<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 15, 1998
Registration No. 333--------
================================================================================
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)
<TABLE>
<S> <C> <C>
MISSOURI 6712 43-0951744
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
P.O. Box 524
St. Louis, Missouri 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, Missouri 63166-0524
(314) 425-2525
(Name, address, including ZIP code, and telephone number, including area code,
of agent for service)
------------------------
Copy to:
<TABLE>
<S> <C> <C>
JOHN Q. ARNOLD ROBERT M. LaROSE, ESQ. STEWART E. CONNER, ESQ.
Chief Financial Officer Thompson Coburn Wyatt, Tarrant & Combs
Mercantile Bancorporation Inc. One Mercantile Center 2800 Citizens Plaza
P.O. Box 524 St. Louis, Missouri 63101 Louisville, Kentucky 40202
St. Louis, Missouri 63166-0524 (314) 552-6000 (502) 589-5235
(314) 425-2525
</TABLE>
------------------------
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after the effective date of this Registration
Statement.
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. / /
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
--------------------------
<TABLE>
CALCULATION OF REGISTRATION FEE
====================================================================================================================================
<CAPTION>
Title of each class of Amount to be Proposed maximum Proposed maximum Amount of
securities to be registered registered offering price per unit<F2> aggregate offering price<F3> registration fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.01 par value<F1> 5,399,763 shares $52.24 $282,107,618.60 $83,221.75
====================================================================================================================================
<FN>
<F1> Includes one attached Preferred Share Purchase Right per share.
<F2> The proposed maximum offering price per unit has been determined by
dividing the proposed maximum aggregate offering price by the number of
shares being registered.
<F3> Estimated solely for purposes of computing the registration fee
pursuant to the provisions of Rule 457(f), and based upon the average
of the high and low sales prices reported on the Nasdaq National Market
on April 14, 1998 of the 7,863,627 shares of the common stock, no par
value, of CBT Corporation outstanding as of March 25, 1998.
</TABLE>
---------------------------
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.
================================================================================
<PAGE> 2
[LETTERHEAD OF CBT CORPORATION]
----------------, 1998
Dear Fellow Shareholder:
The Board of Directors cordially invites you to attend a Special
Meeting of Shareholders of CBT Corporation ("CBT") to be held at ----- a.m.
Central Time, on -----------------, -------------------, 1998, at Madison
Hall, 919 Madison Street, Paducah, Kentucky (the "Special Meeting"). At
the Special Meeting, you will be asked to consider and vote upon a proposal
to approve the Agreement and Plan of Merger, dated January 10, 1998 (the
"Merger Agreement"), and each of the transactions contemplated thereby,
pursuant to which CBT will be merged (the "Merger") with and into
Ameribanc, Inc., a Missouri corporation and wholly owned subsidiary of
Mercantile Bancorporation Inc. ("MBI"). Upon consummation of the Merger,
each share of CBT common stock will be converted into the right to receive
0.6513 of a share of MBI common stock, all as more fully described in the
accompanying Proxy Statement/Prospectus.
I have enclosed the following items relating to the Special Meeting and
the Merger:
1. Proxy Statement/Prospectus;
2. Proxy card; and
3. A pre-addressed return envelope to UMB Bank N.A. 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 CBT and MBI and describe the terms and conditions of the Merger.
The Board of Directors requests that you carefully review these materials
before completing the enclosed proxy card or attending the Special Meeting.
THE BOARD OF DIRECTORS OF CBT CAREFULLY CONSIDERED AND APPROVED THE
TERMS OF THE MERGER AGREEMENT AS BEING IN THE BEST INTEREST OF CBT AND ITS
SHAREHOLDERS. THE BOARD OF DIRECTORS OF CBT RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL TO APPROVE THE MERGER AGREEMENT.
---
The investment banking firm of Morgan Stanley & Co. Incorporated has
issued its written opinion dated as of the date hereof, to your Board of
Directors regarding the fairness from a financial point of view of the
consideration to be received by CBT shareholders pursuant to the Merger
Agreement. A copy of the opinion is attached as Annex A to the Proxy
Statement/Prospectus. -------
Approval of the Merger Agreement by the CBT shareholders is a condition to
the consummation of the Merger. Accordingly, it is important that your shares
be represented at the Special Meeting, whether or not you plan to attend the
Special Meeting in person. Please complete, date and sign the enclosed proxy
card and return it to UMB Bank N.A. in the enclosed pre-addressed envelope,
which requires no postage if mailed within the United States. If you later
decide to attend the Special Meeting and vote in person, or if you wish to
revoke your proxy for any reason prior to the vote at the Special Meeting, you
may do so and your proxy will have no further effect. You may revoke your proxy
by delivering to the Secretary of CBT a written notice of revocation or another
proxy relating to the same shares bearing a later date than the proxy being
revoked or by attending the Special Meeting
<PAGE> 3
and voting in person. Attendance at the Special Meeting will not in itself
constitute a revocation of an earlier dated proxy.
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
me at (502) 575-5139.
Sincerely,
William J. Jones
President and Chief Executive Officer
<PAGE> 4
CBT CORPORATION
333 Broadway
Paducah, Kentucky 42001
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held
----------------------, 1998
TO THE SHAREHOLDERS OF CBT CORPORATION:
Notice is hereby given that a special meeting (the "Special Meeting")
of shareholders of CBT CORPORATION, a Kentucky corporation ("CBT"), will be
held at Madison Hall, 919 Madison Street, Paducah, Kentucky on ------------,
1998, at ----- a.m. Central Time, for the following purposes:
(1) To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger, dated as of January 10, 1998 (the "Merger
Agreement"), by and among Mercantile Bancorporation Inc. ("MBI"), Ameribanc,
Inc., a wholly owned subsidiary of MBI ("Ameribanc"), and CBT, pursuant to
which CBT will be merged (the "Merger") with and into Ameribanc, in a
transaction that will result in the business and operations of CBT being
continued through Ameribanc, and whereby, upon consummation of the Merger,
each outstanding share of CBT common stock will be converted into the right
to receive 0.6513 of a share of MBI common stock, as set forth in detail in
the attached Proxy Statement/Prospectus.
(2) To transact such other business as may properly come before the
Special Meeting or any adjournments or postponements thereof.
The record date for determining the shareholders entitled to receive
notice of, and to vote at, the Special Meeting or any adjournments or
postponements thereof has been fixed as of the close of business on
- -----------------, 1998. On the record date, CBT had ----------- shares of
common stock issued, outstanding and entitled to vote. Such shares were held
by approximately ------ holders of record. Each share will be entitled to one
vote on each matter submitted to a vote at the Special Meeting.
Pursuant to Subchapter 13 of the Kentucky Business Corporation Act,
each holder of CBT common stock will have the right to dissent from the
Merger Agreement and to demand a determination of the fair value of such
shareholder's shares in the event the Merger Agreement is approved and the
Merger consummated. A copy of Subchapter 13 of the Kentucky Business
Corporation Act is attached as Annex B to the Proxy Statement/Prospectus.
-------
THE AFFIRMATIVE VOTE OF THE HOLDERS OF 67% OF THE OUTSTANDING SHARES OF
CBT COMMON STOCK IS REQUIRED FOR APPROVAL OF THE MERGER AGREEMENT. YOUR VOTE
IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING, PLEASE
COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT IN THE
ACCOMPANYING ENVELOPE. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO THE
VOTE AT THE SPECIAL MEETING BY FOLLOWING THE PROCEDURES SET FORTH IN THE
ACCOMPANYING PROXY STATEMENT/PROSPECTUS. FAILURE TO
<PAGE> 5
RETURN THE ENCLOSED PROXY CARD OR TO VOTE AT THE MEETING WILL HAVE THE SAME
EFFECT AS A VOTE AGAINST THE MERGER.
PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME. If the
Merger Agreement is approved, you will be sent instructions regarding the
mechanics of exchanging your existing CBT common stock certificates for new
certificates representing shares of MBI.
