . . . . . . . . A-56
10.11 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . A-56
DEFINITIONS
ACCEPTANCE PERIOD. . . . . . . . . . . . . . . . . . . . . . . . . . . A-7
ADJUSTED EXCHANGE RATIO. . . . . . . . . . . . . . . . . . . . . . . . A-4
AGGREGATE PRICE PER SHARE OF THE COMPARISON STOCKS . . . . . . . . . . A-5
BANK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-20
BREACHING PARTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . A-36
BUSINESS COMBINATION . . . . . . . . . . . . . . . . . . . . . . . . . A-41
CALL REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-22
CEILING PRICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-4
CERCLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-29
CERTIFICATE OF MERGER. . . . . . . . . . . . . . . . . . . . . . . . . A-2
CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-2
COMPARISON ISSUER. . . . . . . . . . . . . . . . . . . . . . . . . . . A-9
COMPARISON STOCKS. . . . . . . . . . . . . . . . . . . . . . . . . . . A-5
COMPARISON STOCKS BASE PRICE PER SHARE . . . . . . . . . . . . . . . . A-5
CONSTITUENT CORPORATION. . . . . . . . . . . . . . . . . . . . . . . . A-2
CONTROL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-20
EFFECTIVE TIME OF THE MERGER . . . . . . . . . . . . . . . . . . . . . A-2
EMPLOYEE BENEFIT PLAN. . . . . . . . . . . . . . . . . . . . . . . . . A-15
EMPLOYMENT-RELATED PAYMENTS. . . . . . . . . . . . . . . . . . . . . . A-27
ENVIRONMENTAL LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . A-29
ENVIRONMENTAL RISK . . . . . . . . . . . . . . . . . . . . . . . . . . A-44
ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-15
EXCHANGE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-10
EXCHANGE RATIO . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-3
EXERCISE PERIOD. . . . . . . . . . . . . . . . . . . . . . . . . . . . A-6
FDIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-20
FEDERAL BANK HOLDING COMPANY ACT . . . . . . . . . . . . . . . . . . . A-1
FEDERAL RESERVE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . A-1
FINAL OKEN STOCK PRICE . . . . . . . . . . . . . . . . . . . . . . . . A-4
FIRST FLOOR PRICE. . . . . . . . . . . . . . . . . . . . . . . . . . . A-4
FIXING PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-5
HAZARDOUS SUBSTANCE. . . . . . . . . . . . . . . . . . . . . . . . . . A-29
INCREASE NOTICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . A-7
INTERNAL REVENUE CODE. . . . . . . . . . . . . . . . . . . . . . . . . A-15
IRS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-17
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MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
MICHIGAN ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
OLD CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . A-9
OLD KENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
OLD KENT COMMON STOCK. . . . . . . . . . . . . . . . . . . . . . . . . A-1
OLD KENT DISCLOSURE STATEMENT. . . . . . . . . . . . . . . . . . . . . A-11
OLD KENT RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . A-13
OLD KENT RIGHTS AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . A-13
PBGC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-28
PHASE I. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-44
PHASE II AND III WORK. . . . . . . . . . . . . . . . . . . . . . . . . A-45
PLAN OF MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
PREMISES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-30
PRICING PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-4
PROPOSAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-41
PROSPECTUS AND PROXY STATEMENT . . . . . . . . . . . . . . . . . . . . A-16
PURCHASE PRICE PER SHARE . . . . . . . . . . . . . . . . . . . . . . . A-4
REGISTRATION STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . A-16
SEAWAY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
SEAWAY COMMON STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . A-1
SEAWAY DEFINED BENEFIT PLAN. . . . . . . . . . . . . . . . . . . . . . A-28
SEAWAY DISCLOSURE STATEMENT. . . . . . . . . . . . . . . . . . . . . . A-18
SEAWAY-RELATED PERSON. . . . . . . . . . . . . . . . . . . . . . . . . A-31
SEAWAY'S FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . A-21
SEAWAY'S LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . A-26
SEAWAY'S REAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . A-25
SEAWAY'S SUBSIDIARIES. . . . . . . . . . . . . . . . . . . . . . . . . A-20
SEC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-16
SECOND FLOOR PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . A-5
SECURITIES ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-40
SECURITIES EXCHANGE ACT. . . . . . . . . . . . . . . . . . . . . . . . A-34
SHAREHOLDERS' MEETING. . . . . . . . . . . . . . . . . . . . . . . . . A-2
SURVIVING CORPORATION. . . . . . . . . . . . . . . . . . . . . . . . . A-2
TERMINATION FEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . A-52
TRANSACTION DOCUMENT . . . . . . . . . . . . . . . . . . . . . . . . . A-16
UNAFFILIATED PERSON. . . . . . . . . . . . . . . . . . . . . . . . . . A-52
UPSET CONDITION. . . . . . . . . . . . . . . . . . . . . . . . . . . . A-5
A-v
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "PLAN OF MERGER") is made as of
August 21, 1996, between Seaway Financial Corporation, a Michigan
corporation headquartered at 200 Riverside Avenue, St. Clair, Michigan
("SEAWAY"), and Old Kent Financial Corporation, a Michigan corporation
headquartered at One Vandenberg Center, Grand Rapids, Michigan ("OLD
KENT").
Old Kent and Seaway desire that Seaway and its subsidiaries become
affiliated with Old Kent. The affiliation would be effected through the
merger of Seaway with and into Old Kent in accordance with this Plan of
Merger and in accordance with 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 per share ("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. As of July 26, 1996, 46,041,003 shares of Old
Kent Common Stock were issued and outstanding, and approximately 872,856
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 (defined in Section 1.3)
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. Each share of Old Kent Common Stock is
entitled to one vote on all matters submitted for a vote of the
shareholders; no shareholder of Old Kent Common Stock is entitled to vote
on this Plan of Merger.
Seaway is a bank holding company registered as such with the Federal
Reserve Board under the Federal Bank Holding Company Act. Seaway has
authorized capital stock consisting of 2,100,000 shares, divided into two
classes: 2,000,000 shares of common stock, $1 par value per share
("SEAWAY COMMON STOCK"); and 100,000 shares of preferred stock, $1 stated
value per share. As of the date of this Plan of Merger, 1,685,430 shares
of Seaway Common Stock were issued and outstanding. 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 Seaway Common Stock is not
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subject to change before the Effective Time of the Merger. Each share of
Seaway Common Stock is entitled to one vote on all matters submitted for a
vote of the shareholders, including their action on this Plan of Merger.
In consideration of 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
shall be carried out in the following manner:
1.1 APPROVAL OF PLAN OF MERGER. As soon as practicable after this
Plan of Merger has been executed and delivered and the Registration
Statement (defined in Section 3.13 (REGISTRATION STATEMENT, ETC.)) has
become effective, Seaway shall submit this Plan of Merger to its
shareholders for approval at a meeting properly called, noticed, and held
for that purpose (the "SHAREHOLDERS' MEETING"). At the Shareholders'
Meeting and in any proxy materials used in connection with the meeting, the
board of directors of Seaway shall recommend that its shareholders vote for
approval of this Plan of Merger. 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 following the
"CLOSING." The Closing shall be held at such time, date, 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 LLP,
900 Old Kent Building, 111 Lyon Street, N.W., Grand Rapids, Michigan,
commencing at 11 a.m. on a date specified by either party upon 10 business
days' written notice after the last to occur of the following events: (i)
receipt of all consents and approvals of government regulatory authorities
legally required to consummate the Merger and the expiration of all
statutory waiting periods; and (ii) approval of this Plan of Merger by
Seaway's shareholders. Scheduling or commencing the Closing shall not,
however, constitute a waiver of the conditions precedent of either Old Kent
or Seaway as set forth in Articles VI and VII, respectively. Upon
completion of the Closing, Seaway and Old Kent shall each execute and file
the certificate of merger as required by the Michigan Act to effect the
Merger (the "CERTIFICATE OF MERGER").
1.3 EFFECTIVE TIME OF THE MERGER. The Merger shall be consummated as
promptly as possible following the Closing by filing the Certificate of
Merger in the manner required by law. The "EFFECTIVE TIME OF THE MERGER"
shall be as of the time and date to be specified in the Certificate of
Merger, which shall be as soon as practicable, but not later than the first
business day of the month next following the month in which the Closing
occurs. The parties presently anticipate that the Effective Time of the
Merger will be on January 2, 1997.
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1.4 MERGER OF SEAWAY WITH AND INTO OLD KENT. At the Effective Time
of the Merger, Seaway shall be merged with and into Old Kent. Seaway and
Old Kent are each sometimes referred to as a "CONSTITUENT CORPORATION"
prior to the Merger. At the Effective Time of the Merger, the Constituent
Corporations shall become a single corporation, which shall be Old Kent
(the "SURVIVING CORPORATION").
1.5 EFFECTS 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 with respect to the merger of two
domestic corporations where the surviving corporation will be subject to
the laws of the State of Michigan.
1.6 ADDITIONAL ACTIONS. At any time after the Effective Time of the
Merger, the Surviving Corporation may determine that 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 Seaway 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. Seaway hereby grants to the
Surviving Corporation an irrevocable power of attorney to execute and
deliver all such deeds, assignments, and assurances and to do all acts
necessary, proper, or convenient to accomplish this purpose. This limited
power of attorney shall only be operative following the Effective Time of
the Merger. The proper officers and directors of the Surviving Corporation
shall be fully authorized in the name of Seaway to take any and all such
action contemplated by this Plan of Merger.
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 as in effect immediately prior to the Effective Time of the
Merger, without change.
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, without change.
1.7.4 DIRECTORS. The directors of the Surviving Corporation
shall be the same as the directors of Old Kent immediately prior to
the Effective Time of the Merger.
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1.7.5 OFFICERS. The officers of the Surviving Corporation shall
be the same as the officers of Old Kent immediately prior to the
Effective Time of the Merger.
ARTICLE II - CONVERSION AND EXCHANGE OF SHARES
Subject to the terms and conditions of this Plan of Merger, the
exchange of Seaway Common Stock for Old Kent Common Stock shall be effected
as follows:
2.1 CONVERSION OF SHARES. At the Effective Time of the Merger:
2.1.1 CONVERSION OF SEAWAY COMMON STOCK. Subject to the
provisions of Sections 2.2 (UPSET PROVISIONS), 2.6 (NO FRACTIONAL
SHARES), and 2.3 (ADJUSTMENTS), each share of Seaway Common Stock
outstanding immediately prior to the Effective Time of the Merger
shall be converted into that number (the "EXCHANGE RATIO") 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 $43.9057 (the "PURCHASE PRICE PER SHARE") by the average of
the closing prices per share of Old Kent Common Stock reported on The
NASDAQ Stock Market during the 10 consecutive trading days ending on
the tenth business day prior to the date of the Closing (the "PRICING
PERIOD") as reported in the DOW JONES NEWS/RETRIEVAL system, or other
equally reliable means (as so calculated, the "FINAL OKEN STOCK
PRICE"). Notwithstanding this calculation of the Final OKEN Stock
Price, the Exchange Ratio shall be computed as follows under these
circumstances:
(a) If the Final OKEN Stock Price is greater than $38.4524
(the "CEILING PRICE"), then the Exchange Ratio shall be
determined by dividing the Purchase Price Per Share by the
Ceiling Price.
(b) If the Final OKEN Stock Price is less than $34.6429
(the "FIRST FLOOR PRICE"), and Subsection 2.1.1(c) does not apply,
then the Exchange Ratio shall be determined by dividing the
Purchase Price Per Share by the First Floor Price.
(c) If Seaway gives, and Old Kent accepts, an Increase
Notice (defined in Section 2.2.2(c)) as provided under Section
2.2 (UPSET PROVISIONS), then the Exchange Ratio shall be
determined by dividing the Purchase Price Per Share by the Second
Floor Price (defined in Section 2.2.1(a)) (resulting in the
"ADJUSTED EXCHANGE RATIO").
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 Old
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Kent Rights (defined in Section 3.3.1) issuable pursuant to the Old
Kent Rights Agreement then represented by each share of Old Kent
Common Stock at the Effective Time of the Merger, provided, that the
Old Kent Rights are not then separately transferable.
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 Old Kent whose shares were outstanding immediately
before the Effective Time of the Merger will hold the same number of
shares of the Surviving Corporation, with identical designations,
preferences, limitations, and relative rights, immediately after the
Effective Time of the Merger.
2.1.4 STOCK HELD BY OLD KENT. Each share of Seaway Common
Stock, if any, held by Old Kent or any of its subsidiaries for its own
account, and not in a fiduciary capacity for a person other than Old
Kent or any of its subsidiaries, shall be canceled and no
consideration shall be issuable or payable with respect to any such
share.
2.1.5 SEAWAY COMMON STOCK NO LONGER OUTSTANDING. Each share of
Seaway 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 SEAWAY COMMON STOCK),
together with any dividends and other distributions payable as
provided in Section 2.5.4 (DIVIDENDS PENDING SURRENDER), but subject
to the payment of cash in lieu of fractional shares as provided in
Section 2.6 (NO FRACTIONAL SHARES).
2.2 UPSET PROVISIONS. After a Closing is properly called pursuant to
Section 1.2 (THE CLOSING) Seaway and Old Kent shall have the following
rights if the "Upset Condition" described below then exists:
2.2.1 UPSET CONDITION. The "UPSET CONDITION" shall exist if
both of the following conditions exist:
(a) The Final OKEN Stock Price determined without regard to
the First Floor Price limitation under Section 2.1.1(b) is less
than $31.0655 (the "SECOND FLOOR PRICE"), subject to adjustment
under Section 2.3 (ADJUSTMENTS); AND
(b) The percentage determined by dividing the Final OKEN
Stock Price by $36.5476 (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 Pricing Period by the Aggregate Price Per
Share of the Comparison Stocks on May 14, 1996 (the "COMPARISON
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STOCKS BASE PRICE PER SHARE"), subject to adjustment under
Section 2.3 (ADJUSTMENTS).
The "AGGREGATE PRICE PER SHARE OF THE COMPARISON STOCKS" means the sum
of the closing prices per share of all of the Comparison Stocks as
reported in the DOW JONES NEWS/RETRIEVAL system, or other equally
reliable means, on the 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
May 14, 1996, are listed below for reference purposes only):
TRADING CLOSING
CORPORATION SYMBOL PRICE
First Security Corporation FSCO 25.000
Huntington Bancshares, Inc. HBAN 24.000
First Tennessee National Corp. FTEN 33.750
Firstar Corporation FSR 47.125
Fifth Third Bancorp FITB 54.250
First of America Bank Corporation FOA 45.750
Regions Financial Corp. RGBK 46.625
Marshall & Ilsley Corporation MRIS 26.625
Star Banc Corp. STB 67.125
AmSouth Bancorporation ASO 38.500
Signet Banking Corporation SBK 24.500
Mercantile Bancorporation, Inc. MTL 45.000
Crestar Financial Corporation CF 55.750
Commerce Bancshares, Inc. CBSH 34.750
Central Fidelity Banks, Inc. CFBS 34.250
Aggregate Price Per Share of
Comparison Stocks (subject to adjustment) $603.000
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 May 14, 1996, and the end of the Pricing
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 SEAWAY'S RIGHTS IN UPSET CONDITION. If the Upset
Condition shall then exist, Seaway shall have the right, exercisable
at any time prior to 5 p.m. on the third business day after the last
day of the Pricing Period (the "EXERCISE PERIOD") to:
A-6
(a) 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; upon the delivery of such notice
by Seaway, the Merger shall be abandoned and this Plan of Merger
shall immediately terminate without further action;
(b) Proceed with the Merger on the basis of the Exchange
Ratio determined pursuant to Section 2.1.1 (CONVERSION OF SEAWAY
COMMON STOCK) under Subsection 2.1.1(b) 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 (SEAWAY'S RIGHTS IN UPSET CONDITION) during
the Exercise Period; or
(c) Request that Old Kent proceed on the basis of the
Adjusted Exchange Ratio determined pursuant to Section 2.1.1
(CONVERSION OF SEAWAY COMMON STOCK) under Subsection 2.1.1(c), by
delivering written notice of this request (an "INCREASE NOTICE")
to Old Kent within the Exercise Period.
2.2.3 OLD KENT'S RIGHTS UPON RECEIPT OF INCREASE NOTICE. If the
Upset Condition occurs and Old Kent receives an Increase Notice
pursuant to Section 2.2.2 (SEAWAY'S RIGHTS IN UPSET CONDITION), then
Old Kent shall either accept or decline the Adjusted Exchange Ratio by
delivering written notice of its decision to Seaway at or before
5 p.m. on the third business day after the expiration of the Exercise
Period (the "ACCEPTANCE PERIOD").
(a) If Old Kent accepts the Adjusted Exchange Ratio within
the Acceptance Period, then this Plan of Merger shall remain in
effect in accordance with its terms except that the Exchange
Ratio shall be equal to the Adjusted Exchange Ratio; or
(b) If Old Kent either (i) declines the Adjusted Exchange
Ratio or (ii) fails to deliver written notice of its decision to
accept or decline the Adjusted Exchange Ratio within the
Acceptance Period, then the Merger shall be abandoned and this
Plan of Merger shall thereupon terminate without further action
by Seaway or Old Kent effective as of 5 p.m. on the third
business day following the expiration of the Acceptance Period,
except as provided in Section 2.2.4.
2.2.4 SEAWAY'S FURTHER RIGHTS IF ADJUSTED EXCHANGE RATIO IS
REJECTED. If Old Kent either (i) declines the Adjusted Exchange Ratio
or (ii) fails to deliver written notice of its decision to accept or
decline the Adjusted Exchange Ratio within the Acceptance Period, then
Seaway may elect to withdraw its Increase Notice and proceed with the
Merger on the basis of the Exchange Ratio determined pursuant to
Section 2.1.1 (CONVERSION OF SEAWAY COMMON STOCK) under Subsection
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2.1.1(b) by written notice delivered to Old Kent at or before 5 p.m.
on the third business day following the expiration of the Acceptance
Period. Upon this 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 ADJUSTMENTS. The Exchange Ratio 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 upon the occurrence of any of the following events:
2.3.1 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 Pricing 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.
2.3.2 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
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 shareholders of Seaway in exchange for their shares of
Seaway Common Stock and the Exchange Ratio 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 Seaway
Common Stock would receive, in lieu of each share of Old Kent Common
Stock to be issued in exchange for Seaway 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.
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2.3.3 POSTPONEMENT OF CLOSING. Old Kent and Seaway 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 2.3.1 or 2.3.2 at any time during the Pricing Period.
2.3.4 EMPLOYEE STOCK OPTIONS, ETC. Notwithstanding any other
provisions of this Section 2.3 (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.
2.3.5 AUTHORIZED BUT UNISSUED SHARES. Notwithstanding the other
provisions of this Section 2.3 (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.
2.3.6 CHANGES IN CAPITAL. Subject only to making any adjustment
to the Exchange Ratio and related computations prescribed by this
Section 2.3 (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 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.
2.3.7 INCREASE IN OUTSTANDING SHARES OF SEAWAY COMMON STOCK. In
the event that the number of shares of Seaway Common Stock outstanding
is greater than 1,685,430 (the total number of shares of Seaway Common
Stock outstanding as of the date of this Plan of Merger) for any
reason whatsoever (whether or not such increase constitutes a breach
of this Plan of Merger), 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 1,685,430;
and (ii) the denominator of which shall be the total number of shares
of Seaway Common Stock outstanding as of the Effective Time of the
Merger.
2.3.8 COMPARISON STOCKS. If the issuer of any Comparison Stock (a
"COMPARISON ISSUER") declares a stock dividend, stock split, or other
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general distribution of that Comparison Issuer's common stock to
holders of that Comparison Issuer's common stock, and the ex-dividend
or ex-distribution date for such stock dividend, stock split, or
distribution occurs between May 14, 1996, and the end of the Pricing
Period, then the price of such Comparison Issuer's common stock as of
May 14, 1996, for the purposes of Section 2.2 (UPSET PROVISIONS) shall
be adjusted by multiplying that price by a ratio (i) the numerator of
which shall be the total number of shares of that Comparison Issuer's
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 that Comparison Issuer's common stock outstanding
immediately after such dividend, split, or distribution.
2.4 CESSATION OF SHAREHOLDER STATUS. As of the Effective Time of the
Merger, record holders of shares of Seaway Common Stock outstanding
immediately prior to the Effective Time of the Merger shall cease to be
shareholders of Seaway and shall have no rights as Seaway shareholders.
Each stock certificate representing shares of Seaway Common Stock ("OLD
CERTIFICATES") shall then be deemed to represent only 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.
2.5 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:
2.5.1 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 Seaway 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.
2.5.2 EXCHANGE AGENT. As soon as practicable after the
Effective Time of the Merger, Old Kent will deliver to Old Kent Bank,
a Michigan banking corporation, 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 dividends or other distributions paid or distributed with
respect to such shares for the account of the persons entitled to such
shares.
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2.5.3 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 Seaway'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
Seaway shareholder, the Exchange Agent shall have received all of
the Old Certificates held by that shareholder, 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.
2.5.4 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
shareholder of Seaway shall be entitled to receive a distribution of
any such dividend until the physical exchange of that shareholder's
Old Certificates for new Old Kent Common Stock certificates shall have
been effected. Upon the physical exchange of that shareholder's Old
Certificates, that shareholder 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.
2.5.5 STOCK TRANSFERS. On or after the Effective Time of the
Merger, there shall be no transfers on Seaway's stock transfer books
of the shares of Seaway 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.
2.5.6 EXCHANGE AGENT'S DISCRETION. The Exchange Agent shall
have discretion to determine reasonable rules and procedures relating
to the exchange of Old Certificates and the issuance and delivery of
new certificates of Old Kent Common Stock into which shares of Seaway
Common Stock are converted in the Merger and governing the payment for
fractional shares of Seaway Common Stock.
