<PAGE> 1
As filed with the Securities and Exchange Commission on May 19, 1997
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
MERCANTILE BANCORPORATION INC.
(Exact name of Registrant as specified in its charter)
Missouri 6712 43-0951744
(State of incorporation) (Primary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification No.)
P.O. Box 524
St. Louis, MO 63166-0524
(314) 425-2525
(Address, including zip code, and telephone number, including area
code, of Registrant's principal executive offices)
----------------
JON W. BILSTROM, ESQ.
General Counsel and Secretary
Mercantile Bancorporation Inc.
P.O. Box 524
St. Louis, MO 63166-0524
(314) 425-2525
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
----------------
Copies to:
GARY W. DOUGLASS EDWARD D. HERLIHY, ESQ. CHRISTOPHER R. KELLY, ESQ.
Chief Financial Officer Wachtell, Lipton, Silver, Freedman
Roosevelt Financial Rosen & Katz & Taff, L.L.P.
Group, Inc. 51 West 52nd Street 1100 New York Avenue, N.W.
900 Roosevelt Parkway New York, NY 10019 Washington DC 20005
Chesterfield, MO 63017-0524 (212) 403-1000 (202) 414-6100
(314) 532-6200
Approximate date of commencement of proposed sale to the public: As
promptly as practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [ ]
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
======================================================================================================================
Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Securities Amount to be Offering Price Aggregate Registration
to be Registered Registered<F2> Per Share<F3> Offering Price<F3> Fee<F4>
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.01 par value per share<F1> 13,042,110 shares $58.875 $767,854,226.25 $232,684
======================================================================================================================
<FN>
<F1> Includes one attached Preferred Share Purchase Right per share.
<F2> Based upon the maximum number of shares that may be issued upon
consummation of the merger described herein, and upon exercise of
securities exercisable for shares of Common Stock.
<F3> Pursuant to Rule 457(f)(1) and 457(c), and solely for purposes of
calculating the registration fee, the proposed maximum aggregate
offering price is $767,855, which equals (x) the average of the high
and low sale prices of the common stock, par value $.01 per share
("MBI Common Stock"), of Mercantile Bancorporation Inc. ("MBI"),
of $58.875 as reported on the New York Stock Exchange on May 12,
1997, multiplied by (y) the total number of shares of MBI
Common Stock to be issued in the merger (the "Merger") of
Roosevelt Financial Group, Inc. with and into a subsidiary of MBI.
The proposed maximum offering price per share is equal to the
proposed maximum aggregate offering price determined in the
manner described in the preceding sentence divided by the maximum
number of shares of Common Stock to be issued in the Merger.
<F4> In accordance with Rule 457(b), the filing fee of $210,160 paid pursuant to
Section 14(g) of the Securities Exchange Act of 1934 and Rule 0-11
thereunder at the time of the filing of the Proxy Statement/Prospectus
contained in this Registration Statement as preliminary proxy
materials of Roosevelt has been credited to offset the $232,684
registration fee that would otherwise be payable.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
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<PAGE> 2
[Roosevelt 900 Roosevelt Parkway (314) 532-6200
Financial Group, Inc. logo] Chesterfield, Missouri 63017
May 19, 1997
Dear Stockholder:
On behalf of the Board of Directors and management, I cordially invite you
to attend the Annual Meeting of Stockholders of Roosevelt Financial Group, Inc.
("Roosevelt") to be held at 2:00 p.m., Central Time, on June 20, 1997, at the
St. Louis Marriott West Hotel, 660 Maryville Centre Drive, St. Louis, Missouri
(the "Annual Meeting").
At this important meeting, you will be asked to consider and vote on a
proposal to approve and adopt an Agreement and Plan of Reorganization, dated
December 22, 1996 (the "Merger Agreement"), providing for the merger (the
"Merger") of Roosevelt with and into a wholly owned subsidiary of Mercantile
Bancorporation Inc. ("MBI"). Upon consummation of the Merger, each share of
Roosevelt common stock, other than shares held by stockholders of Roosevelt who
exercise their appraisal rights under the General Corporation Law of the State
of Delaware, will be converted into either (i) 0.4211 of a share of MBI common
stock, or (ii) $22.00 in cash, provided that the aggregate number of shares of
MBI common stock issued in the Merger shall, subject to allocation procedures
set forth in the Merger Agreement, be equal to 13,042,110 shares less the
number of shares of MBI common stock issuable upon exercise of Roosevelt stock
options and restricted stock outstanding as of the effective time of the
Merger. In certain circumstances, as set forth in the Merger Agreement and more
fully described in the Proxy Statement/Prospectus, Roosevelt stockholders who
have elected to receive all cash or all shares of MBI common stock in the
Merger will receive a combination of cash and MBI common stock. A copy of the
Merger Agreement is attached to the accompanying Proxy Statement/Prospectus as
Annex A and is incorporated by reference herein.
You will also be asked to consider and vote upon the election of four
directors of Roosevelt to serve until the Merger is consummated or, in the
event the Merger is not consummated, until the expiration of their respective
three-year terms or until their respective successors are elected and
qualified.
Finally, you will be asked to ratify the appointment of KPMG Peat Marwick
LLP as Roosevelt's independent auditors for the fiscal year ending December 31,
1997.
I have enclosed the following items relating to the Annual Meeting and the
Merger:
1. Proxy Statement/Prospectus;
2. Proxy card;
3. 1996 Annual Report on Form 10-K;
4. 1996 Summary Annual Report to Stockholders; and
5. A pre-addressed return envelope for the proxy card.
The Proxy Statement/Prospectus and related proxy materials set forth, or
incorporate by reference, financial data and other important information
relating to Roosevelt and MBI and describe the terms and conditions of the
proposed Merger. The Board of Directors urges you to carefully review these
materials before completing the enclosed proxy card or attending the Annual
Meeting.
Montgomery Securities, an investment banking firm, has issued its opinion
to your Board of Directors regarding the fairness, from a financial point of
view, of the consideration to be paid by MBI pursuant to the Merger Agreement
as of the date of such opinion. A copy of the opinion is attached as Annex D to
the Proxy Statement/Prospectus.
YOUR BOARD OF DIRECTORS HAS DETERMINED THAT THE TERMS OF THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY ARE IN THE BEST INTERESTS
OF ROOSEVELT AND ITS STOCKHOLDERS. ACCORDINGLY, THE BOARD OF DIRECTORS OF
ROOSEVELT UNANIMOUSLY RECOMMENDS THAT ROOSEVELT STOCKHOLDERS VOTE "FOR" THE
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT, "FOR" THE PROPOSED SLATE OF
DIRECTORS AND "FOR" THE RATIFICATION OF ROOSEVELT'S INDEPENDENT AUDITORS.
It is important that your shares be represented at the Annual Meeting,
whether or not you plan to attend the Annual Meeting in person. Please
complete, sign and date the enclosed proxy card and return it to Harris Trust
and Savings Bank in the enclosed pre-addressed envelope which requires no
postage if mailed within the United States. If you later decide to attend the
Annual Meeting and vote in person, or if you wish to revoke your proxy for any
reason prior to the vote at the Annual Meeting, you may do so and your proxy
will have no further effect. You may revoke your proxy by delivering to Harris
Trust and Savings Bank a written notice of revocation bearing a later date than
the proxy, or any later dated proxy relating to the same shares, or by
attending the Annual Meeting and voting in person. Attendance at the Annual
Meeting will not in itself constitute the revocation of a proxy.
The Board of Directors and management of Roosevelt appreciate your
continued support. If you need assistance in completing your proxy card or if
you have any questions about the Proxy Statement/Prospectus, please feel free
to contact Mark G. Ellebrecht at 314-532-6200.
Sincerely,
/s/ STANLEY J. BRADSHAW
Stanley J. Bradshaw
Chairman of the Board,
President and Chief Executive Officer
<PAGE> 3
ROOSEVELT FINANCIAL GROUP, INC.
900 ROOSEVELT PARKWAY
CHESTERFIELD, MISSOURI 63017
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
JUNE 20, 1997
To the Stockholders of Roosevelt Financial Group, Inc.:
Notice is hereby given that the Annual Meeting of Stockholders of Roosevelt
Financial Group, Inc., a Delaware corporation ("Roosevelt"), will be held at
the St. Louis Marriott West Hotel, 660 Maryville Centre Drive, St. Louis,
Missouri, on June 20, 1997, at 2:00 p.m., Central Time (the "Annual
Meeting"), for the following purposes:
(1) To consider and vote on a proposal to approve and adopt the Agreement
and Plan of Reorganization, dated December 22, 1996 (the "Merger Agreement"),
by and between Mercantile Bancorporation Inc., a Missouri corporation
("MBI"), and Roosevelt, pursuant to which, among other things, (i) Roosevelt
will be merged (the "Merger") with and into Ameribanc, Inc., a Missouri
corporation and a wholly owned subsidiary of MBI, with the result that the
business and operations of Roosevelt will be continued through such wholly
owned subsidiary, and (ii) upon consummation of the Merger, each outstanding
share of Roosevelt common stock, par value $.01 per share ("Roosevelt Common
Stock"), other than shares held by stockholders of Roosevelt who exercise
their appraisal rights under the General Corporation Law of the State of
Delaware (the "Delaware Law"), will be converted into either (i) 0.4211 of a
share of MBI common stock ("MBI Common Stock"), or (ii) $22.00 in cash,
provided that the aggregate number of shares of MBI Common Stock that shall be
issued in the Merger shall, subject to allocation procedures set forth in the
Merger Agreement, be equal to 13,042,110 shares less the number of shares of
MBI Common Stock issuable upon exercise of Roosevelt stock options and
restricted stock outstanding as of the effective time of the Merger. In certain
circumstances, as set forth in the Merger Agreement and more fully described in
the Proxy Statement/Prospectus, Roosevelt stockholders who have elected to
receive all cash or all shares of MBI Common Stock in the Merger will receive a
combination of cash and MBI Common Stock. The Merger Agreement is attached as
Annex A to the accompanying Proxy Statement/Prospectus and is incorporated by
reference herein.
(2) To consider and vote upon the election of four directors of Roosevelt.
(3) To consider and ratify the appointment of KPMG Peat Marwick LLP as the
independent auditors of Roosevelt for the fiscal year ending December 31, 1997.
(4) To transact such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
The record date for determining the holders of Roosevelt Common Stock
entitled to receive notice of, and to vote at, the Annual Meeting or any
adjournment or postponement thereof has been fixed as of the close of business
on May 22, 1997. Approval by the Roosevelt stockholders of the Merger Agreement
requires the affirmative vote of the holders of at least a majority of the
outstanding shares of Roosevelt Common Stock entitled to vote at the Annual
Meeting. The election of directors requires a plurality of the votes of the
shares present in person or represented by proxy and entitled to vote and the
ratification of the appointment of the independent auditors requires the
affirmative vote of a majority of the shares duly voted on the matter.
Each holder of Roosevelt Common Stock has the right to dissent from the
Merger and to demand payment of the fair value of his or her shares in the
event the Merger is approved and consummated. Any right of any such stockholder
to receive such payment would be contingent upon strict compliance with the
requirements set forth in Section 262 of the Delaware Law, the full text of
which is attached as Annex C to the accompanying Proxy Statement/Prospectus.
For a summary of these requirements, see "APPRAISAL RIGHTS OF STOCKHOLDERS OF
ROOSEVELT" in the Proxy Statement/Prospectus.
<PAGE> 4
Information regarding the Merger and related matters is contained in the
accompanying Proxy Statement/Prospectus and the annexes thereto, which are
incorporated by reference herein and form a part of this Notice.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN
AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO THE VOTE AT THE ANNUAL
MEETING BY FOLLOWING THE PROCEDURES SET FORTH IN THE ACCOMPANYING PROXY
STATEMENT/PROSPECTUS.
THE BOARD OF DIRECTORS OF ROOSEVELT HAS DETERMINED THAT THE TERMS OF THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY ARE IN THE BEST
INTERESTS OF ROOSEVELT AND ITS STOCKHOLDERS. ACCORDINGLY, THE BOARD OF
DIRECTORS OF ROOSEVELT UNANIMOUSLY RECOMMENDS THAT ROOSEVELT STOCKHOLDERS VOTE
"FOR" THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT, "FOR" THE PROPOSED
SLATE OF DIRECTORS AND "FOR" THE RATIFICATION OF ROOSEVELT'S INDEPENDENT
AUDITORS.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ MARK G. ELLEBRECHT
MARK G. ELLEBRECHT
Secretary
Chesterfield, Missouri
May 19, 1997
PLEASE DO NOT SEND ANY SHARE CERTIFICATES AT THIS TIME.
<PAGE> 5
MERCANTILE BANCORPORATION INC.
PROSPECTUS
------------------------
ROOSEVELT FINANCIAL GROUP, INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 20, 1997
--------------------------
This Prospectus of Mercantile Bancorporation Inc., a Missouri corporation
("MBI"), relates to up to 13,042,110 shares of common stock, par value $0.01
per share, and attached preferred share purchase rights (the "Rights"), of
MBI (such common stock and Rights are collectively referred to herein as the
"MBI Common Stock") to be issued to the stockholders of Roosevelt Financial
Group, Inc., a Delaware corporation ("Roosevelt"), upon consummation of the
proposed merger (the "Merger") of Roosevelt with and into Ameribanc, Inc., a
Missouri corporation and a wholly owned subsidiary of MBI ("Merger Sub"). The
Merger will be consummated pursuant to the Agreement and Plan of
Reorganization, dated December 22, 1996, by and between MBI and Roosevelt (the
"Merger Agreement"), upon the terms and subject to the conditions thereof.
This Prospectus also serves as the Proxy Statement of Roosevelt for use in
connection with the solicitation of proxies by the Board of Directors of
Roosevelt (the "Roosevelt Board") to be used at the Annual Meeting of
Stockholders of Roosevelt (the "Annual Meeting") to, among other things,
approve and adopt the Merger Agreement. The Merger Agreement is attached as
Annex A and is incorporated herein by reference.
Pursuant to the Merger Agreement, MBI will issue up to an aggregate of
13,042,110 shares of MBI Common Stock less the number of shares of MBI Common
Stock issuable upon exercise of Roosevelt's stock options and restricted stock
outstanding as of the effective time of the Merger. Upon consummation of the
Merger, among other things, each outstanding share of Roosevelt common stock,
par value $.01 per share ("Roosevelt Common Stock"), other than shares held
by stockholders of Roosevelt who exercise their appraisal rights under the
General Corporation Law of the State of Delaware (the "Delaware Law"), will
be converted into either (i) 0.4211 (the "Exchange Ratio") of a share of MBI
Common Stock, or (ii) $22.00 in cash. Each Roosevelt stockholder will have the
(Cover Page Continued on Next Page)
THE SECURITIES TO BE ISSUED PURSUANT TO THIS PROXY STATEMENT/PROSPECTUS HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION
(THE "COMMISSION") OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF MBI COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS,
DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR SAVINGS ASSOCIATION AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK
INSURANCE FUND, THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY OTHER
GOVERNMENTAL AGENCY.
--------------------------
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS MAY 19, 1997
<PAGE> 6
(Cover Page, Continued)
opportunity to elect whether to receive only shares of MBI Common Stock or cash
as consideration in the Merger. In certain circumstances, as set forth in the
Merger Agreement and more fully described below, Roosevelt stockholders who
have elected to receive all cash or all shares of MBI Common Stock in the
Merger will receive a combination of cash and MBI Common Stock. See "TERMS OF
THE PROPOSED MERGER--Allocation" and "APPRAISAL RIGHTS OF STOCKHOLDERS OF
ROOSEVELT." No fractional shares of MBI Common Stock will be issued in the
Merger, but cash will be paid in lieu of such fractional shares. See "TERMS OF
THE PROPOSED MERGER--Fractional Shares." Because the value of the Per Share
Cash Consideration is fixed at $22.00 and the value of the Per Share Stock
Consideration fluctuates based on the trading price of MBI Common Stock, at the
Effective Time the value of the Per Share Cash Consideration and the value of
the Per Share Stock Consideration received by Roosevelt stockholders may differ
significantly.
MBI Common Stock is listed on the New York Stock Exchange, Inc. (the
"NYSE") under the symbol "MTL." On December 20, 1996, the last full trading
day before public announcement of the Merger, the last sale price of MBI Common
Stock was $50.75 as reported on the NYSE Composite Tape. On May 15, 1997, the
last sale price of MBI Common Stock as reported on the NYSE Composite Tape was
$59.25. Roosevelt Common Stock is quoted on the Nasdaq National Market
("NASDAQ") under the symbol "RFED." On December 20, 1996, the last sale
price of Roosevelt Common Stock was $18.125 as reported by NASDAQ. On May 15,
1997, the last sale price for Roosevelt Common Stock as reported by NASDAQ was
$23.25.
Based on the closing price of MBI Common Stock on May 15, 1997 of $59.25
per share, the value of the Per Share Stock Consideration would have been
$24.95 and the Per Share Cash Consideration would have been $22.00, subject to
the allocation procedures described below. See "TERMS OF THE PROPOSED
MERGER--Allocation." Roosevelt shareholders are advised to obtain current
market quotations for MBI Common Stock.
This Proxy Statement/Prospectus, the Letter to Roosevelt Stockholders, the
Notice of Annual Meeting of Stockholders and the form of proxy are first being
mailed to the stockholders of Roosevelt on or about May 22, 1997.
<PAGE> 7
AVAILABLE INFORMATION
Each of MBI and Roosevelt is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information
with the Commission. Such reports, proxy statements and other information
concerning either MBI or Roosevelt can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's
Regional Offices in New York (Suite 1300, Seven World Trade Center, New York,
New York 10048) and Chicago (Suite 1400, Citicorp Center, 500 West Madison
Street, Chicago, Illinois 60661). Copies of such material can also be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission maintains an
Internet web site that contains reports, proxy and information statements and
other information regarding issuers that file electronically with the
Commission. The address of the web site is http://www.sec.gov. MBI Common Stock
is listed on the NYSE, and such reports, proxy statements and other information
concerning MBI are available for inspection and copying at the offices of the
NYSE, 20 Broad Street, New York, New York 10005. Roosevelt Common Stock is
quoted on NASDAQ, and such reports, proxy statements and other information
concerning Roosevelt are available for inspection and copying at the Public
Reference section of NASDAQ at 1735 K Street, N.W., Washington, D.C. 20006.
This Proxy Statement/Prospectus does not contain all of the information set
forth in the Registration Statement on Form S-4 and exhibits thereto (together
with any amendments thereto, the "Registration Statement") covering the
securities offered hereby which has been filed by MBI with the Commission under
the Securities Act of 1933, as amended (the "Securities Act"). As permitted
by the rules and regulations of the Commission, this Proxy Statement/Prospectus
omits certain information contained or incorporated by reference in the
Registration Statement. Reference is hereby made to the Registration Statement
for further information with respect to MBI and the securities offered hereby.
Such additional information may be obtained from the Commission's principal
office in Washington, D.C. Statements contained in this Proxy
Statement/Prospectus or in any document incorporated by reference in this Proxy
Statement/Prospectus provide a fair summary of the contents of any contract or
other document referenced herein or therein but are not necessarily complete,
and, in each instance, reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement or such other
document, each such statement being qualified in all respects by such
reference.
i
<PAGE> 8
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
This Proxy Statement/Prospectus incorporates documents by reference which
are not presented herein or delivered herewith. Copies of these documents
(excluding exhibits unless specifically incorporated by reference herein or in
such documents) are available, without charge, to any person to whom this Proxy
Statement/Prospectus is delivered upon written or oral request to the
following:
</TABLE>
<TABLE>
<CAPTION>
MBI DOCUMENTS ROOSEVELT DOCUMENTS
------------- -------------------
<C> <C>
Jon W. Bilstrom, Esq. Mark G. Ellebrecht, Esq.
General Counsel Vice President, General Counsel
and Secretary and Secretary
Mercantile Bancorporation Inc. Roosevelt Financial Group, Inc.
P.O. Box 524 900 Roosevelt Parkway
St. Louis, Missouri 63166-0524 Chesterfield, Missouri 63017
(314) 425-2525 314-532-6200
</TABLE>
IN ORDER TO ENSURE TIMELY DELIVERY OF SUCH DOCUMENTS, A REQUEST MUST BE
RECEIVED NO LATER THAN JUNE 13, 1997.
The following documents filed with the Commission by MBI under the Exchange
Act are incorporated herein by reference (Commission File No. 1-11792):
(i) MBI's Annual Report on Form 10-K for the year ended December 31,
1996 (the "1996 MBI Form 10-K").
(ii) MBI's Quarterly Report on Form 10-Q for the quarter ended March
31, 1997.
(iii) The information contained in MBI's Proxy Statement, dated March
21, 1997, for its Annual Meeting of Shareholders to be held on
April 24, 1997 that has been incorporated by reference in the 1996
MBI Form 10-K.
(iv) The description of MBI Common Stock set forth in Item 1 of MBI's
Registration Statement on Form 8-A, dated March 5, 1993, and any
amendment or report filed for the purpose of updating such
description.
(v) The description of the Rights set forth in Item 1 of MBI's
Registration Statement on Form 8-A, dated March 5, 1993, and any
amendment or report filed for the purpose of updating such
description.
(vi) MBI's Current Report on Form 8-K dated April 25, and May 13, 1997.
The following documents filed with the Commission by Roosevelt under the
Exchange Act are incorporated herein by reference (Commission File No.
0-17403):
(i) Roosevelt's Annual Report on Form 10-K for the year ended December
31, 1996, as amended on Form 10-K/A on March 14, 1997 and on Form
10-K/A-2 on April 29, 1997 (the "1996 Roosevelt Form 10-K").
(ii) Roosevelt's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997.
Accompanying this Proxy Statement/Prospectus is a copy of the 1996
Roosevelt 10-K, as amended, and Roosevelt's 1996 Summary Annual Report to
Stockholders (the "Summary Annual Report").
All documents filed with the Commission by MBI and/or Roosevelt pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Proxy Statement/Prospectus and prior to the date of the Annual Meeting shall be
deemed to be incorporated by reference herein and made a part hereof from the
date any such document is filed. The information relating to MBI and Roosevelt
contained in this Proxy Statement/Prospectus does not purport to be complete
and should be read together with the information in the documents incorporated
by reference herein. Any statement contained herein or in a document
incorporated or deemed to be incorporated herein by reference shall be deemed
to be modified or superseded for all purposes to the extent that a statement
contained herein or in any other subsequently filed document incorporated or
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part hereof.
ii
<PAGE> 9
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS OR IN THE
DOCUMENTS INCORPORATED BY REFERENCE HEREIN AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY MBI OR ROOSEVELT. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO EXCHANGE OR SELL, OR A SOLICITATION OF AN OFFER TO EXCHANGE OR BUY,
ANY SECURITIES, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION IN WHICH,
OR FROM ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER, SOLICITATION OF
AN OFFER OR PROXY SOLICITATION. THE INFORMATION CONTAINED IN THIS PROXY
STATEMENT/PROSPECTUS SPEAKS AS OF THE DATE HEREOF UNLESS OTHERWISE SPECIFICALLY
INDICATED. NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY
DISTRIBUTION OF THE SECURITIES TO WHICH IT RELATES SHALL IMPLY OR CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF MBI OR ROOSEVELT OR
ANY OF THEIR RESPECTIVE SUBSIDIARIES OR IN THE INFORMATION SET FORTH OR
INCORPORATED BY REFERENCE HEREIN SUBSEQUENT TO THE DATE HEREOF.
THIS PROXY STATEMENT/PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS
WITH RESPECT TO THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND BUSINESS OF
MBI FOLLOWING THE CONSUMMATION OF THE MERGER, INCLUDING STATEMENTS RELATING TO
THE COST SAVINGS, REVENUE ENHANCEMENTS AND FUNDING ADVANTAGES THAT ARE EXPECTED
TO BE REALIZED FROM THE MERGER AND THE EXPECTED IMPACT OF THE MERGER ON MBI'S
FINANCIAL PERFORMANCE AND EARNINGS ESTIMATES FOR THE COMBINED COMPANY. SEE
"TERMS OF THE PROPOSED MERGER--BACKGROUND OF THE MERGER," "--REASONS FOR THE
MERGER; ROOSEVELT BOARD RECOMMENDATION," "--OPINION OF ROOSEVELT'S FINANCIAL
ADVISOR" AND "PRO FORMA FINANCIAL INFORMATION." THESE FORWARD-LOOKING
STATEMENTS INVOLVE CERTAIN RISKS AND UNCERTAINTIES. FACTORS THAT MAY CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH
FORWARD-LOOKING STATEMENTS INCLUDE, AMONG OTHERS, THE FOLLOWING POSSIBILITIES:
(1) EXPECTED COST SAVINGS FROM THE MERGER CANNOT BE FULLY REALIZED; (2) DEPOSIT
ATTRITION, CUSTOMER LOSS OR REVENUE LOSS FOLLOWING THE MERGER; (3) COMPETITIVE
PRESSURE IN THE BANKING INDUSTRY INCREASES SIGNIFICANTLY; (4) COSTS OR
DIFFICULTIES RELATED TO THE INTEGRATION OF THE BUSINESSES OF MBI AND ROOSEVELT
ARE GREATER THAN EXPECTED; (5) CHANGES IN THE INTEREST RATE ENVIRONMENT REDUCE
MARGINS MORE THAN PLANNED; (6) GENERAL ECONOMIC CONDITIONS, EITHER NATIONALLY
OR REGIONALLY, ARE LESS FAVORABLE THAN EXPECTED, RESULTING IN, AMONG OTHER
THINGS, A DETERIORATION IN CREDIT QUALITY; (7) THE IMPACT OF REGULATORY CHANGES
IS OTHER THAN EXPECTED; (8) CHANGES IN BUSINESS CONDITIONS AND INFLATION; AND
(9) CHANGES IN THE SECURITIES MARKETS. FURTHER INFORMATION ON OTHER FACTORS
WHICH COULD AFFECT THE FINANCIAL RESULTS OF MBI AFTER THE MERGER IS INCLUDED IN
THE COMMISSION FILINGS INCORPORATED BY REFERENCE HEREIN.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
AVAILABLE INFORMATION......................................... i
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE............. ii
SUMMARY INFORMATION........................................... 1
Business of MBI........................................... 1
Business of Merger Sub.................................... 1
Business of Roosevelt..................................... 1
Annual Meeting of Roosevelt Stockholders.................. 2
The Proposed Merger....................................... 2
Fractional Shares......................................... 5
Dividends................................................. 5
Stock Option Agreement.................................... 5
Support Agreements........................................ 5
Recommendation of the Roosevelt Board..................... 6
Opinion of Roosevelt's Financial Advisor.................. 6
Interests of Certain Persons in the Merger................ 6
Regulatory Approval....................................... 6
Waiver and Amendment...................................... 7
Accounting Treatment...................................... 7
Roosevelt Stock Options................................... 7
Federal Income Tax Consequences in General................ 7
Appraisal Rights.......................................... 8
Certain Differences in the Rights of Shareholders......... 8
Markets and Market Prices................................. 8
Comparative Unaudited Per Share Data...................... 10
Summary Financial Data.................................... 11
INFORMATION REGARDING ANNUAL MEETING.......................... 15
General................................................... 15
Date, Time and Place...................................... 15
Roosevelt Record Date; Vote Required...................... 15
Voting Securities and Certain Holders Thereof............. 16
Voting and Revocation of Proxies.......................... 17
Solicitation of Proxies................................... 17
PROPOSAL I--APPROVAL OF THE MERGER AGREEMENT.................. 18
TERMS OF THE PROPOSED MERGER.................................. 18
General Description of the Merger......................... 18
Closing and Effective Time................................ 18
Election Procedures....................................... 18
Allocation................................................ 20
Surrender of Roosevelt Stock Certificates and Receipt of
MBI Common Stock and/or Cash............................ 21
Fractional Shares......................................... 22
Dividends................................................. 22
Stock Option Agreement.................................... 22
Support Agreements........................................ 24
Background of the Merger.................................. 24
Reasons for the Merger; Roosevelt Board Recommendation.... 26
Opinion of Roosevelt's Financial Advisor.................. 26
Interests of Certain Persons in the Merger................ 30
Conditions of the Merger.................................. 32
Termination of the Merger Agreement....................... 33
Regulatory Approval....................................... 33
Business Pending the Merger............................... 34
Waiver and Amendment...................................... 37
Accounting Treatment...................................... 37
Management and Operations After the Merger................ 37
Employee Benefits......................................... 38
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER......... 40
Impact of Section 302 of the Code......................... 41
APPRAISAL RIGHTS OF STOCKHOLDERS OF ROOSEVELT................. 42
PRO FORMA FINANCIAL INFORMATION............................... 45
Comparative Unaudited Per Share Data...................... 45
Pro Forma Combined Consolidated Financial Statements
(Unaudited)............................................. 46
DESCRIPTION OF ROOSEVELT...................................... 54
Roosevelt................................................. 54
Roosevelt Bank............................................ 55
Missouri State Bank and Trust Company..................... 55
INFORMATION REGARDING MBI STOCK............................... 56
Description of MBI Common Stock and Attached Preferred
Share Purchase Rights................................... 56
Restrictions on Resale of MBI Capital Stock by Affiliates;
Affiliate Agreements.................................... 57
Comparison of the Rights of Shareholders of MBI and
Stockholders of Roosevelt............................... 58
SUPERVISION AND REGULATION.................................... 62
General................................................... 62
Certain Transactions with Affiliates...................... 63
Payment of Dividends...................................... 63
Capital Adequacy.......................................... 63
Support of Subsidiary Banks............................... 64
FIRREA and FDICIA......................................... 64
Depositor Preference Statute.............................. 65
FDIC Insurance Assessments................................ 65
Interstate Banking and Other Recent Legislation........... 66
PROPOSAL II--ELECTION OF DIRECTORS............................ 67
Roosevelt Board Meetings and Committees................... 68
Compensation Committee Interlocks and Insider
Participation........................................... 69
Executive Compensation.................................... 70
Pension Plans............................................. 71
Director Compensation..................................... 73
Compensation and Stock Option Committee Report............ 73
Stockholder Return Performance Presentation............... 75
Employment Agreements..................................... 75
Certain Relationships and Related Transactions............ 75
PROPOSAL III--RATIFICATION OF APPOINTMENT OF AUDITORS......... 76
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE....... 76
LEGAL MATTERS................................................. 77
EXPERTS....................................................... 77
OTHER MATTERS................................................. 77
SHAREHOLDER PROPOSALS......................................... 77
ANNEXES
Annex A-- Agreement and Plan of Reorganization.............. A-1
Annex B-- Stock Option Agreement............................ B-1
Annex C-- Appraisal Rights Provisions Under the Delaware
General Corporation Law............................ C-1
Annex D-- Fairness Opinion of Montgomery Securities, dated
December 22, 1996.................................. D-1
</TABLE>
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SUMMARY INFORMATION
THE FOLLOWING IS A SUMMARY OF CERTAIN TERMS OF THE MERGER AND RELATED
INFORMATION DISCUSSED ELSEWHERE IN THIS PROXY STATEMENT/PROSPECTUS AND IS NOT
INTENDED TO BE COMPLETE. IT IS QUALIFIED IN ALL RESPECTS BY THE MORE DETAILED
INFORMATION INCLUDED IN THIS PROXY STATEMENT/PROSPECTUS, THE ACCOMPANYING
ANNEXES AND THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE. AS USED IN THIS
PROXY STATEMENT/PROSPECTUS, THE TERMS "MBI" AND "ROOSEVELT" REFER TO SUCH
CORPORATIONS, RESPECTIVELY, AND, WHERE THE CONTEXT REQUIRES, SUCH CORPORATIONS
AND THEIR RESPECTIVE SUBSIDIARIES ON A CONSOLIDATED BASIS. STOCKHOLDERS OF
ROOSEVELT ARE URGED TO READ AND CONSIDER CAREFULLY ALL OF THE INFORMATION
CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS AND
THE ANNEXES TO THIS PROXY STATEMENT/PROSPECTUS. ALL INFORMATION CONCERNING MBI
INCLUDED IN THIS PROXY STATEMENT/PROSPECTUS HAS BEEN FURNISHED BY MBI AND ALL
INFORMATION CONCERNING ROOSEVELT INCLUDED IN THIS PROXY STATEMENT/PROSPECTUS
HAS BEEN FURNISHED BY ROOSEVELT.
BUSINESS OF MBI
MBI, a Missouri corporation, was organized in 1970 and is a registered bank
holding company under the federal Bank Holding Company Act of 1956, as amended
(the "BHCA"). As of March 31, 1997, MBI owned, directly or indirectly, all of
the capital stock of Mercantile Bank National Association (formerly known as
Mercantile Bank of St. Louis National Association), 33 other commercial banks
and one federally chartered thrift which operate from over 400 locations
throughout Missouri, Illinois, Iowa, Arkansas and eastern Kansas. MBI's
services concentrate in three major lines of business--consumer, corporate, and
trust and investment advisory services. MBI also operates non-banking
subsidiaries that provide related financial services, including investment
management, brokerage services and asset-based lending. As of December 31,
1996, MBI reported, on a consolidated basis, total assets of $22.0 billion,
total deposits of $17.3 billion, total loans and leases of $15.0 billion and
shareholders' equity of $1.9 billion.
MBI's principal executive offices are located at One Mercantile Center, St.
Louis, Missouri 63101 and its telephone number is (314) 425-2525.
For additional information, see "--Summary Financial Data," "TERMS OF
THE PROPOSED MERGER," "INFORMATION REGARDING MBI COMMON STOCK,"
"SUPERVISION AND REGULATION," "PRO FORMA FINANCIAL INFORMATION" and
"INCORPORATION OF CERTAIN INFORMATION BY REFERENCE."
BUSINESS OF MERGER SUB
Merger Sub, a Missouri corporation which was organized in 1991, is a wholly
owned subsidiary of MBI and a registered bank holding company under the BHCA.
At December 31, 1996, Merger Sub owned all of the capital stock of Mercantile
Bank National Association, 33 other commercial banks and one federally
chartered thrift which operate from over 400 locations throughout Missouri,
Illinois, Arkansas, Iowa and eastern Kansas. Merger Sub will be the surviving
corporation after the Merger.
The principal executive offices of Merger Sub are located at One Mercantile
Center, St. Louis, Missouri 63101 and its telephone number is (314) 425-2525.
BUSINESS OF ROOSEVELT
Roosevelt, a Delaware corporation, is the holding company for Roosevelt
Bank, a federally chartered savings bank headquartered in Chesterfield,
Missouri and Missouri State Bank and Trust Company ("Missouri State Bank"), a
Missouri-chartered trust company with full commercial banking powers
headquartered in St. Louis, Missouri. Roosevelt's business has consisted
primarily of the business of Roosevelt Bank, Missouri State Bank and the other
subsidiaries of Roosevelt. Roosevelt Bank had $7.4 billion in total assets at
March 31, 1997, making it the largest Missouri-based thrift institution.
Roosevelt Bank has 79 full-service offices including 37 offices serving the
St. Louis
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metropolitan area and ten offices serving the Kansas City metropolitan area.
Missouri State Bank had total assets of $86.3 million at March 31, 1997.
Missouri State Bank has two offices, both located in the City of St. Louis,
Missouri, from which it conducts a commercial banking business and acts
primarily as a lender to small and middle market companies located within the
St. Louis metropolitan area. Roosevelt's business on a consolidated basis
consists primarily of attracting deposits from the general public and using
those deposits, together with borrowings and other funds, to originate and
acquire real estate and consumer loans, to acquire mortgage-backed securities,
to perform loan servicing functions for others, and to provide other retail
banking and financial services to consumers. As of March 31, 1997, Roosevelt
had total consolidated assets of $7.5 billion, deposits of $5.3 billion and
stockholders' equity of $470 million.
Roosevelt's principal executive offices are located at 900 Roosevelt
Parkway, Chesterfield, Missouri 63017 and its telephone number is (314)
532-6200.
For additional information, see "TERMS OF THE PROPOSED MERGER,"
"DESCRIPTION OF ROOSEVELT," "PRO FORMA FINANCIAL INFORMATION" and
"INCORPORATION OF CERTAIN INFORMATION BY REFERENCE."
ANNUAL MEETING OF ROOSEVELT STOCKHOLDERS
The Annual Meeting will be held at the St. Louis Marriott West Hotel, 660
Maryville Centre Drive, St. Louis, Missouri, on Friday, June 20, 1997, at 2:00
p.m., Central Time, at which Annual Meeting the stockholders of Roosevelt will
consider and vote on (i) a proposal to approve and adopt the Merger Agreement;
(ii) the election of four directors; and (iii) the ratification of the
appointment of Roosevelt's independent auditors, and will transact such other
business as may properly come before the Annual Meeting or any adjournment or
postponement thereof. Approval by the Roosevelt stockholders of the Merger
Agreement requires the affirmative vote of the holders of at least a majority
of the outstanding shares of Roosevelt Common Stock entitled to vote at the
Annual Meeting ("Stockholder Approval"). The election of directors requires a
plurality of the votes of the shares present in person or by proxy and entitled
to vote. The ratification of the appointment of Roosevelt's independent
auditors requires approval by a majority of the votes cast on such proposal.
Only holders of record of Roosevelt Common Stock at the close of business on
May 22, 1997 (the "Record Date") will be entitled to notice of, and to vote
at, the Annual Meeting. As of May 15, 1997, there were 45,149,041 shares of
Roosevelt Common Stock outstanding, held by approximately 5,713 holders of
record. See "INFORMATION REGARDING ANNUAL MEETING."
As of May 15, 1997, directors and executive officers of Roosevelt and
certain of their affiliates owned beneficially an aggregate of 1,158,896 shares
of Roosevelt Common Stock, or approximately 2.57% of the outstanding shares of
Roosevelt Common Stock entitled to vote at the Annual Meeting. All of the
directors of Roosevelt, who as of May 15, 1997 beneficially owned in the
aggregate approximately 2.30% of the outstanding shares of Roosevelt Common
Stock, have each agreed pursuant to a support agreement, dated December 22,
1996 (each, a "Support Agreement"), to vote all shares of Roosevelt Common
Stock beneficially owned by such person, or over which such person has voting
power or control, to approve the Merger Agreement. See "INFORMATION REGARDING
ANNUAL MEETING" and "TERMS OF THE PROPOSED MERGER--Support Agreements."
Any stockholder of Roosevelt giving a proxy may revoke it at any time prior
to the vote at the Annual Meeting. Stockholders of Roosevelt wishing to revoke
a proxy prior to the vote may do so by delivering to the stock transfer agent,
Harris Trust and Savings Bank, at P.O. Box 1878, Chicago, Illinois 60690-9312
by mail, or 311 West Monroe Street, 11th Floor, Chicago, Illinois 60690-3504 by
courier or hand delivery, a written notice of revocation bearing a later date
than the proxy or any later dated proxy relating to the same shares, or by
attending the Annual Meeting and voting in person. Attendance at the Annual
Meeting will not in itself constitute the revocation of a proxy.
THE PROPOSED MERGER
General. Subject to the satisfaction of the terms and conditions set forth
in the Merger Agreement, which are described below, Roosevelt will merge with
and into Merger Sub. Upon consummation of the Merger, Roosevelt's corporate
existence will terminate, with Merger Sub continuing as the surviving
corporation.
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<PAGE> 13
Simultaneously with the effectiveness of the Merger, and subject to the
election and allocation procedures set forth in the Merger Agreement and
described below, each outstanding share of Roosevelt Common Stock, other than
shares held by stockholders of Roosevelt who exercise their appraisal rights
under the Delaware Law, will be converted into either (i) 0.4211 of a share of
MBI Common Stock (the "Per Share Stock Consideration"), or (ii) $22.00 in
cash (the "Per Share Cash Consideration") (together, the "Merger
Consideration"). See "TERMS OF THE PROPOSED MERGER" and "APPRAISAL RIGHTS
OF STOCKHOLDERS OF ROOSEVELT." Because the value of the Per Share Cash
Consideration is fixed at $22.00 and the value of the Per Share Stock
Consideration fluctuates based on the trading price of MBI Common Stock, at the
Effective Time the value of the Per Share Cash Consideration and the value of
the Per Share Stock Consideration received by Roosevelt stockholders may differ
significantly. Based on the closing price of MBI Common Stock on May 15, 1997
of $59.25 per share, the value of the Per Share Stock Consideration would have
been $24.95 and the Per Share Cash Consideration would have been $22.00,
subject to the allocation procedures described below. See "TERMS OF THE
PROPOSED MERGER--Allocation." Roosevelt shareholders are advised to obtain
current market quotations for MBI Common Stock.
Election and Allocation Procedures. Each Roosevelt stockholder may elect to
receive only shares of MBI Common Stock in exchange for such holder's Roosevelt
Common Stock ("Stock Election Shares"), to elect to receive only cash with
respect to such holder's Roosevelt Common Stock ("Cash Election Shares") or
to indicate that such holder makes no election with respect to such holder's
Roosevelt Common Stock ("No Election Shares").
Approximately twenty five days prior to the anticipated Effective Time,
Harris Trust and Savings Bank, which has been appointed the exchange agent (the
"Exchange Agent"), will send to each Roosevelt stockholder who is a
stockholder of record as of five business days prior to such date, an election
form (the "Election Form") to be used by each such stockholder to indicate
Stock Election Shares, Cash Election Shares or No Election Shares. In order for
an Election Form to be deemed to be effective, such Election Form must be
properly completed and duly executed by the Roosevelt stockholder and returned
to the Exchange Agent by 5:00 p.m., Central Time, on the fifth day prior to the
anticipated Effective Time (or such other time and date as MBI and Roosevelt
may mutually agree) (the "Election Deadline"). MBI and Roosevelt currently
anticipate that the Effective Time will occur on July 1, 1997. Based on such
anticipated Effective Time, the Exchange Agent would mail Election Forms and
the accompanying letters of transmittal on approximately June 6, 1997 to each
Roosevelt stockholder who is a stockholder of record as of May 30, 1997. In
addition, based on such anticipated Effective Time, the Election Deadline would
be 5:00 p.m., Central Time, on June 26, 1997.
The actual Merger Consideration that will be paid to each Roosevelt
stockholder upon consummation of the Merger may differ from the form of Merger
Consideration elected by such stockholder pursuant to his or her Election Form
in the event that the aggregate number of shares of MBI Common Stock to be
issued pursuant to the Merger would not equal 13,042,110 shares less the number
of shares of MBI Common Stock issuable upon exercise of Roosevelt stock options
and restricted stock outstanding as of the effective time of the Merger (the
"Stock Amount").
Any shares of Roosevelt Common Stock with respect to which an effective,
properly completed Election Form has not been submitted to the Exchange Agent
by the Election Deadline will be deemed to be "No Election Shares." An
Election Form will be deemed properly completed only if accompanied by one or
more certificates (or customary affidavits and indemnification regarding the
loss or destruction of such certificates or the guaranteed delivery of such
certificates) representing all shares of Roosevelt Common Stock covered by such
Election Form, together with duly executed transmittal materials included with
the Election Form. Any Election Form may be revoked or changed by the person
submitting such Election Form at or prior to the Election Deadline. In the
event an Election Form is revoked prior to the Election Deadline, the shares of
Roosevelt Common Stock represented by such Election Form shall become No
Election Shares and MBI will cause the certificates representing Roosevelt
Common Stock to be promptly returned without charge to the person submitting
the Election Form upon written request to that effect from the person who
submitted the Election Form.
In the event that the number of shares of MBI Common Stock that would be
issued upon conversion in the Merger of the Stock Election Shares is less than
the Stock Amount, (i) all Stock Election Shares will be converted into the
right to receive the Per Share Stock Consideration, (ii) the Exchange Agent
will select first from among the
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holders of No Election Shares and then (if necessary), pro rata from among the
Cash Election Shares (excluding dissenting shares), a sufficient number of
shares ("Stock Designated Shares") such that the number of shares of MBI
Common Stock that will be issued in the Merger equals as closely as practicable
the Stock Amount, and all Stock Designated Shares will be converted into the
right to receive the Per Share Stock Consideration; provided that MBI has the
option, in its sole discretion, to satisfy some or all of the Stock Designated
Shares by similar pro rata selection in Per Share Cash Consideration in lieu of
delivering the Per Share Stock Consideration subject to the requirement that
the Merger continue to qualify as a tax-free reorganization for purposes of
Section 368 of the Code, and (iii) the Cash Election Shares and the No Election
Shares which are not Stock Designated Shares will be converted into the right
to receive the Per Share Cash Consideration.
In the event that the number of shares of MBI Common Stock that would be
issued upon the conversion of the Stock Election Shares is greater than the
Stock Amount, (i) all Cash Election Shares and No Election Shares will be
converted into the right to receive the Per Share Cash Consideration, (ii) the
Exchange Agent will select from among the Stock Election Shares, on a pro rata
basis, a sufficient number of shares ("Cash Designated Shares") such that the
number of shares of MBI Common Stock that will be issued in the Merger equals
as closely as practicable the Stock Amount, and all Cash Designated Shares will
be converted into the right to receive the Per Share Cash Consideration, and
(iii) the Stock Election Shares which are not Cash Designated Shares shall be
converted into the right to receive the Per Share Stock Consideration.
In the event that the number of shares of MBI Common Stock that would be
issued upon conversion of the Stock Election Shares is equal or nearly equal
(as determined by the Exchange Agent) to the Stock Amount, then all Stock
Election Shares will be converted into the right to receive the Per Share Stock
Consideration and all Cash Election Shares and No Election Shares will be
converted into the right to receive the Per Share Cash Consideration. In the
event that the number of shares of MBI Common Stock that would be issued upon
the conversion of the Stock Election Shares and No Election Shares would equal
or nearly equal (as determined by the Exchange Agent) the Stock Amount, then
all Cash Election Shares will be converted into the right to receive the Per
Share Cash Consideration and all Stock Election Shares and No Election Shares
will be converted into the right to receive the Per Share Stock Consideration.
BECAUSE THE MAXIMUM AGGREGATE NUMBER OF SHARES OF MBI COMMON STOCK TO BE
ISSUED IN THE MERGER IS FIXED, NO ASSURANCE CAN BE GIVEN THAT AN ELECTION BY
ANY GIVEN ROOSEVELT STOCKHOLDER WILL BE HONORED IN ITS ENTIRETY. THEREFORE,
ROOSEVELT STOCKHOLDERS MAY NOT RECEIVE PRECISELY THE FORM OF CONSIDERATION
REQUESTED. SEE "TERMS OF THE PROPOSED MERGER--ELECTION PROCEDURES" AND
"--ALLOCATION." IN THE EVENT A HOLDER OF ROOSEVELT COMMON STOCK RECEIVES BOTH
MBI COMMON STOCK AND CASH, THE RECEIPT OF CASH COULD BE SUBJECT TO TAX. SEE
"CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER."
IF THE EXCHANGE AGENT FAILS TO RECEIVE YOUR PROPERLY COMPLETED ELECTION
FORM BY THE ELECTION DEADLINE, YOUR SHARES WILL BE DEEMED NO ELECTION SHARES
AND YOU WILL RECEIVE THE MERGER CONSIDERATION DETERMINED IN ACCORDANCE WITH THE
ALLOCATION PROCEDURES SET FORTH IN THE MERGER AGREEMENT AND DESCRIBED UNDER
"TERMS OF THE PROPOSED MERGER--ALLOCATION." THEREFORE, IT IS IMPORTANT THAT
THE EXCHANGE AGENT RECEIVES YOUR ELECTION FORM BY THE ELECTION DEADLINE.
Conditions. Consummation of the Merger is subject to certain terms and
conditions, including, among other things, Stockholder Approval and receipt of
all requisite regulatory approvals. See "TERMS OF THE PROPOSED
MERGER--Conditions of the Merger" and "--Regulatory Approval."
Closing and Effective Time. Unless the parties otherwise agree, the closing
(the "Closing") of the Merger shall take place at 10:00 a.m., local time, on
the date (the "Closing Date") on which the Effective Time of the Merger
occurs, which shall be any such date on or after May 16, 1997 as MBI shall
notify Roosevelt in writing but (i) not earlier than the receipt of Stockholder
Approval and all requisite regulatory approvals (the "Approval Date"), and
(ii) not later than the first business day of the first full calendar month
commencing at least five business days after the Approval Date. The Merger will
be consummated and become effective on the date and at the time (the
"Effective Time") on which appropriate documents in respect of the Merger are
filed with the Secretaries of State of the States
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<PAGE> 15
of Delaware and Missouri. MBI and Roosevelt currently anticipate that the
Effective Time will occur on July 1, 1997. See "TERMS OF THE PROPOSED
MERGER--Closing and Effective Time."
Termination. The Merger Agreement may be terminated at any time prior to
the Effective Time by the mutual consent of the parties or by either party upon
the occurrence of certain events or if the Merger is not consummated by
December 22, 1997. See "TERMS OF THE PROPOSED MERGER--Termination of the
Merger Agreement."
FRACTIONAL SHARES
No fractional shares of MBI Common Stock will be issued to Roosevelt
stockholders in connection with the Merger. Upon consummation of the Merger,
each former holder of Roosevelt Common Stock who otherwise would have been
entitled to receive a fraction of a share of MBI Common Stock shall be entitled
to receive in lieu thereof cash, without interest, in an amount equal to the
holder's fractional share interest multiplied by the closing stock price of MBI
Common Stock on the last business day preceding the Effective Time. Cash
received by Roosevelt stockholders in lieu of fractional shares may give rise
to taxable income. See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE
MERGER."
DIVIDENDS
On April 24, 1997, the Roosevelt Board declared a dividend of $.225 per
share, payable on May 30, 1997 to stockholders of record as of May 14, 1997.
The dividend consists of Roosevelt's regular dividend of $.17 per share plus a
special transition dividend of $.055 per share (the "Transition Dividend").
The Transition Dividend ensures that Roosevelt Stockholders receive fair
dividends based on the record and payment dates of Roosevelt's anticipated last
dividend prior to the Merger and the record and payment dates of MBI's first
dividend following the Merger.
STOCK OPTION AGREEMENT
In connection with the execution of the Merger Agreement, MBI and Roosevelt
entered into the Stock Option Agreement, dated December 22, 1996 (the "Stock
Option Agreement"), pursuant to which Roosevelt has issued MBI an option (the
"Option") to purchase up to 8,785,429 shares of Roosevelt Common Stock (or
19.46% of the outstanding shares of Roosevelt Common Stock as of May 15, 1997,
without including any shares subject to or issued pursuant to the Option) at an
exercise price of $18.125 per share. The Option is exercisable only upon the
occurrence of certain events and provides MBI the right, under certain
circumstances, to require Roosevelt to purchase for cash the unexercised
portion of the Option and all shares of Roosevelt Common Stock purchased by MBI
pursuant thereto. The Option, which MBI required that Roosevelt grant as a
condition to MBI's entering into the Merger Agreement, may increase the
likelihood of consummation of the Merger by discouraging competing offers for
Roosevelt. Certain aspects of the Stock Option Agreement may have the effect of
discouraging persons who may now, or prior to the Effective Time, be interested
in acquiring all of or a significant interest in Roosevelt from considering or
proposing such an acquisition, even if such persons were prepared to offer to
pay consideration to stockholders of Roosevelt which had a higher current
market price than the Per Share Stock Consideration or Per Share Cash
Consideration to be received for each share of Roosevelt Common Stock pursuant
to the Merger Agreement.
The Stock Option Agreement is attached hereto as Annex B to this Proxy
Statement/Prospectus and is incorporated herein by reference. See "TERMS OF
THE PROPOSED MERGER--Stock Option Agreement."
SUPPORT AGREEMENTS
Concurrently with the execution of the Merger Agreement, all of the
directors of Roosevelt, who as of May 15, 1997 beneficially owned in the
aggregate approximately 2.30% of the outstanding shares of Roosevelt Common
Stock (each, a "Supporting Stockholder" and together, the "Supporting
Stockholders"), executed separate Support Agreements with MBI pursuant to
which each Supporting Stockholder agreed, among other things, to vote all
shares of Roosevelt Common Stock beneficially owned by the Supporting
Stockholder to approve the Merger Agreement and against any Alternative
Transaction (as defined below). Each Supporting Stockholder also thereby
agreed, among other things, to not (i) sell, agree to sell, or otherwise
transfer or dispose of any shares of Roosevelt Common Stock owned by the
Supporting Stockholder, other than pursuant to the Merger, to an affiliate who
agrees to comply
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<PAGE> 16
with such Support Agreement, or with MBI's prior written consent, or (ii)
directly or indirectly, solicit, initiate or encourage any inquiries or
proposals from, discuss or negotiate with, or provide any nonpublic information
to, any person relating to any sale of Roosevelt, or any of its business,
material assets, or capital stock, or any business combination or similar
transaction involving Roosevelt (each such transaction, an "Alternative
Transaction"). Each Support Agreement terminates upon termination of the
Merger Agreement in accordance with its terms. See "TERMS OF THE PROPOSED
MERGER--Support Agreements."
RECOMMENDATION OF THE ROOSEVELT BOARD
THE ROOSEVELT BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY. THE ROOSEVELT BOARD BELIEVES THAT THE MERGER
IS IN THE BEST INTERESTS OF ROOSEVELT AND ITS STOCKHOLDERS AND RECOMMENDS THAT
SUCH STOCKHOLDERS VOTE "FOR" THE MATTERS TO BE VOTED UPON BY SUCH
STOCKHOLDERS IN CONNECTION WITH THE MERGER.
For a discussion of the factors considered by the Roosevelt Board in
reaching its conclusion, see "TERMS OF THE PROPOSED MERGER--Background of the
Merger" and "--Reasons for the Merger; Roosevelt Board Recommendation."
OPINION OF ROOSEVELT'S FINANCIAL ADVISOR
Montgomery Securities ("Montgomery"), Roosevelt's financial advisor,
delivered its oral opinion to the Roosevelt Board on December 22, 1996, which
was confirmed in a written opinion dated December 22, 1996, to the effect that,
as of such date and based upon the procedures and subject to the assumptions
made, matters considered and limitations described therein, the Merger
Consideration is fair from a financial point of view to the holders of
Roosevelt Common Stock. The full text of the written opinion of Montgomery
dated December 22, 1996 is attached as Annex D to this Proxy
Statement/Prospectus and holders of Roosevelt Common Stock are urged to read
carefully the opinion in its entirety. See "TERMS OF THE PROPOSED
MERGER--Opinion of Roosevelt's Financial Advisor."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of the management of Roosevelt have interests in the Merger
in addition to the interests generally as stockholders of Roosevelt. For
instance, Stanley J. Bradshaw, Chairman of the Board, President and Chief
Executive Officer of Roosevelt, Anat Bird, Senior Executive Vice President and
Chief Operating Officer of Roosevelt, and Gary W. Douglass, Executive Vice
President and Chief Financial Officer of Roosevelt, have each entered into
employment agreements with MBI and Roosevelt. MBI and Roosevelt have also
entered into an agreement which provides for the payment of severance benefits
to certain employees of Roosevelt and its subsidiaries upon termination of
their employment, including a payment equal to nine months of base salary to
eligible employees holding the title of Senior Vice President or above. In
addition, under the Merger Agreement, MBI has agreed to indemnify the present
and past employees, agents, directors and officers of Roosevelt and its
subsidiaries for all acts and omissions occurring at or prior to the Effective
Time to the same extent as such persons were indemnified by Roosevelt as of the
date of the Merger Agreement. The Merger Agreement also provides that MBI will
provide, for a period of not less than six years after the Effective Time, an
insurance and indemnification policy providing coverage to the directors and
officers of Roosevelt that is no less favorable than the coverage provided by
MBI to MBI's directors and officers as of the date of the Merger Agreement.
The Roosevelt Board was aware of these interests and considered them, among
other interests and other matters, in approving the Merger Agreement and the
transactions contemplated thereby. See "TERMS OF THE PROPOSED
MERGER--Interests of Certain Persons in the Merger."
REGULATORY APPROVAL
The Merger is subject to the prior approval of the Board of Governors of
the Federal Reserve System (the "Federal Reserve Board") under the BHCA. In
reviewing the Merger, the Federal Reserve Board will consider various factors,
including possible anti-competitive effects of the Merger, and will examine the
financial and
6
<PAGE> 17
managerial resources and future prospects of the combined organization. The
Merger may not be consummated until expiration of all applicable waiting
periods.
Application for such approvals has been filed. There can be no assurance
that any necessary regulatory approvals or actions will be received or taken or
as to the timing of such approvals or actions.
See "TERMS OF THE PROPOSED MERGER--Conditions of the Merger" and
"--Regulatory Approval."
WAIVER AND AMENDMENT
Any term, condition or provision of the Merger Agreement may be waived in
writing at any time by the party which is, or whose shareholders are, entitled
to the benefits thereof. The Merger Agreement may be amended by action taken by
or on behalf of the Board of Directors of MBI (the "MBI Board") and the
Roosevelt Board at any time before or after Stockholder Approval, including an
amendment to change one or more of the termination provisions set forth
therein, by an instrument in writing signed on behalf of each party; provided
that after Stockholder Approval no such modification may alter or change the
amount or kind of consideration to be received by holders of Roosevelt Common
Stock in the Merger.
ACCOUNTING TREATMENT
It is intended that the Merger will be accounted for under the purchase
method of accounting. See "TERMS OF THE PROPOSED MERGER--Accounting
Treatment" and "--Conditions of the Merger."
ROOSEVELT STOCK OPTIONS
At the Effective Time, all rights with respect to Roosevelt Common Stock
pursuant to options (each a "Roosevelt Stock Option") to acquire Roosevelt
Common Stock issued under Roosevelt's stock option plans ("Roosevelt Stock
Plans") that are outstanding at the Effective Time, whether or not then
exercisable, will be converted into and become rights with respect to MBI
Common Stock, and MBI will assume each Roosevelt Stock Option in accordance
with the terms of the Roosevelt Stock Plan under which it was issued and the
stock option agreement by which it is evidenced. From and after the Effective
Time, (i) each Roosevelt Stock Option assumed by MBI will be exercisable solely
for shares of MBI Common Stock, (ii) the number of shares of MBI Common Stock
subject to each Roosevelt Stock Option will be equal to the number of shares of
Roosevelt Common Stock subject to such Roosevelt Stock Option immediately prior
to the Effective Time multiplied by the Exchange Ratio and (iii) the per share
exercise price under each Roosevelt Stock Option will be adjusted by dividing
the per share exercise price under such Roosevelt Stock Option by the Exchange
Ratio and rounding down to the nearest cent; provided, however, that the terms
of each Roosevelt Stock Option will, in accordance with its terms, be subject
to further adjustment as appropriate to reflect any stock split, stock
dividend, recapitalization or other similar transaction subsequent to the
Effective Time. It is intended that the foregoing assumption of stock options
be undertaken in a manner that will not constitute a "modification" as
defined in the Internal Revenue Code of 1986, as amended (the "Code"), as to
any Roosevelt Stock Option that is an "incentive stock option." The holder of
a Roosevelt Stock Option which is converted into an option with respect to MBI
Common Stock will not recognize gain or loss solely as a result of such
conversion. Certain tax consequences will arise, however, upon the exercise of
any such option that is a non-qualified stock option or the sale or disposition
of the shares acquired by exercise of any such option that is an incentive
stock option. See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER."
Certain executive officers, including certain executive officers who are
directors, of Roosevelt currently hold Roosevelt Stock Options which will be
converted into rights with respect to MBI Common Stock as described above.
FEDERAL INCOME TAX CONSEQUENCES IN GENERAL
The Merger is intended to qualify as a reorganization under Section
368(a)(1) of the Code. Wachtell, Lipton, Rosen & Katz, special counsel to MBI,
and Silver, Freedman & Taff, L.L.P., special counsel to Roosevelt, have
delivered their opinions to the effect that, assuming the Merger occurs in
accordance with the Merger Agreement, and conditioned on the accuracy of
certain representations made by MBI, Roosevelt and others, for federal income
tax purposes, the Merger will constitute a "reorganization" within the
meaning of Section 368 of the Code, and no gain or
7
<PAGE> 18
loss will be recognized by the stockholders of Roosevelt to the extent they
receive solely MBI Common Stock in exchange for shares of Roosevelt Common
Stock. Roosevelt stockholders who receive cash in exchange for Roosevelt Common
Stock, including in lieu of fractional shares, may recognize taxable income,
but not in excess of the amount of cash received. EACH ROOSEVELT STOCKHOLDER IS
URGED TO CONSULT SUCH STOCKHOLDER'S OWN TAX ADVISOR TO DETERMINE THE SPECIFIC
TAX CONSEQUENCES OF THE MERGER TO SUCH STOCKHOLDER. See "CERTAIN FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER."
APPRAISAL RIGHTS
Under the Delaware Law, a holder of shares of Roosevelt Common Stock may,
in lieu of the consideration such stockholder would otherwise receive in the
Merger, seek payment of the "fair value" of such shares and receive payment
of such fair value in cash if the Merger is consummated by following certain
procedures set forth in Section 262 of the Delaware Law, the text of which is
attached as Annex C to this Proxy Statement/Prospectus. A holder of shares of
Roosevelt Common Stock who receives such a payment may recognize taxable
income. See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER."
Failure to follow such procedures may result in a loss of such
stockholder's appraisal rights. Any Roosevelt stockholder returning a blank
executed proxy card will be deemed to have approved the Merger Agreement,
thereby waiving any such appraisal rights. See "APPRAISAL RIGHTS OF
STOCKHOLDERS OF ROOSEVELT."
CERTAIN DIFFERENCES IN THE RIGHTS OF SHAREHOLDERS
The rights of stockholders of Roosevelt are currently governed by the
Delaware Law and Roosevelt's Certificate of Incorporation and By-Laws. Upon
consummation of the Merger, Roosevelt stockholders who receive MBI Common Stock
in the Merger will become shareholders of MBI, and their rights will be
governed by the Missouri General and Business Corporation Law (the "Missouri
Law") and MBI's Restated Articles of Incorporation and By-Laws. See
"INFORMATION REGARDING MBI STOCK--Comparison of the Rights of Shareholders of
MBI and Stockholders of Roosevelt."
MARKETS AND MARKET PRICES
MBI Common Stock is currently listed on the NYSE under the symbol "MTL."
On December 20, 1996, the last full trading day preceding public announcement
of the Merger, the last sale price of MBI Common Stock was $50.750 per share as
reported on the NYSE Composite Tape. The last sale price of MBI Common Stock on
May 15, 1997, the most recent practicable date prior to the mailing of this
Proxy Statement/Prospectus, was $59.25 per share as reported on the NYSE
Composite Tape.
Roosevelt Common Stock is currently quoted on NASDAQ under the symbol
"RFED." On December 20, 1996, the last full trading day preceding public
announcement of the Merger, the last sale price of Roosevelt Common Stock was
$18.125 per share as reported on NASDAQ. The value of Roosevelt Common Stock at
December 20, 1996, on an equivalent per share basis, was $21.371 (based upon
the Exchange Ratio of .4211). The last sale price of Roosevelt Common Stock on
May 15, 1997, the most recent practicable date prior to the mailing of this
Proxy Statement/Prospectus, was $23.25 per share as reported on NASDAQ.
8
<PAGE> 19
Stockholders are advised to obtain current market quotations for MBI Common
Stock and Roosevelt Common Stock. There can be no assurance as to the market
price of MBI Common Stock or Roosevelt Common Stock before, at, or, in the case
of MBI Common Stock, after, the Effective Time. The following table sets forth
for the periods indicated the high and low last sale prices (as reported on the
NYSE Composite Tape or on NASDAQ, as the case may be) and per share cash
dividend declared with respect to MBI Common Stock and Roosevelt Common Stock.