BY ORDER OF THE BOARD OF DIRECTORS
Paducah, Kentucky Linda J. Ashley
- --------------,1998 Secretary
<PAGE> 6
MERCANTILE BANCORPORATION INC.
PROSPECTUS
----------------
CBT CORPORATION
PROXY STATEMENT
Special Meeting of Shareholders
To Be Held on --------------, 1998
This Prospectus of Mercantile Bancorporation Inc., a Missouri
corporation ("MBI"), relates to up to 5,399,763 shares of common stock, $0.01
par value (the "Common Stock"), and attached Preferred Share Purchase Rights
(the "Rights"), of MBI (the Common Stock and Rights are collectively referred
to herein as "MBI Common Stock"), to be issued to the shareholders of CBT
Corporation, a Kentucky corporation ("CBT"), upon consummation of the
proposed merger (the "Merger") of CBT with and into Ameribanc, Inc., a
Missouri corporation and wholly owned subsidiary of MBI ("Ameribanc"). Upon
receipt of the requisite shareholder and regulatory approvals, and the
satisfaction or waiver of certain conditions precedent, the Merger will be
consummated pursuant to the terms of the Agreement and Plan of Merger, dated
as of January 10, 1998 (the "Merger Agreement"), by and among MBI, Ameribanc
and CBT. This Prospectus also serves as the Proxy Statement of CBT for use
in connection with the Special Meeting of Shareholders of CBT (the "Special
Meeting"), which will be held on ----------------, 1998, at the time and
place and for the purposes stated in the Notice of Special Meeting of
Shareholders accompanying this Proxy Statement/Prospectus.
Pursuant to the Merger Agreement, MBI will issue up to an aggregate of
5,399,763 shares of MBI Common Stock. Upon consummation of the Merger, the
business and operations of CBT will be continued through Ameribanc and each
share of common stock, no par value, of CBT ("CBT Common Stock") will be
converted into the right to receive 0.6513 of a share of MBI Common Stock
(the "Exchange Ratio"). The fair market value of MBI Common Stock to be
received pursuant to the Merger may fluctuate and at the consummation of the
Merger may be more or less than the current fair market value of such shares.
See "TERMS OF THE PROPOSED MERGER - General Description of the Merger." 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."
The Merger is intended to qualify as a reorganization under the
Internal Revenue Code of 1986, as amended (the "Code"). The Merger generally
is intended to achieve certain federal income tax deferral benefits for CBT
shareholders with respect to shares of MBI Common Stock received in the
Merger. See "SUMMARY INFORMATION - Federal Income Tax Consequences in
General" and "CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER."
MBI Common Stock is traded on the New York Stock Exchange (the "NYSE")
under the symbol "MTL" and CBT Common Stock is traded on the Nasdaq National
Market under the symbol "CBTC." On April 14, 1998, the closing sale price for
MBI Common Stock as reported on the NYSE Composite Tape was $56 9/16 per
share and the closing sale price for CBT Common Stock as reported on the
Nasdaq National Market was $35.75 per share.
This Proxy Statement/Prospectus, the Notice of Special Meeting and the
form of proxy were first mailed to the shareholders of CBT on or about
- -------------------, 1998.
<PAGE> 7
THESE SECURITIES 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 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 NON-BANK SUBSIDIARY OF MBI AND
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK
INSURANCE FUND, THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY OTHER FEDERAL
OR STATE GOVERNMENTAL AGENCY.
All information contained in this Proxy Statement/Prospectus with
respect to MBI has been supplied by MBI and all information with respect to
CBT has been supplied by CBT.
The date of this Proxy Statement/Prospectus is -------------------, 1998.
- 2 -
<PAGE> 8
AVAILABLE INFORMATION
---------------------
MBI and CBT are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, file with the Commission reports, proxy statements and
other information. Such reports, proxy statements and other information
filed with the Commission by MBI and CBT can be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the Commission's regional offices located
at Suite 1300, Seven World Trade Center, New York, New York 10048 and Room
1400, Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois
60661. The Commission maintains an Internet site on the World Wide Web
containing reports, proxy and information statements and other information
filed electronically by MBI and CBT with the Commission. The address of the
World Wide Web site maintained by the Commission is http://www.sec.gov. MBI
Common Stock is listed on the NYSE, and such reports, proxy statements and
other information concerning MBI also are available for inspection and
copying at the offices of the NYSE, 20 Broad Street, New York, New York
10005. CBT Common Stock is quoted on the Nasdaq National Market. Reports,
proxy statements and other information concerning CBT also are available from
CBT, without charge, upon written or oral request to John E. Sircy, Executive
Vice President, 333 Broadway, Paducah, Kentucky 42001, telephone (502)
575-5324.
This Proxy Statement/Prospectus does not contain all of the information
set forth in the Registration Statement on Form S-4 and exhibits thereto (the
"Registration Statement") covering the securities offered hereby which has
been filed by MBI with the Commission. 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. Statements contained in this Proxy Statement/Prospectus provide a
summary of the contents of certain contracts or other documents referenced
herein but are not necessarily complete and in each instance reference is
made to the copy of each such contract or other document filed as an exhibit
to the Registration Statement. For such further information, reference is
made to the Registration Statement.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
-------------------------------------------------
This Proxy Statement/Prospectus incorporates by reference documents
relating to MBI and CBT that are not presented herein or delivered herewith.
Such documents, excluding exhibits unless specifically incorporated therein,
are available, without charge to any person, including beneficial owners of
CBT Common Stock to whom this Proxy Statement/Prospectus is delivered, upon
written or oral request, in the case of documents relating to MBI, to Jon W.
Bilstrom, General Counsel and Secretary, Mercantile Bancorporation Inc., P.O.
Box 524, St. Louis, Missouri 63166-0524, telephone (314) 425-2525, or in the
case of documents relating to CBT, to John E. Sircy, Executive Vice
President, CBT Corporation, 333 Broadway, Paducah, Kentucky 42001, telephone
(502) 575-5324. In order to ensure timely delivery of the documents prior to
the Special Meeting, any request should be made by ------------, 1998.
The following documents filed with the Commission by MBI under the
Exchange Act are incorporated herein by reference:
(a) MBI's Annual Report on Form 10-K for the year ended December 31,
1997.
- 3 -
<PAGE> 9
(b) MBI's Current Reports on Form 8-K dated January 10, 1998 and
January 30, 1998.
(c) The description of MBI's 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.
(d) The description of MBI's Preferred Share Purchase 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.
The following documents filed with the Commission by CBT under the
Exchange Act are incorporated herein by reference:
(a) CBT's Annual Report on Form 10-K for the year ended December 31,
1997.
(b) CBT's Current Report on Form 8-K dated January 10, 1998.
(c) The description of CBT's Common Stock set forth in CBT's
Registration Statement on Form 8-A, dated May 2, 1988, and any
amendment or report filed for the purpose of updating such
description.
Such incorporation by reference shall not be deemed to incorporate by
reference the information referred to in Item 402(a)(8) of Regulation S-K.
All documents filed by MBI and CBT pursuant to Sections 13(a), 13(c),
14 and 15(d) of the Exchange Act after the date hereof and until the date of
the Special 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 CBT 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 herein
by reference shall be deemed to be modified or superseded for purposes hereof
to the extent that a subsequent statement contained herein or in any other
subsequently filed document 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.
Any statements contained in this Proxy Statement/Prospectus involving
matters of opinion, whether or not expressly so stated, are intended as such
and not as representations of fact.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT/ PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY MBI OR CBT. THIS PROXY STATEMENT/PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE SHARES OF MBI COMMON STOCK TO WHICH IT RELATES OR
AN OFFER TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER WOULD BE
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY
DISTRIBUTION OF
- 4 -
<PAGE> 10
SECURITIES PURSUANT HERETO SHALL IMPLY OR CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF MBI OR CBT OR ANY OF THEIR SUBSIDIARIES OR IN
THE INFORMATION SET FORTH HEREIN SUBSEQUENT TO THE DATE HEREOF.