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2.6 NO FRACTIONAL SHARES. Notwithstanding any other provision of
Article II, no certificates or scrip representing fractional shares of Old
Kent Common Stock shall be issued in the Merger (taking into account all
shares held by a particular Seaway shareholder) upon the surrender of Old
Certificates pursuant to Section 2.5 (SURRENDER OF OLD CERTIFICATES AND
DISTRIBUTION OF OLD KENT COMMON STOCK). No fractional interest in any
share of Old Kent Common Stock resulting from the Merger shall be entitled
to any part of a dividend, distribution, or stock split with respect to
shares of Old Kent Common Stock nor entitle the record holder to vote or
exercise any rights of a shareholder with respect to that fractional
interest. In lieu of issuing any fractional share, each holder of an Old
Certificate who would otherwise have been entitled to a fractional share of
Old Kent Common Stock upon surrender of all Old Certificates for exchange
pursuant to Section 2.5 (SURRENDER OF OLD CERTIFICATES AND DISTRIBUTION OF
OLD KENT COMMON STOCK) shall be paid an amount in cash (without interest)
equal to such fraction of a share multiplied by the Final OKEN Stock Price.
ARTICLE III - OLD KENT'S REPRESENTATIONS AND WARRANTIES
Old Kent represents and warrants to Seaway that, except as otherwise
set forth in a disclosure statement dated August 8, 1996, and any
amendments or supplements thereto dated as of or before the date of this
Plan of Merger (collectively, the "OLD KENT DISCLOSURE STATEMENT"), which
have been delivered to Seaway prior to 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 its
subsidiaries, assuming the timely receipt of each of the
approvals referred to in Section 3.1.4 (REQUIRED APPROVALS).
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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 its subsidiaries under any agreement, mortgage,
lease, commitment, indenture, other instrument, or obligation to
which Old Kent or any of its subsidiaries is a party or by which
they are bound or affected:
(1) Which is material to the financial condition,
income, expenses, or business of Old Kent and its
subsidiaries on a consolidated basis; or
(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 Seaway or Seaway's
Subsidiaries (as defined in Section 4.3 (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, compliance with federal and state securities laws,
bylaws and rules of the National Association of Securities Dealers,
Inc. ("NASD"), and the approval required under the Federal Bank
Holding Company Act.
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 as such 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.
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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 July 26, 1996, a total of 46,041,003 shares were validly
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. The 300,000 shares of Series B Preferred Stock
are reserved for issuance pursuant to Series B Preferred Stock
Purchase Rights (the "OLD KENT RIGHTS") governed by a Rights Agreement
dated as of December 19, 1988, between Old Kent and Old Kent Bank and
Trust Company (the "OLD KENT RIGHTS AGREEMENT").
3.3.2 NO OTHER CAPITAL STOCK. As of the execution of this Plan
of Merger:
(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; (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; (iv) shares of Old Kent
Common Stock issuable under agreements entered into in connection
with acquisitions of direct or indirect subsidiaries or assets of
such subsidiaries in transactions approved by the Old Kent board
of directors or a committee of such board, which shares in the
aggregate do not exceed one percent of the number of shares of
Old Kent Common Stock issued and outstanding; and (v) shares of
Old Kent Common Stock issuable under Old Kent's Dividend
Reinvestment Plan.
3.3.3 ISSUANCE OF SHARES. Between July 26, 1996, and the
execution of this Plan of Merger, no additional shares of capital
stock have been issued by Old Kent, except as described in this Plan
of Merger, and except for shares issued or issuable pursuant to (i)
the exercise of employee stock options under employee stock option
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plans; (ii) 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; (iii) any stock dividend
declared and payable (whether or not distributed) as of a record date
prior to the date of this Plan of Merger; and (iv) Old Kent's Dividend
Reinvestment Plan.
3.3.4 VOTING RIGHTS. Neither Old Kent nor any of its
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 its subsidiaries as of and for the year ended December 31,
1995, as reported on by Old Kent's independent accountants, Arthur
Andersen & Co., and the unaudited consolidated financial statements of Old
Kent and its subsidiaries as of and for the quarters ended March 31, 1996,
and June 30, 1996, including all schedules and notes relating to such
statements, as previously delivered to Seaway, are correct and complete in
all material respects. These statements fairly present Old Kent's and its
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
as of December 31, 1995, 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, 1995,
there has been no material adverse change in the financial condition,
income, expenses, or business of Old Kent and its 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 financial condition, income,
expenses, or business of Old Kent and its subsidiaries on a consolidated
basis for reasons unique to Old Kent and not applicable to the banking
industry as a whole.
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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 financial condition, income, expenses, or business 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 4.20.2 ENVIRONMENTAL LAWS)); except for violations which would not
have a material adverse effect on the financial condition, income,
expenses, or business 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 its 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 financial condition, income, expenses, or business 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
"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:
3.10.1 ERISA COMPLIANCE. Old Kent, 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, except to
the extent that noncompliance is not material to the financial
condition, income, expenses, or business of Old Kent and its
subsidiaries on a consolidated basis.
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3.10.2 INTERNAL REVENUE CODE COMPLIANCE. Old Kent, each
Employee Benefit Plan which is intended to be a qualified plan under
Section 401(a) of the Internal Revenue Code of 1986, as amended (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, except to the extent that noncompliance is not
material to the financial condition, income, expenses, or business of
Old Kent and its subsidiaries on a consolidated basis.
3.10.3 PROHIBITED TRANSACTIONS. No Employee Benefit Plan and no
trust created thereunder has been involved, subsequent to June 30,
1974, in any material nonexempt "prohibited transaction" as defined in
Section 4975 of the Internal Revenue Code and in Sections 406, 407,
and 408 of ERISA.
3.10.4 PAYMENT OF CONTRIBUTIONS. Old Kent has made all material
contributions required under each Employee Benefit Plan and under
applicable laws and regulations.
3.10.5 PAYMENT OF BENEFITS. There are no material payments
which have become due from any Employee Benefit Plan, the trusts
created thereunder, or from Old Kent 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.
3.10.6 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, a material "accumulated funding
deficiency" as defined in Section 412(a) of the Internal Revenue Code
and Section 302 of ERISA (whether or not waived).
3.11 ENVIRONMENTAL MATTERS. Old Kent and its subsidiaries have
complied with all Environmental Laws (as defined in Section 4.20.2
(ENVIRONMENTAL LAWS)), except to the extent that noncompliance is not
material to the financial condition, income, expenses, or business of Old
Kent and its subsidiaries on a consolidated basis.
3.12 REGULATORY FILINGS. Except as to any filing that would not be
material to the financial condition, income, expenses, or business of Old
Kent and its subsidiaries on a consolidated basis, 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;
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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 material misstatements or omissions
therein.
3.13 REGISTRATION STATEMENT, ETC.
3.13.1 "TRANSACTION DOCUMENT." The term "TRANSACTION 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 Seaway
shareholders in connection with the Shareholders' Meeting; and (iii)
any other documents to be filed with the SEC, the Federal Reserve
Board, the State of Michigan, 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 Transaction
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 Transaction 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 Shareholders' 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 Shareholders' 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.
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3.14 TAX MATTERS.
3.14.1 TAX RETURNS. Old Kent has duly and timely filed all
material tax returns which it has 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, except for returns for which
extensions were filed. Each such tax return, report, and statement,
as amended, is correct and complies with all applicable laws and
regulations in all material respects.
3.14.2 TAX ASSESSMENTS AND PAYMENTS. All taxes and assessments,
including any penalties, interest, and deficiencies relating to those
taxes and assessments, due and payable by Old Kent have been paid in
full, and the provisions made for taxes on the consolidated balance
sheet of Old Kent and its subsidiaries as of December 31, 1995, are
sufficient for the payment of all material federal, state, county, and
local taxes of Old Kent and its subsidiaries accrued but unpaid,
whether or not disputed, as of December 31, 1995, except to the extent
that any failures to so pay or accrue are not in the aggregate
material to the financial condition, income, expenses or business of
Old Kent and its subsidiaries on a consolidated basis.
3.14.3 TAX AUDITS. As of the date of this Plan of Merger (i)
none of the federal consolidated income tax returns of Old Kent and
its subsidiaries filed for any tax year after 1992 have been audited
by the Internal Revenue Service (the "IRS"); (ii) there is no tax
audit or legal or administrative proceeding for assessment or
collection of Federal income taxes pending or, to Old Kent's
knowledge, threatened with respect to Old Kent; and (iii) no claim for
assessment or collection of Federal income taxes has been asserted
with respect to Old Kent and not been satisfied or resolved.
3.15 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.
3.16 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 validly issued, fully paid, and nonassessable shares.
3.17 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
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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.
3.18 REPRESENTATIONS AND WARRANTIES AT 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, except as otherwise
expressly contemplated by this Plan of Merger. 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.
ARTICLE IV - SEAWAY'S REPRESENTATIONS AND WARRANTIES
Seaway represents and warrants to Old Kent that, except as otherwise
set forth in a disclosure statement dated August 7, 1996, and any
amendments or supplements thereto dated as of or before the date of this
Plan of Merger (collectively, the "SEAWAY DISCLOSURE STATEMENT"), which
have been delivered to Old Kent prior to the execution of this Plan of
Merger:
4.1 AUTHORIZATION, NO CONFLICTS, ETC.
4.1.1 AUTHORIZATION OF AGREEMENT. The Plan of Merger has been
duly adopted by Seaway's board of directors. The execution, delivery,
and performance of this Plan of Merger by Seaway 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 Seaway in accordance with its terms, except
that the consummation of the Merger is subject to the approval of
Seaway's shareholders as described in Section 1.1 (APPROVAL OF PLAN OF
MERGER).
4.1.2 NO CONFLICT, BREACH, VIOLATION, ETC. The execution,
delivery, and performance of this Plan of Merger by Seaway, 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 Seaway'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 Seaway or Seaway's
Subsidiaries (as defined in Section 4.3.1, 4.37 (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 Seaway,
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 Seaway
or any of Seaway's Subsidiaries under any agreement, mortgage,
lease, commitment, indenture, other instrument, or obligation to
which Seaway or any of Seaway's Subsidiaries is a party or by
which they are bound or affected:
(1) Which is material to the financial condition,
income, expenses, business, properties, operations, or
prospects of Seaway or any of Seaway's Subsidiaries; or
(2) The violation or breach of which could prevent
Seaway 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 Seaway or any of
Seaway's Subsidiaries is a party or subject, or by which it is
bound or affected; or
(c) TORTIOUS INTERFERENCE. Subject Old Kent or its
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
Seaway other than in connection or compliance with the provisions of
the Michigan Act, compliance with federal and state securities laws,
and the consents, authorizations, approvals, or exemptions required
under the Federal Bank Holding Company Act.
4.2 ORGANIZATION AND GOOD STANDING. Seaway is a corporation duly
organized, validly existing, and in good standing under the laws of the
State of Michigan. Seaway 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. Seaway is
a bank holding company duly registered as such with the Federal Reserve
Board under the Federal Bank Holding Company Act. Seaway is not required
to be qualified or admitted to conduct business as a foreign corporation in
any other state in which such qualification or admission would be material
to its business.
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4.3 SUBSIDIARIES.
4.3.1 OWNERSHIP OF SUBSIDIARIES. Seaway owns all of the issued
and outstanding shares of capital stock of The Commercial and Savings
Bank of Saint Clair County and The Algonac Savings Bank (separately,
each a "BANK" and, collectively, "SEAWAY'S SUBSIDIARIES"), free and
clear of all claims, security interests, pledges, or liens of any
kind. Each of Seaway's Subsidiaries is duly organized, validly
existing, and in good standing under the laws of the State of
Michigan. Seaway 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 Seaway's
Subsidiaries.
4.3.3 QUALIFICATION AND POWER. Each of Seaway's Subsidiaries:
(a) CORPORATE 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 DEPOSIT INSURANCE; OTHER ASSESSMENTS. Each of Seaway's
Subsidiaries maintains in full force and effect deposit insurance
through the Bank Insurance Fund of the Federal Deposit Insurance
Corporation ("FDIC"). Each of Seaway's Subsidiaries 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. Each of Seaway'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.
4.3.5 ASSETS USED IN BUSINESS. All nonfinancial assets that are
material to the conduct of the business of Seaway and Seaway's
Subsidiaries are owned, leased, or licensed by Seaway and Seaway's
Subsidiaries and are adequate to carry on such business as presently
conducted. All of Seaway's and Seaway's Subsidiaries' nonfinancial
assets and properties are in an operating condition and state of
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maintenance and repair suitable for their present use, and in the
possession of Seaway or Seaway's Subsidiaries.
4.4 CAPITAL STOCK.
4.4.1 CLASSES AND SHARES. The authorized capital stock of
Seaway consists of 2,100,000 shares divided into two classes as
follows: (i) 2,000,000 shares of common stock, $1 par value per
share, of which, as of the date and time of the execution of this Plan
of Merger, 1,685,430 shares were issued and outstanding; and
(ii) 100,000 shares of preferred stock, $1 stated value per share,
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 Seaway 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 Seaway, or agreements to which Seaway is
a party or by which it is bound to issue capital stock.
4.4.3 ISSUANCE OF SHARES. After the execution of this Plan of
Merger, the number of issued and outstanding shares of Seaway Common
Stock is not subject to change before the Effective Time of the
Merger.
4.4.4 VOTING RIGHTS. Other than the shares of Seaway Common
Stock described in this Section 4.4 (CAPITAL STOCK), neither Seaway
nor any of Seaway'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.
4.5 FINANCIAL STATEMENTS.
4.5.1 FINANCIAL STATEMENTS. The consolidated financial
statements of Seaway and Seaway's Subsidiaries as of and for the each
of three years ended December 31, 1993, 1994, and 1995, as reported on
by Seaway's independent accountants, Plante & Moran, LLP, and the
unaudited consolidated financial statements of Seaway and Seaway's
Subsidiaries as of and for each of the quarters ended March 31, 1996,
and June 30, 1996, including all schedules and notes relating to such
statements, as previously delivered to Old Kent, are correct and
complete in all material respects. When prepared and delivered to Old
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Kent, the unaudited consolidated financial statements of Seaway and
Seaway's Subsidiaries as of and for the quarter ended September 30,
1996, including all schedules and notes relating to such statements,
will be correct and complete in all material respects. All of the
consolidated financial statements identified in this Subsection are
collectively referred to as "SEAWAY'S FINANCIAL STATEMENTS." Seaway's
Financial Statements fairly present, and will fairly present, Seaway's
and Seaway's Subsidiaries' financial condition and results of
operations on a consolidated basis on the dates and for the periods
indicated. Seaway's Financial Statements have been prepared, and will
be 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).
4.5.2 CALL REPORTS. The following reports (including all
related schedules, notes, and exhibits) were prepared and filed in
conformity with applicable regulatory requirements and accounting
principles applied consistently throughout the periods indicated
(except as otherwise noted in such reports) and were correct and
complete in all material respects when filed:
(a) The consolidated reports of condition and income of
each of the Banks as of and for each of the years ended
December 31, 1993, 1994, and 1995, as filed with the FDIC; and
(b) The FR Y-9 and FR Y-6 for Seaway and Seaway's
Subsidiaries as of and for each of the years ended December 31,
1993, 1994, and 1995, as filed with the Federal Reserve Board.
All of such reports required to be filed prior to the Closing by
Seaway and/or Seaway's Subsidiaries will be prepared and filed in
conformity with applicable regulatory requirements and accounting
principles applied consistently throughout their respective periods
(except as otherwise noted in such reports) and will be correct and
complete in all material respects when filed. All of the reports
identified in this Subsection are collectively referred to as the
"CALL REPORTS."
4.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as and to the extent
reflected or reserved against in the consolidated balance sheet of Seaway
and Seaway's Subsidiaries as of December 31, 1995, and the notes thereto,
neither Seaway nor any of Seaway's Subsidiaries had, as of such date,
liabilities or 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 financial
condition, income, expenses, business, properties, operations, or prospects
of Seaway or any of Seaway's Subsidiaries.
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4.7 ABSENCE OF MATERIAL ADVERSE CHANGE. Since December 31, 1995,
there has been no material adverse change in the financial condition,
income, expenses, business, properties, operations, or prospects of Seaway
or any of Seaway'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 financial condition, income, expenses, business, properties,
operations, or prospects of Seaway or any of Seaway's Subsidiaries for
reasons unique to Seaway and not applicable to the banking industry as a
whole.
4.8 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
Seaway, any of Seaway's Subsidiaries, or the assets or business of Seaway
or any of Seaway's Subsidiaries, any of which has or may have a material
adverse effect on the financial condition, income, expenses, business,
properties, operations, or prospects of Seaway or any of Seaway's
Subsidiaries. There is no factual basis known to Seaway which presents a
reasonable potential for any such action, suit, proceeding, claim,
arbitration, or investigation.
4.9 CONDUCT OF BUSINESS. Seaway and Seaway'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 4.20.2 (ENVIRONMENTAL LAWS)); except for violations that would not
have a material adverse effect on the financial condition, income,
expenses, business, properties, operations, or prospects of Seaway or any
of Seaway's Subsidiaries.
4.10 ABSENCE OF DEFAULTS UNDER CONTRACTS. There is no existing
default by Seaway or any of Seaway's Subsidiaries, or any other party,
under any contract or agreement to which Seaway or any of Seaway's
Subsidiaries is a party, or by which they are bound, which could have a
material adverse effect on the financial condition, income, expenses,
business, properties, operations, or prospects of Seaway or any of Seaway's
Subsidiaries. Excepting any ordinary and customary banking relationships,
to the best of Seaway's knowledge, there are no material agreements,
contracts, mortgages, deeds of trust, leases, commitments, indentures,
notes, or other instruments under which another party is in material
default under its obligations to Seaway or any of Seaway's Subsidiaries.
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4.11 REGULATORY FILINGS. In the last five years:
4.11.1 SEC FILINGS. Seaway 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;
4.11.2 REGULATORY FILINGS. Seaway has filed in a timely manner
all other filings with other regulatory bodies for which filings are
required;
4.11.3 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 financial condition, income, expenses, business,
properties, operations, or prospects of Seaway and Seaway's
Subsidiaries on a consolidated basis; and
4.11.4 COMPLIANCE WITH REGULATIONS. All such filings complied
in all material respects with all regulations, forms, and guidelines
applicable to such filings.
4.12 REGISTRATION STATEMENT, ETC.
4.12.1 ACCURATE INFORMATION. None of the information to be
supplied by Seaway for inclusion, or included, in any Transaction
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 Transaction 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 Shareholders' 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 Shareholders' Meeting.
4.12.2 COMPLIANCE OF FILINGS. All documents which Seaway is
responsible for filing with any regulatory agency in connection with
the Merger will comply as to form in all material respects with the
provisions of applicable law.
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4.13 TAX MATTERS.
4.13.1 TAX RETURNS. Seaway and Seaway'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.
4.13.2 TAX ASSESSMENTS AND PAYMENTS. All taxes and assessments,
including any penalties, interest, and deficiencies relating to those
taxes and assessments, due and payable by Seaway and Seaway's
Subsidiaries have been paid in full as and when due. The provisions
made for taxes on the consolidated balance sheet of Seaway and
Seaway's Subsidiaries as of December 31, 1995, are sufficient for the
payment of all federal, state, county, and local taxes of Seaway and
Seaway's Subsidiaries accrued but unpaid as of the date indicated,
whether or not disputed, with respect to all periods through
December 31, 1995.
4.13.3 TAX AUDITS. None of the federal consolidated income tax
returns of Seaway and Seaway's Subsidiaries filed for any tax year
after 1990 have been audited by the IRS. There is no tax audit or
legal or administrative proceeding for assessment or collection of
taxes pending or, to Seaway's knowledge, threatened with respect to
Seaway or any of Seaway's Subsidiaries. No claim for assessment or
collection of taxes has been asserted with respect to Seaway or any of
Seaway's Subsidiaries. No waiver of any limitations statute or
extension of any assessment or collection period has been executed by
or on behalf of Seaway or any of Seaway's Subsidiaries.
4.14 TITLE TO PROPERTIES. Seaway and Seaway'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 Seaway and Seaway's Subsidiaries as of
December 31, 1995, except as since disposed of in the ordinary course of
business), free and clear of all liens and encumbrances, except:
4.14.1 REFLECTED ON BALANCE SHEET. As reflected on the
consolidated balance sheet of Seaway and Seaway's Subsidiaries as of
December 31, 1995, and the notes thereto;
4.14.2 NORMAL TO BUSINESS. Liens for current taxes not yet
delinquent, and liens or encumbrances which are normal to the business
of Seaway and Seaway's Subsidiaries and which are not material in
relation to the financial condition, income, expenses, business,
properties, or operations of Seaway or any of Seaway's Subsidiaries;
and
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4.14.3 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 financial condition, income, expenses, business, properties, or
operations of Seaway or any of Seaway's Subsidiaries.
4.15 CONDITION OF REAL PROPERTY. With respect to each parcel of real
property owned, leased, or used by Seaway and Seaway's Subsidiaries
("SEAWAY'S REAL PROPERTY") to the best knowledge and belief of Seaway after
reasonable inquiry:
4.15.1 NO ENCROACHMENTS. No building or improvement to Seaway's
Real Property encroaches on any easement or property owned by another
person. No building or property owned by another person encroaches on
Seaway's Real Property or on any easement benefiting Seaway's Real
Property. None of the boundaries of Seaway's Real Property deviates
substantially from those shown on the survey of such property, if any,
included with the Seaway Disclosure Statement or from what the
boundaries appear to be through visual inspection. No claim of
encroachment has been asserted by any person with respect to Seaway's
Real Property.
4.15.2 ZONING. Neither Seaway nor any of Seaway's Subsidiaries
is in material violation of any zoning regulation, building
restriction, restrictive covenant, ordinance, or other law, order,
regulation, or requirement relating to Seaway's Real Property.
4.15.3 BUILDINGS. All buildings and improvements to Seaway's
Real Property are in good condition (normal wear and tear excepted),
are structurally sound and are 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 business as
presently conducted at that location.
4.15.4 NO CONDEMNATION. None of Seaway's Real Property is the
subject of any condemnation action. There is, to the best of Seaway's
knowledge, no proposal under active consideration by any public or
governmental authority or entity to acquire Seaway's Real Property for
any governmental purpose.
4.16 REAL AND PERSONAL PROPERTY LEASES. With respect to the leases
and licenses pursuant to which Seaway or any of Seaway's Subsidiaries, as
lessee or licensee, has possession of real or personal property ("SEAWAY'S
LEASES"):
4.16.1 Each of Seaway's Leases is valid, effective, and
enforceable against the lessor or licensor in accordance with its
terms.
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4.16.2 There is no existing default under any of Seaway's Leases
or any event which with notice or lapse of time, or both, would
constitute a default with respect to Seaway, any of Seaway's
Subsidiaries, or any other party to the contract.
