UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE TO
(Rule 14d-100)
TENDER OFFER STATEMENT UNDER SECTION 14(d)(1) OR
SECTION 13(e)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
TALMER BANCORP, INC.
(Name of Subject Company (Issuer))
TALMER BANCORP, INC.
(Name of Filing Persons (Offeror))
Options to Purchase Class A Common
Stock, $1.00 Par Value Per Share
(Title of Class of Securities)
87482X 101
(CUSIP Number of Class of Securities)
(
Underlying
Shares of Common Stock)
David T. Provost, Chief Executive Officer
Talmer Bancorp, Inc.
2301 West Big Beaver Rd., Suite 525
Troy, Michigan
(248) 498-2802
(Name, address and telephone number of person
authorized to receive notices and communications on behalf of filing persons)
Copies
to:
J. Brennan Ryan
John M. Jennings
Charles D. Vaughn
Nelson Mullins Riley & Scarborough LLP
Atlantic Station
201 17
th
Street NW, Suite 1700
Atlanta, Georgia 30363
Telephone: (404) 322-6218
Facsimile: (404) 322-6050
CALCULATION OF FILING FEE
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Transaction Valuation
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Amount Of Filing Fee
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Not Applicable*
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Not Applicable*
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*
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A filing fee is not required in connection with this filing as it relates solely to preliminary communications made before the commencement of a tender offer.
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Check the box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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Amount Previously Paid:
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N/A
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Filing Party:
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N/A
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Form or Registration No.:
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N/A
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Date Filed:
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N/A
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Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.
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Check the appropriate boxes below to
designate any transactions to which the statement relates:
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third-party tender offer subject to Rule 14d-1.
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issuer tender offer subject to Rule 13e-4.
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going-private transaction subject to Rule 13e-3.
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amendment to Schedule 13D under Rule 13d-2.
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Check
the following box if the filing is a final amendment reporting the results of the tender offer:
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If applicable, check the appropriate
box(es) below to designate the appropriate rule provision(s) relied upon:
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Rule 13e-4(i) (Cross-Border Issuer Tender Offer)
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Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)
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This communication is for informational purposes only and does not
constitute an offer to buy or a solicitation of an offer to sell any securities of Talmer Bancorp, Inc. (“Talmer”).
The tender offer described in these materials has not yet commenced, and there can be no assurances that Talmer will commence the
tender offer on the terms described in these materials or at all. If Talmer commences the tender offer, the tender offer will be
made solely by an Offer to Purchase and related materials, which Talmer will file with the SEC.
Investors are urged to read
these materials when they become available, as well as any other relevant documents filed with the SEC when they become available,
carefully and in their entirety because they will contain important information, including the terms and conditions of the tender
offer.
If Talmer commences the tender offer, it will file each of the documents referenced in this paragraph with the SEC,
and, when available, investors may obtain a free copy of them from the SEC at its website
www.sec.gov
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MERGER PROPOSED — YOUR
VOTE IS VERY IMPORTANT
The
board of directors of Chemical Financial Corporation is furnishing this joint proxy statement and prospectus and the accompanying
form of proxy to Chemical shareholders to solicit proxies to vote at a special meeting of Chemical’s shareholders to be
held on July 19, 2016, at 3:30 p.m. local time, at Midland Country Club, 1120 W. St. Andrews, Midland, Michigan and at any adjournments of the special meeting. The board of directors of Talmer Bancorp, Inc. is furnishing
this joint proxy statement and prospectus and the accompanying form of proxy to Talmer shareholders to solicit proxies to vote
at a special meeting of Talmer’s shareholders to be held on July 14, 2016, at 10:00 a.m. local time, at Somerset Inn, 2601
West Big Beaver Road, Troy, Michigan 48084 and at any adjournments of the special meeting.
Chemical
and Talmer entered into an Agreement and Plan of Merger, dated as of January 25, 2016. Under the terms of the merger agreement,
Talmer will be merged with and into Chemical, with Chemical as the surviving corporation. The boards of directors of each of Chemical
and Talmer have unanimously adopted the merger agreement and authorized and approved the merger and the other transactions contemplated
thereby. At the special meetings, each of Chemical shareholders and Talmer shareholders will be asked to approve, among other things,
a proposal to approve the merger agreement.
Each of the boards of directors of Chemical and Talmer unanimously recommend that
their respective shareholders vote “FOR” the proposal to approve the merger agreement and “FOR” all of
the remaining proposals to be voted on at their respective special meeting as set forth in this joint proxy statement and prospectus.
Completion
of the merger is subject to regulatory approval, approval of the merger agreement by Chemical and Talmer shareholders and other
customary closing conditions. Upon completion of the merger, Talmer shareholders will receive 0.4725 shares of Chemical common
stock and $1.61 in cash, without interest, for each share of Talmer Class A common stock that they own. The exchange ratio is fixed
and will not be adjusted to reflect stock price changes prior to the effective time of the merger. Chemical shareholders will continue
to own their existing Chemical shares.
Chemical
common stock and Talmer Class A common stock are currently traded on The NASDAQ Stock Market under the symbols “CHFC”
and “TLMR,” respectively. On January 25, 2016, the date of the Merger Agreement, the closing price per share of Chemical
common stock was $29.70 and the closing price per share of Talmer Class A common stock was $16.00. On June 8, 2016, the closing
price per share of Chemical common stock was $39.77 and the closing price per share of Talmer Class A common stock was $20.29.
We urge you to obtain current market quotations for the shares of Chemical common stock and Talmer Class A common stock.
Your vote is
important. Please submit your proxy as soon as possible regardless of whether or not you expect to attend the meeting in person.
Please read
this joint proxy statement and prospectus carefully because it contains important information about the merger and the merger
agreement. Read carefully the risk factors beginning on page 24. You can also obtain additional information about Chemical and
Talmer from documents that each has filed with the Securities and Exchange Commission at www.sec.gov.
The shares of
Chemical common stock to be issued in the merger are not deposits or savings accounts or other obligations of any bank or savings
association, and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency. Chemical common
stock is subject to investment risks, including possible loss of value.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be
issued under this joint proxy statement and prospectus or determined if this joint proxy statement and prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
This joint proxy statement and prospectus
is dated June 9, 2016
and is first being mailed to Chemical
shareholders on or about June 15, 2016
and to Talmer shareholders on or
about June 13, 2016
Chemical Financial Corporation
235 E. Main Street
Midland, Michigan 48640
(989) 839-5350
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held On July 19, 2016
To the Shareholders of Chemical
Financial Corporation:
We are pleased
to invite you to attend the special meeting of shareholders of Chemical Financial Corporation, a Michigan corporation (“Chemical”),
which will be held at Midland Country Club, 1120 W. St. Andrews, Midland, Michigan, on July 19, 2016 at 3:30 p.m., local time,
for the following purposes:
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1.
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To approve the Agreement and Plan of Merger, dated as of January 25, 2016, by and between Talmer Bancorp, Inc. (“Talmer”) and Chemical Financial Corporation (the “merger agreement”), under which Talmer will merge with and into Chemical (the “merger”), a copy of which is included as Annex A to the joint proxy statement and prospectus of which this notice is a part;
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To vote on a proposal to approve the issuance of shares of Chemical common stock, $1 par value per share, to shareholders of Talmer in connection with the merger;
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3.
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To vote on a proposal to approve an amendment to Chemical’s Articles of Incorporation to increase the number of authorized shares of common stock from 60 million to 100 million, a copy of which amendment is included as Annex B to the joint proxy statement and prospectus of which this notice is a part;
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To cast a non-binding, advisory vote to approve the compensation that may be paid or become payable to Chemical’s named executive officers that is based on or otherwise related to the merger (the “Chemical merger-related compensation proposal”); and
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To vote on a proposal to approve the adjournment of the Chemical special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes at the time of the special meeting to approve proposals 1 through 3 listed above (the “Chemical adjournment proposal”).
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We
will also transact such other business as may properly come before the special meeting or any adjournment of the special meeting.
The Chemical
board of directors has fixed the close of business on June 8, 2016 as the record date for the Chemical special meeting. Only Chemical
shareholders of record at that time are entitled to receive notice of, and to vote at, the Chemical special meeting or any adjournment
of the special meeting.
The Chemical
board of directors has unanimously adopted the merger agreement and authorized and approved the merger and the other transactions
contemplated thereby, and unanimously recommends that Chemical shareholders vote “FOR” the proposal to approve the
merger agreement, “FOR” the proposal to approve the issuance of shares of Chemical common stock to Talmer shareholders
in connection with the merger, “FOR” the proposal to approve the amendment to Chemical’s Articles of Incorporation,
“FOR” the Chemical merger-related compensation proposal, and “FOR” the Chemical adjournment proposal.
Your
vote is very important. Whether or not you expect to attend the Chemical special meeting in person, please vote your shares
as promptly as possible by (i) visiting the internet site listed on the proxy, (ii) calling the toll-free number
listed on the proxy or (iii) submitting your proxy by mail by using the provided self-addressed, stamped
envelope
.
The enclosed joint
proxy statement and prospectus provides a detailed description of the merger and the merger agreement and the other matters to
be considered at the Chemical special meeting. We urge you to carefully read the joint proxy statement and prospectus, including
any documents incorporated by reference, and the Annexes in their entirety. If you have any questions concerning the merger or
the joint proxy statement and prospectus, would like additional copies or need help voting your shares of Chemical common stock,
please contact Lori A. Gwizdala at (800) 867-9757.
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By Order of the Chemical Board of Directors
/s/ David B. Ramaker
David B. Ramaker
Chairman, Chief Executive Officer and
President
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June 9, 2016
Midland, Michigan
Talmer Bancorp, Inc.
2301 West Big Beaver Road, Suite 525
Troy, Michigan 48084
NOTICE OF SPECIAL MEETING
OF SHAREHOLDERS
TO BE HELD ON JULY 14, 2016
To the Shareholders of Talmer
Bancorp, Inc.:
We are pleased
to invite you to attend the special meeting of shareholders of Talmer Bancorp, Inc., which will be held on July 14, 2016, at 10:00
a.m., local time, at the Somerset Inn, 2601 West Big Beaver Road, Troy, Michigan 48084, for the following purposes:
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To approve the Agreement and Plan of Merger, dated as of January 25, 2016, by and between Talmer Bancorp, Inc. (“Talmer”) and Chemical Financial Corporation (“Chemical”), as it may be amended from time to time (the “merger agreement”), a copy of which is included as Annex A to the joint proxy statement and prospectus of which this notice is a part, under which Talmer will merge with and into Chemical;
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To cast a non-binding, advisory vote, to approve the compensation that may be paid or become payable to Talmer’s named executive officers that is based on or otherwise related to the merger (the “Talmer merger-related compensation proposal”);
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To vote on a proposal to approve the adjournment or postponement of the Talmer special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes at the time of the special meeting to approve the merger agreement (the “Talmer adjournment proposal”); and
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To transact such other business as may properly come before the special meeting or any adjournments of the special meeting.
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The Talmer board
of directors has set June 8, 2016 as the record date for the Talmer special meeting. Only holders of record of shares of Talmer
Class A common stock at the close of business on June 8, 2016 will be entitled to notice of, and to vote at, the Talmer special
meeting and any adjournment or postponements thereof.
Talmer shareholder
approval of the merger agreement is required to complete the merger, which requires the affirmative vote of a majority of the issued
and outstanding shares of Talmer Class A common stock entitled to vote at the special meeting.
The Talmer board
of directors has unanimously adopted the merger agreement and authorized and approved the merger and the transactions contemplated
thereby, has recommended the merger agreement to Talmer shareholders, and recommends that you vote “FOR” the proposal
to approve the merger agreement, “FOR” the Talmer merger-related compensation proposal, and “FOR” the Talmer
adjournment proposal.
Your vote is
very important. We urge you to vote your shares now whether or not you expect to attend the Talmer special meeting in person.
Submitting
a proxy now will not prevent you from being able to vote in person at the Talmer special meeting. You may revoke your proxy at
any time before the proxy is voted by following the procedures described in the joint proxy statement and prospectus.
Voting by the Internet
is fast and convenient, and your vote is immediately confirmed and tabulated. You may also vote by completing, signing, dating
and returning the accompanying proxy card in the enclosed self-addressed, stamped envelope furnished for that purpose. If your
shares are held in the name of a bank, broker or other nominee, please follow the instructions on the voting instruction card furnished
by such bank, broker or other nominee.
The enclosed joint
proxy statement and prospectus provides a detailed description of the merger and the merger agreement and the other matters to
be considered at the Talmer special meeting. We urge you to carefully read the joint proxy statement and prospectus, including
any documents incorporated by reference, and the Annexes in their entirety. If you have any questions concerning the merger or
the joint proxy statement and prospectus, would like additional copies or need help voting your shares of Talmer Class A common
stock, please contact Brad Adams at (248) 498-2862.
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On behalf of the board of directors,
/s/ David T. Provost
David T. Provost
President and Chief Executive Officer
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June 9, 2016
Troy, Michigan
TABLE OF CONTENTS
Page
ABOUT THIS JOINT PROXY STATEMENT AND PROSPECTUS
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1
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ADDITIONAL INFORMATION
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2
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QUESTIONS AND ANSWERS
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3
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SUMMARY
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7
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The Companies
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7
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The Merger
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8
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Summary Historical Consolidated Financial Data of Talmer
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14
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GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures
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16
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Summary Historical Consolidated Financial Data of Chemical
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18
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Summary Selected Pro Forma Combined Data (Unaudited)
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20
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Comparative Per Share Data (Unaudited)
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21
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Comparative Market Prices
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21
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
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23
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RISK FACTORS
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24
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THE CHEMICAL PROPOSALS
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29
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Chemical Proposal 1 – Approval of the Merger Agreement
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29
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Chemical Proposal 2 – Approval of Issuance of Chemical Shares to Talmer Shareholders in the Merger
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29
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Chemical Proposal 3 – Approval of the Amendment to Chemical’s Articles of Incorporation
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29
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Chemical Proposal 4 – Chemical Merger-Related Compensation Proposal
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30
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Chemical Proposal 5 – Chemical Adjournment Proposal
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30
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THE TALMER PROPOSALS
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31
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Talmer Proposal 1 – Approval of the Merger Agreement
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31
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Talmer Proposal 2 – Talmer Merger-Related Compensation Proposal
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31
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Talmer Proposal 3 – Talmer Adjournment Proposal
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THE CHEMICAL SPECIAL MEETING
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32
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Date, Time and Place
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32
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Purpose of the Chemical Special Meeting
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32
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Recommendation of the Chemical Board of Directors
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32
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Chemical Record Date; Shareholders Entitled to Vote
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32
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Voting by Chemical’s Directors and Executive Officers
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33
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Quorum and Adjournment
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33
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Required Vote
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33
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Voting of Proxies by Holders of Record
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34
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Shares Held in Street Name
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34
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Attending the Meeting; Voting in Person
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34
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Revocation of Proxies
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35
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Solicitation of Proxies
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35
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THE TALMER SPECIAL MEETING
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36
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Date, Time and Place
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36
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Purpose of the Talmer Special Meeting
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36
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Recommendations of the Talmer Board of Directors
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36
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Talmer Record Date; Shareholders Entitled to Vote
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36
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Voting by Talmer’s Directors and Executive Officers
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36
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Quorum and Adjournment
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37
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Required Vote
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37
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Voting of Proxies by Holders of Record
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37
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Shares Held in Street Name
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38
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Attending the Meeting; Voting in Person
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38
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Revocation of Proxies
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39
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Solicitation of Proxies
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39
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THE MERGER
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Effects of the Merger
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Background of the Merger
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Talmer’s Reasons for the Merger and Recommendation of the Talmer Board of Directors
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55
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Chemical’s Reasons for the Merger and Recommendation of the Chemical Board of Directors
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59
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Opinion of Chemical’s Financial Advisor in Connection with the Merger
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61
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Opinion of Talmer’s Financial Advisor in Connection with the Merger
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72
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Certain Talmer Unaudited Prospective Financial Information
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83
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Interests of Certain Chemical Directors and Executive Officers in the Merger
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84
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Interests of Certain Talmer Directors and Executive Officers in the Merger
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85
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Board of Directors and Management Following the Merger
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92
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Regulatory Clearances Required for the Merger
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92
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Exchange of Shares in the Merger
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92
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Litigation Related to the Merger
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93
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Bank Consolidation Following the Merger
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94
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Chemical Dividend Policy
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94
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Listing of Chemical Common Stock
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95
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De-Listing and Deregistration of Talmer Stock
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95
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Support Agreements
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95
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No Appraisal or Dissenters’ Rights
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95
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THE MERGER AGREEMENT
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96
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General; The Merger
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96
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When the Merger Becomes Effective
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96
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Merger Consideration
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97
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Dividends and Distributions
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97
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Treatment of Talmer Awards
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97
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Procedure for Receiving Merger Consideration
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99
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Lost, Stolen or Destroyed Certificates
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99
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Representations and Warranties
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100
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Conduct of Business Pending the Completion of the Transaction
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101
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Restrictions on Solicitation
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104
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Changes in Board Recommendations
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105
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Efforts to Obtain Required Shareholder Approvals
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106
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Efforts to Complete the Transactions
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106
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Other Covenants and Agreements
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106
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Conditions to Completion of the Transaction
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107
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Termination of the Merger Agreement
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109
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Termination Fees and Expenses; Liability for Breach
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111
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Governance of the Combined Company Following the Completion of the Transaction
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113
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Indemnification and Insurance
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114
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Amendments, Extensions and Waivers
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114
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Governing Law
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115
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No Third Party Beneficiaries
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115
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Specific Performance
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115
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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
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116
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Tax Consequences of the Merger Generally
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116
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Tax Consequences of the Merger to Chemical and Talmer
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118
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ACCOUNTING TREATMENT
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118
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
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119
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COMPARISON OF RIGHTS OF SHAREHOLDERS
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127
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Authorized Capital Stock
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127
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Issuance of Additional Shares
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127
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Number and Classification of Directors
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128
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Election of Directors
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128
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Nomination of Director Candidates by Shareholders
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128
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Removal of Directors
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129
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Indemnification of Directors, Officers and Employees
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129
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Shareholder Proposals
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129
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Special Meetings of Shareholders
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130
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Shareholder Action Without a Meeting
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130
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Amendment of Articles of Incorporation and Bylaws
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130
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Business Combination Restrictions and Other Shareholder Limitations
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130
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NO APPRAISAL OR DISSENTERS’ RIGHTS
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131
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LEGAL MATTERS
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131
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EXPERTS
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131
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Chemical
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131
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Talmer
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131
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SHAREHOLDER PROPOSALS
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131
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OTHER MATTERS PRESENTED AT THE MEETINGS
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132
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WHERE YOU CAN FIND MORE INFORMATION
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132
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INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
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133
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Annex A – Agreement and Plan of Merger, dated
as of January 25, 2016
Annex B – Amendment to Chemical Financial Corporation
Articles of Incorporation
Annex C – Opinion of Sandler O’Neill & Partners,
L.P.
Annex D – Opinion of Keefe, Bruyette & Woods,
Inc.
ABOUT THIS JOINT PROXY STATEMENT AND
PROSPECTUS
This joint proxy statement
and prospectus, which forms part of a registration statement on Form S-4 filed with the U.S. Securities and
Exchange Commission (referred to as the “SEC”) by Chemical, constitutes a prospectus of Chemical under Section 5
of the Securities Act of 1933, as amended (referred to as the “Securities Act”), with respect to the shares of Chemical
common stock to be offered to Talmer shareholders in connection with the merger. This joint proxy statement and prospectus also
constitutes a joint proxy statement for both Chemical and Talmer under Section 14(a) of the Securities Exchange Act of 1934,
as amended (referred to as the “Exchange Act”). It also constitutes a notice of meeting with respect to the special
meeting of Chemical shareholders and a notice of meeting with respect to the special meeting of Talmer shareholders.
You should rely
only on the information contained in or incorporated by reference into this joint proxy statement and prospectus. No one has been
authorized to provide you with information that is different from that contained in, or incorporated by reference into, this joint
proxy statement and prospectus. You should not assume that the information contained in this joint proxy statement and prospectus
is accurate as of any date other than the date of this joint proxy statement and prospectus. You should not assume that the information
incorporated by reference into this joint proxy statement and prospectus is accurate as of any date other than the date of the
incorporated document. Neither our mailing of this joint proxy statement and prospectus to Chemical shareholders or Talmer shareholders
nor the issuance by Chemical of shares of common stock pursuant to the merger will create any implication to the contrary.
This joint proxy
statement and prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation
of a proxy, in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation. Information
contained in this joint proxy statement and prospectus regarding Chemical has been provided by Chemical and information contained
in this joint proxy statement and prospectus regarding Talmer has been provided by Talmer.
All references in
this joint proxy statement and prospectus to “Chemical” refer to Chemical Financial Corporation. All references in
this joint proxy statement and prospectus to “Talmer” refer to Talmer Bancorp, Inc. All references in this joint proxy
statement and prospectus to “we,” “our” and “us” refer to Chemical and Talmer collectively,
unless otherwise indicated or as the context requires.
ADDITIONAL INFORMATION
This joint proxy statement
and prospectus incorporates important business and financial information about Chemical and Talmer from other documents filed with
the SEC that are not included in or delivered with this joint proxy statement and prospectus. You can obtain any of the documents
filed with the SEC by Chemical and/or Talmer at no cost from the SEC’s website at www.sec.gov. You can also obtain the documents
incorporated by reference into this joint proxy statement and prospectus free of charge by requesting them in writing or by telephone
from the appropriate company at the following addresses and telephone numbers:
Chemical Financial Corporation
235 E. Main Street
Midland, Michigan 48640
(800) 867-9757
Attention: Lori A. Gwizdala
Talmer Bancorp, Inc.
2301 W. Big Beaver Road, Suite 525
Troy, Michigan 48084
(248) 498-2862
Attention: Brad Adams
Investors may
also visit Chemical’s or Talmer’s website for more information about Chemical or Talmer, respectively.
Chemical’s
website is www.chemicalbankmi.com. Talmer’s website is www.talmerbank.com. Information included on these websites is not
incorporated by reference into, and does not constitute a part of, this joint proxy statement and prospectus.
If you would
like to request any documents, please do so not later than five business days before the date of the applicable special meeting.
This means that Chemical shareholders requesting documents must do so by July 12, 2016, and Talmer shareholders requesting documents
must do so by July 7, 2016, in order to receive them before the Chemical special meeting and Talmer special meeting, respectively.
For a more detailed
description of the information incorporated by reference in this joint proxy statement and prospectus and how you may obtain it,
see “Where You Can Find More Information” beginning on page 132.
QUESTIONS AND ANSWERS
Q: Why am I receiving this joint
proxy statement and prospectus and what will I be asked to vote on?
A: Chemical and Talmer have agreed to a
merger pursuant to the terms of the merger agreement, a copy of which is included in this joint proxy statement and prospectus
as Annex A. In order to complete the merger, among other things, Chemical shareholders must approve the merger agreement, the issuance
of shares of Chemical common stock to Talmer shareholders in connection with the merger, and an amendment to Chemical’s Articles
of Incorporation to increase the number of authorized shares of capital stock of Chemical and Talmer shareholders must approve
the merger agreement. In addition, while not a condition to the closing of the merger, Chemical shareholders will vote on the Chemical
merger-related compensation proposal and the Chemical adjournment proposal and Talmer shareholders will vote on the Talmer merger-related
compensation proposal and the Talmer adjournment proposal.
Chemical and Talmer will hold separate
special meetings of their shareholders to vote on these proposals.
Q: What will I receive in the
merger?
A: Chemical shareholders: Whether
or not the merger is completed, Chemical shareholders will retain the Chemical common stock that they currently own. They will
not receive any merger consideration, and they will not receive any cash or any additional shares of Chemical common stock in the
merger.
Talmer shareholders: If the merger is
completed, Talmer shareholders will receive 0.4725 shares of Chemical common stock and $1.61 in cash, without interest, for each
share of Talmer Class A common stock that they hold at the effective time of the merger plus cash in lieu of any fractional share
of Chemical common stock. The exchange ratio is fixed and will not be adjusted to reflect stock price changes prior to the effective
time of the merger. We urge you to obtain current market quotations for the shares of Chemical common stock and Talmer Class A
common stock.
Q: When and where will the special
meetings be held?
A: Chemical shareholders: The special
meeting of Chemical shareholders will be held at Midland Country Club, 1120 W. St. Andrews, Midland, Michigan, on July 19, 2016
at 3:30 p.m., local time.
Talmer shareholders: The special meeting
of Talmer shareholders will be held at the Somerset Inn, 2601 West Big Beaver Road, Troy, Michigan 48084, on July 14, 2016, at
10:00 a.m., local time.
Q: Who is entitled to vote at
the special meetings?
A: Chemical shareholders: The record
date for the Chemical special meeting is June 8, 2016. Only record holders of shares of Chemical common stock at the close of business
on such date are entitled to notice of, and to vote at, the Chemical special meeting.
Talmer shareholders: The record date
for the Talmer special meeting is June 8, 2016. Only record holders of shares of Talmer Class A common stock at the close of business
on such date are entitled to notice of, and to vote at, the Talmer special meeting.
Q: What constitutes a quorum at
the special meetings?
A: Chemical shareholders: Shareholders
who hold shares representing at least a majority of the shares entitled to vote at the Chemical special meeting must be present
in person or represented by proxy to constitute a quorum. All shares of Chemical common stock represented at the Chemical special
meeting, including shares that are represented but that vote to abstain, will be treated as present for purposes of determining
the presence or absence of a quorum.
Talmer shareholders: Shareholders
who hold shares representing at least a majority of the shares entitled to vote at the Talmer special meeting must be present
in person or represented by proxy to constitute a quorum. All shares of
Talmer Class A common stock represented at the Talmer
special meeting, either in person or by proxy, including shares that are represented but that vote to abstain, will be
treated as present for purposes of determining the presence or absence of a quorum.
Q: How many votes do I have?
A: Chemical shareholders: With respect
to each proposal to be presented at the Chemical special meeting, holders of Chemical common stock are entitled to one vote for
each share of Chemical common stock owned at the close of business on the Chemical record date.
Talmer shareholders: With respect to
each proposal to be presented at the Talmer special meeting, holders of Talmer Class A common stock are entitled to one vote for
each share of Talmer Class A common stock owned at the close of business on the Talmer record date.
Q: What vote is required to approve
each proposal?
A: Chemical shareholders: The proposal
to approve the merger agreement and the proposal to amend Chemical’s Articles of Incorporation each require the affirmative
vote of a majority of the issued and outstanding shares of Chemical common stock entitled to vote at the Chemical special meeting.
Failures to vote, broker non-votes and abstentions will have the same effect as a vote against this proposal.
The remaining proposals each require
the approval of a majority of the votes cast on the proposal at the Chemical special meeting. Failures to vote, broker non-votes
and abstentions will have no effect on the vote for the proposal.
Talmer shareholders: The proposal to
approve the merger agreement requires the affirmative vote of a majority of the issued and outstanding shares of Talmer Class A
common stock entitled to vote at the special meeting. Failures to vote, broker non-votes and abstentions will have the same effect
as a vote against this proposal.
The remaining proposals each require
the affirmative vote of a majority of the votes cast on the proposal at the Talmer special meeting. Failures to vote, broker non-votes
and abstentions will have no effect on the vote for the proposal.
Q: How does the Chemical board
of directors recommend that Chemical shareholders vote?
A: The Chemical board of directors
unanimously recommends that Chemical shareholders vote “FOR” the proposal to approve the merger agreement, “FOR”
the proposal to approve the issuance of shares of Chemical common stock to Talmer shareholders in connection with the merger, “FOR”
the proposal to approve the amendment to Chemical’s Articles of Incorporation, “FOR” the Chemical merger-related
compensation proposal, and “FOR” the Chemical adjournment proposal.
Q: How does the Talmer board of
directors recommend that Talmer shareholders vote?
A: The Talmer board of directors
unanimously recommends that Talmer shareholders vote “FOR” the proposal to approve the merger agreement, “FOR”
the Talmer merger-related compensation proposal, and “FOR” the Talmer adjournment proposal.
Q: How do I vote if I am a shareholder
of record?
A: Chemical
shareholders: If you were a record holder of Chemical common stock at the close of business on the record date for the
Chemical special meeting, you may vote in person by attending the Chemical special meeting or, you may authorize a proxy to
vote by:
-
submitting your Chemical proxy by mail
by using the provided self-addressed, stamped envelope;
-
visiting the internet site listed on the Chemical proxy and following the instructions provided on that site anytime until
11:59 p.m., Eastern Time, on July 18, 2016; or
-
calling the toll-free number listed on the Chemical proxy and following the instructions provided in the recorded message
anytime until 11:59 p.m., Eastern Time, on July 18, 2016.
Talmer shareholders: If you were a
record holder of Talmer Class A common stock at the close of business on the record date for the Talmer special meeting, you
may vote in person by attending the Talmer special meeting or, you may authorize a proxy to vote by:
-
visiting the internet site listed on the Talmer proxy and following the instructions provided on that site anytime until
11:59 p.m., Eastern Time, on July 13, 2016; or
-
submitting your Talmer proxy by mail
by using the provided self-addressed, stamped envelope.
Q: My shares are held in “street
name” by my broker, bank or other nominee. Will my broker, bank or other nominee automatically vote my shares for me?
A: No. If your shares are held through
a stock brokerage account or a bank or other nominee, you are considered the “beneficial holder” of the shares held
for you in what is known as “street name.” The “record holder” of such shares is your broker, bank or other
nominee, and not you. If this is the case, this joint proxy statement and prospectus has been forwarded to you by your broker,
bank or other nominee. You must provide the record holder of your shares with instructions on how to vote your shares. Otherwise,
your broker, bank or other nominee may not vote your shares on any of the proposals to be considered at the Chemical special meeting
or the Talmer special meeting, as applicable, and a broker non-vote will result.
Please follow the voting instructions
provided by your broker, bank or other nominee so that it may vote your shares on your behalf. Please note that you may not vote
shares held in street name by returning a proxy card directly to Chemical or Talmer or by voting in person at the special meeting
unless you first obtain a “legal proxy” from your broker, bank or other nominee.
Q: What will happen if I return
my proxy without indicating how to vote?
A: Chemical shareholders: If you
properly complete and sign your proxy card but do not indicate how your shares of Chemical common stock should be voted on a proposal,
the shares of Chemical common stock represented by your proxy will be voted as the Chemical board of directors recommends and,
therefore, “FOR” the proposal to approve the merger agreement, “FOR” the proposal to approve the issuance
of shares of Chemical common stock to Talmer shareholders in connection with the merger, “FOR” the proposal to approve
the amendment to Chemical’s Articles of Incorporation, “FOR” the Chemical merger-related compensation proposal,
and “FOR” the Chemical adjournment proposal.
Talmer shareholders: If you properly
complete and sign your proxy card but do not indicate how your shares of Talmer Class A common stock should be voted on a proposal,
the shares of Talmer Class A common stock represented by your proxy will be voted as the Talmer board of directors recommends and,
therefore, “FOR” the proposal to approve the merger agreement, “FOR” the Talmer merger-related compensation
proposal, and “FOR” the Talmer adjournment proposal.
Q: Can I change my vote or revoke
my proxy after I have returned a proxy or voting instruction card?
A: Yes. If you are the record holder
of either Chemical or Talmer stock, you can change your vote or revoke your proxy at any time before your proxy is voted at the
applicable special meeting. You can do this by:
-
timely delivering a signed written
notice of revocation to the Corporate Secretary of Chemical or Talmer, as applicable;
-
timely delivering a new, valid proxy
bearing a later date; or
-
attending the special meeting and voting
in person. Simply attending the Chemical special meeting or the Talmer special meeting without voting will not revoke any proxy
that you have previously given or change your vote.
If you hold shares of either
Chemical or Talmer in “street name,” you must contact your broker, bank or other nominee to change your vote.
Q: Do I need to do anything with
my shares of common stock other than vote for the proposals at the special meeting?
A: Chemical shareholders: If you
are a Chemical shareholder, after the merger is completed, you are not required to take any action with respect to your shares
of Chemical common stock.
Talmer shareholders: If you are a Talmer
shareholder, after the merger is completed, each share of Talmer Class A common stock that you hold will be converted automatically
into the right to receive 0.4725 shares of Chemical common stock and $1.61 in cash, without interest, together with cash in lieu
of any fractional share. You will receive instructions at that time regarding exchanging your Talmer shares for shares of Chemical
common stock. You do not need to take any action at this time. Please do not send your Talmer stock certificates with your proxy.
Q: Are shareholders entitled to
appraisal or dissenters’ rights?
A: No. Neither the shareholders of
Talmer nor the shareholders of Chemical are entitled to appraisal rights or dissenters’ rights in connection with the merger
under Michigan law or otherwise.
Q: What if I hold shares in both
Chemical and Talmer?
A: If you are both a Chemical shareholder
and a Talmer shareholder, you will receive two separate packages of proxy materials. A vote cast as a Chemical shareholder will
not count as a vote cast as a Talmer shareholder, and a vote cast as a Talmer shareholder will not count as a vote cast as a Chemical
shareholder. Therefore, please separately submit a proxy for each of your Chemical and Talmer shares.
Q: Who can help answer my questions?
A: Shareholders of Chemical or Talmer
who have questions about the merger, the other matters to be voted on at the special meetings, or how to submit a proxy or who
desire additional copies of this joint proxy statement and prospectus or additional proxy cards should contact:
Chemical Financial Corporation
235 E. Main Street
Midland, Michigan 48640
(800) 867-9757
Attention: Lori A. Gwizdala
Talmer Bancorp, Inc.
2301 W. Big Beaver Road, Suite 525
Troy, Michigan 48084
(248) 498-2862
Attention: Brad Adams
SUMMARY
The Companies
Chemical
Chemical Financial Corporation
235 E. Main Street
Midland, Michigan 48640
Telephone: (989) 839-5350
Chemical is a financial
holding company with its business concentrated in a single industry segment – commercial banking. Chemical is headquartered
in Midland, Michigan and is the second largest banking company headquartered and operating branch offices in Michigan. Chemical’s
common stock trades on the NASDAQ Stock Market under the symbol CHFC and is one of the issues comprising The NASDAQ Global Select
Market.
As of March
31, 2016, Chemical had total assets of $9.3 billion, total loans of $7.4 billion, total deposits of $7.7 billion and total
shareholders’ equity of $1.0 billion. Chemical operates through a single subsidiary bank, Chemical Bank. As of March
31, 2015, Chemical Bank had 185 banking offices spread over 47 counties in Michigan.
More information
about Chemical is available by visiting the “investor info” section of its website at www.chemicalbankmi.com.
Information contained on Chemical’s website does not constitute part of, and is not incorporated into, this joint proxy
statement and prospectus. For a complete description of Chemical’s business, financial condition, results of operations
and other important information, please refer to Chemical’s filings with the SEC that are incorporated by reference in this
document, including its Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 and its Annual Report on Form 10-K
for the year ended December 31, 2015. For instructions on how to find copies of these documents, see “Where You Can
Find More Information” beginning on page 132.
Talmer
Talmer Bancorp, Inc.
2301 West Big Beaver Road, Suite 525
Troy, Michigan 48084
Telephone: (248) 498-2802
Talmer is a
bank holding company that was incorporated under the laws of the State of Michigan in February 2003. As of March 31, 2016, Talmer
had total assets of $6.7 billion, total loans of $4.9 billion, total deposits of $5.2 billion, and total shareholders’ equity
of $748.7 million. Talmer’s Class A common stock trades on The NASDAQ Stock Market under the symbol “TLMR.”
Talmer conducts
substantially all of its operations through its wholly-owned subsidiary bank, Talmer Bank and Trust (“Talmer Bank”),
which as of March 31, 2016, principally operated through 81 branches in Michigan, Ohio, Indiana, Illinois and Nevada and five
lending offices located primarily in the Midwest. Talmer Bank’s product line includes loans to small and medium-sized businesses,
residential mortgage loans, commercial real estate loans, residential and commercial construction and development loans, farmland
and agricultural production loans, home equity loans, consumer loans and a variety of commercial and consumer demand, savings
and time deposit products. Talmer Bank also offers online banking and bill payment services, online cash management, safe deposit
box rentals, debit card and ATM card services and the availability of a network of ATMs for its customers.
Talmer’s
website can be accessed at www.talmerbank.com. Information contained on Talmer’s website does not constitute part of, and
is not incorporated into, this joint proxy statement and prospectus. For a complete description of Talmer’s business, financial
condition, results of operations and other important information, please refer to Talmer’s filings with the SEC that are
incorporated by reference in this document, including its Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 and
its Annual Report on Form 10-K for the year ended
December 31, 2015, as amended. For instructions on how to find copies of
these documents, see “Where You Can Find More Information” beginning on page 132.
The Merger (see page 40)
Effects of the Merger (see page
40)
Subject to the terms and
conditions of the merger agreement, at the effective time of the merger, Talmer will be merged with and into Chemical, and the
separate corporate existence of Talmer shall cease, and Chemical shall be the surviving corporation of the merger.
Upon completion
of the merger, Talmer shareholders will automatically have the right to receive the following for each share of Talmer Class A
common stock they hold: (i) 0.4725 shares (the “exchange ratio”) of Chemical common stock and (ii) $1.61 in cash, without
interest, plus cash in lieu of any fractional share of Chemical common stock.
Following completion
of the merger, Talmer shareholders are expected to hold approximately 45% of the total number of shares outstanding of the combined
company.
Chemical’s Reasons for
the Merger and Recommendation of the Chemical Board of Directors (see page 59)
The board of directors
of Chemical supports the merger and believes that it is in the best interests of Chemical and its shareholders. In adopting the
merger agreement and recommending approval of the Chemical proposals set forth in this joint proxy statement and prospectus, the
Chemical board of directors consulted with members of Chemical’s management and with Chemical’s legal, financial, and
business advisors, and also considered a number of factors that the Chemical board of directors viewed as supporting its decisions,
including, among other factors, the belief that the merger will create the preeminent Michigan-based banking franchise; the fact
that the merger will create the largest community bank headquartered in Michigan; the fact that the merger will allow Chemical
to make a marked entry into southeast Michigan and expand for the first time beyond Michigan’s borders; the belief that the
merger allows Chemical to efficiently and meaningfully cross the $10 billion in total assets threshold; and the expectation that
the merger will result in approximately 8% accretion to Chemical earnings per share in the first full year and a tangible book
value earn-back period of 3.25 years.
The Chemical
board of directors unanimously recommends that Chemical shareholders vote “FOR” the proposal to approve the merger
agreement, “FOR” the proposal to approve the issuance of shares of Chemical common stock to Talmer shareholders in
connection with the merger, “FOR” the proposal to approve the amendment to Chemical’s Articles of Incorporation,
“FOR” the Chemical merger-related compensation proposal, and “FOR” the Chemical adjournment proposal.
Talmer’s Reasons for the Merger and Recommendation
of the Talmer Board of Directors (page 55)
The board of directors of Talmer supports the merger and believes that it is in the best interests of Talmer
and its shareholders. The board of directors of Talmer believes that the merger will:
create, and enable Talmer shareholders to become shareholders of, the preeminent Michigan-based banking franchise; provide significant
earnings per share accretion for Talmer shareholders; provide increased dividends per share for Talmer shareholders; allow Talmer
to merge with a growing partner that has sound credit quality and strong operating performance; provide primarily stock merger
consideration and have a fixed exchange ratio, which will enable Talmer shareholders to participate in long-term stock price appreciation;
and increase Talmer shareholder value as a result of, among other factors, franchise improvement, earnings per share accretion
and combined company valuation. The Talmer board of directors believes that the terms of the merger are fair to and in the best
interests of Talmer and its shareholders
.
The Talmer board of directors unanimously recommends the merger agreement to Talmer shareholders and that
Talmer shareholders vote “FOR” the proposal to approve the merger agreement, “FOR” the Talmer merger-related
compensation proposal, and “FOR” the Talmer adjournment proposal.
Opinion of Chemical’s Financial Advisor in Connection
with the Merger (see page 61)
In connection with
the merger, Chemical’s financial advisor, Sandler O’Neill & Partners, L.P. (“Sandler O’Neill”),
delivered a written opinion, dated January 25, 2016, to the Chemical board of directors as to the fairness, from a financial point
of view and as of the date of the opinion, to Chemical of the merger consideration in the proposed merger. The full text of the
opinion, which describes the procedures followed, assumptions made, matters considered, and qualifications and limitations on
the review undertaken by Sandler O’Neill in preparing the opinion, is attached as Annex C to this joint proxy statement
and prospectus.
The opinion was for the information of, and was directed to, the Chemical board of directors (in its capacity
as such) in connection with its consideration of the financial terms of the merger. The opinion did not address the underlying
business decision of Chemical to engage in the merger or enter into the merger agreement or constitute a recommendation to the
Chemical board of directors in connection with the merger, and it does not constitute a recommendation to any holder of Chemical
common stock or any shareholder of any other entity as to how to vote in connection with the merger or any other matter.
Opinion of Talmer’s Financial Advisor in Connection
with the Merger (see page 72)
In connection with
the merger, Talmer’s financial advisor, Keefe, Bruyette & Woods, Inc. (“KBW”), delivered a written opinion,
dated January 25, 2016, to the Talmer board of directors as to the fairness, from a financial point of view and as of the date
of the opinion, to the holders of Talmer Class A common stock of the merger consideration in the proposed merger. The full text
of the opinion, which describes the procedures followed, assumptions made, matters considered, and qualifications and limitations
on the review undertaken by KBW in preparing the opinion, is attached as Annex D to this joint proxy statement and prospectus.
The opinion was for the information of, and was directed to, the Talmer board of directors (in its capacity as such) in connection
with its consideration of the financial terms of the merger. The opinion did not address the underlying business decision of Talmer
to engage in the merger or enter into the merger agreement or constitute a recommendation to the Talmer board of directors in connection
with the merger, and it does not constitute a recommendation to any holder of Talmer Class A common stock or any shareholder of
any other entity as to how to vote in connection with the merger or any other matter.
Interests of Certain Chemical Directors and Executive
Officers in the Merger (see page 84)
In considering the
recommendation of the Chemical board of directors that you vote to approve the proposals submitted for the Chemical shareholder
vote set forth in this joint proxy statement and prospectus, you should be aware that Chemical’s directors and executive
officers have interests in the merger that are different from, or in addition to, those of Chemical’s shareholders generally.
In the case of Chemical directors, their additional interests are limited to their continued service as directors of the combined
company. The Chemical board of directors was aware of and considered these potential interests, among other matters, in evaluating
the merger agreement and the merger and in recommending to you that you approve the proposals submitted for the Chemical shareholder
vote set forth in this joint proxy statement and prospectus.
The merger will
constitute a “change in control” of Chemical for the purposes of Chemical’s stock incentive plans. All unvested
stock options and other stock-based awards held by Chemical directors and executive officers will become fully vested as of the
effective time of the merger.
Upon
completion of the merger, the board of directors of Chemical will consist of twelve directors, which will include the seven directors
of Chemical serving immediately prior to the merger. After the merger David Ramaker will serve
as Chief Executive Officer and President of Chemical and Chairman of the board of directors, Chief Executive Officer and President
of Chemical Bank and Lori Gwizdala will serve as Executive Vice President, Special Projects of Chemical Bank.
Interests of Certain Talmer Directors and Executive
Officers in the Merger (see page 85)
In considering
the recommendation of the Talmer board of directors that you vote to approve the proposals submitted for the Talmer shareholder
vote set forth in this joint proxy statement and prospectus, you should be aware that Talmer’s directors and executive officers
have interests in the merger that are different from, or in
addition to, those of Talmer’s shareholders generally. The Talmer
board of directors was aware of and considered these potential interests, among other matters, in evaluating the merger agreement
and the merger and in recommending to you that you approve the proposals submitted for the Talmer shareholder vote set forth in
this joint proxy statement and prospectus.
These interests
include:
-
Five members of Talmer’s board
of directors, including Gary Torgow, Talmer’s Chairman, and David Provost, Talmer’s current President and Chief Executive
Officer, will be appointed to serve on the Chemical board of directors following the closing of the merger. Mr. Torgow will serve as Chairman of the board
of directors of Chemical and Mr. Provost will serve as Vice Chairman of the board of directors of Chemical. In addition, after
the merger, Dennis Klaeser will serve as Executive Vice President, Chief Financial Officer of Chemical and Chemical Bank. Mr. Klaeser
will also serve as Chief Financial Officer of Talmer Bank until its merger with Chemical Bank. Thomas Shafer will serve as Executive
Vice President, Director of Regional and Community Banking of Chemical Bank.
-
Chemical has agreed to indemnify the
directors and officers of Talmer following the merger against certain liabilities arising from their acts or omissions before the
merger. Chemical has also agreed to provide directors’ and officers’ liability insurance and fiduciary liability insurance
for the directors and officers of Talmer for a period of six years following the merger with respect to acts or omissions occurring
before the merger that were committed by such officers and directors.
-
Dennis Klaeser and Thomas Shafer will
each receive a lump sum cash change in control payment upon completion of the merger under their existing Talmer employment agreements. (Mr. Provost and Mr. Torgow each voluntarily waived his right to receive a lump sum cash change in control
payment upon completion of the merger under their existing Talmer employment agreements.)
-
Gregory Bixby and certain other executive
officers (other than Mr. Provost, Mr. Torgow, Mr. Klaeser and Mr. Shafer) will each be eligible for a lump sum cash change in control
payment upon completion of the merger, if the executive officer is terminated without cause or if the executive officer terminates
his or her employment for good reason during the 18 month period following the merger under their existing Talmer change in control
agreements.
-
As holders of equity-based compensation
awards, Talmer’s directors and executive officers will be entitled to the same treatment of outstanding Talmer stock options
and unvested Talmer restricted stock awards as Talmer’s other employees.
-
Pursuant to the merger agreement, Mr.
Provost, Mr. Torgow and Mr. Klaeser have entered into services agreements that provide for the payment of base salary compensation
with Chemical and Talmer Bank that will become effective
upon the closing of the merger.
-
Mr. Shafer will enter into an employment
agreement with the surviving bank (that will only become effective at the effective time of the subsidiary bank merger) to serve
as an Executive Vice President of the surviving bank.
For a more complete
description of these interests, see “The Merger - Interests of Certain Talmer Directors and Executive Officers in the Merger,”
beginning on page 85.
Voting by Directors and Executive Officers and Support
Agreements (see page 95)
At the close
of business on the record date for the Chemical special meeting, Chemical directors and executive officers and their affiliates
were entitled to vote 455,891 shares of, or approximately 1.19%, of Chemical common stock outstanding on that date. At
the close of business on the record date for the Talmer special meeting, Talmer directors and executive officers and their affiliates
were entitled to vote 3,636,822 shares of, or approximately 5.41%, of Talmer Class A common stock outstanding on that date.
Chemical’s
and Talmer’s directors have entered into support agreements obligating them to vote their shares in favor of the merger
agreement. At the close of business on the record date for the Chemical special meeting, Chemical directors were entitled to vote
283,700 shares of, or approximately 0.74%, of Chemical common stock outstanding on that date. At the close of business on the
record date for the Talmer special meeting, Talmer directors were entitled to vote 1,472,362 shares of, or approximately 2.19%,
of Talmer Class A common stock outstanding on that date.
Treatment of Talmer Equity-Based Awards (see page
97)
Talmer Stock Options
Upon completion
of the merger, all outstanding Talmer stock options will be converted into Chemical stock options in accordance with the terms
of the merger agreement, provided that up to 25% of outstanding Talmer stock options at the time of execution of the merger agreement
may be cashed out at closing as described in the following paragraph.
Cash Tender Offer
for Up to 25% of Outstanding Talmer Stock Options
Talmer intends to make
a tender offer to all holders of outstanding Talmer stock options (“optionholders”) that will give each optionholder
the opportunity to tender to Talmer up to 25% of such optionholder’s options outstanding as of the date of the merger agreement,
and no more than that amount, calculated on the basis of the number of shares of Talmer Class A common stock for which such options
are exercisable, in exchange for a cash payment to be made on the closing date of the merger. Each option that is validly tendered
and not withdrawn will be cancelled upon such payment. The payment for each such option will be calculated under a formula provided
in the merger agreement that generally reflects the amount that each Talmer option is “in the money.” All options
with the same exercise price will be cancelled for the same per-share consideration. All options that an optionholder could have
tendered in the tender offer but does not tender will be converted into Chemical stock options in accordance with the terms of
the merger agreement. For information about the cash payments that the executive officers and directors of Talmer would receive
in respect of tendering outstanding Talmer stock options, please refer to page 88.
The tender offer
will commence after this joint proxy statement and prospectus is mailed to the shareholders of Chemical and Talmer and will continue
for at least 20 business days from its commencement. The termination of the tender offer will depend on the timing of the closing
of the merger, which is conditioned on the satisfaction or waiver of all conditions in the merger agreement (except for those
conditions in the merger agreement that by their nature cannot be satisfied until the closing date of the merger but that are
expected to be satisfied at the closing date of the merger). We expect that the tender offer will be completed simultaneous with
or immediately prior to the merger. The closing of the merger is not conditioned on any particular percentage of Talmer options
being tendered.
When Talmer commences
the tender offer, Talmer will file with the SEC a Tender Offer Statement on Schedule TO, including the Offer to Purchase and related
tender offer materials. The Tender Offer Statement (including an Offer to Purchase, a related Letter of Transmittal and other
tender offer documents) will contain important information that should be read carefully before any decision is made with respect
to the tender offer. These documents (and all other offer documents filed by Talmer with the SEC) will be available at no charge
on the SEC’s website at
www.sec.gov
.
Talmer Restricted
Stock Awards
All unvested Talmer restricted stock
awards will be converted into Chemical restricted stock awards in accordance with the terms of the merger agreement and on the
same terms and conditions applicable to the Talmer restricted stock awards, subject to any acceleration of vesting provided for
in the applicable Talmer stock plan or award document.
Regulatory Approval Required for the Merger (see page
92)
Approval of the
Board of Governors of the Federal Reserve System (“FRB”) is required to complete the merger. Approval has not yet
been obtained. While Chemical and Talmer expect to obtain all required regulatory clearances, we cannot assure you that
these regulatory clearances will be obtained or that the granting of these regulatory clearances will not involve the imposition
of additional conditions on the completion of the merger, including the requirement to divest assets, or require changes to the
terms of the merger agreement. These conditions or changes could result in the conditions to the merger not being satisfied.
Conditions to Completion of the Merger (see page 107)
The obligations
of Chemical and Talmer to complete the merger are subject to the satisfaction of outstanding conditions, including:
-
the approval of the merger agreement
by holders of a majority of the outstanding shares of Talmer Class A common stock;
-
the approval of each of the merger
agreement and the amendment to Chemical’s Articles of Incorporation to increase the number of authorized shares of common
stock from 60 million to 100 million by holders of a majority of the outstanding shares of Chemical common stock, and the approval
of the issuance of Chemical common stock constituting the merger consideration to Talmer shareholders by a majority of votes cast
by Chemical shareholders;
-
the authorization for listing on NASDAQ
of the shares of Chemical common stock to be issued pursuant to the merger, subject to official notice of issuance;
-
the declaration of effectiveness by
the SEC of this registration statement of which this joint proxy statement and prospectus forms a part, which registration statement
must not be subject to any stop order or proceedings initiated or threatened by the SEC for such purpose;
-
the absence of any order, injunction
or decree issued by any court or agency of competent jurisdiction, or any other legal restraint or prohibition, preventing consummation
of the merger or any other transaction contemplated by the merger agreement, and the absence of any law, regulation, order or decree
prohibiting or making illegal the consummation of the merger; and
-
the receipt and effectiveness of all
required regulatory approvals, excluding regulatory approvals applicable solely to the consolidation of the parties’ respective
subsidiary banks, the expiration of all statutory notice and waiting periods in respect of such regulatory approval, and the absence
of any condition or restriction in connection with any such regulatory approval that would have a material adverse effect on the
surviving corporation.
In addition, each
of Chemical’s and Talmer’s obligations to effect the merger is subject to the satisfaction or waiver of additional
conditions relating to the accuracy of the other party’s representations and warranties, the performance of the other party’s
covenants, the absence of a material adverse effect on the other party and certain other matters.
No Solicitation of Alternative Proposals (see page
104)
If Chemical or
Talmer receives an unsolicited acquisition proposal from a third party and the receiving party’s board of directors,
among other things, determines in good faith (after consultation with its legal and financial advisors) that such unsolicited
proposal is or is reasonably likely to result in a superior proposal to the merger, then the receiving party may furnish
non-public information to and enter into discussions with that third party regarding the alternative acquisition proposal.
Otherwise, the merger agreement generally precludes Chemical and Talmer from directly soliciting or engaging in discussions
or negotiations with a third party with respect to an alternative acquisition proposal.
Termination of the Merger Agreement (see page 109)
Chemical and Talmer
may mutually agree to terminate the merger agreement at any time, notwithstanding approval of the merger agreement by shareholders.
Either company may also terminate the merger agreement if the merger is not consummated by December 31, 2016, subject to certain
exceptions. In addition, either company may terminate the merger agreement to enter into a definitive agreement with respect to
a superior proposal, subject to certain conditions and the payment of a termination fee.
Termination Fees and Expenses (see page 111)
Generally, all fees
and expenses incurred in connection with the merger agreement and the transactions contemplated by the merger agreement will be
paid by the party incurring those expenses, subject to the specific exceptions discussed in this joint proxy statement and prospectus
where Chemical or Talmer, as the case may be, may be required to pay a termination fee of $34 million and/or expense reimbursement
up to $3 million.
Material U.S. Federal Income
Tax Consequences of the Merger (see page 116)
Chemical and
Talmer expect the merger to qualify as a “reorganization” for U.S. federal income tax purposes. If the merger
qualifies as a reorganization, then, in general, Talmer shareholders who exchange their Talmer Class A common stock for
Chemical common stock will not recognize any gain or loss for U.S. federal income tax purposes upon that exchange. Talmer
shareholders, however, may have taxable gain or loss with respect to the cash received in exchange for their shares of Talmer
Class A common stock and/or taxable gain or loss that may result from the receipt of cash in lieu of any fractional share of
Chemical common stock that the Talmer shareholders would otherwise be entitled to receive.
You are urged
to consult your own tax advisor regarding the particular consequences to you of the merger.
Litigation Related to the Merger (see page 93)
In connection with
the merger, five putative class action lawsuits against Talmer, its board of directors, and Chemical
are pending. Among other remedies, the plaintiffs seek to enjoin the merger. If this litigation is not resolved, these lawsuits
could prevent or delay completion of the merger and result in substantial costs to Talmer and Chemical, including any costs associated
with indemnification. Additional lawsuits may be filed against Talmer, Chemical or the directors and officers of either company
in connection with the merger. The defense or settlement of any lawsuit or claim that remains unresolved at the effective time
of the merger may adversely affect Talmer’s and Chemical’s business, financial condition, results of operation, cash
flows and market price.
No Appraisal or Dissenter’s Rights (see page
95)
Neither the Chemical
shareholders nor the Talmer shareholders are entitled to appraisal rights or dissenters’ rights in connection with the merger
under Michigan law or otherwise.
Summary Historical Consolidated Financial Data of Talmer
The
following tables set forth summary selected historical consolidated financial information of Talmer as of and for the three
months ended March 31, 2016 and 2015 and as of and for the years ended December 31, 2015, 2014, 2013, 2012 and 2011. The
summary selected balance sheet and income statement data as of and for the three months ended March 31, 2016 and 2015 was
derived from Talmer’s unaudited interim consolidated financial statements included in its Quarterly Report on Form 10-Q
for the quarter ended March 31, 2016, incorporated by reference in this joint proxy statement and prospectus. The summary
selected balance sheet data as of December 31, 2015 and 2014 and the summary selected income statement data for the
years ended December 31, 2015, 2014 and 2013 was derived from Talmer’s audited consolidated financial statements
included in its Annual Report on Form 10-K for the year ended December 31, 2015, incorporated by reference in this joint
proxy statement and prospectus. The summary selected balance sheet data as of December 31, 2013, 2012 and 2011 and the
summary selected income statement data for the years ended December 31, 2012 and 2011 were derived from Talmer’s
audited consolidated financial statements for each respective year that are not included in this joint proxy statement and
prospectus or incorporated by reference in this joint proxy statement and prospectus. You should read this information in
conjunction with Talmer’s consolidated financial statements and related notes and “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” included in Talmer’s Quarterly Report on Form 10-Q
for the quarter ended March 31, 2016 and Annual Report on Form 10-K for the year ended December 31, 2015.
|
As
of and for the
three months ended
March
31,
|
|
As of and for the years ended December 31,
|
|
(Dollars in thousands,
except per share data)
|
2016
|
|
2015
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
|
2011
|
|
Earnings Summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
$
|
62,555
|
|
$
|
55,122
|
|
$
|
234,888
|
|
$
|
217,023
|
|
$
|
179,722
|
|
$
|
102,564
|
|
$
|
119,478
|
|
Interest expense
|
|
6,457
|
|
|
4,090
|
|
|
20,222
|
|
|
12,760
|
|
|
11,725
|
|
|
5,695
|
|
|
7,076
|
|
Net interest income
|
|
56,098
|
|
|
51,032
|
|
|
214,666
|
|
|
204,263
|
|
|
167,997
|
|
|
96,869
|
|
|
112,402
|
|
Provision (benefit) for loan losses
|
|
(1,111
|
)
|
|
1,993
|
|
|
(9,203
|
)
|
|
4,327
|
|
|
5,098
|
|
|
35,872
|
|
|
68,319
|
|
Bargain purchase gains
|
|
—
|
|
|
—
|
|
|
—
|
|
|
41,977
|
|
|
71,702
|
|
|
—
|
|
|
39,385
|
|
Noninterest income
|
|
13,624
|
|
|
21,430
|
|
|
86,445
|
|
|
117,499
|
|
|
181,138
|
|
|
74,309
|
|
|
113,774
|
|
Noninterest expense
|
|
48,270
|
|
|
56,595
|
|
|
226,319
|
|
|
218,880
|
|
|
250,814
|
|
|
103,404
|
|
|
106,591
|
|
Income before income taxes
|
|
22,563
|
|
|
13,874
|
|
|
83,995
|
|
|
98,555
|
|
|
93,223
|
|
|
31,902
|
|
|
51,266
|
|
Income tax provision
(benefit)
|
|
2,880
|
|
|
4,441
|
|
|
23,866
|
|
|
7,705
|
|
|
(5,335
|
)
|
|
10,232
|
|
|
17,817
|
|
Net income
|
|
19,683
|
|
|
9,433
|
|
|
60,129
|
|
|
90,850
|
|
|
98,558
|
|
|
21,670
|
|
|
33,449
|
|
Per Share Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share
|
$
|
0.30
|
|
$
|
0.13
|
|
$
|
0.87
|
|
$
|
1.30
|
|
$
|
1.49
|
|
$
|
0.46
|
|
$
|
0.85
|
|
Diluted earnings per
common share
|
|
0.28
|
|
|
0.12
|
|
|
0.81
|
|
|
1.21
|
|
|
1.41
|
|
|
0.44
|
|
|
0.82
|
|
Dividends paid per share
|
|
0.05
|
|
|
0.01
|
|
|
0.04
|
|
|
0.02
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Dividend payout ratio
|
|
16.67
|
%
|
|
7.69
|
%
|
|
4.60
|
%
|
|
1.54
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
Book value per common
share
|
$
|
11.20
|
|
$
|
10.63
|
|
$
|
10.97
|
|
$
|
10.80
|
|
$
|
9.32
|
|
$
|
7.86
|
|
$
|
7.23
|
|
Tangible book value per
share(1)
|
|
10.97
|
|
|
10.37
|
|
|
10.72
|
|
|
10.61
|
|
|
9.12
|
|
|
7.77
|
|
|
7.06
|
|
Shares outstanding (in
thousands)
|
|
66,844
|
|
|
70,938
|
|
|
66,115
|
|
|
70,532
|
|
|
66,234
|
|
|
66,229
|
|
|
44,469
|
|
Average diluted common
shares (in thousands)
|
|
69,706
|
|
|
75,103
|
|
|
73,331
|
|
|
75,150
|
|
|
69,664
|
|
|
48,806
|
|
|
40,639
|
|
Selected Period End
Balances
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
$
|
6,713,689
|
|
$
|
6,280,189
|
|
$
|
6,595,890
|
|
$
|
5,872,264
|
|
$
|
4,547,361
|
|
$
|
2,347,508
|
|
$
|
2,123,560
|
|
Securities available-for-sale
|
|
946,543
|
|
|
730,393
|
|
|
890,770
|
|
|
740,819
|
|
|
620,083
|
|
|
345,405
|
|
|
223,938
|
|
Total loans
|
|
4,923,736
|
|
|
4,472,986
|
|
|
4,806,700
|
|
|
4,249,127
|
|
|
3,003,984
|
|
|
1,322,151
|
|
|
1,254,879
|
|
Uncovered loans
|
|
4,923,736
|
|
|
4,155,393
|
|
|
4,806,700
|
|
|
3,902,637
|
|
|
2,473,916
|
|
|
604,446
|
|
|
324,486
|
|
|
|
As of and for the
three months ended
March 31,
|
|
As of and for the years ended December 31,
|
|
(Dollars in thousands,
except per share data)
|
2016
|
|
2015
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
|
2011
|
|
Covered loans
|
|
—
|
|
|
317,593
|
|
|
—
|
|
|
346,490
|
|
|
530,068
|
|
|
717,705
|
|
|
930,393
|
|
FDIC indemnification asset
|
|
—
|
|
|
50,702
|
|
|
—
|
|
|
67,026
|
|
|
131,861
|
|
|
226,356
|
|
|
358,839
|
|
Total deposits
|
|
5,152,798
|
|
|
4,778,574
|
|
|
5,014,581
|
|
|
4,548,863
|
|
|
3,600,865
|
|
|
1,730,226
|
|
|
1,695,599
|
|
Total liabilities
|
|
5,965,019
|
|
|
5,526,340
|
|
|
5,870,675
|
|
|
5,110,657
|
|
|
3,930,346
|
|
|
1,826,765
|
|
|
1,802,234
|
|
Total shareholders’ equity
|
|
748,670
|
|
|
753,849
|
|
|
725,215
|
|
|
761,607
|
|
|
617,015
|
|
|
520,743
|
|
|
321,326
|
|
Tangible shareholders’
equity(1)
|
|
732,950
|
|
|
735,529
|
|
|
708,883
|
|
|
748,572
|
|
|
603,810
|
|
|
514,672
|
|
|
314,017
|
|
Performance and Capital Ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets
(annualized)
|
|
1.19
|
%
|
|
0.62
|
%
|
|
0.95
|
%
|
|
1.61
|
%
|
|
2.09
|
%
|
|
0.98
|
%
|
|
1.60
|
%
|
Return on average equity
(annualized)
|
|
10.69
|
|
|
4.97
|
|
|
8.04
|
|
|
12.42
|
|
|
16.33
|
|
|
6.16
|
|
|
11.95
|
|
Net interest margin (fully
taxable equivalent)(2)
|
|
3.73
|
|
|
3.80
|
|
|
3.73
|
|
|
4.04
|
|
|
3.90
|
|
|
4.69
|
|
|
5.81
|
|
Core efficiency ratio(1)
|
|
59.46
|
|
|
68.61
|
|
|
63.65
|
|
|
72.84
|
|
|
80.44
|
|
|
67.89
|
|
|
76.34
|
|
Average equity to average
assets
|
|
11.09
|
|
|
12.55
|
|
|
11.76
|
|
|
12.96
|
|
|
12.77
|
|
|
15.88
|
|
|
13.35
|
|
Tangible average equity to
tangible average assets(1)
|
|
10.88
|
|
|
12.31
|
|
|
11.52
|
|
|
12.73
|
|
|
12.50
|
|
|
15.63
|
|
|
13.04
|
|
Common equity tier 1
capital(3)
|
|
12.15
|
|
|
13.87
|
|
|
11.99
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
Tier 1 leverage ratio(3)
|
|
10.30
|
|
|
11.65
|
|
|
10.21
|
|
|
11.56
|
|
|
12.19
|
|
|
22.71
|
|
|
14.58
|
|
Tier 1 risk-based capital(3)
|
|
12.15
|
|
|
13.87
|
|
|
11.99
|
|
|
15.20
|
|
|
18.29
|
|
|
44.36
|
|
|
35.65
|
|
Total risk-based capital(3)
|
|
13.13
|
|
|
14.97
|
|
|
13.00
|
|
|
16.44
|
|
|
19.21
|
|
|
45.66
|
|
|
36.91
|
|
Asset Quality Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs (recoveries)
to average loans (annualized)
|
|
0.04
|
%
|
|
0.43
|
%
|
|
(0.17
|
)%
|
|
0.19
|
%
|
|
0.30
|
%
|
|
2.95
|
%
|
|
1.90
|
%
|
Nonperforming assets as a
percentage of total assets
|
|
1.18
|
|
|
1.55
|
|
|
1.30
|
|
|
1.78
|
|
|
1.55
|
|
|
1.79
|
|
|
1.20
|
|
Nonperforming loans as a
percent of total loans
|
|
1.08
|
|
|
1.25
|
|
|
1.20
|
|
|
1.34
|
|
|
1.40
|
|
|
1.30
|
|
|
0.41
|
|
Allowance for loan losses
as a percentage of period-
end loans
|
|
1.06
|
|
|
1.17
|
|
|
1.12
|
|
|
1.30
|
|
|
1.93
|
|
|
4.72
|
|
|
5.04
|
|
Allowance for loan losses
as a percentage of
nonperforming
loans, excluding loans
accounted for under
ASC 310-30
|
|
65.03
|
|
|
41.80
|
|
|
55.13
|
|
|
39.39
|
|
|
43.52
|
|
|
94.75
|
|
|
344.68
|
|
______________________________
(1)
|
Denotes a non-GAAP Financial Measure, see section entitled “GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures” below.
|
(2)
|
Presented on a tax equivalent basis using a 35% tax rate for all periods presented.
|
(3)
|
The three months ended March 31, 2016 and 2015 and the year ended December 31, 2015 is under Basel III transitional and the years ended December 31, 2014, 2013, 2012 and 2011 are under Basel I.
|
GAAP Reconciliation and Management Explanation of Non-GAAP
Financial Measures
Some of the financial
data included in Talmer’s selected historical consolidated financial information are not measures of financial performance
recognized by generally accepted accounting principles in the United States, or GAAP. These non-GAAP financial measures are “tangible
shareholders’ equity,” “tangible book value per share,” “tangible average equity to tangible average
assets,” and “core efficiency ratio.” Talmer’s management uses these non-GAAP financial measures in its
analysis of Talmer’s performance.
-
“Tangible shareholders’
equity” is shareholders’ equity less goodwill and other intangible assets. As with other financial assets, Talmer considered
the FDIC indemnification asset to be a tangible asset. Talmer has not considered loan servicing rights as an intangible asset for
purposes of this calculation.
-
“Tangible book value per share”
is defined as total equity reduced by goodwill and other intangible assets divided by total common shares outstanding. This measure
is important to investors interested in changes from period-to-period in book value per share exclusive of changes in intangible
assets. As with other financial assets, Talmer considered the FDIC indemnification asset to be a tangible asset. Talmer has not
considered loan servicing rights as an intangible asset for purposes of this calculation.
-
“Tangible average equity to tangible
average assets” is defined as the ratio of average shareholders’ equity less average goodwill and average other intangible
assets, divided by average total assets. This measure is important to investors interested in relative changes from period to period
in equity and total assets, each exclusive of changes in intangible assets. As with other financial assets, Talmer considered the
FDIC indemnification asset to be a tangible asset. Talmer has not considered average loan servicing rights as an intangible asset
for purposes of this calculation.
-
“Core efficiency ratio”
begins with the efficiency ratio and then excludes certain items deemed by Talmer management to be unrelated to its regular operations
including bargain purchase gains, net loss on the early termination of its FDIC loss share agreements, net gain on sale of branches,
the fair value adjustment to its loan servicing rights, transaction and integration related costs, FDIC loss share income and expense
recognized related to its targeted review of property efficiency.
Talmer believes
these non-GAAP financial measures provide useful information to management and investors that is supplementary to its financial
condition, results of operations and cash flows computed in accordance with GAAP; however, Talmer acknowledges that its non-GAAP
financial measures have a number of limitations. As such, you should not view these disclosures as a substitute for results determined
in accordance with GAAP, and they are not necessarily comparable to non-GAAP financial measures that other companies use.
The following reconciliation
table provides a more detailed analysis of these non-GAAP financial measures:
|
As of and for the
three months ended
March 31,
|
|
As of and for the years ended December 31,
|
|
(Dollars in thousands,
except per share data)
|
2016
|
|
2015
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
|
2011
|
|
Total shareholders’ equity
|
$
|
748,670
|
|
$
|
753,849
|
|
$
|
725,215
|
|
$
|
761,607
|
|
$
|
617,015
|
|
$
|
520,743
|
|
$
|
321,326
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core deposit intangibles
|
|
12,196
|
|
|
14,796
|
|
|
12,808
|
|
|
13,035
|
|
|
13,205
|
|
|
6,071
|
|
|
7,309
|
|
Goodwill
|
|
3,524
|
|
|
3,524
|
|
|
3,524
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Tangible shareholders’
equity
|
$
|
732,950
|
|
$
|
735,529
|
|
$
|
708,883
|
|
$
|
748,572
|
|
$
|
603,810
|
|
$
|
514,672
|
|
$
|
314,017
|
|
Shares outstanding
|
|
66,844
|
|
|
70,938
|
|
|
66,115
|
|
|
70,532
|
|
|
66,234
|
|
|
66,229
|
|
|
44,469
|
|
Tangible book value per
share
|
$
|
10.97
|
|
$
|
10.37
|
|
$
|
10.72
|
|
$
|
10.61
|
|
$
|
9.12
|
|
$
|
7.77
|
|
$
|
7.06
|
|
Average assets
|
$
|
6,639,603
|
|
$
|
6,050,721
|
|
$
|
6,358,314
|
|
$
|
5,646,248
|
|
$
|
4,725,785
|
|
$
|
2,215,501
|
|
$
|
2,096,325
|
|
Average equity
|
|
736,379
|
|
|
759,365
|
|
|
747,424
|
|
|
731,766
|
|
|
603,657
|
|
|
351,909
|
|
|
279,817
|
|
Average core deposit
intangibles
|
|
12,519
|
|
|
14,201
|
|
|
13,898
|
|
|
15,055
|
|
|
14,524
|
|
|
6,672
|
|
|
7,488
|
|
Average goodwill
|
|
3,524
|
|
|
2,075
|
|
|
3,167
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Tangible average equity to
tangible average assets
|
|
10.88
|
%
|
|
12.31
|
%
|
|
11.52
|
%
|
|
12.73
|
%
|
|
12.50
|
%
|
|
15.63
|
%
|
|
13.04
|
%
|
|
|
As of and for the
three months ended
March 31,
|
|
As of and for the years ended December 31,
|
|
(Dollars in thousands,
except per share data)
|
2016
|
|
2015
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
|
2011
|
|
Core efficiency ratio:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
$
|
56,098
|
|
$
|
51,032
|
|
$
|
214,666
|
|
$
|
204,263
|
|
$
|
167,997
|
|
$
|
96,869
|
|
$
|
112,402
|
|
Noninterest income
|
|
13,624
|
|
|
21,430
|
|
|
86,445
|
|
|
117,499
|
|
|
181,138
|
|
|
74,309
|
|
|
113,774
|
|
Total revenue
|
|
69,722
|
|
|
72,462
|
|
|
301,111
|
|
|
321,762
|
|
|
349,135
|
|
|
171,178
|
|
|
226,176
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bargain purchase gain
|
|
—
|
|
|
—
|
|
|
—
|
|
|
41,977
|
|
|
71,702
|
|
|
—
|
|
|
39,385
|
|
(Expense)/benefit from the
change in the fair value of
loan servicing rights due
to valuation inputs or
assumptions (1)
|
|
(6,625
|
)
|
|
(4,084
|
)
|
|
(3,323
|
)
|
|
(10,237
|
)
|
|
14,218
|
|
|
(598
|
)
|
|
(582
|
)
|
FDIC loss share income
|
|
—
|
|
|
(1,068
|
)
|
|
(9,692
|
)
|
|
(6,211
|
)
|
|
(10,226
|
)
|
|
21,498
|
|
|
50,551
|
|
Net gains on sales of
branches
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,410
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total core revenue
|
|
76,347
|
|
|
77,614
|
|
|
314,126
|
|
|
281,823
|
|
|
273,441
|
|
|
150,278
|
|
|
136,822
|
|
Total noninterest expense
|
|
48,270
|
|
|
56,595
|
|
|
226,319
|
|
|
218,880
|
|
|
250,814
|
|
|
103,404
|
|
|
106,591
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction and integration
related costs
|
|
2,874
|
|
|
3,347
|
|
|
4,207
|
|
|
13,609
|
|
|
30,849
|
|
|
1,382
|
|
|
2,145
|
|
Net loss on early
termination of FDIC loss
share agreements
|
|
—
|
|
|
—
|
|
|
20,364
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Property efficiency review
|
|
—
|
|
|
—
|
|
|
1,820
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total core noninterest
expense
|
|
45,396
|
|
|
53,248
|
|
|
199,928
|
|
|
205,271
|
|
|
219,965
|
|
|
102,022
|
|
|
104,446
|
|
Core efficiency ratio
|
|
59.46
|
%
|
|
68.61
|
%
|
|
63.65
|
%
|
|
72.84
|
%
|
|
80.44
|
%
|
|
67.89
|
%
|
|
76.34
|
%
|
___________________________
(1)
|
Prior to January 1, 2013, we accounted for loan servicing rights using the amortization method. The years ended December 31, 2012 and 2011 include the impairment recognized on loan servicing rights.
|
Summary Historical Consolidated Financial Data of Chemical
The following
tables set forth summary selected historical consolidated financial information of Chemical as of and for the three months ended
March 31, 2016 and 2015 and as of and for the years ended December 31, 2015, 2014, 2013, 2012 and 2011. The summary selected
balance sheet and income statement data as of and for the three months ended March 31, 2016 and 2015 was derived from Chemical’s
unaudited interim consolidated financial statements included in its Quarterly Report on Form 10-Q for the quarter ended March
31, 2016, incorporated by reference in this joint proxy statement and prospectus. The summary selected balance sheet data as of
December 31, 2015 and 2014 and the summary selected income statement data for the years ended December 31, 2015, 2014
and 2013 was derived from Chemical’s audited consolidated financial statements included in its Annual Report on Form 10-K
for the year ended December 31, 2015, incorporated by reference in this joint proxy statement and prospectus. The summary
selected balance sheet data as of December 31, 2013, 2012 and 2011 and the summary selected income statement data for the
years ended December 31, 2012 and 2011 were derived from Chemical’s audited consolidated financial statements for each
respective year that are not included in this joint proxy statement and prospectus or incorporated by reference in this joint
proxy statement and prospectus. You should read this information in conjunction with Chemical’s consolidated financial statements
and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
included in Chemical’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 and Annual Report on Form 10-K
for the year ended December 31, 2015.
|
As
of and for the
three months ended
March
31,
|
|
As
of and for the years ended December 31,
|
|
($ in thousands, except per
share data)
|
2016
(1)(2)(3)(4)
|
|
2015
(1)(2)(3)
|
|
2015
(1)(2)(3)(4)
|
|
2014
(1)(2)(3)
|
|
2013
(1)(2)
|
|
2012
(1)(2)
|
|
2011
(1)
|
|
INCOME STATEMENT
DATA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
$
|
79,464
|
|
$
|
62,630
|
|
$
|
291,789
|
|
$
|
227,261
|
|
$
|
214,061
|
|
$
|
210,758
|
|
$
|
215,242
|
|
Interest expense
|
|
5,134
|
|
|
3,450
|
|
|
17,781
|
|
|
14,710
|
|
|
17,414
|
|
|
23,213
|
|
|
31,389
|
|
Net interest income
|
|
74,330
|
|
|
59,180
|
|
|
274,008
|
|
|
212,551
|
|
|
196,647
|
|
|
187,545
|
|
|
183,853
|
|
Provision for loan losses
|
|
1,500
|
|
|
1,500
|
|
|
6,500
|
|
|
6,100
|
|
|
11,000
|
|
|
18,500
|
|
|
26,000
|
|
Noninterest income,
including securities gains
|
|
19,419
|
|
|
19,275
|
|
|
80,216
|
|
|
63,095
|
|
|
60,409
|
|
|
54,684
|
|
|
46,890
|
|
Securities gains, net
|
|
19
|
|
|
579
|
|
|
630
|
|
|
—
|
|
|
1,133
|
|
|
34
|
|
|
—
|
|
Operating expenses
|
|
58,887
|
|
|
51,020
|
|
|
223,894
|
|
|
179,925
|
|
|
164,948
|
|
|
151,921
|
|
|
144,493
|
|
Net income
|
|
23,262
|
|
|
17,835
|
|
|
86,830
|
|
|
62,121
|
|
|
56,808
|
|
|
51,008
|
|
|
43,050
|
|
Cash dividends declared per
common share
|
$
|
0.26
|
|
$
|
0.24
|
|
$
|
1.00
|
|
$
|
0.94
|
|
$
|
0.87
|
|
$
|
0.82
|
|
$
|
0.80
|
|
PERFORMANCE:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per
common share
|
$
|
0.61
|
|
$
|
0.54
|
|
$
|
2.41
|
|
$
|
1.98
|
|
$
|
2.02
|
|
$
|
1.86
|
|
$
|
1.57
|
|
Diluted earnings per
common share
|
|
0.60
|
|
|
0.54
|
|
|
2.39
|
|
|
1.97
|
|
|
2.00
|
|
|
1.85
|
|
|
1.57
|
|
Book value per
common share
|
|
26.99
|
|
|
24.68
|
|
|
26.62
|
|
|
24.32
|
|
|
23.38
|
|
|
21.69
|
|
|
20.82
|
|
Return on average assets
|
|
1.01
|
%
|
|
0.98
|
%
|
|
1.02
|
%
|
|
0.96
|
%
|
|
0.95
|
%
|
|
0.94
|
%
|
|
0.81
|
%
|
Return on average
shareholders’ equity
|
|
9.2
|
%
|
|
9.0
|
%
|
|
9.4
|
%
|
|
8.2
|
%
|
|
9.1
|
%
|
|
8.7
|
%
|
|
7.6
|
%
|
Net interest margin
|
|
3.60
|
%
|
|
3.55
|
%
|
|
3.58
|
%
|
|
3.59
|
%
|
|
3.59
|
%
|
|
3.76
|
%
|
|
3.80
|
%
|
BALANCE SHEET
DATA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
$
|
9,303,632
|
|
$
|
7,551,635
|
|
$
|
9,188,797
|
|
$
|
7,322,143
|
|
$
|
6,184,708
|
|
$
|
5,917,252
|
|
$
|
5,339,453
|
|
Earning assets
|
|
8,574,769
|
|
|
7,078,034
|
|
|
8,426,736
|
|
|
6,833,898
|
|
|
5,819,049
|
|
|
5,541,426
|
|
|
4,986,936
|
|
Total loans
|
|
7,366,885
|
|
|
5,702,874
|
|
|
7,271,147
|
|
|
5,688,230
|
|
|
4,647,621
|
|
|
4,167,735
|
|
|
3,831,285
|
|
Total deposits
|
|
7,650,116
|
|
|
6,320,353
|
|
|
7,456,767
|
|
|
6,078,971
|
|
|
5,122,385
|
|
|
4,921,443
|
|
|
4,366,857
|
|
Long-term
borrowings
|
|
273,722
|
|
|
—
|
|
|
242,391
|
|
|
—
|
|
|
—
|
|
|
34,289
|
|
|
43,057
|
|
Shareholders’ equity
|
|
1,032,291
|
|
|
810,501
|
|
|
1,015,974
|
|
|
797,133
|
|
|
696,500
|
|
|
596,341
|
|
|
571,729
|
|
|
DAILY AVERAGE
BALANCE SHEET
SUMMARY:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
$
|
9,241,034
|
|
$
|
7,401,258
|
|
$
|
8,481,228
|
|
$
|
6,473,144
|
|
$
|
5,964,592
|
|
$
|
5,442,079
|
|
$
|
5,304,098
|
|
Earning assets
|
|
8,526,711
|
|
|
6,920,734
|
|
|
7,851,134
|
|
|
6,095,064
|
|
|
5,628,969
|
|
|
5,116,127
|
|
|
4,971,704
|
|
Total loans
|
|
7,299,471
|
|
|
5,706,053
|
|
|
6,583,846
|
|
|
4,976,563
|
|
|
4,355,152
|
|
|
3,948,407
|
|
|
3,730,795
|
|
Total deposits
|
|
7,534,962
|
|
|
6,204,095
|
|
|
6,958,667
|
|
|
5,339,422
|
|
|
4,964,082
|
|
|
4,464,062
|
|
|
4,349,873
|
|
Long-term borrowings
|
|
266,022
|
|
|
—
|
|
|
117,000
|
|
|
1,695
|
|
|
1,935
|
|
|
39,301
|
|
|
64,257
|
|
Shareholders’ equity
|
|
1,017,929
|
|
|
801,438
|
|
|
919,328
|
|
|
754,211
|
|
|
626,555
|
|
|
587,451
|
|
|
569,521
|
|
|
As
of and for the
three months ended
March
31,
|
|
As
of and for the years ended December 31,
|
|
($ in thousands, except per
share data)
|
2016
(1)(2)(3)(4)
|
|
2015
(1)(2)(3)
|
|
2015
(1)(2)(3)(4)
|
|
2014
(1)(2)(3)
|
|
2013
(1)(2)
|
|
2012
(1)(2)
|
|
2011
(1)
|
|
DAILY AVERAGE
BALANCE SHEET
SUMMARY:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
$
|
9,241,034
|
|
$
|
7,401,258
|
|
$
|
8,481,228
|
|
$
|
6,473,144
|
|
$
|
5,964,592
|
|
$
|
5,442,079
|
|
$
|
5,304,098
|
|
Earning assets
|
|
8,526,711
|
|
|
6,920,734
|
|
|
7,851,134
|
|
|
6,095,064
|
|
|
5,628,969
|
|
|
5,116,127
|
|
|
4,971,704
|
|
Total loans
|
|
7,299,471
|
|
|
5,706,053
|
|
|
6,583,846
|
|
|
4,976,563
|
|
|
4,355,152
|
|
|
3,948,407
|
|
|
3,730,795
|
|
Total deposits
|
|
7,534,962
|
|
|
6,204,095
|
|
|
6,958,667
|
|
|
5,339,422
|
|
|
4,964,082
|
|
|
4,464,062
|
|
|
4,349,873
|
|
Long-term borrowings
|
|
266,022
|
|
|
—
|
|
|
117,000
|
|
|
1,695
|
|
|
1,935
|
|
|
39,301
|
|
|
64,257
|
|
Shareholders’ equity
|
|
1,017,929
|
|
|
801,438
|
|
|
919,328
|
|
|
754,211
|
|
|
626,555
|
|
|
587,451
|
|
|
569,521
|
|
ASSET QUALITY
RATIOS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loan charge-offs to
average loans
|
|
0.25
|
%
|
|
0.14
|
%
|
|
0.13
|
%
|
|
0.19
|
%
|
|
0.38
|
%
|
|
0.57
|
%
|
|
0.73
|
%
|
Allowance for loan losses
to total originated loans
|
|
1.17
|
%
|
|
1.49
|
%
|
|
1.26
|
%
|
|
1.51
|
%
|
|
1.81
|
%
|
|
2.22
|
%
|
|
2.60
|
%
|
Allowance for loan losses to
total nonperforming loans
|
|
96
|
%
|
|
103
|
%
|
|
87
|
%
|
|
106
|
%
|
|
96
|
%
|
|
92
|
%
|
|
82
|
%
|
Nonperforming loans to
total loans
|
|
0.99
|
%
|
|
1.28
|
%
|
|
1.15
|
%
|
|
1.25
|
%
|
|
1.76
|
%
|
|
2.18
|
%
|
|
2.77
|
%
|
Nonperforming assets to
total assets
|
|
0.89
|
%
|
|
1.16
|
%
|
|
1.02
|
%
|
|
1.17
|
%
|
|
1.48
|
%
|
|
1.85
|
%
|
|
2.47
|
%
|
SELECTED RATIOS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans to total deposits
|
|
96
|
%
|
|
90
|
%
|
|
98
|
%
|
|
94
|
%
|
|
91
|
%
|
|
85
|
%
|
|
88
|
%
|
Average total loans to
average earning assets
|
|
86
|
%
|
|
82
|
%
|
|
84
|
%
|
|
82
|
%
|
|
77
|
%
|
|
77
|
%
|
|
75
|
%
|
Noninterest income to net
revenue
|
|
21
|
%
|
|
25
|
%
|
|
23
|
%
|
|
23
|
%
|
|
24
|
%
|
|
23
|
%
|
|
20
|
%
|
Leverage ratio
|
|
8.5
|
%
|
|
9.1
|
%
|
|
8.6
|
%
|
|
9.3
|
%
|
|
9.9
|
%
|
|
9.2
|
%
|
|
9.0
|
%
|
Tier 1 risk-based capital
ratio
|
|
10.6
|
%
|
|
11.8
|
%
|
|
10.7
|
%
|
|
11.1
|
%
|
|
12.7
|
%
|
|
12.0
|
%
|
|
12.1
|
%
|
Total risk-based capital ratio
|
|
11.5
|
%
|
|
13.0
|
%
|
|
11.8
|
%
|
|
12.4
|
%
|
|
14.0
|
%
|
|
13.2
|
%
|
|
13.3
|
%
|
Average equity to average
assets
|
|
11.0
|
%
|
|
10.8
|
%
|
|
10.8
|
%
|
|
11.7
|
%
|
|
10.5
|
%
|
|
10.8
|
%
|
|
10.7
|
%
|
Tangible shareholders’
equity to tangible assets
(5)
|
|
8.2
|
%
|
|
8.5
|
%
|
|
8.1
|
%
|
|
8.5
|
%
|
|
9.4
|
%
|
|
8.1
|
%
|
|
8.7
|
%
|
Dividend payout ratio
|
|
43.3
|
%
|
|
44.4
|
%
|
|
41.8
|
%
|
|
47.7
|
%
|
|
43.5
|
%
|
|
44.3
|
%
|
|
51.0
|
%
|
___________________________________________________
(1)
|
Includes the impact of the acquisition of O.A.K. Financial Corporation on April 30, 2010.
|
(2)
|
Includes the impact of the acquisition of 21 branch offices from Independent Bank on December 7, 2012.
|
(3)
|
Includes the impact of the acquisition of Northwestern Bancorp, Inc. on October 31, 2014.
|
(4)
|
Includes the impact of the acquisition of Lake Michigan Financial Corporation on May 31, 2015, and the acquisition of Monarch Community Bancorp, Inc. on April 1, 2015.
|
(5)
|
The tangible
shareholders’ equity to tangible assets ratio is a non-GAAP financial measure. This financial measure has
been included as Chemical believes it is an important metric to allow investors to analyze Chemical’s financial
condition and capital strength. A reconciliation of this non-GAAP financial measure follows:
|
|
March 31,
|
|
December 31,
|
|
|
2016
|
|
2015
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
|
2011
|
|
|
(In
thousands)
|
|
Shareholders’ equity
|
$ 1,032,291
|
|
$ 810,501
|
|
$ 1,015,974
|
|
$ 797,133
|
|
$ 696,500
|
|
$ 596,341
|
|
$ 571,729
|
|
Intangible assets (a)
|
(297,821
|
)
|
(187,991
|
)
|
(299,123
|
)
|
(188,505
|
)
|
(125,485
|
)
|
(127,897
|
)
|
(117,493
|
)
|
Tangible shareholders’
equity
|
$ 734,470
|
|
$ 622,510
|
|
$ 716,851
|
|
$ 608,628
|
|
$ 571,015
|
|
$ 468,444
|
|
$ 454,236
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
$ 9,303,632
|
|
$7,551,635
|
|
$ 9,188,797
|
|
$ 7,322,143
|
|
$ 6,184,708
|
|
$ 5,917,252
|
|
$ 5,339,453
|
|
Intangible assets (a)
|
(297,821
|
)
|
(187,991
|
)
|
(299,123
|
)
|
(188,505
|
)
|
(125,485
|
)
|
(127,897
|
)
|
(117,493
|
)
|
Tangible assets
|
$ 9,005,811
|
|
$7,363,644
|
|
$ 8,889,674
|
|
$ 7,133,638
|
|
$ 6,059,223
|
|
$ 5,789,355
|
|
$ 5,221,960
|
|
(a) Includes goodwill, core deposit intangible
assets and noncompete agreements, net of taxes.
Summary Selected Pro Forma Combined Data (Unaudited)
The following table
shows selected financial information on a pro forma combined basis giving effect to the merger as if the merger had become effective
at the end of the period presented, in the case of balance sheet information, and at the beginning of the period presented, in
the case of income statement information. Estimated merger and integration costs expected to be incurred in conjunction with this
transaction are not included in the pro forma income statement information. The pro forma information reflects the purchase method
of accounting.
The pro forma information,
while helpful in illustrating the financial characteristics of the combined organization under one set of assumptions, does not
reflect the potential benefits of the merger, nor does it include the funding cost or the lost opportunity cost related to the
cash consideration, and, accordingly, does not attempt to predict or suggest future results. It also does not necessarily reflect
what the historical results of the combined organization would have been had the companies been combined as of the date and during
the period presented.
(Dollar amounts in thousands, except per share data)
|
|
As
of and for the
three months ended
March 31,
2016
|
|
As
of and for the
year ended
December 31,
2015
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma Combined Income Statement Data
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
126,107
|
|
|
$
|
482,369
|
|
|
Provision (benefit) for loan losses
|
|
|
389
|
|
|
|
(2,703
|
)
|
|
Noninterest income
|
|
|
33,043
|
|
|
|
169,892
|
|
|
Operating expenses
|
|
|
108,630
|
|
|
|
469,168
|
|
|
Net income
|
|
|
39,179
|
|
|
|
135,317
|
|
|
Net income per common share:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.56
|
|
|
$
|
1.95
|
|
|
Diluted
|
|
$
|
0.55
|
|
|
$
|
1.91
|
|
|
Pro Forma Combined Balance Sheet Data
(1)
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
16,479,645
|
|
|
$
|
16,215,735
|
|
|
Total loans
|
|
|
12,248,243
|
|
|
|
12,033,894
|
|
|
Total deposits
|
|
|
12,801,869
|
|
|
|
12,470,303
|
|
|
Shareholders’ equity
|
|
|
2,191,641
|
|
|
|
2,120,593
|
|
|
(1)
|
The
pro forma combined balance sheet data assumes the issuance of approximately 31,583,905 shares of Chemical common stock as of March 31,
2016 and 31,239,242 shares of Chemical common stock as of December 31, 2015, as merger consideration. This is based on the
fixed exchange ratio of 0.4725 shares of Chemical common stock for each share of Talmer Class A common stock outstanding as of
each respective balance sheet date, and a market price per share of Chemical common stock of $35.69 as of March 31, 2016 and $34.27
as of December 31, 2015. The number of shares to be issued is subject to adjustment in certain limited circumstances.
|
Comparative Per Share Data (Unaudited)
The following table
shows information about earnings per share, dividends paid per share, and tangible book value per share, on a historical basis
and on a pro forma combined and pro forma equivalent per share basis.
Comparative Per Share Data
|
Chemical
Historical
|
|
Talmer
Historical
|
|
Pro Forma
Combined
(1)(2)
|
|
Equivalent
Pro Forma
Per Share
of Talmer
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months ended March 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings
|
$
|
0.61
|
|
$
|
0.30
|
|
$
|
0.56
|
|
$
|
0.26
|
Diluted earnings
|
|
0.60
|
|
|
0.28
|
|
|
0.55
|
|
|
0.26
|
Cash dividends paid
|
|
0.26
|
|
|
0.05
|
|
|
0.26
|
|
|
0.12
|
Tangible book value
(period end)
|
|
19.20
|
|
|
10.97
|
|
|
19.11
|
|
|
9.03
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings
|
$
|
2.41
|
|
$
|
0.87
|
|
$
|
1.95
|
|
$
|
0.92
|
Diluted earnings
|
|
2.39
|
|
|
0.81
|
|
|
1.91
|
|
|
0.90
|
Cash dividends paid
|
|
1.00
|
|
|
0.04
|
|
|
1.00
|
|
|
0.47
|
Tangible book value
(period end)
|
|
18.78
|
|
|
10.72
|
|
|
18.64
|
|
|
8.81
|
__________________________
(1)
|
The pro forma combined earnings per share amounts were calculated by totaling the historical earnings of Chemical and Talmer, adjusted for purchase accounting entries, and dividing the resulting amount by the average pro forma shares of Chemical and Talmer, giving effect to the merger as if it had occurred as of the beginning of the period presented, excluding any merger transaction costs. The pro forma combined tangible book value amount, however, does include the impact of estimated contractually obligated merger costs due upon completion of the merger. The average pro forma shares of Chemical and Talmer reflect historical basic and diluted shares, plus historical basic and diluted average shares of Talmer, as adjusted based on the fixed exchange ratio of 0.4725 shares of Chemical common stock for each share of Talmer Class A common stock. The number of shares to be issued is subject to adjustment in certain limited circumstances.
|
(2)
|
Pro forma combined cash dividends paid represents Chemical’s historical amounts only.
|
(3)
|
The equivalent pro forma per share amounts of Talmer were calculated by multiplying the pro forma combined amounts by the fixed exchange ratio of 0.4725 shares of Chemical common stock for each share of Talmer Class A common stock.
|
Comparative Market Prices
The following table
shows the high, low and closing sale prices of Chemical common stock and Talmer Class A common stock as reported on NASDAQ for
each of the quarterly periods presented.
|
Chemical Common Stock
|
|
Talmer Class A Common Stock
|
|
High
|
|
Low
|
|
Close
|
|
High
|
|
Low
|
|
Close
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
$ 36.45
|
|
$ 29.40
|
|
$ 35.69
|
|
$ 18.37
|
|
$ 14.51
|
|
$ 18.09
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
31.56
|
|
28.16
|
|
31.36
|
|
15.62
|
|
12.65
|
|
15.32
|
Second Quarter
|
34.27
|
|
29.73
|
|
33.06
|
|
17.39
|
|
15.17
|
|
16.75
|
Third Quarter
|
34.49
|
|
30.09
|
|
32.35
|
|
18.16
|
|
15.00
|
|
16.65
|
Fourth Quarter
|
37.26
|
|
30.98
|
|
34.27
|
|
18.71
|
|
15.63
|
|
18.11
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter*
|
33.26
|
|
27.86
|
|
32.45
|
|
14.69
|
|
13.20
|
|
14.64
|
Second Quarter
|
33.28
|
|
26.99
|
|
28.08
|
|
15.42
|
|
13.05
|
|
13.79
|
Third Quarter
|
29.00
|
|
26.77
|
|
26.89
|
|
14.99
|
|
13.00
|
|
13.83
|
Fourth Quarter
|
30.95
|
|
26.10
|
|
30.64
|
|
14.80
|
|
13.47
|
|
14.04
|
_________________
* Talmer first publicly traded February
12, 2014.
The closing
sales price of Chemical common stock as of January 25, 2016, the last trading day before the merger agreement was announced, was
$29.70. The closing sales price of Chemical common stock as of June 8, 2016, the latest practicable trading day before the date
of this joint proxy statement and prospectus, was $39.77. The closing sales price of Talmer Class A common stock as of January
25, 2016, the last trading day before the merger agreement was announced, was $16.00. The closing sales price of Talmer Class
common stock as of June 8, 2016, the latest practicable trading day before the date of this joint proxy statement and prospectus,
was $20.29.
The following
table shows the closing sales prices of Chemical common stock and Talmer Class A common stock as of January 25, 2016, the last
trading day before the merger agreement was announced, and on June 8, 2016, the latest practicable trading day before the date
of this joint proxy statement and prospectus. This table also shows the implied value of the merger consideration payable for
each share of Talmer Class A common stock, which was calculated by multiplying the closing price of Chemical common stock on those
dates by the exchange ratio of 0.4725 of a share of Chemical common stock per share of Talmer Class A common stock and then adding
the cash consideration of $1.61.
|
Chemical
Common
Stock
|
|
Talmer
Class A
Common
Stock
|
|
Cash
Consideration
|
|
Implied Value of
One Share of
Talmer Class A
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
January 25, 2016
|
$
|
29.70
|
|
$
|
16.00
|
|
$
|
1.61
|
|
$
|
15.64
|
June 8, 2016
|
$
|
39.77
|
|
$
|
20.29
|
|
$
|
1.61
|
|
$
|
20.40
|
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This joint proxy
statement and prospectus and the documents incorporated by reference into this joint proxy statement and prospectus contain forward-looking
statements regarding Chemical’s and Talmer’s outlook or expectations with respect to the merger, including the expected
costs to be incurred and cost savings to be realized in connection with the merger, the expected impact of the merger on Chemical’s
future financial performance (including anticipated accretion to earnings per share and tangible book value earn back period),
the assumed purchase accounting adjustments, other key transaction assumptions, the timing of the closing of the merger, and consequences
of Talmer’s integration into Chemical. Words such as “anticipated,” “believes,” “estimated,”
“expected,” “projected,” “assumed,” “approximately,” “continued,” “should,”
“will” and variations of such words and similar expressions are intended to identify such forward-looking statements.
Pro forma financial information is not a guaranty of future results and is presented for informational purposes only.
Forward-looking
statements are not guarantees of future financial performance and are subject to risks, uncertainties and assumptions (“risk
factors”) that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual
results and outcomes may materially differ from what may be expressed or forecasted in such forward-looking statements. Neither
Chemical nor Talmer assumes any duty to update, amend or clarify forward-looking statements, whether as a result of new information,
future events or otherwise.
Risk factors relating
both to the merger and the integration of Talmer into Chemical after closing include, without limitation:
-
Completion of the merger is dependent
on, among other things, receipt of regulatory approvals and receipt of Talmer and Chemical shareholder approvals, the timing of
which cannot be predicted with precision at this point and which may not be received at all.
-
The impact of the completion of the
merger on Chemical’s and Talmer’s financial statements will be affected by the timing of the merger.
-
The merger may be more expensive to
complete and the anticipated benefits, including anticipated cost savings and strategic gains, may be significantly harder or take
longer to achieve than expected or may not be achieved in their entirety as a result of unexpected factors or events.
-
The integration of Talmer’s business
and operations into Chemical, which will include conversion of Talmer’s operating systems and procedures, may take longer
than anticipated or be more costly than anticipated or have unanticipated adverse results relating to Talmer’s or Chemical’s
existing businesses.
-
Chemical’s ability to achieve
anticipated results from the merger is dependent on the state of the economic and financial markets going forward. Specifically,
in addition to other risks, Chemical may incur more credit losses than expected and customer and employee attrition may be greater
than expected.
-
The outcome of pending or threatened
litigation, whether currently existing or commencing in the future, including litigation related to the merger.