- 5 -
<PAGE> 11
<TABLE>
TABLE OF CONTENTS
-----------------
<CAPTION>
Page
----
<S> <C>
AVAILABLE INFORMATION 3
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE 3
SUMMARY INFORMATION 8
Business of MBI 8
Business of Ameribanc 9
Business of CBT 9
The Proposed Merger 9
Other Agreements 10
Interests of Certain Persons in the Merger 11
Special Meeting of CBT Shareholders 11
Reasons for the Merger 12
Opinion of Financial Advisor to CBT 12
Fractional Shares 13
Waiver and Amendment 13
Federal Income Tax Consequences in General 13
Regulatory Approval 13
Accounting Treatment 14
Dissenters' Rights 14
Markets and Market Prices 14
Comparative Unaudited Per Share Data 15
Summary Financial Data 16
INFORMATION REGARDING SPECIAL MEETING 19
General 19
Date, Time and Place 19
Record Date; Vote Required 19
Voting and Revocation of Proxies 19
Solicitation of Proxies 20
TERMS OF THE PROPOSED MERGER 21
General Description of the Merger 21
Other Agreements 22
Interests of Certain Persons in the Merger 24
Background of and Reasons for the Merger; Board Recommendations 26
Opinion of Financial Advisor to CBT 30
Conditions of the Merger 35
Representations and Warranties 37
Termination, Waiver and Amendment of the Merger Agreement 38
Indemnification 39
Closing Date 39
Surrender of CBT Stock Certificates and Receipt of MBI Common Stock 39
Fractional Shares 40
Regulatory Approval 40
Business Pending the Merger 41
Accounting Treatment 43
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER 44
- 6 -
<PAGE> 12
RIGHTS OF DISSENTING SHAREHOLDERS OF CBT 45
PRO FORMA FINANCIAL INFORMATION 48
Comparative Unaudited Per Share Data 48
Pro Forma Combined Consolidated Financial Statements (Unaudited) 50
INFORMATION REGARDING MBI STOCK 60
Description of MBI Common Stock and Attached Preferred Share Purchase Rights 60
Restrictions on Resale of MBI Stock by Affiliates 62
Comparison of the Rights of Shareholders of MBI and CBT 63
SUPERVISION AND REGULATION 66
General 66
Certain Transactions with Affiliates 67
Payment of Dividends 67
Capital Adequacy 67
FDIC Insurance Assessments 67
Proposals to Overhaul the Savings Association Industry 69
Support of Subsidiary Banks 69
FIRREA and FDICIA 69
Depositor Preference Statute 70
The Interstate Banking and Community Development Legislation 70
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS 71
LEGAL MATTERS 71
EXPERTS 71
OTHER MATTERS 71
SHAREHOLDER PROPOSALS 72
ANNEXES
Annex A -- Opinion of Morgan Stanley & Co. Incorporated A-1
Annex B -- Dissenters' Rights Provisions of the Kentucky Business Corporation Act B-1
</TABLE>
- 7 -
<PAGE> 13
SUMMARY INFORMATION
-------------------
The following is a summary of the important terms of the proposed
Merger and related information discussed elsewhere in this Proxy
Statement/Prospectus but does not purport to be complete and is qualified in
its entirety by reference to the more detailed information that appears
elsewhere in this Proxy Statement/Prospectus and the documents incorporated
by reference herein. Shareholders of CBT are urged to read this Proxy
Statement/Prospectus in its entirety. All MBI per share data reflect
three-for-two stock splits distributed in the form of dividends on each of
April 11, 1994 and October 1, 1997.
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"). At December 31, 1997, MBI owned, directly or
indirectly, all of the capital stock of Mercantile Bank National Association
("Mercantile Bank") and 19 other commercial banks, all of which operate from
543 banking offices and 514 Fingertip Banking automated teller machines,
including 53 off-premises machines, located throughout Missouri, Illinois,
eastern Kansas, northern and central Arkansas and Iowa. 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, 1997, MBI had
130,508,090 shares of its Common Stock outstanding and reported, on a
consolidated basis, total assets of $30.0 billion, total deposits of $22.1
billion, total loans of $19.2 billion and shareholders' equity of $2.4
billion.
On February 2, 1998, MBI completed the acquisition of Horizon Bancorp,
Inc., an Arkansas corporation and a registered bank holding company under the
BHCA ("Horizon"), headquartered in Arkadelphia, Arkansas. This acquisition
was accounted for under the pooling-of-interests method of accounting. As of
February 2, 1998, Horizon reported, on a consolidated basis, total assets of
$537 million, total deposits of $454 million and shareholders' equity of $47
million.
On March 2, 1998, MBI completed the acquisition of HomeCorp, Inc., a
Delaware corporation and savings and loan holding company ("HomeCorp"),
headquartered in Rockford, Illinois. This acquisition was accounted for
under the pooling-of-interests method of accounting. As of March 2, 1998,
HomeCorp reported, on a consolidated basis, total assets of $335 million,
total deposits of $308 million and stockholders' equity of $21 million.
On February 2, 1998, MBI entered into an agreement to acquire Firstbank
of Illinois Co., a Delaware corporation and registered bank holding company
under the BHCA ("Firstbank"), headquartered in Springfield, Illinois. As of
December 31, 1997, Firstbank reported, on a consolidated basis, total assets
of $2.3 billion, total deposits of $2.0 billion and shareholders' equity of
$233 million.
MBI's principal executive offices are located at One Mercantile Center,
St. Louis, Missouri 63101 and its telephone number is (314) 425-2525.
Additional information concerning MBI is included in the documents
incorporated by reference. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
- 8 -
<PAGE> 14
Business of Ameribanc
Ameribanc, a Missouri corporation, is a wholly owned subsidiary of MBI
that was organized in 1991. Ameribanc is a registered bank holding company
under the BHCA. At December 31, 1997, Ameribanc owned all of the capital
stock of 19 banks which operate from 543 locations in Missouri, Illinois,
eastern Kansas, northern and central Arkansas and Iowa. Ameribanc, which
will continue to be a subsidiary of MBI following the Merger, will be the
surviving corporation upon consummation of the Merger.
Business of CBT
CBT, a Kentucky corporation, was formed in 1983 and is a multi-bank
holding company registered under the BHCA. CBT is the parent company of four
banks, the Bank of Marshall County ("BMC"), Citizens Bank & Trust Company
("Citizens"), Graves County Bank ("GCB"), and Pennyrile Citizens Bank and
Trust Company ("PBC"), and one federal savings bank, United Commonwealth
Bank, FSB ("UCB" and, together with Citizens, GCB and PBC, the "Banks").
Fidelity Credit Corporation ("FCC"), a consumer finance company, is also a
wholly-owned subsidiary of Citizens. United Commonwealth Service Corporation
("UCSC"), which has entered into a networking arrangement with a
broker-dealer pursuant to which such broker-dealer provides brokerage
services to customers of UCB, is a wholly-owned subsidiary of UCB. As of
December 31, 1997, 7,862,627 shares of CBT Common Stock were issued and
outstanding. As of December 31, 1997, CBT reported, on a consolidated basis,
total assets of $1.1 billion, total deposits of $747 million, total loans of
$731 million and shareholders' equity of $120 million.
CBT's principal executive offices are located at 333 Broadway, Paducah,
Kentucky 42001 and its telephone number is (502) 575-5100.
The Proposed Merger
Subject to the satisfaction of the terms and conditions set forth in
the Merger Agreement, CBT will be merged with and into Ameribanc. Upon
consummation of the Merger, CBT's corporate existence will terminate and
Ameribanc will continue as the surviving entity. Simultaneously with the
effectiveness of the Merger, each share of CBT Common Stock will be converted
into the right to receive 0.6513 of a share of MBI Common Stock. Such
consideration is subject to certain anti-dilution protections, but is not
adjustable based upon the operating results, financial condition or other
factors affecting either MBI or CBT prior to the consummation of the Merger.
The fair market value of MBI Common Stock to be received pursuant to the
Merger may fluctuate and at the consummation of the Merger may be more or
less than the current fair market value of such shares.