4.16.3 None of Seaway's Leases contain a prohibition against
assignment by Seaway or any of Seaway's Subsidiaries, by operation of
law or otherwise, or any provision which would materially interfere
with the possession or use of the property by Old Kent or its
subsidiaries for the same purposes and upon the same rental and other
terms following consummation of the Merger as are applicable to Seaway
or Seaway's Subsidiaries.
4.17 REQUIRED LICENSES, PERMITS, ETC.
4.17.1 LICENSES, PERMITS, ETC. Seaway and Seaway's Subsidiaries
each hold all licenses, certificates, permits, franchises, and rights
from all appropriate federal, state, and other public authorities
necessary for its conduct of business as presently conducted.
4.17.2 REGULATORY ACTION. Neither Seaway nor any of Seaway's
Subsidiaries:
(a) Has within the last five years been charged with, or to
the best of Seaway'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 Seaway's
knowledge, threatened proceeding by any regulatory authority
having jurisdiction over its business, properties, or operations.
4.18 CERTAIN EMPLOYMENT MATTERS.
4.18.1 EMPLOYMENT POLICIES, PROGRAMS, AND PROCEDURES. The
policies, programs and practices of Seaway and Seaway's Subsidiaries
relating to equal opportunity and affirmative action, wages, hours of
work, employee disabilities, and other terms and conditions of
employment are in compliance in all material respects with applicable
federal, state, and local laws, orders, regulations, and ordinances
governing or relating to employment and employer facilities.
4.18.2 RECORD OF PAYMENTS. There are no existing or outstanding
obligations of Seaway or any of Seaway'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 4.18.3
(EMPLOYMENT-RELATED PAYMENTS)) to any trust, fund, company,
governmental agency, or any person which have not been duly recorded
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on the books and records of Seaway or Seaway's Subsidiaries and paid
when due or duly accrued as a liability.
4.18.3 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;
social security benefits; fringe benefits, including vacation or
holiday pay, bonuses and other forms of compensation; or for medical
insurance or medical expenses; any of which are payable with respect
to any present or former director, officer, employee, or agent, or his
or her survivors, heirs, legatees, or legal representatives.
4.18.4 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. There is no factual
basis for any valid claim or charge with regard to such employment-
related matters.
4.18.5 DISCLOSURE OF MATERIAL 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 Seaway
or any of Seaway's Subsidiaries which is not terminable by Seaway
or Seaway'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.
4.19 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 Seaway or any of Seaway's Subsidiaries or to which
Seaway or any of Seaway's Subsidiaries have made payments or contributions
on behalf of its employees:
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4.19.1 ERISA COMPLIANCE. Seaway and each of Seaway'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.
4.19.2 INTERNAL REVENUE CODE COMPLIANCE. Seaway and each of
Seaway'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.
4.19.3 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.
4.19.4 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,
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.
4.19.5 MULTIEMPLOYER PLAN. No Employee Benefit Plan is a
"multiemployer plan" within the meaning of Section 3(37)(A) of ERISA.
4.19.6 DEFINED BENEFIT PLAN. Except for the Seaway Financial
Corporation Employees' Pension Plan (the "SEAWAY DEFINED BENEFIT
PLAN"), no Employee Benefit Plan in effect as of December 31, 1995, is
a "defined benefit plan" within the meaning of Section 3(35) of ERISA.
4.19.7 PAYMENT OF CONTRIBUTIONS. Seaway and each of Seaway's
Subsidiaries has made when due all contributions required under each
Employee Benefit Plan and under applicable laws and regulations.
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4.19.8 PAYMENT OF BENEFITS. There are no payments which have
become due from any Employee Benefit Plan, the trusts created
thereunder, or from Seaway or any of Seaway'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.
4.19.9 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).
4.19.10 FILING OF REPORTS. Seaway 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, income, expenses, business, properties,
operations, or prospects of Seaway or any of Seaway's Subsidiaries.
4.20 ENVIRONMENTAL MATTERS.
4.20.1 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. <Section> 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.
4.20.2 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.
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4.20.3 OWNED OR OPERATED PROPERTY. With respect to: (i) the
real estate owned or leased by Seaway or any of Seaway's Subsidiaries
or used in the conduct of their businesses; (ii) other real estate
owned by each of the Banks; (iii) real estate held and administered in
trust by each of the Banks; and (iv) to Seaway's knowledge, any real
estate formerly owned or leased by Seaway or any of Seaway'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. To the best knowledge and
belief of Seaway after reasonable inquiry, 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. To the best knowledge and belief of
Seaway after reasonable inquiry, no part of the Premises has been
used for the generation, manufacture, handling, storage,
disposal, or management of Hazardous Substances.
(c) UNDERGROUND STORAGE TANKS. To the best knowledge and
belief of Seaway after reasonable inquiry, the Premises do not
contain, and have never contained, any underground storage tanks.
With respect to any underground storage tank that is listed in
the Seaway 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. To the best knowledge and
belief of Seaway after reasonable inquiry, 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. To the best
knowledge and belief of Seaway after reasonable inquiry, there is
no action, suit, investigation, liability, inquiry, or other
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proceeding, ruling, order, notice of potential liability, or
citation involving Seaway or any of Seaway'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 Seaway, any of Seaway's Subsidiaries, or any of their
respective properties or assets under Section 107 of CERCLA or
any similar provision of any other Environmental Law.
4.20.4 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. Seaway and each of Seaway'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 Seaway 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 Seaway's knowledge, no
such property contains or is contaminated by any quantity of any
Hazardous Substance from any source.
4.21 DUTIES AS FIDUCIARY. Each 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. Neither
Bank has received notice of any claim, allegation, or complaint from any
person that the Bank failed to perform these fiduciary duties in the
required manner.
4.22 INVESTMENT BANKERS AND BROKERS. Seaway has employed the
investment banking firm of Austin Financial Services, Inc. Seaway's only
financial obligation with respect to investment banking firms is the
payment of fees and expenses as described in the Seaway Disclosure
Statement. Seaway has not employed any other broker, finder, or investment
banker in connection with the Merger. Seaway 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.
4.23 SEAWAY-RELATED PERSONS. For purposes of this Plan of Merger,
the term "SEAWAY-RELATED PERSON" shall mean any director or executive
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officer of Seaway or any of Seaway'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.
4.23.1 CONTROL OF MATERIAL ASSETS. Other than in a capacity as
a shareholder, director, or executive officer of Seaway or any of
Seaway's Subsidiaries, no Seaway-Related Person owns or controls any
material assets or properties which are used in the business of Seaway
or any of Seaway's Subsidiaries.
4.23.2 CONTRACTUAL RELATIONSHIPS. Other than ordinary and
customary banking relationships, no Seaway-Related Person has any
contractual relationship with Seaway or any of Seaway's Subsidiaries.
4.23.3 LOAN RELATIONSHIPS. No Seaway-Related Person has any
outstanding loan or loan commitment from, or on whose behalf an
irrevocable letter of credit has been issued by, Seaway or any of
Seaway's Subsidiaries in a principal amount of $10,000 or more.
4.24 CHANGE IN BUSINESS RELATIONSHIPS. Neither Seaway nor any of
Seaway's Subsidiaries has notice, whether on account of the Merger or
otherwise, that (i) any customer, agent, representative, or supplier of
Seaway or any of Seaway's Subsidiaries intends to discontinue, diminish, or
change its relationship with Seaway or any of Seaway's Subsidiaries, the
effect of which would be material to the business of Seaway or any of
Seaway's Subsidiaries; or (ii) any executive officer of Seaway or any of
Seaway's Subsidiaries intends to terminate his or her employment.
4.25 INSURANCE. Seaway and each of Seaway'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 $10,000 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 a policy of insurance covering Seaway's or any of
Seaway's Subsidiaries' assets, properties, premises, operations, or
personnel. Seaway and each of Seaway's Subsidiaries has given adequate and
timely notice to each insurance carrier, and has complied with all policy
provisions, with respect to any known claim or potential claim for which a
defense and/or indemnification may be available to Seaway or any of
Seaway's Subsidiaries.
4.26 CHANGE OF CONTROL. Neither Seaway nor any of Seaway's
Subsidiaries is bound by or subject to any 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 Seaway upon consummation of
the Merger.
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4.27 BOOKS AND RECORDS. The minutes contained in corporate minute
books and files of Seaway and each of Seaway's Subsidiaries 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 Seaway and each of Seaway'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
Seaway'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.
4.29 EVENTS SINCE DECEMBER 31, 1995. Neither Seaway nor any of
Seaway's Subsidiaries has, since December 31, 1995:
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 $10,000.
4.29.2 STRIKES OR LABOR TROUBLE. Experienced or, to the best
knowledge of Seaway, 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 financial condition,
income, expenses, business, operations, or prospects of Seaway or any
of Seaway'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 Seaway's December 31, 1995, 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 $10,000.
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
encumbrances for indebtedness that do not in the aggregate exceed
$10,000.
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4.29.5 EXTRAORDINARY TRANSACTIONS. Entered into any transaction
involving more than $10,000 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 $10,000.
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 financial condition, income, expenses,
business, properties, operations, or prospects of Seaway or any of
Seaway's Subsidiaries, except as may be expressly provided in this
Plan of Merger.
4.30 RESERVE FOR LOAN LOSSES. The reserve for loan and lease losses
as reflected in Seaway's Financial Statements and Call Reports for the
periods ended December 31, 1995, March 31, 1996, June 30, 1996, and
September 30, 1996, were and will be, as of their respective dates,
adequate to meet all reasonably anticipated loan and lease losses, net of
recoveries related to loans previously charged off as of those dates.
4.31 LOAN ORIGINATION AND SERVICING. In originating, underwriting,
servicing, purchasing, selling, transferring, and discharging loans,
mortgages, land contracts, and other contractual obligations, either for
its own account or for the account of others, each of the Banks has
complied with all applicable terms and conditions of such obligations and
with all applicable laws, regulations, rules, contractual requirements, and
procedures, except for incidents of noncompliance that would not,
individually or in the aggregate, have a material effect on the financial
condition, income, expenses, business, operations, or prospects of Seaway
or any of Seaway's Subsidiaries.
4.32 PUBLIC COMMUNICATIONS; SECURITIES OFFERING. No annual report,
quarterly report, proxy material, press release, or other communication
previously sent or released by Seaway or any of Seaway's Subsidiaries to
Seaway's shareholders or the public 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.
4.33 NO INSIDER TRADING. Seaway has reviewed its stock transfer
records since December 31, 1994, and has questioned its directors and
executive officers concerning known stock transfers since that date. Based
upon that investigation, to the best of Seaway's knowledge, (i) no director
or officer of Seaway or any of Seaway's Subsidiaries; (ii) no person
related to any such director or officer by blood or marriage and residing
in the same household, and (iii) no person knowingly provided material
nonpublic information by any one or more of these persons; has purchased or
sold, or caused to be purchased or sold, any shares of Seaway Common Stock
during any period when Seaway was in possession of material nonpublic
information or in violation of any applicable provision of the Securities
Exchange Act of 1934, as amended (the "SECURITIES EXCHANGE ACT").
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4.34 CONTINUITY OF INTEREST. To the best of Seaway's knowledge,
there is no plan or intention by the shareholders of Seaway who own Seaway
Common Stock to sell, exchange, or otherwise dispose of a number of shares
of Old Kent Common Stock received in the Merger that would reduce the
Seaway shareholders' 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 Seaway Common
Stock as of the same time. For purposes of this representation, shares of
Seaway Common Stock exchanged for cash in lieu of fractional shares will be
treated as outstanding Seaway Common Stock at the Effective Time of the
Merger. Shares of Seaway Common Stock and shares of Old Kent Common Stock
held by Seaway shareholders and otherwise sold, redeemed, or disposed of
before or after the transaction will be considered in making this
representation.
4.35 TRUE AND COMPLETE INFORMATION. No schedule, statement, list,
certificate, or other information furnished or to be furnished by Seaway in
connection with this Plan of Merger, including the Seaway 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.
4.36 REPRESENTATIONS AND WARRANTIES AT CLOSING. Seaway further
warrants that its representations and warranties in this Plan of Merger
will be true in all material respects at the Closing, except as otherwise
expressly contemplated by this Plan of Merger. 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.
ARTICLE V - COVENANTS PENDING CLOSING
Subject to the terms and conditions of this Plan of Merger, Seaway and
Old Kent further agree that:
5.1 SEAWAY DISCLOSURE STATEMENT. Seaway shall prepare the Seaway
Disclosure Statement, certified with respect to Section 4.35 (TRUE AND
COMPLETE INFORMATION) on behalf of Seaway by its chief executive officer
and its chief financial officer, and shall deliver two copies of the Seaway
Disclosure Statement to Old Kent prior to the execution of this Plan of
Merger.
5.1.1 FORM AND CONTENT. The Seaway Disclosure Statement shall
be in the general form prescribed by Exhibit A and 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
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Plan of Merger. In addition to any exceptions to Seaway's
representations set forth in Article IV, the Seaway Disclosure
Statement shall contain true and correct copies of each and every
document specified in Exhibit A.
5.1.2 UPDATE. Not less than 6 business days prior to the
Closing, Seaway shall deliver to Old Kent an update to the Seaway
Disclosure Statement describing any material changes and containing
any new or amended documents, as specified below, which are not
contained in the Seaway Disclosure Statement as initially delivered.
This update shall not cure any breach of a representation or warranty
occurring at the time of execution of this Plan of Merger.
5.1.3 CERTIFICATION. The Seaway Disclosure Statement and its
update shall each be certified with respect to Section 4.35 (TRUE AND
COMPLETE INFORMATION) on behalf of Seaway by its chief executive
officer and its chief financial officer.
5.2 OLD KENT DISCLOSURE STATEMENT. Old Kent shall prepare the Old
Kent Disclosure Statement, certified with respect to Section 3.17 (TRUE AND
COMPLETE INFORMATION) on behalf of Old Kent by its chief executive officer
and its acting chief financial officer, and shall deliver two copies of the
Old Kent Disclosure Statement to Seaway prior to the execution of this Plan
of Merger.
5.2.1 FORM AND CONTENT. The Old Kent Disclosure Statement shall
be in the general form prescribed by Exhibit B and 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.
5.2.2 UPDATE. Not less than 6 business days prior to the
Closing, Old Kent shall deliver to Seaway 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. This update shall not
cure any breach of a representation or warranty occurring at the time
of execution of this Plan of Merger.
5.2.3 CERTIFICATION. The Old Kent Disclosure Statement and its
update shall each be certified with respect to Section 3.17 (TRUE AND
COMPLETE INFORMATION) on behalf of Old Kent by its chief executive
officer and its acting chief financial officer.
5.3 BREACHES OF REPRESENTATIONS. While this Plan of Merger is in
effect, if either Seaway or Old Kent becomes aware of any facts or of the
occurrence or impending occurrence of any event which (i) would cause one
or more of the representations and warranties it has given in Article IV or
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III, respectively, subject to the exceptions contained in the Seaway
Disclosure Statement or the Old Kent Disclosure Statement, respectively, to
become untrue or incomplete, or (ii) would have caused one or more of such
representations and warranties to be untrue or incomplete had such facts
been known or had such event occurred prior to the execution of this Plan
of Merger (the "BREACHING PARTY"), then:
5.3.1 NOTICE. The Breaching Party shall immediately give
detailed written notice of its breach or potential breach, including a
detailed description of the underlying facts or events, to the other
party; and
5.3.2 REMEDY UNLESS WAIVED. Unless waived by the other party in
writing, the Breaching Party shall use all reasonable efforts to take
remedial or preventative action in order that such representations and
warranties will be true and complete at the Closing.
5.3.3 REMEDIAL ACTION NOT DEEMED TO CURE. No remedial action
taken by a Breaching Party shall be deemed to cure a breach of any
representation or warranty given by the Breaching Party in this Plan
of Merger.
5.4 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, Seaway agrees that, except as consented to in writing by Old
Kent or as otherwise provided in this Plan of Merger, Seaway shall, and it
shall cause each of Seaway's Subsidiaries to:
5.4.1 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.
5.4.2 NO INCONSISTENT ACTIONS. Take no action which would be
inconsistent with or contrary to the representations, warranties, and
covenants made by Seaway in this Plan of Merger, and take no action
which would cause Seaway's representations and warranties to become
untrue except as and to the extent required by applicable laws and
regulations or regulatory agencies having jurisdiction.
5.4.3 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
Old Kent has been notified of such contest, and except where
noncompliance is unintentional and not material to the financial
condition, income, expenses, business, properties, operations, or
prospects of Seaway or any of Seaway's Subsidiaries.
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5.4.4 NO AMENDMENTS. Make no change in its articles of
incorporation or its bylaws.
5.4.5 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.
5.4.6 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.
5.4.7 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.
5.4.8 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.
5.4.9 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.
5.4.10 CHARGE-OFFS. Charge off loans and maintain its reserve
for loan and lease losses, in each case in a manner in conformity with
the prior practices of Seaway and each of Seaway's Subsidiaries and
applicable industry, regulatory, and accounting standards.
5.4.11 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.
5.4.12 NEW DIRECTORS OR OFFICERS. Except to reelect persons who
are then incumbent officers and directors at annual meetings, not:
(a) Increase the number of directors or fill any vacancy on
the board of directors; or
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(b) Elect or appoint any person to an executive office.
5.4.13 COMPENSATION AND FRINGE BENEFITS. Except for planned
salary increases as set forth in the Seaway Disclosure Statement
delivered to Old Kent simultaneously with the execution of this Plan
of Merger, take no action to 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
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 1995 may be paid at the end of 1996 if
Seaway's net income for 1996 (without deducting any expenses related
to the Merger) is equal to or exceeds Seaway's net income for 1995 if
and to the extent set forth in the Seaway Disclosure Statement.
5.4.14 BENEFIT PLANS. Take no action to 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.
5.4.15 NEW EMPLOYMENT AGREEMENTS. Take no action to enter into
any employment agreement which is not terminable by Seaway or any of
Seaway's Subsidiaries without cost or penalty upon 60 days' or less
notice.
5.4.16 DIVIDENDS. With respect to Seaway 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 5.5
(REGULAR DIVIDENDS AND COMPENSATION ADJUSTMENTS).
5.4.17 BORROWING. Take no action to borrow money except in the
ordinary course of business.
5.4.18 MORTGAGING ASSETS. Take no action to 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 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.
5.4.19 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) Seaway or any of Seaway's
Subsidiaries; (ii) Seaway's or any of Seaway's Subsidiaries'
directors, officers, or employees in their capacities as such;
(iii) Seaway's or any of Seaway's Subsidiaries' assets, liabilities,
businesses, or operations; or (iv) the Merger or this Plan of Merger.
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5.4.20 COOPERATION. Take such reasonable actions as may be
necessary to cooperate in effecting the Merger.
5.4.21 LARGE EXPENDITURES. Take no action to 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 $10,000 individually or
in excess of $50,000 in the aggregate with respect to Seaway or
Seaway's Subsidiaries, except pursuant to prior commitments or plans
made by Seaway or any of Seaway's Subsidiaries that are disclosed in
the Seaway Disclosure Statement.
5.4.22 NEW SERVICE ARRANGEMENTS. Take no action to enter into,
or commit to enter into, any agreement for trust, consulting,
professional, data processing, or other services to Seaway or any of
Seaway's Subsidiaries which is not terminable by Seaway or any of
Seaway'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.
5.4.23 CAPITAL IMPROVEMENTS. Take no action to 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 Seaway or any
of Seaway's Subsidiaries that are disclosed in the Seaway Disclosure
Statement.
5.5 REGULAR DIVIDENDS AND COMPENSATION ADJUSTMENTS. Seaway may
declare and pay cash dividends upon Seaway Common Stock quarterly at a rate
not to exceed $0.32 per share in a manner, on dates, and with respect to
record dates consistent with its past practice, subject to maintaining
capital ratios not less than as reported at December 31, 1995. If
necessary, Seaway shall adjust the record date for its regularly scheduled
dividend, if any (otherwise permissible under this Section), with respect
to the period in which the Effective Time of the Merger occurs if necessary
to assure that Seaway shareholders 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 respect to Seaway Common
Stock or Old Kent Common Stock received in the Merger.
5.6 DATA PROCESSING AND RELATED CONTRACTS. Until the Effective Time
of the Merger, Seaway shall advise Old Kent of all anticipated renewals or
extensions of existing data processing service agreements, data processing
software license agreements, and data processing hardware lease agreements
with independent vendors. Seaway 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
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not exceed one year from the date of renewal. Seaway 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 a term of more
than one year from the date of renewal, except as otherwise agreed between
Seaway and Old Kent.
5.7 AFFILIATES. The Seaway Disclosure Statement and the update to
the Seaway Disclosure Statement shall identify every person who may, to
Seaway's reasonable knowledge, be deemed to be an "affiliate" of Seaway for
purposes of Rule 145 under the Securities Act of 1933, as amended (the
"SECURITIES ACT"). Seaway 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, Seaway shall use all
reasonable efforts to cause each person who is identified as an affiliate
to deliver to Old Kent, simultaneously with the execution of this Plan of
Merger, the form of written affiliates agreement reasonably requested by
Old Kent. In each affiliates agreement, the affiliate will agree 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. Each new certificate for Old Kent Common Stock
issued to one of Seaway's affiliates may bear a legend giving notice of any
resale limitations that may be imposed by federal or state securities laws
and regulations with respect to those shares.
5.8 MAINTENANCE OF INSURANCE. Seaway 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 Seaway. Seaway
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 Seaway's directors and officers liability
insurance policy is canceled or not renewed by the issuer during the term
of this Plan of Merger, Seaway shall, at Old Kent's option, purchase the
discovery period offered under the policy.
5.9 COMPETING PROPOSALS. Neither Seaway nor any of Seaway'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:
5.9.1 NO SOLICITATION. Neither Seaway nor any of Seaway'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,
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exchange offer, merger, consolidation, sale of shares, sale of assets,
or assumption of liabilities not in the ordinary course, or other
business combination involving Seaway or any of Seaway's Subsidiaries
other than the Merger (a "BUSINESS COMBINATION").