<TABLE>
<CAPTION>
MBI ROOSEVELT
COMMON STOCK CASH COMMON STOCK CASH
--------------------- DIVIDEND --------------------- DIVIDEND
HIGH LOW DECLARED HIGH LOW DECLARED
------- ------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
1994
First Quarter........................... $34.125 $29.875 $.28 $15.833 $13.917 $ .10
Second Quarter.......................... 38.125 31.125 .28 18.250 14.328 .11
Third Quarter........................... 39.250 34.875 .28 17.375 16.000 .11
Fourth Quarter.......................... 36.875 29.500 .28 16.875 12.750 .11
1995
First Quarter........................... $37.250 $31.250 $.33 $17.250 $14.750 $ .14
Second Quarter.......................... 44.875 36.000 .33 18.625 15.750 .14
Third Quarter........................... 47.000 41.625 .33 18.875 15.250 .14
Fourth Quarter.......................... 46.500 41.500 .33 19.375 15.875 .14
1996
First Quarter........................... $46.500 $41.500 $.41 $19.250 $17.000 $ .155
Second Quarter.......................... 47.875 43.500 .41 19.750 17.875 .155
Third Quarter........................... 52.875 43.375 .41 18.875 15.625 .155
Fourth Quarter.......................... 54.000 49.000 .41 21.000 16.875 .155
1997
First Quarter........................... $59.500 $50.000 $.43 $23.375 $20.500 $ .17
Second Quarter (through May 15, 1997)... 59.250 53.000 .43 23.625 21.625 .225
</TABLE>
MBI will apply for the listing on the NYSE of the shares of MBI Common
Stock to be issued in the Merger.
The MBI Board intends to maintain its present policy of paying quarterly
cash dividends on the MBI Common Stock when justified by the financial
condition of MBI and its subsidiaries. The declaration and amount of future
dividends will depend on circumstances existing at the time, including MBI's
earnings, financial condition and capital requirements as well as regulatory
limitations, note and indenture provisions and such other factors as the MBI
Board may deem relevant. See "INFORMATION REGARDING MBI STOCK--Description of
MBI Common Stock and Attached Preferred Share Purchase Rights--Dividends."
Pursuant to the Merger Agreement, Roosevelt has agreed that, during the
period from the date of the Merger Agreement to the Effective Time, Roosevelt
will not declare, set aside or pay any dividends or other distributions on the
Roosevelt Common Stock, except that Roosevelt may declare and pay regular
quarterly cash dividends of not more than $.17 per share on the Roosevelt
Common Stock and declare and pay regular quarterly cash dividends of not more
than $.8125 per share on shares of Roosevelt preferred stock; provided that the
parties agreed to consult with respect to the last quarterly dividend of
Roosevelt payable prior to the Effective Time with the object of assuring that
the shareholders of Roosevelt do not receive a shortfall or a premium based on
the record and payment dates of their last dividend prior to the Merger and the
record and payment dates of the first dividend of MBI following the Merger.
Roosevelt's dividend declared during the second quarter of 1997 consists of
Roosevelt's regular dividend of $.17 per share plus the Transition Dividend of
$.055 per share. See "TERMS OF THE PROPOSED MERGER--Dividends."
9
<PAGE> 20
COMPARATIVE UNAUDITED PER SHARE DATA
The following table sets forth for the periods indicated selected
historical per share data of MBI and Roosevelt and the corresponding pro forma
and pro forma equivalent per share amounts giving effect to the proposed
Merger. The data presented is based upon the supplemental consolidated
financial statements and related notes of MBI and the consolidated financial
statements and related notes of Roosevelt, Mark Twain and Regional included in
this Proxy Statement/Prospectus or in documents prepared by the respective
companies and provided to MBI, and the pro forma combined consolidated balance
sheet and income statements, including the notes thereto, appearing elsewhere
herein. This information should be read in conjunction with such historical and
pro forma financial statements and related notes thereto. The assumptions used
in the preparation of this table appear in the notes to the pro forma financial
information appearing elsewhere in this Proxy Statement/Prospectus. See "PRO
FORMA FINANCIAL INFORMATION."
MBI and Roosevelt expect that the combined company will achieve substantial
benefits from the Merger including operating cost savings and revenue
enhancements. However, the unaudited pro forma comparative per share data does
not reflect any direct costs, potential savings or revenue enhancements which
are expected to result from the consolidation of operations of MBI, Roosevelt
and the Other Acquisitions, and therefore does not purport to be indicative of
the results of future operations.
The comparative per share data presented herein is based on and derived
from, and should be read in conjunction with, the historical consolidated
financial statements and the related notes thereto of Roosevelt, both of which
are incorporated by reference herein. See "AVAILABLE INFORMATION,"
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and "PRO FORMA FINANCIAL
INFORMATION--Pro Forma Combined Consolidated Financial Statements
(Unaudited)." Pro forma amounts are not necessarily indicative of results of
operations or the combined financial position that would have resulted had the
Merger and the Other Acquisitions been consummated at the beginning of the
periods indicated. All adjustments consisting of only normal recurring
adjustments necessary for a fair statement of results of interim periods have
been included.
<TABLE>
<CAPTION>
MBI/ MBI/
ALL ENTITIES ALL ENTITIES
MBI ROOSEVELT PRO FORMA PRO FORMA
REPORTED REPORTED COMBINED<F3> EQUIVALENT<F2>
-------- --------- ------------ --------------
<S> <C> <C> <C> <C>
Book Value per Common Share:
March 31, 1997<F1><F4>........................ $ 24.76 $ 9.91 $25.95 $10.93
December 31, 1996<F1><F4>..................... $ 25.11 $10.15 $26.26 $11.06
Cash Dividends Declared per Common Share:
Three Months ended March 31, 1997............. $ .43 $ 0.17 $ .43 $ .18
Year ended December 31, 1996.................. $ 1.64 $ 0.62 $ 1.64 $ .69
Earnings Before Extraordinary Items per Common
Share:
Three Months ended March 31, 1997............. $ .98 $ 0.49 $ .95 $ .40
Year ended December 31, 1996.................. $ 3.17 $ 0.16 $ 2.13 $ .90
Market Price per Common Share:
December 20, 1996<F5>......................... $ 50.750 $18.125 $50.750 $21.371<F6>
May 15, 1997<F5>.............................. $ 59.250 $23.250 $59.250 $24.950<F6>
<FN>
- ---------
<F1> Includes the effect of pro forma adjustments for Roosevelt as appropriate.
See "PRO FORMA FINANCIAL INFORMATION."
<F2> Based upon the pro forma combined per share amounts multiplied by .4211,
the Exchange Ratio applicable to one share of Roosevelt Common Stock. See
"PRO FORMA FINANCIAL INFORMATION."
10
<PAGE> 21
<F3> Includes the effect of pro forma adjustments for Roosevelt and the Other
Acquisitions. See "PRO FORMA FINANCIAL INFORMATION."
<F4> Based upon the following number of shares outstanding:
<CAPTION>
AS OF AS OF
MARCH 31, 1997 DECEMBER 31, 1996
-------------- -----------------
<S> <C> <C>
Shares of MBI Common Stock, as reported........... 76,015,444 77,486,469
Aggregate number of shares of MBI Common
Stock to be issued in the Merger, net of
treasury shares................................. 6,000,000 6,000,000
---------- ----------
MBI/All Entities Pro Forma Combined............... 82,015,444 83,486,469
========== ==========
<F5> The market values of MBI Common Stock and Roosevelt Common Stock were
determined as of the last trading day preceding the public announcement of
the Merger and as of the most recent practicable date prior to the mailing
of this Proxy Statement/Prospectus based on the last sales price as
reported on the NYSE Composite Tape or NASDAQ.
<F6> This amount represents MBI's Market Price per Common Share multiplied by
the Exchange Ratio applicable to one share of Roosevelt Common Stock.
</TABLE>
SUMMARY FINANCIAL DATA
The following tables set forth for the periods indicated certain summary
historical consolidated financial information for MBI and Roosevelt.
The historical balance sheet data and income statement data included in the
summary financial data for the periods indicated are derived from financial
statements of MBI and Roosevelt as of and for such periods. These data include
all adjustments which are, in the opinion of the respective managements of MBI
and Roosevelt, necessary to present a fair statement of the results of these
periods and all such adjustments are of a normal recurring nature. Results for
interim periods are not necessarily indicative of results for the entire year.
The following information should be read in conjunction with the
consolidated financial statements of MBI and Roosevelt, and the related notes
thereto, included in documents incorporated herein by reference and in
conjunction with the unaudited pro forma combined consolidated financial
information, including notes thereto, appearing elsewhere in this Proxy
Statement/Prospectus. See "INCORPORATION OF CERTAIN INFORMATION BY REFERENCE"
and "PRO FORMA FINANCIAL INFORMATION."
11
<PAGE> 22
<TABLE>
MERCANTILE BANCORPORATION INC.
SUMMARY FINANCIAL DATA
<CAPTION>
ALL ENTITIES
PRO FORMA
COMBINED
CONSOLIDATED
AS OF OR FOR AS OF OR FOR THE
THE THREE THREE MONTHS ENDED AS OF OR FOR THE
MONTHS ENDED MARCH 31 YEAR ENDED DECEMBER 31
MARCH 31, -------------------- ------------------------------------------------------------------
1997 1997 1996 1996 1995 1994 1993 1992
------------ -------- -------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER COMMON SHARE DATA
Net income<F1>........ $ 0.95 $ 0.98 $ 0.21 $ 3.17 $ 3.62 $ 3.10 $ 2.71 $ 2.33
Dividends declared.... 0.43 0.43 0.41 1.64 1.32 1.12 0.99 0.93
Book value at period
end.................. 26.26 24.76 23.98 25.11 24.44 21.71 20.12 18.16
Average shares
outstanding
(Thousands).......... 82,575 76,575 78,484 77,292 77,170 74,882 73,445 68,997
EARNINGS (THOUSANDS)
Interest income....... $534,406 $398,462 $381,923 $1,552,863 $1,516,156 $1,311,928 $1,269,680 $1,316,560
Interest expense...... 286,342 186,501 181,385 724,910 715,466 521,542 508,469 628,837
-------- -------- -------- ---------- ---------- ---------- ---------- ----------
Net interest income... 248,064 211,961 200,538 827,953 800,690 790,386 761,211 687,723
Provision for
possible loan losses. 19,083 18,443 34,149 73,015 41,533 48,791 70,584 88,238
Other income.......... 100,452 88,100 69,795 337,480 311,649 272,368 290,380 264,534
Other expense......... 201,074 165,595 203,696 718,668 640,519 645,011 666,067 616,159
Income taxes.......... 49,838 41,028 15,403 128,535 149,898 135,896 114,768 83,773
-------- -------- -------- ---------- ---------- ---------- ---------- ----------
Net income before
extraordinary
items.............. $ 78,521 $ 74,995 $ 17,085 $ 245,215 $ 280,389 $ 233,056 $ 200,172 $ 164,087
======== ======== ======== ========== ========== ========== ========== ==========
ENDING BALANCE SHEET
(MILLIONS)
Total assets.......... $ 29,831 $ 22,078 $ 20,933 $ 22,030 $ 20,883 $ 19,397 $ 18,878 $ 18,398
Earning assets........ 27,592 20,373 19,284 20,061 18,997 17,904 17,390 16,846
Investment
securities........... 7,755 4,847 5,103 4,746 4,964 4,895 5,234 5,148
Loans and leases, net
of unearned income... 19,523 15,213 13,861 14,953 13,703 12,764 11,637 11,183
Deposits.............. 22,661 17,354 16,423 17,336 16,172 15,137 15,435 15,295
Long-term debt........ 1,326 452 328 305 344 351 340 365
Shareholders' equity.. 2,128 1,882 1,883 1,946 1,915 1,643 1,510 1,322
Reserve for possible
loan losses......... 256 231 243 230 232 245 233 224
SELECTED RATIOS
Return on average
assets.............. 1.05% 1.38% 0.33% 1.16% 1.39% 1.22% 1.08% 0.93%
Return on average
equity.............. 14.45 15.63 3.50 12.95 15.64 14.57 14.06 13.32
Net interest rate
margin<F2>.......... 3.64 4.36 4.27 4.34 4.38 4.61 4.58 4.36
Equity to assets..... 7.13 8.52 8.99 8.83 9.17 8.47 8.00 7.19
Reserve for possible
loan losses
Outstanding loans.. 1.31 1.52 1.75 1.54 1.69 1.92 2.00 2.00
Non-performing
loans.............. 271.59 273.18 271.46 318.99 241.79 552.34 289.13 155.54
Dividend payout
ratio.............. 45.74 43.88 -- 51.74 36.46 36.13 36.53 39.91
<FN>
- ----------
<F1> Based on weighted average common shares outstanding.
<F2> Taxable-equivalent basis. Includes tax equivalent adjustments of
$3,855,000, $4,179,000, $16,353,000, $17,758,000, $17,962,000, $18,598,000
and $17,891,000 for March 31, 1997 and 1996, and December 31, 1996, 1995,
1994, 1993 and 1992, respectively. These adjustments are based upon a
Federal tax rate of 35% for all periods except 1992, when a Federal tax
rate of 34% was used.
</TABLE>
12
<PAGE> 23
<TABLE>
ROOSEVELT FINANCIAL GROUP, INC.
FIVE-YEAR SUMMARY
SELECTED CONSOLIDATED FINANCIAL INFORMATION
<CAPTION>
AS OF OR FOR THE THREE
MONTHS ENDED MARCH 31, AS OF OR FOR THE YEAR ENDED DECEMBER 31,
1997 1996 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF FINANCIAL
CONDITION
Total assets........ $7,508,309 $9,134,660 $7,796,412 $9,013,061 $8,431,866 $7,595,161 $6,038,732
Securities available
for sale.......... 2,908,027 1,459,784 3,157,757 1,606,461 1,765,699 1,665,879 52,399
Securities held to
maturity.......... -- 3,577,034 -- 3,550,140 3,276,062 2,642,916 2,219,147
Loans............... 4,288,411 3,777,160 4,298,469 3,577,892 3,072,151 2,671,810 2,349,771
Deposits............ 5,306,723 4,921,047 5,347,071 4,907,497 4,899,389 5,081,496 4,300,981
Other borrowings.... 1,586,076 3,571,970 1,840,851 3,507,475 2,963,449 1,975,661 1,319,154
Stockholders'
equity............ 469,558 509,105 497,427 496,906 441,626 378,462 288,545
SUMMARY OF OPERATIONS
Total interest
income............ $ 140,012 $ 166,143 $ 640,311 $ 647,795 $ 533,286 $ 486,940 $ 439,173
Total interest
expense........... 90,590 119,769 462,724 466,433 347,574 321,490 314,728
Provision for losses
on loans.......... 640 300 1,262 1,200 12,432 706 2,648
---------- ---------- ---------- ---------- ---------- ---------- ---------
Net interest income
after provision
for losses
on loans.......... 48,782 46,074 176,325 180,162 173,280 164,744 121,797
---------- ---------- ---------- ---------- ---------- ---------- ---------
Retail banking
fees.............. 5,979 3,132 17,157 10,706 8,682 6,260 4,870
Insurance and
brokerage sales
commissions....... 2,975 1,698 8,494 7,506 6,538 5,737 4,347
Loan servicing fees
(expenses), net... 2,754 2,019 10,982 7,401 7,359 (11,145) 8,392
Net gain (loss) from
financial
instruments....... 392 341 (76,634) (58,216) (10,660) 10,646 11,394
Unrealized losses on
impairment of
mortgage-backed
securities held to
maturity.......... -- -- -- (27,063) -- -- --
Other............... 252 1,328 4,034 4,526 5,337 2,759 1,790
---------- ---------- ---------- ---------- ---------- ---------- ---------
Total
noninterest
income (loss). 12,352 8,518 (35,967) (55,140) 17,256 14,257 30,793
---------- ---------- ---------- ---------- ---------- ---------- ---------
Total
noninterest
expense....... 25,438 21,718 123,409 87,666 115,576 98,598 100,452
---------- ---------- ---------- ---------- ---------- ---------- ---------
Income before income
tax expense,
extraordinary
items, and
cumulative effect
of change in
accounting
principle......... 35,696 32,874 16,949 37,356 74,960 80,403 52,138
Income tax expense.. 13,605 11,309 5,835 10,258 25,384 27,134 17,887
Extraordinary items,
net............... -- -- (1,452) -- (7,849) (1,908) (3,796)
Cumulative effect
of change in
accounting
principle......... -- -- -- -- -- (6,489)<F1> --
---------- ---------- ---------- ---------- ---------- ---------- ---------
Net income...... $ 22,091 $ 21,565 $ 9,662 $ 27,098 $ 41,727 $ 44,872 $ 30,455
========== ========== ========== ========== ========== ========== =========
Net income
attributable to
common stock...... $ 21,060 $ 20,508 $ 5,452 $ 22,855 $ 36,543 $ 41,057 $ 28,866
========== ========== ========== ========== ========== ========== =========
PER SHARE DATA:
Primary earnings per
share:
Income before
extraordinary
items and
cumulative
effect of
change in
accounting
principle..... $ 0.49 $ 0.48 $ 0.16 $ 0.56 $ 1.17 $ 1.54 $ 1.09
Extraordinary
items......... -- -- (0.03) -- (0.21) (0.06) (0.13)
Cumulative
effect
of change in
accounting
principle..... -- -- -- -- -- (0.20) --
---------- ---------- ---------- ---------- ---------- ---------- ---------
Net income.. $ 0.49 $ 0.48 $ 0.13 $ 0.56 $ 0.96 $ 1.28 $ 0.96
========== ========== ========== ========== ========== ========== =========
Fully-diluted
earnings
per share:
Income before
extraordinary
items and
cumulative
effect of
change in
accounting
principle..... $ 0.46 $ 0.46 $ 0.16 $ 0.56 $ 1.15 $ 1.32 $ 0.99
Extraordinary
items......... -- -- (0.03) -- (0.21) (0.05) (0.11)
Cumulative
effect
of change in
accounting
principle..... -- -- -- -- -- (0.16) --
---------- ---------- ---------- ---------- ---------- ---------- ---------
Net income.. $ 0.46 $ 0.46 $ 0.13 $ 0.56 $ 0.94 $ 1.11 $ 0.88
========== ========== ========== ========== ========== ========== =========
</TABLE>
13
<PAGE> 24
<TABLE>
ROOSEVELT FINANCIAL GROUP, INC.
FIVE-YEAR SUMMARY
SELECTED CONSOLIDATED FINANCIAL INFORMATION
<CAPTION>
AS OF OR FOR THE THREE
MONTHS ENDED MARCH 31, AS OF OR FOR THE YEAR ENDED DECEMBER 31,
1997 1996 1996 1995 1994 1993 1992
------ ------ ------ ------ ------ ------ ------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Ratio of net interest
income to general
and administrative
expense............ 1.94x 2.14x 1.44x<F2> 2.07x<F3> 1.67x<F4> 1.82x 1.55x
Effective net spread
during the
period............. 2.60% 2.08% 2.02% 2.06% 2.29% 2.40% 2.32%
Nonperforming assets
to total assets,
end of period...... 0.98 0.85 0.99 0.90 0.41 0.46 0.78
Return on assets
(ratio of net
income to average
total assets)...... 1.11 0.93 0.11<F2> 0.30<F3> 0.49<F4> 0.61 0.54
Return on equity
(ratio of net
income to average
stockholders'
equity)............ 18.53 17.18 1.87<F2> 5.97<F3> 10.30<F4> 12.86 11.11
Equity-to-assets
ratio (ratio of
average
stockholders'
equity to average
total assets)...... 6.00 5.40 5.61 4.97 4.80 4.75 4.84
Cash dividends per
share of common
stock.............. $ 0.17 $ 0.155 $ 0.62 $ 0.56 $ 0.43 $ 0.31 $ 0.21
Dividends on common
stock payout ratio
(dividends paid per
share of common
stock divided by
primary net income
per share)......... 34.69% 32.29% 476.92%<F2> 100.00%<F3> 44.79%<F4> 18.72% 18.63%
Book value per share,
end of period...... $ 9.91 $ 10.83 $ 10.15 $ 10.60 $ 9.79 $ 9.18 $ 9.29
<FN>
- ----------
<F1> During December, 1993, Roosevelt adopted the provisions of Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," on a prospective basis. As a
result, Roosevelt recorded a $6.5 million charge, net of applicable income
taxes, as a cumulative effect of a change in accounting principle to
reflect an other than temporary impairment of certain interest-only
stripped coupon mortgage-backed pass-through certificates and
collateralized mortgage obligation residual interests.
<F2> Such ratios for 1996 include the impact of the one-time SAIF assessment of
$27.4 million, the extraordinary items related to the early extinguishment
of debt of $1.5 million and the recognition of previously deferred expense
related to the termination of interest rate exchange agreements of $80.5
million. If such expenses (net of tax benefit) were not included, the
ratio of net interest income to general and administrative expense would
have been 1.85x, return on assets would have been 0.88%, return on equity
would have been 15.75% and the dividend on common stock payout ratio would
have been 34.4%.
<F3> Such ratios for 1995 include the impact of the impairment charge related
to certain mortgage-backed securities of $27.1 million, losses resulting
from the mark to market of Roosevelt's financial futures positions used to
reduce the interest rate risk of certain mortgage-backed securities in the
available for sale portfolio totaling $71.0 million and merger related
expenses of $1.6 million. If such expenses (net of income tax benefit)
were not included, the ratio of net interest income to general and
administrative expense would have been 2.11x, return on assets would have
been 0.95%, return on equity would have been 18.96% and the dividend on
common stock payout ratio would have been 27.59%.
<F4> Includes a $57.3 million net expense (net of income tax benefit) of
merger-related expenses as a result of the acquisition of Farm & Home.
Such merger-related expenses included $11.4 million in provision for
losses on loans, $38.4 million of net loss from financial instruments,
$3.7 million in provision for real estate losses, $6.3 million in
compensation and employee benefits, occupancy expense of $5.9 million,
transaction related fees of $7.0 million, and $1.8 million of other
expenses. This amount was reduced by the income tax effect of $25.0
million. An extraordinary item totaling $7.8 million was recorded related
to the early extinguishment of debt. Also included are gains resulting
from the mark to market of Roosevelt's financial futures positions used to
reduce the interest rate risk of certain mortgage-backed securities in the
available for sale portfolio totaling $39.5 million ($25.1 million, net of
income taxes). Not including the aforementioned charges and gains for
1994, the ratio of net interest income to general and administrative
expense would have been 2.08x, return on assets would have been 0.96%,
return on equity would have been 20.01%, and the dividend on common stock
payout ratio would have been 18.40%.
</TABLE>
14
<PAGE> 25
INFORMATION REGARDING ANNUAL MEETING
GENERAL
This Proxy Statement/Prospectus is being furnished to holders of Roosevelt
Common Stock in connection with the solicitation of proxies by the Roosevelt
Board for use at the Annual Meeting and any adjournment or postponement thereof
at which the stockholders of Roosevelt will consider and vote on (i) a proposal
to approve and adopt the Merger Agreement, (ii) the election of four directors,
and (iii) the ratification of the appointment of the independent auditors, and
will transact such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof. Each copy of this Proxy
Statement/Prospectus is accompanied by a Letter to Roosevelt stockholders, the
Notice of Annual Meeting of Stockholders, a proxy card and a self-addressed
return envelope to the Exchange Agent for the proxy card.
This Proxy Statement/Prospectus is also furnished by MBI to each holder of
Roosevelt Common Stock as a Prospectus in connection with the issuance by MBI
of shares of MBI Common Stock to Roosevelt stockholders upon the consummation
of the Merger. This Proxy Statement/Prospectus, the Letter to Roosevelt
stockholders, the Notice of Annual Meeting of Stockholders, the form of proxy,
the 1996 Roosevelt Form 10-K, as amended, and the Summary Annual Report are
first being mailed to stockholders of Roosevelt on or about May 23, 1997.
THE ROOSEVELT BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER, AS WELL AS EACH OF THE
FOREGOING ADDITIONAL ACTIONS.
DATE, TIME AND PLACE
The Annual Meeting will be held at the St. Louis Marriott West Hotel, 660
Maryville Centre Drive, St. Louis, Missouri, on Friday, June 20, 1997, at 2:00
p.m., Central Time.
ROOSEVELT RECORD DATE; VOTE REQUIRED
The Roosevelt Board has fixed May 22, 1997 as the Record Date for
determination of stockholders of Roosevelt entitled to notice of and to vote at
the Annual Meeting. Accordingly, only holders of record of Roosevelt Common
Stock at the close of business on May 22, 1997 will be entitled to notice of,
and to vote at, the Annual Meeting. At May 15, 1997, there were 45,149,041
shares of Roosevelt Common Stock outstanding and entitled to vote which were
held by approximately 5,713 holders of record. Each share of Roosevelt Common
Stock held as of the Record Date is entitled to one vote on each matter
properly brought before the Annual Meeting. The affirmative vote of the holders
of at least a majority of the outstanding shares of Roosevelt Common Stock
entitled to vote at the Annual Meeting is required to approve the Merger
Agreement. The election of directors requires a plurality of the votes of the
shares present in person or represented by proxy and entitled to vote. The
ratification of the appointment of Roosevelt's independent auditors requires
approval by a majority of the shares duly voted on the proposal.
As of May 15, 1997, directors and executive officers of Roosevelt and
certain of their affiliates beneficially owned an aggregate of 1,158,896 shares
of Roosevelt Common Stock, or approximately 2.57% of the shares of Roosevelt
Common Stock outstanding as of such date. The Supporting Stockholders,
consisting of all of the directors, who as of May 15, 1997 beneficially owned
in the aggregate approximately 2.30% of the outstanding shares of Roosevelt
Common Stock, have each agreed pursuant to a Support Agreement to vote all
shares of Roosevelt Common Stock beneficially owned by such person, or over
which such person has voting power or control, to approve the Merger Agreement.
15
<PAGE> 26
VOTING SECURITIES AND CERTAIN HOLDERS THEREOF
Stockholders of record as of the close of business on May 22, 1997 will be
entitled to one vote for each share then held on all matters brought before the
Annual Meeting. As of May 15, 1997, Roosevelt had 45,149,041 shares of
Roosevelt Common Stock issued and outstanding. The following table sets forth,
as of December 31, 1996, certain information as to (i) those persons who were
known by management to be beneficial owners of more than 5% of the outstanding
shares of Roosevelt Common Stock and (ii) the shares of Roosevelt Common Stock
beneficially owned by the executive officers named below and all directors and
executive officers as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
OF COMMON STOCK OF
BENEFICIAL OWNERS BENEFICIALLY OWNED CLASS
----------------- ------------------ -------
<S> <C> <C>
Jurika & Voyles, Inc.............................. 2,929,966<F1> 6.19
1999 Harrison Street, Suite 700
Oakland, California 94612
John Hancock Mutual Life Insurance Company........ 2,437,447<F2> 5.50
John Hancock Subsidiaries, Inc. and
John Hancock Asset Management
P.O. Box 111
Boston, Massachusetts 02117
and
The Berkeley Financial Group and
John Hancock Advisors, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199
<CAPTION>
NAMED OFFICERS<F3>
------------------
<S> <C> <C>
Stanley J. Bradshaw............................... 651,340 1.45
President and Chief Executive Officer
Anat Bird......................................... 101,735 .23
Senior Executive Vice President and Chief
Operating Officer
Gary W. Douglass.................................. 78,616 .18
Executive Vice President and Chief Financial
Officer
Daniel P. Sneed................................... 30,337 .07
Senior Vice President
All directors and executive officers as a group
(17 persons)<F4>.............................. 1,812,417 4.05
<FN>
- --------
<F1> As reported by Jurika & Voyles, L.P. ("Jurika"), a registered investment
advisor, in Amendment No. Two to a statement as of December 31, 1996 on
Schedule 13G under the Exchange Act. Jurika reported shared voting power
as to 2,643,126 shares, shared dispositive power as to 2,929,966 shares
and sole voting and dispositive powers as to no shares.
<F2> As reported by John Hancock Mutual Life Insurance Company ("JHMLIC"),
JHMLIC's wholly-owned subsidiary, John Hancock Subsidiaries, Inc.
("JHSI"), JHSI's wholly-owned subsidiary, John Hancock Asset Management
("JHAM"), JHAM's wholly-owned subsidiary, The Berkeley Financial Group
("TBFG") and TBFG's wholly-owned subsidiary, John Hancock Advisers,
Inc., ("JHA") in a statement as of December 31, 1996 on Schedule 13G
under the Exchange Act. JHMLI, JHSI, JHAM and TBFG reported indirect
beneficial ownership of these shares. JHA reported sole voting and
dispositive powers as to all of such shares. Amount includes shares of
Roosevelt Common Stock that could be obtained upon conversion of shares of
6 1/2% Non-Cumulative Convertible Preferred Stock, Series F, held.
<F3> Includes shares held directly, in retirement accounts, in a fiduciary
capacity or by certain affiliated entities or members of the named
individuals' families, as well as 381,289, 68,300, 52,500, 30,337 and
677,587 shares, which Mr. Bradshaw, Mrs. Bird, Mr. Douglass, Mr. Sneed and
all directors and executive officers as a group, respectively, have the
right to purchase pursuant to stock options exercisable as of December 31,
1996 or which became exercisable within 60 days of December 31, 1996,
granted under Roosevelt's Amended and Restated 1986 Stock Option and
Incentive Plan (the "1986 Stock Option Plan") or Roosevelt's 1994
Non-Employee Director Stock Option Plan (the "Director Plan"), with
respect to which shares the named individuals and group may be deemed to
have sole voting and dispositive powers.
<F4> Excludes 480, 300, 654 and 1,000 shares as to which Messrs. Turley and
Clayton, Ronald L. Cawood, an officer of Roosevelt Bank, and Daniel P.
Sneed, an officer of Roosevelt Bank, disclaim beneficial ownership,
respectively.
</TABLE>
16
<PAGE> 27
VOTING AND REVOCATION OF PROXIES
Shares of Roosevelt Common Stock entitled to vote and which are represented
at the Annual Meeting by a properly executed proxy received prior to the vote
at the Annual Meeting will be voted at such Annual Meeting in the manner
directed on the proxy card, unless such proxy is revoked in the manner set
forth herein in advance of such vote. ANY ROOSEVELT STOCKHOLDER RETURNING A
BLANK EXECUTED PROXY CARD WILL BE DEEMED TO HAVE VOTED "FOR" APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT AND THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE MERGER, AND "FOR" THE ADDITIONAL
PROPOSALS REFERRED TO HEREIN. Failure to return a properly executed proxy card
or to vote in person at the Annual Meeting will have the practical effect of a
vote against the Merger Agreement.
Shares subject to abstentions will be treated as shares that are present at
the Annual Meeting for purposes of determining the presence of a quorum. If a
broker or other nominee holder indicates on the proxy card that it does not
have discretionary authority to vote the shares it holds of record on the
proposal, those shares will be treated as shares that are present at the Annual
Meeting for purposes of determining the presence of a quorum but will not be
considered as voted for purposes of determining the approval of shareholders on
a particular proposal. Since the approval of the Merger Agreement requires the
affirmative vote of the holders of at least a majority of the outstanding
shares of Roosevelt Common Stock entitled to vote at the Annual Meeting,
abstentions and broker non-votes will have the same effect as votes against the
approval of the Merger Agreement. Broker non-votes and votes withheld will have
no effect on the election of directors, which requires a plurality of the votes
of the shares present and entitled to vote. Because ratification of the
appointment of auditors requires a majority of the votes cast, abstentions will
have the effect of votes against ratification and broker non-votes will have no
effect on the vote on this matter.
Any stockholder of Roosevelt giving a proxy may revoke it at any time prior
to the vote at the Annual Meeting. Stockholders of Roosevelt wishing to revoke
a proxy prior to the vote may do so by delivering to Harris Trust and Savings
Bank, at P.O. Box 1878, Chicago, Illinois 60690-9312 by mail, or 311 West
Monroe Street, 11th Floor, Chicago, Illinois 60690-3504 by courier or hand
delivery, a written notice of revocation bearing a later date than the proxy or
any later dated proxy relating to the same shares, or by attending the Annual
Meeting and voting in person. Attendance at the Annual Meeting will not in
itself constitute the revocation of a proxy.
The Roosevelt Board is not currently aware of any business to be brought
before the Annual Meeting other than that described herein. If, however, other
matters are properly brought before such Annual Meeting, or any adjournment or
postponement thereof, the persons appointed as proxies will have discretionary
authority to vote the shares represented by duly executed proxies in accordance
with their discretion and judgment as to the best interest of Roosevelt.
SOLICITATION OF PROXIES
Roosevelt will bear its own costs of soliciting proxies. Proxies will
initially be solicited by mail, but directors, officers and selected other
employees of Roosevelt may also solicit proxies in person or by telephone,
telegram or other means of communication. Directors, officers and any other
employees of Roosevelt who solicit proxies will not be specially compensated
for such services, but may be reimbursed for reasonable out-of-pocket expenses
in connection with such solicitation. Roosevelt has retained Kissel Blake, Inc.
at an estimated cost of $5,000, plus reimbursement of expenses, to assist in
its solicitation of proxies from brokers, nominees, institutions and
individuals. Brokerage houses, nominees, fiduciaries, and other custodians will
be requested to forward proxy materials to beneficial owners and will be
reimbursed for their reasonable expenses incurred in connection therewith.
HOLDERS OF ROOSEVELT COMMON STOCK ARE REQUESTED TO COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
17
<PAGE> 28
PROPOSAL I--APPROVAL OF THE MERGER AGREEMENT
TERMS OF THE PROPOSED MERGER
THE FOLLOWING SUMMARY OF CERTAIN TERMS AND PROVISIONS OF THE MERGER
AGREEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT,
WHICH IS INCORPORATED HEREIN BY REFERENCE AND IS INCLUDED AS ANNEX A TO THIS
PROXY STATEMENT/PROSPECTUS.
GENERAL DESCRIPTION OF THE MERGER
The Merger Agreement provides that Roosevelt will merge at the Effective
Time with and into Merger Sub, subject to Stockholder Approval and the
satisfaction or waiver of the other conditions to the Merger. Upon consummation
of the Merger, Roosevelt's corporate existence will terminate, with Merger Sub
continuing as the surviving corporation.
Simultaneously with the effectiveness of the Merger, and subject to the
election and allocation procedures set forth in the Merger Agreement and
described below, each outstanding share of Roosevelt Common Stock, other than
shares held by stockholders of Roosevelt who exercise their appraisal rights
under the Delaware Law, will be converted into, at the election of the holder
thereof as provided in the Merger Agreement, either the Per Share Stock
Consideration or the Per Share Cash Consideration. Because the value of the Per
Share Cash Consideration is fixed at $22.00 and the value of the Per Share
Stock Consideration fluctuates based on the trading price of MBI Common Stock,
at the Effective Time the value of the Per Share Cash Consideration and the
value of the Per Share Stock Consideration received by Roosevelt stockholders
may differ significantly. Based on the closing price of MBI Common Stock on May
15, 1997 of $59.25 per share, the value of the Per Share Stock Consideration
would have been $24.95 and the Per Share Cash Consideration would have been
$22.00, subject to the allocation procedures described below. See
"--Allocation." Roosevelt shareholders are advised to obtain current market
quotations for MBI Common Stock.
The shares of MBI Common Stock to be issued pursuant to the Merger will be
freely transferable except by certain stockholders of Roosevelt who are deemed
to be "affiliates" (as such term is defined under the Securities Act) of
Roosevelt. The shares of MBI Common Stock issued to such affiliates will be
restricted in their transferability in accordance with the rules and
regulations promulgated by the Commission and pursuant to agreements entered
into with MBI. See "INFORMATION REGARDING MBI STOCK--Restrictions on Resale of
MBI Capital Stock by Affiliates; Affiliate Agreements."
The amount and nature of the Merger Consideration was established through
arms'-length negotiations between MBI and Roosevelt, and reflects the balancing
of a number of countervailing factors. The total amount of the Merger
Consideration reflects a price both parties concluded was appropriate. See
"--Background of the Merger" and "--Reasons for the Merger; Roosevelt Board
Recommendation."
CLOSING AND EFFECTIVE TIME
Unless the parties otherwise agree, the Closing of the Merger will take
place at 10:00 a.m., local time, on the date on which the Effective Time
occurs, which shall be any such date on or after May 16, 1997 as MBI notifies
Roosevelt in writing but not earlier than the Approval Date, and not later than
the first business day of the first full calendar month commencing at least
five business days after the Approval Date. The Effective Time will occur upon
the filing of the appropriate documents in respect of the Merger with the
Secretaries of State of the States of Delaware and Missouri. MBI and Roosevelt
currently anticipate that the Effective Time will occur on July 1, 1997.
ELECTION PROCEDURES
Approximately twenty five days prior to the anticipated Effective Time, the
Exchange Agent will send to each Roosevelt Stockholder who is a stockholder of
record as of five business days prior to such date an Election Form to be used
by each such stockholder to indicate Stock Election Shares, Cash Election
Shares or No Election Shares. In order for an Election Form to be deemed to be
effective, such Election Form must be properly completed and duly executed by
the Roosevelt stockholder and returned, along with the Roosevelt stock
certificates as to which the
18
<PAGE> 29
election is being made, to the Exchange Agent by the Election Deadline. MBI and
Roosevelt currently anticipate that the Effective Time will occur on July 1,
1997. Based on such anticipated Effective Time, the Exchange Agent would mail
Election Forms and the accompanying letters of transmittal on approximately
June 6, 1997 to each Roosevelt stockholder who is a stockholder of record as of
May 30, 1997. In addition, based on such anticipated Effective Time, the
Election Deadline would be 5:00 p.m., Central Time, on June 26, 1997.
Each Roosevelt stockholder may elect to receive only shares of MBI Common
Stock, to elect to receive only cash or to indicate that such holder makes no
election, in each case, with respect to such holder's Roosevelt Common Stock.
Any shares of Roosevelt Common Stock with respect to which an effective,
properly completed Election Form and stock certificates have not been submitted
to the Exchange Agent by the Election Deadline will be deemed to be No Election
Shares. For purposes of the election procedures, dissenting shares will be
treated as Cash Election Shares, provided, however, that holders of dissenting
shares will receive payment for such shares in accordance with the provisions
of the Delaware Law. See "APPRAISAL RIGHTS OF STOCKHOLDERS OF ROOSEVELT."
Subject to compliance with the applicable provisions of the Delaware Law,
holders of dissenting shares will receive the fair value of their shares of
Roosevelt Common Stock. Holders of Cash Election Shares will receive the Per
Share Cash Consideration, subject to the allocation procedures described below.
As a result, the value of the consideration received by holders of dissenting
shares may not be the same as the value of the consideration received by
holders of Cash Election Shares. Additionally, as a result of the allocation
procedures, holders of Cash Election Shares may not receive precisely the type
of consideration requested. See "--Allocation."
The actual Merger Consideration that will be paid to each Roosevelt
stockholder upon consummation of the Merger may differ from the form of Merger
Consideration elected by such stockholder pursuant to his or her Election Form
in the event that the aggregate number of shares of MBI Common Stock to be
issued pursuant to the Merger would not equal the Stock Amount. Because the
aggregate number of shares of MBI Common Stock that will be issued in the
Merger is fixed at the Stock Amount, the extent to which elections by Roosevelt
stockholders will be accommodated will depend upon the respective numbers of
Roosevelt stockholders who elect to receive all cash, all MBI Common Stock or
who make no election. In the event that one type of consideration is
oversubscribed, the Exchange Agent will follow the allocation procedures set
forth in the Merger Agreement and described below. See "--Allocation."
NO ASSURANCE CAN BE GIVEN THAT THE CURRENT FAIR MARKET VALUE OF MBI COMMON
STOCK WILL BE EQUIVALENT TO THE FAIR MARKET VALUE OF MBI COMMON STOCK ON THE
DATE SUCH STOCK IS RECEIVED BY A ROOSEVELT STOCKHOLDER OR AT ANY OTHER TIME.
THE FAIR MARKET VALUE OF MBI COMMON STOCK RECEIVED BY A ROOSEVELT STOCKHOLDER
MAY BE GREATER OR LESS THAN THE CURRENT FAIR MARKET VALUE OF MBI COMMON STOCK
DUE TO NUMEROUS MARKET FACTORS.
In addition to a properly completed Election Form, each stockholder of
Roosevelt will be required to submit to the Exchange Agent a properly executed
letter of transmittal and surrender to the Exchange Agent the stock
certificate(s) representing shares of Roosevelt Common Stock (the
"Certificates") in order to obtain issuance of a new stock certificate
evidencing the shares of MBI Common Stock and/or cash to which such stockholder
is entitled in the Merger. No dividends or other distributions will be paid to
a former Roosevelt stockholder with respect to shares of MBI Common Stock until
such person surrenders the Certificates, or documentation acceptable to the
Exchange Agent in lieu of lost or destroyed Certificates, at which time such
dividends will be remitted to such person, without interest and less any taxes
that may have been imposed thereon. See "--Surrender of Roosevelt Stock
Certificates and Receipt of MBI Common Stock and/or Cash."
TO MAKE AN EFFECTIVE ELECTION, A ROOSEVELT COMMON STOCKHOLDER MUST SUBMIT A
PROPERLY COMPLETED ELECTION FORM SO THAT IT IS ACTUALLY RECEIVED BY THE
EXCHANGE AGENT AT OR PRIOR TO THE ELECTION DEADLINE IN ACCORDANCE WITH THE
INSTRUCTIONS ON THE ELECTION FORM. AN ELECTION FORM WILL BE PROPERLY COMPLETED
ONLY IF ACCOMPANIED BY CERTIFICATE(S) REPRESENTING ALL SHARES OF ROOSEVELT
COMMON STOCK COVERED THEREBY. THE ELECTION DEADLINE IS 5:00 P.M. ON THE FIFTH
DAY PRIOR TO THE ANTICIPATED EFFECTIVE TIME OR SUCH OTHER DATE UPON WHICH MBI
AND ROOSEVELT MUTUALLY AGREE. MBI AND ROOSEVELT CURRENTLY ANTICIPATE THAT THE
19
<PAGE> 30
EFFECTIVE TIME WILL OCCUR ON JULY 1, 1997 IN WHICH CASE THE ELECTION DEADLINE
WILL BE JUNE 26, 1997.
MBI will make available one or more Election Forms as may be reasonably
requested by all persons who become holders (or beneficial owners) of Roosevelt
Common Stock between the day that is five business days prior to the mailing of
the Election Forms and close of business on the business day prior to the
Election Deadline, and Roosevelt will provide to the Exchange Agent all
information reasonably necessary for it to perform as specified in the Merger
Agreement.
An election will have been properly made only if the Exchange Agent will
have actually received a properly completed Election Form by the Election
Deadline. An Election Form will be deemed properly completed only if
accompanied by one or more Certificates (or customary affidavits and
indemnification regarding the loss or destruction of such Certificates or the
guaranteed delivery of such Certificates) representing all shares of Roosevelt
Common Stock covered by such Election Form, together with duly executed
transmittal materials included with the Election Form. Any Election Form may be
revoked or changed by the person submitting such Election Form at or prior to
the Election Deadline. In the event an Election Form is revoked prior to the
Election Deadline, the shares of Roosevelt Common Stock represented by such
Election Form shall become No Election Shares and MBI will cause the
Certificates to be promptly returned without charge to the person submitting
the Election Form upon written request to that effect from the person who
submitted the Election Form. Subject to the terms of the Merger Agreement and
of the Election Form, the Exchange Agent will have reasonable discretion to
determine whether any election, revocation or change has been properly or
timely made and to disregard immaterial defects in the Election Forms, and any
good faith decisions of the Exchange Agent regarding such matters will be
binding and conclusive. Neither MBI nor the Exchange Agent will be under any
obligation to notify any person of any defect in an Election Form.
IF THE EXCHANGE AGENT FAILS TO RECEIVE YOUR PROPERLY COMPLETED ELECTION
FORM AND STOCK CERTIFICATE(S) BY THE ELECTION DEADLINE, YOUR SHARES WILL BE
DEEMED NO ELECTION SHARES AND YOU WILL RECEIVE THE MERGER CONSIDERATION
DETERMINED IN ACCORDANCE WITH THE ALLOCATION PROCEDURES SET FORTH IN THE MERGER
AGREEMENT AND DESCRIBED BELOW UNDER "--ALLOCATION." THEREFORE, IT IS IMPORTANT
THAT THE EXCHANGE AGENT RECEIVES YOUR ELECTION FORM AND STOCK CERTIFICATE(S) BY
THE ELECTION DEADLINE.
ALLOCATION
In the event that the number of shares of MBI Common Stock that would be
issued upon conversion in the Merger of the Stock Election Shares is less than
the Stock Amount, (i) all Stock Election Shares will be converted into the
right to receive the Per Share Stock Consideration, (ii) the Exchange Agent
will select first from among the holders of No Election Shares and then (if
necessary), pro rata from among the Cash Election Shares (excluding dissenting
shares), a sufficient number of shares ("Stock Designated Shares") such that
the number of shares of MBI Common Stock that will be issued in the Merger
equals as closely as practicable the Stock Amount, and all Stock Designated
Shares will be converted into the right to receive the Per Share Stock
Consideration; provided that MBI has the option, in its sole discretion, to
satisfy some or all of the Stock Designated Shares by similar pro rata
selection in Per Share Cash Consideration in lieu of delivering the Per Share
Stock Consideration subject to the requirement that the Merger continue to
qualify as a tax-free reorganization for purposes of Section 368 of the Code,
and (iii) the Cash Election Shares and the No Election Shares which are not
Stock Designated Shares will be converted into the right to receive the Per
Share Cash Consideration.
In the event that the number of shares of MBI Common Stock that would be
issued upon the conversion of the Stock Election Shares is greater than the
Stock Amount, (i) all Cash Election Shares and No Election Shares will be
converted into the right to receive the Per Share Cash Consideration, (ii) the
Exchange Agent will select from among the Stock Election Shares on a pro rata
basis, a sufficient number of shares such that the number of shares of MBI
Common Stock that will be issued in the Merger equals as closely as practicable
the Stock Amount, and all Cash Designated Shares will be converted into the
right to receive the Per Share Cash Consideration, and (iii) the Stock Election
Shares which are not Cash Designated Shares shall be converted into the right
to receive the Per Share Stock Consideration.
20
<PAGE> 31
In the event that the number of shares of MBI Common Stock that would be
issued upon conversion of the Stock Election Shares is equal or nearly equal
(as determined by the Exchange Agent) to the Stock Amount, then all Stock
Election Shares will be converted into the right to receive the Per Share Stock
Consideration and all Cash Election
Shares and No Election Shares will be converted into the right to receive the
Per Share Cash Consideration. In the event that the number of shares of MBI
Common Stock that would be issued upon the conversion of the Stock Election
Shares and No Election Shares would equal or nearly equal (as determined by the
Exchange Agent) the Stock Amount, then all Cash Election Shares will be
converted into the right to receive the Per Share Cash Consideration and all
Stock Election Shares and No Election Shares will be converted into the right
to receive the Per Share Stock Consideration.
The value of MBI Common Stock to be issued pursuant to the Merger may
fluctuate prior to and following the Effective Time. It is currently
anticipated that the Effective Time will occur on July 1, 1997.
BECAUSE THE TAX CONSEQUENCES OF RECEIVING CASH OR MBI COMMON STOCK WILL
DIFFER, ROOSEVELT STOCKHOLDERS ARE URGED TO READ CAREFULLY THE INFORMATION SET
FORTH UNDER "CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER."
SURRENDER OF ROOSEVELT STOCK CERTIFICATES AND RECEIPT OF MBI COMMON STOCK
AND/OR CASH
Approximately 25 days prior to the anticipated Effective Time, holders of
record of Certificates will be instructed to tender such Certificates to the
Exchange Agent pursuant to a letter of transmittal that MBI will deliver or
cause to be delivered to such holders. The letter of transmittal will specify
that risk of loss and title to Certificates will pass only upon delivery of
such Certificates to the Exchange Agent.
Each previous holder of a Certificate that surrenders such Certificate
together with duly executed transmittal materials and the Election Form to the
Exchange Agent will, after the Effective Time and upon acceptance thereof by
the Exchange Agent, be entitled to a certificate or certificates representing
the number of full shares of MBI Common Stock or cash, as the case may be, into
which the Certificate so surrendered will have been converted pursuant to the
Merger Agreement and any distribution theretofore declared and not yet paid
with respect to such shares of MBI Common Stock, without interest.
The Exchange Agent will accept Certificates upon compliance with such
reasonable terms and conditions as MBI or the Exchange Agent may impose to
effect an orderly exchange thereof in accordance with customary exchange
practices. Certificates shall be appropriately endorsed or accompanied by such
instruments of transfer as MBI or the Exchange Agent may require. Any Roosevelt
Common Stock with respect to which the holder (or the beneficial owner, as the
case may be) shall not have submitted to the Exchange Agent an effective,
properly completed Election Form on or before the Election Deadline shall also
be deemed to be No Election Shares. See "--General Description of the
Merger."
Each outstanding Certificate will, until duly surrendered to the Exchange
Agent, be deemed to evidence ownership of the Merger Consideration into which
the stock previously represented by such Certificate will have been converted
in the Merger. After the Effective Time, holders of Certificates will cease to
have rights with respect to the stock previously represented by such
Certificates, and their sole rights shall be to exchange such Certificates for
the Merger Consideration provided for in the Merger Agreement. After the
Effective Time, there will be no further transfer on the records of Roosevelt
of Certificates, and if such Certificates are presented to Roosevelt for
transfer, they will be cancelled against delivery of the Merger Consideration.
MBI will not be obligated to deliver the Merger Consideration to which any
former holder of Roosevelt Common Stock is entitled as a result of the Merger
until such holder surrenders the Certificates as provided in the Merger
Agreement. No dividends declared will be remitted to any person entitled to
receive MBI Common Stock under the Merger Agreement until such person
surrenders the Certificate representing the right to receive such MBI Common
Stock, at which time such dividends will be remitted to such person, without
interest and less any taxes that may have been imposed thereon. No interest
will be paid on the Merger Consideration.
The shares of MBI Common Stock to be issued pursuant to the Merger will be
freely transferable except by certain stockholders of Roosevelt who are deemed
to be "affiliates" (as such term is defined under the Securities Act) of
Roosevelt. The shares of MBI Common Stock issued to such affiliates will be
restricted in their transferability in accordance with the rules and
regulations promulgated by the Commission and pursuant to agreements entered
into
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<PAGE> 32
thereby and delivered to MBI. See "INFORMATION REGARDING MBI STOCK--
Restrictions on Resale of MBI Capital Stock by Affiliates; Affiliate
Agreements."
Neither the Exchange Agent nor any party to the Merger Agreement nor any
affiliate thereof will be liable to any holder of stock represented by any
Certificate for any Merger Consideration paid to a public official pursuant to
applicable abandoned property, escheat or similar laws. MBI and the Exchange
Agent will be entitled to rely upon the stock transfer books of Roosevelt to
establish the identity of those persons entitled to receive Merger
Consideration, which books will be conclusive with respect thereto. In the
event of a dispute with respect to ownership of stock represented by any
Certificate, MBI and the Exchange Agent shall be entitled to deposit any Merger
Consideration represented thereby in escrow with an independent third party and
thereafter be relieved with respect to any claims thereto.
SUBJECT TO POSSIBLE ADJUSTMENT AS DESCRIBED ABOVE, A FIXED NUMBER OF SHARES
OF MBI COMMON STOCK WILL BE ISSUED IN THE MERGER. ACCORDINGLY, THERE CAN BE NO
ASSURANCE THAT EACH ROOSEVELT STOCKHOLDER WILL RECEIVE THE FORM OF
CONSIDERATION THAT SUCH HOLDER ELECTS WITH RESPECT TO ANY OR ALL SHARES OF
ROOSEVELT COMMON STOCK HELD BY SUCH HOLDER. IF THE ELECTIONS RESULT IN AN
OVERSUBSCRIPTION IN RESPECT OF SHARES OF ROOSEVELT COMMON STOCK WHICH WOULD
OTHERWISE RECEIVE EITHER THE PER SHARE STOCK CONSIDERATION OR THE PER SHARE
CASH CONSIDERATION, THE PROCEDURES FOR ALLOCATING MBI COMMON STOCK AND CASH,
DESCRIBED UNDER "--ALLOCATION," WILL BE FOLLOWED BY THE EXCHANGE AGENT.
FRACTIONAL SHARES
No fractional shares of MBI Common Stock will be issued to the former
stockholders of Roosevelt in connection with the Merger. Each former holder of
Roosevelt Common Stock who otherwise would have been entitled to receive a
fraction of a share of MBI Common Stock will receive cash in lieu thereof,
without interest, in an amount equal to the holder's fractional share interest
multiplied by the closing stock price of MBI Common Stock on the NYSE Composite
Tape as reported in The Wall Street Journal (or in the absence thereof, by any
other authoritative source) on the last business day preceding the Effective
Time. No shareholder of Roosevelt entitled to receive cash in lieu of
fractional shares will be entitled to dividends, voting rights or any other
rights or interest in respect of such fractional shares. Cash received by
Roosevelt shareholders in lieu of fractional shares may give rise to taxable
income. See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER."
DIVIDENDS
On April 24, 1997, the Roosevelt Board declared a dividend of $.225 per
share, payable on May 30, 1997 to stockholders of record as of May 14, 1997.
The dividend consists of Roosevelt's regular dividend of $.17 per share plus
the Transition Dividend of $.055 per share. The Transition Dividend ensures
that Roosevelt Stockholders receive fair dividends based on the record and
payment dates of Roosevelt's anticipated last dividend prior to the Merger and
the record and payment dates of MBI's first dividend following the Merger.
STOCK OPTION AGREEMENT
In connection with the execution of the Merger Agreement, MBI and Roosevelt
entered into the Stock Option Agreement pursuant to which Roosevelt has issued
MBI an Option to purchase up to 8,785,429 shares of Roosevelt Common Stock (or
19.46% of the outstanding shares of Roosevelt Common Stock as of May 15, 1997,
without including any shares subject to or issued pursuant to the Option) at an
exercise price of $18.125 per share. The Option is exercisable (after receipt
of the required regulatory approvals) only upon the occurrence of one of the
following events: (i) Roosevelt or any of its subsidiaries, without having
received prior written consent from MBI, shall have entered into, authorized,
recommended, proposed or publicly announced its intention to enter into,
authorize, recommend, or propose, an agreement, arrangement or understanding
with any person (other than MBI or any of its subsidiaries) to (A) effect a
merger or consolidation or similar transaction involving Roosevelt or any of
its subsidiaries (other than internal mergers, reorganizing actions,
consolidations or dissolutions involving only existing subsidiaries of
Roosevelt), (B) purchase, lease or otherwise acquire 15% or more of the assets
of Roosevelt or any of its subsidiaries or (C) purchase or otherwise acquire
(including by way of merger, consolidation, share exchange or
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<PAGE> 33
similar transaction) Beneficial Ownership (as defined in Rule 13d-3 under the
Exchange Act) of securities representing 10% or more of the voting power of
Roosevelt or any of its subsidiaries; (ii) any person (other than MBI or any
subsidiary of MBI, or Roosevelt or any person acting in concert with MBI, or
Roosevelt or any subsidiary of Roosevelt in a fiduciary capacity) shall have
acquired Beneficial Ownership or the right to acquire Beneficial Ownership of
10% or more of the voting power of Roosevelt; (iii) the Roosevelt Board shall
have withdrawn or modified in a manner adverse to MBI the recommendation of the
Roosevelt Board with respect to the Merger Agreement, in each case, after an
Extension Event (as defined below); or (iv) the holders of Roosevelt Common
Stock shall not have approved the Merger Agreement at the Annual Meeting, or
such Annual Meeting shall not have been held or shall have been cancelled prior
to termination of the Merger Agreement in accordance with its terms, in each
case after an Extension Event (each of the above-described events is referred
to herein as a "Purchase Event"). No Extension Event or Purchase Event has
occurred as of the date of this Proxy Statement/Prospectus.
The Option terminates (i) on the earliest to occur of (A) the Effective
Time of the Merger, (B) the termination of the Merger Agreement (1) by mutual
consent of MBI and Roosevelt, (2) after December 22, 1997, by a party not then
in material breach of the Merger Agreement, (3) by either party if (x) the
Federal Reserve Board has denied approval of the Merger and such denial has
become final and non-appealable or (y) stockholders of Roosevelt shall not have
approved the Merger Agreement at the Annual Meeting following a favorable
recommendation of the Roosevelt Board, (4) by Roosevelt in the event of a
material breach by MBI of the Merger Agreement which is not cured within 30
days of written notice thereof, and (5) by Roosevelt in the event that
after-tax costs, if any, of remedial or other corrective actions or measures
with regard to specified properties exceed $30,000,000, and (C) three years
following the termination of the Merger Agreement by MBI in the event of a
material breach by Roosevelt of the Merger Agreement which is not cured within
30 days of written notice thereof, provided that, for purposes of subclause
(C), if such termination follows an Extension Event, the Option will not
terminate until 12 months following such termination, or (ii) if the Option
cannot be exercised on such day because of any injunction, order or similar
restraint issued by a court of competent jurisdiction, on the 30th business day
after such injunction, order or restraint shall have been dissolved or when
such injunction, order or restraint shall have become permanent and no longer
subject to appeal, as the case may be. Any exercise of the Option will be
subject to compliance with applicable law, including the BHCA. An "Extension
Event" is defined in the Stock Option Agreement as any of: (i) a Purchase
Event of the type specified in clauses (i) and (ii) in the preceding paragraph;
(ii) any person (other than MBI or any of its subsidiaries) shall have
"commenced" (as such term is defined in Rule 14d-2 under the Exchange Act),
or shall have filed a registration statement under the Securities Act with
respect to, a tender offer or exchange offer to purchase shares of Roosevelt
Common Stock such that, upon consummation of such offer, such person would have
Beneficial Ownership (as defined in Rule 13d-3 under the Exchange Act) or the
right to acquire Beneficial Ownership of 10% or more of the voting power of
Roosevelt; or (iii) any person (other than MBI or any subsidiary of MBI, or
Roosevelt or any subsidiary of Roosevelt in a fiduciary capacity) shall have
publicly announced its willingness, or shall have publicly announced a
proposal, or publicly disclosed an intention to make a proposal, (A) to make an
offer described in clause (ii) of this sentence or (B) to engage in a
transaction described in clause (i) of this sentence.
The Stock Option Agreement further provides that, to the extent not
terminated pursuant to its terms, from and after the date of a Purchase Event
until 13 months immediately thereafter (the "Repurchase Period"), MBI will be
entitled to require Roosevelt to repurchase for cash the Option from MBI
together with all (but not less than all) shares of Roosevelt Common Stock
purchased by MBI pursuant thereto, at a price equal to the sum of: (i) the
exercise price paid by MBI for any shares of Roosevelt Common Stock acquired
pursuant to the Option; (ii) the difference between (A) the "Market/Tender
Offer Price" for shares of Roosevelt Common Stock (defined as the higher of
(1) the highest price per share at which a tender or exchange offer has been
made for shares of Roosevelt Common Stock or (2) the highest closing mean of
the "bid" and the "ask" price per share of Roosevelt Common Stock reported
by NASDAQ for any day within that portion of the Repurchase Period which
precedes the date MBI gives notice of the required repurchase) and (B) the
exercise price, multiplied by the number of shares of Roosevelt Common Stock
with respect to which the Option has not been exercised, but only if the
Market/Tender Offer Price is greater than such exercise price; (iii) the
difference between the Market/Tender Offer Price and the exercise price paid by
MBI for any shares of Roosevelt Common Stock purchased pursuant to the exercise
of the Option, multiplied by the number of shares so purchased, but only if the
Market/Tender Offer Price is greater than such exercise price; and (iv) MBI's
reasonable out-of-pocket expenses incurred in connection with the transactions
contemplated by the Merger Agreement, including, without limitation, legal,
accounting and investment banking fees.
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<PAGE> 34
The Option, which MBI required that Roosevelt grant as a condition to MBI's
entering into the Merger Agreement, may increase the likelihood of consummation
of the Merger by discouraging competing offers for Roosevelt. Certain aspects
of the Stock Option Agreement may have the effect of discouraging persons who
may now, or prior to the Effective Time, be interested in acquiring all of or a
significant interest in Roosevelt from considering or proposing such an
acquisition, even if such person were prepared to offer to pay consideration to
stockholders of Roosevelt which had a higher current market price than the Per
Share Stock Consideration or Per Share Cash Consideration to be received for
each share of Roosevelt Common Stock pursuant to the Merger Agreement.
The foregoing is a summary of the material provisions of the Stock Option
Agreement, a copy of which is attached as Annex B to this Proxy
Statement/Prospectus. This summary is qualified in its entirety by reference to
the Stock Option Agreement which is incorporated herein by this reference.
SUPPORT AGREEMENTS
Concurrently with the execution of the Merger Agreement, the Supporting
Stockholders, who, as of May 15, 1997, beneficially owned in the aggregate
approximately 2.30% of the outstanding shares of Roosevelt Common Stock,
executed separate Support Agreements with MBI pursuant to which each Supporting
Stockholder agreed, among other things, that: (i) Supporting Stockholder will
not sell, agree to sell, or otherwise transfer or dispose of any shares of
Roosevelt Common Stock owned by the Supporting Stockholder, other than (A)
pursuant to the Merger, (B) to an affiliate who agrees to comply with the terms
of the Support Agreement, or (C) with MBI's prior written consent; (ii) all of
the shares of Roosevelt Common Stock beneficially owned by Supporting
Stockholder at the record date for any meeting of stockholders of Roosevelt
called to consider and vote to approve the Merger Agreement and/or the
transactions contemplated thereby will be voted by the Supporting Stockholder
to approve the Merger Agreement and voted against any Alternative Transaction;
and (iii) Supporting Stockholder will not, directly or indirectly, solicit,
initiate or encourage any inquiries or proposals from, discuss or negotiate
with, or provide any non-public information to, any person relating to an
Alternative Transaction. The Support Agreements further provide that nothing in
such Support Agreements preclude the Supporting Stockholders from discharging
their fiduciary duties as directors. Each Support Agreement terminates upon
termination of the Merger Agreement in accordance with its terms.
Each Supporting Stockholder and the approximate number of shares of
Roosevelt Common Stock beneficially owned by such Supporting Stockholder over
which he has voting power or control as of May 15, 1997 are as follows: Richard
E. Beumer (37,571 shares); Anat Bird (33,663 shares); Stanley J. Bradshaw
(269,583 shares); Douglas T. Breeden (265,968 shares); Robert M. Clayton II
(39,207); Bradbury Dyer III (272,096 shares); Patricia M. Gammon (150 shares);
Hiram S. Liggett, Jr. (33,330 shares); Clarence M. Turley, Jr. (37,920 shares);
and Alvin D. Vitt (50,121 shares).
The foregoing is a summary of the material provisions of the Support
Agreement. See "AVAILABLE INFORMATION." This summary is qualified in its
entirety by reference to the Support Agreement which is incorporated herein by
reference.
BACKGROUND OF THE MERGER
Since Roosevelt's initial public offering in January 1987, Roosevelt's
management has participated in various investor presentations and
banking-related conferences. These activities have provided Roosevelt's
management with numerous opportunities to meet executives with
acquisition-oriented companies of both a banking and a non-banking nature.
Conversations were largely informal and did not lead to serious merger
negotiations.
Over the years, Roosevelt's management never recommended that the Roosevelt
Board hire an investment banking advisor to seek more serious indications of
interest due to the lack of motivating price discussions by would-be acquirors
and due to management's perception that the existing business strategies of
Roosevelt offered attractive opportunities for enhancing shareholder value.
During the five years ended December 31, 1995, Roosevelt had enjoyed better
than a 15% compound annual growth rate in operating earnings per share. Also,
stockholders had enjoyed better than a 50% compound annual rate of return
considering both share price appreciation and reinvested dividends.
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<PAGE> 35
Throughout this period, Roosevelt's performance had been highly influenced
by the effective integration of acquisitions and the active management of its
mortgage-backed securities portfolio. During 1996, management realized that the
near-term would not likely provide meaningful acquisition opportunities.
Management also believed that the earnings derived from the active management
of its mortgage-backed securities would not help Roosevelt achieve a higher
price-earnings multiple. Addressing these concerns, management undertook a
number of initiatives designed to further develop and enhance the value of its
retail franchise.
Consistent with past practices, Roosevelt's management met off-site during
late August of 1996, with the assistance of an outside planning advisor, in a
series of strategic planning meetings to review current operating performance
and to update Roosevelt's rolling three-year business plan. Simultaneous with
the scheduling of these meetings, the Roosevelt Board scheduled its first ever,
off-site strategic planning meeting for September 27, 1996. The purpose of the
meeting of the Roosevelt Board was to review and critique management's analysis
coming out of the August meetings.