-
The effect of divestitures that may
be required by regulatory authorities in certain markets in which Chemical and Talmer compete.
-
The challenges of integrating, retaining
and hiring key personnel.
-
Failure to attract new customers and
retain existing customers in the manner anticipated.
In addition, risk
factors include, but are not limited to, the risk factors described in Item 1A of each of Chemical’s and Talmer’s Annual
Reports on Form 10-K for the year ended December 31, 2015. These and other factors are representative of the risk factors that
may emerge and could cause a difference between an ultimate actual outcome and a forward-looking statement.
RISK FACTORS
In addition to
the other information contained in or incorporated by reference into this joint proxy statement and prospectus, including the risk
factors included in Chemical’s and Talmer’s Annual Report on Form 10-K for the year ended December 31, 2015 and the
matters addressed in this joint proxy statement and prospectus under the heading “Special Note Regarding Forward-Looking
Statements,” you should carefully consider the following risk factors in deciding how to vote on the merger agreement.
The value of the merger consideration
will fluctuate with the price of Chemical common stock and Talmer shareholders cannot be certain of the market value of the merger
consideration they will receive.
Upon completion
of the merger, each share of Talmer Class A common stock will be converted into the right to receive merger consideration consisting
of 0.4725 shares of Chemical common stock, $1.61 in cash, without interest, and cash in lieu of any fractional share pursuant to
the terms of the merger agreement. Generally, there will be no adjustment made to the merger consideration as a result of fluctuations
in the market price of Chemical common stock or Talmer Class A common stock. As a result, it is possible that the value of any
Chemical common stock that a Talmer shareholder receives in the merger will be different than the value of such shares on the date
that the Talmer board of directors and the Chemical board of directors adopted the merger agreement, on the date of the information
concerning stock value presented in this joint proxy statement and prospectus, on the date that you vote to approve the merger
agreement, and on the date the merger is completed. Stock price changes may result from a variety of factors, including general
market and economic conditions, changes in Chemical’s business, operations and prospects, and regulatory considerations.
Many of these factors are beyond Talmer’s and Chemical’s control. Accordingly, at the time of the Chemical and the
Talmer special meeting, as applicable, you will not necessarily know or be able to calculate the exact value of the shares of Chemical
common stock the Talmer shareholders will receive upon completion of the merger. You should obtain current market quotations for
shares of Chemical common stock and for shares of Talmer Class A common stock.
Regulatory approvals may not be
received, may take longer to receive than expected, or may impose conditions that are not presently anticipated.
Before the merger
may be completed, regulatory approvals must be obtained from the Federal Reserve Board. The Federal Reserve Board will consider,
among other factors, the competitive impact of the merger, Chemical’s financial and managerial resources, the convenience
and needs of the communities to be served, capital position, safety and soundness, legal and regulatory compliance matters, and
Community Reinvestment Act matters, and they may impose conditions, limitations, obligations or restrictions on the conduct of
the combined company’s business, require branch divestitures or changes to the terms of the merger agreement. There can be
no assurance as to whether regulatory approvals will be received, the timing of those approvals or whether any conditions, limitations,
obligations or restrictions will be imposed and, if imposed, that such conditions, limitations, obligations or restrictions will
not have the effect of materially delaying the completion of the merger, imposing additional material costs on or materially limiting
the revenues of the combined company following the merger or otherwise materially reduce the anticipated benefits of the merger.
Each party is subject to business
uncertainties and contractual restrictions while the merger is pending, which could adversely affect each party’s business
and operations.
Uncertainty about
the effect of the merger on employees and customers may have an adverse effect on Talmer and Chemical. These uncertainties may
impair Chemical’s and Talmer’s ability to attract, retain and motivate key personnel until the merger is consummated.
Retention of certain employees by Chemical and Talmer may be challenging during the pendency of the merger, as certain employees
may experience uncertainty about their future roles with Chemical. If key employees depart because of issues relating to the uncertainty
and difficulty of integration or a desire not to remain with Chemical, Chemical’s business following the merger could be
harmed. In addition, uncertainties related to the merger could cause customers and others that deal with Talmer or Chemical to
seek to change existing business relationships with Talmer or Chemical, or delay or defer certain business decisions with respect
to Talmer or Chemical, which could negatively affect Chemical’s or Talmer’s respective revenues, earnings and cash
flows, as well as the market price of Chemical common stock or Talmer Class A common stock, regardless of whether the merger is
completed. Furthermore, the merger agreement restricts each of Chemical and
Talmer from taking specified actions without the consent
of the other until the merger occurs or the merger agreement is terminated. These restrictions may prevent Chemical and Talmer
from pursuing attractive business opportunities that may arise prior to the completion of the merger. See “The Merger Agreement
– Conduct of Business Pending the Completion of the Transaction” for a summary of certain of the contractual restrictions
to which Chemical and Talmer are subject.
Combining the two companies may
be more difficult, costly or time-consuming than we expect.
The difficulties
of merging the operations of Talmer with those of Chemical include, among others, integrating personnel with diverse business backgrounds,
combining different corporate cultures, retaining key employees, and converting operating systems. The process of integrating operations
could cause an interruption of, or loss of momentum in, the activities of the companies, and the loss of key personnel. The diversion
of management’s attention and any delays or difficulties encountered in connection with the merger and integration of Talmer
into Chemical could have an adverse effect on the business and results of operations of Talmer or Chemical. As with any merger
of banking institutions, there also may be business disruptions that cause the banks to lose customers or cause customers to take
their deposits out of the banks. The success of the combined company following the merger may depend in large part on the ability
to integrate the two businesses, including their business models, employees, cultures and operating systems. Inability to integrate
our operations successfully and in a timely manner could result in the expected benefits of the merger not being realized.
Talmer shareholders’ and
Chemical shareholders’ percentage ownership of the combined company will be much smaller than their percentage ownership
of Talmer or Chemical individually.
Talmer shareholders
currently have the right to vote in the election of the Talmer board of directors and on other matters affecting Talmer, and Chemical
shareholders currently have the right to vote in the election of the Chemical board of directors and on other matters affecting
Chemical. When the merger occurs, each Talmer shareholder will become a shareholder of Chemical, and each of the Talmer shareholders
and Chemical shareholders will have a percentage ownership of the combined organization that is much smaller than the shareholder’s
percentage ownership of either Talmer or Chemical individually. Because of this, each of the Talmer shareholders and Chemical
shareholders will have less influence on the management and policies of the combined company than they now have on the management
and policies of Talmer or Chemical individually. Based on the number of shares of Chemical common stock and Talmer Class A common
stock outstanding at the close of business on the record date, June 8, 2016, and based on the number of shares of Chemical common
stock expected to be issued in the merger, the former shareholders of Talmer as a group will receive shares in the merger constituting
approximately 45% of the outstanding shares of Chemical common stock immediately after the merger. As a result, current shareholders
of Chemical as a group will own approximately 55% of the outstanding shares of Chemical common stock immediately after the merger.
Because of this, each of the Talmer shareholders and Chemical shareholders will have less influence on the management and policies
of the combined company than they now have on the management and policies of Talmer or Chemical individually.
The merger agreement limits Talmer’s
and Chemical’s abilities to pursue alternatives to the merger.
The merger agreement
contains provisions that limit the ability of Talmer and Chemical to encourage or consider competing third-party proposals related
to an alternative transaction. These provisions, which include a $34.0 million termination fee payable under certain circumstances,
might discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of Talmer or
Chemical from considering or proposing that acquisition even, in the case of Talmer, if it were prepared to pay consideration with
a higher per share market price than that proposed in the merger, or might result in a potential competing acquirer proposing to
pay a lower per share price to acquire Talmer or Chemical than it might otherwise have proposed to pay.
The merger agreement may be terminated
in accordance with its terms and the merger may not be completed, which could have a negative impact on Talmer and Chemical.
The merger agreement
is subject to a number of conditions that must be fulfilled in order to complete the merger. Those conditions include completion
of the merger by December 31, 2016, receipt of Talmer shareholder
approval and Chemical shareholder approval, receipt of regulatory
approvals, continued accuracy of certain representations and warranties by both parties and performance by both parties of certain
covenants and agreements.
If the merger agreement
is terminated, there may be various consequences to Chemical and Talmer, including:
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Chemical’s business and Talmer’s
business may have been adversely impacted by the failure to pursue other beneficial opportunities due to the focus of management
on the merger without realizing any of the anticipated benefits of completing the merger; and
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Chemical and Talmer may have incurred
substantial expenses in connection with the merger without realizing any of the anticipated benefits of completing the merger.
If the merger agreement
is terminated and the Talmer board of directors seeks another merger or business combination, under certain circumstances Talmer
is required to pay Chemical a $34.0 million termination fee. If the merger agreement is terminated and the Chemical board of directors
seeks another merger or business combination, under certain circumstances Chemical is required to pay Talmer a $34.0 million termination
fee. In addition, upon termination of the merger agreement under certain circumstances, either party may be required to reimburse
the other party for its expenses incurred in connection with the merger agreement, up to a total of $3.0 million. Talmer shareholders
and Chemical shareholders cannot be certain that either Talmer or Chemical would be able to find a party willing to enter into
a transaction on terms equally favorable or more favorable than the terms of the merger agreement.
The unaudited pro forma condensed combined financial information
included in this document is preliminary and the actual financial condition and results of operations of Chemical after the merger
may differ materially.
The unaudited pro forma
condensed combined financial information in this document is presented for illustrative purposes only and is not necessarily indicative
of what Chemical’s actual financial condition or results of operations would have been had the merger been completed on the
dates indicated. The unaudited pro forma condensed combined financial information reflect adjustments, which are based upon preliminary
estimates, to record the Talmer identifiable assets acquired and liabilities assumed at fair value and the resulting goodwill recognized.
The purchase price allocation reflected in this document is preliminary, and final allocation of the purchase price will be based
upon the actual purchase price and the fair value of the assets and liabilities of Talmer as of the date of the completion of the
merger. Accordingly, the final acquisition accounting adjustments may differ materially from the pro forma adjustments reflected
in this document. For more information, see “Unaudited Pro Forma Condensed Combined Financial Information.”
We may fail to realize the cost
savings estimated for the
merger.
Chemical expects
to achieve cost savings from the merger when the two companies have been fully integrated. The cost savings estimates assume the
ability to combine the businesses of Chemical and Talmer in a manner that permits those cost savings to be realized. If the estimates
turn out to be incorrect or if Chemical is not able to combine successfully the two companies, the anticipated cost savings may
not be fully realized or realized at all, or may take longer to realize than expected.
Additional
growth will subject Chemical to additional regulation, increased supervision and increased costs.
The Dodd-Frank Act
imposes additional regulatory requirements on institutions with $10 billion or more in assets. Chemical had $9.3 billion in assets
as of March 31, 2016. If the pending merger with Talmer is completed, then Chemical will have more than $10 billion in assets
and, as a result, will be subject to the additional regulatory requirements, increased supervision and increased costs, including
the following:
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Supervision, examination and enforcement by the Consumer
Financial Protection Bureau (“CFPB”) with respect to consumer financial protection laws;
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Regulatory stress testing requirements, whereby Chemical would be
required to conduct an annual stress test (using assumptions for baseline, adverse and severely adverse scenarios);
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A modified methodology for calculating FDIC insurance assessments
and potentially higher assessment rates as a result of institutions with $10 billion or more in assets being required to bear a
greater portion of the cost of raising the reserve ratio to 1.35% as required by the Dodd-Frank Act;
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Heightened compliance standards under the Volcker Rule;
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Enhanced supervision as a larger financial institution; and
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Under the Durbin Amendment to the Dodd-Frank Act, institutions with
$10 billion or more in assets are subject to a cap on the interchange fees that may be charged in certain electronic debit and
prepaid card transactions. The maximum permissible interchange fee for electronic debit transactions is the sum of 21 cents per
transaction and 5 basis points multiplied by the value of the transaction. In addition, an issuer may charge up to 1 cent on each
transaction as a fraud prevention adjustment if the issuer meets certain fraud prevention standards.
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The imposition of these
regulatory requirements and increased supervision may require additional commitment of financial resources to regulatory compliance
and may increase Chemical’s cost of operations. Further, the results of the stress testing process may lead Chemical to
retain additional capital or alter the mix of its capital components.
The fairness opinion received by the
Chemical board of directors from Sandler O’Neill and the fairness opinion received by the Talmer board of directors from
KBW have not been, and are not expected to be, updated to reflect any changes in circumstances that may have occurred since the
date of such opinions.
The fairness opinions of
Sandler O’Neill and KBW were rendered to the parties’ respective board of directors on January 25, 2016. Changes in
the operations and prospects of Chemical or Talmer, general market and economic conditions and other factors which may be beyond
the control of Chemical and Talmer may have altered the value of Chemical or Talmer or the sale prices of shares of Chemical common
stock and Talmer common stock as of the date of this joint proxy statement and prospectus, or may alter such values and sale prices
by the time the merger is completed. The opinions from Sandler O’Neill and KBW, each dated January 25, 2016, do not speak
as of any date other than the dates of such opinions.
The merger may fail to qualify
as a reorganization for federal income tax purposes, resulting in a shareholder’s recognition of taxable gain or loss in
respect of all of his or her Talmer Class A common stock.
Chemical and Talmer
intend for the merger to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of
1986, as amended (the “Code”). The Internal Revenue Service (“IRS”) will not provide a ruling on the matter.
Chemical and Talmer each will, as a condition to closing, obtain an opinion from counsel that the merger will constitute a reorganization
for federal income tax purposes. However, these opinions do not bind the IRS or prevent the IRS from adopting a contrary position.
If the merger fails to qualify as a reorganization, Talmer shareholders generally would recognize gain or loss on each share of
Talmer Class A common stock surrendered in an amount equal to the difference between the shareholder’s adjusted tax basis
in that share and the fair market value of the Chemical common stock received in exchange for that share upon completion of the
merger. If the merger qualifies as a reorganization, Talmer shareholders may recognize taxable gain with respect to the amount
of cash received upon completion of the merger in exchange for their shares of Talmer Class A common stock.
Litigation filed against Talmer, Chemical, and their
respective boards of directors that could prevent or delay the completion of the merger or result in the payment of damages following
completion of the merger.
In connection
with the merger, five purported Talmer shareholders have filed five putative class action lawsuits against Talmer, Talmer’s board of directors, and Chemical. Among other remedies, the plaintiffs seek to enjoin the merger.
If this litigation is not resolved, these lawsuits could prevent or delay completion of the merger and could result in substantial
costs to Talmer and Chemical, including any costs associated with indemnification.
Additional lawsuits may be filed against Talmer,
Chemical, and their respective officers and boards of directors. The defense or settlement of any lawsuit or claim that remains
unresolved at the time the merger is consummated may adversely affect Talmer’s and Chemical’s business, financial
condition, results of operations, cash flows and market price.
Risks Relating to Chemical’s and Talmer’s
respective businesses.
You should read
and consider risk factors specific to Chemical’s business that will also affect the combined company after the merger. These
risks are described in the sections entitled “Risk Factors” in Chemical’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2015 and in other documents incorporated by reference into this joint proxy statement and prospectus.
You should also read and consider risk factors specific to Talmer’s business that will also affect the combined company after
the merger. These risks are described in the sections entitled “Risk Factors” in Talmer’s Annual Report on Form
10-K for the fiscal year ended December 31, 2015 and in other documents incorporated by reference into this joint proxy statement
and prospectus. Please see “Where You Can Find More Information” for the location of information incorporated by reference
into this joint proxy statement and prospectus.
THE
CHEMICAL PROPOSALS
Chemical Proposal 1 – Approval
of the Merger Agreement
At the Chemical
special meeting, the Chemical shareholders will be asked to approve the merger agreement. Holders of Chemical common stock should
read this joint proxy statement and prospectus carefully and in its entirety, including the annexes, for more detailed information
concerning the merger agreement and the merger. A copy of the merger agreement is attached to this joint proxy statement and prospectus
as Annex A.
After careful consideration,
the Chemical board of directors unanimously adopted the merger agreement, authorized and approved the merger and the transactions
contemplated by the merger agreement and determined the merger agreement and the merger to be advisable and in the best interests
of Chemical and its shareholders.
The Chemical board of directors unanimously
recommends that Chemical shareholders vote “FOR” the proposal to approve the merger agreement.
Chemical Proposal 2 – Approval of Issuance of Chemical
Shares to Talmer Shareholders in the Merger
At the Chemical
special meeting, the Chemical shareholders will be asked to approve the issuance of shares of Chemical common stock to Talmer shareholders
in connection with the merger. If the merger is completed, Talmer shareholders will receive 0.4725 shares of Chemical common stock
and $1.61 in cash for each share of Talmer Class A common stock that they hold at the effective time of the merger. Approval of
this proposal is required under NASDAQ listing rules, and is a condition to the closing of the merger.
After careful consideration,
the Chemical board of directors unanimously approved the issuance of shares of Chemical common stock to Talmer shareholders in
connection with the merger.
The Chemical
board of directors unanimously recommends that Chemical shareholders vote “FOR” the proposal to approve the issuance
of shares of Chemical common stock to Talmer shareholders in connection with the merger.
Chemical Proposal 3 – Approval of the Amendment
to Chemical’s Articles of Incorporation
At the Chemical
special meeting, Chemical shareholders will be asked to approve a proposal to amend Chemical’s Articles of Incorporation
to increase the number of authorized shares of Chemical common stock from 60,000,000 to 100,000,000. A copy of the proposed amendment
to Chemical’s Articles of Incorporation is attached to this joint proxy statement and prospectus as Annex B. Approval of
this proposal is a condition to the closing of the merger.
As of the close
of business on the record date, June 8, 2016, Chemical had no shares of Chemical preferred stock and 38,264,479 shares of
Chemical common stock issued and outstanding. As of the close of business on the record date, June 8, 2016, there were approximately 2,803,350 shares
of Chemical common stock reserved for issuance under various equity plans of Chemical. Based on the number of shares of Talmer
Class A common stock outstanding as of such date, if the merger is completed, Chemical would be required to issue approximately 31,747,135 additional
shares of Chemical common stock to the Talmer shareholders. In addition, upon completion of the merger, Chemical would reserve
for issuance approximately 3.1 million additional shares of Chemical common stock to cover, among other things,
stock options, restricted stock, and other share-based awards assumed from Talmer. Chemical has determined that the 60 million
shares of common stock currently authorized under Chemical’s Articles of Incorporation will be insufficient to complete
the merger. It is estimated that following completion of the merger, Chemical will have approximately 70 million shares
of common stock outstanding. The Chemical board of directors believes that it is advisable to have additional authorized shares
of common stock available for important corporate purposes, such as to provide the ability to react quickly to strategic opportunities
and to attract and retain talented employees through the use of equity incentive compensation. Although there are no present plans
or commitments for the issuance of any of the additional shares that would be authorized upon approval of this amendment, other
than the issuance of shares in connection with the merger, such additional shares would be available for equity incentive plans,
possible future stock splits and dividends, public or
private offerings of common
stock or securities convertible into common stock, equity-based acquisitions and other corporate purposes that might be
proposed. The additional shares of Chemical common stock will not be entitled to preemptive rights nor will existing
shareholders have any preemptive right to acquire any of those shares when issued.
After careful consideration,
the Chemical board of directors unanimously approved, subject to approval by the Chemical shareholders, an amendment to Chemical’s
Articles of Incorporation to increase the number of authorized shares of Chemical common stock from 60,000,000 to 100,000,000.
The Chemical
board of directors unanimously recommends that Chemical shareholders vote “FOR” the proposal to amend Chemical’s
Articles of Incorporation to increase the number of authorized shares of Chemical common stock.
Chemical Proposal 4 – Chemical
Merger-Related Compensation Proposal
Section 14A
of the Exchange Act and Rule 14a-21(c) under the Exchange Act require that Chemical seek a nonbinding advisory vote from its shareholders
to approve the “golden parachute” compensation that its named executive officers will receive in connection with the
merger discussed in “The Merger – Interests of Certain Chemical Directors and Executive Officers in the Merger.”
As required by these provisions, Chemical is asking its shareholders to vote on the adoption of the following resolution:
“RESOLVED,
that the compensation that may be paid or become payable to Chemical’s named executive officers in connection with the merger,
as disclosed in the table entitled “Golden Parachute Compensation” pursuant to Item 402(t) of Regulation S-K,
including the associated narrative discussion, and the agreements or understandings pursuant to which such compensation may be
paid or become payable, are hereby APPROVED.”
The vote with respect to
this proposal is an advisory vote and will not be binding on Chemical, Talmer or the combined company. Therefore, regardless of
whether Chemical shareholders approve this proposal, if the merger agreement is approved by the shareholders and the merger is
completed, the “golden parachute” compensation will still be paid to such named executive officers to the extent payable
in accordance with the terms of such compensation contracts and arrangements. Approval of this proposal is not a condition to the
closing of the merger.
The Chemical board of
directors unanimously recommends that you vote “FOR” approval of the Chemical merger-related compensation proposal.
Chemical Proposal 5 – Chemical Adjournment Proposal
The Chemical special meeting
may be adjourned to another time or place if there are insufficient votes represented at the Chemical special meeting to constitute
a quorum necessary to conduct business at the Chemical special meeting or if there are insufficient votes necessary to obtain the
approval of Proposals 1 through 3, above.
Chemical requests
that its shareholders authorize the holder of any proxy solicited by the Chemical board of directors on a discretionary basis to
vote in favor of adjourning the Chemical special meeting to another time or place, if determined necessary or appropriate by Chemical,
to solicit additional proxies (including the solicitation of proxies from Chemical shareholders who have previously voted). Approval
of this proposal is not a condition to the closing of the merger.
The Chemical
board of directors unanimously recommends that Chemical shareholders vote “FOR” approval of the Chemical adjournment
proposal.
THE
TALmer PROPOSALS
Talmer Proposal 1 – Approval of the Merger Agreement
At the Talmer special
meeting, the Talmer shareholders will be asked to approve the merger agreement. Holders of Talmer Class A common stock should
read this joint proxy statement and prospectus carefully and in its entirety, including the annexes, for more detailed information
concerning the merger agreement and the merger. A copy of the merger agreement is attached to this joint proxy statement and prospectus
as Annex A.
After careful consideration,
the Talmer board of directors unanimously adopted the merger agreement, authorized and approved the merger and the transactions
contemplated by the merger agreement and determined the merger agreement and the merger to be advisable and in the best interests
of Talmer and its shareholders.
The Talmer board of directors unanimously
recommends that Talmer shareholders vote “FOR” the proposal to approve the merger agreement.
Talmer Proposal 2 – Talmer Merger-Related Compensation
Proposal
Section 14A
of the Exchange Act and Rule 14a-21(c) under the Exchange Act require that Talmer seek a nonbinding advisory vote from its shareholders
to approve the “golden parachute” compensation that its named executive officers will receive in connection with the
merger discussed in “The Merger - Interests of Certain Talmer Directors and Executive Officers in the Merger.” As required
by these provisions, Talmer is asking its shareholders to vote on the adoption of the following resolution:
“RESOLVED,
that the compensation that may be paid or become payable to Talmer’s named executive officers in connection with the merger,
as disclosed in the table entitled “Golden Parachute Compensation” pursuant to Item 402(t) of Regulation S-K,
including the associated narrative discussion, and the agreements or understandings pursuant to which such compensation may be
paid or become payable, are hereby APPROVED.”
The vote with respect
to this proposal is an advisory vote and will not be binding on Talmer, Chemical, or the combined company. Therefore, regardless
of whether Talmer shareholders approve this proposal, if the merger agreement is approved by the shareholders and completed, the
“golden parachute” compensation will still be paid to such named executive officers to the extent payable in accordance
with the terms of such compensation contracts and arrangements. Approval of this proposal is not a condition to the closing of
the merger.
The Talmer board
of directors unanimously recommends that you vote “FOR” approval of the Talmer merger-related compensation proposal.
Talmer Proposal 3 – Talmer Adjournment Proposal
The Talmer special
meeting may be adjourned to another time or place if there are insufficient votes represented at the Talmer special meeting to
constitute a quorum necessary to conduct business at the Talmer special meeting or if there are insufficient votes necessary to
obtain the approval of Proposal 1, above.
Talmer requests
that its shareholders authorize the holder of any proxy solicited by the Talmer board of directors on a discretionary basis to
vote in favor of adjourning the Talmer special meeting to another time or place, if determined necessary or appropriate by Talmer,
to solicit additional proxies (including the solicitation of proxies from Talmer shareholders who have previously voted). Approval
of this proposal is not a condition to the closing of the merger.
The Talmer board
of directors unanimously recommends that Talmer shareholders vote “FOR” the proposal to adjourn the Talmer special
meeting, if necessary or appropriate to solicit additional proxies.
THE CHEMICAL SPECIAL MEETING
Date, Time and Place
The special
meeting of Chemical shareholders will be held at Midland Country Club, 1120 W. St. Andrews, Midland, Michigan, on July 19,
2016 at 3:30 p.m., local time. On or about June 15, 2016, Chemical commenced mailing this joint proxy statement
and prospectus and the enclosed form of proxy to its shareholders entitled to vote at the Chemical special meeting.
Purpose of the Chemical Special Meeting
At
the Chemical special meeting, Chemical shareholders will be asked to consider and vote on the following:
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a proposal to approve the merger agreement;
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a proposal to approve the issuance
of shares of Chemical common stock to Talmer shareholders in connection with the merger;
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a proposal to approve an amendment
to Chemical’s Articles of Incorporation to increase the number of authorized shares of Chemical common stock;
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a proposal to approve the Chemical
merger-related compensation proposal;
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a proposal to approve the Chemical
adjournment proposal.
Completion
of the merger is conditioned on approval of the merger agreement, approval of the issuance of shares of Chemical common stock to
Talmer shareholders in connection with the merger, and approval of the amendment to Chemical’s Articles of Incorporation
to increase the number of authorized shares of Chemical common stock, among other conditions. Completion of the merger is not conditioned
on the approval of the Chemical merger-related compensation proposal or the Chemical adjournment proposal.
Recommendation
of the Chemical Board of Directors
At a special meeting
held on January 25, 2016, the Chemical board of directors unanimously determined that the merger and the other transactions contemplated
by the merger agreement, including the issuance of shares of Chemical common stock to Talmer shareholders in connection with the
merger and the proposed amendment to the Chemical’s Articles of Incorporation to increase the authorized shares of common
stock from 60 million to 100 million, are in the best interests of Chemical and its shareholders.
The Chemical board of
directors unanimously recommends that Chemical shareholders vote “FOR” the proposal to approve the merger agreement,
“FOR” the proposal to approve the issuance of shares of Chemical common stock to Talmer shareholders in connection
with the merger, “FOR” the proposal to approve the amendment to Chemical’s Articles of Incorporation, “FOR”
the Chemical merger-related compensation proposal, and “FOR” the Chemical adjournment proposal.
Chemical shareholders
should carefully read this joint proxy statement and prospectus, including any documents incorporated by reference and the Annexes
in their entirety, for more detailed information concerning the merger and the transactions contemplated by the merger agreement.
Chemical Record Date; Shareholders
Entitled to Vote
The record date
for the Chemical special meeting is June 8, 2016. Only record holders of shares of Chemical common stock at the close of business
on such date are entitled to notice of, and to vote at, the Chemical special meeting or any adjournment or postponement of the
meeting. At the close of business on the record date, the only outstanding voting securities of Chemical were common stock, and
38,264,479 shares of Chemical common stock were issued and outstanding and entitled to vote at the Chemical special meeting.
Each share of Chemical
common stock outstanding on the record date of the Chemical special meeting is entitled to one vote on each proposal and any other
matter coming before the Chemical special meeting.
Voting by Chemical’s Directors
and Executive Officers
At the close
of business on the record date for the Chemical special meeting, Chemical directors and executive officers and their affiliates
were entitled to vote 455,891 shares of Chemical common stock or approximately 1.19% of the shares of Chemical common
stock outstanding on that date. In connection with the merger agreement, the Chemical directors entered into Support Agreements
with Talmer, in their capacities as shareholders, agreeing to vote in favor of the approval of the merger agreement, subject to
certain limited exceptions. At the close of business on the record date for the Chemical special meeting, Chemical directors were
entitled to vote 283,700 shares of Chemical common stock or approximately 0.74% of the shares of Chemical common stock
outstanding on that date.
Quorum and Adjournment
No business may
be transacted at the Chemical special meeting unless a quorum is present. Shareholders who hold shares representing at least a
majority of the shares entitled to vote at the Chemical special meeting must be present in person or by proxy to constitute a quorum.
If a quorum is not present, the chairman may adjourn the meeting to solicit additional proxies. In addition, if fewer shares are
voted than the number of shares required to obtain the necessary Chemical shareholder approvals, then the special meeting may be
adjourned to allow additional time for obtaining additional proxies, if the approval of a majority of the votes cast at the special
meeting on the Chemical adjournment proposal is obtained.
No notice of an
adjourned meeting need be given if the time and place of the adjourned meeting are announced at the special meeting unless, after
the adjournment, a new record date is fixed for the adjourned meeting, in which case a notice of the adjourned meeting shall be
given to each shareholder of record entitled to vote at the meeting. At any adjourned meeting, all proxies will be voted in the
same manner as they would have been voted at the original convening of the special meeting, except for any proxies that have been
effectively revoked or withdrawn prior to the adjourned meeting.
All shares of Chemical
common stock represented at the Chemical special meeting, including shares that are represented but that vote to abstain, will
be treated as present for purposes of determining the presence or absence of a quorum. Broker non-votes will have no effect on
determining the presence or absence of a quorum.
Required Vote
The required votes
to approve the Chemical proposals are as follows:
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The approval of the merger agreement
requires the affirmative vote of a majority of the issued and outstanding shares of Chemical common stock entitled to vote at the
Chemical special meeting. Failures to vote, broker non-votes and abstentions will have the same effect as votes against this proposal.
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The approval of the issuance of shares
of Chemical common stock to Talmer shareholders in connection with the merger requires the approval of a majority of the votes
cast on this proposal at the Chemical special meeting, assuming a quorum. Failures to vote, broker non-votes and abstentions will
have no effect on the vote for this proposal.
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The approval of the proposed amendment
to Chemical’s Articles of Incorporation to increase the number of authorized shares of Chemical common stock requires the
approval of a majority of the outstanding shares of Chemical common stock entitled to vote at the Chemical special meeting. Failures
to vote, broker non-votes and abstentions will have the same effect as votes against this proposal.
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The approval of the Chemical merger-related
compensation proposal requires the approval of a majority of the votes cast on this proposal at the Chemical special meeting, assuming
a quorum. Failures to vote, broker non-votes and abstentions will have no effect on the vote for this proposal.
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The approval of the Chemical adjournment
proposal requires the approval of a majority of the votes cast on this proposal at the Chemical special meeting, regardless of
whether or not there is a quorum. Failures to vote, broker non-votes and abstentions will have no effect on the vote for this proposal.
Voting of Proxies by Holders of Record
If you were a
record holder of Chemical common stock at the close of business on the record date of the Chemical special meeting, a proxy
card is enclosed for your use. Chemical requests that you vote your shares as promptly as possible by (i) visiting the
internet site listed on the Chemical proxy card, (ii) calling the toll-free number listed on the Chemical proxy card or
(iii) submitting your Chemical proxy card by mail by using the provided self-addressed, stamped envelope. Information
and applicable deadlines for voting through the internet or by telephone are set forth on the enclosed proxy card. When the
accompanying proxy is returned properly executed, the shares of Chemical common stock represented by it will be voted at the
Chemical special meeting or any adjournment or postponement of the meeting in accordance with the instructions contained in
the proxy card. Your internet or telephone vote authorizes the named proxies to vote your shares in the same manner as if you
had marked, signed and returned a proxy card.
If a proxy is returned
without an indication as to how the shares of Chemical common stock represented are to be voted with regard to a particular proposal,
the Chemical common stock represented by the proxy will be voted in accordance with the recommendation of the Chemical board of
directors and, therefore, “FOR” the proposal to approve the merger agreement, “FOR” the proposal to approve
the issuance of shares of Chemical common stock to Talmer shareholders in connection with the merger, “FOR” the proposal
to amend Chemical’s Articles of Incorporation to increase the number of authorized shares of Chemical common stock, “FOR”
the proposal to approve the Chemical merger-related compensation proposal and “FOR” Chemical’s adjournment proposal.
As of the date hereof,
the Chemical board of directors has no knowledge of any business that will be presented for consideration at the Chemical special
meeting and that would be required to be set forth in this joint proxy statement and prospectus or the related proxy card other
than the matters set forth in Chemical’s Notice of Special Meeting of Shareholders. If any other matter is properly presented
at the Chemical special meeting for consideration, the persons named in the enclosed form of proxy and acting thereunder will vote
in accordance with their discretion on such matter.
Your vote
is important. If you were a record holder of Chemical common stock on the record date of the Chemical special meeting, please
sign and return the enclosed proxy card, or vote via the internet or telephone, regardless of whether or not you plan to attend
the Chemical special meeting in person. Proxies submitted through the specified internet website or by phone must be received
by 11:59 p.m., Eastern Time, on July 18, 2016.
Shares Held in Street Name
If you hold shares of Chemical
common stock through a stock brokerage account or a bank or other nominee, you are considered the “beneficial holder”
of the shares held for you in what is known as “street name.” The “record holder” of such shares is your
broker, bank or other nominee, and not you, and you must provide the record holder of your shares with instructions on how to vote
your shares. Please follow the voting instructions provided by your broker, bank or other nominee. Please note that you may not
vote shares held in street name by returning a proxy card directly to Chemical or by voting in person at the Chemical special meeting
unless you have a “legal proxy,” which you must obtain from your broker, bank or other nominee. Please also note that
brokers, banks or other nominees who hold shares of Chemical common stock on behalf of their customers may not give a proxy to
Chemical to vote those shares without specific instructions from their customers.
If you are a Chemical
shareholder and you do not instruct your broker, bank or other nominee on how to vote your shares, your broker, bank or other nominee
may not vote your shares on any of the Chemical proposals.
Attending the Meeting; Voting in
Person
Only Chemical shareholders,
their duly appointed proxies and invited guests may attend the meeting.
All attendees must present government-issued photo
identification
(such as a driver’s license or passport) for
admittance. The additional items, if any, that attendees
must bring depend on whether they are shareholders of record, beneficial owners, or proxy holders.
A Chemical shareholder
who holds shares directly registered in such shareholder’s name with Chemical’s transfer agent, Computershare, and
who wishes to attend the special meeting in person should bring government-issued photo identification.
A shareholder who
holds shares in “street name” through a broker, bank, trustee or other nominee (referred to in this joint proxy statement
and prospectus as a “beneficial owner”) and who wishes to attend the special meeting in person must bring proof of
beneficial ownership as of the record date, such as a letter from the broker, bank, trustee or other nominee that is the record
owner of such beneficial owner’s shares, a brokerage account statement or the voting instruction form provided by the broker.
A person who holds
a validly executed proxy entitling such person to vote on behalf of a record owner of Chemical shares and who wishes to attend
the special meeting in person must bring the validly executed proxy naming such person as the proxy holder, signed by the Chemical
shareholder, and proof of the signing shareholder’s record ownership as of the record date.
No cameras, recording
equipment or other electronic devices will be allowed in the meeting room. Failure to provide the requested documents at the door
or failure to comply with the procedures for the special meeting may prevent shareholders from being admitted to the Chemical special
meeting.
Revocation of Proxies
A Chemical shareholder
may revoke a proxy at any time before it is voted at the meeting by taking any of the following four actions:
-
delivering written notice of revocation
to Chemical’s Corporate Secretary, William C. Collins, 235 East Main Street, Midland, Michigan 48640;
-
delivering a proxy card bearing a later
date than the proxy that you wish to revoke;
-
casting a subsequent vote via telephone
or the Internet, as described above; or
-
attending the meeting and voting in
person.
Merely attending
the meeting will not, by itself, revoke your proxy; you must cast a subsequent vote at the meeting using forms provided for that
purpose. Your last valid vote that we receive before or at the special meeting is the vote that will be counted.
Solicitation of Proxies
Chemical is soliciting
proxies for the Chemical special meeting from its shareholders. In accordance with the merger agreement, Chemical will pay its
own costs of soliciting proxies from its shareholders, including the cost of mailing this joint proxy statement and prospectus.
In addition to solicitation of proxies by mail, proxies may be solicited by Chemical’s officers, directors and regular employees,
without additional remuneration, by personal interview, telephone or other means of communication.
Chemical will make
arrangements with brokerage houses, custodians, nominees and fiduciaries to forward proxy solicitation materials to beneficial
owners of Chemical common stock. Chemical may reimburse these brokerage houses, custodians, nominees and fiduciaries for their
reasonable expenses incurred in forwarding the proxy materials.
To help assure
the presence in person or by proxy of the largest number of shareholders possible, Chemical has engaged Georgeson LLC, a proxy
solicitation firm, which we refer to as “Georgeson”, to solicit proxies on Chemical’s behalf. Chemical has agreed
to pay Georgeson a proxy solicitation fee of approximately $15,000 and to reimburse Georgeson for its reasonable out-of-pocket
costs and expenses.
THE
TALMER SPECIAL MEETING
Date, Time and Place
The special
meeting of Talmer shareholders will be held on July 14, 2016, at 10:00 a.m., local time, at the Somerset Inn, 2601 West Big
Beaver Road, Troy, Michigan 48084. On or about June 13, 2016, Talmer commenced mailing this joint proxy statement and
prospectus and the enclosed form of proxy to its shareholders entitled to vote at the Talmer special meeting.
Purpose of the Talmer Special Meeting
At the Talmer special
meeting, Talmer shareholders will be asked to consider and vote on the following:
-
a proposal to approve the merger agreement;
-
a proposal to approve the Talmer merger-related
compensation proposal; and
-
a proposal to approve the Talmer adjournment
proposal.
Completion of
the merger is conditioned on approval of the merger agreement by the Talmer shareholders, among other conditions. Completion
of the merger is not conditioned on the approval of the Talmer merger-related compensation proposal or the Talmer adjournment
proposal.
Recommendations of the Talmer Board
of Directors
The Talmer board
of directors has unanimously determined that the merger is advisable and in the best interests of Talmer and its shareholders
.
The Talmer board of directors unanimously recommends that Talmer shareholders vote “FOR” the proposal to approve the
merger agreement, “FOR” the Talmer merger-related compensation proposal, and “FOR” the Talmer adjournment
proposal
.
Talmer shareholders
should carefully read this joint proxy statement and prospectus, including any documents incorporated by reference, and the Annexes
in their entirety for more detailed information concerning the merger and the transactions contemplated by the merger agreement.
Talmer Record Date; Shareholders
Entitled to Vote
The record date
for the Talmer special meeting is June 8, 2016. Only holders of record of shares of Talmer Class A common stock at the close of
business on such date will be entitled to notice of, and to vote at, the Talmer special meeting and any adjournment or postponements
of the meeting. At the close of business on the record date, the only outstanding voting securities of Talmer were Class A common
stock, and 67,189,703 shares of Talmer Class A common stock were issued and outstanding and entitled to vote at the Talmer special
meeting.
Each share of Talmer
Class A common stock outstanding on the record date for the Talmer special meeting is entitled to one vote on each proposal to
be considered at the Talmer special meeting.
Voting by Talmer’s Directors
and Executive Officers
At the close
of business on the record date for the Talmer special meeting, Talmer directors and executive officers and their affiliates were
entitled to vote 3,636,822 shares of Talmer Class A common stock or approximately 5.41% of the shares of Talmer Class A common
stock outstanding on that date. In connection with the merger agreement, the Talmer directors entered into Support Agreements
with Chemical, in their capacities as shareholders, agreeing to vote in favor of the approval of the merger agreement, subject
to certain limited exceptions. At the close of business on the record date for the Talmer special meeting, Talmer directors were
entitled to vote 1,472,362 shares of Talmer Class A common stock or approximately 2.19% of the shares of Talmer Class A common
stock outstanding on that date.
Quorum and Adjournment
No business may
be transacted at the Talmer special meeting unless a quorum is present. Shareholders who hold shares representing at least a majority
of the shares entitled to vote at the Talmer special meeting must be present in person or by proxy to constitute a quorum. If a
quorum is not present, the chairman may adjourn the meeting to solicit additional proxies. In addition, if fewer shares are voted
than the number of shares required to obtain the necessary Talmer shareholder approvals, then the special meeting may be adjourned
to allow additional time for obtaining additional proxies, if the approval of a majority of the votes cast at the special meeting
on the Talmer adjournment proposal is obtained.
No notice of an adjourned meeting needs to be given if the time and place of the adjourned meeting are announced
at the special meeting unless, after the adjournment, a new record date is fixed for the adjourned meeting, in which case a notice
of the adjourned meeting shall be given to each shareholder of record entitled to vote at the meeting. At any adjourned meeting,
all proxies will be voted in the same manner as they would have been voted at the original convening of the special meeting, except
for any proxies that have been effectively revoked or withdrawn prior to the adjourned meeting.
In determining whether
there is a quorum at the Talmer special meeting for purposes of all matters to be voted on, all votes “for” or “against”
and all votes to “abstain” will be counted. Broker non-votes will have no effect on determining the presence or absence
of a quorum.
Required Vote
The required votes
to approve the Talmer proposals are as follows:
-
The approval of the merger agreement requires the affirmative vote of a majority of the issued and outstanding shares of
Talmer Class A common stock entitled to vote at the Talmer special meeting. An abstention, broker non-vote or a failure to
vote your
shares will
have the same
effect as a vote cast
“against” this
proposal.
-
The approval of the Talmer merger-related compensation proposal requires the affirmative vote of a majority of the votes
cast in person or by proxy at
the special meeting, assuming a
quorum is present. Abstentions, broker non-votes and a failure to vote your shares will have no
effect on the outcome of this proposal.
-
The approval of the Talmer adjournment
proposal requires the affirmative vote of a majority of the votes cast in person or by proxy at the special meeting, regardless
of whether or not there is a quorum. Abstentions, broker non-votes and a failure to vote your shares will have no effect on the
outcome of this proposal.
Voting of Proxies by Holders of Record
If you were a record
holder of Talmer Class A common stock at the close of business on the record date of the Talmer special meeting, a proxy card is
enclosed for your use. Talmer requests that you vote your shares as promptly as possible by (i) voting through the Internet
site listed on the Talmer proxy card, or (ii) submitting your Talmer proxy card by mail by using the provided self-addressed,
stamped envelope. Information and applicable deadlines for voting through the Internet are set forth on the enclosed proxy card.
When the accompanying proxy is returned properly executed, the shares of Talmer Class A common stock represented by it will be
voted at the Talmer special meeting or any adjournment or postponement of the meeting in accordance with the instructions contained
in the proxy card. Your Internet vote authorizes the named proxies to vote your shares in the same manner as if you had marked,
signed and returned a proxy card.
If a proxy is returned
without an indication as to how the shares of Talmer Class A common stock represented are to be voted with regard to a particular
proposal, the Talmer Class A common stock represented by the proxy will be voted in accordance with the recommendation of the Talmer
board of directors and, therefore,
“FOR” the proposal to approve the merger agreement, “FOR” the Talmer
merger-related compensation proposal, and “FOR” the Talmer adjournment proposal.
At the date hereof,
the Talmer board of directors has no knowledge of any business that will be presented for consideration at the Talmer special meeting
and that would be required to be set forth in this joint proxy statement and prospectus or the related proxy card other than the
matters set forth in Talmer’s Notice of Special Meeting of Shareholders. If any other matter is properly presented at the
Talmer special meeting for consideration, the persons named in the enclosed form of proxy and acting thereunder
will vote in accordance with their discretion on such matter.
Your vote
is important. Accordingly, if you were a record holder of Talmer Class A common stock on the record date of the Talmer special
meeting, please sign and return the enclosed proxy card or vote via the Internet, regardless of whether or not you plan to attend
the Talmer special meeting in person. Proxies submitted through the specified internet website must be received by 11:59
p.m., Eastern Time, on July 13, 2016.
Shares Held in Street Name
If you hold shares
of Talmer Class A common stock through a stock brokerage account or a bank or other nominee, you are considered the “beneficial
holder” of the shares held for you in what is known as “street name.” The “record holder” of such
shares is your broker, bank or other nominee, and not you, and you must provide the record holder of your shares with instructions
on how to vote your shares. Please follow the voting instructions provided by your broker, bank or other nominee. Please note that
you may not vote shares held in street name by returning a proxy card directly to Talmer or by voting in person at the Talmer special
meeting unless you have a “legal proxy,” which you must obtain from your broker, bank or other nominee. Please also
note that brokers, banks or other nominees who hold shares of Talmer Class A common stock on behalf of their customers may not
give a proxy to Talmer to vote those shares without specific instructions from their customers.
If you are a Talmer
shareholder and you do not instruct your broker, bank or other nominee on how to vote your shares, your broker, bank or other nominee
may not vote your shares on any of the Talmer proposals.
Attending the Meeting; Voting in
Person
Only Talmer shareholders,
their duly appointed proxies, and invited guests may attend the meeting.
All attendees must present government-issued photo
identification
(such as a driver’s license or passport) for admittance. The additional items, if any, that attendees
must bring depend on whether they are shareholders of record, beneficial owners, or proxy holders.
A Talmer shareholder
who holds shares directly registered in such shareholder’s name with Talmer’s transfer agent, American Stock Transfer
& Trust Company, and who wishes to attend the special meeting in person should bring government-issued photo identification.
A shareholder who
holds shares in “street name” through a broker, bank, trustee or other nominee (referred to as a “beneficial
owner”) and who wishes to attend the special meeting in person must bring proof of beneficial ownership as of the record
date, such as a letter from the broker, bank, trustee or other nominee that is the record owner of such beneficial owner’s
shares, a brokerage account statement or the voting instruction form provided by the broker.
A person who holds
a validly executed proxy entitling such person to vote on behalf of a record owner of Talmer shares and who wishes to attend the
special meeting in person must bring the validly executed proxy naming such person as the proxy holder, signed by the Talmer shareholder,
and proof of the signing shareholder’s record ownership as of the record date.
No cameras, recording
equipment or other electronic devices will be allowed in the meeting room. Failure to provide the requested documents at the door
or failure to comply with the procedures for the special meeting may prevent shareholders from being admitted to the Talmer special
meeting.
Revocation of Proxies
If you are a Talmer
record holder (i.e., you hold your shares directly instead of through a brokerage account or other nominee) and you change your
mind after you return your proxy, you may revoke it and change your vote at any time before the polls close at the Talmer special
meeting. You may do this by:
-
delivering written notice of revocation to Talmer’s Corporate
Secretary, James
Dunn, 2301 West
Big Beaver Road, Suite
525, Troy, Michigan 48084;
-
delivering a proxy card bearing a later date than the proxy that you wish to revoke;
-
casting a subsequent vote via the Internet; or
-
attending the meeting and voting in
person.
Merely attending
the meeting will not, by itself, revoke your proxy; you must cast a subsequent vote at the meeting using forms provided for that
purpose.
If you hold your
shares through a brokerage account, you must contact your brokerage firm to revoke your proxy.
Solicitation of Proxies
Talmer is soliciting
proxies for the Talmer special meeting from its shareholders. In accordance with the merger agreement, Talmer will pay its own
costs of soliciting proxies from its shareholders, including the cost of mailing this joint proxy statement and prospectus. In
addition to solicitation of proxies by mail, proxies may be solicited by Talmer’s officers, directors and regular employees,
without additional remuneration, by personal interview, telephone or other means of communication.
Talmer will make
arrangements with brokerage houses, custodians, nominees and fiduciaries to forward proxy solicitation materials to beneficial
owners of Talmer Class A common stock. Talmer may reimburse these brokerage houses, custodians, nominees and fiduciaries for their
reasonable expenses incurred in forwarding the proxy materials.
To help assure
the presence in person or by proxy of the largest number of shareholders possible, we have engaged D.F. King & Co., Inc.,
a proxy solicitation firm, which we refer to as “D.F. King”, to solicit proxies on Talmer’s behalf. We have
agreed to pay D.F. King a proxy solicitation fee of $10,000. We will also reimburse D.F. King for its reasonable out-of-pocket costs
and expenses.
THE
MERGER
This
discussion of the merger is qualified in its entirety by reference to the merger agreement, which is attached to this joint proxy
statement and prospectus and registration statement as Annex A. You should read the entire merger agreement carefully, as it is
the legal document that governs the merger.
Effects of the Merger
At the effective time of
the merger, Talmer will merge with and into Chemical. Chemical will be the surviving entity following the merger.
In
the merger, each outstanding share of Talmer Class A common stock will be converted into the right to receive 0.4725 shares of
Chemical common stock and $1.61 in cash, without interest, together with cash paid in lieu of any fractional share of Chemical
common stock. This exchange ratio is fixed and will not be adjusted to reflect stock price changes prior to the effective time
of the merger. Chemical shareholders will continue to hold their existing Chemical shares.
Following
completion of the merger, Talmer shareholders are expected to hold approximately 45% of the total number of shares outstanding
of the combined company.
Background
of the Merger
As part of Talmer’s
ongoing consideration and evaluation of its long-term prospects and strategies, since the recapitalization of Talmer in 2010, Talmer’s
Board of Directors and senior management have regularly reviewed and assessed its business strategies and objectives, all with
the goal of enhancing long term value for its shareholders. The Talmer Board of Directors also formed a Strategic Initiatives Committee
in November of 2014 in order to facilitate preliminary consideration of corporate opportunities in an efficient and timely manner
and involve the Talmer Board with management in preliminary discussions regarding such opportunities. The Talmer Strategic Initiatives
Committee is comprised of three independent directors. Its members on March 31, 2015 were David Leitch, Ron Klein and Barbara Mahone.
In November of 2015, Mr. Leitch left Talmer’s Board of Directors upon his appointment as general counsel of a major national
bank, and Al Papa replaced him on the Talmer Strategic Initiatives Committee.
The Talmer Board
of Directors, directly and through the Talmer Strategic Initiatives Committee, reviews and assesses strategic alternatives, including
growth strategies (including acquisitions and organic growth), capital planning (including warrant repurchases, share repurchases,
dividends and FDIC loss-share agreement terminations), and potential earnings improvement through revenue increases, expense reductions
and strategic mergers. The Talmer Board of Directors has also reviewed the state of the banking industry generally and Talmer in
particular, including the economic, interest rate and regulatory environment; the competitive landscape for community banks; public
trading prices of bank stocks; and bank merger and acquisition activity and valuations. These meetings have included discussions
regarding potential business combinations, economies of scale, increased client service, and shareholder value benefits that might
be achieved if Talmer were to become a larger institution through acquisitions of troubled institutions and small, healthy banks,
acquisitions of banks with more substantial size, or a merger with a similarly-sized or significantly larger financial institution.
In recent years,
in addition to pursuing organic loan growth and implementing its capital planning strategies, Talmer, with the assistance of its
outside advisors, has repeatedly evaluated the community bank merger and acquisition market and potential merger partners and
acquisition candidates for Talmer. Talmer directors and executive officers have had discussions from time to time with many investment
bankers and financial institutions in an effort to maintain knowledge of the relevant market for business combinations and to
gauge the potential interest level and suitability of various financial institutions with respect to exploring a business combination
with Talmer. These contacts have occurred through formal and informal meetings and telephone calls and impromptu meetings at investor
conferences, banking industry conferences, and social settings. In particular, given Talmer’s previous relationship with
Keefe, Bruyette & Woods, Inc. (“KBW”), an investment banking firm that had served as a lead underwriter in connection
with Talmer’s initial public offering in February 2014 and had also previously provided other financial advisory services
to Talmer, and consistent with common investment banking practice, KBW regularly discussed strategic opportunities with Talmer
and was asked by Talmer to feel out various potential opportunities. As part of Talmer’s active involvement in the bank
merger and acquisition market, between April 30,
2010 and February 6, 2015, Talmer completed eight acquisitions. Of
these, the pursuit of troubled bank acquisitions was its primary initial focus. Four of Talmer’s acquisitions were FDIC-assisted
transactions and two of them involved bank acquisitions from holding companies in transactions facilitated under Section 363 of
the U.S. Bankruptcy Code. In addition, in 2014, Talmer also engaged in two branch sale transactions involving branches that were
outside of Talmer’s Midwest regional focus area.
Talmer Exploratory Discussions with
Other Institutions
While Talmer was
pursuing troubled bank acquisition transactions, as part of Talmer’s ongoing efforts to explore opportunities to enhance
long-term value for its shareholders, Talmer and its advisers also continued to engage in discussions and due diligence with numerous
other potential merger and acquisition partners. As a result of Talmer’s activities and analysis of the community bank merger
and acquisition market, Talmer developed its understanding of its logical potential merger and acquisition partners. Prior to the
announcement of the merger with Chemical, a number of possible merger or acquisition discussions and meetings took place over a
multi-year period with parties that were similar in size to or substantially larger than Talmer which Talmer deemed to have the
highest likelihood of engaging in a transaction with Talmer, taking into account a number of criteria, including the ability-to-pay,
strategic rationale, regulatory readiness and previous oral expressions of interest. A number of the more substantive exploratory
discussions that occurred during 2014 and 2015 include the following.
In late March
2014, a representative of KBW and the CEO of a community bank located in the Midwest that was slightly larger than Talmer, which
we refer to as “Institution A,” discussed a potential merger transaction between Talmer and Institution A. Subsequently,
Talmer senior executives and representatives of KBW met with executives of Institution A on several occasions during 2014 to discuss
a potential merger with Talmer. In September 2015, Institution A advised Talmer’s CFO that Institution A was focused on
other priorities and so was not interested in pursuing a business combination with Talmer.
In November 2014,
Talmer senior executives met with senior executives of a substantially larger regional bank with operations in the State of Michigan,
which we refer to as “Institution B,” and discussed a potential merger. The meeting ended with a commitment to have
further discussions, but without any clearly defined next steps. In August 2015, Talmer re-initiated discussions with Institution
B to determine whether it was interested in pursuing a strategic transaction with Talmer. Institution B expressed a desire to continue
to meet periodically, but it was made clear to Talmer’s CFO that Institution B was not prepared to pursue a transaction with
Talmer at that time. In December 2015, Talmer’s CEO met with Institution B’s CEO and further discussed the possibility
of a merger transaction between Institution B and Talmer. Institution B advised Talmer’s CEO that Institution B was not in
a position to pursue a business combination with Talmer at that time.
In November 2014,
Talmer’s CEO met with the CEO of a larger regional bank with banking offices in Michigan and Ohio, which we refer to as “Institution
C,” and discussed their respective banking franchises, management philosophies and the possibility of joining together. In
July 2015, Talmer’s senior management team met with several members of Institution C’s senior management team to discuss
a potential strategic merger transaction. Following this meeting, the parties participated in a number of telephone calls through
the end of 2015. At the conclusion of these discussions, in December 2015, Talmer was informed that Institution C was not interested
in pursuing a business combination in the near term.
In April 2015, Talmer’s
CFO met with senior management of a bank that was slightly larger than Talmer and located in one of Talmer’s markets, which
we refer to as “Institution D.” Institution D had been identified with input from KBW as a financial institution that
might have interest in exploring a potential transaction with Talmer. The parties discussed Talmer as well as Institution D’s
long-term desire to expand further into Talmer’s Michigan markets. Institution D informed Talmer’s CFO that they had
a long-term interest in Talmer’s markets; however, they were not planning on this expansion within the next couple of years.
Talmer’s discussions
with Institutions A, B, C and D were all preliminary in nature, with no specific proposals being made. In addition to these institutions,
Talmer or its advisers had preliminary exploratory discussions during 2014 and 2015 with representatives of several other potential
merger partners that were similar sized to or substantially larger than Talmer, none of which indicated that it was interested
in pursuing a business combination with Talmer at that time, except for Chemical and one substantially larger party that we refer
to as “Institution E,” as discussed below.
Discussions Between Talmer and
Chemical and Talmer and Institution E
The Chemical
Board of Directors and management team regularly review Chemical’s performance, risks, opportunities and strategy and discuss
such matters at board meetings. Chemical’s Board of Directors and management team review and evaluate the possibility of
pursuing various strategic alternatives and relationships as part of Chemical’s ongoing efforts to strengthen its businesses
and improve its operations and financial performance in order to create value for its shareholders, taking into account economic,
regulatory, competitive and other conditions. Since 2000, Chemical has completed 11 merger and acquisition transactions, including,
most recently, the acquisitions of Northwestern Bancorp, Inc. (October 31, 2014), Monarch Community Bancorp, Inc. (April 1, 2015)
and Lake Michigan Financial Corporation (May 31, 2015). In addition, during the last several years, the Chemical Board of Directors
and management team have considered other strategic transactions with other companies, including Talmer. In May 2014, with Talmer’s
knowledge and approval, KBW discussed with Chemical’s Chairman, Chief Executive Officer and President, David B. Ramaker,
a potential merger between Chemical and Talmer and offered to introduce Mr. Ramaker to Mr. Provost of Talmer. At the time of that
discussion with Chemical, KBW was not engaged by either Talmer or Chemical regarding a potential merger between those parties
but was then acting as Chemical’s financial advisor in connection with its acquisition of Northwestern Bancorp, Inc. and
preparing to act as an underwriter in connection with a follow-on offering of Chemical common stock which closed in June 2014.
A possible strategic transaction with Talmer was first introduced to the Chemical Board of Directors at a meeting held on July
22, 2014 in executive session, at which meeting the Board of Directors instructed Mr. Ramaker to proceed to learn more about the
possibility of a potential strategic transaction with Talmer and pursue informal discussions about a possible transaction with
Talmer management.
Following an introduction
by KBW, Mr. Provost and Mr. Ramaker met on August 15, 2014 to discuss management philosophies and the concept of a potential business
combination.
On September 24,
2014, Mr. Torgow, Mr. Provost and Mr. Klaeser had discussions with Mr. Ramaker and Chemical’s CFO, Lori A. Gwizdala to discuss
the respective cultures and governance of Chemical and Talmer, including how the respective cultures and governance of each organization
might assimilate together following a potential business combination.
On October 21, 2014,
the Chemical Board of Directors met in executive session and continued discussions relating to a possible strategic transaction
with Talmer, including Mr. Ramaker provided his thoughts on his initial impressions relating to the viability of a transaction
based on discussions with Talmer management to date.
During February
2015, Mr. Klaeser had discussions with Ms. Gwizdala, regarding Chemical’s potential interest in a business combination with
Talmer. These discussions focused on financial logic and strategic compatibility, and no specific proposals were made. In March
2015, with Talmer’s knowledge and approval, KBW provided information to Chemical regarding Talmer and a potential merger
between Talmer and Chemical. At that time, KBW was not engaged by either Talmer or Chemical regarding a potential merger between
those parties but was then acting as Chemical’s financial advisor in connection with its acquisition of Lake Michigan Financial
Corporation and had also then recently acted as Chemical’s financial advisor in connection with its acquisition of Monarch
Community Bancorp, Inc.
On March 6, 2015,
Talmer’s Chairman had a social lunch with the CEO of Institution E, during which they discussed the banking environment
and their respective institutions’ business philosophies. Prior to its initial public offering, in 2013, Talmer had engaged
in discussions regarding a possible business combination with Institution E. After conducting preliminary due diligence, Institution
E had expressed interest in acquiring Talmer in a primarily stock transaction, although the merger consideration proposed was
not considered sufficient by Talmer’s Board of Directors, which decided to move forward independently. Senior management
of Talmer and Institution E had continued to have informal dialogue over the next year and a half.
Talmer senior executives
met with senior executives of Institution E on two subsequent occasions in March 2015 to further discuss their respective institutions’
financial performance, markets, and management philosophies, with no specific merger proposals being made.
On March 31, 2015,
the Talmer Strategic Initiatives Committee held a meeting that was also attended by Messrs. Torgow, Provost and Klaeser as well
as KBW and Talmer’s outside legal counsel, Nelson Mullins Riley & Scarborough, LLP (“Nelson Mullins”), to
discuss strategic planning in general, as well as a potential acquisition by Talmer of another institution and Talmer’s
discussions of a strategic transaction with Institution E. As described below, KBW was subsequently engaged to serve as Talmer’s
financial advisor in connection with the potential transaction with Institution E.
During its March
31, 2015 meeting, the Talmer Strategic Initiatives Committee was updated regarding the potential acquisition by Talmer of another
bank of approximately $2 billion in assets—which we refer to as “Institution F”—that had been reviewed
with the Talmer Strategic Initiatives Committee in January 2015. Institution F had indicated to Talmer that it would require a
higher valuation range than the indicative range proposed by Talmer, and Talmer management discussed with the committee that an
acquisition at the higher valuation range would not provide sufficient earnings accretion to Talmer shareholders and would create
downside risk to Talmer’s valuation. The committee also discussed another bank that management had performed due diligence
on that had recently been acquired by another bank. Management believed that this bank would have also been a strategic fit with
Talmer, but that it had been acquired for a price that was notably higher than the price that Talmer had considered paying.
The Talmer Strategic Initiatives Committee then discussed the recent contact between Talmer management and
Institution E. Mr. Klaeser advised the Talmer Strategic Initiatives Committee that any business combination with Institution E
would likely include a significant portion of stock as a result of Institution E’s capital structure, and that due consideration
should be given to potential share price appreciation of Institution E’s stock and the perceived interest of many Talmer shareholders
to maintain a stock investment in the combined company if a merger with Institution E were to occur.
Also at
this meeting, KBW discussed with the Talmer Strategic Initiatives Committee, among other matters: the market outlook for
banks;
the banking industry M&A environment, including the
continued strength in M&A activity by deal value and volume, the positive market reaction and institutional investor
feedback in general to transactions with meaningful earnings per share accretion and reasonable tangible book value earn back
periods, and the general trend to higher price to tangible book value transaction multiples in 2013, 2014 and year to date
2015 relative to the period from 2009 to 2012; then-current market and analyst expectations for Talmer; the status of
discussions with various potential Talmer business combination partners; the significant number of informal discussions in
which Talmer had engaged during the prior two years with banks in Talmer’s markets; and publicly available financial
information regarding Institution E and its prospects. During this discussion, KBW explained how financial
institution mergers were being received in the current public markets, including the observed impact that
“overpriced” mergers, such as mergers with dilution earn back periods that exceed periods that were acceptable to
the investor market, have had upon acquirer stock prices immediately following merger agreement announcements. It was noted
that, among bank M&A transactions announced since January 1, 2013 with transaction values between $50 million and $500
million and publicly disclosed earn back periods, the median post-announcement stock price change relative to the KBW
Regional Bank Index was negative for the acquirors in transactions with earn back periods of four years to five years and
also negative for the acquirors in transactions with earn back periods of greater than five years.
The Talmer Strategic Initiatives Committee discussed with management and KBW various challenges and opportunities
associated with various strategic alternatives, including, among others, pursuing: (i) a stand-alone strategy relying on organic
growth, (ii) acquisitions of troubled institutions and small, healthy banks, (iii) acquisitions of banks with more substantial
size, (iv) a merger with a similarly-sized institution, or (v) a merger with a significantly larger financial institution. The
committee discussed with management Talmer’s strategy and goals, including Talmer’s expected 2015 earnings, Talmer’s
potential acquisition targets, the diminishing opportunities for troubled-bank acquisitions by Talmer, and continuing regulatory
burdens. The committee requested that Talmer management keep it up to date regarding discussions with Institution E, including
by scheduling a subsequent meeting if Institution E made a proposal or if negotiations with respect to terms of a potential merger
with Institution E otherwise developed. Following this meeting, Talmer and Institution E initiated more formalized due diligence.
With Talmer’s knowledge and approval, KBW also maintained communication with Chemical regarding a potential merger between
Talmer and Chemical.
On May 31, 2015,
Chemical completed its previously announced acquisition of Lake Michigan Financial Corporation, with respect to which KBW had served
as Chemical’s financial advisor. Upon completion of the Chemical merger with Lake Michigan Financial Corporation, KBW ceased
to have any active investment banking services engagement with Chemical.
On June 8, 2015,
the Talmer Strategic Initiatives Committee held a meeting that was also attended by Messrs. Torgow, Provost and Klaeser as well
as KBW and Nelson Mullins. The committee received an update regarding discussions and due diligence with Institution E, discussions
with Chemical, and preliminary exploratory discussions with other financial institutions. Also at this meeting, KBW discussed
with the committee, among other things, Institution E’s financial and stock performance and for illustrative purposes certain
financial aspects of a hypothetical merger with Institution E. The committee considered, in consultation with KBW, the likelihood
that, based on Institution E’s financial ability to pursue and provide consideration in a potential merger with Talmer,
the value of the merger consideration at the time of announcement of a merger with Institution E was expected to potentially be
at or near then-current Talmer share trading prices. However, the committee also considered, in consultation with KBW, potential
earnings accretion to Talmer shareholders and other factors that could potentially contribute to a merger with Institution E being
in the best interest of Talmer shareholders, such as price to earnings ratios, price to book value ratios, premium to market pricing
over a multi-month period, the possibility that Institution E’s stock was undervalued, and the potential impact of a merger
on Institution E’s common stock value. At this meeting, KBW also discussed with the committee, among other matters, possible
strategic options that might be available to Talmer as well as advantages and disadvantages of various approaches to exploring
potential strategic merger partners.
Nelson Mullins discussed
with the Talmer Strategic Initiatives Committee various transaction structures and provided an overview of the fiduciary duties
of board members associated therewith. The committee instructed management and KBW to continue discussions with Institution E and
to also continue outreach efforts to Chemical and certain other institutions. The committee also directed that Talmer’s due
diligence on Institution E continue. The committee expressed its availability to further discuss a potential transaction with Institution
E and the committee’s willingness to convene a meeting on short notice. The committee instructed management and KBW to keep
the committee updated and to be prepared to discuss a potential merger with Institution E with the full Talmer Board when a transaction
appeared more likely to occur. Management discussed concerns regarding the extensive due diligence being conducted by Institution
E and possible risks that enterprise-wide due diligence raised with respect to the retention of key employees. The committee noted
these concerns.
On June 9, 2015,
the Talmer Board of Directors held a meeting that was also attended by Dennis Klaeser and Nelson Mullins, and received a report
from the Talmer Strategic Initiatives Committee with respect to the committee’s meeting the day before. The Board discussed
the matters that had been reviewed with and considered by the Talmer Strategic Initiatives Committee on the previous day and the
process by which potential transactions would be evaluated. The Talmer Strategic Initiatives Committee informed the full Talmer
Board that it was heavily involved in the process and would continue to update the full Talmer Board regarding any developments.
On June 17, 2015, the Talmer Board of Directors held a meeting that was also attended by Dennis Klaeser, and
Talmer COO Tom Shafer as well as Nelson Mullins. The Board discussed the process to date with Institution E, discussions with other
potentially interested merger partners, KBW’s engagement as Talmer’s financial advisor in connection with a potential
transaction with Institution E and the importance of confidentiality and of Talmer continuing to operate as effectively as possible
without potential employee and customer distractions caused by rumors of a transaction. Senior management provided a summary of
the process to date with Institution E, and discussed that Institution E had indicated that due to the recent increase in Talmer’s
stock price, which closed at $16.84 on June 16, 2015 (as compared to a closing price of $14.20 on March 5, 2015, the day before
the lunch meeting between Mr. Torgow and the CEO of Institution E), and the current value of Institution E’s stock, an offer
from Institution E would likely provide no premium or would be at a discount to the market trading price at the time of a deal
announcement. Mr. Torgow informed the Board that based on his prior discussions with Institution E, the value of the merger consideration
could be below current market levels.
Nevertheless, a merger with Institution E was expected to involve at least 80% stock
consideration, and the Board discussed that, depending on various factors, a merger could potentially be advisable. The Board was
advised that KBW was going to continue discussions with other potentially interested merger partners. Talmer’s management
indicated that if negotiations
continued to develop, it would convene additional meetings with the Board to provide the Board with
significant additional detail and KBW’s advice and assistance. The Talmer Strategic Initiatives Committee noted KBW’s
bank merger expertise and reported that the committee had been well-served by the advice and assistance that KBW had provided to
the Talmer Strategic Initiatives Committee. After discussing the proposed engagement of KBW, the Board approved the retention of
KBW to serve as Talmer’s financial advisor in anticipation of a potential merger with Institution E. Following the meeting,
Nelson Mullins delivered to the Board a memorandum reviewing the Board’s fiduciary duties in connection with its evaluation
of a potential business combination transaction.
On June 18,
2015, Mr. Provost and Mr. Ramaker met at a banking conference to further discuss the possibility of a merger between Talmer and
Chemical.
On June 24, 2015,
Mr. Klaeser and Ms. Gwizdala met to discuss lending, Talmer’s strategic focus and markets, and steps and challenges associated
with merging similarly-sized institutions. Mr. Klaeser and Ms. Gwizdala also discussed certain critical accounting matters and
certain financial matters relating to a possible strategic transaction between Talmer and Chemical. Chemical informed Talmer that
it was focused on completing the integration process related to its recent acquisition, although the parties agreed that they
would continue dialogue.
On June 29,
2015, the Talmer Strategic Initiatives Committee held a meeting that was also attended by Messrs. Torgow, Provost, Klaeser and
Shafer as well as KBW and Nelson Mullins. The committee discussed Mr. Klaeser’s meeting with Ms. Gwizdala to discuss a merger
between Talmer and Chemical, as well as a scheduled meeting with Institution C’s management team. The committee received
an update regarding, among other matters, the extensive due diligence being performed by Institution E, discussions between KBW
and Institution E’s investment banker, and the due diligence to be performed by Talmer
.
The committee suggested
several items to be included in the list of reverse due diligence topics, and Nelson Mullins indicated that management would update
the committee on these topics once the related due diligence was complete.
On July 7, 2015,
the Talmer Strategic Initiatives Committee held a meeting that was also attended by Messrs. Torgow, Provost and Klaeser as well
as KBW and Nelson Mullins. The committee discussed Institution E’s due diligence. In addition, KBW discussed with the committee,
among other matters, the potential risks, opportunities and shareholder value expectations associated with remaining independent
and those associated with completing a business combination transaction, including an acquisition of a bank with substantial size,
a merger with a similarly-sized institution, or a merger with a significantly larger financial institution.
On July 10, 2015,
Talmer senior executives met with senior executives of Institution E and discussed remaining due diligence and anticipated future
earnings for the combined company.
On July 13, 2015,
counsel to Institution E delivered a draft merger agreement to Nelson Mullins. The draft merger agreement contemplated all-stock
merger consideration, but it did not include a proposed stock exchange ratio.
On July 14, 2015,
the Talmer Strategic Initiatives Committee held a meeting that was also attended by Messrs. Torgow, Provost, Klaeser and Shafer
as well as KBW and Nelson Mullins. At this meeting, Mr. Torgow reported to the committee regarding the recent meeting with Institution
E. KBW discussed with the committee, among other matters, the potential merger with Institution E, and possible advantages and
disadvantages of strategic alternatives that might be available to Talmer, including continuing as a standalone entity, an acquisition
of a bank with substantial size, a merger with a similarly-sized institution, including Chemical, or a merger with a significantly
larger financial institution. Nelson Mullins discussed the draft merger agreement with the committee.
Also on July 14,
2015, the Talmer Board of Directors held a meeting that was also attended by Messrs. Klaeser and Shafer as well as KBW and Nelson
Mullins. At this meeting, KBW discussed with the Board, among other matters, the potential merger with Institution E, Institution
E’s operating and financial metrics and possible advantages and disadvantages of strategic alternatives that might be available
to Talmer, including continuing as a standalone entity, an acquisition of a bank with substantial size, a merger with a similarly-sized
institution, including Chemical, or a merger with a significantly larger financial institution.
With
respect to remaining independent, the Talmer Board of Directors viewed Talmer’s existing management team, regulatory relations,
potential future stock repurchases and growth opportunities as positive factors, but also noted, among other risks, that there
were fewer attractive acquisition opportunities, regulatory burdens would continue to increase and net interest margin pressure
would increase as accretable yield from legacy purchased loans diminished. With respect to Talmer’s potential merger
with a similar-sized institution, the Talmer Board of Directors viewed potential benefits to include, but not be limited to, continued
equity participation and potential appreciation and income tax deferral through stock merger consideration, geographic diversification,
deployment of excess capital, and revenue synergies from new products, but also noted, among other risks, regulatory burdens,
potential reliance on post-merger management with which the Board could be less knowledgeable, and integration risks. With
respect to Talmer’s potential merger with a larger institution, the Talmer Board of Directors discussed, among other considerations,
the possibility of continued equity participation and potential appreciation and income tax deferral through stock merger consideration,
but also noted, among other risks, higher reliance on the management of a larger institution, potentially greater stability but
lower growth going forward, and other risks associated with an acquirer’s stock. There was also preliminary discussion regarding
the potential valuation of Talmer under hypothetical strategic alternative scenarios. However, during July of 2015, Talmer had
not received any actual proposal from an interested potential transaction party with respect to any potential business combination
alternatives, and so a comparison of the potential for the business combination alternatives considered by the Board to actually
add value for Talmer shareholders was recognized as being speculative and premature. The Talmer Board of Directors did not
make a determination that one of the noted alternatives was inherently superior or inferior, nor did the Board foreclose pursuing
any of such alternatives.
On July 17, 2015,
the Talmer Strategic Initiatives Committee held a meeting that was also attended by Messrs. Torgow, Provost, Klaeser and Shafer
as well as KBW and Nelson Mullins. Mr. Torgow reported to the Talmer Strategic Initiatives Committee regarding recent discussions
with Institution E with respect to due diligence and the timing of a potential merger consideration proposal. The committee reviewed
the draft Institution E merger agreement and discussed the Board’s fiduciary duties and certain provisions of the draft agreement
with Nelson Mullins.
On July 21,
2015, KBW attended a Chemical Board of Directors meeting regarding a strategic options review given KBW’s prior investment
banking services engagements and familiarity with Chemical. At that time, KBW did not have any active investment banking services
engagements with Chemical. KBW was requested to discuss the state of the banking industry, overview of the markets, various operating
themes, historical review of mergers and acquisitions in the depository institution sector, Chemical’s current business
model and the issues surrounding crossing $10 billion in total assets, a summary of strategic options that might be available
to Chemical (including the status quo, various acquisitions, mergers and control sale) and the advantages and disadvantages of
each category. With Talmer’s knowledge and approval and in line with the Talmer Strategic Initiatives Committee’s
direction to KBW to continue outreach efforts to Chemical and certain other institutions, one of the numerous examples of potentially
available options for Chemical discussed by KBW was a potential merger with Talmer, which was addressed during a brief portion
of KBW’s discussion with the Chemical Board of Directors. KBW provided information regarding a potential merger with Talmer,
including strategic rationale, transaction structure considerations and illustrative potential pro forma financial impacts of
a hypothetical merger. After KBW left this meeting, the Chemical Board of Directors met in executive session and continued to
discuss the various strategic options outlined above including a possible strategic transaction with Talmer. Given the confidential
nature of Talmer’s exploratory discussions, KBW did not disclose to Chemical the fact that Talmer was in discussions with
Institution E, and KBW did not disclose to Institution E Chemical’s potential interest in a potential merger with Talmer.
KBW obtained Talmer’s knowledge and approval prior to its discussions with Chemical regarding a potential merger between
Talmer and Chemical in order for KBW to avoid disclosing to Chemical any information that Talmer did not wish KBW to disclose
and to avoid any conflict of interest that would disqualify KBW from acting as Talmer’s financial advisor regarding any
potential merger of Talmer with either Institution E or Chemical or any other party.
On or around
July 28, 2015, Institution E advised Talmer that it was not going to make a merger consideration proposal, in part because Institution
E was not willing to offer a level of merger consideration that Institution E believed would be acceptable to Talmer. The Talmer
Board of Directors met on July 29, 2015 with Mr. Klaeser and Nelson Mullins and was advised of Institution E’s position,
and Talmer and Institution E did not engage in any further merger discussions after this date. Due to a combination of increased
regulatory scrutiny and risk management oversight, banks’ due diligence processes have grown significantly. Directors noted
that a substantial number of persons from Institution E accessed electronic due diligence, with an even larger number with overall
knowledge of the transaction. This level of access inevitably led to some knowledge of the transaction being dispersed to a wider
group of Talmer employees beyond Talmer’s executive officers with change in control agreements. As a result, senior management
expressed concern about employee retention, and the Compensation Committee felt a need to institute new retention incentives to
retain certain key personnel, which included: (i) new change in control agreements with three members of Talmer’s senior
management team, (ii) a grant of an aggregate
of 37,250 shares of Talmer restricted stock to certain key employees, and (iii)
an aggregate of $101,710 in additional base salary compensation for certain key employees. No Talmer directors or executive officers
received any new retention incentives as a result of the due diligence process with Institution E.
On July 29, 2015,
Mr. Provost from Talmer and Mr. Ramaker from Chemical spoke at length on the telephone regarding a potential transformational
merger, in that a merger between Talmer and Chemical would be transformative to the combined company in terms of size, markets,
customer base, synergies, governance and geographic footprint, among other things. They agreed to revisit the matter over the
following months once Chemical completed integration activities related to its most recent acquisition.
On July 30, 2015,
Mr. Klaeser from Talmer and Ms. Gwizdala from Chemical met to further discuss critical accounting matters, including accounting
for impaired loans, FDIC loss share arrangements, deferred tax assets related to net operating loss carryforwards and potential
cost synergies, and certain financial matters, including capital levels and cash liquidity available to fund any portion of a
strategic transaction.
On September 23,
2015, Mr. Provost and Mr. Shafer met with Mr. Ramaker, Chemical’s Executive Vice President and Chief Operating Officer –
Customer Experience, Robert S. Rathbun, and Chemical’s Executive Vice President and Chief Credit Officer, James E. Tomczyk
and discussed credit aspects relating to each institution, including credit culture and philosophy, core credit competencies, underwriting
procedures and processes, lending staffing and overall credit quality of the loan portfolio. Also on September 23, 2015, Mr. Klaeser
and Ms. Gwizdala met and further discussed critical accounting matters and financial matters relating to a potential strategic
transaction between Talmer and Chemical.
In early October
2015, with Talmer’s knowledge and approval, KBW provided updated information to Chemical regarding a potential merger between
Chemical and Talmer for purposes of facilitating Chemical management’s preparation for a meeting of the Chemical Board of
Directors on October 20, 2015. Consistent with discussions to date between Chemical’s and Talmer’s respective managements,
which had not advanced to negotiation of the merger consideration, the information was focused on addressing the potential strategic
rationale for a merger, including industrial logic, pro forma branch footprint and the loan and deposit portfolios of each institution
and on a combined basis. The information also addressed transaction structure considerations and the potential financial viability
of the merger for both parties, including illustrative potential pro forma financial impacts of a hypothetical merger.
On October 20,
2015, the Chemical Board of Directors met in executive session and continued discussions relating to a possible strategic transaction
with Talmer, including an update from Mr. Ramaker on discussions with Talmer management to date. At this meeting, Mr. Ramaker
reviewed certain aspects relating to a strategic transaction with Talmer, including the rationale and industrial logic for a transaction,
a pro forma franchise footprint, preliminary due diligence findings, the corporate and capitalization history of Talmer (in particular,
Mr. Ramaker noted that WL Ross Funds had fully divested its approximate 14% ownership in Talmer common stock on August 31, 2015
and that certain other “halo” investors in Talmer’s IPO had also previously fully divested their ownership in
Talmer common stock), the loan and deposit portfolios of each institution and on a pro forma basis, a contribution analysis, various
financial metrics, a sensitivity analysis and certain “guideposts” for a transformational merger. The Chemical Board
of Directors gave Mr. Ramaker direction to proceed with entering into formal discussions with Talmer about a potential strategic
transaction and authorized Mr. Ramaker to engage a financial advisor.
On October 23,
2015, Chemical retained Sandler O’Neill & Partners, L.P. (“Sandler O’Neill”) as its financial
advisor with respect to a potential strategic transaction with Talmer.
On October 26, 2015,
the Talmer Strategic Initiatives Committee held a meeting that was also attended by Messrs. Torgow, Provost and Klaeser as well
as KBW and Nelson Mullins. At this meeting, various aspects of a potential merger with Chemical were discussed, including, among
other matters, the potential strategic fit, costs savings, governance, earnings and capital impacts, and merger consideration and
value to Talmer shareholders associated with a potential merger with Chemical. The committee considered, in consultation with Talmer’s
senior executives and KBW, that the proposed merger with Chemical would be a transformational strategic combination of similarly-sized
institutions rather than a sale of Talmer to Chemical and that the merger would be expected to, among other things:
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create, and enable Talmer shareholders to
become shareholders of, the preeminent Michigan-based banking franchise;
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provide significant earnings per share accretion
for Talmer shareholders;
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provide increased dividends per share for
Talmer shareholders;
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allow Talmer to merge with a growing partner
that has sound credit quality and strong operating performance;
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provide primarily stock merger consideration
and have a fixed exchange ratio, which would enable Talmer shareholders to participate in long-term stock price appreciation; and
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increase Talmer shareholder value as a result
of, among other factors, franchise improvement, earnings per share accretion and combined company valuation.
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KBW discussed with the Talmer Strategic Initiatives Committee for illustrative purposes certain potential
financial aspects of a hypothetical merger with Chemical. The committee and KBW also discussed factors such as relative contribution,
earnings per share accretion and tangible book value earn back period that could impact the parties’ negotiation of the merger
consideration exchange ratio. The committee recognized that, given the anticipated high percentage of stock consideration, Talmer
shareholders would have a significant interest in the performance of Chemical’s stock price. The committee considered, in
consultation with KBW, the likelihood that a merger with Chemical would provide earnings per share accretion for Chemical shareholders
and a tangible-book-value earn back period for Chemical shares that was within the range observed in other financial institution
mergers to have been previously acceptable to the investor market and which would be expected to support combined company stock
price appreciation. The committee also discussed with Talmer’s senior executives Talmer’s overall strategy and goals.
On October 28,
2015, the Talmer Board of Directors held a meeting that was also attended by Dennis Klaeser and Nelson Mullins. The Talmer Strategic
Initiatives Committee reported on its October 26, 2015 meeting, including the matters regarding the potential merger with Chemical
that had been considered and discussed. Mr. Provost informed the Board that he had recently met with the Chemical CEO to discuss
their respective companies and the possibility of exploring a business combination transaction generally, with no specific proposal
being made. The rationale for a merger, as outlined during the Talmer Strategic Initiatives Committee’s October 26, 2015
meeting, was discussed with the Board. The Talmer Board of Directors discussed the potential retention of KBW as Talmer’s
financial advisor in connection with a potential merger with Chemical. The Board authorized the Talmer Strategic Initiatives Committee
to approve the retention of KBW as Talmer’s financial advisor subject to the Strategic Initiative Committee’s review
of a conflicts of interest analysis with respect to KBW and engagement terms.
From November 2,
2015, the date the parties executed a non-disclosure agreement, until the execution of the merger agreement, Chemical and Talmer
conducted mutual due diligence including, in addition to the review of publicly available information and materials posted to
an online data room or provided during on-site diligence, a combination of in-person and telephone meetings between Chemical and
Talmer personnel.
On November 3,
2015, the Talmer Strategic Initiatives Committee held a meeting that was also attended by Messrs. Provost and Klaeser as well
as KBW and Nelson Mullins. The committee members discussed KBW’s prior investment banking and financial advisory services
for Chemical and Talmer, the fact that to date KBW had previously discussed the potential merger between Chemical and Talmer separately
with and had provided information to both parties in order to facilitate their respective preliminary assessments of their respective
interests in exploring the potential merger (including, without limitation, KBW’s discussions with Chemical in May 2014
and on July 21, 2015), and the fact that Chemical had retained Sandler O’Neill as its financial advisor with respect to
a potential merger with Talmer. KBW confirmed for the committee, among other things, that it did not have at that time a current
or prospective investment banking services engagement with Chemical. The Talmer Strategic Initiatives Committee discussed KBW’s
prior relationships with Chemical, including the relationships described under the section entitled “Opinion of Talmer’s
Financial Advisor in Connection with the Merger,” and determined that they did not impair the ability of KBW to continue
to act as the financial advisor to Talmer. In fact, Talmer
believed at the time and continues to believe that, rather than creating
a conflict of interest, the interactions between KBW and Chemical regarding a potential merger between Talmer and Chemical, while
KBW was engaged by Talmer in anticipation of a potential merger with Institution E, served the interests of Talmer both in terms
of seeking to position Talmer to make a more informed decision in the event that Institution E had made a merger consideration
proposal and in the event that a merger with Institution E did not occur. The Talmer Strategic Initiatives Committee concluded
that, based on KBW’s extensive knowledge of both Talmer and the market with respect to community bank mergers and the committee’s
confidence in KBW’s capabilities and professionalism based on Talmer’s previous experiences working with KBW (including
in connection with Talmer’s discussions with Institution E notwithstanding Institution E’s decision not to make a
merger consideration proposal), KBW was the best positioned investment bank to advise Talmer in connection with a potential merger
with Chemical and approved the retention of KBW as Talmer’s financial advisor in connection with a potential merger with
Chemical.
On November
17, 2015, the Talmer Board of Directors held a meeting that was also attended by Dennis Klaeser and Nelson Mullins. The Talmer
Strategic Initiatives Committee and management discussed with the Board the Strategic Initiatives Committee's conflicts of interest
analysis with respect to KBW, including with respect to the information reviewed by the Strategic Initiatives Committee on November
3, 2015, and the potential terms of KBW’s engagement. The Board discussed the ongoing due diligence process with Chemical.
Also on November 17, 2015, Mr. Provost and Mr. Ramaker met and discussed certain aspects relating to a proposed strategic transaction,
including corporate culture, operating structure, operating territory, conversion of data systems and the process of due diligence.
On November 25,
2015, Mr. Provost and Mr. Ramaker met and discussed certain aspects relating to a proposed strategic transaction between Talmer
and Chemical, including early results of due diligence, types of loan structures and potential cultural differences and the respective
loan portfolios of each institution.
On December 3, 2015,
the Talmer Strategic Initiatives Committee held a meeting that was also attended by Messrs. Torgow, Provost and Klaeser as well
as Nelson Mullins. The committee discussed the status and outlook for the due diligence process relating to a potential merger
with Chemical. It also reviewed and approved the terms of KBW’s engagement.
On December 15,
2015, the Talmer Board of Directors held a meeting that was also attended by Dennis Klaeser and Nelson Mullins. The Board discussed
the due diligence process, potential merger costs savings associated with a Chemical merger and the timing of a potential letter
of intent.
On December 21,
2015 and December 22, 2015, the parties negotiated the terms of a letter of intent for the transaction.
On December 22,
2015, the Talmer Strategic Initiatives Committee met to discuss the status of the potential Chemical merger, and to review a draft
preliminary, non-binding letter and term sheet, which we refer to as the “letter of intent.” The meeting was attended
by Messrs. Torgow, Provost, Klaeser and Shafer as well as KBW and Nelson Mullins. The committee reviewed the strategic rationale
of a merger with Chemical and received an update on the progress of due diligence efforts. The committee reviewed with KBW and
Nelson Mullins the terms of the draft letter of intent, including: the entities involved, strategic rationale, transaction structure,
timing, form of consideration, exchange ratio, dividends, management structure, board of directors composition, headquarters location,
employees, employment contracts, anticipated termination fees, covenants, representations and warranties, conditions and other
merger agreement provisions, exclusivity expectations, contingencies, approvals, indemnification, due diligence, that at least
50% of Talmer stock options would be allowed to convert into Chemical stock options, and certain other assumptions
.
The
letter of intent contemplated merger consideration to Talmer shareholders composed of 90% Chemical stock and 10% cash. The exchange
ratio, viewed on a 100% stock merger consideration equivalent basis, was between 0.50 and 0.525 Chemical shares for each Talmer
share. Based on the closing price of $34.65 for Chemical’s shares on December 17, 2015, the range of the exchange ratio
set forth in the letter of intent, viewed on a 100% stock merger consideration equivalent basis, indicated an implied value range
of the merger consideration of between $17.32 and $18.19. Based on the closing price of $34.65 for Chemical’s shares on
December 17, 2015, and assuming a 100% stock merger consideration equivalent exchange ratio of 0.525, the implied value of the
merger consideration of $18.19 for each Talmer share represented a 4.3% premium over Talmer’s stock price of $17.44 on December
17, 2015, a 9.1% premium over Talmer’s ninety-day volume weighted average trading price, and a 37.3% premium over Talmer’s
initial public offering price.
The Talmer Strategic
Initiatives Committee considered, in consultation with KBW, potential earnings accretion and dividend increases for Talmer shareholders
based on the potential terms set forth in the letter of intent. In addition, KBW discussed with the committee that, at that time,
Chemical’s common stock was not performing as well as the stock of certain other financial institutions considered to be
peers of Chemical and that this market underperformance was potentially attributable in part to apparent market concern that Chemical
could cross the $10 billion asset threshold without engaging in a material transaction, which could result in Chemical incurring
additional expenses such as debit card interchange fee limitations, Consumer Financial Protection Bureau oversight, additional
stress testing requirements and potential surcharges levied by the FDIC, without offsetting benefits from the economies of scale
provided by a material transaction. The committee discussed with KBW how potential Chemical share price appreciation might occur
due to Chemical earnings accretion resulting from the merger if Chemical were to trade at an earnings per share multiple in line
with financial institutions considered to be its peers, and how any such appreciation could benefit Talmer shareholders because
of the anticipated significant stock component of the merger consideration and fixed merger exchange ratio with respect to such
stock component. The Talmer Strategic Initiatives Committee discussed regulatory and other due diligence matters, as well as potential
merger agreement breakup fees. The committee asked questions of KBW and Nelson Mullins throughout the meeting, and the members
discussed, among other things, the strategic rationale, transaction structure, timing, form of consideration, exchange ratio,
governance, definitive agreement and key assumptions related to the potential merger. The committee approved the non-binding letter
of intent and directed management to call a board meeting to present the letter of intent to the full board.
On December 22, 2015, the Chemical Board of Directors met with select members of Chemical management (including
Mr. Ramaker and Ms. Gwizdala), Sandler O’Neill and Chemical’s outside legal counsel, Warner Norcross & Judd LLP
(“Warner Norcross”), to consider a merger with Talmer and authorize and approve the terms and delivery of the letter
of intent. Sandler O’Neill reviewed with the Chemical Board of Directors various aspects relating to a merger with Talmer,
including a transaction overview and assumptions (including fair value adjustments, regulatory costs, cost savings and other assumptions),
a pro forma merger analysis (with the merger consideration at various prices and composed on 90% stock and 10% cash and 100% stock),
including a summary financial impact on Chemical, reconciliations related to transaction value and shares of Chemical common stock
to be issued in a merger and a tangible book value earn back sensitivity analysis. The Chemical Directors asked questions of Chemical
management and Sandler O’Neill throughout the presentation. Mr. Ramaker reviewed the terms of the letter of intent. Following
questions that were asked of Chemical management, Sandler O’Neill and Warner Norcross, the Chemical Board of Directors approved
the terms and delivery of the letter of intent to Talmer. The letter of intent was delivered to Talmer following the meeting.
On January 5, 2016,
the Talmer Board of Directors held a meeting that was also attended by Messrs. Klaeser and Shafer as well as KBW and Nelson Mullins.
The Board discussed the terms of the letter of intent. In response to the Board’s questions regarding whether there was
an exchange ratio ceiling above which the merger would be unacceptable to Chemical, the Talmer Board was advised by Mr. Klaeser
that earnings contributions were critical to both parties and that if the exchange ratio, viewed on a 100% stock merger consideration
equivalent basis, was greater than 0.525 then Chemical’s earnings per share accretion from the merger would decrease to
a level that would likely be lower than Chemical would accept. The board reviewed the strategic rationale for the merger, and
KBW discussed with the Board the financial aspects of the potential merger, including the exchange ratio range set forth in the
letter of intent and the impact of the recent decline and volatility in bank stock prices since the December 22, 2015 meeting
of the Talmer Strategic Initiatives Committee on the implied transaction statistics for the merger. Based on the closing price
of Chemical’s shares on January 4, 2016 of $33.01, and assuming a 100% stock merger consideration equivalent exchange ratio
of 0.525, the implied value of the merger consideration was reduced to $17.33 which represented a 1.8% discount to the closing
price of Talmer’s shares as of the same date, a 3.3% premium to Talmer’s ninety-day volume-weighted average price,
and a 33.3% premium to Talmer’s initial public offering price.
The Board also considered,
in consultation with KBW, whether, in the event of a financial downturn, the combined company would be expected to perform better
than Talmer as a stand-alone entity. The Board considered that Chemical had performed relatively well in the most recent economic
downturn and that the anticipated increase in earnings per share for Talmer shareholders as a result of the merger should be a
positive factor for shareholders in the combined company in the event of an economic downturn. Throughout the discussion of the
letter of intent,
members of the Talmer Board asked questions of KBW and Nelson Mullins and provided input on the topics presented.
Nelson Mullins
discussed the directors’ fiduciary duties in connection with the Talmer Board’s evaluation of a potential business
combination transaction. Nelson Mullins reviewed a draft merger agreement that Nelson Mullins had prepared and provided to the
Board. Among other provisions, Nelson Mullins discussed with the Talmer Board terms of the merger agreement that provided that
a termination fee could become payable if Talmer or Chemical terminated the merger agreement in certain circumstances, that would
prohibit Talmer and Chemical from soliciting third-party acquisition proposals, and that would provide Talmer and Chemical with
the ability to match third-party acquisition proposals made to the other party, as well as the unlikelihood that such terms would
have a preclusive effect on a potentially interested third party from making a superior offer because the provisions preserved
the ability of the parties to pay a termination fee and accept a superior proposal. The Talmer Board were informed by Talmer’s
advisors that in their experience such provisions were consistent with common market practice in transactions of this nature.
The Board also discussed
Talmer’s efforts to support community development programs in the locales it serves, including with respect to the Southeast
Michigan metropolitan area, and the possibility of Chemical making a donation, in connection with a potential business combination
transaction with Talmer, to an appropriate community development foundation focused on revitalization or community reinvestment
efforts in the Southeast Michigan metropolitan area.
On January 6, 2016,
Nelson Mullins delivered an initial draft of the merger agreement to Chemical and to Warner Norcross. Through January 25, 2016,
the respective management teams of Chemical and Talmer, with the assistance of the respective legal counsel and the financial advisors
to Chemical and Talmer, engaged in negotiations with respect to the merger agreement and exchanged drafts of the merger agreement.
On January 12, 2016,
the Talmer Board of Directors held a meeting that was also attended by Messrs. Klaeser and Shafer, Talmer Chief Legal Officer Jim
Dunn and Nelson Mullins. The Board discussed due diligence, the status of the merger agreement negotiations, as well as the recent
stock price volatility of the market as a whole and of the shares of Chemical and Talmer, whose shares had closed at $32.40 per
share and $17.05 per share, respectively, on the day before the meeting.
On January 14, 2016,
the Talmer Strategic Initiatives Committee held a meeting that was also attended by Messrs. Torgow, Provost, Klaeser and Shafer
and Nelson Mullins. The committee discussed the status and outlook for the due diligence process as well as Chemical’s comments
on the draft merger agreement. Nelson Mullins explained that Talmer’s processes were designed to provide significant oversight
and involvement by Talmer’s Board of Directors in the evaluation and negotiation of the potential merger.
On January 18,
2016, the Chemical Board of Directors met with select members of Chemical management (including Mr. Ramaker and Ms. Gwizdala)
and Sandler O’Neill to consider a merger with Talmer. At this meeting, Chemical management reviewed with the Chemical Board
of Directors its due diligence findings with respect to Talmer, including relating to corporate history and organization, capitalization,
finance and accounting, taxation, lending, deposits and borrowings, facilities, contracts and agreements, personnel and compensation,
legal, risk management, mortgage banking, commercial banking, information technology, treasury and ALCO, corporate strategy, consumer
and retail, internal audit, fiduciary activities and wealth management and special assets and presented its findings and assessment
of risks associated with Talmer’s business operations. Management also updated the Chemical Board of Directors on the status
of negotiations with respect to the merger agreement, the voting and support agreements and the services agreements with Messrs.
Torgow, Provost and Klaeser. Management noted for the Chemical Board of Directors that, on December 28, 2015, Talmer entered into
an agreement to terminate Talmer’s loss share arrangements with the FDIC and discussed the expected resulting benefits to
Talmer’s future results of operations. In addition, Sandler O’Neill discussed certain aspects of a merger with Talmer
and the Chemical directors asked questions of Sandler O’Neill throughout the presentation.
On January 19, 2016,
the Talmer Board of Directors held a meeting that was attended by Messrs. Klaeser and Shafer as well as KBW and Nelson Mullins.
The Board discussed due diligence and the status of the merger agreement negotiations. KBW and Nelson Mullins discussed with the
Board the termination fee that could become
payable if Talmer or Chemical terminated
the merger agreement in certain circumstances, and reviewed termination fees included in certain other merger transactions. The
Talmer Board discussed with Nelson Mullins and KBW that a termination fee equal to 3% of the merger consideration had been raised
as a possibility and that such a termination fee percentage would be relatively low compared to the percentages observed in certain
other community bank mergers. The Talmer Board, in consultation with Nelson Mullins and KBW, considered that it would be unlikely
that such a termination fee would have a preclusive effect on a potentially interested third party from making a superior offer.
KBW again discussed
with the Board the decline and volatility in bank stock prices since December of 2015, including the stock prices of Talmer and
Chemical, and the impact that this decline could have on announcement-date transaction multiples. During the period between the
December 22, 2015 meeting of the Talmer Strategic Initiatives Committee and the execution of the merger agreement, as the parties
considered and negotiated with respect to the transaction and continued to perform due diligence on one another, U.S. equity markets
experienced tremendous volatility. For example, from December 22, 2015 to January 25, 2016, the S&P 500 Bank Index declined
by 17.4% and the share prices of Chemical and Talmer common stock declined by 14.4% and 10.8%, respectively.
The Talmer Board
also discussed with Nelson Mullins and KBW the advantages and disadvantages of a fixed merger exchange ratio versus a floating
merger exchange ratio and stock collars. A fixed exchange ratio was determined to better position Talmer shareholders to participate
in any Chemical stock price increase after the announcement of a merger agreement and appeared to be more customary based on the
publicly disclosed terms of certain other bank merger transactions. In addition, based on the publicly disclosed terms of certain
other merger transactions, a stock collar appeared to be unusual for a merger of similarly sized banks where the target company’s
shareholders were to receive primarily stock merger consideration. Nelson Mullins made a presentation to the Board and answered
questions from directors regarding the advantages and disadvantages of an exclusive litigation forum bylaw provision.
On January 19, 2016, the Chemical Board of Directors met with select members of Chemical management (including
Mr. Ramaker and Ms. Gwizdala) and Sandler O’Neill to consider a merger with Talmer. Specifically, Sandler O’Neill reviewed
with the Chemical Board of Directors updated transaction modeling using new assumptions based on due diligence findings and compared
the updated transaction modeling with the information Sandler O’Neill reviewed with the Chemical Board of Directors on December
22, 2015. The Chemical directors asked questions of Sandler O’Neill throughout the presentation.
On January 22,
2016, Warner Norcross delivered initial drafts of services agreements with Messrs. Torgow, Provost and Klaeser to Nelson Mullins.