Harris Trust and Savings Bank, the transfer agent for MBI Common Stock,
has been selected as the Exchange Agent (the "Exchange Agent") for purposes
of effecting the conversion of CBT Common Stock into MBI Common Stock upon
consummation of the Merger. As soon as practicable after consummation of the
Merger, a letter of transmittal (including instructions setting forth the
procedures for exchanging certificates representing shares of CBT Common
Stock for the MBI Common Stock payable to each holder thereof pursuant to the
Merger Agreement) will be sent to each record holder of certificates formerly
representing shares of CBT Common Stock as of the Effective Time (as
hereinafter defined). Upon surrender to the Exchange Agent of his or her
certificate(s) representing shares of CBT Common Stock, together with a duly
completed and executed letter of transmittal, each such holder will receive
certificates representing that whole number of shares of MBI Common Stock to
- 9 -
<PAGE> 15
which such holder is entitled under the Merger Agreement. See "TERMS OF THE
PROPOSED MERGER - Surrender of CBT Stock Certificates and Receipt of MBI
Common Stock."
The Merger Agreement provides that the consummation of the Merger is
subject to certain terms and conditions, including the approval of the Merger
Agreement by the requisite vote of the holders of CBT Common Stock, the
receipt of the requisite regulatory approvals, a letter of KPMG Peat Marwick
LLP to the effect that the Merger will qualify for pooling-of-interests
accounting treatment and an opinion of counsel for MBI regarding certain
federal income tax aspects of the transaction. For a discussion of each of
the conditions to the Merger, see "TERMS OF THE PROPOSED MERGER - Conditions
of the Merger." The Merger will be consummated and become effective (the
"Effective Time") upon the later of (i) the issuance of a certificate of
merger by the Office of the Secretary of State of the State of Missouri and
(ii) the filing of articles of merger with the Office of the Secretary of
State of the Commonwealth of Kentucky.
Unless the parties otherwise agree, the date of the closing of the
Merger (the "Closing Date") shall occur on such date as MBI shall notify CBT
in writing but (i) not earlier than the approval of the Merger Agreement by
the requisite vote of the holders of CBT Common Stock and the receipt of the
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 days after the Approval Date. The Merger Agreement may be terminated at
any time prior to the Closing Date by the mutual consent of the parties or,
unilaterally, by either party upon the occurrence of certain events or if the
Merger is not consummated by December 31, 1998. See "TERMS OF THE PROPOSED
MERGER - Conditions of the Merger" and "- Termination of the Merger
Agreement."
Other Agreements
In addition to and contemporaneously with the Merger Agreement, MBI and
CBT executed a Stock Option Agreement (the "Option Agreement") and MBI and
certain of the directors of CBT executed separate Voting Agreements (the
"Voting Agreements"). The following is a summary of the material terms of
the Option Agreement and the Voting Agreements.
Option Agreement. Pursuant to the Option Agreement, CBT issued to MBI
an option (the "Option") to purchase up to 1,564,662 shares of CBT Common
Stock at a price of $33.25 per share (the "Option Price"). The Option is
exercisable upon the occurrence of certain events generally relating to the
failure of CBT to consummate the Merger because of a material change or
potential material change in the ownership of CBT, all as set forth in the
Option Agreement. No such event has occurred as of the date hereof. CBT
granted to MBI the Option as a condition of and in consideration of MBI
entering into the Merger Agreement. The Option is intended to increase the
likelihood that the Merger will be consummated in accordance with the terms
of the Merger Agreement. Consequently, the Option may have the effect of
discouraging a person who might now or prior to the consummation of the
Merger consider or propose the acquisition of CBT (or a significant interest
in CBT), even if such person were prepared to pay a higher price per share
for CBT Common Stock than the price per share implicit in the Exchange Ratio.
In the event MBI acquires shares of CBT Common Stock pursuant to the Option,
MBI could vote those shares in the election of CBT directors and other
matters requiring a shareholder vote, thereby potentially having a material
impact on the outcome of such matters. For additional information regarding
the Option Agreement, see "TERMS OF THE PROPOSED MERGER -- Other Agreements
- -- Option Agreement."
- 10 -
<PAGE> 16
Voting Agreements. Concurrent with the execution of the Merger
Agreement, MBI and eighteen of the nineteen directors of CBT executed
separate Voting Agreements (the "Voting Agreements") pursuant to which each
such director agreed that he will vote all of the shares of CBT Common Stock
then owned, controlled or subsequently acquired in favor of the approval of
the Merger Agreement at the Special Meeting. In addition, until the earliest
to occur of the Closing Date or the termination of the Merger Agreement, each
director further agreed he will not vote any such shares in favor of the
approval of any other competing acquisition proposal involving CBT and a
third party. Each director also agreed that he will not transfer shares of
CBT Common Stock unless, prior to such transfer, the transferee executes an
agreement in substantially the same form as the Voting Agreement and
satisfactory to MBI. As of the Record Date (as defined below), the directors
of CBT who signed Voting Agreements owned beneficially, directly and
indirectly, an aggregate of ---------- shares of CBT Common Stock, or
approximately -----% of the issued and outstanding shares.
Interests of Certain Persons in the Merger
Employment Agreements. William J. Jones, President and Chief Executive
Officer of CBT, and five other executive officers of CBT have entered into
separate employment agreements (collectively, the "Employment Agreements") with
MBI pursuant to which such executive officers will continue to be employed by
MBI or its affiliates following the consummation of the Merger. Pursuant to Mr.
Jones' Employment Agreement, in addition to certain other terms and conditions,
Mr. Jones will be engaged as the Chairman, President and Chief Executive Officer
of the Mercantile banking franchise in western Kentucky (the "Franchise") and as
a member of the Board of Directors of the banks comprising the Franchise
(collectively, the "Franchise Banks") for a period commencing at the Effective
Time and continuing until December 31, 2000. Mr. Jones will also be entitled to
receive two cash transition payments if he is in the employ of MBI on the
twelve- and twenty-four-month anniversaries of the Effective Time. Pursuant to
the five remaining executive officers' Employment Agreements, in addition to
certain other terms and conditions, commencing at the Effective Time, MBI will
engage such executive officers as senior officers of the Franchise and such
executive officers will be entitled to receive cash transition payments if they
are in the employ of MBI on the twelve-month anniversary of the Effective Time.
In addition to the Employment Agreements, MBI has also entered into similar
employment agreements with twelve additional less senior officers of CBT or its
subsidiaries. See "TERMS OF THE PROPOSED MERGER - Interests of Certain Persons
in the Merger - Employment Agreements."
Severance Agreement. CBT is party to a Severance Protection Agreement,
dated June 28, 1995 (the "Severance Agreement"), with John E. Sircy, Executive
Vice President and Chief Operating Officer of CBT, pursuant to which Mr. Sircy
is entitled to certain payments and benefits in the event that, following a
change of control (as defined in the Severance Agreement), Mr. Sircy's
employment is terminated by CBT for any reason other than for cause, death or
disability or by Mr. Sircy for good reason (as defined in the Severance
Agreement). See "TERMS OF THE PROPOSED MERGER - Interests of Certain Persons in
the Merger - Severance Agreement."
Indemnification. MBI also has agreed that the Merger will not diminish
any indemnification obligations of CBT or its subsidiaries in favor of the
employees, agents, directors or officers of CBT or its subsidiaries existing
as of the Effective Time. In addition, to the extent that CBT's existing
directors' and officers' liability insurance policy provides coverage for the
acts or omissions of the directors and officers of CBT and its subsidiaries
prior to the Effective Time, CBT has agreed to give to such insurance carrier
and to MBI notice of any potential claims thereunder. On and after the
- 11 -
<PAGE> 17
Effective Time, MBI's directors' and officers' liability insurance policy
will provide coverage for the prior acts of the directors and officers of CBT
and its subsidiaries. See "TERMS OF THE PROPOSED MERGER - Interests of
Certain Persons in the Merger - Indemnification."