Subsequent to management's August meetings, but prior to a regular meeting
of the Roosevelt Board to be held on September 26, 1996, NationsBank
Corporation announced its agreement to acquire Boatmen's Bancshares, Inc.
Shortly thereafter, representatives from a number of regional bank holding
companies, including John H. Beirise, Group President, Capital Markets of MBI,
called Stanley J. Bradshaw, Chairman of the Board, President and Chief
Executive Officer of Roosevelt, to schedule a meeting, the expressed purpose of
which was to explore a possible business combination. Accordingly,
representatives from Montgomery were invited to the Roosevelt Board's September
26, 1997 meeting to evaluate management's strategic plan and to express their
views of value of Roosevelt in plausible business combinations.
During the September 26, 1996 meeting of the Roosevelt Board, management
reported that retail fee income was up sharply during the year due to the many
retail transition initiatives. However, management explained that much of the
increase in revenue was offset by higher expenses necessary to fund the many
initiatives. Management also reported that any anticipated expansion in the
price-earnings multiple from the enhancement of the retail franchise was
seemingly offset by the market's expressed uncertainty regarding the
mortgage-backed securities portfolio.
Management also reported that Roosevelt's asset generation capabilities had
been expanded significantly during 1996. However, management noted that most of
the 1996 loan originations carried low introductory rates which mitigated much
of the near-term earnings benefit from the expanded asset generation
capability. All in all, management expressed disappointment in year-to-date
1996 earnings per share even though core operating earnings continued to
represent greater than a 15% return on shareholders equity. For the first time,
management recommended that the Roosevelt Board anticipate less than a 15%
earnings per share growth rate for the foreseeable future.
Montgomery reviewed with the Roosevelt Board the progress Roosevelt had
made in making the transition to a more retail-oriented business model, noting
the establishment of a sales culture, expansion of fee income, increased asset
generation capacity and increased demand deposits. Montgomery observed that
progress made in these areas had not resulted in higher earnings per share.
Montgomery then presented an analysis to the Roosevelt Board of Roosevelt's
potential value in a possible business combination.
Based upon the normal execution risk inherent in any strategic plan, the
potential delay between the increase in retail activities and the increase in
earnings per share, and the potential additional delay by the market in
increasing the price earnings multiple for the stock, the Roosevelt Board
authorized management to grant MBI's request for an exploratory meeting. In
connection therewith, the Roosevelt Board also authorized Montgomery to
ascertain the nature and extent of the interest previously expressed by various
other regional bank holding companies.
After detailed updates by management and Montgomery, the Roosevelt Board
met again on November 25, 1996 for the expressed purpose of evaluating the
continuing expressions of interest. Representatives of MBI expressed a desire
to enter into a cash election merger whereby the cash consideration would be
set at $22 per share and the stock component would be tied to the future
performance of MBI's stock. Based upon a review of MBI's operating
fundamentals; the impact of MBI's previously announced planned acquisition of
Mark Twain; the potential influence of Roosevelt's operations on the three-way
combination; the fact that the pro forma combination would have a number one
market share in deposits in Missouri; and the fact that MBI's stock had
under-performed other regional
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<PAGE> 36
bank share prices during the previous 60 days, the Roosevelt Board authorized
management to engage in mutual due diligence activities and to explore the
negotiations of an appropriate definitive agreement.
After a full update at its regular meeting on December 18, 1996 regarding
all negotiations with MBI, the Roosevelt Board met again on December 22, 1996
to specifically consider the merger and to review the latest draft of the
Merger Agreement. The Roosevelt Board approved the Merger Agreement that
evening as well as announcement of the Merger on December 23, 1996.
REASONS FOR THE MERGER; ROOSEVELT BOARD RECOMMENDATION
The terms of the Merger Agreement, including the consideration to be paid
to Roosevelt's stockholders, were the result of arms'-length negotiations
between representatives of MBI and Roosevelt. In the course of reaching its
determination to approve the Merger Agreement and recommend it to the
stockholders of Roosevelt, the Roosevelt Board, without assigning any relative
or specific weights, considered a number of factors, including, among other
things (i) the fairness opinion rendered by Montgomery, a copy of which is
attached hereto as Annex D, (ii) the terms of the Merger Agreement as
negotiated (including the transaction structure, the form and amount of the
Merger Consideration, and the potential impact of the proposed Merger Agreement
and the Option Agreement on other institutions that might have an interest in a
business combination with Roosevelt), and the negotiation process, (iii) the
financial condition, operations and prospects of MBI and the anticipated effect
thereon of the proposed transaction, (iv) industry and economic factors, (v)
the nature and compatibility of MBI's management and business philosophy, (vi)
the benefits available to the combined company's shareholders resulting from
anticipated growth and expanded products and services, and other anticipated
impact on depositors, employees, customers and communities serviced by
Roosevelt, (vii) the financial and valuation analyses prepared by Montgomery,
and (viii) regulatory and other factors.
The Roosevelt Board unanimously recommends that the holders of Roosevelt
Common Stock vote "FOR" approval of the Merger Agreement and the Merger.
OPINION OF ROOSEVELT'S FINANCIAL ADVISOR
General. Pursuant to an engagement letter dated October 8, 1996 (the
"Engagement Letter"), Roosevelt engaged Montgomery to assist in identifying
opportunities for maximizing shareholder value, including the potential sale of
Roosevelt, and advising Roosevelt in connection with such opportunities. As
part of its engagement, Montgomery agreed, if requested by Roosevelt, to render
to the Roosevelt Board an opinion as to the fairness from a financial point of
view of the consideration to be received by the stockholders of Roosevelt in
connection with a merger agreement or agreement of sale entered into by
Roosevelt. Montgomery is a nationally recognized investment banking firm and,
as part of its investment banking activities, is regularly engaged in the
valuation of businesses and their securities in connection with merger
transactions and other types of acquisitions, negotiated underwritings, private
placements and valuations for corporate and other purposes. Roosevelt selected
Montgomery to render the opinion on the basis of its experience and expertise
in transactions similar to the Merger and its reputation in the banking and
investment communities.
At a meeting of the Roosevelt Board on December 22, 1996, Montgomery
delivered its oral opinion that the consideration to be received by the holders
of Roosevelt Common Stock pursuant to the Merger Agreement was fair to such
stockholders from a financial point of view as of the date of such opinion.
Montgomery's oral opinion was confirmed in a letter dated December 22, 1996.
THE FULL TEXT OF MONTGOMERY'S WRITTEN OPINION TO THE ROOSEVELT BOARD, DATED
DECEMBER 22, 1996, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED,
AND LIMITATIONS OF THE REVIEW BY MONTGOMERY, IS ATTACHED HERETO AS ANNEX D AND
IS INCORPORATED HEREIN BY REFERENCE. THE FOLLOWING SUMMARY OF MONTGOMERY'S
OPINION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE
OPINION, WHICH SHOULD BE READ CAREFULLY AND IN ITS ENTIRETY. IN FURNISHING SUCH
OPINION, MONTGOMERY DOES NOT ADMIT THAT IT IS AN EXPERT WITH RESPECT TO THE
REGISTRATION STATEMENT OF WHICH THIS JOINT PROXY STATEMENT/PROSPECTUS IS A PART
WITHIN THE MEANING OF THE TERM "EXPERTS" AS USED IN THE SECURITIES ACT AND
THE RULES AND REGULATIONS PROMULGATED THEREUNDER. MONTGOMERY'S OPINION IS
ADDRESSED TO THE ROOSEVELT BOARD, COVERS ONLY THE FAIRNESS OF THE CONSIDERATION
TO BE RECEIVED BY HOLDERS OF ROOSEVELT COMMON STOCK FROM A FINANCIAL POINT OF
VIEW AS OF THE DATE OF THE OPINION AND DOES NOT CONSTITUTE A RECOMMENDATION TO
ANY HOLDER OF ROOSEVELT COMMON STOCK AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT
THE ANNUAL MEETING.
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In connection with its December 22, 1996 opinion, Montgomery, among other
things: (i) reviewed certain publicly available financial and other data with
respect to Roosevelt and MBI, including the audited, consolidated financial
statements for the fiscal years ended December 31, 1994 and 1995 and the
interim periods to September 30, 1996, and certain other relevant financial
and operating data relating to Roosevelt and MBI made available to Montgomery
from published sources and from the internal records of Roosevelt and MBI; (ii)
reviewed the draft Merger Agreement dated December 21, 1996; (iii) reviewed
certain publicly available information concerning the trading of, and the
trading market for, Roosevelt Common Stock and MBI Common Stock; (iv) compared
both Roosevelt and MBI from a financial point of view with certain other
companies in the thrift and bank industries, respectively, which Montgomery
deemed to be relevant; (v) considered the financial terms, to the extent
publicly available, of selected thrift acquisitions which Montgomery deemed to
be comparable, in whole or in part, to the Merger; (vi) reviewed and discussed
with representatives of the management of Roosevelt and MBI certain information
of a business and financial nature regarding Roosevelt and MBI, including
information furnished to Montgomery by Roosevelt and MBI, and third-party
analysts' estimates; (vii) reviewed and discussed with representatives of the
management of Roosevelt and MBI estimates of cost savings and other synergies
furnished to Montgomery by Roosevelt and MBI; (viii) made inquiries regarding
and discussed the proposed Merger and the Merger Agreement and other matters
related thereto with Roosevelt's counsel; and (ix) performed such other
analyses and examinations as Montgomery deemed appropriate.
In connection with its review, and with Roosevelt's consent, Montgomery did
not assume any obligation independently to verify the foregoing information and
relied on its being accurate and complete in all material respects. Upon the
advice of representatives of the management of Roosevelt and MBI and with their
consent, Montgomery assumed that the third-party analysts' estimates provided a
reasonable basis upon which it could form its opinion. Montgomery also assumed
that there have been no material changes in Roosevelt's or MBI's assets,
financial condition, results of operations, business or prospects since the
respective dates of their last financial statements made available to
Montgomery. Montgomery assumed that the Merger will be consummated in a manner
that complies in all respects with the applicable provisions of the Securities
Act, the Exchange Act and all other applicable federal and state statutes,
rules and regulations. In addition, Montgomery did not assume responsibility
for reviewing any individual credit files, or making an independent evaluation,
appraisal or physical inspection of any of the assets or liabilities
(contingent or otherwise) of Roosevelt or MBI, nor was Montgomery furnished
with any such appraisals. Montgomery is not an expert in the evaluation of loan
portfolios for purposes of assessing the adequacy of the allowances for losses
with respect thereto and assumed, with Roosevelt's consent, that such
allowances for each of Roosevelt and MBI are in the aggregate adequate to cover
such losses. Montgomery was informed by Roosevelt, and assumed, that the Merger
will be recorded as a purchase under generally accepted accounting principles.
Finally, Montgomery's opinion was based on economic, monetary and market and
other conditions as in effect on, and the information made available to
Montgomery as of December 22, 1996. Accordingly, although subsequent
developments may affect its opinion, Montgomery has not assumed any obligation
to update, revise or reaffirm its opinion.
Set forth below is a brief summary of the report presented by Montgomery to
the Roosevelt Board on December 22, 1996 in connection with its opinion. For
purposes of the report, Montgomery assumed 50.080 million fully-diluted
Roosevelt shares outstanding, 13 million shares to be issued by MBI in the
Merger and cash consideration of $22.00 per share, and Roosevelt balance sheet
figures as of September 30, 1996. In some cases as indicated, Montgomery
assumed balance sheet figures, supplied by Roosevelt management, as of October
31, 1996.
Analysis of Selected Merger Transactions. Montgomery reviewed the
consideration paid in selected thrift acquisition transactions. Specifically,
Montgomery reviewed an aggregate of 144 thrift transactions from 1991 to
December 20, 1996 including (i) mergers in Illinois, Kansas and Missouri; (ii)
transactions involving values of greater than $500 million; (iii) transactions
involving sellers with more than $5 billion in assets; (iv) transactions
involving sellers with returns on assets exceeding .75% and with deposits
greater than $500 million; and (v) transactions involving values of greater
than $100 million. For each of these lists, Montgomery examined the median
valuation multiples and the 75th percentile valuation multiples. Several
transactions appeared on more than one of these lists. For each transaction,
Montgomery analyzed data illustrating, among other things, purchase price to
last twelve-months ("LTM") earnings, purchase price to deposits, the ratio of
the premium (i.e., purchase price in excess of tangible book value) to core
deposits, and purchase price to book value.
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<PAGE> 38
A summary of the analysis is as follows:
<TABLE>
<CAPTION>
PRICE TO PREMIUM PRICE TO # OF
LTM PRICE TO TO CORE BOOK TRANSACTIONS
TRANSACTION LIST: EARNINGS DEPOSITS DEPOSITS VALUE EXAMINED
----------------- -------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
Mergers in Illinois, Kansas and Missouri --
Median........................................ 14.7x 14.5% 4.3% 1.3x 51
75th Percentile............................... 20.1x 22.6% 7.2% 1.6x 51
Transaction value greater than $500 million --
Median........................................ 13.1x 15.2% 6.1% 1.6x 14
75th Percentile............................... 14.3x 17.9% 9.8% 1.7x 14
Sellers with more than $5 billion in assets --
Median........................................ 12.8x 14.6% 4.0% 1.4x 12
75th Percentile............................... 13.3x 15.4% 6.7% 1.6x 12
Sellers with ROA exceeding .75% and deposits
greater than $500 million --
Median........................................ 13.2x 18.0% 7.7% 1.6x 63
75th Percentile............................... 14.8x 20.6% 10.4% 1.7x 63
Transaction value greater than $100 million --
Median........................................ 14.8x 16.6% 7.3% 1.6x 87
75th Percentile............................... 18.1x 20.4% 9.7% 1.7x 87
</TABLE>
A summary of the results of Montgomery's analysis concerning this
transaction is as follows:
<TABLE>
<CAPTION>
PRICE TO PREMIUM PRICE TO
LTM PRICE TO TO CORE BOOK
EARNINGS DEPOSITS DEPOSITS VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
The Merger................................................. 27.4x 20.5% 11.8% 2.0x
</TABLE>
Montgomery used a group of national thrift acquisitions announced since
January 1, 1991 with purchase prices of greater than $100 million where pricing
information was available to analyze premiums paid compared to the sellers'
stock price at various times prior to the announcement of the acquisition.
These figures produced: (i) a median premium to the seller's stock price one
month prior to announcement of 33.2%; (ii) a median premium to the seller's
stock price six days prior to announcement of 24.6%; and (iii) a median premium
to the seller's stock price the day prior to announcement of 20.7%. In
comparison, MBI's offer of $21.61 average price per share exceeded Roosevelt's
stock price one month prior to the announcement by 13.7%, the stock price six
days prior to the announcement by 14.5% and the stock price one day prior to
the announcement by 19.2%.
Comparable Company Analysis. Using publicly available information,
Montgomery compared certain financial ratios of MBI to those of a group
consisting of commercial banks with assets greater than $15 billion and less
than $30 billion which included AmSouth Bancorporation, BancPonce Corporation,
Crestar Financial Corporation, Fifth Third Bancorp, First of America Bank
Corp., Firstar Corporation, Huntington Bancshares Inc., Northern Trust Corp.,
Regions Financial Corp., Southern National Corporation, SouthTrust Corp., State
Street Boston Corp., Summit Bancorp, and UnionBanCal Corp. (the "Comparable
Banks"). The figures at or for the twelve months ended September 30, 1996 for
the Comparable Banks showed (i) a median return on average equity of 15.51%,
(ii) a median return on average assets of 1.11%, (iii) a median ratio of common
equity to total assets of 7.75%, and (iv) a median ratio of nonperforming
assets to total assets of 0.74%. In comparison, the figures produced for MBI
for the same time period indicated (i) return on average equity of 12.32%, (ii)
return on average assets of 1.12%, (iii) common equity to total assets of
8.55%, and (iv) nonperforming assets to total assets of 0.38%.
Using publicly available information, Montgomery compared certain financial
ratios of Roosevelt to those of a group consisting of thrifts with assets
greater than $7 billion and less than $14 billion which included Astoria
Financial Corporation, Bank United Corp., Commercial Federal Corporation,
Charter One Financial, Coast Savings Financial, GreenPoint Financial Corp.,
People's Bank, MHC, Sovereign Bancorp Inc., and TCF Financial Corp. (the
"Comparable Thrifts"). The figures at or for the twelve months ended
September 30, 1996 for the Comparable Thrifts showed
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<PAGE> 39
(i) a median return on average equity of 10.29%, (ii) a median return on
average assets of 0.61%, (iii) a median ratio of common equity to total assets
of 6.59%, and (iv) a median ratio of nonperforming assets to total assets of
1.02%. In
comparison, the figures produced for Roosevelt for the same time period
produced (i) return on average equity of 7.88%, (ii) return on average assets
of 0.42, (iii) common equity to total assets of 4.87%, and (iv) nonperforming
assets to total assets of 0.52%.
No other company or transaction used in the above analysis as a comparison
is identical to MBI, Roosevelt or the Merger. Accordingly, an analysis of the
results of the foregoing is not mathematical; rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and other factors that could affect the public
trading value and the announced acquisition prices of the companies to which
Roosevelt and the Merger are being compared.
Present Value Analysis. In performing the present value analysis,
Montgomery estimated the future earnings per share and dividend payments of
Roosevelt over a five year period. The estimated earnings per share in the year
2001 was multiplied by an estimated price to earnings multiple ranging from
10.0x to 14.0x. This product was then added to the cumulative estimated
dividends and the sum of these two numbers was discounted to the present using
a discount rate of 14%. This analysis indicated that the present value of
Roosevelt's future stock price plus dividends ranged from $16.59 to $22.31 per
share.
Dilution Analysis. Using third party analysts estimates and projected
growth rates on which Roosevelt informed Montgomery that it could rely,
Montgomery compared estimated reported EPS ("Reported EPS") and estimated
cash EPS ("Cash EPS") of Roosevelt's common stock on a stand-alone basis to
the Reported EPS and Cash EPS of the common stock for the pro forma combined
company for the calendar years 1997, 1998, 1999, 2000 and 2001. Montgomery
noted that, based upon third party estimates after giving effect to pretax cost
savings estimates of the managements of MBI and Roosevelt and one-time charges
related to the transaction and certain assumptions as to, among other things,
the Consideration and cost of acquisition funds, (i) the Merger would be
dilutive to MBI's Reported EPS in 1997 and accretive thereafter, and (ii) the
Merger would be accretive to Cash Earnings in 1997 and thereafter. These
estimates are not necessarily indicative of expected results or plans of MBI,
Roosevelt, or the combined institution.
The summary set forth above does not purport to be a complete description
of the presentation by Montgomery to the Roosevelt Board or of the analyses
performed by Montgomery. The preparation of a fairness opinion is not
necessarily susceptible to partial analysis or summary description. Montgomery
believes that its analyses and the summary set forth above must be considered
as a whole and that selecting a portion of its analyses and factors, without
considering all analyses and factors, would create an incomplete view of the
process underlying the analyses set forth in its presentation to the Roosevelt
Board. In addition, Montgomery did not provide the Roosevelt Board with any
specific weight that may have been given to various factors in its analyses,
and may have deemed various assumptions more or less probable than other
assumptions, so that the ranges of valuations resulting from any particular
analysis described above should not be taken to be Montgomery's view of the
actual value of Roosevelt or the combined companies. The fact that any specific
analysis has been referred to in the summary above is not meant to indicate
that such analysis was given greater weight than any other analysis.
In performing its analyses, Montgomery made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Roosevelt or MBI. The
analyses performed by Montgomery are not necessarily indicative of actual
values or actual future results, which may be significantly more or less
favorable than suggested by such analyses. Such analyses were prepared solely
as part of Montgomery's analysis of the fairness of the consideration to be
received by the holders of Roosevelt Common Stock in the Merger and were
provided to the Roosevelt Board in connection with the delivery of Montgomery's
opinion. The analyses do not purport to be appraisals or to reflect the prices
at which a company might actually be sold or the prices at which any securities
may trade at the present time or any time in the future. The projections are
based on numerous variables and assumptions which are inherently unpredictable
and must be considered not certain of occurrence as projected. Accordingly,
actual results could vary significantly from those set forth in such
projections.
As described above, Montgomery's opinion and presentation to the Roosevelt
Board were among the many factors taken into consideration by the Roosevelt
Board in making its determination to approve the Merger Agreement.
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<PAGE> 40
Pursuant to the Engagement Letter, Roosevelt paid Montgomery a fee of
$500,000 upon delivery of its December 22, 1996 fairness opinion. Additionally,
Montgomery will receive approximately $6.1 million upon the closing of the
Merger. Roosevelt has also agreed to reimburse Montgomery for its reasonable
out-of-pocket expenses, including any fees and disbursements for Montgomery's
legal counsel and other experts retained by Montgomery. Roosevelt has agreed to
indemnify Montgomery, its affiliates, and their respective partners, directors,
officers, agents, consultants, employees and controlling persons against
certain liabilities, including liabilities under the federal securities laws.
In addition to its engagement in connection with the Merger, over the past two
and one half years, Montgomery has provided various investment banking services
or other financial advisory services to Roosevelt for which fees totaling
$150,000 were paid. These fees will be credited against the fee due Montgomery
upon the closing of the Merger.
In the ordinary course of its business, Montgomery may trade equity
securities of Roosevelt and MBI for its own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
General. Certain members of Roosevelt's management, including Messrs.
Bradshaw and Douglass and Ms. Bird, have interests in the Merger that are in
addition to any interests they may have as stockholders of Roosevelt. The
Roosevelt Board was aware of these interests and considered them, among other
matters, in approving the Merger Agreement and the Merger.
Employment Agreements. On the date of the Merger Agreement, Anat Bird,
Executive Vice President and Chief Operating Officer of Roosevelt, Gary W.
Douglass, Executive Vice President and Chief Financial Officer of Roosevelt,
and Stanley J. Bradshaw, Chairman of the Board, President and Chief Executive
Officer of Roosevelt, each entered into employment agreements with MBI and
Roosevelt. These employment agreements, which take effect at the Effective
Time, are summarized below.
Under Ms. Bird's employment agreement, Ms. Bird will serve as Chief
Operating Officer of Roosevelt Bank until Roosevelt Bank is merged with another
subsidiary of MBI, after which time Ms. Bird will serve in another senior
management position with MBI. Ms. Bird's employment agreement is for a term of
one year and calls for an annual base salary of not less than $250,000, which
amount represents approximately a 21% reduction from her existing base salary.
She will also be entitled to receive a cash bonus for that first year of not
less than $75,000. As an inducement for Ms. Bird to enter into the
aforementioned agreement, she will receive a cash payment of $500,000 on the
date immediately prior to the Effective Time. In the event Ms. Bird voluntarily
terminates her employment prior to the first anniversary of the Effective Time,
she will be entitled to receive only the amount of accrued salary and bonus
through the termination date. In the event Ms. Bird either voluntarily
terminates her employment on or after the first anniversary of the Effective
Time or experiences an Involuntary Termination (as such term is defined in the
agreement), she will be entitled to receive accrued salary and bonus and an
amount equal to her annual base salary and minimum bonus in 24 equal
semi-monthly installments. In the event that a "parachute" excise tax would
be imposed on any payments to Ms. Bird, Ms. Bird's payments would be
appropriately reduced such that no "parachute" excise tax is imposed. The
agreement also contains a covenant not to compete with MBI during the term of
her employment agreement and, if her employment terminates during the term of
the agreement for any reason, for a period of one year beginning on the date of
termination.
Under Mr. Douglass' employment agreement, Mr. Douglass will serve as Chief
Financial Officer of Roosevelt Bank until Roosevelt Bank is merged with a
subsidiary of MBI, after which time Mr. Douglass will serve in another senior
management position with MBI. Mr. Douglass' employment agreement is for a term
of two years and calls for an annual base salary of not less than $225,000, an
amount approximating Mr. Douglass' existing salary. The agreement also calls
for a minimum bonus payment during the first year of $67,500, an amount
approximating the average bonus received by Mr. Douglass during the previous
two years. As an inducement for Mr. Douglass to enter into the aforementioned
agreement, he will receive a cash payment of $225,000 on the date immediately
prior to the Effective Time. In the event Mr. Douglass voluntarily terminates
his employment prior to the first anniversary of the Effective Time, he will be
entitled to receive only the amount of accrued salary and bonus through the
termination date. In the event that Mr. Douglass either voluntarily terminates
his employment on or after the first anniversary of the Effective Time or
experiences an Involuntary Termination (as such term is defined in the
agreement), he will be
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<PAGE> 41
entitled to receive accrued salary and bonus and an amount equal to his annual
base salary plus bonus in 24 equal semi-monthly installments. In the event that
a "parachute" excise tax would be imposed on any payments to Mr. Douglass,
Mr. Douglass' payments would be appropriately reduced such that no
"parachute" excise tax is imposed. The agreement also contains a covenant not
to compete with MBI during the term of his employment agreement and, if his
employment terminates during the term of the agreement for any reason, for a
period of one year beginning on the date of termination.
Mr. Bradshaw's employment agreement is for a term of three years and
stipulates an annual base salary of $425,000, an amount which represents a 15%
reduction from his current base salary. The agreement also stipulates a bonus
during the first year of not less than $233,750, an amount which approximates
his average bonus for the previous three years. In the event Mr. Bradshaw
experiences an Involuntary Termination (as such term is defined in the
agreement), he will be entitled to receive accrued salary and bonus and an
amount equal to his base salary and bonus for the remainder of the term of the
agreement in 24 equal semi-monthly installments. In the event a "parachute"
excise tax would be imposed on any payments to Mr. Bradshaw, Mr. Bradshaw's
payments will be appropriately reduced such that no "parachute" excise tax is
imposed. The agreement also contains a covenant not to compete with MBI during
the term of Mr. Bradshaw's employment agreement and, if Mr. Bradshaw's
employment terminates for any reason during the term of the agreement, until
the later of the third anniversary of the Effective Time or the first
anniversary of the date of termination.
As stipulated in Mr. Bradshaw's employment agreement, MBI's management
believes that it is essential to the management and future growth of the assets
acquired in the Merger for Mr. Bradshaw to be retained. Accordingly, the
agreement provides that Mr. Bradshaw will become a member of MBI's Management
Executive Committee and report to the Chief Executive Officer of MBI. Mr.
Bradshaw will serve as President and Chief Executive Officer of Roosevelt Bank
from and after the Effective Time until Roosevelt Bank is merged with another
affiliate with MBI. Concurrently and thereafter, Mr. Bradshaw will serve as
President and Chief Executive Officer of MERC Mortgage, MBI's St. Louis-based
mortgage banking operation.
MBI presented Mr. Bradshaw with the three-year employment agreement
described above as a condition to MBI's entering into the Merger Agreement. As
an inducement to Mr. Bradshaw to enter into the agreement, Roosevelt will issue
100,000 shares of restricted stock of Roosevelt to Mr. Bradshaw at the
Effective Time. Such shares shall vest annually in equal portions over a period
of three years following the Effective Time; provided that the vesting of such
shares shall not accelerate in the event of a future change in control of MBI.
The market value of the restricted stock represents an amount which
approximates the difference between Mr. Bradshaw's cash compensation and the
average cash compensation received by chief executive officers in Roosevelt's
peer group during the six years Mr. Bradshaw has served as Chief Executive
Officer of Roosevelt, a period during which Roosevelt's total shareholder
return had been above average compared to the peer group.
Severance Benefits. Contemporaneously with the execution of the Merger
Agreement, Roosevelt and MBI entered into an agreement (the "Severance
Agreement") pursuant to which the full time employees of Roosevelt and its
subsidiaries at the Effective Time whose employment is involuntarily terminated
prior to December 31, 1998 will be entitled to receive certain severance
benefits. Under this agreement, eligible employees up to and including the
title of Assistant Vice President will receive a severance payment equal to two
weeks of base salary for employees having up to one full year of service, plus
one additional week for each additional full year of service, up to a maximum
of 26 weeks. Eligible employees holding the title of Vice President will
receive a payment equal to six months of base salary. There are currently 26
individuals holding the title of Vice President. Eligible employees holding the
title of Senior Vice President or above (other than those individuals with
individual employment agreements who will receive the greater of the cash award
payable under their respective employment agreements or under the Severance
Agreement) will receive a payment equal to nine months of base salary. There
are currently 6 individuals holding the title of Senior Vice President or
above.
Indemnification and Insurance. Under the Merger Agreement, MBI agreed to
indemnify and hold harmless the past and present employees, agents, directors
or officers of Roosevelt and its subsidiaries for all acts or omissions
occurring at or prior to the Effective Time to the same extent such persons are
indemnified and held harmless by Roosevelt as of the date of the Merger
Agreement (whether by operation of Roosevelt's or one of its subsidiaries'
charter or by-laws, any resolution, contract or similar agreement, or by
operation of law). The Merger Agreement also provides that MBI will assume the
obligations of Roosevelt with respect to directors and officers insurance under
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<PAGE> 42
Roosevelt's prior acquisition agreements. In addition, MBI agreed under the
Merger Agreement to provide, for a period of not less than six years after the
Effective Time, an insurance and indemnification policy that provides the
officers and directors of Roosevelt and its subsidiaries immediately prior to
the Effective Time coverage no less favorable than the coverage provided by MBI
to MBI's directors and officers as of the date of the Merger Agreement.
Other. Pursuant to an agreement between Roosevelt and John L. LeCave,
Senior Vice President of Roosevelt Bank, in the event of a "change in
control" of Roosevelt, Mr. LeCave is entitled to receive his annual base
salary ($125,000) for a period of two years following the commencement of his
employment with Roosevelt, regardless of whether Mr. LeCave continues in the
employ of or is involuntarily terminated by Roosevelt's successor. The term
"change in control" is not defined in the agreement; however, a "change in
control" will be deemed to have occurred no later than the Effective Time.
Stock Options. At the Effective Time, each Roosevelt Stock Option, whether
vested or unvested, will be assumed by MBI. Each Roosevelt Stock Option will be
deemed to constitute an option to acquire, on the same terms and conditions as
were applicable under such Roosevelt Stock Option, the same number of shares of
MBI Common Stock as the holder of such Roosevelt Stock Option would have been
entitled to receive pursuant to the Merger had such holder exercised such
option in full immediately prior to the Effective Time multiplied by the
Exchange Ratio, at a price per share equal to the per share exercise price
under such Roosevelt Stock Option divided by the Exchange Ratio, rounded down
to the nearest cent.
At May 15, 1997, the directors and executive officers of Roosevelt held
outstanding options to purchase an aggregate of 644,087 shares of Roosevelt
Common Stock at an average exercise price of $13.59 per share (which is
equivalent to 271,225 shares of MBI Common Stock at an average exercise price
of $32.28 per share).
Restricted Stock. Pursuant to agreements between Roosevelt and each of Mrs.
Bird and Mr. Douglass, the 30,000 and 20,000 shares of restricted stock awarded
to Mrs. Bird and Mr. Douglass, respectively, under such agreements that have
not by then vested will vest upon approval of the Merger Agreement by
Roosevelt's stockholders. Pursuant to an agreement between Roosevelt and Mr.
Bradshaw awarding Mr. Bradshaw 35,000 restricted shares of Roosevelt Common
Stock, it is anticipated that the Roosevelt Board will adopt a resolution
causing Mr. Bradshaw's unvested restricted shares to vest immediately prior to
consummation of the Merger. As of the date of this Proxy Statement/Prospectus,
none of the restricted shares referred to above have vested. In addition, as
discussed above, at the Effective Time, Roosevelt will grant to Mr. Bradshaw
100,000 restricted shares of Roosevelt Common Stock. See "--Employment
Agreements."
CONDITIONS OF THE MERGER
The respective obligations of MBI and Roosevelt to consummate the Merger
are subject to the fulfillment or waiver at or prior to the Effective Time of
the following conditions:
(i) The Merger Agreement shall have received the requisite approval of
stockholders of Roosevelt.
(ii) All requisite approvals of the Merger Agreement and the
transactions contemplated thereby shall have been received from the Federal
Reserve Board, and any other necessary governmental or regulatory authority
or agency (collectively, the "Regulatory Authorities").
(iii) The Registration Statement shall have been declared effective and
shall not be subject to a stop order or any threatened stop order.
(iv) Neither MBI nor Roosevelt shall be subject to any order, decree or
injunction, and there shall be no pending or threatened order, decree or
injunction, of a court or agency of competent jurisdiction which enjoins or
prohibits the consummation of the Merger.
(v) There shall be no legislative, statutory or regulatory action
(whether federal or state) pending which prohibits or threatens to prohibit
consummation of the Merger or which otherwise materially adversely affects
the Merger.
(vi) Each of MBI and Roosevelt shall have received, from counsel
reasonably satisfactory to it, an opinion reasonably satisfactory in form
and substance to it to the effect that the Merger will constitute a
reorganization
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<PAGE> 43
within the meaning of Section 368 of the Code and that no gain or loss will
be recognized by the stockholders of Seller to the extent they receive MBI
Common Stock solely in exchange for shares of Roosevelt Common Stock.
Roosevelt's obligation to effect the Merger is subject to the fulfillment
or waiver at or prior to the Effective Time of the following additional
conditions:
(i) The representations and warranties of MBI set forth in Article III
of the Merger Agreement shall be true and correct in all material respects
as of December 22, 1996 and as of the Effective Time (as though made on and
as of the Effective Time except (A) to the extent such representations and
warranties are by their express provisions made as of a specified date or
period and (B) for the effect of transactions contemplated by the Merger
Agreement).
(ii) MBI shall have performed in all material respects all obligations
required to be performed by it under the Merger Agreement prior to the
Effective Time.
(iii) Roosevelt shall have received a certificate of the chairman or
vice chairman of MBI as to the satisfaction of the conditions set forth in
clauses (i) and (ii).
MBI's obligation to effect the Merger is subject to the fulfillment or
waiver at or prior to the Effective Time of the following additional
conditions:
(i) The representations and warranties of Roosevelt set forth in
Article II of the Merger Agreement shall be true and correct in all
material respects as of December 22, 1996 and as of the Effective Time (as
though made on and as of the Effective Time except (A) to the extent such
representations and warranties are by their express provisions made as of a
specified date or period and (B) for the effect of transactions
contemplated by the Merger Agreement).
(ii) Roosevelt shall have performed in all material respects all
obligations required to be performed by it under the Merger Agreement prior
to the Effective Time.
(iii) MBI shall have received certificates of the chairman and the
president and chief executive officer of Roosevelt as to the satisfaction
of the conditions set forth in clauses (i) and (ii).
(iv) All shares of Roosevelt preferred stock shall have been either
converted into shares of Roosevelt Common Stock or redeemed, in each case,
in accordance with the terms of the related certificate of designation.
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after any requisite shareholder approval: (i) by mutual
consent of the Executive Committee of the MBI Board (the "MBI Executive
Committee") and the Roosevelt Board; (ii) by the MBI Executive Committee or
the Roosevelt Board (A) at any time after December 22, 1997 if the Merger shall
not theretofore have been consummated (provided that the terminating party is
not then in material breach of the Merger Agreement), (B) if the Federal
Reserve Board has denied approval of the Merger and such denial has become
final and non-appealable or (C) if stockholders of Roosevelt shall not have
approved the Merger Agreement at the Annual Meeting following a favorable
recommendation of the Roosevelt Board; (iii) by the MBI Executive Committee in
the event of a material breach by Roosevelt of the Merger Agreement, which
breach is not cured within 30 days after written notice thereof to Roosevelt by
MBI; or (iv) by the Roosevelt Board (A) in the event of a material breach by
MBI of the Merger Agreement, which breach is not cured within 30 days after
written notice thereof is given to MBI by Roosevelt or (B) in the event that
after-tax costs, if any, of remedial or other corrective actions or measures
with regard to specified properties exceed $30,000,000.
No assurance can be given that the Merger will be consummated, that MBI and
Roosevelt will not mutually agree to terminate the Merger Agreement or that MBI
or Roosevelt will not elect to terminate the Merger Agreement if the Merger has
not been consummated on or before December 22, 1997.
REGULATORY APPROVAL
The obligations of the parties to effect the Merger are subject to prior
approval of the Federal Reserve Board and any other necessary Regulatory
Authority.
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<PAGE> 44
The Merger is subject to the prior approval of the Federal Reserve Board
under the BHCA. Under the BHCA, the Federal Reserve Board is required, in
approving transactions such as the Merger, to take into consideration the
financial and managerial resources and future prospects of the existing and
proposed institutions and the convenience and needs of the communities to be
served. In considering financial resources and future prospects, the Federal
Reserve Board will, among other things, evaluate the adequacy of the capital
levels of MBI and its bank subsidiaries following the Merger.
The BHCA prohibits the Federal Reserve Board from approving the Merger if
the Merger would result in a monopoly, or be in furtherance of any combination
or conspiracy to monopolize or to attempt to monopolize, the business of
banking in any part of the United States, if the effect of the Merger in any
section of the country may be substantially to lessen competition or to tend to
create a monopoly, or if the Merger would in any other manner result in a
restraint of trade, unless the Federal Reserve Board finds that the
anti-competitive effects of the Merger are clearly outweighed in the public
interest by the probable effect of transactions in meeting the convenience and
needs of the communities to be served. In addition, under the Community
Reinvestment Act of 1977, as amended, the Federal Reserve Board must take into
account the record of performance of the existing institutions in meeting the
credit needs of the entire community, including low- and moderate-income
neighborhoods, served by such institutions.
Under the BHCA, the Merger may not be consummated until the 30th day
following the date of Federal Reserve Board approval (or, if the United States
Department of Justice (the "DOJ") has not submitted adverse comments with
respect to competitive factors, the 15th day), during which time the DOJ may
challenge the Merger on antitrust grounds. The commencement of an antitrust
action would stay the effectiveness of the Federal Reserve Board's approval
unless a court specifically orders otherwise.
The BHCA provides for the publication of notice and public comment on the
applications and authorizes the Federal Reserve Board to permit interested
parties to intervene in the proceedings. If an interested party is permitted to
intervene, such intervention could delay the regulatory approvals required for
consummation of the Merger.
MBI and Roosevelt have filed all applications and notices and have taken
other appropriate action with respect to any requisite approvals or other
action of any Regulatory Authority. MBI and Roosevelt are not aware of any
governmental approvals or actions that may be required for consummation of the
Merger other than as described above. Should any other approval or action be
required, it is presently contemplated that such approval or action would be
sought.
THE MERGER CANNOT PROCEED IN THE ABSENCE OF THE REQUISITE REGULATORY
APPROVALS. THERE CAN BE NO ASSURANCE THAT ANY NECESSARY APPROVALS OR ACTIONS
WILL BE RECEIVED OR TAKEN, AS TO THE TIMING OF SUCH APPROVALS OR ACTIONS, OR
THAT ANY APPROVALS OR ACTIONS WILL NOT BE CONDITIONED IN A MANNER THAT WOULD
CAUSE THE PARTIES TO ABANDON THE MERGER. IN ADDITION, THERE CAN BE NO ASSURANCE
THAT ACTION WILL NOT BE BROUGHT CHALLENGING SUCH APPROVALS OR ACTIONS, OR, IF
SUCH A CHALLENGE IS BROUGHT, AS TO THE RESULT THEREOF.
See "--Closing and Effective Time," "--Conditions of the Merger,"
"--Waiver and Amendment" and "--Termination of the Merger Agreement" and
"SUPERVISION AND REGULATION."
BUSINESS PENDING THE MERGER
From December 22, 1996 to the Effective Time, each of MBI and Roosevelt
agreed to, and agreed to cause each of their respective subsidiaries to,
conduct its business according to the ordinary and usual course consistent with
past practices, and agreed to, and agreed to cause each such subsidiary to, use
its best efforts to maintain and preserve its business organization, employees
and advantageous business relationships and retain the services of its officers
and key employees.
From December 22, 1996 to the Effective Time, the Merger Agreement provides
that, except as provided in the Merger Agreement, Roosevelt has agreed not to,
and to cause each of its subsidiaries not to, without the prior written consent
of MBI:
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<PAGE> 45
(i) declare, set aside or pay any dividends or other distributions,
directly or indirectly, in respect of its capital stock (other than
dividends from a subsidiary of Roosevelt to Roosevelt or another subsidiary
of Roosevelt), except that Roosevelt may (A) declare and pay cash dividends
on the Roosevelt Common Stock of not more than $.17 per share per quarterly
period and (B) declare and pay cash dividends on Roosevelt's preferred
stock of not more than $.8125 per share per quarterly period; provided that
the parties agree to consult with respect to the last quarterly dividend of
Roosevelt payable prior to the Effective Time with the object of assuring
that the stockholders of Roosevelt do not receive a shortfall or a premium
based on the record and payment dates of their last dividend prior to the
Merger and the record and payment dates of the first dividend of MBI
following the Merger;
(ii) enter into or amend any employment, severance or similar agreement
or arrangement with any director or officer or employee, or materially
modify any of Roosevelt's employee benefit plans specified in the Merger
Agreement or grant any salary or wage increase or materially increase any
employee benefit (including incentive or bonus payments), except normal
individual increases in compensation to employees consistent with past
practice, or as required by law or contract;
(iii) authorize, recommend (subject to the fiduciary duties of the
Roosevelt Board, based upon written advice of counsel to Roosevelt, which
counsel is reasonably acceptable to MBI), propose or announce an intention
to authorize, recommend or propose, or enter into an agreement in principle
with respect to, any merger, consolidation or business combination (other
than the Merger), any acquisition of a material amount of assets or
securities, any disposition of a material amount of assets or securities or
any release or relinquishment of any material contract rights;
(iv) propose or adopt any amendments to its certificate or articles of
incorporation, association or other charter document or by-laws;
(v) issue, sell, grant, confer or award any of its Equity Securities
(as defined in the Merger Agreement) (except that Roosevelt may (A) issue
shares of Roosevelt Common Stock upon exercise of Roosevelt Stock Options
outstanding on December 22, 1996, (B) issue shares of Roosevelt Common
Stock upon the conversion of Roosevelt's preferred stock, (C) issue shares
of Roosevelt Common Stock as contemplated by Roosevelt's Supplemental
Pension Plan, or (D) issue shares of Roosevelt Common Stock pursuant to
Roosevelt's dividend reinvestment plan) or effect any stock split or
adjust, combine, reclassify or otherwise change its capitalization as it
existed on December 22, 1996;
(vi) purchase, redeem, retire, repurchase, or exchange, or otherwise
acquire or dispose of, directly or indirectly, any of its Equity
Securities, whether pursuant to the terms of such Equity Securities or
otherwise; provided, however, that Roosevelt will be permitted to purchase
up to 6,973,380 shares of Roosevelt Common Stock (as contemplated by the
Merger Agreement) at a purchase price per share not to exceed $22.00 per
share;
(vii) (A) without first consulting with MBI, enter into, renew or
increase any loan or credit commitment (including standby letters of
credit) to, or invest or agree to invest in any person or entity or modify
any of the material provisions or renew or otherwise extend the maturity
date of any existing loan or credit commitment (collectively, "lend to")
in an amount in excess of (1) $500,000 in respect of commercial
transactions, including commercial real estate transactions ("Commercial
Transactions") and (2) $1,000,000 in respect of residential real estate
transactions, or in an amount which, or when aggregated with any and all
loans or credit commitments to such person or entity, would be in excess of
(x) $500,000 in respect of commercial transactions, including Commercial
Transactions and (y) $1,000,000 in respect of residential real estate
transactions; (B) without first obtaining the written consent of MBI, lend
to any person or entity in an amount in excess of $750,000 in respect of
Commercial Transactions or in an amount which, when aggregated with any and
all loans or credit commitments to such person or entity, would be in
excess of $750,000 in respect of Commercial Transactions; (C) lend to any
person other than in accordance with lending policies as in effect on the
date of the Merger Agreement; provided that, in the case of subclauses (B)
and (C) Roosevelt or any Roosevelt subsidiary may make any such loan in the
event (1) Roosevelt or any Roosevelt subsidiary has delivered to MBI or its
designated representative a notice of its intention to make such loan and
such information as MBI or its designated representative may reasonably
require in respect thereof and (2) MBI or its designated representative
will not have reasonably objected to such loan by giving written or
facsimile notice of such objection within two business days following the
delivery to MBI of the notice of intention and information as aforesaid; or
(D) lend to any
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person or entity any of the loans or other extensions of credit to which or
investments in which are on a "watch list" or similar internal report of
Roosevelt or any Roosevelt subsidiary (except those denoted "pass"
thereon) in an amount in excess of $250,000; provided, however, that
nothing in this paragraph will prohibit Roosevelt or any Roosevelt
subsidiary from honoring any contractual obligation in existence on the
date of the Merger Agreement. Notwithstanding the provisions of clauses (A)
and (B) described above, Roosevelt will be authorized without first
consulting with MBI or obtaining MBI's prior written consent, to increase
the aggregate amount of any credit facilities theretofore established in
favor of any person or entity (each a "Pre-Existing Facility"), provided
that aggregate increases with respect to any Pre-Existing Facility will not
without MBI's prior written consent, which consent will not be unreasonably
withheld or delayed, be in excess of the lesser of 5% or such Pre-Existing
Facility or $25,000;
(viii) directly or indirectly (including through its officers,
directors, employees or other representatives), initiate, solicit or
encourage any discussions, inquiries or proposals with any third party
relating to the disposition of any significant portion of the business or
assets of Roosevelt or any Roosevelt subsidiary or the acquisition of
Equity Securities of Roosevelt or any Roosevelt subsidiary or the merger of
Roosevelt or any Roosevelt subsidiary with any person (other than MBI) or
any similar transaction (each such transaction being referred to as an
"Acquisition Transaction"), or provide any such person with information
or assistance or negotiate with any such person with respect to an
Acquisition Transaction, and Roosevelt will promptly notify MBI orally of
all the relevant details relating to all inquiries, indications of interest
and proposals which it may receive with respect to any Acquisition
Transaction;
(ix) take any action that would (A) materially impede or delay the
consummation of the transactions contemplated by the Merger Agreement or
the ability of MBI or Roosevelt to obtain any approval of any Regulatory
Authority required for the transactions contemplated by the Merger
Agreement or to perform its covenants and agreements under the Merger
Agreement or (B) prevent the Merger from qualifying as a reorganization
within the meaning of Section 368 of the Code;
(x) 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 or liable for
the obligations of any other individual, corporation or other entity, or,
pay without prior approval of MBI, which will not be unreasonably withheld,
any fees and expenses to attorneys, accountants or investment bankers in
connection with the Merger in excess of the amount set forth in the Merger
Agreement;
(xi) materially restructure or materially change its investment
securities portfolio, without prior written consent of MBI, which consent
will not be unreasonably withheld or delayed, through purchases, sales or
otherwise, or the manner in which the portfolio is classified or reported
or execute any individual investment transaction (A) in securities backed
by the full faith and credit of the United States or an agency thereof in
excess of $10,000,000 and (B) in any other investment securities in excess
of $1,000,000; or
(xii) agree in writing or otherwise to take any of the foregoing
actions or engage in any activity, enter into any transaction or take or
omit to take any other act which would make any of the representations and
warranties of Roosevelt in the Merger Agreement untrue or incorrect in any
material respect if made anew after engaging in such activity, entering
into such transaction, or taking or omitting such other act.
The Merger Agreement further provides that, from December 22, 1996 to the
Effective Time, except as provided in the Merger Agreement, MBI has agreed not
to, and to cause each of its subsidiaries not to, without the prior written
consent of Roosevelt:
(i) declare, set aside or pay any dividends or other distributions,
directly or indirectly, in respect of its capital stock (other than
dividends from any of the MBI subsidiaries to MBI or to another of the MBI
subsidiaries), except that MBI may pay its regular quarterly dividends in
amounts as it will determine from time to time;
(ii) take any action that would (A) materially impede or delay the
consummation of the transactions contemplated by the Merger Agreement or
the ability of Roosevelt or MBI to obtain any approval of any Regulatory
Authority required for the transactions contemplated by the Merger
Agreement or to perform its covenants and agreements under the Merger
Agreement or (B) prevent the Merger from qualifying as a reorganization
within the meaning of Section 368 of the Code; or
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<PAGE> 47
(iii) agree in writing or otherwise to take any of the foregoing
actions or engage in any activity, enter into any transaction or
intentionally take or omit to take any other action which would make any of
the representations and warranties in the Merger Agreement untrue or
incorrect in any material respect if made anew after engaging in such
activity, entering into such transaction, or taking or omitting such other
action.
WAIVER AND AMENDMENT
Any term, condition or provision of the Merger Agreement may be waived in
writing at any time by the party which is, or whose shareholders are, entitled
to the benefits thereof. The Merger Agreement may be amended by or on behalf of
the MBI Board and the Roosevelt at any time before or after Stockholder
Approval, by an instrument in writing signed on behalf of each party; provided
that after Stockholder Approval no such modification may alter or change the
amount or kind of consideration to be received by holders of Roosevelt Common
Stock in the Merger.
ACCOUNTING TREATMENT
The Merger will be accounted for under the purchase method of accounting.
Accordingly, data regarding the financial condition and results of operations
of Roosevelt will be included in MBI's consolidated financial statements on and
after the Closing Date. See "SUMMARY INFORMATION--Comparative Unaudited Per
Share Data" and "--Summary Financial Data" and "PRO FORMA FINANCIAL
INFORMATION."
MANAGEMENT AND OPERATIONS AFTER THE MERGER
General. Merger Sub, a wholly owned subsidiary of MBI, will be the
surviving corporation resulting from the Merger. Merger Sub will be governed by
the laws of the state of Missouri and will operate in accordance with the
articles of incorporation and by-laws of Merger Sub as in effect immediately
prior to the Merger, until otherwise amended or repealed after the Effective
Time.
Management. In connection with the proposed Merger, pursuant to an
employment agreement, which was executed and will become effective at the
Effective Time, Mr. Bradshaw will continue to serve as President and Chief
Executive Officer of Roosevelt Bank and, pending integration of Roosevelt Bank
with and into MBI's banking and/or other affiliates, will serve as head of
MBI's St. Louis-based mortgage banking operations. In addition, pursuant to the
employment agreement, Mr. Bradshaw will serve as a member of the Management
Executive Committee of MBI. Pursuant to employment agreements, which were
executed and will become effective at the Effective Time, Mrs. Bird and Mr.
Douglass will serve as Chief Operating Officer and Chief Financial Officer,
respectively, of Roosevelt Bank until Roosevelt Bank is merged with another
subsidiary of MBI, after which time each of them will serve in another senior
management position with MBI. See "--Interests of Certain Persons in the
Merger." In addition, as soon as practicable after consummation of the Merger,
MBI will nominate a current member of the Roosevelt Board to serve as a
director of the MBI Board for a three-year term expiring in 2000.
Operations after the Merger. Following the Merger and subject to necessary
preparations for systems integration, MBI intends to combine the operations
and, subject to required regulatory approvals, to merge subsidiary banks of MBI
and Roosevelt and to consolidate the operations of other subsidiaries of MBI
and Roosevelt that provide similar services. Receipt of such regulatory
approvals is not a condition to the Merger.
While no assurance can be given, MBI believes that, at current volumes,
approximately $39 million of potential pre-tax cost savings can be achieved on
an annualized basis by 1999. Cost savings are expected to be realized primarily
through the consolidation of certain offices and branches, staff functions and
data processing and other redundant back-office operations. MBI currently
estimates that approximately 50 branches will be closed in connection with the
proposed transaction, which closures would not be expected to occur until
mid-1998. The extent of which cost savings will be achieved is dependent upon
various factors beyond the control of MBI and Roosevelt, including the
regulatory environment, economic conditions, unanticipated changes in business
conditions and inflation. Therefore, no assurance can be given with respect to
the ultimate level or composition of cost savings to be realized, or that such
savings will be realized in the time-frame currently anticipated.
MBI also anticipates that in order to achieve the contemplated level of
savings within the desired time-frame, MBI and Roosevelt will incur one-time
Merger expenses, purchase accounting adjustments and/or restructuring charges
in connection with the Merger, estimated at the current time to be
approximately $38-$45 million (pre-tax) in
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the aggregate, principally as a result of expenses to be incurred in connection
with transaction costs and anticipated elimination of duplicate headquarters
and operational facilities. The one-time charge is expected to be recorded in
the third quarter of 1997. The exact level of the restructuring charge that
will be taken in connection with the Merger has not yet been determined and
could vary, potentially significantly, from the current estimate based upon a
further refinement of anticipated restructurings to occur following the Merger.
In addition, while no assurances can be given, in connection with the
proposed Mark Twain transaction, MBI believes that approximately $20 million
of potential pre-tax cost savings can be achieved on an annualized basis by
1999. MBI currently estimates that approximately 24 branches will be closed in
connection with the proposed transaction, which closures would be expected to
occur in the second and third quarters of 1997. MBI also anticipates that in
order to achieve the contemplated level of savings within the desired
time-frame, MBI will incur one-time merger expenses in connection with the
proposed transaction estimated currently to be approximately $40-$50 million
(pre-tax). The extent to which such cost savings will be achieved is dependent
upon various factors, a number of which are beyond the control of MBI,
including the regulatory environment, economic conditions, unanticipated
changes in business conditions and inflation, and no assurances can be given
with respect to the ultimate level and composition of cost savings to be
realized, or that such savings will be realized in the time-frame currently
anticipated.
In order to remain within the State of Missouri's limit on the percentage
of the State's deposits that may be controlled by one bank holding company, and
contingent upon successful consummation of the Merger, MBI intends to divest
Missouri State Bank at or following the Effective Time. On April 1, 1997, MBI
entered into a contract for the sale of Missouri State Bank to a third party.
Pursuant to such contract, the sale will be closed shortly after receipt of all
requisite regulatory approvals, but in any event no earlier than the Effective
Time. MBI also has entered into a trust agreement which provides for a trustee
to control Missouri State Bank following the Effective Time. Due to its lack of
materiality, the "Pro Forma Financial Information" does not reflect the sale
of Missouri State Bank.
At or following the Effective Time, MBI may merge or otherwise consolidate
legal entities to the extent desirable for regulatory or other reasons.
EMPLOYEE BENEFITS
Employee Benefits. Except as set forth in the Merger Agreement, the
Roosevelt Employee Plans (as defined and set forth in the Merger Agreement)
will not be terminated by reason of the Merger but will continue thereafter as
plans of the surviving corporation until such time as the employees of
Roosevelt and Roosevelt's subsidiaries are integrated into MBI's employee
benefit plans that are available to other employees of MBI and MBI's
subsidiaries, subject to the terms and conditions specified in such plans and
to such changes therein as may be necessary to reflect the consummation of the
Merger. MBI will take such steps as are necessary or required to integrate the
employees of Roosevelt and Roosevelt's subsidiaries into MBI's employee benefit
plans available to other employees of MBI and MBI's subsidiaries as soon as
practicable after the Effective Time, (i) with full credit for prior service
with Roosevelt or any of the Roosevelt subsidiaries for all purposes other than
determining the amount of benefit accruals under any defined benefit plan, (ii)
without any waiting periods, evidence of insurability, or application of any
pre-existing condition limitations, and (iii) with full credit for claims
arising prior to the Effective Time for purposes of deductibles, out-of-pocket
maximums, benefit maximums, and all other similar limitations for the
applicable plan year during which the Merger is consummated. Each of MBI and
Roosevelt will use all reasonable efforts to insure that no amounts paid or
payable by Roosevelt, Roosevelt subsidiaries or MBI to or with respect to any
employee or former employee of Roosevelt or any Roosevelt subsidiary will fail
to be deductible for federal income tax purposes by reason of Section 280G of
the Code. Roosevelt shall ensure that following the Effective Time no holder of
Roosevelt Stock Options or any participant in any Roosevelt Stock Plan shall
have any right thereunder to acquire any securities of Roosevelt or any
Roosevelt subsidiary.
Roosevelt Stock Options. At the Effective Time, all rights with respect to
Roosevelt Common Stock pursuant to Roosevelt Stock Options that are outstanding
at the Effective Time, whether or not then exercisable, will be converted into
and become rights with respect to MBI Common Stock, and MBI will assume each
Roosevelt Stock Option in accordance with the terms of the stock option plan
under which it was issued and the stock option agreement by which it is
evidenced. From and after the Effective Time, (i) each Roosevelt Stock Option
assumed by MBI will be exercisable solely for shares of MBI Common Stock, (ii)
the number of shares of MBI Common Stock subject to each Roosevelt Stock Option
will be equal to the number of shares of Roosevelt Common Stock subject to
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<PAGE> 49
such Roosevelt Stock Option immediately prior to the Effective Time multiplied
by the Exchange Ratio and (iii) the per share exercise price under each
Roosevelt Stock Option will be adjusted by dividing the per share exercise
price under such Roosevelt Stock Option by the Exchange Ratio and rounding down
to the nearest cent; provided, however, that the terms of each Roosevelt Stock
Option will, in accordance with its terms, be subject to further adjustment as
appropriate to reflect any stock split, stock dividend, recapitalization or
other similar transaction subsequent to the Effective Time. It is intended that
the foregoing assumption of stock options will be undertaken in a manner that
will not constitute a "modification" (as defined in the Code) as to any
Roosevelt Stock Option that is an "incentive stock option" (as defined in the
Code).
The holder of a Roosevelt Stock Option which is converted into an option
with respect to MBI Common Stock will not recognize gain or loss solely as a
result of such conversion. Certain tax consequences will arise, however, upon
the exercise of any such option that is a nonqualified stock option or the sale
or disposition of the shares acquired by exercise of any such option that is an
incentive stock option. See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE
MERGER."
Certain executive officers of Roosevelt, including certain executive
officers who are directors, currently hold Roosevelt Stock Options which will
be converted into rights with respect to MBI Common Stock as described above.
See "--Interests of Certain Persons in the Merger."
Indemnification and Insurance. Under the Merger Agreement, MBI agreed to
(i) indemnify and hold harmless the past and present employees, agents,
directors or officers of Roosevelt or its subsidiaries for all acts or
omissions occurring at or prior to the Effective Time to the same extent such
persons are indemnified and held harmless by Roosevelt as of the date of the
Merger Agreement (whether by operation of Roosevelt's or one of its
subsidiaries' articles of incorporation, corporate resolution, contract or
similar agreement, or by operation of law), and (ii) assume the obligations of
Roosevelt with respect to directors and officers insurance under its prior
acquisition agreements, which obligations are set forth in the Merger
Agreement. In addition, MBI agreed under the Merger Agreement to provide, for a
period of not less than six years after the Effective Time, an insurance and
indemnification policy that provides the officers and directors of Roosevelt
and its subsidiaries in office immediately prior to the Effective Time coverage
no less favorable than the coverage provided by MBI to MBI's directors and
officers as of the date of the Merger Agreement.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following discussion summarizes the material federal income tax
consequences of the Merger. The discussion does not address all aspects of
federal taxation that may be relevant to particular Roosevelt stockholders, and
it may not be applicable to Roosevelt stockholders who, for federal income tax
purposes, are nonresident alien individuals, foreign corporations, foreign
partnerships, foreign trusts or foreign estates, or who acquired their
Roosevelt Common Stock pursuant to the exercise of employee stock options or
otherwise as compensation. The discussion does not address the effect of any
applicable state, local or foreign tax laws or any federal tax laws other than
those pertaining to the income tax. EACH ROOSEVELT STOCKHOLDER SHOULD CONSULT
SUCH STOCKHOLDER'S OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO
SUCH STOCKHOLDER OF THE MERGER.
This discussion is based on the Code, regulations and rulings now in effect
or proposed thereunder, current administrative rulings and practice, and
judicial precedent, all of which are subject to change. Any such change, which
may or may not be retroactive, could alter the tax consequences to Roosevelt
stockholders discussed herein. This discussion is also based on certain
assumptions regarding the factual circumstances that will exist at the
Effective Time, including certain representations made or to be made by MBI,
Roosevelt and others. This discussion assumes that Roosevelt stockholders hold
their Roosevelt Common Stock as a capital asset within the meaning of Section
1221 of the Code.
MBI has received an opinion from Wachtell, Lipton, Rosen & Katz, special
counsel to MBI, and Roosevelt has received an opinion from Silver, Freedman &
Taff, L.L.P., special counsel to Roosevelt, that, assuming the Merger occurs in
accordance with the Merger Agreement, and conditioned on the accuracy of
certain representations made by MBI, Roosevelt and others, the Merger will
constitute a "reorganization" within the meaning of Section 368 of the Code,
and no gain or loss will be recognized by the stockholders of Roosevelt to the
extent they receive solely MBI Common Stock in exchange for shares of Roosevelt
Common Stock. Accordingly, the material federal income tax consequences
expected to result from the Merger, under currently applicable law, are as
follows:
(i) The Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code.
(ii) No gain or loss will be recognized by Roosevelt or MBI as a result
of the Merger under Section 361(a) of the Code.
(iii) Roosevelt stockholders who receive solely shares of MBI Common
Stock in exchange for their Roosevelt Common Stock pursuant to the Merger
will recognize no gain or loss, except with respect to cash received in
lieu of fractional shares, if any, as discussed below.
(iv) A Roosevelt stockholder who receives only cash (A) in exchange for
shares of Roosevelt Common Stock pursuant to the Merger or (B) as a result
of the exercise of appraisal rights, will realize gain or loss for federal
income tax purposes in an amount equal to the difference between (1) the
amount of cash received by such stockholder, and (2) such stockholder's tax
basis for the shares of Roosevelt Common Stock surrendered in exchange
therefor. Any such gain or loss will be recognized for federal income tax
purposes and will be treated as capital gain or loss.
(v) A Roosevelt stockholder who receives shares of MBI Common Stock and
cash in exchange for shares of Roosevelt Common Stock in the Merger will
realize gain (determined separately as to each block of Roosevelt Common
Stock exchanged) if the sum of the amount of cash and the fair market value
of the shares of MBI Common Stock received by such stockholder exceeds such
stockholder's tax basis for the shares of Roosevelt Common Stock
surrendered in exchange therefor. The amount of such gain that is
recognized for federal income tax purposes will be limited to the amount of
cash received. If the amount of cash received exceeds the amount of gain
realized, only the amount of gain realized will be recognized for federal
income tax purposes. Any such gain recognized will be taxable as capital
gain, provided that the cash payment does not have the effect of the
distribution of a dividend. Any loss realized will not be recognized for
federal income tax purposes. Under Section 356 of the Code, the
determination of whether a cash payment has the effect of the distribution
of a dividend generally will be made in accordance with the provisions and
limitations of Section 302 of the Code, taking into account the
constructive stock ownership rules of Section 318 of the Code. See
"--Impact of Section 302 of the Code," below.
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(vi) The aggregate adjusted tax basis of the shares of MBI Common Stock
received by each Roosevelt stockholder in the Merger (including any
fractional share of MBI Common Stock deemed to be received, as described in
paragraph (viii) below), will be equal to the aggregate adjusted tax basis
of the shares of Roosevelt Common Stock surrendered therefor, decreased by
the amount of any cash received and increased by the amount of any gain (or
dividend) recognized.
(vii) The holding period of the shares of MBI Common Stock (including
any fractional share of MBI Common Stock deemed to be received, as
described in paragraph (viii) below) will include the holding period of the
shares of Roosevelt Common Stock exchanged therefor.
(viii) A Roosevelt stockholder who receives cash in the Merger in lieu
of a fractional share of MBI Common Stock will be treated as if the
fractional share had been received in the Merger and then redeemed by MBI
in return for the cash. The receipt of such cash will cause the recipient
to recognize capital gain or loss equal to the difference between the
amount of cash received and the portion of such holder's adjusted tax basis
in the shares of MBI Common Stock allocable to the fractional share.
IMPACT OF SECTION 302 OF THE CODE
A Roosevelt stockholder who receives only cash in exchange for its
Roosevelt Common Stock or a Roosevelt stockholder who receives a combination of
stock and cash (other than with respect to a fractional share) will receive
capital gains or dividend treatment based upon the tests defined below under
Section 302 of the Code.
The determination of whether a cash payment has the effect of the
distribution of a dividend generally will be made in accordance with the
provisions of Section 302 of the Code. A cash payment to a Roosevelt
stockholder will be considered not to have the effect of the distribution of a
dividend under Section 302 of the Code and such stockholder will recognize
capital gain or loss only if the cash payment (i) results in a "complete
redemption" of such stockholder's actual and constructive stock interest, (ii)
results in a "substantially disproportionate" reduction in such stockholder's
actual and constructive stock interest or (iii) is "not essentially equivalent
to a dividend."