5.9.2 COMMUNICATION OF OTHER PROPOSALS. Seaway shall cause
written notice to be delivered to Old Kent promptly upon receipt of
any solicitation, offer, proposal, or expression of interest (a
"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 Seaway's unequivocal
rejection of the Proposal in the form actually delivered to the person
from whom the Proposal was received. Thereafter, Seaway shall
promptly notify Old Kent of any material changes in the terms,
conditions, and status of any Proposal.
5.9.3 FURNISHING INFORMATION. Neither Seaway nor any of
Seaway's Subsidiaries, nor any of their respective directors,
officers, employees, investment bankers, representatives, or agents,
shall furnish any nonpublic information concerning Seaway or any of
Seaway's Subsidiaries to any person who is not affiliated or under
contract with Seaway or Old Kent, except as required by applicable law
or regulations.
5.10 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 Seaway 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 agrees to provide Seaway, upon
request, 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 Seaway of
any stop orders or threatened stop orders with respect to the Registration
Statement. Seaway agrees to provide all necessary information pertaining
to Seaway and Seaway's Subsidiaries promptly upon request, and to use its
best efforts to obtain the cooperation of Seaway's independent accountants
and attorneys, in connection with the preparation of the Registration
Statement.
5.11 OTHER FILINGS. Old Kent agrees to prepare and file, as soon as
is reasonably practical, with the Federal Reserve Board and other
regulatory agencies having jurisdiction all documents reasonably required
to obtain approval of or consent to consummate the Merger. Old Kent agrees
to provide Seaway with the opportunity to review and comment upon such
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documents before filing and to make such amendments and file such
supplements thereto as Seaway may reasonably request. Old Kent shall
provide Seaway with copies of all correspondence received from these
agencies and all responsive correspondence sent to these agencies.
5.12 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 Seaway will
use all reasonable efforts to obtain consents of all third parties and
governmental bodies necessary or desirable for the consummation of the
Merger.
5.13 EXCHANGE OF FINANCIAL INFORMATION. Subject to Section 5.14
(INVESTIGATION):
5.13.1 QUARTERLY INFORMATION. Seaway and Old Kent shall each,
as promptly as practicable, deliver to the other copies of each
quarterly consolidated financial statement prepared for distribution
to shareholders after the date of this Plan of Merger.
5.13.2 SEAWAY INFORMATION. After the execution of this Plan of
Merger until the Effective Time of the Merger, Seaway shall promptly
deliver to Old Kent copies of:
(a) Each monthly internal financial report prepared with
respect to Seaway and each of Seaway's Subsidiaries on a
consolidated or unconsolidated basis. Seaway represents and
warrants that such information shall be consistent with the
fundamental information as used for internal purposes by Seaway
in the management of its consolidated business; and
(b) Each financial report or statement submitted to
regulatory authorities for Seaway and each of Seaway's
Subsidiaries.
5.14 INVESTIGATION.
5.14.1 OLD KENT'S ACCESS TO INFORMATION. For the purpose of
permitting an examination of Seaway by Old Kent's officers, attorneys,
accountants, and representatives, Seaway shall:
(a) Permit, and shall cause each of Seaway's Subsidiaries
to permit, full access to their respective properties, books, and
records at reasonable times;
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(b) Use reasonable efforts to cause its and each of
Seaway'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 Seaway's
Subsidiaries' properties, assets, business, and affairs.
5.14.2 CONSENT TO DISCLOSE. Old Kent acknowledges that certain
information may not be disclosed by Seaway or Seaway's Subsidiaries
without the prior written consent of persons not affiliated with
Seaway or any of Seaway's Subsidiaries. If such information is
requested by Old Kent, then Seaway shall use, or cause each of
Seaway'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.
5.14.3 SEAWAY'S ACCESS TO INFORMATION. For the purpose of
permitting an examination of Old Kent by Seaway's officers, attorneys,
accountants, and representatives, 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 Seaway, upon request, any information
reasonably requested respecting its properties, assets, business,
and affairs.
5.14.4 RETURN OF MATERIALS. In the event of termination of this
Plan of Merger, Old Kent and Seaway 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 copies,
notes, and summaries of such written materials. Old Kent and Seaway
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 six years from the termination
of this Plan of Merger.
5.15 CONFIDENTIALITY. Except as provided in Subsection 5.15.3
(EXCEPTED INFORMATION), Old Kent and Seaway each agree:
5.15.1 TREATMENT; RESTRICTED ACCESS. All information furnished
to the other party pursuant to this Plan of Merger shall be treated as
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strictly confidential and shall not be disclosed to any other person,
natural or corporate, except for its employees, attorneys,
accountants, and financial advisers who are reasonably believed to
have a need for such information in connection with the Merger.
5.15.2 NO OTHER USE. Each party shall not make any use, other
than related to the Merger, of any information it may come to know as
a direct result of a disclosure by the other party, its subsidiaries,
directors, officers, employees, attorneys, accountants, or advisers or
which may come into its possession from any other confidential source
during the course of its investigation.
5.15.3 EXCEPTED INFORMATION. The provisions of this
Section 5.15 (CONFIDENTIALITY) shall not preclude Old Kent or Seaway,
or their respective subsidiaries, from using or disclosing information
which is:
(a) Readily ascertainable from public information or trade
sources;
(b) 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;
(c) Received from any other person who is not affiliated
with a party and who is not under any obligation to keep such
information confidential; or
(d) Reasonably required to be included in any filing or
application required by any governmental or regulatory agency,
including without limitation Old Kent's application to the
Federal Reserve Board, Old Kent's or Seaway's reports filed with
the SEC, and Old Kent's or Seaway's annual report and proxy
statement.
5.15.4 PREVIEW OF FILINGS. Old Kent shall permit Seaway to
review its application to the Federal Reserve Board and its
Registration Statement prior to filing. Seaway may reasonably request
that sensitive or competitive information be separately filed with the
Federal Reserve Board as confidential in accordance with instructions,
rules, and regulations issued by that agency.
5.15.5 PROHIBIT INSIDER TRADING. Old Kent and Seaway shall take
responsible steps to assure that any person who receives nonpublic
information concerning the Merger or the other party will (i) treat
the information confidentially as provided in this Section and (ii)
not directly or indirectly buy or sell, or advise other persons to buy
or sell, the other party's stock until such information is properly
disclosed to the public.
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5.16 ENVIRONMENTAL INVESTIGATION. Old Kent shall be permitted to
conduct an environmental assessment of each parcel of Seaway's Real
Property and, at Old Kent's option, (i) any other real estate formerly
owned by Seaway or Seaway's Subsidiaries, and (ii) acquired by Seaway's
Subsidiaries in satisfaction of a debt previously contracted. As to each
such property:
5.16.1 PRELIMINARY ENVIRONMENTAL ASSESSMENTS. Old Kent may, at
its expense, engage an environmental consultant acceptable to Seaway
to conduct a preliminary ("PHASE I") assessment of the property.
Seaway and Seaway's Subsidiaries shall provide reasonable assistance,
including site access and a knowledgeable contact person, to the
consultant for purposes of conducting the Phase I assessments.
5.16.2 ENVIRONMENTAL RISKS. If there are any facts or
conditions identified in a Phase I assessment which, in its
discretion, Old Kent believes could potentially pose a current or
future risk of a material liability, interference with use, or
diminution of value of the property, then Old Kent shall identify that
risk to Seaway, identify the facts or conditions underlying that risk,
and provide Seaway with a copy of the Phase I assessment for that
property (an "ENVIRONMENTAL RISK").
5.16.3 PHASE II AND III WORK. Old Kent may obtain one or more
estimates of the proposed scope of work and cost of any further
environmental investigation, remediation, or other follow-up work it
reasonably deems necessary or appropriate to assess and, if necessary
or appropriate, remediate an Environmental Risk ("PHASE II AND III
WORK"). Old Kent shall provide copies of those estimates to Seaway.
The fees and expenses of any Phase II and III Work shall be paid by
Seaway. Old Kent and Seaway shall cooperate in the review, approval,
and implementation of all work plans for Phase II and III Work. All
work plans for any Phase II and III Work shall be mutually
satisfactory to Old Kent and Seaway. Mutually agreed upon Phase II
and III Work shall be undertaken and completed as quickly as possible
and shall be completed prior to the Closing. If the proposed work
plans or removal or remediation actions would entail a material cost
to complete, Old Kent and Seaway shall discuss a mutually acceptable
modification to this Plan of Merger.
5.16.4 OLD KENT'S TERMINATION RIGHTS. If Old Kent and Seaway
are unable to agree upon a course of action to promptly complete any
Phase II and III Work and/or a mutually acceptable modification to
this Plan of Merger, then Old Kent may give Seaway notice of the
unacceptable Environmental Risk. Seaway shall have 30 days following
receipt of that notice to cure that Environmental Risk, if possible,
to Old Kent's reasonable satisfaction. If not so cured within that 30
days, then Old Kent may terminate this Plan of Merger as provided in
Section 8.2.8 (ENVIRONMENTAL RISKS).
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5.17 INDEMNIFICATION. Old Kent acknowledges that any and all rights
to indemnification now existing in favor of the directors and officers of
Seaway and each of Seaway's Subsidiaries under their respective articles of
incorporation or bylaws shall survive the Merger and shall continue with
respect to acts or omissions occurring before the Effective Time of the
Merger with the same force and effect as prior to the Effective Time of the
Merger.
ARTICLE VI - 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:
6.1 RENEWAL OF REPRESENTATIONS AND WARRANTIES, ETC.
6.1.1 REPRESENTATIONS AND WARRANTIES. Seaway'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 financial condition, income,
expenses, business, properties, operations, or prospects of Seaway and
Seaway's Subsidiaries on a consolidated basis. For purposes of this
Subsection 6.1.1, representations and warranties made with respect to
specified dates or events shall continue to be 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.
6.1.2 COMPLIANCE WITH AGREEMENTS. Seaway and Seaway'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 Seaway and Seaway's Subsidiaries prior
to or at the Closing in all material respects.
6.1.3 CERTIFICATES. Compliance with Sections 6.1.1
(REPRESENTATIONS AND WARRANTIES) and 6.1.2 (COMPLIANCE WITH
AGREEMENTS) shall be evidenced by one or more certificates signed by
appropriate officers of Seaway and, with respect to agreements,
conditions, and covenants pertaining to Seaway's Subsidiaries, by
appropriate officers of Seaway'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.
6.2 OPINION OF LEGAL COUNSEL. Seaway shall have delivered to Old
Kent an opinion of Bischoff, Kenney & Niehaus, counsel for Seaway, dated as
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of the date of the Closing and reasonably satisfactory to counsel for Old
Kent, substantially in the form contained in Exhibit C.
6.3 REQUIRED APPROVALS. Old Kent shall have received:
6.3.1 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
Seaway and Old Kent of their respective obligations under this Plan of
Merger and the consummation of the Merger.
6.3.2 SHAREHOLDER. Evidence reasonably satisfactory to Old Kent
of the requisite approval of the shareholders of Seaway of this Plan
of Merger and the Merger.
6.4 ORDER, DECREE, ETC. Neither Old Kent nor Seaway 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.
6.5 PROCEEDINGS. There shall not be any action, suit, proceeding,
claim, arbitration, or investigation pending or threatened: (i) against
or relating to Seaway or any of Seaway's Subsidiaries or its or their
respective properties or businesses which may result in any liability to
Seaway or any of Seaway's Subsidiaries which could have a material adverse
effect on the financial condition, income, expenses, business, properties,
operations, or prospects of Seaway and Seaway's Subsidiaries on a
consolidated basis; or (ii) which challenges the Merger or this Plan of
Merger.
6.6 TAX MATTERS. Old Kent shall have received a tax opinion from its
counsel, reasonably satisfactory in form and substance, which Old Kent
shall use reasonable efforts to obtain. The tax opinion shall be supported
by one or more fact certificates or affidavits in such form and content as
may be reasonably requested by Old Kent's counsel from Seaway. The tax
opinion shall be substantially to the effect that:
6.6.1 REORGANIZATION. The Merger of Seaway 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
Seaway will each be a "party to a reorganization" within the meaning
of Section 368(b) of the Internal Revenue Code.
6.6.2 ASSETS' TAX BASIS. The basis of the Seaway assets in the
hands of Old Kent will be the same as the basis of those assets in the
hands of Seaway immediately prior to the Merger.
6.6.3 NO GAIN OR LOSS. No gain or loss will be recognized to
Old Kent on the receipt by Old Kent of the assets of Seaway in
exchange for Old Kent Common Stock and the assumption by Old Kent of
the liabilities of Seaway.
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6.6.4 HOLDING PERIOD. The holding period of the assets of
Seaway in the hands of Old Kent will include the holding period during
which such assets were held by Seaway.
6.7 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.
6.8 CERTIFICATE AS TO OUTSTANDING SHARES. Old Kent shall have
received one or more certificates dated as of the Closing date and signed
by the secretary of Seaway on behalf of Seaway, and by the transfer agent
for Seaway Common Stock, certifying (i) the total number of shares of
capital stock of Seaway 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 of Seaway Common Stock, if
any, which are issuable on or after that date, all in such form as Old Kent
may reasonably request.
6.9 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 Seaway
upon consummation of the Merger under any agreements, contracts, mortgages,
deeds of trust, leases, commitments, indentures, notes, or other
instruments described in Section 4.26 (CHANGE OF CONTROL), all in form and
substance reasonably satisfactory to Old Kent.
6.10 ESTOPPEL CERTIFICATES. Seaway shall have obtained and delivered
to Old Kent, in form and substance reasonably satisfactory to Old Kent,
estoppel certificates from all lessors or licensors under leases or
licenses pursuant to which Seaway or any of Seaway's Subsidiaries leases
possession of or licenses access to Seaway's Real Property.
6.11 ENVIRONMENTAL RISK. Any Environmental Risk identified during
its Phase I assessments and all related Phase II and III Work shall have
been substantially completed to Old Kent's satisfaction, all as provided in
Section 5.16, 5.17 (ENVIRONMENTAL INVESTIGATION).
6.12 OTHER CLOSING TRANSACTION DOCUMENTS. Seaway shall have
delivered to Old Kent at the Closing such other certificates, instruments,
and documents as may be reasonably requested by Old Kent prior to the
Closing.
ARTICLE VII - CONDITIONS PRECEDENT TO SEAWAY'S OBLIGATIONS
All obligations of Seaway under this Plan of Merger are subject to the
fulfillment (or waiver in writing by a duly authorized officer of Seaway),
prior to or at the Closing, of each of the following conditions:
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7.1 RENEWAL OF REPRESENTATIONS AND WARRANTIES, ETC.
7.1.1 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 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. 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.
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 Old Kent, dated as of the date of the Closing,
certifying the foregoing in such detail as Seaway may reasonably
request, describing any exceptions to such compliance in such
certificates.
7.2 OPINION OF LEGAL COUNSEL. Old Kent shall have delivered to
Seaway an opinion of Warner Norcross & Judd LLP, counsel for Old Kent,
dated as of the date of the Closing and reasonably satisfactory to counsel
for Seaway, substantially in the form contained in Exhibit D.
7.3 REQUIRED APPROVALS. Seaway or Old Kent shall have received:
7.3.1 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 Seaway and Old Kent of their respective obligations
under this Plan of Merger and the consummation of the Merger.
7.3.2 SEAWAY SHAREHOLDERS. The requisite approval of the
shareholders of Seaway of this Plan of Merger and the Merger.
7.4 ORDER, DECREE, ETC. Neither Old Kent nor Seaway 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.
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7.5 TAX MATTERS. Seaway shall have received a tax opinion from
counsel for Old Kent, reasonably satisfactory in form and substance to
Seaway's counsel. The tax opinion shall be supported by one or more fact
certificates or affidavits in such form and content as may be reasonably
requested by Old Kent's counsel from Old Kent. The tax opinion shall be
substantially to the effect that:
7.5.1 NO GAIN OR LOSS. No gain or loss will be recognized by
the shareholders of Seaway who receive shares of Old Kent Common Stock
in exchange for all of their shares of Seaway Common Stock, except to
the extent of any cash received in lieu of a fractional share of Old
Kent Common Stock.
7.5.2 STOCK TAX BASIS. The basis of the Old Kent Common Stock
to be received by shareholders of Seaway will, in each instance, be
the same as the basis of the respective shares of Seaway Common Stock
surrendered in exchange therefor.
7.5.3 HOLDING PERIOD. The holding period of the Old Kent Common
Stock received by shareholders of Seaway will, in each instance,
include the period during which the Seaway Common Stock surrendered in
exchange therefor was held, provided that the Seaway Common Stock was,
in each instance, held as a capital asset in the hands of the
shareholder of Seaway at the Effective Time of the Merger.
7.6 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.
7.7 FAIRNESS OPINION. Seaway shall have received an opinion from
Austin Financial Services, Inc., or another financial expert reasonably
acceptable to Seaway, dated approximately the date of the Prospectus and
Proxy Statement, to the effect that the terms of the Merger are fair to
Seaway's shareholders from a financial point of view as of that date and
such opinion shall not have been subsequently withdrawn.
7.8 OTHER CLOSING TRANSACTION DOCUMENTS. Old Kent shall have
delivered to Seaway at the Closing such other certificates, instruments,
and documents as may be reasonably requested by Seaway prior to the
Closing.
ARTICLE VIII - 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 shareholders of Seaway may have
previously been obtained) as follows:
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8.1 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 Seaway.
8.2 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:
8.2.1 MATERIAL ADVERSE CHANGE. There has occurred since
December 31, 1995, any material adverse change in the financial
condition, income, expenses, business, properties, operations, or
prospects of Seaway or any of Seaway's Subsidiaries on a consolidated
basis for reasons unique to Seaway or Seaway's Subsidiaries and not
the banking industry as a whole.
8.2.2 BREACH OF WARRANTY. One or more of the representations
and warranties made by Seaway 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 financial condition, income, expenses, business, properties,
operations, or prospects of Seaway and Seaway's Subsidiaries on a
consolidated basis.
8.2.3 BREACH OF COVENANT. Seaway 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 Seaway specific notice of the
breach or breaches in writing and Seaway shall have not cured such
breach or breaches to the reasonable satisfaction of Old Kent within
30 days of receipt of such notice.
8.2.4 UPSET DATE. The Merger has not yet become effective on or
before March 31, 1997.
8.2.5 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.
8.2.6 NO SHAREHOLDER APPROVAL. The shareholders of Seaway have
failed to approve this Plan of Merger by at least the minimum number
of votes required by Seaway's articles of incorporation and bylaws,
and by the Michigan Act, at an annual or special meeting, or
adjournments thereof, called and held for that purpose, and at which
the holders of not less than such minimum number of shares of Seaway
Common Stock are present in person or represented by proxy, and such
meeting has been finally adjourned.
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8.2.7 NO REGULATORY APPROVAL. The Federal Reserve Board or its
delegate shall have refused to approve the Merger.
8.2.8 ENVIRONMENTAL RISKS. If Old Kent has given Seaway notice
of an unacceptable Environmental Risk pursuant to Section 5.16, 5.17
(ENVIRONMENTAL INVESTIGATION), and it is not cured within the 30-day
period, or any extension thereof, as provided in Section 5.16.4 (OLD
KENT'S RIGHT TO TERMINATE).
8.2.9 REJECTION OF INCREASE NOTICE. If Old Kent receives and
rejects an Increase Notice as provided in Section 2.2.3(b) (OLD
KENT'S RIGHTS UPON RECEIPT OF INCREASE NOTICE), subject to Seaway's
right to withdraw its Increase Notice under Section 2.2.4 (SEAWAY'S
FURTHER RIGHTS IF ADJUSTED EXCHANGE RATIO IS REJECTED).
8.3 SEAWAY'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 Seaway under any of the following
circumstances:
8.3.1 MATERIAL ADVERSE CHANGE. There has occurred since
December 31, 1995, any material adverse change in the financial
condition, income, expenses, or business of Old Kent and its
subsidiaries on a consolidated basis for reasons unique to Old Kent
and its subsidiaries and not the banking industry as a whole.
8.3.2 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
all such untrue representations and warranties is material to the
financial condition, income, expenses, or business of Old Kent and its
subsidiaries on a consolidated basis.
8.3.3 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, Seaway 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 Seaway within 30
days of receipt of such notice.
8.3.4 UPSET DATE. The Merger has not yet become effective on or
before March 31, 1997.
8.3.5 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.
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8.3.6 NO SHAREHOLDER APPROVAL. The shareholders of Seaway have
failed to approve this Plan of Merger by at least the minimum number
of votes required by Seaway's articles of incorporation and bylaws,
and by the Michigan Act, at an annual or special meeting, or
adjournments thereof, called and held for that purpose, and at which
the holders of not less than minimum number of shares of Seaway Common
Stock are present in person or represented by proxy, and such meeting
has been finally adjourned.
8.3.7 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.
8.3.8 UPSET CONDITION. If after a Closing is properly called
pursuant to Section 1.2 (THE CLOSING) the Upset Condition shall then
exist, as provided in Section 2.2.2(a) (SEAWAY'S RIGHTS IN UPSET
CONDITION).
ARTICLE IX - LIABILITIES AND REMEDIES
Subject to the terms and conditions of this Plan of Merger, the
liabilities and remedies of Old Kent and Seaway with respect to the Merger
and this Plan of Merger shall be as follows:
9.1 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 9.1 (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,
its subsidiaries and affiliates, and their respective directors, officers,
employees, representatives, and agents. Seaway and Old Kent agree that the
Termination Fee is reasonable and just compensation under such
circumstances.
9.1.1 "TERMINATION FEE." The "TERMINATION FEE" shall be
$7,400,000.
9.1.2 RIGHTS TO THE TERMINATION FEE. Old Kent shall be paid the
Termination Fee in the manner provided in Section 9.1.3 (MANNER OF
PAYMENT) if, while this Plan of Merger is in effect:
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(a) Any Unaffiliated Person directly or indirectly, or
acting through one or more intermediaries, acquires Control
(calculated using 25 percent) of Seaway, or its successor by
merger or consolidation, or acquires 25 percent or more of the
consolidated assets of Seaway and Seaway's Subsidiaries; or
(b) Seaway solicits, invites, negotiates, or enters into an
agreement with an Unaffiliated Person to acquire such Control or
such assets, or either Seaway 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 not this Plan of Merger is then in
effect) the Unaffiliated Person acquires such Control or such
assets.
(c) For purposes of this Section, any transfer of Seaway
Common Stock for purposes of estate planning or probating of an
estate of an existing shareholder of Seaway shall not be deemed
to effect a transfer of "Control;" provided, that the transferee
is not another bank holding company, an affiliate of another bank
holding company, or acting in concert with another bank holding
company.