Through January 25, 2016, Mr. Ramaker and Messrs. Torgow, Provost and Klaeser, with the assistance of respective legal counsel,
negotiated the terms of the services agreements and exchanged drafts of the services agreements.
On January 24, 2016,
the Chemical Board of Directors met with select members of Chemical management (including Mr. Ramaker and Ms. Gwizdala), Sandler
O’Neill and Warner Norcross, to consider a merger with Talmer. At this meeting, management informed the Chemical Board of
Directors that the merger agreement, the voting and support agreements and the services agreements with Messrs. Torgow, Provost
and Klaeser were in negotiated form. Warner Norcross reviewed the terms of the merger agreement with the Board of Directors, including
the non-solicitation provisions and termination fee that could become payable if Talmer or Chemical terminated the merger agreement
in certain circumstances, the voting and support agreements and the terms of the services agreements with Messrs. Torgow, Provost
and Klaeser. Warner Norcross also reviewed the directors’ fiduciary duties in connection with the Chemical Board of Directors’
evaluation of a merger with Talmer. The Chemical directors asked questions of Warner Norcross throughout the presentation.
Sandler O’Neill
reviewed with the Board of Directors various aspects relating to a merger with Talmer, generally consistent with those aspects
discussed during the January 19, 2016 Chemical Board of directors meeting, but with certain information updated for the presentation.
In addition, Sandler O’Neill reviewed certain trading data for Chemical and Talmer stock, an implied purchase price per
share analysis, a comparable company analysis for Chemical and Talmer and on a pro forma basis, an analysis of analyst estimates
for Chemical and Talmer, a net present value analysis for Chemical and Talmer and on a pro forma basis, shareholder composition
for Chemical and Talmer, a precedent transaction analysis. The Chemical Directors asked questions of Chemical management and Sandler
O’Neill throughout the presentation.
On January 25,
2016, the Talmer Compensation Committee met in executive session with Nelson Mullins. Nelson Mullins provided an overview of draft
employment services agreements with Messrs. Torgow, Provost and Klaeser that were proposed to become effective upon the closing
of a merger with Chemical. The agreements were requested by Chemical to provide management support and commitment regarding these
executives’ roles with the combined company. The agreements provided for base salary only and stated that the individuals
were not expected to be eligible for the Chemical Bank Annual Incentive Plan or the Chemical Bank Long Term Incentive Plan or
any bonus or incentive plan of Chemical or any stock options, restricted stock units, or other equity awards under any Chemical
equity plan. The base salary amounts were materially less than the total compensation amounts (including equity awards and bonus)
of these individuals in each of the past three years. In addition, after discussions between Chemical management and Mr. Torgow
and Mr. Provost, and taking into account their current ownership and Chemical’s commitment to support communities in Talmer’s
markets, each of Mr. Torgow and Mr. Provost agreed to eliminate change in control payments of approximately $1.2 million that
would otherwise have been payable to each of them upon completion of a merger with Chemical. The employment services agreements
of Mr. Torgow and Mr. Provost contained eighteen-month post-termination non-compete and non-solicitation provisions. Subject to
approval of the merger agreement with Chemical by the Talmer Board of Directors, the Compensation Committee approved the employment
services agreements.
The Talmer
Compensation Committee also reviewed a draft merger agreement provision that would allow Talmer to offer to cancel up to 25%
of the outstanding Talmer stock options immediately prior to completion of a merger with Chemical in exchange for an amount
for each such cancelled stock option equal to the difference between the per share value of the merger consideration and the
per share exercise price of such option. All of Talmer’s stock options were already fully vested, and Talmer directors
and officers could already exercise their options and sell into the market in accordance with SEC Rule 144 and subject to
applicable securities laws. The parties viewed the stock option cancellation provision as beneficial because it would create
a fully-transparent and organized process for holders of Talmer stock options, particularly Talmer’s directors and
officers, who have a high ownership stake in Talmer relative to other peer institutions, including Chemical, to divest a
portion of their stock options to bring their ownership in the combined company closer in line with that of Chemical’s
insiders and the insiders of other peer institutions. In addition, allowing holders of Talmer stock options to cash-out a
portion of their Talmer stock options in this manner would also alert the market to the details of these possible
transactions well in advance of the merger, which would provide an opportunity for increased disclosure and market clarity.
The committee reviewed the stock option cancellation provision, discussed these possible benefits and determined that it was
fair to and in the best interests of Talmer and its shareholders. The committee was aware that any actual offer to cancel
Talmer stock options for a cash payment would require further Compensation Committee approval.
Later in the day
on January 25, 2016, the Talmer Board of Directors held a meeting that was also attended by Dennis Klaeser, Thomas Shafer and
JoAnne Huls, the Chief of Staff at Talmer Bank as well as KBW and Nelson Mullins. The Compensation Committee reported to the Board
with respect to its review and actions regarding the employment services agreements of Messrs. Torgow, Provost and Klaeser, and
its determinations with respect to the draft merger agreement provision concerning the potential cash-out of 25% of the outstanding
Talmer stock options. Nelson Mullins discussed with the Board potential advantages and disadvantages of an exclusive forum bylaw
provision. The Board unanimously approved the amendment and restatement of the Talmer bylaws to include an exclusive forum bylaw
provision.
At this meeting,
KBW made a presentation to the Talmer Board regarding the financial aspects of the proposed transaction and rendered to the Talmer
Board of Directors an opinion to the effect that, as of that date and subject to the procedures followed, assumptions made, matters
considered, and qualifications and limitations on the review undertaken by KBW as set forth in such opinion, the merger consideration
in the proposed merger was fair, from a financial point of view, to holders of Talmer common stock. Prior to delivery of KBW’s
opinion, the Talmer directors engaged in extensive discussions with KBW and among themselves regarding, among other matters, the
anticipated earnings per share and dividend accretion for Talmer shareholders, the timing of the proposed transaction in light
of recent stock market volatility, and the value of Talmer shares if Talmer were to remain independent as compared to the value
of such shares if Talmer were to merge with Chemical.
The Talmer Board
considered, in consultation with KBW, the fact that, based on Chemical’s closing share price of $30.69 on January 22, 2016,
the implied value of the merger consideration per share of Talmer was $16.11,
which represented a 2.5% discount to
Talmer’s closing share price on January 22, 2016. However, the Talmer board of directors also considered, in consultation
with KBW, that the recent share price declines of Chemical and Talmer appeared to be part of overall stock market declines and
not the result of any developments specific to the fundamental financial results of Talmer or Chemical, which did not appear to
have changed in any material respect over the prior month. The Talmer Board was advised that the recent decline in Chemical’s
stock price had provided additional leverage for Talmer to use in negotiating for merger consideration that was at the highest
end of the range set forth in the letter of intent, notwithstanding the fact that that the stock price volatility had not affected
the relative contributions of the parties with respect to assets, loans, deposits, tangible common equity or net income. The proposed
merger consideration of 0.4725 shares of Chemical common stock and $1.61 in cash for each share of Talmer common stock reflected
a 100% stock merger consideration equivalent exchange ratio of 0.525 (based on Chemical’s closing stock price on January
22, 2016). Management reported that it had insisted on an exchange ratio at the highest end of the possible range negotiated in
the letter of intent. The Talmer board considered, in consultation with KBW, that the Chemical merger was expected to result in
per share earnings and dividend accretion for Talmer shareholders, which would be expected to result in greater long-term value.
The Talmer Board also considered that Talmer shareholders would receive primarily Chemical stock as merger consideration, which
would position Talmer shareholders to participate in any general market recovery and to benefit from the anticipated synergies
associated with the proposed Chemical merger. Additionally, the Talmer Board noted that five of the 12 total directors of the
combined company would be current Talmer directors (including Messrs. Torgow and Provost).
Nelson Mullins reviewed
the terms of the merger agreement with the Talmer Board, including the termination fee that could become payable if Talmer or Chemical
terminated the merger agreement in certain circumstances. The Talmer Board discussed with Nelson Mullins the unlikelihood that
the termination fee would have a preclusive effect on a potentially interested third party from making a superior offer. The Board
also discussed the plan for the combined company to donate to the Community Foundation of Southeast Michigan’s Talmer/Chemical
Donor Advised Fund, and the impact that it could have on Southeast Michigan communities.
The Talmer directors
further discussed among themselves, and in consultation with Talmer senior management, KBW and Nelson Mullins, the terms of the
proposed merger agreement, Talmer’s potential future prospects as an independent company and Talmer’s strategic alternatives.
After considering the proposed terms of the merger agreement and the various presentations of its financial and legal advisors,
and taking into consideration the matters discussed during the meeting and in prior meetings of the Talmer Board and the Talmer
Strategic Initiatives Committee, including the factors described under “—Talmer’s Reasons for the Merger and
Recommendation of the Talmer Board of Directors”, the Talmer Board of Directors unanimously adopted and approved the merger
agreement and unanimously determined to recommend the merger agreement to the Talmer shareholders for approval.
The Board also discussed
with Nelson Mullins and approved voting and support agreements to be entered into by each director with Chemical, which agreements
would terminate by their terms in the event the Board recommends a superior business combination proposal for Talmer and its shareholders.
On January 25, 2016,
the Chemical Board of Directors met with select members of Chemical management (including Mr. Ramaker and Ms. Gwizdala), Sandler
O’Neill and Warner Norcross, to consider a merger with Talmer. At this meeting, management informed the Chemical Board of
Directors that the merger agreement, the voting and support agreements and the services agreements with Messrs. Torgow, Provost
and Klaeser were in final form and ready to be executed.
Sandler O’Neill
rendered its oral opinion, subsequently confirmed in writing, that, as of January 25, 2016, and based upon and subject to the assumptions
made, procedures followed, matters considered and limitations on the review undertaken as set forth in its opinion, the proposed
merger consideration was fair, from a financial point of view, to Chemical.
After considering
the proposed terms of the merger agreement and the various presentations of its financial and legal advisors, and taking into
consideration the matters discussed during the meeting and in prior meetings of the Chemical Board of Directors, including the
factors described under “—Chemical’s Reasons for the Merger and Recommendation of the Chemical Board of Directors”,
the Chemical Board of Directors unanimously adopted and approved the merger agreement and unanimously determined to recommend
the merger agreement to the Chemical
shareholders for approval. In addition, the Chemical Board of Directors approved the voting
and support agreements and the services agreements with Messrs. Torgow, Provost and Klaeser.
The merger agreement
was entered into on January 25, 2016. On the morning of January 26, 2016, Talmer and Chemical issued a joint news release publicly
announcing the merger agreement.
Talmer’s Reasons for the Merger
and Recommendation of the Talmer Board of Directors
In reaching its
decision to adopt the merger agreement and recommend that Talmer’s shareholders approve the merger agreement, in addition
to relying on personal knowledge of Talmer, Chemical and the banking industry, the Talmer Board of Directors evaluated the merger
and merger agreement in consultation with Talmer senior management and outside financial and legal advisors, reviewed various financial
data and due diligence information, and considered the views of, among others, Talmer’s CFO and COO. After such consultation
and review, and after considering Talmer’s future prospects as an independent company and its strategic alternatives, the
Talmer Board of Directors concluded that the proposed merger with Chemical was fair to and in the best interests of Talmer and
its shareholders.
In evaluating the
merger agreement and reaching its decision to adopt the merger agreement and recommend that Talmer shareholders approve the merger
agreement, Talmer’s Board of Directors considered a number of factors, including the following, which are not intended to
be exhaustive and are not presented in any relative order of importance:
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the belief that the merger will create,
and enable Talmer shareholders to become shareholders of, the preeminent Michigan-based banking franchise;
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the anticipated earnings per share accretion
for Talmer shareholders as a result of the merger;
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the anticipated future receipt by Talmer
shareholders of an increase in dividends after completion of the merger as Chemical shareholders, based on Chemical’s current
and forecasted dividend payout ratio;
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the views of the Talmer Board of Directors
as to the prospect that Chemical’s stock price was undervalued considering its strong performance metrics, consistently strong
credit metrics and strong organic and acquisitive growth over the prior five years;
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the current and prospective business and
economic environment of the markets in which Talmer operates, including consolidation in the banking industry, a declining number
of opportunities for troubled bank acquisitions, the level of pricing for healthy bank acquisitions, the regulatory burdens on
financial institutions and the increased regulatory costs associated with having more than $10 billion in assets, and anticipated
core net interest margin pressure as accretable yield from legacy purchased loans diminishes;
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the fact that Talmer shares would be converted
primarily into Chemical common stock in the merger, which would allow Talmer shareholders to participate substantially in the future
performance of the combined businesses of Talmer and Chemical, the potential synergies resulting from the merger and potential
increases in the trading price of Chemical’s shares;
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the business, earnings, operations, financial
condition, stock price performance, management, prospects, capital levels and credit quality of both Talmer and Chemical, taking
into account the results of Talmer’s due diligence of Chemical;
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the overall greater scale that would be
achieved by the merger, which is expected to position the combined company to efficiently cross the $10 billion asset threshold
and operate efficiently, thereby facilitating continued growth and profitability;
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the Talmer Board of Directors’ views
with respect to other potential Talmer strategic alternatives, including remaining independent, making acquisitions, pursuing other
similarly-sized merger partners and pursuing larger merger partners;
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the Talmer Board of Directors’ views
with respect to the value of the merger consideration to Talmer’s shareholders, including: the implied net present value
of the merger consideration (based on (i) 2016 and 2017 EPS consensus “street estimates” for Chemical and dividend
and long term net income and balance sheet growth rate assumptions for
Chemical provided by Chemical management, (ii) financial forecasts and projections relating to Talmer prepared by Talmer
management, and (iii) pro forma assumptions (including purchase accounting adjustments, cost savings and related expenses)
prepared by Talmer management in consultation with Chemical management) compared to the implied net present value of
Talmer’s common stock if Talmer were to remain an independent company (based on Talmer’s internal management
financial forecasts and projections) and as compared to recent Talmer share trading prices;
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the form and amount of the merger consideration,
including the tax effects of stock merger consideration;
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the fact that Talmer shareholders would
own approximately 45% of the combined company;
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the fact that five of the 12 total directors
of the combined company would be current Talmer directors (including Messrs. Torgow and Provost);
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the results of Talmer’s exploration
of possible merger partners other than Chemical, the Talmer Board of Directors’ views based on years of strategic combination
discussions and evaluations, with respect to the likelihood of any such other merger occurring and providing greater value to Talmer
shareholders, and the ability of the combined company to explore potential merger opportunities and for current Talmer shareholders,
as Chemical shareholders following the Talmer merger with Chemical, to participate in the financial benefits of any such combined
company merger;
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the views of the Talmer Board of Directors
as to the potential of the combined company’s strong position in Michigan and adjacent markets to make it an attractive acquisition
candidate;
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the views of the Talmer Board of Directors
with respect to the complementary aspects of the businesses of Talmer and Chemical, including geographic focus, business lines
and compatibility of management philosophies with respect to credit quality, operating performance and expenses, which the Talmer
Board of Directors believes should facilitate integration and enhance the likelihood of successful post-merger operations;
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the views of the Talmer Board of Directors
as to the ability of Chemical’s and Talmer’s management teams to successfully integrate and operate the business of
the combined company after the merger;
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the continued participation from both merger
parties in the management team and board of directors of the combined company, which increases the likelihood that the expected
benefits of the merger will be realized;
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the potential revenue synergy opportunities
resulting from the merger, including opportunities to cross-sell expanded products and services to a larger combined customer base
and to larger customers;
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the potential cost-saving opportunities
resulting from the merger which were estimated to be approximately $52 million per year, with 50% of these savings expected to
be achieved in the first year after the merger and the full amount to be achieved in subsequent years;
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the Talmer Board of Directors’ understanding
of Chemical’s commitment to its strategic position in Michigan and in the Midwest region, and the Talmer Board of Directors’
views as to the potential of the combined company to serve, and to compete effectively in, its markets;
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Chemical’s historical performance
and asset quality, and the views of the Talmer Board of Directors as to the stability of the combined company’s business
and earnings in varying economic and market climates;
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the views of the Talmer Board of Directors
as to the likelihood that the regulatory approvals necessary to complete the merger would be obtained;
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the views of the Talmer Board of Directors
as to the potential pro-forma impact of the merger on the future profitability and earnings per share of Chemical and the potential
impact of such factors on Chemical’s stock price;
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the potential increased demand among index
funds and other large investors for the stock of the combined company, which stock is expected to be more liquid than the stock
of Talmer or Chemical on a standalone basis, and the potential for stock price appreciation as a result;
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the potential trading peer group for the
combined company and potential increased trading multiple to earnings for the combined company compared to the multiplier at which
Chemical’s stock was trading on a standalone basis;
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the financial presentation, dated January
25, 2016, of KBW to the Talmer Board of Directors and opinion, dated January 25, 2016, of KBW to the Talmer Board of Directors
as to the fairness, from a financial point of view and as of the date of the opinion, to the holders of Talmer common stock of
the merger consideration in the proposed merger, as more fully described below under “Opinion of Talmer’s Financial
Advisor in connection with the Merger;” and
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the terms of the merger agreement, including
the tax treatment and transaction protection provisions provided by the merger agreement, including:
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the ability of Talmer’s Board of Directors
to withdraw its recommendation to Talmer’s shareholders under certain circumstances to accept a superior business combination
proposal (and the fact that the voting support agreements signed by Talmer directors terminate upon any change of the Talmer Board
of Directors’ recommendation with respect to the merger with Chemical); and
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the ability of Talmer’s Board of Directors
to terminate the merger agreement in order to enter into a definitive agreement with respect to a superior proposal (subject to
payment of a $34 million termination fee, which termination fee was lower, as a percentage of transaction value, than the average
termination fee in selected transactions reviewed by the Talmer Board of Directors).
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The Talmer Board
of Directors also considered a variety of risks and other potentially negative factors concerning the merger, including the following,
which are not intended to be exhaustive and are not presented in any relative order of importance:
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that the exchange ratio for the stock portion
of the merger consideration is fixed, so that if the market price of Chemical common stock is lower at the time of the closing
of the merger, the economic value of the per share merger consideration to be received by Talmer’s shareholders in exchange
for their shares of Talmer common stock will also be lower;
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the fact that the estimated value of the
merger consideration as of January 25, 2016 represented a discount to the closing price of Talmer common stock on the preceding
trading day;
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the possibility that the merger and the
related integration process could result in the loss of key employees, in the disruption of Talmer’s ongoing business and
in the loss of customers for the combined company;
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there can be no assurance that all conditions
to the parties’ obligations to complete the merger agreement will be satisfied, including the risk that certain regulatory
approvals, the receipt of which are conditions to
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the consummation of the merger, might not be obtained, and, as a result, that
the merger might not be consummated;
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the fact that Talmer’s officers and
employees would have to focus on actions required to complete the merger, which would divert their attention from Talmer’s
day-to-day business, and that Talmer will incur substantial transaction costs even if the merger is not consummated;
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the risk that potential benefits and synergies
sought in the merger might not be realized or might not be realized within the expected time period, and the risks associated with
the integration of the two companies;
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the restrictions on the conduct of Talmer’s
business prior to the completion of the merger, which are customary for public company merger agreements involving financial institutions,
but which, subject to specific exceptions, could delay or prevent Talmer from undertaking business opportunities that might arise
or any other action it would otherwise take with respect to the operations of Talmer absent the pending completion of the merger;
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the significant risks and costs involved
in connection with entering into and completing the merger, or failing to complete the merger in a timely manner, or at all, including
as a result of any failure to obtain required regulatory approvals, such as the risks and costs relating to diversion of management
and employee attention from other strategic opportunities and operational matters, potential employee attrition, and the potential
effect on business and customer relationships;
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the fact that shareholder litigation is
common in connection with public company mergers;
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the fact that Talmer would be prohibited
from affirmatively soliciting acquisition proposals after execution of the merger agreement, and the possibility that, while it
was not viewed as precluding other proposals, the $34 million termination fee payable by Talmer upon the termination of the merger
agreement under certain circumstances could potentially dampen the interest of other potential acquirers in making a competing
offer to acquire Talmer; and
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the fact that Talmer shareholders would
not be entitled to dissenters’ rights in connection with the merger.
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In addition, the
Talmer Board of Directors was aware of and considered the fact that some of Talmer’s directors and executive officers may
have other interests in the merger that may be different from, or in addition to, their interests as Talmer shareholders, as more
fully described under “—Interests of Talmer’s Directors and Executive Officers in the Merger.” The Talmer
Board of Directors also realized that there can be no assurance about future results, including results expected or considered
in the factors listed above. However, the Board of Directors concluded that the potential positive factors outweighed the risks
and other potentially negative factors associated with the merger.
In reaching its
conclusion, the Talmer Board of Directors did not find it practical to assign, and did not assign, any relative or specific weight
to the different factors that were considered, and individual members of the Talmer Board of Directors may have given different
weight to different factors. It should be noted that the explanation of the reasoning of the Talmer Board of Directors and certain
information presented in this section is forward-looking in nature and should be read in light of the factors set forth in the
section entitled “Special Note Regarding Forward-Looking Statements.”
The Talmer Board
of Directors unanimously adopted the merger agreement and recommends that you vote “FOR” approval of the merger agreement.
Each of the
Talmer directors has entered into a voting and support agreement with Chemical, pursuant to which they have agreed to vote in
favor of the merger agreement at the special meeting. For more information regarding the voting and support agreements, please
see the section entitled “The Merger — Support Agreements” beginning on page 95.
Chemical’s Reasons
for the Merger and Recommendation of the Chemical Board of Directors
In adopting the
merger agreement and recommending approval of the Chemical proposals set forth in this joint proxy statement and prospectus, the
Chemical board of directors consulted with members of Chemical’s management and with Chemical’s legal, financial, and
business advisors, and also considered a number of factors that the Chemical board of directors viewed as supporting its decisions.
The principal factors that the Chemical board of directors viewed as supporting its decisions are:
|
·
|
the
belief that the merger will create the preeminent Michigan-based banking franchise;
|
|
·
|
the
fact that the merger will create the largest community bank headquartered in Michigan,
with approximately $16 billion in total assets, $12 billion in total loans and $13 billion
in total deposits and 266 locations primarily in Michigan and northeast Ohio as of December
31, 2015;
|
|
·
|
the
fact that the merger will allow Chemical to make a marked entry into southeast Michigan
and expand for the first time beyond Michigan’s borders;
|
|
·
|
the
belief that, in Talmer, Chemical will be partnering with a like-minded, growth-oriented
organization that shares a conservative lending culture built by talented and experienced
professionals who seek to develop and support long-term customer relationships with businesses
and consumers who reside in the communities they serve;
|
|
·
|
the
belief that the combined organization will add increased talent and scale and established
track records for acquisitive and organic growth resulting in continued growth;
|
|
·
|
the
belief that the merger will allow the combined organization to more effectively and efficiently
navigate the challenges and costs associated with becoming a larger financial institution;
|
|
·
|
the
belief that the merger allows Chemical to efficiently and meaningfully cross the $10 billion in total
assets threshold, which will result in additional regulatory burden and associated costs and expenses, including debit card interchange
fee limitations, Consumer Financial Protection Bureau oversight, additional stress testing requirements and potential surcharges
levied by the FDIC, because the additional regulatory burden and associated costs and expenses are expected to be mitigated due
to the economies of scale provided by the size of the combined company following the merger;
|
|
·
|
the
expectation that the merger will result in complementary strengths in specialty business
lines, such as wealth management and mortgage banking, leading to organic growth opportunities
across the combined organization’s expanded franchise;
|
|
·
|
the
fact that the merger will result in the combined organization having material scale in
nearly all of the lower peninsula of Michigan and immediate scale in northeastern Ohio;
|
|
·
|
the
expectation that the merger will result in approximately 8% accretion to Chemical earnings
per share in the first full year and a tangible book value earn-back period of 3.25 years;
|
|
·
|
the
fact that the combined organization will have a deep, experienced team based on management
strengths of Chemical and Talmer;
|
|
·
|
the
expectation that the combined company will have a comprehensive retail branch delivery
system in Michigan, which will offer access to new customers and markets;
|
|
·
|
the
compatible cultures of Chemical and Talmer, with similar strategies, customer focus,
strong service and community orientation;
|
|
·
|
the
potential opportunities for greater efficiencies from conducting Chemical’s and
Talmer’s operations as part of a single enterprise;
|
|
·
|
the
board of directors’ belief that the merger represents a superior opportunity for
increasing shareholder value compared to the other strategic alternatives available to
Chemical;
|
|
·
|
the
expectation that the combined company will have increased resources to invest in future
growth opportunities in comparison to Chemical on a stand-alone basis; and
|
|
·
|
the
opinion of Sandler O’Neill, dated January 25, 2016, addressed to Chemical’s
board of directors as to the fairness, from a financial point of view, of the merger
consideration to Chemical, as more fully described below under the caption “Opinion
of Chemical’s Financial Advisor.”
|
In
addition to considering the factors described above, the Chemical board of directors also considered the following factors:
|
·
|
its
knowledge of Chemical’s business, operations, financial condition, earnings and
prospects and its knowledge of Talmer’s business, operations, financial condition,
earnings and prospects, taking into account Talmer’s publicly-filed information
and the results of Chemical’s due diligence review of Talmer;
|
|
·
|
the
long-term and recent historical trading prices with respect to Chemical common stock
and Talmer Class A common stock and the type and amount of the merger consideration;
|
|
·
|
the
fact that the exchange ratio is fixed and will not fluctuate based upon changes in the
market price of Chemical common stock or Talmer Class A common stock between the date
of the merger agreement and the date of the completion of the merger;
|
|
·
|
the
terms and conditions of the merger agreement, including the commitments by both Chemical
and Talmer to complete the merger and certain reciprocal provisions that may have the
effect of discouraging alternative acquisition proposals involving Talmer or Chemical,
and the likelihood of completing the merger; and
|
|
·
|
the
fact that the merger agreement does not preclude a third party from making an unsolicited
proposal for a competing transaction with Chemical or Talmer and, that under certain
circumstances, Chemical or Talmer, as applicable, may furnish non-public information
to and enter into discussions with such third party regarding an alternative transaction
and the Chemical or Talmer board, as applicable, may withdraw or modify its recommendations
to Chemical or Talmer shareholders regarding the merger and terminate the merger agreement
to enter into an alternative transaction under certain circumstances.
|
The
Chemical board of directors weighed the foregoing against a number of potentially negative factors, including:
|
·
|
the
restrictions on the conduct of Chemical’s business during the period between the
execution of the merger agreement and the completion of the merger;
|
|
·
|
the
costs associated with the completion of the merger and the realization of the benefits
expected to be obtained in connection with the merger, including management’s time
and energy and potential opportunity cost;
|
|
·
|
the
challenges in absorbing the effect of any failure to complete the merger, including potential
termination fees and shareholder and market reactions;
|
|
·
|
the
risk that regulatory agencies may not approve the merger or may impose terms and conditions
on their approvals that adversely affect the business and financial results of the combined
company;
|
|
·
|
the
challenges inherent in the combination of two businesses of the size and complexity of
Chemical and Talmer, including the possible diversion of management attention for an
extended period of time;
|
|
·
|
the
risk of not being able to realize all of the anticipated cost savings and operational
synergies between Chemical and Talmer and the risk that other anticipated benefits might
not be realized; and
|
|
·
|
the
risks of the type and nature described under “Risk Factors,” beginning on
page 24, and the matters described under “Special Note Regarding Forward-Looking
Statements,” beginning on page 23.
|
This
discussion of the information and factors considered by Chemical’s board of directors in reaching its conclusions and recommendation
includes the principal factors considered by the board of directors, but is not intended to be exhaustive and may not include
all of the factors considered by the Chemical board of directors. In view of the wide variety of factors considered in connection
with its evaluation of the merger and the other transactions contemplated by the merger agreement, and the complexity of these
matters, the Chemical board of directors did not find it useful and did not attempt to quantify, rank or assign any relative or
specific weights to the various factors that it considered in reaching its determination to approve the merger and the other transactions
contemplated by the merger agreement, and to make its recommendation to Chemical shareholders. Rather, the Chemical board of directors
viewed its decisions as being based on the totality of the information presented to it and the factors it considered, including
its discussions with and questioning of members of Chemical’s management and outside legal and financial advisors. In addition,
individual members of the Chemical board of directors may have assigned different weights to different factors.
Certain
of Chemical’s directors and executive officers have financial interests in the merger that are different from, or in addition
to, those of Chemical’s shareholders generally, as discussed under the caption “The Merger – Interests of Certain
Chemical Directors and Executive Officers in the Merger,” below. The Chemical board of directors was aware of and considered
these potential interests, among other matters, in evaluating the merger and in making its recommendation to Chemical shareholders.
The
Chemical board of directors unanimously adopted the merger agreement, authorized the merger and the other transactions contemplated
by the merger agreement, and determined that the merger and the other transactions contemplated by the merger agreement, including
the issuance of shares of Chemical common stock to Talmer shareholders in connection with the merger, are in the best interests
of Chemical and its shareholders. Accordingly, the Chemical board of directors unanimously recommends that Chemical shareholders
vote “FOR” the proposal to approve the merger agreement, “FOR” the proposal to approve the issuance of
shares of Chemical common stock to Talmer shareholders in connection with the merger, “FOR” the proposal to approve
the amendment to Chemical’s Articles of Incorporation to increase the number of shares of Chemical’s common stock,
“FOR” the Chemical merger-related compensation proposal, and “FOR” the Chemical adjournment proposal.
Opinion
of Chemical’s Financial Advisor in Connection with the Merger
Chemical
retained Sandler O’Neill to act as an independent financial advisor to the Chemical board of directors in connection with
Chemical’s consideration of a possible business combination. Sandler O’Neill is a nationally recognized investment
banking firm whose principal business specialty is advising financial institutions. In the ordinary course of its investment banking
business, Sandler O’Neill is regularly engaged in the valuation of financial institutions and their securities in connection
with mergers and acquisitions and other corporate transactions. The Chemical board of directors also considered the fact that
Sandler O’Neill is familiar with Chemical and its business, as Sandler O’Neill has provided investment banking services
to Chemical in the past.
Sandler
O’Neill acted as financial advisor in connection with the proposed merger and participated in certain of the negotiations
leading to the execution of the merger agreement. At the January 25, 2016 meeting at which the Chemical board of directors considered
and adopted the merger agreement and authorized and approved the merger, Sandler O’Neill delivered to the Chemical board
of directors its oral opinion, which was subsequently confirmed in writing, that, as of such date, the merger consideration was
fair to Chemical from a financial point of view
. The full text of Sandler O’Neill’s opinion is attached as Annex
C to this joint proxy statement and prospectus. The opinion outlines the procedures followed, assumptions made, matters considered
and
qualifications and limitations on the review undertaken by Sandler O’Neill in rendering its opinion. The description
of the opinion set forth below is qualified in its entirety by reference to the full text of the opinion.
Holders
of Chemical common stock are urged to read the entire opinion carefully in connection with their consideration of the merger agreement
and the merger.
Sandler
O’Neill’s opinion speaks only as of the date of the opinion. The opinion was directed to the Chemical board of directors
in connection with its consideration of the merger agreement and the merger and is directed only to the fairness, from a financial
point of view, of the merger consideration to Chemical. Sandler O’Neill’s opinion does not constitute a recommendation
to any holder of Chemical common stock as to how such holder of Chemical common stock should vote with respect to the merger agreement
and the merger or any other matter. It does not address the underlying business decision of Chemical to engage in the merger,
the relative merits of the merger as compared to any other alternative business strategies that might exist for Chemical or the
effect of any other transaction in which Chemical might engage.
Sandler O’Neill did not express any opinion as to the
fairness of the amount or nature of the compensation to be received in the merger by any Chemical or Talmer officer, director,
or employee, or class of such persons, if any, relative to the amount of any compensation to be received by any other shareholder.
Sandler O’Neill’s opinion was approved by Sandler O’Neill’s fairness opinion committee.
In
connection with rendering its opinion, Sandler O’Neill reviewed and considered, among other things:
|
·
|
a
draft of the merger agreement dated January 25, 2016;
|
|
·
|
certain
publicly available financial statements and other historical financial information of
Chemical that Sandler O’Neill deemed relevant;
|
|
·
|
certain
publicly available financial statements and other historical financial information of
Talmer that Sandler O’Neill deemed relevant;
|
|
·
|
publicly
available consensus mean analyst earnings per share estimates for Chemical for the years
ending December 31, 2016 and December 31, 2017, as well as an estimated earnings per
share growth rate for the years thereafter, as provided by the senior management of Chemical;
|
|
·
|
publicly
available consensus mean analyst earnings per share estimates for Talmer for the years
ending December 31, 2016 and December 31, 2017, as well as an estimated earnings per
share growth rate for the years thereafter, as provided by the senior management of Talmer;
|
|
·
|
the
pro forma financial impact of the merger on Chemical based on assumptions related to
transaction expenses, purchase accounting adjustments, regulatory costs and cost savings,
as provided by the senior management of Chemical;
|
|
·
|
the
publicly reported historical price and trading activity for Chemical and Talmer Class
A common stock, including a comparison of certain financial and stock market information
for Chemical and Talmer Class A common stock and certain stock indices as well as similar
publicly available information for certain other companies, the securities of which are
publicly traded;
|
|
·
|
a
comparison of certain financial information for Chemical and Talmer with similar bank
institutions for which publicly available information is available;
|
|
·
|
the
financial terms of certain other recent business combinations in the commercial banking
industry on a national basis, to the extent publicly available; and
|
|
·
|
the
current market environment generally and the banking environment in particular.
|
Sandler
O’Neill also discussed with certain members of the senior management of Chemical the business, financial condition, results
of operations and prospects of Chemical and held similar discussions with certain
members of the senior management of Talmer regarding
the business, financial condition, results of operations and prospects of Talmer.
In performing its
review, Sandler O’Neill relied upon the accuracy and completeness of all of the financial and other information that was
available to and reviewed by it from public sources, that was provided to it by Chemical or Talmer, or their respective representatives,
or that was otherwise reviewed by it, and Sandler O’Neill assumed such accuracy and completeness for purposes of rendering
its opinion without any independent verification or investigation. Sandler O’Neill relied, at the direction of Chemical,
without independent verification or investigation, on the assessments of the management of Chemical as to its existing and future
relationships with key employees and partners, clients, products and services and assumed, with the consent of Chemical, that
there would be no developments with respect to any such matters that would affect Sandler O’Neill’s analyses or opinion.
Sandler O’Neill further relied on the assurances of the respective managements of Chemical and Talmer that they were not
aware of any facts or circumstances that would have made any of such information inaccurate or misleading. Sandler O’Neill
was not asked to undertake, and did not undertake, an independent verification of any such information and did not assume any
responsibility or liability for the accuracy and completeness thereof. Sandler O’Neill did not make an independent evaluation
or appraisal of the specific assets, the collateral securing assets or the liabilities (contingent or otherwise) of Chemical or
Talmer, or any of their respective subsidiaries, nor was Sandler O’Neill furnished with any such evaluations or appraisals.
Sandler O’Neill rendered no opinion or evaluation on the collectability of any assets or the future performance of any loans
of Chemical or Talmer. Sandler O’Neill did not make an independent evaluation of the adequacy of the allowance for loan
losses of Chemical or Talmer, or the combined entity after the merger, and did not review any individual credit files related
to Chemical or Talmer. Sandler O’Neill assumed, with Chemical’s consent, that the respective allowances for loan losses
for both Chemical and Talmer were adequate to cover such losses and would be adequate on a pro forma basis for the combined entity.
In preparing its
analyses, Sandler O’Neill used publicly available consensus mean analyst earnings per share estimates for Chemical for the
years ending December 31, 2016 and December 31, 2017, as well as an estimated earnings per share growth rate for the years thereafter,
as provided by the senior management of Chemical, as well as publicly available consensus mean analyst earnings per share estimates
for Talmer for the years ending December 31, 2016 and December 31, 2017, as well as an estimated earnings per share growth rate
for the years thereafter, as provided by the senior management of Talmer. Sandler O’Neill also received and used in its pro
forma analyses certain assumptions relating to transaction expenses, purchase accounting adjustments, regulatory costs and cost
savings, as provided by the senior management of Chemical. With respect to the foregoing information, the senior managements of
Chemical and Talmer confirmed to Sandler O’Neill that such information reflected (or, in the case of the publicly available
mean analyst earnings per share estimates referred to above, were consistent with) the best currently available estimates and judgments
of the senior managements of Chemical and Talmer, respectively, and Sandler O’Neill assumed that the financial results reflected
in such information would be achieved. Sandler O’Neill expressed no opinion as to such estimates or judgments, or the assumptions
on which they were based. Sandler O’Neill also assumed that there had been no material change in Chemical’s or Talmer’s
assets, financial condition, results of operations, business or prospects since the date of the most recent financial statements
made available to Sandler O’Neill. Sandler O’Neill assumed in all respects material to its analysis that Chemical and
Talmer would remain as going concerns for all periods relevant to its analyses.
Sandler O’Neill
also assumed, with Chemical’s consent, that (i) each of the parties to the merger agreement would comply in all material
respects with all material terms of the merger agreement and all related agreements, that all of the representations and warranties
contained in such agreements were true and correct in all material respects, that each of the parties to such agreements would
perform in all material respects all of the covenants and other obligations required to be performed by such party under such
agreements and that the conditions precedent in such agreements were not waived, (ii) in the course of obtaining the necessary
regulatory or third party approvals, consents and releases with respect to the merger, no delay, limitation, restriction or condition
would be imposed that would have an adverse effect on Chemical, Talmer or the merger or any related transaction, (iii) the merger
and any related transactions would be consummated in accordance with the terms of the merger agreement without any waiver, modification
or amendment of any material term, condition or agreement thereof and in compliance with all applicable laws and other requirements,
and (iv) the
merger would
qualify
as
a
tax-free
reorganization
for
federal income
tax
purposes. Finally, with Chemical’s consent, Sandler O’Neill relied
upon the advice that Chemical
received from its lega
l
,
accounting or
tax
advisors as to
all legal, accounting and tax matters relating to
the merger and the
other transactions
contemplated
by
the merger agreement.
Sandler O’Neill’s
analyses and the views expressed therein are necessarily based on financial, economic, market and other conditions as in effect
on, and the information made available to Sandler O’Neill as of, the date of its opinion. Events occurring after the date
of the opinion could materially affect Sandler O’Neill’s views. Sandler O’Neill has not undertaken to update,
revise, reaffirm or withdraw its opinion or otherwise comment upon events occurring after the date thereof. Sandler O’Neill
expressed no opinion as to the trading values of Chemical common stock or Talmer Class A common stock after the date of its opinion
or what the value of Chemical common stock would be once it is actually received by the holders of Talmer Class A common stock.
In rendering its
opinion, Sandler O’Neill performed a variety of financial analyses. The summary below is not a complete description of all
of the analyses underlying Sandler O’Neill’s opinion or the presentation made by Sandler O’Neill to the Chemical
board of directors, but is a summary of the material analyses performed and presented by Sandler O’Neill. The summary includes
information presented in tabular format.
In order to fully understand the financial analyses, these tables must be read together
with the accompanying text. The tables alone do not constitute a complete description of the financial analyses.
The preparation
of a fairness opinion is a complex process involving subjective judgments as to the most appropriate and relevant methods of financial
analysis and the application of those methods to the particular circumstances. The process, therefore, is not necessarily susceptible
to a partial analysis or summary description. Sandler O’Neill believes that its analyses must be considered as a whole and
that selecting portions of the factors and analyses to be considered without considering all factors and analyses, or attempting
to ascribe relative weights to some or all such factors and analyses, could create an incomplete view of the evaluation process
underlying its opinion. Also, no company included in Sandler O’Neill’s comparative analyses described below is identical
to Chemical or Talmer and no transaction is identical to the merger. Accordingly, an analysis of comparable companies or transactions
involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies
and other factors that could affect the public trading values or merger transaction values, as the case may be, of Chemical and
Talmer and the companies to which they are being compared. In arriving at its opinion, Sandler O’Neill did not attribute
any particular weight to any analysis or factor that it considered. Rather, Sandler O’Neill made qualitative judgments as
to the significance and relevance of each analysis and factor. Sandler O’Neill did not form an opinion as to whether any
individual analysis or factor (positive or negative) considered in isolation supported or failed to support its opinion, rather,
Sandler O’Neill made its determination as to the fairness of the merger consideration on the basis of its experience and
professional judgment after considering the results of all its analyses taken as a whole.
In performing its
analyses, Sandler O’Neill also made numerous assumptions with respect to industry performance, business and economic conditions
and various other matters, many of which cannot be predicted and are beyond the control of Chemical, Talmer and Sandler O’Neill.
The analyses performed by Sandler O’Neill are not necessarily indicative of actual values or future results, both of which
may be significantly more or less favorable than suggested by such analyses. Sandler O’Neill prepared its analyses solely
for purposes of rendering its opinion and provided such analyses to the Chemical board of directors at its January 25, 2016 meeting.
Estimates on the values of companies do not purport to be appraisals or necessarily reflect the prices at which companies or their
securities may actually be sold. Such estimates are inherently subject to uncertainty and actual values may be materially different.
Accordingly, Sandler O’Neill’s analyses do not necessarily reflect the value of Chemical common stock or the prices
at which Chemical or Talmer Class A common stock may be sold at any time. The analyses of Sandler O’Neill and its opinion
were among a number of factors taken into consideration by the Chemical board of directors in making its determination to adopt
the merger agreement and authorize and approve the merger and the analyses described below should not be viewed as determinative
of the decision of the Chemical board of directors or management with respect to the fairness of the merger.
Summary
of Proposed Merger Consideration and Implied Transaction Metrics.
Sandler O’Neill reviewed the financial terms
of the merger. As described in the merger agreement, each share of Talmer Class A common stock issued and outstanding
immediately prior to the effective time of the merger, other than certain shares described in the merger agreement which will
be cancelled without any consideration delivered in exchange therefor, will be converted into the right to receive $1.61 in
cash, without interest, and 0.4725 shares of Chemical common stock. Based upon Chemical’s price per share of common
stock of $30.69 as of January 22, 2016, Sandler O’Neill calculated an aggregate implied transaction value of
approximately $1.1 billion, or $16.11 per share. Based
upon Chemical’s 1-month volume
weighted average price per share of common stock of $32.52 as of January 22, 2016, Sandler O’Neill calculated an aggregate
implied transaction value of approximately $1.2 billion, or $16.97 per share. The aggregate implied transaction value was calculated
assuming, at the direction of Chemical and Talmer’s senior management, 66,114,798 outstanding shares of Talmer Class A common
stock and 7,235,424 outstanding Talmer Class A common stock options with a weighted average exercise price of $6.97 per share,
as of December 31, 2015, and assuming 75% of the outstanding Talmer stock options are converted into Chemical options and 25%
are cashed out, based upon guidance of Talmer and Chemical senior management. Based upon financial information for Talmer as of
or for the period ending December 31, 2015 (unless otherwise indicated), Sandler O’Neill calculated the following implied
transaction metrics:
|
Chemical
common stock
price of $30.69
|
|
Chemical 1-
Month Volume
weighted average
common stock
price of
$32.52
|
Transaction Price / Book Value Per Share:
|
147%
|
|
155%
|
Transaction Price / Tangible Book Value Per Share:
|
150%
|
|
158%
|
Transaction Price / 2015 Earnings Per Share:
|
19.9x
|
|
21.0x
|
Transaction Price / 2016 Estimated Earnings Per Share
(1)
:
|
13.1x
|
|
13.8x
|
Transaction Price / 2017 Estimated Earnings Per Share
(1)
:
|
11.8x
|
|
12.5x
|
Tangible Book Premium / Core Deposits
(2)
:
|
10.8%
|
|
12.4%
|
Market
Premium
(3)
:
|
(2.5%
|
)
|
2.7%
|
___________________
(1)
|
Based on mean analyst earnings per share estimates as provided by Bloomberg.
|
(2)
|
Core deposits defined as total deposits, less time deposit accounts with a balance of at least $100,000.
|
(3)
|
Talmer closing price of $16.52 per share as of January 22, 2016.
|
Stock Trading
History.
Sandler O’Neill reviewed the history of the publicly reported trading prices of Chemical common stock for
the three-year period ended January 22, 2016 and Talmer Class A common stock for the period beginning February 11, 2014, the first
trading day following Talmer’s initial public offering of common stock, and ending January 22, 2016. Sandler O’Neill
then compared the relationship between the movements in the price of Chemical and Talmer Class A common stock, respectively, to
movements in their respective peer groups, as well as certain stock indices.
Chemical’s Three Year Stock Performance
|
Beginning Value
January 22, 2013
|
Ending Value
January 22, 2016
|
Chemical
|
100%
|
124.4%
|
NASDAQ Bank Index
|
100%
|
126.9%
|
Chemical Peer Group
|
100%
|
121.6%
|
Talmer’s Stock Performance Since
Initial Public Offering
|
Beginning Value
February 11, 2014
|
Ending Value
January 22, 2016
|
Talmer
|
100%
|
127.1%
|
NASDAQ Bank Index
|
100%
|
100.6%
|
Talmer Peer Group
|
100%
|
110.0%
|
Comparable
Company Analysis.
Sandler O’Neill used publicly available information to compare selected financial information
for Chemical with a group of financial institutions selected by Sandler O’Neill. The Chemical peer group consisted of Midwest
banks whose securities trade on a major exchange with assets between $5.0 billion and $15.0 billion (the “Chemical Peer
Group”). The Chemical Peer Group excluded announced merger targets and
MB Financial due to its pending acquisition which
will result in total assets above the defined asset range. The Chemical Peer Group consisted of the following companies:
Old National Bancorp
|
Heartland Financial USA, Inc.
|
First Midwest Bancorp, Inc.
|
Talmer Bancorp, Inc.
|
Great Western Bancorp, Inc.
|
First Merchants Corporation
|
First Financial Bancorp.
|
1st Source Corporation
|
Park National Corporation
|
|
The analysis compared
publicly available financial information for Chemical as of or for the periods ending December 31, 2015 and September 30, 2015
with corresponding data for the Chemical Peer Group as of or for the period ending September 30, 2015 (unless otherwise indicated),
with pricing data as of January 22, 2016. The table below sets forth the data for Chemical and the median, mean, high and low data
for the Chemical Peer Group.
Comparable Company
Analysis
|
|
|
Chemical Peer Group
|
|
Chemical
12/31/15
|
Chemical
9/30/15
|
Median
|
Mean
|
High
|
Low
|
Total assets (in millions)
|
$9,189
|
$9,265
|
$7,300
|
$7,976
|
$11,915
|
$5,188
|
Tangible common equity/Tangible assets
|
7.91%
|
7.64%
|
8.50%
|
8.72%
|
10.96%
|
6.50%
|
Leverage ratio
|
8.62%
|
8.39%
|
9.29%
|
9.61%
|
12.23%
|
8.33%
|
Total risk-based capital ratio
|
11.78%
|
11.59%
|
13.24%
|
13.48%
|
14.97%
|
11.43%
|
LTM Return on average assets
|
1.02%
|
0.97%
|
1.00%
|
1.02%
|
1.16%
|
0.84%
|
LTM Return on average tangible common equity
|
13.0%
|
12.4%
|
13.1%
|
12.3%
|
15.2%
|
8.3%
|
LTM Net interest margin
|
3.58%
|
3.58%
|
3.74%
|
3.73%
|
3.94%
|
3.41%
|
LTM Efficiency ratio
|
59.8%
|
60.6%
|
63.0%
|
62.6%
|
71.1%
|
48.5%
|
Loan loss reserves/Gross loans
|
1.01%
|
1.05%
|
1.04%
|
1.17%
|
2.20%
|
0.75%
|
Non-performing assets
(1)
/Total assets
|
*
|
1.47%
|
0.84%
|
1.09%
|
1.76%
|
0.67%
|
Net charge-offs/Average loans
|
0.24%
|
0.05%
|
0.02%
|
0.03%
|
0.18%
|
(0.11%)
|
Price/Tangible book value
|
163%
|
168%
|
157%
|
158%
|
202%
|
129%
|
Price/Book value
|
115%
|
117%
|
112%
|
120%
|
182%
|
91%
|
Price/LTM Earnings per share
|
12.8x
|
14.1x
|
12.8x
|
13.9x
|
21.2x
|
9.7x
|
Price/FY1 Est. Earnings per share
(2)
|
11.4x
|
12.3x
|
12.3x
|
12.9x
|
16.7x
|
9.7x
|
Price/FY2 Est. Earnings per share
(2)
|
10.7x
|
11.4x
|
11.6x
|
11.7x
|
15.0x
|
9.6x
|
Current Dividend Yield
|
3.4%
|
3.4%
|
2.3%
|
2.6%
|
4.4%
|
0.2%
|
LTM Dividend Ratio
|
45.0%
|
45.0%
|
30.9%
|
32.7%
|
68.6%
|
5.1%
|
Market value (in millions)
|
$1,170
|
$1,170
|
$1,092
|
$1,059
|
$1,334
|
$612
|
___________________
(1)
|
Nonperforming assets include nonaccrual loans and leases, renegotiated loans and leases and real estate owned.
|
(2)
|
FY1 EPS estimate represents 2015 EPS estimate for companies not having reported December 31, 2015 financial results, and 2016 EPS estimates where December 31, 2015 results have been reported. FY2 EPS estimate represents 2016 EPS estimates for companies not having reported December 31, 2015 financial results, and 2017 EPS estimates where December 31, 2015 results have been reported. Great Western Bancorp, Inc.’s FY1 estimate represents 2016 fiscal year ending September 30, 2016 and FY2 estimate represents fiscal year ending September 30, 2017.
|
*
|
Indicates financial metric is unavailable or has been provided by Chemical management but is not comparable to data provided by SNL Financial.
|
Source: SNL Financial and Chemical
senior management.
|
Note:
|
LTM defined as last-twelve-months; Financial data for First Financial Bancorp and 1st Source Corporation
as of December 31, 2015; First Financial Bancorp’s Leverage Ratio, ROATCE and NPAs/Total Assets data as of September 30,
2015; 1st Source Corporation’s Leverage Ratio and NPAs/Total Assets data as of September 30, 2015.
|
Sandler O’Neill
used publicly available information to perform a similar analysis for Talmer and a group of financial institutions, as selected
by Sandler O’Neill. Talmer’s peer group consisted of Midwest banks whose securities trade on a major exchange with
assets between $3.0 billion and $10.0 billion (the “Talmer Peer Group”). The Talmer Peer Group excluded companies with
supervoting structures and announced merger targets. The Talmer Peer Group consisted of the following companies:
First Midwest Bancorp, Inc.
|
Great Southern Bancorp, Inc.
|
Great Western Bancorp, Inc.
|
Community Trust Bancorp, Inc.
|
Chemical Financial Corporation
|
First Busey Corporation
|
First Financial Bancorp.
|
Lakeland Financial Corporation
|
Park National Corporation
|
Enterprise Financial Services Corp
|
Heartland Financial USA, Inc.
|
MainSource Financial Group, Inc.
|
First Merchants Corporation
|
Peoples Bancorp Inc.
|
1st Source Corporation
|
|
The analysis compared
publicly available financial information for Talmer as of or for the periods ending September 30, 2015 and December 31, 2015 with
corresponding data for the Talmer Peer Group as of or for the period ending September 30, 2015 (unless otherwise indicated), with
pricing data as of January 22, 2016. The table below sets forth the data for Talmer and the median, mean, high and low data for
the Talmer Peer Group.
Comparable Company
Analysis
|
|
|
Talmer Peer Group
|
|
Talmer
12/31/15
|
Talmer
9/30/15
|
Median
|
Mean
|
High
|
Low
|
Total assets (in millions)
|
$6,596
|
$6,504
|
$5,188
|
$5,883
|
$9,935
|
$3,229
|
Tangible common equity/Tangible assets
|
10.77%
|
10.76%
|
8.90%
|
8.95%
|
10.96%
|
6.50%
|
Leverage ratio
|
10.21%
|
10.21%
|
10.14%
|
10.16%
|
12.40%
|
8.33%
|
Total risk-based capital ratio
|
13.00%
|
13.20%
|
13.79%
|
14.07%
|
17.95%
|
11.43%
|
LTM Return on average assets
|
0.95%
|
0.96%
|
1.04%
|
1.02%
|
1.29%
|
0.43%
|
LTM Return on average tangible common equity
|
*
|
8.3%
|
11.8%
|
11.9%
|
15.2%
|
5.8%
|
LTM Net interest margin
|
3.73%
|
3.74%
|
3.72%
|
3.70%
|
4.53%
|
3.07%
|
LTM Efficiency ratio
|
*
|
69.5%
|
60.6%
|
60.8%
|
71.1%
|
48.5%
|
Loan loss reserves/Gross loans
|
1.12%
|
1.16%
|
1.14%
|
1.28%
|
2.20%
|
0.78%
|
Non-performing assets
(1)
/Total assets
|
*
|
1.44%
|
0.83%
|
1.06%
|
2.73%
|
0.30%
|
Net charge-offs/Average loans
|
(0.23%)
|
(0.11%)
|
0.10%
|
0.11%
|
0.38%
|
(0.05%)
|
Price/Tangible book value
|
154%
|
157%
|
158%
|
155%
|
202%
|
116%
|
Price/Book value
|
151%
|
153%
|
117%
|
125%
|
182%
|
75%
|
Price/LTM Earnings per share
|
20.4x
|
21.2x
|
13.4x
|
14.3x
|
23.6x
|
9.7x
|
Price/FY1 Est. Earnings per share
(2)
|
13.4x
|
16.7x
|
12.4x
|
13.2x
|
17.6x
|
9.7x
|
Price/FY2 Est. Earnings per share
(2)
|
12.1x
|
13.4x
|
11.6x
|
11.8x
|
15.0x
|
9.6x
|
Current Dividend Yield
|
0.2%
|
0.2%
|
2.6%
|
2.8%
|
4.4%
|
1.2%
|
LTM Dividend Ratio
|
5.1%
|
5.1%
|
33.8%
|
38.1%
|
82.2%
|
14.1%
|
Market value (in millions)
|
$1,092
|
$1,092
|
$672
|
$795
|
$1,324
|
$318
|
___________________
(1)
|
Nonperforming assets include nonaccrual loans and leases, renegotiated loans and leases and real estate owned.
|
(2)
|
FY1 EPS estimate represents 2015 EPS estimate for companies not having reported December 31, 2015 financial results, and 2016 EPS estimates where December 31, 2015 results were reported. FY2 EPS estimate represents 2016 EPS estimates for companies which had not reported December 31, 2015 financial results, and 2017 EPS estimates where December 31, 2015 results were reported. Great Western Bancorp, Inc.’s FY1 estimate represents 2016 fiscal year ending September 30, 2016 and FY2 estimate represents fiscal year ending September 30, 2017.
|
|
*
|
Indicates financial metric was unavailable or has been provided by Talmer management but is not comparable to data provided by SNL Financial.
|
Source: SNL Financial and Talmer
senior management.
|
Note:
|
LTM defined as last-twelve-months; Financial data for First Financial Bancorp, 1st Source Corporation,
Great Southern Bancorp, Inc. and Community Trust Bancorp, Inc. as of December 31, 2015; First Financial Bancorp’s Leverage
Ratio, LTM Return on average tangible common equity and Non-performing assets/total assets as of September 30, 2015; 1st Source
Corporation’s Leverage Ratio and non-performing assets/total assets as of September 30, 2015; Great Southern Bancorp, Inc.’s
non-performing assets/total assets as of September 30, 2015.
|
Analysis of
Selected Merger Transactions
.
Sandler O’Neill reviewed a group of selected merger and acquisition transactions.
The group consisted of nationwide bank and thrift transactions announced between January 1, 2013 and January 24, 2016 with reported
deal values over $100 million where pro forma target ownership was greater than 40% (the “Nationwide Precedent Transactions”).
The Nationwide Precedent
Transactions group was composed of the following transactions:
Acquiror
|
Target
|
BBCN Bancorp Inc.
|
Wilshire Bancorp Inc.
|
Nicolet Bankshares Inc.
|
Baylake Corp.
|
Yadkin Financial Corporation
|
VantageSouth Bancshares
|
Center Bancorp Inc.
|
ConnectOne Bancorp Inc.
|
Rockville Financial Inc.
|
United Financial Bancorp
|
Heritage Financial Corporation
|
Washington Banking Company
|
Umpqua Holdings Corporation
|
Sterling Financial Corporation
|
Mercantile Bank Corporation
|
Firstbank Corporation
|
Peoples Financial Services
|
Penseco Financial Services
|
Union First Market Bankshares Corporation
|
StellarOne Corporation
|
Provident New York Bancorp
|
Sterling Bancorp
|
Using the latest
publicly available information prior to the announcement of the relevant transaction, Sandler O’Neill reviewed the following
transaction metrics: transaction price to last-twelve-months earnings per share, transaction price to estimated earnings per share,
transaction price to book value per share, transaction price to tangible book value per share, tangible book premium to core deposits,
and 1-day market premium. Sandler O’Neill compared the indicated transaction metrics for the merger to the median, mean,
high and low metrics of the Nationwide Precedent Transactions group.
|
|
Nationwide Precedent Transactions
|
|
Chemical /
Talmer
|
Median
|
Mean
|
High
|
Low
|
Transaction price/LTM earnings per share:
|
19.9x
(1)
|
16.1x
|
17.1x
|
21.8x
|
13.9x
|
Transaction price/Estimated earnings per share:
|
13.1x
(2)
|
17.0x
|
16.9x
|
19.6x
|
13.1x
|
Transaction price/Book value per share:
|
147%
(3)
|
134%
|
140%
|
194%
|
103%
|
Transaction price/Tangible book value per share:
|
150%
(3)
|
149%
|
161%
|
224%
|
140%
|
Core deposit premium:
|
10.8%
(3)
|
7.5%
|
9.7%
|
22.9%
|
5.3%
|
1-Day market premium:
|
(2.5%)
|
14.5%
|
15.0%
|
26.1%
|
5.2%
|
___________________
(1)
|
Calculated using 2015 earnings per share.
|
(2)
|
Calculated using 2016 mean analyst estimated earnings per share per Bloomberg.
|
(3)
|
Calculated using December 31, 2015 book value and tangible book value per share.
|
Source: SNL Financial and Talmer senior
management.
Net Present
Value Analyses.
Sandler O’Neill performed an analysis that estimated the net present value per share of Chemical
common stock, assuming that Chemical performed in accordance with publicly available consensus mean analyst earnings per share
estimates for Chemical for the years ending December 31, 2016 through
December 31, 2017 as well as an estimated earnings per share
growth rate for the years thereafter, as provided by the senior management of Chemical. To approximate the terminal value of Chemical
common stock at December 31, 2020, Sandler O’Neill applied price to 2020 earnings multiples ranging from 11.0x to 16.0x and
multiples of December 31, 2020 tangible book value ranging from 125% to 175%. The terminal values were then discounted to present
values using different discount rates ranging from 8.0% to 12.0% when applied to 2020 earnings multiples and 8.0% to 12.0% when
applied to multiples of December 31, 2020 tangible book value, which were chosen to reflect different assumptions regarding required
rates of return of holders or prospective buyers of Chemical common stock. As illustrated in the following tables, the analysis
indicated an imputed range of values per share of Chemical common stock of $26.28 to $43.06 when applying earnings multiples and
$24.52 to $38.66 when applying multiples of tangible book value.
Earnings Per Share Multiples
Discount
Rate
|
11.0x
|
12.0x
|
13.0x
|
14.0x
|
15.0x
|
16.0x
|
8.0%
|
$31.14
|
$33.52
|
$35.91
|
$38.29
|
$40.68
|
$43.06
|
9.0%
|
$29.82
|
$32.10
|
$34.38
|
$36.66
|
$38.93
|
$41.21
|
10.0%
|
$28.58
|
$30.75
|
$32.93
|
$35.11
|
$37.28
|
$39.46
|
11.0%
|
$27.40
|
$29.48
|
$31.56
|
$33.64
|
$35.71
|
$37.79
|
12.0%
|
$26.28
|
$28.26
|
$30.25
|
$32.24
|
$34.23
|
$36.22
|
Tangible Book Value Multiples
Discount
Rate
|
125%
|
135%
|
145%
|
155%
|
165%
|
175%
|
8.0%
|
$29.03
|
$30.96
|
$32.88
|
$34.81
|
$36.74
|
$38.66
|
9.0%
|
$27.81
|
$29.65
|
$31.49
|
$33.33
|
$35.17
|
$37.01
|
10.0%
|
$26.66
|
$28.41
|
$30.17
|
$31.93
|
$33.69
|
$35.44
|
11.0%
|
$25.56
|
$27.24
|
$28.92
|
$30.60
|
$32.28
|
$33.96
|
12.0%
|
$24.52
|
$26.13
|
$27.73
|
$29.34
|
$30.95
|
$32.55
|
Sandler O’Neill
also considered and discussed with the Chemical board of directors how this analysis would be affected by changes in the underlying
assumptions, including variations with respect to net income. To illustrate this impact, Sandler O’Neill performed a similar
analysis assuming Chemical’s net income varied from 25% above estimates to 25% below estimates. This analysis resulted in
the following range of per share values for Chemical common stock, applying the price to 2020 earnings multiples range of 11.0x
to 16.0x referred to above and a discount rate of 8.86%.
Earnings Per Share Multiples
Annual
Estimate
Variance
|
11.0x
|
12.0x
|
13.0x
|
14.0x
|
15.0x
|
16.0x
|
(25.0%)
|
$23.70
|
$25.42
|
$27.14
|
$28.86
|
$30.58
|
$32.30
|
(20.0%)
|
$24.96
|
$26.80
|
$28.63
|
$30.46
|
$32.30
|
$34.13
|
(15.0%)
|
$26.22
|
$28.17
|
$30.12
|
$32.07
|
$34.02
|
$35.96
|
(10.0%)
|
$27.48
|
$29.55
|
$31.61
|
$33.67
|
$35.73
|
$37.80
|
(5.0%)
|
$28.74
|
$30.92
|
$33.10
|
$35.28
|
$37.45
|
$39.63
|
0.0%
|
$30.00
|
$32.30
|
$34.59
|
$36.88
|
$39.17
|
$41.46
|
5.0%
|
$31.26
|
$33.67
|
$36.08
|
$38.49
|
$40.89
|
$43.30
|
10.0%
|
$32.53
|
$35.05
|
$37.57
|
$40.09
|
$42.61
|
$45.13
|
15.0%
|
$33.79
|
$36.42
|
$39.06
|
$41.69
|
$44.33
|
$46.97
|
20.0%
|
$35.05
|
$37.80
|
$40.55
|
$43.30
|
$46.05
|
$48.80
|
25.0%
|
$36.31
|
$39.17
|
$42.04
|
$44.90
|
$47.77
|
$50.63
|
Sandler O’Neill
also performed an analysis that estimated the net present value per share of Talmer Class A common stock, assuming Talmer performed
in accordance with publicly available consensus mean analyst earnings per share estimates for Talmer for the years ending December
31, 2016 and December 31, 2017 as well as an estimated earnings per share growth rate for the years thereafter, as provided by
the senior management of Talmer. To approximate the terminal value of Talmer Class A common stock at December 31, 2020, Sandler
O’Neill applied price to 2020 earnings multiples ranging from 11.0x to 16.0x and multiples of December 31, 2020 tangible
book value ranging from 125% to 175%. The terminal values were then discounted to present values using different discount rates
ranging from 9.0% to 13.0% when applied to 2020 earnings multiples and 9.0% to 13.0% when applied to multiples of December 31,
2020 tangible book value, which were chosen to reflect different assumptions regarding required rates of return of holders or prospective
buyers of Talmer Class A common stock. As illustrated in the following tables, the analysis indicated an imputed range of values
per share of Talmer Class A common stock of $11.57 to $19.32 when applying multiples of earnings and $12.66 to $20.45 when applying
multiples of tangible book value.
Earnings Per Share Multiples
Discount
Rate
|
11.0x
|
12.0x
|
13.0x
|
14.0x
|
15.0x
|
16.0x
|
9.0%
|
$13.75
|
$14.86
|
$15.98
|
$17.09
|
$18.20
|
$19.32
|
10.0%
|
$13.16
|
$14.22
|
$15.29
|
$16.35
|
$17.41
|
$18.48
|
11.0%
|
$12.60
|
$13.62
|
$14.63
|
$15.65
|
$16.67
|
$17.68
|
12.0%
|
$12.07
|
$13.04
|
$14.01
|
$14.99
|
$15.96
|
$16.93
|
13.0%
|
$11.57
|
$12.50
|
$13.43
|
$14.36
|
$15.29
|
$16.22
|
Tangible Book Value Multiples
Discount
Rate
|
125%
|
135%
|
145%
|
155%
|
165%
|
175%
|
9.0%
|
$15.06
|
$16.14
|
$17.21
|
$18.29
|
$19.37
|
$20.45
|
10.0%
|
$14.41
|
$15.44
|
$16.47
|
$17.50
|
$18.53
|
$19.56
|
11.0%
|
$13.80
|
$14.78
|
$15.77
|
$16.75
|
$17.73
|
$18.72
|
12.0%
|
$13.22
|
$14.16
|
$15.10
|
$16.04
|
$16.98
|
$17.92
|
13.0%
|
$12.66
|
$13.56
|
$14.46
|
$15.36
|
$16.26
|
$17.16
|
Sandler O’Neill
also considered and discussed with the Chemical board of directors how this analysis would be affected by changes in the underlying
assumptions, including variations with respect to net income. To illustrate this impact, Sandler O’Neill performed a similar
analysis, assuming Talmer’s net income varied from 25% above estimates to 25% below estimates. This analysis resulted in
the following range of per share values for Talmer Class A common stock, applying the price to 2020 earnings multiples range of
11.0x to 16.0x referred to above and a discount rate of 12.00%.
Earnings Per Share Multiples
Annual
Estimate
Variance
|
11.0x
|
12.0x
|
13.0x
|
14.0x
|
15.0x
|
16.0x
|
(25.0%)
|
$9.40
|
$10.13
|
$10.85
|
$11.58
|
$12.31
|
$13.04
|
(20.0%)
|
$9.93
|
$10.71
|
$11.49
|
$12.26
|
$13.04
|
$13.82
|
(15.0%)
|
$10.47
|
$11.29
|
$12.12
|
$12.94
|
$13.77
|
$14.60
|
(10.0%)
|
$11.00
|
$11.88
|
$12.75
|
$13.62
|
$14.50
|
$15.37
|
(5.0%)
|
$11.53
|
$12.46
|
$13.38
|
$14.31
|
$15.23
|
$16.15
|
0.0%
|
$12.07
|
$13.04
|
$14.01
|
$14.99
|
$15.96
|
$16.93
|
5.0%
|
$12.60
|
$13.62
|
$14.65
|
$15.67
|
$16.69
|
$17.71
|
10.0%
|
$13.14
|
$14.21
|
$15.28
|
$16.35
|
$17.42
|
$18.49
|
15.0%
|
$13.67
|
$14.79
|
$15.91
|
$17.03
|
$18.15
|
$19.26
|
20.0%
|
$14.21
|
$15.37
|
$16.54
|
$17.71
|
$18.87
|
$20.04
|
25.0%
|
$14.74
|
$15.96
|
$17.17
|
$18.39
|
$19.60
|
$20.82
|
In connection with
its analyses, Sandler O’Neill considered and discussed with the Chemical board of directors how the present value analyses
would be affected by changes in the underlying assumptions. Sandler O’Neill noted that the net present value analysis is
a widely used valuation methodology, but the results of such methodology are highly dependent upon the numerous assumptions that
must be made, and the results thereof are not necessarily indicative of actual values or future results.
Pro Forma
Merger Analysis.
Sandler O’Neill analyzed certain potential pro forma effects of the merger, based on the following
assumptions: (i) the merger closes on June 30, 2016; (ii) 100% of the outstanding shares of Talmer common are converted into the
stock consideration at the fixed exchange ratio of 0.4725 and receive $1.61 in cash (other than certain shares described in the
merger agreement which will be cancelled without any consideration delivered in exchange therefor); and (iii) 75% of the outstanding
Talmer stock options are converted into Chemical options and 25% are cashed out, based upon guidance of Talmer and Chemical senior
management. Sandler O’Neill also utilized assumptions, as provided by the senior management of Chemical, relating to (a)
estimated transaction costs and expenses, (b) purchase accounting adjustments, (c) anticipated regulatory costs, and (d) estimated
cost savings resulting from the merger. The analysis indicated that the merger would be accretive to Chemical’s estimated
earnings per share in 2017 (the first full-year after the estimated closing of the transaction) and dilutive to estimated tangible
book value per share at close.
In connection with
this analysis, Sandler O’Neill considered and discussed with the Chemical board of directors how the analysis would be affected
by changes in the underlying assumptions, including the impact of final purchase accounting adjustments determined at the closing
of the transaction, and noted that the actual results achieved by the combined company may vary from projected results and the
variations may be material.
Sandler O’Neill’s
Relationship.
Sandler O’Neill is acting as Chemical’s financial advisor in connection with the merger and Chemical
has agreed to pay Sandler O’Neill a fee for such services in an amount equal to 0.70% of the aggregate merger consideration,
a substantial portion of which is contingent upon the closing of the merger. Sandler O’Neill also received a fee from Chemical
in an amount equal to $500,000 as a result of rendering its opinion, which opinion fee will be credited in full towards the fee
that will become payable on the day of closing of the merger. Chemical has also agreed to indemnify Sandler O’Neill against
certain liabilities arising out of Sandler O’Neill’s engagement and to reimburse Sandler O’Neill for certain
of its out-of-pocket expenses incurred in connection with its engagement.
In the two years
preceding the date of its opinion, Sandler O’Neill provided certain other investment banking services to Chemical, for which
compensation was received, and may provide, and receive compensation for, such services in the future, including during the pendency
of the merger. In addition, as Sandler O’Neill advised the Chemical board of directors, in the two years preceding the date
of Sander O’Neill’s opinion, Sandler O’Neill provided certain investment banking services to Talmer and received
compensation for such services. In the ordinary course of Sandler O’Neill’s business as a broker-dealer, Sandler O’Neill
may purchase securities from and
sell securities to Chemical and Talmer and their respective affiliates. Sandler O’Neill
may also actively trade the equity and debt securities of Chemical, Talmer or their affiliates for its own account and for the
accounts of its customers and, accordingly, may at any time hold a long or short position in such securities.
Opinion of Talmer’s Financial
Advisor in Connection with the Merger
Talmer engaged Keefe,
Bruyette & Woods, Inc. (“KBW”) to render financial advisory and investment banking services to Talmer, including
an opinion to the Talmer board of directors as to the fairness, from a financial point of view, to the holders of Talmer Class
A common stock of the merger consideration to be received by such shareholders in the proposed merger of Talmer with and into Chemical.
Talmer selected KBW because KBW is a nationally recognized investment banking firm with substantial experience in transactions
similar to the merger and is familiar with Talmer and its business. As part of its investment banking business, KBW is continually
engaged in the valuation of financial services businesses and their securities in connection with mergers and acquisitions.
As part of its engagement,
representatives of KBW attended the meeting of the Talmer board of directors held on January 25, 2016, at which the Talmer board
of directors evaluated the proposed merger. At this meeting, KBW discussed with the Talmer board of directors the financial aspects
of the proposed merger and rendered an opinion to the Talmer board of directors to the effect that, as of such date and subject
to the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by
KBW as set forth in its opinion, the merger consideration in the proposed merger was fair, from a financial point of view, to the
holders of Talmer Class A common stock. The Talmer board of directors adopted the merger agreement at this meeting.
The description
of the opinion set forth herein is qualified in its entirety by reference to the full text of the opinion, which is attached as
Annex D to this joint proxy statement and prospectus and is incorporated herein by reference, and describes the procedures followed,
assumptions made, matters considered, and qualifications and limitations on the review undertaken by KBW in preparing the opinion.
KBW’s opinion
speaks only as of the date of the opinion. The opinion was for the information of, and was directed to, the Talmer board of directors
(in its capacity as such) in connection with its consideration of the financial terms of the merger. The opinion addressed only
the fairness, from a financial point of view, of the merger consideration in the merger to the holders of Talmer Class A common
stock. It did not address the underlying business decision of Talmer to engage in the merger or enter into the merger agreement
or constitute a recommendation to the Talmer board of directors in connection with the merger, and it does not constitute a recommendation
to any holder of Talmer Class A common stock or any shareholder of any other entity as to how to vote in connection with the merger
or any other matter, nor does it constitute a recommendation regarding whether or not any such shareholder should enter into a
voting, shareholders’ or affiliates’ agreement with respect to the merger.
KBW’s opinion
was reviewed and approved by KBW’s Fairness Opinion Committee in conformity with its policies and procedures established
under the requirements of Rule 5150 of the Financial Industry Regulatory Authority.
In connection with
the opinion, KBW reviewed, analyzed and relied upon material bearing upon the merger and upon the financial and operating condition
of Talmer and Chemical, including, among other things:
-
a draft of the merger agreement dated
January 25, 2016 (the most recent draft then made available to KBW);
-
the audited financial statements for
the three fiscal years ended December 31, 2014, and the Annual Reports on Form 10-K for the two fiscal years ended December 31,
2014, of Talmer;
-
the unaudited quarterly financial statements
and Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2015, June 30, 2015 and September 30, 2015 of Talmer;
-
certain unaudited quarterly and fiscal
year-end financial results for the period ended December 31, 2015 of Talmer (provided to KBW by representatives of Talmer);
-
the audited financial statements and
Annual Reports on Form 10-K for the three fiscal years ended December 31, 2014 of Chemical;
-
the unaudited quarterly financial statements
and Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2015, June 30, 2015 and September 30, 2015 of Chemical;
-
certain draft and unaudited quarterly
and fiscal year-end financial results for the period ended December 31, 2015 of Chemical (provided to KBW by representatives of
Chemical);
-
certain regulatory filings of Talmer,
Talmer Bank, Chemical and Chemical Bank, including (as applicable) the quarterly reports on Form FRY-9C and Form FRY-9LP and the
quarterly call reports filed with respect to each quarter during the three year period ended December 31, 2014 and the three quarters
ended March 31, 2015, June 30, 2015 and September 30, 2015;
-
certain other interim reports and other
communications of Talmer and Chemical to their respective shareholders; and
-
other financial information concerning
the businesses and operations of Talmer and Chemical that was furnished to KBW by Talmer and Chemical or which KBW was otherwise
directed to use for purposes of KBW’s analyses.
KBW’s consideration
of financial information and other factors that it deemed appropriate under the circumstances or relevant to its analyses included,
among others, the following:
-
the historical and current financial
position and results of operations of Talmer and Chemical;
-
the assets and liabilities of Talmer
and Chemical;
-
the nature and terms of certain other
merger transactions and business combinations in the banking industry;
-
a comparison of certain financial and
stock market information for Talmer and Chemical with similar information for certain other companies the securities of which were
publicly traded;
-
financial and operating forecasts and
projections of Talmer that were prepared by, and provided to KBW and discussed with KBW by, Talmer management and that were used
and relied upon by KBW at the direction of such management and with the consent of the Talmer board of directors;
-
publicly available consensus “street
estimates” (per FactSet Research Systems) of Chemical for 2016 and 2017, as well as assumed long term growth rates provided
to KBW by Chemical management, all of which information was discussed with KBW by such management and used and relied upon by KBW
based on such discussions, at the direction of Talmer management and with the consent of the Talmer board of directors; and
-
estimates regarding certain pro forma
financial effects of the merger on Chemical (including, without limitation, the cost savings and related expenses expected to result
or be derived from the merger) that were prepared (in consultation with Chemical management) by, and provided to and discussed
with KBW by, the management of Talmer, and used and relied upon by KBW at the direction of Talmer management and with the consent
of the Talmer board of directors.
KBW also performed
such other studies and analyses as it considered appropriate and 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 knowledge
of the banking industry generally. KBW also held discussions with senior management of Talmer and Chemical regarding the past and
current business operations, regulatory relations, financial condition and future prospects of their respective companies and such
other matters as KBW deemed relevant to its inquiry.
In conducting its
review and arriving at its opinion, KBW relied upon and assumed the accuracy and completeness of all of the financial and other
information that was provided to it or that was publicly available and did not independently verify the accuracy or completeness
of any such information or assume any responsibility or liability for such verification, accuracy or completeness. KBW relied upon
the management of Talmer as to the reasonableness and achievability of the financial and operating forecasts and projections of
Talmer and the estimates regarding certain pro forma financial effects of the merger on Chemical referred to above (and the assumptions
and bases for such forecasts, projections and estimates, including without limitation, the cost savings and related expenses expected
to result or be derived from the merger) and KBW assumed, with the consent of the Talmer board of directors, that such forecasts,
projections and estimates were reasonably prepared on a basis reflecting the best currently available estimates and judgments of
such management and that such forecasts projections and estimates would be realized in the amounts and in the time periods estimated
by such management. KBW further relied, with the consent of Talmer, upon Chemical management as to the reasonableness and achievability
of the publicly available consensus “street estimates” of Chemical and the assumed long term growth rates provided
to and discussed with KBW by such management referred to above and KBW assumed, with the consent of the Talmer board of directors,
that such information was reasonably prepared on a basis reflecting, or in the case of the publicly available consensus “street
estimates” of Chemical referred to above were consistent with, the best currently available estimates and judgments of Chemical
management and that the forecasts, projections and estimates reflected in such information would be realized in the amounts and
in the time periods estimated.
It
is understood that the forecasts, projections and estimates of Talmer and Chemical provided to KBW were not prepared with
the expectation of public disclosure and that all such forecasts, projections and estimates, together with the publicly
available consensus “street estimates” of Chemical referred to above that KBW was directed to use, were based on
numerous variables and assumptions that are inherently uncertain, including, without limitation, factors related to general
economic and competitive conditions and that, accordingly, actual results could vary significantly from those set forth in
such information. KBW assumed, based on discussions with the respective managements of Talmer and Chemical with the consent
of the Talmer board of directors, that all such information provided a reasonable basis upon which KBW could form its opinion and KBW
expressed no view as to any such information or the assumptions or bases therefor. KBW relied on all such information without
independent verification or analysis and did not in any respect assume any responsibility or liability for the accuracy or
completeness thereof.
KBW also assumed
that there were no material changes in the assets, liabilities, financial condition, results of operations, business or prospects
of either Talmer or Chemical since the date of the last financial statements of each such entity that were made available to KBW.
KBW is not an expert in the independent verification of the adequacy of allowances for loan and lease losses and KBW assumed, without
independent verification and with Talmer’s consent, that the aggregate allowances for loan and lease losses for Talmer and
Chemical were adequate to cover such losses. In rendering its opinion, KBW did not make or obtain any evaluations or appraisals
or physical inspection of the property, assets or liabilities (contingent or otherwise) of Talmer or Chemical, the collateral securing
any of such assets or liabilities, or the collectability of any such assets, nor did KBW examine any individual loan or credit
files, nor did it evaluate the solvency, financial capability or fair value of Talmer or Chemical under any state or federal laws,
including those relating to bankruptcy, insolvency or other matters. Estimates of values of companies and assets do not purport
to be appraisals or necessarily reflect the prices at which companies or assets may actually be sold. Because such estimates are
inherently subject to uncertainty, KBW assumed no responsibility or liability for their accuracy.
KBW assumed, in
all respects material to its analyses:
-
that the merger and any related transactions
(including the subsidiary bank merger) would be completed substantially in accordance with the terms set forth in the merger agreement
(the final terms of which KBW assumed would not differ in any respect material to KBW’s analyses from the draft reviewed
and referred to above) with no adjustments to the merger consideration;
-
that the representations and warranties
of each party in the merger agreement and in all related documents and instruments referred to in the merger agreement were true
and correct;
-
that each party to the merger agreement
and all related documents would perform all of the covenants and agreements required to be performed by such party under such documents;
-
that there were no factors that would
delay any necessary regulatory or governmental approval for the merger or any related transaction or cause any necessary regulatory
or governmental approval for the merger or any related transaction to be subject to any adverse conditions, and that all conditions
to the completion of the merger and any related transaction would be satisfied without any waivers or modifications to the merger
agreement; and
-
that in the course of obtaining the
necessary regulatory, contractual, or other consents or approvals for the merger and any related transaction, no restrictions,
including any divestiture requirements, termination or other payments or amendments or modifications, would be imposed that would
have a material adverse effect on the future results of operations or financial condition of Talmer, Chemical, the combined entity,
or the contemplated benefits of the merger, including the cost savings and related expenses expected to result or be derived from
the merger.
KBW assumed, in
all respects material to KBW’s analyses, that the merger would be consummated in a manner that complied with the applicable
provisions of the Securities Act, the Exchange Act, and all other applicable federal and state statutes, rules and regulations.
KBW was further advised by representatives of Talmer that Talmer relied upon advice from its advisors (other than KBW) or other
appropriate sources as to all legal, financial reporting, tax, accounting and regulatory matters with respect to Talmer, Chemical,
the merger, any related transaction (including the subsidiary bank merger), and the merger agreement. KBW did not provide advice
with respect to any such matters.
KBW’s opinion
addressed only the fairness, from a financial point of view, as of the date of the opinion, to the holders of Talmer Class A common
stock of the merger consideration to be received by such holders in the merger. KBW’s opinion did not consider, include or
address any other terms or aspects of the merger or any term or aspect of any related transaction (including the subsidiary bank
merger), including without limitation, the form or structure of the merger (including the form of merger consideration or the allocation
thereof between cash and stock) or any related transaction, any consequences of the merger or any related transaction to Talmer,
its shareholders, creditors or otherwise, or any terms, aspects, merits or implications of any employment, consulting, voting,
support, shareholder or other agreements, arrangements or understandings contemplated or entered into in connection with the merger
or otherwise. KBW’s opinion was necessarily based upon conditions as they existed and could be evaluated on the date of such
opinion and the information made available to KBW through such date. Developments subsequent to the date of KBW’s opinion
may have affected, and may affect, the conclusion reached in KBW’s opinion and KBW did not and does not have an obligation
to update, revise or reaffirm its opinion. KBW’s opinion did not consider, include or address:
-
the underlying business decision of
Talmer to engage in the merger or enter into the merger agreement;
-
the relative merits of the merger as
compared to any strategic alternatives that are, have been or may be available to or contemplated by Talmer or the Talmer board
of directors;
-
the fairness of the amount or nature
of any compensation to any of Talmer’s officers, directors or employees, or any class of such persons, relative to the compensation
to the holders of Talmer Class A common stock;
-
the effect of the merger or any related
transaction on, or the fairness of the consideration to be received by, holders of any class of securities of Talmer (other than
the holders of Talmer Class A common stock solely with respect to the merger consideration, as described in KBW’s opinion
and not relative to the consideration to be received by holders of any other class of securities) or holders of any class of securities
of Chemical or any other party to any transaction contemplated by the merger agreement;
-
whether Chemical has sufficient cash,
available lines of credit or other sources of funds to enable it to pay the aggregate amount of the cash consideration to the holders
of Talmer Class A common stock at the closing of the merger;
-
the actual value of the Chemical common
stock to be issued in the merger;
-
the prices, trading range or volume
at which Talmer Class A common stock or Chemical common stock would trade following the public announcement of the merger or the
prices, trading range or volume at which Chemical common stock would trade following the consummation of the merger;
-
any advice or opinions provided by
any other advisor to any of the parties to the merger or any other transaction contemplated by the merger agreement; or
-
any legal, regulatory, accounting,
tax or similar matters relating to Talmer, Chemical, their respective shareholders, or relating to or arising out of or as a consequence
of the merger or any related transaction (including the subsidiary bank merger), including whether or not the merger would qualify
as a tax-free reorganization for United States federal income tax purposes.
In performing its
analyses, KBW made numerous assumptions with respect to industry performance, general business, economic, market and financial
conditions and other matters, which are beyond the control of KBW, Talmer and Chemical. Any estimates contained in the analyses
performed by KBW are not necessarily indicative of actual values or future results, which may be significantly more or less favorable
than suggested by these analyses. Additionally, estimates of the value of businesses or securities do not purport to be appraisals
or to reflect the prices at which such businesses or securities might actually be sold. Accordingly, these analyses and estimates
are inherently subject to substantial uncertainty. In addition, the KBW opinion was among several factors taken into consideration
by the Talmer board of directors in making its determination to adopt the merger agreement and authorize and approve the merger
and the other transactions contemplated thereby. Consequently, the analyses described below should not be viewed as determinative
of the decision of the Talmer board of directors with respect to the fairness of the merger consideration. The type and amount
of consideration payable in the merger were determined through negotiation between Talmer and Chemical and the decision to adopt
the merger agreement was solely that of the Talmer board of directors.
The following is a
summary of the material financial analyses presented by KBW to and reviewed by KBW with the Talmer board of directors in connection
with its opinion. The summary is not a complete description of the financial analyses underlying the opinion or the presentation
made by KBW to the Talmer board of directors, but summarizes the material analyses performed and presented in connection with such
opinion. The financial analyses summarized below include information presented in tabular format. The tables alone do not constitute
a complete description of the financial analyses. The preparation of a fairness opinion is a complex analytic process involving
various determinations as to appropriate and relevant methods of financial analysis and the application of those methods to the
particular circumstances. Therefore, a fairness opinion is not readily susceptible to partial analysis or summary description.
In arriving at its opinion, KBW did not attribute any particular weight to any analysis or factor that it considered, but rather
made qualitative judgments as to the significance and relevance of each analysis and factor. Accordingly, KBW believes that its
analyses and the summary of its analyses must be considered as a whole and that selecting portions of its analyses and factors
or focusing on the information presented below in tabular format, without considering all analyses and factors or the full narrative
description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading
or incomplete view of the process underlying its analyses and opinion.
Implied Transaction Statistics for
the Proposed Merger
In the financial analyses
described below performed for purposes of its opinion, KBW utilized an implied transaction value for the proposed merger of $16.11
per share of Talmer Class A common stock, consisting of the sum of (i) the implied value of the stock consideration based on the
closing price of Chemical common stock on January 22, 2016, and (ii) the cash consideration. In addition to such financial analyses,
KBW reviewed with the Talmer board of directors, among other things, the following implied transaction statistics for the proposed
merger, which (as indicated below) were based on either the implied transaction value for the proposed merger of $16.11 per
share
of Talmer Class A common stock or an implied “fully diluted” transaction value for the proposed merger (after giving
effect to the treatment of Talmer stock options in the proposed merger) of approximately $1.131 billion in the aggregate and used
historical financial information of Talmer as of or for the latest 12 month (“LTM”) period ended December 31, 2015
and either consensus “street estimates” for Talmer or internal estimates for Talmer prepared by Talmer management:
|
|
Consensus “Street
Estimates”
|
|
Internal Talmer
Management
Estimates
|
|
|
|
|
|
Implied Transaction Value Per Share / LTM Earnings Per Share (“EPS”)
|
|
19.9 x
|
|
19.9 x
|
Implied “Fully Diluted” Transaction Value / LTM Earnings
|
|
20.0 x
|
|
20.0 x
|
Implied Transaction Value Per Share / 2016 Estimated EPS
|
|
13.1 x
|
|
13.1 x
|
Implied “Fully Diluted” Transaction Value / 2016 Estimated Earnings
|
|
13.1 x
|
|
13.2 x
|
Implied Transaction Value Per Share / 2017 Estimated EPS
|
|
11.8 x
|
|
11.3 x
|
Implied “Fully Diluted” Transaction Value / 2017 Estimated Earnings
|
|
11.9 x
|
|
11.3 x
|
Implied Transaction Value Per Share / Tangible Book Value Per Share
|
|
1.50 x
|
|
1.50 x
|
Implied “Fully Diluted” Transaction Value / Tangible Book Value
|
|
1.60 x
|
|
1.60 x
|
KBW also reviewed
with the Talmer board of directors, among other things, the implied value of the stock consideration provided for in the proposed
merger based on the average price of Chemical common stock for various periods ended January 22, 2016, as compared to the implied
value of the stock consideration of $14.50 based on the closing price of Chemical common stock on January 22, 2016:
Based on:
|
|
Implied Value of Stock
Consideration
(0.4725x)
|
|
Current Chemical Stock Price
|
|
|
|
|
|
$14.50
|
30-Day VWAP
(1)
|
|
|
|
|
|
$15.65
|
90-Day VWAP
(1)
|
|
|
|
|
|
$15.96
|
LTM Average
|
|
|
|
|
|
$15.28
|
Average since 2/11/2014
(2)
|
|
|
|
|
|
$14.51
|
(1)
|
VWAP refers to Volume Weighted Average Price.
|
(2)
|
February 11, 2014 was Talmer’s initial public offering date.
|
|
|
|
|
|
Selected Companies Analyses
Using publicly available
information, KBW compared the financial performance, financial condition and market performance of Chemical and Talmer to 19 selected
depositories headquartered in the Midwest region (defined as Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Missouri,
Nebraska, North Dakota, Ohio, South Dakota and Wisconsin) that were traded on NASDAQ or the New York Stock Exchange with total
assets between $3 billion and $15 billion. The selected companies were as follows:
1
st
Source Corporation
|
Great Western Bancorp, Inc.
|
Capitol Federal Financial, Inc.
|
Heartland Financial USA, Inc.
|
Community Trust Bancorp, Inc.
|
Lakeland Financial Corporation
|
Enterprise Financial Services Corp
|
MainSource Financial Group, Inc.
|
First Busey Corporation
|
MB Financial, Inc.
|
First Financial Bancorp.
|
Old National Bancorp
|
First Merchants Corporation
|
Park National Corporation
|
First Midwest Bancorp, Inc.
|
Peoples Bancorp Inc.
|
Flagstar Bancorp, Inc.
|
Republic Bancorp, Inc.
|
Great Southern Bancorp, Inc.
|
|
To perform this
analysis, KBW used the profitability data and other financial information as of, or for the period ended September 30, 2015, and
market price information as of January 22, 2016. KBW also used 2016 and 2017 earnings per share (“EPS”) estimates taken
from consensus “street estimates” (per FactSet Research Systems) for Chemical, Talmer and the selected companies. Certain
financial data prepared by KBW, as referenced in the tables presented below, may not correspond to the data presented in Chemical
and Talmer’s historical financial statements, or the data prepared by Sandler O’Neill & Partners, L.P. presented
under the section “The Merger — Opinion of Chemical’s Financial Advisor in Connection with the Merger,”
as a result of the different assumptions and methods used by KBW to compute the financial data presented.
KBW’s analysis
showed the following concerning the financial performance of Chemical, Talmer and, to the extent publicly available, the selected
companies:
|
|
|
|
|
Selected Companies
|
|
Chemical
|
|
Talmer
|
|
Bottom
Quartile
|
|
Average
|
|
Median
|
|
Top
Quartile
|
|
|
|
|
|
|
|
|
|
|
|
|
LTM Core Return on Average Assets
(1)
|
1.07%
|
|
1.03%
|
|
0.96%
|
|
1.05%
|
|
1.09%
|
|
1.16%
|
LTM Core Return on Average Equity
(1)
|
9.75%
|
|
8.50%
|
|
7.95%
|
|
8.95%
|
|
9.34%
|
|
9.93%
|
LTM Core Return on Average Tangible
Common Equity
(1)
|
13.35%
|
|
8.69%
|
|
11.44%
|
|
11.58%
|
|
12.04%
|
|
13.05%
|
LTM Net Interest Margin
|
3.58%
|
|
3.74%
|
(3)
|
3.35%
|
|
3.56%
|
|
3.72%
|
|
3.86%
|
LTM Fee Income / Revenue Ratio
(2)
|
23.2%
|
|
25.5%
|
|
23.1%
|
|
27.4%
|
|
28.2%
|
|
33.0%
|
LTM Efficiency Ratio
|
60.6%
|
|
69.5%
|
|
65.8%
|
|
61.5%
|
|
63.4%
|
|
59.0%
|
___________________
(1)
|
Core income excludes extraordinary items, non-recurring items, gains/losses on sale of securities, and amortization of intangibles. In the case of Great Southern Bancorp, Inc., non-recurring items for Q4 2014 were not publicly available.
|
(2)
|
Excludes gains/losses on sale of securities.
|
(3)
|
Excluding the impact of excess accretable yield, Talmer had a Q3 2015 core net interest margin of 3.46%, per Talmer earnings release for Q3 2015.
|
KBW’s analysis
also showed the following concerning the financial condition of Chemical, Talmer and the selected companies:
|
|
|
|
|
Selected Companies
|
|
Chemical
|
|
Talmer
|
|
Bottom
Quartile
|
|
Average
|
|
Median
|
|
Top
Quartile
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible Common Equity / Tangible Assets
|
7.64%
|
|
10.76%
|
|
8.47%
|
|
9.53%
|
|
8.96%
|
|
10.15%
|
Total Risk-Based Capital / Risk-Weighted Assets
|
11.59%
|
|
13.20%
|
|
13.31%
|
|
15.99%
|
|
14.75%
|
|
16.32%
|
Loans / Deposits
|
94.8%
|
|
91.7%
|
|
82.9%
|
|
93.5%
|
|
89.8%
|
|
96.9%
|
Loan Loss Reserve / Gross Loans
|
1.05%
|
|
1.16%
|
|
1.01%
|
|
1.24%
|
|
1.17%
|
|
1.48%
|
Nonperforming Assets / Loans + OREO
(1)
|
1.88%
|
|
2.02%
|
|
2.15%
|
|
1.50%
|
|
1.22%
|
|
0.90%
|
LTM Net Charge-Offs / Average Loans
|
0.12%
|
|
0.05%
|
|
0.18%
|
|
0.16%
|
|
0.10%
|
|
0.03%
|
___________________
(1)
|
Nonperforming assets include nonaccrual loans, loans 90+ days past due and other real estate owned.
|
In addition, KBW’s
analysis showed the following concerning the market performance of Chemical, Talmer and, to the extent publicly available, the
selected companies:
|
|
|
|
|
Selected Companies
|
|
Chemical
|
|
Talmer
|
|
Bottom
Quartile
|
|
Average
|
|
Median
|
|
Top
Quartile
|
|
|
|
|
|
|
|
|
|
|
|
|
Price / 60-Day VWAP
(1)
|
88.8%
|
|
95.0%
|
|
86.4%
|
|
89.4%
|
|
89.4%
|
|
92.1%
|
One – Year Stock Price Change
|
3.7%
|
|
22.3%
|
|
(5.0%)
|
|
(0.3%)
|
|
(1.4%)
|
|
1.9%
|
1-Year Total Return
|
7.1%
|
|
22.6%
|
|
(2.4%)
|
|
2.4%
|
|
1.4%
|
|
5.5%
|
YTD Stock Price Change
|
(10.4%)
|
|
(8.8%)
|
|
(13.4%)
|
|
(10.5%)
|
|
(10.7%)
|
|
(8.6%)
|
Stock Price / Book Value per Share
|
1.17x
|
|
1.53x
|
|
1.00x
|
|
1.19x
|
|
1.14x
|
|
1.34x
|
Stock Price / Tangible Book Value per Share
|
1.71x
|
|
1.57x
|
|
1.30x
|
|
1.47x
|
|
1.52x
|
|
1.65x
|
Stock Price / LTM EPS
|
14.1x
|
|
21.2x
|
|
12.6x
|
|
14.4x
|
|
13.4x
|
|
15.5x
|
Stock Price / 2016 EPS
|
11.4x
|
|
13.4x
|
|
11.2x
|
|
12.6x
|
|
12.4x
|
|
13.6x
|
Stock Price / 2017 EPS
|
10.8x
|
|
12.1x
|
|
10.1x
|
|
11.4x
|
|
10.9x
|
|
12.1x
|
Dividend Yield
(2)
|
3.4%
|
|
0.2%
|
|
2.2%
|
|
2.7%
|
|
2.6%
|
|
3.5%
|
LTM Dividend Payout
|
45.0%
|
|
5.1%
|
|
23.4%
|
|
42.1%
|
|
33.8%
|
|
49.2%
|
___________________
(1)
|
VWAP refers to Volume Weighted Average Price.
|
(2)
|
Most recent completed quarter dividend annualized as a percentage of stock price.
|
KBW also reviewed
with the Talmer board of directors the corresponding trading multiple for Talmer of 11.6x based on the closing share price of Talmer
Class A common stock on January 22, 2016 and the internal 2017 EPS estimate for Talmer prepared by Talmer management and provided
to KBW.
No company used
as a comparison in the above selected companies analyses is identical to Talmer or Chemical. Accordingly, an analysis of these
results is not mathematical. Rather, it involves complex considerations and judgments concerning differences in financial and operating
characteristics of the companies involved.
Select Transactions Analysis
KBW reviewed publicly
available information related to 14 selected bank and thrift “merger of equals” transactions in the U.S. announced
since January 1, 2010 with transaction values greater than $100 million and in which the former shareholders of the accounting
target were expected to own more than 40% of the pro forma company. The selected transactions were as follows:
Accounting Buyer:
|
Accounting Target:
|
BBCN Bancorp, Inc.
|
Wilshire Bancorp, Inc.
|
Nicolet Bankshares, Inc.
|
Baylake Corp.
|
Yadkin Financial Corporation
|
VantageSouth Bancshares, Inc.
|
Center Bancorp, Inc.
|
ConnectOne Bancorp, Inc.
|
Rockville Financial, Inc.
|
United Financial Bancorp, Inc.
|
Heritage Financial Corporation
|
Washington Banking Company
|
Umpqua Holdings Corporation
|
Sterling Financial Corporation
|
Mercantile Bank Corporation
|
Firstbank Corporation
|
PacWest Bancorp
|
CapitalSource Inc.
|
Peoples Financial Services Corp.
|
Penseco Financial Services Corporation
|
Union First Market Bankshares Corporation
|
StellarOne Corporation
|
Provident New York Bancorp
|
Sterling Bancorp
|
Hancock Holding Company
|
Whitney Holding Corporation
|
Nara Bancorp, Inc.
|
Center Financial Corporation
|
For each selected
transaction, KBW derived the following implied transaction statistics, in each case based on the transaction consideration value
paid for the accounting target and using financial data based on the
accounting target’s then latest publicly available financial
statements and forward year EPS consensus “street estimates” prior to announcement of the respective transaction:
-
price per common share to tangible
book value per share of the accounting target;
-
price per common share to LTM EPS of
the accounting target;
-
price to next year estimated EPS of
the accounting target; and
-
tangible equity premium to core deposits
of the accounting target (total deposits less time deposits greater than $100,000), referred to as core deposit premium.
KBW also reviewed
the price per common share paid for the accounting target for each selected transaction as a premium to the closing price of the
accounting target one day prior to the announcement of the transaction (expressed as a percentage and referred to as the one-day
market premium). The above transaction statistics for the selected transactions were compared with the corresponding transaction
statistics for the proposed merger based on the implied transaction value for the proposed merger of $16.11 per share of Talmer
Class A common stock and using historical financial information for Talmer as of, or for the latest 12 months ended, December 31,
2015, 2016 EPS consensus “street estimates” for Talmer and the closing share price of Talmer Class A common stock on
January 22, 2016.