A cash payment will result in a "complete redemption" of a stockholder's
stock interest and such stockholder will recognize capital gain or loss if such
stockholder does not actually or constructively own any stock after the receipt
of the cash payment. A reduction in a stockholder's stock interest will be
"substantially disproportionate" and such stockholder will recognize capital
gain or loss if (i) the percentage of outstanding shares actually and
constructively owned by such stockholder after the receipt of the cash payment
is less than four-fifths (80%) of the percentage of outstanding shares actually
and constructively owned by such stockholder immediately prior to the receipt
of the cash payment. A cash payment will qualify as "not essentially
equivalent to a dividend" and a stockholder will recognize capital gain or
loss if it results in a meaningful reduction in the percentage of outstanding
shares actually and constructively owned by such stockholder. No specific tests
apply to determine whether a reduction in a stockholder's ownership interest is
meaningful; rather, such determination will be made based on all the facts and
circumstances applicable to such Roosevelt stockholder. No general guidelines
dictating the appropriate interpretation of facts and circumstances have been
announced by the courts or issued by the Internal Revenue Service (the
"Service"). However, the Service has indicated in Revenue Ruling 76-385 that
a minority stockholder (i.e., a holder who exercises no control over corporate
affairs and whose proportionate stock interest is minimal in relation to the
number of shares outstanding) generally is treated as having had a "meaningful
reduction" in interest if a cash payment reduces such holder's actual and
constructive stock ownership to any extent.
With regard to Roosevelt stockholders who receive MBI Common Stock and cash
in the Merger, the determination of whether a cash payment has the effect of a
distribution of a dividend will be made as if the Roosevelt Common Stock
exchanged for cash in the Merger had instead been exchanged in the Merger for
shares of MBI Common Stock followed immediately by a redemption of such shares
by MBI for the cash payment (a "deemed MBI redemption"). Under this analysis,
the determination of whether a cash payment qualifies as a substantially
disproportionate reduction of interest or is not essentially equivalent to a
dividend will be made by comparing (i) the stockholder's actual and
constructive stock interest in MBI before the deemed MBI redemption (determined
as if such stockholder had received solely MBI Common Stock in the Merger) with
(ii) such stockholder's actual and constructive stock interest in MBI after the
deemed MBI redemption.
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The determination of ownership for purposes of the three foregoing tests
will be made by taking into account both shares owned actually by such
stockholder and shares owned constructively by such stockholder pursuant to
Section 318 of the Code. Under Section 318 of the Code, a stockholder will be
deemed to own stock that is actually or constructively owned by certain members
of his or her family (spouse, children, grandchildren and parents) and other
related parties including, for example, certain entities in which such
stockholder has a direct or indirect interest (including partnerships, estates,
trusts and corporations), as well as shares of stock that such stockholder (or
a related person) has the right to acquire upon exercise of an option or
conversion right.
BECAUSE THE DETERMINATION OF WHETHER A PAYMENT WILL BE TREATED AS HAVING
THE EFFECT OF THE DISTRIBUTION OF A DIVIDEND WILL GENERALLY DEPEND UPON THE
FACTS AND CIRCUMSTANCES OF EACH ROOSEVELT STOCKHOLDER, ROOSEVELT STOCKHOLDERS
ARE STRONGLY ADVISED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE TAX
TREATMENT OF CASH RECEIVED IN THE MERGER.
THE FOREGOING IS A GENERAL DISCUSSION OF THE MATERIAL FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER AND IS INCLUDED FOR GENERAL INFORMATION ONLY. THE
FOREGOING DISCUSSION DOES NOT TAKE INTO ACCOUNT THE PARTICULAR FACTS AND
CIRCUMSTANCES OF EACH STOCKHOLDER'S TAX STATUS AND ATTRIBUTES. AS A RESULT, THE
FEDERAL INCOME TAX CONSEQUENCES ADDRESSED IN THE FOREGOING DISCUSSION MAY NOT
APPLY TO EACH STOCKHOLDER. IN VIEW OF THE INDIVIDUAL NATURE OF INCOME TAX
CONSEQUENCES, EACH STOCKHOLDER IS URGED TO CONSULT SUCH STOCKHOLDER'S OWN TAX
ADVISOR TO DETERMINE THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO SUCH
STOCKHOLDER, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND
OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL AND OTHER TAX
LAWS.
APPRAISAL RIGHTS OF STOCKHOLDERS OF ROOSEVELT
Each stockholder of Roosevelt has the right to demand the appraised value
of his or her shares of Roosevelt Common Stock in cash if the stockholder
follows the procedures set forth under Section 262 of the Delaware Law, a copy
of which is attached hereto as Annex C.
Under the Delaware Law, a stockholder of Roosevelt may demand an appraisal
of the fair value (as determined pursuant to Section 262 of the Delaware Law)
of his or her shares of Roosevelt Common Stock and payment of such fair value
to the stockholder in cash if the Merger is consummated. Merger Sub, as the
surviving corporation, will pay to such stockholder the fair value of such
stockholder's shares of Roosevelt Common Stock if such Roosevelt stockholder
(a) files with Roosevelt, prior to the vote at the Annual Meeting, a written
demand for an appraisal of the fair value of his or her shares; (b) does not
vote in favor of the Merger; (c) continues to hold his or her shares through
the Effective Time; and (d) does not withdraw the demand for appraisal within a
period of 60 days after the Closing Date. Such demand shall be sufficient if it
reasonably informs Roosevelt of the identity of the stockholder and that the
stockholder intends thereby to demand an appraisal of his or her shares. A VOTE
AGAINST THE APPROVAL OF THE MERGER AGREEMENT WILL NOT, BY ITSELF, BE REGARDED
AS A WRITTEN OBJECTION FOR PURPOSES OF ASSERTING APPRAISAL RIGHTS. A VOTE IN
FAVOR OF THE APPROVAL OF THE MERGER AGREEMENT WILL CONSTITUTE A WAIVER OF A
STOCKHOLDER'S APPRAISAL RIGHTS.
All written demands for appraisal should be addressed to and must be
received by: Mark G. Ellebrecht, Vice President, General Counsel and Secretary,
Roosevelt Financial Group, Inc., 900 Roosevelt Parkway, Chesterfield, Missouri
63017, before the taking of the vote concerning the Merger Agreement at the
Annual Meeting, and should be executed by, or on behalf of, the holder of
record.
To be effective, a demand for appraisal must be executed by or for the
stockholder of record who held such shares on the date of making such demand,
and who continuously holds such shares through the Effective Time, fully and
correctly, as such stockholder's name appears on his or her stock
certificate(s) and cannot be made by the beneficial owner if he or she does not
also hold the shares of record. The beneficial holder must, in such case, have
the registered owner submit the required demand in respect of such shares.
42
<PAGE> 53
If Roosevelt Common Stock is owned of record in a fiduciary capacity, as by
a trustee, guardian or custodian, execution of a demand for appraisal should be
made in such capacity. If Roosevelt Common Stock is owned of record by more
than one person, as in a joint tenancy or tenancy in common, such demand must
be executed by or for all joint owners. An authorized agent, including one of
two or more joint owners may execute the demand for appraisal for a stockholder
of record; however, the agent must identify the record owner or owners and
expressly disclose the fact that, in executing the demand, he or she is acting
as agent for the record owner. A record owner such as a broker, who holds
Roosevelt Common Stock as nominee for others may exercise his or her right of
appraisal with respect to the shares held for one or more beneficial owners,
while not exercising such right for other beneficial owners. In such case, the
written demand should set forth the number of shares as to which the record
owner dissents. Where no number of shares is expressly mentioned, the demand
will be presumed to cover all shares of Roosevelt Common Stock in the name of
such record owner.
If at any time within the 60-day period after the Effective Time, a
stockholder of Roosevelt withdraws his or her demand for appraisal, then he or
she will be deemed to have accepted the terms offered pursuant to the Merger.
After the 60-day withdrawal period, a Roosevelt stockholder may withdraw only
with the consent of Merger Sub and the approval of the Delaware Court of
Chancery. Within 10 days after the Effective Time, Merger Sub (as the surviving
corporation in the Merger) must give written notice that the Merger has become
effective to each stockholder who so filed a written demand for appraisal and
who did not vote in favor of the Merger Agreement. Within 120 days after the
Effective Time, any stockholder of Roosevelt who has validly perfected
appraisal rights shall be entitled, upon written request, to receive from
Merger Sub a statement setting forth the aggregate number of shares of
Roosevelt Common Stock not voted in favor of the Merger with respect to which
demands for appraisal have been received and the aggregate number of holders of
such shares. Merger Sub shall respond to such request within 10 days after
receipt or within 10 days after the date of the Annual Meeting, whichever is
later. Within 120 days after the Effective Time, Merger Sub or any such
stockholder seeking appraisal may file a petition in the Delaware Court of
Chancery demanding a determination of the value of the Roosevelt Common Stock
held by all stockholders seeking appraisal. The Delaware Law contemplates a
single proceeding in the Delaware Court of Chancery that will apply to all
stockholders of Roosevelt who have perfected their appraisal rights, whether or
not such stockholders have individually filed a petition seeking appraisal with
the Court of Chancery. If neither Merger Sub nor any of the stockholders of
Roosevelt who have perfected their appraisal rights have filed a petition in
the Court of Chancery within the 120-day period following the Effective Time,
such appraisal rights will be waived, and the stockholders will be entitled to
receive, upon surrender of the certificates evidencing their shares of
Roosevelt Common Stock, the amount of cash equal to that paid to the Cash
Election Shares in the Merger (i.e., $22.00 per share of Roosevelt Common
Stock), subject to the adjustments as provided in the Merger Agreement. Merger
Sub has no present intention to file such a petition with the Delaware Court of
Chancery.
If a petition for appraisal is filed by a stockholder, a copy of the
petition shall be served on Merger Sub, which then will have 20 days after such
service to file with the Register of the Delaware Court of Chancery (the
"Register") a verified list of Roosevelt stockholders who have perfected
appraisal rights but have not yet reached agreement as to value with Merger
Sub. If the petition is filed by Merger Sub, such verified list must accompany
the filing. The Register, if so ordered by the Court, will give notice of the
time and place fixed for hearing of the petition, by registered or certified
mail, to Merger Sub and each stockholder named on the verified list. Such
notice shall also be published at least one week prior to the hearing in one or
more newspapers of general circulation in Wilmington, Delaware and in such
other publications as directed by the Court.
The Court of Chancery shall conduct a hearing on the petition for appraisal
at which the Court will determine the stockholders of Roosevelt who have
properly perfected appraisal rights with respect to their shares and may
require such stockholders to submit the certificates evidencing their Roosevelt
Common Stock to the Register for notation of the pendency of the appraisal
proceeding thereon. Failure to comply with such direction may result in
dismissal of the proceeding as to such non-complying stockholder. After
determining the stockholders entitled to appraisal, the Court of Chancery,
after taking into account all relevant factors, will appraise the shares,
determining their fair value exclusive of any element of value arising from the
accomplishment or expectation of the Merger, together with a fair rate of
interest, if any, to be paid upon the amount determined to be the fair value.
Upon application of either Merger Sub or any of the stockholders entitled to
appraisal, the Court may permit discovery or other pretrial proceedings and may
proceed to trial prior to a final determination of the stockholders entitled to
appraisal. Any stockholder whose name appears on the verified list submitted by
Merger Sub may participate in the appraisal proceedings until it is
43
<PAGE> 54
finally determined by the Court that such stockholder is not entitled to
appraisal rights. The judgment shall be payable only upon and simultaneously
with the surrender to Merger Sub of the certificate(s) representing such shares
of Roosevelt Common Stock. Upon payment of the judgment, the stockholder who
sought appraisal shall cease to have any interest in such shares or in
Roosevelt and will have no right to receive dividends in such stock or exercise
other rights of stock ownership.
Section 262 provides fair value is to be "exclusive of any element of
value arising from the accomplishment or expectation of the merger." The
Delaware Supreme Court has construed Section 262 to mean that "elements of
future value, including the nature of the enterprise, which are known or
susceptible of proof as of the date of the merger and are not the product of
speculation, may be considered." Stockholders who are considering seeking an
appraisal should bear in mind that the fair value of their shares of Roosevelt
Common Stock determined under Section 262 could be more than, the same as or
less than the consideration they are to receive pursuant to the Merger
Agreement if they do not seek appraisal of their shares of Roosevelt Common
Stock, and that an opinion of an investment banking firm as to fairness is not
an opinion as to fair value under Section 262.
Costs of the appraisal proceeding may be assessed against the parties
thereto (i.e., Merger Sub and the stockholders participating in the appraisal
proceeding) by the court as the court deems equitable in the circumstances.
Upon the application of any stockholder, the court may determine the amount of
interest, if any, to be paid upon the value of the stock of stockholders
entitled thereto. Upon application of a stockholder, the court may order all or
a portion of the expenses incurred by any stockholder in connection with the
appraisal proceeding, including, without limitation, reasonable attorneys' fees
and the fees and expenses of experts, to be charged pro rata against the value
of all shares entitled to appraisal. Any stockholder who has demanded appraisal
rights will not, after the Effective Time, be entitled to vote the stock
subject to such demand for any purpose or to receive payment of dividends or
any other distribution with respect to such shares (other than dividends or
distributions, if any, payable to holders of record as of a record date prior
to the Effective Time) or to receive the payment of the consideration provided
for in the Merger Agreement. However, if no petition for an appraisal is filed
within 120 days after the Effective Time or if such stockholder delivers to
Merger Sub a written withdrawal of his demand for an appraisal and an
acceptance of the Merger, either within 60 days after the Effective Time or
thereafter with the written approval of Merger Sub, then the right of such
stockholder to an appraisal will cease. Notwithstanding the foregoing, no
appraisal proceeding in the Court of Chancery will be dismissed as to any
stockholder without the approval of the court, and such approval may be
conditioned upon such terms as the court deems just.
FAILURE TO COMPLY STRICTLY WITH THESE PROCEDURES WILL CAUSE THE STOCKHOLDER
TO LOSE HIS OR HER APPRAISAL RIGHTS. CONSEQUENTLY, ANY STOCKHOLDER WHO DESIRES
TO EXERCISE HIS OR HER APPRAISAL RIGHTS IS URGED TO CONSULT A LEGAL ADVISOR
BEFORE ATTEMPTING TO EXERCISE SUCH RIGHTS.
THE PRECEDING DISCUSSION IS A SUMMARY OF THE PROVISIONS REGARDING APPRAISAL
RIGHTS UNDER THE DELAWARE LAW AND IS QUALIFIED IN ITS ENTIRETY BY THE TEXT OF
SECTION 262 OF THE DELAWARE LAW WHICH IS ATTACHED HERETO AS ANNEX C.
ROOSEVELT STOCKHOLDERS WHO ARE INTERESTED IN PERFECTING APPRAISAL RIGHTS
PURSUANT TO THE DELAWARE LAW IN CONNECTION WITH THE MERGER SHOULD CONSULT WITH
THEIR COUNSEL FOR ADVICE AS TO THE PROCEDURES REQUIRED TO BE FOLLOWED.
44
<PAGE> 55
PRO FORMA FINANCIAL INFORMATION
COMPARATIVE UNAUDITED PER SHARE DATA
The following table sets forth for the periods indicated selected
historical per share data of MBI and Roosevelt and the corresponding pro forma
and pro forma equivalent per share amounts giving effect to the proposed Merger
and the Other Acquisitions. The data presented is based upon the consolidated
financial statements and related notes of MBI and the consolidated financial
statements and related notes of Roosevelt, Mark Twain and Regional included in
this Proxy Statement/Prospectus or in documents prepared by the respective
companies and provided to MBI, and the pro forma combined consolidated balance
sheet and income statements, including the notes thereto, appearing elsewhere
herein. This information should be read in conjunction with such historical and
pro forma financial statements and related notes thereto. The assumptions used
in the preparation of this table appear in the notes to the pro forma financial
information appearing elsewhere in the Proxy Statement/Prospectus. See "--Pro
Forma Combined Consolidated Financial Statements (Unaudited)." This data is not
necessarily indicative of the results of the future operations of the combined
organization or the actual results that would have occurred if the Merger or
the Other Acquisitions had been consummated prior to the periods indicated.
<TABLE>
<CAPTION>
MBI/ALL ENTITIES MBI/ALL ENTITIES
MBI ROOSEVELT PRO FORMA PRO FORMA
REPORTED REPORTED COMBINED<F3> EQUIVALENT<F2>
-------- --------- ---------------- ----------------
<S> <C> <C> <C> <C>
Book Value per Common Share:
March 31, 1997<F1><F4>............................. $24.76 $ 9.91 $25.95 $10.93
December 31, 1996<F1><F4>.......................... 25.11 10.15 26.26 11.06
Cash Dividends Declared per Common Share:
Three months ended March 31, 1997.................. $ .43 $ 0.17 $ .43 $ .18
Year ended December 31, 1996....................... 1.64 0.62 1.64 .69
Earnings Before Extraordinary Items per Common Share:
Three months ended March 31, 1997.................. $ .98 $ 0.49 $ .95 $ .40
Year ended December 31, 1996....................... 3.17 0.16 2.13 .90
Market Price per Common Share:
December 20, 1996<F5>.............................. $50.750 $18.125 $50.750 $21.371<F6>
May 15, 1997<F5>................................... 59.250 23.250 59.250 24.950<F6>
<FN>
- ---------
<F1> Includes the effect of pro forma adjustments for Roosevelt as appropriate.
<F2> Based upon the pro forma combined per share amounts multiplied by .4211,
the Exchange Ratio applicable to one share of Roosevelt Common Stock.
<F3> Includes the effect of pro forma adjustments for Roosevelt and the Other
Acquisitions.
<F4> Based upon the following number of shares outstanding:
<CAPTION>
AS OF AS OF
MARCH 31, 1997 DECEMBER 31, 1996
-------------- -----------------
<S> <C> <C>
Shares of MBI Common Stock, as
reported........................... 76,015,444 77,486,469
Aggregate number of shares of MBI
Common Stock to be issued in the
Merger, net of treasury shares..... 6,000,000 6,000,000
---------- ----------
MBI/All Entities Pro Forma
Combined........................... 82,015,444 83,486,469
========== ==========
<FN>
<F5> The market values of MBI Common Stock and Roosevelt Common Stock were
determined as of the last trading day preceding the public announcement of
the Merger and as of the most recent practicable date prior to the mailing
of this Proxy Statement/Prospectus based on the last sales price as
reported on the NYSE Composite Tape or NASDAQ.
<F6> This amount represents MBI's Market Price per Common Share multiplied by
the Exchange Ratio applicable to one share of Roosevelt Common Stock.
</TABLE>
45
<PAGE> 56
PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MBI has completed or announced a number of acquisitions during the years
covered by the pro forma financial statements that follow. Set forth below is a
table which summarizes the completed and pending acquisitions, including the
name of the acquired entity, the date or expected date of consummation of the
acquisition, the assets and deposits of the acquired entities at the date of
consummation for the completed acquisitions and as of December 31, 1996 for the
pending acquisitions, the consideration paid or to be paid in cash and shares
of MBI stock and the accounting method utilized.
<TABLE>
<CAPTION>
CONSIDERATION
-------------------
GROSS ACCOUNTING
DATE ASSETS DEPOSITS CASH SHARES METHOD
---- ------ -------- ---- ------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ACQUISITIONS COMPLETED BY MBI
Regional Bancshares, Inc................ Mar. 5, 1997 $ 171,979 $ 135,954 $12,300 600,417 Purchase
TODAY'S Bancorp, Inc.................... Nov. 7, 1996 501,418 432,104 34,912 1,127,058 Purchase
First Financial Corporation of America.. Nov. 1, 1996 87,649 76,791 3,253 258,742 Purchase
Peoples State Bank...................... Aug. 22, 1996 95,657 75,149 -- 325,837 Purchase
Metro Savings Bank, F.S.B............... Mar. 7, 1996 80,857 73,843 5 197,902 Purchase
Security Bank of Conway, F.S.B.......... Feb. 9, 1996 102,502 89,697 1 321,964 Purchase
Hawkeye Bancorporation.................. Jan. 2, 1996 1,978,540 1,739,811 80 7,892,196 Pooling
First Sterling Bancorp, Inc............. Jan. 2, 1996 167,610 147,588 1 521,417 Pooling<F1>
Southwest Bancshares, Inc............... Aug. 1, 1995 187,701 155,628 1 674,975 Pooling<F1>
AmeriFirst Bancorporation, Inc.......... Aug. 1, 1995 155,521 130,179 1 661,356 Pooling<F1>
Plains Spirit Financial Corporation..... July 7, 1995 400,754 276,887 6,697 1,301,180 Purchase
TCBankshares, Inc....................... May 1, 1995 1,422,798 1,217,740 -- 4,749,999<F2> Pooling
Central Mortgage Bancshares, Inc........ May 1, 1995 654,584 571,105 8 2,537,723 Pooling
UNSL Financial Corp..................... Jan. 3, 1995 508,346 380,716 11 1,578,107 Pooling
Wedge Bank.............................. Jan. 3, 1995 195,716 152,865 1 969,954 Pooling<F1>
ACQUISITIONS PENDING AT MARCH 31, 1997
Mark Twain Bancshares, Inc.............. Apr. 25, 1997 3,227,972 2,519,474 73 16,059,142 Pooling
Roosevelt Financial Group, Inc.......... 3rd Qtr. 1997 7,508,309 5,306,723 --<F3> --<F3> Purchase
<FN>
- ---------
<F1> The historical financial statements of MBI were not restated for the
acquisition due to the immateriality of the acquiree's financial condition
and results of operations to those of MBI.
<F2> In addition to MBI Common Stock issued, MBI assumed, through an exchange,
the outstanding, non-convertible preferred stock of TCBankshares, Inc.
Such preferred stock was redeemed in the first quarter of 1996.
<F3> MBI will deliver up to 13,042,110 shares of MBI Common Stock at the
Exchange Ratio, or $22.00 in cash, for each share of Roosevelt Common
Stock.
</TABLE>
The following unaudited pro forma combined consolidated balance sheet gives
effect to the proposed Merger as if it were consummated on March 31, 1997.
The following pro forma unaudited combined consolidated income statements
for the year ended December 31, 1996 and for the three-month periods ended
March 31, 1997 and 1996 set forth the results of operations of MBI combined
with the results of operations of Roosevelt as if the proposed Merger had
occurred as of January 1, 1996.
The unaudited pro forma combined consolidated financial statements should
be read in conjunction with the accompanying Notes to the Pro Forma Combined
Consolidated Financial Statements (Unaudited) and with the historical financial
statements of MBI and Roosevelt. These pro forma combined consolidated
financial statements may not be indicative of the results of operations that
actually would have occurred if the proposed acquisitions had been consummated
on the dates assumed above or of the results of operations that may be achieved
in the future.
46
<PAGE> 57
<TABLE>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
MARCH 31, 1997
(THOUSANDS)
(UNAUDITED)
<CAPTION>
ROOSEVELT/ PRO FORMA
MARK TWAIN COMBINED
MBI<F1> ROOSEVELT ADJUSTMENTS <F2> CONSOLIDATED
----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks....................... $ 941,549 $ 41,875 $(355,250) <F3> $ 627,524
(50,000) <F4>
(412,250) <F5>
500,000 <F7>
(38,400) <F9>
Due from banks - interest bearing............. 112,905 1,150 114,055
Federal funds sold and repurchase
agreements.................................. 200,011 0 200,011
Investments in debt and equity securities.....
Trading................................... 65,934 0 65,934
Available-for-sale........................ 4,246,090 2,908,027 7,154,117
Held-to-maturity.......................... 534,994 0 534,994
----------- ---------- --------- -----------
Total Investments in Debt and Equity
Securities.......................... 4,847,018 2,908,027 0 7,755,045
Loans and leases.............................. 15,212,683 4,310,014 19,522,697
Reserve for possible loan losses.............. (231,496) (21,603) (2,500) <F9> (255,599)
----------- ---------- --------- -----------
Net Loans and Leases...................... 14,981,187 4,288,411 (2,500) 19,267,098
Other assets.................................. 995,631 268,846 469,558 <F5> 1,866,919
602,442 <F5>, <F10>
(469,558) <F6>
----------- ---------- --------- -----------
Total Assets..................... $22,078,301 $7,508,309 $ 244,042 $29,830,652
=========== ========== ========= ===========
LIABILITIES
Deposits
Non-interest bearing...................... $ 2,896,268 $ 0 $ 2,896,268
Interest bearing.......................... 14,180,186 5,306,723 19,486,909
Foreign................................... 277,560 0 0 277,560
----------- ---------- --------- -----------
Total Deposits........................ 17,354,014 5,306,723 0 22,660,737
Federal funds purchased and repurchase
agreements.................................. 1,675,864 2,076 1,677,940
Other short term borrowings................... 197,905 1,210,000 1,407,905
Bank notes.................................... 175,000 0 175,000
Long term debt................................ 451,982 374,000 500,000 <F7> 1,325,982
Other liabilities............................. 341,616 145,952 (18,000) <F4> 454,844
(14,724) <F9>
----------- ---------- --------- -----------
Total Liabilities..................... 20,196,381 7,038,751 467,276 27,702,408
SHAREHOLDERS' EQUITY
Preferred stock............................... 0 13 (13) <F6> 0
Common stock.................................. 396,963 442 30,000 <F5> 426,963
(442) <F6>
Capital surplus............................... 233,384 294,481 274,500 <F5> 507,884
(294,481) <F6>
Retained earnings............................. 1,432,824 207,174 (32,000) <F4> 1,374,648
(207,174) <F6>
(26,176) <F9>
Treasury stock................................ (181,251) (32,552) (355,250) <F3> (181,251)
355,250 <F5>
32,552 <F6>
----------- ---------- --------- -----------
Total Shareholders' Equity............ 1,881,920 469,558 (223,234) 2,128,244
----------- ---------- --------- -----------
Total Liabilities and Shareholders'
Equity.............................. $22,078,301 $7,508,309 $ 244,042 $29,830,652
=========== ========== ========= ===========
See notes to pro forma combined consolidated financial statements.
</TABLE>
47
<PAGE> 58
<TABLE>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED INCOME STATEMENT
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<CAPTION>
PRO FORMA
ROOSEVELT COMBINED
MBI<F1> ROOSEVELT ADJUSTMENTS <F2> CONSOLIDATED
---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Interest Income................................... $ 398,462 $ 140,012 $ (1,469) <F11> $ 534,406
(2,599) <F12>
Interest Expense.................................. 186,501 90,590 8,438 <F7> 286,342
813 <F8>
---------- ---------- --------- ----------
Net Interest Income........................... 211,961 49,422 (13,319) 248,064
Provision for Possible Loan Losses................ 18,443 640 19,083
---------- ---------- --------- ----------
Net Interest Income after Provision for
Possible Loan Losses........................ 193,518 48,782 (13,319) 228,981
Other Income
Trust......................................... 22,801 0 22,801
Service charges............................... 22,798 5,979 28,777
Credit card fees.............................. 5,399 0 5,399
Net gain from financial instruments........... 0 392 392
Securities gains.............................. 1,049 0 1,049
Other......................................... 36,053 5,981 42,034
---------- ---------- --------- ----------
Total Other Income........................ 88,100 12,352 0 100,452
Other Expense
Salaries and employee benefits................ 97,722 11,160 108,882
Net occupancy and equipment................... 26,528 4,811 31,339
Other......................................... 41,345 9,467 10,041 <F10> 60,853
---------- ---------- --------- ----------
Total Other Expense....................... 165,595 25,438 10,041 201,074
---------- ---------- --------- ----------
Income Before Income Taxes................ 116,023 35,696 (23,360) 128,359
Income Taxes...................................... 41,028 13,605 (4,795) <F2> 49,838
---------- ---------- --------- ----------
Net Income.................................... $ 74,995 $ 22,091 $ (18,565) $ 78,521
========== ========== ========= ==========
Per Share Data
Average Common Shares Outstanding............. 76,574,752 43,395,534 82,574,752 <F14>
Net Income.................................... $0.98 $0.49 $0.95
See notes to pro forma combined consolidated financial statements.
</TABLE>
48
<PAGE> 59
<TABLE>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED INCOME STATEMENT
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<CAPTION>
PRO FORMA
ROOSEVELT COMBINED
MBI ROOSEVELT ADJUSTMENTS <F2> CONSOLIDATED
---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Interest Income................................... $ 381,923 $ 166,143 $ (1,469) <F11> $ 543,998
(2,599) <F12>
Interest Expense.................................. 181,385 119,769 8,438 <F7> 312,030
2,438 <F8>
---------- ---------- --------- ----------
Net Interest Income........................... 200,538 46,374 (14,944) 231,968
Provision for Possible Loan Losses................ 34,149 300 34,449
---------- ---------- --------- ----------
Net Interest Income after Provision for
Possible Loan Losses........................ 166,389 46,074 (14,944) 197,519
Other Income
Trust......................................... 21,059 0 21,059
Service charges............................... 21,214 3,132 24,346
Credit card fees.............................. 1,561 0 1,561
Net gain from financial instruments........... 0 341 341
Securities losses............................. (2,722) 0 (2,722)
Other......................................... 28,683 5,045 33,728
---------- ---------- --------- ----------
Total Other Income........................ 69,795 8,518 0 78,313
Other Expense
Salaries and employee benefits................ 92,260 9,882 102,142
Net occupancy and equipment................... 24,428 3,922 28,350
Other......................................... 87,008 7,914 10,041 <F10> 104,963
---------- ---------- --------- ----------
Total Other Expense....................... 203,696 21,718 10,041 235,455
---------- ---------- --------- ----------
Income Before Income Taxes................ 32,488 32,874 (24,985) 40,377
Income Taxes...................................... 15,403 11,309 (5,379) <F2> 21,333
---------- ---------- --------- ----------
Net Income.................................... $ 17,085 $ 21,565 $ (19,606) $ 19,044
========== ========== ========= ==========
Per Share Data
Average Common Shares Outstanding............. 78,483,581 42,373,404 84,483,581 <F14>
Net Income.................................... $0.21 $0.48 $0.22
See notes to pro forma combined consolidated financial statements.
</TABLE>
49
<PAGE> 60
<TABLE>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1996
(THOUSANDS EXCEPT PER SHARE DATA)
<CAPTION>
PRO FORMA
ROOSEVELT COMBINED
MBI<F1> ROOSEVELT ADJUSTMENTS <F2> CONSOLIDATED
---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Interest Income................................... $1,552,863 $ 640,311 $ (5,875) <F11> $2,176,904
(10,395) <F12>
Interest Expense.................................. 724,910 462,724 33,750 <F7> 1,231,134
9,750 <F8>
---------- ---------- --------- ----------
Net Interest Income........................... 827,953 177,587 (59,770) 945,770
Provision for Possible Loan Losses................ 73,015 1,262 74,277
---------- ---------- --------- ----------
Net Interest Income after Provision for
Possible Loan Losses........................ 754,938 176,325 (59,770) 871,493
Other Income
Trust......................................... 86,616 0 86,616
Service charges............................... 88,916 17,157 106,073
Credit card fees.............................. 27,962 0 27,962
Net loss from financial instruments........... 0 (76,634) (76,634)
Securities gains (losses)..................... (83) 0 (83)
Other......................................... 134,069 23,510 157,579
---------- ---------- --------- ----------
Total Other Income........................ 337,480 (35,967) 0 301,513
Other Expense
Salaries and employee benefits................ 365,729 42,304 408,033
Net occupancy and equipment................... 103,715 18,081 121,796
Other......................................... 249,224 63,024 40,163 <F10> 352,411
---------- ---------- --------- ----------
Total Other Expense....................... 718,668 123,409 40,163 882,240
---------- ---------- --------- ----------
Income Before Income Taxes................ 373,750 16,949 (99,933) 290,766
Income Taxes...................................... 128,535 5,835 (21,517) <F2> 112,853
---------- ---------- --------- ----------
Income Before Extraordinary Items......... $ 245,215 $ 11,114 $ (78,416) $ 177,913
========== ========== ========= ==========
Per Share Data
Average Common Shares Outstanding............. 77,292,207 42,698,851 83,292,207
Income Before Extraordinary Items............. $3.17 $0.16 $2.13
See notes to pro forma combined consolidated financial statements.
50
<PAGE> 61
MERCANTILE BANCORPORATION INC.
NOTES TO PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
<FN>
<F1> Represents MBI restated historical consolidated financial statements
reflecting the acquisition of Hawkeye Bancorporation, effective January
2, 1996, and Mark Twain effective April 25, 1997. Such acquisitions were
accounted for as poolings-of-interests. The acquisition of First Sterling
Bancorp, Inc. ("Sterling") by MBI and the acquisition of Northland
Bancshares, Inc. by Mark Twain were also accounted for as poolings-of-
interests; however, due to the immateriality of the financial condition
and results of operations of Sterling and Northland Bancshares, Inc. to
that of MBI and Mark Twain, the historical financial statements were not
restated. Therefore, Sterling and Northland Bancshares, Inc. are included
in these pro forma financial statements only from its respective
acquisition date forward. Each of Security Bank of Conway, F.S.B., Metro
Savings Bank, F.S.B., Peoples State Bank, First Financial Corporation of
America, TODAY'S Bancorp, Inc., Regional Bancshares, Inc. and First City
Bancshares, Incorporated, which were accounted for as purchases, is
included in these pro forma financial statements only from its
acquisition date forward. The full impact of these acquisitions is
immaterial to the pro forma combined consolidated financial statements.
<F2> The acquisition of Roosevelt will be accounted for as a purchase
transaction. Purchase accounting adjustments offset each other or are
believed to be immaterial at this time to the pro forma consolidated
financial condition and results of operations of MBI. Included herein are
the amortization of goodwill over a 15-year period (see footnote 10
below), the lost interest income/interest expense on the cash
consideration and stock buybacks. Goodwill is considered nondeductible.
The balance sheet impact of goodwill amortization and lost interest
income is ignored due to immateriality. The income tax benefit associated
with taxable income statement adjustments is computed at an effective tax
rate of 36%.
<F3> In conjunction with the proposed acquisition of Roosevelt, MBI plans to
repurchase 7,000,000 shares of MBI Common Stock in the open market. The
assumed repurchase price per share is $50.75, the closing price of MBI
Common Stock on December 20, 1996, the last business date before the
announcement of the reorganization agreement between MBI and Roosevelt.
<F4> Balance sheet impact of adjustments related to the merger with Mark Twain
(see footnote 13 below). These adjustments will be initially recorded as
a credit to accrued liabilities. Since they will be paid out in cash
within an estimated 18-month period following the merger with Mark Twain,
the Pro Forma Combined Consolidated Financial Statements reflect the cash
outlay. An income tax benefit at an effective tax rate of 36% is included
in this adjustment.
<F5> Purchase entry of Roosevelt with assumed consideration consisting of
7,000,000 reissued treasury shares at $50.75 per share, 6,000,000 shares
of issued MBI Common Stock and $412,250,000 in cash. The closing price
for MBI Common Stock on December 20, 1996, the business date preceding
the announcement of the reorganization agreement between MBI and
Roosevelt, was $50.75. The pro forma financial statements assume that all
Roosevelt preferred shares are converted to common shares prior to the
acquisition by MBI of Roosevelt. Roosevelt completed three acquisitions
in the fourth quarter of 1996. Roosevelt acquired Community Charter
Corporation, a commercial bank holding company, Mutual Bancompany, Inc.,
parent company of Mutual Savings Bank and Sentinel Financial Corporation,
a thrift holding company. The impact of these acquisitions is immaterial
to the pro forma combined consolidated financial statements.
<F6> Elimination of MBI's investment in Roosevelt.
<F7> Proposed senior and subordinated debt of $500,000,000 to be issued. This
amount was determined based upon present cash levels of MBI's parent
company and estimated outflows associated with cash payments to Roosevelt
shareholders and with treasury share repurchases. Therefore,
significantly all of the proposed senior and subordinated debt will be
used to finance the acquisition of Roosevelt. The assumed interest rate
on such debt is 6.75%.
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<PAGE> 62
<F8> Issuance of $150,000,000 of subordinated debt securities of MBI (the
"Debt Securities"). This transaction occurred on January 29, 1997. The
Debt Securities are issued at a floating rate equal to the three-month
LIBOR plus 85 basis points. The rate assumed in calculating the expense
for the Pro Forma Combined Consolidated Financial Statements is 6.5%. The
Debt Securities will be the sole assets of Mercantile Capital Trust I, a
statutory business trust created under the laws of the State of Delaware
of which MBI owns all the common securities (the "Trust"). Floating
Rate Capital Trust Pass-through Securities of the Trust (the "Trust
Securities") will be issued in exchange for approximately $150,000,000
and the proceeds therefrom will be invested in the Debt Securities. The
payment of distributions on the Trust Securities out of moneys held by
the Trust and payments on liquidation of the Trust or the redemption of
the Trust Securities will be guaranteed by MBI (the "Guarantee"). The
Guarantee covers payments of distributions and other payments on the
Trust Securities only if and to the extent MBI has made payments of
interest or principal or other payments on the Debt Securities held by
the Trust. The Guarantee, when taken together with MBI's obligations
under the Debt Securities, the declaration and the indenture, including
MBI's obligations to pay costs, expenses, debts and other obligations of
the Trust, will provide a full and unconditional guarantee on a
subordinated basis by MCI of amounts due on the Trust Securities.
<F9> Balance sheet impact of adjustments related to the merger with Roosevelt
(see footnote 13 below). These adjustments, excluding the reserve for
possible loan losses entry, will be initially recorded as a credit to
accrued liabilities. Since they will be paid out in cash within an
estimated 18-month period following the merger with Roosevelt, the Pro
Forma Combined Consolidated Financial Statements reflect the cash outlay.
An income tax benefit at an effective tax rate of 36% is included in this
adjustment.
<F10> The pro forma excess of cost over fair value of net assets acquired was
$602,442,000 for Roosevelt as of March 31, 1997. The annual amount of
goodwill amortization given that goodwill is amortized over a 15-year
period is $40,163,000.
<F11> To partially finance the Roosevelt acquisition, it is estimated that
$117,500,000 in short-term earning assets will be liquidated. The assumed
interest rate is 5%.
<F12> Interest income foregone if Roosevelt repurchases 7,000,000 of its shares
in the open market prior to the acquisition by MBI at a per share price
of $22. The assumed interest rate is 6.75%, which is the same rate
indicated in note 7 for senior and/or subordinated debt.
<F13> Upon consummation of the merger with Mark Twain in April 1997, MBI
expects to record certain adjustments related to the merger at an
approximate pre-tax total of between $40 and $50 million. Upon
consummation of the acquisition of Roosevelt, MBI expects to record
certain adjustments related to purchase accounting adjustments and to
conform accounting and credit policies regarding loan and other asset
valuations to those of MBI. The pre-tax adjustment for Roosevelt is
expected to total between $38 and $45 million. The pre-tax adjustments of
Bancshares and Roosevelt are estimated as follows.
<CAPTION>
$(000'S)
MARK TWAIN ROOSEVELT
---------- ---------
<S> <C> <C>
- --Transition and duplicative costs related to
system standardization and signage.............. $10,000 $ 8,000
- --Provision for possible loan losses.............. 0 2,500
- --Valuation of other real estate for
accelerated disposition......................... 0 3,100
- --Accruals for severance and change of
control payments................................ 13,000 6,600
- --Write-downs to fair value of branches and
equipment to be disposed of..................... 9,000 8,500
- --Investment banking, legal and accounting
fees............................................ 7,000 8,800
- --Environmental exposure.......................... 1,000 3,400
------- -------
Total......................................... $40,000 $40,900
======= =======
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The Mark Twain and Roosevelt adjustments are MBI's estimate based upon
prior acquisitions, where amounts to standardize systems, standardize
procedures, accruals for severance and employee change of control contracts
and the write-down of fixed assets approximated 60 basis points of total
assets. For the Mark Twain acquisition, approximately $11 million was added
for professional fees, and, as the transaction is entirely in-market,
additional charges for branch closings and severance payments are expected
to exceed the base 60 basis point estimate. As Roosevelt's asset base is
three times that of Mark Twain and includes a significant investment
portfolio, no additional amount was deemed necessary.
<F14> The computation of year-to-date average shares:
<CAPTION>
FOR THE THREE MONTHS ENDED
FOR THE YEAR ENDED ---------------------------------
DECEMBER 31, 1996 MARCH 31, 1997 MARCH 31, 1996
------------------ -------------- --------------
<S> <C> <C> <C>
MBI as restated for the pooling-of-interests with
Mark Twain...................................... 77,292,207 76,574,752 78,483,581
Shares of MBI Common Stock to be issued in the
Roosevelt acquisition, net of treasury shares... 6,000,000 6,000,000 6,000,000
---------- ---------- ----------
MBI/All Entities Pro Forma Combined............... 83,292,207 82,574,752 84,483,581
========== ========== ==========
</TABLE>
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<PAGE> 64
DESCRIPTION OF ROOSEVELT
ROOSEVELT
General. Roosevelt is a Delaware corporation organized in 1988 to be the
thrift holding company for Roosevelt Bank. The principal asset of Roosevelt is
the outstanding stock of Roosevelt Bank, which along with Missouri State Bank
(described below) is a wholly owned subsidiary of Roosevelt. As of March 31,
l997, Roosevelt had total consolidated assets of $7.5 billion, deposits of $5.3
billion and stockholders' equity of $470 million. The executive offices of
Roosevelt are located at 900 Roosevelt Parkway, Chesterfield, Missouri 63017
and the telephone number at that address is (314) 532-6200.
Roosevelt's business consists primarily of attracting deposits from the
general public and using those deposits, together with borrowings and other
funds, to originate and acquire real estate and consumer loans, to acquire
mortgage-backed securities, to perform loan servicing functions for others and
to provide other retail banking and financial services for consumers. The
principal elements of Roosevelt's business plan are (i) the origination of a
higher percentage of its assets; (ii) the diversification of its balance sheet
away from only mortgage and real estate related loans; (iii) the expansion of
its retail deposit base with a simultaneous shift within that deposit base
toward checking and transaction accounts; and (iv) growth in fee income by
providing other services such as insurance, brokerage and mortgage loan
servicing for other investors.
Acquisitions. Since the beginning of 1990, Roosevelt has pursued a program
of acquiring other in-market and adjacent-market thrift institutions.
In 1990, Roosevelt expanded its franchise to the Illinois portion of the
St. Louis metropolitan area by acquiring Home Federal Savings, Alton, Illinois,
through the merger conversion acquisition of Home Federal Savings, which had
$110 million in assets and $104 million in deposits. In October 1991, Roosevelt
completed the merger conversion acquisition of Hannibal Mutual Loan and
Building Association, Hannibal, Missouri, which had $18 million in assets and
deposits. In November 1992, Roosevelt completed the merger conversion
acquisitions of Conservative Bank, FSB, St. Louis, Missouri, which had $65
million in assets and $61 million in deposits, and First Granite City Savings
and Loan, Granite City, Illinois, which had $49 million in assets and $42
million in deposits. In December 1992, Roosevelt entered the Kansas City,
Missouri market by completing the purchase of Brookside Savings Bank, FSB,
which had $219 million in assets and $146 million in deposits.
In June 1993, Roosevelt completed the acquisition of the Missouri retail
banking network of First Nationwide Bank of San Francisco, California.
Roosevelt received net cash totaling $588 million. Gross proceeds totaled $595
million, which represented the amount of deposit accounts acquired by Roosevelt
Bank and accrued but unpaid interest on such accounts. This amount was reduced
by $7 million, which was paid by Roosevelt Bank for the acquisition of certain
loans and a tax deductible intangible asset related to the deposit accounts.
In November 1993, Roosevelt completed the acquisition of the 17 eastern
Missouri retail banking branches of Home Savings of America, Los Angeles,
California. The transaction was structured as a purchase of deposits and
related branch locations and equipment. Roosevelt received net cash of $709
million. Gross proceeds totaled $733 million, which represented the amount of
deposit accounts acquired by Roosevelt and accrued but unpaid interest on such
accounts. This amount was reduced by $24 million, which was paid by Roosevelt
for the acquisition of certain loans and a tax deductible intangible asset
related to the deposit accounts.
On April 22, 1994, Roosevelt completed the acquisition of Home Federal
Bancorp of Missouri, Inc., St. Louis, Missouri, which had total consolidated
assets of $533 million and deposits of $467 million.
On June 30, 1994, Farm & Home Financial Corporation ("Farm & Home"),
Nevada, Missouri, with total consolidated assets of $3.1 billion and deposits
of $2.1 billion, merged with and into Roosevelt and Farm & Home Savings
Association, a Missouri chartered stock savings and loan association and wholly
owned subsidiary of Farm & Home, merged with and into Roosevelt Bank. The
transaction was accounted for as a pooling-of-interests and, accordingly, the
consolidated financial statements of Roosevelt have been restated to include
the results of Farm & Home for the periods presented. On July 1, 1994,
Roosevelt completed the sale of Farm & Home's construction lending business for
$75 million in cash.
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<PAGE> 65
On October 20, 1995, Roosevelt completed the acquisition of WSB Bancorp,
Inc. ("WSB"), Washington, Missouri, the holding company for Washington
Savings. Upon consummation of the merger, each WSB stockholder became entitled
to receive $22.75 in cash for each share of WSB common stock held. As of the
date of the acquisition, WSB had $97 million in total consolidated assets, $81
million in deposits and stockholders' equity of $19 million.
On December 29, 1995, Roosevelt completed the acquisition of Kirksville
Bancshares, Inc. ("Kirksville"), Kirksville, Missouri, the holding company
for Kirksville Bank. Upon consummation of the merger, each Kirksville
stockholder became entitled to receive 2.4437 shares of Roosevelt Common Stock.
As of the date of the acquisition, Kirksville had total consolidated assets of
$131 million, deposits of $102 million and stockholders' equity of $21 million.
On October 25, 1996, Roosevelt completed the acquisition of Mutual
Bancompany, Inc. ("Mutual"), Jefferson City, the holding company for Mutual
Savings Bank, F.S.B. Upon the consummation of the merger, each Mutual
stockholder became entitled to receive, for each share of Mutual common stock
held, 1.3235 shares of Roosevelt Common Stock. As of the date of acquisition,
Mutual had $48.8 million in total consolidated assets, $41.4 million in
deposits and stockholders' equity of $5.0 million.
On October 31, 1996, Roosevelt completed the acquisition of Sentinel
Financial Corporation ("Sentinel"), Kansas City, Missouri, the holding
company for Sentinel Federal Savings and Loan Association of Kansas City
("Sentinel Federal"). Upon the consummation of the merger, each Sentinel
stockholder became entitled to receive 1.4321 shares of Roosevelt Common Stock
for each share of Sentinel common stock held. As of the date of acquisition,
Sentinel had total consolidated assets of $144.0 million, deposits of $120.0
million and stockholders' equity of $12.0 million.
On December 2, 1996, Roosevelt completed its acquisition of Community
Charter Corporation ("CCC"), St. Louis, Missouri, the holding company for
Missouri State Bank. Upon the consummation of the merger, each CCC stockholder
became entitled to receive 1.6 shares of Roosevelt Common Stock. As of the date
of acquisition, CCC had total consolidated assets of $77.0 million, deposits of
$67.0 million and stockholders' equity of $6.0 million.
ROOSEVELT BANK
Roosevelt Bank is a federally chartered savings bank with $7.4 billion in
consolidated assets at March 31, 1997, making it the largest Missouri-based
thrift institution. Roosevelt Bank has 79 full-service offices with 37 offices
serving the St. Louis metropolitan area (including Alton and Granite City,
Illinois) and ten offices serving the Kansas City metropolitan area. The
remaining 32 offices are located in Staunton, Illinois and Pittsburg, Kansas
and the Missouri cities of Hannibal (2), Springfield (3), Columbia, Union,
Warrenton, St. James, Washington, Sikeston, Dexter, Malden, Poplar Bluff,
Hayti, Portageville, Cape Girardeau, Mexico, Jefferson City, Trenton, Marshall,
Sedalia, Clinton, Maryville, St. Joseph, Nevada, Lamar, Joplin (2) and
Kirksville. Incorporated as a Missouri chartered mutual savings and loan in
1934, Roosevelt Bank converted to a federally chartered savings and loan in
1935. In 1987, Roosevelt Bank became a stock savings and loan and, one year
later, converted to a stock savings bank.
Roosevelt Bank is subject to examination and comprehensive regulation and
oversight by the Office of Thrift Supervision (the "OTS") and the Federal
Deposit Insurance Company (the "FDIC"). Roosevelt Bank is further subject to
regulations of the Federal Reserve Board with respect to reserves required to
be maintained against transaction accounts. Roosevelt Bank is a member of the
Federal Home Loan Bank ("FHLB") of Des Moines, which is one of the 12
regional banks constituting the FHLB system. Most of Roosevelt Bank's deposits
are insured by the Savings Association Insurance Fund (the "SAIF"); however,
approximately 21% of its deposits are insured by the Bank Insurance Fund as a
result of Roosevelt's acquisition of the eastern Missouri retail branching
network of Home Savings of America. All of Roosevelt Bank's deposits are
insured to the maximum extent permitted by the FDIC.
MISSOURI STATE BANK AND TRUST COMPANY
Missouri State Bank was organized in 1966, and is a Missouri-chartered
trust company with full commercial banking powers headquartered in St. Louis,
Missouri. Because the Missouri trust company and banking laws were consolidated
subsequent to Missouri State Bank's organization, the Bank now has all the
powers and is subject to the same regulations as a Missouri-chartered
commercial bank.
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<PAGE> 66
Missouri State Bank became a first-tier subsidiary of Roosevelt upon
consummation of the merger of CCC with and into Roosevelt. Missouri State Bank,
which had assets of approximately $86.3 million at March 31, 1997, conducts a
commercial banking business from two locations, both of which are in the City
of St. Louis, Missouri. Its main office is a full service bank at Tucker and
Olive, downtown. Its other office is located at Hampton and Fyler in the St.
Louis Hills area, and handles depository transactions and provides night
deposit services; it also provides the primary contact for lending activities
in that area, with loan applications subsequently referred to the main office.
Missouri State Bank acts primarily as a lender to small and middle market
companies located within the St. Louis metropolitan area. These companies tend
to be privately held and owner-operated with annual sales of less than $50
million, and with typical borrowing requirements of $50,000 to $1,000,000.
For additional information, see "SUMMARY INFORMATION--Business of
Roosevelt," "TERMS OF THE PROPOSED MERGER," "PRO FORMA FINANCIAL
INFORMATION" and "INCORPORATION OF CERTAIN INFORMATION BY REFERENCE."
INFORMATION REGARDING MBI STOCK
DESCRIPTION OF MBI COMMON STOCK AND ATTACHED PREFERRED SHARE PURCHASE RIGHTS
General. MBI has authorized 200,000,000 shares of MBI Common Stock and
5,000,000 shares of preferred stock, no par value ("MBI Preferred Stock"). At
April 30, 1997, MBI had 74,366,211 shares of MBI Common Stock outstanding and
no shares of MBI Preferred Stock issued and outstanding. Under the Missouri
Law, the MBI Board may generally approve the issuance of authorized shares of
MBI Common Stock and MBI Preferred Stock without shareholder approval.
The MBI Board is also authorized to fix the number of shares and determine
the designation of any series of MBI Preferred Stock and to determine or alter
the rights, preferences, privileges and restrictions granted to or imposed upon
any series of MBI Preferred Stock. The MBI Board has designated and reserved
Series A Junior Participating Preferred Stock pursuant to MBI's Preferred Share
Purchase Rights Plan described below.
The existence of a substantial number of unissued and unreserved shares of
MBI Common Stock and undesignated shares of MBI Preferred Stock may enable the
MBI Board to issue shares to such persons and in such manner as may be deemed
to have an antitakeover effect.
Dividends. The holders of the MBI Common Stock are entitled to share
ratably in dividends when, as and if declared by the MBI Board from funds
legally available therefor, after full cumulative dividends have been paid or
declared, and funds sufficient for the payment thereof set apart, on all series
of MBI Preferred Stock ranking superior as to dividends to the MBI Common
Stock.
The MBI Board intends to maintain its present policy of paying quarterly
cash dividends on the MBI Common Stock, when justified by the financial
condition of MBI and its subsidiaries. The declaration and amount of future
dividends will depend on circumstances existing at the time, including MBI's
earnings, financial condition and capital requirements as well as regulatory
limitations, note and indenture provisions and such other factors as the MBI
Board may deem relevant. The payment of dividends to MBI by subsidiary banks is
subject to extensive regulation by various state and federal regulatory
agencies. See "SUPERVISION AND REGULATION."
Voting Rights. Each holder of MBI Common Stock has one vote for each share
held on matters presented for consideration by the shareholders, except that,
in the election of directors, such shareholders presently have cumulative
voting rights which entitle each such shareholder to the number of votes which
equals the number of shares held by the shareholder multiplied by the number of
directors to be elected. All such cumulative votes may be cast for one
candidate for election as a director or may be distributed among two or more
candidates.
Preemptive Rights. The holders of MBI Common Stock have no preemptive right
to acquire any additional unissued shares or treasury shares of MBI.
Liquidation Rights. In the event of liquidation, dissolution or winding-up
of MBI, whether voluntary or involuntary, the holders of MBI Common Stock will
be entitled to share ratably in any of its assets or funds that are available
for distribution to its shareholders after the satisfaction of its liabilities
(or after adequate provision is made therefor) and after preferences on any
outstanding MBI Preferred Stock.
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<PAGE> 67
Assessment and Redemption. Shares of MBI Common Stock issuable in the
Merger will be, when issued, fully paid and nonassessable. Such shares do not
have any redemption provisions.
Preferred Share Purchase Rights Plan. One Right is attached to each share
of MBI Common Stock. The Rights trade automatically with shares of MBI Common
Stock, and become exercisable and will trade separately from the MBI Common
Stock on the 10th day after public announcement, or notice to MBI, that a
person or group has acquired, or has the right to acquire, beneficial ownership
of 20% or more of the outstanding shares of MBI Common Stock, or upon
commencement or announcement, or notice to MBI, of intent to make a tender
offer for 20% or more of the outstanding shares of MBI Common Stock, in either
case, without prior written consent of a majority of the MBI Board. When
exercisable, each Right will entitle the holder to buy 1/100 of a share of
Series A Junior Participating Preferred Stock at an exercise price of $100 per
Right. In the event a person or group acquires beneficial ownership of 20% or
more of MBI Common Stock, holders of Rights (other than the acquiring person or
group) may purchase MBI Common Stock having a market value of twice the then
current exercise price of each Right. If MBI is acquired by any person or group
after the Rights become exercisable, each Right will entitle its holder to
purchase stock of the acquiring company having a market value of twice the
current exercise price of each Right. The Rights are designed to protect the
interests of MBI and its shareholders against coercive takeover tactics. The
purpose of the Rights is to encourage potential acquirors to negotiate with the
MBI Board prior to attempting a takeover and to give the MBI Board leverage in
negotiating on behalf of all shareholders the terms of any proposed takeover.
The Rights may deter certain takeover proposals. The Rights, which can be
redeemed by the MBI Board in certain circumstances, expire by their terms on
June 3, 1998.
Classification of the MBI Board. The MBI Board is divided into three
classes, and the directors are elected by classes to three-year terms, so that
one of the three classes of the directors of MBI will be elected at each annual
meeting of the shareholders. While this provision promotes stability and
continuity of the MBI Board, classification of the MBI Board may also have the
effect of decreasing the number of directors that could otherwise be elected at
each annual meeting of shareholders by a person who obtains a controlling
interest in the MBI Common Stock and thereby could impede a change in control
of MBI. Because fewer directors will be elected at each annual meeting, such
classification also will reduce the effectiveness of cumulative voting as a
means of establishing or increasing minority representation on the MBI Board.
Other Matters. MBI's Restated Articles of Incorporation and By-Laws also
contain provisions which: (i) require the affirmative vote of holders of at
least 75% of the voting power of all of the outstanding shares of MBI entitled
to vote in the election of directors to remove a director or directors without
cause; (ii) require the affirmative vote of the holders of at least 75% of the
voting power of all shares of the outstanding capital stock of MBI to approve
certain "business combinations" with "interested parties" unless at least
66 2/3% of the MBI Board first approve such business combinations; and (iii)
require an affirmative vote of at least 75% of the voting power of all shares
of the outstanding capital stock of MBI for the amendment, alteration, change
or repeal of any of the above provisions unless at least 66 2/3% of the MBI
Board first approve such an amendment, alteration, change or repeal. MBI's
Restated Articles of Incorporation also requires the MBI Board, in considering
any business combination, to give due consideration to all factors that the MBI
Board may consider relevant, including the effects of the proposed transaction
on the depositors and customers of MBI and its subsidiaries, on their
communities and geographic areas and on any of their businesses and properties;
and the adequacy of the consideration offered in the proposed transaction in
relation to the current market price of MBI's outstanding securities and to the
value of MBI in a freely negotiated transaction and the estimate of the MBI
Board of the future value of MBI. Such provisions may be deemed to have an
antitakeover effect.
RESTRICTIONS ON RESALE OF MBI CAPITAL STOCK BY AFFILIATES; AFFILIATE AGREEMENTS
MBI Common Stock. Under Rule 145 of the Securities Act, all of the
executive officers and directors of Roosevelt, including certain of the
Supporting Stockholders, by virtue of being affiliates of Roosevelt, will be
limited in their right to resell the stock so received in the Merger. Such
officers and directors who desire to resell the MBI Common Stock so received
must sell such stock either pursuant to an effective registration statement
under the Securities Act or in accordance with an applicable exemption. In
addition, Supporting Stockholders who become "affiliates" of MBI following
the Merger will be limited in their right to resell the MBI Common Stock
received in the Merger.
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<PAGE> 68
Rule 145(d) under the Securities Act currently provides that persons deemed
to be affiliates of a company such as MBI solely by virtue of having been
affiliates of a company such as Roosevelt prior to a transaction such as the
Merger may resell their stock pursuant to certain of the requirements of Rule
144 under the Securities Act if such stock is sold within the first two years
after the receipt thereof. After one year if such person is not an affiliate of
MBI and if MBI is current with respect to its required public filings, a former
affiliate of Roosevelt may freely resell the stock received in the Merger
without limitation. After two years from the issuance of the stock, if such
person is not an affiliate of MBI at the time of sale and for at least three
months prior to such sale, such person may freely resell such stock, without
limitation, regardless of the status of MBI's required public filings.
The shares of MBI Common Stock to be received by affiliates of Roosevelt in
the Merger will be legended as to the restrictions imposed upon resale of such
stock.
COMPARISON OF THE RIGHTS OF SHAREHOLDERS OF MBI AND STOCKHOLDERS OF ROOSEVELT
MBI is incorporated under the laws of the State of Missouri. Roosevelt is
organized under the laws of the State of Delaware. The rights of MBI's
shareholders are governed by MBI's Restated Articles of Incorporation and
By-Laws and the Missouri Law. The rights of Roosevelt's stockholders are
governed by Roosevelt's Certificate of Incorporation and By-Laws and the
Delaware Law. The rights of Roosevelt stockholders who receive shares of MBI
Common Stock in the Merger will thereafter be governed by MBI's Restated
Articles of Incorporation and By-Laws and by the Missouri Law. The material
rights of such stockholders, and, where applicable, the differences between the
rights of MBI shareholders and Roosevelt stockholders, are summarized below.
The summary is qualified in its entirety by reference to the Missouri Law, the
Delaware Law, the Restated Articles of Incorporation and the By-Laws of MBI and
the Certificate of Incorporation and By-Laws of Roosevelt.
Preferred Share Purchase Rights Plan. As described above under
"--Description of MBI Common Stock and Attached Preferred Share Purchase
Rights--Preferred Share Purchase Rights Plan," MBI Common Stock has attached
Rights, which may deter certain takeover proposals. Roosevelt does not have a
rights plan.
Supermajority Provisions. MBI's Restated Articles of Incorporation and
By-Laws contain provisions requiring a supermajority vote of the shareholders
of MBI to approve certain proposals. Under both MBI's Restated Articles of
Incorporation and By-Laws, removal by the shareholders of the entire MBI Board
or any individual director from office without cause requires the affirmative
vote of not less than 75% of the total votes entitled to be voted at a meeting
of shareholders called for the election of directors. However, if less than the
entire MBI Board is to be so removed without cause, no individual director may
be so removed if the votes cast against such director's removal would be
sufficient to elect such director if then cumulatively voted at an election of
the class of directors of which such director is a part. Amendment by the
shareholders of MBI's Restated Articles of Incorporation or By-Laws relating to
(i) the number or qualification of directors; (ii) the classification of the
MBI Board; (iii) the filling of vacancies on the MBI Board; or (iv) the removal
of directors requires the affirmative vote of not less than 75% of the total
votes of MBI's then outstanding shares of capital stock entitled to vote at a
meeting, voting together as a single class, unless such amendment has
previously been expressly approved by at least 66 2/3% of the MBI Board.
Roosevelt's Certificate of Incorporation provides that no director may be
removed except for cause and then only by the affirmative vote of a majority of
the directors in office and the affirmative vote of the holders of a majority
of the outstanding shares entitled to vote in director elections, provided that
if not all directors are removed no individual director may be removed if the
votes cast against removal would be sufficient to elect the director under
cumulative voting. Roosevelt's Certificate of Incorporation may be amended only
if first approved by two-thirds of the directors then in office at a duly
constituted meeting called expressly for that purpose and if thereafter
approved by the affirmative vote of a majority of the total votes eligible to
be cast at a duly constituted meeting of stockholders called expressly for that
purpose, except that the affirmative vote of the holders of at least 75% of the
total votes eligible to be cast at such meeting is required to amend, add to,
change or repeal the provisions of Roosevelt's Certificate of Incorporation
governing (i) Roosevelt's internal affairs; (ii) the calling of special
meetings of stockholders; (iii) indemnification of directors, officers,
employees and agents; (iv) limitation on the personal liability of directors;
(v) approval for acquisitions of control and offers to acquire control; and
(vi) amendment of Roosevelt's Certificate of Incorporation. Further, the
provisions of Roosevelt's Certificate of Incorporation governing business
combinations may be amended, added to, changed or repealed only as set forth
therein. Roosevelt's Certificate of Incorporation provides that Roosevelt's
By-Laws may be amended or repealed by a two-thirds vote of the entire
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Roosevelt Board then in office at a meeting called expressly for such purpose
or by the holders of at least 75% of the outstanding capital stock of Roosevelt
entitled to vote thereon at a meeting called expressly for such purpose.
The Restated Articles of Incorporation of MBI provide that, in addition to
any shareholder vote required under the Missouri Law, the affirmative vote of
the holders of not less than 75% of the total votes to which all of the then
outstanding shares of capital stock of MBI are entitled, voting together as a
single class (the "Voting Stock"), shall be required for the approval of any
Business Combination. A "Business Combination" is defined generally to
include sales, exchanges, leases, transfers or other dispositions of assets,
mergers or consolidations, issuances of securities, liquidations or
dissolutions of MBI, reclassifications of securities or recapitalizations of
MBI, involving MBI on the one hand, and an Interested Shareholder or an
affiliate of an Interested Shareholder (as defined in MBI's Restated Articles)
on the other hand. If, however, at least 66 2/3% of the MBI Board approve the
Business Combination, such Business Combination shall require only the vote of
shareholders as provided by the Missouri Law or otherwise. The amendment of the
provisions of MBI's Restated Articles of Incorporation relating to the approval
of Business Combinations requires the affirmative vote of the holders of at
least 75% of the Voting Stock unless such amendment has previously been
approved by at least 66 2/3% of the MBI Board.
The provisions of MBI's Restated Articles of Incorporation and By-Laws
requiring a supermajority vote may have the effect of discouraging takeover
attempts that do not have MBI Board approval.