(d) For purposes of this Section 9.1.1 (TERMINATION FEE),
"Control" is defined in Section 2(a)(2) of the Federal Bank
Holding Company Act using 25 percent as set forth therein.
9.1.3 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
(b) In any other case, upon termination of this Plan of
Merger, after Old Kent becomes entitled to the Termination Fee.
9.2 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 VIII:
9.2.1 CONTINUING OBLIGATIONS. The obligations of Old Kent and
Seaway under Sections 5.14.4 (RETURN OF MATERIALS), 5.15
(CONFIDENTIALITY), 9.1 (TERMINATION FEE), and 9.3 (EXPENSES) shall
continue.
9.2.2 LIABILITY. Neither Old Kent nor Seaway shall incur any
liability whatsoever under, or pursuant to, this Plan of Merger,
except for:
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(a) Damages for breach of Sections 5.9 (COMPETING
PROPOSALS), 5.14.4 (RETURN OF MATERIALS), or 5.15
(CONFIDENTIALITY);
(b) Payment of the fee, if any, provided under Section 9.1
(TERMINATION FEE); and
(c) Reimbursement of costs and expenses, if any, provided
under Section 9.3 (EXPENSES).
9.2.3 ELECTION OF REMEDIES. If Old Kent is entitled to be paid,
and is paid, the Termination Fee, that 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 5.14.4 (RETURN OF MATERIALS) and 5.15
(CONFIDENTIALITY). If there has been a breach of Section 5.9
(COMPETING PROPOSALS), Old Kent shall be entitled to damages for
breach of that Section or the Termination Fee, whichever is greater,
but not both.
9.3 EXPENSES. Except as otherwise provided in this Plan of Merger,
Seaway 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 Seaway.
9.4 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 Seaway,
Seaway'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.
9.5 JURISDICTION; VENUE; JURY. Old Kent and Seaway each agree to the
jurisdiction and venue of any state or federal court located in Kent
County, Michigan. Old Kent and Seaway each hereby waive their right to a
trial by jury.
ARTICLE X - MISCELLANEOUS
Subject to the terms and conditions of this Plan of Merger, Old Kent
and Seaway further agree as follows:
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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 Seaway, 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 in writing at any time by action taken by the board of
directors of a party, a duly authorized committee thereof, or a duly
authorized officer of such party. The failure of any party at any time or
times to require performance of any provision of this Plan of Merger shall
in no manner affect such party's right at a later time to enforce the same
provision. 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 NOTICES. 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 a fax
transmission (if receipt by the intended recipient is confirmed by
telephone and if hard copy is delivered by overnight delivery service the
next day), a hand delivery, or a nationwide overnight delivery service (all
fees prepaid) to the following addresses:
If to Old Kent: With a copy to:
Old Kent Financial Corporation Warner Norcross & Judd LLP
Attention: B. P. Sherwood III, Attention: Gordon R. Lewis, Esq.
Vice Chairman and Treasurer 900 Old Kent Building
One Vandenberg Center 111 Lyon Street, N.W.
Grand Rapids, Michigan 49503 Grand Rapids, Michigan 49503-2489
Fax: (616) 771-4378 Fax: (616) 752-2500
If to Seaway: With a copy to:
Seaway Financial Corporation Bischoff, Kenney & Niehaus
Attention: Franklin H. Moore, Attention: Charles D. Niehaus, Esq.
Chairman and Treasurer 5630 North Main Street
200 Riverside Avenue Sylvania, Ohio 43560
St. Clair, Michigan 48079-0028 Fax: (419) 885-2042
Fax: (810) 329-1011
10.4 GOVERNING LAW. This Plan of Merger shall be governed,
construed, and enforced in accordance with the laws of the State of
Michigan.
A-60
10.5 ENTIRE AGREEMENT. The Seaway Disclosure Statement, the Old Kent
Disclosure Statement, the updates to such disclosure statements, the
exhibits, and the agreements expressly identified in this Plan of Merger
are an integral part of this Plan of Merger. This Plan of Merger contains
the entire agreement between the parties with respect to the Merger. This
Plan of Merger supersedes all prior written and oral arrangements,
agreements or understandings with respect to its subject matter. The
parties have not relied upon any written or oral statements or
representations other than as stated in this Plan of Merger, the Seaway
Disclosure Statement, the Old Kent Disclosure Statement or the updates to
such disclosure statements. The terms and conditions of this Plan of
Merger shall inure to the benefit of and be binding upon Old Kent and
Seaway and their respective successors. Nothing in this Plan of Merger,
express or implied, is intended to confer upon any person other than these
parties any rights, remedies, obligations, or liabilities under or by
reason of this Plan of Merger.
10.6 NO ASSIGNMENT. Neither party may assign any of its rights or
obligations under this Plan of Merger to any other person.
10.7 COUNTERPARTS. This Plan of Merger may be executed in one or
more counterparts, which taken together shall constitute one and the same
instrument. Executed counterparts of this Plan of Merger shall be deemed
to have been fully delivered and shall become legally binding if and when
executed signature pages are received by fax from a party. If so delivered
by fax, the parties agree to promptly send original, manually executed
copies by nationwide overnight delivery service.
10.8 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.
10.9 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.
10.10 CALCULATION OF DATES AND DEADLINES. Unless otherwise
specified, any period of time to be determined under this Plan of Merger
shall be deemed to commence at 12:01 a.m. on the first full day after the
specified starting date, event, or occurrence. Any deadline, due date,
expiration date, or period-end to be calculated under this Plan of Merger
shall be deemed to end at 5 p.m. on the last day of the specified period.
The time of day shall be determined with reference to the then current
local time in Grand Rapids, Michigan.
A-61
10.11 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.
[BALANCE OF THIS PAGE INTENTIONALLY BLANK]
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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/ B.P. SHERWOOD, III
B.P. Sherwood, III
Vice Chairman and Treasurer
Seaway Financial Corporation
By /S/ FRANKLIN H. MOORE
Franklin H. Moore
Chairman and Treasurer
A-63
APPENDIX B
OPINION OF AUSTIN FINANCIAL SERVICES, INC.
September __, 1996 DRAFT
Board of Directors
Seaway Financial Corporation
200 S. Riverside Avenue
St. Clair, MI 48079
Members of the Board:
You have requested our opinion, from a financial point of view, as to
the fairness to Seaway Financial Corporation ("SFC"), St. Clair, Michigan
and its shareholders of the terms of the Agreement and Plan of Merger
("Plan of Merger"), dated August 21, 1996, between SFC and Old Kent
Financial Corporation ("Old Kent"), Grand Rapids, Michigan. The terms of
the Plan of Merger provide for affiliation and merger of SFC with and into
Old Kent.
AFSI is a nationally recognized investment banking firm specializing
in the banking and financial services industry. AFSI is continually
engaged in the valuation of businesses and securities in connection with
mergers and acquisitions and valuations for estate, corporate and other
purposes. In the past ten years, AFSI has not provided professional
services and/or products to Old Kent or SFC in the ordinary course of
business. Furthermore, AFSI does not contemplate any future business with
SFC and/or Old Kent arising from this engagement, nor has its opinion
concerning the fairness of the Plan of Merger been subject to indications
of future business with either SFC or Old Kent.
In connection with its opinion, AFSI reviewed material bearing upon
the financial operating condition of SFC and Old Kent including, but not
limited to: (1) the audited financial statements of SFC and Old Kent for
the years ending 1990-1995; (2) the financial statements of SFC and Old
Kent for June 30, 1996; (3) certain other public information on SFC and Old
Kent; (4) other internal financial and operating information which was
provided to AFSI by SFC and Old Kent; (5) 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; (6)
discussed 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 SFC and Old Kent, both separately and on a combined
basis with certain officers and representatives of SFC and Old Kent;
(7) reviewed the reported price and trading activity for SFC Common Stock
and Old Kent Common Stock, compared certain financial and stock market
information for SFC and Old Kent with similar information for certain other
B-1
companies the securities of which are publicly traded; (8) reviewed the
financial terms of certain recent business combinations in the financial
institution industry and performed such other studies and analyses as it
considered appropriate; (9) the Plan of Merger; and (10) the Prospectus and
Proxy Statement related to the merger transaction. AFSI 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.
AFSI'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 AFSI through that date.
AFSI relied upon and assumed without independent verification the
accuracy and completeness of all of the financial and other information
provided to it by SFC and Old Kent or from public sources. AFSI has not
made an independent evaluation of the assets of SFC or Old Kent, but has
relied upon the books and records of SFC, Old Kent, and the audited
financial statements as presented to AFSI as the valuators of the fair
value of SFC. In addition, AFSI did not independently verify and relied on
and assumed that the aggregate allowances for loan losses set forth in the
sheet of each of SFC and Old Kent at June 30, 1996, were adequate to cover
such losses and complied fully with applicable law, regulatory policy, and
sound banking practice as of the date of such financial statements.
Furthermore, AFSI did not independently verify the carrying values of other
real estate owned and loans classified as in-substance foreclosures of each
of SFC and Old Kent in their respective June 30, 1996, balance sheets, and
AFSI assumed that such carrying values complied fully with applicable law,
regulatory policy and sound banking practice as of such date. AFSI was not
retained to and did not conduct a physical inspection of any of the
properties or facilities of SFC or Old Kent, nor did AFSI make any
independent evaluation or appraisal of the assets, liabilities or prospects
of SFC or Old Kent, was not furnished with any such evaluation or
appraisal, and did not review any individual credit files. AFSI also
assumed that the Merger is, and will be, in compliance with all laws and
regulations that are applicable to SFC and Old Kent.
In its analyses, AFSI made numerous assumptions with respect to
industry performance, business and economic conditions, and other matters,
many of which are beyond the control of SFC and Old Kent. Any estimates
contained in AFSI'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
AFSI's analyses was identical to SFC 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
B-2
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 AFSI was assigned a greater significance by
AFSI than any other.
The terms of the Merger between Old Kent and SFC provide that each
share of SFC common stock will be exchanged for Old Kent common stock under
the exchange ratio described in the Plan of Merger. The exchange ratio
shall be equal to $43.9057 (the "Purchase Price Per Share") divided by the
average of the closing prices per share of Old Kent common stock reported
on The NASDAQ Stock Market during the 10 consecutive trading days ending on
the tenth business day prior to the closing date of the transaction
("Closing Price") subject to the following: (1) if the Closing Price is
greater than $38.4524 ("Ceiling Price") then the exchange ratio shall be
determined by dividing the Purchase Price Per Share by the Ceiling Price;
(2) if the Closing Price is less than $34.6429 ("First Floor Price") then
the exchange ratio shall be determined by dividing the Purchase Price Per
Share by the First Floor Price; and (3) an adjustment, only upon agreement
by SFC and acceptance by Old Kent, if Old Kent's Closing Price drops below
$31.0655 by dividing the Closing Price by $36.5476 is more than 15
percentage points less than the percentage determined by dividing the sum
of the closing prices per share of a group of comparison stocks at the
closing date of the transaction by the same as of May 14, 1996. Based on
September __, 1996 data, the Closing Price at $___ still remained above the
$38.4524 Ceiling Price.
Using a discounted cash flow analysis, AFSI projected SFC's bank
subsidiaries earnings from December 31, 1996 through December 31, 2000,
assuming a minimum equity capital to asset ratio of 6.00%. AFSI also
estimated the residual value of SFC's bank subsidiaries common equity as of
December 31, 2000. The steps involved in determining the discounted cash
flow value of SFC's bank subsidiaries included the following: (1) the
projected earnings in excess over the amount necessary to maintain a 6.00%
equity capital to asset ratio were added to book charges such as
depreciation less any projected capital expenditures in order to determine
future cash flows; (2) the future cash flows were then converted to a
present value equivalent using a discount rate of 12.40%, which was
determined from the use of the Capital Asset Pricing Model ("CAPM");
(3) the residual value was then calculated by dividing the projected
earnings for the year 2000 by the capitalization rate. The capitalization
rate not only includes all aspects of the CAPM but also reflects the long-
term income growth prospects of Seaway, as well as specific company risk
factors; (4) the present value equivalent of the projected residual value
was calculated using the 12.40% discount rate; and (5) the present value of
the cash flows and the residual value were added together. The present
value per fully diluted share of SFC Common Stock resulting from this
analysis was $32.31.
B-3
Using an adjusted book value analysis, AFSI restated, where
appropriate, SFC's bank subsidiaries' assets and liabilities to their fair
market values. The adjusted book value calculation considers each major
asset and liability account classification. For example, SFC's bank
subsidiaries' loan portfolios were adjusted based upon their current yield,
repricing, and maturity structure. Additionally, a core deposit valuation
was calculated for each of SFC's bank subsidiaries. A core deposit
valuation is an analysis of the customer list which is unique to an
institution. The value per fully diluted share of SFC Common Stock
resulting from this analysis was $35.76.
AFSI used the same percentage weight (75% weight for the discounted
cash flow value and 25% weight for the adjusted book value) to assign the
results of each relevant valuation technique for each of SFC's bank
subsidiaries. AFSI then added together the weighted values of each of
SFC's bank subsidiaries resulting in a weighted average single value.
Finally, AFSI substituted the weighted average single value in the parent
company only balance sheet of SFC in order to derive an aggregate fair
value of SFC. No other adjustments to SFC's parent company only balance
sheet were deemed necessary. The present value per fully diluted share of
SFC Common Stock resulting from this analysis was $33.94
AFSI analyzed certain other mergers and acquisitions in the Midwest
(including the states of Michigan, Ohio, and Indiana) involving financial
institutions with assets between $200 million and $600 million. AFSI
compared the multiples produced by the Old Kent offer to the median
multiples for the transactions analyzed. Set forth below are the median
transaction multiples:
SELECTED
MIDWEST BANK OLD KENT/
ACQUISITIONS SFC
Price/Earnings 19.03 17.71
Price/Book Value 147.14% 187.64%
AFSI's analysis showed that the range of implied valuations of SFC,
applying the median transaction multiples described above to SFC's earnings
and book value was $47.18 to $34.43 per share. The results produced in
this analysis do not purport to be indicative of actual values or expected
values of SFC or shares of SFC Common Stock.
The financial institution acquisition transactions announced for the
Midwest during the period after January 1, 1995 included in the above
multiples are:
B-4
STATE OF STATE OF BANK/
BUYER TARGET BUYER TARGET THRIFT
OH OH Fidelity Financial of Ohio Circle Financial Corp. Thrift
IN IN Old National Bancorp Workingmens Capital Thrift
OH OH BancFirst Ohio Corp. County Savings Bank Thrift
MI MI Ottawa Financial Corp. AmeriBank FSB Thrift
MI IN Pinnacle Financial Services MACO Bancorp Thrift
AFSI also examined the operating and trading performance of SFC in
comparison to selected publicly-traded bank/bank holding companies located
in the Midwest with total assets of between $200 million and $600 million.
The group of companies included:
BancFirst Ohio Corp., OH Belmont Bancorp, OH
First-Knox Banc Corp., OH Oak Hill Financial, Inc., OH
Peoples Bancorp, Inc., OH United Bancorp, Inc., OH
ANB Corp., IN German American Bancorp, IN
Indiana United Bancorp, IN Peoples Bank Corp. of Indiana, IN
Capitol Bancorp Ltd., MI Firstbank Corp., MI
Franklin Bank, MI Independent Bank Corp., MI
AFSI analyzed the relative performance and outlook for SFC by
comparing certain financial and trading market information of SFC with the
group of comparable banks. AFSI compared SFC 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, 1996, the multiple of median market price to latest 12
months earnings was 11.78 for the comparable banks. The median price to
stated book value was 154.10 percent for the comparable banks. The implied
market trading values for SFC derived from such comparable company analysis
utilizing the resulting median valuation ratios ranged from approximately
$29.21 to $36.06 per share.
SFC and AFSI have entered into a letter agreement, dated February 2,
1996 (the "AFSI Engagement Letter"), relating to the services to be
provided by AFSI in connection with the Merger. SFC has agreed to pay AFSI
a fee (the "Fee") for its services equal to .50% of the value of the
consideration received by SFC and its shareholders which, based upon a
projected $43.9057 equivalent price for each share of SFC Common Stock,
will equal $370,000. The Fee, which will be paid in cash, will be paid
B-5
according to the following schedule: $25,000 was paid upon the execution of
the AFSI Engagement Letter, AFSI's billing charges above the initial
$25,000 were paid on a monthly basis, and the remaining balance will be
paid at the effective time of the Merger. All such payments are non-
refundable. In the AFSI Engagement Letter, SFC also has agreed to
indemnify AFSI and its officers, directors, shareholders, employees and
agents for all of the time, expenses, and any liability incurred as a
result of AFSI's proposed engagement by means of legal action,
administrative proceedings or threat thereof, unless such action, pending
or threat thereof is caused by AFSI's own unlawful conduct, breach of duty
or negligence during the course of performing AFSI's services.
AFSI, in rendering its opinion, has assumed that the transaction will
be a tax-free reorganization with no material adverse tax consequences to
any of the parties involved, or to SFC shareholders receiving holding
company stock of Old Kent. In addition, AFSI has assumed that in the
course of obtaining the necessary regulatory approvals for the transaction,
no condition will be imposed upon SFC or Old Kent that will have a material
adverse impact on the contemplated benefits of the proposed transaction to
SFC and Old Kent and their shareholders.
Based upon AFSI's analysis and subject to the qualifications described
herein, considering all circumstances known to us and based upon other
matters considered relevant, AFSI believes that as of the date of this
letter, the terms of the Plan of Merger from a financial point of view are
fair to SFC and its shareholders.
AFSI hereby consents to the reference to our firm in the proxy
statement or prospectus which will be a part of a registration statement
related to the Old Kent Common Stock to be issued in the merger transaction
and to the inclusion of our opinion in the proxy statement or prospectus
which will be a part of a registration statement related to the Old Kent
Common Stock to be issued in the merger transaction.
B-6
APPENDIX C
SEAWAY FINANCIAL CORPORATION AND SUBSIDIARIES
AUDITED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Appendix C contains audited consolidated financial statements of
Seaway Financial Corporation and Subsidiaries for the years ended December
31, 1995, 1994 and 1993, substantially in the form that appeared in
Seaway's Form 10-K Annual Report for the fiscal year ended December 31,
1995.
[PLANTE & MORAN, LLP LOGO]
Board of Directors
Seaway Financial Corporation
We have audited the accompanying consolidated balance sheet of Seaway
Financial Corporation as of December 31, 1995 and 1994, and the related
consolidated statements of changes in stockholders' equity, income and cash
flows for each year in the three-year period ended December 31, 1995.
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, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Seaway Financial Corporation as of December 31, 1995 and 1994,
and the consolidated results of its operations and its cash flows for each
year in the three-year period ended December 31, 1995, in conformity with
generally accepted accounting principles.