Special Meeting of CBT Shareholders
The Special Meeting will be held on -------------, 1998, at -------
a.m. Central Time, at Madison Hall, 919 Madison Street, Paducah, Kentucky.
Approval by the CBT shareholders of the Merger Agreement requires the
affirmative vote of the holders of 67% of the outstanding shares of CBT Common
Stock. Only holders of record of CBT Common Stock at the close of business on
- --------------, 1998 (the "Record Date") will be entitled to notice of, and to
vote at, the Special Meeting. At such date, there were ------ shares of CBT
Common Stock outstanding. Each share of CBT Common Stock is entitled to one
vote on each matter submitted to a vote at the Special Meeting.
As of the Record Date, directors and executive officers of CBT and
their affiliates owned beneficially, or controlled the voting of, an
aggregate of ---------- shares of CBT Common Stock, or approximately -----%
of the shares entitled to vote at the Special Meeting. Each of CBT's
directors and executive officers has indicated his or her intention to vote
his or her shares for the approval of the Merger Agreement. Additionally,
eighteen of the nineteen directors of CBT, pursuant to the terms of his
respective Voting Agreement, has committed to vote his shares of CBT Common
Stock for the approval of the Merger Agreement. As of the Record Date, such
persons who had executed Voting Agreements or otherwise indicated they would
vote for approval of the Merger Agreement owned beneficially, directly and
indirectly, an aggregate of ------- shares of CBT Common Stock, or
approximately ----% of the issued and outstanding shares.
THE BOARD OF DIRECTORS OF CBT CAREFULLY CONSIDERED AND APPROVED THE TERMS
OF THE MERGER AS BEING IN THE BEST INTEREST OF CBT AND ITS SHAREHOLDERS. THE
BOARD OF DIRECTORS OF CBT RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL TO
APPROVE THE MERGER AGREEMENT. ---
Reasons for the Merger
CBT. CBT's Board of Directors believes that the Merger is in the best
interests of CBT and its shareholders. In reaching the decision to recommend
the approval of the Merger Agreement to the shareholders, the Board of
Directors, without assigning any relative or specific weights, considered a
number of factors. For a discussion of such factors, see "TERMS OF THE PROPOSED
MERGER - Background of and Reasons for the Merger; Board Recommendations."
MBI. MBI's Board of Directors believes that the Merger will enable MBI
to (i) establish MBI's presence in western Kentucky through the acquisition
of an established banking organization and (ii) enhance MBI's ability to
compete in the increasingly competitive banking and financial services
industry. See "TERMS OF THE PROPOSED MERGER - Background of and Reasons for
the Merger; Board Recommendations."
- 12 -
<PAGE> 18
Opinion of Financial Advisor to CBT
As of the date of this Proxy Statement/Prospectus, Morgan Stanley & Co.
Incorporated ("Morgan Stanley"), CBT's financial advisor, rendered to the
Board of Directors of CBT a written opinion to the effect that, as of the
date of such opinion, the consideration to be received by the holders of CBT
Common Stock in the Merger is fair to them from a financial point of view.
Attached to this Proxy Statement/Prospectus as Annex A is a copy of the
-------
opinion of Morgan Stanley, as of the date hereof, setting forth the
procedures followed, assumptions made, matters considered and qualifications
and limitations of the review undertaken by Morgan Stanley in connection with
rendering its opinion. Holders of CBT Common Stock are urged to read Morgan
Stanley's opinion in its entirety. See "TERMS OF THE PROPOSED MERGER -
Background of and Reasons for the Merger; Board Recommendations" and "- Opinion
of Financial Advisor to CBT."
Fractional Shares
No fractional shares of MBI Common Stock will be issued to the
shareholders of CBT in connection with the Merger. Each holder of CBT Common
Stock who otherwise would have been entitled to receive a fraction of a share
of MBI Common Stock shall 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 NYSE Composite Tape on the
Closing Date as reported in The Wall Street Journal. Cash received by CBT
shareholders in lieu of fractional shares may give rise to taxable income.
See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER."
Waiver and Amendment
Any provision of the Merger Agreement, including, without limitation,
the conditions to the consummation of the Merger and the restrictions
described under the caption "TERMS OF THE PROPOSED MERGER - Business Pending
the Merger," may be (i) waived in writing at any time by the party that is,
or whose shareholders or shareholders are, entitled to the benefits thereof
or (ii) amended at any time by written agreement of the parties approved by
or on behalf of their respective Boards of Directors, whether before or after
the approval of the Merger Agreement by the shareholders of CBT; provided,
however, that after approval of the Merger Agreement by the shareholders of
CBT at the Special Meeting no such modification may (i) alter or change the
amount or kind of the consideration to be received by the CBT shareholders
pursuant to the Merger Agreement or (ii) adversely affect the tax treatment
to the CBT shareholders as a result of receiving shares of MBI Common Stock
in the Merger.
Federal Income Tax Consequences in General
Thompson Coburn, MBI's legal counsel, has delivered its opinion 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, CBT and certain shareholders of CBT, the Merger will constitute a
"reorganization" for federal income tax purposes and that, accordingly,
assuming the CBT Common Stock is a capital asset in the hands of the holder
at the Effective Time, (i) no gain or loss will be recognized by CBT
shareholders who exchange their shares of CBT Common Stock solely for shares
of MBI Common Stock in the Merger, (ii) the basis of the MBI Common Stock
will equal the basis of the CBT Common Stock for which it is exchanged and
(iii) the holding period of the MBI Common Stock will include the holding
period of the CBT Common Stock for which it is exchanged. However, cash
received in lieu of fractional shares may give rise to taxable income. Each
CBT shareholder is urged to consult his or her own tax advisor to determine
the specific tax consequences of the
- 13 -
<PAGE> 19
Merger to such shareholder, including the applicability of various state, local
and foreign tax laws. See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE
MERGER."
Regulatory Approval
The Merger is subject to prior approval of the Board of Governors of
the Federal Reserve System (the "Federal Reserve Board"), the Kentucky
Department of Financial Institutions (the "Kentucky Commissioner") and any
other bank regulatory authority that may be necessary or appropriate (the
Federal Reserve Board, Kentucky Commissioner and any other bank regulatory
authority that may be necessary or appropriate are collectively referred to
herein as the "Regulatory Authorities" and, individually, as a "Regulatory
Authority"). On March 12, 1998, MBI filed the required applications
regarding the Merger with the Federal Reserve Board and the Kentucky
Commissioner. In reviewing the applications and the proposed Merger, the
Federal Reserve Board and the Kentucky Commissioner will consider various
factors, including possible anticompetitive effects of the Merger, and
examine the financial and managerial resources and future prospects of the
combined organization. There can be no assurance that the requisite regulatory
approvals will be granted or as to the timing of such approvals. See "TERMS OF
THE PROPOSED MERGER - Regulatory Approval" and "SUPERVISION AND REGULATION."
Accounting Treatment
It is intended that the Merger will be accounted for under the
pooling-of-interests method of accounting. See "TERMS OF THE PROPOSED MERGER
- - Accounting Treatment."
Dissenters' Rights
Pursuant to Subchapter 13 of the Kentucky Business Corporation Act (the
"Kentucky Act"), each holder of CBT Common Stock will have the right to
dissent from the Merger Agreement and to demand a determination of the fair
value of such holder's shares in the event the Merger Agreement is approved
and the Merger consummated. The right of any shareholder to receive the fair
value of the shareholder's shares is contingent upon strict compliance with
the provisions of Subtitle 13 of the Kentucky Act, a copy of which is
included as Annex B to this Proxy Statement-Prospectus. See "RIGHTS OF
-------
DISSENTING SHAREHOLDERS OF CBT."
Markets and Market Prices
MBI Common Stock is traded on the NYSE under the symbol "MTL." The
closing per share sale price reported for MBI Common Stock on January 9,
1998, the last trading date preceding the public announcement of the Merger,
was $52.75. CBT Common Stock is traded on the Nasdaq National Market under
the symbol "CBTC." The closing per share sale price reported for CBT Common
Stock on January 9, 1998, the last date on which CBT Common Stock traded
preceding the public announcement of the Merger, was $33.25.