In connection with certain "Business Combinations" (as defined below) and
related transactions between Roosevelt and a "Related Person" (generally any
person or entity who or which, together with affiliates, controls 10% of more
of the outstanding shares of voting stock of Roosevelt), Roosevelt's
Certificate of Incorporation requires the approval of the holders of at least
75% of Roosevelt's outstanding shares of voting stock voting as a single class
unless the transaction is approved by the affirmative vote of at least 75% of
the directors who are not affiliated with the Related Person and who were
directors prior to the time the Related Person became a Related Person or
unless certain fair price criteria are met. Roosevelt's Certificate of
Incorporation defines a "Business Combination" as: (i) any merger or
consolidation of Roosevelt or any of its subsidiaries with or into any Related
Person; (ii) any sale, lease, exchange, mortgage, pledge, transfer, or other
disposition other than in the ordinary course of business to or with a Related
Person of any assets of Roosevelt or any subsidiary thereof having an aggregate
fair market value of $1,000,000 or more; (iii) the issuance or transfer by
Roosevelt of any shares of its voting stock or securities convertible into such
shares (other than by way of a pro rata distribution to all stockholders) to a
Related Person; (iv) the adoption of any plan or proposal for the liquidation
or dissolution of Roosevelt or any of its subsidiaries proposed, directly or
indirectly, by or on behalf of a Related Person; (v) any recapitalization,
merger or consolidation that would have the effect of increasing the voting
power of a Related Person; (vi) any merger or consolidation of Roosevelt with
another person proposed, directly or indirectly, by or on behalf of a Related
Person unless the surviving or resulting entity has a provision in its
governing instrument which is substantially identical to this provision of
Roosevelt's Certificate of Incorporation; and (vii) any agreement, contract or
other arrangement or understanding providing, directly or indirectly, for any
of the transactions described in this paragraph.
Amendment of the provision described in the preceding paragraph may be
effected only after the amendment is proposed by two-thirds of the directors
and then approved by the holders of at least 75% of Roosevelt's outstanding
shares of voting stock voting together as a single class. However, the 75% vote
requirement does not apply if the amendment is recommended by at least 75% of
the directors.
Voting for Directors. MBI's By-Laws provide for cumulative voting in the
election of directors. Cumulative voting entitles each shareholder to cast an
aggregate number of votes equal to the number of voting shares held, multiplied
by the number of directors to be elected. Each shareholder may cast all such
votes for one nominee or distribute them among two or more nominees, thus
permitting holders of less than a majority of the outstanding shares of voting
stock to achieve board representation. Roosevelt's Certificate of Incorporation
and By-Laws do not provide for cumulative voting. Where cumulative voting is
not permitted, holders of a majority of outstanding shares of voting stock of a
corporation may elect the entire board of directors of such corporation,
thereby precluding the election of any directors by the holders of less than a
majority of the outstanding shares of voting stock.
Classified Board. As described under "--Description of MBI Common Stock
and Attached Preferred Share Purchase Rights--Classification of the MBI
Board," the MBI Board is divided into three classes of directors, with each
class being elected to a staggered three-year term. By reducing the number of
directors to be elected in any given
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year, the existence of a classified board diminishes the benefits of the
cumulative voting rights to minority shareholders of MBI. Roosevelt also has a
classified board of directors with three classes of directors but its
Certificate of Incorporation and By-Laws do not, as noted above, permit
cumulative voting in the election of directors.
Action by Shareholders or Stockholders Without a Meeting. Under the
Missouri Law and the Delaware Law, written action of stockholders in lieu of a
meeting is permitted unless the articles or certificate of incorporation or by-
laws of the corporation provide otherwise. MBI's By-Laws provide that any
action which must or may be taken at a meeting of the shareholders, may be
taken without a meeting of the shareholders if a consent in writing, setting
forth the action so taken, is signed by all of the shareholders. Roosevelt's
Certificate of Incorporation provides that Roosevelt shareholders may take
action only at an annual or a special meeting of stockholders, and not by
written consent.
Special Meetings. MBI's By-Laws provide that special meetings of
stockholders, for any purpose, may be called by the Chairman of the Board or by
the MBI Board at any time in their sole discretion. Roosevelt's Certificate of
Incorporation and By-Laws provide that special meetings of stockholders of
Roosevelt may be called only by the Chairman of the Board or the President and
shall be called by either individual at the written request of a majority of
the directors of Roosevelt then in office.
Anti-takeover Statutes. The Missouri Law contains certain provisions
applicable to Missouri corporations which may be deemed to have an
anti-takeover effect. Such provisions include Missouri's business combination
statute and the control share acquisition statute.
The Missouri business combination statute protects domestic corporations
after hostile takeovers occur by prohibiting certain transactions once an
acquiror has gained control. The statute restricts certain "Business
Combinations" between a corporation and an "Interested Shareholder" or
affiliates of the Interested Shareholder for a period of five years unless
certain conditions are met. A "Business Combination" includes a merger or
consolidation, certain sales, leases, exchanges, pledges and similar
dispositions of corporate assets or stock and certain reclassifications and
recapitalizations. An "Interested Shareholder" includes any person or entity
which beneficially owns or controls 20% or more of the outstanding voting
shares of the corporation.
During the initial five-year restricted period, no Business Combination may
occur unless such Business Combination or the transaction in which an
Interested Shareholder becomes an Interested Shareholder is approved by the
board of directors of the corporation. Business Combinations may occur
following such five-year period if: (i) prior to the stock acquisition by the
Interested Shareholder, the board of directors approves the transaction in
which the Interested Shareholder became an Interested Shareholder or approves
the Business Combination in question; (ii) the holders of a majority of the
outstanding voting stock, other than stock owned by the Interested Shareholder,
approve the Business Combination; or (iii) the Business Combination satisfies
certain detailed fairness and procedural requirements.
The Missouri Law exempts from its provisions: (i) corporations not having a
class of voting stock registered under Section 12 of the Exchange Act; (ii)
corporations which adopted provisions in their articles of incorporation or
by-laws expressly electing not to be covered by the statute; and (iii) certain
circumstances in which a shareholder inadvertently becomes an Interested
Shareholder. MBI's Restated Articles of Incorporation and By-Laws were not
amended to "opt out" of the Missouri business combination statute.
The Missouri Law also contains a "control share acquisition statute"
which provides that an "Acquiring Person" who, after any acquisition of
shares of a publicly traded corporation, has the voting power, when added to
all shares of the same corporation already owned or controlled by the Acquiring
Person, to exercise or direct the exercise of: (i) 20% or more but less than
33 1/3%, (ii) 33 1/3% or more but less than a majority or (iii) a majority of
the voting power of outstanding stock of such corporation must obtain
shareholder approval for the purchase of the "Control Shares." If approval is
not given, the Acquiring Person loses the right to vote the Control Shares. The
statute prohibits an Acquiring Person from voting its shares unless certain
disclosure requirements are met and the retention or restoration of voting
rights is approved by both: (i) a majority of the outstanding voting stock, and
(ii) a majority of the outstanding voting stock after exclusion of "Interested
Shares." "Interested Shares" are defined as shares owned by the Acquiring
Person, by directors who are also employees, and by officers of the
corporation. Shareholders are given dissenters' rights with respect to the vote
on control share acquisitions and may demand payment of the fair value of their
shares by following certain procedures set forth in the control share
acquisition statute.
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A number of acquisitions of shares are deemed not to constitute control
share acquisitions, including good faith gifts, transfers pursuant to wills,
purchases pursuant to an issuance of shares by the corporation, mergers
involving the corporation which satisfy the other requirements of the Missouri
Law, transactions with a person who owned a majority of the voting power of the
corporation within the prior year, or purchases from a person who has
previously satisfied the provisions of the control share acquisition statute so
long as the transaction does not result in the purchasing party having voting
power after the purchase in a percentage range (such ranges are as set forth in
the immediately preceding paragraph) beyond the range for which the selling
party previously satisfied the provisions of the statute. Additionally, a
corporation may exempt itself from application of the statute by including a
provision in its articles of incorporation or by-laws expressly electing not to
be covered by the statute. MBI's Restated Articles of Incorporation and By-Laws
do not "opt out" of the Control Share Acquisition Statute.
The Delaware Law contains a business combination statute similar to that
contained in the Missouri Law. Like the Missouri business combination statute,
the Delaware business combination statute generally prohibits a domestic
corporation from engaging in mergers or other business combinations with
Interested Stockholders (as defined in the Delaware Law) for a period of three
years following the time that the stockholder became an Interested Stockholder
if (i) prior to the time at which the Interested Stockholder attained such
status, the board of directors approved either the business combination in
question or the transaction which resulted in the stockholder becoming an
Interested Stockholder, (ii) upon consummation of the transaction which
resulted in the stockholder becoming an Interested Stockholder, the Interested
Stockholder owned at least 85% of the corporation's voting stock, or, (iii) at
or after the time the stockholder became an Interested Stockholder, the
proposed business combination is approved by the board of directors and the
holders of two-thirds of the corporation's outstanding voting stock not owned
by the Interested Stockholder.
The Missouri Law imposes a longer prohibition period on transactions with
Interested Persons (five years) than the Delaware Law (three years), thereby
potentially increasing the period during which a hostile takeover may be
frustrated. In addition, the Delaware Law, unlike its Missouri counterpart,
does not apply if the Interested Person obtains at least 85% of the
corporation's voting stock upon consummation of the transactions which resulted
in the stockholder becoming an Interested Person. Thus, a person acquiring at
least 85% of the corporation's voting stock could circumvent the defensive
provisions of the Delaware Law while being unable to do so under the Missouri
Law.
The Delaware Law does not contain a control share acquisition statute
similar to that contained in the Missouri Law. However, the Certificate of
Incorporation of Roosevelt generally provides that so long as Roosevelt Bank
remains a majority-owned subsidiary of Roosevelt, no person may acquire control
(i.e., sole or shared power to vote 10% or more of the outstanding voting
stock) of Roosevelt without the prior approval of either the holders of two-
thirds of the outstanding voting stock or two-thirds of the directors and the
holders of a majority of the outstanding voting stock or without the prior
receipt of all required federal regulatory approvals. If any person acquires
control in violation of this limitation, the excess shares will not be counted
as shares entitled to vote and may not be voted by any person or counted as
voting shares in connection with any matter submitted to the shareholders for a
vote.
Dissenters' Rights. Under the Missouri Law, a shareholder of any
corporation which is a party to a merger or consolidation, or which sells all
or substantially all of its assets, has the right to dissent from such
corporate action and to demand payment of the value of his shares. Under the
Delaware Law, stockholders of a corporation are entitled to appraisal rights
upon the consolidation or merger of the corporation which are similar but not
identical to those under the Missouri Law. Specifically, the dissenters' rights
provisions of the Missouri Law do not provide an exemption from such provisions
in circumstances in which the shareholder seeking to exercise such rights owns
shares in a widely held, publicly traded corporation and is to receive, or
continue to hold after the transaction under which such shareholder is seeking
to exercise dissenters' rights, share of a widely held, publicly traded
corporation. In addition, the procedures and the filing deadlines applicable to
dissenters' rights under the Missouri Law are somewhat different than those
applicable in appraisal rights proceedings under the Delaware Law.
Advance Notice Requirements for Nominations of Directors and Proposals for
New Business at Annual Meetings of Stockholders. MBI's By-Laws provide that a
shareholder may make nominations of persons for election to the MBI Board
providing notice in writing to MBI not less than 30 days nor more than 60 days
prior to the meeting; however, in the event that less than 40 days' notice of
the date of the meeting is given to the shareholders, such notice of nomination
must be received by MBI no later than the 10th day following the day on which
notice of the meeting was provided to shareholders. MBI's By-Laws provide that
a shareholder desiring to present a proposal at an annual
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meeting must provide notice of such proposal in writing to the Secretary of MBI
not less than 30 days nor more than 60 days prior to the meeting; however, in
the event that less than 40 days' notice of the date of the meeting is given to
the shareholders, such notice of proposal must be received by MBI no later than
the tenth day following the day on which notice of the meeting was provided to
shareholders. The notice of proposal must contain a brief description of the
proposal and the reasons for the proposal, the shareholder's name and address
and the class and number of shares beneficially owned by the shareholder and
any interest of the shareholder in the business proposed to be conducted. The
presentation of a proposal at an annual meeting will not be permitted if the
shareholder proponent does not follow the procedures described above.
Roosevelt's By-Laws provide that Roosevelt stockholders may make
nominations for the election of directors by delivering written notice of such
nominations to the Secretary of Roosevelt at least 15 days prior to the date of
the annual meeting of stockholders. Furthermore, if the Roosevelt Board fails
to nominate candidates for the board at least 20 days prior to the annual
meeting, then nominations may be made at the meeting by any stockholder
entitled to vote and such nominations shall be voted upon. Roosevelt's By-Laws
generally provide that any stockholder desiring to make a proposal for new
business at the annual meeting of stockholders must submit a written statement
of the proposal which must be received by the Secretary of Roosevelt at least
20 days in advance of the meeting; provided, however, if less than 30 days
-------- -------
notice of the date of the meeting is given to stockholders, notice by the
stockholder to be timely must be so received not later than the close of
business on the tenth day following the day on which such notice of the date of
the annual meeting was mailed. The stockholder's notice must include a brief
description of the proposal, the stockholder's name and address and the class
and number of shares owned of record by the stockholder. If a stockholder fails
to comply with these advance notice requirements, no action will be taken on
the proposal at the meeting.
Stockholders' Right to Inspect. Under the Delaware Law, any stockholder may
inspect the corporation's stock ledger, stockholder list and other books and
records for any proper purpose. A "proper purpose" is defined as a purpose
reasonably related to such person's interest as a stockholder. The Delaware Law
specifically provides that a stockholder may appoint an agent for the purpose
of examining the stock ledger, list of stockholders or other books and records
of the corporation. A stockholder may apply to the Delaware Court of Chancery
to compel inspection in the event the stockholder's request to examine the
books and records is refused. In general, the corporation has the burden of
proving an improper purpose where a stockholder requests to examine the
stockholder ledger or stockholder list and otherwise complies with the
procedures set forth in the statute. The right of stockholders to inspect under
the Missouri Law is similar to that of stockholders under the Delaware Law.
Neither the Missouri Law nor Missouri case law, however, provides any specific
guidance as to whether a shareholder may appoint an agent for the purpose of
examining books and records or the extent to which a shareholder must have a
"proper purpose" for inspection. Accordingly, in a given situation a
shareholder of a Missouri corporation may be provided with less guidance as to
the scope of his or her ability to inspect the books and records of the
corporation than a shareholder of a Delaware corporation.
Size of Board of Directors. As permitted under the Missouri Law, the number
of members of the MBI Board is set forth in MBI's By-Laws (currently 19) which
provide that the number of directors may be fixed from time to time at not less
than 12 nor more than 24 by an amendment of the By-Laws or by a resolution of
the MBI Board, in either case, adopted by the vote or consent of at least
66 2/3% of the number of directors then authorized under MBI's By-Laws. Similar
to the Missouri Law, the Delaware Law provides that a corporation may fix the
number of directors in its Certificate of Incorporation or By-Laws. The
Certificate of Incorporation of Roosevelt provides that the number of directors
shall be no fewer than six and no more than 18, as set forth in Roosevelt's
By-Laws (currently ten) fixed exclusively by the Roosevelt Board pursuant to a
resolution adopted by a majority of the whole board.
SUPERVISION AND REGULATION
GENERAL
As a bank holding company, MBI is subject to regulation under the BHCA and
its examination and reporting requirements. Under the BHCA, a bank holding
company may not, directly or indirectly, acquire the ownership or control of
more than 5% of the voting shares or substantially all of the assets of any
company, including a bank or savings and loan association, without the prior
approval of (or, in the case of certain non-bank companies, prior notice
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to) the Federal Reserve Board. In addition, bank holding companies are
generally prohibited under the BHCA from engaging in non-banking activities,
subject to certain exceptions.
MBI and its subsidiaries are subject to supervision and examination by
applicable federal and state banking and other agencies. The earnings of MBI's
subsidiaries, and therefore the earnings of MBI, are affected by general
economic conditions, management policies and the legislative and governmental
actions of various Regulatory Authorities, including the Federal Reserve Board,
the OTS, the FDIC, the Comptroller of the Currency (the "Comptroller") and
various state financial institution regulatory agencies. In addition, there are
numerous governmental requirements and regulations that affect the activities
of MBI and its subsidiaries.
CERTAIN TRANSACTIONS WITH AFFILIATES
There are various legal restrictions on the extent to which a bank holding
company such as MBI and certain of its nonbank subsidiaries can borrow or
otherwise obtain credit from its bank subsidiaries. In general, these
restrictions require that any such extensions of credit must be on
non-preferential terms and secured by designated amounts of specified
collateral and be limited, as to any one of the holding company or such nonbank
subsidiaries, to 10% of the lending bank's capital stock and surplus, and as to
the holding company and all such nonbank subsidiaries in the aggregate, to 20%
of such capital stock and surplus.
PAYMENT OF DIVIDENDS
MBI is a legal entity separate and distinct from its wholly owned financial
institutions and other subsidiaries. The principal source of MBI's revenues is
dividends from its financial institution subsidiaries. Various federal and
state statutory provisions limit the amount of dividends the affiliate
financial institution can pay to MBI without regulatory approval. The approval
of federal and state bank regulatory agencies, as appropriate, is required for
any dividend if the total of all dividends declared in any calendar year would
exceed the total of the institution's net profits, as defined by regulatory
agencies, for such year combined with its retained net profits for the
preceding two years. In addition, a national bank or a state member bank may
not pay a dividend in an amount greater than its net profits then on hand. The
payment of dividends by any financial institution subsidiary may also be
affected by other factors, such as the maintenance of adequate capital.
In addition, if, in the opinion of the applicable federal bank regulatory
agency, a depository institution under its jurisdiction is engaged in or is
about to engage in an unsafe and unsound practice (which, depending on the
financial condition of the institution, could include the payment of
dividends), such agency may require, after notice and hearing, that the
institution in question cease and desist from such practice. The Comptroller
has indicated that paying dividends that would deplete a depository
institution's capital base to an inadequate level would be an unsafe and
unsound practice. Moreover, an insured depository institution may not pay any
dividends if such payment would cause it to become under-capitalized or once it
is undercapitalized. See "--Capital Adequacy." Also, the federal bank
regulatory agencies have issued policy statements which provide that depository
institutions and their holding companies should generally pay dividends only
out of current operating earnings.
CAPITAL ADEQUACY
The Federal Reserve Board has issued standards for measuring capital
adequacy for bank holding companies. These standards are designed to provide
risk-responsive capital guidelines and to incorporate a consistent framework
for use by financial institutions operating in major international financial
markets. The banking regulators have issued standards for banks that are
similar to, but not identical with, the standards for bank holding companies.
In general, the risk-related standards require financial institutions and
financial institution holding companies to maintain certain capital levels
based on "risk-adjusted" assets, so that categories of assets with
potentially higher credit risk will require more capital backing than
categories with lower credit risk. In addition, banks and bank holding
companies are required to maintain capital to support off-balance-sheet
activities such as loan commitments.
Under the risk-based capital standard, the minimum consolidated ratio of
total capital to risk-adjusted assets (including certain off-balance sheet
items, such as standby letters of credits) required by the Federal Reserve
Board for bank holding companies is currently 8%. At least one-half of the
total capital must be comprised of common equity, retained earnings, qualifying
noncumulative perpetual preferred stock, a limited amount of qualifying
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cumulative perpetual preferred stock and minority interest in the equity
accounts of consolidated subsidiaries, plus certain items such as goodwill and
certain other intangible assets ("Tier I Capital"). The remainder may consist
of qualifying hybrid capital instruments, perpetual debt, mandatory convertible
debt securities, a limited amount of subordinated debt, preferred stock that
does not qualify as Tier I Capital and a limited amount of loan and lease loss
reserves. As of December 31, 1996, MBI's Tier I Capital and total capital to
risk adjusted assets ratios were 11.00% and 13.68%, respectively. At December
31, 1996, on a pro forma combined basis after giving effect to the Merger,
MBI's estimated consolidated Tier I Capital and total capital to risk-adjusted
assets ratios would be 7.91% and 11.35%, respectively.
In addition to the risk-based standard, the Federal Reserve Board has
established minimum leverage ratio guidelines for bank holding companies. These
guidelines provide for a minimum ratio of Tier 1 Capital to adjusted average
total assets less goodwill and certain other intangibles (the "Leverage
Ratio") of 3% for bank holding companies that meet certain specified criteria,
including having the highest regulatory rating. Other bank holding companies
generally are required to maintain a Leverage Ratio of at least 4% to 5%. The
guidelines also provide that bank holding companies experiencing internal
growth or making acquisitions will be expected to maintain strong capital
positions substantially above minimum supervisory levels, without significant
reliance on intangible assets.
The guidelines also provide that bank holding companies experiencing
internal growth or making acquisitions are expected to maintain strong capital
positions substantially above the minimum supervisory levels without
significant reliance on intangible assets. Furthermore, the Federal Reserve
Board has indicated that it will consider a "tangible Tier I Capital Leverage
Ratio" (deducting all intangibles) and other indicia of capital strength in
evaluating proposals for expansion or new activities.
As of December 31, 1996, MBI's Leverage Ratio was 8.12%. At December 31,
1996, on a pro forma combined basis after giving effect to the Merger, MBI's
estimated consolidated Leverage Ratio would be 5.25%.
SUPPORT OF SUBSIDIARY BANKS
Under Federal Reserve Board policy, MBI is expected to act as a source of
financial strength to each subsidiary bank and to commit resources to support
each of the subsidiaries in circumstances where it may not choose to do so
absent such a policy. This support may be required at times when MBI may not
find itself able to provide it. In addition, any capital loans by MBI to any of
its subsidiaries would also be subordinate in right of payment to deposits and
certain other indebtedness of such subsidiary.
Consistent with the policy regarding bank holding companies serving as a
source of financial strength for their subsidiary banks, the Federal Reserve
Board has stated that, as a matter of prudent banking, a bank holding company
generally should not maintain a rate of cash dividends unless its net income
available to common shareholders has been sufficient to fully fund the
dividends, and the prospective rate of earnings retention appears consistent
with the bank holding company's capital needs, asset quality and overall
financial condition.
FIRREA AND FDICIA
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA") contains a cross-guarantee provision which could result in insured
depository institutions owned by MBI being assessed for losses incurred by the
FDIC in connection with assistance provided to, or the failure of, any other
insured depository institution owned by MBI. Under FIRREA, failure to meet the
capital guidelines could subject a banking institution to a variety of
enforcement remedies available to federal regulatory authorities, including the
termination of deposit insurance by the FDIC.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") made extensive changes to the federal banking laws. FDICIA
instituted certain changes to the supervisory process, including provisions
that mandate certain regulatory agency actions against undercapitalized
institutions within specified time limits. FDICIA contains various other
provisions that may affect the operations of banks and savings institutions.
The prompt corrective action provision of FDICIA requires the federal
banking regulators to assign each insured institution to one of five capital
categories ("well capitalized," "adequately capitalized" or one of three
"undercapitalized" categories) and to take progressively more restrictive
actions based on the capital categorization, as specified below. Under FDICIA,
capital requirements would include a leverage limit, a risk-based capital
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requirement and any other measure of capital deemed appropriate by the federal
banking regulators for measuring the capital adequacy of an insured depository
institution. All institutions, regardless of their capital levels, are
restricted from making any capital distribution or paying any management fees
that would cause the institution to fail to satisfy the minimum levels for any
relevant capital measure.
The FDIC and the Federal Reserve Board adopted capital-related regulations
under FDICIA. Under those regulations, a bank will be well capitalized if it:
(i) had a risk-based capital ratio of 10% or greater; (ii) had a ratio of Tier
I Capital to risk-adjusted assets of 6% or greater; (iii) had a ratio of Tier I
Capital to average assets of 5% or greater; and (iv) was not subject to an
order, written agreement, capital directive, or prompt corrective action
directive to meet and maintain a specific capital level for any capital
measure. An institution will be adequately capitalized if it was not "well
capitalized" and: (i) had a risk-based capital ratio of 8% or greater; (ii)
had a ratio of Tier I Capital to risk-adjusted assets of 4% or greater; and
(iii) had a ratio of Tier I Capital to average assets of 4% or greater (except
that certain associations rated "Composite 1" under the federal banking
agencies' CAMEL rating system may be adequately capitalized if their ratios of
core capital to average assets were 3% or greater). As previously discussed,
all MBI subsidiary financial institutions as of March 31, 1997 were categorized
as "well capitalized".
FDICIA makes extensive changes in existing rules regarding audits,
examinations and accounting. It generally requires annual on-site, full scope
examinations by each bank's primary federal regulatory. It also imposes new
responsibilities on management, the independent audit committee and outside
accountants to develop or approve reports regarding the effectiveness of
internal controls, legal compliance and off-balance-sheet liabilities and
assets.
DEPOSITOR PREFERENCE STATUTE
Legislation enacted in August 1993 provides a preference for deposits and
certain claims for administrative expenses and employee compensation against an
insured depository institution in the liquidation or other resolution of such
an institution by any receiver. Such obligations would be afforded priority
over other general unsecured claims against such an institution, including
federal funds and letters of credit, as well as any obligation to shareholders
of such an institution in their capacity as such.
FDIC INSURANCE ASSESSMENTS
The subsidiary depository institutions of MBI are subject to FDIC deposit
insurance assessments. The FDIC has adopted a risk-based premium schedule. Each
financial institution is assigned to one of three capital groups--well
capitalized, adequately capitalized or undercapitalized--and further assigned
to one of three subgroups within a capital group, on the basis of supervisory
evaluations by the institution's primary federal and, if applicable, state
supervisors, and on the basis of other information relevant to the
institution's financial condition and the risk posed to the applicable
insurance fund. The actual assessment rate applicable to a particular
institution will, therefore, depend in part upon the risk assessment
classification so assigned to the institution by the FDIC. See "--FIRREA and
FDICIA."
FIRREA, adopted in August 1989 to provide for the resolution of insolvent
savings associations, required the FDIC to establish separate deposit insurance
funds--the Bank Insurance Fund ("BIF") for banks and the Savings Association
Insurance Fund ("SAIF") for savings associations. FIRREA also required the
FDIC to set deposit insurance assessments at such levels as would cause BIF and
SAIF to reach their "designated reserve ratios" of 1.25 percent of the
deposits insured by them within a reasonable period of time. Due to low costs
of resolving bank insolvencies in the last few years, BIF reached its
designated reserve ratio in May 1995. As a result, effective January 1, 1996,
the FDIC eliminated deposit insurance assessments (except for the minimum
$2,000 payment required by law) for banks that are well capitalized and well
managed and reduced the deposit insurance assessments for all other banks. As
of January 1, 1996, the SAIF had not reached the designated reserve ratio. MBI,
which has acquired substantial amounts of SAIF-insured deposits during the
years from 1989 to the present, is required to pay SAIF deposit insurance
premiums on these SAIF-insured deposits.
The Deposit Insurance Funds Act of 1996 (the "Funds Act"), enacted as
part of the Omnibus Appropriations Bill on September 30, 1996, required the
FDIC to take immediate steps to recapitalize the SAIF and to change the basis
on which funds are raised to make the scheduled payments on the FICO bonds
issued in 1987 to replenish the Federal Savings and Loan Insurance Corporation.
The new legislation, combined with regulations issued by the FDIC
65
<PAGE> 76
immediately after enactment of the Funds Act, provided for a special assessment
in the amount of 65.7 basis points on SAIF-insured deposits held by depository
institutions on March 31, 1995 (the special assessment was required by the
Funds Act to recapitalize the SAIF to the designated reserve ratio of 1.25
percent of the deposits insured by SAIF). Payments of this assessment were made
in November 1996, but were accrued by financial institutions in the third
calendar quarter of 1996. Institutions such as MBI that have deposits insured
by both the BIF and the SAIF ("Oakar Banks") were required to pay the special
assessment on 80% of their "adjusted attributable deposit amounts ("AADA").
In addition, for purposes of future regular deposit insurance assessments, the
AADA on which Oakar Banks pay assessments to SAIF was also reduced by 20%.
Commencing January 1, 1997, BIF insured institutions will be responsible for a
portion of the annual carrying costs of the FICO bonds. Such institutions will
be assessed at 80% of the rate applicable to SAIF-insured institutions until
December 31, 1999. Effective January 1, 1997, the Funds Act also reduced
ongoing SAIF deposit insurance assessment rates to a range from $.064 to $.23
(from previous rates of $.23 to $.31) per $100 of insured deposits and
increased ongoing BIF deposit insurance assessment rates to a range from $0 to
$.013 per $100 of insured deposits. Additionally, pursuant to the Funds Act, if
the reserves in BIF at the end of any semiannual assessment period exceed 1.25%
of insured deposits, the FDIC is required to refund the excess to the
BIF-insured institutions.
The Funds Act contemplates the merger of the SAIF and BIF by 1999, provided
the consolidation/merger of federal bank and thrift charters under applicable
law and regulation has been achieved by that time. Until such time, however,
depository institutions will continue to be prohibited from shifting deposits
from SAIF insurance coverage to BIF insurance coverage in an attempt to avoid
the higher SAIF assessments. The FDIC is required to issue regulations to guard
against the shifting of deposits from SAIF to BIF.
As of December 31, 1996, approximately 7.78% of MBI's banking subsidiaries
deposits were insured by the SAIF. On a pro forma combined basis, approximately
26.67% of MBI's banking subsidiaries' deposits would be insured by SAIF.
INTERSTATE BANKING AND OTHER RECENT LEGISLATION
In September 1994, legislation was enacted that is expected to have a
significant effect in restructuring the banking industry in the United States.
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
("Riegle-Neal") facilitates the interstate expansion and consolidation of
banking organizations by permitting (i) bank holding companies that are
adequately capitalized and managed, one year after enactment of the
legislation, to acquire banks located in states outside their home states
regardless of whether such acquisitions are authorized under the law of the
host state, (ii) the interstate merger of banks after June 1, 1997, subject to
the right of individual states to "opt in" or to "opt out" of this
authority before that date, (iii) banks to establish new branches on an
interstate basis provided that such action is specifically authorized by the
law of the host state, (iv) foreign banks to establish, with approval of the
regulators in the United States, branches outside their home states to the same
extent that national or state banks located in the home state would be
authorized to do so, and (v) banks to receive deposits, renew time deposits,
close loans, service loans and receive payments on loans and other obligations
as agent for any bank or thrift affiliate, whether the affiliate is located in
the same state or a different state. One effect of Riegle-Neal is to permit MBI
to acquire banks located in any state and to permit bank holding companies
located in any state to acquire banks and bank holding companies in Missouri,
including MBI. Overall, Riegle-Neal may have the effects of increasing
competition and promoting geographic diversification in the banking industry.
In addition, the Funds Act contains a variety of regulatory relief measures
affecting banks and thrifts, including provisions modifying some of the more
onerous requirements imposed under federal banking laws passed in the late
1980s and early 1990s. Among the measures are provisions reducing certain
regulatory burdens imposed upon bank holding companies. For example, the Funds
Act eliminates the requirement that a bank holding company seeking to acquire
control of a thrift must file an application with the OTS and for approval to
become a unitary savings and loan holding company as a result of such
acquisition. The Funds Act also provides that a bank holding company owning or
controlling a thrift will no longer be subject to the supervision and
regulation of the OTS. The OTS will continue to regulate and supervise all
thrifts acquired in such transactions.
There also have been a number of recent legislative and regulatory
proposals designed to strengthen the federal deposit insurance system and to
improve the overall financial stability of the United States banking system,
and to provide for other changes in the bank regulatory structure, including
proposals to reduce regulatory burdens on
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<PAGE> 77
banking organizations and to expand the nature of products and services banks
and bank holding companies may offer. It is not possible to predict whether or
in what form these proposals may be adopted in the future, and, if adopted,
what their effect will be on MBI.
PROPOSAL II--ELECTION OF DIRECTORS
Directors of Roosevelt generally are elected to serve for a three-year
period or until their respective successors shall have been elected and shall
qualify. Last year, however, Director Douglas T. Breeden was nominated and
elected to serve a two-year term in order to join the class of directors with
terms to expire in 1998. The change in Dr. Breeden's class was designed to
comply with the requirement set forth in Roosevelt's By-Laws that approximately
one-third of the directors be elected annually. Each director of Roosevelt is
also a director of Roosevelt Bank. The vote required for the election of
directors is a plurality of the shares present in person or represented by
proxy at the Meeting and entitled to vote on the matter.
The table below sets forth certain information regarding the Roosevelt
Board as of December 31, 1996. It is intended that the proxies solicited on
behalf of the Roosevelt Board (other than proxies in which the vote is withheld
as to a nominee) will be voted at the Annual Meeting for the election of the
nominees listed below. If any nominee is unable to serve, it is intended that
the shares represented by all such proxies will be voted for the election of
such substitute as the Roosevelt Board may recommend or the Roosevelt Board may
reduce the number of directors to eliminate the vacancy. At this time, the
Roosevelt Board knows of no reason why any nominee might be unavailable to
serve, if elected. There are no arrangements or understandings between any
director and any other person pursuant to which such director has been elected
or nominated.
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
YEAR COMMON
FIRST STOCK PERCENT
ELECTED TERM TO BENEFICIALLY OF
NAME AGE POSITION DIRECTOR EXPIRE OWNED<F1> CLASS
---- --- -------- -------- ------- ------------ -------
<S> <C> <C> <C> <C> <C> <C>
NOMINEES
Stanley J. Bradshaw....... 39 Chairman of the Board, 1991 2000 651,340 1.45%
President and Chief
Executive Officer
Patricia M. Gammon........ 47 Director 1994 2000 9,150 .02
Hiram S. Liggett, Jr...... 64 Director 1978 2000 42,330 .09
Clarence M. Turley,
Jr.<F2>................. 68 Director 1968 2000 46,920 .10
<CAPTION>
DIRECTORS CONTINUING IN OFFICE
<S> <C> <C> <C> <C> <C> <C>
Anat Bird................. 45 Director, Senior 1995 1998 101,735 .23
Executive Vice President
and Chief Operating
Officer
Robert M. Clayton II<F3>.. 56 Director 1974 1998 47,859 .23
Douglas T. Breeden........ 46 Director 1990 1998 280,468 .63
Richard E. Beumer......... 58 Director 1986 1999 46,927 .10
Bradbury Dyer III......... 54 Director 1994 1999 281,096 .63
Alvin D. Vitt............. 61 Director 1981 1999 60,941 .14
<FN>
- --------
<F1> Includes shares held directly, in retirement accounts, in a fiduciary
capacity or by certain affiliated entities or members of the named
individuals' families, as well as 9,000, 18,500, 9,000, 19,500, 381, 287,
68,300, 9,000, 15,000 and 9,000 shares, which Directors Breeden, Beumer,
Dyer, Vitt, Bradshaw, Bird, Clayton, Gammon, Liggett and Turley,
respectively, have the right to purchase pursuant to stock options
exercisable as of December 31, 1996 or which became exercisable within 60
days of December 31, 1996, granted under the 1986 Stock Option Plan and
the Roosevelt Financial Group, Inc. 1994 Non-Employee Director Stock Option
Plan, as appropriate, with respect to which shares the directors may be
deemed to have sole voting and dispositive powers. The 1986 Stock Option
Plan terminated on January 29, 1997.
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<PAGE> 78
<F2> Excludes 480 shares as to which Mr. Turley disclaims beneficial ownership.
<F3> Excludes 300 shares as to which Mr. Clayton disclaims beneficial
ownership.
</TABLE>
The business experience of each of the directors for at least the past five
years is as follows:
Stanley J. Bradshaw. Mr. Bradshaw joined Roosevelt Bank in December 1985 as
Vice President and Chief Lending Officer and was promoted to Senior Vice
President and Chief Investment Officer in 1987. During 1988, Mr. Bradshaw was
named Executive Vice President and Chief Operating Officer. He joined the
Roosevelt Board and the Board of Directors of Roosevelt Bank and became
President and Chief Executive Officer of Roosevelt in 1991. Mr. Bradshaw became
Chairman of the Board in April 1996.
Patricia M. Gammon. Ms. Gammon is Vice President of Blackstone Alternative
Asset Management, an investment management firm located in New York, New York.
From 1978 to December 1995, Ms. Gammon served as Director of Investments for
Yale University.
Hiram S. Liggett, Jr. Mr. Liggett is President of Liggett Consulting
Services, Inc. From December 1989 to August 1992, Mr. Liggett served as a
special consultant to Keystone Consulting Group. From August 1987 to November
1988, he served as a special consultant to Blue Cross/Blue Shield of Missouri.
Mr. Liggett retired in August 1986 as Vice President of Brown Group, Inc., a
shoe manufacturing and sales company in St. Louis.
Clarence M. Turley, Jr. Mr. Turley is Vice Chairman of the Board of
Colliers Turley Martin Company, a commercial real estate company in St. Louis.
Anat Bird. Mrs. Bird joined Roosevelt and Roosevelt Bank as Senior
Executive Vice President and Chief Operating Officer in July 1995. In January
1991, Mrs. Bird founded the Financial Institutions Consulting Group ("FICG")
at BDO Seidman, New York City, and developed and managed the FICG through June
1994. In June 1994, Mrs. Bird founded SCB Forums, LTD. ("SCB"), a financial
institutions consulting firm located in New York City and the successor to
FinExc Group, L.L.C.
Robert M. Clayton II. Mr. Clayton is a partner in the law firm of Clayton,
Curl & Clayton in Hannibal, Missouri.
Dr. Douglas T. Breeden. Dr. Breeden is Chairman of the Board of Directors
of Smith Breeden Associates, Inc. ("Smith Breeden"), a money management firm
that manages money for and advises mutual funds, pension funds, municipalities,
private entities and banks, including Roosevelt Bank. Dr. Breeden is also a
director of Smith Breeden Family of Funds and Harrington Financial Group, Inc.
In addition, Dr. Breeden is a Research Professor of Finance at the Fuqua School
of Business, Duke University. Dr. Breeden served as Vice Chairman of the Board
of the Roosevelt Bank from May 1992 to June 1995 and as Chairman of the Board
of Roosevelt from June 1995 to April 1996.
Richard E. Beumer. Mr. Beumer is Chairman and Chief Executive Officer of
Sverdrup Corporation, an international engineering, design, development and
construction company headquartered in St. Louis. Mr. Beumer is also a director
of Laclede Gas Company.
Bradbury Dyer III. Mr. Dyer is managing agent of Paragon Joint Venture and
a general partner of Paragon Associates and Paragon Associates II, private
investment partnerships in Dallas, Texas, positions he has held since 1972. Mr.
Dyer is also a Director of Capsure Holdings Corp. and Falcon Building Products.
Alvin D. Vitt. Mr. Vitt is Chairman and President of Alvin D. Vitt &
Company, a real estate development company in St. Louis.
ROOSEVELT BOARD MEETINGS AND COMMITTEES
During the fiscal year ended December 31, 1996, the Roosevelt Board held 17
meetings. No incumbent director attended fewer than 75% of the total number of
meetings held by the Roosevelt Board and by all committees of the Roosevelt
Board on which he or she served during the year. The Roosevelt Board has
standing Audit, Executive and Stock Option Committees.
The Audit Committee commissions and reviews audit reports and related
matters to ensure effective compliance by Roosevelt and Roosevelt Bank with
regulatory and internal policies and procedures. Directors Vitt (Chairman),
Liggett, Gammon and Turley are members of this committee. The Audit Committee
held 4 meetings during 1996.
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<PAGE> 79
The full Roosevelt Board acts as a nominating committee for the annual
selection of nominees for election as directors. While the Roosevelt Board will
consider nominees recommended by others, it has not actively solicited
nominations nor established any procedures for this purpose. Pursuant to
Roosevelt's By-Laws, nominations generally must be delivered in writing to the
Secretary of Roosevelt at least 15 days before the date of the annual meeting.
The Board of Directors of Roosevelt Bank held 17 meetings during the year
ended December 31, 1996. No incumbent director attended fewer than 75% of the
total number of meetings held by the Board and by all committees of the Board
on which he or she served during the year. The Board of Directors of Roosevelt
Bank has standing Executive, Audit and Compensation Committees.
The Compensation Committee is responsible for making recommendations with
respect to salaries and other compensation for senior management of Roosevelt
and Roosevelt Bank. The Compensation Committee is composed of Directors Clayton
(Chairman), Beumer, Breeden, and Dyer. This committee held 4 meetings during
1996.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Stock Option Committee and Compensation Committee during
1996 were Directors Clayton (Chairman), Breeden, Beumer and Dyer. Dr. Breeden
is Chairman of the Board of Smith Breeden. Smith Breeden is a money management
firm that provides Roosevelt Bank with certain investment consulting services,
including advice on asset/liability management and analysis. Approval of the
retention of Smith Breeden is reviewed annually by the Roosevelt Board, in
accordance with the terms of Roosevelt Bank's Director and Officer Conflict of
Interest Policy, without the participation of Dr. Breeden. For the year ended
December 31, 1996, Smith Breeden received approximately $1.3 million in fees
and expenses from Roosevelt Bank.
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<PAGE> 80
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation for
services in all capacities to Roosevelt and Roosevelt Bank for the years ended
December 31, 1996, 1995 and 1994 of Roosevelt's Chief Executive Officer and the
other most highly compensated executive officers of Roosevelt and Roosevelt
Bank, whose respective salaries and bonuses exceeded $100,000 in 1996 (the
"named officers").
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
ANNUAL COMPENSATION
------------------------------------- LONG TERM
OTHER COMPENSATION<F8>
ANNUAL ----------------
COMPEN- SECURITIES
SATION UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS ($) OPTIONS COMPENSATION
- --------------------------- ---- ------ ----- -------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Stanley J. Bradshaw, 1996 $440,000 $250,000 $ -- 50,000 $9,840<F1>
President and Chief 1995 400,000 125,000 -- 25,000 $9,846<F1>
Executive Officer 1994 335,000 251,250 -- 75,000 9,843<F1>
Anat Bird, 1996 306,000 147,000 -- 28,300 5,340<F4>
Senior Executive 1995 137,500 35,000 196,663<F3> 40,000 24<F4>
Vice President and 1994 -- -- -- -- --
Chief Operating Officer<F2>
Gary W. Douglass, 1996 207,000 81,000 -- 17,500 4,588<F5>
Executive Vice President 1995 162,179 50,000 -- 35,000 56<F5>
and Chief Financial 1994 -- -- -- -- --
Officer<F2>
Daniel P. Sneed, 1996 130,000 13,000 -- -- 5,011
Senior Vice 1995 116,375 31,255<F6> -- 4,000 3,363<F7>
President<F2> 1994 69,962 -- -- -- 48<F7>
<FN>
- --------
<F1> Matching contributions to Mr. Bradshaw's account in Roosevelt Bank's
401(k) Plan (the "401(k) Plan"), contributions under Roosevelt's
Employee Stock Ownership Plan (the "ESOP") and life insurance premiums,
respectively, for (i) 1996--$9,000, $750 and $90; (ii) 1995--$9,000, $750,
and $96; and (iii) 1994--$9,000, $750 and $93. Effective February 1, 1997,
the ESOP was terminated and all employee ESOP account balances were
transferred into the employees' respective 401(k) Plan accounts.
<F2> Mrs. Bird, Mr. Douglass and Mr. Sneed assumed their positions with
Roosevelt and Roosevelt Bank on July 17, 1995, March 9, 1995 and April 23,
1994, respectively.
<F3> Value adjustment on prior home, reimbursement for taxes, relocation
expenses and employee benefit expenses of $89,500, $79,528, $25,535 and
$2,100, respectively.
<F4> For 1996, represents matching contributions to Mrs. Bird's account in the
401(k) Plan, the ESOP and life insurance premiums, respectively, as
follows: $4,500, $750 and $90. For 1995, represents life insurance
premiums paid on Mrs. Bird's behalf.
<F5> For 1996, represents matching contributions to Mr. Douglass' account in
the 401(k) Plan, the ESOP and life insurance premiums, respectively, as
follows: $3,748, $750 and $90. For 1995, represents life insurance
premiums paid on Mr. Douglass' behalf.
<F6> Represents the fair market value on November 21, 1995 of 1,866 shares of
restricted Common Stock awarded to Mr. Sneed on such date. The restricted
Common Stock vested on December 21, 1995.
<F7> Matching contributions to Mr. Sneed's account in Roosevelt Bank's 401(k)
Plan, contributions under the ESOP and life insurance premiums,
respectively, for (i) 1996--$4,171, $750 and $90; (ii) 1995--$2,517, $750
and $96; and (iii) 1994--$0, $0 and $48.
<F8> At December 31, 1996, Mr. Bradshaw, Mrs. Bird and Mr. Douglass held
35,000, 30,000 and 20,000 shares of restricted stock, respectively. The
restricted shares, which were awarded during 1995, will vest, if not
earlier forfeited or terminated due to termination or separation from
Roosevelt within ten years from the date of grant if and only if Roosevelt
Common Stock has experienced 20 consecutive days of trading at a price
equal to or above $56.64 per share. In addition, the vesting of Mr.
Bradshaw's restricted shares may be wholly or partially accelerated, at
the discretion of Roosevelt's Stock Option Committee, upon a change in
control of Roosevelt. The restricted shares awarded to Mrs. Bird and Mr.
Douglass will vest immediately upon a change in control of Roosevelt. For
these purposes, approval of the Merger by Roosevelt stockholders at the
Annual Meeting will constitute a change in control. Dividends are paid on
the restricted shares to the same extent and on the same date as dividends
are paid on all other outstanding shares of Roosevelt Common Stock. Based
on the closing price per share of Roosevelt Common Stock on NASDAQ on
December 31, 1996, the shares held by Mr. Bradshaw, Mrs. Bird and Mr.
Douglass had aggregate market values of $735,000, $630,000 and $420,000,
respectively.
</TABLE>
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<PAGE> 81
The following table sets forth certain information concerning grants of
stock options pursuant to the 1986 Stock Option Plan to the named officers in
1996. No stock appreciation rights ("SARs") were granted in 1996.
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED PER SHARE GRANT DATE
OPTIONS TO EMPLOYEES EXERCISE EXPIRATION PRESENT
NAME GRANTED<F1> IN FISCAL YEAR PRICE DATE VALUE<F2>
---- ----------- -------------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Stanley J. Bradshaw...... 50,000 33.590% $20.620 12/18/2001 $190,900
Anat Bird................ 28,300 19.012% $20.620 12/18/2001 $108,049
Gary W. Douglass......... 17,500 11.755% $20.620 12/18/2001 $ 66,815
Daniel P. Sneed.......... 0 N/A N/A N/A N/A
<FN>
- --------
<F1> Five-year options which are exercisable immediately.
<F2> Based on the Black-Scholes option pricing model adapted for use in valuing
stock options. The actual value, if any, an executive may realize will
depend on the excess of the stock price over the exercise price on the
date the option is exercised, so there is no assurance that the value
realized by an executive will be at or near the value estimated by the
Black-Scholes model. The estimated values under that model are based on
various assumptions, as discussed below.
The Black-Scholes option pricing model used for purposes of the table
above reflects an implied price volatility of 25.41%. The Stock Option
Committee further assumed that the term of the options was five years and
that the then dividend yield of approximately 3.18% would remain constant.
The risk free rate was assumed to be above 6.22% for all relevant periods.
No diminution of value was considered due to the option holder's inability
to transfer his rights under the option agreements.
</TABLE>
The following table sets forth certain information concerning the exercise
of options during 1996 and the number and value of unexercised stock options at
December 31, 1996 held by the named officers. None of the named officers held
any SARs at December 31, 1996 or exercised any SARs during 1996.
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT FY-END OPTIONS AT FY-END<F2>
ACQUIRED VALUE ------------------------------- ------------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stanley J. Bradshaw...... 1,213 $19,990 381,287<F1> 0 $3,724,496 N/A
Anat Bird................ 0 N/A 68,300 0 224,504 N/A
Gary W. Douglass......... 0 N/A 52,500 0 157,900 N/A
Daniel P. Sneed.......... 0 N/A 11,500 0 72,312 N/A
<FN>
- --------
<F1> The difference between the aggregate option exercise price and the fair
market value of the underlying shares on the date of exercise.
<F2> The difference between the aggregate option exercise price and the fair
market value of the underlying shares at December 31, 1996.
</TABLE>
PENSION PLANS
Roosevelt Bank's employees are eligible to participate in the Financial
Institutions Retirement Fund (the "FIRF"), a multiple employer pension plan.
Annual benefits under the FIRF cannot exceed the Service maximum annual benefit
for 1996 of $125,000 under the standard form elected by Roosevelt Bank.
Benefits in excess of this amount are provided to certain executive officers
through a supplemental retirement plan (together with the FIRF, the "Pension
Plans"). Prior to February 1, 1997, benefits under the Pension Plans were
generally payable in straight life annuity payments, and determined by first
multiplying the average of the three highest years of compensation at
71
<PAGE> 82
time of retirement by the number of years of service, and then multiplying that
amount by 2% (the "Old Method"). The following table sets forth annual
pension benefits payable under the Old Method.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
------------------------------------------------------
COMPENSATION 15 20 25 30
------------ --------- --------- --------- ---------
<S> <C> <C> <C> <C>
$125,000 $ 37,500 $ 50,000 $ 62,500 $ 75,000
150,000............ 45,000 60,000 75,000 90,000
175,000............ 52,500 70,000 87,500 105,000
200,000............ 60,000 80,000 100,000 120,000
225,000............ 67,500 90,000 112,500 135,000
250,000............ 75,000 100,000 125,000 150,000
300,000............ 90,000 120,000 150,000 180,000
350,000............ 105,000 140,000 175,000 210,000
400,000............ 120,000 160,000 200,000 240,000
450,000............ 135,000 180,000 225,000 270,000
500,000............ 150,000 200,000 250,000 300,000
550,000............ 165,000 220,000 275,000 330,000
600,000............ 180,000 240,000 300,000 360,000
650,000............ 195,000 260,000 325,000 390,000
700,000............ 210,000 280,000 350,000 420,000
750,000............ 225,000 300,000 375,000 450,000
</TABLE>
Effective February 1, 1997, Roosevelt Bank's method of participation in the
FIRF was amended, replacing the Old Method with the Pension Equity Plan Method
("PEP"), under which benefits will be based upon the average of the three
highest years of compensation at time of retirement and the age of the
employee. Unlike the Old Method, benefits under the PEP are payable in a lump
sum upon termination of employment, determined by multiplying the applicable
annual accrual rate by the average of the three highest years of compensation
at time of retirement. The annual accrual rate is determined as follows:
3% for each year of service from ages 0 through 29, plus
4% for each year of service from ages 30 through 39, plus
5% for each year of service from ages 40 through 49, plus
6% for each year of service from ages 50 through 59, plus
7% for each year of service from ages 60 and over.
In connection with the adoption of the PEP, with respect to benefits
accrued prior to February 1, 1997, each employee will be entitled to receive
the greater of (i) the benefit to which he or she is entitled to receive under
the Old Method earned through February 1, 1997 or (ii) the benefit he or she
would have been entitled to receive if the PEP had been in effect on the
employee's start date under the FIRF. In addition, each employee who had at
least ten years of service under the FIRF as of February 1, 1997 will be
entitled to receive at retirement the greater of (i) the benefit the employee
would have earned under the Old Method if the Old Method had been in effect at
time of retirement or (ii) the benefit earned under the PEP. For purposes of
the Pension Plans, compensation means salary, cash bonus awards and other forms
of cash compensation. Cash compensation does not include employer contributions
pursuant to Roosevelt's and Roosevelt Bank's retirement and benefit plans and
amounts attributable to other miscellaneous benefits received by executive
officers. Benefits under the Pension Plan are not offset by the recipient's
primary Social Security Benefits.
At December 31, 1996, Mr. Bradshaw had 10 years of credited service under
the Pension Plans. Mr. Sneed had approximately 1 1/2 years and Mrs. Bird and
Mr. Douglass each had less than 1 year of credited service under the Pension
Plans at December 31, 1996. Based upon their respective ages, years of service,
annual compensation and benefits accrued as of December 31, 1996, the estimated
annual benefits payable upon retirement at normal
72
<PAGE> 83
retirement age to each of Mr. Bradshaw, Mrs. Bird, Mr. Douglass and Mr. Sneed
are $41,846, $1,250, $2,250 and $4,430, respectively.
DIRECTOR COMPENSATION
Fees. Directors' fees are paid to non-employee directors only, in the
amount of $2,083 per month plus an additional $500 for each regular meeting
attended, and $1,000 per special board meeting attended in person or $450 for
participation in a special meeting by telephone. Mr. Breeden received an
additional $1,000 per month for his service as Chairman, in which capacity he
served until April 1996. Non-employee members of Roosevelt Bank's Audit and
Compensation Committees and Roosevelt's Stock Option Committee (except for the
chairman of each such committee) receive $1,000 per meeting attended in person
and $300 for participation by telephone. The chairman of each committee
receives $1,250 for each meeting attended in person and $300 for participation
by telephone. The Chairman of Roosevelt's Executive Committee (if not an
employee) receives $2,500 for each meeting attended while each other committee
member receives $1,250 for each meeting attended in person and $300 for
participation by telephone.
Retirement Pension Plan for Outside Directors. The Roosevelt Board has
adopted a non-qualified unfunded Retirement Pension Plan for Outside Directors
(the "Retirement Plan"), which was ratified by stockholders at Roosevelt's
1989 Annual Meeting of Stockholders. The Retirement Plan provides for payment
of a pension to former non-employee directors beginning at the later of age 65
or the date upon which service as a director ceases.
Under the terms of the Retirement Plan, benefits are payable in monthly
installments to the retired director (or such director's surviving spouse) for
15 years. In order to be eligible to receive the pension benefit, the director
must have served as a member of the Board of Directors for not less than ten
years.
Directors having ten years of service are entitled to an annual benefit
equal to 40% of the average annual director's fees (exclusive of any special
meeting fees or committee fees) for the three consecutive years in which such
average is greater than the average of any other three consecutive years. The
benefit level increases by an additional 6% of average annual director's fees,
as previously defined, for each additional year of service, provided that the
maximum benefit to any participant will not exceed 70% of such participant's
average annual director's fees. Accordingly, maximum benefits under the
Retirement Plan are earned and vested after 15 years of service. Messrs.
Turley, Liggett, Clayton and Vitt have more than 15 years of service. The years
of service applicable to Messrs. Beumer, Breeden, Dyer and Gammon are eleven,
seven, three and three, respectively.
COMPENSATION AND STOCK OPTION COMMITTEE REPORT
Executive compensation is determined jointly by the Compensation Committee
of Roosevelt Bank's Board of Directors and the Stock Option Committee of
Roosevelt's Board of Directors (collectively the "Committee"). In fiscal
1996, the Committee was composed of four members, all being non-employee
directors: Messrs. Beumer, Breeden, Clayton and Dyer. The Committee recommends
salaries, bonuses and grants under the Stock Option Plan for approval by the
Board of Directors.
Compensation Philosophy Regarding Executive Officers. Roosevelt Bank's
executive compensation policy is designed to attract and retain quality
management by providing competitive levels of compensation which relate pay to
Roosevelt's performance, reward above-average performance, and acknowledge
significant individual contributions to Roosevelt's growth and profitability.
For the purpose of evaluating the compensation of executive officers, the
Committee maintains a peer group each year made up of well capitalized,
Midwestern publicly traded bank and thrift institution holding companies of
similar size (the "Peer Group").
Salary levels for executive officers are positioned to generally not exceed
the average salary levels paid by the Peer Group over time. Annual cash bonuses
paid to executive officers are intended to offer executives the opportunity to
earn total compensation amounts which are above the average of the Peer Group
when the average performance for that year exceeds the average performance of
the Peer Group. Annual cash bonuses are discretionary and are determined by the
Committee after evaluating performance relative to the following criteria: (i)
the performance of the Common Stock relative to the S&P 500 Stock Index, the
SNL Securities Bank Index (the "SNL Bank Index") and the average performance
of the common stock of the Peer Group; (ii) the return on stockholders' equity
for the year, computed both with and without nonrecurring items; (iii) an
assessment of the quality of
73
<PAGE> 84
Roosevelt's assets; and (iv) the change in the "net market value" of
Roosevelt. Depending upon Roosevelt's performance in any particular year,
Roosevelt's executives may be paid more or less than executives of the Peer
Group. In years when Roosevelt's performance is significantly below the norms
of the Peer Group, the Committee intends to provide for a total cash
compensation which is well below the average for the peer group.
Roosevelt's long-term incentive program is designed to encourage stock
ownership by Roosevelt's executives and strengthen their commitment to
increasing Roosevelt's stockholder value. Accordingly, the Committee has
implemented a long-term incentive program composed of periodic stock option
grants to executives and the opportunity to receive stock after a ten-year
period wherein Roosevelt's Common Stock has achieved a 15% or greater compound
annual return. This long-term incentive was implemented in the form of
restricted stock which will not vest unless and until the ten-year performance
goal is achieved or in certain cases, upon a change in control of Roosevelt.
Compensation paid to Roosevelt's executive officers in 1996, as shown in
the foregoing tables, was comprised of the following elements: base salary,
contributions made under Roosevelt Bank's 401(k) Plan, cash bonus for 1996 paid
in 1996, and contributions under the ESOP. As noted above, effective February
1, 1997, the ESOP was terminated. In addition, in 1996 the Compensation
Committee, in concert with the Stock Option Committee, awarded stock options to
certain of the executive officers pursuant to the Stock Option Plan. As noted
above, the 1986 Stock Option Plan terminated on January 29, 1997. The 1996
bonus and award of the options were based upon Roosevelt's performance relative
to its Peer Group and brought the respective executives' 1996 cash compensation
up to an amount which was below average for the Peer Group for 1995.
Deductibility of Executive Compensation. Recent amendments to federal tax
laws limit the deduction a publicly-held company is allowed for compensation
paid to its chief executive officer and its four other most highly compensated
executive officers. Generally, amounts in excess of $1 million (other than
performance-based compensation) paid in any tax year to a covered executive
cannot be deducted. Although the current compensation of each of Roosevelt's
executive officers is well below the $1 million threshold, the Committee will,
to the extent it would become an issue in the future, consider ways to maximize
the deductibility of executive compensation, while retaining the discretion the
Committee deems necessary to compensate executive officers in a manner
commensurate with performance and the competitive environment for executive
talent.
Chief Executive Officer's Compensation. The Chief Executive Officer's base
salary for 1996 was $440,000, which was well below the average salary paid to
Peer Group chief executive officers during 1994. The Chief Executive Officer's
base salary for 1997 was set at $500,000, which was well below the average paid
to Peer Group Chief Executive Officers during 1995.
The criteria applied to determine the annual cash bonus and long-term
incentive awards for the Chief Executive Officer is largely the same as for the
other executive officers. The Chief Executive Officer's bonus of $250,000
brought 1996 cash compensation up to an amount which was 10% below the average
received during 1995 by the Peer Group Chief Executive Officers. The stock
option grant of 50,000 shares carried an economic value comparable to the cash
bonus.
Robert M. Clayton II, Chairman
Douglas T. Breeden
Richard E. Beumer
Bradbury Dyer III
74
<PAGE> 85
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
The line graph below compares the cumulative total stockholder return on
Roosevelt Common Stock to the cumulative total return of the S&P Composite-500
Stock Index and the SNL Bank Index for the period December 31, 1991 through
December 31, 1996. The information assumes that $100 was invested on December
31, 1991 and that all dividends were reinvested.
ROOSEVELT FINANCIAL GROUP, INC.
TOTAL RETURN PERFORMANCE
[GRAPH]
<TABLE>
<CAPTION>
PERIOD ENDING
-----------------------------------------------------------------------------------
INDEX 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
----- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Roosevelt Financial Group, Inc......... 100.00 267.52 414.33 448.43 598.76 671.53
S&P 500................................ 100.00 107.62 118.47 120.03 165.13 202.89
SNL Banks (All) Index.................. 100.00 136.96 150.03 146.62 228.28 318.53
</TABLE>
EMPLOYMENT AGREEMENTS
On the date of execution of the Merger Agreement, Mr. Bradshaw, Mrs. Bird
and Mr. Douglass each entered into employment agreements with MBI and
Roosevelt. For a description of the terms and conditions of such agreements,
see "TERMS OF THE PROPOSED MERGER--Interests of Certain Persons in the
Merger."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Prior to the enactment on August 9, 1989 of FIRREA, Roosevelt Bank, like
many savings associations, followed a policy of granting loans with favorable
interest rates to eligible officers, directors and employees, generally for the
financing of their personal residences and for consumer purposes. Under FIRREA,
all loans and extensions of credit to the executive officers and directors of
Roosevelt Bank and their related entities must be on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with other persons. Roosevelt Bank has continued
its policy of granting loans with favorable interest rates only for employees
other than executive officers and directors. The balance at December 31, 1996
of all loans by Roosevelt or its subsidiaries to the directors, executive
officers and other affiliated persons of Roosevelt or of its subsidiaries
totaled $409,315, or .08% of stockholders' equity at that date.
75
<PAGE> 86
In addition, all loans and other comparable transactions between Roosevelt
Bank or Roosevelt and its executive officers, directors, controlling persons,
or affiliated interests of any of the foregoing are subject to approval of a
majority of the disinterested directors of Roosevelt Bank or Roosevelt, as the
case may be.
Set forth below is certain information as of December 31, 1996 as to loans
made by Roosevelt Bank to each of its directors and executive officers whose
aggregate indebtedness to the Bank exceeded $60,000 at any time since January
1, 1996. The loans designated in the table below as residential loans are first
mortgage loans secured by the borrower's current principal place of residence.
<TABLE>
<CAPTION>
LARGEST
AGGREGATE
AMOUNT
OUTSTANDING BALANCE INTEREST
DATE NATURE OF SINCE AS OF RATE AS OF
NAME AND POSITION OF LOAN INDEBTEDNESS 01/01/96 12/31/96 12/31/96
----------------- --------- ----------------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C>
Hiram S. Liggett, Jr..... 12/01/86 Residential $ 88,419 $ 77,435 8.56%
Director
Ronald L. Cawood......... 09/16/92 Residential 189,696 186,445 6.13
Senior Vice President
Terry F. Grzina.......... 12/01/93 Residential 75,801 74,034 4.51
Senior Vice President
Gerald M. Klug<F1>....... 09/04/96 Secured Personal 100,000 70,000 9.00
Senior Vice President
and Controller
<FN>
<F1> Loan made by Missouri State Bank, a wholly-owned subsidiary of Roosevelt.
In addition, Joseph Stieven, a brother-in-law of Mr. Klug, was indebted to
Missouri State Bank in the amount of $750,000 as of December 31, 1996
pursuant to an investment line of credit extended to Mr. Stieven. The rate
of interest charged on such indebtedness is the prime rate plus one
percent.
</TABLE>
For a discussion of certain transactions with Roosevelt Bank involving
Director Breeden, see "--Compensation Committee Interlocks and Insider
Participation."
PROPOSAL III--RATIFICATION OF APPOINTMENT OF AUDITORS
Roosevelt's independent auditors are KPMG Peat Marwick LLP, independent
certified public accountants. At the Annual Meeting, the stockholders will
consider and vote on the ratification of the appointment of KPMG Peat Marwick
LLP as independent auditors for Roosevelt's fiscal year ending December 31,
1997. The Board of Directors has appointed KPMG Peat Marwick LLP to be
Roosevelt's auditors, subject to the ratification of such appointment by the
stockholders.
Representatives of KPMG Peat Marwick LLP are expected to attend the Annual
Meeting to respond to appropriate questions and to make a statement if they so
desire.
The Board of Directors recommends that stockholders vote "FOR" the
ratification of KPMG Peat Marwick LLP as Roosevelt's auditors for the fiscal
year ending December 31, 1997.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires Roosevelt's officers and
directors, and persons owning more than 10% of a registered class of
Roosevelt's equity securities, to file periodic reports of ownership and
changes in ownership with the Commission and to provide Roosevelt with copies
of such reports. Based solely upon information provided to Roosevelt by the
directors and officers subject to Section 16(a), Roosevelt believes that all
filing requirements applicable to its directors and officers were complied with
during 1996, except for the inadvertent failure to timely report one
transaction each by Terry F. Grzina and Gerald M. Klug, both officers of
Roosevelt Bank. Messrs. Grzina and Klug subsequently filed Form 4s to report
the transactions.
76
<PAGE> 87
LEGAL MATTERS
The validity of the MBI Common Stock to be issued in the Merger will be
passed upon by Jon W. Bilstrom, General Counsel and Secretary of MBI, who, as
of May 15, 1997, beneficially owned 29,977 shares of MBI Common Stock and held
options to acquire 36,899 additional shares of MBI Common Stock.