/S/ PLANTE & MORAN, LLP
Bloomfield Hills, Michigan
January 12, 1996
[PLANTE & MORAN, LLP LOGO]
C-1
SEAWAY FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
DECEMBER 31,
1995 1994
ASSETS
CASH AND CASH EQUIVALENTS
Cash and due from banks (Note 2) $ 11,058 $ 10,593
Federal funds sold 10,700 --
Total cash and cash equivalents 21,758 10,593
INVESTMENT SECURITIES HELD-TO-MATURITY
Fair value of $47,999 in 1995 and $57,315 in 1994 (Note 3) 46,779 57,464
SECURITIES AVAILABLE FOR SALE (Note 3) 77,423 80,810
LOANS (Note 4) 192,283 178,894
LESS RESERVE FOR POSSIBLE LOAN LOSSES (Note 5) (2,294) (2,182)
Net loans 189,989 176,712
BANK PREMISES AND EQUIPMENT (Note 6) 7,626 6,454
ACCRUED INTEREST RECEIVABLE AND OTHER ASSETS 4,254 5,787
TOTAL ASSETS $347,829 $337,820
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
DEPOSITS (Note 7)
Interest bearing deposits $269,640 $248,085
Noninterest bearing deposits 36,736 34,206
Total deposits 306,376 282,291
SHORT-TERM BORROWINGS (Note 8) 760 18,867
ACCRUED INTEREST, TAXES AND OTHER LIABILITIES 1,662 1,717
TOTAL LIABILITIES 308,798 302,875
C-2
SHAREHOLDERS' EQUITY
Preferred stock - No par value; 100,000 shares authorized;
no shares issued -- --
Common stock - $1 par value; 2,000,000 shares
authorized; 1,685,430 and 1,532,375 issued and
outstanding in 1995 and 1994, respectively $ 1,685 $ 1,532
Capital surplus 31,288 26,084
Retained earnings 5,965 9,244
Unrealized gain (loss) on securities available for sale, net
of tax of $48 and ($987) (Note 3) 93 (1,915)
TOTAL SHAREHOLDERS' EQUITY 39,031 34,945
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $347,829 $337,820
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
C-3
SEAWAY FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
UNREALIZED
GAIN
COMMON (LOSS) ON
STOCK SECURITIES
NUMBER PAR RETAINED AVAILABLE
OF SHARES VALUE SURPLUS EARNINGS FOR SALE TOTAL
BALANCE - December 31, 1992 1,277 $1,277 $18,680 $12,617 $ -- $32,574
Net income -- -- -- 4,022 -- 4,022
Stock dividend (Note 12) 255 255 7,404 (7,659) -- --
Cash dividends - $1.07 per common share -- -- -- (1,804) -- (1,804)
Unrealized gain on securities
available-for-sale, net of tax of $232
(Note 3) -- -- -- -- 451 451
BALANCE - December 31, 1993 1,532 1,532 26,084 7,176 451 35,243
Net income -- -- -- 3,907 -- 3,907
Cash dividends - $1.09 per common share -- -- -- (1,839) -- (1,839)
Change in unrealized loss on securities
available-for-sale, net of tax of $1,219
(Note 3) -- -- -- -- (2,366) (2,366)
BALANCE - December 31, 1994 1,532 1,532 26,084 9,244 (1,915) 34,945
Net income -- -- -- 4,061 -- 4,061
Stock dividend (Note 12) 153 153 5,204 (5,357) -- --
Cash dividends, $1.18 per common share -- -- -- (1,983) -- (1,983)
Change in unrealized gain on securities
available-for-sale, net of tax of $1,034
(Note 3) -- -- -- -- 2,008 2,008
BALANCE December 31, 1995 1,685 $1,685 $31,288 $ 5,965 $ 93 39,031
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
C-4
SEAWAY FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31,
1995 1994 1993
INTEREST INCOME
Interest on loans (Note 4) $ 16,595 $ 14,386 $ 15,035
Interest on securities (Note 5):
Taxable 5,482 5,612 5,021
Tax-exempt 2,158 2,268 2,311
Interest on short-term investments 204 159 303
Interest on mortgages held-for-sale 41 15 47
Total interest income 24,480 22,440 22,717
INTEREST EXPENSE
Interest on deposits 9,615 8,407 9,112
Interest on short-term borrowings (Note 8) 736 736 446
Total interest expense 10,351 9,143 9,558
NET INTEREST INCOME 14,129 13,297 13,159
PROVISION FOR LOAN LOSSES (Note 5) 189 19 58
NET INCOME INTEREST AFTER
PROVISION FOR LOAN LOSSES 13,940 13,278 13,101
OTHER OPERATING INCOME
Service charges on deposit accounts 1,047 949 893
Income from fiduciary activities 1,458 1,631 1,594
Net losses on security transactions (Note 3) (58) (19) --
Gain on sales of mortgage loans 15 25 337
Bankcard processing fees 188 258 292
Other 1,043 936 1,048
Total other operating income 3,693 3,780 4,164
OTHER OPERATING EXPENSES
Salaries and employee benefits (Note 10) 7,324 6,959 7,037
Net occupancy expenses 1,765 1,744 1,723
Supplies 597 427 454
Processing fees 730 707 826
Professional fees 365 287 291
FDIC assessment 329 648 643
Other 1,401 1,469 1,305
Total other operating expenses 12,511 12,241 12,279
C-5
INCOME BEFORE INCOME TAXES 5,122 4,817 4,986
PROVISION FOR INCOME TAXES (Note 9) 1,061 910 964
NET INCOME $ 4,061 $ 3,907 $ 4,022
NET INCOME PER COMMON SHARE (Note 12) $ 2.41 $ 2.32 $ 2.39
CASH DIVIDENDS PER COMMON SHARE (Note 12) $ 1.18 $ 1.09 $ 1.07
AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING (Note 12) 1,685,000 1,685,000 1,685,000
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
C-6
SEAWAY FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31,
1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,061 $ 3,907 $ 4,022
Adjustments to reconcile net income to net
cash from operating activities
Depreciation and amortization 1,036 939 858
Provision for loan losses 189 19 58
Deferred income taxes 171 91 (9)
Gain on sale of fixed assets (77) -- --
Loss on sale of investment securities 58 19 --
Amortization and accretion on securities 1,419 1,832 1,565
Decrease (increase) in accrued interest receivable
and other assets 444 113 (375)
Increase (decrease) in accrued taxes, interest and
other liabilities (172) 50 226
Net (increase) decrease in mortgages held for sale -- 957 (480)
NET CASH PROVIDED BY OPERATING ACTIVITIES 7,129 7,927 5,865
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease in other short-term investments -- 250 1,001
Proceeds from sales of securities available-for-sale 4,445 4,551 --
Proceeds from maturities of securities available-for-sale 16,836 25,395 --
Purchase of securities available-for-sale (15,763) (33,671) --
Proceeds from maturities of securities held-to-maturity 15,287 12,549 49,000
Purchase of securities held-to-maturity (5,167) (8,820) (64,979)
Proceeds from sale of fixed assets 203 -- --
Net decrease (increase) in loans (13,466) (8,460) 4,793
Capital expenditures (2,334) (724) (1,890)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 41 (8,930) (12,075)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in demand deposits,
NOW accounts and savings accounts 2,134 (2,792) 11,705
Net increase (decrease) in certificates of deposit 21,951 (10,394) (7,056)
Cash dividends (1,983) (1,839) (1,804)
Net increase (decrease) in short-term borrowings (18,107) 1,705 11,418
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 3,995 (13,320) 14,263
C-7
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 11,165 (14,323) 8,053
CASH AND CASH EQUIVALENTS - Beginning of Year 10,593 24,916 16,863
CASH AND CASH EQUIVALENTS - End of Year $ 21,758 $ 10,593 $ 24,916
CASH PAID FOR INTEREST AND INCOME TAXES
Interest $ 10,083 $ 9,104 $ 9,660
Income taxes $ 1,050 $ 767 $ 837
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
C-8
SEAWAY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
Seaway Financial Corporation and its wholly owned subsidiaries: The
Commercial and Savings Bank of St. Clair County and The Algonac
Savings Bank. All significant intercompany transactions are
eliminated in consolidation.
NATURE OF OPERATIONS
The Commercial and Savings Bank of St. Clair County and The
Algonac Savings Bank operate in rural and suburban communities in the
county of St. Clair in the State of Michigan. The Banks' primary
source of revenue results primarily from providing real estate and
commercial loans, and to a lesser extent, consumer loans, to customers
who are predominantly small and middle-market businesses and to
individuals in the local communities served by the Banks.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
SECURITIES
Securities are recorded in accordance with Financial Accounting
Standards Board Statement No. 115, "Accounting for Certain Investments
in Debt and Equity Securities," which requires an investment in a
security to be classified based on Seaway's intent with respect to
holding securities. The following summarizes the classification of
securities held at December 31, 1995 and 1994.
Securities purchased, where Seaway has both the positive intent
and ability to hold to maturity, are classified as held-to-maturity
and are recorded at cost adjusted for accumulated amortization of
premium and accretion of discount. Realized gains and losses on sales
of held-to-maturity securities, while rare, are included in net
securities gains based on the adjusted cost of the specific item sold.
C-9
SEAWAY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
When securities are purchased and Seaway intends to hold the
securities for an indefinite period of time but not necessarily to
maturity, they are classified as available-for-sale and recorded at
market value. Any decision to sell a security available-for-sale
would be based on various factors, including significant movements in
interest rates, changes in the maturity mix of Seaway's assets and
liabilities, liquidity demands, regulatory capital considerations and
other similar factors. Cost is adjusted for amortization of premiums
and accretion of discounts to maturity or, for mortgage-backed
securities, over the estimated life of the security. Unrealized gains
and losses on available-for-sale securities are excluded from earnings
and recorded as an amount, net of tax, in a separate component of
shareholders' equity.
LOANS
Loans are generally reported as the principal amount outstanding,
net of unearned income. Non-refundable loan origination and certain
direct loan origination costs are deferred and included in interest
income over the term of the related loan as a yield adjustment.
Interest on loans is accrued and credited to income based upon
the principal amount outstanding. The accrual of interest on loans is
discontinued when, in the opinion of management, there is an
indication that the borrower may be unable to meet payments as they
become due. Upon such discontinuance, all unpaid interest accrued is
reversed. Interest accruals are generally resumed when all delinquent
principal and/or interest have been brought current or the loan
becomes both well secured and in the process of collection.
Seaway will adopt Financial Accounting Standards Board Statement
No. 122, "Accounting for Mortgage Servicing Rights," effective January
1, 1996. As a result of applying the new rules, servicing rights
retained on mortgage loans sold (or securitized) will be required to
be recorded as a separate asset. For loans with servicing rights
retained, an allocation of the cost of the mortgage loans is made
between the mortgage servicing rights and the loans (without mortgage
servicing rights) based on their relative fair values. Any subsequent
impairments will be recognized through a valuation allowance. Seaway
does not expect the adoption of SFAS No. 122 to have a material impact
on Seaway's financial position or results of operations.
C-10
SEAWAY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RESERVE FOR POSSIBLE LOAN LOSSES
The reserve for possible loan losses is maintained at a level
considered by management to be adequate to absorb losses inherent in
existing loans and loan commitments. The adequacy of the reserve is
based on evaluations that take into consideration such factors as
prior loss experience, changes in the nature and volume of the
portfolio, overall portfolio quality, loan concentrations, specific
problem loans and commitments and current and anticipated economic
conditions that may affect the borrower's ability to pay.
Seaway adopted Statement of Financial Accounting Standards No.
114, "Accounting by Creditors for Impairment of a Loan," on January 1,
1995. SFAS No. 114 requires that impaired loans be measured based on
the present value of expected future cash flows discounted at the
loan's effective interest rate. As a practical expedient, impairment
may be measured based on the loan's observable market price or the
fair value of the collateral if the loan is collateral dependent.
When the measure of the impaired loan is less than the recorded
investment in the loan, the impairment is recorded through a valuation
allowance. The valuation allowance and provision for loan losses are
adjusted for changes in the present value of the impaired loans for
which impairment is measured based on the present value of expected
future cash flows or for changes in the appraised value of the loans
that are collateral dependent. Interest income on impaired loans is
recognized when received. There was no significant effect of adopting
SFAS No. 114 on Seaway's financial statements.
BANK PREMISES AND EQUIPMENT
Bank premises and equipment are stated at cost, less accumulated
depreciation computed using straight-line and declining balance
methods over estimated useful lives ranging from 3 to 50 years.
OTHER REAL ESTATE
Other real estate is carried at the lower of the recorded
investment in the property or its fair value. If a write-down to fair
value is necessary, the allowance for loan losses is charged and is
done so prior to foreclosure. Any subsequent write-downs are charged
against operating expenses. Estimated costs to sell the real estate
are considered in determining its fair value.
C-11
SEAWAY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Effective January 1, 1995, SFAS No. 114 requires that impaired
loans for which foreclosure is probable (in-substance foreclosed) be
accounted for as loans. In prior years, in-substance foreclosed loans
were reported as other real estate. However, other real estate at
January 1, 1995, did not include any in-substance foreclosed loans and
no reclassification was required.
INCOME FROM FIDUCIARY ACTIVITIES
Income from fiduciary activities is recognized on the accrual
basis.
INCOME TAXES
Seaway files a consolidated federal income tax return. Seaway
accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." SFAS
No. 109 requires the use of the asset and liability method of
accounting for income taxes. Current taxes are measured by applying
the provisions of enacted tax laws to taxable income to determine the
amount of taxes receivable or payable. Deferred tax assets and
liabilities are recorded based on the difference between the tax bases
of assets and liabilities and their carrying amounts for financial
reporting purposes. SFAS No. 109 also provides for the utilization of
tax planning strategies in the computation of deferred federal income
taxes.
PENSION COSTS
Seaway accounts for pension cost under the provisions of
Financial Accounting Standards Board Statement No. 87, "Employers'
Accounting for Pensions." This pronouncement requires the use of the
"projected unit credit" method in the determination of accumulated
benefits and periodic cost.
CASH EQUIVALENTS
For purposes of the statement of cash flows, Seaway considers
cash on hand, cash due from banks and federal funds sold to be cash
equivalents.
C-12
SEAWAY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to
the current year presentation.
NOTE 2 - RESTRICTED CASH BALANCES
The required reserve balance calculated, based on a percentage of
deposits, was approximately $2,003,000 at December 31, 1995. These
reserve requirements were met through a combination of vault cash and
deposits with correspondent banks.
NOTE 3 - SECURITIES
The amortized cost and estimated market value of securities held-
to-maturity are as follows at December 31, 1995 and 1994 (dollars in
thousands):
1995
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
Obligations of states and political subdivisions $38,136 $1,359 $ (33) $39,462
Corporate securities 8,643 19 (125) 8,537
Total $46,779 $1,378 $(158) $47,999
1994
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
Obligations of states and political subdivisions $38,541 $585 $(250) $38,876
Corporate securities 18,923 19 (503) 18,439
Total $57,464 $604 $(753) $57,315
C-13
SEAWAY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - SECURITIES (CONTINUED)
The amortized cost and estimated market value of securities held-
to-maturity at December 31, 1995, by contractual maturity, are shown
below. Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties (dollars in thousands):
ESTIMATED
AMORTIZED MARKET
COST VALUE
Due in 1 year or less $ 5,224 $ 5,261
Due in 1 year through 5 years 28,432 29,319
Due after 5 years through 10 years 9,617 9,784
Due after 10 years 3,506 3,635
Total $46,779 $47,999
The amortized cost and estimated market value of investments in
securities available-for-sale are as follows at December 31, 1995 and
1994 (dollars in thousands):
1995
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
U.S. treasury securities and obligations of
U.S. government corporations and agencies $39,278 $148 $(110) $39,316
Obligations of states and political subdivisions 1,097 17 -- 1,114
Mortgage-backed securities 35,044 228 (229) 35,043
Other 1,863 87 -- 1,950
Total $77,282 $480 $(339) $77,423
C-14
SEAWAY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - SECURITIES (CONTINUED)
1994
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
U.S. treasury securities and obligations of
U.S. government corporations and agencies $49,096 $ 8 $(1,754) $47,350
Mortgage-backed securities 32,754 40 (1,334) 31,460
Other 1,863 137 -- 2,000
Total $83,713 $185 $(3,088) $80,810
The amortized cost and estimated market value of securities
available-for-sale at December 31, 1995, by contractual maturity, are
shown below. Expected maturities will differ from contractual
maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties (dollars in
thousands):
ESTIMATED
AMORTIZED MARKET
COST VALUE
Due in 1 year or less $27,292 $27,348
Due in 1 year through 5 years 11,548 11,653
Due after 5 years through 10 years 3,398 3,379
42,238 42,380
Mortgage-backed securities 35,044 35,043
Total $77,282 $77,423
Securities having a carrying value of $10,997,000 (market value
of $11,467,000) were pledged at December 31, 1995, to secure public
deposits, repurchase agreements and for other purposes required by
law.
C-15
SEAWAY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - SECURITIES (CONTINUED)
Proceeds from sales of securities available-for-sale during 1995,
1994 and 1993 were $4,445,000, $4,551,000 and $0, respectively. Gross
gains of $3,000, $2,000 and $0 and gross losses of $61,000, $21,000
and $0 were recognized on those sales in 1995, 1994 and 1993,
respectively.
NOTE 4 - LOANS
Major categories of loans included in the portfolio at December
31, 1995 and 1994 are as follows (dollars in thousands):
1995 1994
Commercial Loans $ 68,497 $ 62,553
Mortgage Loans 98,523 95,404
Consumer Loans 25,263 20,937
Total Loans $192,283 $178,894
Final loan maturities and rate sensitivity of the loan portfolio
at December 31, 1995, are as follows (dollars in thousands):
WITHIN ONE- AFTER
ONE FIVE FIVE
YEAR YEARS YEARS TOTAL
Commercial Loans $17,060 $46,913 $ 4,524 $ 68,497
Mortgage Loans 10,994 21,375 66,154 98,523
Consumer Loans 4,300 18,371 2,592 25,263
$32,354 $86,659 $73,270 $192,283
Loans at fixed interest rates $20,602 $61,118 $41,863 $123,583
Loans at variable interest rates 11,752 25,541 31,407 68,700
$32,354 $86,659 $73,270 $192,283
C-16
SEAWAY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - LOANS (CONTINUED)
Certain directors and executive officers of Seaway, including
their associates, were loan customers of the Banks during 1995 and
1994. Such loans were made in the ordinary course of business and do
not involve more than a normal risk of collectibility. Total loans to
these persons at December 31, 1995 and 1994 amounted to $13,157,000
and $11,285,000, respectively. During 1995, $6,907,000 of new loans
were made and repayments totaled $5,035,000. The total unused
commitments for these loans were $3,190,000 at December 31, 1995.
Mortgage loans serviced for others are not included in the
accompanying consolidated statements of financial condition. The
unpaid principal balances of mortgage loans serviced for others was
$42,154,000 and $39,742,000 at December 31, 1995 and 1994,
respectively. Seaway has not purchased mortgage servicing rights from
others.
Custodial escrow balances maintained in connection with the
foregoing loan servicing, and included in demand deposits, were
approximately $175,000 and $225,000 at December 31, 1995 and 1994,
respectively.
NOTE 5 - RESERVE FOR POSSIBLE LOAN LOSSES
Transactions in the reserve for possible loan losses for the
years ended December 31, 1995, 1994 and 1993 were as follows (dollars
in thousands):
1995 1994 1993
BALANCE - Beginning of year $2,182 $2,182 $2,178
Provision for loan losses charged to operations 189 19 58
2,371 2,201 2,236
Loans charged off - Net of recoveries of
$34, $99 and $65 (77) (19) (54)
Balance - End of year $2,294 $2,182 $2,182
As a percent of total loans 1.19% 1.22% 1.28%
C-17
SEAWAY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - RESERVE FOR POSSIBLE LOAN LOSSES (CONTINUED)
As disclosed in Note 1, Seaway adopted SFAS No. 114 as of January
1, 1995. The following is a summary of nonperforming loans, troubled
debt restructured and other impaired loans as of December 31, 1995
(dollars in thousands):
1995
Nonperforming loans $1,236
Troubled debt restructured --
Other impaired loans --
Total $1,236
Based on the analysis of expected cash flows and collateral
values, no additional reserve for possible loan losses was deemed
necessary for impaired loans at December 31, 1995. The average
recorded investment in total impaired loans was $650,000 during 1995.
The amount of interest income recognized on total impaired loans was
$34,000 during 1995.
The aggregate balances of non-accrual loans and the reduction of
interest income associated with these loans at December 31, 1994 are
as follows (dollars in thousands):
1994
Nonaccrual loans $1,188
Income in accordance with original loan terms $ 129
Income recognized 79
Reduction in interest income $ 50
C-18
SEAWAY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - BANK PREMISES AND EQUIPMENT
Bank premises and equipment at December 31, 1995 and 1994
consisted of the following (dollars in thousands):
1995 1994
Land $ 929 $ 1,011
Buildings and improvements 5,913 5,595
Furniture, fixtures and equipment 9,049 7,980
Total bank premises and equipment 15,891 14,586
Less accumulated depreciation and amortization (8,265) (8,132)
Net carrying amount $ 7,626 $ 6,454
NOTE 7 - DEPOSITS
The following is a summary of the distribution of deposits at
December 31 (dollars in thousands):
1995 1994
Noninterest bearing - Demand $ 36,736 $ 34,206
Interest bearing
NOW accounts $ 47,794 $ 47,150
Savings 55,921 56,195
Money market demand 40,284 41,050
Time:
$100,000 and over 28,827 16,437
Under $100,000 96,814 87,253
Total interest bearing $269,640 $248,085
C-19
SEAWAY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - SHORT-TERM BORROWINGS
Seaway includes both agreements to repurchase and federal funds
purchased in short-term borrowings. Securities sold under agreements
to repurchase generally mature within 90 days. Federal funds
purchased generally mature within 1 to 4 days. The following is a
summary of short-term borrowings for the 3 years ended December 31,
1995 (dollars in thousands):
1995 1994 1993
Amount outstanding at year-end $ 760 $18,867 $17,162
Weighted average interest rate at year-end 5.62% 5.73% 3.19%
Daily average amount outstanding $12,284 $17,981 $13,967
Weighted average interest rate for the year 5.99% 4.09% 3.19%
Maximum amount outstanding at any month-end $27,268 $23,410 $19,747
NOTE 9 - INCOME TAXES
The provision for income taxes reflected in the consolidated
statements of income for the 3 years ended December 31, 1995, consists
of the following (dollars in thousands):
1995 1994 1993
Current expense $ 890 $819 $973
Deferred expense (benefit) 171 91 (9)
Total income tax expense $1,061 $910 $964
Tax expense includes charges applicable to securities gains or
losses in the amounts of ($20,000), ($6,000) and $0, respectively for
the years ended December 31, 1995, 1994 and 1993.
Total income tax expense was less than the amount computed by
applying the statutory federal income tax rate to income before income
taxes. The reasons for the difference are explained as follows:
C-20
SEAWAY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - INCOME TAXES (CONTINUED)
PERCENT OF PRETAX INCOME
1995 1994 1993
Income tax at statutory rate 34% 34% 34%
Tax exempt interest (13) (16) (14)
Other -- 1 (1)
Actual income tax expense 21% 19% 19%
The current and deferred net tax asset/liabilities are reflected
in the balance sheet and are as follows (dollars in thousands):
1995 1994
Deferred liability (asset) $118 $(1,218)
Current liability (asset) $(95) $ 102
Deferred income taxes are provided for the temporary differences
between the financial reporting bases and the tax bases of Seaway's
assets and liabilities. The sources of such temporary differences and
the resulting net deferred tax expense (benefit) for the years ended
December 31, 1995, 1994 and 1993 are as follows (dollars in
thousands):
1995 1994 1993
Provision for loan losses $(38) $ -- $ (1)
Pension expense 89 70 (52)
Reserve for security loss (20) (24) --
Original issue discount 39 169 --
Other 101 (124) 44
$171 $ 91 $ (9)
C-21
SEAWAY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - INCOME TAXES (CONTINUED)
The detail of the net deferred tax asset reflected in the balance
sheet is as follows (dollars in thousands):
1995 1994
Deferred tax asset
Bad debts $ 424 $ 386
Deferred loan fees 72 65
Unrealized losses on investment securities available-for-sale -- 987
Security reserve 44 24
Other 36 195
Total deferred tax assets 576 1,657
Valuation allowance for deferred tax assets -- --
Deferred tax liabilities:
Depreciation $(263) $ (176)
Accretion on investment securities (82) (71)
Pension (91) (2)
Original issue discount (208) (169)
Unrealized gains on investment securities available-for-sale (48) --
Other (2) (21)
Total deferred tax liabilities (694) (439)
Net deferred tax asset (liability) $(118) $1,218
The tax effect of the unrealized gains (losses) on investment
securities available-for-sale is charged directly to its related
component of shareholders' equity.
C-22
SEAWAY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - EMPLOYEE BENEFIT PLANS
RETIREMENT PLAN
Seaway has a defined benefit plan covering substantially all of
the employees of Seaway and the Banks. The following table sets forth
the retirement plan's funded status and amounts recognized on Seaway's
balance sheet at December 31, 1995 and 1994 (dollars in thousands):
1995 1994
Accumulated benefit obligation $3,680 $ 3,053
Projected benefit obligation $5,439 $ 5,180
Plan assets at fair value 5,725 3,986
Funded status 286 (1,194)
Unrecognized net (gain) loss from past experience different
from that assumed (48) 1,047
Unrecognized prior service cost (65) (69)
Unrecognized transition asset (89) (97)
Prepaid (accrued) pension cost $ 84 $ (313)
In 1995 and 1994, the weighted average discount rate used in
determining the actuarial present value of the projected benefit
obligation was 8 percent. The rate of increase in future compensation
levels was 5 percent and the expected long-term rate of return on
assets was 8.5 percent in 1995 and 8 percent in 1994 and 1993.