The results of the
analysis are set forth in the following table (excluding the impact of LTM and next year estimated EPS multiples for selected transaction,
which multiples were considered not to be meaningful because they were negative):
|
|
|
Selected Transactions
|
|
Chemical /
Talmer
|
|
Bottom
Quartile
|
|
Average
|
|
Median
|
|
Top
Quartile
|
|
|
|
|
|
|
|
|
|
|
Transaction Price / Tangible Book Value
|
1.50x
|
|
1.45x
|
|
1.59x
|
|
1.54x
|
|
1.68x
|
Transaction Price / LTM EPS
|
19.9x
|
|
15.1x
|
|
21.7x
|
|
16.6x
|
|
20.4x
|
Transaction Price / Next Year EPS Est.
|
13.1x
|
|
13.9x
|
|
15.6x
|
|
16.1x
|
|
17.2x
|
Core Deposit Premium
|
10.8%
|
|
6.4%
|
|
11.1%
|
|
7.4%
|
|
12.7%
|
One-Day Market Premium
|
(2.5%)
|
|
11.6%
|
|
16.6%
|
|
14.7%
|
|
19.6%
|
No company or transaction
used as a comparison in the above selected transaction analysis is identical to Talmer or the proposed merger. Accordingly, an
analysis of these results is not mathematical. Rather, it involves complex considerations and judgments concerning differences
in financial and operating characteristics of the companies involved.
Relative Contribution Analysis
KBW analyzed the
relative standalone contribution of Chemical and Talmer to various pro forma balance sheet and income statement items and the pro
forma market capitalization of the combined entity. This analysis excluded purchase accounting adjustments. To perform this analysis,
KBW used (i) historical balance sheet and LTM net income data for Chemical and Talmer as of December 31, 2015, (ii) net income
consensus “street estimates” for Chemical and net income estimates for Talmer provided by Talmer management, and (iii)
market price data as of January 22, 2016. The results of KBW’s analysis are set forth in the following table, which also
compares the results of KBW’s analysis with the implied pro forma ownership percentages of Chemical’s and Talmer’s
respective shareholders in the combined company based on the 90% stock / 10% cash implied merger consideration mix provided for
in the proposed merger and also based on a hypothetical exchange ratio of 0.525x assuming 100% stock consideration in the proposed
merger for illustrative purposes:
|
|
Chemical
as a %
of Combined
|
|
Talmer
as a %
of Combined
|
|
|
Ownership
|
|
|
|
|
|
90% stock / 10% cash
(1)
|
55.0%
|
|
45.0%
|
|
|
100% stock
(1)(2)
|
52.4%
|
|
47.6%
|
|
|
|
|
|
|
|
|
Balance Sheet
|
|
|
|
|
|
Total Assets
|
58.2%
|
|
41.8%
|
|
|
Net Loans
|
60.0%
|
|
40.0%
|
|
|
Deposits
|
59.8%
|
|
40.2%
|
|
|
Tangible Common Equity
(3)
|
50.3%
|
|
49.7%
|
|
|
|
|
|
|
|
|
Net Income to Common
|
|
|
|
|
|
2015 GAAP Net Income
|
59.1%
|
|
40.9%
|
|
|
2016 Estimated GAAP Net Income
|
54.6%
|
|
45.4%
|
|
|
2017 Estimated GAAP Net Income
|
52.3%
|
|
47.7%
|
|
|
|
|
|
|
|
|
Market Capitalization
|
|
|
|
|
|
Pre – Deal Market Capitalization
|
51.7%
|
|
48.3%
|
|
|
(1)
|
Based solely on Chemical and Talmer common shares outstanding as of December 31, 2015 as provided by Chemical and Talmer. After giving effect to the treatment of Talmer stock options in the proposed merger, the implied pro forma ownership percentage of Talmer’s shareholders and option holders in the combined company on a fully diluted basis would be approximately 46.3% based on the 90% stock/10% cash implied merger consideration mix provided for in the proposed merger and approximately 48.8% based on a hypothetical exchange ratio of 0.525x assuming 100% stock consideration in the proposed merger.
|
|
(2)
|
For illustrative purposes only.
|
|
(3)
|
Includes adjustment for Chemical’s deferred tax credit.
|
Pro Forma Financial Impact Analysis
KBW performed
a pro forma financial impact analysis that combined projected income statement and balance sheet information of Chemical and Talmer.
Using closing balance sheet estimates as of June 30, 2016 for Chemical and Talmer per the respective managements of Chemical and
Talmer, the 2017 net income consensus “street estimate” for Chemical, an assumed long-term earnings growth rate for
Chemical provided by Chemical management, a 2017 net income estimate and assumed long-term earnings growth rate for Talmer provided
by Talmer management, and pro forma assumptions (including certain purchase accounting adjustments, cost savings and related expenses)
provided by Talmer management (prepared in consultation with Chemical management), KBW analyzed the potential financial impact
of the merger on certain projected financial results of Chemical. This analysis indicated that the merger could be accretive to
Chemical’s 2017 and 2018 estimated EPS by approximately 10.3% and 11.3%, respectively, and dilutive to Chemical’s
estimated tangible book value per share as of June 30, 2016 by approximately 5.5%. This analysis also indicated that, based on
Chemical’s projected pro forma financial results attributable to a share of Talmer Class A common stock using a hypothetical
exchange ratio of 0.525x (assuming 100% stock consideration in the proposed merger for illustrative purposes), the merger could
be accretive relative to Talmer’s 2017 and 2018 estimated EPS by approximately 15.5% and 15.6%, respectively, and dilutive
relative to Talmer’s estimated tangible book value per share as of June 30, 2016 by 13.5%. Additionally, this analysis indicated
that Chemical’s annualized fourth quarter 2015 quarterly dividend, when multiplied by the hypothetical exchange ratio of
0.525x, was higher than each of Talmer’s fourth quarter 2015 annualized quarterly dividend and Talmer’s estimated
2016 dividends provided by Talmer management. Furthermore, the analysis indicated that, pro forma for the proposed merger, each
of Chemical’s tangible common equity to tangible assets ratio, Leverage Ratio, Tier 1 Risk-Based Capital Ratio and Total
Risk-Based Capital Ratio as of June 30, 2016 could be lower. For all of the above, the actual results achieved by Chemical following
the merger may vary from the projected results, and the variations may be material.
Discounted Cash Flow Analysis
KBW performed a
discounted cash flow analysis to estimate a range for the implied equity value of Talmer. In this analysis, KBW used financial
forecasts and projections relating to the earnings, dividends and assets of Talmer prepared, and provided to KBW, by Talmer management,
and assumed discount rates ranging from 8.0% to 12.0%. The ranges of values were derived by adding (i) the present value of the
estimated cash dividends that Talmer could generate over the period from 2016 through 2021 as a stand alone company, and (ii) the
present value of Talmer’s implied terminal value at the end of such period. In calculating the terminal value of Talmer,
KBW applied a range of 11.0x to 15.0x estimated 2022 earnings. This discounted cash flow analysis resulted in a range of implied
values per share of Talmer Class A common stock of approximately $13.22 per share to $21.10 per share.
KBW also performed
a discounted cash flow analysis of the pro forma combined company to estimate a range for the implied value of the merger consideration
per share of Talmer Class A common stock. In this analysis, KBW used (i) financial forecasts and projections relating to the earnings
and assets of Chemical based on 2016 and 2017 EPS consensus “street estimates” for Chemical and dividend and long term
net income and balance sheet growth rate assumptions for Chemical provided by Chemical management, (ii) financial forecasts and
projections relating to the earnings, dividends and assets of Talmer provided by Talmer management, and (iii) pro forma assumptions
(including purchase accounting adjustments, cost savings and related expenses) provided by Talmer management (prepared in consultation
with Chemical management), and KBW assumed discount rates ranging from 8.0% to 12.0%. The ranges of values were derived by adding
(i) the present value of the estimated cash dividends that the pro forma combined company could generate over the period from 2016
to 2021, and (ii) the present value of the pro forma combined company’s implied terminal value at the end of such period.
In calculating the terminal value of the pro forma combined company, KBW applied a range of 11.0x to 15.0x estimated 2022 earnings
for the pro forma combined company. This discounted cash flow analysis resulted in a range of implied values of the merger consideration
per share of Talmer Class A common stock of approximately $15.64 per share to $23.74 per share.
The discounted cash
flow analysis is a widely used valuation methodology, but the results of such methodology are highly dependent on the assumptions
that must be made, including asset and earnings growth rates, terminal values, dividend payout rates, and discount rates. The foregoing
discounted cash flow analyses did not purport to be indicative of the actual values or expected values of Talmer or the pro forma
combined company.
Miscellaneous
KBW acted as financial
advisor to Talmer in connection with the proposed merger and did not act as an advisor to or agent of any other person. As part
of its investment banking business, KBW is continually engaged in the valuation of bank and bank holding company securities in
connection with acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements
and valuations for various other purposes. As specialists in the securities of banking companies, KBW has experience in, and knowledge
of, the valuation of banking enterprises. In the ordinary course of their broker-dealer business and further to certain existing
sales and trading relationships with Talmer and Chemical, KBW and its affiliates may from time to time purchase securities from,
and sell securities to, Talmer and Chemical. As a market maker in securities, KBW and its affiliates may from time to time have
a long or short position in, and buy or sell, debt or equity securities of Talmer or Chemical for their own accounts and for the
accounts of their customers and clients.
Pursuant to the
KBW engagement agreement, Talmer agreed to pay KBW a total cash fee equal to 1.00% of the aggregate merger consideration, $200,000
of which became payable to KBW upon entering into the engagement letter, $2,000,000 of which became payable to KBW with the rendering
of its opinion and the balance of which is contingent upon the closing of the merger. Talmer also agreed to reimburse KBW for reasonable
out-of-pocket expenses and disbursements incurred in connection with its retention and to indemnify KBW against certain liabilities
relating to or arising out of KBW’s engagement or KBW’s role in connection therewith. In addition to this present engagement,
in the past two years, both KBW and a broker-dealer acquired by an affiliate of KBW in June 2015 provided investment banking and
financial advisory services to Talmer and received compensation for such services. Both KBW and such broker-dealer served as underwriters
in connection with the initial public offering of Talmer in February 2014. KBW also served as financial advisor to Talmer in connection
with its acquisition of four banking subsidiaries of Capitol Bancorp Ltd. in January 2014 and as an underwriter in connection with
a follow-on
public offering of Talmer in August 2015. In connection with those public offerings and acquisition, KBW and such broker
dealer received fees (including underwriting discounts) of approximately $8 million in the aggregate from Talmer. In the past two
years, KBW has provided investment banking and financial advisory services to Chemical and received compensation for such services.
KBW served as financial advisor to Chemical in connection with its acquisitions of Northwestern Bancorp in October 2014, Monarch
Community Bancorp, Inc. in April 2015 and Lake Michigan Financial Corporation in May 2015, and as an underwriter in connection
with a follow-on public offering of Chemical in June 2014. In connection with those acquisitions and public offering, KBW received
fees (including underwriting discounts) of approximately $4.8 million in the aggregate from Chemical. KBW may in the future provide
investment banking and financial advisory services to Talmer or Chemical and receive compensation for such services.
Certain Talmer Unaudited Prospective
Financial Information
Talmer does
not as a matter of course publicly disclose forecasts or internal projections as to future performance, revenues, earnings, financial
condition or other results due to, among other reasons, the inherent uncertainty of the underlying assumptions and estimates.
However, in connection with the evaluation of a potential merger, Talmer management prepared certain projections of Talmer’s
future financial performance for 2016 and 2017, which we refer to as the Talmer management projections, which contain unaudited
prospective financial information with respect to Talmer on a standalone, pre-merger basis, and which were made available to Talmer’s
financial advisor, KBW, and to Chemical and its financial adviser, Sandler O’Neill. The Talmer management projections were
not prepared with a view toward public disclosure and the inclusion of the Talmer management projections in this document should
not be regarded as an indication that Talmer or any other recipient of the Talmer management projections considered, or now considers,
them to be necessarily predictive of actual future results. The Talmer management projections were not prepared with a view toward
complying with the guidelines of the SEC, the guidelines established by the Public Company Accounting Oversight Board for preparation
or presentation of financial information, or generally accepted accounting principles in the United States. Neither Talmer’s
current independent registered public accounting firm, Crowe Horwath LLP, nor any other independent accountants, have compiled,
examined or performed any procedures with respect to the Talmer management projections, or expressed any opinion or any other
form of assurance on such information or its achievability. The report of Crowe Horwath LLP that is incorporated by reference
into this document related only to Talmer’s historical financial information. It does not extend to any prospective financial
information.
The Talmer management
projections reflect numerous estimates and assumptions made by Talmer with respect to industry performance, general business,
economic, regulatory, market and financial conditions and other future events, as well as matters specific to Talmer’s business,
all of which are difficult to predict and many of which are beyond Talmer’s control. The Talmer management projections also
reflect assumptions as to certain business decisions that are subject to change. The Talmer management projections reflect subjective
judgment in many respects and thus are susceptible to multiple interpretations and periodic revisions based on actual experience
and business developments. As such, the Talmer management projections constitute forward-looking information and are subject to
risks and uncertainties that could cause actual results to differ materially from the results forecasted in such prospective information,
including, but not limited to, Talmer’s performance, industry performance, general business and economic conditions, customer
requirements, competition, adverse changes in applicable laws, regulations or rules, interest rates, the regulatory environment,
and the various risks set forth in Talmer’s reports filed with the SEC. The Talmer management projections do not take into
account any circumstances or events occurring after the date they were prepared, including the transactions contemplated by the
merger agreement. Further, the Talmer management projections do not take into account the effect of any failure of the merger
to occur. None of Talmer, Chemical nor any of their financial advisors nor any of their affiliates intends to, and each of them
disclaims any obligation to, update, revise or correct such Talmer management projections if they are or become inaccurate (even
in the short term). The inclusion of the Talmer management projections herein should not be deemed an admission or representation
by Talmer or Chemical that they are viewed by Talmer or Chemical as material information of Talmer, particularly in light of the
inherent risks and uncertainties associated with such forecasts.
The following table
presents selected items of the Talmer management projections.
($ in millions, except per share data)
|
As of and for the Years Ending
December 31,
|
|
2016
|
|
2017
|
Balance Sheet:
|
|
|
|
Total Assets
|
$7,353,102
|
|
$7,914,304
|
Total Net Loans
|
5,354,410
|
|
5,952,234
|
Total Deposits
|
5,702,645
|
|
6,244,523
|
Total Common Shareholders’ Equity
|
797,877
|
|
871,690
|
Tangible Common Equity
|
788,980
|
|
865,893
|
Book Value Per Share
|
12.07
|
|
13.18
|
Tangible Book Value Per Share
|
11.88
|
|
13.04
|
Income Statement:
|
|
|
|
Net Income
|
$85,885
|
|
$100,259
|
Earnings Per Diluted Share
|
1.23
|
|
1.43
|
Capital Ratios:
|
|
|
|
Average Tangible Common Equity / Average Tangible Assets
|
10.70%
|
|
10.91%
|
Tier 1 Leverage Ratio
|
9.01%
|
|
9.64%
|
Tier 1 Common Equity / Risk-Weighted Assets
(Tier 1 Common Capital Ratio)
|
10.56%
|
|
11.29%
|
Total Risk-Based Capital Ratio
|
11.60%
|
|
12.25%
|
In addition, Talmer
senior management provided KBW with, and directed KBW to rely upon and utilize, a 8% annual net income growth rate assumption for
2018 through 2021 for purposes of the discounted cash flow analysis performed in connection with KBW’s fairness opinion.
Interests of Certain Chemical Directors
and Executive Officers in the Merger
In considering the
recommendation of the Chemical board of directors that you vote to approve the proposals submitted for the Chemical shareholder
vote set forth in this joint proxy statement and prospectus, you should be aware that some of Chemical’s directors and executive
officers have financial interests in the merger that are different from, or in addition to, those of Chemical’s shareholders
generally. In the case of Chemical directors, their additional interests are limited to their continued service as directors of
the combined company. The Chemical board of directors was aware of and considered these potential interests, among other matters,
in evaluating the merger agreement and the merger and in recommending to you that you approve the proposals submitted for the Chemical
shareholder vote set forth in this joint proxy statement and prospectus.
The merger will
constitute a “change in control” of Chemical for the purposes of the Chemical stock incentive plan. All unvested stock
options and other stock-based awards held by Chemical’s executive officers and directors will become fully vested as of the
effective time of the merger.
Upon
completion of the merger, the board of directors of Chemical will consist of twelve directors, which will include the seven directors
of Chemical serving immediately prior to the merger. After the merger, David Ramaker will serve
as Chief Executive Officer and President of Chemical and Chairman of the board of directors, Chief Executive Officer and President
of Chemical Bank. Lori Gwizdala will serve as Executive Vice President, Special Projects of Chemical Bank.
Golden Parachute Compensation
The following
table sets forth the information required by Item 402(t) of Regulation S-K promulgated by the SEC regarding certain compensation
which Chemical’s named executive officers may receive that is based on or that otherwise relates to the merger. The amounts
are calculated assuming that the effective date of the merger occurred on June 8, 2016. The amounts indicated below are estimates
based on multiple assumptions that may or may not actually occur or be accurate on the relevant date, including assumptions described
below, and do not reflect certain compensation actions that may occur before the completion of the merger. The merger-related
compensation payable to the Chemical named executive officers is the subject of a non-binding advisory vote of Chemical shareholders,
as described under “The Chemical Proposals
—
Chemical Proposal 4 – Chemical Merger-Related Compensation
Proposal” beginning on page 30.
Name
|
|
Cash ($)
|
|
Equity
($)
(1)
|
|
Pension/
NQDC
($)
|
|
Perquisites/
Benefits
($)
|
|
Tax
Reimburse-
ments($)
|
|
Other
($)
|
|
Total
($)
|
David B. Ramaker
|
|
—
|
|
1,517,141
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,517,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas W. Kohn
|
|
—
|
|
561,310
|
|
—
|
|
—
|
|
—
|
|
—
|
|
561,310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lori A. Gwizdala
|
|
—
|
|
540,111
|
|
—
|
|
—
|
|
—
|
|
—
|
|
540,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James E. Tomczyk
|
|
—
|
|
431,345
|
|
—
|
|
—
|
|
—
|
|
—
|
|
431,345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel W. Terpsma
|
|
—
|
|
148,179
|
|
—
|
|
—
|
|
—
|
|
—
|
|
148,179
|
____________________________
(1)
|
Represents the aggregate dollar value of the acceleration of in-the-money stock options, restricted stock performance units and restricted stock service-based units, assuming a value of $30.80 per share of Chemical common stock, which was the average closing market price of Chemical common stock over the first five business days following the first public announcement of the transaction.
|
Interests of Certain Talmer Directors and Executive Officers
in the Merger
In considering the
recommendation of the Talmer board of directors that you vote to approve the proposals submitted for the Talmer shareholder vote
set forth in this joint proxy statement and prospectus, you should be aware that Talmer’s directors and executive officers
have interests in the merger that are different from, or in addition to, those of Talmer’s shareholders generally. The Talmer
board of directors was aware of and considered these potential interests, among other matters, in evaluating the merger agreement
and the merger and in recommending to you that you approve the proposals submitted for the Talmer shareholder vote set forth in
this joint proxy statement and prospectus.
These interests
are described in further detail below. For purposes of all Talmer agreements described below, the completion of the merger contemplated
by the merger agreement will constitute a change in control, change of control event or term of similar meaning. Certain of the
agreements described below require the executive officer to be terminated without cause, or require the executive officer to terminate
his or her employment for good reason before receiving a change in control benefit. We refer to either of these events as a “qualifying
termination.”
Director Appointments
Under the merger agreement,
Gary Torgow, Talmer’s current Chairman, and David Provost, Talmer’s current President and Chief Executive Officer,
will be appointed to the board of directors of Chemical at the effective time of the merger. In addition, Chemical will appoint
three additional directors from Talmer’s board of directors to serve on the board of directors of the combined company following
the merger. As of the date of this joint proxy statement and prospectus, the additional three individuals from Talmer who will
become directors of the combined company have not been determined.
If the merger is completed,
Chemical intends to merge Talmer Bank with and into Chemical Bank. At the effective time of the bank merger, Chemical Bank will
appoint two new directors to serve on the board of the combined bank, which two individuals will be mutually agreed upon by Talmer
and Chemical. As of the date of this joint proxy statement and prospectus, the two new individuals who will become directors of
the combined bank have not been determined.
Indemnification and Insurance
To the fullest extent
permitted by applicable law, Chemical has agreed that it will indemnify, and provide for the advancement of reasonable expenses
to, present and former Talmer directors and officers with respect to liabilities arising from acts or omissions of such directors
and officers occurring before the merger. Chemical has also agreed to maintain, for at least six years from the effective time
of the merger, Talmer’s existing directors’ and officers’ liability insurance and fiduciary liability insurance
coverage for acts or omissions of such directors and officers occurring before the merger. Alternatively, Chemical may substitute
such coverage with policies that provide substantially the same coverage, or Chemical may purchase a six-year prepaid tail policy
on terms and conditions providing substantially equivalent benefits as the current insurance policies. Chemical will not be required,
however, to pay premiums for insurance coverage in excess of 300% of the last annual premium paid by Talmer before the date of
the merger agreement. If the amount of the premiums necessary to maintain or procure such insurance coverage exceeds the 300% maximum
premium amount, then Chemical must purchase the greatest coverage available for the cost, not exceeding such 300% maximum premium
amount.
Existing Talmer Employment Agreements
Talmer has existing
employment agreements with the following executive officers: David Provost, Gary Torgow, Dennis Klaeser and Thomas Shafer. Each
of these employment agreements provide for certain lump sum cash payments upon a change in control of Talmer.
Under the merger agreement,
Mr. Provost and Mr. Torgow each entered into services agreements with Chemical and Talmer Bank, as described below, which will
become effective at the closing of the merger, and will supersede their existing Talmer employment agreements. Under the services
agreements, Mr. Provost and Mr. Torgow each voluntarily waived his right to receive a lump sum cash payment upon a change in control
of Talmer that otherwise would have been paid to each officer upon the closing of the merger under their existing Talmer employment
agreements. Absent such a waiver, Mr. Provost and Mr. Torgow each would have been entitled to receive a lump sum cash payment at
the closing of the merger equal to two times the sum of each officer’s then-current base salary, or $1.2 million (based on
each officer’s current base salary of $600,000). The aggregate amount of such payments to Mr. Provost and Mr. Torgow would
have equaled $2.4 million. In addition, under the services agreements, all provisions in Mr. Provost’s and Mr. Torgow’s
Talmer employment agreement that entitle each officer to certain excise tax payments upon certain events (similar to the provision
described below in Mr. Shafer’s employment agreement with Talmer) will remain in full force and effect.
Under the merger
agreement, Mr. Klaeser also entered into a services agreement with Chemical and Talmer Bank, as described below, which will become
effective at the closing of the merger, and will supersede his existing Talmer employment agreement. Under Mr. Klaeser’s
services agreement, Chemical has agreed to assume the obligation to pay Mr. Klaeser his change in control payment under his existing
Talmer employment agreement, equal to a lump sum cash payment of two times his current base salary plus an amount equal to his
average bonus paid in the prior two calendar years, or $1,984,307 (based on his current base salary of $500,012 and average bonus
of $492,142), subject to his execution of a general release and waiver of claims against Talmer and its affiliates. In addition,
under the services agreement, all provisions in Mr. Klaeser’s Talmer employment agreement that entitle him to certain excise
tax payments upon certain events (similar to the provision described below in Mr. Shafer’s employment agreement with Talmer)
will remain in full force and effect.
Mr. Shafer has entered
into an employment agreement with Talmer pursuant to which he is entitled to a lump sum payment at the closing of the merger equal
to one times his current base salary plus an amount equal to his average bonus paid in the prior two calendar years, or $803,266
(based on his current base salary of $425,000 and average bonus of $378,266), subject to his execution of a general release and
waiver of claims against Talmer and its affiliates. In addition, his outstanding stock options will accelerate and become fully
vested upon a change in control and continue to be exercisable as provided in the agreement or plan under which they were granted.
As of the date hereof, all of Mr. Shafer’s Talmer stock options are fully vested.
Mr. Shafer’s
employment agreement with Talmer also provides that if Mr. Shafer’s employment is terminated by Talmer or Talmer Bank without
cause or if he terminates his employment for good reason, he is entitled to receive a severance payment equal to one times his
current annual base salary plus an amount equal to the average of his bonus paid in the prior two calendar years, to be paid in
equal installments over a one year period (subject to certain exceptions), and all of his outstanding stock options would accelerate
and become fully vested and exercisable for a period of 90 days following the termination date. Under the employment agreement,
if, in connection with a change in control event, Mr. Shafer experiences a qualifying termination, he is entitled to receive either
the severance payment or the change in control payment, but not both. A termination of Mr. Shafer’s employment shall be
conclusively deemed to be in connection with a change in control event if it occurs within six months before or after the closing
date of a change in control.
Mr.
Shafer’s employment agreement with Talmer further provides that if any payment received by him following a change in control
is determined to constitute a “parachute payment” as such term is defined in Section 280G(b)(2) of the Internal
Revenue Code of 1986, as amended, Talmer will pay to Mr. Shafer an additional amount which, after the imposition of all income
and excise taxes thereon, is equal to the excise tax imposed by Section 4999 of the Internal Revenue Code with respect to
such payment.
Existing Talmer Change in Control
Agreements
Talmer is
also a party to change in control agreements with Gregory Bixby and four other executive officers (other than Mr. Provost,
Mr. Torgow, Mr. Klaeser and Mr. Shafer). Under these agreements, upon providing proper notice, if, during the 18 month period
commencing after a change in control (or in the event of an anticipatory termination, the period commencing up to six months
prior to the consummation of a change in control), Talmer terminates the officer without cause, or the officer terminates his
or her employment for good reason, the officer is entitled to receive a severance payment in a lump sum equal to one times
his or her annual base salary plus an amount equal to the average of his or her annual performance bonuses during the two
calendar years before the change in control event.
In general, the
change in control agreements also provide that for a term of one year following the officer’s termination he or she will
not solicit any of Talmer’s customers with whom he or she had contact during the 12 months before his or her termination
or solicit Talmer’s employees to join a competing business. In addition, the agreements generally provide that for a term
of one year following the officer’s termination he or she will not, without Talmer’s prior written consent, engage
in any business which is essentially the same as Talmer’s business within the State of Michigan, or within 25 miles of one
of Talmer’s locations, if located outside of the State of Michigan. Mr. Bixby’s change in control agreement also provides
that Mr. Bixby may engage in a business that is essentially the same as Talmer’s business within the restricted area and
within the one year period following his termination, if he provides prior written notice of such intent and if he pays an amount
equal to the pro rata portion of the severance payment Talmer previously paid to him under the change in control agreement.
The estimated
aggregate amount that would be payable to Talmer’s executive officers, including Mr. Bixby, assuming each
officer experienced a qualifying termination at the closing of the merger under their respective change in control agreements
is $1,890,212.
Treatment of Outstanding Talmer
Equity Awards
Under the merger agreement,
outstanding equity-based awards held by Talmer’s directors and executive officers as of the effective time of the merger
will be treated as follows:
Talmer Stock Options
Upon completion
of the merger, all outstanding Talmer stock options will be converted into Chemical stock options in accordance with the terms
of the merger agreement, provided that up to 25% of outstanding Talmer stock options at the time of execution of the merger agreement
may be cashed out at closing as described below.
Talmer intends
to make a tender offer to all holders of outstanding Talmer stock options (“optionholders”), including all of Talmer’s
directors and executive officers. The tender offer was authorized by the compensation committee of Talmer’s board of directors
and by the full board. The members of the compensation committee have indicated that they will not participate in the tender offer.
The tender offer
will give each optionholder the opportunity to tender to Talmer up to 25% of such optionholder’s options outstanding as
of the date of the merger agreement, calculated on the basis of the number of shares of Talmer Class A common stock for which
such options are exercisable, in exchange for a cash payment to be made on the closing date of the merger. Each option that is
validly tendered and not withdrawn will be cancelled upon such payment. The payment for each such option will be calculated as
follows: the optionholder will be entitled to receive, for each cancelled option to purchase one share of Talmer Class A common
stock, cash in an amount equal to the “Option Cash-Out Consideration,” less any required withholding taxes. “Option
Cash-Out Consideration” means, for each cancelled option, cash in an amount equal to (i) the sum of (A) the product of (x) 0.4725
(the exchange ratio in the merger) multiplied by (y) the “Chemical Closing Price,” plus (B) $1.61, minus (ii) the
per-share exercise price for such cancelled option. The “Chemical Closing Price” means the volume weighted average
trading price on the NASDAQ Global Select Market of Chemical common stock for the 15 full trading days ending on the second trading
day immediately preceding the closing date of the merger. All options with the same exercise price will be cancelled for the same
Option Cash-Out Consideration. All options that an optionholder could have tendered in the tender offer but does not tender will
be converted into Chemical stock options in accordance with the terms of the merger agreement.
For illustrative
purposes, the table below shows the cash payment the executive officers would receive in respect of tendering outstanding Talmer
stock options, applying the assumptions described in the footnotes to the table.
Talmer Stock Options
Name
|
|
Total
Outstanding
Stock Options
(#)
|
|
Maximum
Number of Stock
Options Subject
to Cash-Out
(#)
|
|
Option Cash-Out
Consideration
(1) (2)
|
David Provost
|
|
1,907,924
|
|
476,981
|
|
$5,617,368
|
Gary Torgow
|
|
1,645,000
|
|
411,250
|
|
4,292,034
|
Dennis Klaeser
|
|
450,000
|
|
112,500
|
|
1,143,338
|
Thomas Shafer
|
|
450,000
|
|
112,500
|
|
1,143,338
|
Gregory Bixby
|
|
150,000
|
|
37,500
|
|
334,238
|
All Other Executive Officers and
Directors as a Group (10 persons)
(3)
|
|
905,000
|
|
241,250
|
|
2,165,161
|
|
(1)
|
The amounts set forth assumes that each executive officer tenders 25% of such optionholder’s options, calculated on the basis of the number of shares of Talmer Class A common stock for which such options are exercisable, by tendering the executive officer’s options with the lowest exercise prices to produce the highest Option Cash-Out Consideration.
|
|
(2)
|
The Option Cash-Out Consideration was calculated using $30.80 as the assumed Chemical Closing Price, which was the average closing market price of Chemical common stock over the first five business days following the first public announcement of the merger transactions, which occurred prior to the opening of NASDAQ on January 26, 2016.
|
|
(3)
|
Excludes the members of Talmer’s Compensation Committee, Thomas Schellenberg, Max Berlin, Ronald Klein and Barbara Mahone, who will not participate in the tender offer.
|
Talmer Restricted
Stock
As of the date hereof, Talmer’s ten executive officers held an aggregate
of 525,200 shares of unvested Talmer restricted stock, which includes an aggregate of 188,500 shares of Talmer restricted stock
subject to retention grants described below and an aggregate of 336,700 shares of Talmer restricted stock that were granted in
2014 and 2015. Under the merger agreement,
all restricted stock awards of Talmer that are unvested and remain outstanding at the effective time of the merger will be converted
into restricted stock awards of Chemical, on the same terms and conditions as were applicable to the Talmer restricted stock awards.
The number of shares of Chemical common stock into which the Talmer restricted stock will convert is equal to the product of (i)
the total number of shares of Talmer restricted stock multiplied by (ii) the “Equity Award Exchange Ratio,” rounded
up or down, if necessary, to the nearest whole share of Chemical common stock. Under the merger agreement, the “Equity Award
Exchange Ratio” is defined as the sum of (A) 0.4725 (the exchange ratio in the merger) plus (B) the quotient of (x) $1.61
divided by (y) the Chemical Closing Price.
As noted above,
on February 22, 2016, the compensation committee of the Talmer board of directors approved an aggregate of 188,500 retention restricted
stock awards for its executive officers, which includes 51,000 shares granted to each of Mr. Provost and Mr. Torgow and 31,000
shares granted to each of Mr. Klaeser and Mr. Shafer. No retention awards were granted to Mr. Bixby. These awards were intended
to address retention in connection with the anticipated merger, while at the same time preserving appropriate incentives and alignment
of executives with Talmer shareholders in light of the possibility that the merger may not close. The awards were granted on February
22, 2016. These retention grants replaced the annual equity awards that executives would otherwise have received in 2016, consistent
with Talmer’s historical practice of providing long-term equity compensation as a portion of overall executive compensation.
These retention awards vest in equal installments on the first, second and third anniversaries of the February 22, 2016 grant date.
Under the restricted stock agreements, the completion of the merger will not result in vesting of the retention awards. However,
if an executive officer’s employment is terminated without cause by Talmer or Talmer Bank, or any of their respective successors,
then the shares of restricted stock will become fully vested (regardless of whether or not the merger closes).
In addition to the
retention grants, Talmer’s executive officers hold an aggregate of 336,700 shares of unvested restricted stock that were
granted in 2014 and 2015 that vest upon the earlier of (i) the vesting of the shares of restricted stock under the terms of the
agreement, (ii) the one-year anniversary of a change of control event; or (iii) the date the officer is terminated by Talmer or
Talmer Bank, or any of their respective successors, without cause, or by the officer for good reason, during the one-year period
following such change of control event. If the executive officer’s employment ceases for any reason other than a qualifying
termination following a change in control, all shares of restricted stock that are not then vested will be immediately and automatically
forfeited and cancelled. For an estimate of the amounts payable in connection with the merger with respect to the 2014 and 2015
restricted stock grants, which have vesting rights affected by the merger, see “—Golden Parachute Compensation”
below.
Employment with Chemical
Each of Mr. Provost,
Mr. Torgow, Mr. Klaeser, and Mr. Shafer have agreed to serve as officers of the combined company or combined bank, as applicable,
upon the closing of the merger.
Services Agreements
with Mr. Provost, Mr. Torgow and Mr. Klaeser
Each of Mr. Provost,
Mr. Torgow and Mr. Klaeser has executed a services agreement with Chemical and Talmer Bank, which will become effective upon the
closing of the merger and will supersede their existing Talmer employment agreements.
Mr. Provost will
become Vice Chairman of the board of directors of Chemical and will also continue to serve as Chief Executive Officer of Talmer
Bank, until it is merged with Chemical Bank. Mr. Provost’s services agreement has a term of 24 months beginning on the effective
date of the merger. Under the agreement, he will receive an annual salary of $1.0 million, which may not be adjusted downward
during the term. He will also be eligible for a $600 per month car allowance, as well as a membership in a country club of his
choice. Under the agreement, if Chemical terminates his employment with or without cause during the term, Chemical will continue
to pay Mr. Provost his annual salary through the end of the term. As noted above, under the services agreement, Mr. Provost has
agreed to waive his change in control payment under his existing Talmer employment agreement. In addition, unlike his existing
Talmer employment agreement, Mr. Provost’s services agreement with Chemical does not contain change in control provisions
or protections. The services agreement further provides that Mr. Provost is
not expected to be eligible for the Chemical Bank
Annual Incentive Plan or the Chemical Bank Long Term Incentive Plan or any other bonus or incentive plan of Chemical Bank or any
stock options, restricted stock units or other equity awards under any Chemical equity plan. Mr. Provost’s services agreement
also contains provisions related to non-competition and non-solicitation that generally preclude Mr. Provost, for a period of
18 months following the termination of the agreement, from engaging, directly or indirectly, in the operation of a bank in Michigan
or any other state in which Chemical or one of its subsidiaries operated a bank during the term of his agreement, or from diverting
from Chemical any trade or business with any customer or supplier with whom Mr. Provost had contact during his employment, subject
to certain conditions and exceptions.
Mr. Torgow will
become Chairman of the board of directors of Chemical. Mr. Torgow’s services agreement has a term of 24 months beginning
on the effective date of the merger. Under the agreement, he will receive an annual salary of $1.0 million, which may not be adjusted
downward during the term. He will also be eligible for a $600 per month car allowance, as well as a membership in a country club
of his choice. Under the agreement, if Chemical terminates his employment with or without cause during the term, Chemical will
continue to pay Mr. Torgow his annual salary through the end of the term. As noted above, under the services agreement, Mr. Torgow
has agreed to waive his change in control payment under his existing Talmer employment agreement. In addition, unlike his existing
Talmer employment agreement, Mr. Torgow’s services agreement with Chemical does not contain change in control provisions
or protections. The services agreement further provides that Mr. Torgow is not expected to be eligible for the Chemical Bank Annual
Incentive Plan or the Chemical Bank Long Term Incentive Plan or any other bonus or incentive plan of Chemical Bank or any stock
options, restricted stock units or other equity awards under any Chemical equity plan. Mr. Torgow’s services agreement also
contains provisions related to non-competition and non-solicitation that generally preclude Mr. Torgow, for a period of 18 months
following the termination of the agreement, from engaging, directly or indirectly, in the operation of a bank in Michigan or any
other state in which Chemical or one of its subsidiaries operated a bank during the term of his agreement, or from diverting from
Chemical any trade or business with any customer or supplier with whom Mr. Torgow had contact during his employment, subject to
certain conditions and exceptions.
Mr. Klaeser
will become Executive Vice President, Chief Financial Officer of Chemical and Chemical Bank and will also continue to
serve as Chief Financial Officer of Talmer Bank, until it is merged with Chemical Bank. Mr. Klaeser’s services agreement has a term of 24 months beginning on the effective
date of the merger. Under the agreement, he will receive an annual salary of $500,000, which may not be adjusted downward during
the term. He will also be eligible for a $600 per month car allowance, as well as a membership in a country club of his choice.
Under the agreement, if Chemical terminates his employment with or without cause during the term, Chemical will continue to pay
Mr. Klaeser his annual salary through the end of the term. Unlike his existing Talmer employment agreement, Mr. Klaeser’s
services agreement with Chemical does not contain change in control provisions or protections, although Chemical has agreed to
assume the change in control payments due and payable to Mr. Klaeser under his existing Talmer employment agreement upon the closing
of the merger. The services agreement further provides that Mr. Klaeser is not expected to be eligible for the Chemical Bank Annual
Incentive Plan or the Chemical Bank Long Term Incentive Plan or any other bonus or incentive plan of Chemical Bank or any stock
options, restricted stock units or other equity awards under any Chemical equity plan. Mr. Klaeser’s services agreement
also contains provisions related to non-competition and non-solicitation that generally preclude Mr. Klaeser, for a period of
12 months following the termination of the agreement, from engaging, directly or indirectly, in the operation of a bank in Michigan
or any other state in which Chemical or one of its subsidiaries operated a bank during the term of his agreement, or from diverting
from Chemical any trade or business with any customer or supplier with whom Mr. Klaeser had contact during his employment, subject
to certain conditions and exceptions.
Under their respective
services agreements, each of Mr. Provost, Mr. Torgow and Mr. Klaeser will also be eligible to participate in Chemical’s
employee benefit plans, including its 401(k) plan, group health plan and non-qualified deferred compensation plan.
Employment Agreement
with Mr. Shafer
Mr. Shafer will
enter into an employment agreement with the surviving bank (that will only become effective at the effective time of the subsidiary
bank merger) to serve as an Executive Vice President, Director of Regional and Community Banking of the surviving bank.
Golden Parachute Compensation
The following
table sets forth the information required by Item 402(t) of Regulation S-K promulgated by the SEC regarding certain compensation
which Talmer named executive officers may receive that is based on or that otherwise relates to the merger. The amounts are calculated
assuming that the effective date of the merger occurred on June 8, 2016. The amounts indicated below are estimates based on multiple
assumptions that may or may not actually occur or be accurate on the relevant date, including assumptions described below, and
do not reflect certain compensation actions that may occur before the completion of the merger. The merger-related compensation
payable to the Talmer named executive officers is the subject of a non-binding advisory vote of Talmer shareholders, as described
under “The Talmer Proposals
—
Talmer Proposal 2 – The Talmer Merger-Related Compensation Proposal”
beginning on page 31.
As discussed
above in “—Existing Talmer Employment Agreements” beginning on page 86, under the merger agreement, Mr. Provost,
Mr. Torgow and Mr. Klaeser each entered into services agreements with Chemical and Talmer Bank, which will become effective at
the closing of the merger, and will supersede their existing Talmer employment agreements. Under the services agreements, Mr.
Provost and Mr. Torgow each voluntarily waived his right to receive a $1.2 million lump sum cash payment that otherwise would
have been paid to each officer upon the closing of the merger under their existing Talmer employment agreements.
Name
|
|
Cash
($)
(1)
|
|
Equity
($)
(2)
|
|
Pension/
NQDC
($)
|
|
Perquisites/
Benefits
($)
|
|
Tax
Reimburse-
ments($)
|
|
Other
($)
|
|
Total
($)
|
David Provost
|
|
—
|
|
1,185,554
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,185,554
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary Torgow
|
|
—
|
|
1,185,554
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,185,554
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dennis Klaeser
|
|
1,984,307
|
|
824,300
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2,808,607
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas Shafer
|
|
803,266
|
|
646,523
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,449,789
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregory Bixby
|
|
470,500
|
|
387,926
|
|
—
|
|
—
|
|
—
|
|
—
|
|
858,426
|
____________________________
(1)
|
Cash
. Mr. Provost and Mr. Torgow each voluntarily waived his right to receive a lump sum cash payment upon a change in control of Talmer that otherwise would have been made to each officer upon the closing of the merger under their existing Talmer employment agreements. The amounts set forth for Mr. Klaeser and Mr. Shafer represents a single trigger lump sum cash payment under each of their existing Talmer employment agreements. The amount set forth for Mr. Bixby represents a double trigger lump sum cash payment under his existing Talmer change in control agreement assuming he has a qualifying termination event during the 18 month period following the effective date of the merger.
|
|
|
(2)
|
Equity
. The amounts set forth represents the value of each officer’s unvested restricted stock related to the 2014 and 2015 annual restricted stock awards assuming that each executive officer either (i) remains employed with the combined company until the one-year anniversary of the effective date of the merger, or (ii) has a qualifying termination event during the one-year period following the effective date of the merger, at which time all of such unvested shares of Talmer restricted stock will fully vest. The value of the unvested 2014 and 2015 annual restricted stock awards was calculated assuming that each share of Talmer restricted stock would convert into shares of Chemical common stock, based on the formula contained in the merger agreement described above under “Treatment of Outstanding Talmer Equity Awards—Talmer Restricted Stock,” using $30.80 as the assumed Chemical Closing Price, which was the average closing market price of Chemical common stock over the first five business days following the first public announcement of the merger transactions, which occurred prior to the opening of NASDAQ on January 26, 2016. The value of the converted shares also assumes a per share price of $30.80.
For the retention awards, the completion of the merger itself will not result in vesting of the restricted stock awards and, therefore, these restricted stock awards have been excluded from this table.
|
Board of Directors and Management
Following the Merger
Immediately
following the effective time of the merger, the board of directors of Chemical will consist of twelve members, which
will include the seven directors of Chemical serving immediately prior to the merger and five of the directors of Talmer
serving immediately prior to the merger, two of whom shall be Gary Torgow and David Provost. The parties will consult as to
the other three Talmer directors who will serve on the board of directors of Chemical following the merger. David Ramaker
will continue to serve as Chief Executive Officer and President of Chemical and Chairman of the board of directors, Chief
Executive Officer and President of Chemical Bank. After the merger, Gary Torgow will serve as Chairman of the board of
directors of Chemical. David Provost will serve as Vice Chairman of the board of directors of Chemical. Dennis Klaeser will
serve as Executive Vice President, Chief Financial Officer of Chemical and Chemical Bank. Mr. Klaeser will also continue to
serve as Chief Financial Officer of Talmer Bank until its merger with Chemical Bank. Lori Gwizdala will serve as Executive
Vice President, Special Projects of Chemical Bank. Thomas Shafer will serve as Executive Vice President, Director of Regional
and Community Banking of Chemical Bank.
Regulatory Clearances Required for the Merger
The merger must
be approved by the Board of Governors of the Federal Reserve System, which will review, among other things, the effect of the merger
on competition, the companies’ capital position, safety and soundless, legal and regulatory compliance matters and Community
Investment Act matters. There can be no assurance as to whether this and other regulatory approvals will be obtained, the timing
of such approvals or whether any conditions will be imposed on such approvals.
Chemical and Talmer
have agreed to use their respective commercially reasonable efforts to obtain as promptly as practicable applicable regulatory
approvals, and any other approval required under any applicable federal or state law. Chemical and Talmer have agreed to cooperate
with one another to determine which regulatory filings or approvals are required to be made or obtained prior to the effective
date of the merger and to timely make all such filings and seek all such approvals. Chemical and Talmer are currently reviewing
which such regulatory filings and approvals, if any, are required and expect to timely make all such filings and seek all such
approvals.
Chemical and Talmer
cannot assure you that other government agencies or private parties will not initiate actions to challenge the merger before or
after it is completed. Any such challenge to the merger could result in a court order enjoining the merger or in restrictions or
conditions that would have a material adverse effect on the combined company following the merger if the merger is completed. Such
restrictions and conditions could include requiring the divestiture or spin-off of assets or businesses. No additional shareholder
approval is expected to be required or sought for any decision by Chemical or Talmer after the Chemical special meeting and the
Talmer special meeting to agree to any terms and conditions necessary to resolve any regulatory objections to the merger.
Exchange of Shares in the Merger
Chemical
intends to appoint Computershare to serve as exchange agent to handle the exchange of shares of Talmer Class A common
stock for shares of Chemical common stock. At the effective time of the merger, each share of Talmer Class A common stock
will be converted into the right to receive the merger consideration, consisting of 0.4725 shares of Chemical common stock
and $1.61 in cash, without interest, and cash in lieu of any fractional share of Chemical common stock, without the need for
any action by the holders of Talmer Class A common stock.
Promptly after the
effective time of the merger, but in no event later than ten days after the effective time, Chemical will cause the exchange agent
to mail to each holder of record of one or more Talmer stock certificates a letter of transmittal specifying, among other things,
that delivery will be effected, and risk of loss and title to any certificates representing Talmer Class A common stock shall pass,
only upon proper delivery of such certificates to the exchange agent. The letter of transmittal will also include instructions
explaining the procedure for surrendering Talmer stock certificates in exchange for the merger consideration. Talmer shareholders
should
not
return Talmer stock certificates with the enclosed proxy card.
After the effective time of the merger,
shares of Talmer Class A common stock will no longer be outstanding, will be automatically canceled and will cease to exist and
each certificate, if any, that previously represented shares of Talmer Class A common stock will represent only the right to receive
the merger consideration
as described above. With respect to merger consideration deliverable upon the surrender of Talmer stock
certificates, until holders of such Talmer stock certificates have surrendered such stock certificates to the exchange agent for
exchange, those holders will not receive dividends or distributions with respect to such shares of Chemical common stock issuable
as merger consideration with a record date after the effective time of the merger, and will not receive interest on any cash issuable
as merger consideration.
Talmer shareholders
will not receive any fractional shares of Chemical common stock pursuant to the merger. In lieu of fractional shares, Chemical
will pay to each former Talmer shareholder who otherwise would be entitled to receive a fractional share of Chemical common stock
an amount in cash (rounded up to the nearest cent), without interest thereon, equal to the product of (i) the volume weighted average
trading price on the NASDAQ Global Select Market of Chemical common stock for the 15 full trading days ending on the second trading
day immediately preceding the closing date of the merger, multiplied by (ii) the fraction of a share (rounded to the nearest thousandth)
of Chemical common stock which such holder otherwise would be entitled to receive.
Chemical shareholders
need not take any action with respect to their shares of Chemical common stock, and will continue to hold their shares of Chemical
common stock after the effective time of the merger.
Litigation Related to the Merger
On February
22, 2016, two putative class action and derivative complaints were filed in the Circuit Court for Oakland County, Michigan by
individuals purporting to be a shareholder of Talmer. The actions are styled
Regina Gertel Lee v. Chemical Financial Corporation,
et. al.
, Case No. 2016-151642-CB and
City of Livonia Employees’ Retirement System v. Chemical Financial Corporation
et. al.
, Case No. 2016-151641-CB. These complaints purport to be brought derivatively on behalf of Talmer against the individual
defendants, and individually and on behalf of all others similarly situated against Talmer and Chemical. The complaints allege,
among other things, that the directors of Talmer breached their fiduciary duties to Talmer’s shareholders in connection
with the merger by approving a transaction pursuant to an allegedly inadequate process that undervalues Talmer and includes preclusive
deal protection provisions, and that Chemical allegedly aided and abetted the Talmer directors in breaching their duties to Talmer’s
shareholders. The complaints also allege that the individual defendants have been unjustly enriched. Both complaints seek various
remedies on behalf of the putative class (consisting of all shareholders of Talmer who are not related to or affiliated with any
defendant). They request, among other things, that the Court enjoin the merger from being consummated in accordance with its agreed-upon
terms, direct the Talmer directors to exercise their fiduciary duties, rescind the merger agreement to the extent that it is already
implemented, award the plaintiff all costs and disbursements in each respective action (including reasonable attorneys’
and experts’ fees), and grant such further relief as the court deems just and proper. The
City of Livonia
plaintiff
amended its complaint on April 21, 2016 to add additional factual allegations, including but not limited to allegations that KBW
served as a financial advisor for the proposed merger despite an alleged conflict of interest, that Talmer’s board acted
under actual or potential conflicts of interest, and that the defendants omitted and/or misrepresented material information about
the proposed merger in the preliminary Form S-4 Registration Statement relating to the proposed merger. Pursuant to a stipulated
order, dated May 12, 2016, the above two referenced cases were consolidated. Talmer, Chemical and the individual defendants all
believe that the claims asserted against each of them in the above-described lawsuits are without merit and intend to vigorously
defend against these lawsuits.
On March 22, 2016, an additional putative class action and derivative complaint was filed in the Circuit Court
for Oakland County, Michigan, by an individual purporting to be a shareholder of Talmer, styled
Stephen Bushansky v. Gary Torgow
et. al.
, Case No. 2016-152112-CB. This action contained similar allegations, claims, and requests for relief as the complaints
filed in the Lee and City of Livonia lawsuits discussed above. The
Bushansky
lawsuit was voluntarily dismissed by the plaintiff
as to all defendants, without prejudice, on April 18, 2016. On April 27, 2016, Stephen Bushansky filed a new putative class action
complaint in the United States District Court for Eastern District of Michigan, styled
Stephen Bushansky v. Talmer Bancorp Inc.
et. al.
, Docket No. 1:16-cv-11511. This lawsuit alleges violations of Sections 14(a) and 20(a) of the Securities Exchange Act
of 1934, naming Talmer, Chemical, and several individuals as defendants. The complaint alleges, among other things, that the Defendants
issued materially incomplete and misleading disclosures in the preliminary Form S-4 Registration Statement relating to the proposed
merger. The Complaint contains requests for relief that include, among other things, that the Court enjoin the proposed transaction,
rescind the transaction if it is consummated or award
rescissory damages, order the Talmer directors to file a revised Registration
Statement, declare that the Defendants violated Sections 14(a) and/or Section 20(a) of the Securities Exchange Act, as well as
Rule 14a-9 promulgated thereunder, award the plaintiff all costs associated with bringing the action (including reasonable attorneys’
and experts’ fees), and grant such further relief as the court deems just and proper. Talmer, Chemical and the individual
defendants all believe that the claims asserted against each of them in this lawsuit are without merit and intend to vigorously
defend against this lawsuit.
On April 6,
2016, a complaint was filed in the United States District Court for the Eastern District of Michigan by another purported shareholder
of Talmer, styled
Matthew Sciabacucchi v. Chemical Financial Corporation et. al.
, Docket No. 1:16-cv-11261. This lawsuit
alleges violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, naming Talmer, Chemical, and several individuals
as defendants. The complaint alleges, among other things, that the Defendants issued materially incomplete and misleading disclosures
in the preliminary Form S-4 Registration Statement relating to the proposed merger. The Complaint contains requests for relief
that include, among other things, that the Court enjoin the proposed transaction, rescind the transaction if it is consummated
or award rescissory damages, order the Talmer directors to file a revised Registration Statement, declare that the Defendants
violated Sections 14(a) and/or Section 20(a) of the Securities Exchange Act, as well as Rule 14a-9 promulgated thereunder, award
the plaintiff all costs associated with bringing the action (including reasonable attorneys’ and experts’ fees), and
grant such further relief as the court deems just and proper. Talmer, Chemical and the individual defendants all believe that
the claims asserted against each of them in this lawsuit are without merit and intend to vigorously defend against this lawsuit.
On April 25,
2016, a complaint was filed in the United States District Court for the Eastern District of Michigan by another purported shareholder
of Talmer, styled
Kevin Nicholl v. Chemical Financial Corporation et. al.
, Docket No. 1:16-cv-11482. The plaintiff names
Talmer, Chemical, and several individuals as defendants. This lawsuit is styled as a class action and derivative action, and alleges
breach of fiduciary duties as well as violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934. The complaint
alleges, among other things, that the individual defendants breached their fiduciary duties as directors of Talmer by, among other
things, entering into the proposed merger under various alleged conflicts of interest without regard to the fairness of the transaction
to Talmer’s shareholders, using a flawed process in entering into the proposed merger that failed to maximize value for
Talmer shareholders, and knowingly or recklessly attempting to unfairly deprive the Talmer shareholders of the true value of their
investment in Talmer. The Complaint further alleges that the individual defendants issued materially incomplete and misleading
disclosures in the preliminary Form S-4 Registration Statement relating to the proposed merger, in violation of Section 14(a)
of the Securities Exchange Act, and/or were control persons liable for these alleged violations under Section 20(a) of the Securities
Exchange Act. The Complaint alleges that Chemical aided and abetted the alleged wrongdoing of the individual defendants, as described
in the Complaint. The Complaint contains requests for relief that include, among other things, that the Court certify the action
as a class and derivative action, declare that the individual defendants breached their fiduciary duties in entering into the
transaction, direct the individual defendants to comply with their fiduciary duties to obtain a transaction in the best interests
of Talmer’s shareholders, enjoin the proposed transaction unless an appropriate procedure or process is implemented to provide
the best terms to Talmer’s shareholders, rescind the transaction if it is consummated, award the plaintiff the costs and
disbursements of the action (including reasonable attorneys’ and experts’ fees), and grant such further equitable
relief as the court deems just and proper. Talmer, Chemical and the individual defendants all believe that the claims asserted
against each of them in this lawsuit are without merit and intend to vigorously defend against this lawsuit.
Bank Consolidation Following the Merger
Following completion of the merger, Chemical intends to consolidate Talmer Bank with and into Chemical Bank,
with Chemical Bank as the surviving institution, subject to, among other things, regulatory approval.
Chemical Dividend Policy
Chemical currently
pays quarterly cash dividends of $0.26 per share on shares of its common stock and currently intends to consider the declaration
of a dividend on a quarterly basis. Any future determination regarding dividend or distribution payments will be at the discretion
of the Chemical board of directors, subject to applicable limitations under Michigan law, and will depend upon many factors, including
results of operations, financial condition, liquidity, capital requirements and legal requirements.
Listing of Chemical Common Stock
It is a condition
to the completion of the merger that the shares of Chemical common stock to be issued to Talmer shareholders pursuant to the merger
(including those shares of Chemical common stock to be issued upon conversion of the Talmer share-based awards) be authorized
for listing on NASDAQ, subject to official notice of issuance.
De-Listing and Deregistration of
Talmer Stock
Upon completion
of the merger, the Talmer Class A common stock currently listed on NASDAQ will cease to be listed on NASDAQ and will subsequently
be deregistered under the Exchange Act.
Support Agreements
Each of Chemical’s
directors, in their capacities as shareholders of Chemical, entered into a Support Agreement with Talmer pursuant to which the
Chemical directors have agreed, subject to certain exceptions, to vote their shares, and to use reasonable efforts to cause all
shares owned by such director jointly with any other person over which such director has shared voting control to be voted, in
favor of the merger agreement. At the close of business on the record date for the Chemical special meeting, Chemical directors
were entitled to vote 283,700 shares of, or approximately 0.74%, of Chemical common stock outstanding on that date.
Each of Talmer’s
directors, in their capacities as shareholders of Talmer, entered into a Support Agreement with Chemical pursuant to which the
Talmer directors have agreed, subject to certain exceptions, to vote their shares, and to use reasonable efforts to cause all
shares owned by such director jointly with any other person over which such director has shared voting control to be voted, in
favor of the merger agreement. At the close of business on the record date for the Talmer special meeting, Talmer directors were
entitled to vote 1,472,362 shares of, or approximately 2.19%, of Talmer Class A common stock outstanding on that date.
No Appraisal or Dissenters’
Rights
Under Michigan law,
as well as the governing instruments of each company, neither the holders of Chemical common stock nor the holders of Talmer Class
A common stock are entitled to appraisal rights or dissenters’ rights in connection with the merger.
THE MERGER AGREEMENT
The following
describes the material provisions of the merger agreement, which is included as Annex A to this joint proxy statement and prospectus
and incorporated by reference herein. The summary of the material provisions of the merger agreement below and elsewhere in this
joint proxy statement and prospectus is qualified in its entirety by reference to the merger agreement. This summary does not purport
to be complete and may not contain all of the information about the merger agreement that is important to you. Chemical and Talmer
encourage you to read the merger agreement carefully in its entirety before making any decisions regarding the merger as it is
the legal document governing the merger and related transactions.
The merger
agreement and this summary of its terms have been included to provide you with information regarding the terms of the merger agreement
and are not intended to provide any factual information about Chemical or Talmer. Chemical and Talmer are responsible for considering
whether additional disclosure of material information is required to make the statements in this joint proxy statement and prospectus
not misleading. Factual disclosures about Chemical or Talmer contained in this joint proxy statement and prospectus or Chemical’s
or Talmer’s public reports filed with the SEC may supplement, update or modify the factual disclosures about Chemical or
Talmer contained in the merger agreement and described in this summary. The representations, warranties and covenants made in
the merger agreement by Chemical and Talmer are qualified and subject to important limitations agreed to by Chemical and Talmer
in connection with negotiating the terms of the merger agreement. In particular, in your review of the representations and warranties
contained in the merger agreement and described in this summary, it is important to bear in mind that the representations and
warranties were made solely for the benefit of the parties to the merger agreement, and were negotiated with the principal purpose
of allocating risk between the parties to the merger agreement rather than establishing matters as facts. The representations
and warranties may also be subject to a contractual standard of materiality that may be different from that generally relevant
to shareholders or applicable to reports and documents filed with the SEC, and in some cases are qualified by confidential disclosures
that were made by each party to the other, which disclosures are not reflected in the merger agreement or otherwise publicly disclosed.
The representations and warranties in the merger agreement will not survive the completion of the merger. Moreover, information
concerning the subject matter of the representations and warranties may have changed since the date of the merger agreement, and
subsequent developments or new information qualifying a representation or warranty may have been included or incorporated by reference
into this joint proxy statement and prospectus. For the foregoing reasons, the representations, warranties and covenants or any
descriptions of those provisions should not be read alone, but instead should be read together with the information provided elsewhere
in this joint proxy statement and prospectus and in the documents incorporated by reference into this joint proxy statement and
prospectus. See “Where You Can Find More Information” beginning on page 132.
General; The Merger
At the effective
time of the merger, upon the terms and subject to the satisfaction or waiver of the conditions of the merger agreement and in accordance
with the Michigan Business Corporation Act, Talmer will be merged with and into Chemical, the separate corporate existence of Talmer
will cease, and Chemical will be the surviving corporation of the merger. As of the effective time of the merger, the articles
of incorporation of the surviving corporation will be the articles of incorporation of Chemical as in effect immediately prior
to the effective time, and the bylaws of Chemical as in effect immediately prior to the effective time will be the bylaws of the
surviving corporation. Effective as of the effective time of the merger, Chemical will cause the size of the board of directors
of the surviving corporation to be 12 directors.
When the Merger Becomes Effective
Chemical and Talmer
will file a certificate of merger (the “Certificate of Merger”) with the Michigan Department of Licensing and Regulatory
Affairs after the last of the conditions to the closing of the merger have been satisfied or waived (other than those conditions
that by their nature are to be satisfied or waived at the closing of the merger), or at such other date and time as the parties
may agree. The merger will be effective when the Certificate of Merger is accepted for filing by the Michigan Department of Licensing
and Regulatory Affairs or at such later time as is agreed to by the parties and specified in the Certificate of Merger. If requested
by Chemical,
the effective time of the Merger will occur on either the last day or the first day of a month, but will not occur
during a month in which a calendar quarter ends.
Chemical and Talmer
currently expect to complete the transaction in the second half of 2016, subject to receipt of required shareholder approvals and
regulatory approvals and the satisfaction or waiver of the other conditions to the merger, described below.
Merger Consideration
The merger agreement
provides that, at the effective time of the merger, each share of Talmer Class A common stock issued and outstanding immediately
prior to the effective time of the merger (except for shares of Talmer Class A common stock owned, directly or indirectly, by Talmer
or Chemical immediately before the effective time of the merger (excluding any of such shares that are held (i) as a result of
debts previously contracted, or (ii) in trust accounts or otherwise held in a fiduciary or agency capacity and beneficially owned
by third parties), which will be cancelled and cease to exist with no consideration paid) will be converted into the right to receive
0.4725 (referred to as the “exchange ratio”) fully paid and nonassessable shares of Chemical common stock plus $1.61
in cash (collectively the “merger consideration”). Upon this conversion, such shares of Talmer Class A common stock
will no longer be outstanding and all rights with respect to such shares will cease to exist, except for the right to receive the
merger consideration (and cash in lieu of fractional shares).
Pursuant to the
merger, Chemical will not issue any certificates or scrip representing fractional shares of Chemical common stock in exchange for
shares of Talmer Class A common stock, or pay any dividends or distributions with respect to such fractional share interests, and
such fractional share interests will not entitle the holder thereof to vote or to have any rights as a holder of shares of Chemical
common stock. Instead, a shareholder of Talmer who otherwise would have been entitled to receive a fraction of a share of Chemical
common stock in connection with the merger will receive cash (without interest, and rounded to the nearest cent) in an amount equal
to the product of (i) the volume weighted average trading price on the NASDAQ Global Select Market of Chemical common stock for
the 15 full trading days ending on the second trading day immediately preceding the closing date of the merger, multiplied by (ii)
such fraction of a share of Chemical common stock, rounded to the nearest thousandth.
After the effective
time of the merger, there will be no further transfers on the stock transfer books of Talmer of shares of Talmer Class A common
stock that were outstanding immediately prior to the effective time of the merger.
Dividends and Distributions
No dividends or
other distributions with respect to Chemical common stock with a record date on or after the effective time of the merger will
be paid to the holder of any unsurrendered certificate or book-entry share that represented Talmer Class A common stock immediately
prior to the effective time of the merger until the holder of such certificate or book-entry surrenders such certificate or book-entry
share in accordance with the instructions received from the exchange agent. Following such surrender, there will be paid, without
interest, with respect to whole shares of Chemical common stock that shares of Talmer Class A common stock represented by the certificate
or book-entry share have been converted into: (i) at the time of such surrender, the amount of dividends or other distributions
with a record date and a payment date on or after the effective time of the merger and on or prior to the date of such surrender
and (ii) at the appropriate payment date, the amount of any dividends or other distributions with a record date on or after the
effective time of the merger and prior to the date of such surrender and a payment date subsequent to the date of such surrender.
Treatment of Talmer Awards
Talmer Stock
Options
As of the effective
time of the merger, each outstanding Talmer stock option (excluding any Talmer stock options cancelled immediately prior to the
effective time pursuant to the tender offer as described below) will be assumed by Chemical substantially in accordance with the
terms of the Talmer stock plans and any applicable award
agreements and will be converted into a stock option with respect to the
number of shares of Chemical common stock equal to the product of (i) the total number of shares of Talmer Class A common stock
subject to such Talmer stock option, multiplied by (ii) the equity award exchange ratio (defined below), rounded up or down, if
necessary, to the nearest whole share of Chemical common stock. The per-share exercise price of such Talmer stock option will be
adjusted to equal the quotient of (a) the exercise price per share of Talmer Class A common stock at which such stock option was
exercisable immediately prior to the effective time, divided by (b) the equity award exchange ratio, rounded up or down to the
nearest whole cent, if necessary. The “equity award exchange ratio” means the sum of (i) the exchange ratio (0.4725),
plus (ii) the quotient of (a) the cash consideration ($1.61) divided by (b) the “Chemical Closing Price,” which is
the volume weighted average trading price on the NASDAQ Global Select Market of Chemical common stock for the 15 full trading days
ending on the second trading day immediately preceding the closing date of the merger.
Cash Tender Offer
for Up to 25% of Outstanding Talmer Stock Options
Talmer intends to make
a tender offer to all holders of outstanding Talmer stock options (“optionholders”) that will give each optionholder
the opportunity to tender to Talmer up to 25% of such optionholder’s options that were outstanding on January 25, 2016 (the
date of the merger agreement), and no more than that amount, calculated on the basis of the number of shares of Talmer Class A
common stock for which such options are exercisable, in exchange for a cash payment to be made on the closing date of the merger.
Each option that is validly tendered and not withdrawn will be cancelled upon such payment. The payment for each such option will
be calculated as follows: the optionholder will be entitled to receive, for each cancelled option to purchase one share of Talmer
Class A common stock, cash in an amount equal to the “Option Cash-Out Consideration,” less any required withholding
taxes. “Option Cash-Out Consideration” means, for each cancelled option, cash in an amount equal to (i) the sum of
(A) the product of (x) 0.4725 multiplied by (y) the Chemical Closing Price, plus (B) $1.61, minus (ii) the per-share
exercise price for such cancelled option. All options with the same exercise price will be cancelled for the same Option Cash-Out
Consideration. All options that an optionholder could have tendered in the tender offer but does not tender will be converted
into Chemical stock options in accordance with the terms of the merger agreement. For information about the cash payments that
the executive officers and directors of Talmer would receive in respect of tendering outstanding Talmer stock options, please
refer to page 88.
The tender offer will
commence after this joint proxy statement and prospectus is mailed to the shareholders of Chemical and Talmer and will continue
for at least 20 business days from its commencement. The termination of the tender offer will depend on the timing of the closing
of the merger, which is conditioned on the satisfaction or waiver of all conditions in the merger agreement (except for those
conditions in the merger agreement that by their nature cannot be satisfied until the closing date of the merger but that are
expected to be satisfied at the closing date of the merger). We expect that the tender offer will be completed simultaneous with
or immediately prior to the merger. The closing of the merger is not conditioned on any particular percentage of Talmer options
being tendered.
When Talmer commences
the tender offer, Talmer will file with the SEC a Tender Offer Statement on Schedule TO, including the Offer to Purchase and related
tender offer materials. The Tender Offer Statement (including an Offer to Purchase, a related Letter of Transmittal and other
tender offer documents) will contain important information that should be read carefully before any decision is made with respect
to the tender offer. These documents (and all other offer documents filed by Talmer with the SEC) will be available at no charge
on the SEC’s website at www.sec.gov.
Talmer Restricted Stock
Awards
Each restricted
stock award granted under a Talmer stock plan which is unvested or contingent and is outstanding immediately prior to the effective
time will, as of the effective time, cease to represent any rights with respect to shares of Talmer Class A common stock and will
be converted into a stock award with respect to the number of shares of Chemical common stock equal to the product of (i) the total
number of shares of Talmer Class A common stock subject to the Talmer stock award, multiplied by (ii) the equity award exchange
ratio, rounded up or down, if necessary, to the nearest whole share of Chemical common stock. Each converted stock award will continue
to be subject to the terms of the applicable Talmer stock plan (but taking into account any changes to the
restricted stock award;
including acceleration of vesting, provided for in the applicable Talmer stock plans or related award agreement as a result of
the merger).
Procedure for Receiving Merger Consideration
At or prior to
the effective time of the merger, Chemical will deposit with the exchange agent (i) evidence of shares of Chemical common stock
in book-entry form, in the aggregate amount equal to the number of shares of Chemical common stock to which holders of Talmer
Class A common stock are entitled based on the exchange ratio, (ii) cash in an amount sufficient to pay all cash consideration
to which holders of Talmer Class A common stock are entitled based on cash consideration of $1.61 per share of Talmer Class A
common stock, and (iii) cash in an amount sufficient to make payments in lieu of any fractional shares and payments of any dividends
or other distributions payable pursuant to the merger agreement. The cash and shares deposited pursuant to the foregoing are referred
to as the “exchange fund.”
As soon as reasonably
practicable after the effective time of the merger (but in any event, no later than ten days after the effective time of the merger),
Chemical will cause the exchange agent to mail to each holder of record of shares of Talmer Class A common stock immediately prior
to the merger that were converted at the effective time of the merger into the right to receive the merger consideration, (i) a
letter of transmittal and (ii) instructions for use in effecting the surrender of certificates or book-entry shares of Talmer Class
A common stock in exchange for the merger consideration, cash in lieu of fractional shares and any dividends or other distributions
payable pursuant to the merger agreement. Each holder of Talmer Class A common stock will be entitled to receive the appropriate
merger consideration, cash in lieu of any fractional shares and any dividends or distributions payable pursuant to the merger agreement
upon surrendering to the exchange agent such shareholder’s certificates or book-entry shares, together with a properly executed
letter of transmittal and any other documents required by the exchange agent. The merger consideration and any other consideration
paid under the merger agreement may be reduced by any amounts required to be deducted and withheld pursuant to any applicable tax
law. You should not return your certificates representing shares of Talmer Class A common stock to the exchange agent without a
letter of transmittal, and you should not return your certificates representing Talmer Class A common stock to Talmer.
If any shares of
Chemical common stock are to be issued as merger consideration to a person other than the person in whose name the certificates
or book-entry shares representing shares of Talmer Class A common stock are registered, it will be a condition to such issuance
that such surrendered Talmer certificate or book-entry share is properly endorsed with a medallion signature guaranty or otherwise
in proper form for transfer, and that the person requesting payment will have paid to the exchange agent in advance any transfer
or other similar taxes required by reason of the issuance of Chemical shares in any name other than that of the registered holder
of the surrendered Talmer shares, or required for any other reason, or establish, to the satisfaction of the exchange agent, that
such taxes have been paid or are not payable.
No interest will
be paid or will accrue on the merger consideration payable in respect of any shares of Talmer Class A common stock.
Lost, Stolen or Destroyed Certificates
If any certificate
representing shares of Talmer Class A common stock has been lost, stolen or destroyed, the exchange agent will deliver the applicable
merger consideration, any cash in lieu of any fractional shares payable and any dividends or other distributions payable pursuant
to the merger agreement with respect to the shares formerly represented by such certificate if the shareholder asserting the claim
of a lost, stolen or destroyed certificate has delivered an affidavit of that fact to the exchange agent and has posted a bond
through the exchange agent in such amount as the exchange agent would charge other similarly situated holders of Chemical common
stock as indemnity against any claim that may be made against the exchange agent with respect to such lost, stolen or destroyed
Talmer certificate.
Representations and Warranties
The merger agreement
contains a number of representations and warranties made by each of Talmer and Chemical that relate to, among other things:
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corporate existence, organization, qualification
and corporate power;
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adoption of the merger agreement and approval
of the merger and the other transactions contemplated by the merger agreement by the relevant board of directors and the receipt
by the relevant board of directors of a fairness opinion from its financial advisors;
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any conflicts created by the transactions
contemplated by the merger agreement, including the merger;
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capital structure and capitalization;
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the absence of certain changes or events;
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the absence of certain indemnification claims;
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conduct of business in compliance with applicable
laws;
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information supplied in connection with
the merger agreement, this joint proxy statement and prospectus and the registration statement of which it is a part;
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agreements with bank regulators;
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owned and leased real and personal property;
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possession and status of material permits
and other rights from appropriate governmental entities necessary for the conduct of business as presently conducted;
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labor and employment matters;
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performance of duties as a fiduciary;
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certain related person transactions and
relationships;
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changes in certain business relationships;
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maintenance of content of books and records;
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data security and customer privacy;
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loan-related matters, including loan guarantees,
loans and investments, allowances for loan and lease losses, and loan origination and servicing;
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documents filed with the SEC and other securities
laws matters;
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joint ventures and strategic alliances;
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policies and procedures;
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the absence of a shareholder rights or other
similar plan; and
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the absence of undisclosed liabilities.
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Many of the representations
and warranties in the merger agreement are qualified by a “materiality” or “material adverse effect” standard
(that is, they will not be deemed to be untrue or incorrect unless their failure to be true or correct, individually or in the
aggregate, as the case may be, would be material or have a material adverse effect, respectively). For purposes of the merger
agreement, a “material adverse effect” with respect to a party is any fact, event, change, condition, development,
circumstance, or effect that, individually or in the aggregate, (i) is or would be reasonably likely to be material and adverse
to the business, assets, liabilities, properties, results of operations, or financial condition of such party and its subsidiaries
taken as a whole, or (ii) prohibits or materially impairs or would be reasonably likely to materially impair the ability of such
party to timely consummate the merger and the related transactions contemplated by the merger agreement, except, in the case of
clause (i), for any adverse fact, event, change, condition, development, circumstance or effect to the extent arising from:
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i.
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changes after the date of the merger agreement in GAAP or regulatory accounting requirements applicable to banks and their holdings, generally;
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ii.
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changes after the date of the merger agreement in laws of general applicability to banks and their holding companies, generally, or interpretations thereof by governmental entities;
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iii.
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changes after the date of the merger agreement in global or national political conditions (including the outbreak of war or acts of terrorism) or in general economic or market conditions affecting banks and their holding companies, generally;
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iv.
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the taking of any action required or expressly permitted by, or the failure to take any action prohibited by, the merger agreement;
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v.
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the announcement or pendency of the merger agreement or the transactions contemplated thereby;
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vi.
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the occurrence of any natural or man-made disaster; or
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vii.
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the acts or omissions of a party, prior to the effective time of the merger, taken at the written request or with the prior written consent of the other party;
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except, in the case of each
of (i) through (iii), above, to the extent that such party is affected in a disproportionate manner as compared to other community
banks and their holding companies in the midwestern United States.
The representations
and warranties of the parties to the merger agreement will expire upon the effective time of the merger or the termination of the
merger agreement pursuant to its terms.
Conduct of Business Pending
the Completion of the Transaction
Each of Talmer and
Chemical has agreed to certain covenants in the merger agreement restricting the conduct of its business between the date of the
merger agreement and the effective time of the merger. In general, except as expressly contemplated or permitted by the merger
agreement or as required by applicable law or with the prior written consent of the other party (which consent will not be unreasonably
withheld, conditioned or delayed), each party will conduct its business in the ordinary course of business generally consistent
with past practice in all material respects and will use its commercially reasonable efforts to (i) preserve substantially intact
such party’s business organization and advantageous business relationships, and (ii) retain the services of such party’s
key officers and key employees.
In addition, each
of Talmer and Chemical have agreed to reciprocal restrictions relating to the conduct of their respective businesses between the
date of the merger agreement and the effective time of the merger, including, but not limited to, prohibitions against taking the
following actions without the other party’s prior written consent (which consent may not be unreasonably withheld, conditioned
or delayed) and subject, in each case, to certain exceptions specified in the merger agreement or previously disclosed in writing
to the other party as provided in the merger agreement:
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other than in the ordinary course of business
consistent with past practice (which includes creation of deposit liabilities, purchases of federal funds, borrowings from the
Federal Home Loan Bank, sales of certificates of deposit, and entry into repurchase agreements), incurring any indebtedness for
borrowed money, or assuming, guaranteeing, endorsing or otherwise as an accommodation becoming responsible for the obligations
of, or making any loan or advance or capital contribution to, any other person;
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adjusting, splitting, combining or reclassifying
of any of its capital stock;
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making, declaring or paying any dividend
or other distribution on, or directly or indirectly redeeming, purchasing or otherwise acquiring, any shares of its capital stock
or any securities or obligations convertible into or exchangeable for any shares of its capital stock (except (i) dividends paid
by any party’s subsidiaries to such party or any of its wholly-owned subsidiaries, (ii) regular quarterly dividends by each
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party on its common stock as disclosed in writing to the other party, (iii) dividends in respect of certain outstanding trust preferred
securities (and, with respect to Chemical, the payoff of Chemical’s outstanding trust preferred securities), and (iv) acceptance
of such party’s shares in payment of the exercise price or withholding taxes incurred in connection with the vesting of equity-based
awards, in each case in accordance with past practice and the terms of the applicable stock plans and related award agreements);
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granting equity-based awards with respect
to shares of such party’s common stock;
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issuing any securities except pursuant to
settlement of equity-based awards previously granted under such party’s stock plans, provided that each party may in its
reasonable discretion engage in a bona fide capital raising transaction without the prior written consent of the other party;
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entering into any new or amending any existing
employment, consulting, severance, termination or change in control agreements;
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except as required by applicable law or
in accordance with the terms of any benefit plan of such party as in effect on the date of the merger agreement, and except for
normal increases made in the ordinary course of business consistent with past practice, (i) increasing the wages, salaries, incentive
compensation, incentive compensation opportunities of, or benefits provided to, any current, former, or retired employee or director
of such party, its subsidiaries or its ERISA affiliates; (ii) establishing, adopting or becoming a party to any new employee benefit
or compensation plan, program, commitment, or agreement, or amendment, modification, change, or termination of, or acceleration
of any rights under, any benefit plan of such party; (iii) granting any stock options, stock appreciation rights, stock-based or
stock-related awards, performance stock, or phantom or restricted stock unit awards; (iv) taking any action other than in the ordinary
course of business consistent with past practice to fund or in any way secure the payment of compensation or benefits under any
benefit plan of such party; (v) amending, modifying or altering any warrant or other equity-based right to purchase any shares
of such party’s capital stock or other equity interests in such party or any securities exchangeable for or convertible into
capital stock of such party outstanding on the date of the merger agreement; (vi) entering into any collective bargaining agreement;
(vii) entering into, amending, modifying, altering, terminating, or changing any third-party vendor or service agreement related
to any benefit plan of such party; or (viii) granting any severance or termination pay unless provided under any benefit plan of
such party or unless such grant is in the ordinary course of business consistent with past practice;
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selling, transferring, mortgaging, encumbering,
or otherwise disposing of any material amount of its properties or assets to any person other than a subsidiary of such party,
or canceling, releasing, or assigning any material amount of indebtedness to any such person or any claims held by any such person,
in each case other than in the ordinary course of business consistent with past practice or pursuant to contracts in force at the
date of the merger agreement; provided, however, that each party will be permitted under certain conditions to make certain divestitures
as required by governmental entities to consummate the merger; and provided, further, that each party may make, sell, transfer
or dispose of certain “Other Real Estate Owned” if such party notifies the other party and the other party does not
object according to procedures provided in the merger agreement;
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making any application for the opening,
relocation, or closing of any branch office, loan production office or other material office or facility, or opening, relocating
or closing any branch office, loan production office or other material office or facility;
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acquiring, by merger, consolidation, acquisition
of stock or assets, or otherwise, any business or division of a business or entering into any new line of business or changing
in any material respect its lending, investment, underwriting, risk and asset liability management, and other banking, operating,
and servicing policies, except as required by applicable law, regulation, recommendation of or policies imposed by any governmental
entity;
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making any material investment either by
purchase of stock or securities, contributions to capital, property transfers, or purchase of any property or assets of any other
person outside of the ordinary course of business consistent with past practice;
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taking any action, or knowingly failing
to take any action, which is reasonably likely to prevent the merger from qualifying for the intended tax treatment defined in
the merger agreement;
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except, in the case of Chemical, for the
proposed amendment to Chemical’s Articles of Incorporation to increase the number of authorized shares of common stock, amending
its articles of incorporation or bylaws, or otherwise taking any action to exempt any person (other than the other party or its
subsidiaries) or any action taken by any person from any takeover statute or similarly restrictive provisions of its organizational
documents or terminating, amending or waiving any provisions of any confidentiality or standstill agreements in place with any
third parties;
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other than after prior consultation with
the other party, materially changing or restructuring its investment securities portfolio or its gap position, through purchases,
sales, or otherwise, or the manner in which the portfolio is classified or reported;
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other than commencement or settlement of
foreclosure or debt collection actions in the ordinary course of business consistent with past practice, commencing or settling
any claim, action, or proceeding where the amount in dispute is in excess of $500,000 or subjects such party or any of its subsidiaries
to any material restrictions on its current or future business operations;
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taking or failing to take any action that
is intended or may reasonably be expected to result in any of the conditions to the merger set forth in the merger agreement not
being satisfied;
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implementing or adopting any material change
in its tax accounting or financial accounting principles, practices or methods, changing any tax accounting period, or surrendering
in writing any right to claim a tax refund, offset or other reduction in tax liability or consenting to any extension or waiver
of the limitation period applicable to any tax claim or assessment relating to such party or its subsidiaries and involving in
excess of $1,000,000, in each case other than as may be required by applicable law, GAAP, or regulatory guidelines;
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filing or amending any tax return other
than in the ordinary course of business, making any significant change in any method of tax or accounting (other than as may be
required by applicable law, GAAP or regulatory guidelines), making or changing any tax election, or settling or compromising any
disputed tax liability in excess of $1,000,000;
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extending the term of any material contract
(except for the extension of any such term for one year or less due to the automatic renewal of such term in accordance with the
terms of such contract), and except for transactions in the ordinary course of business consistent with past practice, terminating
or waiving any material provision of any material contract;
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entering into or amending any contract or
other transaction with any “related person” of such party (as defined in the merger agreement), except as contemplated
or permitted by the merger agreement;
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taking any action to enter into, or committing
to enter into, any contract for trust, consulting, professional, or other services to such party or any of its subsidiaries that
is not terminable by such party or its subsidiary without penalty upon 30 days’ or less notice, except for contracts for
services under which the aggregate required payments do not exceed $500,000, and except for legal, accounting, and other ordinary
expenses (not including expenses of financial advisors) related to the merger agreement;
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taking any action to enter into, or committing
to enter into, any joint venture, strategic alliance, or material relationship with any person to jointly develop, market, or offer
any product or service;
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failing to promptly notify the other party
of the threat or the commencement of any material action against, relating to, or affecting (i) such party or any of its subsidiaries,
(ii) such party or any of its subsidiaries’ directors, officers or employees in their capacities as such, (iii) such party’s
or any of its subsidiaries’ assets, liabilities, businesses or operations, or (iv) the merger or the merger agreement;
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except for (i) capital expenditures of amounts
set forth in such party’s capital expenditure plan disclosed in writing to the other party, or (ii) capital expenditures
required by law or governmental entities or incurred in connection with the repair or replacement of facilities destroyed or damaged
due to casualty or accident, making any capital expenditure or permitting any subsidiary to make any capital expenditure;
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making or renewing any charitable contributions,
gifts, commitments, or pledges of cash or other assets except in the ordinary course of business consistent with past practice
and not in excess of such party’s 2016 budget for such charitable contributions, gifts, commitments or pledges;
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taking any action that would materially
impede or materially delay the completion of the transactions contemplated by the merger agreement or the ability of the parties
to obtain any necessary regulatory or governmental approvals required for the transactions contemplated by the merger agreement;
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entering into any contract that (i) is outside
the ordinary course of business consistent with past practice and (ii) would constitute a “material contract” of such
party (as defined in the merger agreement); or
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except for transactions in the ordinary
course of business consistent with past practice, entering into any derivative transaction.
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Restrictions on Solicitation
Except as described
below, each of Chemical and Talmer has agreed that, from the time of the execution of the merger agreement until the earlier of
the effective time of the merger or the termination of the merger agreement, it will not, and will not knowingly permit its authorized
representatives to and will cause its subsidiaries not to, directly or indirectly: (i) solicit or initiate, or knowingly facilitate
or knowingly encourage (including by way of furnishing non-public information) any inquiries regarding, or the making of any proposal
or offer that constitutes, or would reasonably be expected to lead to a proposal that constitutes, a takeover proposal; or (ii) engage
or enter into, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any other person material
non-public information in connection with, any takeover proposal, or otherwise cooperate with or assist or participate in, or encourage
or knowingly facilitate any such inquiries, proposals, discussions or negotiations or any effort or attempt to make a takeover
proposal. Each of Chemical and Talmer have, and have caused each of its respective subsidiaries and each of its and its respective
subsidiaries’ representatives to, cease any solicitation, encouragement, discussions or negotiations with any person that
may be ongoing with respect to any takeover proposal, and terminated all physical and electronic data room access previously granted
to any such person or its representatives.
A “takeover
proposal” with respect to either Chemical or Talmer means any inquiry, proposal, or offer from any person (other than the
other party) or “group”, within the meaning of Section 13(d) of the Exchange Act, of persons relating to, in a
single transaction or series of related transactions (other than any single transaction or series of related transactions to which
the other party has consented to in writing), any (i) acquisition of assets equal to more than ten percent of consolidated
assets or to which more than ten percent of net income on a consolidated basis are attributable; (ii) acquisition of more
than ten percent of the outstanding common stock or the capital stock of any subsidiary; (iii) tender offer or exchange offer
that, if consummated, would result in any person or group of persons beneficially owning more than ten percent of the outstanding
common stock; (iv) merger, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution,
or similar transaction; or (v) any combination of the foregoing types of transactions if the sum of the percentage of consolidated
assets, consolidated net income, and common stock involved is more than ten percent, in each case, other than the merger.
Notwithstanding
the restrictions described above, at any time prior to obtaining the relevant shareholder approval, if a party receives a takeover
proposal, it and its representatives are permitted, subject to certain
conditions, to contact the person who made such proposal
to request clarification of any term or condition of the takeover proposal that such party’s board of directors determines
in good faith to be ambiguous or unclear. If such party’s board of directors determines in good faith, after consultation
with its financial advisors and outside legal counsel, that such takeover proposal constitutes or is reasonably likely to constitute
a superior proposal, such party and its representatives may furnish (pursuant to a confidentiality agreement meeting certain requirements
set forth in the merger agreement) information with respect to such party and its subsidiaries to the person who made the proposal
and its representatives (provided that such party provides the other party with express written notification of the availability
of any written material non-public information that is provided to such person or their representatives, if such information was
not previously provided to the other party or its representatives), and engage in or otherwise participate in discussions or negotiations
with such person and its representatives; provided that such party will promptly provide to the other party (i) a copy of the takeover
proposal together with the identity of the person(s) making the takeover proposal, and (ii) a written summary of the material terms
of any such takeover proposal not made in writing.
A “superior
proposal” means, with respect to either Chemical or Talmer, any bona fide written takeover proposal with respect to such
party that such party’s board of directors has determined in its good faith judgment, after consultation with its financial
advisors and outside legal counsel, is reasonably likely to be consummated in accordance with its terms and that is reasonably
likely to result in the consummation of a transaction more favorable to the shareholders of such party than the merger, taking
into account such factors as such board of directors in good faith deems relevant, including legal, financial, regulatory and other
aspects of the proposal, and any changes to the terms the merger agreement proposed by the other party in response to such proposal
or otherwise. For purposes of the definition of “superior proposal,” the references to “ten percent” in
the definition of takeover proposal are deemed to be references to “fifty percent.”
Changes in Board Recommendations
The respective boards
of directors of Chemical and Talmer have each agreed, subject to certain exceptions discussed below, not to (i) fail to recommend
the approval of the merger agreement (and, in the case of the Chemical board of directors, approval of the issuance of Chemical
common stock in the merger and approval of the amendment to Chemical’s Articles of Incorporation to increase the number of
authorized shares of common stock), (ii) change, qualify, withhold, withdraw or modify, or publicly propose to take such an action,
in a manner adverse to the other party, their respective recommendations with respect to the merger, (iii) take any formal action
or make any recommendation or public statement in connection with a tender offer or exchange offer other than a recommendation
of rejection of such offer or a temporary “stop, look and listen” communication pursuant to Rule 14d-9(f) of the Exchange
Act, or (iv) adopt, approve or recommend a takeover proposal. In addition, subject to certain exceptions described below and in
the merger agreement, the respective boards of directors of Chemical and Talmer have agreed not to cause or permit their respective
companies, or any subsidiaries thereof, to enter into any letter of intent, agreement or agreement in principle with respect to
any takeover proposal (other than a confidentiality agreement meeting certain requirements set forth in the merger agreement).
Notwithstanding
the restrictions described above, prior to obtaining the relevant shareholder approval, the board of directors of each of Chemical
or Talmer is permitted to change, qualify, withhold, withdraw or modify in a manner adverse to the other party its recommendations
with respect to the merger if, subject to certain conditions, the board of directors of Chemical or Talmer, as applicable, among
other things, determines in good faith after consultation with its financial advisors and outside legal counsel that a takeover
proposal received after the date of the merger agreement constitutes a superior proposal.
Prior to making
a change in recommendation as described above, the party whose board of directors is making such change must (i) inform the other
party in writing of its board of directors’ intention to change its recommendation at least three business days in advance,
(ii) provide to such other party the material terms and conditions of and identity of the person making the takeover proposal,
as well as a copy of all written materials with or from the party making such takeover proposal, and (iii) negotiate (and cause
its representatives to negotiate) in good faith with the other party during such notice period, to the extent that the other party
wishes to negotiate, to enable the other party to revise the terms of the merger agreement such that it would cause the superior
proposal to no longer constitute a superior proposal. Following the end of such notice period, the board of directors making the
change must consider in good faith any changes to the merger agreement proposed in writing by the other party, and
must have determined
that the superior proposal would continue to constitute a superior proposal if such revisions were to be given effect. If material
revisions to a takeover proposal would have an impact, influence or other effect on the receiving party’s board of directors’
decision or discussion with respect to whether such proposal constitutes a superior proposal, that party’s board of directors
must deliver to the other party a new written notice and again comply with the procedures set forth in this paragraph, except that
the three business day period described above becomes a two business day period.
Efforts to Obtain Required Shareholder
Approvals
Each party has agreed
to hold its special meeting, as soon as practicable following the date on which the registration statement of which this joint
proxy statement and prospectus forms a part is declared effective, for the purposes of seeking the required approvals of its shareholders
related to the merger agreement and the merger and, unless the board of directors of such party has changed its recommendation
as permitted by the merger agreement, to use its commercially reasonable efforts to solicit the requisite shareholder approval
for such proposals.
Efforts to Complete the Transactions
Chemical and Talmer
have each agreed to, among other things, take, or cause to be taken, all appropriate actions, and do, or cause to be done, all
things necessary, proper or advisable under the merger agreement and any applicable law to consummate and make effective the merger
and the other transactions contemplated by the merger agreement as soon as reasonably practicable, including preparing and filing
as promptly as practicable all documentation to effect all necessary notices, reports and other filings, and to obtain as promptly
as reasonably practicable all consents, registrations, approvals, permits and authorizations necessary or advisable to be obtained
from any governmental entity or other third party in order to consummate the merger or any of the other transactions contemplated
by the merger agreement.
Other Covenants and Agreements
The merger agreement
contains certain other covenants and agreements, including, among others, the following covenants:
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each party will hold and treat in confidence
all information received from the other party in connection with the merger agreement or the merger pursuant to the provisions
of the confidentiality agreement between Chemical and Talmer;
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all employees of Talmer or any Talmer subsidiary
(including employees on an authorized leave of absence) immediately before the effective time of the merger will automatically
become employees of Chemical and its subsidiaries as of the effective time, and Chemical will (i) provide all former Talmer employees
rates of base salary or hourly wages that are substantially similar, in the aggregate, to the base salary or hourly wages of such
employees in effect immediately prior to the effective time of the merger (provided that Chemical will not be required to maintain
any particular benefit plan or retain the employment of any particular employee), (ii) pay severance payments to any employee of
Talmer or its subsidiaries whose jobs are eliminated as a result of the merger and whose employment is terminated by Chemical within
nine months after the effective time of the merger, in accordance with Talmer’s severance practices as disclosed in writing
to Chemical, (iii) provide credit for years of service at Talmer or any Talmer subsidiary (and their respective predecessors if
currently honored by Talmer) for all purposes, (iv) honor and discharge all of Talmer’s obligations and assume all of its
defenses under certain identified severance, change of control or employment agreements of Talmer and its subsidiaries, and (v)
maintain all accruals existing as of the effective time under Talmer’s and its subsidiaries’ non-equity incentive or
bonus plans, consistent with Talmer’s and its subsidiaries’ 2016 budget approved by its board of directors, and pay
any such benefits accrued as of the effective time in accordance with Talmer’s and its subsidiaries’ historic payment
practices for such benefits (with approval of such payments to be made in consultation with Chemical’s chairman);
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Talmer will cooperate with Chemical in its
efforts to cause certain Talmer employees identified by Chemical to enter into retention or stay bonus agreements prior to the
effective time of the merger;
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each party will give prompt written notice
to the other party of any change or event (i) having or reasonably likely to have a material adverse effect on such party, or (ii)
that such party believes would or would be reasonably likely to cause or constitute a material breach of any of its representations,
warranties or covenants contained in the merger agreement;
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Chemical will, at the effective time of
the merger, assume the obligations of Talmer to make all payments of principal and interest on all debt securities issued pursuant
to certain trust preferred securities agreements to which Talmer is a party, and all obligations of Talmer to perform and observe
all covenants and conditions to be performed by Talmer under such trust preferred securities agreements;
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each party will keep the other party reasonably
informed with respect to the defense or settlement of any securityholder action against it or its directors or officers relating
to the merger or other transactions contemplated by the merger agreement, will give the other party opportunity to consult with
it regarding the defense or settlement of any such securityholder action, and will not settle any such action without the other
party’s prior written consent (such consent not to be unreasonably withheld, conditioned or delayed);
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whether or not the merger is consummated,
except as otherwise expressly provided in the merger agreement, all costs and expenses incurred in connection with the merger agreement
and the transactions contemplated thereby will be borne by the party incurring such expenses, except that the parties will each
pay and bear one-half of (i) each regulatory filing, notification, registration or similar fee required to be paid by a party in
connection with the merger agreement and the transactions contemplated thereby pursuant to the Securities Act, the Exchange Act,
applicable banking laws and other applicable laws, and (ii) any fees and expenses (excluding each party’s internal costs
and fees and expenses of attorneys, accountants and financial and other advisors) incurred in respect of printing, filing and mailing
this joint proxy statement and prospectus and the registration statement of which this joint proxy statement and prospectus is
a part;
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the parties will coordinate with each other
regarding the declaration, setting of record dates and payment dates of dividends with respect to shares of Chemical common stock
and Talmer Class A common stock for the purpose of minimizing the risk that holders of shares of Talmer Class A common stock (i)
in respect of any calendar quarter, receive dividends on both shares of Talmer Class A common stock and shares of Chemical common
stock received as merger consideration, or (ii) in respect of any calendar quarter, fail to receive a dividend on shares of Talmer
Class A common stock or shares of Chemical common stock received as merger consideration;
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the parties will mutually agree as to a
plan of merger to accomplish the consolidation of the parties’ respective subsidiary banks following the effective time of
the merger, and each party will approve (and cause its subsidiary bank to approve) such plan of merger, and the parties will cooperate
with each other and use their respective commercially reasonable efforts to obtain and comply with all regulatory approvals necessary
to consummate the consolidation of the parties’ respective subsidiary banks following the effective time of the merger and
to convert their respective information to a common information technology system; and
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neither party will issue or cause the publication
of, or permit any of its subsidiaries or agents to issue or cause the publication of, any press release or other public announcement
with respect to the transactions contemplated by the merger agreement without the prior consent of the other party (which consent
will not be unreasonably withheld), provided that either party may, without the prior written consent of the other party (but after
prior consultation with the other party to the extent practicable under the circumstances) issue or cause the publication of any
press release or other announcement, after consultation with outside legal counsel, to the extent required by law or NASDAQ rules
or regulations.
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Conditions to Completion of the Transaction
The obligations
of Chemical and Talmer to consummate the transactions are subject to the satisfaction of the following conditions:
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the approval of the merger agreement by
holders of a majority of the outstanding shares of Talmer Class A common stock;
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the approval of each of the merger agreement
and the amendment to Chemical’s Articles of Incorporation to increase the number of authorized shares of common stock by
holders of a majority of the outstanding shares of Chemical common stock, and the approval of the issuance of Chemical common stock constituting the merger consideration by a majority of the votes cast by the holders of shares of Chemical common stock entitled
to vote on the action;
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the authorization for listing on NASDAQ
of the Chemical common stock to be issued pursuant to the merger, subject to official notice of issuance;
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the declaration by the SEC of the effectiveness
of the registration statement of which this joint proxy statement and prospectus forms a part, which registration statement must
not be subject to any stop order or proceedings initiated or threatened by the SEC for such purpose;
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the absence of any order, injunction or
decree issued by any court or agency of competent jurisdiction, or any other legal restraint or prohibition, preventing consummation
of the merger or any other transaction contemplated by the merger agreement, and the absence of any law, regulation, order or decree
prohibiting or making illegal the consummation of the merger; and
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the receipt and effectiveness of all required
regulatory approvals, excluding regulatory approvals applicable solely to the consolidation of the parties’ respective subsidiary
banks, the expiration of all statutory notice and waiting periods in respect of such regulatory approval, and the absence of any
condition or restriction in connection with any such regulatory approval that would have a material adverse effect on the surviving
corporation.
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In addition, the
obligations of Talmer to effect the merger are subject to satisfaction or waiver of the following additional conditions:
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(i) the representations and warranties of
Chemical (other than certain representations related to Chemical’s
authorization and adoption of the merger agreement, enforceability of the
merger agreement against Chemical, Chemical’s organization and good standing, Chemical’s capital stock, and the absence
of certain changes or events), without giving effect to any limitation as to “materiality” or “material adverse
effect” contained therein, being true and correct as of the date of the merger agreement and as of the effective time of
the merger as though made on and as of the effective time (except that representations and warranties that by their terms speak
specifically as of the date of the merger agreement or another date must be true and correct as of such date), except where the
failure of such representations and warranties to be so true and correct does not have, and would not reasonably be expected to
have, individually or in the aggregate, a material adverse effect on Chemical, and (ii) certain representations and warranties
related to Chemical’s authorization and adoption of the merger agreement, enforceability of the merger agreement against
Chemical, Chemical’s organization and good standing, Chemical’s capital stock, and the absence of certain changes or
events being true and correct as of the date of the merger agreement and as of the effective time of the merger as though made
on and as of the effective time (except that representations and warranties that by their terms speak specifically as of the date
of the merger agreement or another date must be true and correct as of such date) in all material respects;
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Chemical having performed in all material
respects all of the obligations required to be performed by it under the merger agreement at or prior to the effective time of
the merger;
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Chemical having delivered to Talmer a certificate,
dated as of the closing date, executed on behalf of Chemical by its chief executive officer or chief financial officer certifying
as to the satisfaction of the conditions described in the preceding two paragraphs;
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the absence of any change, state of facts,
event, development or effect since September 30, 2015 that has had or would reasonably be expected to have, individually or in
the aggregate, a material adverse effect on Chemical; and
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the receipt by Talmer from Nelson Mullins
Riley & Scarborough LLP of a written opinion, dated as of the closing date, to the effect that the merger will be treated for
federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code and that Talmer and Chemical will
each be party to that reorganization within the meaning of Section 368(b) of the Code.