EXPERTS
The consolidated financial statements of MBI as of December 31, 1996, 1995
and 1994, and for each of the years in the three-year period ended December 31,
1996, incorporated by reference in MBI's Annual Report on Form 10-K, and
supplemental consolidated financial statements of MBI as of December 31, 1996,
1995 and 1994, and for each of the years in the three-year period ended
December 31, 1996, contained in MBI's Current Report on Form 8-K dated
May 13, 1997, have been incorporated by reference herein in reliance upon the
reports of KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as
experts in accounting and auditing.
The consolidated financial statements of Roosevelt as of December 31, 1996,
1995 and 1994, and for each of the years in the three-year period ended
December 31, 1996, incorporated by reference in the 1996 Roosevelt Form 10-K
have been incorporated by reference herein in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of such firm as experts in accounting
and auditing.
OTHER MATTERS
The Roosevelt Board, at the date hereof, is not aware of any business to be
presented at the Annual Meeting other than that referred to in the Notice of
Annual Meeting of Stockholders and discussed herein. If any other matter should
properly come before the Annual Meeting, the persons named as proxies will have
discretionary authority to vote the shares represented by proxies in accordance
with their discretion and judgment as to the best interests of Roosevelt.
SHAREHOLDER PROPOSALS
If the Merger is consummated, stockholders of Roosevelt who receive MBI
Common Stock will become shareholders of MBI at the Effective Time. MBI
shareholders may submit to MBI proposals for formal consideration at the 1998
Annual Meeting of MBI's shareholders and inclusion in MBI's proxy statement and
proxy for such meeting. All such proposals must be received in writing by the
Corporate Secretary at Mercantile Bancorporation Inc., P.O. Box 524, St. Louis,
Missouri 63166-0524 by November 22, 1997 in order to be considered for
inclusion in MBI's Proxy Statement and proxy for the 1998 Annual Meeting.
In the event the Merger is not consummated, in order to be eligible for
inclusion in Roosevelt's proxy materials for its next Annual Meeting of
Stockholders, any stockholder proposal to take action at such meeting must be
in writing and received at Roosevelt's main office, 900 Roosevelt Parkway,
Chesterfield, Missouri 63017, no later than January 23, 1998. Any such
proposals shall be subject to the requirements of the proxy rules adopted under
the Exchange Act.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ MARK G. ELLEBRECHT
Mark G. Ellebrecht
Secretary
Chesterfield, Missouri
May 19, 1997
77
<PAGE> 88
ANNEX A
===============================================================================
AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN
MERCANTILE BANCORPORATION INC.,
AS BUYER,
AND
ROOSEVELT FINANCIAL GROUP, INC.,
AS SELLER
----------------------------------------
DATED DECEMBER 22, 1996
===============================================================================
A-1
<PAGE> 89
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and
entered into on December 22, 1996 by and between MERCANTILE BANCORPORATION
INC., a Missouri corporation ("Buyer"), and ROOSEVELT FINANCIAL GROUP, INC.,
a Delaware corporation (together with its predecessors, "Seller").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Buyer is a registered bank holding company under the Bank Holding
Company Act of 1956, as amended (the "Holding Company Act") and a registered
savings and loan holding company under the Home Owners' Loan Act, as amended
("HOLA"); and
WHEREAS, Seller is a registered bank holding company under the Holding
Company Act and a registered unitary savings and loan holding company under
HOLA; and
WHEREAS, the Board of Directors of Seller and the Executive Committee of
the Board of Directors of Buyer have approved the merger (the "Merger") of
Seller with and into Ameribanc, Inc., a Missouri corporation and wholly owned
subsidiary of Buyer ("Merger Sub") pursuant to the terms and subject to the
conditions of this Agreement; and
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"); and
WHEREAS, as a condition to, and immediately after the execution of this
Agreement, Buyer and each director of Seller will enter into Support Agreements
(the "Support Agreements") in the form attached hereto as Exhibit A; and
WHEREAS, as a condition to, and immediately prior to execution of this
Agreement, Buyer and Seller will enter into a stock option agreement (the
"Stock Option Agreement") in the form attached hereto as Exhibit B; and
WHEREAS, the parties desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated by this Agreement.
NOW THEREFORE, in consideration of the premises and the representations,
warranties and agreements herein contained, the parties agree as follows:
ARTICLE I
---------
THE MERGER
1.01. The Merger. Subject to the terms and conditions of this Agreement,
----------
Seller shall be merged with and into Merger Sub in accordance with the Delaware
General Corporation Law (the "DGCL") and the Missouri General and Business
Corporation Law (the "MGBCL") and the separate corporate existence of Seller
shall cease. Merger Sub shall be the surviving corporation of the Merger
(sometimes referred to herein as the "Surviving Corporation") and shall
continue to be governed by the laws of the State of Missouri.
1.02. Closing. The closing (the "Closing") of the Merger shall take place
-------
at 10:00 a.m., local time, on the date that the Effective Time (as defined in
Section 1.03) occurs, or at such other time, and at such place, as Buyer and
Seller shall agree (the "Closing Date").
1.03. Effective Time. The Merger shall become effective on the date and at
--------------
the time (the "Effective Time") on which appropriate documents in respect of
the Merger are filed with the Secretaries of State of the States of Delaware
and Missouri in such form as required by, and in accordance with, the relevant
provisions of the DGCL and MGBCL, respectively. Subject to the terms and
conditions of this Agreement, the Effective Time shall occur on any such date
on or after May 16, 1997 as Buyer shall notify Seller in writing (such notice
to be at least five business days in advance of the Effective Time) but (i) not
earlier than the satisfaction of all conditions set forth in Section 6.01(a)
and 6.01(b) (the "Approval Date") and (ii) subject to clause (i), not later
than the first business day of the first full calendar month commencing at
least five business days after the Approval Date. As soon as practicable
following the Effective Time,
A-2
<PAGE> 90
Buyer and Seller shall cause a certificate or plan of merger reflecting the
terms of this Agreement to be delivered for filing and recordation with other
appropriate state or local officials in the States of Delaware and Missouri in
accordance with the DGCL and the MGBCL, respectively.
1.04. Additional Actions. If, at any time after the Effective Time, Buyer
------------------
or the Surviving Corporation shall consider or be advised that any further
deeds, assignments or assurances or any other acts are necessary or desirable
to (i) vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of Seller or Merger Sub or (ii) otherwise carry out the
purposes of this Agreement, Seller and Merger Sub and each of their respective
officers and directors, shall be deemed to have granted to the Surviving
Corporation an irrevocable power of attorney to execute and deliver all such
deeds, assignments or assurances and to do all acts necessary or desirable to
vest, perfect or confirm title and possession to such rights, properties or
assets in the Surviving Corporation and otherwise to carry out the purposes of
this Agreement, and the officers and directors of the Surviving Corporation are
authorized in the name of Seller or otherwise to take any and all such action.
1.05. Articles of Incorporation and Bylaws. The Articles of Incorporation
------------------------------------
and Bylaws of Merger Sub in effect immediately prior to the Effective Time
shall be the Articles of Incorporation and Bylaws of the Surviving Corporation
following the Merger until otherwise amended or repealed.
1.06. Boards of Directors and Officers. At the Effective Time, the
--------------------------------
directors and officers of Merger Sub immediately prior to the Effective Time
shall be directors and officers, respectively, of the Surviving Corporation
following the Merger; such directors and officers shall hold office in
accordance with the Surviving Corporation's Bylaws and applicable law.
1.07. Conversion of Securities. At the Effective Time, by virtue of the
------------------------
Merger and without any action on the part of Buyer, Seller or the holder of any
of the following securities:
(i) Each share of the common stock, par value $.01 per share, of Merger Sub
that is issued and outstanding immediately prior to the Effective Time shall
remain outstanding and shall be unchanged after the Merger and shall thereafter
constitute all of the issued and outstanding capital stock of the Surviving
Corporation; and
(ii) Each share of the common stock, $.01 par value ("Seller Common
Stock"), of Seller issued and outstanding immediately prior to the Effective
Time, other than any Dissenting Shares (as defined in Section 1.11), shall
cease to be outstanding and shall be converted into and become the right to
receive, at the election of the holder thereof as provided in Section 1.08,
either
(1) .4211 (the "Exchange Ratio") shares of common stock, par value
$5.00 per share ("Buyer Common Stock"), of Buyer and the associated
Rights under the Buyer Rights Agreement as those terms are defined in
Section 3.02 (the "Per Share Stock Consideration"), or
(2) $22.00 in cash (the "Per Share Cash Consideration");
provided that the aggregate number of shares of Buyer Common Stock that shall
be issued in the Merger (the "Stock Amount") shall not exceed (x) 13,042,110
shares less (y) the number of shares of Buyer Common Stock issuable upon
exercise of the Seller Stock Options or restricted stock outstanding as of the
Effective Time.
1.08. Election Procedures. An election form and other appropriate and
-------------------
customary transmittal materials (which shall specify that delivery shall be
effected, and risk of loss and title to the certificates theretofore
representing Seller Common Stock shall pass, only upon proper delivery of such
certificates to an exchange agent designated by Buyer (the "Exchange Agent"))
in such form as Buyer and Seller shall mutually agree ("Election Form") shall
be mailed approximately 25 days prior to the anticipated Effective Time or on
such other date as Buyer and Seller shall mutually agree ("Mailing Date") to
each holder of record of Seller Common Stock as of five business days prior to
the Mailing Date ("Election Form Record Date"). Buyer shall determine the
anticipated Effective Time (the "Anticipated Effective Time") in its sole
discretion and the failure of the Effective Time to occur at the Anticipated
Effective Time for purposes of this Section 1.08 shall not affect the time
periods which are established for purposes of these election procedures.
Each Election Form shall permit the holder (or the beneficial owner through
appropriate and customary documentation and instructions) to elect to receive
only Buyer Common Stock with respect to such holder's Seller
A-3
<PAGE> 91
Common Stock ("Stock Election Shares"), to elect to receive only cash with
respect to such holder's Seller Common Stock ("Cash Election Shares") or to
indicate that such holder makes no election ("No Election Shares"). For
purposes of this Section 1.08, Dissenting Shares shall be treated as Cash
Election Shares but shall not be converted into the Per Share Stock
Consideration or the Per Share Cash Consideration except as provided in Section
1.11.
Any Seller Common Stock with respect to which the holder (or the beneficial
owner, as the case may be) shall not have submitted to the Exchange Agent an
effective, properly completed Election Form on or before 5:00 p.m. on the 20th
day following the Mailing Date (or such other time and date as Buyer and Seller
may mutually agree) (the "Election Deadline") shall be deemed to be "No
Election Shares."
Buyer shall promptly make available one or more Election Forms as may be
reasonably requested by all persons who become holders (or beneficial owners)
of Seller Common Stock between the Election Form Record Date and close of
business on the business day prior to the Election Deadline, and Seller shall
provide to the Exchange Agent all information reasonably necessary for it to
perform as specified herein.
Any such election shall have been properly made only if the Exchange Agent
shall have actually received a properly completed Election Form by the Election
Deadline. An Election Form shall be deemed properly completed only if
accompanied by one or more certificates (or customary affidavits and
indemnification regarding the loss or destruction of such certificates or the
guaranteed delivery of such certificates) representing all shares of Seller
Common Stock covered by such Election Form, together with duly executed
transmittal materials included in the Election Form. Any Election Form may be
revoked or changed by the person submitting such Election Form at or prior to
the Election Deadline. In the event an Election Form is revoked prior to the
Election Deadline, the shares of Seller Common Stock represented by such
Election Form shall become No Election Shares and Buyer shall cause the
certificates representing Seller Common Stock to be promptly returned without
charge to the person submitting the Election Form upon written request to that
effect from the person who submitted the Election Form. Subject to the terms of
this Agreement and of the Election Form, the Exchange Agent shall have
reasonable discretion to determine whether any election, revocation or change
has been properly or timely made and to disregard immaterial defects in the
Election Forms, and any good faith decisions of the Exchange Agent regarding
such matters shall be binding and conclusive. Neither Buyer nor the Exchange
Agent shall be under any obligation to notify any person of any defect in an
Election Form.
1.09. Allocation Procedures. Within ten business days after the Election
---------------------
Deadline, unless the Effective Time has not yet occurred, in which case as soon
thereafter as practicable, Buyer shall cause the Exchange Agent to effect the
allocation among the holders of Seller Common Stock of rights to receive Buyer
Common Stock or cash in the Merger in accordance with the Election Forms as
follows:
(a) Stock Elections Less Than Stock Amount. If the number of shares of
--------------------------------------
Buyer Common Stock that would be issued upon conversion in the Merger of
the Stock Election Shares is less than the Stock Amount, then:
(i) all Stock Election Shares shall be converted into the right to
receive Buyer Common Stock,
(ii) the Exchange Agent shall select first from among the holders of
No Election Shares and then (if necessary) pro rata from among the Cash
Election Shares (excluding Dissenting Shares), a sufficient number of
shares ("Stock Designated Shares") such that the number of shares of
Buyer Common Stock that will be issued in the Merger equals as closely
as practicable the Stock Amount, and all Stock Designated Shares shall
be converted into the right to receive Buyer Common Stock; provided,
--------
however, that Buyer shall have the option, in its sole discretion, to
-------
satisfy some or all of the Stock Designated Shares by similar pro rata
selection in cash in lieu of delivering Buyer Common Stock subject to
the requirement that the Merger continue to qualify as a tax-free
reorganization for purposes of section 368 of the Code, and
(iii) the Cash Election Shares and the No Election Shares which are
not Stock Designated Shares shall be converted into the right to receive
cash;
(b) Stock Elections More Than Stock Amount. If the number of shares of
--------------------------------------
Buyer Common Stock that would be issued upon the conversion into Buyer
Common Stock of the Stock Election Shares is greater than the Stock Amount,
then:
(i) all Cash Election Shares and No Election Shares shall be
converted into the right to receive cash,
A-4
<PAGE> 92
(ii) the Exchange Agent shall select from among the Stock Election
Shares on a pro rata basis, a sufficient number shares ("Cash Designated
Shares") such that the number of shares of Buyer Common Stock that will
be issued in the Merger equals as closely as practicable the Stock
Amount, and all Cash Designated Shares shall be converted into the right
to receive cash, and
(iii) the Stock Election Shares which are not Cash Designated Shares
shall be converted into the right to receive Buyer Common Stock; or
(c) Stock Elections Equal to Stock Amount. If the number of shares of
-------------------------------------
Buyer Common Stock that would be issued upon conversion into Buyer Common
Stock of the Stock Election Shares is equal or nearly equal (as determined
by the Exchange Agent) to the Stock Amount, then subparagraphs (a) and (b)
above and subparagraph (d) below shall not apply and all Stock Election
Shares shall be converted into the right to receive Buyer Common Stock and
all Cash Election Shares and No Election Shares shall be converted into the
right to receive cash; or
(d) Stock Elections and No Elections Equal to Stock Amount. If the
------------------------------------------------------
number of shares of Buyer Common Stock that would be issued upon the
conversion into Buyer Common Stock of the Stock Election Shares and No
Election Shares would equal or nearly equal (as determined by the Exchange
Agent) the Stock Amount, then subparagraphs (a), (b) and (c) above shall
not apply and all Cash Election Shares shall be converted into the right to
receive cash and all Stock Election Shares and No Election Shares shall be
converted into the right to receive Buyer Common Stock.
1.10. Exchange Procedures. (a) In accordance with Section 1.08, holders of
-------------------
record of certificates formerly representing shares of Seller Common Stock (the
"Certificates") shall be instructed to tender such Certificates to Buyer
pursuant to a letter of transmittal that Buyer shall deliver or cause to be
delivered to such holders, which letter of transmittal shall be included within
the election forms distributed pursuant to Section 1.08. Such letters of
transmittal shall specify that risk of loss and title to Certificates shall
pass only upon delivery of such Certificates to Buyer or the Exchange Agent (as
defined below).
(b) Subject to Section 1.12, after the Effective Time, each previous
holder of a Certificate that surrenders such Certificate to the Buyer or,
at the election of Buyer, an exchange agent designated by Buyer (the
"Exchange Agent") will, upon acceptance thereof by Buyer or the Exchange
Agent, be entitled to a certificate or certificates representing the number
of full shares of Buyer Common Stock or cash, as the case may be, into
which the Certificate so surrendered shall have been converted pursuant to
this Agreement and any distribution theretofore declared and not yet paid
with respect to such shares of Buyer Common Stock, without interest.
(c) Buyer or, at the election of Buyer, the Exchange Agent shall accept
Certificates upon compliance with such reasonable terms and conditions as
Buyer or the Exchange Agent may impose to effect an orderly exchange
thereof in accordance with customary exchange practices. Certificates shall
be appropriately endorsed or accompanied by such instruments of transfer as
Buyer or the Exchange Agent may require.
(d) Each outstanding Certificate shall until duly surrendered to Buyer
or the Exchange Agent be deemed to evidence ownership of the consideration
into which the stock previously represented by such Certificate shall have
been converted pursuant to this Agreement.
(e) After the Effective Time, holders of Certificates shall cease to
have rights with respect to the stock previously represented by such
Certificates, and their sole rights shall be to exchange such Certificates
for the consideration provided for in this Agreement. After the Effective
Time, there shall be no further transfer on the records of Seller of
Certificates, and if such Certificates are presented to Seller for
transfer, they shall be cancelled against delivery of the consideration
provided therefor in this Agreement. Buyer shall not be obligated to
deliver the consideration to which any former holder of Seller Common Stock
is entitled as a result of the Merger until such holder surrenders the
Certificates as provided herein. No dividends declared will be remitted to
any person entitled to receive Buyer Common Stock under this Agreement
until such person surrenders the Certificate representing the right to
receive such Buyer Common Stock, at which time such dividends shall be
remitted to such person, without interest and less any taxes that may have
been imposed thereon. Certificates surrendered for exchange by any person
constituting an "affiliate" of Seller for purposes of Rule 145 of the
Securities Act of 1933, as amended (together with the rules and regulations
thereunder, the "Securities Act"), shall not be exchanged for
certificates representing Buyer Common Stock until Buyer has received a
written
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agreement from such person in the form attached as Exhibit C. Neither the
Exchange Agent nor any party to this Agreement nor any affiliate thereof
shall be liable to any holder of stock represented by any Certificate for
any consideration paid to a public official pursuant to applicable
abandoned property, escheat or similar laws. Buyer and the Exchange Agent
shall be entitled to rely upon the stock transfer books of Seller to
establish the identity of those persons entitled to receive consideration
specified in this Agreement, which books shall be conclusive with respect
thereto. In the event of a dispute with respect to ownership of stock
represented by any Certificate, Buyer and the Exchange Agent shall be
entitled to deposit any consideration represented thereby in escrow with an
independent third party and thereafter be relieved with respect to any
claims thereto.
1.11. Dissenting Shares. (a) "Dissenting Shares" means any shares held by
-----------------
any holder who becomes entitled to payment of the fair value of such shares
under the DGCL. Any holders of Dissenting Shares shall be entitled to payment
for such shares only to the extent permitted by and in accordance with the
provisions of the DGCL; provided, however, that if, in accordance with the
-------- -------
DGCL, any holder of Dissenting Shares shall forfeit such right to payment of
the fair value of such shares, such shares shall thereupon be deemed to have
been converted into and to have become exchangeable for, as of the Effective
Time, the right to receive the consideration provided in this
Article I.
(b) Seller shall give Buyer (i) prompt notice of any written objections
to the Merger and any written demands for the payment of the fair value of
any shares, withdrawals of such demands, and any other instruments served
pursuant to the DGCL received by Seller and (ii) the opportunity to
participate in all negotiations and proceedings with respect to such
demands under the DGCL. Seller shall not voluntarily make any payment with
respect to any demands for payment of fair value and shall not, except with
the prior written consent of Buyer, settle or offer to settle any such
demands.
1.12. No Fractional Shares. Notwithstanding any other provision of this
--------------------
Agreement, neither certificates nor scrip for fractional shares of Buyer Common
Stock shall be issued in the Merger. Each holder who otherwise would have been
entitled to a fraction of a share of Buyer Common Stock shall receive in lieu
thereof cash (without interest) in an amount determined by multiplying the
fractional share interest to which such holder would otherwise be entitled by
the Closing Price per share of Buyer Common Stock on the last business day
preceding the Effective Time. With respect to a share of stock, "Closing
Price" shall mean: the closing price as reported on the Consolidated Tape (as
reported in The Wall Street Journal or in the absence thereof, by any other
-----------------------
authoritative source). No such holder shall be entitled to dividends, voting
rights or any other rights in respect of any fractional share.
1.13. Anti-Dilution Adjustments. If prior to the Effective Time Buyer shall
-------------------------
declare a stock dividend or make distributions upon or subdivide, split up,
reclassify or combine or make other similar change to Buyer Common Stock,
exchange Buyer Common Stock for a different number or kind of shares or
securities or declare a dividend or make a distribution on Buyer Common Stock
or on any security convertible into Buyer Common Stock, or is involved in any
transaction resulting in any of the foregoing (including any exchange of Buyer
Common Stock for a different number or kind of shares or securities),
appropriate adjustment or adjustments will be made to the Exchange Ratio.
1.14. Reservation of Right to Revise Transaction. Buyer may at any time
------------------------------------------
change the method of effecting the acquisition of Seller or Seller's
Subsidiaries by Buyer and Seller shall cooperate in such efforts (including
without limitation (a) the provisions of this Article I and (b) causing the
merger of Roosevelt Bank, a wholly owned subsidiary of Seller ("Seller Bank")
and/or any of the Banks (as defined herein) with any depository institution
which is a Subsidiary of Buyer (any such merger together with the Merger being
referred to herein as the "Transactions")) if and to the extent it deems such
change to be desirable, including without limitation to provide for a merger of
Seller directly into Buyer, in which Buyer is the surviving corporation,
provided, however, that no such change shall (A) alter or change the amount or
- -------- -------
kind of consideration to be issued to holders of Seller Common Stock as
provided for in this Agreement (the "Merger Consideration"), (B) adversely
affect the tax treatment to Seller's stockholders as a result of receiving the
Merger Consideration or (C) materially delay receipt of any approval referred
to in Section 6.01(b) or the consummation of the transactions contemplated by
this Agreement.
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ARTICLE II
----------
REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER
Seller represents and warrants to and covenants with Buyer as follows:
2.01. Organization and Authority. Seller is a corporation duly organized,
--------------------------
validly existing and in good standing under the laws of the State of Delaware
and is duly qualified to do business and is in good standing in all
jurisdictions where its ownership or leasing of property or the conduct of its
business requires it to be so qualified, except as set forth on Schedule 2.01
and except where the failure to be so qualified would not have a material
adverse effect on the financial condition, results of operations or business
(collectively, the "Condition") of Seller and its Subsidiaries, taken as a
whole, and has corporate power and authority to own its properties and assets
and to carry on its business as it is now being conducted. Seller is registered
as a bank holding company with the Board of Governors of the Federal Reserve
System (the "Board") under the Holding Company Act and as a unitary savings
and loan holding company with the Office of Thrift Supervision (the "OTS")
under HOLA. True and complete copies of the Certificate of Incorporation and
the Bylaws of Seller and, to the extent requested in writing by Buyer, of the
articles of incorporation and bylaws of the Seller Subsidiaries (as defined in
Section 2.02), each as in effect on the date of this Agreement, have been
provided to Buyer.
2.02. Subsidiaries. Schedule 2.02 sets forth, among other things, a
------------
complete and correct list of all of Seller's Subsidiaries (each a "Seller
Subsidiary" and collectively the "Seller Subsidiaries"), all outstanding
Equity Securities of each of which, except as set forth on Schedule 2.02, are
owned directly or indirectly by Seller. "Equity Securities" of an issuer
means capital stock or other equity securities of such issuer, options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, shares of any
capital stock or other Equity Securities of such issuer, or contracts,
commitments, understandings or arrangements by which such issuer is or may
become bound to issue additional shares of its capital stock or other Equity
Securities of such issuer, or options, warrants, scrip or rights to purchase,
acquire, subscribe to, calls on or commitments for any shares of its capital
stock or other Equity Securities. Except as set forth on Schedule 2.02, all of
the outstanding shares of capital stock of the Seller Subsidiaries are validly
issued, fully paid and nonassessable, and those shares owned by Seller are
owned free and clear of any lien, claim, charge, option, encumbrance,
agreement, mortgage, pledge, security interest or restriction (a "Lien") with
respect thereto. Each of the Seller Subsidiaries is a corporation, savings bank
or bank and trust company duly incorporated or organized, validly existing, and
in good standing under the laws of its jurisdiction of incorporation or
organization, and has corporate power and authority to own or lease its
properties and assets and to carry on its business as it is now being
conducted. Each of the Seller Subsidiaries is duly qualified to do business in
each jurisdiction where its ownership or leasing of property or the conduct of
its business requires it so to be qualified, except where the failure to so
qualify would not have a material adverse effect on the Condition of Seller and
its Subsidiaries, taken as a whole. Except for the Equity Securities of Seller
Bank of which Seller owns 100% and except as set forth on Schedule 2.02, Seller
does not own beneficially, directly or indirectly, any shares of any class of
Equity Securities or similar interests of any corporation, bank, business
trust, association or similar organization. Seller Bank is chartered by the
OTS. The deposits of Seller Bank are insured by the Savings Association
Insurance Fund ("SAIF") or the Bank Insurance Fund ("BIF"). The place and
type of charter and the applicable insurance fund for each of Seller's other
Subsidiaries which are financial institutions (the "Banks") are set forth on
Schedule 2.02. Except as set forth on Schedule 2.02, neither Seller nor any
Seller Subsidiary holds any interest in a partnership or joint venture of any
kind.
2.03. Capitalization. The authorized capital stock of Seller consists of
--------------
(i) 90,000,000 shares of Seller Common Stock, of which, as of December 20,
1996, 44,147,886 shares were issued and outstanding and (ii) 1,000,000 shares
of Class I serial preferred stock, par value $.01 per share, of which, as of
December 20, 1996, 999,100 shares were issued and outstanding, and (iii)
2,000,000 shares of Class II serial preferred stock, no par value, of which, as
of December 20, 1996, 289,725 shares were issued and outstanding (clauses (ii)
and (iii) together, "Seller Preferred Stock"). As of December 20, 1996,
Seller had reserved 4,650,000 shares of Seller Common Stock for issuance under
Seller's stock option and incentive plans, a list of which is set forth on
Schedule 2.03 (the "Seller Stock Plans"), pursuant to which options ("Seller
Stock Options") covering 1,176,993 shares of Seller Common Stock were
outstanding as of December 20, 1996. Except as set forth on Schedule 2.03,
since December 20, 1996, no Equity Securities of Seller have been issued other
than shares of Seller Common Stock which may have been issued upon the exercise
of Seller Stock Options. Except as set forth above, there are no other Equity
Securities of Seller outstanding. All of the issued and outstanding shares of
Seller Common Stock are validly issued, fully paid, and nonassessable, and have
not been issued
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in violation of any preemptive right of any stockholder of Seller. Each share
of Seller Preferred Stock may be called for redemption on and after May 16,
1997. Since December 20, 1996, Seller has not granted any options or similar
rights pursuant to which shares of Seller Common Stock may be issued and has
not issued any shares of Seller Common Stock.
2.04. Authorization. (a) Except as set forth on Schedule 2.04A, Seller has
-------------
the corporate power and authority to enter into this Agreement and, subject to
the approval of this Agreement by the stockholders of Seller, to carry out its
obligations hereunder. The only stockholder vote required for Seller to approve
this Agreement is the affirmative vote of the holders of at least a majority of
the shares of Seller Common Stock entitled to vote at a meeting called for such
purpose. The execution, delivery and performance of this Agreement by Seller
and the consummation by Seller of the transactions contemplated hereby have
been duly authorized by the Board of Directors of Seller. Subject to approval
by the stockholders of Seller, this Agreement is a valid and binding obligation
of Seller enforceable against Seller in accordance with its terms.
(b) Except as set forth on Schedule 2.04B, neither the execution nor
delivery nor performance by Seller of this Agreement, nor the consummation by
Seller of the transactions contemplated hereby, nor compliance by Seller with
any of the provisions hereof, will (i) violate, conflict with, or result in a
breach of any provisions of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result
in the termination of, or accelerate the performance required by, or result in
a right of termination or acceleration of, or result in the creation of, any
Lien upon any of the material properties or assets of Seller or any Seller
Subsidiary under any of the terms, conditions or provisions of (x) its articles
or certificate of incorporation or bylaws or (y) any material note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Seller or any Seller Subsidiary is a party or
by which it may be bound, or to which Seller or any Seller Subsidiary or any of
the material properties or assets of Seller or any Seller Subsidiary may be
subject, or (ii) subject to compliance with the statutes and regulations
referred to in paragraph (c) of this Section 2.04, to the best knowledge of
Seller, violate any judgment, ruling, order, writ, injunction, decree, statute,
rule or regulation applicable to Seller or any Seller Subsidiary or any of
their respective material properties or assets.
(c) Other than in connection or in compliance with the provisions of the
DGCL, the MGBCL, the Securities Act, the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder (the "Exchange Act"), the
securities or blue sky laws of the various states or filings, consents,
reviews, authorizations, approvals or exemptions required under the Holding
Company Act, and the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the
"HSR Act"), or any required approvals or filings pursuant to any state
statutes or regulations applicable to Seller, Buyer or their respective
Subsidiaries with respect to the transactions contemplated by this Agreement,
no notice to, filing with, exemption or review by, or authorization, consent or
approval of, any public body or authority is necessary for the consummation by
Seller of the transactions contemplated by this Agreement.
2.05. Seller Financial Statements. The consolidated balance sheets of
---------------------------
Seller and its Subsidiaries as of December 31, 1995, 1994 and 1993 and related
consolidated statements of income, cash flows and changes in stockholders'
equity for each of the three years in the three-year period ended December 31,
1995, together with the notes thereto, audited by KPMG Peat Marwick LLP and
included in an annual report on Form 10-K (including amendments thereto) as
filed with the Securities and Exchange Commission (the "SEC"), and the
unaudited consolidated balance sheets of Seller and its Subsidiaries as of
March 31, June 30, and September 30, 1996 and the related unaudited
consolidated statements of income and cash flows for the periods then ended,
together with the notes thereto, included in quarterly reports on Form 10-Q
(including amendments thereto) (each a "Seller Form 10-Q") as filed with the
SEC (collectively, the "Seller Financial Statements"), except as set forth on
Schedule 2.05, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis ("GAAP"), present fairly
the consolidated financial position of Seller and its Subsidiaries at the dates
and the consolidated results of operations, cash flows and changes in
stockholders' equity of Seller and its Subsidiaries for the periods stated
therein and are derived from the books and records of Seller and its
Subsidiaries, which are complete and accurate in all material respects and have
been maintained in all material respects in accordance with applicable laws and
regulations. Except as set forth on Schedule 2.05, neither Seller nor any of
its Subsidiaries has any material contingent liabilities that are not reflected
in the Seller Reports (defined below) or disclosed in the financial statements
described above.
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2.06. Seller Reports. Except as set forth on Schedule 2.06, since January
--------------
1, 1993, each of Seller and the Seller Subsidiaries has filed all material
reports, registrations and statements, together with any required material
amendments thereto, that it was required to file with (i) the SEC, including,
but not limited to, Forms 10-K, Forms 10-Q, Forms 8-K and proxy statements,
(ii) the OTS, (iii) the FDIC, (iv) the Board and (v) any other federal, state,
municipal, local or foreign government, securities, banking, savings and loan,
insurance and other governmental or regulatory authority and the agencies and
staffs thereof (the entities in the foregoing clauses (i) through (v) being
referred to herein collectively as the "Regulatory Authorities" and
individually as a "Regulatory Authority"). All such reports and statements
filed with any such Regulatory Authority are collectively referred to herein as
the "Seller Reports." As of its respective date, each Seller Report complied
in all material respects with all the rules and regulations promulgated by the
applicable Regulatory Authority and did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
2.07. Properties and Leases. Except as set forth on Schedule 2.07 or as may
---------------------
be reflected in the Seller Financial Statements, except for any Lien for
current taxes not yet delinquent and except with respect to assets classified
as real estate owned, Seller and its Subsidiaries have good title free and
clear of any material Lien to all the real and personal property reflected in
Seller's consolidated balance sheet as of September 30, 1996 included in the
most recent Seller Form 10-Q and, in each case, all real and personal property
acquired since such date, except such real and personal property as has been
disposed of in the ordinary course of business. All leases material to Seller
or any Seller Subsidiary pursuant to which Seller or any Seller Subsidiary, as
lessee, leases real or personal property, are valid and effective in accordance
with their respective terms, and there is not, under any of such leases, any
material existing default by Seller or any Seller Subsidiary or any event
which, with notice or lapse of time or both, would constitute such a material
default. Substantially all of Seller's and Seller Subsidiaries' buildings,
structures and equipment in regular use have been well maintained and are in
good and serviceable condition, normal wear and tear excepted.
2.08. Taxes. Except as set forth on Schedule 2.08 or except as previously
-----
disclosed to Buyer, Seller and each Seller Subsidiary have timely filed or will
timely (including extensions) file all material tax returns required to be
filed at or prior to the Closing Date ("Seller Returns"). Each of Seller and
its Subsidiaries has paid, or set up adequate reserves on the Seller Financial
Statements for the payment of, all taxes required to be paid in respect of the
periods covered by such returns and has set up adequate reserves on the most
recent financial statements Seller has filed under the Exchange Act for the
payment of all taxes anticipated to be payable in respect of all periods up to
and including the latest period covered by such financial statements. Neither
Seller nor any Seller Subsidiary will have any liability material to the
Condition of Seller and the Seller Subsidiaries, taken as a whole, for any such
taxes in excess of the amounts so paid or reserves so established and no
material deficiencies for any tax, assessment or governmental charge have been
proposed, asserted or assessed (tentatively or definitely) against any of
Seller or any Seller Subsidiary which would not be covered by existing
reserves. Neither Seller nor any Seller Subsidiary is delinquent in the payment
of any material tax, assessment or governmental charge, nor, except as
previously disclosed, has it requested any extension of time within which to
file any tax returns in respect of any fiscal year which have not since been
filed and no requests for waivers of the time to assess any tax are pending.
The federal and state income tax returns of Seller and the Seller Subsidiaries
have been audited and settled by the Internal Revenue Service (the "IRS") or
appropriate state tax authorities for all periods ended through December 31,
1991 or the period for assessment of taxes in respect of such periods has
expired. There is no deficiency or refund litigation or matter in controversy
with respect to Seller Returns. Neither Seller nor any Seller Subsidiary has
extended or waived any statute of limitations on the assessment of any tax due
that is currently in effect.
2.09. Material Adverse Change. Since September 30, 1996, there has been no
-----------------------
material adverse change in the Condition of Seller and its Subsidiaries, taken
as a whole, except as may have resulted or may result from changes to laws and
regulations or changes in economic conditions applicable to banking and thrift
institutions generally or in general levels of interest rates affecting banking
and thrift institutions generally.
2.10. Commitments and Contracts. (a) Except as set forth on Schedule 2.10A,
-------------------------
neither Seller nor any Seller Subsidiary is a party or subject to any of the
following (whether written or oral, express or implied):
(i) any material agreement, arrangement or commitment (A) not made in
the ordinary course of business or (B) pursuant to which Seller or any of
its Subsidiaries is or may become obligated to invest in or contribute
capital to any Seller Subsidiary;
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(ii) any agreement, indenture or other instrument not disclosed in the
Seller Financial Statements relating to the borrowing of money by Seller or
any Seller Subsidiary or the guarantee by Seller or any Seller Subsidiary of
any such obligation (other than trade payables or instruments related to
transactions entered into in the ordinary course of business by any Seller
Subsidiary, such as deposits and Fed Funds borrowings);
(iii) any contract, agreement or understanding with any labor union or
collective bargaining organization;
(iv) any contract containing covenants which limit the ability of Seller
or any Seller Subsidiary to compete in any line of business or with any
person or which involve any restriction of the geographical area in which,
or method by which, Seller or any Seller Subsidiary may carry on its
business (other than as may be required by law or any applicable Regulatory
Authority);
(v) any other contract or agreement which is a "material contract"
within the meaning of Item 601(b)(10) of Regulation S-K promulgated by the
SEC; or
(vi) any lease with annual rental payments aggregating $250,000 or more.
(b) Neither Seller nor any Seller Subsidiary is in violation of its charter
documents or bylaws or in default under any material agreement, commitment,
arrangement, lease, insurance policy, or other instrument, whether entered into
in the ordinary course of business or otherwise and whether written or oral,
and there has not occurred any event that, with the lapse of time or giving of
notice or both, would constitute such a default, except, in all cases, where
such default would not have a material adverse effect on the Condition of
Seller and its Subsidiaries, taken as a whole.
2.11. Litigation and Other Proceedings. Except as set forth on Schedule
--------------------------------
2.11, neither Seller nor any Seller Subsidiary is a party to any pending or, to
the best knowledge of Seller, threatened claim, action, suit, investigation or
proceeding, or is subject to any order, judgment or decree, except for matters
which, in the aggregate, will not have, or reasonably could not be expected to
have, a material adverse effect on the Condition of Seller and its
Subsidiaries, taken as a whole, or which purports or seeks to enjoin or
restrain the transactions contemplated by this Agreement. Without limiting the
generality of the foregoing, as of the date of this Agreement, there are no
actions, suits, or proceedings pending or, to the best knowledge of Seller,
threatened against Seller or any Seller Subsidiary or any of their respective
officers or directors by any stockholder of Seller or any Seller Subsidiary (or
any former stockholder of Seller or any Seller Subsidiary) or involving claims
under the Securities Act, the Exchange Act, the Community Reinvestment Act of
1977, as amended, or the fair lending laws.
2.12. Insurance. Each of Seller and its Subsidiaries has taken all
---------
requisite action (including without limitation the making of claims and the
giving of notices) pursuant to its directors' and officers' liability insurance
policy or policies in order to preserve all rights thereunder with respect to
all matters (other than matters arising in connection with this Agreement and
the transactions contemplated hereby) occurring prior to the Effective Time
that are known to Seller, except for such matters which, individually or in the
aggregate, will not have and reasonably could not be expected to have a
material adverse effect on the Condition of Seller and its Subsidiaries, taken
as a whole. Set forth on Schedule 2.12 is a list of all insurance policies
maintained by or for the benefit of Seller or its Subsidiaries or their
directors, officers, employees or agents.
2.13. Compliance with Laws. (a) Except as set forth on Schedule 2.13A,
--------------------
Seller and each of its Subsidiaries have all permits, licenses, authorizations,
orders and approvals of, and have made all filings, applications and
registrations with, all Regulatory Authorities that are required in order to
permit them to own or lease their properties and assets and to carry on their
business as presently conducted and that are material to the business of Seller
and its Subsidiaries; all such permits, licenses, certificates of authority,
orders and approvals are in full force and effect and, to the best knowledge of
Seller, no suspension or cancellation of any of them is threatened; and all
such filings, applications and registrations are current.
(b) Except as set forth on Schedule 2.13B and except for failures to comply
or defaults which individually or in the aggregate would not have a material
adverse effect on the Condition of Seller and its Subsidiaries, taken as a
whole, (i) each of Seller and its Subsidiaries has complied with all laws,
regulations and orders (including without limitation zoning ordinances,
building codes, the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and securities, tax, environmental, civil rights, and occupational
health and safety laws and regulations and including without limitation in the
case of any Seller Subsidiary that is a bank or savings association, banking
organization, banking corporation or trust company, all statutes, rules,
regulations and policy statements pertaining to
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the conduct of a banking, deposit-taking, lending or related business, or to
the exercise of trust powers) and governing instruments applicable to them and
to the conduct of their business, and (ii) neither Seller nor any Seller
Subsidiary is in default under, and no event has occurred which, with the lapse
of time or notice or both, could result in the default under, the terms of any
judgment, order, writ, decree, permit, or license of any Regulatory Authority
or court, whether federal, state, municipal, or local and whether at law or in
equity. Except as set forth on Schedule 2.13B, as of the date of this
Agreement, neither Seller nor any Seller Subsidiary is subject to or reasonably
likely to incur a liability as a result of its ownership, operation, or use of
any Property (as defined below) of Seller (whether directly or, to the best
knowledge of Seller, as a consequence of such Property being part of the
investment portfolio of Seller or any Seller Subsidiary) (A) that is
contaminated by or contains any hazardous waste, toxic substance, or related
materials, including without limitation asbestos, PCBs, pesticides, herbicides,
and any other substance or waste that is hazardous to human health or the
environment (collectively, a "Toxic Substance"), or (B) on which any Toxic
Substance has been stored, disposed of, placed, or used in the construction
thereof. "Property" of a person shall include all property (real or personal,
tangible or intangible) owned or controlled by such person, including without
limitation property under foreclosure, property held by such person or any
Subsidiary of such person in its capacity as a trustee and property in which
any venture capital or similar unit of such person or any Subsidiary of such
person has an interest. Except as set forth on Schedule 2.13B, no claim,
action, suit, or proceeding is pending against Seller or any Seller Subsidiary
relating to Property of Seller before any court or other Regulatory Authority
or arbitration tribunal relating to hazardous substances, pollution, or the
environment, and there is no outstanding judgment, order, writ, injunction,
decree, or award against or affecting Seller or any Seller Subsidiary with
respect to the same. Except for statutory or regulatory restrictions of general
application, no Regulatory Authority has placed any restriction on the business
of Seller or any Seller Subsidiary which reasonably could be expected to have a
material adverse effect on the Condition of Seller and its Subsidiaries, taken
as a whole.
(c) From and after January 1, 1993, neither Seller nor any Seller
Subsidiary has received any notification or communication which has not been
resolved from any Regulatory Authority (i) asserting that any Seller or any
Subsidiary of Seller, is not in substantial compliance with any of the
statutes, regulations or ordinances that such Regulatory Authority enforces,
except with respect to matters which (A) are set forth on Schedule 2.13C or in
any writing previously furnished to Buyer and (B) reasonably could not be
expected to have a material adverse effect on the Condition of Seller and its
Subsidiaries, taken as a whole, (ii) threatening to revoke any license,
franchise, permit or governmental authorization that is material to the
Condition of Seller and its Subsidiaries, taken as a whole, including without
limitation such company's status as an insured depositary institution under the
Federal Deposit Insurance Act, or (iii) requiring or threatening to require
Seller or any of its Subsidiaries, or indicating that Seller or any of its
Subsidiaries may be required, to enter into a cease and desist order, agreement
or memorandum of understanding or any other agreement restricting or limiting
or purporting to direct, restrict or limit in any manner the operations of
Seller or any of its Subsidiaries, including without limitation any restriction
on the payment of dividends. No such cease and desist order, agreement or
memorandum of understanding or other agreement is currently in effect.
(d) Except as set forth on Schedule 2.17D, neither Seller nor any Seller
Subsidiary is required by Section 32 of the Federal Deposit Insurance Act to
give prior notice to any 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.
2.14. Labor. No work stoppage involving Seller or any Seller Subsidiary, is
-----
pending or, to the best knowledge of Seller, threatened which reasonably could
be expected to have a material adverse effect on the Condition of Seller and
its Subsidiaries, taken as a whole. Neither Seller nor any Seller Subsidiary is
involved in, or, to the best knowledge of Seller, threatened with or affected
by, any labor dispute, arbitration, lawsuit or administrative proceeding which
reasonably could be expected to have a material adverse affect on the Condition
of Seller and its Subsidiaries, taken as a whole. Employees of neither Seller
nor any Seller Subsidiary, are represented by any labor union or any collective
bargaining organization.
2.15. Material Interests of Certain Persons. (a) Except as set forth in
-------------------------------------
Seller's Proxy Statement for its 1996 Annual Meeting of Stockholders, to the
best knowledge of Seller, no officer or director of Seller or any Subsidiary of
Seller, or any "associate" (as such term is defined in Rule l4a-1 under the
Exchange Act) of any such officer or director, has any material interest in any
material contract or property (real or personal, tangible or intangible), used
in, or pertaining to the business of, Seller or any Subsidiary of Seller, which
in the case of Seller is required to be disclosed by Item 404
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of Regulation S-K promulgated by the SEC or in the case of any such Subsidiary
would be required to be so disclosed if such Subsidiary had a class of
securities registered under Section 12 of the Exchange Act.
(b) Except as set forth in Seller's Proxy Statement for its 1996 Annual
Meeting of Stockholders or on Schedule 2.15B, there are no loans from Seller or
any Seller Subsidiary to any present officer, director, employee or any
associate or related interest of any such person which was or would be required
under any rule or regulation to be approved by or reported to Seller's or
Seller Subsidiary's Board of Directors ("Insider Loans"). All outstanding
Insider Loans from Seller or any Seller Subsidiary were approved by or reported
to the appropriate board of directors in accordance with applicable law and
regulations.
2.16. Allowance for Loan and Lease Losses; Nonperforming Assets. (a) The
---------------------------------------------------------
allowances for loan and lease losses contained in the Seller Financial
Statements were established in accordance with the past practices and
experiences of Seller and its Subsidiaries, and the allowance for loan losses
shown on the consolidated condensed balance sheet of Seller and its
Subsidiaries contained in the most recent Seller Form 10-Q is adequate in all
material respects under the requirements of GAAP to provide for possible losses
on loans (including without limitation accrued interest receivable) and credit
commitments (including without limitation stand-by letters of credit)
outstanding as of the date of such balance sheet.
(b) As of September 30, 1996, the aggregate amount of all Nonperforming
Assets (as defined below) on the books of Seller and its Subsidiaries does not
exceed $74,889,000. "Nonperforming Assets" shall mean (i) all loans and
leases (A) that are contractually past due 90 days or more in the payment of
principal and/or interest, (B) that are on nonaccrual status, (C) where a
reasonable doubt exists, in the reasonable judgment of Seller, as to the timely
future collectibility of principal and/or interest, whether or not interest is
still accruing or the loan is less than 90 days past due, (D) where the
interest rate terms have been reduced and/or the maturity dates have been
extended subsequent to the agreement under which the loan was originally
created due to concerns regarding the borrower's ability to pay in accordance
with such initial terms, (E) where a specific reserve allocation exists in
connection therewith, or (F) that have been classified "doubtful", "loss" or
the equivalent thereof by any Regulatory Authority, and (ii) all assets
classified as real estate acquired through foreclosure or repossession and
other assets acquired through foreclosure or repossession.
2.17. Employee Benefit Plans. (a) Except as set forth on Schedule 2.17A,
----------------------
neither Seller nor any Seller Subsidiary is a party to any existing employment,
management, consulting, deferred compensation, change-in-control or other
similar contract. Schedule 2.17A lists all pension, retirement, supplemental
retirement, savings, profit sharing, stock option, stock purchase, stock
ownership, stock appreciation right, deferred compensation, consulting, bonus,
medical, disability, workers' compensation, vacation, group insurance,
severance and other material employee benefit, incentive and welfare policies,
contracts, plans and arrangements, and all trust agreements related thereto,
maintained (currently or at any time in the last five years) by or contributed
to by Seller or any Seller Subsidiary in respect of any of the present or
former directors, officers, or other employees of and/or consultants to Seller
or any Seller Subsidiary (collectively, "Seller Employee Plans"). Seller has
furnished, or will promptly furnish after the date hereof, Buyer with the
following documents with respect to each Seller Employee Plan: (i) a true and
complete copy of all written documents comprising such Seller Employee Plan
(including amendments and individual agreements relating thereto) or, if there
is no such written document, an accurate and complete description of the Seller
Employee Plan; (ii) the most recent Form 5500 or Form 5500-C (including all
schedules thereto), if applicable; (iii) the most recent financial statements
and actuarial reports, if any; (iv) the summary plan description currently in
effect and all material modifications thereof, if any; and (v) the most recent
IRS determination letter, if any. Without limiting the generality of the
foregoing, Seller has furnished Buyer with true and complete copies of each
form of stock option grant or stock option agreement that is outstanding under
any stock option plan of Seller or any Seller Subsidiary.
(b) All Seller Employee Plans have been maintained and operated materially
in accordance with their terms and with the material requirements of all
applicable statutes, orders, rules and final regulations, including without
limitation ERISA and the Internal Revenue Code ("IRC"). All contributions
required to be made to Seller Employee Plans have been made.
(c) With respect to each of the Seller Employee Plans which is a pension
plan (as defined in Section 3(2) of ERISA) (the "Pension Plans"): (i) each
Pension Plan which is intended to be "qualified" within the meaning of
Section 401(a) of the IRC has been determined to be so qualified by the IRS
and, to the knowledge of Seller, such determination letter may still be relied
upon, and each related trust is exempt from taxation under Section 501(a) of
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the IRC; (ii) the actuarial present value of all benefits under each Pension
Plan which is subject to Title IV of ERISA, valued using the assumptions in the
most recent actuarial report, did not, in each case, as of the last applicable
annual valuation date (as indicated on Schedule 2.17A), exceed the value of the
assets of the Pension Plan allocable to such vested or accrued benefits; (iii)
to the best knowledge of Seller, there has been no "prohibited transaction,"
as such term is defined in Section 4975 of the IRC or Section 406 of ERISA,
which could subject any Pension Plan or associated trust, or the Seller or any
Seller Subsidiary, to any material tax or penalty; (iv) except as set forth on
Schedule 2.17C, no Pension Plan subject to Title IV of ERISA or any trust
created thereunder has been terminated, nor have there been any "reportable
events" with respect to any Pension Plan, as that term is defined in Section
4043 of ERISA for which the 30-day notice requirement has not been waived on or
after January 1, 1985; and (v) no Pension Plan or any trust created thereunder
has incurred any "accumulated funding deficiency", as such term is defined in
Section 302 of ERISA (whether or not waived). Except as set forth on Schedule
2.17C, no Pension Plan is a "multiemployer plan" as that term is defined in
Section 3(37) of ERISA. With respect to each Pension Plan that is described in
Section 4063(a) of ERISA (a "Multiple Employer Pension Plan"): (i) neither
Seller nor any Seller Subsidiary would have any liability or obligation to post
a bond under Section 4063 of ERISA if Seller and all Seller Subsidiaries were
to withdraw from such Multiple Employer Pension Plan; and (ii) neither Seller
nor any Seller Subsidiary would have any liability under Section 4064 of ERISA
if such Multiple Employer Pension Plan were to terminate.
(d) Except as set forth on Schedule 2.17D, neither Seller nor any Seller
Subsidiary has any liability for any post-retirement health, medical or similar
benefit of any kind whatsoever, except as required by statute or regulation.
(e) Except as set forth on Schedule 2.17E, neither Seller nor any Seller
Subsidiary has any material liability under ERISA or the IRC as a result of its
being a member of a group described in Sections 414(b), (c), (m) or (o) of the
IRC.
(f) Except as set forth on Schedule 2.17F, neither the execution nor
delivery of this Agreement, nor the consummation of any of the transactions
contemplated hereby, will (i) result in any material payment (including without
limitation severance, unemployment compensation or golden parachute payment)
becoming due to any director or employee of Seller or any Seller Subsidiary
from any of such entities, (ii) materially increase any benefit otherwise
payable under any of the Seller Employee Plans or (iii) result in the
acceleration of the time of payment of any such benefit. No holder of an option
to acquire stock of Seller has or will have at any time through the Effective
Time the right to receive any cash or other payment (other than the issuance of
stock of Seller) in exchange for or with respect to all or any portion of such
option. Seller shall use its best efforts to insure that no amounts paid or
payable by Seller, Seller Subsidiaries or Buyer to or with respect to any
employee or former employee of Seller or any Seller Subsidiary will fail to be
deductible for federal income tax purposes by reason of Section 280G of the
IRC. No Seller Stock Option has an associated "Additional Option Right" or
similar "re-load" feature.
2.18. Conduct of Seller to Date. From and after January 1, 1996 through the
-------------------------
date of this Agreement, except as set forth on Schedule 2.18 or in Seller
Financial Statements or Seller Reports: (i) Seller and the Seller Subsidiaries
have conducted their respective businesses in all material respects in the
ordinary and usual course consistent with past practices; (ii) neither Seller
nor any Seller Subsidiary has incurred any material obligation or liability
(absolute or contingent), except normal trade or business obligations or
liabilities incurred in the ordinary course of business, or subjected to Lien
any of its assets or properties other than in the ordinary course of business
consistent with past practice; (iii) neither Seller nor any Seller Subsidiary
has discharged or satisfied any material Lien or paid any material obligation
or liability (absolute or contingent), other than in the ordinary course of
business; (iv) neither Seller nor any Seller Subsidiary has sold, assigned,
transferred, leased, exchanged, or otherwise disposed of any of its material
properties or assets other than for a fair consideration in the ordinary course
of business; (v) except as required by contract or law, neither Seller nor any
Seller Subsidiary has (A) increased the rate of compensation of, or paid any
bonus to, any of its directors, officers, or other employees, except merit,
promotion or annual increases and bonuses in accordance with existing policy,
(B) entered into any new, or amended or supplemented any existing, employment,
management, consulting, deferred compensation, severance, or other similar
contract, (C) entered into, terminated, or substantially modified any of the
Seller Employee Plans or (D) agreed to do any of the foregoing; (vi) neither
Seller nor any Seller Subsidiary has suffered any material damage, destruction,
or loss, whether as the result of fire, explosion, earthquake, accident,
casualty, labor trouble, requisition, or taking of property by any Regulatory
Authority, flood, windstorm, embargo, riot, act of God or the enemy, or other
casualty or event, and whether or not covered by insurance; and (vii) neither
Seller nor any Seller Subsidiary has cancelled or compromised any debt, except
for debts charged off or compromised in accordance with the past practice of
Seller and its Subsidiaries.
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2.19. Proxy Statement, etc. None of the information regarding Seller or any
--------------------
Seller Subsidiary supplied or to be supplied by Seller for inclusion or
included in (i) the registration statement on Form S-4 to be filed with the SEC
by Buyer for the purpose of registering the shares of Buyer Common Stock to be
exchanged for shares of Seller Common Stock pursuant to the provisions of this
Agreement (the "Registration Statement"), (ii) the proxy or information
statement (the "Proxy Statement") to be mailed to Seller's stockholders in
connection with the transactions contemplated by this Agreement or (iii) any
other documents to be filed with any Regulatory Authority in connection with
the transactions contemplated hereby will, at the respective times such
documents are filed with any Regulatory Authority and, in the case of the
Registration Statement, when it becomes effective and, with respect to the
Proxy Statement, when mailed, be false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make
the statements therein not misleading or, in the case of the Proxy Statement or
any amendment thereof or supplement thereto, at the time of the meeting of
Seller's stockholders referred to in Section 5.03 (the "Meeting") (or, if no
Meeting is held, at the time the Proxy Statement is first furnished to Seller's
stockholders), be false or misleading with respect to any material fact, or
omit to state any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of any proxy for the
Meeting. All documents which Seller or any Seller Subsidiary is responsible for
filing with any Regulatory Authority in connection with the Merger will comply
as to form in all material respects with the provisions of applicable law.
2.20. Registration Obligations. Except as set forth on Schedule 2.20,
------------------------
neither Seller nor any Seller Subsidiary is under any obligation, contingent or
otherwise to register any of its securities under the Securities Act.
2.21. State Takeover Statutes; Seller's Certificate of Incorporation. (a)
--------------------------------------------------------------
Except as set forth on Schedule 2.21, the transactions contemplated by this
Agreement are not subject to any applicable state takeover law.
(b) Except as set forth on Schedule 2.21, the transactions contemplated by
this Agreement and the agreements contemplated hereby are not, and will not be,
prohibited by, or subject to the super majority provisions of Sections 9 or 12
of the Seller's Certificate of Incorporation.
2.22. Accounting, Tax and Regulatory Matters. Neither Seller nor any Seller
--------------------------------------
Subsidiary has taken or agreed to take any action or has any knowledge of any
fact or circumstance that would (i) prevent the transactions contemplated
hereby from qualifying as a reorganization within the meaning of Section 368 of
the IRC or (ii) materially impede or delay receipt of any approval referred to
in Section 6.01(b) or the consummation of the transactions contemplated by this
Agreement.
2.23. Brokers and Finders. Except for Montgomery Securities and Stifel,
-------------------
Nicolaus & Company, Incorporated neither Seller nor any Seller Subsidiary nor
any of their respective officers, directors or employees has employed any
broker or finder or incurred any liability for any financial advisory fees,
brokerage fees, commissions or finder's fees, and no broker or finder has acted
directly or indirectly for Seller or any Seller Subsidiary in connection with
this Agreement or the transactions contemplated hereby. Schedule 2.23 discloses
a bona fide estimate of the aggregate amount of all fees and expenses expected
to be paid by Seller to all third parties in connection with the Merger
("Merger Fees").
2.24. Other Activities. (a) Except as set forth on Schedule 2.24A, neither
----------------
Seller nor any of its Subsidiaries engages in any insurance activities other
than acting as a principal, agent or broker for insurance that is directly
related to an extension of credit by Seller or any of its Subsidiaries and
limited to assuring the repayment of the balance due on the extension of credit
in the event of the death, disability or involuntary unemployment of the
debtor.
(b) Except as set forth on Schedule 2.24B, to the knowledge of Seller's
management: each Subsidiary that is a bank that performs personal trust,
corporate trust and other fiduciary activities ("Trust Activities") has done
so with requisite authority under applicable law of Regulatory Authorities and
in material accordance with the agreements and instruments governing such Trust
Activities, sound fiduciary principles and applicable law and regulation
(specifically including but not limited to Section 9 of Title 12 of the Code of
Federal Regulations); there is no investigation or inquiry by any governmental
entity pending or threatened against Seller or any of its Subsidiaries thereof
relating to the compliance by Seller or any of its Subsidiaries with sound
fiduciary principles and applicable law and regulations; and each employee of
any such bank had the authority to act in the capacity in which such employee
acted with respect to Trust Activities in each case in which such employee was
held out as a representative of such bank; and such bank has established
policies and procedures for the purpose of complying with applicable laws of
governmental entities relating to Trust Activities, has followed such policies
and procedures in all material
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respects and has performed appropriate internal audit reviews of Trust
Activities, which audits have disclosed no material violations of applicable
laws of governmental entities or such policies and procedures.
2.25. Interest Rate Risk Management Instruments. (a) Set forth on Schedule
-----------------------------------------
2.25A is a list, as of the date hereof, of all interest rate swaps, caps,
floors, and option agreements and other interest rate risk management
arrangements to which Seller or any of its Subsidiaries is a party or by which
any of their properties or assets may be bound.
(b) All interest rate swaps, caps, floors and option agreements and other
interest rate risk management arrangements to which Seller or any of its
Subsidiaries is a party or by which any of their properties or assets may be
bound were entered into in the ordinary course of business and, to the best
knowledge of Seller, in accordance with prudent banking practice and applicable
rules, regulations and policies of Regulatory Authorities and with
counterparties believed to be financially responsible at the time and are
legal, valid and binding obligations and are in full force and effect. Seller
and each of its Subsidiaries has duly performed in all material respects all of
its obligations thereunder to the extent that such obligations to perform have
accrued, and there are no material breaches, violations or defaults or
allegations or assertions of such by any party thereunder.
2.26. Accuracy of Information. To the best knowledge of Seller, the
-----------------------
statements of Seller contained in this Agreement, the Schedules and any other
written document executed and delivered by or on behalf of Seller pursuant to
the terms of this Agreement are true and correct in all material respects, and
such statements and documents do not omit any material fact necessary to make
the statements contained therein not misleading.
ARTICLE III
-----------
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER
Buyer represents, and warrants to and covenants with Seller as follows:
3.01. Organization and Authority. Buyer and each of its Subsidiaries is a
--------------------------
corporation, bank, trust company or other entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of
organization, is duly qualified to do business and is in good standing in all
jurisdictions where its ownership or leasing of property or the conduct of its
business requires it to be so qualified and, except where the failure to be so
qualified would not have a material adverse effect on the Condition of Buyer
and its Subsidiaries, taken as a whole, has corporate power and authority to
own its properties and assets and to carry on its business as it is now being
conducted, except, in the case of the Buyer Subsidiaries, where the failure to
be so qualified would not have a material adverse effect on the Condition of
Buyer and its Subsidiaries, taken as a whole. Buyer is registered as a bank
holding company with the Board under the Holding Company Act. True and complete
copies of the Articles of Incorporation and Bylaws of Buyer and Merger Sub,
each in effect on the date of this Agreement, have been provided to Seller.
3.02. Capitalization of Buyer. The authorized capital stock of Buyer
-----------------------
consists of (i) 100,000,000 shares of Buyer Common Stock, of which, as of
November 30, 1996, 61,586,802 shares were issued and outstanding and (ii)
5,000,000 shares of preferred stock, no par value ("Buyer Preferred Stock"),
issuable in series, none of which, as of November 30, 1996, is issued or
outstanding. Buyer has designated 1,000,000 shares of Buyer Preferred Stock as
"Series A Junior Participating Preferred Stock" and has reserved such shares
for issuance upon exercise of Preferred Stock Purchase Rights under a Rights
Agreement dated May 23, 1988 (the "Buyer Rights Agreement"), between Buyer
and Mercantile Bank of St. Louis National Association, as Rights Agent. As of
November 30, 1996 Buyer had reserved (i) 4,074,479 shares of Buyer Common Stock
for issuance under various employee stock option and incentive plans ("Buyer
Stock Options"), (ii) 600,418 shares of Buyer Common Stock for issuance upon
the acquisition of Regional Bancshares, Inc. pursuant to an agreement dated
August 22, 1996, and (iii) up to 17,235,960 shares of Buyer Common Stock for
issuance upon the acquisition of Mark Twain Bancshares, Inc. ("Mark Twain")
pursuant to an agreement dated October 27, 1996 (the "Mark Twain Merger
Agreement"). From November 30, 1996 through the date of this Agreement, no
shares of Buyer Common Stock or other Equity Securities of Buyer have been
issued excluding any such shares which may have been issued pursuant to
stock-based employee benefit or incentive plans and programs or pursuant to the
foregoing agreements. Buyer continually evaluates possible acquisitions and may
prior to the Effective Time enter into one or more agreements providing for,
and may consummate, the acquisition by it of another bank, association, bank
holding company, savings and loan holding company or other company (or the
assets thereof) for consideration that may include equity securities. In
addition, prior to the Effective Time, Buyer may, depending on market conditions
and other factors, otherwise determine to issue equity, equity-linked or other
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securities for financing purposes. Notwithstanding the foregoing, Buyer will not
take any action that would (i) prevent the transactions contemplated hereby from
qualifying as a reorganization within the meaning of Section 368 of the IRC or
(ii) materially impede or delay receipt of any approval referred to in Section
6.01(b) or the consummation of the transactions contemplated by this Agreement.
Except as set forth above and except pursuant to the Buyer Rights Agreement,
there are no other Equity Securities of Buyer outstanding. All of the issued and
outstanding shares of Buyer Common Stock are validly issued, fully paid, and
nonassessable, and have not been issued in violation of any preemptive right of
any stockholder of Buyer. At the Effective Time, the Buyer Common Stock to be
issued in the Merger will be duly authorized, validly issued, fully paid and
non-assessable, and will not be issued in violation of any preemptive right of
any stockholder of Buyer.
3.03. Authorization. (a) Each of Buyer and Merger Sub has the corporate
-------------
power and authority to enter into this Agreement and to carry out its
obligations hereunder. No stockholder vote is required for Buyer to approve
this Agreement. The execution, delivery and performance of this Agreement by
Buyer and Merger Sub and the consummation by Buyer and Merger Sub of the
transactions contemplated hereby have been duly authorized by all requisite
corporate action of Buyer. This Agreement is a valid and binding obligation of
Buyer enforceable against Buyer in accordance with its terms.
(b) Neither the execution, delivery and performance by Buyer of this
Agreement, nor the consummation by Buyer of the transactions contemplated
hereby, nor compliance by Buyer with any of the provisions hereof, will (i)
violate, conflict with or result in a breach of any provisions of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
of, or result in the creation of, any Lien upon any of the material properties
or assets of Buyer or any Buyer Subsidiary under any of the terms, conditions
or provisions of (x) its articles or certificate of incorporation or bylaws, or
(y) any material note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which Buyer or any of the
material properties or assets of Buyer is a party or by which it may be bound,
or to which Buyer may be subject, or (ii) subject to compliance with the
statutes and regulations referred to in paragraph (c) of this Section 3.03, to
the best knowledge of Buyer, violate any judgment, ruling, order, writ,
injunction, decree, statute, rule or regulation applicable to Buyer or any of
its Subsidiaries or any of their respective material properties or assets.