The following table sets forth for the periods indicated the high and
low prices per share of MBI Common Stock as reported on the NYSE and of CBT
Common Stock as reported on the Nasdaq National Market along with the
quarterly cash dividends per share declared. The per share prices do not
include adjustments for markups, markdowns or commissions.
-14-
<PAGE> 20
<TABLE>
<CAPTION>
MBI CBT
----------------------------------------- ----------------------------------------
Sales Price<F1> Cash Sales Price<F1> Cash
--------------------- Dividend --------------------- Dividend
High Low Declared High Low Declared
---- --- -------- ---- --- --------
<S> <C> <C> <C> <C> <C> <C>
1996
- ----
First Quarter $31.000 $27.688 $.273 $24.500 $21.500 $.12
Second Quarter 31.938 29.000 .273 24.250 21.500 .12
Third Quarter 35.250 28.938 .273 23.500 20.000 .13
Fourth Quarter 36.000 32.688 .273 28.000 21.000 .13
1997
- ----
First Quarter $39.688 $33.312 $.287 $26.500 $20.500 $.13
Second Quarter 41.688 35.000 .287 24.500 20.250 .13
Third Quarter 53.500 40.500 .287 25.625 21.000 .13
Fourth Quarter 61.625 45.500 .287 31.625 23.500 .13
1998
- ----
First Quarter $61.250 $49.5625 $.31 $36.875 $31.375 $.14
Second Quarter 57.500 54.125 -- 36.50 34.250 --
(through April 14, 1998)
<FN>
- --------------------
<F1> For recent sale prices of MBI Common Stock and CBT Common Stock, see
the cover of this Proxy Statement/Prospectus.
</TABLE>
Comparative Unaudited Per Share Data
The following table sets forth for the periods indicated selected
historical per share data of MBI and CBT and the corresponding pro forma and
pro forma equivalent per share amounts giving effect to the proposed Merger
and the recently completed acquisition of Roosevelt Financial Group, Inc.
("Roosevelt"), which was consummated on July 1, 1997. The data presented is
based upon the consolidated financial statements and related notes of each of
MBI and CBT included in this Proxy Statement/Prospectus or in documents
incorporated herein by reference, 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--Notes to Pro
Forma Combined Consolidated Financial Statements." 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
proposed Merger and the recently completed acquisition of Roosevelt had been
consummated prior to the periods indicated.
- 15 -
<PAGE> 21
<TABLE>
<CAPTION>
MBI/ MBI/ MBI/
CBT CBT MBI/All Entities All Entities
MBI CBT Pro Forma Pro Forma Pro Forma Pro Forma
Reported Reported Combined<F1> Equivalent<F2> Combined<F3> Equivalent<F2>
-------- -------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Book Value per Share:
December 31, 1997 $18.47 $15.27 $18.38 $11.97 $17.77 $11.57
Cash Dividends Declared per Share:
Year ended December 31, 1997 $1.148 $ .52 $1.148 $ .75 $1.148 $ .75
Year ended December 31, 1996 1.092 .50 1.092 .71 1.092 .71
Year ended December 31, 1995 .88 .46 .88 .57 .88 .57
Basic Earnings per Share:
Year ended December 31, 1997 $ 1.68 $ 1.63 $ 1.71 $ 1.11 $ 1.55 $ 1.01
Year ended December 31, 1996 2.11 1.48 2.12 1.38 2.13 1.39
Year ended December 31, 1995 2.41 1.52 2.41 1.57 2.38 1.55
Diluted Earnings per Share:
Year ended December 31, 1997 $ 1.65 $ 1.62 $ 1.68 $ 1.09 $ 1.52 $ .99
Year ended December 31, 1996 2.08 1.47 2.09 1.36 2.10 1.37
Year ended December 31, 1995 2.37 1.51 2.37 1.54 2.34 1.52
Market Price per Share:
At January 9, 1998<F4> $52.75 $33.25 $52.75 $34.36 $52.75 $34.36
At April 14, 1998<F4> 56.56 35.69 56.56 36.84 56.56 36.84
<FN>
- --------------------
<F1> Includes the effect of pro forma adjustments for CBT, as appropriate.
See "PRO FORMA FINANCIAL INFORMATION - Notes to Pro Forma Combined
Consolidated Financial Statements."
<F2> Based on the pro forma combined per share amounts multiplied by 0.6513,
the Exchange Ratio applicable to one share of CBT Common Stock in the
Merger. Further explanation of the assumptions used in the preparation
of the pro forma combined consolidated financial statements is included
in the notes to pro forma combined consolidated financial statements.
See "PRO FORMA FINANCIAL INFORMATION - Notes to Pro Forma Combined
Consolidated Financial Statements."
<F3> Includes the effect of pro forma adjustments for CBT, Firstbank and
Roosevelt, as appropriate. Due to the immateriality of the financial
condition and results of operations of Horizon and HomeCorp to that of
MBI, does not include the effect of pro forma adjustments for Horizon
and HomeCorp. See "PRO FORMA FINANCIAL INFORMATION--Notes to Pro Forma
Combined Consolidated Financial Statements."
<F4> The market value of MBI Common Stock disclosed as of January 9, 1998,
the last trading day preceding the public announcement of the Merger,
and as of April 14, 1998, the last practicable date prior to the filing
of the Registration Statement, is based on the last sale price as
reported on the NYSE Composite Tape. The market value of CBT Common
Stock disclosed as of January 9, 1998, the last day on which CBT Common
Stock traded preceding the public announcement of the Merger, and as of
April 14, 1998, the last practicable date prior to the filing of the
Registration Statement, is based on the last sale price as reported on
the Nasdaq National Market.
</TABLE>
Summary Financial Data
The following table sets forth for the periods indicated certain
summary historical consolidated financial information for MBI and CBT. The
balance sheet data and income statement data of each of MBI and CBT included
in the summary financial data as of and for the five years ended December 31,
1997 are taken from the audited consolidated financial statements. These
data include all adjustments which are, in the opinion of the respective
managements of MBI and CBT, necessary to present a fair statement of these
periods and are of a normal recurring nature. The following information
should be read in conjunction with the audited consolidated financial
statements of each of MBI and CBT, 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
the notes thereto, appearing elsewhere in this Proxy Statement/Prospectus.
See "INCORPORATION OF CERTAIN INFORMATION BY REFERENCE" and "PRO FORMA
FINANCIAL INFORMATION."
- 16 -
<PAGE> 22
<TABLE>
MERCANTILE BANCORPORATION INC.
Summary Financial Data
<CAPTION>
All Entities
Pro Forma
Combined
Consolidated
as of or for
the Year As of or for the
Ended Year Ended December 31,
December 31, --------------------------------------------------------------
1997 1997 1996 1995 1994 1993
------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Data
Basic earnings per share $ 1.55 $ 1.68 $ 2.11 $ 2.41 $ 2.06 $ 1.81
Diluted earnings per share 1.52 1.65 2.08 2.37 2.02 1.77
Dividends declared 1.148 1.148 1.092 .88 .748 .66
Book value at period end 17.77 18.47 16.74 16.29 14.48 13.41
Earnings (Thousands)
Interest income $2,386,824 $1,878,194 $1,552,863 $1,516,156 $1,311,928 $1,269,680
Interest expense 1,264,664 957,690 724,910 715,466 521,542 508,469
---------- ---------- ---------- ---------- ---------- ----------
Net interest income 1,122,160 920,504 827,953 800,690 790,386 761,211
Provision for possible loan losses 89,829 79,309 73,015 41,533 48,791 70,584
Other income 400,549 378,684 337,480 311,649 272,368 290,380
Other expense 1,076,787 894,780 718,668 640,519 645,011 666,067
Income taxes 142,402 120,506 128,535 149,898 135,896 114,768
---------- ---------- ---------- ---------- ---------- ----------
Net income $ 213,691 $ 204,593 $ 245,215 $ 280,389 $ 233,056 $ 200,172
========== ========== ========== ========== ========== ==========
Ending Balance Sheet (Millions)
Total assets $ 32,867 $ 29,955 $ 22,030 $ 20,883 $ 19,397 $ 18,878
Earning assets 29,771 27,278 20,061 18,997 17,904 17,390
Investment securities 8,385 7,546 4,746 4,964 4,895 5,234
Loans and leases, net of unearned income 21,145 19,200 14,953 13,703 12,764 11,637
Deposits 24,520 22,080 17,336 16,172 15,137 15,435
Long-term debt<F1> 1,518 1,469 305 344 351 340
Shareholders' equity 2,626 2,410 1,946 1,915 1,643 1,510
Reserve for possible loan losses 291 255 230 232 245 233
Selected Ratios
Return on average assets .66% .79% 1.16% 1.39% 1.22% 1.08%
Return on average equity 7.99 9.55 12.95 15.64 14.66 14.06
Net interest rate margin<F2> 3.84 3.93 4.34 4.38 4.61 4.58
Equity to assets 7.99 8.05 8.83 9.17 8.47 8.00
Reserve for possible loan losses to
Outstanding loans 1.38 1.33 1.54 1.70 1.92 2.00
Non-performing loans 247.96 249.51 318.99 241.79 552.34 289.13
Dividend payout ratio<F3> 75.53 69.58 52.50 37.13 37.03 37.29
<FN>
- --------------------
<F1> Includes company-obligated mandatorily redeemable preferred securities
of Mercantile Capital Trust I.