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In addition, the
obligations of Chemical to effect the merger are subject to satisfaction or waiver of the following additional conditions:
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(i)
the representations and warranties of Talmer (other than certain representations related to Talmer’s authorization and adoption
of the merger agreement, enforceability of the merger agreement against Talmer, Talmer’s organization and good standing,
Talmer’s capital stock, and the absence of certain changes or events), without giving effect to any limitation as to “materiality”
or “material adverse effect” contained therein, being true and correct as of the date of the merger agreement and
as of the effective time of the merger as though made on and as of the effective time (except that representations and warranties
that by their terms speak specifically as of the date of the merger agreement or another date must be true and correct as of such
date), except where the failure of such representations and warranties to be so true and correct does not have, and would not
reasonably be expected to have, individually or in the aggregate, a material adverse effect on Talmer, and (ii) certain representations
and warranties related to Talmer’s authorization and adoption of the merger agreement, enforceability of the merger agreement
against Talmer, Talmer’s organization and good standing, Talmer’s capital stock, and the absence of certain changes
or events being true and correct as of the date of the merger agreement and as of the effective time of the merger as though made
on and as of the effective time (except that representations and warranties that by their terms speak specifically as of the date
of the merger agreement or another date must be true and correct as of such date) in all material respects;
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Talmer having performed in all material
respects all of the obligations required to be performed by it under the merger agreement at or prior to the closing;
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Talmer having delivered to Chemical a certificate,
dated as of the closing date, executed on behalf of Talmer by its chief executive officer or chief financial officer certifying
as to the satisfaction of the conditions described in the preceding two paragraphs;
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the absence of any change, state of facts,
event, development or effect since September 30, 2015 that has had or would reasonably be expected to have, individually or in
the aggregate, a material adverse effect on Talmer; and
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the receipt by Chemical from Warner Norcross
& Judd LLP of a written opinion, dated as of the closing date, to the effect that the merger will be treated for federal income
tax purposes as a reorganization within the meaning of Section 368(a) of the Code and that Talmer and Chemical will each be party
to that reorganization within the meaning of Section 368(b) of the Code.
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Termination of the Merger Agreement
The merger agreement
may be terminated at any time prior to the effective time of the merger, and, except as described below, whether before or after
the receipt of the required shareholder approvals, under the following circumstances:
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by mutual written consent of Chemical and
Talmer;
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by either Chemical or Talmer:
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if any governmental entity has issued an
order or taken any other action permanently enjoining, restraining or otherwise prohibiting the consummation of the merger and
such order or other action is final and nonappealable, except in the event that the party seeking to terminate has failed to perform
any of its obligations under the merger agreement required to be performed at or prior to the effective time of the merger and
such failure has been a substantial cause of, or a substantial factor that resulted in, the issuance of such an order or the taking
of such an action;
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if the merger does not occur before December
31, 2016 (the “end date”), provided that the parties may extend such date by mutual written agreement, if on the end
date, all conditions to closing are satisfied or capable of being satisfied except for (i) the registration statement (of which
this joint proxy statement and prospectus forms a part) having been declared effective by the SEC, (ii) there being no stop order
suspending the effectiveness of the registration statement or proceedings initiated or threatened by the SEC for such purpose,
or (iii) the parties having obtained all regulatory approvals (excluding regulatory approvals applicable solely to the consolidation
of the parties’ respective subsidiary banks), such approvals remaining in full force and effect, and there being no materially
burdensome regulatory condition (as defined in the merger agreement), then the end date will be extended to February 28, 2017 if
either party notifies the other party in writing on or prior to the end date of its election to extend the end date (except that
a party may not extend the end date or terminate the merger agreement in the event that such party has failed to perform any of
its obligations under the merger agreement required to be performed at or prior to the effective time of the merger and such failure
has been a substantial cause of, or a substantial factor that resulted in, the failure of the effective time of the merger to occur
on or before the end date);
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(i) if the Chemical shareholder meeting
has concluded and been finally adjourned and the requisite Chemical shareholder approval has not been obtained, or (ii) if the
Talmer shareholder meeting has concluded and been finally adjourned and the requisite Talmer shareholder approval has not been
obtained, except in the event that the party seeking to terminate has failed to perform any of its obligations under the merger
agreement required to be performed at or prior to such party’s shareholder meeting and such failure has been a substantial
cause of, or is a substantial factor that resulted in, the required approval of such party’s shareholders not having been
obtained;
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by Talmer, if Chemical has breached or failed
to perform any of its representations, warranties, covenants or other agreements contained in the merger agreement, such that the
mutual conditions to the parties’ respective obligations to complete the transaction or the conditions to Talmer’s
obligations to complete the transaction are not satisfied, and which either (i) cannot be cured by the end date or (ii) if
capable of being cured by the end date, have not been cured within 30 business days following receipt of written notice from
Talmer of such breach or failure, except in the event that Talmer is then in breach of any representation, warranty, covenant or
other agreement contained in the merger agreement and such breach would give rise to the failure of Talmer’s satisfaction
of any condition to closing;
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by Chemical, if Talmer has breached or failed
to perform any of its representations, warranties, covenants or other agreements contained in the merger agreement, such that the
mutual conditions to the parties’ respective obligations to complete the transaction or the conditions to Chemical’s
obligations to complete the transaction are not satisfied, and which either (i) cannot be cured by the end date, or (ii) if
capable of being cured by the end date, have not been cured within 30 business days following receipt of written notice from
Chemical of such breach or failure, except in the event that Chemical is then in breach of any representation, warranty, covenant
or other agreement contained in the merger agreement and such breach would give rise to the failure of Chemical’s satisfaction
of any condition to closing;
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by Talmer prior to the receipt of the Chemical
shareholder approval if: (i) the Chemical board of directors has taken any of the actions in items (i) through (iv) described above
in the first sentence of the section entitled “The Merger Agreement – Changes in Board Recommendations” beginning
on page 105; (ii) the Chemical board of directors has failed to reject a Chemical takeover proposal and reaffirm the Chemical
board recommendation within ten business days following the public announcement of such Chemical takeover proposal, and in any
event at least two business days prior to the Chemical shareholder meeting;
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(iii) Chemical enters into an agreement with respect
to any Chemical takeover proposal (other than a confidentiality agreement that meets certain requirements set forth in the merger
agreement); (iv) Chemical has materially breached its non-solicitation obligations under the non-solicitation covenant of the merger
agreement; (v) subject to Chemical’s right to adjourn or postpone the Chemical shareholder meeting in accordance with the
merger agreement, Chemical has failed to call, give proper notice of, convene and hold the Chemical shareholder meeting materially
in accordance with the requirements set forth in the merger agreement; or (vi) Chemical or the Chemical board of directors
has publicly announced its intention to do any of the foregoing;
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by Chemical prior to the receipt of the
Talmer shareholder approval if: (i) the Talmer board of directors has taken any of the actions in items (i) through (iv) described
above in the first sentence of the section entitled “The Merger Agreement – Changes in Board Recommendations”
beginning on page 105; (ii) the Talmer board of directors has failed to reject a Talmer takeover proposal and reaffirm the
Talmer board recommendation within 10 business days following the public announcement of such Talmer takeover proposal, and in
any event at least two business days prior to the Talmer shareholder meeting; (iii) Talmer enters into an agreement with respect
to any Talmer takeover proposal; (iv) Talmer has materially breached its non-solicitation obligations under the non-solicitation
covenant of the merger agreement; (v) subject to Talmer’s right to adjourn or postpone the Talmer shareholder meeting in
accordance with the merger agreement, Talmer has failed to call, give proper notice of, convene and hold the Talmer shareholder
meeting materially in accordance with the requirements set forth in the merger agreement; or (vi) Talmer or the Talmer board
of directors has publicly announced its intention to do any of the foregoing;
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by Talmer prior to receipt of the Talmer
shareholder approval, in order to enter into a definitive merger agreement or other definitive purchase or acquisition agreement
that constitutes a superior proposal, provided that (i) Talmer has complied in all material respects with its non-solicitation
obligations under the merger agreement, and (ii) Talmer pays a termination fee and expense reimbursement prior to or simultaneously
with such termination; or
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by Chemical prior to receipt of the Chemical
shareholder approval, in order to enter into a definitive merger agreement or other definitive purchase or acquisition agreement
that constitutes a superior proposal, provided that (i) Chemical has complied in all material respects with its non-solicitation
obligations under the merger agreement, and (ii) Chemical pays a termination fee and expense reimbursement prior to or simultaneously
with such termination.
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Termination Fees and Expenses; Liability
for Breach
Talmer will be obligated
to pay to Chemical a termination fee of $34,000,000 (referred to as the “termination fee”) and/or reimburse Chemical
in an aggregate amount not to exceed $3,000,000 for out-of-pocket fees and expenses actually incurred by or on behalf of Chemical
in connection with the due diligence, authorization, preparation, negotiation, execution or performance of the merger agreement
and transactions contemplated thereby (referred to as the “Chemical expense reimbursement”) upon the occurrence of
the event giving rise to termination as follows:
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Talmer will be obligated to pay the termination
fee to Chemical if Chemical terminates the merger agreement because, prior to the receipt of the Talmer shareholder approval: (i)
the Talmer board of directors has effected a Talmer adverse recommendation change; (ii) the Talmer board of directors has failed
to reject a Talmer takeover proposal and reaffirm the Talmer board recommendation within ten business days following the public
announcement of such Talmer takeover proposal, and in any event at least two business days prior to the Talmer shareholder meeting;
(iii) Talmer enters into an agreement with respect to any Talmer takeover proposal (other than a confidentiality agreement that
meets certain requirements set forth in the merger agreement); (iv) Talmer has materially breached its non-solicitation obligations
under the non-solicitation covenant of the merger agreement; (v) subject to Talmer’s rights to adjourn or postpone the Talmer
Shareholder Meeting in accordance with the merger agreement, Talmer has failed to call, give proper notice of, convene and hold
the Talmer Shareholder Meeting materially in accordance with the requirements set forth in the merger agreement; or (vi) Talmer
or the Talmer board of directors has publicly announced its intention to do any of the foregoing.
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Talmer will be obligated to pay the Chemical
expense reimbursement to Chemical (i) if Chemical terminates the merger agreement because Talmer has breached or failed to perform
any of its representations, warranties, covenants or other agreements contained in the merger agreement, such that the mutual conditions
to the parties’ respective obligations to complete the transaction or the conditions to Talmer’s obligations to complete
the transaction are not satisfied, and which either (A) cannot be cured by the end date or (B) if capable of being cured
by the end date, have not been cured within thirty business days following receipt of written notice from Talmer of such breach
or failure, or (ii) if Chemical or Talmer terminates the merger agreement because the Talmer shareholder meeting has concluded
and been finally adjourned and the requisite Talmer shareholder approval has not been obtained.
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Talmer will be obligated to pay to Chemical
an amount equal to the termination fee minus the amount of any Chemical expense reimbursement already paid to Chemical if (i) any
person or group of persons has made (whether or not subsequently withdrawn) a takeover proposal to Chemical after the date of the
merger agreement and prior to (a) the date that the merger agreement is terminated in the case of a termination by Chemical for
breach, or (b) the date of the Chemical shareholder meeting in the case of a termination by Talmer or Chemical because the requisite
Talmer shareholder approval has not been obtained; and (ii) at any time prior to the date that is 12 months after the date of any
such termination, Talmer or any of its subsidiaries enters into a definitive agreement providing for a Talmer takeover proposal
or consummates a Talmer takeover proposal (provided that for the purposes of this paragraph, references to ten percent in the definition
of “Talmer takeover proposal” are deemed to be references to fifty percent).
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Talmer will be obligated to pay the termination
fee to Chemical if (i) Chemical or Talmer terminates the merger agreement because the merger does not occur on or before the end
date (if the requisite Talmer shareholder approval has not been obtained by such date), (ii) any person or group of persons has
made (whether or not subsequently withdrawn) a Talmer takeover proposal after the date of the merger agreement and prior to the
date of any such termination, and (iii) at any time prior to the date that is 12 months after the date of such termination, Talmer
or any of its subsidiaries enters into any definitive agreement providing for a Talmer takeover proposal or consummates a Talmer
takeover proposal (provided that for the purposes of this paragraph, references to ten percent in the definition of “Talmer
takeover proposal” are deemed to be references to fifty percent).
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Talmer will be obligated to pay the termination
fee and the Chemical expense reimbursement to Chemical if Talmer terminates the merger agreement prior to receipt of the Talmer
shareholder approval in order to enter into a definitive merger agreement or other definitive purchase or acquisition agreement
that constitutes a Talmer superior proposal.
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Chemical will be
obligated to pay the termination fee to Talmer and/or reimburse Talmer in an aggregate amount not to exceed $3,000,000 for out-of-pocket
fees and expenses actually incurred by or on behalf of Talmer in connection with the due diligence, authorization, preparation,
negotiation, execution or performance of the merger agreement and transactions contemplated thereby (referred to as the “Talmer
expense reimbursement”) upon the occurrence of the event giving rise to termination as follows:
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Chemical will be obligated to pay the termination
fee to Talmer if Talmer terminates the merger agreement because, prior to the receipt of the Chemical shareholder approval: (i)
the Chemical board of directors has effected a Chemical adverse recommendation change; (ii) the Chemical board of directors has
failed to reject a Chemical takeover proposal and reaffirm the Chemical board recommendation within ten business days following
the public announcement of such Chemical takeover proposal, and in any event at least two business days prior to the Chemical shareholder
meeting; (iii) Chemical enters into an agreement with respect to any Chemical takeover proposal (other than a confidentiality agreement
that meets certain requirements set forth in the merger agreement); (iv) Chemical has materially breached its non-solicitation
obligations under the non-solicitation covenant of the merger agreement; (v) subject to Chemical’s rights to adjourn or postpone
the Chemical shareholder meeting in accordance with the merger agreement, Chemical has failed to call, give proper notice of, convene
and hold the Chemical shareholder meeting materially in
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accordance with the requirements set forth in the merger agreement; or
(vi) Chemical or the Chemical board of directors has publicly announced its intention to do any of the foregoing.
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Chemical will be obligated to pay the Talmer
expense reimbursement to Talmer (i) if Talmer terminates the merger agreement because Chemical has breached or failed to perform
any of its representations, warranties, covenants or other agreements contained in the merger agreement, such that the mutual conditions
to the parties’ respective obligations to complete the transaction or the conditions to Talmer’s obligations to complete
the transaction are not satisfied, and which either (a) cannot be cured by the end date or (b) if capable of being cured
by the end date, have not been cured within thirty business days following receipt of written notice from Talmer of such breach
or failure, or (ii) if Talmer or Chemical terminates the merger agreement because the requisite Chemical shareholder meeting has
concluded and been finally adjourned and the Chemical shareholder approval has not been obtained.
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Chemical will be obligated to pay to Talmer
an amount equal to the termination fee minus the amount of any Talmer expense reimbursement already paid to Talmer if (i) any person
or group of persons has made (whether or not subsequently withdrawn) a takeover proposal to Chemical after the date of the merger
agreement and prior to (a) the date that the merger agreement is terminated in the case of a termination by Talmer for breach,
or (b) the date of the Chemical shareholder meeting in the case of a termination by Talmer or Chemical because the requisite Chemical
shareholder approval has not been obtained; and (ii) at any time prior to the date that is 12 months after the date of any such
termination, Chemical or any of its subsidiaries enters into a definitive agreement providing for a Chemical takeover proposal
or consummates a Chemical takeover proposal (provided that for the purposes of this paragraph, references to ten percent in the
definition of “Chemical takeover proposal” are deemed to be references to fifty percent).
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Chemical will be obligated to pay the termination
fee to Talmer if (i) Talmer or Chemical terminates the merger agreement because the merger does not occur on or before the end
date (if the Chemical shareholder approval has not been obtained by such date), (ii) any person or group of persons has made (whether
or not subsequently withdrawn) a Chemical takeover proposal after the date of the merger agreement and prior to the date of any
such termination, and (iii) at any time prior to the date that is 12 months after the date of such termination, Chemical or any
of its subsidiaries enters into any definitive agreement providing for a Chemical takeover proposal or consummates a Chemical takeover
proposal (provided that for the purposes of this paragraph, references to ten percent in the definition of “Chemical takeover
proposal” are deemed to be references to fifty percent).
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Chemical will be obligated to pay the termination
fee and the Talmer expense reimbursement to Talmer if Chemical terminates the merger agreement prior to receipt of the Chemical
shareholder approval in order to enter into a definitive merger agreement or other definitive purchase or acquisition agreement
that constitutes a Chemical superior proposal.
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In no event will
either of Talmer or Chemical be required to pay the termination fee or the expense reimbursement on more than one occasion.
Upon the termination
of the merger agreement in accordance with its terms and payment of the termination fee and/or expense reimbursement, if applicable,
neither Talmer nor Chemical will have any continuing liability to the other (except with respect to press releases, confidentiality
and certain miscellaneous provisions). However, each party will remain liable for damages arising from a willful or intentional
breach of the merger agreement or fraud.
Governance of the Combined Company
Following the Completion of the Transaction
Chemical has agreed to
take all requisite action, effective as of the effective time of the merger, to cause the Chemical board of directors to consist
of twelve directors, which will include: (i) the then-current seven members of the Chemical board of directors, and (ii)
five of the then-current members of the Talmer board of directors (two of whom will be Gary Torgow and David Provost). The parties
will confer with regard to the other three Talmer directors to be appointed to the Chemical board of directors. The parties have
agreed that the board of directors of Chemical (or the appropriate committee thereof) will cause the Talmer continuing directors
to be nominated for election at the 2017 annual meeting of Chemical’s shareholders.
Effective as of the effective
time of the consolidation of the parties’ respective subsidiary banks, Chemical has agreed that Chemical Bank will take all
requisite action, effective as of the effective time of such consolidation, to cause the Chemical Bank board of directors to consist
of fourteen directors, which will include: (i) the then-current twelve members of the Chemical Bank board of directors, and (ii)
two individuals mutually agreed on by the parties. The Chemical Bank board of directors (or the appropriate committee thereof)
will cause those two individuals to be nominated for election at the 2017 annual meeting of the shareholder of Chemical Bank.
Effective as of the
effective time of the merger (and, with respect to positions with Chemical Bank, effective as of the effective time of the bank
consolidation), (i) David Ramaker will continue as Chief Executive Officer of Chemical and as Chairman, Chief Executive Officer
and President of Chemical Bank, (ii) Gary Torgow will become and serve as Chairman of Chemical, (iii) David Provost will become
and serve as Vice Chairman of the Board of Directors of Chemical and an employee of Chemical, (iv) Lori Gwizdala will become Executive
Vice President, Special Projects of Chemical Bank, (v) Dennis Klaeser will become and serve as Executive Vice President and Chief
Financial Officer of Chemical, and (vi) Thomas Shafer will become and serve as Executive Vice President of Chemical Bank. Mr.
Klaeser will continue to serve as the Chief Financial Officer of Talmer Bank until the effective time of the bank consolidation.
Effective as of the effective time of the bank consolidation, Mr. Klaeser will become and serve as Chief Financial Officer of
Chemical Bank.
Indemnification and Insurance
Chemical has agreed that
all rights to indemnification (including advancement of expenses) and exculpation from liabilities for acts or omissions occurring
at or before the effective time of the merger now existing in favor of the current or former directors or officers of Talmer or
its subsidiaries, as provided in Talmer’s articles of incorporation or bylaws, and any existing indemnification agreements,
will survive the merger and will continue in full force and effect in accordance with their terms, and may not be amended, repealed,
or otherwise modified after the effective time of the merger in any manner that would adversely affect the rights of such individuals
with respect to acts or omissions occurring at or prior to the effective time of the merger or taken at the request of Chemical.
The combined company will indemnify, defend, and hold harmless, and provide advancement of reasonable expenses to each of the current
or former directors or officers of Talmer or its subsidiaries against all losses, claims, damages, costs, expenses, liabilities,
or judgments, or amounts that are paid in settlement of or in connection with any claim based in whole or in part on or arising
in whole or in part out of the fact that such individual was a director or officer of Talmer or its subsidiaries and pertaining
to acts or omissions occurring at or prior to the effective time of the merger or taken at the request of Chemical, provided that
with respect to predecessor entities of Talmer Bank, matters arising from acts or omissions occurring before the acquisition by
Talmer of such predecessor entities are not covered by this paragraph.
For a period of six years
following the effective time of the merger, the surviving corporation will maintain the current policies (or policies of substantially
the same coverage) of directors’ and officers’ liability insurance and fiduciary liability insurance maintained by
Talmer and its subsidiaries for the indemnified parties prior to the effective time of the merger with respect to matters occurring
at or prior to the effective time of the merger, including the transactions contemplated by the merger agreement. However, after
the effective time of the merger, the combined company will not be required to pay annual premiums for insurance coverages in excess
of three hundred percent of the last annual premium paid by Talmer prior to the date of the merger agreement (referred to as the
“maximum amount”) in respect of the coverages required to be obtained, but in such case will purchase the greatest
coverage available for a cost not exceeding the maximum amount. Alternatively, at the combined company’s option, the combined
company may purchase at or after the effective time of the merger, at a cost not exceeding the maximum amount, a six-year prepaid
“tail” policy on terms and conditions providing substantially equivalent benefits as the current policies of directors’
and officers’ liability insurance and fiduciary liability insurance maintained by Talmer and its subsidiaries for the indemnified
parties with respect to matters occurring at or prior to the effective time of the merger, including the transactions contemplated
by the merger agreement.
Amendments, Extensions and Waivers
The merger agreement
may be amended by the parties at any time before or after the receipt of the Talmer shareholder approval or the Chemical shareholder
approval by action taken or authorized by the parties’ respective
boards of directors. After receipt of any such approval,
no amendment will be made which by law or in accordance with the rules of any relevant stock exchange requires further approval
by the Talmer shareholders or the Chemical shareholders, as applicable, without such further shareholder approval. The merger
agreement may not be amended except by an instrument in writing signed on behalf of Chemical and Talmer.
Governing Law
The merger agreement
is governed by the laws of the State of Michigan.
No Third Party Beneficiaries
While the merger
agreement is not intended to confer upon you or any other person other than Chemical and Talmer any rights or remedies, it provides
limited exceptions for (i) Talmer’s and its subsidiaries’ directors and officers to continue to have indemnification
and liability insurance coverage after the completion of the merger, and (ii) holders of Talmer Class A common stock after the
effective time of the merger and any holder of an award granted under a Talmer stock plan to properly convert their shares of common
stock and awards pursuant to the merger agreement.
Specific Performance
Chemical and Talmer
agreed that irreparable damage would occur in the event that any of the provisions of the merger agreement were not performed in
accordance with their specific terms or were otherwise breached. Each party will be entitled to seek an injunction, specific performance
and other equitable relief to prevent breaches of the merger agreement by the other party or to enforce specifically the terms
and provisions of the merger agreement.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is
a summary of the material anticipated United States federal income tax consequences generally applicable to a U.S. Holder (as defined
below) of Talmer Class A common stock with respect to the exchange of Talmer Class A common stock for Chemical common stock and
cash pursuant to the merger. This discussion assumes that U.S. Holders hold their Talmer Class A common stock as capital assets
within the meaning of section 1221 of the Code. This summary is based on the Code, Treasury Regulations, judicial decisions and
administrative pronouncements, each as in effect as of the date of this joint proxy statement and prospectus. All of the foregoing
are subject to change at any time, possibly with retroactive effect, and all are subject to differing interpretation. No advance
ruling has been sought or obtained from the IRS regarding the United States federal income tax consequences of the merger. As a
result, no assurance can be given that the IRS would not assert or that a court would not sustain a position contrary to any of
the tax consequences set forth below.
For purposes of
this summary, a “U.S. Holder” is a beneficial owner of Talmer Class A common stock that is for United States federal
income tax purposes:
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a United States citizen or resident
alien;
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a corporation or other entity taxable
as a corporation for United States federal income tax purposes, created or organized under the laws of the United States or any
state therein or the District of Columbia;
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a trust if (i) it is subject to the
primary supervision of a court within the United States and one or more United States persons have the authority to control all
substantial decisions of the trust, or (ii) it was in existence on August 20, 1996 and has a valid election in effect under applicable
Treasury Regulations to be treated as a United States person; or
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an estate, the income of which is subject
to United States federal income taxation regardless of its source.
If a partnership
(including an entity treated as a partnership for United States federal income tax purposes) holds Talmer Class A common stock,
the tax treatment of a partner in the partnership will generally depend on the status of each partner and the activities of the
partnership.
Tax Consequences of the Merger Generally
Chemical and Talmer
have structured the merger to qualify as a reorganization within the meaning of Section 368(a) of the Code. The obligations of
Chemical and Talmer to consummate the merger are conditioned upon the receipt of an opinion from Warner Norcross & Judd LLP
for its client, Chemical, and an opinion from Nelson Mullins Riley & Scarborough LLP for its client, Talmer, each dated as
of the closing date of the merger, to the effect that (i) the merger will for federal income tax purposes qualify as a reorganization
within the meaning of Section 368(a) of the Code, and (ii) each respective client will be a party to that reoroganization within
the meaning of Section 368(b) of the Code, based upon customary representations made by Chemical and Talmer.
Assuming that the
transactions are consummated substantially in conformity with the terms of the merger agreement, the merger will constitute a reorganization
within the meaning of Section 368(a) of the Code and therefore, the material United States federal income tax consequences of the
merger are as follows:
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no gain or loss will be recognized
by Chemical or Talmer by reason of the merger;
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you will not recognize gain if you
exchange your Talmer Class A common stock for Chemical common stock, except to the extent of any cash received as consideration
for your shares of Talmer Class A common stock and in lieu of fractional shares of Chemical common stock you would otherwise be
entitled to receive (see discussion below);
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you will not recognize any loss if
you exchange your Talmer Class A common stock for Chemical common stock, even if you might otherwise recognize a loss in a sale
to a third party, except for any loss that may result from the receipt of cash in lieu of fractional shares of Chemical common
stock you would otherwise be entitled to receive;
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your aggregate tax basis in the Chemical
common stock that you receive in the merger will equal your aggregate tax basis in the Talmer Class A common stock you surrendered,
decreased by the amount of cash received and increase by the amount of any gain recognized upon the receipt of cash (excluding
receipt of cash in lieu of fractional shares of Chemical common stock); and
-
your holding period for the Chemical
common stock that you receive in the merger will include your holding period for the shares of Talmer Class A common stock that
you surrender in the merger.
Exchange of Talmer
Class A Common Stock for Cash and Chemical Common Stock
Talmer shareholders
will exchange all of their Talmer Class A common stock for a combination of Chemical common stock and cash in the merger. Accordingly,
Talmer shareholders will recognize gain (but not loss) in an amount equal to the lesser of (i) the amount of cash received in the
merger; and (ii) the excess, if any, of (a) the sum of the amount of cash and the fair market value of the Chemical common stock
received in the merger above (b) the Talmer shareholder’s aggregate tax basis in its Talmer Class A common stock surrendered
in exchange therefor. Talmer shareholders will not recognize a loss on the receipt of cash.
The gain recognized
upon receipt of a combination of stock and cash will be capital gain unless the Talmer shareholder’s receipt of cash has
the effect of a distribution of a dividend, in which case the gain will be treated as ordinary income to the extent of the holder’s
ratable share of Talmer’s accumulated undistributed earnings and profits, as calculated for U.S. federal income tax purposes.
For purposes of determining whether a Talmer shareholder’s receipt of cash has the effect of a distribution of a dividend,
the Talmer shareholder will be treated as if he, she or it first exchanged all of his, her or its Talmer Class A common stock solely
in exchange for Chemical common stock and then Chemical immediately redeemed a portion of that stock for the cash that the holder
actually received in the merger (referred to herein as the “deemed redemption”). Receipt of cash will generally not
have the effect of a dividend to the Talmer shareholder if such receipt is, with respect to the Talmer shareholder, “not
essentially equivalent to a dividend” or “substantially disproportionate,” each within the meaning of Section
302(b) of the Code. In order for the deemed redemption to be “not essentially equivalent to a dividend,” the deemed
redemption must result in a “meaningful reduction” in the shareholder’s deemed percentage stock ownership of
Chemical following the merger. The determination generally requires a comparison of the percentage of the outstanding stock of
Chemical the shareholder is considered to have owned immediately before the deemed redemption to the percentage of the outstanding
stock of Chemical the shareholder owns immediately after the deemed redemption. The Internal Revenue Service has indicated in rulings
in certain transactions that any reduction in the interest of a minority shareholder that owns a small number of shares in a publicly
and widely held corporation and that exercises no control over corporate affairs would result in capital gain (as opposed to dividend)
treatment. Rulings issued by the Internal Revenue Service may be relied upon only if the facts of a taxpayer are substantially
similar to the facts stated in the ruling.
For purposes of
applying the foregoing tests, a shareholder will be deemed to own the stock the shareholder actually owns and the stock the shareholder
constructively owns under the attribution rules of Section 318 of the Code. Under Section 318 of the Code, a shareholder will be
deemed to own the shares of stock owned by certain family members, by certain estates and trusts of which the shareholder is a
beneficiary, and by certain affiliated entities, as well as shares of stock subject to an option actually or constructively owned
by the shareholder or such other persons. If, after applying these tests, the deemed redemption results in a capital gain, the
capital gain will be long-term if the Talmer shareholder’s holding period for its Talmer Class A common stock is more than
one year as of the date of the exchange or if the Talmer shareholder’s holding period for its Talmer Class A common stock
is one year or less as of the date of the exchange, the capital gain will be a short-term capital gain taxed at ordinary income
rates. If, after applying these tests, the deemed redemption results in the gain recognized by a Talmer shareholder being classified
as a dividend, such dividend will be treated as either ordinary income or qualified dividend income.
Any gain treated
as qualified dividend income will be taxable to individual Talmer shareholders at the long-term capital gains rate, provided that
the shareholder held the shares giving rise to such income for more than 60 days during the 121 day period beginning 60 days before
the closing date. The determination as to whether a Talmer shareholder will recognize a capital gain or dividend income as a result
of its exchange of Talmer Class A
common stock for a combination of Chemical common stock and cash in the merger is complex and
is determined on a shareholder-by-shareholder basis. Accordingly, each Talmer shareholder is urged to consult such shareholder’s
own tax advisor with respect to this determination.
Backup Withholding and Information
Reporting
Payments of cash
to a holder of Talmer Class A common stock may, under certain circumstances, be subject to information reporting and backup withholding
at a rate of 28% of the cash payable to the holder, unless the holder provides proof of an applicable exemption or furnishes his,
her or its taxpayer identification number, and otherwise complies with all applicable requirements of the backup withholding rules.
Any amounts withheld from payments to a holder under the backup withholding rules are not additional tax and will be allowed as
a refund or credit against the holder’s U.S. federal income tax liability, provided the required information is furnished
to the Internal Revenue Service.
Tax on Net Investment
Income
Certain U.S. Holders
whose income exceeds certain threshold amounts will be subject to a 3.8% Medicare contribution tax on “net investment income”.
Net investment income is generally the excess of dividends and capital gains with respect to the sale, exchange, or other disposition
of stock over allowable deductions. Each Talmer shareholder is urged to consult his, her or its tax advisor to determine their
own particular tax consequences with respect to the merger Consideration to be received in the merger and the net investment income
tax.
Tax Consequences of the Merger to
Chemical and Talmer
Each of Chemical
and Talmer will be a party to the merger within the meaning of Section 368(b) of the Code, and neither Chemical nor Talmer will
recognize any gain or loss for U.S. federal income tax purposes as a result of the merger.
This summary does
not address any tax consequences arising under United States federal tax laws other than United States federal income tax laws,
nor does it address the laws of any state, local, foreign or other taxing jurisdiction, nor does it address any aspect of income
tax that may be applicable to non-U.S. Holders of Talmer Class A common stock. In addition, this summary does not address all aspects
of United States federal income taxation that may apply to U.S. Holders of Talmer Class A common stock in light of their particular
circumstances or U.S. Holders that are subject to special rules under the Code, such as holders of Talmer Class A common stock
that are partnerships or other pass-through entities (and persons holding their Talmer Class A common stock through a partnership
or other pass-through entity), persons who acquired shares of Talmer Class A common stock as a result of the exercise of employee
stock options or otherwise as compensation or through a tax-qualified retirement plan, persons subject to the alternative minimum
tax, tax-exempt organizations, financial institutions, broker-dealers, traders in securities that have elected to apply a mark
to market method of accounting, insurance companies, persons having a “functional currency” other than the U.S. dollar,
and persons holding their Talmer Class A common stock as part of a straddle, hedging, constructive sale or conversion transaction.
The preceding discussion
is intended only as a summary of material United States federal income tax consequences of the merger. It is not a complete analysis
or discussion of all potential tax effects that may be important to you. Chemical and Talmer have not requested and do not intend
to request any ruling from the IRS.
You are urged to consult your own tax advisor as to the specific tax consequences resulting
from the merger, including tax return reporting requirements, the applicability and effect of federal, state, local and other applicable
tax laws and the effect of any proposed changes in the tax laws.
ACCOUNTING TREATMENT
In accordance with
current accounting guidance, the merger will be accounted for using the purchase method. The result of this is that the recorded
assets and liabilities of Chemical will be carried forward at their recorded amounts, the historical operating results will be
unchanged for the prior periods being reported on and the assets and liabilities of Talmer will be adjusted to fair value at the
date of the merger. In addition, all identified intangibles will be recorded at fair value and included as part of the net assets
acquired. To the extent that the
purchase price consideration, which is measured at the date of the effective time of the merger
and consists of the cash consideration, the shares of Chemical common stock to be issued to Talmer shareholders, the “in
the money” value of the stock options and cash in lieu of any fractional shares, exceeds the fair value of the net assets
(including identifiable intangibles) of Talmer at the effective time of the merger, that amount will be reported as goodwill. In
accordance with current accounting guidance, goodwill will not be amortized but will be evaluated for impairment annually or more
often if necessary. Identified intangibles will be amortized over their estimated lives. Further, the purchase accounting method
results in the operating results of Talmer being included in the consolidated financial results of Chemical beginning from the
effective time of the merger.
UNAUDITED
PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The
following pro forma condensed combined financial information combines the historical consolidated financial position
and results of operations of Chemical and Talmer, after giving effect to the merger, using the purchase method of accounting
and giving effect to the related pro forma adjustments described in the accompanying notes. Under the purchase method
of accounting, the assets and liabilities of Talmer will be recorded by Chemical at their respective fair values as of the
date that the merger is completed. The pro forma condensed combined balance sheet gives effect to the merger as if the
transaction had occurred on March 31, 2016. The pro forma combined income statement for the three months ended March 31,
2016 gives effect to the merger as if the transaction had become effective on January 1, 2016. The pro forma combined income
statement for the year ended December 31, 2015 gives effect to the merger as if the transaction had become effective on
January 1, 2015.
The pro forma condensed
combined financial information is presented for illustrative purposes only and does not indicate the financial results of the combined
company had the companies actually been combined at the beginning of the period presented, nor the impact of possible business
model changes. The pro forma condensed combined financial information, while helpful in illustrating the financial characteristics
of the combined organization under one set of assumptions, does not reflect the potential effects of changes in market conditions
on revenues, expense efficiencies, and asset dispositions, among other factors, nor does it include the funding cost or lost opportunity
cost related to the cash consideration being paid to Talmer shareholders and, accordingly, does not attempt to predict or suggest
future results. In addition, as explained in more detail in the accompanying notes, the preliminary allocation of the pro forma
purchase price reflected in the pro forma condensed combined financial information is subject to adjustment and may vary significantly
from the actual purchase price allocation that will be recorded upon completion of the merger.
The pro forma condensed
combined income statement does not include estimated merger and integration costs expected to be incurred in conjunction with the
merger. See Note 4 accompanying the pro forma condensed combined financial statements for additional information regarding merger
and integration costs.
Chemical Financial Corporation and
Talmer Bancorp, Inc.
Unaudited Pro Forma Condensed Combined
Balance Sheet
March 31, 2016
|
Chemical
Historical
|
|
Talmer
Historical
|
|
Pro Forma
Adjustments
|
|
Pro Forma
Chemical
and Talmer
|
|
|
(Amounts in thousands, except per share data)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
291,374
|
|
$
|
363,815
|
|
$
|
(89,039
|
)
(1)
|
$
|
566,150
|
|
Investment securities
|
|
1,032,315
|
|
|
948,221
|
|
|
-
|
|
|
1,980,536
|
|
Loans held-for-sale
|
|
9,667
|
|
|
25,040
|
|
|
-
|
|
|
34,707
|
|
Total loans
|
|
7,366,885
|
|
|
4,923,736
|
|
|
(42,378
|
)
(2)
|
|
12,248,243
|
|
Allowance for loan losses
|
|
(70,318
|
)
|
|
(52,378
|
)
|
|
52,378
|
(3)
|
|
(70,318
|
)
|
Net loans
|
|
7,296,567
|
|
|
4,871,358
|
|
|
10,000
|
|
|
12,177,925
|
|
Premises and equipment, net
|
|
105,868
|
|
|
42,446
|
|
|
-
|
|
|
148,314
|
|
Goodwill
|
|
286,867
|
|
|
3,524
|
|
|
500,305
|
(4)
|
|
790,696
|
|
Other intangible assets
|
|
36,266
|
|
|
63,544
|
|
|
43,404
|
(5)
|
|
143,214
|
|
Interest receivable and other assets
|
|
244,708
|
|
|
395,741
|
|
|
(2,346
|
)
(6)
|
|
638,103
|
|
Total Assets
|
$
|
9,303,632
|
|
$
|
6,713,689
|
|
$
|
462,324
|
|
$
|
16,479,645
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
$
|
7,650,116
|
|
$
|
5,152,798
|
|
$
|
(1,045
|
)
(7)
|
$
|
12,801,869
|
|
Interest payable and other liabilities
|
|
64,120
|
|
|
78,265
|
|
|
-
|
|
|
142,385
|
|
Short-term borrowings
|
|
283,383
|
|
|
334,480
|
|
|
-
|
|
|
617,863
|
|
Other borrowings
|
|
273,722
|
|
|
399,476
|
|
|
52,689
|
(8)
|
|
725,887
|
|
Total liabilities
|
|
8,271,341
|
|
|
5,965,019
|
|
|
51,644
|
|
|
14,288,004
|
|
Shareholders’ equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, no par value
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Common stock, $1 par value per share
|
|
38,248
|
|
|
66,844
|
|
|
(35,260
|
)
(9)
|
|
69,832
|
|
Additional paid-in capital
|
|
725,874
|
|
|
319,207
|
|
|
825,212
|
(10)
|
|
1,870,293
|
|
Retained earnings
|
|
294,859
|
|
|
355,493
|
|
|
(372,146
|
)
(11)
|
|
278,206
|
|
Accumulated other comprehensive
income (loss)
|
|
(26,690
|
)
|
|
7,126
|
|
|
(7,126
|
)
(12)
|
|
(26,690
|
)
|
Total shareholders’ equity
|
|
1,032,291
|
|
|
748,670
|
|
|
410,680
|
|
|
2,191,641
|
|
Total Liabilities and Shareholders’ Equity
|
$
|
9,303,632
|
|
$
|
6,713,689
|
|
$
|
462,324
|
|
$
|
16,479,645
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book value per share
|
$
|
26.99
|
|
$
|
11.20
|
|
|
|
|
$
|
31.38
|
|
Tangible book value per share
|
$
|
19.20
|
|
$
|
10.97
|
|
|
|
|
$
|
19.11
|
|
See accompanying notes to unaudited pro forma combined condensed
financial statements.
Chemical Financial Corporation and
Talmer Bancorp, Inc.
Unaudited Pro Forma Condensed Combined
Statement of Income
Quarter Ended March 31, 2016
|
Chemical
Historical
|
|
Talmer
Historical
|
|
Pro Forma
Adjustments
|
|
Pro Forma
Chemical &
Talmer
|
|
|
(Amounts in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
$
|
79,464
|
|
$
|
62,555
|
|
$
|
(3,855
|
)
(13)
|
$
|
138,164
|
|
Interest expense
|
|
5,134
|
|
|
6,457
|
|
|
466
|
(14)
|
|
12,057
|
|
Net interest income
|
|
74,330
|
|
|
56,098
|
|
|
(4,321
|
)
|
|
126,107
|
|
Provision (benefit) for loan losses
|
|
1,500
|
|
|
(1,111
|
)
|
|
-
|
|
|
389
|
|
Noninterest income
|
|
19,419
|
|
|
13,624
|
|
|
-
|
|
|
33,043
|
|
Operating expenses
|
|
58,887
|
|
|
48,270
|
|
|
1,473
|
(15)
|
|
108,630
|
|
Net income before income taxes
|
|
33,362
|
|
|
22,563
|
|
|
(5,794
|
)
|
|
50,131
|
|
Income tax
|
|
10,100
|
|
|
2,880
|
|
|
(2,028
|
)
(16)
|
|
10,952
|
|
Net income
|
$
|
23,262
|
|
$
|
19,683
|
|
$
|
(3,766
|
)
|
$
|
39,179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.61
|
|
$
|
0.30
|
|
|
|
|
$
|
0.56
|
|
Diluted
|
$
|
0.60
|
|
$
|
0.28
|
|
|
|
|
$
|
0.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends per share
|
$
|
0.26
|
|
$
|
0.05
|
|
|
|
|
$
|
0.26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
38,198
|
|
|
65,636
|
|
|
(34,052
|
)
(17)
|
|
69,782
|
|
Diluted
|
|
38,521
|
|
|
69,706
|
|
|
(37,048
|
)
(17)
|
|
71,179
|
|
See accompanying notes to unaudited pro forma combined condensed financial statements.
Chemical Financial Corporation
and Talmer Bancorp, Inc.
Unaudited Pro Forma Condensed Combined
Statement of Income
Year Ended December 31, 2015
|
Chemical
Historical
|
|
Talmer
Historical
|
|
Pro Forma
Impact of
Chemical
Acquisitions
(A)
|
|
Pro Forma
Adjustments
|
|
Pro Forma
Chemical &
Talmer
|
|
|
(Amounts in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
$
|
291,789
|
|
$
|
234,888
|
|
$
|
22,062
|
|
$
|
(22,533
|
)
(13)
|
$
|
526,206
|
|
Interest expense
|
|
17,781
|
|
|
20,222
|
|
|
3,969
|
|
|
1,865
|
(14)
|
|
43,837
|
|
Net interest income
|
|
274,008
|
|
|
214,666
|
|
|
18,093
|
|
|
(24,398
|
)
|
|
482,369
|
|
Provision (benefit) for loan losses
|
|
6,500
|
|
|
(9,203
|
)
|
|
-
|
|
|
-
|
|
|
(2,703
|
)
|
Noninterest income
|
|
80,216
|
|
|
86,445
|
|
|
3,231
|
|
|
-
|
|
|
169,892
|
|
Operating expenses
|
|
223,894
|
|
|
226,319
|
|
|
13,252
|
|
|
5,703
|
(15)
|
|
469,168
|
|
Net income before income taxes
|
|
123,830
|
|
|
83,995
|
|
|
8,072
|
|
|
(30,101
|
)
|
|
185,796
|
|
Income tax
|
|
37,000
|
|
|
23,866
|
|
|
148
|
|
|
(10,535
|
)
(16)
|
|
50,479
|
|
Net income
|
$
|
86,830
|
|
$
|
60,129
|
|
$
|
7,924
|
|
$
|
(19,566
|
)
|
$
|
135,317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
2.41
|
|
$
|
0.87
|
|
|
|
|
|
|
|
$
|
1.95
|
|
Diluted
|
$
|
2.39
|
|
$
|
0.81
|
|
|
|
|
|
|
|
$
|
1.91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends per share
|
$
|
1.00
|
|
$
|
0.04
|
|
|
|
|
|
|
|
$
|
1.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
36,081
|
|
|
68,646
|
|
|
2,016
|
|
|
(37,407
|
)
(17)
|
|
69,336
|
|
Diluted
|
|
36,353
|
|
|
73,331
|
|
|
2,016
|
|
|
(40,795
|
)
(17)
|
|
70,905
|
|
(A)
|
Represents the pro forma impact of Chemical’s acquisitions of Monarch Community Bancorp, Inc. on April, 1, 2015 and Lake Michigan Financial Corporation on May 31, 2015, assuming these acquisitions had been completed as of the beginning of the period presented. In accordance with Article 11 of Regulation S-X, transactions costs directly attributable to these acquisitions have been excluded.
|
See accompanying notes to unaudited pro forma combined condensed
financial statements.
Note 1—Basis of Presentation
The pro forma condensed
combined financial information and explanatory notes have been prepared to illustrate the effects of the merger involving Chemical
and Talmer under the purchase method of accounting with Chemical treated as the acquirer. The pro forma condensed combined financial
information is presented for illustrative purposes only and does not necessarily indicate the financial results of the combined
companies had the companies actually been combined at the beginning of the period presented, nor does it necessarily indicate the
results of operations in future periods or the future financial position of the combined entities. Under the purchase method of
accounting, the assets and liabilities of Talmer, as of the effective date of the merger, will be recorded by Chemical at their
respective fair values and the excess of the merger consideration over the fair value of Talmer’s net assets will be allocated
to goodwill.
The merger,
which is currently expected to be completed in the second half of 2016, provides for Talmer common shareholders to receive 0.4725
shares of Chemical common stock and $1.61 in cash for each share of Talmer common stock they hold immediately prior to the merger.
Based on the closing trading price of shares of Chemical common stock on the NASDAQ Stock Market on March 31, 2016, the date the
pro forma condensed combined financial statements are presented, the value of the merger consideration of Talmer common stock
was $18.47 per share. Based on the closing trading price of shares of Chemical common stock on the NASDAQ Stock Market on January 25,
2016, the last trading day before the public announcement of the signing of the merger agreement, the value of the merger consideration
of Talmer common stock was $15.64 per share. Based on the closing trading price of shares of Chemical common stock on the NASDAQ
on June 8, 2016, the value of the merger consideration of Talmer common stock was $20.40 per share.
The pro forma
allocation of the purchase price reflected in the pro forma condensed combined financial information is subject to adjustment
and may vary from the actual purchase price allocation that will be recorded at the time the merger is completed. Adjustments
will include, but not be limited to, changes in (i) Talmer’s balance sheet and operating results through the effective time
of the merger; (ii) the aggregate value of merger consideration paid if the price of shares of Chemical common stock varies
from the assumed $35.69 per share, which represents the closing share price of Chemical common stock on March 31, 2016; (iii)
total merger-related expenses from amounts included herein; and (iv) the underlying values of assets and liabilities if market
conditions differ from current assumptions.
The accounting policies
of both Chemical and Talmer are in the process of being reviewed in detail. Upon completion of such review, conforming adjustments
or financial statement reclassification may be determined.
Note 2—Preliminary Purchase
Price Allocation
The pro forma adjustments
include the estimated purchase accounting entries to record the merger transaction. The excess of the purchase price over the fair
value of net assets acquired, net of deferred taxes, is allocated to goodwill. Estimated fair value adjustments included in the
pro forma financial statements are based upon available information and certain assumptions considered reasonable, and may be revised
as additional information becomes available.
Core deposit
intangible assets of $55.6 million are included in the pro forma adjustments separate from goodwill and amortized on an accelerated
method over 10 years. Goodwill totaling $504 million is included in the pro forma adjustments and is not subject to amortization.
The purchase price is variable based on Chemical’s price per common share at the closing date of the merger, which has not
yet occurred. Accordingly, a 10% increase or decrease in Chemical’s price per share of common stock would result in a corresponding
purchase price and goodwill adjustment of approximately $113 million.
The preliminary
purchase price allocation is as follows:
Pro Forma Purchase Price
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(In thousands, except per share amounts)
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|
|
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Equity consideration:
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|
|
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Talmer shares outstanding as of March 31, 2016
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66,844
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Exchange ratio
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0.4725
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Chemical shares issued
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31,584
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Chemical share price (as of March 31, 2016)
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$
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35.69
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Equity portion of purchase price
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$
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1,127,233
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Cash consideration:
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Talmer shares outstanding
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66,844
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Cash consideration (per Talmer share)
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$
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1.61
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Cash portion of purchase price
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107,619
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Option consideration (B):
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Cash
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18,982
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Equity
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48,770
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Stock option portion of purchase price
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67,752
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Total consideration to be paid (transaction value)
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$
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1,302,604
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Talmer Net Assets at Fair Value
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Assets acquired:
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Cash and cash equivalents
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$
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363,815
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Investment securities
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948,221
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Loans held-for-sale
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25,040
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Net loans
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4,881,358
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Premises and equipment, net
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42,446
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Other intangible assets
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106,948
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Interest receivable and other assets
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387,610
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Total assets acquired
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6,755,438
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Liabilities assumed:
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Deposits
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5,151,753
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Interest payable and other liabilities
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78,265
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Short-term borrowings
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334,480
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Other borrowings
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392,165
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Total liabilities assumed
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5,956,663
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Net assets acquired
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798,775
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Preliminary pro forma goodwill
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$
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503,829
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(B)
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The
fair value of option consideration is based on the excess of the transaction value per share as of March 31, 2016 of
$18.47 over the weighted average strike price of Talmer’s stock options outstanding as of that date. Further, 25% of
Talmer’s stock options are expected to be cashed out upon completion of the merger, with the remaining 75% converted
into options to purchase shares of Chemical common stock in accordance with the merger agreement.
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Note 3—Pro Forma Adjustments
The following pro
forma adjustments have been reflected in the pro forma condensed combined financial information. All taxable adjustments were calculated
using a 35.0% tax rate to arrive at deferred tax asset or liability adjustments. All adjustments are based on current assumptions
and valuations, which are subject to change.
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(1)
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Adjustments to
cash reflect the estimated cash component of the merger consideration of $107.6 million, based on 66,844,244 shares of
Talmer Class A common stock outstanding as of March 31, 2016, cash consideration of $19.0 million based on 25% of
Talmer’s stock options being cashed out pursuant to the merger agreement, contractually obligated pre-tax
merger costs of $22.4 million and reflects $60.0 million of borrowed funds to facilitate the merger. The fair
value of converted stock options was determined based on the excess of the transaction value
per share as of March 31, 2016 of $18.47 over the weighted average strike price of
Talmer’s stock options outstanding for the 25% of Talmer’s stock options assumed
to be cashed out upon completion of the merger.
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(2)
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Adjustment to Talmer’s loans, net of unrecognized costs, to reflect the estimated fair value of the loan portfolio based on estimates of expected cash flows, which includes credit loss expectations and current interest rates.
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(3)
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Elimination of Talmer’s existing allowance for loan losses. Purchased loans in a business combination are recorded at estimated fair value on the purchase date and the carryover of the related allowance for loan losses is prohibited.
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(4)
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Adjustments to
goodwill to eliminate Talmer goodwill of $3.5 million at the merger date and record estimated goodwill associated with the
merger of $504 million.
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(5)
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Adjustments to other intangible assets to eliminate Talmer’s core deposit intangible assets of $12.2 million and record estimated core deposit intangible assets associated with the merger of $55.6 million, based on a value of 1.75% of Talmer’s non-time customer deposits. Core deposit intangible assets recorded as a result of the merger are expected to be amortized on an accelerated basis over a period of 10 years.
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(6)
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Adjustment to deferred tax liabilities to reflect the effects of the acquisition accounting adjustments of $21.6 million and adjustments to deferred tax assets to recognize the tax benefit of the merger consideration related to nonqualified stock options and the tax benefit of contractually obligated merger costs of $13.5 million and $5.8 million, respectively.
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(7)
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Adjustment to reflect the estimated fair value of Talmer’s time deposits.
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(8)
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Adjustment to
reflect the estimated fair value of Talmer’s long-term debt included in other borrowings and to reflect $60.0 million
of borrowed funds to facilitate the merger.
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(9)
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Adjustment to
eliminate Talmer common stock of $66.8 million and record the issuance of 31,583,905 shares of Chemical common stock at $1
par value (recorded value of $31.6 million) based on 66,844,244 shares of Talmer Class A common stock outstanding at
March 31, 2016 multiplied by the merger exchange ratio of 0.4725 shares.
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(10)
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Adjustment to
eliminate Talmer additional paid-in capital of $319.2 million, record the issuance of Chemical common stock in excess of par
value of $1.095 billion and record the fair value of stock option consideration attributable to Talmer stock options converted
to options to purchase shares of Chemical common stock of $48.8 million. The fair value of converted stock options was
determined based on the excess of the transaction value per share as of March 31, 2016 of $18.47 over the weighted average
strike price of Talmer’s stock options outstanding as of that date, with 75% of Talmer’s stock options assumed to
be converted into options to purchase shares of Chemical common stock in accordance with the merger agreement.
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(11)
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Adjustment to eliminate retained earnings of Talmer and recognize contractually obligated after-tax merger costs of $16.6 million.
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(12)
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Adjustment to eliminate accumulated other comprehensive income of Talmer.
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(13)
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Net adjustment to interest income to recognize estimated discount loan accretion attributable to recording the acquired loans at fair value as of the transaction date. The discount loan accretion is expected to accrete over a period of approximately 4.4 years.
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(14)
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Net adjustment to interest expense to eliminate Talmer’s net amortization of premiums on previously acquired time deposits and long-term debt and record estimated net accretion of discounts on acquired time deposits and long-term debt. The discount accretion on deposits and the net discount accretion on long-term debt is expected to be approximately 2 years and 15 years, respectively.
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(15)
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Adjustment to eliminate Talmer’s amortization of core deposit intangible asset of $0.6
million for the three months ended March 31, 2016 and $2.6 million for the year ended December 31, 2015 and recognize estimated
first year core deposit intangible asset amortization of $2.1 million for the three months ended March 31, 2016 and $8.3 million
for the year ended December 31, 2015. See item (5) above for information regarding Chemical’s amortization of core deposit
intangible assets.
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(16)
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Recognize the tax impact of pro forma transaction-related adjustments at 35%.
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(17)
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Adjustment to eliminate Talmer’s average common shares outstanding during the three-month period ended
March 31, 2016 and the twelve-month period ended December 31, 2015 and recognize the issuance of 31,583,905 shares of Chemical
common stock based on Talmer’s 66,844,244 common shares outstanding at March 31, 2016 and the merger exchange ratio of 0.4725.
Average diluted shares outstanding also includes the effect of dilutive stock options outstanding at March 31, 2016 and December
31, 2015 that are assumed to be converted to options to purchase shares of Chemical common stock in accordance with the merger
agreement and dilutive warrants of Talmer that were outstanding during the three-month period ended March 31, 2016 and the twelve-month
period ended December 31, 2015.
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Note 4—Merger Integration Costs
Merger and integration
related costs are estimated to be $63 million on a combined pre-tax basis, with contractually obligated pre-tax merger costs of
$22.4 million ($16.6 million net of tax) due at closing. Contractually obligated merger costs are reflected in the pro forma condensed
combined balance sheet as part of the pro forma adjustments discussed in Note 3. Merger and integration related costs are not included
in the pro forma condensed combined statement of income since they will be recorded in the combined results of operations as they are
incurred prior to, or after completion of, the merger and are not indicative of what the historical results of the combined company
would have been had the companies been actually combined during the periods presented.
Note 5—Divestiture or Closure
of Talmer and/or Chemical Branches
Due to the
competitive considerations of the merger in accordance with regulatory guidelines, Chemical may have to divest of Talmer
and/or Chemical branches in certain market areas in order to obtain regulatory approvals to complete the transactions
contemplated by the merger agreement or may choose to consolidate branches after the completion of the transaction. If
required by regulatory authorities, Chemical intends to divest branches in certain areas in a manner sufficient to eliminate
such regulatory authorities’ competitive concerns. Branch divestitures or closures have not yet been identified and are
excluded from the pro forma analysis.
COMPARISON OF RIGHTS OF SHAREHOLDERS
Chemical and
Talmer are Michigan corporations subject to the Michigan Business Corporation Act (the “MBCA”). The rights of Chemical
shareholders are governed by the MBCA and Chemical’s restated articles of incorporation, as amended (“Chemical Articles”),
and bylaws, as amended (“Chemical Bylaws”). The rights of Talmer shareholders are governed by the MBCA and Talmer’s
restated articles of incorporation, as amended (“Talmer Articles”) and bylaws, as amended and restated (“Talmer
Bylaws”). After the merger, the rights of Talmer’s common shareholders who become Chemical common shareholders will
be governed by the MBCA, the Chemical Articles and the Chemical Bylaws.
The following
discussion is a summary of the current rights of Talmer and Chemical shareholders. While this summary includes the material differences
between the two, this summary may not contain all of the information that is important to you. You should carefully read this
entire joint proxy statement and prospectus, the relevant provisions of the MBCA and the other governing documents which are referenced
in this joint proxy statement and prospectus for a more complete understanding of the differences between being a shareholder
of Talmer and a shareholder of Chemical. Chemical has filed with the SEC its governing documents referenced in this summary and
will send copies of these documents to you, without charge, upon your request. See “Where You Can Find More Information”
beginning on page 132.
Authorized Capital Stock
Chemical
.
The Chemical Articles authorize Chemical to issue up to 60,000,000 shares of common stock, par value $1.00 per share, and 2,000,000
shares of preferred stock, no par value. If the proposed amendment to the Chemical Articles is approved by the Chemical shareholders,
as of the effective time of the merger, the Chemical Articles will authorize Chemical to issue up to 100,000,000 shares of Chemical
common stock. The proposed amendment does not alter the authorized number of shares of Chemical preferred stock. As of the record
date, there were 38,264,479 shares of Chemical common stock outstanding, and no
shares of Chemical preferred stock outstanding.
Talmer.
The
Talmer Articles authorize Talmer to issue up to 200,000,000 shares of common stock, par value $1.00 per share, of which 198,000,000
shares shall be Class A voting common stock and 2,000,000 shares shall be Class B non-voting common stock, and 20,000,000 shares
of preferred stock, par value $1.00 per share. As of the record date, there were 67,189,703 shares of Talmer Class A voting common
stock outstanding, and no shares of Talmer Class B non-voting common stock or preferred stock outstanding.
Issuance of Additional Shares
Chemical.
Chemical’s
board of directors may authorize the issuance of additional shares of common stock up to the amounts authorized in the Chemical
Articles, without shareholder approval, subject only to the restrictions of the MBCA and the Chemical Articles.
Chemical’s
board of directors may authorize the issuance of shares of preferred stock up to the amounts specified in the Chemical Articles,
without shareholder approval, subject only to the restrictions of the MBCA and the Chemical Articles and not for any defensive
or anti-takeover purpose or for the purpose of implementing any shareholders rights plan.
Talmer.
Talmer’s
board of directors may authorize the issuance of additional shares of common stock up to the amounts authorized in the Talmer Articles,
without shareholder approval, subject only to the restrictions of the MBCA and the Talmer Articles.
Talmer’s board
of directors may authorize the issuance of shares of preferred stock up to the amounts authorized in the Talmer Articles, without
shareholder approval, subject only to the restrictions of the MBCA and the Talmer Articles.
Number and Classification of Directors
Chemical
.
The Chemical Bylaws provide that Chemical’s board must consist of at least five directors, but may not exceed 25 directors.
The exact number of directors is determined from time to time by the board of directors. Chemical’s board of directors currently
has seven directors. Chemical’s board of directors is not classified, and directors are elected annually.
Talmer
. The
Talmer Bylaws provide that Talmer’s board must consist of at least three directors, but may not exceed 20 directors. The
exact number of directors is determined from time to time by the board of directors. Talmer’s board of directors currently
has 14 directors. Talmer’s board of directors is not classified, and directors are elected annually.
Election of Directors
Chemical
.
Chemical’s directors are elected annually, to hold office for one-year terms (or until their respective successors are elected
and qualified, or until their respective resignation or removal). Chemical’s directors are elected by a plurality of the
votes cast.
Talmer
. Talmer’s
directors are elected annually, to hold office for one-year terms (or until their respective successors are elected and qualified,
or until their respective resignation or removal). Talmer’s directors are elected by a plurality of the votes cast.
Nomination of Director Candidates
by Shareholders
Chemical
.
The Chemical Bylaws provide that a shareholder of record entitled to vote in an election of directors may nominate a person for
election to the Chemical board by delivering, not less than 120 days prior to the annual meeting, and not more than seven days
following the date of notice of a special meeting called for election of directors, a notice to Chemical’s Secretary that
includes, with respect to each proposed nominee, (i) the nominee’s name, age, business address and residence; (ii) the nominee’s
occupation or employment; (iii) the number of shares of capital stock of Chemical that are beneficially owned by the nominee; (iv)
a statement that such nominee is willing to be nominated and to serve if elected; and (v) such other information concerning such
nominee as would be required under SEC rules to be provided in a proxy statement soliciting proxies for the election of such nominee.
Talmer
. The
Talmer Bylaws provide that a shareholder of record entitled to vote in an election of directors may nominate a person for election
to the Talmer board, provided that notice is received by Talmer’s Secretary not less than 60 days nor more than 90 days prior
to the first anniversary of the preceding year’s annual meeting (however, if the date of the annual meeting is advanced by
more than 30 days prior to the anniversary date or delayed by more than 30 days after such anniversary date, then notice must be
received by Talmer’s Secretary no later than the later of 60 days prior to the date of the meeting or the tenth day following
the day on which notice of the annual meeting was mailed or made public), and not less than 10
days following the day
on which notice of a special meeting was mailed or made public, if the special meeting calls for the election of directors. Such
notice to Talmer’s Secretary must include, with respect to each proposed nominee, (a) the name and address of the shareholder
who intends to make the nomination and of the person or persons to be nominated; (b) a representation that the shareholder
is a holder of record of stock of Talmer entitled to vote at such meeting and of the number of shares beneficially owned by such
shareholder (determined in accordance with Section 13(d) of the Exchange Act), and that the shareholder intends to appear in person
or by proxy at the meeting to nominate the person or persons specified in the notice; (c) a description of all arrangements
or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant
to which the nomination or nominations are to be made by the shareholder; (d) such other information regarding each nominee
proposed by such shareholder as would have been required to be included in a proxy statement filed pursuant to the proxy rules
of the SEC had each nominee been nominated, or intended to be nominated, by the board of directors; (e) the consent of each
nominee to serve as a director of Talmer if so elected; and (f) a representation as to whether or not the shareholder will
solicit proxies in support of his nominee(s).
Removal of Directors
Chemical
.
The Chemical Bylaws provide that each Chemical director may be removed, with or without cause, by vote of the holders of a majority
of the shares entitled to vote at an election of directors.
Talmer
. The
Talmer Bylaws provide that each Talmer director may be removed, with or without cause, by vote of the holders of a majority of
the shares entitled to vote at any special meeting called for that purpose.
Indemnification of Directors, Officers
and Employees
Chemical
.
The Chemical Articles and Chemical Bylaws each indicate that Chemical will indemnify, to the fullest extent permitted by the MBCA,
persons who serve or have served as directors, officers, employees or agents of Chemical, and persons who serve or have served
at the request of Chemical as directors, officers, employees, partners or agents of another foreign or domestic corporation, partnership,
joint venture, trust or other enterprise.
Talmer
. The
Talmer Articles and Talmer Bylaws each indicate that Talmer will indemnify, to the fullest extent permitted by the MBCA, persons
who serve or have served as directors or officers of Talmer, and persons who serve or have served at the request of Talmer as directors,
officers, employees, partners or agents of another foreign or domestic corporation, partnership, joint venture, trust or other
enterprise if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best
interest of Talmer or its shareholders, and with respect to a criminal action or proceeding, if the person had no reasonable cause
to believe his or her conduct was unlawful. For derivative actions, indemnification shall not be made for any claim, issue or matter
in which the person has been found liable to Talmer unless and only to the extent that the court in which the action or suit was
brought has determined on application that, despite the adjudication of liability but in view of all circumstances of the case,
the person is fairly and reasonably entitled to indemnification for the reasonable expenses incurred.
Shareholder Proposals
Chemical
.
The Chemical Bylaws provide that a shareholder may propose a shareholder action at an annual or special meeting of shareholders
if it is properly presented. For a matter to be properly presented by a shareholder, the shareholder must give notice of the matter
in writing to the Secretary of Chemical. The notice must be received at the principal executive offices of Chemical not less than
120 calendar days prior to the date corresponding to the date of Chemical’s proxy statement or notice of meeting released
to shareholders in connection with the last preceding annual meeting of shareholders, in the case of an annual meeting, and not
more than ten days after the earlier of the date of notice of the meeting or public disclosure of the date of the meeting, in the
case of a special meeting. The notice must include (i) a brief description of the matter the shareholder desires to present for
action; (ii) the name and record address of the shareholder; (iii) the class and number of shares of Chemical’s stock that
are beneficially owned by the shareholder; and (iv) any material interest of the shareholder in the matter proposed for action.
Talmer
. The
Talmer Bylaws provide that a shareholder may propose a shareholder action at an annual meeting of its shareholders if it is properly
presented. For a matter to be properly presented by a shareholder, the notice of the proposal must be received by Talmer’s
Secretary not less than 60 days nor more than 90 days prior to the first anniversary of the preceding year’s annual meeting
(however, if the date of the annual meeting is advanced by more than 30 days prior to the anniversary date or delayed by more than
30 days after such anniversary date, then notice must be received by Talmer’s Secretary no later than the later of 60 days
prior to the date of the meeting or the tenth day following the day on which notice of the annual meeting was mailed or made public).
Such shareholder notice shall set forth (a) a brief description of the business desired to be brought before the meeting and the
reasons for conducting such business at the meeting and in the event that such business includes a proposal to amend either the
articles of incorporation or bylaws of Talmer, the language of the proposed amendment, (b) the name and address of the shareholder
proposing such business, (c) a representation that the shareholder is a holder of record of stock of Talmer entitled to vote at
such meeting and of the number of shares beneficially owned by such shareholder (determined in accordance with Section 13(d) of
the Exchange Act), and that the shareholder intends to appear in person or by proxy at the meeting to propose such business, (d)
any material interest of the shareholder in
such business, and (e) a representation as to whether or not the shareholder will solicit
proxies in support of his proposal.
Special Meetings of Shareholders
Chemical
.
The Chemical Bylaws require the President or Secretary of Chemical to call a special meeting of shareholders at the written
request of shareholders holding a majority of the shares of Chemical common stock outstanding and entitled to vote at a
meeting. The request must state the purpose or purposes for which the meeting is to be called. A special meeting of
shareholders also may be called by Chemical’s board of directors, Chairman of the board of directors, or President.
Talmer
. The
Talmer Bylaws require the Chief Executive Officer or Secretary to call a special meeting of shareholders at the written request
of a majority of the board of directors or shareholders holding a majority of the shares of Talmer capital stock outstanding and
entitled to vote at a meeting. Such request must state the purpose or purposes of the proposed meeting. A special meeting of shareholders
may also be called by the Chief Executive Officer, Chairman of the board of directors or President.
Shareholder Action Without a Meeting
Chemical
.
The Chemical Articles provide that any action required or permitted under the MBCA to be taken at an annual or special
meeting of the Chemical shareholders may be taken without a prior meeting, without prior notice, and without a vote, if a
written consent setting forth the action so taken is signed by the holders of outstanding stock having not less than the
minimum number of votes necessary to authorize or take the action at a meeting at which all shares entitled to vote were
present and voted.
Talmer
.
The Talmer Articles provide that any action required or permitted under the MBCA to be taken at an annual or special meeting
of the Talmer shareholders may be taken without a prior meeting, without prior notice, and without a vote, if a written
consent setting forth the action so taken is signed by the holders of outstanding stock having not less than the minimum
number of votes necessary to authorize or take the action at a meeting at which all shares entitled to vote were present and
voted. Such written consents are not effective unless within 60 days after the record date for determining shareholders
entitled to express consent or dissent from a proposal without a meeting, written consents dated not more than 10 days before
the record date and signed by a sufficient number of shareholders to take the action are delivered to Talmer.
Amendment of Articles of Incorporation
and Bylaws
Chemical
.
The Chemical Articles may be amended by the affirmative vote of the holders of a majority of the outstanding Chemical shares entitled
to vote. The Chemical Bylaws may be amended, altered or repealed by the Chemical board of directors or by the Chemical shareholders
at a meeting.
Talmer
. The
Talmer Articles may be amended by the affirmative vote of the holders of a majority of the outstanding Talmer shares entitled to
vote. The Talmer Bylaws may be amended, altered or repealed by the Talmer board of directors or by the Talmer shareholders holding
a majority of the shares of Talmer capital stock outstanding and entitled to vote at a meeting.
Business Combination Restrictions
and Other Shareholder Limitations
Chemical
.
Neither the Chemical Articles nor the Chemical Bylaws contain any special provisions relating to the approval of business combinations.
Talmer
. Neither
the Talmer Articles nor the Talmer Bylaws contain any special provisions relating to the approval of business combinations.
NO APPRAISAL OR DISSENTERS’
RIGHTS
Dissenters’
rights are rights that, if available under law, enable shareholders to dissent from an extraordinary transaction, such as a merger,
and to demand that the corporation pay the fair value for their shares as determined by a court in a judicial proceeding instead
of receiving the consideration offered to shareholders in connection with the extraordinary transaction. Under the MBCA, as well
as the governing documents of each company, neither the holders of Chemical capital stock nor the holders of Talmer capital stock
are entitled to appraisal rights or dissenters’ rights in connection with the merger.
LEGAL MATTERS
The validity
of the shares of Chemical common stock to be issued pursuant to the merger will be passed upon by Warner Norcross & Judd LLP,
111 Lyon Street NW, Suite 900, Grand Rapids, Michigan 49503. The material U.S. federal income tax consequences relating to the
merger will be passed upon for Chemical by Warner Norcross & Judd LLP and for Talmer by Nelson Mullins Riley & Scarborough
LLP, 201 17th Street NW, Suite 1700, Atlanta, Georgia 30363. J. Brennan Ryan, a partner of Nelson Mullins Riley & Scarborough LLP,
holds stock options to acquire up to 100,000 shares of Talmer’s Class A common stock with a weighted average exercise price
of $8.25 per share. In addition, Mr. Ryan holds shares of Talmer restricted stock for which restrictions lapse for
22,000 shares in June 2019 and 22,300 shares in March 2020, and 21,500 shares for which restrictions lapse in one-third increments
in February 2017, 2018 and 2019.
EXPERTS
Chemical
The consolidated
financial statements of Chemical as of December 31, 2015 and 2014 and for each of the years in the three-year period ended December
31, 2015, and management’s assessment of the effectiveness of internal control over financial reporting as of December 31,
2015, appearing in Chemical’s Annual Report on Form 10-K for the year ended December 31, 2015, have been incorporated by
reference herein and in the registration statement in reliance upon the reports of KPMG LLP, independent registered public accounting
firm, which reports have been incorporated by reference herein and in the registration statement by inclusion of such reports in
our Annual Report on Form 10-K for the year ended December 31, 2015, and upon the authority of said firm as experts in accounting
and auditing.
Talmer
The consolidated financial statements of Talmer as of December 31, 2015 and 2014 and for each of the three
years in the period ended December 31, 2015, and the effectiveness of Talmer’s internal control over financial reporting
as of December 31, 2015 have been audited by Crowe Horwath LLP, an independent registered public accounting firm, as set forth
in their report appearing in the Talmer Annual Report on Form 10-K, as amended, and incorporated in this joint proxy statement
and prospectus by reference. Such consolidated financial statements have been so incorporated in reliance on the report of such
firm given upon their authority as experts in auditing and accounting.
SHAREHOLDER PROPOSALS
A Chemical shareholder
seeking to present a proposal at a Chemical annual meeting of shareholders must submit a notice to the Secretary of Chemical in
accordance with Chemical’s bylaws not less than 120 calendar days prior to the date corresponding to the date of Chemical’s
proxy statement or notice of meeting released to shareholders in connection with the last preceding annual meeting of shareholders,
in the case of an annual meeting (unless Chemical did not hold an annual meeting within the last year, or if the date of the upcoming
annual meeting changed by more than 30 days from the date of the last preceding meeting, then the notice must be delivered or mailed
and received not more than 10 days after the earlier of the date of the notice of the meeting or public disclosure of the date
of the meeting), and not more than ten days after the earlier of the date of the notice of the meeting or public disclosure of
the date of the meeting, in the case of a special meeting. A Chemical shareholder seeking to include a proposal in Chemical’s
proxy statement and form of proxy relating to a meeting of shareholders
must submit the proposal to Chemical in accordance with
SEC Rule 14a-8. With respect to Chemical’s 2017 annual meeting of shareholders, the deadline to submit a notice of a proposal
and to include a proposal in Chemical’s proxy statement and form of proxy relating to the meeting is November 4, 2016.
A Chemical shareholder
seeking to nominate an individual for election as a Chemical director must submit a notice to the Secretary of Chemical in accordance
with the Chemical Bylaws not less than 120 days prior to the date of the meeting, in the case of an annual meeting, and not more
than seven days following the date of notice of the meeting, in the case of a special meeting.
Talmer does not
currently anticipate holding an annual meeting of shareholders in 2016. However, if the merger is not completed as anticipated,
Talmer may hold a 2016 annual meeting of shareholders. If such an annual meeting is held, it will not likely fall within 30 days
of the anniversary of Talmer’s 2015 annual meeting, which was held on June 8, 2015. Accordingly, under SEC rules, if Talmer
holds a 2016 annual meeting, shareholder proposals must be submitted a reasonable time before Talmer begins to print and send its
proxy materials. Such proposals will be subject to the requirements of the proxy rules adopted under the Exchange Act and Talmer’s
Bylaws.
Under Talmer’s
Bylaws, in order for a shareholder to make a proposal for business to be brought before the 2016 annual meeting or to nominate
an individual for election as a Talmer director at the 2016 annual meeting, if such a meeting is held, the shareholder must submit
each such notice to Talmer’s Secretary not less than 60 days nor more than 90 days prior to the first anniversary of the
preceding year’s annual meeting (however, if the date of the annual meeting is advanced by more than 30 days prior to the
anniversary date or delayed by more than 30 days after such anniversary date, then notice must be received by Talmer’s Secretary
no later than the later of 60 days prior to the date of the meeting or the tenth day following the day on which notice of the annual
meeting was mailed or made public).
OTHER MATTERS PRESENTED AT THE MEETINGS
As of the date of
this joint proxy statement and prospectus, neither the Chemical board of directors nor the Talmer board of directors knows of any
matters that will be presented for consideration at either the Chemical special meeting or the Talmer special meeting, respectively,
other than as described in this joint proxy statement and prospectus. If any other matters come before either the Chemical special
meeting or the Talmer special meeting or any adjournment or postponement thereof and are voted upon, the proposed proxy will be
deemed to confer authority to the individuals named as authorized therein to vote the shares represented by the proxy and the persons
named in the enclosed proxy and acting thereunder will vote in accordance with their discretion on such matters.
WHERE YOU CAN FIND MORE INFORMATION
Chemical and Talmer
each file annual, quarterly and current reports, proxy statements and other information with the SEC under the Exchange Act. You
may read and copy any of this information at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. In addition, Chemical and Talmer each
file such reports and other information with the SEC electronically, and the SEC maintains an internet website located at www.sec.gov
containing this information. The reports and other information that Chemical and Talmer file with the SEC is also available at
their respective websites, www.chemicalbankmi.com and www.talmerbank.com. Information included on Chemical’s and Talmer’s
websites is not incorporated by reference into this joint proxy statement and prospectus.
You can obtain
any reports, proxy statements or other information filed by Chemical or Talmer with the SEC, without charge, electronically at
the SEC’s website above. In addition, Chemical will provide you with copies of any reports, proxy statements or other information
filed by Chemical with the SEC, without charge, upon written or oral request to: Chemical Financial Corporation, 235 East Main
Street, Midland, Michigan 48640. Attn: Lori A. Gwizdala, telephone no. (989) 839-5350. Talmer will provide you with copies of any
reports, proxy statements or other information filed by Talmer with the SEC, without charge, upon written or oral request to: Talmer
Bancorp, Inc., 2301 West Big Beaver Road, Suite 525, Troy, Michigan 48084, Attention: Brad Adams, telephone no. (248) 489-2852.
You should rely only on
the information contained in or incorporated by reference into this joint proxy statement and prospectus. We have not authorized
anyone to provide you with information that is different from what is contained in or incorporated by reference into this joint
proxy statement and prospectus. The information contained in this joint proxy statement and prospectus speaks only as of the date
of this joint proxy statement and prospectus unless the information specifically indicates that another date applies. You should
not assume that the information contained in this joint proxy statement and prospectus is accurate as of any date other than the
date of this joint proxy statement and prospectus, and neither the delivery of this joint proxy statement and prospectus to you
nor the issuance of Chemical common stock under it shall create any implication to the contrary.
If you are in a
jurisdiction where offers to exchange or sell, or solicitations of offers to exchange or purchase, the securities offered by this
joint proxy statement and prospectus or the solicitation of proxies is unlawful, or if you are a person to whom it is unlawful
to direct these types of activities, then the offer presented in this joint proxy statement and prospectus does not extend to you.
This document contains
a description of the representations and warranties that each of Chemical and Talmer made to the other in the merger agreement.
Representations and warranties made by Chemical, Talmer and other applicable parties are also set forth in contracts and other
documents (including the merger agreement) that are attached or filed as exhibits to this document or are incorporated by reference
into this document. These materials are included or incorporated by reference only to provide you with information regarding the
terms and conditions of the agreements, and not to provide any other factual information regarding Chemical, Talmer or their businesses.
Accordingly, the representations and warranties and other provisions of the merger agreement should not be read alone, but instead
should be read only in conjunction with the other information provided elsewhere in this document or incorporated by reference
into this document.
INCORPORATION OF CERTAIN INFORMATION BY
REFERENCE
The following documents
filed by Chemical or Talmer, as applicable, with the SEC are incorporated by reference into this joint proxy statement and prospectus.
You should carefully read and consider all of these documents before making an investment decision.
(a)
The description of Chemical’s common stock in Chemical’s Form S-3 Registration
Statement filed June 12, 2014, including any amendments or reports filed for the purpose of updating the description.
(b)
Chemical’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, filed
on February 26, 2016.
(c)
Chemical’s definitive Proxy Statement on Schedule 14A for its 2016 annual meeting of
shareholders, filed March 4, 2016.
(d) Chemical’s Quarterly Report on Form 10-Q filed April 27, 2016.
(e)
Chemical’s Current Reports on Form 8-K filed January 26, 2016, February 1, 2016, February 11, 2016, April 19, 2016 and May
31, 2016 (other than those portions of the documents deemed to be furnished and not filed).
(f)
The description of Talmer’s common stock, which is contained in Talmer’s Form
S-1 Registration Statement filed on January 10, 2014, including any amendments or reports filed for the purpose of updating such
description.
(g)
Talmer’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, filed
on February 29, 2016, as amended by the Amendment to such Annual Report filed on March 30, 2016.
(h) Talmer’s Quarterly Report on Form 10-Q filed May 6, 2016.
(i)
Talmer’s Current Reports on Form 8-K or Form 8-K/A filed January 26, 2016, February 1, 2016, February 11, 2016, February
26, 2016 and April 27, 2016 (other than those portions of the documents deemed to be furnished and not filed).
Chemical
also incorporates by reference all documents that it may file with the SEC pursuant to Sections 13(a), 13(c), 14, or 15(d) of the
Exchange Act, after the date of this joint proxy statement and prospectus and prior to the date of the special meeting (except,
with respect to each of the foregoing, for portions of such reports which are deemed to be furnished and not filed). Such documents
are considered to be a part of this joint proxy statement and prospectus, effective as of the date such documents are filed.
In addition, Talmer incorporates
by reference any future filings it makes with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date
of this joint proxy statement and prospectus and prior to the date of the Talmer special meeting (except, with respect to each
of the foregoing, for portions of such reports which are deemed to be furnished and not filed). Such documents are considered to
be a part of this joint proxy statement and prospectus, effective as of the date such documents are filed.
ANNEX
A
EXECUTION
COPY
______________________________________________________________________________
AGREEMENT
AND PLAN OF MERGER
BY
AND BETWEEN
CHEMICAL
FINANCIAL CORPORATION
AND
TALMER
BANCORP, INC.
Dated
as of January 25, 2016
___________________________________________________________________________
Table of Contents
|
|
Page
|
|
|
ARTICLE I THE MERGER
|
A-1
|
1.1
|
The Merger
|
A-1
|
1.2
|
Effective Time
|
A-1
|
1.3
|
Effects of the Merger
|
A-2
|
1.4
|
Conversion of Shares
|
A-2
|
1.5
|
Stock Options and Other Stock-Based
Awards
|
A-3
|
1.6
|
Articles of Incorporation
|
A-4
|
1.7
|
Bylaws
|
A-4
|
1.8
|
Tax Consequences
|
A-4
|
1.9
|
Bank Merger
|
A-4
|
1.10
|
Directors and Officers
|
A-4
|
1.11
|
Name
|
A-4
|
1.12
|
Additional Actions
|
A-5
|
1.13
|
Right to Revise Structure
|
A-5
|
|
|
ARTICLE II DELIVERY OF
MERGER CONSIDERATION
|
A-5
|
2.1
|
Chemical to Make Shares Available
|
A-5
|
2.2
|
Exchange of Shares
|
A-5
|
|
|
ARTICLE III REPRESENTATIONS
AND WARRANTIES OF TALMER
|
A-7
|
3.1
|
Authorization, No Conflicts, Etc.
|
A-7
|
3.2
|
Organization and Good Standing
|
A-8
|
3.3
|
Subsidiaries
|
A-8
|
3.4
|
Capital Stock
|
A-9
|
3.5
|
Financial Statements
|
A-9
|
3.6
|
Absence of Certain Changes or Events
|
A-10
|
3.7
|
Legal Proceedings
|
A-10
|
3.8
|
Regulatory Filings
|
A-10
|
3.9
|
No Indemnification Claims
|
A-10
|
3.10
|
Conduct of Business
|
A-10
|
3.11
|
Transaction Documents
|
A-11
|
3.12
|
Agreements With Bank Regulators
|
A-11
|
3.13
|
Tax Matters
|
A-11
|
3.14
|
Properties
|
A-12
|
3.15
|
Intellectual Property
|
A-13
|
3.16
|
Required Licenses, Permits,
Etc.
|
A-13
|
3.17
|
Material Contracts and
Change of Control
|
A-13
|
3.18
|
Labor and Employment Matters
|
A-15
|
3.19
|
Employee Benefits
|
A-16
|
|
3.20
|
Environmental Matters
|
A-18
|
3.21
|
Duties as Fiduciary
|
A-18
|
3.22
|
Investment Bankers and Brokers
|
A-18
|
3.23
|
Fairness Opinion
|
A-18
|
3.24
|
Talmer-Related Persons
|
A-19
|
3.25
|
Change in Business Relationships
|
A-19
|
3.26
|
Insurance
|
A-19
|
3.27
|
Books and Records
|
A-19
|
3.28
|
Loan Guarantees
|
A-19
|
3.29
|
Data Security and Customer Privacy
|
A-20
|
3.30
|
Allowance for Loan and Lease Losses
|
A-20
|
3.31
|
Loans and Investments
|
A-20
|
3.32
|
Loan Origination and Servicing
|
A-20
|
3.33
|
Securities Laws Matters
|
A-20
|
3.34
|
Joint Ventures; Strategic Alliances
|
A-21
|
3.35
|
Policies and Procedures
|
A-21
|
3.36
|
Shareholder Rights Plan
|
A-21
|
3.37
|
Absence of Undisclosed Liabilities
|
A-21
|
3.38
|
No Other Representations and Warranties
|
A-21
|
|
|
ARTICLE IV REPRESENTATIONS
AND WARRANTIES OF CHEMICAL
|
A-21
|
4.1
|
Authorization, No Conflicts, Etc.
|
A-22
|
4.2
|
Organization and Good Standing
|
A-22
|
4.3
|
Subsidiaries
|
A-22
|
4.4
|
Capital Stock
|
A-23
|
4.5
|
Financial Statements
|
A-24
|
4.6
|
Absence of Certain Changes or Events
|
A-24
|
4.7
|
Legal Proceedings
|
A-24
|
4.8
|
Regulatory Filings
|
A-25
|
4.9
|
No Indemnification Claims
|
A-25
|
4.10
|
Conduct of Business
|
A-25
|
4.11
|
Transaction Documents
|
A-25
|
4.12
|
Agreements With Bank Regulators
|
A-25
|
4.13
|
Tax Matters
|
A-25
|
4.14
|
Properties
|
A-26
|
4.15
|
Intellectual Property
|
A-27
|
4.16
|
Required Licenses, Permits, Etc.
|
A-27
|
4.17
|
Material Contracts and Change of Control
|
A-27
|
4.18
|
Labor and Employment Matters
|
A-29
|
4.19
|
Employee Benefits
|
A-30
|
|
4.20
|
Environmental Matters
|
A-32
|
4.21
|
Duties as Fiduciary
|
A-32
|
4.22
|
Investment Bankers and Brokers
|
A-33
|
4.23
|
Fairness Opinion
|
A-33
|
4.24
|
Chemical-Related Persons
|
A-33
|
4.25
|
Change in Business Relationships
|
A-33
|
4.26
|
Insurance
|
A-33
|
4.27
|
Books and Records
|
A-34
|
4.28
|
Loan Guarantees
|
A-34
|
4.29
|
Data Security and Customer Privacy
|
A-34
|
4.30
|
Allowance for Loan and Lease Losses
|
A-34
|
4.31
|
Loans and Investments
|
A-34
|
4.32
|
Loan Origination and Servicing
|
A-34
|
4.33
|
Securities Laws Matters
|
A-34
|
4.34
|
Joint Ventures; Strategic Alliances
|
A-35
|
4.35
|
Policies and Procedures
|
A-35
|
4.36
|
Shareholder Rights Plan
|
A-35
|
4.37
|
Absence of Undisclosed Liabilities
|
A-35
|
4.38
|
No Other Representations and Warranties
|
A-35
|
|
|
ARTICLE V COVENANTS RELATING
TO CONDUCT OF BUSINESS
|
A-36
|
5.1
|
Conduct of Business Before the Effective
Time
|
A-36
|
5.2
|
Talmer Forbearances
|
A-36
|
5.3
|
Chemical Forbearances
|
A-39
|
|
|
ARTICLE VI ADDITIONAL AGREEMENTS
|
A-42
|
6.1
|
Regulatory Matters
|
A-42
|
6.2
|
Access to Information; Confidentiality
|
A-43
|
6.3
|
Preparation of the Joint Proxy Statement
and Registration Statement; Shareholders’ Meetings
|
A-
44
|
6.4
|
NASDAQ Listing
|
A-45
|
6.5
|
Employee Matters
|
A-46
|
6.6
|
Indemnification; Directors’ and
Officers’ Insurance
|
A-47
|
6.7
|
Additional Agreements
|
A-48
|
6.8
|
Advice of Changes
|
A-48
|
6.9
|
No Solicitation by Talmer
|
A-48
|
6.10
|
No Solicitation by Chemical
|
A-50
|
6.11
|
Corporate Governance
|
A-52
|
6.12
|
Restructuring Efforts
|
A-52
|
6.13
|
Exemption from Liability Under Section
16(b)
|
A-52
|
6.14
|
Trust Preferred Securities; Senior
Debt Facility
|
A-53
|
6.15
|
Data Conversion
|
A-53
|
|
6.16
|
Commercially Reasonable Efforts; Cooperation
|
A-53
|
6.17
|
Securityholder Litigation
|
A-53
|
6.18
|
Expenses
|
A-53
|
6.19
|
Fairness Opinions
|
A-54
|
6.20
|
Dividends
|
A-54
|
|
|
ARTICLE VII CONDITIONS
PRECEDENT
|
A-54
|
7.1
|
Conditions to Each Party’s Obligation
To Effect the Merger
|
A-54
|
7.2
|
Conditions to Obligations of Talmer
|
A-54
|
7.3
|
Conditions to Obligations of Chemical
|
A-55
|
|
|
ARTICLE VIII TERMINATION
AND AMENDMENT
|
A-56
|
8.1
|
Termination
|
A-56
|
8.2
|
Effect of Termination
|
A-57
|
8.3
|
Amendment
|
A-59
|
8.4
|
Extension; Waiver
|
A-59
|
|
|
ARTICLE IX DEFINITIONS
|
A-59
|
|
|
ARTICLE X GENERAL PROVISIONS
|
A-69
|
10.1
|
Closing
|
A-69
|
10.2
|
Nonsurvival of Representations, Warranties
and Agreements
|
A-69
|
10.3
|
Notices
|
A-69
|
10.4
|
Interpretation
|
A-70
|
10.5
|
Entire Agreement
|
A-70
|
10.6
|
Governing Law
|
A-70
|
10.7
|
Exclusive Jurisdiction
|
A-70
|
10.8
|
Waiver of Jury Trial
|
A-70
|
10.9
|
Publicity
|
A-70
|
10.10
|
Assignment; Third-Party Beneficiaries
|
A-71
|
10.11
|
Enforcement
|
A-71
|
10.12
|
Severability
|
A-71
|
10.13
|
Counterparts
|
A-71
|
10.14
|
Construction
|
A-71
|
10.15
|
Calculation of Dates and Deadlines
|
A-71
|
EXHIBITS
EXHIBIT A-1
|
—
|
FORM OF TALMER SUPPORT AGREEMENT
|
EXHIBIT A-2
|
—
|
FORM OF CHEMICAL SUPPORT AGREEMENT
|
AGREEMENT
AND PLAN OF MERGER
This
AGREEMENT AND PLAN OF MERGER (this “
Agreement
”), dated as of January 25, 2016, is entered into by and
between Chemical Financial Corporation, a Michigan corporation (“
Chemical
”), and Talmer Bancorp, Inc.,
a Michigan corporation (“
Talmer
”). Each of Chemical and Talmer is referred to herein as a “
Party
”
and, together, as the “
Parties
.”
W I
T N E S S E T H:
WHEREAS,
the Boards of Directors of Chemical and Talmer (the “
Chemical Board
” and the “
Talmer
Board
,” respectively) have determined that it is in the best interests of their respective companies and their shareholders
to consummate the strategic business combination transaction provided for in this Agreement in which Talmer will, on the terms
and subject to the conditions set forth in this Agreement, merge with and into Chemical (the “
Merger
”),
so that Chemical is the surviving corporation in the Merger (sometimes referred to in such capacity as the “
Surviving
Corporation
”);
WHEREAS,
the Chemical Board and the Talmer Board have each adopted this Agreement, duly authorized the Merger and the other transactions
contemplated hereby, and resolved to recommend that the shareholders of each of Chemical and Talmer approve this Agreement and
the transactions contemplated hereby, including the Merger;
WHEREAS,
concurrently with the execution of this Agreement, each member of the Chemical Board and each member of the Talmer Board is
entering into a voting and support agreement substantially in the forms attached hereto as
Exhibit A-1
and
Exhibit A-2
,
respectively (each, a “
Support Agreement
”);
WHEREAS,
it is intended that, following the Merger, Talmer Bank and Trust, a Michigan banking corporation and wholly-owned subsidiary
of Talmer (“
Talmer Bank
”), will be merged with and into Chemical Bank, a Michigan banking corporation
and wholly-owned subsidiary of Chemical (“
Chemical Bank
”), so that Chemical Bank is the surviving bank
(sometimes referred to in such capacity as the “
Surviving Bank
”);
WHEREAS,
for federal income Tax purposes, it is intended that the Merger shall qualify as a reorganization under the provisions of
Section 368(a) of the Internal Revenue Code of 1986, as amended and including the Treasury Regulations promulgated thereunder
(the “
Code
”); and
WHEREAS,
the Parties desire to make certain representations, warranties and agreements in connection with the Merger and to prescribe
certain conditions precedent to the Merger.
NOW,
THEREFORE,
in consideration of the mutual covenants, representations, warranties, and agreements contained in this Agreement,
and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally
bound hereby, the Parties agree as follows:
Article
I
THE
MERGER
1.1
The
Merger
. Subject to the terms and conditions of this
Agreement
,
in accordance with the Michigan Business Corporation Act (the “
MBCA
”),
at the
Effective Time
,
Talmer
shall merge with and
into
Chemical
.
Chemical
shall be the surviving entity
in the
Merger
and shall continue its corporate existence under the laws of the State of
Michigan. As of the
Effective Time
, the separate corporate existence of
Talmer
shall cease.
1.2
Effective
Time
.
The
Merger
shall become effective on the date and at the time for effectiveness set forth in the
Certificate
of Merger
(the “
Effective Time
”) accepted for filing by
the Michigan Department of Licensing and Regulatory Affairs (the “
Certificate of Merger
”).
The
Parties
agree, if requested by
Chemical
, that
the
Effective Time
shall occur on either the last day or the first day of a month, but
shall not occur during a month in which a calendar quarter ends.
1.3
Effects
of the
Merger
.
At and after
the
Effective Time
, the
Merger
shall have the effects
set forth in this
Agreement
and in the relevant provisions of the
MBCA
.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time
,
all the property, rights, privileges, powers, and franchises of
Talmer
shall vest in the
Surviving Corporation
, and all debts, liabilities, and duties of
Talmer
shall become the debts, liabilities, and duties of the
Surviving Corporation
.
1.4
Conversion
of Shares
.
At the
Effective Time
,
by virtue of the
Merger
and without any further
action
on the part of
Chemical
,
Talmer
, or the holder
of any of the following securities:
(a)
Each
share of Common Stock, $1.00 par value per share, of
Chemical
(the “
Chemical
Common Stock
”) issued and outstanding immediately prior to the
Effective
Time
shall remain issued and outstanding and shall not be affected by the
Merger
.
(b)
All
shares of
Class A Common Stock
, $1.00 par value per share, of Talmer (the “
Talmer
Common Stock
”) issued and outstanding immediately prior to the
Effective
Time
that are owned, directly or indirectly, by
Talmer
or
Chemical
(other than
Trust Account Shares
and other than shares of
Talmer
Common Stock
held as a result of debts previously contracted) shall no longer be outstanding, shall automatically be cancelled,
and shall cease to exist, and no
Chemical Common Stock
or other consideration shall be
delivered in exchange therefor.
(c)
Subject
to
Section
1.4(e)
, each share of
Talmer Common Stock
,
except for shares of
Talmer Common Stock
owned by
Chemical
,
Talmer
, or any of their respective wholly-owned
Subsidiaries
(other than
Trust Account Shares
and shares of
Talmer
Common Stock
held as a result of debts previously contracted), shall be converted into the right to receive (i) 0.4725
shares (the “
Exchange Ratio
”) of validly issued, fully paid,
and nonassessable shares of
Chemical Common Stock (
the “
Stock
Consideration
”); and (ii) $1.61
in cash, without interest (the “
Cash
Consideration
” and, together with the
Stock Consideration
, the “
Merger
Consideration
”).
(d)
All
of the shares of
Talmer Common Stock
converted into the right to receive the
Merger
Consideration
pursuant to this
Article
I
shall no longer be outstanding, shall automatically be cancelled, and shall cease to exist as of the
Effective
Time
, and each book entry notation of record ownership and each certificate previously representing any such shares of
Talmer Common Stock
shall thereafter represent only the right to receive the
Merger
Consideration
into which the shares of
Talmer Common Stock
represented by such book
entry notation of record ownership or such certificate have been converted pursuant to this
Section
1.4
,
as well as any dividends to which holders of
Talmer Common Stock
become entitled in accordance
with
Section
2.2
.
(e) I
f,
between the date of this
Agreement
and the
Effective Time
,
there is declared (with an
effective time
prior to the
Effective
Time
) or effected a reorganization, reclassification, recapitalization, stock split (
including
a reverse stock split), split-up, stock dividend or stock distribution (
including
any
dividend or distribution of securities convertible into
Chemical Common Stock
or
Talmer
Common Stock
), combination, exchange, or readjustment of shares with respect to, or rights issued in respect of,
Chemical
Common Stock
or
Talmer Common Stock
, the
Exchange
Ratio
shall be proportionately adjusted accordingly to provide to the holders of
Talmer
Common Stock
the same economic effect as contemplated by this
Agreement
prior to
such event. Notwithstanding any other provisions of this
Section
1.4(e)
, no adjustment
shall be made in the event of the issuance of additional shares of
Chemical Common Stock
or
Talmer Common Stock
pursuant to any dividend reinvestment plan or direct investment plan
of
Chemical
or
Talmer
, as applicable, pursuant to
the exercise of stock options awarded under any director, employee or
affiliate
stock option
plans of
Chemical
or
Talmer
, as applicable, or their
Subsidiaries
, or upon the grant or sale of shares or rights to receive shares to or for
the account of any director, employee, or
Affiliate
of
Chemical
or
Talmer
, as applicable, or any of their
Subsidiaries
pursuant to any stock option or other compensation or benefit plans of
Chemical
or
Talmer
, as applicable, or in connection with the issuance of shares as consideration in
a transaction where
Chemical
or
Talmer
, as applicable,
is the
surviving corporation
or in connection with any offering of shares where
Chemical
or
Talmer
, as applicable, receives consideration in exchange for the shares so offered.
1.5
Stock
Options and Other Stock-Based Awards
.
(a)
Unless
otherwise expressly provided in this
Agreement
, the provisions of this
Section
1.5
pertain to all plans sponsored by
Talmer
under which options, restricted stock
and other stock-based awards are granted, and the award agreements thereunder (collectively, the “
Talmer
Stock Plans
”).
(b)
As
of the Effective Time, each outstanding option to purchase a share or shares of Talmer Common Stock (each, a “
Talmer
Stock Option
”), excluding any Talmer Stock Options cancelled immediately prior to the Effective Time in accordance
with
Section 1.5(c)
) (the “
Cancelled Talmer Stock Options
”), shall be assumed by Chemical substantially
in accordance with the terms of the Talmer Stock Plans and the option grants or other award agreements by which they are evidenced
in accordance with the terms of the applicable Talmer Stock Plans, such that after the Merger and without any action on the part
of the holders of such Talmer Stock Options, the Talmer Stock Options shall be converted into and become stock options with respect
to Chemical Common Stock (each, a “
Surviving Corporation Stock Option
”).
From and after the Effective Time, (i) each Talmer Stock Option may be exercised solely for shares of Chemical Common Stock; (ii)
the number of shares of Chemical Common Stock subject to such Talmer Stock Option shall be equal to the product of (A) the total
number of shares of Talmer Common Stock subject to such Talmer Stock Option
multiplied by
(B) the Equity Award Exchange
Ratio, rounded up or down, if necessary, to the nearest whole share of Chemical Common Stock; and (iii) the per-share exercise
price under each such Talmer Stock Option shall be adjusted to equal the quotient of (x) the exercise price per share of such
Talmer Stock Option at which such Talmer Stock Option was exercisable immediately prior to the Effective Time
divided by
(y) the Equity Award Exchange Ratio, rounded up or down to the nearest whole cent, if necessary. For purposes of this Agreement,
the “
Equity Award Exchange Ratio
” shall mean the sum of (1) the Exchange Ratio
plus
(2) the quotient
of (I) the Cash Consideration
divided by
(II) the Chemical Closing Price.
(c) Talmer
may offer to cancel, effective immediately prior to the Effective Time, up to twenty-five percent (25%) of the Talmer Stock Options
outstanding as of the date of this Agreement. In exchange for the cancellation of any such Cancelled Talmer Stock Options, each
holder thereof shall be entitled to receive, for each Cancelled Talmer Stock Option, cash in an amount equal to the Option Cash-Out
Consideration, less any required withholding taxes. For purposes of this Agreement, the “
Option
Cash-Out Consideration
” shall mean, for each Cancelled Talmer Stock Option, cash in an amount equal to the difference
between (i) the sum of (A) the product of (x) the Exchange Ratio
multiplied by
(y) the Chemical Closing Price,
plus
(B) the Cash Consideration,
minus
(ii) the per-share exercise price under each such Cancelled Talmer Stock Option.