Net pension cost includes the following components for the years
ended December 31, 1995, 1994 and 1993 (dollars in thousands):
1995 1994 1993
Service cost benefits earned during the period $ 278 $ 293 $ 247
Interest cost on projected benefit obligation 388 368 315
Actual return (gain) loss on plan assets (1,181) 248 63
Net amortization and deferral 810 (613) (433)
Net pension cost $ 295 $ 296 $ 192
C-23
SEAWAY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - EMPLOYEE BENEFIT PLANS (CONTINUED)
DEFINED CONTRIBUTION PLAN
Seaway has a 401(k) Plan which is a defined contribution and
voluntary savings plan for employees. Employer contributions are
discretionary and are determined by an annual resolution of the Board
of Directors. No employer contributions were paid or accrued for the
3 years ended December 31, 1995.
POSTRETIREMENT BENEFITS
The Banks provide certain health care benefits for certain
retired employees. Employees may become eligible for these benefits
if they reach normal retirement age and meet certain vesting
requirements. Such benefits for retired employees are provided
through insurance companies.
Expense for postretirement benefits is recorded on the accrual
basis. However, postretirement benefits do not have a material impact
on Seaway's consolidated financial position or results of operations.
INCENTIVE PLANS
Seaway has established incentive compensation plans for
management groups and profit-sharing plans for employees not covered
under the incentive compensation plans. The plans were established to
pay incentive compensation to employees of Seaway based on achieving
certain operating results. For the years ended December 31, 1995,
1994 and 1993, incentive compensation under the plans totaled
$366,000, $172,000 and $497,000, respectively.
NOTE 11 - RESTRICTIONS ON DIVIDENDS
Dividends paid to Seaway by the Banks amounted to $2,877,000 in
1995, $1,857,000 in 1994 and $1,804,000 in 1993. Unless prior
regulatory approval is obtained, banking regulations limit the amount
of dividends that the Banks can declare in 1995 to the 1995 "net
profits," as defined in the Federal Reserve Act, and "retained net
profits" for 1994 and 1993.
C-24
SEAWAY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - COMMON STOCK
In January 1995, Seaway declared a 10 percent stock dividend.
Seaway also declared a 20 percent stock dividend in 1993.
Accordingly, per share amounts for all periods presented have been
retroactively adjusted to reflect these transactions.
NOTE 13 - FINANCIAL INSTRUMENTS
FAIR VALUES OF FINANCIAL INSTRUMENTS
Seaway has disclosed the following fair values of its financial
instruments in accordance with Statement of Financial Accounting
Standards No. 107, "Disclosures About Fair Value of Financial
Instruments" (dollars in thousands):
1995 1994
ESTIMATED ESTIMATED
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
Assets:
Cash and cash equivalents $ 21,758 $ 21,758 $ 10,593 $ 10,593
Securities 124,202 125,422 138,274 138,125
Loans 189,989 190,718 176,712 176,166
Accrued interest receivable 2,816 2,816 2,844 2,844
Liabilities:
Deposits 306,376 306,516 282,291 281,912
Securities sold under agreements to
repurchase 760 760 18,867 18,867
Accrued interest payable 873 873 607 607
The following methods and assumptions were used by Seaway in
estimating its fair value disclosures for financial instruments:
CASH AND CASH EQUIVALENTS
The carrying amounts reported in the balance sheet for cash and
short-term instruments approximate those assets' fair values.
C-25
SEAWAY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 - FINANCIAL INSTRUMENTS (CONTINUED)
INVESTMENT SECURITIES (INCLUDING MORTGAGE-BACKED SECURITIES)
Fair values for investment securities are based on quoted market
prices, where available. If quoted market prices are not available,
fair values are based on quoted market prices of comparable
instruments.
LOANS
For variable rate loans that reprice frequently, and with no
significant change in credit risk, fair values are based on carrying
values. The fair values for other loans are estimated using
discounted cash flow analyses, using interest rates currently being
offered for loans with similar terms to borrowers of similar credit
quality. The fair value of loan commitments and standby letters of
credit, valued on the basis of fees currently charged for commitments
for similar loan terms to new borrowers with similar credit profiles
is not considered material.
ACCRUED INTEREST RECEIVABLE
The carrying amount of accrued interest receivable approximates
fair value.
DEPOSIT LIABILITIES
The fair values disclosed for demand deposits are by definition
equal to the amount payable on demand at the reporting date. The
carrying amounts for variable rate, fixed term money market accounts
and certificates of deposit approximate their fair values at the
reporting date. Fair values for fixed rate certificates of deposit
are estimated using a discounted cash flow calculation that applies
interest rates currently being offered on similar certificates.
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
The carrying amounts of federal funds purchased, borrowings under
repurchase agreements and other short-term borrowings approximate
their fair values.
ACCRUED INTEREST PAYABLE
The carrying amount of accrued interest payable approximates its
fair value.
C-26
SEAWAY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 - FINANCIAL INSTRUMENTS (CONTINUED)
LIMITATIONS
Fair value estimates are made at a specific point in time, based
on relevant market information and information about the financial
instrument. These estimates do not reflect any premium or discount
that could result from offering for sale, at one time, Seaway's entire
holdings of a particular financial instrument.
Because no market exists for a significant portion of Seaway's
financial instruments, fair value estimates are based on judgments
regarding future expected loss experience, current economic
conditions, risk characteristics and other factors. These estimates
are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with
precision. Changes in assumptions could significantly affect the
estimates.
OFF-BALANCE SHEET RISK
Seaway is party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of
its customers and to reduce its own exposure to fluctuations in
interest rates. These financial instruments include commitments to
extend credit and financial guarantees and involve, to varying
degrees, elements of credit and interest rate risk that are not
recognized in the statement of financial condition.
Commitments to extend credit are agreements to lend to a customer
as long as there are no violations of any conditions established in
the contract. Commitments generally have fixed expiration dates or
other termination clauses and may require payment of a fee. Fees from
issuing these commitments to extend credit are recognized over the
period to maturity. Since a portion of the commitments is expected to
expire without being drawn upon, the total commitments do not
necessarily represent future cash requirements. Seaway evaluates each
customer's creditworthiness on a case-by-case basis. The amount of
collateral obtained upon extension of credit is based on management's
credit evaluation of the customer.
Exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend
credit and financial guarantees written is represented by the
C-27
SEAWAY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 - FINANCIAL INSTRUMENTS (CONTINUED)
contractual notional amount of those items. Seaway generally requires
collateral to support such financial instruments in excess of the
contractual notional amount of those instruments.
Seaway had outstanding loan origination commitments and standby
letters of credit aggregating $50,686,000 and $50,992,000 at December
31, 1995 and 1994, respectively, of which $20,910,000 and $26,329,000
was outstanding at year end and included in Seaway's balance sheet.
NOTE 14 - PARENT ONLY CONDENSED FINANCIAL INFORMATION
The condensed financial information that follows presents the
financial condition of Seaway Financial Corporation (the "Parent
Company"), along with the results of its operations and its cash
flows. The Parent Company has recorded its investment in subsidiaries
at cost plus its share of the undistributed earnings of the Banks
since they were acquired. The Parent Company recognizes dividends
from the Banks as revenue and undistributed earnings of the Banks as
other income. The Parent Company's financial information should be
read in conjunction with its consolidated financial statements.
The condensed balance sheets at December 31 are the following
(dollars in thousands):
1995 1994
ASSETS
Cash on deposit at subsidiary bank $ 43 $ 85
Time deposits 100 250
Securities available-for-sale 1,114 --
Investment in subsidiaries 37,642 34,419
Deferred tax receivable -- 1,218
Other assets 190 140
Total assets $39,089 $36,112
LIABILITIES - Accounts payable and accrued expenses $ 58 $ 1,167
SHAREHOLDERS' EQUITY 39,031 34,945
Total liabilities and shareholders' equity $39,089 $36,112
C-28
SEAWAY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 - PARENT ONLY CONDENSED FINANCIAL INFORMATION (CONTINUED)
The condensed statement of income for the year ended December 31
is the following (dollars in thousands):
1995 1994 1993
DIVIDENDS FROM SUBSIDIARY BANKS $2,877 $1,857 $1,804
MANAGEMENT FEES 488 539 380
OTHER 29 6 14
3,394 2,402 2,198
OPERATING EXPENSES 595 630 424
INCOME - Before tax benefit and equity in
undistributed income of subsidiaries 2,799 1,772 1,774
INCOME TAX CREDIT 32 29 38
INCOME - Before equity in undistributed income of
subsidiaries 2,831 1,801 1,812
EQUITY IN UNDISTRIBUTED INCOME OF
SUBSIDIARIES 1,230 2,106 2,210
NET INCOME $4,061 $3,907 $4,022
The condensed statement of cash flows for the year ended December
31 is the following (dollars in thousands):
1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,061 $ 3,907 $ 4,022
Adjustment to reconcile net income to net cash
provided by operating activities:
Equity in undistributed income of
subsidiaries (1,230) (2,106) (2,210)
Amortization and depreciation expense 17 19 26
Decrease (increase) in other assets and
deferred tax receivable 1,151 (900) 65
Increase (decrease) in accounts payable and
accrued expenses (1,109) 1,032 86
Amortization on securities 2 -- --
Net cash provided by operating activities 2,892 1,952 1,989
C-29
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease (increase) in time deposits 150 (125) (125)
Purchase of municipal bonds (1,101) -- --
Net cash used in investing activities (951) (125) (125)
CASH FLOWS USED IN FINANCING ACTIVITIES -
Dividends paid (1,983) (1,839) (1,804)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (42) (12) 60
CASH AND CASH EQUIVALENTS - Beginning of year 85 97 37
CASH AND CASH EQUIVALENTS - End of year $ 43 $ 85 $ 97
C-30
APPENDIX D
SEAWAY FINANCIAL CORPORATION AND SUBSIDIARIES
UNAUDITED FINANCIAL STATEMENTS
AS OF JUNE 30, 1996
AND FOR THE THREE AND SIX MONTHS THEN ENDED
Appendix D contains unaudited financial statements of Seaway Financial
Corporation and Subsidiaries for the three and six months ended June 30,
1996, substantially in the form that appears in Seaway's Form 10-Q
Quarterly Report for the period ended June 30, 1996.
SEAWAY FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
JUNE 30, DECEMBER 31,
1996 1995
ASSETS
CASH AND CASH EQUIVALENTS
Cash and due from banks $ 10,849 $ 11,058
Federal funds sold 7,000 10,700
Total cash and cash equivalents 17,849 21,758
MORTGAGES HELD FOR SALE 1,454 --
INVESTMENT SECURITIES HELD TO MATURITY (At cost) 52,944 46,779
INVESTMENT SECURITIES AVAILABLE FOR SALE (At market) 73,216 77,423
Total investment securities 126,160 124,202
LOANS 206,038 192,283
LESS RESERVE FOR POSSIBLE LOAN LOSSES (2,463) (2,294)
Net loans 203,575 189,989
BANK PREMISES AND EQUIPMENT 7,929 7,626
ACCRUED INTEREST RECEIVABLE AND OTHER ASSETS 4,920 4,254
Total assets $361,887 $347,829
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
DEPOSITS
Interest bearing deposits $283,326 $269,640
Non-interest bearing deposits 37,429 36,736
Total deposits 320,755 306,376
SHORT-TERM BORROWINGS 30 760
ACCRUED INTEREST, TAXES AND OTHER LIABILITIES 1,353 1,662
Total liabilities 322,138 308,798
D-1
SHAREHOLDERS' EQUITY
Common stock - $1 par value; 2,000,000 shares authorized;
1,685,430 issued and outstanding in 1996 and 1995,
respectively 1,685 1,685
Capital surplus 31,288 31,288
Undivided profits 7,059 5,965
Unrealized gain/loss on securities available-for-sale (283) 93
Total shareholders' equity 39,749 39,031
Total liabilities and shareholders' equity $361,887 $347,829
D-2
SEAWAY FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
1996 1995
INTEREST INCOME
Interest and fees on loans $ 4,523 $ 4,151
Interest on investment securities
Taxable 1,246 1,443
Tax-exempt 526 515
Interest on short-term investments 104 66
Interest on mortgages held-for-sale 6 4
Total interest income 6,405 6,179
INTEREST EXPENSE
Interest on deposits 2,690 2,397
Interest on short-term borrowings 3 279
Total interest expense 2,693 2,676
NET INTEREST INCOME 3,712 3,503
PROVISION FOR LOAN LOSSES 116 23
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 3,596 3,480
OTHER OPERATING INCOME
Service charges on deposit accounts 288 269
Income from fiduciary activities 409 404
Gains (losses) on security transactions (23) 10
Gains (losses) on sales of mortgage loans (19) 5
Bankcard processing fees 44 31
Other 266 247
Total other operating income 965 966
D-3
OTHER OPERATING EXPENSES
Salaries and employee benefits 1,862 1,779
Net occupancy expense 507 442
Supplies 135 128
Processing fees 154 175
Professional fees 150 110
FDIC assessment 1 160
Marketing 54 44
Other 338 322
Total other operating expenses 3,201 3,160
INCOME BEFORE INCOME TAXES 1,360 1,286
PROVISION FOR INCOME TAXES 282 266
NET INCOME $ 1,078 $ 1,020
NET INCOME PER SHARE OF COMMON STOCK $ .64 $ .61
CASH DIVIDENDS PER SHARE OF COMMON STOCK $ .32 $ .30
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 1,685,430 1,685,430
D-4
SEAWAY FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
1996 1995
INTEREST INCOME
Interest and fees on loans $ 8,871 $ 8,080
Interest on investment securities
Taxable 2,522 2,870
Tax-exempt 1,069 1,063
Interest on short-term investments 223 92
Interest on mortgages held-for-sale 9 4
Total interest income 12,694 12,109
INTEREST EXPENSE
Interest on deposits 5,352 4,634
Interest on short-term borrowings 10 589
Total interest expense 5,362 5,223
NET INTEREST INCOME 7,332 6,886
PROVISION FOR LOAN LOSSES 167 41
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 7,165 6,845
OTHER OPERATING INCOME
Service charges on deposit accounts 554 520
Income from fiduciary activities 858 849
Gains (losses) on security transactions (23) 10
Gains (losses) on sales of mortgage loans (26) 6
Bankcard processing fees 87 78
Other 460 428
Total other operating income 1,910 1,891
D-5
OTHER OPERATING EXPENSES
Salaries and employee benefits 3,674 3,501
Net occupancy expense 1,009 898
Supplies 276 250
Processing fees 331 352
Professional fees 217 196
FDIC assessment 2 319
Marketing 133 88
Other 657 623
Total other operating expenses 6,299 6,227
INCOME BEFORE INCOME TAXES 2,776 2,509
PROVISION FOR INCOME TAXES 604 509
NET INCOME $ 2,172 $ 2,000
NET INCOME PER SHARE OF COMMON STOCK $ 1.29 $ 1.19
CASH DIVIDENDS PER SHARE OF COMMON STOCK $ .64 $ .57
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 1,685,430 1,685,430
D-6
SEAWAY FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
(DOLLARS IN THOUSANDS)
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,172 $ 2,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Gains (loss) on sale of investment securities (23) 10
Loss on sale of fixed assets 81 --
Depreciation and amortization 534 512
Provision for possible loan losses 167 41
Increase in accrued interest and other assets (432) (57)
Decrease in accrued expenses and other liabilities (262) (422)
Amortization and accretion on securities 434 1,005
Net increase in mortgages held-for-sale (1,454) (307)
Total adjustments (955) 782
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,217 2,782
CASH FLOWS FROM INVESTING ACTIVITIES
Investment securities
Proceeds from maturities available-for-sale 17,361 6,507
Proceeds from maturities held-to-maturity 28,547 7,996
Proceeds from sales available-for-sale 2,728 991
Purchases available-for-sale (16,859) (8,399)
Purchases held-to-maturity (34,713) (2,673)
Net increase in loans (13,753) (4,548)
Capital expenditures (1,008) (1,302)
NET CASH USED IN INVESTING ACTIVITIES (17,697) (1,428)
CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) increase in demand, NOW and savings
deposits (4,177) 1,853
Net increase in certificates of deposit 18,556 9,084
Dividends paid (1,078) (972)
Net (decrease) increase in short-term borrowing (730) (4,492)
NET CASH USED IN FINANCING ACTIVITIES 12,571 5,473
Net increase (decrease) in cash and cash equivalents (3,909) 6,827
D-7
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 21,758 10,593
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 17,849 $ 17,420
D-8
APPENDIX E
STATISTICAL INFORMATION
REGARDING SEAWAY FINANCIAL CORPORATION AND SUBSIDIARIES
Appendix E contains additional statistical information concerning
Seaway Financial Corporation and Subsidiaries for the periods presented as
prepared by Seaway Financial Corporation.
TABLE 1
GROSS MARGIN ANALYSIS
(DOLLARS IN THOUSANDS)
YEARS ENDED DECEMBER 31,
1995 1994 1993
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST YIELD/RATE BALANCE INTEREST YIELD/RATE BALANCE INTEREST YIELD/RATE
ASSETS
Interest Earning Assets:
Loans <F1> $183,496 $16,595 9.04% $170,695 $14,386 8.43% $173,680 $15,035 8.66%
Loans held for sale 535 41 7.66 195 15 7.69 688 47 6.83
Investment Securities:
Taxable 96,530 5,482 5.68 110,278 5,612 5.09 94,752 5,021 5.30
Non-taxable <F2> 35,978 2,158 6.00 35,877 2,268 6.32 36,318 2,311 6.36
Total investment
securities 132,508 7,640 5.77 146,155 7,880 5.39 131,070 7,332 5.59
Federal funds sold 3,216 204 6.34 3,946 147 3.73 8,698 260 2.99
Other bank time deposits -- -- -- 138 12 8.70 715 43 6.01
Total interest earning
assets 319,755 24,480 7.66 321,129 22,440 6.99 314,851 22,717 7.22
Noninterest Earning Assets:
Cash and due from banks 11,151 10,129 10,016
Premises and equipment (net) 6,354 6,528 6,317
Other assets 6,822 5,864 4,866
Allowance for loan losses (2,206) (2,186) (2,191)
Total assets $341,876 $341,464 $333,859
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Deposits:
Demand $ 87,128 $ 2,248 2.58% $ 89,986 $ 2,248 2.50% $ 86,976 $ 2,345 2.70%
Savings 56,500 1,437 2.54 56,724 1,518 2.68 53,173 1,413 2.66
Time 113,473 5,930 5.23 108,880 4,641 4.26 115,571 5,354 4.63
Total Deposits 257,101 9,615 3.74 255,590 8,407 3.29 255,720 9,112 3.56
Short-term borrowings 12,306 736 5.98 17,978 736 4.09 13,965 446 3.19
Total interest-bearing
liabilities 269,407 10,351 3.84 273,568 9,143 3.34 269,685 9,558 3.54
E-1
Non-interest-bearing
liabilities:
Demand deposits 32,931 31,077 28,746
Other liabilities 2,499 1,577 1,888
Total non-interest bearing
liabilities 35,430 32,654 30,634
Shareholders' equity 37,039 35,242 33,540
Total liabilities and
shareholders' equity $341,876 $341,464 $333,859
Net interest earnings $14,129 3.82% $13,297 3.65% $13,159 3.67%
Net yield on interest-earning
assets 4.42% 4.14% 4.18%
__________________________
<FN>
<F1> Nonaccrual loans have been included in the average loan amounts
outstanding. Loan fees are treated as interest income. The
amounts are not material.
<F2> Income from nontaxable investment securities has not been adjusted
to a tax equivalent basis.
</FN>
E-2
TABLE 2
ANALYSIS OF GROSS INTEREST MARGIN
(DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31,
1995 COMPARED TO 1994 1994 COMPARED TO 1993
INCREASE (DECREASE) INCREASE (DECREASE)
VOLUME/ VOLUME/
VOLUME RATE RATE TOTAL VOLUME RATE RATE TOTAL
INTEREST INCOME:
Loans $1,079 $1,051 $ 79 $2,209 $(258) $(398) $ 7 $(649)
Loans held-for-sale 26 (0) (0) 26 (34) 6 (4) (32)
Investment securities:
Taxable (700) 651 (81) (130) 823 (199) (33) 591
Non-taxable 6 (116) (0) (110) (28) (15) -- (43)
Federal funds sold (27) 103 (19) 57 (142) 64 (35) (113)
Other bank time deposits (12) (12) 12 (12) (35) 19 (15) (31)
Total 372 1,677 (9) 2,040 326 (523) (80) (277)
INTEREST EXPENSE:
Deposits:
Demand (72) 74 (2) -- 81 (172) (6) (97)
Savings (6) (75) -- (81) 94 10 1 105
Time 196 1,049 44 1,289 (310) (428) 25 (713)
Short-term borrowings (232) 339 (107) (0) 128 126 37 291
Total (114) 1,387 (65) 1,208 (7) (464) 57 (414)
Increase (decrease) in
net interest income $ 486 $ 290 $ 56 $ 832 $ 333 $ (59) $(137) $ 137
<FN>
<F1> Yields on non-taxable securities have not been adjusted to a
tax-equivalent basis.