(c) Other than in connection with or in compliance with the provisions of
the DGCL, the MGBCL, the Securities Act, the Exchange Act, the securities or
blue sky laws of the various states or filings, consents, reviews,
authorizations, approvals or exemptions required under the Holding Company Act,
and the HSR Act, or any required approvals of, or notice to, any other
Regulatory Authority, no notice to, filing with, exemption or review by, or
authorization, consent or approval of, any public body or authority is
necessary for the consummation by Buyer of the transactions contemplated by
this Agreement.
3.04. Buyer Financial Statements. The supplemental consolidated and parent
--------------------------
company only balance sheets of Buyer and its Subsidiaries as of December 31,
1995, 1994 and 1993 and related supplemental consolidated and parent company
only statements of income, cash flows and changes in stockholders' equity for
each of the three years in the three-year period ended December 31, 1995,
together with the notes thereto, audited by KPMG Peat Marwick ("Buyer
Auditors") and included in Buyer's current report on Form 8-K dated May 31,
1995 as filed with the SEC, and the unaudited consolidated balance sheets of
Buyer and its Subsidiaries as of March 31, June 30, and September 30, 1996 and
the related unaudited consolidated statements of income and cash flows for the
periods then ended included in quarterly reports on Form 10-Q (including
amendments thereto) as filed with the SEC (collectively, the "Buyer Financial
Statements"), have been prepared in accordance with GAAP, present fairly the
consolidated financial position of Buyer and its Subsidiaries at the dates and
the consolidated results of operations, changes in stockholders' equity and
cash flows of Buyer and its Subsidiaries for the periods stated therein and are
derived from the books and records of Buyer and its Subsidiaries, which are
complete and accurate in all material respects and have been maintained in all
material respects in accordance with applicable laws and regulations. Neither
Buyer nor any of its Subsidiaries has any material contingent liabilities that
are not reflected in the Buyer Reports (defined below) or disclosed in the
financial statements described above.
3.05. Buyer Reports. Since January 1, 1993, each of Buyer and the Buyer
-------------
Subsidiaries has filed all material reports, registrations and statements,
together with any required material amendments thereto, that it was required to
file with any Regulatory Authority. All such reports and statements filed with
any such Regulatory Authority are
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collectively referred to herein as the "Buyer Reports." As of its respective
date, each Buyer Report complied in all material respects with all the rules and
regulations promulgated by the applicable Regulatory Authority and did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
3.06. Material Adverse Change. Since September 30, 1996, there has been no
-----------------------
material adverse change in the Condition of Buyer and its Subsidiaries, taken
as a whole, except as may have resulted or may result from changes to laws and
regulations or changes in economic conditions applicable to banking and thrift
institutions generally or in general levels of interest rates affecting banking
and thrift institutions generally.
3.07. Compliance with Laws. (a) Each of Buyer and its Subsidiaries has
--------------------
complied with all laws, regulations, and orders (including without limitation
zoning ordinances, building codes, ERISA, and securities, tax, environmental,
civil rights, and occupational health and safety laws and regulations and
including without limitation in the case of any Buyer Subsidiary that is a
bank, banking organization, banking corporation or trust company, all statutes,
rules and regulations, pertaining to the conduct of a banking, deposit-taking
or lending or related business or to the exercise of trust powers) and
governing instruments applicable to them and to the conduct of their business,
except where such failure to comply would not have a material adverse effect on
the Condition of Buyer and its Subsidiaries, taken as a whole, and (ii) neither
Buyer nor any Buyer Subsidiary is in default under, and no event has occurred
which, with the lapse of time or notice or both, could result in the default
under, the terms of any judgment, order, writ, decree, permit, or license of
any Regulatory Authority or court, whether federal, state, municipal, or local
and whether at law or in equity, except where such default would not have a
material adverse effect on the Condition of Buyer and its Subsidiaries, taken
as a whole. Neither Buyer nor any Buyer Subsidiary is subject to or reasonably
likely to incur a liability as a result of its ownership, operation, or use of
any Property of Buyer (whether directly or, to the best knowledge of Buyer, as
a consequence of such Property being part of the investment portfolio of Buyer
or any Buyer Subsidiary) (A) that is contaminated by or contains any Toxic
Substance, or (B) on which any Toxic Substance has been stored, disposed of,
placed, or used in the construction thereof; and which, in each case,
reasonably could be expected to have a material adverse effect on the Condition
of Buyer and its Subsidiaries, taken as a whole. Except for statutory or
regulatory restrictions of general application, no Regulatory Authority has
placed any restriction on the business of Buyer or any Buyer Subsidiary which
reasonably could be expected to have a material adverse effect on the Condition
of Buyer and its Subsidiaries, taken as a whole. As of the date of this
Agreement, no claim, action, suit, or proceeding is pending against Buyer or
any Buyer Subsidiary relating to Property of Buyer before any court or other
Regulatory Authority or arbitration tribunal relating to hazardous substances,
pollution, or the environment, and there is no outstanding judgment, order,
writ, injunction, decree, or award against or affecting Buyer or any Buyer
Subsidiary with respect to the same.
(b) Buyer and each of its Subsidiaries have all permits, licenses,
authorizations, orders and approvals of, and have made all filings,
applications and registrations with, all Regulatory Authorities that are
required in order to permit them to own or lease their properties and assets
and to carry on their business as presently conducted, except where the failure
to so have or make would not have a material adverse effect on the Condition of
Buyer and its Subsidiaries, taken as a whole; all such permits, licenses,
certificates of authority, orders and approvals are in full force and effect
and, to the best knowledge of Buyer, no suspension or cancellation of any of
them is threatened; and all such filings, applications and registrations are
current.
(c) From and after January 1, 1993, neither Buyer nor any Buyer Subsidiary
has received any notification or communication which has not been resolved from
any Regulatory Authority (i) asserting that any Buyer or any Subsidiary of
Buyer, is not in substantial compliance with any of the statutes, regulations
or ordinances that such Regulatory Authority enforces, except with respect to
matters which (A) are set forth on Schedule 3.07C or in any writing previously
furnished to Buyer or (B) reasonably could not be expected to have a material
adverse effect on the Condition of Buyer and its Subsidiaries, taken as a
whole, (ii) threatening to revoke any license, franchise, permit or
governmental authorization that is material to the Condition of Buyer and its
Subsidiaries, taken as a whole, including without limitation such company's
status as an insured depositary institution under the Federal Deposit Insurance
Act, or (iii) requiring or threatening to require Buyer or any of its
Subsidiaries, or indicating that Buyer or any of its Subsidiaries may be
required, to enter into a cease and desist order, agreement or memorandum of
understanding or any other agreement restricting or limiting or purporting to
direct, restrict or limit in any material manner the operations of Buyer or any
of its Subsidiaries, including without limitation any restriction on the payment
of
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dividends. No such cease and desist order, agreement or memorandum of
understanding or other agreement is currently in effect.
(d) Neither Buyer nor any Buyer Subsidiary is required by Section 32 of the
Federal Deposit Insurance Act to give prior notice to any 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.
3.08. Registration Statement, etc. None of the information regarding Buyer
---------------------------
or any of its Subsidiaries supplied or to be supplied by Buyer for inclusion or
included in (i) the Registration Statement, (ii) the Proxy Statement, or (iii)
any other documents to be filed with any Regulatory Authority in connection
with the transactions contemplated hereby will, at the respective times such
documents are filed with any Regulatory Authority and, in the case of the
Registration Statement, when it becomes effective and, with respect to the
Proxy Statement, when mailed (or furnished to stockholders of Seller), be false
or misleading with respect to any material fact, or omit to state any material
fact necessary in order to make the statements therein not misleading or, in
the case of the Proxy Statement or any amendment thereof or supplement thereto,
at the time of the Meeting, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to correct any statement in
any earlier communication with respect to the solicitation of any proxy for the
Meeting. All documents which Buyer or any of its Subsidiaries are responsible
for filing with any Regulatory Authority in connection with the Merger will
comply as to form in all material respects with the provisions of applicable
law.
3.09. Brokers and Finders. Except for UBS Securities Inc., neither Buyer
-------------------
nor any of its Subsidiaries nor any of their respective officers, directors or
employees has employed any broker or finder or incurred any liability for any
financial advisory fees, brokerage fees, commissions or finder's fees, and no
broker or finder has acted directly or indirectly for Buyer or any of its
Subsidiaries in connection with this Agreement or the transactions contemplated
hereby.
3.10. Commitments and Contracts. Neither Buyer nor any Buyer Subsidiary is
-------------------------
in violation of its charter documents or bylaws or in default under any
material agreement, commitment, arrangement, lease, insurance policy, or other
instrument, whether entered into in the ordinary course of business or
otherwise and whether written or oral, and there has not occurred any event
that, with the lapse of time or giving of notice or both, would constitute such
a default, except, in all cases, where such default would not have a material
adverse effect on the Condition of Buyer and its Subsidiaries, taken as a
whole.
3.11. Litigation and Other Proceedings. Neither Buyer nor any Buyer
--------------------------------
Subsidiary is a party to any pending or, to the best knowledge of Buyer,
threatened claim, action, suit, investigation or proceeding, or is subject to
any order, judgment or decree, except for matters which, in the aggregate, will
not have, or reasonably could not be expected to have, a material adverse
effect on the Condition of Buyer and its Subsidiaries, taken as a whole.
Without limiting the generality of the foregoing, as of the date of this
Agreement, there are no actions, suits, or proceedings pending or, to the best
knowledge of Buyer, threatened against Buyer or any Buyer Subsidiary or any of
their respective officers or directors by any stockholder of Buyer or any Buyer
Subsidiary (or any former stockholder of Buyer or any Buyer Subsidiary) or
involving claims under the Securities Act, the Exchange Act, the Community
Reinvestment Act of 1977, as amended, or the fair lending laws or which purport
or seek to enjoin or restrain the transactions contemplated by this Agreement.
3.12. Interest Rate Risk Management Instruments. All interest rate swaps,
-----------------------------------------
caps, floors and option agreements and other interest rate risk management
arrangements to which Buyer or any of its Subsidiaries is a party or by which
any of their properties or assets may be bound were entered into in the
ordinary course of business and, to the knowledge of Buyer, in accordance with
prudent banking practice and applicable rules, regulations and policies of
Regulatory Authorities and with counterparties believed to be financially
responsible at the time and are legal, valid and binding obligations and are in
full force and effect. Buyer and each of its Subsidiaries has duly performed in
all material respects all of its obligations thereunder to the extent that such
obligations to perform have accrued, and, to the knowledge of Buyer, as of the
date hereof, there are no material breaches, violations or defaults or
allegations or assertions of such by any party thereunder.
3.13. Taxes. Buyer and each Buyer Subsidiary have timely filed or will
-----
timely file (including extensions) all material tax returns required to be
filed at or prior to the Closing Date ("Buyer Returns"). Each of Buyer and
its Subsidiaries has paid, or set up adequate reserves on the Buyer Financial
Statements for the payment of, all taxes
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<PAGE> 106
required to be paid in respect of the periods covered by the Buyer Financial
Statements and has paid or set up adequate reserves on the most recent financial
statements Buyer has filed under the Exchange Act for the payment of, all taxes
anticipated to be payable in respect of the periods covered by such financial
statements. No material deficiencies for any tax, assessment or governmental
charge have been proposed, asserted or assessed in writing by any governmental
or taxing authority against any of Buyer or any Buyer Subsidiary which have not
been settled or would not be covered by existing reserves. Neither Buyer nor any
Buyer Subsidiary is delinquent in the payment of any material tax, assessment or
governmental charge shown to be due on any Buyer Return (taking into account
extensions properly obtained), and no waiver of the time to assess any tax
granted in writing by Buyer or any Buyer Subsidiary is pending. The federal and
state income tax returns of Buyer and the Buyer Subsidiaries have been audited
and settled by the IRS or appropriate state tax authorities for all periods
ended through December 31, 1992, or the period for assessment of taxes in
respect of such periods has expired.
3.14. Accounting, Tax and Regulatory Matters. Neither Buyer nor any Buyer
--------------------------------------
Subsidiary has taken or agreed to take any action or has any knowledge of any
fact or circumstance that would (i) prevent the transactions contemplated
hereby from qualifying as a reorganization within the meaning of Section 368 of
the IRC or (ii) materially impede or delay receipt of any approval referred to
in Section 6.01(b) or the consummation of the transactions contemplated by this
Agreement.
3.15. Accuracy of Information. The statements of Buyer contained in this
-----------------------
Agreement, the Schedules and in any other written document executed and
delivered by or on behalf of Buyer pursuant to the terms of this Agreement are
true and correct in all material respects, and such statements and documents do
not omit any material fact necessary to make the statements contained herein or
therein not misleading.
3.16. Labor. No work stoppage involving Buyer or any Buyer Subsidiary, is
-----
pending or, to the best knowledge of Buyer, threatened which reasonably could
be expected to have a material adverse effect on the Condition of Buyer and its
Subsidiaries, taken as a whole. Neither Buyer nor any Buyer Subsidiary is
involved in, or, to the best knowledge of Buyer, threatened with or affected
by, any labor dispute, arbitration, law suit or administration proceeding which
reasonably could be expected to have a material adverse effect on the Condition
of Buyer and its Subsidiaries, taken as a whole.
3.17. Mark Twain Merger Agreement. In the case of the representations and
---------------------------
warranties made by Mark Twain, as of the date hereof, to the knowledge of Buyer
after reasonable inquiry, (i) the representations and warranties of Mark Twain
set forth in Article II of the Mark Twain Merger Agreement are true and correct
as if made on the date hereof and (ii) there has been no breach or violation
of, or default under, the Mark Twain Merger Agreement by Mark Twain or by
Buyer. As of the date hereof, the Mark Twain Merger Agreement has not been
amended, modified or supplemented, and there have been no waivers of any
conditions granted by either party thereto.
ARTICLE IV
----------
CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME
4.01. Conduct of Businesses Prior to the Effective Time. During the period
-------------------------------------------------
from the date of this Agreement to the Effective Time, each of Buyer and Seller
shall, and shall cause each of their respective Subsidiaries to, conduct its
business according to the ordinary and usual course consistent with past
practices and shall, and shall cause each such Subsidiary to, use its best
efforts to maintain and preserve its business organization, employees and
advantageous business relationships and retain the services of its officers and
key employees.
4.02. Forbearances. Except as set forth on Schedule 4.02 or as otherwise
------------
contemplated by this Agreement, during the period from the date of this
Agreement to the Effective Time, Seller shall not and shall not permit any of
its Subsidiaries to, without the prior written consent of Buyer:
(a) declare, set aside or pay any dividends or other distributions,
directly or indirectly, in respect of its capital stock (other than
dividends from a Subsidiary of Seller to Seller or another Subsidiary of
Seller), except that Seller may (i) declare and pay cash dividends on the
Seller Common Stock of not more than $.17 per share per quarterly period
and (ii) declare and pay cash dividends on Seller Preferred Stock of not
more than $.8125 per share per quarterly period; provided, that the parties
agree to consult with respect to the last quarterly dividend of Seller
payable prior to the Effective Time with the object of assuring that the
shareholders of Seller
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<PAGE> 107
do not receive a shortfall or a premium based on the record and payment
dates of their last dividend prior to the Merger and the record and payment
dates of the first dividend of Buyer following the Merger; or
(b) enter into or amend any employment, severance or similar agreement
or arrangement with any director or officer or employee, or materially
modify any of the Seller Employee Plans or grant any salary or wage
increase or materially increase any employee benefit (including incentive
or bonus payments), except normal individual increases in compensation to
employees consistent with past practice, or as required by law or contract;
or
(c) authorize, recommend (subject to the fiduciary duties of Seller's
Board of Directors, based upon written advice of counsel to Seller, which
counsel is reasonably acceptable to Buyer), propose or announce an
intention to authorize, so recommend or propose, or enter into an agreement
in principle with respect to, any merger, consolidation or business
combination (other than the Merger), any acquisition of a material amount
of assets or securities, any disposition of a material amount of assets or
securities or any release or relinquishment of any material contract
rights; or
(d) propose or adopt any amendments to its articles of incorporation,
association or other charter document or bylaws; or
(e) issue, sell, grant, confer or award any of its Equity Securities
(except that Seller may (i) issue shares of Seller Common Stock upon
exercise of Seller Stock Options outstanding on the date of this Agreement,
(ii) issue shares of Seller Common Stock upon the conversion of Seller
Preferred Stock, (iii) issue shares of Seller Common Stock as contemplated
by the Seller's Supplemental Pension Plan, or (iv) issue shares of Seller
Common Stock pursuant to the Seller's dividend reinvestment plan) or effect
any stock split or adjust, combine, reclassify or otherwise change its
capitalization as it existed on the date of this Agreement; or
(f) purchase, redeem, retire, repurchase, or exchange, or otherwise
acquire or dispose of, directly or indirectly, any of its Equity
Securities, whether pursuant to the terms of such Equity Securities or
otherwise; provided, however, that Seller shall be permitted to purchase up
to 6,973,380 shares of Seller Common Stock (as contemplated by Section
5.17) at a purchase price per share not to exceed $22.00 per share; or
(g) (i) without first consulting with Buyer, enter into, renew or
increase any loan or credit commitment (including stand-by letters of
credit) to, or invest or agree to invest in any person or entity or modify
any of the material provisions or renew or otherwise extend the maturity
date of any existing loan or credit commitment (collectively, "Lend to")
in an amount in excess of (A) $500,000 in respect of commercial
transactions, including commercial real estate transactions ("Commercial
Transactions") and (B) $1,000,000 in respect of residential real estate
transactions, or in an amount which, or when aggregated with any and all
loans or credit commitments to such person or entity, would be in excess of
(A) $500,000 in respect of commercial transactions, including Commercial
Transactions and (B) $1,000,000 in respect of residential real estate
transactions; (ii) without first obtaining the written consent of Buyer,
lend to any person or entity in an amount in excess of $750,000 in respect
of Commercial Transactions or in an amount which, when aggregated with any
and all loans or credit commitments to such person or entity, would be in
excess of $750,000 in respect of Commercial Transactions; (iii) Lend to any
person other than in accordance with lending policies as in effect on the
date hereof; provided that in the case of clauses (ii) and (iii) Seller or
--------
any Seller Subsidiary may make any such loan in the event (A) Seller or any
Seller Subsidiary has delivered to Buyer or its designated representative a
notice of its intention to make such loan and such information as Buyer or
its designated representative may reasonably require in respect thereof and
(B) Buyer or its designated representative shall not have reasonably
objected to such loan by giving written or facsimile notice of such
objection within two business days following the delivery to Buyer of the
notice of intention and information as aforesaid; or (iv) Lend to any
person or entity any of the loans or other extensions of credit to which or
investments in which are on a "watch list" or similar internal report of
Seller or any Seller Subsidiary (except those denoted "pass" thereon), in
an amount in excess of $250,000; provided, however, that nothing in this
-------- -------
paragraph shall prohibit Seller or any Seller Subsidiary from honoring any
contractual obligation in existence on the date of this Agreement.
Notwithstanding the provisions of clauses (i) and (ii) of this Section
4.02(g), Seller shall be authorized without first consulting with Buyer or
obtaining Buyer's prior written consent, to increase the aggregate amount
of any credit facilities theretofore established in favor of any person or
entity (each a "Pre-Existing Facility"), provided that the aggregate
amount of any and all such increases with respect to any Pre-Existing
Facility shall not without Buyer's prior written consent, which consent
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<PAGE> 108
shall not be unreasonably withheld or delayed, be in excess of the lesser
of five percent (5%) of such Pre-Existing Facility or $25,000; or;
(h) directly or indirectly (including through its officers, directors,
employees or other representatives) initiate, solicit or encourage any
discussions, inquiries or proposals with any third party relating to the
disposition of any significant portion of the business or assets of Seller
or any Seller Subsidiary or the acquisition of Equity Securities of Seller
or any Seller Subsidiary or the merger of Seller or any Seller Subsidiary
with any person (other than Buyer) or any similar transaction (each such
transaction being referred to herein as an "Acquisition Transaction"), or
provide any such person with information or assistance or negotiate with
any such person with respect to an Acquisition Transaction, and Seller
shall promptly notify Buyer orally of all the relevant details relating to
all inquiries, indications of interest and proposals which it may receive
with respect to any Acquisition Transaction; or
(i) take any action that would (A) materially impede or delay the
consummation of the transactions contemplated by this Agreement or the
ability of Buyer or Seller to obtain any approval of any Regulatory
Authority required for the transactions contemplated by this Agreement or
to perform its covenants and agreements under this Agreement or (B) prevent
the transactions contemplated hereby from qualifying as a reorganization
within the meaning of Section 368 of the IRC; or
(j) 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 or liable for
the obligations of any other individual, corporation or other entity, or
pay without prior approval of Buyer, which shall not be unreasonably
withheld, any Merger Fees in excess of the amount set forth on Schedule
2.23; or
(k) materially restructure or materially change its investment
securities portfolio, without prior written consent of Buyer which consent
shall not be unreasonably withheld or delayed, through purchases, sales or
otherwise, or the manner in which the portfolio is classified or reported,
or execute any individual investment transaction for its own account (i)
in securities backed by the full faith and credit of the United States or an
agency thereof in excess of $10,000,000 and (ii) in any other investment
securities in excess of $1,000,000; or
(l) agree in writing or otherwise to take any of the foregoing actions
or engage in any activity, enter into any transaction or take or omit to
take any other act which would make any of the representations and
warranties in Article II of this Agreement untrue or incorrect in any
material respect if made anew after engaging in such activity, entering
into such transaction, or taking or omitting such other act.
4.03. Forbearances of Buyer. Except to the extent required by law,
---------------------
regulation or Regulatory Authority, or with the prior written consent of
Seller, during the period from the date of this Agreement to the Effective
Time, Buyer shall not and shall not permit any of the Buyer Subsidiaries to:
(a) declare, set aside or pay any dividends or other distributions,
directly or indirectly, in respect of its capital stock (other than
dividends from any of the Buyer Subsidiaries to Buyer or to another of the
Buyer Subsidiaries), except that Buyer may pay its regular quarterly
dividends in amounts as it shall determine from time to time;
(b) take any action that would (A) materially impede or delay the
consummation of the transactions contemplated by this Agreement or the
ability of Seller or Buyer to obtain any approval of any Regulatory
Authority required for the transactions contemplated by this Agreement or
to perform its covenants and agreements under this Agreement or (B) prevent
the transactions contemplated hereby from qualifying as a reorganization
within the meaning of Section 368 of the Code; or
(c) agree in writing or otherwise to take any of the foregoing actions
or engage in any activity, enter into any transaction or intentionally take
or omit to take any other action which would make any of the
representations and warranties in Article III of this Agreement untrue or
incorrect in any material respect if made anew after engaging in such
activity, entering into such transaction, or taking or omitting such other
action.
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<PAGE> 109
ARTICLE V
---------
ADDITIONAL AGREEMENTS
5.01. Access and Information. Buyer and its Subsidiaries, on the one hand,
----------------------
and Seller and its Subsidiaries, on the other hand, shall each afford to each
other, and to the other's accountants, counsel and other representatives, full
access during normal business hours, during the period prior to the Effective
Time, to all their respective properties, books, contracts, commitments and
records and, during such period, each shall furnish promptly to the other (i) a
copy of each report, schedule and other document filed or received by it during
such period pursuant to the requirements of federal and state securities laws
and (ii) all other information concerning its business, properties and
personnel as such other party may reasonably request. Each party hereto shall,
and shall cause its advisors and representatives to, (A) hold confidential all
information obtained in connection with any transaction contemplated hereby
with respect to the other party which is not otherwise public knowledge, (B)
return all documents (including copies thereof) obtained hereunder from the
other party to such other party and (C) use its best efforts to cause all
information obtained pursuant to this Agreement or in connection with the
negotiation of this Agreement to be treated as confidential and not use, or
knowingly permit others to use, any such information unless such information
becomes generally available to the public.
5.02. Registration Statement; Regulatory Matters. (a) Buyer shall prepare
------------------------------------------
and, subject to the review and consent of Seller with respect to matters
relating to Seller, file with the SEC as soon as is reasonably practicable the
Registration Statement (or the equivalent in the form of preliminary proxy
material) with respect to the shares of Buyer Common Stock to be issued in the
Merger and the exercise of Buyer Stock Options after the Effective Time. Buyer
shall prepare and file a notice with the Board as soon as reasonably
practicable. Buyer shall use all reasonable efforts cause the Registration
Statement to become effective. Buyer shall also take any action required to be
taken under any applicable state blue sky or securities laws in connection with
the issuance of such shares and the exercise of such options, and Seller and its
Subsidiaries shall furnish Buyer all information concerning Seller and its
Subsidiaries and the stockholders thereof as Buyer may reasonably request in
connection with any such action. Buyer shall use its best efforts to cause the
shares of Buyer Common Stock to be issued in the Merger to be approved for
listing on the New York Stock Exchange, subject to official notice of issuance,
prior to the Effective Time.
(b) Seller and Buyer shall cooperate and use their respective best efforts
to prepare all documentation, to effect all filings and to obtain all permits,
consents, approvals and authorizations of all third parties, Regulatory
Authorities necessary to consummate the transactions contemplated by this
Agreement and, as and if directed by Buyer, to consummate such other mergers,
consolidations or asset transfers or other transactions by and among Buyer's
Subsidiaries and Seller's Subsidiaries concurrently with or following the
Effective Time, provided, however, that the foregoing shall not (A) alter or
-------- -------
change the Merger Consideration, (B) adversely affect the tax treatment to
Sellers' stockholders as a result of receiving the Merger Consideration or (C)
materially impede or delay receipt of any approval referred to in Section
6.01(b) or the consummation of the transactions contemplated by this Agreement.
5.03. Stockholder Approval. Seller shall call a meeting of its stockholders
--------------------
to be held as soon as practicable for the purpose of voting upon the Merger or
take other action for stockholders to authorize the Merger. In connection
therewith, Buyer shall prepare the Proxy Statement and, with the approval of
each of Buyer and Seller, the Proxy Statement shall be filed with the SEC and
mailed to the stockholders of Seller. The Board of Directors of Seller shall
submit for approval of Seller's stockholders the matters to be voted upon in
order to authorize the Merger. The Board of Directors of Seller hereby does and
(subject to the fiduciary duties of Seller's Board of Directors, as advised by
outside counsel) will recommend this Agreement and the transactions
contemplated hereby to stockholders of Seller and will use its best efforts to
obtain any vote of Seller's stockholders that is necessary for the approval and
adoption of this Agreement and consummation of the transactions contemplated
hereby.
5.04. Current Information. During the period from the date of this
-------------------
Agreement to the Effective Time, each party shall promptly furnish the other
with copies of all monthly and other interim financial statements as the same
become available and shall cause one or more of its designated representatives
to confer on a regular and frequent basis with representatives of the other
party. Each party shall promptly notify the other party of any material change
in its business or operations and of any governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated), or the institution or the threat of material litigation
involving such party, and shall keep the other party fully informed of such
events.
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5.05. Agreements of Affiliates. As soon as practicable after the date of
------------------------
this Agreement, Seller shall deliver to Buyer a letter identifying all persons
whom Seller believes to be, at the time this Agreement is submitted to a vote
of the stockholders of Seller, "affiliates" of Seller for purposes of Rule
145 under the Securities Act. Seller shall use its best efforts to cause each
person who is so identified as an "affiliate" to deliver to Buyer as soon as
practicable thereafter, and in any event no later than the publication of
notice in the Federal Register of Buyer's notice to the Board referred to in
Section 5.02, a written agreement providing that from the date of such
agreement each such person will agree not to sell, pledge, transfer or
otherwise dispose of any shares of stock of Seller held by such person or any
shares of Buyer Common Stock to be received by such person in the Merger except
in compliance with the applicable provisions of the Securities Act. Prior to
the Effective Time, Seller shall amend and supplement such letter and use its
best efforts to cause each additional person who is identified as an
"affiliate" to execute a written agreement as set forth in this Section 5.05.
5.06. Expenses. Each party hereto shall bear its own expenses incident to
--------
preparing, entering into and carrying out this Agreement and to consummating
the Merger.
5.07. Miscellaneous Agreements and Consents. (a) Subject to the terms and
-------------------------------------
conditions herein provided, each of the parties hereto agrees to use its
respective best efforts to take, or cause to be taken, all action, and to do,
or cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement as expeditiously as possible, including without
limitation using its respective best efforts to lift or rescind any injunction
or restraining order or other order adversely affecting the ability of the
parties to consummate the transactions contemplated hereby. Each party shall,
and shall cause each of its respective subsidiaries to, use its best efforts to
obtain consents of all third parties and Regulatory Authorities necessary or,
in the opinion of Buyer, desirable for the consummation of the transactions
contemplated by this Agreement.
(b) Subject to applicable laws, regulations and requirements of Regulatory
Authorities, Seller, prior to the Effective Time, shall (i) consult and
cooperate with Buyer regarding the implementation of those policies and
procedures established by Buyer for its governance and that of its Subsidiaries
and not otherwise referenced in Section 5.15 hereof, including, without
limitation, policies and procedures pertaining to the accounting,
asset/liability management, audit, credit, human resources, treasury and legal
functions, and (ii) at the request of Buyer, conform Seller's existing policies
and procedures in respect of such matters to Buyer's policies and procedures
or, in the absence of any existing Seller policy or procedure regarding any
such function, introduce Buyer's policies or procedures in respect thereof,
unless to do so would cause Seller or any of the Seller Subsidiaries to be in
violation of any law, rule or regulation of any Regulatory Authority having
jurisdiction over Seller and/or the Seller Subsidiary affected thereby,
provided, however, that prior to the date that it shall be a requirement
- -------- -------
hereunder for such policies and procedures to be established, Buyer shall
certify to Seller that Buyer's representations and warranties are true and
correct as of such date, that the approval conditions to its obligations
contemplated by Section 6.01(b) have been satisfied or waived (except to the
extent that any waiting period associated therewith may then have commenced but
not expired) and that Buyer is otherwise in compliance with this Agreement; and
provided, further, that Seller shall not be required to take any such action
that is not consistent with GAAP and regulatory accounting principles.
5.08. Employee Benefits. The Seller Employee Plans shall not be terminated
-----------------
by reason of the Merger but shall continue thereafter as plans of the Surviving
Corporation until such time as the employees of Seller and the Seller
Subsidiaries are integrated into Buyer's employee benefit plans that are
available to other employees of Buyer and Buyer Subsidiaries, subject to the
terms and conditions specified in such plans and to such changes therein as may
be necessary to reflect the consummation of the Merger. Buyer shall take such
steps as are necessary or required to integrate the employees of Seller and the
Seller Subsidiaries in Buyer's employee benefit plans available to other
employees of Buyer and Buyer Subsidiaries as soon as practicable after the
Effective Time, (i) with full credit for prior service with Seller or any of
the Seller Subsidiaries for all purposes other than determining the amount of
benefit accruals under any defined benefit plan, (ii) without any waiting
periods, evidence of insurability, or application of any pre-existing condition
limitations, and (iii) with full credit for claims arising prior to the
Effective Time for purposes of deductibles, out-of-pocket maximums, benefit
maximums, and all other similar limitations for the applicable plan year during
which the Merger is consummated. Each of Buyer and Seller shall use all
reasonable efforts to insure that no amounts paid or payable by Seller, Seller
Subsidiaries or Buyer to or with respect to any employee or former employee of
Seller or any Seller Subsidiary will fail to be deductible for federal income
tax purposes by reason of Section 280G of the IRC. Seller shall ensure that
following the Effective Time no holder of Seller Employee Stock
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Options or any participant in any Seller Stock Plan shall have any right
thereunder to acquire any securities of Seller or any Seller Subsidiary.
5.09. Seller Stock Options. (a) At the Effective Time, all rights with
--------------------
respect to Seller Common Stock pursuant to Seller Stock Options that are
outstanding at the Effective Time, whether or not then exercisable, shall be
converted into and become rights with respect to Buyer Common Stock, and Buyer
shall assume Seller Stock Option in accordance with the terms of the stock
option plan under which it was issued and the stock option agreement by which
it is evidenced. From and after the Effective Time, (i) each Seller Stock
Option assumed by Buyer shall be exercised solely for shares of Buyer Common
Stock, (ii) the number of shares of Buyer Common Stock subject to each Seller
Stock Option shall be equal to the number of shares of Seller Common Stock
subject to such Seller Stock Option immediately prior to the Effective Time
multiplied by the Exchange Ratio and (iii) the per share exercise price under
each Seller Stock Option shall be adjusted by dividing the per share exercise
price under such Seller Stock Option by the Exchange Ratio and rounding down to
the nearest cent; provided, however, that the terms of each Seller Stock Option
-------- -------
shall, in accordance with its terms, be subject to further adjustment as
appropriate to reflect any stock split, stock dividend, recapitalization or
other similar transaction subsequent to the Effective Time. It is intended that
the foregoing assumption shall be undertaken in a manner that will not
constitute a "modification" as defined in the IRC, as to any Seller Stock
Option that is an "incentive stock option."
(b) At or prior to the Effective Time, Buyer shall take all corporate
action necessary to authorize and reserve for issuance a sufficient number of
shares of Buyer Common Stock for delivery upon exercise of Seller Stock Options
to purchase Seller Common Stock assumed by it in accordance paragraph (a)
above. As soon as practicable after the Effective Time, Buyer shall file a
registration statement on Form S-3 or Form S-8, as the case may be (or any
successor or other appropriate forms), or another appropriate form with respect
to the shares of Buyer Common Stock subject to such options and shall use its
best efforts to maintain the effectiveness of such registration statements (and
maintain the current status of the prospectus contained therein) for so long as
such options remain outstanding.
5.10. Press Releases. Except as may be required by law, Seller and Buyer
--------------
shall consult and agree with each other as to the form and substance of any
proposed press release relating to this Agreement or any of the transactions
contemplated hereby.
5.11. State Takeover Statutes; Seller's Certificate of Incorporation. (a)
--------------------------------------------------------------
Seller will take all steps necessary to exempt the transactions contemplated by
this Agreement and any agreement contemplated hereby from, and if necessary
challenge the validity of, any applicable state takeover law.
(b) Seller will take all steps necessary to exempt the transactions
contemplated by this Agreement and any agreement contemplated hereby from the
super-majority voting provisions of Sections 9 and 12 of Seller's Certificate
of Incorporation.
5.12. D&O Indemnification. From and after the Effective Time, Buyer agrees
-------------------
to (i) indemnify and hold harmless the past and present employees, agents,
directors or officers of Seller and its Subsidiaries for all acts or omissions
occurring at or prior to the Effective Time to the same extent such persons are
indemnified and held harmless (A) under their respective Articles of
Incorporation or Bylaws of Seller and its Subsidiaries in the form in effect at
the date of this Agreement, (B) by operation of law, or (C) by virtue of any
contract, resolution or other agreement or document existing at the date of
this Agreement, and such duties and obligations shall continue in full force
and effect for so long as they would (but for the Merger) otherwise survive and
continue in full force and effect, and (ii) assume the obligations of Seller
with respect to directors and officers insurance under its prior acquisition
agreements, which obligations are set forth on Schedule 5.12. Buyer will
provide, or cause to be provided, for a period of not less than six years from
the Effective Time, an insurance and indemnification policy that provides the
officers and directors of Seller and its Subsidiaries immediately prior to the
Effective Time coverage no less favorable than as currently provided by Buyer
to its officers and directors.
5.13. Best Efforts. Each of Buyer and Seller undertakes and agrees to use
------------
its best efforts to cause the Merger (i) to qualify as a reorganization within
the meaning of Section 368 of the IRC (including, if necessary, to take
reasonable steps to restructure the transactions contemplated by this Agreement
to so qualify) and (ii) to occur as soon as practicable. Each of Buyer and
Seller agrees to not take any action that would materially impede or delay the
consummation of the transactions contemplated by this Agreement or the ability
of Buyer or Seller to obtain any
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<PAGE> 112
approval of any Regulatory Authority required for the transactions contemplated
by this Agreement or to perform its covenants and agreements under this
Agreement.
5.14. Insurance. Seller shall, and Seller shall cause each of its
---------
Subsidiaries to, use its best efforts to maintain its existing insurance.
5.15. Conforming Entries. (a) Notwithstanding that Seller believes that
------------------
Seller and the Seller Subsidiaries have established all reserves and taken all
provisions for possible loan losses required by GAAP and applicable laws, rules
and regulations, Seller recognizes that Buyer may have adopted different loan,
accrual and reserve policies (including loan classifications and levels of
reserves for possible loan losses). Subject to applicable laws, regulations and
the requirements of Regulatory Authorities, from and after the date of this
Agreement to the Effective Time, Seller and Buyer shall consult and cooperate
with each other with respect to conforming the loan, accrual and reserve
policies of Seller and the Seller Subsidiaries to those policies of Buyer, as
specified in each case in writing to Seller, based upon such consultation and
as hereinafter provided.
(b) Subject to applicable laws, regulations and the requirements of
Regulatory Authorities, in addition, from and after the date of this Agreement
to the Effective Time, Seller and Buyer shall consult and cooperate with each
other with respect to determining appropriate Seller accruals, reserves and
charges to establish and take in respect of excess equipment write-off or
write-down of various assets and other appropriate charges and accounting
adjustments taking into account the parties' business plans following the
Merger, as specified in each case in writing to Seller, based upon such
consultation and as hereinafter provided.
(c) Subject to applicable laws, regulations and the requirements of
Regulatory Authorities, Seller and Buyer shall consult and cooperate with each
other with respect to determining, as specified in a written notice from Buyer
to Seller, based upon such consultation and as hereinafter provided, the amount
and the timing for recognizing for financial accounting purposes Seller's
expenses of the Merger and the restructuring charges relating to or to be
incurred in connection with the Merger.
(d) Subject to applicable laws, regulations and the requirements of
Regulatory Authorities, Seller shall (i) establish and take such reserves and
accruals at such time as Buyer shall reasonably request to conform Seller's
loan, accrual and reserve policies to Buyer's policies, and (ii) establish and
take such accruals, reserves and charges in order to implement such policies in
respect of excess facilities and equipment capacity, severance costs,
litigation matters, write-off or write-down of various assets and other
appropriate accounting adjustments, and to recognize for financial accounting
purposes such expenses of the Merger and restructuring charges related to or to
be incurred in connection with the Merger, in each case at such times as are
reasonably requested by Buyer; provided, however, that on the date such
-------- -------
reserves, accruals and charges are to be taken, Buyer shall certify to Seller
that Buyer's representations and warranties are true and correct as of such
date, that the approval conditions to its obligations contemplated by Section
6.01(b) have been satisfied or waived (except to the extent that any waiting
period associated therewith may then have commenced but not expired) and that
Buyer is otherwise in compliance with this Agreement; and provided, further,
that Seller shall not be required to take any such action that is not
consistent with GAAP and regulatory accounting principles.
(e) No reserves, accruals or charges taken in accordance with Section
5.15(d) above may be a basis to assert a violation of a breach of a
representation, warranty or covenant of Seller herein.
5.16. Environmental Reports. Seller shall cooperate with Buyer so that
---------------------
Buyer may as soon as reasonably practicable obtain, at Buyer's expense, a
report of a phase one environmental investigation on all real property owned,
leased or operated by Seller or any of the Seller Subsidiaries as of the date
hereof (but excluding Brio or Brio related properties, "other real estate
owned," property held in trust or in a fiduciary capacity and space in retail
or similar establishments leased by Seller or any of the Seller Subsidiaries
for automatic teller machines or bank branch facilities where the space leased
comprises less than 20% of the total space leased to all tenants of such
property) and within ten (10) days after the acquisition or lease of any real
property acquired or leased by Seller or any of the Seller Subsidiaries after
the date hereof (but excluding space in retail and similar establishments
leased by Seller or any of the Seller Subsidiaries for automatic teller
machines or bank branch facilities where the space leased comprises less than
20% of the total space leased to all tenants of such property). If advisable in
light of the phase one report with respect to any parcel of real property
referred to above, in the reasonable opinion of Buyer, Seller shall also
cooperate with Buyer so that Buyer may obtain, at Buyer's expense, a phase two
investigation report on such designated parcels.
A-25
<PAGE> 113
Buyer shall have fifteen (15) business days from the receipt of any such phase
two investigation report to notify Seller of any dissatisfaction with the
contents of such report. The after-tax costs (based on the highest federal
marginal tax rate) of all remedial or other corrective actions or measures with
regard to the real properties referred to above required by applicable law up
to and including $6.5 million in the aggregate shall be paid by Buyer. Such
after-tax costs of remedial or other corrective actions or measures with regard
to such real properties so required which exceed $6.5 million shall be the
responsibility of Seller and shall be deducted from the consideration to be
paid by Buyer pursuant to this Merger Agreement; provided that in the event
such after-tax costs exceed $30,000,000 Seller shall have the right pursuant to
Section 7.01(f) hereof to terminate this Agreement. Any costs associated with
the Brio property or Brio related properties are assumed in the transaction and
are not part of the subject matter of this Section 5.16.
5.17. Seller Securities. Subject to Buyer's certification to Seller that
-----------------
Buyer's representations and warranties are true and correct as of such date,
that the approval conditions to its obligations contemplated by Section 6.01(b)
have been satisfied or waived (except to the extent that any waiting period
associated therewith may then have commenced but not expired) and that Buyer is
otherwise in compliance with this Agreement, Seller shall call for redemption
at the earliest practicable date permitted pursuant to the related certificate
of designation all issued and outstanding shares of Seller Preferred Stock.
Seller shall use its reasonable best efforts, subject to prudent business
practices, to acquire up to 6,973,380 shares of Seller Common Stock in
open-market transactions consummated prior to the Effective Time, and subject
to compliance with applicable securities laws and regulations, at a cost per
share in each transaction of not more than $22.00 per share.
ARTICLE VI
----------
CONDITIONS
6.01. Conditions to Each Party's Obligation To Effect the Merger. The
----------------------------------------------------------
respective obligations of each party to effect the Merger shall be subject to
the fulfillment or waiver at or prior to the Effective Time of the following
conditions:
(a) This Agreement shall have received the requisite approval of
stockholders of Seller.
(b) All requisite approvals of this Agreement and the transactions
contemplated hereby shall have been received from the Board and any other
Regulatory Authority.
(c) The Registration Statement shall have been declared effective and
shall not be subject to a stop order or any threatened stop order.
(d) Neither Seller nor Buyer shall be subject to any order, decree or
injunction, and there shall be no pending or threatened order, decree or
injunction, of a court or agency of competent jurisdiction which enjoins or
prohibits the consummation of any of the Transactions.
(e) There shall be no legislative, statutory or regulatory action
(whether federal or state) pending which prohibits or threatens to prohibit
consummation of the Transactions or which otherwise materially adversely
affects the Transactions.
(f) Each of Buyer and Seller shall have received, from counsel
reasonably satisfactory to it, an opinion reasonably satisfactory in form
and substance to it to the effect that the Merger will constitute a
reorganization within the meaning of Section 368 of the IRC and that no
gain or loss will be recognized by the stockholders of Seller to the extent
they receive Buyer Common Stock solely in exchange for shares of Seller
Common Stock.
6.02. Conditions to Obligations of Seller To Effect the Merger. The
--------------------------------------------------------
obligations of Seller to effect the Merger shall be subject to the fulfillment
or waiver at or prior to the Effective Time of the following additional
conditions:
(a) Representations and Warranties. The representations and warranties
------------------------------
of Buyer set forth in Article III of this Agreement shall be true and
correct in all material respects as of the date of this Agreement and as of
the Effective Time (as though made on and as of the Effective Time except
(i) to the extent such representations and warranties are by their express
provisions made as of a specified date or period and (ii) for the effect of
transactions contemplated by this Agreement) and Seller shall have received
a certificate of the chairman or vice chairman of Buyer to that effect.
A-26
<PAGE> 114
(b) Performance of Obligations. Buyer shall have performed in all
--------------------------
material respects all obligations required to be performed by it under this
Agreement prior to the Effective Time, and Seller shall have received a
certificate of the chairman or vice chairman of Buyer to that effect.
6.03. Conditions to Obligations of Buyer To Effect the Merger. The
-------------------------------------------------------
obligations of Buyer to effect the Merger shall be subject to the fulfillment
or waiver at or prior to the Effective Time of the following additional
conditions:
(a) Representations and Warranties. The representations and warranties
------------------------------
of Seller set forth in Article II of this Agreement shall be true and
correct in all material respects as of the date of this Agreement and as of
the Effective Time (as though made on and as of the Effective Time except
(i) to the extent such representations and warranties are by their express
provisions made as of a specific date or period and (ii) for the effect of
transactions contemplated by this Agreement) and Buyer shall have received
a certificate of the chairman of Seller and a certificate of the president
and chief executive officer of Seller to that effect.
(b) Performance of Obligations. Seller shall have performed in all
--------------------------
material respects all obligations required to be performed by it under this
Agreement prior to the Effective Time, and Buyer shall have received a
certificate of the chairman of Seller and a certificate of the president
and chief executive officer of Seller to that effect.
(c) All shares of Seller Preferred Stock shall have been either
converted into shares of Seller Common Stock or redeemed, in each case in
accordance with the terms of the related certificate of designation.
ARTICLE VII
-----------
TERMINATION, AMENDMENT AND WAIVER
7.01. Termination. This Agreement may be terminated at any time prior to
-----------
the Effective Time, whether before or after any requisite stockholder approval:
(a) by mutual consent by the Executive Committee of the Board of
Directors of Buyer and the Board of Directors of Seller;
(b) by the Executive Committee of the Board of Directors of Buyer or
the Board of Directors of Seller at any time after the date that is twelve
months after the date of this Agreement if the Merger shall not theretofore
have been consummated (provided that the terminating party is not then in
material breach of any representation, warranty, covenant or other
agreement contained herein);
(c) by the Executive Committee of the Board of Directors of Buyer or
the Board of Directors of Seller if (i) the Board has denied approval of
the Merger and such denial has become final and nonappealable or (ii)
stockholders of Seller shall not have approved this Agreement at the
Meeting following a favorable recommendation of Seller's Board of
Directors;
(d) by the Executive Committee of the Board of Directors of Buyer in
the event of a material breach by Seller of any representation, warranty,
covenant or other agreement contained in this Agreement, which breach is
not cured within 30 days after written notice thereof to Seller by Buyer;
(e) by the Board of Directors of Seller in the event of a material
breach by Buyer of any representation, warranty, covenant or other
agreement contained in this Agreement, which breach is not cured within 30
days after written notice thereof is given to Buyer by Seller; or
(f) by the Board of Directors of Seller pursuant to and in accordance
with the provisions of the last sentence of Section 5.16.
7.02. Effect of Termination. In the event of termination of this Agreement
---------------------
as provided in Sections 7.01(a) through 7.01(c) and Section 7.01(f) above, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Buyer or Seller or their respective officers or
directors except as set forth in the second sentence of Section 5.01 and in
Section 5.06.
7.03. Amendment. This Agreement and the Schedules hereto may be amended by
---------
the parties hereto, by action taken by or on behalf of their respective Boards
of Directors, at any time before or after approval of this Agreement by the
stockholders of Seller; provided, however, that after any such approval by the
-------- -------
stockholders of Seller no such
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<PAGE> 115
modification shall alter or change the amount or kind of consideration to be
received by holders of Seller Common Stock as provided in this Agreement. This
Agreement may not be amended except by an instrument in writing signed on
behalf of each of Buyer and Seller.
7.04. Severability. Any term, provision, covenant or restriction contained
------------
in this Agreement held by a court or a Regulatory Authority of competent
jurisdiction or the Board to be invalid, void or unenforceable, shall be
ineffective to the extent of such invalidity, voidness or unenforceability, but
neither the remaining terms, provisions, covenants or restrictions contained in
this Agreement nor the validity or enforceability thereof in any other
jurisdiction shall be affected or impaired thereby. Any term, provision,
covenant or restriction contained in this Agreement that is so found to be so
broad as to be unenforceable shall be interpreted to be as broad as is
enforceable.
7.05. Waiver. Any term, condition or provision of this Agreement may be
------
waived in writing at any time by the party which is, or whose stockholders are,
entitled to the benefits thereof.
ARTICLE VIII
------------
GENERAL PROVISIONS
(8.01.) Non-Survival of Representations, Warranties and Agreements. No
----------------------------------------------------------
investigation by the parties hereto made heretofore or hereafter shall affect
the representations and warranties of the parties which are contained herein
and each such representation and warranty shall survive such investigation.
Except as set forth below in this Section 8.01, all representations, warranties
and agreements in this Agreement of Buyer and Seller or in any instrument
delivered by Buyer or Seller pursuant to or in connection with this Agreement
shall expire at the Effective Time or upon termination of this Agreement in
accordance with its terms or, in the case of any other such instrument, in
accordance with the terms of such instrument. In the event of consummation of
the Merger, the agreements contained in or referred to in Sections 5.02(b),
5.07, 5.08, 5.09 and 5.12 shall survive the Effective Time. In the event of
termination of this Agreement in accordance with its terms, the agreements
contained in or referred to in the second sentence of Section 5.01, Section
5.06 and Section 7.02 shall survive such termination.
8.02. Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed to be duly received (i) on the date given if
delivered personally or (ii) upon confirmation of receipt, if by facsimile
transmission or (iii) on the date received if mailed by registered or certified
mail (return receipt requested), or (iv) on the business date after being
delivered to a reputable overnight delivery service, if by such service, to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(i) if to Buyer:
Mercantile Bancorporation Inc.
Mercantile Tower
P.O. Box 524
St. Louis, Missouri 63166-0524
Attention: John W. Rowe
Executive Vice President
Copies to:
Jon W. Bilstrom, Esq.
General Counsel
Mercantile Bancorporation Inc.
Mercantile Tower
P.O. Box 524
St. Louis, Missouri 63166-0524
and
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
A-28
<PAGE> 116
Attention: Edward D. Herlihy, Esq.
Telecopy: (212) 403-2000
(ii) if to Seller:
Roosevelt Financial Group, Inc.
900 Roosevelt Parkway
Chesterfield, Missouri 63017
Attention: Stanley Bradshaw, President
and Chief Executive Officer
Copies to:
Silver, Freedman & Taff, L.L.P.
1100 New York Avenue, N.W.
Seventh Floor
Washington, D.C. 20005
Attention: Barry P. Taff, P.C.
Christopher R. Kelly, P.C.
Telecopy: (202) 682-0354
8.03. Miscellaneous. This Agreement (including the Schedules and other
-------------
written documents referred to herein or provided hereunder) (i) constitutes the
entire agreement and supersedes all other prior agreements and understandings,
both written and oral, among the parties, or any of them, with respect to the
subject matter hereof, including any confidentiality agreement between the
parties hereto, (ii) except for the provisions of Section 5.08 and 5.12, is not
intended to confer upon any person not a party hereto any rights or remedies
hereunder, (iii) shall not be assigned by operation of law or otherwise and
(iv) shall be governed in all respects by the laws of the State of Missouri,
except as otherwise specifically provided herein or required by the DGCL.
Nothing in this Agreement shall be construed to require any party (or any
subsidiary or affiliate of any party) to take any action or fail to take any
action in violation of applicable law, rule or regulation. This Agreement may
be executed in counterparts which together shall constitute a single agreement.
IN WITNESS WHEREOF, Buyer and Seller have caused this Agreement to be
signed and, by such signature, acknowledged by their respective officers
thereunto duly authorized, and such signatures to be attested to by their
respective officers thereunto duly authorized, all as of the date first written
above.
Attest: MERCANTILE BANCORPORATION INC.
- ------
/s/ John W. Rowe By: /s/ Thomas H. Jacobsen
- -------------------------------------------- -------------------------
Name: John W. Rowe Name: Thomas H. Jacobsen
Title: Title: Chairman, President
and Chief Executive
Officer
Attest: ROOSEVELT FINANCIAL GROUP, INC.
- ------
/s/ Gary W. Douglass By: /s/ Stanley J. Bradshaw
- -------------------------------------------- ------------------------
Name: Gary W. Douglass Name: Stanley J. Bradshaw
Title: Executive Vice Title: President and Chief
President and Chief Executive Officer
Financial Officer
A-29
<PAGE> 117
ANNEX B
STOCK OPTION AGREEMENT
----------------------
STOCK OPTION AGREEMENT ("Option Agreement") dated December 22, 1996,
between MERCANTILE BANCORPORATION INC. ("Buyer"), a Missouri corporation
registered as a bank holding company under the Bank Holding Company Act of
1956, as amended (the "Holding Company Act") and as a savings and loan
holding company under the Home Owners' Loan Act, as amended ("HOLA"), and
Roosevelt Financial Group, Inc. ("Seller"), a Delaware corporation registered
as a unitary savings and loan holding company under HOLA and as a bank holding
company under the Holding Company Act.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Executive Committee of the Board of Directors of Buyer and the
Board of Directors of Seller have approved an Agreement and Plan of
Reorganization dated as of even date herewith (the "Merger Agreement")
providing for the merger of Seller with and into a wholly owned subsidiary of
Buyer;
WHEREAS, as a condition to Buyer's entering into the Merger Agreement,
Buyer has required that Seller agree, and Seller has agreed, to grant to Buyer
the option set forth herein to purchase authorized but unissued shares of
Seller Common Stock;
NOW, THEREFORE, in consideration of the premises herein contained, the
parties agree as follows:
1. Definitions.
-----------
Capitalized terms used but not defined herein shall have the same meanings
as in the Merger Agreement.
2. Grant of Option.
---------------
Subject to the terms and conditions set forth herein, Seller hereby grants
to Buyer an option (the "Option") to purchase up to 8,785,429 authorized and
unissued shares of Seller Common Stock at a price of $18.125 per share (the
"Purchase Price") payable in cash as provided in Section 4 hereof.
3. Exercise of Option.
------------------
(a) Buyer may exercise the Option, in whole or in part, at any time or from
time to time if a Purchase Event (as defined below) shall have occurred;
provided, however, that (i) to the extent the Option shall not have been
- -------- -------
exercised, it shall terminate and be of no further force and effect upon the
earliest to occur of (i) the Effective Time of the Merger, (ii) the termination
of the Merger Agreement in accordance with Sections 7.01(e), 7.01(f) or 7.01(a)
through 7.01(c) thereof, and (iii) three years following the termination of the
Merger Agreement in accordance with Section 7.01(d) thereof, provided that if
--------
such termination follows an Extension Event (as defined below), the Option
shall not terminate until the date that is 12 months following such
termination; (ii) if the Option cannot be exercised on such day because of any
injunction, order or similar restraint issued by a court of competent
jurisdiction, the Option shall expire on the 30th business day after such
injunction, order or restraint shall have been dissolved or when such
injunction, order or restraint shall have become permanent and no longer
subject to appeal, as the case may be; and (iii) that any such exercise shall
be subject to compliance with applicable law, including the Holding Company
Act.
(b) As used herein, a "Purchase Event" shall mean any of the following
events:
(i) Seller or any of its Subsidiaries, without having received prior
written consent from Buyer, shall have entered into, authorized,
recommended, proposed or publicly announced its intention to enter into,
authorize, recommend, or propose, an agreement, arrangement or
understanding with any person (other than Buyer or any of its
Subsidiaries) to (A) effect a merger or consolidation or similar
transaction involving Seller or any of its Subsidiaries (other than
internal mergers, reorganizing actions, consolidations or dissolutions
involving only existing Subsidiaries of Seller), (B) purchase, lease or
otherwise acquire 15% or more of the assets of Seller or any of its
Subsidiaries or (C) purchase or otherwise acquire (including by way of
merger, consolidation, share exchange or similar transaction) Beneficial
Ownership of securities representing 10% or more of the voting power of
Seller or any of its Subsidiaries;
(ii) any person (other than Buyer or any Subsidiary of Buyer or any
person acting in concert with Buyer, or
B-1
<PAGE> 118
Seller or any Subsidiary of Seller in a fiduciary capacity) shall have
acquired Beneficial Ownership or the right to acquire Beneficial Ownership
of 10% or more of the voting power of Seller; or
(iii) Seller's Board of Directors shall have withdrawn or modified in a
manner adverse to Buyer the recommendation of Seller's Board of Directors
with respect to the Merger Agreement, in each case after an Extension Event;
or
(iv) the holders of Seller Common Stock shall not have approved the
Merger Agreement at the Meeting, or such Meeting shall not have been held or
shall have been cancelled prior to termination of the Merger Agreement in
accordance with its terms, in each case after an Extension Event.
(c) As used herein, the term "Extension Event" shall mean any of the
following events:
(i) a Purchase Event of the type specified in clauses (b)(i) and
(b)(ii) above;
(ii) any person (other than Buyer or any of its Subsidiaries) shall have
"commenced" (as such term is defined in Rule 14d-2 under the Exchange Act),
or shall have filed a registration statement under the Securities Act with
respect to, a tender offer or exchange offer to purchase shares of Seller
Common Stock such that, upon consummation of such offer, such person would
have Beneficial Ownership (as defined below) or the right to acquire
Beneficial Ownership of 10% or more of the voting power of Seller; or,
(iii) any person (other than Buyer or any Subsidiary of Buyer, or Seller
or any Subsidiary of Seller in a fiduciary capacity) shall have publicly
announced its willingness, or shall have publicly announced a proposal, or
publicly disclosed an intention to make a proposal, (x) to make an offer
described in clause (ii) above or (y) to engage in a transaction described
in clause (i) above.
(d) As used herein, the terms "Beneficial Ownership" and "Beneficially
Own" shall have the meanings ascribed to them in Rule 13d-3 under the Exchange
Act.
(e) In the event Buyer wishes to exercise the Option, it shall deliver to
Seller a written notice (the date of which being herein referred to as the
"Notice Date") specifying (i) the total number of shares it intends to
purchase pursuant to such exercise and (ii) a place and date not earlier than
three business days nor later than 60 calendar days from the Notice Date for
the closing of such purchase (the "Closing Date").
4. Payment and Delivery of Certificates.
------------------------------------
(a) At the closing referred to in Section 3 hereof, Buyer shall pay to
Seller the aggregate purchase price for the shares of Seller Common Stock
purchased pursuant to the exercise of the Option in immediately available funds
by wire transfer to a bank account designated by Seller.
(b) At such closing, simultaneously with the delivery of cash as provided
in Section 4(a), Seller shall deliver to Buyer a certificate or certificates
representing the number of shares of Seller Common Stock purchased by Buyer,
registered in the name of Buyer or a nominee designated in writing by Buyer,
and Buyer shall deliver to Seller a letter agreeing that Buyer shall not offer
to sell, pledge or otherwise dispose of such shares in violation of applicable
law or the provisions of this Option Agreement.
(c) If at the time of issuance of any Seller Common Stock pursuant to any
exercise of the Option, Seller shall have issued any share purchase rights or
similar securities to holders of Seller Common Stock, then each such share of
Seller Common Stock shall also represent rights with terms substantially the
same as and at least as favorable to Buyer as those issued to other holders of
Seller Common Stock.
(d) Certificates for Seller Common Stock delivered at any closing hereunder
shall be endorsed with a restrictive legend which shall read substantially as
follows:
The transfer of the shares represented by this certificate is subject
to certain provisions of an agreement between the registered holder
hereof and , a copy of which is on file at the
------------------------
principal office of , and to resale restrictions
------------------------
arising under the Securities Act of 1933 and any applicable state
securities laws. A copy of such agreement will be provided to the holder
hereof without charge upon receipt by of a
------------------------
written request therefor.
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It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if Buyer shall have delivered
to Seller an opinion of counsel, in form and substance reasonably satisfactory
to Seller and its counsel, to the effect that such legend is not required for
purposes of the Securities Act and any applicable state securities laws.
5. Authorization, etc.
------------------
(a) Seller hereby represents and warrants to Buyer that:
(i) Seller has full corporate authority to execute and deliver this
Option Agreement and, subject to Section 11(i), to consummate the
transactions contemplated hereby;
(ii) such execution, delivery and consummation have been authorized by
the Board of Directors of Seller, and no other corporate proceedings are
necessary therefor;
(iii) this Option Agreement has been duly and validly executed and
delivered and represents a valid and legally binding obligation of Seller,
enforceable against Seller in accordance with its terms; and
(iv) Seller has taken all necessary corporate action to authorize and
reserve and, subject to Section 11(i), permit it to issue and, at all times
from the date hereof through the date of the exercise in full or the
expiration or termination of the Option, shall have reserved for issuance
upon exercise of the Option, 8,785,429 shares of Seller Common Stock, all
of which, upon issuance pursuant hereto, shall be duly authorized, validly
issued, fully paid and nonassessable, and shall be delivered free and clear
of all claims, liens, encumbrances, restrictions (other than federal and
state securities restrictions) and security interests and not subject to
any preemptive rights.
(b) Buyer hereby represents and warrants to Seller that:
(i) Buyer has full corporate authority to execute and deliver this
Option Agreement and, subject to Section 11(i), to consummate the
transactions contemplated hereby;
(ii) such execution, delivery and consummation have been authorized by
all requisite corporate action by Buyer, and no other corporate proceedings
are necessary therefor;
(iii) this Option Agreement has been duly and validly executed and
delivered and represents a valid and legally binding obligation of Buyer,
enforceable against Buyer in accordance with its terms; and
(iv) any Seller Common Stock or other securities acquired by Buyer upon
exercise of the Option will not be taken with a view to the public
distribution thereof and will not be transferred or otherwise disposed of
except in compliance with the Securities Act.
6. Adjustment upon Changes in Capitalization.
-----------------------------------------
In the event of any change in Seller Common Stock by reason of stock
dividends, split-ups, recapitalizations or the like, the type and number of
shares subject to the Option, and the purchase price per share, as the case may
be, shall be adjusted appropriately. In the event that any additional shares of
Seller Common Stock are issued after the date of this Option Agreement (other
than pursuant to an event described in the preceding sentence or pursuant to
this Option Agreement), the number of shares of Seller Common Stock subject to
the Option shall be adjusted so that, after such issuance, it equals at least
19.9% of the number of shares of Seller Common Stock then issued and
outstanding (without considering any shares subject to or issued pursuant to
the Option).
7. Repurchase.
----------
(a) Subject to Section 11(i), at the request of Buyer at any time
commencing upon the occurrence of a Purchase Event and ending 13 months
immediately thereafter (the "Repurchase Period"), Seller (or any successor
entity thereof) shall repurchase the Option from Buyer together with all (but
not less than all, subject to Section 10) shares of Seller Common Stock
purchased by Buyer pursuant thereto with respect to which Buyer then has
Beneficial Ownership, at a price (per share, the "Per Share Repurchase
Price") equal to the sum of:
(i) The exercise price paid by Buyer for any shares of Seller Common
Stock acquired pursuant to the Option;
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(ii) The difference between (A) the "Market/Tender Offer Price" for
shares of Seller Common Stock (defined as the higher of (x) the highest
price per share at which a tender or exchange offer has been made for shares
of Seller Common Stock or (y) the highest closing mean of the "bid" and the
"ask" price per share of Seller Common Stock reported by NASDAQ, the
automated quotation system of the National Association of Securities
Dealers, Inc., for any day within that portion of the Repurchase Period
which precedes the date Buyer gives notice of the required repurchase under
this Section 7) and (B) the exercise price as determined pursuant to Section
2 hereof (subject to adjustment as provided in Section 6), multiplied by the
number of shares of Seller Common Stock with respect to which the Option has
not been exercised, but only if the Market/Tender Offer Price is greater
than such exercise price;
(ii) The difference between the Market/Tender Offer Price and the
exercise price paid by Buyer for any shares of Seller Common Stock purchased
pursuant to the exercise of the Option, multiplied by the number of shares
so purchased, but only if the Market/Tender Offer Price is greater than
such exercise price; and
(iv) Buyer's reasonable out-of-pocket expenses incurred in connection
with the transactions contemplated by the Merger Agreement, including,
without limitation, legal, accounting and investment banking fees.