Prior to any offer by Talmer to cancel Talmer Stock Options in accordance with this
Section 1.5(c)
, the Parties shall mutually
agree regarding which holders of Talmer Stock Options may be given the opportunity to cancel Talmer Stock Options in exchange
for the Option Cash-Out Consideration in accordance with this
Section 1.5(c)
and the manner in which Talmer would make
any such offer to any such holders of Talmer Stock Options
.
(d)
Each
restricted stock award granted under a
Talmer Stock Plan
(a “
Talmer
Stock Award
”) which is unvested or contingent and outstanding immediately prior to the
Effective
Time
shall cease, at the
Effective Time
, to represent any rights with respect to
shares of
Talmer Common Stock
and shall be converted, without any
action
on the part of the holder thereof, into a restricted stock award of
Chemical
(a
“
Surviving Corporation Stock Award
”), on the same terms and conditions
as were applicable under the applicable
Talmer Stock Plans
(but taking into account any
changes thereto,
including
any acceleration of vesting thereof, provided for in the applicable
Talmer Stock Plans
or in the related award document by reason of the
Merger
).
The
number of shares of Chemical Common Stock subject to each such Surviving Corporation Stock
Award
shall be equal to the product of (i) the total
number of shares of Talmer Common
Stock subject to the Talmer Stock Award
multiplied by
(ii) the
Equity Award Exchange
Ratio
, rounded up or down, if necessary, to the nearest whole share of
Chemical Common
Stock
.
Talmer
or
Chemical
, as applicable,
shall be entitled to deduct and withhold such amounts as may be required to be deducted and withheld under the
Code
and any applicable state or local
Tax
laws with respect to the lapsing of any restrictions
on
Talmer Stock Awards
pursuant to this
Section
1.5(d)
.
(e) Chemical
shall take all corporate action necessary to reserve a sufficient number of shares of Chemical Common Stock for delivery upon
the exercise or settlement of each
of the Surviving Corporation Stock Options and the Surviving Corporation Stock Awards. As soon as reasonably practicable after
the Effective Time, if and to the extent necessary to cause a sufficient number of shares of Chemical Common Stock to be registered
and issuable upon the exercise or settlement of the Surviving Corporation Stock Options and the
Surviving Corporation Stock Awards,
Chemical shall file a post-effective amendment to the Form S-4 or one or more registration statements on Form S-8 (or any successor
or other appropriate form) with respect to the shares of Chemical Common Stock subject to the Surviving Corporation Stock Options
or Surviving Corporation Stock Awards and shall use its commercially reasonable efforts to maintain the effectiveness of such
registration statement or registration statements (and maintain the current status of the prospectus or prospectuses contained
therein) for so long as such Surviving Corporation Stock Options and Surviving Corporation Stock Awards remain outstanding.
(f)
At or prior to the
Effective
Time
,
Chemical
, the
Chemical Board
, and the
compensation committee of the
Chemical Board
, as applicable, and
Talmer
,
the
Talmer Board
and the compensation committee of the
Talmer
Board
, as applicable, shall adopt any resolutions and take any actions (
including
obtaining
any
Talmer
or Talmer Bank employee or other participant consents or providing any required
or advisable notices to any
Talmer
or Talmer Bank employee) necessary to effectuate the
provisions of this
Section
1.5
.
1.6
Articles
of Incorporation
.
At the
Effective
Time
, the
Articles of Incorporation of Chemical
,
including
any amendments thereto (the “
Chemical Articles
”), shall
be the
Articles of Incorporation
of the
Surviving Corporation
until thereafter amended in accordance with applicable
Law
.
1.7
Bylaws
.
At the
Effective Time
, the
Bylaws
of Chemical
,
including
any amendments thereto (the “
Chemical
Bylaws
”), shall be the Bylaws of the
Surviving Corporation
until thereafter
amended in accordance with applicable
Law
.
1.8
Tax
Consequences
.
It
is intended that the
Merger
shall constitute a “
reorganization
”
within the meaning of Section 368(a) of the
Code
, and that this
Agreement
shall constitute a “
plan of reorganization
” for purposes of Sections
354 and 361 of the
Code (collectively, the “
Intended Tax Treatment
”)
.
Each
Party
shall not, and shall not
permit
any of
its respective
Subsidiaries
to, take any
action
or fail to take any
action
that would reasonably be expected to jeopardize the qualification
of the
Merger
as a reorganization under Section 368(a) of the
Code
.
Each
Party
shall
use commercially reasonable efforts
,
and shall cause their respective
Subsidiaries
to
use commercially
reasonable efforts
, to cause the
Merger
to qualify as a reorganization within the
meaning of Section 368(a) of the
Code
,
including
providing
reasonable and customary representations, covenants and certificates requested by legal counsel. Within forty-five (45) days following
the
Effective Time
, the Surviving Corporation shall comply with the reporting requirements
of Section 1.6045B-1(a)(2) of the Treasury Regulations. Each
Party
shall report the Merger
as a reorganization within the meaning of Section 368(a) of the
Code
on its United States
federal income
Tax Return
, unless otherwise required pursuant to a “
determination
”
within the meaning of Section 1313(a) of the
Code
.
1.9
Bank
Merger
. Following the Merger, Talmer Bank shall merge with and into Chemical Bank (the “
Bank Merger
”).
Chemical Bank shall be the surviving entity in the Bank Merger
and shall continue its corporate existence. Following the Bank Merger, the separate corporate existence of Talmer Bank shall cease.
The Bank Merger shall be effected pursuant to a subsidiary plan of merger in a form to be mutually agreed upon by the Parties
(the “
Subsidiary Plan of Merger
”). In order to obtain the Regulatory Approvals for the Bank Merger,
the Parties shall cause the following to be accomplished prior to the filing of applications for such Regulatory Approvals: (a)
Chemical shall cause Chemical Bank to approve the Subsidiary Plan of Merger; (b) Chemical, as the sole shareholder of Chemical
Bank, shall approve the Subsidiary Plan of Merger; (c) Chemical shall cause Chemical Bank to duly execute and deliver the Subsidiary
Plan of Merger to Talmer; (d) Talmer shall cause Talmer Bank to approve the Subsidiary Plan of Merger; (e) Talmer, as the sole
shareholder of Talmer Bank, shall approve the Subsidiary Plan of Merger; and (f) Talmer shall cause Talmer Bank to duly execute
and deliver the Subsidiary Plan of Merger to Chemical.
1.10
Directors and Officers
. At the Effective Time, (a) the directors of the Surviving Corporation
shall be as set forth in
Section 6.11(a)
until such time as their successors are duly elected and qualified; and (b) the
officers of the Surviving Corporation shall be as set forth in
Section 6.11(c)
.
1.11
Name
.
At the Effective Time, the name of the Surviving Corporation shall be “Chemical Financial Corporation.”
1.12
Additional
Actions
. At any time after the Effective Time, the Surviving Corporation may determine that deeds, 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 Chemical and Talmer 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 Agreement. Chemical and Talmer grant 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
irrevocable power of attorney shall only be operative following the Effective Time and at such time the officers and directors
of the Surviving Corporation shall be fully authorized in the name of Chemical and Talmer to take any and all such actions contemplated
by this Agreement.
1.13
Right
to Revise Structure
. At Chemical’s election, the Merger may be alternatively structured so that (a) Talmer is merged
with and into any direct or indirect wholly-owned subsidiary of Chemical or (b) any direct or indirect wholly-owned subsidiary
of Chemical is merged with and into Talmer;
provided, however
, that no such change shall (i) alter or change the amount
or kind of the Merger Consideration or the treatment of the holders of Talmer Common Stock; (ii) prevent the Parties from obtaining
the opinions of legal counsel referred to in
Section 7.2(e)
and
Section 7.3(e)
or otherwise cause the Merger to
fail to qualify for the Intended Tax Treatment; or (iii) materially impede or delay consummation of the transactions contemplated
by this Agreement. In the event of such an election, the Parties agree to execute an appropriate amendment to this Agreement (to
the extent such amendment only changes the method of effecting the business combination and does not substantively affect this
Agreement or the rights and obligations of the Parties or their respective shareholders) in order to reflect such election.
Article
II
DELIVERY OF
MERGER CONSIDERATION
2.1
Chemical
to Make Shares Available
.
At
or prior to the
Effective Time, Chemical shall deposit, or shall cause
to be deposited, with Computershare Investor Services, LLC or such other bank or trust company designated by Chemical and reasonably
acceptable to Talmer (the “
Exchange Agent
”), for the benefit of the holders of certificates representing
shares of Talmer Common Stock immediately prior to the Effective Time (“
Talmer Certificates
,” it being
understood that any reference herein to “Talmer Certificate” shall be deemed to include reference to book-entry account
statements relating to the ownership of shares of Talmer Common Stock, and it being further understood that provisions herein
relating to Talmer Certificates shall be interpreted in a manner that appropriately accounts for book-entry shares, including
that, in lieu of delivery of a Talmer Certificate and a letter of transmittal as specified herein, shares held in book-entry form
may be transferred by means of an “agent’s message” to the Exchange Agent or such other evidence of transfer
as the Exchange Agent may reasonably request), for exchange in accordance with this
Article II
, (a) evidence of shares
in book-entry form representing shares of Chemical Common Stock (collectively, “
Chemical Certificates
”)
to be issued pursuant to this Agreement and exchanged pursuant to
Section 2.2(a)
in exchange for outstanding shares of
Talmer Common Stock, and (b) cash in an amount sufficient to pay (i) the Cash Consideration and (ii) cash in lieu of issuing
any fractional shares (such cash and Chemical Certificates described in the foregoing clauses (a) and (b), together with any dividends
or distributions with respect thereto, being hereinafter referred to as the “
Exchange Fund
”)
.
2.2
Exchange
of Shares
.
(a) As
promptly as practicable after the Effective Time, but in no event later than ten (10) days thereafter, Chemical shall cause the
Exchange Agent to mail to each holder of record of one or more Talmer Certificates representing shares of Talmer Common Stock
immediately prior to the Effective Time that have been converted at the Effective Time into the right to receive the Merger Consideration
pursuant to
Article I
, a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and
title to the Talmer Certificates shall pass, only upon proper delivery of the Talmer Certificates to the Exchange Agent) and instructions
for use in effecting the surrender of the Talmer Certificates in exchange for certificates representing the number of whole shares
of Chemical Common Stock, any cash in lieu of fractional shares, and the Cash Consideration that the shares of Talmer Common Stock
represented by such Talmer Certificate or Talmer Certificates shall have been converted into the right to receive pursuant to
this Agreement, as well as any dividends or distributions to be paid pursuant to
Section 2.2(b)
. From and after the Effective
Time, upon proper surrender of a Talmer Certificate or Talmer Certificates for exchange and cancellation to the Exchange Agent,
together with such properly completed letter of
transmittal, duly executed, the holder of such Talmer Certificate or Talmer Certificates
shall be entitled to receive in exchange therefor, as applicable, (i) book-entry shares representing that number of whole shares
of Chemical Common Stock to which such holder of Talmer Common Stock shall have become entitled pursuant to the provisions of
Article I
and (ii) a check representing the amount of (A) the Cash Consideration which such holder has the right to receive
in respect of the Talmer Certificate or Talmer Certificates
surrendered pursuant to the provisions of this
Article II
, (B) any cash in lieu of fractional shares which such holder
has the right to receive in respect of the Talmer Certificate or Talmer Certificates surrendered pursuant to the provisions of
this
Article II
, and (C) any dividends or distributions which the holder thereof has the right to receive pursuant to this
Section 2.2
, and the Talmer Certificate or Talmer Certificates so surrendered shall forthwith be cancelled. Until surrendered
as contemplated by this
Section 2.2
, each Talmer Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive, upon surrender, the Merger Consideration, any cash in lieu of fractional shares payable pursuant to
Section 2.2(e)
, and any cash in respect of dividends or distributions as contemplated by this
Section 2.2
.
(b) No
dividends or other distributions declared with respect to Chemical Common Stock shall be paid to the holder of any unsurrendered
Talmer Certificate until the holder thereof has surrendered such Talmer Certificate in accordance with this
Article II
.
After the surrender of a Talmer Certificate in accordance with this
Article II
, the record holder thereof shall be entitled
to receive any such dividends or other distributions, without any interest thereon, with respect to the whole shares of Chemical
Common Stock that the shares of Talmer Common Stock represented by such Talmer Certificate have been converted into (i) with a
record date and a payment date on or after the Effective Time and on or prior to the date of such surrender, and (ii) at the appropriate
payment date, with a record date on or after the Effective Time but prior to the date of such surrender and a payment date subsequent
to the date of such surrender.
(c) If
any Chemical Certificate representing shares of Chemical Common Stock is to be issued in a name other than that in which the Talmer
Certificate or Talmer Certificates surrendered in exchange therefor is or are registered, it shall be a condition to the issuance
thereof that the Talmer Certificate or Talmer Certificates so surrendered shall be properly endorsed (or accompanied by an appropriate
instrument of transfer) and otherwise in proper form for transfer, and that the Person requesting such exchange shall pay to the
Exchange Agent in advance any transfer or other similar taxes required by reason of the issuance of a Chemical Certificate representing
shares of Chemical Common Stock in any name other than that of the registered holder of the Talmer Certificate or Talmer Certificates
surrendered, or required for any other reason, or shall establish to the satisfaction of the Exchange Agent that such tax has
been paid or is not payable.
(d) After
the Effective Time, there shall be no transfers on the stock transfer books of Talmer of the shares of Talmer Common Stock that
were issued and outstanding immediately prior to the Effective Time. If, after the Effective Time, Talmer Certificates representing
such shares are presented for transfer to the Exchange Agent, they shall be cancelled and exchanged for the Merger Consideration,
cash in lieu of fractional shares, and dividends or distributions that the holder presenting such Talmer Certificates is entitled
to, as provided in this
Article II
.
(e) Notwithstanding
anything to the contrary contained herein, no Chemical Certificates or scrip representing fractional shares of Chemical Common
Stock shall be issued upon the surrender for exchange of Talmer Certificates, no dividend or distribution with respect to Chemical
Common Stock shall be payable on or with respect to any fractional share, and such fractional share interests shall not entitle
the owner thereof to vote or to any other rights of a shareholder
of Chemical. In lieu of the issuance of any such fractional share, Chemical shall pay to each former shareholder of Talmer who
otherwise would be entitled to receive such fractional share an amount in cash (rounded up to the nearest cent), without any interest
thereon, equal to the product of (i) the Chemical Closing Price
multiplied by
(ii) the fraction of a share (rounded to
the nearest thousandth when expressed in decimal form) of Chemical Common Stock which such holder would otherwise be entitled
to receive pursuant to
Section 1.4
.
(f) Any
former holders of Talmer Common Stock who have not exchanged their Talmer Certificates pursuant to this
Article II
shall
look only to the Exchange Agent for payment of the Merger Consideration, cash in lieu of fractional shares, and any unpaid dividends
and distributions on the Chemical Common Stock deliverable in respect of each former share of Talmer Common Stock such shareholder
holds as determined pursuant to this Agreement, in each case, without any interest thereon. Notwithstanding the foregoing,
none
of Chemical, Talmer, the Surviving Corporation, the Exchange Agent or any other Person shall be liable to any former holder of
Talmer Common Stock for any amount delivered in good faith to a public official pursuant to applicable abandoned property, escheat,
or similar laws.
(g) Chemical
shall be entitled to deduct and withhold, or cause the Exchange Agent to deduct and withhold, from the Merger Consideration, any
cash in lieu of fractional shares of Chemical Common Stock, cash dividends or distributions payable pursuant to this
Section
2.2
, or any other cash amounts otherwise payable pursuant to this Agreement to any holder of Talmer Common Stock such amounts
as it is required to deduct and withhold with respect to the making of such payment under the Code or any provision of state,
local or foreign Tax Law. To the extent that amounts are so withheld by Chemical or the Exchange Agent, as the case may be, and
paid over to the appropriate governmental authority, the withheld amounts shall be treated for all purposes of this Agreement
as having been paid to the holder of Talmer Common Stock in respect of which the deduction and withholding was made by Chemical
or the Exchange Agent, as the case may be.
(h) In
the event any Talmer Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the
Person claiming such Talmer Certificate to be lost, stolen or destroyed and the posting by such Person of a bond in such amount
as the Exchange Agent would charge other similarly situated holders of Chemical Common Stock as indemnity against any claim that
may be made against it with respect to such Talmer Certificate, the Exchange Agent will issue in exchange for such lost, stolen
or destroyed Talmer Certificate the Merger Consideration, any cash in lieu of fractional shares deliverable in respect thereof,
and any dividends or distributions that the holder presenting such Talmer Certificates is entitled to, each as provided pursuant
to this Agreement.
Article
III
REPRESENTATIONS AND WARRANTIES OF
TALMER
Except
as disclosed in the Talmer SEC Reports filed with or furnished to the SEC prior to the date of this Agreement (excluding any risk
factor disclosures set forth under the heading “Risk Factors,” any disclosure of risks included in any “forward-looking
statements” disclaimer or any other forward-looking statement of risk that does not contain a reasonable level of detail
about the risks of which the statement warns) or as disclosed in the disclosure schedules delivered
by Talmer to Chemical prior to or concurrently with the execution of this Agreement (the “
Talmer Disclosure Schedules
”),
it being understood and agreed that the disclosure of any item in the Talmer SEC Reports shall be deemed a disclosure only to
the extent the relevance of such disclosure to the sections or subsections of this
Article III
is reasonably apparent on
the face of such disclosure, Talmer represents and warrants to Chemical that:
3.1
Authorization,
No Conflicts, Etc
.
(a) Talmer
has the requisite corporate power and authority to execute and deliver this Agreement, and, subject to receipt of the Talmer Shareholder
Approval, to consummate the transactions contemplated by this Agreement. This Agreement has been duly adopted, and the consummation
of the Merger and the other transactions contemplated by this Agreement have been duly authorized, by the Talmer Board. The Talmer
Board has (i) determined that the terms of this Agreement are fair to and in the best interests of Talmer and the Talmer Shareholders,
and (ii) adopted this Agreement and authorized the transactions contemplated by this Agreement and resolved to make the Talmer
Board Recommendation. Except for the Talmer Shareholder Approval, no other corporate proceedings on the part of Talmer are necessary
to authorize this Agreement or to consummate the Merger (other than the submission to the Talmer Shareholders of an advisory (non-binding)
vote on the compensation that may be paid or become payable to Talmer’s named executive officers that is based on or otherwise
related to the transactions contemplated by this Agreement). This Agreement has been duly executed and delivered by, and (assuming
due authorization, execution and delivery by Chemical) constitutes valid and binding obligations of, Talmer and is enforceable
against Talmer in accordance with its terms, except to the extent that (A) such enforcement may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws, now or hereafter in effect, relating to creditors’ rights
generally and (B) equitable remedies of specific performance and injunctive and other forms of equitable relief may be subject
to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.
(b) The
execution, delivery, and performance of this Agreement by Talmer and the consummation of the Merger, do not and will not violate,
conflict with, or result in a breach of: (i) any provision of the articles of incorporation or bylaws (or similar organizational
documents) of Talmer or any Subsidiary of Talmer (each a “
Talmer Subsidiary
” and collectively, the “
Talmer
Subsidiaries
”); or (ii) any Law or Order applicable to Talmer or any Talmer Subsidiary, assuming the timely receipt
of each of the approvals referred to in
Section 3.1(d)
.
(c) The
execution, delivery, and performance of this Agreement by Talmer and the consummation of the Merger do not and will not 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 cease and desist order, written agreement, memorandum of understanding, board resolutions
or other Regulatory Agreement or commitment with or from a Governmental Entity to which Talmer or any Talmer Subsidiary is a party
or subject, or by which Talmer or any Talmer Subsidiary is bound or affected.
(d) No
notice to, filing with, authorization of, exemption by, or consent or approval of, any Governmental Entity is necessary for the
consummation of the transactions contemplated by this Agreement by Talmer other than in connection or compliance with the provisions
of the MBCA, compliance with federal and state securities laws, and the consents, authorizations, approvals, or exemptions required
under the BHC Act and the Michigan Banking Code. Talmer has no Knowledge of any reason why the Regulatory Approvals referred to
in this
Section 3.1(d)
cannot be obtained or why the regulatory approval process would be materially impeded.
3.2
Organization
and Good Standing
. Talmer is a corporation duly organized, validly existing, and in good standing under the laws of the State
of Michigan. Talmer has all requisite corporate power and authority to own, operate, and lease its properties and assets and to
carry on its business as it is now being conducted in all material respects. Talmer is a bank holding company duly registered
as such with the Federal Reserve Board under the BHC Act. Talmer is not, and is not required to be, qualified or admitted to conduct
business as a foreign corporation in any other state, except where such failure to be so qualified has not had, and would not
reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Talmer.
3.3
Subsidiaries
.
(a) Talmer
has provided to Chemical a true and complete list of each Talmer Subsidiary as of the date of this Agreement. Other than the Talmer
Subsidiaries, Talmer does not have “control” (as defined in Section 2(a)(2) of the BHC Act, using five percent (5%)
rather than twenty-five percent (25%)), either directly or indirectly, of any Person engaged in an active trade or business or
that holds any significant assets. Talmer or a Talmer Subsidiary owns all of the issued and outstanding capital stock or other
equity interests of each of the Talmer Subsidiaries, free and clear of any claim or Lien of any kind. There is no legally binding
and enforceable subscription, option, warrant, right to acquire, or any other similar agreement pertaining to the capital stock
or other equity interests of any Talmer Subsidiary.
(b) Each
of the Talmer Subsidiaries (i) is duly organized and validly existing under the laws of its jurisdiction of organization; (ii)
is duly qualified to do business and in good standing in all jurisdictions (whether federal, state, or local) where its ownership
or leasing of property or the conduct of its business requires it to be so qualified; and (iii) has all requisite corporate power
and authority to own or lease its properties and assets and to carry on its business as now conducted, except in each of (ii)
and (iii) as has not had, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect
on Talmer.
(c) The
deposits of Talmer Bank are insured by the FDIC to the fullest extent permitted by Law, and all premiums and assessments to be
paid in connection therewith have been paid when due. No proceeding for the revocation or termination of such deposit insurance
is pending or, to the Knowledge of Talmer, threatened. Talmer and each Talmer Subsidiary has paid as and when due all material
fees, charges, assessments, and the like as required by Law to each and every Governmental Entity having jurisdiction over Talmer
or each Talmer Subsidiary.
3.4
Capital
Stock
.
(a) The
authorized capital stock of Talmer consists of 198,000,000 shares of Talmer Common Stock, of which, as of the close of business
on January 21, 2016 (the “
Capitalization Date
”), 66,129,873 shares were issued and outstanding, 2,000,000
shares of Class B Non-Voting Common Stock, $1.00 par value per share (the “
Talmer Class B Common Stock
”),
of which, as of the Capitalization Date, no shares were issued and outstanding, and 20,000,000 shares of Preferred Stock, $1.00
par value per share (the “
Talmer Preferred Stock
”), of which, as of the Capitalization Date, no shares
were issued and outstanding. Except for the Talmer Share-Based Awards, as of the date of this Agreement, there is no security
or class of securities outstanding that represents, is convertible into, or is exercisable for capital stock of Talmer.
(b)
Section
3.4(b)
of the Talmer Disclosure Schedules sets forth, as of the date of this Agreement, the number of shares of Talmer Common
Stock that are authorized and reserved for issuance under each Talmer Stock Plan, and the number of shares of Talmer Common Stock
that are subject to outstanding Talmer Stock Options and Talmer Stock Awards (collectively, “
Talmer Share-Based Awards
”)
issued under a Talmer Stock Plan. All Talmer Share-Based Awards have been awarded under a Talmer Stock Plan, and, as of the date
of this Agreement, there are no other compensatory awards outstanding pursuant to which Talmer Common Stock has been issued or
is issuable, or that relate to or are determined by reference to the value of Talmer Common Stock. All outstanding shares of Talmer
Common Stock, and all Talmer Common Stock reserved for issuance under the Talmer Stock Plans when issued in accordance with the
respective terms of the Talmer Stock Plans, are or will be duly authorized, validly issued, fully paid and non-assessable and
not issued in violation of any preemptive rights, purchase option, call or right of first refusal rights.
(c) After
the date of this Agreement, the number of issued and outstanding shares of Talmer Common Stock, Talmer Class B Common Stock, and
Talmer Preferred Stock is not subject to change before the Effective Time, other than the issuance of shares of Talmer Common
Stock upon the exercise of any Talmer Stock Options granted pursuant to a Talmer Stock Plan prior to the date of this Agreement.
(d) Other
than the issued and outstanding shares of Talmer Common Stock described in
Section 3.4(a)
, neither Talmer nor any Talmer
Subsidiary has outstanding any security or issue of securities the holder or holders of which have the right to vote on the approval
of the Merger or this Agreement, or that entitle the holder or holders to consent to, or withhold consent on, the Merger or this
Agreement.
(e) No
Talmer Shareholder will be entitled to appraisal rights pursuant to the MBCA as a result of the consummation of the Merger.
3.5
Financial
Statements
.
(a) The
consolidated financial statements of Talmer as of and for each of the three (3) years ended December 31, 2014, 2013, and 2012,
as reported on by Talmer’s independent accountants, and the unaudited consolidated financial statements of Talmer as of and for
each quarter in 2015 ended before the date of this Agreement, including all schedules and notes relating to such statements, as
previously delivered to Chemical (collectively, “
Talmer Financial Statements
”), fairly present, and
the unaudited consolidated financial statements of Talmer as of and for each quarter ending after the date of this Agreement until
the Effective Time, including all schedules and notes relating to such statements, will fairly present the financial condition
and the results of operations, changes in shareholders’ equity, and cash flows of Talmer as of the respective dates of and
for the periods referred to in such financial statements, all in accordance with GAAP, consistently applied, subject, in the case
of unaudited interim financial statements, to normal, recurring year-end adjustments (the effect of which has not had, and would
not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Talmer) and the absence of
notes (that, if presented, would not differ materially from those included in Talmer Financial Statements). No financial statements
of any entity or enterprise other than the Talmer Subsidiaries are required by GAAP to be included in the consolidated financial
statements of Talmer.
(b) The
following reports (including all related schedules, notes, and exhibits) were prepared and filed in conformity with applicable
regulatory requirements and were correct and complete in all material respects when filed:
(i) The
Consolidated Reports of Condition and Income (Form FFIEC 041) of each Talmer Subsidiary required to file such reports (including
any amendments) as of and for each of the fiscal years ended December 31, 2014, 2013, and 2012, and as of and for each of the
first, second and third quarter of 2015 as filed with the FDIC; and
(ii) The
Consolidated Financial Statements for Bank Holding Companies (Form FR Y-9C) and Parent Company Only Financial Statements for Large
Bank Holding Companies (Form FR Y-9LP) (including any amendments) for Talmer as of and for each of the fiscal years ended December
31, 2014, 2013, and 2012, and as of and for each quarter ended in 2015 before the date of this Agreement as filed with the Federal
Reserve Board. All of such reports required to be filed prior to the Effective Time by Talmer or any Talmer Subsidiary will be
prepared and filed in conformity with applicable regulatory requirements 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
Section 3.5(b)
are collectively referred to as the “
Talmer Call Reports
.”
3.6
Absence
of Certain Changes or Events
. Since September 30, 2015, (a) Talmer and the Talmer Subsidiaries have conducted their respective
businesses in the ordinary course consistent with past practice and (b) no event has occurred that has had, or would reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect on Talmer.
3.7
Legal
Proceedings
. There is no Action pending or, to the Knowledge of Talmer, threatened against Talmer or any of the Talmer Subsidiaries
that (a) as of the date of this Agreement, challenges or seeks to enjoin, alter, prevent or materially delay the Merger or (b)
has had, or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Talmer. There
is no material unsatisfied judgment, penalty or award against Talmer or any of the Talmer Subsidiaries. Neither Talmer nor any
of the Talmer Subsidiaries, nor any
of their respective properties or assets, is subject to any Order or any investigation by a Governmental Entity that has had,
or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Talmer. No officer or
director of Talmer or any of the Talmer Subsidiaries is a defendant in any Action commenced by any shareholder of Talmer or any
of the Talmer Subsidiaries with respect to the performance of his or her duties as an officer or a director of Talmer or any of
the Talmer Subsidiaries under any applicable Law, except for any Action arising out of or relating to the Merger and the transactions
contemplated by this Agreement.
3.8
Regulatory
Filings
. In the last three (3) years:
(a) Talmer
and each Talmer Subsidiary has filed in a timely manner all filings with Governmental Entities as required by applicable Law;
and
(b) All
such filings, as of their respective filing dates, complied in all material respects with all Laws, forms, and guidelines applicable
to such filings.
3.9
No
Indemnification Claims
. To the Knowledge of Talmer, there has been no event, action, or omission by or with respect to any
director, officer, employee, trustee, agent, or other Person who may be entitled to receive indemnification or reimbursement of
any claim, loss, or expense under any Contract or arrangement providing for indemnification or reimbursement of any such Person
by Talmer or any Talmer Subsidiary.
3.10
Conduct
of Business
. Talmer and each Talmer Subsidiary has conducted its business and used its properties in compliance with all applicable
Laws, 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,
fair lending, civil rights, employee protection, fair employment practices, fair labor standards, real estate settlement and procedures,
insurance, privacy, and Environmental Laws; except for violations that have not had, and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Talmer.
3.11
Transaction
Documents
. None of the information supplied or to be supplied by Talmer for inclusion or incorporation by reference in any
Transaction Document will contain any untrue statement of material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading,
(a) in the case of any Transaction Document (other than the Form S-4 and the Joint Proxy Statement), at the time it is filed or
at any time it is amended or supplemented, (b) in the case of the Form S-4, at the time it is filed with the SEC, at any time
it is amended or supplemented and at the time it becomes effective under the Securities Act, and (c) in the case of the Joint
Proxy Statement, at the date it is first mailed to the Chemical Shareholders and the Talmer Shareholders and at the time of the
Chemical Shareholder Meeting and the Talmer Shareholder Meeting. The Joint Proxy Statement (other than those portions relating
solely to the Chemical Shareholder Meeting) will, at the time the Joint Proxy Statement is filed with the SEC, at any time it
is amended or supplemented, at the date it is first mailed to the Chemical Shareholders and the Talmer Shareholders and at the
time of the Chemical Shareholder Meeting and the
Talmer Shareholder Meeting, comply as to form in all material respects with the requirements of the Exchange Act and the rules
and regulations thereunder, except that no representation is made by Talmer with respect to statements made or incorporated by
reference therein based on information supplied by or on behalf of Chemical for inclusion or incorporation by reference in the
Joint Proxy Statement.
3.12
Agreements
With Bank Regulators
. Neither Talmer nor any Talmer Subsidiary is a party to any Contract, cease and desist order, written
agreement or memorandum of understanding with, or a party to any commitment letter, board resolution or similar undertaking to,
or is subject to any Order by, or is a recipient of any extraordinary supervisory letter from, any Governmental Entity that restricts
materially the conduct of Talmer’s or a Talmer Subsidiary’s business, or in any manner relates to the capital adequacy,
credit or reserve policies or management of Talmer or any Talmer Subsidiary (a “
Regulatory Agreement
”),
nor has Talmer nor any Talmer Subsidiary been advised by any Governmental Entity that a Governmental Entity is contemplating issuing
or requesting (or is considering the appropriateness of issuing or requesting) an Order or a Regulatory Agreement. Neither Talmer
nor any Talmer Subsidiary is required by Section 32 of the Federal Deposit Insurance Act or FDIC Regulation Part 359 or the Federal
Reserve Board to give prior notice to a federal banking agency of the proposed addition of an individual to its board of directors
or the employment of an individual as a senior executive officer or to limit golden parachute payments or indemnification.
3.13
Tax
Matters
.
(a) All
material Tax Returns required by applicable Law to have been filed by Talmer and each Talmer Subsidiary since January 1, 2010
have been filed when due (taking into account any extensions), and each such Tax Return is complete and accurate and correctly
reflects the liability for Taxes in all material respects. Since January 1, 2010, Talmer and each Talmer Subsidiary has withheld
and paid all material Taxes required to have been withheld and paid in connection with amounts paid or owing to any third party.
Since January 1, 2010, all material Taxes that are due and payable by Talmer and each Talmer Subsidiary have been paid.
(b) There
is no audit or other proceeding pending against or with respect to Talmer or any Talmer Subsidiary with respect to any material
amount of Tax. There are no material Liens on any of the assets of Talmer or any of the Talmer Subsidiaries that arose in connection
with any failure (or alleged failure) to pay any Tax, other than Liens for Taxes not yet due and payable.
(c) Neither
Talmer nor any Talmer Subsidiary has waived any statute of limitations in respect of Taxes or agreed to any extension of time
with respect to any Taxes, which waiver or extension is still open.
(d) Except
as required by Law, neither Talmer nor any Talmer Subsidiary is a party to any Tax allocation or sharing agreement.
(e) Neither
Talmer nor any Talmer Subsidiary has been included in any “consolidated,” “unitary” or “combined”
Tax Return for any taxable period for which the statute of limitations
has not expired (other than a group of which Talmer and one or more Talmer Subsidiaries are the only members). Neither Talmer
nor any Talmer Subsidiary is a general partner in any partnership that is material to its business operations.
(f) Within
the past three (3) years, neither Talmer nor any Talmer Subsidiary has been a “distributing corporation” or a “controlled
corporation” in a distribution intended to qualify for tax-free treatment under Section 355 of the Code.
(g) Neither
Talmer nor any Talmer Subsidiary has participated in or been a party to a transaction that, as of the date of this Agreement,
constitutes a “listed transaction” for purposes of Section 6011 of the Code (or a similar provision of state Law).
(h) Neither
Talmer nor any Talmer Subsidiary has taken any action or has Knowledge of any fact that would reasonably be expected to prevent
the Merger from qualifying for the Intended Tax Treatment.
(i) There
has been no disallowance of a deduction under Section 162(m) or 280G of the Code for any amount paid or payable by Talmer or any
Talmer Subsidiary as employee compensation, whether under any Contract, plan, program or arrangement, understanding or otherwise.
3.14
Properties
.
(a) Except
with such exceptions that have not had, and would not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Talmer, Talmer and each Talmer Subsidiary has good and valid title to, or valid leasehold interests in, all
of their respective personal and real properties and assets as used in their respective businesses as presently conducted, and
all such personal and real properties and assets, other than personal and real properties and assets in which Talmer or any of
the Talmer Subsidiaries has leasehold interests, are free and clear of all Liens, except for Permitted Liens. Talmer and each
Talmer Subsidiary has complied in all material respects with the terms of all leases to which it is a party. All material leases
to which Talmer or any Talmer Subsidiary is a party and under which it is in possession of any personal or real property are valid
and binding contracts and are in full force and effect, and neither Talmer nor any Talmer Subsidiary has received any written
notice alleging violation, breach, or default of such lease. Talmer and each Talmer Subsidiary is in possession of the properties
or assets purported to be leased under all its material leases (except where Talmer or a Talmer Subsidiary is the lessor). The
tangible personal and real property and assets of Talmer and all Talmer Subsidiaries are in good operating condition and repair,
reasonable wear and tear excepted, and, subject to maintenance and repair in the ordinary course of business consistent with past
practice, are adequate for the uses to which they are being put.
(b) With
respect to real property owned by Talmer or any Talmer Subsidiary, none of Talmer nor any Talmer Subsidiary (i) has received written
notice of any pending, and to the Knowledge of Talmer there is no threatened, condemnation proceeding against any of such real
property or (ii) has received written notice from any Governmental Entity that such real property is not in compliance with any
applicable Law, except as have not had, and would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect on Talmer.
(c) With
respect to real property leased, subleased or licensed by Talmer or any Talmer Subsidiary, none of Talmer nor any Talmer Subsidiary
(i) has received any written notice alleging a violation, breach or default under any lease of such real property, except for
matters being contested in good faith for which adequate accruals or reserves have been established on the books and records of
Talmer or (ii) (A) has received written notice of any pending, and to the Knowledge of Talmer there is no threatened, condemnation
proceeding with respect to any of such real property or (B) has received written notice from any Governmental Entity that such
real property is not in compliance with any applicable Law, except as have not had, and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Talmer.
(d) No
lease or license pursuant to which Talmer or any Talmer Subsidiary, as lessor, lessee, licensor or licensee, has possession of,
or leases or licenses to others, any real or personal property, excluding any personal property lease with payments of less than
$500,000 per year, contains any provision, including any prohibition against assignment by Talmer or any Talmer Subsidiary, by
operation of Law or otherwise, that would require any third party consent or approval for, or that would materially interfere
with, the possession, use or rights with respect to the property by the Surviving Corporation or its Subsidiaries for the same
purposes and upon the same rental and other terms following consummation of the Merger.
3.15
Intellectual
Property
. Talmer and the Talmer Subsidiaries exclusively own, or have a valid license or other valid right to use, all material
Intellectual Property as used in their business as presently conducted; it being understood that the foregoing shall not be construed
to expand or diminish the scope of the non-infringement representations and warranties that follow in this
Section 3.15
.
No Actions, suits or other proceedings are pending or, to the Knowledge of Talmer, threatened that Talmer or any of the Talmer
Subsidiaries is infringing, misappropriating or otherwise violating the rights of any Person with regard to any Intellectual Property.
To the Knowledge of Talmer, no Person is materially infringing, misappropriating or otherwise violating the rights of Talmer or
any of the Talmer Subsidiaries with respect to any material Intellectual Property owned or purported to be owned by Talmer or
any of the Talmer Subsidiaries (collectively the “
Talmer-Owned Intellectual Property
”). Except as have
not had, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Talmer,
to the Knowledge of Talmer: (a) no circumstances exist which could reasonably be expected to give rise to any (i) Action that
challenges the rights of Talmer or any of the Talmer Subsidiaries with respect to the validity or enforceability of the Talmer-Owned
Intellectual Property or (ii) claim of infringement, misappropriation, or violation of the Intellectual Property rights of any
Person, and (b) the consummation of the transactions contemplated by this Agreement will not give rise to any claim by any Person
to a right to own, purchase, transfer, use, alter, impair, extinguish or restrict any Talmer-Owned Intellectual Property or Intellectual
Property licensed to Talmer or any Talmer Subsidiary.
3.16
Required
Licenses, Permits, Etc
. Talmer and each Talmer Subsidiary hold all material Permits and other rights from all appropriate
Governmental Entities necessary for the conduct of its business as presently conducted. All such material Permits and rights are
in full force
and effect. Each Talmer Subsidiary, as applicable, is an approved seller-servicer for each mortgage investor with whom it conducts
business, and holds all material Permits, authorizations, and approvals necessary to carry on a mortgage banking business.
3.17
Material
Contracts and Change of Control
.
(a) For
the purposes of this Agreement, the term “
Talmer Material Contract
” means any of the following Contracts
to which Talmer or any of the Talmer Subsidiaries is a party or bound as of the date of this Agreement:
(i) Each
Contract that (A) has been or (B) would be required to be, but has not been, filed by Talmer as a material contract pursuant to
Item 601(b)(10) of Regulation S-K on Form 10-K under the Exchange Act as if such Form 10-K were filed as of the date of this Agreement;
(ii) Each
Contract, other than any Contracts contemplated by this Agreement, that limits (or purports to limit) in any material respect
the ability of Talmer or any of the Talmer Subsidiaries to engage or compete in any business (including geographic restrictions
and exclusive or preferential arrangements);
(iii) Each
Contract that creates a material partnership or joint venture to which Talmer or any of the Talmer Subsidiaries is a party;
(iv) Each
Contract between or among Talmer and any Talmer Subsidiary;
(v) Each
Contract with a correspondent banker;
(vi) Each
Contract relating to the borrowing of money by Talmer or any Talmer Subsidiary or guarantee by Talmer or any Talmer Subsidiary
of such obligation (other than Contracts evidencing deposit liabilities, purchases of federal funds, fully-secured repurchase
agreements, FHLB advances of depository institution Talmer Subsidiaries, trade payables and Contracts relating to borrowings or
guarantees made in the ordinary course of business consistent with past practice) in excess of $2,000,000;
(vii) Each
Contract that relates to the acquisition or disposition of any material business (whether by merger, sale of stock, sale of assets
or otherwise) or material asset, other than this
Agreement, pursuant to which Talmer or any of the Talmer Subsidiaries has any
material continuing obligations, contingent or otherwise;
(viii) Each
Contract that grants any right of first refusal or right of first offer or similar right or that limits or purports to limit the
ability of Talmer or any of the Talmer Subsidiaries to own, operate, sell, transfer, pledge or otherwise dispose of any material
amount of assets or businesses;
(ix) Each
voting agreement or registration rights agreement with respect to the capital stock of Talmer or any of the Talmer Subsidiaries;
(x) Each
Contract granting Talmer or any Talmer Subsidiary the right to use, restricting Talmer’s or any Talmer Subsidiary’s
right to use, or granting any other Person the right to use Intellectual Property that is material to the conduct of Talmer’s
or any Talmer Subsidiary’s business (including any license, franchise agreement, co-existence agreement, concurrent-use
agreement, settlement agreement or other similar type Contract);
(xi) Each
Contract that limits the payment of dividends by Talmer or any Talmer Subsidiary;
(xii) Each
Contract involving a standstill or similar obligation of Talmer or any of the Talmer Subsidiaries relating to the purchase of
securities of Talmer or any other Person;
(xiii) Except
transactions made in accordance with Regulation O and agreements entered into in the ordinary course of business consistent with
past practice for compensation or indemnity, any Contract between Talmer or any Talmer Subsidiary, on the one hand, and, on the
other hand (A) any officer or director of Talmer or a Talmer Subsidiary, or (B) to the Knowledge of Talmer, any (1) record or
beneficial owner of five percent (5%) or more of the voting securities of Talmer, (2) Affiliate or family member of any such officer,
director, or record or beneficial owner, or (3) other Affiliate of Talmer, except those Contracts of a type available to employees
of Talmer generally;
(xiv) Each
Contract for any one capital expenditure or a series of capital expenditures, the aggregate amount of which is in excess of $1,000,000;
(xv) Each
Contract or commitment to make a loan not yet fully disbursed or funded to any Person, wherein the undisbursed or unfunded amount
exceeds $10,000,000;
(xvi) Each
Contract or commitment for a loan participation agreement with any other Person in excess of $10,000,000;
(xvii) Each
employment Contract with an employee of Talmer or any Talmer Subsidiary or any other compensatory Contract or plan in which any
executive officer of Talmer or any Talmer Subsidiary participates (other than any compensatory Contract or plan which pursuant
to its terms is available to employees, officers or directors generally and which in operation provides for the same method of
allocation of benefits between management and non-management participants); and
(xviii) Each
Contract that is material to the financial condition, results of operations or business of Talmer or any Talmer Subsidiary.
(b) Prior
to the date of this Agreement, Talmer has provided or made available to Chemical a true and complete copy of each Talmer Material
Contract in effect as of the date of this Agreement. Except for matters that have not had, and would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on Talmer, (i) all Talmer Material Contracts are in full
force and effect as of the date of this Agreement, (ii) neither
Talmer nor any of the Talmer Subsidiaries is in violation or breach of or default under (or with notice or lapse of time, or both,
would be in violation or breach of or default under) the terms of any Talmer Material Contract, (iii) to the Knowledge of Talmer,
no other party to any Talmer Material Contract is in breach of
or in default under any Talmer Material Contract, and (iv) neither
Talmer nor any Talmer Subsidiary has received written notice of breach or termination (or proposed breach or termination) of any
Talmer Material Contract.
(c) There
is no Talmer Material Contract under which (i) a consent or approval is required, (ii) a prohibited assignment by operation of
Law could occur, (iii) a waiver or loss of any right could occur, or (iv) an acceleration of any obligation could occur, in each
case as a result of the execution and delivery of this Agreement or the consummation of the transactions contemplated herein,
where any such occurrence would reasonably be expected to (A) materially interfere with the ordinary course of business conducted
by Talmer, any Talmer Subsidiary or the Surviving Corporation or (B) have a Material Adverse Effect on Talmer.
(d) (i)
All data processing Contracts of Talmer or any of the Talmer Subsidiaries are cancelable by Talmer or a Talmer Subsidiary on or
immediately after the Effective Time without cost, penalty or further obligation, except for costs, penalties or further obligations
that, in the aggregate with respect to any Contract, do not exceed $1,000,000; and (ii) neither Talmer nor any Talmer Subsidiary
is party to any Contract that would require any payment to another party upon termination in excess of $1,000,000.
3.18
Labor
and Employment Matters
.
(a)
(i) Talmer and all of the Talmer Subsidiaries are in compliance with all applicable Laws relating to labor and employment practices,
including those relating to wages, employee benefits, hours and overtime, workplace safety and health, immigration, individual
and collective termination, non-discrimination and data privacy, workers’ compensation, the identification of particular
employees or job classifications as “exempt” or “non-exempt” for purposes of such obligations, and any
and all other matters involving compensation or benefits afforded to or not afforded to employees, contractors or consultants
except for such noncompliance as has not had, and would not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on Talmer; (ii) as of the date of this Agreement, there is no unfair labor practice charge or complaint
pending before the NLRB or, to the Knowledge of Talmer, threatened against Talmer or any of the Talmer Subsidiaries; (iii) as
of the date of this Agreement and during the past three (3) years, there has been no labor strike, slowdown, work stoppage or
lockout pending or, to the Knowledge of Talmer, threatened against or affecting Talmer or any of the Talmer Subsidiaries; (iv)
there is no representation claim or petition pending before the NLRB or any similar foreign agency relating to the employees of
Talmer or any Talmer Subsidiary; (v) as of the date of this Agreement, Talmer has not received written notice of charges with
respect to or relating to Talmer or any Talmer Subsidiary pending before the Equal Employment Opportunity Commission or other
Governmental Entity responsible for the prevention of unlawful employment practices, nor is there any claim pending before any
court or administrative agency regarding any unlawful employment practices relating to Talmer or any Talmer Subsidiary; and (vi)
neither Talmer nor any Talmer Subsidiary has received any written notice from any Governmental Entity responsible for the enforcement
of labor or employment
laws of an intention to conduct an investigation of Talmer or any Talmer Subsidiary and, to the Knowledge of Talmer, no such investigation
is in progress.
(b) Neither
Talmer nor any Talmer Subsidiary is party to, bound by, or negotiating any Collective Bargaining Agreement or any other Contract
with any labor organization, union, works council, employee representative or association.
(c) All
salaried employees, hourly employees, and temporary employees of Talmer and its Subsidiaries are employed on an at-will basis
by Talmer and/or its Subsidiaries and may be terminated at any time with or without cause and without any severance or other liabilities
to Talmer or any Talmer Subsidiary, or have signed an agreement or acknowledged in writing that their employment is at will. There
has been no written representation by Talmer or any Talmer Subsidiary made to any employee that commits Talmer, any Talmer Subsidiary,
or the Surviving Corporation to retain them as employees for any period of time subsequent to the Closing.
(d) Since
January 1, 2013, neither Talmer nor any Talmer Subsidiary has effectuated a “plant closing” or a “mass lay off”
(in each case, as defined in the WARN Act), in either case affecting any site of employment or facility of Talmer or any Talmer
Subsidiary, except in compliance with the WARN Act.
(e) There
is no audit, investigation, charge or proceeding with respect to a material violation of any occupational health and safety standards
that is pending or unremedied, or, to the Knowledge of Talmer, threatened against Talmer or any Talmer Subsidiary. Talmer and
all of the Talmer Subsidiaries are in compliance with all applicable occupational health and safety Laws, except for such failures
to comply as have not had, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse
Effect on Talmer.
(f) Neither
Talmer nor any Talmer Subsidiary is a party or subject to any Contract which restricts Talmer or any Talmer Subsidiary from relocating,
closing or terminating any of its operations or facilities or any portion of its operations or facilities.
(g) The
consummation of the transactions contemplated by this Agreement will not create Liabilities for any act by Talmer or any Talmer
Subsidiary on or prior to the Closing under any Collective Bargaining Agreement, Contract or Talmer Benefit Plan.
(h) Talmer
has implemented commercially reasonable procedures to ensure that all employees who are performing services for Talmer or any
Talmer Subsidiary in the United States are legally permitted to work in the United States and will be legally permitted to work
in the United States for the Surviving Corporation or any of its Subsidiaries following the consummation of the transactions contemplated
by this Agreement.
(i) The
policies, programs, and practices of Talmer and all Talmer Subsidiaries relating to equal opportunity and affirmative action,
wages, employee classifications (including independent contractor versus employee and exempt versus non-exempt), hours of work,
employee disabilities, employment termination, employment discrimination, employee safety, labor relations, and other terms and
conditions of employment are in compliance in all material
respects with applicable Law governing or relating to employment and employer practices and facilities.
3.19
Employee
Benefits
.
(a) Talmer
has delivered or made available to Chemical true and complete copies of all material Talmer Benefit Plans. Each Talmer Benefit
Plan is in compliance with all applicable requirements of ERISA, the Code and all other applicable Laws and has been administered
in accordance with its terms and such Laws, except for such noncompliance that has not had, and would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on Talmer.
(b) Each
Talmer Benefit Plan that is intended to be qualified within the meaning of Section 401 of the Code is so qualified and has at
all times since its adoption been so qualified, and, to the Knowledge of Talmer, no condition exists and no event has occurred
that could reasonably be expected to result in the loss or revocation of such qualification in any material respect.
(c) All
contributions, payments or premiums required to be made with respect to any Talmer Benefit Plan by Talmer on or before the date
of this Agreement have been timely made, and all benefits accrued under any unfunded Talmer Benefit Plan have been paid, accrued
or otherwise adequately reserved in accordance with GAAP, and each of Talmer and the Talmer Subsidiaries have performed all material
obligations required to be performed under all Talmer Benefit Plans with respect to which Talmer or any ERISA Affiliate of Talmer
has an obligation to contribute.
(d) Neither
Talmer nor any ERISA Affiliate of Talmer (or, to Talmer’s Knowledge, their respective predecessors) participates in nor
since December 31, 1973, has ever participated in any Multiemployer Plan, and neither Talmer nor any ERISA Affiliate of Talmer
(or, to Talmer’s Knowledge, their respective predecessors) maintains or contributes to, or is party to, and, at no time
maintained, contributed to, or was a party to, any plan, program, agreement or policy that (i) is a “defined benefit plan”
within the meaning of Section 414(j) of the Code or Section 3(35) of ERISA, (ii) is a “multiple employer plan” as
defined in ERISA or the Code (whether or not subject thereto), (iii) is described in Section 401(a)(1) of ERISA (whether or not
subject thereto), (iv) is a multiple employer welfare arrangement within the meaning of Section 3(40)(A) of ERISA, (v) is a voluntary
employees beneficiary association within the meaning of Code Section 501(c)(9), or (vi) is primarily for the benefit
of employees
who reside outside of the United States. No Liability under Title IV of ERISA has been or is expected to be incurred by Talmer
or any Talmer Subsidiary with respect to any applicable Talmer Benefit Plan. Except as may arise in connection with the transactions
contemplated by this Agreement, there has been no “reportable event,” within the meaning of ERISA Section 4043, for
which the 30-day reporting requirement has not been waived in relation to any applicable Talmer Benefit Plan. In relation to each
applicable Talmer Benefit Plan, (A) all contributions required to be made under one or both of Section 412 and 430 of the Code
have been timely made, (B) there has been no application for any waiver of the minimum funding premium standards imposed by Section
412 of the Code, and such minimum funding standards have been met to date, and (C) there is no “amount of unfunded benefit
liabilities” as defined in Section 4001(a)(18) of ERISA.
(e) Except
as required by Part 6 of Subtitle B of Title I of ERISA or Section 4980B of the Code or any state Laws requiring continuation
of benefits coverage following termination of employment, neither Talmer nor any Talmer Subsidiary provides health or welfare
benefits for any retired or former employee following such employee’s retirement or other termination of service.
(f) The
execution, delivery of, and performance by Talmer of its obligations under the transactions contemplated by this Agreement (either
alone or upon the occurrence of any additional or subsequent event) will not (i) result in any payment (whether of severance pay
or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits
with respect to any current, former or retired employees, officers, consultants, independent contractors, agents or directors
of Talmer or any of the Talmer Subsidiaries; (ii) result in the triggering or imposition of any restrictions or limitations on
the right of Talmer or any of the Talmer Subsidiaries to amend or terminate any Talmer Benefit Plan; or (iii) result in any “excess
parachute payments” within the meaning of Section 280G(b)(1) of the Code that would result in a deduction disallowance under
Code Section 280G(a) on the part of Talmer or any Talmer Subsidiary.
(g) Talmer
and the Talmer Subsidiaries may, subject to the limitations imposed by applicable Law and the terms of the applicable Talmer Benefit
Plan, without the consent of any employee, beneficiary, or other Person, prospectively terminate, modify, or amend any such Talmer
Benefit Plan effective as of any date on or after the date of this Agreement.
(h) With
respect to each Talmer Benefit Plan that is a “nonqualified deferred compensation plan” (as defined under Section
409A(d)(1) of the Code), (i) such plan has been operated and administered in compliance with Section 409A of the Code or (ii)
any payments under such plan have been earned and vested on or prior to December 31, 2004, and such plans have not been materially
modified other than modifications to comply with Code Section 409A and the regulations promulgated thereunder. Neither Talmer
nor any of the Talmer Subsidiaries have entered into any agreement or arrangement to, and do not otherwise have any obligation
to, indemnify or hold harmless any Person for any Liability that results from the failure to comply with the requirements of Section
409A of the Code and the regulations promulgated thereunder.
(i) There
is no pending or, to the Knowledge of Talmer, threatened Action with respect to any Talmer Benefit Plans, other than ordinary
and usual claims for benefits by participants and beneficiaries.
(j) Since
January 1, 2015, neither Talmer nor any of the Talmer Subsidiaries have agreed or otherwise committed to, whether in writing or
otherwise, adopt any new plan, program, agreement or policy that would constitute a Talmer Benefit Plan or result in participation
in a Multiemployer Plan or increase or improve the compensation, benefits, or terms and conditions of employment or service of
any director, officer, employee, or consultant, except (i) in the ordinary course of business consistent with past practice with
respect to individual employees who are not officers (and not with respect to a substantial class of employees) or (ii) as required
by applicable Law or any applicable Talmer Benefit Plan.
(k) Each
of the Talmer Benefit Plans which is an “employee welfare benefit plan” within the meaning of Section 3(1) of ERISA
is in compliance with the Patient Protection and Affordable Care Act and its companion bill, the Health Care and Education Reconciliation
Act of 2010, to the extent applicable, except for such noncompliance that has not had, and would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on Talmer. Additionally, Talmer and Talmer Subsidiaries operate
such Talmer Benefit Plans to avoid assessable payments under Code Sections 4980H(a) and (b).
Neither Talmer nor any of the Talmer
Subsidiaries
have any liability in the nature of a retroactive rate adjustment, loss sharing arrangement or other material Liability arising
wholly or partially out of events occurring on or before the Closing.
(l) No
stock options, stock appreciation rights or other grants of stock-based awards by Talmer or any Talmer Subsidiaries were backdated,
spring-loaded, or granted at less than fair market value.
3.20
Environmental
Matters
.
(a) Except
for any matters that have not had, and would not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Talmer: (i) Talmer and each of the Talmer Subsidiaries is and has been in compliance with and has no Liability
under applicable Environmental Laws; (ii) Talmer and each of the Talmer Subsidiaries possesses, has possessed and is and has been
in compliance with all required Environmental Permits; (iii) there are no Environmental Claims pending or, to the Knowledge of
Talmer, threatened against Talmer or any of the Talmer Subsidiaries, and, to the Knowledge of Talmer, there are no facts or circumstances
which could reasonably be expected to form the basis for any Environmental Claim against Talmer or any of the Talmer Subsidiaries;
(iv) no Releases of Hazardous Materials have occurred and no Person has been exposed to any Hazardous Materials at, from, in,
to, on, or under any Talmer Site and no Hazardous Materials are present in, on, about or migrating to or from any Talmer Site
in quantities or concentrations or under circumstances that could give rise to an Environmental Claim against Talmer or any of
the Talmer Subsidiaries; (v) neither Talmer nor any of the Talmer Subsidiaries has entered into or is subject to, any judgment,
decree, order or other similar requirement of or agreement with any Governmental Entity under any Environmental Laws; (vi) neither
Talmer nor any of the Talmer Subsidiaries has assumed responsibility for or agreed to indemnify or hold harmless any Person for
any Liability, arising under or relating to Environmental Laws; and (vii) neither Talmer nor any of the Talmer Subsidiaries, any
predecessors of Talmer or any of the Talmer Subsidiaries, nor any entity previously owned by Talmer or any of the Talmer Subsidiaries,
has transported or arranged for the treatment, storage, handling, disposal, or transportation of any Hazardous Material to any
off-Site location which has or could result in an Environmental Claim against Talmer or any of the Talmer Subsidiaries.
(b) To
the Knowledge of Talmer, each underground storage tank presently or previously located on any Talmer Site has been operated, maintained
and removed or closed in place, as applicable, in compliance with all applicable Environmental Laws, and has not been the source
of any Release of a Hazardous Material to the environment that has not been fully remediated as required by applicable Environmental
Laws.
3.21
Duties
as Fiduciary
. To the Knowledge of Talmer, Talmer and each Talmer Subsidiary has performed all of its respective 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, Contracts, wills, instruments and common law standards.
Neither Talmer nor any Talmer Subsidiary has received any notice of any Action, claim, allegation or complaint from any Person
that Talmer or any Talmer Subsidiary failed to perform these duties in a manner that complies in all material respects with all
applicable Laws, Contracts, wills, instruments and common law standards, except for notices involving matters that have been resolved
and any cost of such resolution is reflected in the Talmer Financial Statements.
3.22
Investment
Bankers and Brokers
. Talmer has employed Keefe, Bruyette & Woods, Inc. (the “
Talmer Investment Banker
”)
in connection with the Merger. Talmer, the Talmer Subsidiaries, and their respective Representatives have not employed, engaged,
or consulted with any broker, finder, or investment banker other than the Talmer Investment Banker in connection with this Agreement
or the Merger. Other than the fees and expenses payable by Talmer to the Talmer Investment Banker in connection with the Merger,
as described in
Section 3.22
of the Talmer Disclosure Schedules, there is no investment banking fee, financial advisory
fee, brokerage fee, finder’s fee, commission, or compensation of a similar type payable by Talmer or any Talmer Subsidiary
to any Person with respect to the Agreement or the consummation of the Merger. Talmer has provided to Chemical true and complete
copies of each agreement, arrangement, and understanding between Talmer and the Talmer Investment Banker prior to the date of
this Agreement.
3.23
Fairness
Opinion
. The Talmer Board has received the opinion (which, if initially rendered orally, has been or will be confirmed by
a written opinion, dated the same date) of the Talmer Investment Banker, to the effect that, as of the date of such opinion and
based on and subject to the assumptions, qualifications and limitations
contained therein, the Merger Consideration is fair to
the holders of Talmer Common Stock from a financial point of view. Such opinion has not been rescinded as of the date of this
Agreement.
3.24
Talmer-Related
Persons
.
(a) No
Talmer-Related Person has any loan, credit or other Contract outstanding with Talmer or any Talmer Subsidiary that does not conform
to applicable rules and regulations of the FDIC, the Federal Reserve Board, or any other Governmental Entity with jurisdiction
over Talmer or any Talmer Subsidiary.
(b) Other
than in a capacity as a shareholder, director, or executive officer of Talmer or any Talmer Subsidiary, no Talmer-Related Person
owns or controls any assets or properties that are used in the business of Talmer or any Talmer Subsidiary.
(c) Other
than ordinary and customary banking relationships, no Talmer-Related Person has any contractual relationship with Talmer or any
Talmer Subsidiary.
(d) No
Talmer-Related Person has any outstanding loan or loan commitment from, or on whose behalf an irrevocable letter of credit has
been issued by, Talmer or any Talmer Subsidiary in a principal amount of $2,000,000 or more.
3.25
Change
in Business Relationships
. As of the date of this Agreement, no director or executive officer of Talmer has Knowledge, whether
on account of the Merger or otherwise, that any customer, agent, representative, supplier of Talmer or any Talmer Subsidiary,
or other Person with whom Talmer or any Talmer Subsidiary has a contractual relationship, intends to discontinue, diminish, or
change its relationship with Talmer or any Talmer Subsidiary, the effect of which would reasonably be expected to have a Material
Adverse Effect on Talmer.
3.26
Insurance
.
Talmer and the Talmer Subsidiaries maintain in full force and effect insurance on their respective 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 $400,000 or more under such insurance as to which
the insurance carrier has denied liability. Since January 1, 2014, no insurance company has canceled or refused to renew a policy
of insurance covering Talmer’s or any Talmer Subsidiary’s assets, properties, premises, operations, directors or personnel.
Talmer and the Talmer Subsidiaries have given adequate and timely notice to each insurance carrier, and have complied with all
policy provisions, with respect to any material known claim for which a defense or indemnification or both may be available to
Talmer or the Talmer Subsidiaries.
3.27
Books
and Records
. The books of account, minute books, stock record books, and other records of Talmer are complete and correct
in all material respects, represent bona fide transactions, and have been maintained in accordance with sound business practices,
including the maintenance of an adequate internal control system. The corporate minute books of Talmer and the Talmer Subsidiaries
contain accurate and complete records of all meetings of, and corporate action taken by, their shareholders, boards, and committees
in all material respects. Since January 1, 2013, the minutes of each meeting (or corporate action without a meeting) of any such
shareholders, boards, or committees have been duly prepared and are contained in such minute books. All such minute books and
related exhibits or attachments for all meetings since January 1, 2013, have been made available for Chemical’s review prior
to the date of this Agreement without material omission or redaction (other than with respect to the minutes relating to (a) the
Merger or recent and similarly proposed transactions or (b) matters which Talmer is prohibited from disclosing pursuant to applicable
Law).
3.28
Loan
Guarantees
. Except as have not had, and would not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Talmer, all guarantees of indebtedness owed to Talmer or any Talmer Subsidiary, including without limitation
those of the Federal Housing Administration, the Small Business Administration, and any other Governmental Entity, are valid and
enforceable, except as limited by bankruptcy, insolvency, moratorium, reorganization, or similar laws affecting the rights of
creditors generally and the availability of equitable remedies.
3.29
Data
Security and Customer Privacy
. Talmer and each Talmer Subsidiary is in compliance in all material respects with (a) all applicable
Laws and applicable requirements of Governmental
Entities regarding the security of each of their customers’ data and the systems operated by Talmer and each Talmer Subsidiary,
and (b) their respective privacy policies, including as relates to the use of individually identifiable personal information relating
to identifiable or identified natural persons.
3.30
Allowance
for Loan and Lease Losses
. The allowance for loan and lease losses as reflected in Talmer’s consolidated financial statements
and the Talmer Call Reports as of December 31, 2014 and as of each quarter ended after December 31, 2014 was, in the reasonable
opinion of Talmer’s management, (a) adequate to meet all reasonably anticipated loan and lease losses, net of recoveries
related to loans previously charged off as of those dates, (b) consistent with GAAP and reasonable and sound banking practices,
and (c) in conformance with recommendations and comments in reports of examination in all material respects.
3.31
Loans
and Investments
. All investments and, except as would not reasonably be expected to have a Material Adverse Effect on Talmer,
all loans of Talmer and each Talmer Subsidiary are: (a) evidenced by notes, agreements or other evidences of indebtedness that
are true, genuine and what they purport to be; (b) legal and enforceable in accordance with their terms, except as may be limited
by any bankruptcy, insolvency, moratorium, or other laws affecting the rights of creditors generally or by the exercise of judicial
discretion; (c) authorized under all applicable Laws; and (d) to the extent secured, secured by valid Liens which have been perfected.
3.32
Loan
Origination and Servicing
. In originating, underwriting, servicing, selling, transferring, and discharging loans, mortgages,
land contracts, and other contractual obligations, either for its own account or for the account of others, Talmer and each Talmer
Subsidiary has complied with all applicable terms and conditions of such obligations and with all applicable Laws, Contracts,
rules, and procedures, except for incidents of noncompliance that have not had, and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Talmer.
3.33
Securities
Laws Matters
.
(a) Since
the date of becoming a reporting company with the SEC, Talmer has filed or furnished all forms, documents and reports required
to be filed or furnished with the SEC under the Securities Act or the Exchange Act (collectively with any amendments thereto,
but excluding the Joint Proxy Statement and the Form S-4, the “
Talmer SEC Reports
”). Each of the Talmer
SEC Reports, in each case as of its filing or furnishing date, or, if amended, as finally amended prior to the date of this Agreement
(with respect to those Talmer SEC Reports filed or furnished prior to the date of this Agreement), has complied as to form in
all material respects with the applicable requirements of the Securities Act and the Exchange Act, and none of the Talmer SEC
Reports, when filed or furnished or, if amended, as finally amended prior to the date of this Agreement, contained any untrue
statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were made, not misleading. None of the Talmer Subsidiaries
are or ever have been required to file periodic reports with the SEC. As of the date of this Agreement, there are no material
outstanding or unresolved comments received from the SEC with respect to any of the Talmer SEC Reports.
(b) Talmer
has established and maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange
Act) as required by Rule 13a-15(a) under the Exchange Act, and Talmer has established and maintains internal controls over financial
reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) as required by Rule 13a-15(a) under the Exchange
Act. Talmer has disclosed, based on its most recent evaluation prior to the date of this Agreement, to Talmer’s auditors
and the audit committee of the Talmer Board (i) any significant deficiencies and material weaknesses in the design or operation
of its internal controls over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) which are reasonably likely
to adversely affect Talmer’s ability to record, process, summarize and report financial information and (ii) any fraud that
involves management or other employees who have a significant role in Talmer’s internal controls over financial reporting.
Since January 1, 2012, neither Talmer nor any of the Talmer Subsidiaries has Knowledge of any written complaint, allegation, assertion
or claim regarding the accounting or auditing practices, procedures, methodologies or methods of Talmer or any Talmer Subsidiary
or their respective internal accounting controls, including any written complaint, allegation, assertion or claim that Talmer
or any Talmer Subsidiary has engaged in
questionable accounting or auditing practices, which, if true, would constitute a significant
deficiency or a material weakness. Since the date of becoming a reporting company with the SEC, subject to any applicable grace
periods, Talmer has been and is in compliance with (A) the applicable provisions of the Sarbanes Oxley Act of 2002 and (B) the
applicable listing and corporate governance rules and regulations of NASDAQ, except in each case as has not had, and would not
reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Talmer.
3.34
Joint
Ventures; Strategic Alliances
. Neither Talmer nor any Talmer Subsidiary is, directly or indirectly, a party to or bound by
any material joint venture, partnership, limited partnership, limited liability company, or strategic alliance agreement or arrangement
with or through any unaffiliated Person providing for their joint or cooperative development, marketing, referrals, or sales of
banking, securities, insurance, or other financial products or services, or their joint investment in and management of any active
business enterprise.
3.35
Policies
and Procedures
. Talmer and each Talmer Subsidiary have complied in all material respects with the policies and procedures
as formally adopted and disclosed to Chemical as applicable to the periods when those policies and procedures were in effect.
3.36
Shareholder
Rights Plan
. Talmer does not have in effect any shareholder rights plan, “poison pill,” or similar plan or arrangement.
3.37
Absence
of Undisclosed Liabilities
. There exist no Liabilities of Talmer or any Talmer Subsidiary of the type required to be disclosed
in the liabilities column of a balance sheet prepared in accordance with GAAP, other than (a) Liabilities that are adequately
reflected, reserved for or disclosed in the Talmer Financial Statements, (b) Liabilities under executory contracts to which Talmer
or a Talmer Subsidiary is a party or otherwise incurred in the ordinary course of business of Talmer or a Talmer Subsidiary, or
(c) Liabilities that have not had, and would not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Talmer.
3.38
No
Other Representations and Warranties
. Except for the express representations and warranties made by Talmer and the Talmer
Subsidiaries in this Article III, neither Talmer nor any other Person makes or has made any representation or warranty with respect
to Talmer or the Talmer Subsidiaries or their respective business, operations, assets, Liabilities, condition (financial or otherwise)
or prospects, notwithstanding the delivery or disclosure to Chemical or any of its Affiliates or Representatives of any documentation,
projections, forecasts, estimates, budgets, prospect information or other information with respect to any one or more of the foregoing.
Talmer has not relied on any representations or warranties relating to Chemical or any Chemical Subsidiary in determining to enter
into this Agreement, except for those expressly made by Chemical in
Article IV
.
Article
IV
REPRESENTATIONS AND WARRANTIES OF
CHEMICAL
Except
as disclosed in the Chemical SEC Reports filed with or furnished to the SEC prior to the date of this Agreement (excluding any
risk factor disclosures set forth under the heading “Risk Factors,” any disclosure of risks included in any “forward-looking
statements” disclaimer or any other forward-looking statement of risk that does not contain a reasonable level of detail
about the risks of which the statement warns) or as disclosed in the disclosure schedules delivered by Chemical to Talmer prior
to or concurrently with the execution of this Agreement (the “
Chemical Disclosure Schedules
”), it being
understood and agreed that the disclosure of any item in the Chemical SEC Reports shall be deemed a disclosure only to the extent
the relevance of such disclosure to the sections or subsections of this
Article IV
is reasonably apparent on the face of
such disclosure, Chemical represents and warrants to Talmer that:
4.1
Authorization,
No Conflicts, Etc
.
(a) Chemical
has the requisite corporate power and authority to execute and deliver this Agreement, and, subject to receipt of the Chemical
Shareholder Approval, to consummate the transactions contemplated by this Agreement. This Agreement has been duly adopted, and
the consummation of the Merger and the other transactions contemplated by this Agreement have been duly authorized, by the Chemical
Board. The Chemical Board has (i) determined that the terms of this Agreement are fair to and in the best interests of Chemical
and the Chemical Shareholders, and (ii) adopted this Agreement and authorized the transactions contemplated by this Agreement
and resolved to make the Chemical Board Recommendation to the Chemical Shareholders. Except for the Chemical Shareholder Approval,
no other corporate proceedings on the part of Chemical are necessary to authorize this Agreement or to consummate the Merger (other
than the submission to the Chemical Shareholders of an advisory (non-binding) vote on the compensation that may be paid or become
payable to Chemical’s named executive officers that is based on or otherwise related to the transactions contemplated by
this Agreement). This Agreement has been duly executed and delivered by, and (assuming due authorization, execution and delivery
by Talmer) constitutes valid and binding obligations of, Chemical and is enforceable against Chemical in accordance with its terms,
except to the extent that (A) such enforcement may be subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws, now or hereafter in effect, relating to creditors’ rights generally and (B) equitable remedies of
specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.
(b) The
execution, delivery, and performance of this Agreement by Chemical, the issuance of shares of Chemical Common Stock constituting
the Merger Consideration, and the consummation of the Merger, do not and will not violate, conflict with, or result in a breach
of: (i) any provision of the articles of incorporation or bylaws (or similar organizational documents) of Chemical or any Subsidiary
of Chemical (each a “
Chemical Subsidiary
” and collectively, the “
Chemical Subsidiaries
”);
or (ii) any Law or Order applicable to Chemical or any Chemical Subsidiary, assuming the timely receipt of each of the approvals
referred to in
Section 4.1(d)
.
(c) The
execution, delivery, and performance of this Agreement by Chemical, the issuance of shares of Chemical Common Stock constituting
the Merger Consideration, and the consummation of the Merger do not and will not 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 cease and desist order, written agreement, memorandum of understanding, board resolutions or other Regulatory Agreement or
commitment with or from a Governmental Entity to which Chemical or any Chemical Subsidiary is a party or subject, or by which
Chemical or any Chemical Subsidiary is bound or affected.
(d) No
notice to, filing with, authorization of, exemption by, or consent or approval of, any Governmental Entity is necessary for the
consummation of the transactions contemplated by this Agreement by Chemical other than in connection or compliance with the provisions
of the MBCA, compliance with federal and state securities laws, and the consents, authorizations, approvals, or exemptions required
under the BHC Act and the Michigan Banking Code. Chemical has no Knowledge of any reason why the Regulatory Approvals referred
to in this
Section 4.1(d)
cannot be obtained or why the regulatory approval process would be materially impeded.
4.2
Organization
and Good Standing
. Chemical is a corporation duly organized, validly existing, and in good standing under the laws of the
State of Michigan. Chemical has all requisite corporate power and authority to own, operate, and lease its properties and assets
and to carry on its business as it is now being conducted in all material respects. Chemical is a financial holding company duly
registered as such with the Federal Reserve Board under the BHC Act. Chemical is not, and is not required to be, qualified or
admitted to conduct business as a foreign corporation in any other state, except where such failure to be so qualified has not
had, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Chemical.
4.3
Subsidiaries
.
(a) Chemical
has provided to Talmer a true and complete list of each Chemical Subsidiary as of the date of this Agreement. Other than the Chemical
Subsidiaries, Chemical does not have “control” (as defined in Section 2(a)(2) of the BHC Act, using five percent (5%)
rather than twenty-five percent (25%)), either directly or indirectly, of any Person engaged in an active trade or business or
that holds any significant assets. Chemical or a
Chemical
Subsidiary owns all of the issued and outstanding capital stock or other equity interests of each of the Chemical Subsidiaries,
free and clear of any claim or Lien of any kind. There is no legally binding and enforceable subscription, option, warrant, right
to acquire, or any other similar agreement pertaining to the capital stock or other equity interests of any Chemical Subsidiary.
(b) Each
of the Chemical Subsidiaries (i) is duly organized and validly existing under the laws of its jurisdiction of organization; (ii)
is duly qualified to do business and in good standing in all jurisdictions (whether federal, state, or local) where its ownership
or leasing of property or the conduct of its business requires it to be so qualified; and (iii) has all requisite corporate power
and authority to own or lease its properties and assets and to carry on its business as now conducted, except in each of (ii)
and (iii) as has not had, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect
on Chemical.
(c) The
deposits of Chemical Bank are insured by the FDIC to the fullest extent permitted by Law, and all premiums and assessments to
be paid in connection therewith have been paid when due. No proceeding for the revocation or termination of such deposit insurance
is pending or, to the Knowledge of Chemical, threatened. Chemical and each Chemical Subsidiary has paid as and when due all material
fees, charges, assessments, and the like as required by Law to each and every Governmental Entity having jurisdiction over Chemical
or each Chemical Subsidiary.
4.4
Capital
Stock
.
(a) The
authorized capital stock of Chemical consists of 60,000,000 shares of Chemical Common Stock, of which, as of the Capitalization
Date, 38,167,861 shares were issued and outstanding; and 2,000,000 shares of Preferred Stock (the “
Chemical Preferred
Stock
”), of which, as of the Capitalization Date, no
shares were issued
and outstanding. Except for the Chemical Share-Based Awards, as of the date of this Agreement, there is no security or class of
securities outstanding that represents, is convertible into, or is exercisable for capital stock of Chemical.
(b)
Section
4.4(b)
of the Chemical Disclosure Schedules sets forth, as of the date of this Agreement, the number of shares of Chemical
Common Stock that are authorized and reserved for issuance under each plan sponsored by Chemical under which options and other
stock-based awards are granted, and the award agreements thereunder (collectively, the “
Chemical Stock Plans
”),
and the number of shares of Chemical Common Stock that are subject to outstanding Chemical Stock Options and Chemical Stock Awards
(collectively, “
Chemical Share-Based Awards
”) issued under a Chemical Stock Plan. All Chemical Share-Based
Awards have been awarded under a Chemical Stock Plan, and, as of the date of this Agreement, there are no other compensatory awards
outstanding pursuant to which Chemical Common Stock has been issued or is issuable, or that relate to or are determined by reference
to the value of Chemical Common Stock. All outstanding shares of Chemical Common Stock, and all Chemical Common Stock reserved
for issuance under the Chemical Stock Plans when issued in accordance with the respective terms of the Chemical Stock Plans, are
or will be duly authorized, validly issued, fully paid
and non-assessable and not issued in violation of any preemptive rights, purchase option, call or right of first refusal rights.
(c) After
the date of this Agreement, the number of issued and outstanding shares of Chemical Common Stock and Chemical Preferred Stock
is not subject to change before the Effective Time, other than the issuance of shares of Chemical Common Stock upon the exercise
of any Chemical Stock Options granted pursuant to a Chemical Stock Plan prior to the date of this Agreement.
(d) Other
than the issued and outstanding shares of Chemical Common Stock described in
Section 4.4(a)
, neither Chemical nor any Chemical
Subsidiary has outstanding any security or issue of securities the holder or holders of which have the right to vote on the approval
of the Merger, this Agreement, or the issuance of Chemical Common Stock that constitutes the Merger Consideration, or that entitle
the holder or holders to consent to, or withhold consent on, the Merger, this Agreement or the issuance of Chemical Common Stock
that constitutes the Merger Consideration.
(e) No
Chemical Shareholder will be entitled to appraisal rights pursuant to the MBCA as a result of the consummation of the Merger.
4.5
Financial
Statements
.
(a) The
consolidated financial statements of Chemical as of and for each of the three (3) years ended December 31, 2014, 2013, and 2012,
as reported on by Chemical’s independent accountants, and the unaudited consolidated financial statements of Chemical as
of and for each quarter in 2015 ended before the date of this Agreement, including all schedules and notes relating to such statements,
as previously delivered to Talmer (collectively, “
Chemical Financial Statements
”), fairly present, and
the unaudited consolidated financial statements of Chemical as of and for each quarter ending after the date of this Agreement
until the Effective Time, including all schedules and notes relating to such statements, will fairly present the financial condition
and the results of operations, changes in shareholders’ equity, and cash flows of Chemical as of the respective dates of
and for the periods referred to in such financial statements, all in accordance with GAAP, consistently applied, subject, in the
case of unaudited interim financial statements, to normal, recurring year-end adjustments (the effect of which has not had, and
would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Chemical) and the absence
of notes (that, if presented, would not differ materially from those included in Chemical Financial Statements). No financial
statements of any entity or enterprise other than the Chemical Subsidiaries are required by GAAP to be included in the consolidated
financial statements of Chemical.
(b) The
following reports (including all related schedules, notes, and exhibits) were prepared and filed in conformity with applicable
regulatory requirements and were correct and complete in all material respects when filed:
(i) The
Consolidated Reports of Condition and Income (Form FFIEC 041) of each Chemical Subsidiary required to file such reports (including
any amendments) as of and for each of the fiscal years ended December 31, 2014, 2013, and as
of and for each of the first, second and third quarter of 2015 as filed with the FDIC; and
(ii) The
Consolidated Financial Statements for Bank Holding Companies (Form FR Y-9C) and Parent Company Only Financial Statements for Large
Bank Holding Companies (Form FR Y-9LP) (including any amendments) for Chemical as of and for each of the fiscal years ended December
31, 2014, 2013, and 2012, and as of and for each quarter ended in 2015 before the date of this Agreement as filed with the Federal
Reserve Board. All of such reports required to be filed prior to the Effective Time by Chemical or any Chemical Subsidiary will
be prepared and filed in conformity with applicable regulatory requirements 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
Section 4.5(b
) are collectively referred to as the “
Chemical Call Reports
.”
4.6
Absence
of Certain Changes or Events
. Since September 30, 2015, (a) Chemical and the Chemical Subsidiaries have conducted their respective
businesses in the ordinary course consistent with past practice and (b) no event has occurred that has had, or would reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect on Chemical.
4.7
Legal
Proceedings
. There is no Action pending or, to the Knowledge of Chemical, threatened against Chemical or any of the Chemical
Subsidiaries that (a) as of the date of this Agreement, challenges or seeks to enjoin, alter, prevent or materially delay the
Merger or (b) has had, or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on
Chemical. There is no material unsatisfied judgment, penalty or award against Chemical or any of the Chemical Subsidiaries. Neither
Chemical nor any of the Chemical Subsidiaries, nor any of their respective properties or assets, is subject to any Order or any
investigation by a Governmental Entity that has had, or would reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on Chemical. No officer or director of Chemical or any of the Chemical Subsidiaries is a defendant in
any Action commenced by any shareholder of Chemical or any of the Chemical Subsidiaries with respect to the performance of his
or her duties as an officer or a director of Chemical or any of the Chemical Subsidiaries under any applicable Law, except for
any Action arising out of or relating to the Merger and the transactions contemplated by this Agreement.
4.8
Regulatory
Filings
. In the last three (3) years:
(a) Chemical
and each Chemical Subsidiary has filed in a timely manner all filings with Governmental Entities as required by applicable Law;
and
(b) All
such filings, as of their respective filing dates, complied in all material respects with all Laws, forms, and guidelines applicable
to such filings.
4.9
No
Indemnification Claims
. To the Knowledge of Chemical, there has been no event, action, or omission by or with respect to any
director, officer, employee, trustee, agent, or other Person who may be entitled to receive indemnification or reimbursement of
any claim, loss,
or expense under any Contract or arrangement providing for indemnification or reimbursement of any such Person by Chemical or
any Chemical Subsidiary.
4.10
Conduct
of Business
. Chemical and each Chemical Subsidiary has conducted its business and used its properties in compliance with all
applicable Laws, 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, fair lending, civil rights, employee protection, fair employment practices, fair labor standards, real estate settlement
and procedures, insurance, privacy, and Environmental Laws; except for violations that have not had, and would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect on Chemical.
4.11
Transaction
Documents
. None of the information supplied or to be supplied by Chemical for inclusion or incorporation by reference in any
Transaction Document will contain any untrue statement of material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading,
(a) in the case of any Transaction Document (other than the Form S-4 and the Joint Proxy Statement), at the time it is filed or
at any time it is amended or supplemented, (b) in the case of the Form S-4, at the time it is filed with the SEC, at any time
it is amended or supplemented and at the time it becomes effective under the Securities Act, and (c) in the case of the Joint
Proxy Statement, at the date it is first mailed to the Chemical Shareholders and the Talmer Shareholders and at the time of the
Chemical Shareholder Meeting and the Talmer Shareholder Meeting. The Joint Proxy Statement (other than those portions relating
solely to the Talmer Shareholder Meeting) will, at the time the Joint Proxy Statement is filed with the SEC, at any time it is
amended or supplemented, at the date it is first mailed to the Chemical Shareholders and the Talmer Shareholders and at the time
of the Chemical Shareholder Meeting and the Talmer Shareholder Meeting, comply as to form in all material respects with the requirements
of the Exchange Act and the rules and regulations thereunder, except that no representation is made by Chemical with respect to
statements made or incorporated by reference therein based on information supplied by or on behalf of Talmer for inclusion or
incorporation by reference in the Joint Proxy Statement.
4.12
Agreements
With Bank Regulators
. Neither Chemical nor any Chemical Subsidiary is a party to any Regulatory Agreement, nor has Chemical
nor any Chemical Subsidiary been advised by any Governmental Entity that a Governmental Entity is contemplating issuing or requesting
(or is considering the appropriateness of issuing or requesting) an Order or a Regulatory Agreement. Neither Chemical nor any
Chemical Subsidiary is required by Section 32 of the Federal Deposit Insurance Act or FDIC Regulation Part 359 or the Federal
Reserve Board to give prior notice to a federal banking agency of the proposed addition of an individual to its board of directors
or the employment of an individual as a senior executive officer or to limit golden parachute payments or indemnification.
4.13
Tax
Matters
.
(a) All
material Tax Returns required by applicable Law to have been filed by Chemical and each Chemical Subsidiary since January 1, 2010
have been filed when due (taking into
account any extensions), and each such Tax Return is complete and accurate and correctly reflects the liability for Taxes in all
material respects. Since January 1, 2010, Chemical and each Chemical Subsidiary has withheld and paid all material Taxes required
to have been withheld and paid in connection with amounts paid or owing to any third party. Since January 1, 2010, all material
Taxes that are due and payable by Chemical and each Chemical Subsidiary have been paid.
(b) There
is no audit or other proceeding pending against or with respect to Chemical or any Chemical Subsidiary with respect to any material
amount of Tax. There are no material Liens on any of the assets of Chemical or any of the Chemical Subsidiaries that arose in
connection with any failure (or alleged failure) to pay any Tax, other than Liens for Taxes not yet due and payable.
(c) Neither
Chemical nor any Chemical Subsidiary has waived any statute of limitations in respect of Taxes or agreed to any extension of time
with respect to any Taxes, which waiver or extension is still open.
(d) Except
as required by Law, neither Chemical nor any Chemical Subsidiary is a party to any Tax allocation or sharing agreement.
(e) Neither
Chemical nor any Chemical Subsidiary has been included in any “consolidated,” “unitary” or “combined”
Tax Return for any taxable period for which the statute of limitations has not expired (other than a group of which Chemical and
one or more Chemical Subsidiaries are the only members). Neither Chemical nor any Chemical Subsidiary is a general partner in
any partnership that is material to its business operations.
(f) Within
the past three (3) years, neither Chemical nor any Chemical Subsidiary has been a “distributing corporation” or a
“controlled corporation” in a distribution intended to qualify for tax-free treatment under Section 355 of the Code.
(g) Neither
Chemical nor any Chemical Subsidiary has participated in or been a party to a transaction that, as of the date of this Agreement,
constitutes a “listed transaction” for purposes of Section 6011 of the Code (or a similar provision of state Law).
(h) Neither
Chemical nor any Chemical Subsidiary has taken any action or has Knowledge of any fact that would reasonably be expected to prevent
the Merger from qualifying for the Intended Tax Treatment.
(i) There
has been no disallowance of a deduction under Section 162(m) or 280G of the Code for any amount paid or payable by Chemical or
any Chemical Subsidiary as employee compensation, whether under any Contract, plan, program or arrangement, understanding or otherwise.
4.14
Properties
.
(a) Except
with such exceptions that have not had, and would not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Chemical, Chemical and each Chemical Subsidiary has good and valid title to, or valid leasehold interests in, all
of their respective personal and real properties and assets as used in their respective businesses as presently conducted, and
all such personal and real properties and assets, other than personal and real properties and assets in which Chemical or any
of the Chemical Subsidiaries has leasehold interests, are free and clear of all Liens, except for Permitted Liens. Chemical and
each Chemical Subsidiary has complied in all material respects with the terms of all leases to which it is a party. All material
leases to which Chemical or any Chemical Subsidiary is a party and under which it is in possession of any personal or real property
are valid and binding contracts and are in full force and effect, and neither Chemical nor any Chemical Subsidiary has received
any written notice alleging violation, breach, or default of such lease. Chemical and each Chemical Subsidiary is in possession
of the properties or assets purported to be leased under all its material leases (except where Chemical or a Chemical Subsidiary
is the lessor). The tangible personal and real property and assets of Chemical and all Chemical Subsidiaries are in good operating
condition and repair, reasonable wear and tear excepted, and, subject to maintenance and repair in the ordinary course of business
consistent with past practice, are adequate for the uses to which they are being put.
(b) With
respect to real property owned by Chemical or any Chemical Subsidiary, none of Chemical nor any Chemical Subsidiary (i) has received
written notice of any pending, and to the Knowledge of Chemical there is no threatened, condemnation proceeding against any of
such real property or (ii) has received written notice from any Governmental Entity that such real property is not in compliance
with any applicable Law, except as have not had, and would not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on Chemical.
(c) With
respect to real property leased, subleased or licensed by Chemical or any Chemical Subsidiary, none of Chemical nor any Chemical
Subsidiary (i) has received any written notice alleging a violation, breach or default under any lease of such real property,
except for matters being contested in good faith for which adequate accruals or reserves have been established on the books and
records of Chemical or (ii) (A) has received written notice of any pending, and to the Knowledge of Chemical there is no threatened,
condemnation proceeding with respect to any of such real property or (B) has received written notice from any Governmental Entity
that such real property is not in compliance with any applicable Law, except as have not had, and would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on Chemical.
(d) No
lease or license pursuant to which Chemical or any Chemical Subsidiary, as lessor, lessee, licensor or licensee, has possession
of, or leases or licenses to others, any real or personal property, excluding any personal property lease with payments of less
than $500,000 per year, contains any provision, including any prohibition against assignment by Chemical or any Chemical Subsidiary,
by operation of Law or otherwise, that would require any third party consent or approval for, or that would materially interfere
with, the possession, use or rights with respect to the property by the Surviving Corporation or its Subsidiaries for the same
purposes and upon the same rental and other terms following consummation of the Merger.
4.15
Intellectual
Property
. Chemical and the Chemical Subsidiaries exclusively own, or have a valid license or other valid right to use, all
material Intellectual Property as used in their
business as presently conducted; it being understood that the foregoing shall not be construed to expand or diminish the scope
of the non-infringement representations and warranties that follow in this
Section 4.15
. No Actions, suits or other proceedings
are pending or, to the Knowledge of Chemical, threatened that Chemical or any of the Chemical Subsidiaries is infringing, misappropriating
or otherwise violating the rights of any Person with regard to any Intellectual Property. To the Knowledge of Chemical, no Person
is materially infringing, misappropriating or otherwise violating the rights of Chemical or any of the Chemical Subsidiaries with
respect to any material Intellectual Property owned or purported to be owned by Chemical or any of the Chemical Subsidiaries (collectively
the “
Chemical-Owned Intellectual Property
”). Except as have not had, and would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on Chemical, to the Knowledge of Chemical: (a) no circumstances
exist which could reasonably be expected to give rise to any (i) Action that challenges the rights of Chemical or any of the Chemical
Subsidiaries with respect to the validity or enforceability of the Chemical-Owned Intellectual Property or (ii) claim of infringement,
misappropriation, or violation of the Intellectual Property rights of any Person, and (b) the consummation of the transactions
contemplated by this Agreement will not give rise to any claim by any Person to a right to own, purchase, transfer, use, alter,
impair, extinguish or restrict any Chemical-Owned Intellectual Property or Intellectual Property licensed to Chemical or any Chemical
Subsidiary.
4.16
Required
Licenses, Permits, Etc
. Chemical and each Chemical Subsidiary hold all material Permits and other rights from all appropriate
Governmental Entities necessary for the conduct of its business as presently conducted. All such material Permits and rights are
in full force and effect. Each Chemical Subsidiary, as applicable, is an approved seller-servicer for each mortgage investor with
whom it conducts business, and holds all material Permits, authorizations, and approvals necessary to carry on a mortgage banking
business.
4.17
Material
Contracts and Change of Control
.
(a) For
the purposes of this Agreement, the term “
Chemical Material Contract
” means any of the following Contracts
to which Chemical or any of the Chemical Subsidiaries is a party or bound as of the date of this Agreement:
(i) Each
Contract that (A) has been or (B) would be required to be, but has not been, filed by Chemical as a material contract pursuant
to Item 601(b)(10) of Regulation S-K on Form 10-K under the Exchange Act as if such Form 10-K were filed as of the date of this
Agreement;
(ii) Each
Contract, other than any Contracts contemplated by this Agreement, that limits (or purports to limit) in any material respect
the ability of Chemical or any of the Chemical Subsidiaries to engage or compete in any business (including geographic restrictions
and exclusive or preferential arrangements);
(iii) Each
Contract that creates a material partnership or joint venture to which Chemical or any of the Chemical Subsidiaries is a party;
(iv) Each
Contract between or among Chemical and any Chemical Subsidiary;
(v) Each
Contract with a correspondent banker;
(vi) Each
Contract relating to the borrowing of money by Chemical or any Chemical Subsidiary or guarantee by Chemical or any Chemical Subsidiary
of such obligation (other than Contracts evidencing deposit liabilities, purchases of federal funds, fully-secured repurchase
agreements, FHLB advances of depository institution Chemical Subsidiaries, trade payables and Contracts relating to borrowings
or guarantees made in the ordinary course of business consistent with past practice) in excess of $2,000,000;
(vii) Each
Contract that relates to the acquisition or disposition of any material business (whether by merger, sale of stock, sale of assets
or otherwise) or material asset, other than this Agreement, pursuant to which Chemical or any of the Chemical Subsidiaries has
any material continuing obligations, contingent or otherwise;
(viii) Each
Contract that grants any right of first refusal or right of first offer or similar right or that limits or purports to limit the
ability of Chemical or any of the Chemical Subsidiaries to own, operate, sell, transfer, pledge or otherwise dispose of any material
amount of assets or businesses;
(ix) Each
voting agreement or registration rights agreement with respect to the capital stock of Chemical or any of the Chemical Subsidiaries;
(x) Each
Contract granting Chemical or any Chemical Subsidiary the right to use, restricting Chemical’s or any Chemical Subsidiary’s
right to use, or granting any other Person the right to use Intellectual Property that is material to the conduct of Chemical’s
or any Chemical Subsidiary’s business (including any license, franchise agreement, co-existence agreement, concurrent-use
agreement, settlement agreement or other similar type Contract);
(xi) Each
Contract that limits the payment of dividends by Chemical or any Chemical Subsidiary;
(xii) Each
Contract involving a standstill or similar obligation of Chemical or any of the Chemical Subsidiaries relating to the purchase
of securities of Chemical or any other Person;
(xiii) Except
transactions made in accordance with Regulation O and agreements entered into in the ordinary course of business consistent with
past practice for compensation or indemnity, any Contract between Chemical or any Chemical Subsidiary, on the one hand, and, on
the other hand (A) any officer or director of Chemical or a Chemical Subsidiary, or (B) to the Knowledge of Chemical, any (1)
record or beneficial owner of five percent (5%) or more of the voting securities of Chemical, (2) Affiliate or family member of
any such officer, director, or record or beneficial owner, or (3) other Affiliate of Chemical, except those Contracts of a type
available to employees of Chemical generally;
(xiv) Each
Contract for any one capital expenditure or a series of capital expenditures, the aggregate amount of which is in excess of $1,000,000;
(xv) Each
Contract or commitment to make a loan not yet fully disbursed or funded to any Person, wherein the undisbursed or unfunded amount
exceeds $10,000,000;
(xvi) Each
Contract or commitment for a loan participation agreement with any other Person in excess of $10,000,000;
(xvii) Each
employment Contract with an employee of Chemical or any Chemical Subsidiary or any other compensatory Contract or plan in which
any executive officer of Chemical or any Chemical Subsidiary participates (other than any compensatory Contract or plan which
pursuant to its terms is available to employees, officers or directors generally and which in operation provides for the same
method of allocation of benefits between management and non-management participants); and
(xviii) Each
Contract that is material to the financial condition, results of operations or business of Chemical or any Chemical Subsidiary.
(b) Prior
to the date of this Agreement, Chemical has provided or made available to Talmer a true and complete copy of each Chemical Material
Contract in effect as of the date of this Agreement. Except for matters that have not had, and would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on Chemical, (i) all Chemical Material Contracts are in full
force and effect as of the date of this Agreement, (ii) neither Chemical nor any of the Chemical Subsidiaries is in violation
or breach of or default under (or with notice or lapse of time, or both, would be in violation or breach of or default under)
the terms of any Chemical Material Contract, (iii) to the Knowledge of Chemical, no other party to any Chemical Material Contract
is in breach of or in default under any Chemical Material Contract, and (iv) neither Chemical nor any Chemical Subsidiary has
received written notice of breach or termination (or proposed breach or termination) of any Chemical Material Contract.
(c) There
is no Chemical Material Contract under which (i) a consent or approval is required, (ii) a prohibited assignment by operation
of Law could occur, (iii) a waiver or loss of any right could occur, or (iv) an acceleration of any obligation could occur, in
each case as a result of the execution and delivery of this Agreement or the consummation of the transactions contemplated herein,
where any such occurrence would reasonably be expected to (A) materially interfere with the ordinary course of business conducted
by Chemical, any Chemical Subsidiary or the Surviving Corporation or (B) have a Material Adverse Effect on Chemical.
(d) (i)
All data processing Contracts of Chemical or any of the Chemical Subsidiaries are cancelable by Chemical or a Chemical Subsidiary
on or immediately after the Effective Time without cost, penalty or further obligation, except for costs, penalties or further
obligations that, in the aggregate with respect to any Contract, do not exceed $1,000,000; and (ii) neither
Chemical nor any Chemical Subsidiary is party to any Contract that would require any payment to another party upon termination
in excess of $1,000,000.
4.18
Labor
and Employment Matters
.
(a) (i)
Chemical and all of the Chemical Subsidiaries are in compliance with all applicable Laws relating to labor and employment practices,
including those relating to wages, employee benefits, hours and overtime, workplace safety and health, immigration, individual
and collective termination, non-discrimination and data privacy, workers’ compensation, the identification of particular
employees or job classifications as “exempt” or “non-exempt” for purposes of such obligations, and any
and all other matters involving compensation or benefits afforded to or not afforded to employees, contractors or consultants
except for such noncompliance as has not had, and would not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on Chemical; (ii) as of the date of this Agreement, there is no unfair labor practice charge or complaint
pending before the NLRB or, to the Knowledge of Chemical, threatened against Chemical or any of the Chemical Subsidiaries; (iii)
as of the date of this Agreement and during the past three (3) years, there has been no labor strike, slowdown, work stoppage
or lockout pending or, to the Knowledge of Chemical, threatened against or affecting Chemical or any of the Chemical Subsidiaries;
(iv) there is no representation claim or petition pending before the NLRB or any similar foreign agency relating to the employees
of Chemical or any Chemical Subsidiary; (v) as of the date of this Agreement, Chemical has not received written notice of charges
with respect to or relating to Chemical or any Chemical Subsidiary pending before the Equal Employment Opportunity Commission
or other Governmental Entity responsible for the prevention of unlawful employment practices, nor is there any claim pending before
any court or administrative agency regarding any unlawful employment practices relating to Chemical or any Chemical Subsidiary;
and (vi) neither Chemical nor any Chemical Subsidiary has received any written notice from any
Governmental Entity responsible
for the enforcement of labor or employment laws of an intention to conduct an investigation of Chemical or any Chemical Subsidiary
and, to the Knowledge of Chemical, no such investigation is in progress.
(b) Neither
Chemical nor any Chemical Subsidiary is party to, bound by, or negotiating any Collective Bargaining Agreement or any other Contract
with any labor organization, union, works council, employee representative or association.
(c) All
salaried employees, hourly employees, and temporary employees of Chemical and its Subsidiaries are employed on an at-will basis
by Chemical and/or its Subsidiaries and may be terminated at any time with or without cause and without any severance or other
liabilities to Chemical or any Chemical Subsidiary, or have signed an agreement or acknowledged in writing that their employment
is at will. There has been no written representation by Chemical or any Chemical Subsidiary made to any employee that commits
Chemical, any Chemical Subsidiary, or the Surviving Corporation to retain them as employees for any period of time subsequent
to the Closing.
(d) Since
January 1, 2013, neither Chemical nor any Chemical Subsidiary has effectuated a “plant closing” or a “mass lay
off” (in each case, as defined in the WARN Act), in either
case affecting any site of employment or facility of Chemical or any Chemical Subsidiary, except in compliance with the WARN Act.