<F2> Taxable-equivalent basis. Includes tax-equivalent adjustments for MBI
of $15,086,000, $16,353,000, $17,758,000, $17,962,000, and $18,598,000
for December 31, 1997, 1996, 1995, 1994 and 1993, respectively, and for
all entities pro forma combined consolidated for December 31, 1997 of
$17,820,000. These adjustments are based upon a federal tax rate of
35% for all periods.
<F3> Based upon diluted earnings per share.
</TABLE>
- 17 -
<PAGE> 23
<TABLE>
CBT CORPORATION
Summary Financial Data
<CAPTION>
As of or for the
year ended December 31,
----------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Data
Net income<F1>
Primary $ 1.63 1.48 1.52 1.45 1.32
Diluted 1.62 1.47 1.51 1.44 1.31
Dividends declared 0.52 0.50 0.46 0.43 0.39
Book value at period end 15.27 14.02 13.20 11.52 11.19
Average common shares outstanding 7,862,848 7,873,182 7,928,155 7,926,168 7,928,578
Earnings (Thousands)
Interest income $ 83,984 $ 77,646 75,762 65,857 58,558
Interest expense 40,616 36,242 35,588 27,161 24,960
---------- ---------- ---------- ---------- ----------
Net interest income 43,368 41,404 40,174 38,696 33,598
Provision for possible loan losses 4,088 2,883 1,106 1,361 1,366
Other income 9,821 8,732 8,172 6,513 7,017
Other expense 31,054 30,982 30,475 28,129 25,236
Income taxes 5,201 4,646 4,741 4,233 3,565
---------- ---------- ---------- ---------- ----------
Net income $ 12,846 $ 11,625 $ 12,024 $ 11,486 $ 10,448
========== ========== ========== ========== ==========
Ending Balance Sheet (Thousands)
Total assets $1,078,475 $ 960,552 $ 904,741 $ 875,117 $ 805,476
Earning assets 995,263 892,713 850,562 825,662 763,981
Investments 264,069 205,495 204,901 209,653 226,870
Loans and leases, net of unearned income 731,194 687,218 644,661 616,009 524,185
Deposits 746,520 710,131 673,734 669,557 648,664
Long-term debt 48,990 22,841 26,404 20,461 22,014
Shareholders' equity 120,080 110,216 104,371 91,337 88,712
Allowance for possible loan losses 9,243 8,243 11,004 11,533 10,998
Selected Ratios
Return on average assets 1.28% 1.26% 1.36% 1.37% 1.38%
Return on average equity 11.14% 10.78% 11.91% 12.42% 12.30%
Net interest rate margin<F2> 4.76% 4.91% 4.96% 5.04% 4.88%
Equity to assets 11.52% 11.71% 11.46% 11.03% 10.82%
Reserve for possible loan losses to:
Outstanding loans 1.26% 1.20% 1.71% 1.87% 2.10%
Non-performing loans 124.05% 111.92% 227.17% 501.43% 1040.49%
Dividend payout ratio 31.84% 33.22% 29.65% 29.66% 29.55%
<FN>
<F1> Based on weighted average common shares outstanding.
<F2> Based on interest income on a fully tax-equivalent basis.
</TABLE>
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<PAGE> 24
INFORMATION REGARDING SPECIAL MEETING
-------------------------------------
General
This Proxy Statement/Prospectus is being furnished to holders of CBT
Common Stock in connection with the solicitation of proxies by the Board of
Directors of CBT for use at the Special Meeting and any adjournments or
postponements thereof at which the shareholders of CBT will consider and vote
upon a proposal to approve the Merger Agreement and consider and vote upon
any other business that may properly be brought before the Special Meeting or
any adjournments or postponements thereof. Each copy of this Proxy
Statement/Prospectus is accompanied by the Notice of Special Meeting of
Shareholders of CBT, a proxy card and a return envelope to UMB Bank N.A. for
the proxy card.
This Proxy Statement/Prospectus also is furnished by MBI to each holder
of CBT Common Stock as a prospectus in connection with the issuance by MBI of
shares of MBI Common Stock upon the consummation of the Merger. This Proxy
Statement/Prospectus, the Notice of Special Meeting and proxy card are being
first mailed to shareholders of CBT on -----------------, 1998.
Date, Time and Place
The Special Meeting will be held at Madison Hall, 919 Madison Street,
Paducah, Kentucky, on ---------------, 1998, at ------ a.m. Central Time.
Record Date; Vote Required
On the Record Date, there were --------- shares of CBT Common Stock
outstanding and entitled to vote at the Special Meeting. Each such share is
entitled to one vote on each matter properly brought before the Special
Meeting. The affirmative vote of the holders of 67% of the outstanding
shares of CBT Common Stock is required to approve the Merger Agreement.
As of the Record Date, directors and executive officers of CBT and
their affiliates owned beneficially, or controlled the voting of, an
aggregate of -------- shares of CBT Common Stock, or approximately -----% of
the outstanding shares of CBT Common Stock entitled to vote at the Special
Meeting. Each of the directors and executive officers of CBT has indicated
his or her intention to vote his or her shares for the approval of the Merger
Agreement at the Special Meeting. Additionally, eighteen of the nineteen
directors of CBT, pursuant to the terms of his respective Voting Agreement,
has committed to vote his shares of CBT Common Stock for approval of the
Merger Agreement. As of the Record Date, such persons who had executed
Voting Agreements or otherwise indicated they would vote for approval of the
Merger Agreement owned beneficially, directly or indirectly, an aggregate of
- -------- shares of CBT Common Stock, or approximately ----% of the issued and
outstanding shares. See "TERMS OF THE PROPOSED MERGER - Other Agreements."
Voting and Revocation of Proxies
Shares of CBT Common Stock that are represented by a properly executed
proxy received prior to the vote at the Special Meeting will be voted at such
Special 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 CBT
shareholder returning an executed proxy card that does not provide
- 19 -
<PAGE> 25
instructions to vote against the approval of the Merger Agreement will be
deemed to have approved the Merger Agreement. Failure to return a properly
executed proxy card or to vote in person at the Special Meeting will have the
practical effect of a vote against the approval of the Merger Agreement.
Shares subject to abstentions will be treated as shares that are
present and voting at the Special Meeting for purposes of determining the
presence of a quorum. Because the affirmative vote of 67% of the outstanding
shares of CBT Common Stock is required for approval of the Merger Agreement,
abstentions will have the effect of votes against the approval of the Merger
Agreement. Broker "non-votes" (i.e., proxies from brokers or nominees
indicating that such persons have not received instructions from the
beneficial owners or other persons entitled to vote shares with respect to
which the brokers or nominees do not have discretionary power to vote without
such instructions) will not be considered as present for the purposes of
determining the presence of a quorum. Broker non-votes will, therefore, have
the effect of a vote against the approval of the Merger Agreement.