</FN>
E-3
TABLE 3
INVESTMENT SECURITIES MATURITY DISTRIBUTION
SECURITIES AVAILABLE FOR SALE <F1> SECURITIES HELD TO MATURITY <F1>
(DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS)
AVERAGE CARRYING VALUE AVERAGE CARRYING VALUE
YIELD DECEMBER 31, YIELD DECEMBER 31,
Maturities of: 1995 1995 1994 1993 Maturities of: 1995 1995 1994 1993
U.S. Treasury & U.S. Treasury &
Agency Agency
within 1 year 5.17% $27,348 $12,947 $10,483 within 1 year -- $ -- $ -- $ --
1 - 5 years 5.97% 10,651 33,134 31,711 1 - 5 years -- -- -- --
5 - 10 years 4.95% 3,267 3,269 6,737 5 - 10 years -- -- -- --
Over 10 years -- -- -- 255 Over 10 years -- -- -- --
Total 5.36% $41,266 $49,350 $49,186 Total -- $ -- $ -- $ --
Mortgage Backed Mortgage Backed
Securities 6.20% $35,043 $31,460 $30,334 Securities -- $ -- $ -- $ --
States and Political States and Political
Subdivisions <F2> Subdivisions <F2>
within 1 year -- $ -- $ -- $ -- within 1 year 6.10% $ 4,053 $ 3,863 $ 5,306
1 - 5 years 4.52% 1,002 -- -- 1 - 5 years 5.80% 21,915 24,610 17,697
5 - 10 years 5.11% 112 -- -- 5 - 10 years 5.14% 8,662 9,551 14,800
Over 10 years -- -- -- -- Over 10 years 5.55% 3,506 517 3,364
Total 4.58% $ 1,114 $ -- $ -- Total 5.66% $38,136 $38,541 $41,167
Other <F3>
within 1 year 5.88% $ 1,171 $ 4,436 $ 4,555
1 - 5 years 5.89% 6,517 13,611 13,570
5 - 10 years 8.48% 955 622 3,478
Over 10 years -- -- 254 1,424
Total 5.94% $ 8,643 $18,923 $23,027
<FN>
<F1> Seaway adopted SFAS No. 115 on December 31, 1993.
<F2> Yields on non-taxable securities have not been adjusted to a tax
equivalent base.
<F3> Contains no concentrations of securities originated by a single
issuer other than the U.S. Government and its agencies that exceed
10 percent of shareholders' equity.
</FN>
E-4
TABLE 4
OUTSTANDING LOAN BALANCE
(DOLLARS IN THOUSANDS)
DECEMBER 31,
1995 1994 1993 1992 1991
Commercial $ 68,497 $ 62,553 $ 62,029 $ 57,757 $ 50,952
Real Estate Construction 2,884 3,511 3,187 4,285 2,691
Real Estate Mortgage 95,639 91,893 88,557 93,248 91,550
Installment 25,263 20,937 16,680 20,010 18,404
Total loans $192,283 $178,894 $170,453 $175,300 $163,597
Loans held for sale $ -- $ -- $ 957 $ 477 $ 706
MATURITIES OF LOANS
DECEMBER 31, 1995
UNDER FROM ONE AFTER
ONE YEAR TO FIVE YEARS FIVE YEARS TOTAL
Commercial $17,060 $46,913 $ 4,524 $ 68,497
Real Estate Construction 2,884 -- -- 2,884
Real Estate Mortgage 8,110 21,375 66,154 95,639
Installment 4,300 18,371 2,592 25,263
Total loans $32,354 $86,659 $73,270 $192,283
Percent of total 16.8% 45.1% 38.1% 100.00%
Of the loans maturing after 1 year at December 31, 1995, the following
table illustrates the sensitivity of the loan portfolio to changes in
interest rates:
E-5
FIXED RATE VARIABLE RATE TOTAL
Commercial $ 33,119 64.4% $18,318 35.6% $ 51,437
Real Estate Construction -- -- -- -- --
Real Estate Mortgage 56,361 64.4 31,168 35.6 87,529
Installment 13,501 64.4 7,462 35.6 20,963
$102,981 64.4% $56,948 35.6% $159,929
E-6
TABLE 5
NON-PERFORMING ASSETS
(DOLLARS IN THOUSANDS)
DECEMBER 31,
1995 1994 1993 1992 1991
Nonperforming loans
Impaired loans
under SFAS No. 114 <F1> $1,236 $ -- $ -- $ -- $ --
Nonaccrual
restructured <F2> -- 224 -- 511 916
Nonaccrual
original terms <F2> 130 964 94 278 304
Accruing loans past
due 90 days or more <F2> 210 507 1,326 787 1,115
Nonperforming loans 1,576 1,695 1,420 1,576 2,335
Other real estate 120 299 807 656 230
Nonperforming assets $1,696 $1,994 $2,227 $2,232 $2,565
Nonperforming loans as
a percentage of total
loans .8% .9% .8% .9% 1.4%
Reserve for loan losses
as a percentage of
nonperforming loans 145.6% 128.7% 153.7% 138.2% 83.3%
Reserve for loan losses
as a percentage of
nonperforming assets 135.3% 109.4% 98.0% 97.6% 75.8%
_________________________
<FN>
<F1> Seaway adopted SFAS No. 114 on January 1, 1995.
<F2> Data for 1995 includes residential mortgage loans and consumer
installment loans. For all periods prior to 1995, all loan types
are included.
</FN>
E-7
Loans are placed on a non-accrual basis when management believes that
there is a reasonable doubt as to their collectibility and interest is
recorded to income only as collected.
At December 31, 1995, other than the nonperforming loans noted above,
management is not aware of any other potential loan problems.
There are no concentrations of loans which exceed 10 percent of total
loans.
Based on the analysis of expected future cash flows and collateral
values, no additional reserve for possible loan losses was deemed
necessary for impaired loans at December 31, 1995. The average recorded
investment in total impaired loans was $650,000 during 1995. The amount
of interest income recognized on total impaired loans was $34,000 during
1995.
E-8
TABLE 6
SUMMARY OF LOAN LOSS EXPERIENCE
(DOLLARS IN THOUSANDS)
DECEMBER 31,
1995 1994 1993 1992 1991
Loans outstanding $192,283 $178,894 $170,453 $175,300 $163,597
Average total loans 183,496 170,695 173,680 165,926 156,936
Allowance for loan loss
at beginning of year 2,182 2,182 2,178 1,945 1,613
Loans charged off:
Commercial 8 2 30 41 68
Real Estate Construction -- -- -- -- --
Real Estate Mortgage 11 13 7 -- 17
Installment 91 103 82 126 75
Total charge-offs 110 118 119 167 160
Recoveries:
Commercial -- 32 11 31 43
Real Estate Construction -- -- -- -- --
Real Estate Mortgage 1 39 1 -- 1
Installment 32 28 53 50 31
Total recoveries 33 99 65 81 75
Net charge-offs 77 19 54 86 85
Provision for loan loss 189 19 58 319 417
Allowance for loan loss
at end of year $ 2,294 $ 2,182 $ 2,182 $ 2,178 $ 1,945
Ratio of net charge-offs
to average loans .04% .01% .03% .05% .05%
The reserve for possible loan losses is maintained at a level considered
by management to be adequate to absorb losses inherent in existing loans
and loan commitments. The adequacy of the reserve is based on
evaluations which take into consideration such factors as prior loss
experience, changes in the nature and volume of the portfolio, overall
portfolio quality, loan concentrations, specific problem loans and
commitments and current and anticipated economic conditions that may
affect a borrower's ability to pay.
E-9
TABLE 7
ANALYSIS OF RESERVE FOR LOAN LOSSES
(DOLLARS IN THOUSANDS)
DECEMBER 31,
1995 1994 1993 1992 1991
Commercial Loans $ 549 $ 361 $ 818 $2,113 $ 788
Real Estate Construction -- -- -- -- 58
Real Estate Mortgage 22 103 101 61 749
Installment Loans 114 143 201 4 350
Unallocated 1,609 1,575 1,062 -- --
Total reserve for loan
losses $2,294 $2,182 $2,182 $2,178 $1,945
Percentage of loans
to total loans:
Commercial Loans 35.6% 34.9% 36.4% 32.9% 31.1%
Real Estate Construction 1.5 2.0 1.8 2.5 1.7
Real Estate Mortgage 49.8 51.4 52.0 53.2 56.0
Installment Loans 13.1 11.7 9.8 11.4 11.2
Total 100.0% 100.0% 100.0% 100.0% 100.0%
For 1991 and prior years, the loan loss reserve was allocated to the
various portfolios by specific identification and historical charge-off
percentages. The remaining unallocated reserve was then allocated based
on the outstanding balance of each loan portfolio. In 1992, as part of
Seaway's compliance with SFAS No. 107, the reserve was allocated based
on the inherent risk in each portfolio. For 1993, 1994 and 1995 the
reserve is allocated as in 1991, with the remaining reserve being
allocated to a new category called unallocated.
E-10
TABLE 8
AVERAGE DEPOSITS
(DOLLARS IN THOUSANDS)
1995 1994 1993
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE RATE BALANCE RATE BALANCE RATE
Demand deposits:
Noninterest bearing $ 32,931 --% $ 31,077 --% $ 28,746 --%
Interest-bearing 87,128 2.58% 89,986 2.50% 86,976 2.70%
Savings 56,500 2.54% 56,724 2.68% 53,173 2.66%
Time 113,473 5.23% 108,880 4.26% 115,571 4.63%
Total Deposits $290,032 3.32% $286,667 2.93% $284,466 3.20%
Maturities of time certificates of deposit and other time deposits of
$100,000 or more outstanding at December 31, 1995, were as follows:
DECEMBER 31,1995
Under 3 months $16,328
3 through 6 months 7,137
Over 6 through 12 months 2,235
Over 12 months 3,127
Total $28,827
TABLE 9
FINANCIAL RATIOS
YEAR ENDED
DECEMBER 31,
1995 1994 1993
Return on Equity 10.96% 11.09% 11.99%
Return on Assets 1.19% 1.14% 1.20%
Dividend Payout Ratio 48.83% 42.75% 40.68%
Equity to Assets Ratio 10.83% 10.32% 10.05%
E-11
TABLE 10
GAP ANALYSIS
Balances December 31, 1995
(dollars in thousands)
INTEREST EARNING ASSETS 0-3 4-12 1-5 AFTER
MONTHS MONTHS YEARS 5 YEARS TOTAL
Federal funds sold $ 10,700 $ -- $ -- $ -- $ 10,700
Investment securities
held-to-maturity 4,824 6,067 26,619 9,269 46,779
Investment securities
available-for-sale 24,980 25,071 25,003 2,369 77,423
Loans 47,871 47,729 81,980 14,703 192,283
TOTAL $ 88,375 $ 78,867 $133,602 $26,341 $327,185
INTEREST BEARING LIABILITIES
Interest bearing demand $ -- $ 47,794<F1> $ -- $ -- $ 47,794
Savings 96,205<F2> -- -- 96,205
Time 37,274 49,958 37,314 1,095 125,641
Subtotal deposits 133,479 97,752 37,314 1,095 269,640
Short-term borrowing 760 -- -- -- 760
TOTAL $134,239 $ 97,752 $ 37,314 $ 1,095 $270,400
INTEREST RATE SENSITIVITY
GAP (45,864) (18,885) 96,288 25,246 56,785
CUMULATIVE INTEREST RATE
SENSITIVITY GAP (45,864) (64,749) 31,539 56,785 56,785
INTEREST RATE SENSITIVITY
GAP RATIO -14.02% -5.78% 29.43% 7.72% 17.35%
CUMULATIVE INTEREST RATE
SENSITIVITY GAP -14.02% -19.80% 9.63% 17.35% 17.35%
E-12
<FN>
<F1> NOW accounts included in 4-12 months based on the assumption that
if rates change unfavorably the funds would be withdrawn over a
period of 1 year.
<F2> Savings accounts included in 0-3 months based on the assumption
that if rates change unfavorably the funds would be withdrawn over
a period of 90 days.
</FN>
E-13
===========================================================================
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 Seaway since the date hereof.
TABLE OF CONTENTS
PAGE
INTRODUCTION AND SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . 1
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Old Kent Financial Corporation . . . . . . . . . . . . . . . . . . . . 2
Seaway Financial Corporation . . . . . . . . . . . . . . . . . . . . . 2
Summary of Certain Aspects of the Merger . . . . . . . . . . . . . . . 3
Market Value of Shares . . . . . . . . . . . . . . . . . . . . . . . . 6
Selected Financial Data. . . . . . . . . . . . . . . . . . . . . . . . 7
Comparative Per Share Data . . . . . . . . . . . . . . . . . . . . . . 8
GENERAL MEETING INFORMATION. . . . . . . . . . . . . . . . . . . . . . . 10
Purpose. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Voting by Proxy. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Proxy Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Voting Rights and Record Date. . . . . . . . . . . . . . . . . . . . . 11
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Background of the Merger . . . . . . . . . . . . . . . . . . . . . . . 12
Merger Recommendation and Reasons
for the Transaction . . . . . . . . . . . . . . . . . . . . . . . . 12
Opinion of Financial Adviser . . . . . . . . . . . . . . . . . . . . . 14
Conversion of Seaway Shares. . . . . . . . . . . . . . . . . . . . . . 17
Stock Price Condition. . . . . . . . . . . . . . . . . . . . . . . . . 17
Distribution of Old Kent Common Stock. . . . . . . . . . . . . . . . . 18
Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . . 19
Business of Seaway Pending the Merger. . . . . . . . . . . . . . . . . 19
Management After the Merger. . . . . . . . . . . . . . . . . . . . . . 20
Conditions to the Merger and Abandonment . . . . . . . . . . . . . . . 20
Termination Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Description of Old Kent Capital Stock. . . . . . . . . . . . . . . . . 22
Provisions Affecting Control . . . . . . . . . . . . . . . . . . . . . 23
Comparison of Rights of Old Kent Shareholders
and Seaway Shareholders . . . . . . . . . . . . . . . . . . . . . . 24
Agreements of Affiliates . . . . . . . . . . . . . . . . . . . . . . . 25
Federal Income Tax Consequences. . . . . . . . . . . . . . . . . . . . 26
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . 27
SEAWAY FINANCIAL CORPORATION . . . . . . . . . . . . . . . . . . . . . . 27
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Market Price and Dividends . . . . . . . . . . . . . . . . . . . . . . 29
Management's Discussion and Analysis
of Financial Condition and Results
of Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Selected Financial Data. . . . . . . . . . . . . . . . . . . . . . . . 38
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 38
NO DISSENTERS' RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . 39
VOTING AND MANAGEMENT INFORMATION. . . . . . . . . . . . . . . . . . . . 39
Voting Securities and Principal Shareholders
of Seaway . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Interests of Certain Persons . . . . . . . . . . . . . . . . . . . . . 41
GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Incorporation by Reference . . . . . . . . . . . . . . . . . . . . . . 41
Independent Public Accountants . . . . . . . . . . . . . . . . . . . . 42
Shareholder Proposals. . . . . . . . . . . . . . . . . . . . . . . . . 42
Legal Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Sources of Information . . . . . . . . . . . . . . . . . . . . . . . . 43
Appendix A-- Agreement and Plan of Merger
Appendix B-- Opinion of Austin Financial Services, Inc.
Appendix C-- Seaway Financial Corporation and Sub-
sidiaries Audited Financial Statements
Appendix D-- Seaway Financial Corporation and Subsi-
diaries Unaudited Financial Statements
Appendix E-- Statistical Information Regarding Seaway
Financial Corporation and Subsidiaries
===========================================================================
===========================================================================
[SEAWAY LOGO]
PROSPECTUS AND
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS OF
SEAWAY FINANCIAL
CORPORATION
IN CONNECTION WITH AN OFFERING OF UP TO
2,382,100 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 Restated Articles of Incorporation to
indemnify its directors and executive officers to the full extent permitted
under the Michigan Act. Old Kent may similarly indemnify persons who are
not directors or executive officers to the extent authorized by the board
of directors of Old Kent.
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, provided that an
appropriate court could determine 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, 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
II-1
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
Restated 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 or executive officer.
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
2.1 AGREEMENT AND PLAN OF MERGER. Attached as Appendix A to the
Prospectus and Proxy Statement.
4.1 LONG-TERM DEBT. The registrant is a party to several long-
term debt agreements which at the time of this Registration
Statement do not exceed 10 percent of the registrant's total
consolidated assets. The registrant agrees to furnish
copies of the agreements defining the rights of the other
parties thereto to the Securities and Exchange Commission
upon request.
4.2 RESTATED ARTICLES OF INCORPORATION. Previously filed as
Exhibit 3(a) to the registrant's Form 10-Q Quarterly
Report for the quarter ended March 31, 1993. Here
incorporated by reference.
4.3 BYLAWS. Previously filed as Exhibit 3(b) to the
registrant's Form 8-K filed February 23, 1996. Here
incorporated by reference.
II-2
5 OPINION OF COUNSEL REGARDING THE LEGALITY OF THE SECURITIES
BEING REGISTERED.
8 OPINION OF COUNSEL REGARDING CERTAIN TAX MATTERS.
12 STATEMENT REGARDING COMPUTATION OF OTHER RATIOS. Previously
filed as Exhibit 11 to the registrant's Form 10-K Annual
Report for its fiscal year ended December 31, 1995. Here
incorporated by reference.
23.1 CONSENT OF COUNSEL (included in Exhibits 5 and 8).
23.2 CONSENT OF INDEPENDENT ACCOUNTANTS (OLD KENT FINANCIAL
STATEMENTS).
23.3 CONSENT OF INDEPENDENT ACCOUNTANTS (SEAWAY FINANCIAL
STATEMENTS).
23.4 CONSENT OF AUSTIN FINANCIAL SERVICES, INC. (included in the
opinion of Austin Financial Services, Inc., the form of
which appears as Appendix B to the Prospectus and Proxy
Statement).
24 POWERS OF ATTORNEY.
99.1 SEAWAY PRESIDENT'S LETTER.
99.2 FORM OF PROXY FOR SEAWAY.
(b) FINANCIAL STATEMENT SCHEDULES. Financial statement schedules
have been omitted because they are not applicable.
(c) OPINION OF FINANCIAL ADVISER. The opinion of Austin Financial
Services, Inc. will be filed with an amendment. A form of such opinion
appears as Appendix B to the Prospectus and Proxy Statement.
II-3
ITEM 22. UNDERTAKINGS.
(1) 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 the time shall be deemed to be the initial bona fide offering
thereof.
(2) (a) 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.
(b) The registrant undertakes that every prospectus (i)
that is filed pursuant to the immediately preceding paragraph, 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.
(3) The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or
sales are being made, a post-effective amendment to this
registration statement;
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the
registration statement (or the most recent post-
II-4
effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar
value of securities offered would not exceed that which
was registered) and any deviation from the low or high
and of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the
aggregate, the change in the volume and price represent
no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement.
(iii) To include any material information with
respect to the plan of distribution not previously
disclosed in the registration statement or any material
change to such information in the registration
statement;
(b) That for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the
initial BONA FIDE offering thereof.
(c) To remove from registration by means of a post-
effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to 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.
II-5
(5) The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the
Prospectus pursuant to Item 4, 10(b), 11, or 13 of 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.
(6) 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-6
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 September 27, 1996.
OLD KENT FINANCIAL CORPORATION
(Registrant)
By */S/ B.P. SHERWOOD, III
B.P. Sherwood, III
Vice Chairman and Treasurer
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.
_____________, 1996 _______________________________
John M. Bissell
Director
September 27, 1996 */S/ JOHN D. BOYLES
John D. Boyles
Director
September 27, 1996 */S/ RICHARD M. DEVOS, JR.
Richard M. DeVos, Jr.
Director
_____________, 1996 _______________________________
James P. Hackett, Sr.
Director
_____________, 1996 _______________________________
Erina Hanka
Director
September 27, 1996 */S/ EARL D. HOLTON
Earl D. Holton
Director
_____________, 1996 ________________________________
Michael J. Jandernoa
Director
September 27, 1996 */S/ JOHN P. KELLER
John P. Keller
Director
September 27, 1996 */S/ WILLIAM U. PARFET
William U. Parfet
Director
September 27, 1996 */S/ PERCY A. PIERRE
Percy A. Pierre
Director
September 27, 1996 */S/ ROBERT L. SADLER
Robert L. Sadler
Vice Chairman of the Board and
Director
_____________, 1996 ________________________________
Peter F. Secchia
Director
September 27, 1996 */S/ B.P. SHERWOOD, III
B.P. Sherwood, III
Vice Chairman of the Board and
Treasurer and Director
(Principal Financial Officer)
September 27, 1996 */S/ DAVID J. WAGNER
David J. Wagner
Chairman, President, Chief
Executive Officer and
Director (Principal Executive
Officer)
September 27, 1996 */S/ ALBERT T. POTAS
Albert T. Potas
Senior Vice President (Principal
Accounting Officer)
*By /S/ MARY E. TUUK
Mary E. Tuuk
Attorney-In-Fact
EXHIBIT INDEX
NUMBER EXHIBIT
2.1 AGREEMENT AND PLAN OF MERGER. Attached as Appendix A to the
Prospectus and Proxy Statement.
4.1 LONG-TERM DEBT. The registrant is a party to several long-
term debt agreements which at the time of this Registration
Statement do not exceed 10 percent of the registrant's total
consolidated assets. The registrant agrees to furnish
copies of the agreements defining the rights of the other
parties thereto to the Securities and Exchange Commission
upon request.
4.2 RESTATED ARTICLES OF INCORPORATION. Previously filed as
Exhibit 3(a) to the registrant's Form 10-Q Quarterly
Report for the quarter ended March 31, 1993. Here
incorporated by reference.
4.3 BYLAWS. Previously filed as Exhibit 3(b) to the
registrant's Form 8-K filed February 23, 1996. Here
incorporated by reference.
5 OPINION OF COUNSEL REGARDING THE LEGALITY OF THE SECURITIES
BEING REGISTERED.
8 OPINION OF COUNSEL REGARDING CERTAIN TAX MATTERS.
12 STATEMENT REGARDING COMPUTATION OF OTHER RATIOS. Previously
filed as Exhibit 11 to the registrant's Form 10-K Annual
Report for its fiscal year ended December 31, 1995. Here
incorporated by reference.
23.1 CONSENT OF COUNSEL (included in Exhibits 5 and 8).
23.2 CONSENT OF INDEPENDENT ACCOUNTANTS (OLD KENT FINANCIAL
STATEMENTS).
23.3 CONSENT OF INDEPENDENT ACCOUNTANTS (SEAWAY FINANCIAL
STATEMENTS).
23.4 CONSENT OF AUSTIN FINANCIAL SERVICES, INC. (included in the
opinion of Austin Financial Services, Inc., the form of
which appears as Appendix B to the Prospectus and Proxy
Statement).
24 POWERS OF ATTORNEY.
99.1 SEAWAY PRESIDENT'S LETTER.
99.2 FORM OF PROXY FOR SEAWAY.
FINANCIAL STATEMENT SCHEDULES
Financial statements have been omitted because they are not
applicable.
FAIRNESS OPINION
The opinion of Austin Financial Services, Inc. will be filed
with an amendment. A form of such opinion appears as Appendix
B to the Prospectus and Proxy Statement.