(e) There
is no audit, investigation, charge or proceeding with respect to a material violation of any occupational health and safety standards
that is pending or unremedied, or, to the Knowledge of Chemical, threatened against Chemical or any Chemical Subsidiary. Chemical
and all of the Chemical Subsidiaries are in compliance with all applicable occupational health and safety Laws, except for such
failures to comply as have not had, and would not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Chemical.
(f) Neither
Chemical nor any Chemical Subsidiary is a party or subject to any Contract which restricts Chemical or any Chemical Subsidiary
from relocating, closing or terminating any of its operations or facilities or any portion of its operations or facilities.
(g) The
consummation of the transactions contemplated by this Agreement will not create Liabilities for any act by Chemical or any Chemical
Subsidiary on or prior to the Closing under any Collective Bargaining Agreement, Contract or Chemical Benefit Plan.
(h) Chemical
has implemented commercially reasonable procedures to ensure that all employees who are performing services for Chemical or any
Chemical Subsidiary in the United States are legally permitted to work in the United States and will be legally permitted to work
in the United States for the Surviving Corporation or any of its Subsidiaries following the consummation of the transactions contemplated
by this Agreement.
(i) The
policies, programs, and practices of Chemical and all Chemical Subsidiaries relating to equal opportunity and affirmative action,
wages, employee classifications (including independent contractor versus employee and exempt versus non-exempt), hours of work,
employee disabilities, employment termination, employment discrimination, employee safety, labor relations, and other terms and
conditions of employment are in compliance in all material respects with applicable Law governing or relating to employment and
employer practices and facilities.
4.19
Employee
Benefits
.
(a) Chemical
has delivered or made available to Talmer true and complete copies of all material Chemical Benefit Plans. Each Chemical Benefit
Plan is in compliance with all applicable requirements of ERISA, the Code and all other applicable Laws and has been administered
in accordance with its terms and such Laws, except for such noncompliance that has not had, and would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on Chemical.
(b) Each
Chemical Benefit Plan that is intended to be qualified within the meaning of Section 401 of the Code is so qualified and has at
all times since its adoption been so qualified, and, to the Knowledge of Chemical, no condition exists and no event has occurred
that could reasonably be expected to result in the loss or revocation of such qualification in any material respect.
(c) All
contributions, payments or premiums required to be made with respect to any Chemical Benefit Plan by Chemical on or before the
date of this Agreement have been timely made, and all benefits accrued under any unfunded Chemical Benefit Plan have been paid,
accrued or otherwise adequately reserved in accordance with GAAP, and each of Chemical and the Chemical Subsidiaries have performed
all material obligations required to be performed under all Chemical Benefit Plans with respect to which Chemical or any ERISA
Affiliate of Chemical has an obligation to contribute.
(d) Neither
Chemical nor any ERISA Affiliate of Chemical (or, to Chemical’s Knowledge, their respective predecessors) participates in
nor since December 31, 1973, has ever participated in any Multiemployer Plan, and neither Chemical nor any ERISA Affiliate of
Chemical (or, to Chemical’s Knowledge, their respective predecessors) maintains or contributes to, or is party to, and,
at no time maintained, contributed to, or was a party to, any plan, program, agreement or policy that (i) is a “defined
benefit plan” within the meaning of Section 414(j) of the Code or Section 3(35) of ERISA, (ii) is a “multiple employer
plan” as defined in ERISA or the Code (whether or not subject thereto), (iii) is described in Section 401(a)(1) of ERISA
(whether or not subject thereto), (iv) is a multiple employer welfare arrangement within the meaning of Section 3(40)(A) of ERISA,
(v) is a voluntary employees beneficiary association within the meaning of Code Section 501(c)(9), or (vi) is primarily for the
benefit of employees who reside outside of the United States. No Liability under Title IV of ERISA has been or is expected to
be incurred by Chemical or any Chemical Subsidiary with respect to any applicable Chemical Benefit Plan. Except as may arise in
connection with the transactions contemplated by this Agreement, there has been no “reportable event,” within the
meaning of ERISA Section 4043, for which the 30-day reporting requirement has not been waived in relation to any applicable Chemical
Benefit Plan. In relation to each applicable Chemical Benefit Plan, (A) all contributions required to be made under one or both
of Section 412 and 430 of the Code have been timely made, (B) there has been no application for any waiver of the minimum funding
premium standards imposed by Section 412 of the Code, and such minimum funding standards have been met to date, and (C) there
is no “amount of unfunded benefit liabilities” as defined in Section 4001(a)(18) of ERISA.
(e) Except
as required by Part 6 of Subtitle B of Title I of ERISA or Section 4980B of the Code or any state Laws requiring continuation
of benefits coverage following termination of employment, neither Chemical nor any Chemical Subsidiary provides health or welfare
benefits for any retired or former employee following such employee’s retirement or other termination of service.
(f) The
execution, delivery of, and performance by Chemical of its obligations under the transactions contemplated by this Agreement (either
alone or upon the occurrence of any additional or subsequent event) will not (i) result in any payment (whether of severance pay
or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits
with respect to any current, former or retired employees, officers, consultants, independent contractors, agents or directors
of Chemical or any of the Chemical Subsidiaries; (ii) result in the triggering or imposition of any restrictions or limitations
on the right of Chemical or any of the Chemical Subsidiaries to amend or terminate any Chemical Benefit Plan; or (iii) result
in any “excess parachute payments” within the meaning of Section
280G(b)(1) of the Code that would result in a deduction disallowance under Code Section 280G(a) on the part of Chemical or any
Chemical Subsidiary.
(g) Chemical
and the Chemical Subsidiaries may, subject to the limitations imposed by applicable Law and the terms of the applicable Chemical
Benefit Plan, without the consent of any employee, beneficiary, or other Person, prospectively terminate, modify, or amend any
such Chemical Benefit Plan effective as of any date on or after the date of this Agreement.
(h) With
respect to each Chemical Benefit Plan that is a “nonqualified deferred compensation plan” (as defined under Section
409A(d)(1) of the Code), (i) such plan has been operated and administered in compliance with Section 409A of the Code or (ii)
any payments under such plan have been earned and vested on or prior to December 31, 2004, and such plans have not been materially
modified other than modifications to comply with Code Section 409A and the regulations promulgated thereunder. Neither Chemical
nor any of the Chemical
Subsidiaries have entered into any agreement or arrangement to, and do not otherwise have any obligation
to, indemnify or hold harmless any Person for any Liability that results from the failure to comply with the requirements of Section
409A of the Code and the regulations promulgated thereunder.
(i) There
is no pending or, to the Knowledge of Chemical, threatened Action with respect to any Chemical Benefit Plans, other than ordinary
and usual claims for benefits by participants and beneficiaries.
(j) Since
January 1, 2015, neither Chemical nor any of the Chemical Subsidiaries have agreed or otherwise committed to, whether in writing
or otherwise, adopt any new plan, program, agreement or policy that would constitute a Chemical Benefit Plan or result in participation
in a Multiemployer Plan or increase or improve the compensation, benefits, or terms and conditions of employment or service of
any director, officer, employee, or consultant, except (i) in the ordinary course of business consistent with past practice with
respect to individual employees who are not officers (and not with respect to a substantial class of employees) or (ii) as required
by applicable Law or any applicable Chemical Benefit Plan.
(k) Each
of the Chemical Benefit Plans which is an “employee welfare benefit plan” within the meaning of Section 3(1) of ERISA
is in compliance with the Patient Protection and Affordable Care Act and its companion bill, the Health Care and Education Reconciliation
Act of 2010, to the extent applicable, except for such noncompliance that has not had, and would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on Chemical. Additionally, Chemical and the Chemical Subsidiaries
operate such Chemical Benefit Plans to avoid assessable payments under Code Sections 4980H(a) and (b).
Neither Chemical nor any of the Chemical Subsidiaries have any liability in the nature of a retroactive rate adjustment,
loss sharing arrangement or other material Liability arising wholly or partially out of events occurring on or before the Closing.
(l) No
stock options, stock appreciation rights or other grants of stock-based awards by Chemical or any Chemical Subsidiaries were backdated,
spring-loaded, or granted at less than fair market value.
4.20
Environmental
Matters
.
(a) Except
for any matters that have not had, and would not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Chemical: (i) Chemical and each of the Chemical Subsidiaries is and has been in compliance with and has no Liability
under applicable Environmental Laws; (ii) Chemical and each of the Chemical Subsidiaries possesses, has possessed and is and has
been in compliance with all required Environmental Permits; (iii) there are no Environmental Claims pending or, to the Knowledge
of Chemical, threatened against Chemical or any of the Chemical Subsidiaries, and, to the Knowledge of Chemical, there are no
facts or circumstances which could reasonably be expected to form the basis for any Environmental Claim against Chemical or any
of the Chemical Subsidiaries; (iv) no Releases of Hazardous Materials have occurred and no Person has been exposed to any Hazardous
Materials at, from, in, to, on, or under any Chemical Site and no Hazardous Materials are present in, on, about or migrating to
or from any Chemical Site in quantities or concentrations or under circumstances that could give rise to an Environmental Claim
against Chemical or any of the Chemical Subsidiaries; (v) neither Chemical nor any of the Chemical Subsidiaries has entered into
or is subject to, any judgment, decree, order or other similar requirement of or agreement with any Governmental Entity under
any Environmental Laws; (vi) neither Chemical nor any of the Chemical Subsidiaries has assumed responsibility for or agreed to
indemnify or hold harmless any Person for any Liability, arising under or relating to Environmental Laws; and (vii) neither Chemical
nor any of the Chemical Subsidiaries, any predecessors of Chemical or any of the Chemical Subsidiaries, nor any entity previously
owned by Chemical or any of the Chemical Subsidiaries, has transported or arranged for the treatment, storage, handling, disposal,
or transportation of any Hazardous Material to any off-Site location which has or could result in an Environmental Claim against
Chemical or any of the Chemical Subsidiaries.
(b) To
the Knowledge of Chemical, each underground storage tank presently or previously located on any Chemical Site has been operated,
maintained and removed or closed in place, as applicable, in compliance with all applicable Environmental Laws, and has not been
the source of any Release of a Hazardous Material to the environment that has not been fully remediated as required by applicable
Environmental Laws.
4.21
Duties
as Fiduciary
. To the Knowledge of Chemical, Chemical and each Chemical Subsidiary has performed all of its respective 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, Contracts, wills, instruments and common law standards.
Neither Chemical nor any Chemical Subsidiary has received any notice of any Action, claim, allegation or complaint from any Person
that Chemical or any Chemical Subsidiary failed to perform these duties in a manner that complies in all material respects with
all applicable Laws, Contracts, wills, instruments and common law standards, except for notices involving matters that have been
resolved and any cost of such resolution is reflected in the Chemical Financial Statements.
4.22
Investment
Bankers and Brokers
. Chemical has employed Sandler O’Neill & Partners, L.P. (the “
Chemical Investment
Banker
”) in connection with the Merger. Chemical, the Chemical Subsidiaries, and their respective Representatives
have not employed, engaged, or consulted
with any broker, finder, or investment banker other than the Chemical Investment Banker in connection with this Agreement or the
Merger. Other than the fees and expenses payable by Chemical to the Chemical Investment Banker in connection with the Merger,
as described in
Section 4.22
of the Chemical Disclosure Schedules, there is no investment banking fee, financial advisory
fee, brokerage fee, finder’s fee, commission, or compensation of a similar type payable by Chemical or any Chemical Subsidiary
to any Person with respect to the Agreement or the consummation of the Merger. Chemical has provided to Talmer true and complete
copies of each agreement, arrangement, and understanding between Chemical and the Chemical Investment Banker prior to the date
of this Agreement.
4.23
Fairness
Opinion
. The Chemical Board has received the opinion (which, if initially rendered orally, has been or will be confirmed by
a written opinion, dated the same date) of the Chemical Investment Banker, to the effect that, as of the date of such opinion
and based on and subject to the assumptions, qualifications and limitations contained therein, the Merger Consideration is fair
to Chemical from a financial point of view. Such opinion has not rescinded as of the date of this Agreement.
4.24
Chemical-Related
Persons
.
(a) No
Chemical-Related Person has any loan, credit or other Contract outstanding with Chemical or any Chemical Subsidiary that does
not conform to applicable rules and regulations of the FDIC, the Federal Reserve Board, or any other Governmental Entity with
jurisdiction over Chemical or any Chemical Subsidiary.
(b) Other
than in a capacity as a shareholder, director, or executive officer of Chemical or any Chemical Subsidiary, no Chemical-Related
Person owns or controls any assets or properties that are used in the business of Chemical or any Chemical Subsidiary.
(c) Other
than ordinary and customary banking relationships, no Chemical-Related Person has any contractual relationship with Chemical or
any Chemical Subsidiary.
(d) No
Chemical-Related Person has any outstanding loan or loan commitment from, or on whose behalf an irrevocable letter of credit has
been issued by, Chemical or any Chemical Subsidiary in a principal amount of $2,000,000 or more.
4.25
Change
in Business Relationships
. As of the date of this Agreement, no director or executive officer of Chemical has Knowledge, whether
on account of the Merger or otherwise, that any customer, agent, representative, supplier of Chemical or any Chemical Subsidiary,
or other Person with whom Chemical or any Chemical Subsidiary has a contractual relationship, intends to discontinue, diminish,
or change its relationship with Chemical or any Chemical Subsidiary, the effect of which would reasonably be expected to have
a Material Adverse Effect on Chemical.
4.26
Insurance
.
Chemical and the Chemical Subsidiaries maintain in full force and effect insurance on their respective 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 $400,000 or more under such insurance as to which
the insurance carrier has denied liability. Since January 1, 2014,
no insurance company has canceled or refused to renew a policy of insurance covering Chemical’s or any Chemical Subsidiary’s
assets, properties, premises, operations, directors or personnel. Chemical and the Chemical Subsidiaries have given adequate and
timely notice to each insurance carrier, and have complied
with all policy provisions, with respect to any material known claim
for which a defense or indemnification or both may be available to Chemical or the Chemical Subsidiaries.
4.27
Books
and Records
. The books of account, minute books, stock record books, and other records of Chemical are complete and correct
in all material respects, represent bona fide transactions, and have been maintained in accordance with sound business practices,
including the maintenance of an adequate internal control system. The corporate minute books of Chemical and the Chemical Subsidiaries
contain accurate and complete records of all meetings of, and corporate action taken by, their shareholders, boards, and committees
in all material respects. Since January 1, 2013, the minutes of each meeting (or corporate action without a meeting) of any such
shareholders, boards, or committees have been duly prepared and are contained in such minute books. All such minute books and
related exhibits or attachments for all meetings since January 1, 2013, have been made available for Talmer’s review prior
to the date of this Agreement without material omission or redaction (other than with respect to the minutes relating to (a) the
Merger or recent and similarly proposed transactions or (b) matters which Chemical is prohibited from disclosing pursuant to applicable
Law).
4.28
Loan
Guarantees
. Except as have not had, and would not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Chemical, all guarantees of indebtedness owed to Chemical or any Chemical Subsidiary, including without limitation
those of the Federal Housing Administration, the Small Business Administration, and any other Governmental Entity, are valid and
enforceable, except as limited by bankruptcy, insolvency, moratorium, reorganization, or similar laws affecting the rights of
creditors generally and the availability of equitable remedies.
4.29
Data
Security and Customer Privacy
. Chemical and each Chemical Subsidiary is in compliance in all material respects with (a) all
applicable Laws and applicable requirements of Governmental Entities regarding the security of each of their customers’
data and the systems operated by Chemical and each Chemical Subsidiary, and (b) their respective privacy policies, including as
relates to the use of individually identifiable personal information relating to identifiable or identified natural persons.
4.30
Allowance
for Loan and Lease Losses
. The allowance for loan and lease losses as reflected in Chemical’s consolidated financial
statements and the Chemical Call Reports as of December 31, 2014 and as of each quarter ended after December 31, 2014 was, in
the reasonable opinion of Chemical’s management, (a) adequate to meet all reasonably anticipated loan and lease losses,
net of recoveries related to loans previously charged off as of those dates, (b) consistent with GAAP and reasonable and sound
banking practices, and (c) in conformance with recommendations and comments in reports of examination in all material respects.
4.31
Loans
and Investments
. All investments and, except as would not reasonably be expected to have a Material Adverse Effect on Chemical,
all loans of Chemical and each Chemical Subsidiary are: (a) evidenced by notes, agreements or other evidences of indebtedness that
are true, genuine and what they purport to be; (b) legal and enforceable in accordance with their terms, except as may be limited
by any bankruptcy, insolvency, moratorium, or other laws affecting the rights of creditors generally or by the exercise of judicial
discretion; (c) authorized under all applicable Laws; and (d) to the extent secured, secured by valid Liens which have been perfected.
4.32
Loan
Origination and Servicing
. In originating, underwriting, servicing, selling, transferring, and discharging loans, mortgages,
land contracts, and other contractual obligations, either for its own account or for the account of others, Chemical and each
Chemical Subsidiary has complied with all applicable terms and conditions of such obligations and with all applicable Laws, Contracts,
rules, and procedures, except for incidents of noncompliance that have not had, and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Chemical.
4.33
Securities
Laws Matters
.
(a) Since
January 1, 2012, Chemical has filed or furnished all forms, documents and reports required to be filed or furnished with the SEC
under the Securities Act or the Exchange Act (collectively with any amendments thereto, but excluding the Joint Proxy Statement
and the Form S-4, the “
Chemical SEC Reports
”). Each of the Chemical SEC Reports, in each case as of
its filing or furnishing date, or, if amended, as finally amended prior to the date of this Agreement (with respect to those Chemical
SEC Reports filed or furnished prior to
the date of this Agreement), has complied as to form in all material respects with the
applicable requirements of the Securities Act and the Exchange Act, and none of the Chemical SEC Reports, when filed or furnished
or, if amended, as finally amended prior to the date of this Agreement, contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. None of the Chemical Subsidiaries are or ever have been required to
file periodic reports with the SEC. As of the date of this Agreement, there are no material outstanding or unresolved comments
received from the SEC with respect to any of the Chemical SEC Reports.
(b) Chemical
has established and maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange
Act) as required by Rule 13a-15(a) under the Exchange Act, and Chemical has established and maintains internal controls over financial
reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) as required by Rule 13a-15(a) under the Exchange
Act. Chemical has disclosed, based on its most recent evaluation prior to the date of this Agreement, to Chemical’s auditors
and the audit committee of the Chemical Board (i) any significant deficiencies and material weaknesses in the design or operation
of its internal controls over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) which are reasonably likely
to adversely affect Chemical’s ability to record, process, summarize and report financial information and (ii) any fraud
that involves management or other employees who have a significant role in Chemical’s internal controls over financial reporting.
Since January 1, 2012, neither Chemical nor any of the Chemical Subsidiaries has Knowledge of any written complaint,
allegation, assertion or claim regarding the accounting or auditing practices, procedures, methodologies or methods of Chemical
or any Chemical Subsidiary or their respective internal accounting controls, including any written complaint, allegation, assertion
or claim that Chemical or any Chemical Subsidiary has engaged in questionable accounting or auditing practices, which, if true,
would constitute a significant deficiency or a material weakness. Since January 1, 2012, subject to any applicable grace periods,
Chemical has been and is in compliance with (A) the applicable provisions of the Sarbanes Oxley Act of 2002 and (B) the applicable
listing and corporate governance rules and regulations of NASDAQ, except in each case as has not had, and would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect on Chemical.
4.34
Joint
Ventures; Strategic Alliances
. Neither Chemical nor any Chemical Subsidiary is, directly or indirectly, a party to or bound
by any material joint venture, partnership, limited partnership, limited liability company, or strategic alliance agreement or
arrangement with or through any unaffiliated Person providing for their joint or cooperative development, marketing, referrals,
or sales of banking, securities, insurance, or other financial products or services, or their joint investment in and management
of any active business enterprise.
4.35
Policies
and Procedures
. Chemical and each Chemical Subsidiary have complied in all material respects with the policies and procedures
as formally adopted and disclosed to Talmer as applicable to the periods when those policies and procedures were in effect.
4.36
Shareholder
Rights Plan
. Chemical does not have in effect any shareholder rights plan, “poison pill,” or similar plan or arrangement.
Chemical is not an “interested shareholder” of Talmer as defined in Section 778 of the MBCA.
4.37
Absence
of Undisclosed Liabilities
. There exist no Liabilities of Chemical or any Chemical Subsidiary of the type required to be disclosed
in the liabilities column of a balance sheet prepared in accordance with GAAP, other than (a) Liabilities that are adequately
reflected, reserved for or disclosed in the Chemical Financial Statements, (b) Liabilities under executory contracts to which
Chemical or a Chemical Subsidiary is a party or otherwise incurred in the ordinary course of business of Chemical or a Chemical
Subsidiary, or (c) Liabilities that have not had, and would not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on Chemical.
4.38
No
Other Representations and Warranties
. Except for the express representations and warranties made by Chemical and the Chemical
Subsidiaries in this
Article IV
, neither Chemical nor any other Person makes or has made any representation or warranty
with respect to Chemical or the Chemical Subsidiaries or their respective business, operations, assets, Liabilities, condition
(financial or otherwise) or prospects, notwithstanding the delivery or disclosure to Talmer or any of its Affiliates or Representatives
of any documentation, projections, forecasts,
estimates, budgets, prospect information or other information with respect to any
one or more of the foregoing. Chemical has not relied on any representations or warranties relating to Talmer or any Talmer Subsidiary
in determining to enter into this Agreement, except for those expressly made by Talmer in
Article III
.
Article
V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1
Conduct
of Business Before the
Effective Time
.
Except
as expressly contemplated by or permitted by this Agreement or required by applicable Law or with the prior written consent of
the other Party, which consent shall not be unreasonably withheld, conditioned or delayed, during the period from the date of
this Agreement until the earlier of the Effective Time and the date of termination of this Agreement in accordance with
Article
VIII
, each Party shall, and shall cause each of its Subsidiaries, as applicable, to:
(a)
conduct
its business
in the ordinary course consistent with past practice
in all material respects;
and
(b) use
commercially reasonable efforts
to (i) maintain and preserve intact its business organization
and advantageous business relationships, and (ii) retain the services of its key officers and key employees.
5.2
Talmer
Forbearances
.
During
the period from the date of this
Agreement
until the earlier of the
Effective
Time
and the date of termination of this
Agreement
in accordance with
Article
VIII
, except as expressly contemplated or permitted by this
Agreement
,
or as set forth on the correspondingly labeled section of the
Talmer Disclosure Schedules
or
required by applicable
Law
,
Talmer
shall not, and
shall not
permit
any of its
Subsidiaries
to, without
the prior written consent of
Chemical
(which consent shall not be unreasonably withheld,
conditioned, or delayed):
(a) other
than in the ordinary course of business consistent with past practice
, incur any indebtedness
for borrowed money, assume, guarantee, endorse, or otherwise as an accommodation become responsible for the obligations of, or
make any loan or advance or capital contribution to, or investment in, any other
Person
(it
being understood and agreed that incurrence of
indebtedness in the ordinary course of business
consistent with past practice
shall
include
the creation of deposit liabilities,
purchases of federal funds, borrowings from the Federal Home Loan Bank, sales of certificates of deposit, and entry into repurchase
agreements);
(b)
adjust,
split, combine or reclassify any of its capital stock;
(c)
make,
declare or pay any dividend, or make any other distribution on, or directly or indirectly redeem, purchase, or otherwise acquire,
any shares of its capital stock or any securities or obligations convertible (whether currently convertible or convertible only
after the passage of time or the occurrence of certain events) into or exchangeable for any shares of its capital stock (except
(i) dividends paid by any of the Talmer
Subsidiaries
to
Talmer
or to any of its wholly-owned
Subsidiaries
, (ii) regular quarterly dividends on
Talmer Common Stock as set forth in
Section 5.2(c)
of the Talmer Disclosure Schedules
,
(iii) dividends in respect of the outstanding trust preferred securities of
Talmer
as of
the date of this
Agreement
, and (iv) the acceptance of shares of
Talmer
Common Stock
in payment of the exercise price or withholding
taxes
incurred by any
employee or director in connection with the vesting of equity-based awards in respect of
Talmer
Common Stock
granted under
Talmer Stock Plans
, in each case in accordance
with past practice and the terms of the applicable
Talmer Stock Plans
and related award
agreements);
(d)
grant
any stock options, restricted shares, or other equity-based award with respect to shares of
Talmer
Common Stock
under the
Talmer Stock Plans
, or otherwise, or grant any
Person
any right to acquire any shares of
Talmer Capital Stock
;
(e)
issue
any additional shares of
Talmer Capital Stock
or other securities except pursuant to the
settlement of equity-based awards previously granted under the
Talmer Stock Plans;
provided,
however
,
Talmer may in its reasonable discretion engage in a bona fide capital raising
transaction under this
Section
5.2(e)
without
the prior written consent of
Chemical
;
(f)
amend
any existing employment, consulting, severance, termination or change in
control
agreements
or enter into any new employment, consulting, severance, termination or change in
control
agreements;
(g)
except
as required by applicable
Law
or in accordance with the terms of any
Talmer
Benefit Plan
as in effect on the date of this
Agreement
, and except for normal increases
made in the ordinary course of business consistent with past practice
, (i) increase the
wages, salaries, incentive compensation, incentive compensation opportunities of, or benefits provided to, any current, former,
or retired employee or director of
Talmer
or any of its
Subsidiaries
or
ERISA Affiliates
; (ii) establish, adopt, or become a
party
to any new employee benefit or compensation plan, program, commitment, or
agreement
,
or amend, modify, change, or terminate, or accelerate any rights under, any
Talmer Benefit Plan
;
(iii) grant any stock options, stock appreciation rights, stock-based or stock-related awards, performance stock, or phantom or
restricted stock unit awards; (iv) take any
action other than in the ordinary course of business
consistent with past practice
, to fund or in any way secure the payment of compensation or benefits under any
Talmer
Benefit Plan
; (v) amend, alter, or modify any warrant or other equity-based right to purchase any shares of
Talmer
Capital Stock
or other equity interests in
Talmer
or any securities exchangeable
for or convertible into
Talmer Capital Stock
outstanding on the date hereof, except as
otherwise permitted in this
Agreement
; (vi) enter into any
Collective
Bargaining Agreement
; (vii) enter into, amend, modify, alter, terminate, or change any third-
party
vendor or service
agreement
related to any
Talmer
Benefit Plan; or (viii)
grant any severance or termination pay unless provided under any
Talmer
Benefit Plan or unless such grant is in the ordinary course of business consistent with past practice;
(h)
sell,
transfer, mortgage, encumber, or otherwise dispose of any material amount of its properties or assets to any
Person
other than a Talmer
Subsidiary
, or cancel,
release
,
or assign any material amount of indebtedness to any such
Person
or any claims held by
any such
Person
, in each case
other than in the ordinary
course of business consistent with past practice
or pursuant to contracts in force at the date of this
Agreement
;
provided, however
, that
Talmer
shall be permitted to divest of immaterial amounts
of deposit liabilities, banking offices, and/or loans as required by
Governmental Entities
to
consummate the
Merger
and which do not constitute, individually or in the aggregate, a
Materially Burdensome Regulatory Condition;
provided, further
, that, if
Talmer
or any of its
Subsidiaries
shall request the prior approval of
Chemical
in accordance with this
Section
5.2
to
make, sell, transfer, or dispose of any “Other Real
Estate Owned” of
Talmer outside of the ordinary course of business consistent with past
practice,
and
Chemical
shall not have disapproved such request in writing within
five (5)
Business Days
upon receipt of such request from
Talmer
or any of its
Subsidiaries
, as applicable, then such request shall be deemed to
be approved by
Chemical
in writing, and
Talmer
or
its
Subsidiary
, as applicable, may effect the sale, transfer, or disposal
referenced
in such request on the terms described therein;
provided
,
further
, that the foregoing shall not apply to
dealings with financial assets or investment securities nor prohibit
Talmer
and its
Subsidiaries
from transferring, licensing, selling, leasing or disposing of obsolete or unused equipment, fixtures or assets, in each
case in the ordinary course of business consistent with past practice
;
(i) make
any application for the opening, relocation, or closing of any branch office, loan production office or other material office
or facility, or open, relocate or close any branch office, loan production office or other material office or facility;
(j)
acquire,
by
merger
, consolidation, acquisition of stock or assets, or otherwise, any business or
division of a business or enter into any new line of business or change in any material respect its lending, investment, underwriting,
risk and asset
liability
management, and other banking, operating, and servicing policies,
except as required by applicable
Law
, regulation, recommendation of or policies imposed
by any
Governmental Entity
;
(k)
make
any material investment either by purchase of stock or securities, contributions to capital, property transfers, or purchase of
any property or assets of any other
Person outside of the ordinary course of business consistent
with past practice
;
(l)
take
any
action
, or knowingly fail to take any
action
,
which
action
or failure to act is reasonably likely to prevent the
Merger
from qualifying for the
Intended Tax Treatment
;
(m)
amend
the
Talmer Articles
or
Talmer Bylaws
, or otherwise
take any
action
to exempt any
Person
(other than
Chemical
or its
Subsidiaries
) or any
action
taken by any
Person
from any
Takeover Statute
or
similarly restrictive provisions of its organizational documents or terminate, amend, or waive any provisions of any confidentiality
or standstill agreements in place with any third parties;
(n)
other
than after prior consultation with
Chemical
, materially change or restructure its investment
securities portfolio or its gap position, through purchases, sales, or otherwise, or the manner in which the portfolio is classified
or reported;
(o)
other
than commencement or settlement of foreclosure or debt collection
actions in the ordinary course
of business consistent with past practice
, commence or settle any
claim
,
action
,
or proceeding where the amount in dispute is in excess of $
500,000
or subjects
Talmer
or any of its
Subsidiaries
to any material restrictions on its current or future
business operations (
including
the future business and operations of the Surviving Corporation
or the
Surviving Bank
);
(p)
take
any
action
or fail to take any
action
that is intended
or may reasonably be expected to result in any of the conditions to the
Merger
set forth
in
Article
VII
not being satisfied;
(q)
implement
or adopt any material change in its
tax
accounting or financial accounting principles,
practices or methods, change any
tax
accounting period, or surrender in writing any right
to
claim
a
Tax
refund, offset or other reduction
in
Tax liability
or consent to any extension or waiver of the limitation period applicable
to any
Tax claim
or assessment relating to
Talmer
or
its
Subsidiaries
and involving in excess of $1,000,000, in each case other than as may
be required by applicable
Law
,
GAAP
, or regulatory
guidelines;
(r)
file
or amend any
Tax Return other than in the ordinary course of business,
make any significant
change in any method of
Tax
or accounting (other than as may be required by applicable
Law
,
GAAP
or regulatory guidelines), make or change
any
Tax
election, or settle or compromise any disputed
Tax
liability
in excess of $1,000,000;
(s) extend
the term of any Talmer Material Contract (except for the extension of any such term for one year or less due to the automatic
renewal of such term in accordance with the terms of the Talmer Material Contract), and
except
for
transactions in the ordinary course of business consistent with past practice
, terminate
or waive any material provision of any
Talmer Material Contract
;
(t) enter
into or amend any Contract or other transaction with any Talmer-Related Person, except as contemplated or permitted by this Agreement;
(u) take
any action to enter into, or commit to enter into, any Contract for trust, consulting, professional, or other services to Talmer
or any Talmer Subsidiary that is not terminable by Talmer or such Talmer Subsidiary without penalty upon thirty (30) days’
or less notice, except for contracts for services under which the aggregate required payments do not exceed $500,000, and except
for legal, accounting, and other ordinary expenses (not including expenses of financial advisors) related to this Agreement or
the transactions contemplated hereby;
(v) take
any action to enter into, or commit to enter into, any joint venture, strategic alliance, or material relationship with any Person
to jointly develop, market, or offer any product or service;
(w) fail
to promptly notify Chemical of the threat (to the Knowledge of Talmer) or the commencement of any material Action against, relating
to, or affecting (i) Talmer or any Talmer Subsidiary, (ii) Talmer’s or any Talmer Subsidiary’s directors, officers
or employees in their capacities as such, (iii) Talmer’s or any Talmer Subsidiary’s assets, liabilities, businesses
or operations, or (iv) the Merger or this Agreement;
(x) except
for (i) capital expenditures of amounts set forth in Talmer’s capital expenditure plan included in
Section 5.2(x)
of the Talmer Disclosure Schedules, or (ii) capital expenditures required by Law or Governmental Entities or incurred in connection
with the repair or replacement of facilities destroyed or damaged due to casualty or accident (whether or not covered by insurance),
make any capital expenditure or permit any Talmer Subsidiary to make any capital expenditure;
(y) make
or renew any charitable contributions, gifts, commitments, or pledges of cash or other assets except in the ordinary course of
business consistent with past practice and not in excess of Talmer’s 2016 budget for such charitable contributions, gifts,
commitments or pledges;
(z) take
any action that would materially impede or materially delay the completion of the transactions contemplated by this Agreement
or the ability of the Parties to obtain any necessary approvals of any Regulatory Agency or Governmental Entity required for the
transactions contemplated hereby;
(aa)
enter
into any Contract that (i) is outside the ordinary course of business consistent with past practice and (ii) would constitute a Talmer Material Contract;
(bb) except
for transactions in the ordinary course of business consistent with past practice, enter into any Derivative Transaction; or
(cc)
agree
or commit to do any of the foregoing
.
5.3
Chemical
Forbearances
.
During
the period from the date of this
Agreement
until the earlier of the
Effective
Time
and the date of termination of this
Agreement
in accordance with
Article
VIII
, except as expressly contemplated or permitted by this
Agreement
,
or as set forth on the correspondingly labeled section of the
Chemical Disclosure Schedules
or
required by applicable
Law
,
Chemical
shall not,
and shall not
permit
any of its
Subsidiaries
to,
without the prior written consent of
Talmer
(which consent shall not be unreasonably withheld,
conditioned, or delayed):
(a) other
than in the ordinary course of business consistent with past practice
, incur any indebtedness
for borrowed money, assume, guarantee, endorse, or otherwise as an accommodation become responsible for the obligations of, or
make any loan or advance or capital contribution to, or investment in, any other
Person
(it
being understood and agreed that incurrence of
indebtedness in the ordinary course of business
consistent with past practice
shall
include
the creation of deposit liabilities,
purchases of federal funds, borrowings from the Federal Home Loan Bank, sales of certificates of deposit, and entry into repurchase
agreements);
(b)
adjust,
split, combine or reclassify any of its capital stock;
(c)
make,
declare or pay any dividend, or make any other distribution on, or directly or indirectly redeem, purchase, or otherwise acquire,
any shares of its capital stock or any securities or obligations convertible (whether currently convertible or convertible only
after the passage of time or the occurrence of certain events) into or exchangeable for any shares of its capital stock (except
(i) dividends paid by any of the Chemical
Subsidiaries
to
Chemical
or to any of its wholly-owned
Subsidiaries
, (ii) regular quarterly dividends on
Chemical Common Stock as set forth in
Section 5.3(c)
of the Chemical Disclosure Schedules,
(iii) the payoff of, or
dividends in respect of, the outstanding trust preferred securities of
Chemical
as of the date of this Agreement, and
(iv)
the
acceptance of shares of
Chemical Common Stock
in payment of the exercise price or withholding
taxes
incurred by any employee or director in connection with the vesting of equity-based
awards in respect of
Chemical Common Stock
granted under
Chemical
Stock
Plans
, in each case in accordance with past practice and the terms of the applicable
Chemical
Stock Plans
and related award agreements);
(d)
grant
any stock options, restricted shares, or other equity-based award with respect to shares of
Chemical
Common Stock
under the
Chemical Stock Plans
, or otherwise, or grant any
Person
any right to acquire any shares of
Chemical Capital Stock
;
(e)
issue
any additional shares of
Chemical Capital Stock
or other securities except pursuant to
the settlement of equity-based awards previously granted under the
Chemical Stock Plans
;
provided, however
,
Chemical
may in its reasonable discretion engage in a bona fide
capital raising transaction under this
Section
5.3(e)
without the prior written consent of
Talmer
,
(f)
amend
any existing employment, consulting, severance, termination or change in
control
agreements
or enter into any new employment, consulting, severance, termination or change in
control
agreements;
(g)
except
as required by applicable
Law
or in accordance with the terms of any
Chemical
Benefit Plan
as in effect on the date of this
Agreement,
and except for normal increases
made in the ordinary course of business consistent with past practice
, (i) increase the
wages, salaries, incentive compensation, incentive compensation opportunities of, or benefits provided to, any current, former,
or retired employee or director of
Chemical
or any of its
Subsidiaries
or
ERISA Affiliates
; (ii) establish, adopt, or become a
party
to any new employee benefit or compensation plan, program, commitment, or
agreement
,
or amend, modify, change, or terminate, or accelerate any rights under, any
Chemical Benefit Plan
;
(iii) grant any stock options, stock appreciation rights, stock-based or stock-related awards, performance stock, or phantom or
restricted stock unit awards; (iv) take any
action other than in the ordinary course of business
consistent with past practice
, to fund or in any way secure the payment of compensation or benefits under any
Chemical
Benefit Plan
; (v) amend, alter, or modify any warrant or other equity-based right to purchase any
Chemical
Capital Stock
or other equity interests in
Chemical
or any securities exchangeable
for or convertible into
Chemical Capital Stock
outstanding on the date hereof, except as
otherwise permitted in this
Agreement
; (vi) enter into any
Collective
Bargaining Agreement
; (vii) enter into, amend, modify, alter, terminate, or change any third-
party
vendor or service
agreement
related to any
Chemical
Benefit Plan; or (viii)
grant any severance or termination pay unless provided under any
Chemical
Benefit Plan or unless such grant is in the ordinary course of business consistent with past practice
;
(h)
sell,
transfer, mortgage, encumber, or otherwise dispose of any material amount of its properties or assets to any
Person
other than a Chemical
Subsidiary
, or cancel,
release
,
or assign any material amount of indebtedness to any such
Person
or any claims held by
any such
Person
, in each case
other than in the ordinary
course of business consistent with past practice
or pursuant to contracts in force at the date of this
Agreement
;
provided, however
, that
Chemical
shall be permitted to divest of immaterial amounts
of deposit liabilities, banking offices, and/or loans as required by
Governmental Entities
to
consummate the
Merger
and which do not constitute, individually or in the aggregate, a
Materially Burdensome Regulatory Condition;
provided, further
, that, if
Chemical
or any of its
Subsidiaries
shall request the prior approval of
Talmer
in accordance with this
Section
5.3
to
make, sell, transfer, or dispose of any “Other Real Estate Owned” of
Chemical outside
of the ordinary course of business consistent
with
past practice,
and
Talmer
shall not have disapproved
such request in writing within five (5)
Business Days
upon receipt of such request from
Chemical
or any of its
Subsidiaries
, as applicable,
then such request shall be deemed to be approved by
Talmer
in writing, and
Chemical
or its
Subsidiary
, as applicable, may effect the sale, transfer, or disposal
referenced
in such request on the terms described therein;
provided
,
further
, that the foregoing shall not apply to
dealings with financial assets or investment securities nor prohibit
Chemical
and its
Subsidiaries
from transferring, licensing, selling, leasing or disposing of obsolete or unused equipment, fixtures or assets, in each
case in the ordinary course of business consistent with past practice
;
(i) make
any application for the opening, relocation, or closing of any branch office, loan production office or other material office
or facility, or open, relocate or close any branch office, loan production office or other material office or facility;
(j)
acquire,
by
merger
, consolidation, acquisition of stock or assets, or otherwise, any business or
division of a business or enter into any new line of business or change in any material respect its lending, investment, underwriting,
risk and asset
liability
management, and other banking, operating, and servicing policies,
except as required by applicable
Law
, regulation, recommendation of or policies imposed
by any
Governmental Entity
;
(k)
make
any material investment either by purchase of stock or securities, contributions to capital, property transfers, or purchase of
any property or assets of any other
Person outside the ordinary course of business consistent
with past practice
;
(l)
take
any
action
, or knowingly fail to take any
action
,
which
action
or failure to act is reasonably likely to prevent the
Merger
from qualifying for the
Intended Tax Treatment
;
(m) except
for the Chemical Articles Amendment,
amend the
Chemical Articles
or
Chemical Bylaws
, or otherwise take any
action
to exempt any
Person
(other than
Talmer
or
its
Subsidiaries
) or any
action
taken by any
Person
from any
Takeover Statute
or similarly restrictive provisions of its organizational
documents or terminate, amend, or waive any provisions of any confidentiality or standstill agreements in place with any third
parties;
(n)
other
than after prior consultation with
Talmer
, materially change or restructure its investment
securities portfolio or its gap position, through purchases, sales, or otherwise, or the manner in which the portfolio is classified
or reported;
(o)
other
than commencement or settlement of foreclosure or debt collection
actions in the ordinary course
of business consistent with past practice
, commence or settle any
claim
,
action
,
or proceeding where the amount in dispute is in excess of $
500,000
or subjects
Chemical
or any of its
Subsidiaries
to any material restrictions on its current or future
business operations (
including
the future business and operations of the Surviving Corporation
or the
Surviving Bank
);
(p)
take
any
action
or fail to take any
action
that is intended
or may reasonably be expected to result in any of the conditions to the
Merger
set forth
in
Article
VII
not being satisfied;
(q)
implement
or adopt any material change in its
tax
accounting or financial accounting principles,
practices or methods, change any
tax
accounting period, or surrender in writing any right
to
claim
a
Tax
refund, offset or other reduction
in
Tax liability
or consent to any extension or waiver of the limitation period applicable
to any
Tax claim
or assessment relating to
Chemical
or
its
Subsidiaries
and involving in excess of $1,000,000, in each case other than as may
be required by applicable
Law
,
GAAP
, or regulatory
guidelines;
(r)
file
or amend any
Tax Return other than in the ordinary course of business,
make any significant
change in any method of
Tax
or accounting (other than as may be required by applicable
Law
,
GAAP
or regulatory guidelines), make or change
any
Tax
election, or settle or compromise any disputed
Tax
liability
in excess of $1,000,000;
(s) extend
the term of any Chemical Material Contract (except for the extension of any such term for one year or less due to the automatic
renewal of such term in accordance with the terms of the Chemical Material Contract), and
except
for
transactions in the ordinary course of business consistent with past practice
terminate
or waive any material provision of any
Chemical Material Contract;
(t) enter
into or amend any Contract or other transaction with any Chemical-Related Person, except as contemplated or permitted by this
Agreement;
(u)
take any action to enter into, or commit to enter into, any Contract for trust, consulting, professional, or other services to
Chemical or any Chemical Subsidiary that is not terminable by Chemical or Chemical Subsidiary without penalty upon thirty (30)
days’ or less notice, except for contracts for services under which the aggregate required payments do not exceed $500,000,
and except for legal, accounting, and other ordinary expenses (not including expenses of financial advisors) related to this Agreement
or the transactions contemplated hereby;
(v) take
any action to enter into, or commit to enter into, any joint venture, strategic alliance, or material relationship with any Person
to jointly develop, market, or offer any product or service;
(w) fail
to promptly notify Talmer of
the threat (to the Knowledge of Chemical)
the commencement of any material Action against, relating to, or affecting (i) Chemical or any Chemical Subsidiary, (ii) Chemical’s
or any Chemical Subsidiary’s directors, officers or employees in their capacities as such, (iii) Chemical’s or any
Chemical Subsidiary’s assets, liabilities, businesses or operations, or (iv) the Merger or this Agreement;
(x) except
for (i) capital expenditures of amounts set forth in Chemical’s capital expenditure plan included in
Section 5.3(x)
of the Chemical Disclosure Schedules, or (ii) capital expenditures required by Law or Governmental Entities or incurred in connection
with the repair or replacement of facilities destroyed or damaged
due to casualty or accident (whether or not covered by insurance),
make any capital expenditure or permit any Chemical Subsidiary to make any capital expenditure;
(y) make
or renew any charitable contributions, gifts, commitments, or pledges of cash or other assets except in the ordinary course of
business consistent with past practice
and not in excess of Chemical’s 2016 budget for such charitable contributions, gifts, commitments or pledges;
(z)
take
any
action
that would materially impede or materially delay the completion of the transactions
contemplated by this
Agreement
or the ability of the
Parties
to obtain any necessary approvals of any Regulatory Agency or
Governmental Entity
required
for the transactions contemplated hereby;
(aa)
enter
into any
Contract
that (i) is
outside the ordinary course
of business consistent with past practice
and (ii) would constitute a
Chemical Material
Contract
;
(bb) except
for transactions in the ordinary course of business consistent with past practice,
enter
into any
Derivative Transaction
; or
(cc)
agree
or commit to do any of the foregoing
.
Article
VI
ADDITIONAL
AGREEMENTS
6.1
Regulatory
Matters
.
(a)
The
Parties
shall cooperate with each other and use their respective commercially reasonable
efforts to promptly prepare and file all necessary documentation, to effect all applications, notices, petitions and filings,
to obtain as promptly as practicable all permits, consents, approvals, and authorizations of all third parties and
Governmental
Entities
that are necessary or advisable
to consummate the transactions contemplated by
this
Agreement
(
including
the
Merger
and the
Bank Merger
), and to comply with the terms and conditions of all such permits,
consents, approvals and authorizations of all such third parties or
Governmental Entities
(collectively,
the “
Regulatory Approvals
”).
As
soon as practicable after the date of this Agreement (but in no event more than 75 days after the date hereof), Chemical shall
prepare and file with the Federal Reserve Board and each other Governmental Entity having jurisdiction all applications and documents
required to obtain the Regulatory Approvals (excluding the Regulatory Approvals applicable solely to the Bank Merger), and shall
use its commercially reasonable efforts to obtain each necessary approval of or consent to consummate the Merger. Chemical shall
provide Talmer with reasonable opportunities to review and comment upon such documents before filing and to make such amendments
and file such supplements thereto as Talmer may reasonably request. Chemical shall provide Talmer with copies of all material
correspondence received from such Governmental Entities and all material responsive correspondence sent thereto.
Chemical
and
Talmer
shall have the right to review in advance, and each will consult the
other on, in each case subject to applicable laws relating to the confidentiality of information, all other information relating
to
Chemical
or
Talmer
, as the case may be, and any
of their respective
Subsidiaries
, that appears in any filing made with, or written materials
submitted to, any third
party
or any
Governmental Entity
in connection with the transactions contemplated by this
Agreement
. In exercising
the foregoing right, each of the
Parties
shall act reasonably and as promptly as practicable.
Each
Party
shall consult with the other in advance of any meeting or conference with any
Governmental Entity
in connection with the transactions contemplated by this
Agreement
and, to the extent permitted by such Governmental
Entity
, give the other
Party
and its counsel the opportunity
to attend and participate in such meetings and conferences. The
Parties
shall consult with
each other with respect to the obtaining of all permits, consents, approvals, and authorizations of all third parties and
Governmental
Entities
necessary or advisable
to consummate the transactions contemplated by
this
Agreement
, and each
Party
will keep the other apprised
of the status of matters relating to completion of the transactions contemplated by this
Agreement
.
Notwithstanding the foregoing, nothing contained herein shall be deemed to require
Chemical
,
Talmer
, or any of their respective
Subsidiaries
to
take any
action
, or commit to take any
action
, or
agree to any condition or restriction, in connection with obtaining the foregoing permits, consents, approvals, and authorizations
of third parties or
Governmental Entities
, that would have a
Material
Adverse Effect on the Surviving Corporation (a “
Materially Burdensome Regulatory Condition
”)
;
provided
,
that a
Materially Burdensome Regulatory Condition
shall not be
deemed to
include
(i) the applicability of any regulatory condition or
requirement affecting
the
Surviving Corporation
as a result of its expected asset size following the
Merger
;
or (ii) except as would have a Material Adverse Effect on the Surviving Corporation, any requirement by a
Governmental
Entity that, as a condition to the Parties consummating the Merger,
either
Party
or
the Surviving Corporation divest of any amount of deposit liabilities, banking offices and/or loans
.
(b)
Each
of
Chemical
and
Talmer
shall, upon request, furnish
to the other all information concerning itself and its
Subsidiaries
, directors, officers,
and shareholders, and such other matters as may be reasonably necessary or advisable in connection with the applications necessary
to obtain the
Regulatory Approvals
, the
Joint Proxy Statement
,
the
Form S-4
, or any other statement, filing, notice, or application made by or on behalf
of
Chemical
,
Talmer
, or any of their respective
Subsidiaries
to any
Governmental Entity
in connection
with the
Merger
and the other transactions contemplated by this
Agreement
.
(c)
Each
of
Chemical
and
Talmer
shall promptly advise the
other upon receiving any communication from any
Governmental Entity
, the consent or approval
of which is required for consummation of the transactions contemplated by this
Agreement
,
that causes such
Party
to believe that there is a reasonable likelihood that any
Regulatory
Approval
will not be obtained or that the receipt of any such approval may be materially delayed or subject to a
Materially
Burdensome Regulatory Condition
.
(d)
Nothing contained in this Agreement shall give Chemical or Talmer, directly or indirectly, the right
to control or direct the operations of the other Party prior to the Effective Time. Prior to the Effective Time, subject to
Article
V
, as applicable, Chemical and Talmer each shall exercise, consistent with the terms and conditions of this Agreement, complete
control and supervision over their respective business operations.
(e) From
the date of this Agreement until the Effective Time, each Party shall promptly notify the other Party in writing of any pending
or, to the Knowledge of either Party (as the case may be), threatened Action or Order by any Governmental Entity or any other
Person (a) challenging or seeking material damages in connection with the Merger or the other transactions contemplated by
this Agreement or (b) seeking to restrain or prohibit the consummation of the Merger or the other transactions contemplated
by this Agreement. If any Action or Order is instituted (or threatened to be instituted) challenging any of the transactions contemplated
by this Agreement as violative of any Law, each Party shall, and shall cause their respective
Representatives to, cooperate and use their commercially reasonable efforts to contest and resist, except insofar as the Parties
may otherwise agree, any such Action or Order, including any Action or Order that seeks a temporary restraining order or preliminary
injunction that would prohibit, prevent or restrict consummation of the Merger or the other transactions contemplated by this
Agreement.
6.2
Access
to Information; Confidentiality
.
(a)
Upon
reasonable notice and subject to applicable laws relating to the confidentiality of information, each
Party
shall, and shall cause each of its
Subsidiaries
to, afford to the officers, employees,
accountants, counsel, advisors, agents, and other R
epresentatives
of the other
Party
reasonable access, during normal business hours throughout the period before the
Effective
Time
, to all its properties, books, contracts, commitments and records, and, during such period, such
Party
shall, and shall cause its
Subsidiaries
to, make available to the other
Party
(i) a copy of each report, schedule, registration statement, and other document filed or received by it during such period
pursuant to the requirements of federal securities laws or federal or state banking or insurance laws (other than reports or documents
that such
Party
is not permitted to disclose under applicable
Law
)
and (ii) all other information concerning its business, properties, and personnel as the other
Party
may reasonably request. Neither
Party
, nor any of its
Subsidiaries
,
shall be required to provide access to or to disclose information where such access or disclosure would jeopardize the attorney-client
privilege of such
Party
or its
Subsidiaries
or contravene
any
Law
, rule, regulation,
order
, judgment, decree,
fiduciary duty, or binding
agreement
entered into before the date of this
Agreement
.
The
Parties
shall make appropriate substitute disclosure arrangements under circumstances
in which the restrictions of the preceding sentence apply.
(b)
Each
Party
shall, and shall cause its respective agents and R
epresentatives
to, maintain in confidence all information received from the other
Party
(other
than disclosure to that
Party
’s agents and R
epresentatives
in connection with the evaluation and consummation of the
Merger
) in connection
with this
Agreement
or the
Merger
pursuant to the
provisions of the
Confidentiality Agreement
and use such information
solely to evaluate
the
Merger;
provided that
,
the disclosure of such
information shall be permitted if (i) the receiving Party in good faith believes that the use of such information is necessary
or appropriate in making any filing or obtaining any consent required for the Merger (in which case the receiving Party shall
advise the other Party before making the disclosure) or (ii) the receiving Party in good faith believes that the furnishing or
use of such information is required by or necessary or appropriate in connection with any applicable laws or any listing or trading
requirement concerning its publicly traded securities (in which case the receiving Party shall advise the other Party before making
the disclosure)
.
(c)
No
investigation by a
Party
or its agents or R
epresentatives
shall affect the representations and warranties of the other
Party
set forth in
this
Agreement
.
6.3
Preparation
of the Joint Proxy Statement and Registration Statement; Shareholders’ Meetings
.
(a)
As
promptly as practicable following the date of this
Agreement
,
Chemical
and
Talmer
shall
use commercially reasonable efforts
to: (i) jointly prepare and cause to be filed with the
SEC
a
joint
proxy statement
to be sent to the
Chemical Shareholders
and the
Talmer
Shareholders
relating to the
Chemical Shareholder Meeting
and the
Talmer
Shareholder Meeting
(together with any amendments or supplements thereto, the “
Joint
Proxy Statement
”) and (ii) jointly prepare, and
Chemical
shall cause
to be filed with the
SEC (not later than 75 days following the date of this Agreement),
a
registration statement on
Form S-4
(together with any amendments or supplements thereto,
the “
Form S-4
”), in which the
Joint
Proxy Statement
will be included, and
Chemical
and
Talmer
shall use their respective commercially reasonable efforts to have the
Form S-4
declared
effective under the
Securities Act
as promptly as practicable after such filing and
use
all commercially reasonable efforts
to keep the
Form S-4
effective as long as reasonably
necessary to consummate the
Merger
. Prior to the filing of the
Joint
Proxy Statement
or the
Form S-4
, each of
Chemical
and
Talmer
shall consult with the other
Party
with
respect to such filings and shall afford the other
Party
and its R
epresentatives
reasonable opportunity to comment thereon. Each of
Chemical
and
Talmer
shall furnish all information concerning itself and its
Affiliates
to the other
and provide such other assistance as may be reasonably requested in connection with the preparation, filing, and distribution
of the
Joint Proxy Statement
and the
Form S-4
, and
the
Joint Proxy Statement
and the
Form S-4
shall
include
all information reasonably requested by each
Party
to be included.
(b)
Each
of
Talmer
and
Chemical
shall promptly provide to
the other copies of all correspondence between it or its
Representatives
, on the one hand,
and the
SEC
, on the other hand, related to the
Joint Proxy
Statement
or the
Form S-4
. Each of
Talmer
and
Chemical
shall promptly notify the other upon the receipt of any comments from the
SEC
or any request from the
SEC
for amendments or supplements to the
Joint
Proxy Statement
or the
Form S-4
and shall provide the other with copies of all such
SEC
comments or requests. Each of
Talmer
and
Chemical
shall
use its commercially reasonable efforts
to respond as promptly as practicable
to and resolve any comments from the
SEC
with respect to the
Joint
Proxy Statement
or the
Form S-4
. Notwithstanding the foregoing, prior to filing
the
Form S-4
(or any amendment or supplement thereto) or mailing the
Joint
Proxy Statement
(or any amendment or supplement thereto) or responding to any comments of the
SEC
with respect thereto, each of
Talmer
and
Chemical
(i) shall provide the other an opportunity to review and comment on such document or response (
including
the proposed final version of such document or response), (ii) shall
include
in
such document or response all comments reasonably proposed by the other and (iii) shall not file or mail such document or respond
to the
SEC
prior to receiving the approval of the other, which approval shall not be unreasonably
withheld, conditioned or delayed. Each of
Talmer
and
Chemical
shall advise the other, promptly after receipt of notice thereof, of the time of effectiveness of the
Form
S-4
, the issuance of any stop
order
relating thereto or the suspension of the registration
or qualification of the
Stock Consideration
for offering or sale in any jurisdiction, and
each of
Talmer
and
Chemical
shall
use
its commercially reasonable efforts
to have any such stop
order
or suspension lifted,
reversed or otherwise terminated. Each of the Parties agrees to correct any information provided by it for use in the
Joint
Proxy Statement
or the
Form S-4
that shall have become false or misleading in any
material respect.
(c) Talmer
shall, as soon as practicable following the effective date of the Form S-4, duly call, give proper notice of, convene, and hold
a meeting of the Talmer Shareholders (the “
Talmer Shareholder Meeting
”) for the purpose of (i) obtaining
the approval of this Agreement by the holders of a majority of the outstanding shares of Talmer Common Stock entitled to vote
thereon; (ii) obtaining the approval by a majority of the votes cast thereon of the Chemical Articles Amendment, if required (such
approvals in clauses (i) and (ii),
collectively, the “
Talmer Shareholder Approval
”); and (iii) submitting
a proposal to the Talmer Shareholders to approve, on an advisory (non-binding) basis, the compensation that may be paid or become
payable to Talmer’s named executive officers that is based on or otherwise related to the transactions contemplated by this
Agreement. Talmer shall use commercially reasonable efforts to (A) cause the Joint Proxy Statement to be mailed to the Talmer
Shareholders and to hold the Talmer Shareholder Meeting as promptly as practicable after the Form S-4 is declared effective under
the Securities Act and (B) except if the Talmer Board shall have made a Talmer Adverse Recommendation Change as permitted
by
Section 6.9
, solicit the Talmer Shareholder Approval. Talmer shall, through the Talmer Board, recommend to the Talmer
Shareholders that they vote for the Talmer Shareholder Approval and shall include such recommendation (the “
Talmer
Board Recommendation
”) in the Joint Proxy Statement, except to the extent that the Talmer Board shall have made
a Talmer Adverse Recommendation Change as permitted by
Section 6.9
.
(d) Talmer
may adjourn or postpone the
Talmer Shareholder Meeting
(i)
to the extent necessary to ensure that any necessary supplement or amendment to the
Joint Proxy
Statement
is provided to the
Talmer Shareholders
in advance of a vote on the
Talmer
Shareholder Approval
or (ii) if, as of the time for which the
Talmer Shareholder Meeting
is originally scheduled (as set forth in the
Joint Proxy Statement
), there are insufficient
Talmer Shareholders
represented (either in
person
or
by proxy) to constitute a quorum necessary to conduct the business of such
Talmer Shareholder
Meeting
or there are insufficient votes to obtain the
Talmer Shareholder Approval
,
(A) at the request of
Chemical
,
Talmer
shall adjourn
or postpone the
Talmer Shareholder Meeting
to a date no more than ten (10)
Business
Days
later than the date of the initial
Talmer Shareholder Meeting
;
provided
,
that
Chemical
may not request that
Talmer
make such
an adjournment or postponement more than once, and (B)
Talmer
may adjourn or postpone the
Talmer Shareholder Meeting
.
(e) Chemical
shall, as soon as practicable following the effective date of the Form S-4, duly call, give proper notice of, convene, and hold
a special meeting of the Chemical Shareholders (the “
Chemical Shareholder Meeting
”) for the purpose
of (i) obtaining the approval by the holders of a majority of the outstanding shares of Chemical Common Stock entitled to vote
thereon of (A) this Agreement, and (B) the amendment of the Chemical Articles to increase the number of authorized shares of Chemical
Common Stock to 100,000,000 (the “
Chemical Articles Amendment
”); (ii) obtaining the approval by a majority
of the votes cast thereon of the issuance of the Stock Consideration (such approvals in clauses (i) and (ii), collectively, the
“
Chemical Shareholder Approval
”); and (iii) submitting a proposal to the Chemical Shareholders to approve,
on an advisory (non-binding) basis, the compensation that may be paid or become payable to Chemical’s named executive officers
that is based on or otherwise related to the transactions contemplated by this Agreement. Chemical shall use commercially reasonable
efforts to (A) cause the Joint Proxy Statement to be mailed to the Chemical Shareholders and to hold the Chemical Shareholder
Meeting as promptly as practicable after
the Form S-4 is declared effective under the Securities Act and (B) except if the Chemical Board shall have made a Chemical
Adverse Recommendation Change as permitted by
Section 6.10
, solicit the Chemical Shareholder Approval. Chemical shall,
through the Chemical Board, recommend to the Chemical Shareholders that they vote for the Chemical Shareholder Approval and shall
include such recommendation (the “
Chemical Board Recommendation
”) in the Joint Proxy Statement, except
to the extent that the Chemical Board shall have made a Chemical Adverse Recommendation Change as permitted by
Section 6.10
.
(f) Chemical
may adjourn or postpone the Chemical Shareholder Meeting (i) to the extent necessary to ensure that any necessary supplement or
amendment to the Joint Proxy Statement is provided to the Chemical Shareholders in advance of a vote on the Chemical Shareholder
Approval or (ii) if, as of the time for which the Chemical Shareholder Meeting is originally scheduled (as set forth in the Joint
Proxy Statement), there are insufficient Chemical Shareholders represented (either in person or by proxy) to constitute a quorum
necessary to conduct the business of such Chemical Shareholder Meeting or there are insufficient votes to obtain the Chemical
Shareholder Approval, (A) at the request of Talmer, Chemical shall adjourn or postpone the Chemical Shareholder Meeting to a date
no more than ten (10) Business Days later than the date of the initial Chemical Shareholder Meeting;
provided
, that Talmer
may not request that Chemical make such an adjournment or postponement more than once and (B) Chemical may adjourn or postpone
the Chemical Shareholder Meeting.
6.4
NASDAQ
Listing
.
Chemical
shall cause the shares of Chemical Common Stock to be issued in the Merger to be approved for listing on NASDAQ prior to the Effective
Time.
6.5
Employee
Matters
.
(a)
All
individuals employed by, or on an authorized leave of absence from,
Talmer
or any of
Talmer
Subsidiaries
immediately before the
Effective Time
(collectively, the “
Covered
Employees
”) shall automatically become employees of the
Surviving Corporation
and its
Subsidiaries
as of the
Effective Time
.
(b)
The
Surviving Corporation
shall
provide the
Covered Employees
rates of base salary or hourly wages that are substantially
similar, in the aggregate, to the rates of base salary or hourly wages provided to such
Covered
Employees
as in effect immediately before the
Effective Time
. Except as provided
in the foregoing, the
Surviving Corporation
shall provide each
Covered
Employee
with the same employee benefits then provided to similarly situated employees at
Chemical
and consistent with this
Section
6.5
;
provided, however
, that, notwithstanding
the foregoing, nothing contained herein shall (i) be treated as an amendment of any particular
Chemical
Benefit Plan
or
Talmer Benefit Plan
, (ii) give any third
party
any right to enforce the provisions of this
Section
6.5
, (iii) limit the
right of the Surviving Corporation or any of its
Subsidiaries
to terminate the employment
of any
Covered Employee
at any time or require the Surviving Corporation or any of its
Subsidiaries
to provide any such employee benefits, rates of base salary or hourly wage
or annual bonus opportunities for any period following any such termination, or (iv) obligate
Chemical
or any of its
Subsidiaries
to (A) maintain any particular
Chemical
Benefit Plan
or
Talmer Benefit Plan
, as applicable, or (B) retain the employment
of any particular
Covered Employee
.
(c)
The
Surviving Corporation
shall
pay severance payments to all employees of one or more of
Talmer and any Talmer Subsidiaries
whose
jobs are eliminated as a result of the
Merger
and whose employment is terminated by the
Surviving Corporation
other than for cause within nine (9) months after the
Effective
Time
, in accordance with
Talmer
’s practices as described on
Section 6.5(c)
of the
Talmer Disclosure Schedules
.
(d) The
Surviving Corporation shall provide credit for years of service at Talmer or any Talmer Subsidiary (and their respective predecessors
if currently honored by Talmer) for all purposes, including, without limitation, for purposes of eligibility to participate, vesting
credit, entitlement to benefits, and levels of benefits of any Chemical Benefit Plan (including, but not limited to, any 401(k)
plan and vacation leave policy but excluding the Chemical Financial Corporation Employees' Pension Plan and any other plan that
has been frozen) or any other employee benefit plan of the Surviving Corporation commencing after the Effective Time, and for
purposes of determining seniority in connection with employment with the Surviving Corporation and its Affiliates.
(e) Talmer
will cooperate with Chemical in its efforts to cause certain employees of Talmer identified by Chemical to enter into retention
or stay bonus agreements (in a form mutually agreed to by Chemical and the employee) prior to the Effective Time.
(f) The
Surviving Corporation shall honor and discharge all of Talmer’s obligations and assume all of its defenses under existing
severance, change of control or employment agreements to which Talmer or any Talmer Subsidiary is a party and which are listed
on
Section 6.5(f)
of the Talmer Disclosure Schedules in accordance with the terms thereof.
(g) On
and after the date of this Agreement, Talmer shall not make or cause to be made any discretionary employer contributions to participants,
and shall prohibit any new participant elections to defer compensation, under Talmer’s deferred compensation plans. Any
preexisting deferral elections that are irrevocable as of the date of this Agreement shall remain in effect for compensation paid
through the end of the periods covered by such deferral elections. Talmer’s deferred compensation plans shall remain in
full force and effect and payments of any benefits to participants shall be made in accordance with the terms of Talmer’s
deferred compensation plans.
(h) The
Surviving Corporation shall maintain all accruals existing as of the Effective Time under Talmer’s and its Subsidiaries’
non-equity incentive and/or bonus plans consistent with Talmer’s and its Subsidiaries’ 2016 budget approved by its
board of directors. Benefits accrued thereunder as of the Effective Time shall be paid by the Surviving Corporation to employees
of Talmer and its Subsidiaries in accordance with Talmer’s and its Subsidiaries’ historic payment practices for such
benefits, with approval of such payments to be made in consultation with the Chairman of the Surviving Corporation.
(i) The
Talmer Board shall, prior to the Effective Time, adopt resolutions terminating its 401(k) Plan effective as of immediately prior
to the Effective Time. The accounts of all participants and beneficiaries in the Talmer 401(k) Plan shall become fully vested
upon termination of the Talmer 401(k) Plan. As soon as practicable following the Effective Time, all account balances in
the Talmer 401(k) Plan shall be either distributed to participants and beneficiaries
or rolled over to an eligible tax-qualified retirement plan or individual retirement account as a participant or beneficiary may
direct. Chemical agrees to permit participants in the Talmer 401(k) Plan who become employees of Chemical or any of its
Subsidiaries to roll over their 401(k) account balances in the Talmer 401(k) Plan to the Chemical 401(k) Plan.
6.6
Indemnification;
Directors’ and Officers’ Insurance
.
(a) In
the event of any threatened or actual claim, action, suit, proceeding or investigation, whether civil, criminal, or administrative
(a “
Claim
”), including any such Claim in which any individual who is now, or has been at any time before
the date of this Agreement, or who becomes before the Effective Time, a director or officer of Talmer or any of its Subsidiaries
(each, an “
Indemnified Party
”), is, or is threatened to be, made a party based in whole or in part on,
or arising in whole or in part out of, or pertaining to this Agreement or any of the transactions contemplated by this Agreement,
whether asserted or arising before or after the Effective Time, the Parties shall cooperate and use their commercially reasonable
efforts to defend against and respond thereto. All rights to indemnification (including advancement of expenses) and exculpation
from liabilities for acts or omissions occurring at or before the Effective Time now existing in favor of any Indemnified Party
as provided in the Talmer Articles and/or the Talmer Bylaws, and any existing indemnification agreements, shall survive the Merger
and shall continue in full force and effect in accordance with their terms, and shall not be amended, repealed, or otherwise modified
after the Effective Time in any manner that would adversely affect the rights thereunder of such individuals for acts or omissions
occurring at or before the Effective Time or taken at the request of Chemical pursuant to
Section 6.7
, it being understood
that nothing in this sentence shall require any amendment to the Articles of Incorporation or Bylaws of the Surviving Corporation.
(b) From
and after the Effective Time, the Surviving Corporation shall, to the fullest extent permitted by applicable Law, indemnify, defend,
and hold harmless, and provide advancement of reasonable expenses to, each Indemnified Party against all losses, claims, damages,
costs, expenses, liabilities, or judgments, or amounts that are paid in settlement of or in connection with any Claim based in
whole or in part on or arising in whole or in part out of the fact that such Person was a director or officer of Talmer or any
Talmer Subsidiary (or was serving at the request of Talmer or any of its Subsidiaries as a director, officer, employee, or trustee
of another Person) and pertaining to any matter existing or occurring, or any acts or omissions occurring, at or before the Effective
Time, whether asserted or claimed before, or at or after, the Effective Time (including matters, acts or omissions occurring in
connection with the approval of this Agreement and the consummation of the transactions contemplated hereby) or taken at the request
of Chemical pursuant to
Section 6.7
;
provided
,
that, and without limitation to the covenants set forth in
Section 6.6(a)
, with respect to any predecessor entities of Talmer Bank, only matters arising from acts or omissions occurring
after the acquisition by Talmer of such entities shall be covered by this
Section 6.6(b)
.
(c)
The Surviving Corporation shall maintain in effect for not less than six (6) years from the Effective
Time the current policies of directors’ and officers’ liability insurance and fiduciary liability insurance maintained
by Talmer and the Talmer Subsidiaries for the Indemnified Parties prior to the Effective Time with respect to matters occurring
at or prior to the Effective Time, including the transactions contemplated by this Agreement. Alternatively, the Surviving
Corporation may substitute therefor policies of substantially the same coverage containing terms and conditions that, taken as
a whole, are no less advantageous to the Indemnified Parties. After the Effective Time, the Surviving Corporation shall not be
required to pay premiums for insurance coverages in excess of 300% of the last annual premium (such 300% threshold, the “
Maximum
Amount
”) paid by Talmer prior to the date of this Agreement in respect of the coverages required to be obtained
pursuant to this
Section 6.6(c)
, but in such case shall purchase the greatest coverage available for a cost not exceeding
the Maximum Amount. Alternatively, the Surviving Corporation may purchase at or after the Effective Time, at a cost not exceeding
the Maximum Amount, a six-year prepaid “tail” policy on terms and conditions providing substantially equivalent benefits
as the current policies of directors’ and officers’ liability insurance and fiduciary liability insurance maintained
by Talmer and the Talmer Subsidiaries for the Indemnified Parties with respect to matters occurring at or prior to the Effective
Time, including the transactions contemplated by this Agreement. If such
“tail” prepaid policy has been obtained,
the Surviving Corporation shall maintain it in full force and effect for its full term and honor all obligations thereunder.
(d) The
provisions of this
Section 6.6
shall survive the Effective Time and are intended to be for the benefit of, and shall be
enforceable by, each Indemnified Party and his or her heirs and representatives.
6.7
Additional
Agreements
.
In case at any
time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement (including
any merger between a Chemical Subsidiary and a Talmer Subsidiary) or to vest the Surviving Corporation with full title to all
properties, assets, rights, approvals, immunities, and franchises of either Party to the Merger, the proper officers and directors
of each Party and their respective Subsidiaries shall take all such necessary action as may be reasonably requested by Chemical.
6.8
Advice
of Changes
.
Each of Chemical and Talmer shall promptly advise the
other of any change or event (a) having or reasonably likely to have a Material Adverse Effect on it or (b) that it believes would
or would be reasonably likely to cause or constitute a material breach of any of its representations, warranties, or covenants
contained in this Agreement;
provided, however
, that no such notification shall affect the representations, warranties,
covenants, or agreements of the Parties (or remedies with respect thereto) or the conditions to the obligations of the Parties
under this Agreement;
provided, further
, that a failure to comply with this
Section 6.8
shall not constitute a breach
of this Agreement or the failure of any condition set forth in
Article VII
to be satisfied unless the underlying Material
Adverse Effect or material breach would independently result in the failure of a condition set forth in
Article VII
to
be satisfied.
6.9
No
Solicitation by
Talmer
.
(a)
Except
as specifically permitted by this
Section
6.9
,
Talmer
shall not, and shall cause each of its
Subsidiaries
not to, and shall not authorize
or knowingly
permit
any of its
Representatives
to,
during the period from the date of this
Agreement
until the earlier of the
Effective
Time
and the termination of this
Agreement
in accordance with
Section
8.1
,
directly or indirectly, (i) solicit or initiate, or knowingly facilitate or knowingly encourage (
including
by way of furnishing non-public information), any inquiries regarding, or the making of any proposal
or offer that constitutes or would reasonably be expected to lead to, a
Talmer Takeover Proposal
,
or (ii) engage or enter into, continue, or otherwise participate in any discussions or negotiations regarding, or furnish
to any other
Person
material non-public information in connection with, any
Talmer
Takeover Proposal
, or otherwise cooperate with or assist or participate in, or knowingly encourage or knowingly facilitate,
any such inquiries, proposals, discussions, or negotiations or any effort or attempt to make a
Talmer
Takeover Proposal
.
Talmer
shall, and shall cause each of the
Talmer
Subsidiaries and each of its
and the
Talmer Subsidiaries
’
Representatives
to, (A) immediately upon execution of this
Agreement
, cease any solicitation,
encouragement, discussions, or negotiations with any
Person
that may be ongoing with respect
to a
Talmer Takeover Proposal
as of the date of this
Agreement
,
and (B) immediately upon execution of this
Agreement
, terminate all physical and electronic
data room access previously granted to any such
Person
or its
Representatives
.
(b)
Notwithstanding
anything to the contrary contained herein, if at any time prior to obtaining the
Talmer Shareholder
Approval
,
Talmer
or any of its
Representatives
receives
a bona fide written
Talmer Takeover
Proposal from any
Person
or
group of Persons
, which
Talmer Takeover
Proposal
did not result from any breach of this
Section
6.9
, then
Talmer
and its Representatives may, (i) contact such
Person
or
group
of Persons
and their
Representatives
to request that such
Person
or
group of Persons
provide clarification of any term or condition of such
Talmer
Takeover Proposal
that the
Talmer Board
determines in good faith to be ambiguous
or unclear, and (ii) if the
Talmer Board
determines in good faith, after consultation with
its financial advisors and outside legal counsel, that such
Talmer Takeover Proposal
constitutes
or is reasonably likely to result in a
Talmer Superior Proposal,
(A) furnish, pursuant
to an
Acceptable Talmer Confidentiality Agreement
, information (
including
non-public information) with respect to
Talmer
and its
Subsidiaries
to the
Person
or
group of Persons
who has
made such
Talmer Takeover Proposal
and their respective
Representatives
;
provided that
,
Talmer
shall (subject to the terms of the
Confidentiality
Agreement
) promptly make available to
Chemical
(through an electronic data room
or otherwise), and provide express written notification via electronic mail notification to
Chemical
in accordance with the applicable provisions of
Section 10.3
of, the availability of any written material non-public
information that is provided to any such
Person
or
group
of Persons
or their respective
Representatives
, if such information was not
previously
provided or made available to
Chemical
or its
Representatives
,
and
(B)
engage in or otherwise participate in discussions or negotiations with the
Person
or
group of Persons
making such
Talmer
Takeover Proposal
and their respective
Representatives
;
provided
,
further
that
Talmer
shall promptly provide to
Chemical
(1) a
copy of any
Talmer Takeover Proposal
made in writing by any such
Person
or group of
Persons
to
Talmer
, any of its
Subsidiaries
, or any of their respective
Representatives
,
together with the identity of the
Person
or
group of Persons
making the
Talmer Takeover Proposal
, and (2) a written summary of the material
terms of any such
Talmer Takeover Proposal
not made in writing.
(c) Talmer
shall keep
Chemical
promptly informed of any material
developments, discussions, or negotiations regarding any
Talmer Takeover Proposal
,
including
any such proposal first made to or discussed with
Talmer
prior to the date of this
Agreement and remade after the date of this Agreement
(
including
forwarding to
Chemical
any written materials provided to
Talmer
or its
Representatives
in connection with any such
Talmer
Takeover Proposal
) on a reasonably prompt basis. Any such disclosure shall be subject to the terms of the
Confidentiality
Agreement
.
Talmer
agrees that it and its
Subsidiaries
will not to enter into any confidentiality
or other
agreement
with any
Person
subsequent to
the date of this
Agreement
which would prohibit
Talmer
from providing any information to
Chemical
in accordance with this
Section
6.9
.
(d)
Except
as permitted by
Section
6.9(e)
, the
Talmer Board
shall not
(i)(
A) fail to recommend to the
Talmer
Shareholders
that the
Talmer Shareholder Approval
be given or fail to
include
the
Talmer Board Recommendation
in the
Joint Proxy
Statement
, (B) change, qualify, withhold, withdraw, or modify, or publicly propose to change, qualify, withhold, withdraw,
or modify, in a manner adverse to
Chemical
, the
Talmer
Board Recommendation
, (C) take any formal
action
or make any recommendation
or public statement in connection with a tender offer or exchange offer other than a recommendation of rejection of such offer
or a temporary “stop, look, and listen” communication by the
Talmer Board
pursuant
to Rule 14d-9(f) of the
Exchange Act
, or (D) adopt, approve, or recommend, or publicly
propose to approve or recommend to the
Talmer Shareholders
, a
Talmer
Takeover Proposal
(each of the actions described in this clause
(i)
being referred
to as a “
Talmer Adverse Recommendation Change
”); or (ii) cause
or
permit Talmer
or any of the
Talmer Subsidiaries
to
enter into any letter of intent,
agreement
, or
agreement
in principle with respect to any
Talmer Takeover Proposal
(other than an
Acceptable
Talmer Confidentiality Agreement
) (each, a “
Talmer Acquisition Agreement
”).
(e)
Notwithstanding
anything to the contrary herein, prior to the time the
Talmer Shareholder Approval
is obtained,
the
Talmer Board
may, in connection with a bona fide written
Talmer
Takeover Proposal
, which
Talmer Takeover Proposal
was made after the date of this
Agreement
(or that was made prior to the date of this
Agreement
and remade after the date of this
Agreement
) and that did not result from any breach
of this
Section
6.9
, make a
Talmer Adverse Recommendation
Change
or terminate this
Agreement
pursuant to
Section
8.1(i)
to enter into a definitive
merger agreement
or other definitive purchase or
acquisition
agreement
with respect to such
Talmer Takeover
Proposal
, if and only if, prior to taking such
action
,
Talmer
has complied with its obligations under this
Section
6.9
and the
Talmer Board
has determined in good faith, after consultation with its financial
advisors and outside legal counsel, that such
Talmer Takeover Proposal
constitutes
a
Talmer Superior Proposal
;
provided
,
however
, that prior to taking any such
action (i) Talmer
has given
Chemical
at least
three (3)
Business Days
prior written notice of its intention to take such
action
(which notice shall specify the material terms and conditions of any such
Talmer Superior
Proposal
,
including
the identity of the
Person
or
group of Persons
making such
Talmer Superior Proposal
)
and has contemporaneously provided a copy to
Chemical
of all written materials (
including
all transaction agreements and related documents) with or from the
party
making
such
Talmer Superior Proposal
, (ii)
Talmer
has
negotiated, and has caused its
Representatives
to negotiate, in good faith with
Chemical
during such notice period, to the extent
Chemical
wishes to negotiate, to enable
Chemical
to revise the terms of this
Agreement
such
that it would cause such
Talmer Superior Proposal
to no longer constitute a
Talmer
Superior Proposal
, and (iii) following the end of such notice period, the
Talmer Board
shall have considered in good faith any changes to this
Agreement
proposed in writing
by
Chemical
, and shall have determined that the
Talmer
Superior Proposal
would continue to constitute a
Talmer Superior Proposal
if such
revisions were to be given effect. In the event of any material revisions to a
Talmer Takeover
Proposal
that could have an impact, influence, or other effect on the
Talmer Board
’s
decision or discussion with respect to whether such proposal is a
Talmer Superior Proposal
,
Talmer
shall deliver a new written notice to Chemical
pursuant to the foregoing clause
(i)
and again
comply with the requirements of this
Section
6.9(e
)
with respect to such new written notice;
provided
,
however
, that references herein to the three (3)
Business
Day
period shall be deemed to be references to a two (2)
Business Day
period with
respect thereto.
(f)
Provided
that
Talmer
and the
Talmer Board
comply with their
respective obligations under
Section
6.9(e)
,
nothing in this
Section
6.9
shall prohibit the
Talmer Board
from
(i)
taking
and disclosing to the
Talmer Shareholders
a position contemplated by Rule 14e-2(a), Rule
14d-9, or Item 1012(a) of Regulation M-A promulgated under the
Exchange Act
,
(ii)
making
any “stop, look, and listen” communications to
Talmer Shareholders
pursuant
to Section 14d-9(f) promulgated under the
Exchange Act (or any similar communications to
the Talmer Shareholders), or (iii) making any disclosure to the Talmer Shareholders if the Talmer Board determines in good faith,
after consultation with its outside legal counsel, that failure to take such action would be reasonably likely to be inconsistent
with the Talmer Boards’ fiduciary duties under applicable Law
;
provided, however
, that the taking of any
action
pursuant to any of the preceding clauses
(i), (ii),
or
(iii)
shall
in no way limit or modify the effect of this
Agreement
with respect to any such
action
taken.
6.10
No
Solicitation by
Chemical
.
(a)
Except
as specifically permitted by this
Section
6.10
,
Chemical
shall not, and shall cause each of its
Subsidiaries
not to, and shall not authorize
or knowingly
permit
any of its
Representatives
to,
during the period from the date of this
Agreement
until the earlier of the
Effective
Time
and the termination of this
Agreement
in accordance with
Section
8.1
,
directly or indirectly, (i) solicit or initiate, or knowingly facilitate or knowingly encourage (
including
by way of furnishing non-public information), any inquiries regarding, or the making of any proposal or offer that constitutes
or would reasonably be expected to lead to, a
Chemical Takeover Proposal
, or (ii) engage
or enter into, continue, or otherwise participate in any discussions or negotiations regarding, or furnish to any other
Person
material non-public information in connection with, any
Chemical Takeover Proposal
,
or otherwise cooperate with or assist or participate in, or knowingly encourage or knowingly facilitate, any such inquiries, proposals,
discussions, or negotiations or any effort or attempt to make a
Chemical Takeover Proposal
.
Chemical
shall, and shall cause each of the
Chemical Subsidiaries
and each of its and the
Chemical Subsidiaries
’
Representatives
to (A) immediately upon execution of this
Agreement
, cease any solicitation,
encouragement, discussions, or negotiations with any
Person
that may be ongoing with respect
to a
Chemical Takeover Proposal
as of the date of this
Agreement
,
and (B) immediately upon execution of this
Agreement
, terminate all physical and electronic
data room access previously granted to any such
Person
or its
Representatives
.
(b)
Notwithstanding
anything to the contrary contained herein, if at any time prior to obtaining the
Chemical Shareholder
Approval
,
Chemical
or any of its
Representatives
receives a bona fide written
Chemical Takeover
Proposal from any
Person
or
group of Persons
, which
Chemical Takeover
Proposal
did not result from any breach of this
Section
6.10
, then
Chemical
and its Representatives may, (i) contact such
Person
or
group
of Persons
and their
Representatives
to request that such
Person
or
group of Persons
provide clarification of any term or condition of such
Chemical
Takeover Proposal
that the
Chemical Board
determines in good faith to be ambiguous
or unclear and (ii) if the
Chemical Board
determines in good faith, after consultation
with its financial advisors and outside legal counsel, that such
Chemical Takeover Proposal
constitutes
or is reasonably likely to result in a
Chemical Superior Proposal,
(A) furnish, pursuant
to an
Acceptable Chemical Confidentiality Agreement
, information (
including
non-public information) with respect to
Chemical
and its
Subsidiaries
to the
Person
or
group of Persons
who has
made such
Chemical Takeover Proposal
and their respective
Representatives
;
provided
, that
Chemical
shall (subject to the terms of the
Confidentiality
Agreement
) promptly make available to
Talmer
(through an electronic data room or
otherwise), and provide express written notification via electronic mail notification to
Talmer
in accordance with the applicable provisions of
Section 10.3
of the availability of, any written material non-public
information that is provided to any such
Person
or
group
of Persons
or their respective
Representatives
, if such information was not previously
provided or made available to
Talmer
or its
Representatives
,
and
(B)
engage in or otherwise participate in discussions or negotiations with the
Person
or
group of Persons
making such
Chemical
Takeover Proposal
and their respective
Representatives
;
provided
,
further
that
Chemical
shall promptly provide to
Talmer
(1) a
copy of any
Chemical Takeover Proposal
made in writing by any such
Person
or group of
Persons
to
Chemical
, any of its
Subsidiaries
, or any of their respective
Representatives
,
together with the identity of the
Person
or
group of Persons
making the
Chemical Takeover Proposal
, and (2) a written summary of the material
terms of any such
Chemical Takeover Proposal
not made in writing.
(c) Chemical
shall keep
Talmer
promptly informed of any material
developments, discussions, or negotiations regarding any
Chemical Takeover Proposal, including
any such proposal first made to or discussed with Chemical prior to
the date of this
Agreement
and remade after the date of this Agreement
(
including
forwarding to
Talmer
any written materials provided to
Chemical
or its
Representatives
in connection with any such
Chemical Takeover Proposal
) on a reasonably prompt basis.
Any such disclosure shall be subject to the terms of the
Confidentiality Agreement
.
Chemical
agrees that it and its
Subsidiaries
will not enter into any confidentiality or other
agreement
with any
Person
subsequent to the date
of this
Agreement
which would prohibit
Chemical
from
providing any information to
Talmer
in accordance with this
Section
6.10
.
(d)
Except
as permitted by
Section
6.10(e)
, the
Chemical Board
shall not
(i)(
A) fail to recommend to the
Chemical
Shareholders
that the
Chemical Shareholder Approval
be given or fail to
include
the
Chemical Board Recommendation
in the
Joint Proxy
Statement
; (B) change, qualify, withhold, withdraw, or modify, or publicly propose to change, qualify, withhold, withdraw,
or modify, in a manner adverse to
Talmer
, the
Chemical
Board Recommendation
; (C) take any formal
action
or make any recommendation
or public statement in connection with a tender offer or exchange offer other than a recommendation of rejection of such offer
or a temporary “stop, look, and listen” communication by the
Chemical Board
pursuant
to Rule 14d-9(f) of the
Exchange Act
; or (D) adopt, approve, or recommend, or publicly
propose to approve or recommend to the
Chemical Shareholders
, a
Chemical
Takeover Proposal
(each of the actions described in this clause
(i)
being referred
to as a “
Chemical Adverse Recommendation Change
”) or (ii) cause
or
permit Chemical
or any of the
Chemical Subsidiaries
to enter into any letter of intent,
agreement
, or
agreement
in principle with respect to any
Chemical Takeover Proposal
(other than an
Acceptable
Chemical Confidentiality Agreement
) (each, a “
Chemical Acquisition Agreement
”).
(e)
Notwithstanding
anything to the contrary herein, prior to the time the
Chemical Shareholder Approval
is
obtained, the
Chemical Board
may, in connection with a bona fide written
Chemical
Takeover Proposal
, which
Chemical Takeover Proposal
was made after the date of this
Agreement
(or that was made prior to the date of this
Agreement
and remade after the date of this
Agreement
) and that did not result from any breach
of this
Section
6.10
, make a
Chemical Adverse Recommendation
Change
or terminate this
Agreement
pursuant to
Section
8.1(j)
to enter into a definitive
merger agreement
or other definitive purchase or
acquisition
agreement
with respect to such
Chemical Takeover
Proposal
, if and only if, prior to taking such
action
,
Chemical
has complied with its obligations under this
Section
6.10
and the
Chemical Board
has determined in good faith, after consultation with its
financial advisors and outside legal counsel, that such
Chemical Takeover Proposal
constitutes
a
Chemical Superior Proposal
;
provided
,
however
, that prior to taking any
such
action (i) Chemical
has given
Talmer
at
least three (3)
Business Days
prior written notice of its intention to take such
action
(which notice shall specify the material terms and conditions of any such
Chemical Superior
Proposal
,
including
the identity of the
Person
or
group of Persons
making such
Chemical Superior Proposal
)
and has contemporaneously provided a copy to
Talmer
of all written materials (
including
all transaction agreements and related documents) with or from the
party
making
such
Chemical Superior Proposal
; (ii)
Chemical
has
negotiated, and has caused its
Representatives
to negotiate, in good faith with
Talmer
during such notice period, to the extent
Talmer
wishes to negotiate, to enable
Talmer
to revise the terms of this
Agreement
such that it would cause such
Chemical
Superior Proposal
to no longer constitute a
Chemical Superior Proposal
; and (iii) following
the end of such notice period, the
Chemical Board
shall have considered in good faith any
changes to this
Agreement
proposed in writing by
Talmer
,
and shall have determined that the
Chemical Superior Proposal
would continue to constitute
a
Chemical Superior Proposal
if such revisions were to be given effect. In the event of
any material revisions to a
Chemical Takeover Proposal
that could have an impact, influence,
or other effect on the
Chemical Board
’s decision or discussion with respect to whether
such proposal is a
Chemical Superior Proposal
,
Chemical
shall deliver a new written notice to
Talmer
pursuant to the foregoing clause
(i)
and again comply with the requirements of this
Section
6.10(e
)
with respect to such new written notice;
provided
,
however
, that references herein to the three (3)
Business
Day
period shall be deemed to be references to a two (2)
Business Day
period with
respect thereto.
(f)
Provided
that
Chemical
and the
Chemical Board
comply with
their respective obligations under
Section
6.10(e)
,
nothing in this
Section
6.10
shall prohibit the
Chemical Board
from
(i)
taking
and disclosing to the
Chemical Shareholders
a position contemplated by Rule 14e-2(a), Rule
14d-9, or Item 1012(a) of Regulation M-A promulgated under the
Exchange Act
,
(ii)
making
any “stop, look, and listen” communications to
Chemical Shareholders
pursuant
to Section 14d-9(f) promulgated under the
Exchange Act (or any similar communications to
the Chemical Shareholders), or (iii) making any disclosure to the Chemical Shareholders if the Chemical Board determines in good
faith, after consultation with its outside legal counsel, that failure to take such action would be reasonably likely to be inconsistent
with the Chemical Boards’ fiduciary duties under applicable Law
;
provided, however
, that the taking of any
action
pursuant to any of the preceding clauses
(i), (ii) or
(iii)
shall in no way limit or modify the effect of this
Agreement
with respect
to any such
action
taken.
6.11
Corporate
Governance
.
(a)
Effective as of the
Effective Time
,
Chemical
shall
take all actions necessary to cause the size of the
Board of Directors
of the Surviving
Corporation to be twelve (12) directors. The then-current seven (7) members of the
Chemical Board
(the “
Chemical Continuing Directors
”) shall continue in
office and shall serve on the
Board of Directors
of the Surviving Corporation
until
such time as their successors are duly elected and qualified
. As of the
Effective Time
,
the
Chemical Continuing Directors
shall immediately appoint five (5) of the then-current
members of the
Talmer Board
(two of whom shall be Gary Torgow and David Provost) (the “
Talmer
Continuing Directors
”) to serve on the Board of Directors of the Surviving Corporation
until
such time as their successors are duly elected and qualified
. The
Board of Directors
of
the Surviving Corporation (or the appropriate committee thereof) shall cause the Talmer Continuing Directors to be nominated for
election at the 2017 annual meeting of shareholders of the
Surviving Corporation
. The
Parties
shall confer with regard to the individuals constituting the Talmer Continuing Directors.
(b)
Effective as of the
effective time
of the
Bank Merger
,
Chemical
Bank shall take all actions necessary to cause the size of the
Board
of Directors
of the Surviving Bank to be fourteen (
14)
directors. The then-current
twelve (
12)
members of the
Chemical
Bank Board of
Directors (the “
Chemical Bank Continuing Directors
”) shall continue
in office and shall serve on the
Board of Directors
of the Surviving Bank
until
such time as their successors are duly elected and qualified
. As of the
effective time
of the
Bank Merger
, the
Chemical Bank Continuing
Directors
shall immediately appoint
two individuals mutually agreed upon by the Parties
to serve on the
Board of Directors
of the Surviving Bank
until
such time as their successors are duly elected and qualified
. The
Board of Directors
of
the Surviving Bank (or the appropriate committee thereof) shall cause those two individuals to be nominated for election at the
2017 annual meeting of the shareholder of the
Surviving Bank
.
(c)
Effective as of the
Effective Time (and, with respect to positions with the Surviving Bank, effective
as of the effective time of the Bank Merger)
, (i) David Ramaker shall continue as Chief Executive Officer of the
Surviving
Corporation
and Chairman, Chief Executive Officer, and President of the Surviving Bank; (ii) Gary Torgow shall become and
serve as Chairman of the Surviving Corporation; (iii) David Provost shall become and serve as a consultant to the
Surviving
Corporation
and a member of the Board of Directors of the Surviving Corporation; (iv)
Lori
Gwizdala
shall continue as the Chief Financial Officer of the Surviving Corporation and the Surviving Bank; (v) Dennis
Klaeser shall become and serve as a consultant to the Surviving Corporation and the Surviving Bank; and (vi) Thomas Shafer shall
become and serve as Executive Vice President of the Surviving Bank. Dennis Klaeser shall continue to serve as the Chief Financial
Officer of
Talmer Bank
until the
effective time
of
the
Bank Merger
.
(d) On
the date hereof, each of Gary Torgow, David Provost, and Dennis Klaeser shall enter into a mutually acceptable services agreement
with the Surviving Corporation and Talmer Bank, which shall become effective at the Effective Time. In addition, prior to the
Effective Time, Thomas Shafer shall enter into a mutually acceptable employment agreement with the Surviving Bank, which shall
become effective at the effective time of the Bank Merger.
6.12
Restructuring
Efforts
.
If either Talmer or Chemical shall have failed to obtain
the requisite vote or votes of the Talmer Shareholders or the Chemical Shareholders, respectively, for the consummation of the
transactions contemplated by this Agreement at a duly held shareholders’ meeting or at any adjournment thereof, then, unless
this Agreement shall have been terminated pursuant to its terms, each of the Parties shall in good faith use its commercially
reasonable efforts to negotiate a restructuring of the transaction provided for herein (it being understood that neither Party
shall have any obligation to alter or change the amount or kind of the Merger Consideration in a manner adverse to such Party
or its shareholders) and to resubmit the transaction to its shareholders for approval, with the timing of such resubmission to
be determined at the request of the other Party.
6.13
Exemption
from
Liability
Under Section 16(b)
.
Prior
to the Effective Time, Talmer and Chemical each shall take all such steps as may be required to cause (a) any dispositions of
Talmer Common Stock (including derivative securities with respect to Talmer Common Stock, options and other stock-based awards)
resulting from the Merger and the other transactions contemplated by this Agreement, by each individual who will be subject to
the reporting requirements of Section 16(a) of the Exchange Act with respect to Talmer immediately prior to the Effective Time,
to be exempt under Rule 16b-3 promulgated under the Exchange Act and (b) any acquisitions or
dispositions of Chemical Common Stock
(including derivative securities with respect to Chemical Common Stock, options and other stock-based awards) resulting from the
Merger and the other transactions contemplated by this Agreement, by each individual who may become or is reasonably expected
to become subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to Chemical immediately following
the Effective Time, to be exempt under Rule 16b-3 promulgated under the Exchange Act.
6.14
Trust
Preferred Securities; Senior Debt Facility
.
At the Effective Time,
the Surviving Corporation shall assume (a) the obligations of Talmer to make all payments of the principal and interest on
all of the debt securities issued to First Place Capital Trust, First Place Capital Trust II, First Place Capital Trust III, and
First of Huron Capital Trust I (collectively, the “
Capital Trusts
”), and (b) the performance and
observance of all covenants and conditions to be performed or observed by Talmer under indentures held by or for the benefit of
the Capital Trusts. In connection therewith, the Surviving Corporation shall execute and deliver such supplemental indentures
as are required to make such assumptions effective, all in a form reasonably acceptable to the Surviving Corporation. The parties
hereto shall provide such opinions of counsel and officer’s certificates to the trustees of the Capital Trusts for such
assumptions in a form reasonably acceptable to the Parties. The Parties also agree to use commercially reasonable efforts to cooperate
with U.S. Bank National Association in an attempt to obtain its consent for Chemical to retain Talmer’s current senior unsecured
revolving credit facility with U.S. Bank National Association following the Merger.
6.15
Data
Conversion
. The Parties intend to convert their respective information and data onto a common information technology system
(the “
Data Conversion
”). The Parties agree to use all commercially reasonable efforts to promptly commence
preparations for implementation of the Data Conversion, with the goal of effecting the Data Conversion after the Effective Time
and at such later time as mutually agreed upon by the Parties. The Parties agree to cooperate in preparing for the Data Conversion,
including by providing reasonable access to data,
information systems, and personnel having expertise with their and their respective Subsidiaries’ information and data systems;
provided, however
, that neither Party shall be required to terminate any third-party service provider arrangements prior
to the Effective Time. In the event that either Party takes, at the request of the other Party, any action relative to third parties
to facilitate the Data Conversion that results in the imposition of any termination fees or other charges or expenses, the Party
that requested such action shall indemnify the other Party for all such fees, charges and expenses, and the costs of reversing
the Data Conversion process, if the Merger is not consummated for any reason, other than the breach of this Agreement by the party
otherwise entitled to indemnification under this
Section 6.15
or the termination by Talmer under
Section 8.1(i)
(in the case of Talmer being otherwise entitled to indemnification under this
Section 6.15
) or by Chemical under
Section
8.1(j)
(in the case of Chemical being otherwise entitled to indemnification under this
Section 6.15
).
6.16
Commercially
Reasonable Efforts; Cooperation
.
Each of Chemical and Talmer agrees
to exercise good faith and use its commercially reasonable efforts to satisfy the various covenants and conditions to Closing
in this Agreement, and to take or cause to be taken all actions, and do or cause to be done all things, necessary, proper, or
advisable on its part under this Agreement and applicable Law to consummate and make effective the Merger and the other transactions
contemplated by this Agreement as soon as reasonably practicable, including preparing and filing as promptly as practicable all
documentation to effect all necessary notices, reports, and other filings, and to obtain as promptly as reasonably practicable
all consents, registrations, approvals, permits, and authorizations necessary or advisable to be obtained from any Governmental
Entity or other third party in order to consummate the Merger or any of the other transactions contemplated by this Agreement.
6.17
Securityholder
Litigation
. Each Party shall keep the other Party reasonably informed with respect to the defense or settlement of any securityholder
Action against it or its directors or officers relating to the Merger or the other transactions contemplated by this Agreement.
Each Party shall give the other Party the opportunity to consult with it regarding the defense or settlement of any such securityholder
Action and shall not settle any such Action without the other Party’s prior written consent (such consent not to be unreasonably
withheld, conditioned or delayed).
6.18
Expenses
.
Whether or not the Merger is consummated, except as otherwise provided in this Agreement, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated by this Agreement shall be paid by the party incurring such expenses, except
that Talmer and Chemical shall each pay and bear one-half of (a) each regulatory filing, notification, registration or similar
fee required to be paid by any
party in connection with this Agreement and the transactions contemplated by this Agreement under
the Securities Act, the Exchange Act, applicable banking Laws and other applicable Laws and (b) any fees and expenses (excluding
each Party’s internal costs and fees and expenses of attorneys, accountants and financial and other advisors) incurred in
respect of printing, filing and mailing of the Registration Statement and Proxy Statement.
6.19
Fairness
Opinions
. Talmer will use commercially reasonable efforts to provide Chemical with a copy of the written fairness opinion
referred to in
Section 3.23
solely for informational purposes within ten (10) Business Days of the date of this Agreement.
Chemical will
use commercially reasonable efforts to provide Talmer with a copy of the written fairness opinion referred to in
Section 4.23
solely for informational purposes within ten (10) Business Days of the date of this Agreement.