(b) In the event Buyer exercises its rights under this Section 7, Seller
shall, within 10 business days thereafter, pay the required amount to Buyer by
wire transfer of immediately available funds to an account designated by Buyer
and Buyer shall surrender to Seller the Option and the certificates evidencing
the shares of Seller Common Stock purchased thereunder with respect to which
Buyer then has Beneficial Ownership, and Buyer shall warrant that it has sole
record and Beneficial Ownership of such shares and that the same are free and
clear of all liens, claims, charges, restrictions and encumbrances of any kind
whatsoever.
(c) In determining the Market/Tender Offer Price, the value of any
consideration other than cash shall be determined by an independent nationally
recognized investment banking firm selected by Buyer and reasonably acceptable
to Seller.
8. Repurchase at Option of Seller and First Refusal.
------------------------------------------------
(a) Except to the extent that Buyer shall have previously exercised its
rights under Section 7, at the request of Seller during the six-month period
commencing 13 months following the first occurrence of a Purchase Event, Seller
may repurchase from Buyer, and Buyer shall sell to Seller, all (but not less
than all, subject to Section 10) of the Seller Common Stock acquired by Buyer
pursuant hereto and with respect to which Buyer has Beneficial Ownership at the
time of such repurchase at a price per share equal to the greater of (i) 110%
of the Market/Tender Offer Price per share, (ii) the Per Share Repurchase Price
or (iii) the sum of (A) the aggregate Purchase Price of the shares so
repurchased plus (B) interest on the aggregate Purchase Price paid for the
shares so repurchased from the date of purchase to the date of repurchase at
the highest rate of interest announced by Buyer as its prime or base lending or
reference rate during such period, less any dividends received on the shares so
repurchased, plus (C) Buyer's reasonable out-of-pocket expenses incurred in
connection with the transactions contemplated by the Merger Agreement,
including, without limitation, legal, accounting and investment banking fees.
Any repurchase under this Section 8(a) shall be consummated in accordance with
Section 7(b).
(b) If, at any time after the occurrence of a Purchase Event and prior to
the earlier of (i) the expiration of 18 months immediately following such
Purchase Event or (ii) the expiration or termination of the Option, Buyer shall
desire to sell, assign, transfer or otherwise dispose of the Option or all or
any of the shares of Seller Common Stock acquired by it pursuant to the Option,
it shall give Seller written notice of the proposed transaction (an "Offeror's
Notice"), identifying the proposed transferee, and setting forth the terms of
the proposed transaction. An Offeror's Notice shall be deemed an offer by Buyer
to Seller, which may be accepted within 10 business days of the receipt of such
Offeror's Notice, on the same terms and conditions and at the same price at
which Buyer is proposing to transfer the Option or such shares to a third
party. The purchase of the Option or any such shares by Seller shall be closed
within 10 business days of the date of the acceptance of the offer and the
purchase price shall be paid to Buyer by wire transfer of immediately available
funds to an account designated by Buyer. In the event of the failure or refusal
of Seller to purchase the Option or all the shares covered by the Offeror's
Notice or if the Board or any other Regulatory Authority disapproves Seller's
proposed purchase of the Option or such shares, Buyer may, within 60 days from
the date of the Offeror's Notice, sell all, but not less than all, of the
Option or such shares to such third party at no less than the price specified
and on terms no more favorable to the purchaser than those set forth in the
Offeror's Notice.
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The requirements of this Section 8(b) shall not apply to (i) any disposition as
a result of which the proposed transferee would Beneficially Own not more than
2% of the voting power of Seller or (ii) any disposition of Seller Common Stock
by a person to whom Buyer has sold shares of Seller Common Stock issued upon
exercise of the Option.
9. Registration Rights.
-------------------
At any time after a Purchase Event, Seller shall, if requested by any
holder or beneficial owner of shares of Seller Common Stock issued upon
exercise of the Option (except any beneficial holder who acquired all of such
holder's shares in a transaction exempt from the requirements of Section 8(b)
by reason of clause (i) thereof) (each a "Holder"), as expeditiously as
possible file a registration statement on a form for general use under the
Securities Act if necessary in order to permit the sale or other disposition of
the shares of Seller Common Stock that have been acquired upon exercise of the
Option in accordance with the intended method of sale or other disposition
requested by any such Holder (it being understood and agreed that any such sale
or other disposition shall be effected on a widely distributed basis so that,
upon consummation thereof, no purchaser or transferee shall Beneficially Own
more than 2% of the shares of Seller Common Stock then outstanding). Each such
Holder shall provide all information reasonably requested by Seller for
inclusion in any registration statement to be filed hereunder. Seller shall use
its best efforts to cause such registration statement first to become effective
and then to remain effective for such period not in excess of 180 days from the
day such registration statement first becomes effective as may be reasonably
necessary to effect such sales or other dispositions. The registration effected
under this Section 9 shall be at Seller's expense except for underwriting
commissions and the fees and disbursements of such Holders' counsel
attributable to the registration of such Seller Common Stock. In no event shall
Seller be required to effect more than one registration hereunder. The filing
of the registration statement hereunder may be delayed for such period of time
as may reasonably be required to facilitate any public distribution by Seller
of Seller Common Stock or if a special audit of Seller would otherwise be
required in connection therewith. If requested by any such Holder in connection
with such registration, Seller shall become a party to any underwriting
agreement relating to the sale of such shares, but only to the extent of
obligating itself in respect of representations, warranties, indemnities and
other agreements customarily included in such underwriting agreements for
parties similarly situated. Upon receiving any request for registration under
this Section 9 from any Holder, Seller agrees to send a copy thereof to any
other person known to Seller to be entitled to registration rights under this
Section 9, in each case by promptly mailing the same, postage prepaid, to the
address of record of the persons entitled to receive such copies.
10. Severability.
------------
Any term, provision, covenant or restriction contained in this Option
Agreement held by a court or a Regulatory Authority of competent jurisdiction
to be invalid, void or unenforceable, shall be ineffective to the extent of
such invalidity, voidness or unenforceability, but neither the remaining terms,
provisions, covenants or restrictions contained in this Option Agreement nor
the validity or enforceability thereof in any other jurisdiction shall be
affected or impaired thereby. Any term, provision, covenant or restriction
contained in this Option Agreement that is so found to be so broad as to be
unenforceable shall be interpreted to be as broad as is enforceable. If for any
reason such court or Regulatory Authority determines that applicable law will
not permit Buyer or any other person to acquire, or Seller to repurchase or
purchase, the full number of shares of Seller Common Stock provided in Section
2 hereof (as adjusted pursuant to Section 6 hereof), it is the express
intention of the parties hereto to allow Buyer or such other person to acquire,
or Seller to repurchase or purchase, such lesser number of shares as may be
permissible, without any amendment or modification hereof.
11. Miscellaneous.
-------------
(a) Expenses. Each of the parties hereto shall pay all costs and expenses
--------
incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own financial
consultants, investment bankers, accountants and counsel, except as otherwise
provided herein.
(b) Entire Agreement. Except as otherwise expressly provided herein, this
----------------
Option Agreement and the Merger Agreement contain the entire agreement between
the parties with respect to the transactions contemplated hereunder and
supersedes all prior arrangements or understandings with respect thereto,
written or oral.
(c) Successors; No Third Party Beneficiaries. The terms and conditions of
----------------------------------------
this Option Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns. Nothing
in this Option Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and
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<PAGE> 122
their respective successors and assigns, any rights, remedies, obligations, or
liabilities under or by reason of this Option Agreement, except as expressly
provided herein.
(d) Assignment. Other than as provided in Sections 8 and 9 hereof, neither
----------
of the parties hereto may sell, transfer, assign or otherwise dispose of any of
its rights or obligations under this Option Agreement or the Option created
hereunder to any other person (whether by operation of law or otherwise),
without the express written consent of the other party.
(e) Notices. All notices or other communications which are required or
-------
permitted hereunder shall be in writing and sufficient if delivered in
accordance with Section 8.02 of the Merger Agreement (which is incorporated
herein by reference).
(f) Counterparts. This Option Agreement may be executed in counterparts,
------------
and each such counterpart shall be deemed to be an original instrument, but
both such counterparts together shall constitute but one agreement.
(g) Specific Performance. The parties hereto agree that if for any reason
--------------------
Buyer or Seller shall have failed to perform its obligations under this Option
Agreement, then either party hereto seeking to enforce this Option Agreement
against such nonperforming party shall be entitled to specific performance and
injunctive and other equitable relief, and the parties hereto further agree to
waive any requirement for the securing or posting of any bond in connection
with the obtaining of any such injunctive or other equitable relief. This
provision is without prejudice to any other rights that either party hereto may
have against the other party hereto for any failure to perform its obligations
under this Option Agreement.
(h) Governing Law. This Option Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Missouri applicable to agreements
made and entirely to be performed within such state. Nothing in this Option
Agreement shall be construed to require any party (or any subsidiary or
affiliate of any party) to take any action or fail to take any action in
violation of applicable law, rule or regulation.
(i) Regulatory Approvals; Section 16(b). If, in connection with (A) the
-----------------------------------
exercise of the Option under Section 3 or a sale by Buyer to a third party
under Section 8, (B) a repurchase by Seller under Section 7 or a repurchase or
purchase by Seller under Section 8, prior notification to or approval of the
Board or any other Regulatory Authority is required, then the required notice
or application for approval shall be promptly filed and expeditiously processed
and periods of time that otherwise would run pursuant to such Sections shall
run instead from the date on which any such required notification period has
expired or been terminated or such approval has been obtained, and in either
event, any requisite waiting period shall have passed. In the case of clause
(A) of this subsection (i), such filing shall be made by Buyer, and in the case
of clause (B) of this subsection (i), such filing shall be made by Seller,
provided that each of Buyer and Seller shall use its best efforts to make all
filings with, and to obtain consents of, all third parties and Regulatory
Authorities necessary to the consummation of the transactions contemplated
hereby, including without limitation applying to the Board under the Holding
Company Act for approval to acquire the shares issuable hereunder. Periods of
time that otherwise would run pursuant to Sections 3, 7 or 8 shall also be
extended to the extent necessary to avoid liability under Section 16(b) of the
Exchange Act.
(j) No Breach of Merger Agreement Authorized. Nothing contained in this
----------------------------------------
Option Agreement shall be deemed to authorize Seller to issue any shares of
Seller Common Stock in breach of, or otherwise breach any of, the provisions of
the Merger Agreement.
(k) Waiver and Amendment. Any provision of this Agreement may be waived at
--------------------
any time by the party that is entitled to the benefits of such provision. This
Option Agreement may not be modified, amended, altered or supplemented except
upon the execution and delivery of a written agreement executed by the parties
hereto.
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<PAGE> 123
IN WITNESS WHEREOF, each of the parties hereto has executed this Option
Agreement as of the date first written above.
MERCANTILE BANCORPORATION INC.
By: /s/ Thomas H. Jacobsen
-----------------------------------
Name: Thomas H. Jacobsen
Title: Chairman, President and
Chief Executive Officer
ROOSEVELT FINANCIAL GROUP, INC.
By: /s/ Gary W. Douglass
-----------------------------------
Name: Gary W. Douglass
Title: Executive Vice President and
Chief Executive Officer
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<PAGE> 124
ANNEX C
APPRAISAL RIGHTS PROVISIONS UNDER THE
DELAWARE GENERAL CORPORATION LAW
Set forth below is the text of the statutory appraisal rights provisions
under Section 262 of the Delaware General Corporation Law.
262 APPRAISAL RIGHTS. (a) Any stockholder of a corporation of this State
who holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation,
who has otherwise complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor consented thereto in
writing pursuant to Sec. 228 of this title shall be entitled to an appraisal by
the Court of Chancery of the fair value of his shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by
those words and also membership or membership interest of a member of a
nonstock corporation; and the words "depository receipt" mean a receipt or
other instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Sec. 251, 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the holders of the surviving corporation as
provided in subsections (f) or (g) of Sec. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to Sec.
251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on
a national securities exchange or designated as a national market
system security or an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more than
2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares of fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Sec. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all
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<PAGE> 125
of the assets of the corporation. If the certificate of incorporation contains
such a provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to Sec. 228 or
253 of this title, the surviving or resulting corporation, either before the
effective date of the merger or consolidation or within 10 days thereafter,
shall notify each of the stockholders entitled to appraisal rights of the
effective date of the merger or consolidation and that appraisal rights are
available for any or all of the shares of the constituent corporation, and
shall include in such notice a copy of this section. The notice shall be
sent by certified or registered mail, return receipt requested, addressed
to the stockholder at his address as it appears on the records of the
corporation. Any stockholder entitled to appraisal rights may, within 20
days after the date of mailing of the notice, demand in writing from the
surviving or resulting corporation the appraisal of his shares. Such demand
will be sufficient if it reasonably informs the corporation of the identity
of the stockholder and that the stockholder intends thereby to demand the
appraisal of his shares.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who
has complied with subsections (a) and (d) hereof and who is otherwise entitled
to appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10
days after his written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable.
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<PAGE> 126
The forms of the notices by mail and by publication shall be approved by the
Court, and the costs thereof shall be borne by the surviving or resulting
corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court may,
in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on the
list filed by the surviving or resulting corporation pursuant to subsection (f)
of this section and who has submitted his certificates of stock to the Register
in Chancery, if such is required, may participate fully in all proceedings
until it is finally determined that he is not entitled to appraisal rights
under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall
deliver to the surviving or resulting corporation a written withdrawal of his
demand for an appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the merger or consolidation
as provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the
Court of Chancery shall be dismissed as to any stockholder without the approval
of the Court, and such approval may be conditioned upon such terms as the Court
deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation. (Last amended by Ch.
79, L. '95, eff. 7-1-95.)
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ANNEX D
Letterhead of Montgomery Securities
MONTGOMERY
December 22, 1996
Board of Directors
Roosevelt Financial Group, Inc.
900 Roosevelt Parkway
Chesterfield, MO 63017
Members of the Board:
We understand that Roosevelt Financial Group, Inc., a Delaware corporation
("Roosevelt"), and Mercantile Bancorporation Inc., a Missouri corporation
("Mercantile"), have entered into an Agreement and Plan of Reorganization,
pursuant to which Roosevelt will be merged with and into a wholly owned
subsidiary of Mercantile (the "Merger"). Pursuant to the Merger, as more
fully described in the Agreement and Plan of Reorganization, dated December 22,
1996 provided to us by Roosevelt and as further described to us by management
of Roosevelt (the "Merger Agreement"), each outstanding share of the common
stock, $0.01 par value per share, of Roosevelt ("Roosevelt Common Stock"),
will at the election of the shareholder be exchanged for either $22.00 cash
(the "Cash Consideration") or .4211 shares (the "Stock Consideration") of
the common stock, par value of $5.00 per share of Mercantile ("Mercantile
Common Stock"), provided that the aggregate number of shares of Mercantile
Common Stock to be issued, including Mercantile Common Stock issuable upon
exercise of common stock options of Roosevelt to be converted into stock
options of Mercantile in connection with the Merger, shall not exceed
13,042,110. Cash Consideration and Stock Consideration are hereinafter
collectively referred to as the Consideration. The terms and conditions of the
Merger are set forth in more detail in the Merger Agreement.
We previously delivered to you an opinion dated December 22, 1996 (the
"Prior Letter") which stated, subject to the limitations and conditions
contained therein, our opinion as investment bankers that the Consideration to
be received by the shareholders of Roosevelt pursuant to the Merger is fair to
such shareholders from a financial point of view, as of the date of the Merger
Agreement. You have asked us to reconfirm the opinion expressed in the Prior
Letter, and further asked for our opinion as investment bankers as to whether
the Consideration to be received by the shareholders of Roosevelt pursuant to
the Merger is fair to such shareholders from a financial point of view, as of
the date hereof.
In connection with our opinion, we have, among other things: (i) reviewed
certain publicly available financial and other data with respect to Roosevelt
and Mercantile, including the audited, consolidated financial statements for
the fiscal years ended December 31, 1994 and 1995 and 1996 and certain other
relevant financial and operating data relating to Roosevelt and Mercantile made
available to us from published sources and from the internal records of
Roosevelt and Mercantile; (ii) reviewed the Merger Agreement; (iii) reviewed
certain publicly available information concerning the trading of, and the
trading market for, Roosevelt Common Stock and Mercantile Common Stock; (iv)
compared both Roosevelt and Mercantile from a financial point of view with
certain other companies in the thrift and bank industries, respectively, which
we deemed to be relevant; (v) considered the financial terms, to the extent
publicly available, of selected thrift acquisitions which we deemed to be
comparable, in whole or in part, to the Merger; (vi) reviewed and discussed
with representatives of the management of Roosevelt and Mercantile certain
information of a business and financial nature regarding Roosevelt and
Mercantile, furnished to us by them, and third party analysts' estimates; (vii)
reviewed and discussed with representatives of the management of Roosevelt and
Mercantile estimates of cost savings and other synergies furnished to us by
them; (viii) made inquiries regarding and discussed the proposed Merger and the
Merger Agreement and other matters related thereto with Roosevelt's counsel;
and (ix) performed such other analyses and examinations as we have deemed
appropriate.
D-1
MONTGOMERY SECURITIES
INVESTMENT BANKING, BROKERAGE, ASSET MANAGEMENT
600 MONTGOMERY STREET, SAN FRANCISCO, CALIFORNIA 94111 TELEPHONE 415-627-2000
<PAGE> 128
MONTGOMERY
In connection with our review, and with your consent, we have not assumed
any obligation independently to verify the foregoing information and have
relied on its being accurate and complete in all material respects. Upon the
advice of representatives of the management of Roosevelt and Mercantile and
with your consent we have assumed that the third party analysts' estimates
provide a reasonable basis upon which we can form our opinion. We have also
assumed that there have been no material changes in Roosevelt's or Mercantile's
assets, financial condition, results of operations, business or prospects since
the respective dates of their last financial statements made available to us.
We have assumed that the Merger will be consummated in a manner that complies
in all respects with the applicable provisions of the Securities Act of 1933
(the "Securities Act"), the Securities Exchange Act of 1934 and all other
applicable federal and state statutes, rules and regulations. In addition, we
have not assumed responsibility for reviewing any individual credit files, or
making an independent evaluation, appraisal or physical inspection of any of
the assets or liabilities (contingent or otherwise) of Roosevelt or Mercantile,
nor have we been furnished with any such appraisals. We are not experts in the
evaluation of loan portfolios for purposes of assessing the adequacy of the
allowances for losses with respect thereto and have assumed, with your consent,
that such allowances for each of Roosevelt and Mercantile are in the aggregate
adequate to cover such losses. You have informed us, and we have assumed, that
the Merger will be recorded as a purchase under generally accepted accounting
principles. Finally, our opinion is based upon economic, monetary and market
and other conditions as in effect on, and the information made available to us
as of, the date hereof. Accordingly, although subsequent developments may
affect this opinion, we have not assumed any obligation to update, revise or
reaffirm this opinion.
We have further assumed with your consent that the Merger will be
consummated substantially in accordance with the terms described in the Merger
Agreement, without any further amendments thereto, and without waiver by
Roosevelt of any of the conditions to its obligations thereunder.
We have acted as financial advisor to Roosevelt in connection with the
Merger and will receive a fee for our services, including rendering this
opinion, a significant portion of which is contingent upon the consummation of
the Merger. In the ordinary course of our business, we actively trade the
equity securities of Roosevelt and Mercantile for our own account and for the
accounts of customers and, accordingly, may at any time hold a long or short
position in such securities. We have also acted as an underwriter in connection
with offerings of securities of Roosevelt and performed various investment
banking services for Roosevelt.
Based upon the foregoing and in reliance thereon, it is our opinion as
investment bankers that the Consideration to be received by the shareholders of
Roosevelt pursuant to the Merger Agreement is fair to such shareholders from a
financial point of view, as of the date hereof.
This opinion is directed to the Board of Directors of Roosevelt in its
consideration of the Merger and is not a recommendation to any shareholder as
to how such shareholder should vote with respect to the Merger. Further, this
opinion addresses only the financial fairness of the Consideration to the
shareholders and does not address any other aspect of the Merger. This opinion
may not be used or referred to by Roosevelt, or quoted or disclosed to any
person in any manner, without our prior written consent, which consent is
hereby given to the inclusion of this opinion in any proxy statement or
registration statement filed with the Securities and Exchange Commission in
connection with the Merger. In furnishing this opinion, we do not admit that we
are experts within the meaning of the term "experts" as used in the
Securities Act and the rules and regulations promulgated thereunder, nor do we
admit that this opinion constitutes a report or valuation within the meaning of
Section 11 of the Securities Act.
Very truly yours,
MONTGOMERY SECURITIES
D-2
<PAGE> 129
[FORM OF PROXY]
[FRONT]
ROOSEVELT FINANCIAL GROUP, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR
THE ROOSEVELT ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
JUNE 20, 1997
The undersigned hereby appoints the Board of Directors to act as attorneys
and proxies for the undersigned to vote all shares of Common Stock of ROOSEVELT
FINANCIAL GROUP, INC., a Delaware corporation (the "Company"), held by the
undersigned, with full power of substitution and revocation, with the same
force and effect as the undersigned would be entitled to vote if personally
present at the Annual Meeting of Stockholders of the Company to be held at the
St. Louis Marriott West Hotel, 660 Maryville Centre Drive, St. Louis, Missouri,
on June 20, 1997, at 2:00 p.m. (Central Time), and at any adjournment or
postponement thereof, as follows:
1. Approval and adoption of the Agreement and FOR AGAINST ABSTAIN
Plan of Reorganization, dated December 22, [ ] [ ] [ ]
1996 (the "Merger Agreement"), by and
between Mercantile Bancorporation Inc., a
Missouri corporation, and the Company.
2. Election as directors of the nominees FOR WITHHELD
listed below for a term of three years. [ ] [ ]
INSTRUCTION: To withhold your vote for
any individual nominee, strike a line in
the nominees name in the list below.
Stanley J. Bradshaw Patricia M. Gammon
Hiram S. Liggett, Jr. Clarence M. Turley, Jr.
3. Ratification of the appointment of KPMG FOR AGAINST ABSTAIN
Peat Marwick LLP as independent auditors [ ] [ ] [ ]
for the Company for the fiscal year ending
December 31, 1997.
4. OTHER MATTERS: Discretionary authority is
hereby granted to transact such other
business as may properly come before the
meeting or any adjournment or postponement
thereof.
See back side for important information.
===============================================================================
<PAGE> 130
[BACK]
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT, "FOR" THE ELECTION AS DIRECTORS OF THE
NOMINEES STATED HEREIN AND "FOR" THE RATIFICATION OF APPOINTMENT OF AUDITORS.
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN. IF THIS PROXY IS SUBMITTED, BUT NO DIRECTIONS ARE MADE, THIS PROXY WILL
BE VOTED "FOR" THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT, "FOR" THE
ELECTION AS DIRECTORS OF THE NOMINEES STATED HEREIN AND "FOR" THE RATIFICATION
OF APPOINTMENT OF AUDITORS.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and the Proxy Statement/Prospectus, each dated May 19, 1997,
furnished herewith.
Dated: ----------------------, 1997
Signature: ----------------------------------------------
Signature(s) (if held jointly): -------------------------------
Title or Authority:----------------------------------------
IMPORTANT: Please sign your name exactly as it appears hereon. When signing
as attorney, agent, executor, administrator, trustee, guardian or corporate
officer, please give your full title as such. Each joint owner should sign the
proxy. If executed by a partnership, this proxy should be signed by an
authorized partner.
<PAGE> 131
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 20. Indemnification of Directors and Officers
Sections 351.355(1) and (2) of The General and Business Corporation Law
of the State of Missouri provide that a corporation may indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding by reason of the fact that he
is or was a director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust
or other enterprise, against expenses, including attorneys' fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by him
in connection with such action, suit or proceeding if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful,
except that, in the case of an action or suit by or in the right of the
corporation, the corporation may not indemnify such persons against
judgments and fines and no person shall be indemnified as to any claim, issue
or matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to the corporation,
unless and only to the extent that the court in which the action or suit was
brought determines upon application that, despite the adjudication of
liability and in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for proper expenses. Section
331.355(3) provides that, to the extent that a director, officer, employee or
agent of the corporation has been successful in the defense of any such
action, suit or proceeding or any claim, issue or matter therein, he shall be
indemnified against expenses, including attorneys' fees, actually and
reasonably, incurred in connection with such action, suit or proceeding.
Section 351.355(7) provides that a corporation may provide additional
indemnification to any person indemnifiable under subsections (1) or (2),
provided such additional indemnification is authorized by the corporation's
articles of incorporation or an amendment thereto or by a shareholder approved
bylaw or agreement, and provided further that no person shall thereby be
indemnified against conduct which was finally adjudged to have been knowingly
fraudulent, deliberately dishonest or willful misconduct or, as provided in
Article 12 of the Restated Articles of Incorporation of the Registrant, which
involved an accounting for profits pursuant to Section 16(b) of the
Securities Exchange Act of 1934.
Article 12 of the Restated Articles of Incorporation of the Registrant
provides that the Registrant shall extend to its directors and executive
officers the indemnification specified in subsections (1) and (2) and may
also extend the additional indemnification authorized in subsection (7) and
that it may extend to other officers, employees and agents such
indemnification and additional indemnification.
Pursuant to directors' and officers' liability insurance policies, with
total limits of $45,000,000 per loss, the Registrant's directors and officers
are insured, subject to the limits, retention, exceptions and other terms and
conditions of such policy, against liability for any actual or alleged error,
misstatement, misleading statement, act or omission, or neglect or breach of
duty by the directors or officers of the Registrant, individually or
collectively, or any matter claimed against them solely by reason of their
being directors or officers of the Registrant.
<PAGE> 132
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits. See Exhibit Index.
(b) Financial Statement Schedules. Not Applicable.
(c) Reports, Opinions or Appraisals. Not Applicable.
Item 22. Undertakings
(a) The undersigned Registrant hereby undertakes:
1. To file during any period in which offers and sales are
being made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration
Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the
Registration Statement; and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement.
2. That for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
3. To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each filing of
the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) The undersigned Registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder through
use of a prospectus which is a part of this Registration Statement, by any
person or party who is deemed to be an underwriter within the meaning of Rule
145(c), the issuer undertakes that such reoffering prospectus will contain
the information called for by the applicable registration form with
<PAGE> 133
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other Items of the applicable form.
(d) The Registrant undertakes that every prospectus: (i) that is
filed pursuant to paragraph (c) immediately preceding, or (ii) that purports
to meet the requirements of Section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the Registration Statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offering therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(f) The undersigned Registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the
prospectus pursuant to Item 4, 10(b), 11 or 13 of this Form, within one
business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in the documents filed subsequent to the effective date
of the Registration Statement through the date of responding to the request.
(g) The undersigned Registrant hereby undertakes to supply by means
of a post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of St.
Louis, State of Missouri, on May 19, 1997.
MERCANTILE BANCORPORATION INC.
By: /s/Thomas H. Jacobsen
---------------------------------
Thomas H. Jacobsen
Chairman of the Board,
<PAGE> 134
President and Chief Executive
Officer
POWER OF ATTORNEY
We, the undersigned officers and directors of Mercantile
Bancorporation Inc., hereby severally and individually constitute and appoint
Thomas H. Jacobsen and John Q. Arnold, and each of them, the true and lawful
attorneys and agents of each of us to execute in the name, place and stead of
each of us (individually and in any capacity stated below) any and all
amendments to this Registration Statement on Form S-4, registering shares of
Mercantile Bancorporation Inc. common stock and the rights attached thereto
to be issued in connection with the proposed acquisition of Roosevelt
Financial Group, Inc., and all instruments necessary or advisable in
connection therewith and to file the same with the Securities and Exchange
Commission, each of said attorneys and agents to have the power to act with
or without the others and to have full power and authority to do and perform
in the name and on behalf of each of the undersigned every act whatsoever
necessary or advisable to be done in the premises as fully and to all intents
and purposes as any of the undersigned might or could do in person, and we
hereby ratify and confirm our signatures as they may be signed by our said
attorneys and agents or each of them to any and all such amendments and
instruments.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on this 19th day of May, 1997.
<PAGE> 135
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Thomas H. Jacobsen Chairman of the Board, May 19, 1997
- ---------------------------- President, Chief Executive
Thomas H. Jacobsen Officer and Director
Principal Executive Officer
/s/ John Q. Arnold Senior Executive May 19, 1997
- ---------------------------- Vice President and
John Q. Arnold Chief Financial Officer
Principal Financial Officer
/s/ Michael T. Normile Senior Vice President -- May 19, 1997
- --------------------------- Finance and Control
Michael T. Normile
Principal Accounting Officer
/s/ Harry M. Cornell, Jr. Director May 19, 1997
- ---------------------------
Harry M. Cornell, Jr.
/s/ William A. Hall Director May 19, 1997
- ---------------------------
William A. Hall
/s/ Thomas A. Hays Director May 19, 1997
- ---------------------------
Thomas A. Hays
/s/ Frank Lyon, Jr.
- --------------------------- Director May 19, 1997
Frank Lyon, Jr.
/s/ Edward A. Mueller
- --------------------------- Director May 19, 1997
Edward A. Mueller
/s/ Robert W. Murray
- --------------------------- Director May 19, 1997
Robert W. Murray
/s/ Harvey Saligman
- --------------------------- Director May 19, 1997
Harvey Saligman
/s/ Craig D. Schnuck
- --------------------------- Director May 19, 1997
Craig D. Schnuck
- --------------------------- Director
Alvin Siteman
/s/ Robert L. Stark
- --------------------------- Director May 19, 1997
Robert L. Stark
/s/ Patrick T. Stokes
- --------------------------- Director May 19, 1997
Patrick T. Stokes
- --------------------------- Director
John A. Wright
</TABLE>
<PAGE> 136
<TABLE>
INDEX TO EXHIBITS
<CAPTION>
Exhibit
Number Description
- ------- -----------
<C> <S>
2.1 Agreement and Plan of Reorganization, dated December 22, 1996, by
and between MBI and Roosevelt Financial Group, Inc.
("Roosevelt"), included as Annex A to the accompanying Proxy
Statement/Prospectus.
2.2 Stock Option Agreement, dated December 22, 1996, between
Registrant and Roosevelt, included as Annex B to the
accompanying Proxy Statement/Prospectus.
3.1 Registrant's Restated Articles of Incorporation, as amended and
currently in effect, filed as Exhibit 3 to Registrant's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1997 (File
No. 1-11792), are incorporated herein by reference.
3.2 Registrant's By-Laws, as amended and currently in effect, filed
as Exhibit 3.2 to Amendment No. 2 to Registrant's Registration
Statement No. 333-17757, are incorporated herein by reference.
4.1 Form of Indenture Regarding Subordinated Securities between
Registrant and The First National Bank of Chicago, Trustee,
filed as Exhibit 4-1 to Registrant's Report on Form 8-K dated
September 24, 1992 (File No. 1-11792), is incorporated herein
by reference.
4.2 Form of Indenture Regarding Floating Rate Junior Subordinated
Definable Interest Debentures Due 2027 between Registrant and
the Chase Manhattan Bank, as Trustee, filed as Exhibit 4.2 to
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 (File No. 1-11792), is incorporated
herein by reference.
4.3 Form of First Supplemental Indenture Regarding Floating Rate
Junior Subordinated Definable Interest Debentures Due 2027
between Registrant and the Chase Manhattan Bank, as Trustee,
filed as Exhibit 4.3 to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 (File No. 1-11792),
is incorporated herein by reference.
<PAGE> 137
4.4 Rights Agreement, dated as of May 23, 1988, between Registrant
and Mercantile Bank National Association, as Rights Agent
(including as exhibits thereto the form of Certificate of
Designation, Preferences and Rights of Series A Junior
Participating Preferred Stock and the form of Right
Certificate), filed on May 24, 1988 as Exhibits 1 and 2 to
Registrant's Registration Statement on Form 8-A (File No.
1-11792), is incorporated herein by reference.
5 Opinion of Jon W. Bilstrom as to the legality of the securities
being issued.
8.1 Opinion of Wachtell, Lipton, Rosen & Katz as to certain tax matters
in the Merger.
8.2 Opinion of Silver, Freedman & Taff, L.L.P. as to certain tax matters
in the Merger.
10.1 The Mercantile Bancorporation Inc. 1987 Stock Option Plan as
amended, filed as Exhibit 10.3 to Registrant's Report on Form
10- K for the year ended December 31, 1989 (File No. 1-11792),
is incorporated herein by reference.
10.2 The Mercantile Bancorporation Inc. Amended and Restated Executive
Incentive Compensation Plan, filed as Annex H to Registrant's
definitive Proxy Statement for the 1997 Annual Meeting of
Shareholders, is incorporated herein by reference.
10.3 The Mercantile Bancorporation Inc. Employee Stock Purchase Plan,
filed as Exhibit 10.7 to Registrant's Report on Form 10-K for
the year ended December 31, 1989 (File No. 1-11792), is
incorporated herein by reference.
10.4 The Mercantile Bancorporation Inc. 1991 Employee Incentive Plan,
filed as Exhibit 10.7 to Registrant's Report on Form 10-K for
the year ended December 31, 1990 (File No. 1-11792), is
incorporated herein by reference.
10.5 Amendment Number One to the Mercantile Bancorporation Inc. 1991
Employee Incentive Plan, filed as Exhibit 10.6 to Registrant's
Report on Form 10-K for the year ended December 31, 1994 (File No.
1-11792), is incorporated herein by reference.
10.6 The Mercantile Bancorporation Inc. Amended and Restated Stock
Incentive Plan, filed as Annex G to Registrant's definitive Proxy
Statement for the 1997 Annual Meeting of Shareholders, is
incorporated herein by reference.
10.7 The Mercantile Bancorporation Inc. 1994 Stock Incentive Plan for
Non-Employee Directors, filed as Appendix E to Registrant's
definitive Proxy Statement for the 1994 Annual Meeting of
Shareholders, is incorporated herein by reference.
10.8 The Mercantile Bancorporation Inc. Voluntary Deferred
Compensation Plan, filed as Appendix D to Registrant's definitive
Proxy Statement for the 1994 Annual Meeting of Shareholders, in
incorporated herein by reference.
10.9 Form of Employment Agreement for Thomas H. Jacobson, as amended,
filed as Exhibit 10.8 to Registrant's Report on Form 10-K for the
year ended December 31, 1989 (File No. 1-11792), is incorporated
herein by reference.
<PAGE> 138
10.10 Form of Change of Control Employment Agreement for John W.
McClure, W. Randolph Adams, John Q. Arnold and Certain Other
Executive Officers, filed as Exhibit 10.10 to Registrant's Report on
Form 10-K for the year ended December 31, 1989 (File No. 1-11792),
incorporated herein by reference.
10.11 Agreement and Plan of Reorganization, dated August 4, 1995, by
and between Registrant and Hawkeye Bancorporation, filed as Exhibit
2.1 to MBI's Registration Statement No. 33-63609, is incorporated
herein by reference.
10.12 The Mercantile Bancorporation Inc. Supplemental Retirement Plan,
filed as Exhibit 10.12 to Registrant's Report on Form 10-K for the
year ended December 31, 1992 (File No. 1-11792), is incorporated
herein by reference.
10.13 Agreement and Plan of Reorganization, dated as of October 27,
1996, by and between Registrant, Ameribanc, Inc. and Mark Twain
Bancshares, Inc. ("Bancshares"), filed as Exhibit 2.1 to
Registrant's Current Report on Form 8-K, dated November 6, 1996, is
incorporated herein by reference.
10.14 Amendment to Agreement and Plan of Reorganization, dated January
24, 1997, by and among Registrant, Ameribanc, Inc. and Bancshares,
filed as Exhibit 10.16 to Amendment No. 2 to Registrant's
Registration Statement No. 333-17757, is incorporated herein by
reference.
10.15 Stock Option Agreement, dated October 27, 1996, by and between
Mercantile Bancorporation Inc., as grantee, and Mark Twain
Bancshares, Inc., as issuer, filed as Exhibit 2.2 to Registrant's
Report on Form 8-K filed on November 6, 1996, is incorporated
herein by reference.
23.1 Consent of KPMG Peat Marwick LLP with regard to use of its report on
Registrant's financial statements.
23.2 Consent of KPMG Peat Marwick LLP with regard to the use of its
report on Roosevelt's financial statements.
23.3 Consent of Jon W. Bilstrom (included in Exhibit 5).
23.4 Consent of Wachtell, Lipton, Rosen & Katz (included in Exhibit 8.1).
23.5 Consent of Silver, Freedman & Taff, L.L.P. (included in Exhibit
8.2).
23.6 Consent of Montgomery Securities.
24.1 Power of Attorney (included on signature page).
99.1 Form of Support Agreement, dated as of December 22, 1996,
by and between Registrant and each director of Roosevelt.
</TABLE>
<PAGE> 139
APPENDIX
Page 75 of the proxy contains a Total Return Performance Graph. The
information contained in the graph is set forth in the table immediately
following the graph.
<PAGE> 1
EXHIBIT 5
[LETTERHEAD OF MERCANTILE BANCORPORATION INC.]
May 19, 1997
Board of Directors
Mercantile Bancorporation Inc.
P.O. Box 24
St. Louis, Missouri 63166-0524
Gentlemen:
In connection with the proposed registration under the Securities Act
of 1933, as amended, of up to 13,042,110 shares of common stock
(collectively, the "Shares") of Mercantile Bancorporation Inc., a Missouri
corporation (the "Company"), which are to be issued or reserved for issuance
by the Company upon consummation of the merger (the "Merger") of Roosevelt
Financial Group, Inc. with and into Ameribanc, Inc., a Missouri corporation
and wholly-owned subsidiary of the Company, I have examined such corporate
records and other documents, including the Registration Statement on Form S-4
relating to the Shares (together with the Proxy Statement/Prospectus
contained in such Registration Statement, and any amendments or supplements
thereto, the "Registration Statement") and have reviewed such matters of law
as I have deemed necessary or appropriate for this opinion. Based on such
examination and review, it is my opinion that, when issued upon consummation
of the Merger as contemplated by the Registration Statement, the Shares will
be duly authorized, validly issued, fully paid and nonassessable.
I consent to be named in the Registration Statement as the attorney who
passed upon the validity of the Shares, and to the filing of a copy of this
opinion as an exhibit to the Registration Statement.
Sincerely,
Jon W. Bilstrom
<PAGE> 1
EXHIBIT 8.1
[Wachtell, Lipton, Rosen & Katz Letterhead]
Dated the Effective Date of
the Registration Statement
Mercantile Bancorporation Inc.
Mercantile Tower
P. O. Box 524
St. Louis, Missouri 63166-0524
Ladies/Gentlemen:
We have acted as special counsel to Mercantile Bancorporation, a
Missouri corporation ("MBI"), in connection with the proposed merger (the
"Merger") of Roosevelt Financial Group, Inc., a Delaware corporation
("Roosevelt") with and into Ameribanc, Inc., a Missouri corporation ("Merger
Sub") and a direct wholly-owned subsidiary of MBI, upon the terms and
conditions set forth in the Agreement and Plan of Merger dated as of December
22, 1996 by and between MBI and Roosevelt (the "Agreement"). At your
request, we are rendering our opinion concerning certain federal income tax
consequences of the Merger.
For purposes of the opinion set forth below, we have relied, with the
consent of MBI and the consent of Roosevelt, upon the accuracy and
completeness of the statements and representations (which statements and
representations we have neither investigated nor verified) contained,
respectively, in the certificates of the officers of MBI and Roosevelt
(copies of which are attached hereto and which are incorporated herein by
reference), and have assumed that such statements and representations will be
complete and accurate as of the Effective Time. We have also relied upon the
accuracy of the Registration Statement on Form S-4 (the "Registration
Statement") and the Proxy Statement/Prospectus (the
<PAGE> 2
Mercantile Bancorporation Inc.
Page 2
"Proxy Statement") filed with the Securities Exchange Commission, as amended
through the date hereof, in connection with the Merger. Any capitalized term
used and not defined herein has the meaning given to it in the Proxy Statement
or the appendices thereto (including the Agreement).
We have also assumed that (i) the Stock Amount will have a fair market
value at the Effective Time that is greater than 50 percent of the total
consideration to be received by Roosevelt shareholders in the Merger, (ii) the
transactions contemplated by the Agreement will be consummated in accordance
therewith and as described in the Proxy Statement and (iii) the Merger will
qualify as a statutory merger under the applicable laws of the State of
Missouri and the State of Delaware.
Based upon and subject to the foregoing, it is our opinion that, for
federal income tax purposes, the Merger will constitute a "reorganization"
within the meaning of Section 368 of the Internal Revenue Code of 1986, as
amended, and no gain or loss will be recognized by the stockholders of
Roosevelt to the extent they receive solely MBI Common Stock in exchange for
shares of Roosevelt Common Stock.
This opinion may not be applicable to Roosevelt shareholders who
received their Roosevelt Common Stock pursuant to the exercise of employee
stock options or otherwise as compensation or who are not citizens or
residents of the United States.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement, and to the
reference to this opinion under the caption "SUMMARY INFORMATION -- Federal
Income Tax Consequences in General," under the caption "CERTAIN FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER" and elsewhere in the Proxy Statement.
In giving such consent, we do not hereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act of
1933, as amended.
Very truly yours,
/s/ Wachtell, Lipton, Rosen & Katz
<PAGE> 1
May 19, 1997
Roosevelt Financial Group, Inc.
900 Roosevelt Parkway
Chesterfield, Missouri 63017
Ladies and Gentlemen:
You have requested our opinion with regard to certain federal income
tax consequences of the proposed merger (the "Merger") of Roosevelt Financial
Group, Inc. ("Roosevelt") with and into Ameribanc, Inc. ("Merger Sub"), a
first-tier wholly owned subsidiary of Mercantile Bancorporation ("MBI").
In connection with the preparation of our opinion, we have examined and
have relied upon the following:
(i) the Agreement and Plan of Reorganization by and among MBI and
Roosevelt, dated December 22, 1996, including the schedules and
exhibits thereto (the "Agreement");
(ii) MBI's Registration Statement on Form S-4, including the Proxy
Statement/Prospectus contained therein, filed with the Securities and
Exchange Commission on even date herewith (the "Registration Statement");
(iii) the proposed representations and undertakings of MBI in the form
of Exhibit A hereto; and
(iv) the proposed representations and undertakings of Roosevelt in the
form of Exhibit B hereto.
Our opinion is based solely upon applicable law and the factual
information and undertakings contained in the above-mentioned documents. In
rendering our opinion, we have assumed the accuracy of all information and
the performance of all undertakings contained in each of such documents. We
also have assumed the authenticity of all original documents, the conformity
of all copies to the original documents, and the genuineness of all
signatures. We have not attempted to verify independently the accuracy of
any information in any such document, and we have assumed
<PAGE> 2
Roosevelt Financial Group, Inc.
May 19, 1997
Page 2
that such documents accurately and completely set forth all material facts
relevant to this opinion. All of our assumptions were made with your consent.
If any fact or assumption described herein is incorrect, any or all of the
federal income tax consequences described herein may be inapplicable.
Capitalized terms not defined herein shall have the meaning ascribed to them in
the Agreement.
OPINIONS
Subject to the foregoing, to the conditions and limitations expressed
elsewhere herein, we are of the opinion that for federal income tax
purposes:
1. The Merger will constitute a reorganization within the meaning of
section 368(a) of the Internal Revenue Code of 1986, as amended to
the date hereof (the "Code").
2. Each stockholder of Roosevelt who exchanges, in the Merger,
shares of Roosevelt common stock solely for shares of MBI common
stock ("MBI Common Stock"):
a) will recognize no gain or loss, except with regard to cash
received in lieu of a fractional share, as discussed in
paragraph 5 below (Code section 354(a)(1));
b) will have an aggregate basis for the shares of MBI Common
Stock received (including any fractional share of MBI Common
Stock deemed to be received, as described in paragraph 5 below)
equal to the aggregate basis of the shares of MBI Common Stock
surrendered (Code section 358(a)(1)); and
c) will have a holding period for the shares of MBI Common
Stock received (including any fractional share of MBI Common
Stock deemed to be received as described in paragraph 5 below)
which includes the period during which the shares of Roosevelt
common stock surrendered were held, provided that the shares of
Roosevelt common stock surrendered were capital assets in the
hands of such holder at the time of the Merger (Code section
1223(1)).
3. Each stockholder of Roosevelt who receives solely cash (i) in
exchange for Roosevelt common stock pursuant to the Merger or (ii)
as a result of the exercise of appraisal rights will recognize gain
or loss (determined separately as to each block of Roosevelt common
stock exchanged) in an amount equal to the difference between (x)
the amount of cash received by such stockholder and (y) such
stockholder's basis for the shares of Roosevelt common stock
surrendered, provided that the cash payment does not have the effect
of the distribution of a dividend (Code sections 1001 and 302(a)).
Such gain or loss will be capital gain or loss if the shares of
Roosevelt common stock surrendered were capital assets in the hands
of the holder, and long-term or short-term depending on the holder's
holding period for each block of Roosevelt common stock surrendered
(Code section 1222). However, if the cash payment does have the
effect of the distribution of a dividend, such stockholder will
recognize income
<PAGE> 3
Roosevelt Financial Group, Inc.
May 19, 1997
Page 3
in the amount of the cash received (without regard to such stockholder's
basis in the Roosevelt common stock surrendered), which generally will be
taxable as a dividend (Code sections 302(d) and 301).
The determination of whether a cash payment has the effect of the
distribution of a dividend will be made pursuant to the provisions and
limitations of section 302 of the Code, taking into account the stock
ownership attribution rules of section 318 of the Code. Because such
determination generally will depend on the facts and circumstances of each
Roosevelt stockholder, we express no opinion as to whether the cash payments
discussed in this paragraph 3 will be treated as having the effect of the
distribution of a dividend.
A cash payment will be considered not to have the effect of the
distribution of a dividend under section 302 of the Code only if the cash
payment (i) results in a "complete redemption" of such stockholder's actual
and constructive stock interest, (ii) qualifies as a "substantially
disproportionate" reduction in such stockholder's actual and constructive
stock interest, or (iii) is not "essentially equivalent to a dividend" (Code
section 302(b)(1), (2), (3)).
A cash payment will result in a "complete redemption" of a
stockholder's stock interest if such stockholder does not actually or
constructively own any stock after the Merger. A reduction in a
stockholder's stock interest will be "substantially disproportionate" if (i)
the percentage of outstanding shares actually and constructively owned by
such stockholder after the receipt of the cash payment is less than
four-fifths (80%) of the percentage of outstanding shares actually and
constructively owned by such stockholder immediately prior to the receipt of
the cash payment, and (ii) such stockholder actually and constructively owns
less than 50 percent of the number of shares outstanding after the receipt of
the cash payment (Code section 302(b)(2)). The cash payment will not be
"essentially equivalent to a dividend" if there has been a "meaningful
reduction" (as the quoted term has been interpreted by judicial authorities
and by rulings of the Internal Revenue Service (the "Service")) of the
stockholder's actual and constructive ownership interest (Code section
302(b)(1); United States v. Davis, 397 U.S. 301 (1970); see, e.g., Rev.
---------------------- --- ----
Rul. 76-385, 1976-2 C.B. 92; Rev. Rul. 76-364, 1976-2 C.B. 91).
Under the traditional analysis (which apparently continues to be used
by the Service), section 302 of the Code will apply as though the
distribution of cash were made by Roosevelt in a hypothetical redemption of
Roosevelt common stock immediately prior to, and in a transaction separate
from, the Merger (the "deemed Roosevelt redemption"). Thus, under the
traditional analysis, the determination of whether a cash payment results in
a complete redemption of interest, qualifies as a substantially
disproportionate reduction of interest, or is not essentially equivalent to a
dividend will be made by comparing (x) the stockholder's actual and
constructive stock interest in Roosevelt before the deemed Roosevelt
redemption, with (y) such stockholder's actual and constructive stock
interest in Roosevelt after the deemed Roosevelt redemption (but before the
Merger). Nevertheless, in view of Commissioner v. Clark, 489 U.S. 726
---------------------
(1989), many tax
<PAGE> 4
Roosevelt Financial Group, Inc.
May 19, 1997
Page 4
practitioners believe that the continuing validity of the traditional analysis
is open to question and that, in a transaction such as the Merger, the receipt
of solely cash in exchange for stock actually owned should be treated in
accordance with the principles of Commissioner v. Clark, supra, as if the
--------------------- -----
Roosevelt common stock exchanged for cash in the Merger had instead been
exchanged in the Merger for shares of MBI Common Stock followed immediately by
a redemption of such shares by MBI for the cash payment (the "deemed MBI
redemption"). Under this analysis, the determination of whether a cash payment
satisfies any of the foregoing tests would be made by comparing (i) the
stockholder's actual and constructive stock interest in MBI before the deemed
MBI redemption (determined as if such stockholder had received solely MBI
Common Stock in the Merger), with (ii) such stockholder's actual and
constructive stock interest in MBI after the deemed MBI redemption. Because
this analysis is more likely to result in capital gain treatment than the
traditional analysis, each Roosevelt stockholder who receives solely cash in
exchange for all of the Roosevelt common stock he or she actually owns should
consult his or her own tax advisor with regard to the proper treatment of such
cash.
The determination of ownership for purposes of the foregoing tests will
be made by taking into account both shares actually owned by such stockholder
and shares constructively owned by such stockholder pursuant to section 318
of the Code (Code section 302(c)). Under section 318 of the Code, a
stockholder will be deemed to own stock that is owned or deemed to be owned
by certain members of his or her family (spouse, children, grandchildren, and
parents) and other related parties including, for example, certain entities
in which such stockholder has a direct or indirect interest (including
partnerships, estates, trust and corporations), as well as shares of stock
that such stockholder (or a related person) has the right to acquire upon
exercise of an option or conversion right. Section 302(c)(2) of the Code
provides certain exceptions to the family attribution rules for the purpose
of determining whether a complete redemption of a stockholder's interest has
occurred for purposes of Code section 302.
4. Each stockholder of Roosevelt who exchanges, in the Merger,
shares of Roosevelt common stock solely for shares of MBI common
stock and cash:
a) will not recognize any loss (determined separately as to
each block of Roosevelt common stock exchanged), except with
regard to cash received in lieu of a fractional share as
discussed in paragraph 5 below (Code section 356(c));
b) will realize gain (determined as to each block of Roosevelt
common stock exchanged) if (i) the sum of the amount of cash
and the fair market value of the shares of MBI Common Stock
received (including any fractional share of MBI common stock
deemed to be received as described in paragraph 5 below)
exceeds (ii) the tax basis of the Roosevelt common stock
surrendered in exchange therefor, and will recognize such gain,
if any, up to but not in excess of the amount of cash
<PAGE> 5
Roosevelt Financial Group, Inc.
May 19, 1997
Page 5
received (excluding cash received in lieu of a fractional share)
(Code section 1001 and 356(a));
c) will have an aggregate basis for the shares of MBI Common
Stock received (including any fractional share of MBI Common
Stock deemed to be received, as described in paragraph 5 below)
equal to the basis of the shares of Roosevelt common stock
surrendered, increased by the amount of gain, if any,
recognized by such holder and decreased by the amount of any
cash received (excluding cash received in lieu of a fractional
share) (Code section 358(a)); and
d) will have a holding period for the shares of MBI common
stock received (including any fractional share of MBI Common
Stock deemed to be received as described in paragraph 5 below)
which includes the period during which the shares of Roosevelt
common stock surrendered were held, provided that the shares of
Roosevelt common stock surrendered were capital assets in the
hands of such holder (Code section 1223(1)).
No opinion is expressed as to whether the recognized gain described in
subparagraph b of this paragraph 4 will be capital gain or will be treated as
the receipt of a taxable dividend. Provided that the receipt of the cash by
the Roosevelt stockholder does not have the effect of the distribution of a
dividend, such gain will be capital gain if the shares of Roosevelt common
stock exchanged were capital assets in the hands of the holder, and long-term
or short-term depending on the holder's holding period for each block of
Roosevelt common stock surrendered (Code section 1222). However, if the cash
payment does have the effect of the distribution of a dividend, such gain
generally will be taxable as a dividend (Code section 356(a)).
Under section 356 of the Code, the determination of whether a cash
payment has the effect of the distribution of a dividend will be made
generally in accordance with the principles of section 302 of the Code,
taking into account the stock ownership attribution rules of section 318 of
the Code. Because this determination generally will depend on the facts and
circumstances of each Roosevelt stockholder, we express no opinion as to
whether the cash payments discussed in this paragraph 4 will be treated as
having the effect of the distribution of a dividend.
A cash payment will be considered not to have the effect of the
distribution of a dividend under section 302 of the Code only if the cash
payment (i) results in a "substantially disproportionate" reduction in such
stockholder's actual and constructive stock interest, or (ii) is not
"essentially equivalent to a dividend" (Code section 302(b)(1), (2)). These
two tests will be applied as if all Roosevelt common stock exchanged for cash
in the Merger had instead been exchanged in the Merger solely for shares of
MBI Common Stock, and such shares of MBI Common Stock were then redeemed by
MBI in return for the cash payments. Accordingly, the determination of
whether a cash payment to a Roosevelt stockholder satisfies either of the
foregoing tests will be made by
<PAGE> 6
Roosevelt Financial Group, Inc.
May 19, 1997
Page 6
comparing (i) such stockholder's actual and constructive stock interest in MBI
before the deemed MBI redemption (determined as if such stockholder had
received solely MBI Common Stock in the Merger), with (ii) such stockholder's
actual and constructive stock interest in MBI after the deemed MBI redemption.
Commissioner v. Clark, 489 U.S. 726 (1989).
- ---------------------
A cash payment will result in a "substantially disproportionate"
reduction in a stockholder's stock interest if (i) the percentage of
outstanding MBI Common Stock actually and constructively owned by such
stockholder after the deemed MBI redemption is less than four-fifths (80%) of
the percentage of outstanding MBI Common Stock actually and constructively
owned by such stockholder immediately prior to the deemed MBI redemption
(determined as if such stockholder had received solely MBI Common Stock in
the Merger), and (ii) such stockholder actually and constructively owns less
than 50 percent of the number of shares outstanding after the deemed MBI
redemption (Code section 302(2)). The cash payment will not be "essentially
equivalent to a dividend" if the deemed MBI redemption results in a
"meaningful reduction" (as the quoted term has been interpreted by judicial
authorities and by rulings of the Service) of the stockholder's actual and
constructive ownership interest (Code section 302(b)(1); United States v.
----------------
Davis, 397 U.S. 301 (1970); see, e.g., Rev. Rul. 76-385, 1976-2 C.B. 92;
- ----- --- ----
Rev. Rul. 76-364, 1976-2 C.B. 91).
The determination of ownership for purposes of each of the foregoing
tests will be made by taking into account both shares of MBI Common Stock
actually owned by such stockholder and shares of MBI Common Stock
constructively owned by such stockholder pursuant to section 318 of the Code
(Code section 356(a)). Under section 318 of the Code, a stockholder will be
deemed to own stock that is owned or deemed to be owned by certain members of
his or her family (spouse, children, grandchildren, and parents) and other
related parties including, for example, certain entities in which such
stockholder has a direct or indirect interest (including partnerships,
estates, trusts and corporations), as well as shares of stock that such
stockholder (or a related person) has the right to acquire upon exercise of
an option or conversion right.
5. Each stockholder of Roosevelt who receives cash in lieu of a
fractional share of MBI Common Stock will be treated as if the fractional
share had been received in the Merger and then redeemed by MBI. Provided
that the shares of Roosevelt common stock surrendered were capital assets in
the hands of such holder, the receipt of such cash will cause the recipient
to recognize capital gain or loss, equal to the difference between the amount
of cash received and the portion of such holder's adjusted tax basis in the
shares of MBI Common Stock allocable to the fractional share interest (Code
sections 1001 and 1222; Rev. Rul. 66-365, 1966-2 C.B. 116; Rev. Proc. 77-41,
1977-2 C.B. 574).
<PAGE> 7
Roosevelt Financial Group, Inc.
May 19, 1997
Page 7
* * * * * * * * * * * *
The foregoing opinion specifically assumes that:
(i) at least 50% of total value of the consideration to be paid by
MBI in the Merger will consist of MBI Common Stock (excluding
the value of any MBI Common Stock to be received by any
Roosevelt stockholder who owns 5% or more of the Roosevelt
common stock);
(ii) each of MBI and Roosevelt shall execute and deliver to us a
representation letter or certificate in the form of Exhibit A
and B, respectively, on the Closing Date; and
(iii) the Merger is consummated in accordance with the Agreement and
the Registration Statement.
We express no opinion with regard to (1) the federal income tax
consequences of the Merger not addressed expressly by this opinion, including
without limitation, (i) the tax consequences, if any, to those stockholders
of Roosevelt who acquired shares of Roosevelt common stock pursuant to the
exercise of employee stock options or otherwise as compensation, and (ii) the
tax consequences to special classes of stockholders, if any, including
without limitation, foreign persons, insurance companies, tax-exempt
entities, retirement plans, and dealers in securities; and (2) federal,
state, local, or foreign taxes (or any other federal, state, local, or
foreign laws) not specifically referred to and discussed herein. Further,
our opinion is based upon the Code, Treasury Regulations proposed or
promulgated thereunder, and administrative interpretations and judicial
precedents relating thereto, all of which are subject to change at any time,
possibly with retroactive effect, and we assume no obligation to advise you
of any subsequent change thereto. If there is any change in the applicable
law or regulations, or if there is any new administrative or judicial
interpretation of the applicable law or regulations, any or all of the
federal income tax consequences herein may become inapplicable.
The foregoing opinion reflects our legal judgment solely on the issue
presented and discussed herein. This opinion has no official status or
binding effect of any kind. Accordingly, we cannot assure you that the
Service or any court of competent jurisdiction will agree with this opinion.
<PAGE> 8
Roosevelt Financial Group, Inc.
May 19, 1997
Page 8
We hereby consent to the filing of this letter as an exhibit to the
Registration Statement and to all references made to this letter in such
Registration Statement.
Very truly yours,
/s/ Barry P. Taff, P.C.
SILVER, FREEDMAN & TAFF, L.L.P.
<PAGE> 1
Independent Auditors' Consent
-----------------------------
The Board of Directors and Stockholders
Mercantile Bancorporation Inc.:
We consent to the use of our reports incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the Proxy Statement/
Prospectus.
/s/ KPMG Peat Marwick LLP
St. Louis, Missouri
May 19, 1997
<PAGE> 1
Independent Auditors' Consent
-----------------------------
The Board of Directors and Stockholders
Roosevelt Financial Group, Inc.:
We consent to the use of our reports incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the Proxy Statement/
Prospectus.
/s/ KPMG Peat Marwick LLP
St. Louis, Missouri
May 19, 1997
<PAGE> 1
May 13, 1997
Board of Directors
Roosevelt Financial Group, Inc.
900 Roosevelt Parkway
Chesterfield, MO 63017
Members of the Board:
We hereby consent to the inclusion of our opinion letter dated December
22, 1997 to the Board of Directors of Roosevelt Financial Group, Inc. (the
"Company") regarding the acquisition of Roosevelt Financial Group, Inc. by
Mercantile Bancorporation, Inc., in Mercantile Bancorporation, Inc.'s
Registration Statement on Form S-4 (the "Registration Statement") and to the
references therein to our firm and to our opinion in the Letter to Roosevelt
Stockholders and under the headings "SUMMARY INFORMATION - Opinion of
Roosevelt's Financial Advisor", "TERMS OF THE PROPOSED MERGER - Background of
the Merger", "TERMS OF THE PROPOSED MERGER - Reasons for the Merger; Roosevelt
Board Recommendation", and "TERMS OF THE PROPOSED MERGER - Opinion of
Roosevelt's Financial Advisor". In giving the foregoing consent, we do not
admit (i) that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended (the
"Securities Act"), or the rules and regulations of the Securities and Exchange
Commission promulgated thereunder, and (ii) that we are experts with respect
to any part of the Registration Statement within the meaning of the term
"experts" as used in the Securities Act and the rules and regulations of the
Securities and Exchange Commission promulgated thereunder.
Very truly yours,
MONTGOMERY SECURITIES
<PAGE> 1
EXHIBIT 99.1
December 22, 1996
Mercantile Bancorporation Inc.
Mercantile Tower
St. Louis, Missouri 63166
Dear Sirs:
The undersigned understands that Mercantile Bancorporation Inc.
("Mercantile"), and Roosevelt Financial Group, Inc. ("Seller") are entering
into an Agreement and Plan of Reorganization (the "Agreement") providing for,
amont other things, a merger between a wholly owned subsidiary of Mercantile,
and Seller (the "Merger"), in which all of the outstanding shares of capital
stock of Seller will be exchanged for shares of common stock, par value $5.00
per share, of Mercantile.
The undersigned is a stockholder of Seller (the "Stockholder")
and is entering into this letter agreement to induce you to enter into the
Agreement and to consummate the transactions contemplated thereby.
The undersigned confirms its agreement with you as follows:
1. The undersigned represents, warrants and agrees that Schedule
I annexed hereto sets forth shares of the capital stock of Seller of which
the undersigned is the record or beneficial owner (the "Shares") and that the
undersigned is on the date hereof the lawful owner of the number of shares set
forth in Schedule I free and clear of all liens, charges, encumbrances, voting
agreements and commitments of every kind, except as disclosed in Schedule I.
Except as set forth in the Schedule, the undersigned does not own or hold any
rights to acquire any additional shares of the capital stock of Seller (by
exercise of stock options or otherwise) or any interest therein or any voting
rights with respect to any additional shares, other than as previously disclosed
to you.
2. The undersigned agrees that the undersigned will not, and will
not permit any company, trust or other entity controlled by the undersigned to,
contract to sell, sell or otherwise transfer or dispose of any of the Shares of
any interest therein or securities convertible thereunto or any voting rights
with respect thereto, other than (i) pursuant to the Merger, (ii) with your
prior written consent, which consent shall not be unreasonably withheld or
delayed, (iii) a transfer to a party who executes
<PAGE> 2
Mercantile Bancorporation Inc.
December 22, 1996
Page 2
a counterpart of this agreement to be bound by the terms and provisions hereof,
(iv) Shares transferred by gift to a charitable organization (provided that the
aggregate amount of all Shares so transferred by all parties executing Support
Agreements in connection with the Merger shall not exceed in the aggregate
50,000 Shares) and (v) Shares transferred to the Company in connection with
the exercise of stock options to the extent that as of the date hereof the
related option agreement permits Shares to be so used in connection with the
exercise of stock options.
3. The undersigned agrees that all of the Shares beneficially
owned by the undersigned, or over which the undersigned has voting power or
control, directly or indirectly, at the record date for any meeting of
stockholders of Seller called to consider and vote to approve the Agreement
and/or the transactions contemplated thereby will be voted by the undersigned
in favor thereof.
4. The undersigned agrees to, and will cause any company, trust
or other entity controlled by the undersigned to, cooperate fully with you
in connection with the Agreement and the transactions contemplated thereby.
The undersigned agrees that the undersigned will not, and will not permit
any such company, trust or other entity to directly, or indirectly (including
through its officers, directors, employees or other representatives) initiate,
solicit or encourage any discussions, inquiries or proposals with any third
party relating to the disposition of any significant portion of the business
or assets of Seller or the acquisition of any capital stock or other securities
of Seller or the business combination, merger or consolidation of Seller with
any person of any similar transaction (each such transaction being referred to
herein as an "Acquisition Transaction"), or provide any such person with
information or assistance or negotiate with any such person with respect to an
Acquisition Transaction or agree to or otherwise assist in the effectuation of
any Acquisition Transaction.
The undersigned has all necessary power and authority to enter into
this letter agreement. This agreement is the legal, valid and binding agreement
of the undersigned, and is enforceable against the undersigned in accordance
with its terms.
This letter agreement may be terminated at the option of any party
at any time after the earlier of (i) termination of the Agreement and (ii) the
day following the Closing Date (as defined in the Agreement). Please confirm
that the foregoing correctly states the understanding between us by signing
and returning to us a counterpart hereof.
Nothing herein shall be construed to required the undersigned or
any company, trust or other entity controlled by the undersigned to
<PAGE> 3
Mercantile Bancorporation Inc.
December 22, 1996
Page 3
take any action or fail to take any action in violation of applicable
law, rule or regulation.
Very truly yours,
By:
------------------------------------
Stockholder
Confirmed on the date
first above written.
MERCANTILE BANCORPORATION INC.
By:
------------------------------------