6.20
Dividends
.
Talmer and Chemical shall coordinate with each other regarding the declaration, setting of record dates, and payment dates of
dividends with respect to shares of Talmer Common Stock and Chemical Common Stock for the purpose of minimizing the risk that
holders of shares of Talmer Common Stock (a) in respect of any calendar quarter, receive dividends on both shares of Talmer Common
Stock and shares of Chemical Common Stock received as Merger Consideration, or (b) in respect of any calendar quarter, fail to
receive a dividend on shares of Talmer Common Stock or shares of Chemical Common Stock received as Merger Consideration.
Article
VII
CONDITIONS PRECEDENT
7.1
Conditions
to Each
Party
’s Obligation To Effect the
Merger
.
The respective obligations of the Parties to effect the Merger shall
be subject to the satisfaction at or before the Effective Time of the following conditions:
(a)
Shareholder
Approvals
. The
Chemical Shareholder Approval
and the
Talmer
Shareholder Approval
shall have been obtained by the requisite affirmative votes of
Chemical
Shareholders
and
Talmer Shareholders
entitled to vote thereon.
(b)
The
NASDAQ
Listing
. The shares of
Chemical Common Stock
to be issued to the holders of
Talmer Common Stock
upon consummation of the
Merger
shall have been authorized for listing on
NASDAQ
(or such other national securities
exchange mutually agreed upon by the
Parties
).
(c)
Form
S-4
. The
Form S-4
shall have become effective
under the
Securities Act
, no stop
order
suspending
the effectiveness of the
Form S-4
shall have been issued, and no proceedings for that purpose
shall have been initiated or threatened by the
SEC
.
(d)
No
Injunctions
or Restraints; Illegality
. No
order
,
injunction
or decree issued by any court or agency of competent jurisdiction or other legal
restraint or prohibition (an “
Injunction
”) preventing the consummation
of the
Merger
or any of the other transactions contemplated by this
Agreement
shall be in effect. No statute, rule, regulation,
order
, or decree shall have been
enacted, entered, promulgated, or enforced by any
Governmental Entity
that prohibits or
makes illegal the consummation of the
Merger
.
(e)
Regulatory
Approvals
. All
Regulatory Approvals (excluding the Regulatory
Approvals applicable solely to the Bank Merger)
shall have been obtained and shall remain in full force and effect, all
statutory notice and waiting periods in respect thereof shall have expired, and no such
Regulatory
Approval
shall have resulted in the imposition of any
Materially Burdensome Regulatory
Condition
.
7.2
Conditions
to Obligations of
Talmer
.
The
obligation of Talmer to effect the Merger is also subject to the satisfaction (or waiver by Talmer), at or before the Effective
Time, of the following conditions:
(a)
Representations
and Warranties
. (i) The representations and warranties of
Chemical
set forth in this
Agreement (other than
Sections 4.1(a)
,
4.2
,
4.4
, and
4.6
)
shall
be true and correct (without giving effect to any limitation as to “materiality” or “
Material
Adverse Effect
” contained therein) as of the date of this
Agreement
and as
of the
Effective Time
as though made on and as of the
Effective
Time
(except that representations and
warranties
that by their terms speak specifically as of the date of this
Agreement
or another date
shall be true and correct as of such date), except where the failure of such representations and warranties to be so true and
correct
does not have, and would not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on Chemical
; and (ii) the representations and warranties of
Chemical
set forth in
Sections 4.1(a)
,
4.2
,
4.4
, and
4.6
shall be true
and correct as of the date of this Agreement and the Effective Time as though made on and as of the Effective Time
(except
that representations and warranties that by their terms speak specifically as of the date of this
Agreement
or another date shall be true and correct as of such date) in all material respects.
(b)
Performance
of Obligations of
Chemical
.
Chemical
shall have
performed in all material respects the obligations required to be performed by it under this
Agreement
at or before the
Effective Time
.
(c)
Officer’s Certificate
. Chemical shall have delivered to Talmer a certificate, dated
as of the Closing Date and signed on behalf of Chemical by its Chief Executive Officer or Chief Financial Officer certifying to
the effect that the conditions set forth in
Sections 7.2(a)
and
7.2(b)
have been satisfied.
(d)
No
Material Adverse Effect
. Since September 30, 2015, there shall not have been any change, state of facts, event, development
or effect that has had, or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on
Chemical.
(e)
Federal
Tax Opinion
. Talmer shall have received the opinion of its counsel, Nelson Mullins Riley & Scarborough LLP, in form and
substance customary in transactions of the type contemplated hereby, dated as of the Closing Date, substantially to the effect
that, on the basis of facts, representations, and assumptions set forth in such opinion that are consistent with the state of
facts existing at the Effective Time, (i) the Merger will be treated as a reorganization within the meaning of Section 368(a)
of the Code and (ii) Talmer and Chemical will each be a party to that reorganization within the meaning of Section 368(b) of the
Code. In rendering such opinion, counsel may require and rely upon customary representations contained in certificates of officers
of Chemical and Talmer.
7.3
Conditions
to Obligations of
Chemical
.
The
obligation of Chemical to effect the Merger is also subject to the satisfaction (or waiver by Chemical) at or before the Effective
Time of the following conditions:
(a)
Representations
and Warranties
. (i) The representations and warranties of
Talmer
set forth in this
Agreement (other than
Sections 3.1(a)
,
3.2
,
3.4
, and
3.6
)
shall
be true and correct (without giving effect to any limitation as to “materiality” or “
Material
Adverse Effect
” contained therein) as of the date of this
Agreement
and as
of the
Effective Time
as though made on and as of the
Effective
Time
(except that representations and warranties that by their terms speak specifically as of the date of this
Agreement
or another date shall be true and correct as of such date), except where the failure of such representations and warranties
to be so true and correct
does not have, and would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on Talmer
; and (ii) the representations and warranties of
Talmer
set forth in
Sections 3.1(a)
,
3.2
,
3.4
, and
3.6
shall be true
and correct as of the date of this Agreement and the Effective Time as though made on and as of the Effective Time
(except
that representations and warranties that by their terms speak specifically as of the date of this
Agreement
or another date shall be true and correct as of such date) in all material respects.
(b)
Performance
of Obligations of
Talmer
.
Talmer
shall have
performed in all material respects the obligations required to be performed by it under this
Agreement
at or before the
Effective Time
.
(c)
Officer’s Certificate
. Talmer shall have delivered to Chemical a certificate, dated
as of the Closing Date and signed on behalf of Talmer by its Chief Executive Officer or Chief Financial Officer certifying to
the effect that the conditions set forth in
Sections 7.3(a)
and
7.3(b)
have been satisfied.
(d)
No
Material Adverse Effect
. Since September 30, 2015, there shall not have been any change, state of facts, event, development
or effect that has had, or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on
Talmer.
(e)
Federal
Tax Opinion
. Chemical shall have received the opinion of its counsel, Warner Norcross & Judd LLP, in form and substance
customary in transactions of the type contemplated hereby, dated as of the Closing Date, substantially to the effect that, on
the basis of facts, representations, and assumptions set forth in such opinion that are consistent with the state of facts existing
at the Effective Time, (i) the Merger will be treated as a reorganization within the meaning of Section 368(a) of the Code and
(ii) Talmer and Chemical will each be a party to that reorganization within the meaning of Section 368(b) of the Code. In rendering
such opinion, counsel may require and rely upon customary representations contained in certificates of officers of Chemical and
Talmer.
Article
VIII
TERMINATION AND AMENDMENT
8.1
Termination
.
Notwithstanding anything contained in this Agreement to the contrary,
this Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, whether before or, subject
to the terms of this Agreement, after receipt of the Chemical Shareholder Approval or the Talmer Shareholder Approval, as follows:
(a)
by
mutual written consent of
Chemical
and
Talmer
;
(b)
by
either
Chemical
or
Talmer
, if any
Governmental
Entity
has issued an
order
or taken any other
action
permanently enjoining, restraining, or otherwise prohibiting the consummation of the
Merger
,
and such
order
or other
action
is final and nonappealable.
The right to terminate this
Agreement
pursuant to this
Section
8.1(b)
shall not be available to the
Party
seeking to terminate if the failure of such
Party
to perform any of its obligations under this
Agreement
required to be performed at or prior to the
Effective Time
has been a substantial
cause of, or a substantial factor that resulted in, the issuance of such an
order
or the
taking of such an
action
;
(c)
by
either
Chemical
or
Talmer,
if the
Merger
does not occur on or before
December 31, 2016
(the “
End
Date
”);
provided,
however
, that (i) the
End Date
may
be extended by mutual written consent of the
Parties,
and (ii) if on the
End
Date
, any of the conditions to
Closing
set forth in
Sections
7.1(c)
or
7.1(e)
shall not have been satisfied but all other conditions to
Closing
set forth in
Article
VII
shall be
satisfied or capable of being satisfied, then the
End Date
shall be extended to February
28, 2017 if either
Party
notifies the other
Party
in
writing on or prior to the
End Date
of its election to extend the
End
Date
;
provided
,
further
, that the right to extend the
End Date
and
the right to terminate this
Agreement
pursuant to this
Section
8.1(c)
shall not be available to the
Party
seeking to extend or terminate if the failure
of such
Party
to perform any of its obligations under this
Agreement
required to be performed at or prior to the
Effective Time
has been a substantial
cause of, or a substantial factor that resulted in, the failure of the
Effective Time
to
occur on or before the
End Date;
(d)
by
either
Chemical
or
Talmer,
if
(i)
the
Chemical Shareholder Meeting
(
including
any
adjournments thereof) shall have concluded and been finally adjourned and the
Chemical Shareholder
Approval
shall not have been obtained or
(ii)
the
Talmer
Shareholder Meeting
(
including
any adjournments) shall have concluded and been finally
adjourned and the
Talmer Shareholder Approval
shall not have been obtained. The right to
terminate this
Agreement
pursuant to this
Section
8.1(d)
shall not be available to the
Party
seeking to terminate if the failure of such
Party
to perform any of its obligations under this
Agreement
required to be performed at or prior to the
Chemical Shareholder Meeting
or the
Talmer Shareholder Meeting
, as applicable, has been a substantial cause of, or a substantial
factor that resulted in, the
Chemical Shareholder Approval
or the
Talmer
Shareholder Approval
, as applicable, not having been obtained;
(e)
by
Talmer
, if
Chemical
shall have breached or failed
to perform any of its representations, warranties, covenants, or other agreements contained in this
Agreement
,
which breach or failure to perform (i) would result in a failure of a condition set forth in
Section
7.1
or
Section
7.2
and (ii)(A) cannot
be cured by the
End Date
or
(B)
if capable
of being cured by the
End Date
, shall not have been cured within thirty (30)
Business
Days
following receipt of written notice (which notice shall specify in reasonable detail the nature of such breach or
failure and
Talmer
’s intention to terminate this
Agreement
if such breach or failure is not cured) from
Talmer
of such breach or failure;
provided
,
that
Talmer
shall not have a right to terminate this
Agreement
pursuant to this
Section
8.1(e)
if
it is then in breach of any representation, warranty, covenant, or other
agreement
contained
in this
Agreement
that would result in a failure of a condition set forth in
Section
7.1
or
Section
7.3
;
(f)
by
Chemical
, if
Talmer
shall have breached or failed
to perform any of its representations, warranties, covenants, or other agreements contained in this
Agreement
,
which breach or failure to perform (i) would result in a failure of a condition set forth in
Section
7.1
or
Section
7.3
and (ii)(A) cannot
be cured by the
End Date
, or
(B)
if capable
of being cured by the
End Date
, shall not have been cured within thirty (30)
Business
Days
following receipt of written notice (which notice shall specify in reasonable detail the nature of such breach or
failure and
Chemical
’s intention to terminate this
Agreement
if such breach or failure is not cured) from
Chemical
of such breach or failure;
provided
, that
Chemical
shall not have a right to terminate this
Agreement
pursuant to this
Section
8.1(f)
if
it is then in breach of any representation, warranty, covenant, or other
agreement
contained
in this
Agreement
that would result in a failure of a condition set forth in
Section
7.1
or
Section
7.2
;
(g)
by
Talmer
prior to the receipt of the
Chemical Shareholder
Approval
if (i) the
Chemical Board
shall have effected a
Chemical
Adverse Recommendation Change
; (ii) the
Chemical Board
shall have failed to
reject a
Chemical Takeover Proposal
and reaffirm the
Chemical
Board Recommendation
within ten (10)
Business Days
following the public announcement
of such
Chemical Takeover Proposal
and in any event at least two (2)
Business
Days
prior to the
Chemical Shareholder Meeting
; (iii)
Chemical
enters into a Chemical Acquisition Agreement; (iv)
Chemical
shall have materially
breached
Section
6.10
; (v) subject to
Chemical
’s
rights to adjourn or postpone the
Chemical Shareholder Meeting as permitted by
Section 6.3(f)
,
Chemical
shall have failed to call, give proper notice of, convene and hold the
Chemical
Shareholder Meeting materially in accordance with
Section 6.3(e)
; or (vi)
Chemical
or the
Chemical Board
shall have publicly announced its intention to do any of the
foregoing;
(h)
by
Chemical
prior to the receipt of the
Talmer Shareholder
Approval
if (i) the
Talmer Board
shall have effected a
Talmer
Adverse Recommendation Change
; (ii) the
Talmer Board
shall have failed to reject
a
Talmer Takeover Proposal
and reaffirm the
Talmer Board
Recommendation
within ten (10)
Business Days
following the public announcement of
such
Talmer Takeover Proposal
and in any event at least two (2)
Business
Days
prior to the
Talmer Shareholder Meeting
; (iii)
Talmer
enters into a Talmer Acquisition Agreement; (iv)
Talmer
shall have materially
breached
Section
6.9
; (v) subject to
Talmer
’s
rights to adjourn or postpone the
Talmer Shareholder Meeting as permitted by
Section 6.3(d)
,
Talmer
shall have failed to call, give proper notice of, convene, and hold the
Talmer
Shareholder Meeting materially in accordance with
Section 6.3(c)
; or (vi)
Talmer
or the
Talmer Board
shall have publicly announced its intention to do any of the
foregoing;
(i)
by
Talmer
prior to receipt of the
Talmer Shareholder Approval
,
in
order
to enter into a definitive
merger agreement
or
other definitive purchase or acquisition
agreement
that constitutes a
Talmer
Superior Proposal
;
provided
,
however
, that (i)
Talmer
has complied
with
Section 6.9
in all material respects and (ii)
Talmer
pays (or causes to
be paid) the
Termination Fee
and
Talmer Expense Reimbursement
prior to or simultaneously with such termination; or
(j)
by
Chemical
prior to receipt of the
Chemical Shareholder Approval
,
in
order
to enter into a definitive
merger agreement
or
other definitive purchase or acquisition
agreement
that constitutes a
Chemical
Superior Proposal
;
provided
,
however
, that (i)
Chemical
has complied
with
Section 6.10
in all material respects and (ii)
Chemical
pays (or causes
to be paid)
the
Termination Fee
and
Chemical Expense Reimbursement
prior to or simultaneously with such termination.
8.2
Effect
of Termination
.
(a)
In
the event that:
(i) this
Agreement is terminated by Talmer pursuant to
Section 8.1(g)
, Chemical shall pay, or cause to be paid, to Talmer
cash in an amount equal to $34,000,000 (the “
Termination Fee
”);
(ii) this
Agreement is terminated by Chemical pursuant to
Section 8.1(h)
, Talmer shall pay, or cause to be paid, to Chemical
the Termination Fee;
(iii) this
Agreement is terminated by Talmer pursuant to
Section 8.1(e)
, or by Talmer or Chemical pursuant to
Section 8.1(d)(i)
,
Chemical shall pay, or cause to be paid, to Talmer cash in an amount equal to the Talmer Expense Reimbursement, and if (A) any
Person or group of Persons shall have
made (whether or not subsequently withdrawn) a Chemical Takeover Proposal after the date
of this Agreement and prior to (1) the date that this Agreement is terminated in the case of a termination pursuant to
Section
8.1(e)
or (2) the Chemical Shareholder Meeting in the case of a termination pursuant to
Section 8.1(d)(i)
, and
(B) at any time prior to the date that is 12 months after the date of any such termination, Chemical or any of its Subsidiaries
enters into any definitive agreement providing for a Chemical Takeover Proposal or consummates a Chemical Takeover Proposal
(
provided
that,
for purposes of this
Section 8.2(a)(iii)
, the references to “ten percent (10%)” in the definition of “Chemical
Takeover Proposal” shall be deemed to be references to “fifty percent (50%)”)
, then Chemical shall pay,
or cause to be paid, to Talmer cash in an amount equal to the Termination Fee
minus
the Talmer Expense Reimbursement (to
the extent such Talmer Expense Reimbursement has been previously paid to Talmer);
(iv) this
Agreement is terminated by Chemical pursuant to
Section 8.1(f)
, or by Talmer or Chemical pursuant to
Section 8.1(d)(ii)
,
Talmer shall pay, or cause to be paid, to Chemical cash in an amount equal to the Chemical Expense Reimbursement, and if (A) any
Person or group of Persons shall have made (whether or not subsequently withdrawn) a Talmer Takeover Proposal after the date of
this Agreement and prior to (1) the date that this Agreement is terminated in the case of a termination pursuant to
Section
8.1(f)
or (2) the Talmer Shareholder Meeting in the case of a termination pursuant to
Section 8.1(d)(ii)
, and
(B) at any time prior to the date that is 12 months after the date of any such termination, Talmer or any of its Subsidiaries
enters into any definitive agreement providing for a Talmer Takeover Proposal or consummates a Talmer Takeover Proposal (
provided
that, for
purposes of this
Section 8.2(a)(iv)
, the references to “ten percent
(10%)” in the definition of “Talmer Takeover Proposal” shall be deemed to be references to “fifty percent
(50%)”)
, then Talmer shall pay, or cause to be paid, to Chemical cash in an amount equal to the Termination Fee
minus
the Chemical Expense Reimbursement (to the extent such Chemical Expense Reimbursement has been previously paid to Chemical);
(v) (A)
this Agreement is terminated by Talmer or Chemical pursuant to
Section 8.1(c)
(if the Chemical Shareholder Approval has
not theretofore been obtained), (B) any Person or group of Persons shall have made (whether or not subsequently withdrawn)
a Chemical Takeover Proposal after the date of this Agreement and prior to the date of any such termination, and (C) at any
time prior to the date that is 12 months after the date of any such termination, Chemical or any of its Subsidiaries enters into
any definitive agreement providing for a Chemical Takeover Proposal or consummates a Chemical Takeover Proposal (
provided
that, for purposes of this
Section 8.2(a)(v)
, the references to “ten percent (10%)” in the definition
of “Chemical Takeover Proposal” shall be deemed to be references to “fifty percent (50%)”), then Chemical
shall pay, or cause to be paid, to Talmer cash in an amount equal to the Termination Fee;
(vi) (A)
this Agreement is terminated by Chemical or Talmer pursuant to
Section 8.1(c)
(if the Talmer Shareholder Approval has not
theretofore been obtained), (B) any Person or group of Persons shall have made (whether or not subsequently withdrawn) a
Talmer Takeover Proposal after the date of this Agreement and prior to the date of any such termination, and (C) at any time
prior to the date that is 12 months after the date of any such termination, Talmer or any of its Subsidiaries enters into any
definitive agreement providing for a Talmer Takeover Proposal or consummates a Talmer Takeover Proposal (
provided
that,
for purposes of this
Section 8.2(a)(vi)
, the references to “ten percent (10%)” in the definition of “Talmer
Takeover Proposal” shall be deemed to be references to “fifty percent (50%)”), then Talmer shall pay, or cause
to be paid, to Chemical cash in an amount equal to the Termination Fee;
(vii) this
Agreement is terminated by Talmer pursuant to
Section 8.1(i)
, then Talmer shall pay, or cause to be paid, to Chemical,
prior to or contemporaneously with such termination, cash in an amount equal to the Termination Fee (and any purported termination
pursuant to
Section 8.1(i)
shall be void and of no force or effect unless and until Talmer shall have made such payment);
or
(viii) this
Agreement is terminated by Chemical pursuant to
Section 8.1(j)
, then Chemical shall pay, or cause to be paid, to Talmer,
prior to or contemporaneously with such termination, cash in an amount equal to the Termination Fee (and any purported termination
pursuant to
Section 8.1(j)
shall be void and of no force or effect unless Chemical shall have made such payment).
(b)
Each
of the
Parties
acknowledges and agrees that the agreements contained in this
Section
8.2
are an integral part of the transactions contemplated by this
Agreement
, and
that without these agreements, the other
Party
would not enter into this
Agreement
.
Accordingly, (i) if
Talmer
fails to pay amounts due pursuant to this
Section
8.2
and, in
order
to obtain such payment,
Chemical
commences a suit that results in a judgment against
Talmer
for the
Termination
Fee
or the
Talmer Expense Reimbursement
, then
Talmer
shall pay
Chemical
its costs and expenses (
including
reasonable attorneys’ fees and expenses) in connection with such suit, together with interest on the amount of the
Termination Fee
and the
Chemical Expense Reimbursement
,
as applicable, from the date such payment was required to be made until the date of payment at the prime rate published in the
Wall Street Journal
on the date such
payment was required to be made and (ii) if
Chemical
fails to pay amounts due pursuant
to this
Section
8.2
and, in
order
to obtain such payment,
Talmer
commences a suit that results in a judgment against
Chemical
for the
Termination Fee
or the
Talmer
Expense Reimbursement
, then
Chemical
shall pay
Talmer
its costs and expenses (
including
reasonable attorneys’ fees and expenses)
in connection with such suit, together with interest on the amount of the
Termination Fee
or
the
Talmer Expense Reimbursement
, as applicable, from the date such payment was required
to be made until the date of payment at the prime rate published in the
Wall Street Journal
on the date such payment was
required to be made.
(c)
On
any termination of this
Agreement
pursuant to
Section
8.1
,
this
Agreement
shall terminate and forthwith become void and have no further force or effect
(except for the provisions of
Section
6.2(b)
,
Section
6.18
,
Section
8.2
, and
Article
X
)
,
and, subject to the payment of any amounts owing pursuant to this
Section
8.2
,
there shall be no other
liability
on the part of
Chemical
or
Talmer
to the other. Notwithstanding anything in this
Agreement
to the contrary, no
Party
hereto will be relieved or released from any
liability
or damages arising from a willful or intentional breach of any provision of this
Agreement
or fraud, and the aggrieved
Party
will be entitled to all rights and remedies available
at
law
or in equity.
(d)
Any
Termination Fee
or
Chemical Expense Reimbursement
,
as applicable, that is owed by
Talmer
pursuant to
Section
8.2(a)
will be paid in the aggregate to
Chemical
by or at the direction of
Talmer
in immediately available funds upon the occurrence of the event giving rise to the obligation to make such payment. Any
Termination Fee
or
Talmer Expense Reimbursement
,
as applicable, that is owed by
Chemical
pursuant to
Section
8.2(a)
will be paid in the aggregate to
Talmer
by or at the direction of
Chemical
in immediately available funds upon the occurrence of the event giving rise to the obligation to make such payment. For
the avoidance of doubt, (i) in no event shall
Chemical
be required to pay the
Termination
Fee
or the
Talmer Expense Reimbursement
on more than one occasion; and (ii) in no
event shall
Talmer
be required to pay the
Termination Fee
or the
Chemical Expense Reimbursement
on more than one occasion.
8.3
Amendment
.
This
Agreement
may be amended by the
Parties
, by
action
taken
or authorized, in the case of
Talmer
, by the
Talmer Board
and,
in the case of
Chemical
, by the
Chemical Board
, at any time
before or after the receipt of the
Talmer Shareholder Approval
or the
Chemical Shareholder
Approval
;
provided, however
, that after receipt of any such shareholder approval, no amendment
shall be made which by
Law
or in accordance with the rules of any relevant stock exchange requires
further approval by the
Talmer Shareholders
or the
Chemical Shareholders
,
as applicable, without such further approval. This
Agreement
may not be amended except by an
instrument in writing signed on behalf of
Talmer
and
Chemical
.
8.4
Extension;
Waiver
.
At any time before the Effective Time, the Parties, by action
taken or authorized by their respective Boards of Directors, may, to the extent legally allowed, (a) extend the time for the performance
of any of the obligations or other acts of the other Party, (b) waive any inaccuracies in the representations and warranties contained
in this Agreement, or (c) waive compliance with any of the agreements or conditions contained in this Agreement. Any agreement
on the part of a Party to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf
of such Party, but such extension or waiver or failure to insist on strict compliance with an obligation,
covenant,
agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.
Article
IX
DEFINITIONS
As
used in this Agreement, the following terms shall have the following meanings. Unless context otherwise requires, references to
Articles and Sections shall refer to Articles and Sections of this Agreement.
“
Acceptable
Chemical Confidentiality Agreement
” shall mean any
confidentiality agreement
or standstill
agreement
that contains provisions with respect to confidentiality
matters that are no less favorable to
Talmer
than those contained in the
Confidentiality
Agreement and that complies with
Section 6.10(c)
hereof
.
“
Acceptable
Talmer Confidentiality Agreement
” shall mean any
confidentiality agreement
or standstill
agreement
that contains provisions with respect to confidentiality
matters that are no less favorable to
Talmer
than those contained in the
Confidentiality
Agreement and that complies with
Section 6.9(c)
hereof
.
“
Action
”
shall mean (a) any litigation, claim, action, suit, hearing, proceeding or arbitration, (b) any material investigation by a Governmental
Entity or (c) any demand or notice of violation by a Governmental Entity (in the case of clauses (a), (b) and (c), whether civil,
criminal, administrative, labor or investigative).
“
Affiliate
”
shall mean (unless otherwise specified), with respect to any
Person
, any other
Person
that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common
control
with, such specified
Person
, and “
control
,”
with respect to the relationship between or among two or more
Persons
, means the possession,
directly or indirectly, of the power to direct or cause the direction of the affairs or management of a
Person
,
whether through the ownership of voting securities, as trustee or executor, by
Contract
,
or by any other means.
“
Agreement
”
shall have the meaning set forth in the
Preamble
.
“
Bank
Merger
” shall have the meaning set forth in
Section 1.9
.
“
Benefit
Plan
” shall have the meaning set forth in
Section 10.10(b)
.
“
BHC
Act
” shall mean the Bank Holding Company Act of 1956, as amended.
“
Business
Day
” shall mean any day other than a Saturday, Sunday, or day on which banking institutions in the State
of Michigan are authorized or obligated pursuant to legal requirements or executive
order
to
be closed.
“
Cancelled
Talmer Stock Options
” shall have the meaning set forth in
Section 1.5(b)
.
“
Capital
Trusts
” shall have the meaning set forth in
Section 6.14
.
“
Capitalization
Date
” shall have the meaning set forth in
Section 3.4
.
“
Cash
Consideration
” shall have the meaning set forth in
Section 1.4(c)
.
“
Certificate
of Merger
” shall have the meaning set forth in
Section 1.2
.
“
Chemical
”
shall have the meaning set forth in the
Preamble
.
“
Chemical
Acquisition Agreement
” shall have the meaning set forth in
Section 6.10(d)
.
“
Chemical
Adverse Recommendation Change
” shall have the meaning set forth in
Section 6.10(d)
.
“
Chemical
Articles
” shall have the meaning set forth in
Section 1.6
.
“
Chemical
Articles Amendment
” shall have the meaning set forth in
Section 6.3(e)
.
“
Chemical
Bank
” shall have the meaning set forth in the
Recitals
.
“
Chemical
Bank Continuing Directors
” shall have the meaning set forth in
Section 6.11(b)
.
“
Chemical
Benefit Plans
” shall mean (a) any “
employee benefit plan
”
within the meaning of
Section 3(3) of ERISA
, (b) any
Chemical
Stock Plan
, and (c) any deferred compensation, retirement, defined contribution, defined benefit, pension, profit sharing,
employee welfare, fringe benefit, flexible spending account, stock purchase, stock option, stock ownership, phantom stock, stock
appreciation rights, restricted stock, restricted stock units, severance, separation, employment, change in
control
,
vacation pay, leave of absence, layoff, salary continuation, sick leave, excess benefit, bonus or other incentive compensation,
day or dependent care, legal services, cafeteria, health, life, accident, disability, workers’ compensation or other insurance,
or other employee
benefit plan
, or
Contract
, program,
or practice, whether written or oral, for the benefit of
Chemical
’s current or former
officers, employees, independent contractors, or directors, in each case either (i) existing at the
Closing
Date
and sponsored, maintained, or contributed to by
Chemical
or any
Chemical
Subsidiary
, or (ii) existing at the
Closing Date
or prior thereto, in respect of
which
Chemical
or any
Chemical Subsidiary
has any
Liability
.
“
Chemical
Board
” shall have the meaning set forth in the
Recitals
.
“
Chemical
Board Recommendation
” shall have the meaning set forth in
Section 6.3(e)
.
“
Chemical
Bylaws
” shall have the meaning set forth in
Section 1.7
.
“
Chemical
Call Reports
” shall have the meaning set forth in
Section 4.5(b)(ii)
.
“
Chemical
Capital Stock
” shall mean the
Chemical Common Stock
and the
Chemical
Preferred Stock.
“
Chemical
Certificates
” shall have the meaning set forth in
Section 2.1
.
“
Chemical
Closing Price
” shall mean the volume weighted average trading price on
NASDAQ
of
Chemical Common Stock for the fifteen (15) full trading days ending on t
he second
trading day immediately preceding the
Closing Date.
“
Chemical
Common Stock
” shall have the meaning set forth in
Section 1.4(a)
.
“
Chemical
Continuing Directors
” shall have the meaning set forth in
Section 6.11(a)
.
“
Chemical
Disclosure Schedules
” shall have the meaning set forth in
Article IV
.
“
Chemical
Expense Reimbursement
” shall mean
the out-of-pocket fees and expenses (
including
fees and expenses of financial advisors, outside legal counsel, accountants, experts, consultants, and other
Representatives
)
actually incurred by or on behalf of
Chemical
in connection with the authorization, preparation,
negotiation, execution, or performance of this
Agreement
and the transactions contemplated
by this
Agreement
and the due diligence and evaluation by
Chemical
of the transactions contemplated by this
Agreement
, in an aggregate amount not to
exceed $
3,000,000
.
“
Chemical
Financial Statements
”
shall have the meaning set forth in
Section 4.5(a)
.
“
Chemical
Investment Banker
” shall have the meaning set forth in
Section 4.22
.
“
Chemical
Material Contract
” shall have the meaning set forth in
Section 4.17(a)
.
“
Chemical-Owned
Intellectual Property
” shall have the meaning set forth in
Section 4.15
.
“
Chemical
Preferred Stock
” shall have the meaning set forth in
Section 4.4(a)
.
“
Chemical-Related
Person
” shall mean any shareholder owning five percent (5%) or more of the issued and outstanding Chemical Common
Stock, any director or executive officer of Chemical or any Chemical Subsidiary, their spouses and children, any Affiliate of
or member of the same household as such persons, and any Person of which such persons, alone or together, have control.
“
Chemical
SEC Reports
” shall have the meaning set forth in
Section 4.33(a)
.
“
Chemical
Share-Based Awards
” shall have the meaning set forth in
Section 4.4(b)
.
“
Chemical
Shareholder Approval
” shall have the meaning set forth in
Section 6.3(e)
.
“
Chemical
Shareholder Meeting
” shall have the meaning set forth in
Section 6.3(e)
.
“
Chemical
Shareholders
” shall mean the shareholders of
Chemical
.
“
Chemical
Site
” shall mean a Site with respect to Chemical or any Chemical Subsidiary.
“
Chemical
Stock Option
” means any grant of an option to purchase a share or shares of Chemical Common Stock under any Chemical
Stock Plan.
“
Chemical
Stock Plan
” shall have the meaning set forth in
Section 4.4(b)
.
“
Chemical
Subsidiary
” shall have the meaning set forth in
Section 4.1(b)
.
“
Chemical
Superior Proposal
” shall mean any bona fide written
Chemical Takeover Proposal
that the
Chemical Board
has determined in its good faith judgment, after consultation
with its financial advisors and outside legal counsel, is reasonably likely to be consummated in accordance with its terms and
that is reasonably likely to result in the consummation of a transaction more favorable to the
Chemical
Shareholders
than the
Merger
, taking into account such factors as the
Chemical
Board
in good faith deems relevant,
including
legal, financial, regulatory and other
aspects of the proposal, and any changes to the terms of this
Agreement
proposed by
Talmer
in response to such proposal or otherwise. For purposes of the definition of “
Chemical
Superior Proposal
,” the references to “
ten percent (10%)
” in the
definition of
Chemical Takeover Proposal
shall
be deemed
to be references to “fifty percent (50%)
.”
“
Chemical
Takeover Proposal
” shall mean any inquiry, proposal, or offer from any
Person
(other than
Talmer
and its
Subsidiaries
)
or “
group
”, within the meaning of Section 13(d) of the
Exchange
Act
, of
Persons
relating to, in a single transaction or series of related transactions
(other than any single transaction or series of related transactions to which Talmer has consented to in writing), any (i) acquisition
of assets of
Chemical
and its
Subsidiaries
equal
to more than
ten percent (10%)
of
Chemical
’s
consolidated assets or to which more than
ten percent (10%)
of
Chemical
’s
net income on a consolidated basis are attributable; (ii) acquisition of more than
ten percent
(10%)
of the outstanding
Chemical Common Stock
or the capital stock of any Chemical
Subsidiary
; (iii) tender offer or exchange offer that, if consummated, would result
in any
Person
or
group of Persons
beneficially owning
more than
ten percent (10%)
of the outstanding
Chemical
Common Stock
; (iv)
merger
, consolidation, share exchange, business combination,
recapitalization, liquidation, dissolution, or similar transaction involving
Chemical
or
any of its
Subsidiaries
; or (v) any combination of the foregoing types of transactions
if the sum of the percentage of consolidated assets, consolidated net income, and
Chemical Common
Stock
involved is more than
ten percent (10%)
, in each case, other than the
Merger
.
“
Claim
”
shall have the meaning set forth in
Section 6.6(a)
.
“
Closing”
shall have the meaning set forth in
Section 10.1
.
“
Closing
Date
” shall have the meaning set forth in
Section 10.1
.
“
Code
”
shall have the meaning set forth in the
Recitals
.
“
Collective
Bargaining Agreement
” means any Contract that has been entered into with any labor organization, union, works council,
employee representative or association
.
“
Confidentiality
Agreement
” shall mean that certain Confidentiality Agreement, dated as of November 2, 2015, by and between Chemical
and Talmer
.
“
Contract
”
shall mean any
agreement
, contract, commitment, arrangement, memorandum of understanding,
side letter, understanding, contractual obligation or other instrument of a contractual nature, whether written or oral.
“
Covered
Employees
” shall have the meaning set forth in
Section 6.5(a)
.
“
Data
Conversion
” shall have the meaning set forth in
Section 6.15
.
“
Derivative
Transaction
” shall mean any swap transaction, option, warrant, forward purchase or sale transaction, futures
transaction, cap transaction, floor transaction, or collar transaction relating to one or more currencies, commodities, bonds,
equity securities, loans, interest rates, prices, values, or other financial or nonfinancial assets, credit-related events, or
conditions or any indices, or any other similar transaction or combination of any of these transactions,
including
collateralized mortgage obligations or other similar instruments or any debt or equity instruments evidencing or embedding
any such types of transactions, and any related credit support, collateral, or other similar arrangements related to such transactions.
“
Effective
Time
” shall have the meaning set forth in
Section 1.2
.
“
End
Date
” shall have the meaning set forth in
Section 8.1(c)
.
“
Environmental
Claim
” shall mean any and all administrative or judicial actions, suits, orders, claims, liens, notices,
notices of violations, investigations, complaints, requests for information, proceedings, or other communication (written or oral),
whether criminal or civil, pursuant to or relating to any applicable
Environmental Law
.
“
Environmental
Law
” shall mean any and all
Laws
,
Environmental
Permits
, or binding agreements with any
Governmental Entity
, relating to the protection
of health and the environment, or governing the handling, use, generation, treatment, storage, transportation, disposal, manufacture,
distribution, formulation, packaging, labeling, or
Release
of or exposure to
Hazardous
Materials
.
“
Environmental
Permit
” shall mean any
Permit
required or issued by any
Governmental
Entity
under or in connection with any
Environmental Law
,
including
without limitation, any and all orders, consent orders or binding agreements issued by or entered into with a
Governmental
Entity
under any applicable
Environmental Law
.
“
Equity
Award Exchange Ratio
” shall have the meaning set forth in
Section 1.5(b)
.
“
ERISA
”
shall mean the
Employee Retirement Income Security Act of 1974
, as amended and
including
the regulations promulgated thereunder.
“
ERISA
Affiliate
” shall mean any entity that is a member of (i) a controlled group of corporations (as defined in
Section 414(b) of the
Code
), (ii) a group of trades or businesses under common
control
(as defined in Section 414(c) of the
Code
), (iii) an affiliated service group (as
defined under Section 414(m) of the
Code
or the regulations under Section 414(o) of the
Code
), or (iv) a “
controlled group
”
within the meaning of
Section 4001 of ERISA
, any of which
includes
Talmer
or any of its
Subsidiaries
or
Chemical
or
any of its
Subsidiaries
, as applicable.
“
Exchange
Act
” shall mean the
Securities Exchange Act of 1934, as amended
.
“
Exchange
Agent
” shall have the meaning set forth in
Section 2.1
.
“
Exchange
Fund
” shall have the meaning set forth in
Section 2.1
.
“
Exchange
Ratio
” shall have the meaning set forth in
Section 1.4(c)
.
“
FDIC
”
shall mean the Federal Deposit Insurance Corporation.
“
Federal
Reserve Board
” shall mean the Board of Governors of the Federal Reserve System or its delegees.
“
Form
S-4
” shall have the meaning set forth in
Section 6.3(a)
.
“
GAAP
”
shall mean United States generally accepted accounting principles.
“
Governmental
Entity
” shall mean any entity or body exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to United States federal, state or local government or other non-United States international, multinational
or other government,
including
any department, commission, board, agency, instrumentality,
political subdivision, bureau, official or other regulatory, administrative or judicial authority thereof and any self-regulatory
organization.
“
Gramm-Leach-Bliley
Act
” shall mean the
Gramm-Leach-Bliley Act of 1999
.
“
Hazardous
Material
” shall mean petroleum, petroleum hydrocarbons or petroleum products, petroleum by-products, radioactive
materials, asbestos or asbestos-containing materials, gasoline, diesel fuel, pesticides, radon, urea formaldehyde, mold, lead
or lead-containing materials, or polychlorinated biphenyls; and any other chemicals, materials, substances or wastes in any amount
or concentration that are regulated under or for which liability can be imposed under any Environmental Law.
“
Indemnified
Party
” shall have the meaning set forth in
Section 6.6(a)
.
“
Injunction
”
shall have the meaning set forth in
Section 7.1(d)
.
“
Intended
Tax Treatment
” shall have the meaning set forth in
Section 1.8
.
“
Joint
Proxy Statement
” shall have the meaning set forth in
Section 6.3(a)
.
“
Knowledge
”
shall mean the actual knowledge (without investigation) of such
Person
’s senior executive
officers.
“
Law
”
shall mean any statute, law, ordinance, rule, code, executive order, common law, injunction, judgment, decree, Order or regulation
of any Governmental Entity.
“
Liability
”
shall mean all indebtedness, obligations and other liabilities and contingencies of a Person, whether absolute, accrued, contingent,
fixed or otherwise, or whether due or to become due.
“
Lien
”
shall mean, with respect to any property or asset, any mortgage, lien, pledge, security interest, hypothecation or other encumbrance
affecting such property or asset.
“
Material
Adverse Effect
” shall mean with respect to
Talmer
,
Chemical
,
or the Surviving Corporation, as the case may be, any fact, event, change, condition, development, circumstance, or effect that,
individually or in the aggregate,
(i)
is or would be reasonably likely to be material and
adverse to the business, assets, liabilities, properties, results of operations, or financial condition of such
Party
and its
Subsidiaries
taken as a whole (
provided, however
, that, with respect
to this clause
(i)
, a
Material Adverse Effect
shall
not be deemed to
include
any adverse fact, event, change, condition, development, circumstance
or effect to the extent arising from (A) changes, after the date hereof, in
GAAP
or regulatory
accounting requirements applicable to banks and their holding companies, generally, in each case except to the extent such
Party
is affected in a disproportionate manner as compared to other community banks and their holding companies in the midwestern
United States, (B) changes, after the date hereof, in
Laws
of general applicability to
banks and their holding companies, generally, or interpretations thereof by
Governmental Entities
,
in each case except to the extent such
Party
is affected in a disproportionate manner as
compared to other community banks and their holding companies in the midwestern United States, (C) changes, after the date hereof,
in global or national political conditions (
including
the outbreak of war or acts of terrorism)
or in general economic or market conditions affecting banks and their holding companies, generally, in each case
except to the
extent such
Party
is affected in a disproportionate manner as compared to other community
banks and their holding companies in the midwestern United States, (D) the taking of any
action
required or expressly permitted by, or the failure to take any
action
prohibited
by, this
Agreement
, (E) the announcement or pendency of this
Agreement
or the transactions contemplated hereby, (F) the occurrence of any natural or man-made disaster, or (G) acts or omissions
of (1)
Talmer
prior to the
Effective Time
taken
at the written request of
Chemical
or with the prior written consent of
Chemical
or (2)
Chemical
prior to the
Effective Time
taken at the written request of
Talmer
or with the prior written consent of
Talmer);
or (ii) prohibits or materially impairs or would be reasonably likely to materially impair the ability of such
Party
to timely consummate the
Merger
and the related transactions contemplated by this
Agreement
.
“
Materially
Burdensome Regulatory Condition
” shall have the meaning set forth in
Section 6.1(a)
.
“
Maximum
Amount
” shall have the meaning set forth in
Section 6.6(c)
.
“
MBCA
”
shall have the meaning set forth in
Section 1.1
.
“
Merger
”
shall have the meaning set forth in the
Recitals
.
“
Merger
Consideration
” shall have the meaning set forth in
Section 1.4(c)
.
“
Michigan
Banking Code
” means the Michigan Banking Code of 1999, as amended.
“
Multiemployer
Plan
” means a multiemployer plan within the meaning of Section 3(37) of ERISA.
“
NASDAQ
”
shall mean the NASDAQ Global Select Market.
“
NLRB
”
shall mean the National Labor Relations Board.
“
Option
Cancellation Agreements
” shall have the meaning set forth in
Section 1.5(c)
.
“
Option
Cash-Out Consideration
” shall have the meaning set forth in
Section 1.5(c)
.
“
Order
”
shall mean any award,
injunction
, judgment, decree, order, ruling or verdict or other similar
decision issued, promulgated or entered by or with any
Governmental Entity
of competent
jurisdiction.
“
Party
(ies
)
”
shall have the meaning set forth in the
Preamble
.
“
Permit
”
shall mean any grant, exemption, declaration, registration, filing, order, authorization, approval, consent, exception, accreditation,
certificate, license, permit or franchise of, from or required by any Governmental Entity of competent jurisdiction or pursuant
to any Law.
“
Permitted
Liens
” shall mean with respect to any
Person
, (a)
Liens
for
Taxes
that are not yet due and payable or that may hereafter be paid without
material penalty or that are being contested in good faith for which adequate accruals or reserves have been established on the
books and records of such
Person
, (b) statutory
Liens
of
landlords and workers’, carriers’ and mechanics’ or other like
Liens incurred
in the ordinary course of business
for amounts that are not yet due and payable or that are being contested in good faith
for which adequate accruals or reserves have been established on the books and records of such
Person
,
(c)
Liens
and encroachments that do not materially interfere with the present use of the
properties or assets they affect, (d)
Liens
that will be released prior to or as of the
Closing
, (e)
Liens
that are disclosed on the most
recent consolidated balance sheet of such
Person
or notes thereto included in the
Talmer
SEC Reports
or
Chemical SEC Reports
, as applicable, or securing liabilities reflected
on such balance sheet, (f)
Liens
that were
incurred in
the ordinary course of business
since the date of the most recent consolidated balance sheet of such
Person
,
(g)
Liens
set forth in
Section 9
of the
Talmer Disclosure
Schedules
or
Section 9
of the
Chemical Disclosure Schedules
, and (h) with
respect to real property, whether owned or leased,
any Lien that has not had, and would not reasonably
be
expected
to have, individually or in the aggregate, a Material Adverse Effect on Talmer
or a
Material
Adverse Effect
on
Chemical
, as applicable.
“
Person
”
shall mean an individual, corporation, partnership, limited
liability
company, joint venture,
association, trust, unincorporated organization, or other entity (
including
its permitted
successors and assigns).
“
Regulatory
Agreement
” shall have the meaning set forth in
Section 3.12
.
“
Regulatory
Approvals
” shall have the meaning set forth in
Section 6.1(a)
.
“
Release
”
shall mean any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, migrating, leaching,
dumping or disposing of a Hazardous Material.
“
Representatives
”
means, with respect to any Person, the officers, directors, managers, members, employees, consultants, accountants, brokers, financial
advisors, legal counsel, agents, advisors and other representatives of that Person or of the Subsidiaries of that Person.
“
SEC
”
shall mean the Securities and Exchange Commission.
“
Securities
Act
” shall mean the
Securities Act of 1933
.
“
Site
”
shall mean, with respect to any Person, any real properties (in each case, including all soil, subsoil, surface waters and groundwater
thereat) currently or previously owned, leased or operated by: (a) such Person or any of its Subsidiaries; (b) any predecessors
of such Person or any of its Subsidiaries; or (c) any entities previously owned by such Person or any of its Subsidiaries.
“
Stock
Consideration
” shall have the meaning set forth in
Section 1.4(c)
.
“
Subsidiary
”
shall mean, when used with respect to either
Party
, any bank, corporation, partnership,
limited
liability
company, or other entity or organization, whether incorporated or unincorporated,
that is consolidated with such
Party
for financial reporting purposes under
GAAP.
“
Subsidiary
Plan of Merger
” shall have the meaning set forth in
Section 1.9
.
“
Support
Agreement
” shall have the meaning set forth in the
Recitals
.
“
Surviving
Bank
” shall have the meaning set forth in the
Recitals
.
“
Surviving
Corporation
” shall have the meaning set forth in the
Recitals
.
“
Surviving
Corporation Stock Award
” shall have the meaning set forth in
Section 1.5(d)
.
“
Surviving
Corporation Stock Option
” shall have the meaning set forth in
Section 1.5(b)
.
“
Takeover
Statute
” shall mean any “moratorium,” “
control
share
acquisition,” “fair price,” “shareholder protection,” “takeover,” or “interested
shareholder”
Law
applicable to either
Talmer
or
Chemical
.
“
Talmer
”
shall have the meaning set forth in the
Preamble
.
“
Talmer
Acquisition Agreement
” shall have the meaning set forth in
Section 6.9(d)
.
“
Talmer
Adverse Recommendation Change
” shall have the meaning set forth in
Section 6.9(d)
.
“
Talmer
Articles
” shall mean the
Articles of Incorporation of Talmer
.
“
Talmer
Bank
” shall have the meaning set forth in the
Recitals
.
“
Talmer
Benefit Plan
” shall mean (a) any “employee benefit plan” within the meaning of Section 3(3) of ERISA,
(b) any Talmer Stock Plan, and (c) any deferred compensation, retirement, defined contribution, defined
benefit, pension, profit
sharing, employee welfare, fringe benefit, flexible spending account, stock purchase, stock option, stock ownership, phantom stock,
stock appreciation rights, restricted stock, restricted stock units, severance, separation, employment, change in control, vacation
pay, leave of absence, layoff, salary continuation, sick leave, excess benefit, bonus or other incentive compensation, day or
dependent care, legal services, cafeteria, health, life, accident, disability, workers’ compensation or other insurance,
or other employee benefit plan, or Contract, program, or practice, whether written or oral, for the benefit of Talmer’s
current or former officers, employees, independent contractors, or directors, in each case either (i) existing at the Closing
Date and sponsored, maintained, or contributed to by Talmer or any Talmer Subsidiary, or (ii) existing at the Closing Date or
prior thereto, in respect of which Talmer or any Talmer Subsidiary has any Liability.
“
Talmer
Board
” shall have the meaning set forth in the
Recitals
.
“
Talmer
Board Recommendation
” shall have the meaning set forth in
Section 6.3(c)
.
“
Talmer
Bylaws
” shall mean the
Bylaws of Talmer
.
“
Talmer
Call Reports
” shall have the meaning set forth in
Section 3.5(b)
.
“
Talmer
Capital Stock
” shall mean the
Talmer Common Stock, the Talmer Class B Common
Stock,
and the
Talmer Preferred Stock.
“
Talmer
Certificates
” shall have the meaning set forth in
Section 2.1
.
“
Talmer
Class B Common Stock
” shall have the meaning set forth in
Section 3.4(a)
.
“
Talmer
Common Stock
” shall have the meaning set forth in
Section 1.4(b)
.
“
Talmer
Continuing Directors
” shall have the meaning set forth in
Section 6.11(a)
.
“
Talmer
Disclosure Schedules
” shall have the meaning set forth in
Article III
.
“
Talmer
Expense Reimbursement
” shall mean
the out-of-pocket fees and expenses (
including
fees and expenses of financial advisors, outside legal counsel, accountants, experts, consultants, and other
representatives
)
actually incurred by or on behalf of
Talmer
in connection with the authorization, preparation,
negotiation, execution, or performance of this
Agreement
and the transactions contemplated
by this
Agreement
and the due diligence and evaluation by
Talmer
of the transactions contemplated by this
Agreement
, in an aggregate amount not to
exceed $
3,000,000
.
“
Talmer
Financial Statements
” shall have the meaning set forth in
Section 3.5(a)
.
“
Talmer
Investment Banker
” shall have the meaning set forth in
Section 3.22
.
“
Talmer
Material Contract
” shall have the meaning set forth in
Section 3.17(a)
.
“
Talmer-Owned
Intellectual Property
” shall have the meaning set forth in
Section 3.15
.
“
Talmer
Preferred Stock
” shall have the meaning set forth in
Section 3.4(a)
.
“
Talmer-Related
Person
” shall mean any shareholder owning five percent (5%) or more of the issued and outstanding Talmer Common
Stock, any director or executive officer of Talmer or any Talmer Subsidiary, his or her spouses and children, any Affiliate of
or member of the same household as such persons, and any Person of which such persons, alone or together, have control.
“
Talmer
SEC Reports
” shall have the meaning set forth in
Section 3.33(a)
.
“
Talmer
Share-Based Awards
” shall have the meaning set forth in
Section 3.4(b)
.
“
Talmer
Shareholder Approval
” shall have the meaning set forth in
Section 6.3(c)
.
“
Talmer
Shareholder Meeting
” shall have the meaning set forth in
Section 6.3(c)
.
“
Talmer
Shareholders
” shall mean the shareholders of
Talmer
.
“
Talmer
Site
” shall mean a Site with respect to Talmer or any Talmer Subsidiary.
“
Talmer
Stock Award
” shall have the meaning set forth in
Section 1.5(d)
.
“
Talmer
Stock Options
” shall have the meaning set forth in
Section 1.5(b)
.
“
Talmer
Stock Plans
” shall have the meaning set forth in
Section 1.5(a)
.
“
Talmer
Subsidiary
” shall have the meaning set forth in
Section 3.1(b)
.
“
Talmer
Superior Proposal
” shall mean any bona fide written
Talmer Takeover Proposal
that the
Talmer Board
has determined in its good faith judgment, after consultation with
its financial advisors and outside legal counsel, is reasonably likely to be consummated in accordance with its terms and that
is reasonably likely to result in the consummation of a transaction more favorable to the
Talmer
Shareholders
than the
Merger
, taking into account such factors as the
Talmer
Board
in good faith deems relevant,
including
legal, financial, regulatory and other
aspects of the proposal, and any changes to the terms of this
Agreement
proposed by
Chemical
in response to such proposal or otherwise. For purposes of the definition of “
Talmer
Superior Proposal
,” the references to “
ten percent (10%)
” in the
definition of
Talmer Takeover Proposal
shall
be deemed
to be references to “fifty percent (50%)
.”
“
Talmer
Takeover Proposal
” shall mean any inquiry, proposal, or offer from any
Person
(other than
Chemical
and its
Subsidiaries
)
or “
group
”, within the meaning of Section 13(d) of the
Exchange
Act
, of
Persons
relating to, in a single transaction or series of related transactions
(other than any single transaction or series of related transactions to which Chemical has consented to in writing), any (i) acquisition
of assets of
Talmer
and its
Subsidiaries
equal to
more than
ten percent (10%)
of
Talmer
’s consolidated
assets or to which more than
ten percent (10%)
of
Talmer
’s
net income on a consolidated basis are attributable; (ii) acquisition of more than
ten percent
(10%)
of the outstanding
Talmer Common Stock
or the capital stock of any Talmer
Subsidiary
; (iii) tender offer or exchange offer that, if consummated, would result
in any
Person
or
group of Persons
beneficially owning
more than
ten percent (10%)
of the outstanding
Talmer Common
Stock
; (iv)
merger
, consolidation, share exchange, business combination, recapitalization,
liquidation, dissolution, or similar transaction involving
Talmer
or any of its
Subsidiaries
;
or (v) any combination of the foregoing types of transactions if the sum of the percentage of consolidated assets, consolidated
net income, and
Talmer Common Stock
involved is more than
ten
percent (10%)
, in each case, other than the
Merger
.
“
Tax
”
or
“
Taxes
”
shall mean any and all federal, state, local, or foreign net
or gross income, gross receipts, net proceeds, sales, use, ad valorem, value added, franchise, withholding, payroll, employment,
excise, property, abandoned property, escheat, deed, stamp, alternative or add-on minimum, environmental, profits, windfall profits,
transaction, license, lease, service, service use, occupation, severance, energy, transfer, real property transfer, recording,
documentary, stamp, registration, unemployment, social security, workers’ compensation, capital, premium, and other governmental
taxes, assessments, customs, duties or levies, whether disputed or not, together with any interest, penalties, additions to tax,
or additional amounts with respect thereto.
“
Tax
Return
” shall mean a report, return, or other information (including any amendments) required to be supplied to
a Governmental Entity with respect to Taxes, including, where permitted or required, combined or consolidated returns for any
group of entities that includes Talmer or any of its Subsidiaries or that includes Chemical or any of its Subsidiaries, as applicable.
“
Termination
Fee
” shall have the meaning set forth in
Section 8.2(a)(i)
.
“
Transaction
Documents
” means (a) the
Joint Proxy Statement
, (b) the
Form
S-4
, and (c) any other documents to be filed with the
SEC
, the
Federal
Reserve Board
or any other
Governmental Entity
in connection with the
Merger
.
“
Trust
Account Shares
” shall mean any shares of
Talmer Common Stock
held
in trust accounts (
including
grantor or rabbi trust accounts), managed accounts, and the
like, or otherwise held in a fiduciary or agency capacity, that are beneficially owned by third parties.
ARTICLE
X
GENERAL PROVISIONS
10.1
Closing
.
On the terms and subject to conditions set forth in this Agreement, the
closing of the Merger (the “
Closing
”) shall take place at 10:00 a.m., or at another time designated
by the Parties, on a date and at a place to be specified by the Parties, which date shall be no later than five (5) Business Days
after the satisfaction or waiver (subject to applicable Law) of the latest to occur of the conditions set forth in
Article
VII
(other than those conditions that by their nature are to be satisfied or waived at the Closing), unless extended by mutual
agreement of the Parties (the “
Closing Date
”).
10.2
Nonsurvival
of Representations, Warranties and Agreements
.
None of the representations,
warranties, covenants, and agreements set forth in this Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time, except for those other covenants and agreements contained in this Agreement that by their terms apply
or are to be performed in whole or in part after the Effective Time and this
Article X
.
10.3
Notices
.
All notices and other communications in connection with this Agreement
shall be in writing and shall be deemed given effective immediately if delivered personally, sent via facsimile (with confirmation),
mailed by registered or certified mail (return receipt requested), delivered by an express courier (with confirmation), or delivered
by email (with confirmation) to the Parties at the following addresses (or at such other address for a Party as shall be specified
by like notice):
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(a)
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if
to Chemical, to:
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Chemical
Financial Corporation
235 E. Main Street
P.O. Box 569
Midland, MI 48640
Attention: David B. Ramaker
E-mail: david.ramaker@chemicalbankmi.com
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with
a copy (which shall not constitute notice) to:
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Chemical
Financial Corporation
235 E. Main Street
P.O. Box 569
Midland, MI 48640
Attention: William C. Collins, General Counsel
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Warner
Norcross & Judd LLP
900 Fifth Third Center
111 Lyon Street, N.W.
Grand Rapids, MI 49503
Attention: Jeffrey A. Ott, Esq.
Email: jott@wnj.com
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and
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(b)
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if
to Talmer, to:
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Talmer
Bancorp, Inc.
2301 W. Big Beaver Rd.
Troy, MI 48084
Attention: David Provost
Email: dprovost@talmerbank.com
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with
a copy (which shall not constitute notice) to:
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Nelson
Mullins Riley & Scarborough LLP
201 17
th
Street NW
Suite 1700
Atlanta, GA 30363
Attention: J. Brennan Ryan, Esq.
Email: brennan.ryan@nelsonmullins.com
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10.4
Interpretation
.
When a reference is made in this Agreement to articles, sections, exhibits,
or schedules, such reference shall be to an article or section of, or exhibit or schedule to, this Agreement, unless otherwise
indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words “include,” “includes,”
or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.”
The schedules and all exhibits hereto, shall be deemed part of this Agreement and included in any reference to this Agreement.
This Agreement shall not be interpreted or construed to require any Person to take any action, or fail to take any action, if
to do so would violate any applicable Law.
10.5
Entire
Agreement
.
This Agreement
(including the schedules and exhibits hereto, and the other documents and instruments referred to in this Agreement), together
with the Confidentiality Agreement, constitutes the entire agreement between the Parties and supersedes all prior agreements and
understandings, both written and oral, between the Parties with respect to the subject matter of this Agreement, other than the
Confidentiality Agreement.
10.6
Governing
Law
.
This Agreement shall be governed and construed in accordance
with the internal Laws of the State of Michigan applicable to contracts made and performed within such state, without regard to
any applicable conflict of laws principles.
10.7
Exclusive
Jurisdiction
. Each of the Parties to this Agreement irrevocably and unconditionally submits, for itself and its property,
to the exclusive jurisdiction of the Circuit Courts of the State of Michigan or any federal courts of the United States of America
sitting in the State of Michigan, and any appellate courts from any thereof, in any Action or proceeding arising out of or relating
to this Agreement or the transactions contemplated by this Agreement, or for recognition or enforcement of any judgment, and agrees
that all claims in respect of any such Action or proceeding shall be heard and determined in such Michigan court or, to the extent
permitted by Law, in such federal court.
10.8
Waiver
of Jury Trial
. Each of the Parties waives to the fullest extent permitted by applicable Law any right it may have to a trial
by jury with respect to any Action or proceeding directly or indirectly arising out of, under, or in connection with this Agreement
or the transactions contemplated by this Agreement.
10.9
Publicity
.
Neither Party shall, and neither Party shall permit any of its Subsidiaries
or agents to, issue or cause the publication of any press release or other public announcement with respect to the transactions
contemplated by this Agreement without the prior consent (which consent shall not be unreasonably withheld) of the other Party;
provided, however
, that either Party may, without the prior consent of the other Party (but after prior consultation with
the other Party to the extent practicable under the circumstances) issue or cause the publication of any press release or other
public announcement to the extent required by Law or by the rules and regulations of NASDAQ after consultation with outside legal
counsel.
10.10
Assignment;
Third-
Party
Beneficiaries
.
(a) Neither
this Agreement nor any of the rights, interests, or obligations under this Agreement shall be assigned by either of the Parties
(whether by operation of law or otherwise) without the prior written consent of the other Party. Subject to the preceding sentence,
this Agreement shall be binding upon, inure to the benefit of, and be enforceable by, each of the Parties and their respective
successors and assigns. Other than (i) as otherwise specifically provided in
Section 6.6
and (ii)
Articles I
and
II
(which, after the Effective Time, shall be for the benefit of holders of Talmer Common Stock and any holder of an award
granted under a Talmer Stock Plan), this Agreement (including the documents and instruments referred to in this Agreement) is
not intended to and does not confer upon any Person other than the Parties any rights or remedies under this Agreement.
(b)
No
provision in this
Agreement
modifies or amends or creates any employee benefit plan, program,
or document (each, a “
Benefit Plan
”) unless this
Agreement
explicitly states that the provision “amends” or “creates” that
Benefit
Plan
, and no third
party
shall be entitled to enforce any provision of this
Agreement
on the grounds that it is an amendment to, or a creation of, a
Benefit Plan
, unless
that provision explicitly states that such enforcement rights are being conferred. This provision shall not prevent the
Parties
to this Agreement
from enforcing any provision of this
Agreement
. If
a
Person
not entitled to enforce this
Agreement
brings
a lawsuit or other
action
to enforce any provision in this
Agreement
as an amendment to, or creation of a
Benefit Plan
, and that provision is construed
to be such an amendment or creation despite not being explicitly designated as one in this
Agreement
,
that provision shall lapse retroactively, thereby precluding it from having any effect.
10.11
Enforcement
.
The Parties agree that irreparable damage would occur in the event that
any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached.
Accordingly, each of the Parties shall be entitled to seek specific performance of the terms hereof, including an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, this
being in addition to any other remedy to which such Party is entitled at law or in equity. Each of the Parties hereby further
waives (a) any defense in any action for specific performance that a remedy at law would be adequate and (b) any requirement under
any Law to post security as a prerequisite to obtaining equitable relief.
10.12
Severability
.
If any term, provision, covenant, or restriction contained in this Agreement 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 Agreement 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 Agreement to not achieve its essential purposes.
10.13
Counterparts
.
This Agreement may be executed in one or more counterparts which, taken together, shall constitute one and the same instrument.
Executed counterparts of this Agreement shall be deemed to have been fully delivered and shall become legally binding if and when
executed signature pages are received by facsimile or electronic mail transmission from a Party. If so delivered by facsimile
or electronic mail transmission, the Parties agree, if requested by the other Party, to promptly send original, manually executed
copies by nationwide overnight delivery service.
10.14
Construction
.
The Parties have participated jointly in the negotiation and drafting of this Agreement, and, in the event an ambiguity or question
of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the Parties, and no presumption
or burden of proof will arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.
10.15
Calculation
of Dates and Deadlines
. Unless otherwise specified, any period of time to be determined under this Agreement 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 Agreement shall be deemed to end at 11:59 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 Michigan.
[
Signature
Page Follows
]
IN
WITNESS WHEREOF
, Chemical and Talmer have caused this Agreement to be executed by their respective duly authorized officers
as of the date first above written.
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CHEMICAL FINANCIAL CORPORATION
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By:
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/s/ David B. Ramaker
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Name:
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David B. Ramaker
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Title:
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Chairman, Chief Executive Officer
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and President
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TALMER BANCORP, INC.
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By:
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/s/ David Provost
|
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Name:
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David Provost
|
|
Title:
|
Chief Executive Officer and President
|
Signature
Page to Merger Agreement
EXHIBIT
A-1
FORM
OF TALMER SUPPORT AGREEMENT
SUPPORT
AGREEMENT
This
Support Agreement is entered into between Chemical Financial Corporation and the undersigned director of Talmer Bancorp, Inc.
(the “
Company
”). The undersigned director hereby agrees in his or her individual capacity as a shareholder
to vote his or her shares of Company Common Stock that are registered in his or her personal name (and agrees to use his or her
reasonable efforts to cause all additional shares of Company Common Stock owned jointly by him or her with any other person or
over which he or she has shared voting control to be voted) in favor of the Agreement and Plan of Merger by and between Chemical
Financial Corporation and Company, dated January 25, 2016 (the “
Agreement
”). In addition, the undersigned
director hereby agrees, that until the earlier of the record date of the Talmer Shareholder Meeting (as defined in the Agreement)
or the termination of this Support Agreement, that he or she will not make any transfers of shares of Company Common Stock with
the purpose of avoiding his or her agreements set forth in the preceding sentence and agrees to cause any permitted transferee
of such shares to abide by the terms of this Support Agreement. The undersigned is entering into this Support Agreement solely
in his or her capacity as an individual shareholder and, notwithstanding anything to the contrary in this Support Agreement, nothing
in this Support Agreement is intended or shall be construed to require the undersigned, (i) in his or her capacity as a director
of Company or (ii) in his or her capacity as a trustee, personal representative or other fiduciary capacity, to act or fail to
act in accordance with his or her duties in such director or fiduciary capacity. Furthermore, the undersigned does not make any
agreement or understanding herein in his or her capacity as a director of Company. Notwithstanding any contrary provision herein,
this Support Agreement shall be effective from the date hereof and shall terminate and be of no further force and effect upon
the earliest of (a) the obtainment of the Talmer Shareholder Approval (as defined in the Agreement); (b) the termination of the
Agreement in accordance with its terms; or (c) a Talmer Adverse Recommendation Change (as defined in the Agreement). This Support
Agreement may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together
constitute one and the same instrument.
Dated
this ___ day of January, 2016.
CHEMICAL FINANCIAL CORPORATION
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By:
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David B. Ramaker
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Its:
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Chairman, Chief Executive Officer and
President
|
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[Exhibit
A-1]
EXHIBIT
A-2
FORM OF CHEMICAL
SUPPORT AGREEMENT
SUPPORT
AGREEMENT
This
Support Agreement is entered into between Talmer Bancorp, Inc. and the undersigned director of Chemical Financial Corporation
(the “
Company
”). The undersigned director hereby agrees in his or her individual capacity as a shareholder
to vote his or her shares of Company Common Stock that are registered in his or her personal name (and agrees to use his or her
reasonable efforts to cause all additional shares of Company Common Stock owned jointly by him or her with any other person or
over which he or she has shared voting control to be voted) in favor of the Agreement and Plan of Merger by and between Talmer
Bancorp, Inc. and Company, dated January 25, 2016 (the “
Agreement
”). In addition, the undersigned director
hereby agrees, that until the earlier of the record date of the Chemical Shareholder Meeting (as defined in the Agreement) or
the termination of this Support Agreement, that he or she will not make any transfers of shares of Company Common Stock with the
purpose of avoiding his or her agreements set forth in the preceding sentence and agrees to cause any permitted transferee of
such shares to abide by the terms of this Support Agreement. The undersigned is entering into this Support Agreement solely in
his or her capacity as an individual shareholder and, notwithstanding anything to the contrary in this Support Agreement, nothing
in this Support Agreement is intended or shall be construed to require the undersigned, (i) in his or her capacity as a director
of Company or (ii) in his or her capacity as a trustee, personal representative or other fiduciary capacity, to act or fail to
act in accordance with his or her duties in such director or fiduciary capacity. Furthermore, the undersigned does not make any
agreement or understanding herein in his or her capacity as a director of Company. Notwithstanding any contrary provision herein,
this Support Agreement shall be effective from the date hereof and shall terminate and be of no further force and effect upon
the earliest of (a) the obtainment of the Chemical Shareholder Approval (as defined in the Agreement); (b) the termination of
the Agreement in accordance with its terms; or (c) a Chemical Adverse Recommendation Change (as defined in the Agreement). This
Support Agreement may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall
together constitute one and the same instrument.
Dated
this ___ day of January, 2016.
TALMER BANCORP, INC.
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By:
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David Provost
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Its:
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Chief Executive Officer and President
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[Exhibit A-2]
ANNEX B
Article III of Chemical Financial
Corporation’s Restated Articles of Incorporation, as amended, is deleted in its entirety and replaced with the following:
ARTICLE III
The total authorized capital stock of the Corporation
is 102,000,000 shares of stock divided into two classes, as follows:
A. 100,000,000 shares of common
stock, par value $1.00 per share; and
B. 2,000,000 shares of preferred
stock, no par value.
The following provisions apply to the authorized capital
stock of the corporation:
1.
Provisions Applicable
to Common Stock
.
a.
No
Preference
. None of the shares of common stock are entitled to any preferences, and each share of common stock is equal
to every other share of common stock in every respect.
b.
Dividends
. After
payment or declaration of full dividends on all shares having a priority over the common stock as to dividends, and after making
all required sinking or retirement fund payments, if any, on all classes of preferred stock and on any other stock of the corporation
ranking with priority as to dividends or assets over the common stock, dividends on the shares of common stock may be declared
and paid, but only when and as determined by the board of directors.
c.
Rights
on Liquidation
. On any liquidation, dissolution or winding up of the affairs of the corporation, after payment or setting
aside of the full preferential amounts to which holders of all shares having priority over the common stock are entitled, the holders
of the common stock will be entitled to receive pro rata all the remaining assets of the corporation available for distribution
to shareholders. The board of directors may distribute in kind to the holders of common stock the remaining assets of the corporation
or may sell, transfer or otherwise dispose of all or any part of the remaining assets to any person and may sell all or any part
of the consideration so received and distribute any balance thereof in kind to holders of common stock. The merger or consolidation
of the corporation into or with any other corporation, or the merger or consolidation of any other corporation into it, or any
purchase or redemption of shares of stock of the corporation of any class, will not be deemed to be a dissolution, liquidation
or winding up of the corporation for the purposes of this paragraph.
d.
Voting
. At
all meetings of shareholders of the corporation, the holders of the common stock are entitled to one vote for each share of common
stock held by them respectively.
2.
Provisions Applicable
To Preferred Stock
.
a.
Provisions
to be Fixed by the Board of Directors
. The board of directors is expressly authorized at any time, and from time to time, to
provide for the issuance of shares of preferred stock in one or more series, each having the designations and relative voting,
distribution, dividend, liquidation, and other rights, preferences, and limitations, consistent with the Michigan Business Corporation
Act, as amended, as are stated in the resolution or resolutions providing for the issuance of shares of preferred stock adopted
by the board of directors, and as are not stated in these Restated Articles of Incorporation, or any amendments thereto, including
(without limiting the generality of the foregoing) the following:
(1) The distinctive designation
and number of shares comprising the series, which number may (except where other-wise provided by the board of directors in creating
the series) be increased or decreased (but
not below the number of shares then issued and outstanding) from time to time by action
of the board of directors.
(2) The stated
value of the shares of the series.
(3) The dividend rate
or rates on the shares of the series and the relation which dividends will bear to the dividends payable on any other class of
capital stock or on any other series of preferred stock, the terms and conditions upon which and the periods in respect of which
dividends will be pay-able, whether and upon what conditions dividends will be cumulative and, if cumulative, the date or dates
from which dividends will accumulate.
(4) Whether the shares
of the series are redeemable and, if redeemable, whether redeemable for cash, property or rights, including securities of any other
corporation, and whether redeemable at the option of the holder or the corporation or upon the happening of a specified event,
the limitations and restrictions with respect to the redemption, the time or times when, the price or prices or rate or rates at
which, the adjustments with which and the manner in which such shares are redeemable, including the manner of selecting shares
of the series for redemption if less than all shares are to be redeemed.
(5) The rights to which
the holders of shares of the series are entitled, and the preferences, if any, over any other series (or of any other series over
the series), upon the voluntary or involuntary liquidation, dissolution, distribution or winding up of the corporation, which rights
may vary depending on whether the liquidation, dissolution, distribution or winding up is voluntary or involuntary, and, if
voluntary, may vary at different dates.
(6) Whether the shares
of the series are subject to the operation of a purchase, retirement or sinking fund and, if so, whether and upon what conditions
the fund will be cumulative or noncumulative, the extent to which and the manner in which the fund will be applied to the purchase
or redemption of the shares of the series for retirement or to other corporation purposes and the terms and provisions relative
to the operation thereof.
(7) Whether the shares
of the series are convertible into or exchangeable for shares of any other class or of any other series of any class of capital
stock of the corporation or any other corporation, and, if so convertible or exchangeable, the price or prices or the rate or rates
of conversion or exchange and the method, if any, of adjusting the same, and any other terms and conditions of such conversion
or exchange.
(8) The voting powers,
if any, of the shares of the series, and whether and under what conditions the shares of the series (alone or together with the
shares of one or more of other series having similar provisions) are entitled to vote separately as a single class, for the election
of one or more additional directors of the corporation or upon other matters.
(9) Whether the issuance
of any additional shares of the series, or of any shares of any other series, is subject to restrictions as to issuance, or as
to the powers, preferences or rights of any other series.
(10) Any other preferences,
privileges and powers and relative participating, optional or other special rights, and qualifications, limitations or restrictions
of the series, as the board of directors determines and as are not inconsistent with the provisions of these Restated Articles
of Incorporation.
b.
Provisions Applicable
to All Preferred Stock
.
(1) Subject to the designations,
relative rights, preferences, and limitations applicable to separate series, each share shall be equal to every other share of
the same class.
(2) Shares of preferred
stock redeemed, converted, exchanged, purchased, retired or surrendered to the corporation, or which have been issued and reacquired
in any manner, may, upon compliance with any
applicable provisions of the Michigan Business Corporation Act, as amended, be given
the status of authorized and unissued shares of preferred stock and may be reissued by the board of directors as part of the series
of which they were originally a part or may be reclassified into and reissued as part of a new series or as a part of any other
series, all subject to the protective conditions or restrictions of any outstanding series of preferred stock.
(3) Any of the voting,
distribution, liquidation, or other rights, preferences, or limitations of a series may be made dependent upon facts or circumstances
ascertainable outside of the Restated Articles of Incorporation or the resolution or resolutions providing for the issuance of
shares of preferred stock adopted by the board of directors, if the manner in which the facts or events operate on the rights,
preferences, or limitations is set forth in the Restated Articles of Incorporation or board resolution or resolutions.
ANNEX C
[LETTERHEAD OF SANDLER O’NEILL & PARTNERS,
L.P.]
January 25, 2016
Board of Directors
Chemical Financial Corporation
235 East Main Street
Midland, MI 48640
Gentlemen:
Chemical Financial
Corporation (“Chemical”) and Talmer Bancorp, Inc. (“Talmer”) are proposing to enter into an Agreement and
Plan of Merger (the “Agreement”) pursuant to which Talmer will merge with and into Chemical with Chemical being the
surviving corporation (the “Merger”). Pursuant to the terms of the Agreement, upon the effective time of the Merger,
each share of Talmer Class A common stock, $1.00 par value per share (“Talmer Common Stock”), except for certain shares
of Talmer Common Stock as specified in the Agreement, shall be converted into the right to receive, (a) $1.61 in cash, without
interest (the “Cash Consideration”), and (b) 0.4725 shares of Chemical common stock, $1.00 par value per share (the
“Stock Consideration” and together with the Cash Consideration, the “Merger Consideration”). Capitalized
terms used herein without definition shall have the meanings assigned to them in the Agreement. The terms and conditions of the
Merger are more fully set forth in the Agreement. You have requested our opinion as to the fairness, from a financial point of
view, of the Merger Consideration to Chemical.
Sandler O’Neill
& Partners, L.P. (“Sandler O’Neill”, “we” or “our”), as part of its investment banking
business, is regularly engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions
and other corporate transactions. In connection with this opinion, we have reviewed and considered, among other things: (i) a draft
of the Agreement, dated January 25, 2016; (ii) certain publicly available financial statements and other historical financial
information of Chemical that we deemed relevant; (iii) certain publicly available financial statements and other historical financial
information of Talmer that we deemed relevant; (iv) publicly available consensus mean analyst earnings per share estimates
for Chemical for the years ending December 31, 2016 and December 31, 2017 as well as an estimated earnings per share growth rate
for the years thereafter, as provided by the senior management of Chemical; (v) publicly available consensus mean analyst earnings
per share estimates for Talmer for the years ending December 31, 2016 and December 31, 2017 as well as an estimated earnings per
share growth rate for the years thereafter, as provided by the senior management of Talmer; (vi) the pro forma financial impact
of the Merger on Chemical based on assumptions relating to transaction expenses, purchase accounting adjustments, regulatory costs
and cost savings, as provided by the senior management of Chemical; (vii) the publicly reported historical price and trading
activity for Chemical and Talmer common stock, including a comparison of certain stock market information for Chemical and Talmer
common stock and certain stock indices as well as similar publicly available information for certain other similar companies the
securities of which are publicly traded; (viii) a comparison of certain financial information for Chemical and Talmer with similar
institutions for which publicly available information is available; (ix) the financial terms of certain recent business combinations
in the commercial banking industry on a national basis, to the extent publicly available; (x) the current market environment generally
and the banking environment in particular; and (xi) such other information, financial studies, analyses and investigations and
financial, economic and market criteria as we considered relevant. We also discussed with certain members of the senior management
of Chemical the business, financial condition, results of operations and prospects of Chemical and held similar discussions with
certain members of the senior management of Talmer regarding the business, financial condition, results of operations and prospects
of Talmer.
In performing our
review, we have relied upon the accuracy and completeness of all of the financial and other information that was available to and
reviewed by us from public sources, that was provided to us by Chemical or Talmer, or their respective representatives, or that
was otherwise reviewed by us and we have assumed such accuracy and completeness for purposes of rendering this opinion without
any independent verification or investigation. We have relied, at the direction of Chemical, without independent verification or
investigation, on the
assessments of the management of Chemical as to its existing and future relationships with key employees
and partners, clients, products and services and we have assumed, with your consent, that there will be no developments with respect
to any such matters that would affect our analyses or opinion. We have further relied on the assurances of the respective managements
of Chemical and Talmer that they are not aware of any facts or circumstances that would make any of such information inaccurate
or misleading. We have not been asked to and have not undertaken an independent verification of any of such information and we
do not assume any responsibility or liability for the accuracy or completeness thereof. We did not make an independent evaluation
or perform an appraisal of the specific assets, the collateral securing assets or the liabilities (contingent or otherwise) of
Chemical or Talmer, or any of their respective subsidiaries, nor have we been furnished with any such evaluations or appraisals.
We render no opinion or evaluation on the collectability of any assets or the future performance of any loans of Chemical or Talmer.
We did not make an independent evaluation of the adequacy of the allowance for loan losses of Chemical or Talmer, or the combined
entity after the Merger, and we have not reviewed any individual credit files relating to Chemical or Talmer. We have assumed,
with your consent, that the respective allowances for loan losses for both Chemical and Talmer are adequate to cover such losses
and will be adequate on a pro forma basis for the combined entity.
In preparing its
analyses, Sandler O’Neill used publicly available consensus mean analyst earnings per share estimates for Chemical for the
years ending December 31, 2016 and December 31, 2017 as well as an estimated earnings per share growth rate for the years thereafter,
as provided by the senior management of Chemical, as well as publicly available consensus mean analyst earnings per share estimates
for Talmer for the years ending December 31, 2016 and December 31, 2017 as well as an estimated earnings per share growth rate
for the years thereafter, as provided by the senior management of Talmer. Sandler O’Neill also received and used in its pro
forma analyses certain assumptions relating to transaction expenses, purchase accounting adjustments, regulatory costs and cost
savings, as provided by the senior management of Chemical. With respect to the foregoing information, the senior managements of
Chemical and Talmer confirmed to us that such information reflected (or, in the case of the publicly available mean analyst earnings
per share estimates referred to above, were consistent with) the best currently available estimates and judgments of the senior
managements of Chemical and Talmer, respectively, and we assumed that the financial results reflected in such information would
be achieved. We express no opinion as to such estimates or judgments, or the assumptions on which they are based. We have also
assumed that there has been no material change in Chemical’s or Talmer’s assets, financial condition, results of operations,
business or prospects since the date of the most recent financial statements made available to us. We have assumed in all respects
material to our analysis that Chemical and Talmer will remain as going concerns for all periods relevant to our analyses.
We have also assumed,
with your consent, that (i) each of the parties to the Agreement will comply in all material respects with all material terms and
conditions of the Agreement and all related agreements, that all of the representations and warranties contained in such agreements
are true and correct in all material respects, that each of the parties to such agreements will perform in all material respects
all of the covenants and other obligations required to be performed by such party under such agreements and that the conditions
precedent in such agreements are not and will not be waived, (ii) in the course of obtaining the necessary regulatory or third
party approvals, consents and releases with respect to the Merger, no delay, limitation, restriction or condition will be imposed
that would have an adverse effect on Chemical, Talmer or the Merger or any related transaction, (iii) the Merger and any related
transactions will be consummated in accordance with the terms of the Agreement without any waiver, modification or amendment of
any material term, condition or agreement thereof and in compliance with all applicable laws and other requirements, and (iv) the
Merger will qualify as a tax-free reorganization for federal income tax purposes. Finally, with your consent, we have relied upon
the advice that Chemical has received from its legal, accounting and tax advisors as to all legal, accounting and tax matters relating
to the Merger and the other transactions contemplated by the Agreement.
Our opinion is necessarily
based on financial, economic, market and other conditions as in effect on, and the information made available to us as of, the
date hereof. Events occurring after the date hereof could materially affect this opinion. We have not undertaken to update, revise,
reaffirm or withdraw this opinion or otherwise comment upon events occurring after the date hereof. We express no opinion as to
the trading values of Chemical Common Stock or Talmer Common Stock after the date of this opinion or what the value of Chemical
Common Stock will be once it is actually received by the holders of Talmer Common Stock.
We have acted as
Chemical’s financial advisor in connection with the Merger and will receive a fee for our services, a substantial portion
of which is contingent upon consummation of the Merger. We will also receive a fee for rendering this opinion, which opinion fee
will be credited in full towards any fee becoming payable to Sandler O’Neill on the day of closing of the Merger. Chemical
has also agreed to indemnify us against certain claims and liabilities arising out of our engagement and to reimburse us for certain
of our out-of-pocket expenses incurred in connection with our engagement. In the two years preceding the date of this opinion,
we have provided certain other investment banking services to Chemical and received fees for such services. In addition, as we
have previously advised you, in the two years preceding the date of this opinion, we have provided certain investment banking services
to Talmer and received fees for such services. In the ordinary course of our business as a broker-dealer, we may purchase securities
from and sell securities to Chemical, Talmer and their respective affiliates. We may also actively trade the equity and debt securities
of Chemical and Talmer or their respective affiliates for our own account and for the accounts of our customers.
Our opinion is directed
to the Board of Directors of Chemical in connection with its consideration of the Agreement and Merger and does not constitute
a recommendation to any shareholder of Chemical as to how any such shareholder should vote at any meeting of shareholders called
to consider and vote upon the Merger. Our opinion is directed only to the fairness, from a financial point of view, of the Merger
Consideration to Chemical and does not address the underlying business decision of Chemical to engage in the Merger, the form or
structure of the Merger and/or other transactions contemplated in the Agreement, the relative merits of the Merger as compared
to any other alternative transactions or business strategies that might exist for Chemical or the effect of any other transaction
in which Chemical might engage. We also do not express any opinion as to the fairness of the amount or nature of the compensation
to be received in the Merger by any Chemical or Talmer officer, director or employee, or class of such persons, if any, relative
to the amount of compensation to be received by any other shareholder. This opinion has been approved by Sandler O’Neill’s
fairness opinion committee. This opinion shall not be reproduced without Sandler O’Neill’s prior written consent, provided
however Sandler O’Neill will provide its consent for the opinion to be included in regulatory filings to be completed in
connection with the Merger.
Based upon and subject
to the foregoing, it is our opinion that, as of the date hereof, the Merger Consideration is fair to Chemical from a financial
point of view.
Very truly yours,
/s/ Sandler O’Neill & Partners, L.P.
ANNEX D
January 25, 2016
The Board of Directors
Talmer Bancorp, Inc.
2301 West Big Beaver Road
Suite 525
Troy, MI 48084
Members of the Board:
You have requested
the opinion of Keefe, Bruyette & Woods, Inc. (“KBW” or “we”) as investment bankers as to the fairness,
from a financial point of view, to the common shareholders of Talmer Bancorp, Inc. (“TLMR”) of the Merger Consideration
(as defined below) to be received by such shareholders in the proposed merger (the “Merger”) of TLMR with and into
Chemical Financial Corporation (“CHFC”), pursuant to the Agreement and Plan of Merger (the “Agreement”)
to be entered into by and between TLMR and CHFC. Pursuant to the Agreement and subject to the terms, conditions and limitations
set forth therein, at the Effective Time (as defined in the Agreement), by virtue of the Merger and without any action on the part
of TLMR, CHFC, the holders of shares of Class A common stock, par value $1.00 per share, of TLMR (“TLMR Common Stock”)
or the holders of shares of common stock, par value $1.00 per share, of CHFC (“CHFC Common Stock”), each share of TLMR
Common Stock issued and outstanding immediately prior to the Effective Time (except for shares of TLMR Common Stock owned, directly
or indirectly, by TLMR or CHFC (in each case other than those held in a fiduciary capacity or as a result of debts previously contracted),
shall be converted into the right to receive: (i) 0.4725 of a share of CHFC Common Stock (the “Stock Consideration”)
and (ii) $1.61 in cash (the “Cash Consideration”). The Cash Consideration and the Stock Consideration, taken together,
are referred to herein as the “Merger Consideration.” The terms and conditions of the Merger are more fully set forth
in the Agreement.
The Agreement further
provides that, following the Merger, Talmer Bank and Trust, a wholly owned subsidiary of TLMR (“Talmer Bank”), shall
merge with and into Chemical Bank, a wholly owned subsidiary of CHFC (“Chemical Bank”), with Chemical Bank as the surviving
entity, pursuant to a subsidiary plan of merger (such transaction, the “Bank Merger”).
KBW has acted as
financial advisor to TLMR and not as an advisor to or agent of any other person. As part of our investment banking business, we
are continually engaged in the valuation of bank and bank holding company securities in connection with acquisitions, negotiated
underwritings, secondary distributions of listed and unlisted securities, private placements and valuations for various other purposes.
As specialists in the securities of banking companies, we have experience in, and knowledge of, the valuation of banking enterprises.
In the ordinary course of their broker-dealer business and further to certain existing sales and trading relationships with TLMR
and CHFC, KBW and its affiliates may from time to time purchase securities from, and sell securities to, TLMR and CHFC. As a market
maker in securities, KBW and its affiliates may from time to time have a long or short position in, and buy or sell, debt or equity
securities of TLMR or CHFC for their own accounts and for the accounts of their customers and clients. We have acted exclusively
for the board of directors of TLMR (the “Board”) in rendering this opinion and will receive a fee from TLMR for our
services. A portion of our fee is payable upon the rendering of this opinion, and a significant portion is contingent upon the
successful completion of the Merger. In addition, TLMR has agreed to indemnify us for certain liabilities arising out of our engagement.
In addition to this
present engagement, in the past two years, both KBW and a broker-dealer acquired by an affiliate of KBW in June 2015 have provided
investment banking and financial advisory services to TLMR and received compensation for such services. Both KBW and such broker-dealer
served as underwriters in connection with the initial public offering of TLMR in February 2014. KBW also served as financial advisor
to TLMR in
connection with its acquisition of four banking subsidiaries of Capitol Bancorp Ltd. in January 2014 and as an underwriter
in connection with a follow-on public offering of TLMR in August 2015. In the past two years, KBW has provided investment banking
and financial advisory services to CHFC and received compensation for such services. KBW served as financial advisor to CHFC in
connection with its acquisitions of Northwestern Bancorp in October 2014, Monarch Community Bancorp, Inc. in April 2015 and Lake
Michigan Financial Corporation in May 2015, and as an underwriter in connection with a follow-on public offering of CHFC in September
2014. We may in the future provide investment banking and financial advisory services to TLMR or CHFC and receive compensation
for such services.
In connection with this
opinion, we have reviewed, analyzed and relied upon material bearing upon the Merger and upon the financial and operating condition
of TLMR and CHFC, including among other things, the following: (i) a draft of the Agreement dated January 25, 2016 (the most recent
draft made available to us); (ii) the audited financial statements for the three fiscal years ended December 31, 2014, and the
Annual Reports on Form 10-K for the two fiscal years ended December 31, 2014, of TLMR; (iii) the unaudited quarterly financial
statements and Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2015, June 30, 2015 and September 30, 2015
of TLMR; (iv) certain unaudited quarterly and fiscal year-end financial results for the period ended December 31, 2015 of TLMR
(provided to us by representatives of TLMR); (v) the audited financial statements and Annual Reports on Form 10-K for the three
fiscal years ended December 31, 2014 of CHFC; (vi) the unaudited quarterly financial statements and Quarterly Reports on Form 10-Q
for the fiscal quarters ended March 31, 2015, June 30, 2015 and September 30, 2015 of CHFC; (vii) certain draft and unaudited quarterly
and fiscal year-end financial results for the period ended December 31, 2015 of CHFC (provided to us by representatives of CHFC);
(viii) certain regulatory filings of TLMR, Talmer Bank, CHFC and Chemical Bank, including (as applicable) the quarterly reports
on Form FRY-9C and Form FRY-9LP and the quarterly call reports filed with respect to each quarter during the three year period
ended December 31, 2014 and the three quarters ended March 31, 2015, June 30, 2015 and September 30, 2015; (ix) certain other interim
reports and other communications of TLMR and CHFC to their respective shareholders; and (x) other financial information concerning
the businesses and operations of TLMR and CHFC that was furnished to us by TLMR and CHFC or which we were otherwise directed to
use for purposes of our analyses. Our consideration of financial information and other factors that we deemed appropriate under
the circumstances or relevant to our analyses included, among others, the following: (i) the historical and current financial position
and results of operations of TLMR and CHFC; (ii) the assets and liabilities of TLMR and CHFC; (iii) the nature and terms of certain
other merger transactions and business combinations in the banking industry; (iv) a comparison of certain financial and stock market
information for TLMR and CHFC with similar information for certain other companies the securities of which are publicly traded;
(v) financial and operating forecasts and projections of TLMR that were prepared by, and provided to us and discussed with us by,
TLMR management and that were used and relied upon by us at the direction of such management and with the consent of the Board;
(vi) publicly available consensus “street estimates” of CHFC for 2016 and 2017, as well as assumed long term growth
rates provided to us by CHFC management, all of which information was discussed with us by such management and used and relied
upon by us based on such discussions, at the direction of TLMR management and with the consent of the Board; and (vii) estimates
regarding certain pro forma financial effects of the Merger on CHFC (including, without limitation, the cost savings and related
expenses expected to result or be derived from the Merger) that were prepared (in consultation with CHFC management) by, and provided
to and discussed with us by, the management of TLMR, and used and relied upon by us at the direction of TLMR management and with
the consent of the Board. We have also performed such other studies and analyses as we considered appropriate and have taken into
account our assessment of general economic, market and financial conditions and our experience in other transactions, as well as
our experience in securities valuation and knowledge of the banking industry generally. We have also held discussions with senior
management of TLMR and CHFC regarding the past and current business operations, regulatory relations, financial condition and future
prospects of their respective companies and such other matters as we have deemed relevant to our inquiry.
In conducting our
review and arriving at our opinion, we have relied upon and assumed the accuracy and completeness of all of the financial and other
information that was provided to us or that was publicly available and we have not independently verified the accuracy or completeness
of any such information or assumed any responsibility or liability for such verification, accuracy or completeness. We have relied
upon the management of TLMR as to the reasonableness and achievability of the financial and operating forecasts and projections
of TLMR and the estimates regarding certain pro forma financial effects of the Merger on CHFC referred to above (and the assumptions
and bases for such forecasts, projections and estimates, including without limitation, the cost savings
and related expenses expected
to result or be derived from the Merger) and we have assumed, with the consent of TLMR, that such forecasts, projections and estimates
were reasonably prepared on a basis reflecting the best currently available estimates and judgments of such management and that
such forecasts, projections and estimates will be realized in the amounts and in the time periods currently estimated by such management.
We have further relied, with the consent of TLMR, upon CHFC management as to the reasonableness and achievability of the publicly
available consensus “street estimates” of CHFC and the assumed long-term growth rates provided to and discussed with
us by such management referred to above and we have assumed, with the consent of TLMR, that such information was reasonably prepared
on a basis reflecting, or in the case of the publicly available consensus “street estimates” of CHFC referred to above
were consistent with, the best currently available estimates and judgments of CHFC management and that the forecasts, projections
and estimates reflected in such information will be realized in the amounts and in the time periods currently estimated.
It is understood that the
forecasts, projections, and estimates of TLMR and CHFC provided to us were not prepared with the expectation of public disclosure
and that all of such forecasts, projections, and estimates, together with the publicly available consensus “street estimates”
of CHFC referred to above that we were directed to use, is based on numerous variables and assumptions that are inherently uncertain,
including, without limitation, factors related to general economic and competitive conditions and that, accordingly, actual results
could vary significantly from those set forth in such information. We have assumed, based on discussions with the respective managements
of TLMR and CHFC and with the consent of the Board, that all such information provides a reasonable basis upon which we could form
our opinion and we express no view as to any such information or the assumptions or bases therefor. We have relied on all such
information without independent verification or analysis and do not in any respect assume any responsibility or liability for the
accuracy or completeness thereof.
We also assumed that there
were no material changes in the assets, liabilities, financial condition, results of operations, business or prospects of either
TLMR or CHFC since the date of the last financial statements of each such entity that were made available to us. We are not experts
in the independent verification of the adequacy of allowances for loan and lease losses and we have assumed, without independent
verification and with your consent, that the aggregate allowances for loan and lease losses for TLMR and CHFC are adequate to cover
such losses. In rendering our opinion, we have not made or obtained any evaluations or appraisals or physical inspection of the
property, assets or liabilities (contingent or otherwise) of TLMR or CHFC, the collateral securing any of such assets or liabilities,
or the collectability of any such assets, nor have we examined any individual loan or credit files, nor did we evaluate the solvency,
financial capability or fair value of TLMR or CHFC under any state or federal laws, including those relating to bankruptcy, insolvency
or other matters. Estimates of values of companies and assets do not purport to be appraisals or necessarily reflect the prices
at which companies or assets may actually be sold. Because such estimates are inherently subject to uncertainty, we assume no responsibility
or liability for their accuracy.
We have assumed, in all
respects material to our analyses, the following: (i) that the Merger and any related transactions (including the Bank Merger)
will be completed substantially in accordance with the terms set forth in the Agreement (the final terms of which we have assumed
will not differ in any respect material to our analyses from the draft reviewed and referred to above) with no adjustments to the
Merger Consideration; (ii) that the representations and warranties of each party in the Agreement and in all related documents
and instruments referred to in the Agreement are true and correct; (iii) that each party to the Agreement and all related documents
will perform all of the covenants and agreements required to be performed by such party under such documents; (iv) that there are
no factors that would delay any necessary regulatory or governmental approval for the Merger or any related transaction or cause
any necessary regulatory or governmental approval for the Merger or any related transaction to be subject to any adverse conditions,
and that all conditions to the completion of the Merger and any related transaction will be satisfied without any waivers or modifications
to the Agreement; and (v) that in the course of obtaining the necessary regulatory, contractual, or other consents or approvals
for the Merger and any related transaction, no restrictions, including any divestiture requirements, termination or other payments
or amendments or modifications, will be imposed that will have a material adverse effect on the future results of operations or
financial condition of TLMR, CHFC, the combined entity, or the contemplated benefits of the Merger, including the cost savings
and related expenses expected to result or be derived from the Merger. We have assumed, in all respects material to our analyses,
that the Merger will be consummated in a manner that complies with the applicable provisions of the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended, and all other applicable federal and state statutes, rules and regulations.
We have further been advised by
representatives of TLMR that TLMR has relied upon advice from its advisors (other than KBW) or
other appropriate sources as to all legal, financial reporting, tax, accounting and regulatory matters with respect to TLMR, CHFC,
the Merger, any related transaction (including the Bank Merger), and the Agreement. KBW has not provided advice with respect to
any such matters.
This opinion addresses
only the fairness, from a financial point of view, as of the date hereof, to the holders of TLMR Common Stock of the Merger Consideration
to be received by such holders in the Merger. We express no view or opinion as to any other terms or aspects of the Merger or any
term or aspect of any related transaction (including the Bank Merger), including without limitation, the form or structure of the
Merger (including the form of Merger Consideration or the allocation thereof between cash and stock) or any related transaction,
any consequences of the Merger or any related transaction to TLMR, its shareholders, creditors or otherwise, or any terms, aspects,
merits or implications of any employment, consulting, voting, support, shareholder or other agreements, arrangements or understandings
contemplated or entered into in connection with the Merger or otherwise. Our opinion is necessarily based upon conditions as they
exist and can be evaluated on the date hereof and the information made available to us through the date hereof. It is understood
that subsequent developments may affect the conclusion reached in this opinion and that KBW does not have an obligation to update,
revise or reaffirm this opinion. Our opinion does not address, and we express no view or opinion with respect to, (i) the underlying
business decision of TLMR to engage in the Merger or enter into the Agreement; (ii) the relative merits of the Merger as compared
to any strategic alternatives that are, have been or may be available to or contemplated by TLMR or the Board; (iii) the fairness
of the amount or nature of any compensation to any of TLMR’s officers, directors or employees, or any class of such persons,
relative to the compensation to the holders of TLMR Common Stock; (iv) the effect of the Merger or any related transaction on,
or the fairness of the consideration to be received by, holders of any class of securities of TLMR (other than the holders of TLMR
Common Stock solely with respect to the Merger Consideration, as described herein and not relative to the consideration to be received
by holders of any other class of securities) or holders of any class of securities of CHFC or any other party to any transaction
contemplated by the Agreement; (v) whether CHFC has sufficient cash, available lines of credit or other sources of funds to enable
it to pay the aggregate amount of the Cash Consideration to the holders of TLMR Common Stock at the closing of the Merger; (vi)
the actual value of CHFC Common Stock to be issued in the Merger; (vii) the prices, trading range or volume at which TLMR Common
Stock or CHFC Common Stock will trade following the public announcement of the Merger or the prices, trading range or volume at
which CHFC Common Stock will trade following the consummation of the Merger; (viii) any advice or opinions provided by any other
advisor to any of the parties to the Merger or any other transaction contemplated by the Agreement; or (ix) any legal, regulatory,
accounting, tax or similar matters relating to TLMR, CHFC, their respective shareholders, or relating to or arising out of or as
a consequence of the Merger or any related transaction (including the Bank Merger), including whether or not the Merger would qualify
as a tax-free reorganization for United States federal income tax purposes.
This opinion is for the
information of, and is directed to, the Board (in its capacity as such) in connection with its consideration of the financial terms
of the Merger. This opinion does not constitute a recommendation to the Board as to how it should vote on the Merger, or to any
holder of TLMR Common Stock or any shareholder of any other entity as to how to vote in connection with the Merger or any other
matter, nor does it constitute a recommendation regarding whether or not any such shareholder should enter into a voting, shareholders’,
or affiliates’ agreement with respect to the Merger or exercise any dissenters’ or appraisal rights that may be available
to such shareholder.
This opinion has been reviewed
and approved by our Fairness Opinion Committee in conformity with our policies and procedures established under the requirements
of Rule 5150 of the Financial Industry Regulatory Authority.
Based upon and subject
to the foregoing, it is our opinion that, as of the date hereof, the Merger Consideration to be received by the holders of TLMR
Common Stock in the Merger is fair, from a financial point of view, to such holders.
|
Very truly yours,
Keefe, Bruyette & Woods,
Inc.
|
D-4
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