Any shareholder of CBT giving a proxy may revoke it at any time prior
to the vote at the Special Meeting. Shareholders of CBT wishing to revoke a
proxy prior to the vote may do so by delivering to the Secretary of CBT at
333 Broadway, Paducah, Kentucky 42001, at or before the Special Meeting, a
written notice of revocation bearing a later date than the proxy or a later
dated proxy relating to the same shares, or by attending the Special Meeting
and voting such shares in person. Attendance at the Special Meeting will not
in itself constitute the revocation of a proxy.
The Board of Directors of CBT currently is not aware of any business to
be brought before the Special Meeting other than that described herein. If,
however, other matters are properly brought before such Special Meeting, or
any adjournments or postponements 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 CBT.
Solicitation of Proxies
CBT will bear its own costs of soliciting proxies, except that MBI will
pay printing and mailing expenses and registration fees incurred in
connection with preparing this Proxy Statement/Prospectus. Proxies will
initially be solicited by mail, but directors, officers and selected other
employees of CBT also may solicit proxies in person or by telephone.
Directors, executive officers and any other employees of CBT who solicit
proxies will not be specially compensated for such services. 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 sending proxy materials to beneficial owners.
HOLDERS OF CBT COMMON STOCK ARE REQUESTED TO COMPLETE, DATE AND SIGN
THE ACCOMPANYING PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
- 20 -
<PAGE> 26
TERMS OF THE PROPOSED MERGER
----------------------------
The following is a summary of the material terms and conditions of the
Merger Agreement, which document is incorporated by reference herein. This
summary is qualified in its entirety by the full text of the Merger
Agreement. MBI, upon written or oral request, will furnish a copy of the
Merger Agreement, without charge, to any person who receives a copy of this
Proxy Statement/Prospectus. Such requests should be directed to Jon W.
Bilstrom, General Counsel and Secretary, Mercantile Bancorporation Inc., P.O.
Box 524, St. Louis, Missouri 63166-0524, telephone (314) 425-2525.
General Description of the Merger
Pursuant to the Merger Agreement, subject to satisfaction or waiver of
certain conditions precedent, including receipt of all applicable regulatory
approvals, CBT will be merged on the Closing Date with and into Ameribanc.
Upon consummation of the Merger, CBT's corporate existence will terminate and
Ameribanc will continue as the surviving entity. At the Effective Time, each
share of CBT Common Stock will be converted into the right to receive 0.6513
of a share of MBI Common Stock. Such consideration is subject to certain
anti-dilution protections but is not adjustable based upon the operating
results, financial condition or other factors affecting either MBI or CBT
prior to the consummation of the Merger. The fair market value of MBI Common
Stock received pursuant to the Merger may fluctuate and at the consummation
of the Merger may be more or less than the current fair market value of such
shares.
The amount and nature of the consideration was established through
arm's-length negotiations between MBI and CBT and their respective advisors,
and reflects the balancing of a number of countervailing factors. The total
amount of the consideration reflects a price both parties concluded was
appropriate. See "-Background of and Reasons for the Merger; Board
Recommendations." The fact that the consideration is payable in shares of
MBI Common Stock reflects the desire of the parties to the Merger to have the
favorable tax attributes of a "reorganization" for federal income tax
purposes. See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER."
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 CBT SHAREHOLDER OR AT ANY OTHER TIME.
THE FAIR MARKET VALUE OF MBI COMMON STOCK RECEIVED BY A CBT SHAREHOLDER MAY
BE GREATER OR LESS THAN THE CURRENT FAIR MARKET VALUE OF MBI COMMON STOCK DUE
TO NUMEROUS MARKET FACTORS.
Following the Closing Date, each shareholder of CBT 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) formerly
representing the shares of CBT Common Stock in order to receive a new stock
certificate(s) evidencing the shares of MBI Common Stock to which such
shareholder is entitled. As soon as practicable following the Effective
Time, the Exchange Agent will mail to each CBT shareholder a notice of
consummation of the Merger and a form of letter of transmittal, together with
instructions and a return envelope to facilitate the exchange of such
holder's certificate(s) formerly representing CBT Common Stock for
certificate(s) evidencing MBI Common Stock. No dividends or other
distributions will be paid to a former CBT shareholder with respect to shares
of MBI Common Stock until such
- 21 -
<PAGE> 27
shareholder's letter of transmittal and stock certificate(s) formerly
representing CBT Common Stock, or documentation reasonably acceptable to the
Exchange Agent in lieu of lost or destroyed certificate(s), is delivered to the
Exchange Agent. See "TERMS OF THE PROPOSED MERGER - Surrender of CBT Stock
Certificates and Receipt of MBI Common Stock." No fractional shares of MBI
Common Stock will be issued in the Merger, but cash will be paid in lieu of such
fractional shares, such cash being calculated by multiplying the holder's
fractional share interest by the closing stock price of MBI Common Stock on the
NYSE Composite Tape on the Closing Date of the Merger as reported in The Wall
Street Journal. See "- Fractional Shares." The shares of MBI Common Stock to
be issued pursuant to the Merger will be freely transferable except by certain
shareholders of CBT who are deemed to be "affiliates" of CBT. 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. See "INFORMATION REGARDING MBI STOCK - Restrictions on Resale of
MBI Stock by Affiliates."
Other Agreements
In addition to and contemporaneously with the Merger Agreement, MBI and
CBT executed the Option Agreement and MBI and eighteen of the nineteen
directors of CBT executed separate Voting Agreements. The following is a
summary of the material terms of the Option Agreement and the Voting
Agreements:
Option Agreement. Under the terms of the Option Agreement, CBT issued
to MBI an option to purchase up to 1,564,662 shares of CBT Common Stock at a
price per share equal to $33.25. The Option was granted by CBT to MBI as a
condition to and in consideration of MBI entering into the Merger Agreement.
The following description does not purport to be complete and is qualified in
its entirety by reference to the Option Agreement, which is attached as an
exhibit to the Registration Statement and is incorporated herein by
reference.
The Option is intended to increase the likelihood that the Merger will
be consummated in accordance with the terms of the Merger Agreement. The
occurrence of certain events described below could cause the Option to become
exercisable and thereby significantly increase the cost of the acquisition of
CBT. Consequently, the Option may (i) have the effect of discouraging a
person who might now or prior to the consummation of the Merger consider or
propose the acquisition of CBT (or a significant interest in CBT), even if
such a person were prepared to pay a higher price per share for CBT Common
Stock than the price per share implicit in the Exchange Ratio, (ii) result in
the proposal by a potential acquiror of a lower per share price than such
acquiror might otherwise have been willing to pay or (iii) prevent a
potential acquiror from accounting for the acquisition of CBT through the
pooling-of-interests method for a period of two years and thereby discourage
or preclude the acquisition of CBT during such period.
As of the Record Date, the maximum number of shares issuable pursuant
to the Option (the "MBI Option Shares") represented approximately [19.9%] of
the issued and outstanding shares of CBT Common Stock after giving effect to
the exercise of the Option. The Option exercise price is $33.25 per share.
In the event MBI acquires the MBI Option Shares, MBI could vote such shares
in the election of CBT directors and other matters requiring a shareholder
vote, thereby potentially having a material impact on the outcome of such
matters.
If not then in material breach of the Merger Agreement, MBI may
exercise the Option, in whole or in part, at any time or from time to time if
a Purchase Event (as defined below) has occurred;
- 22 -
<PAGE> 28
provided, however, that: (i) to the extent the Option has not been exercised, it
will terminate and be of no further force and effect upon the earlier to occur
of (A) the Effective Time and (B) the termination of the Merger Agreement in
accordance with its terms, provided that in the case of a termination of the
Merger Agreement arising from the volitional breach by CBT of any of its
representations, warranties or covenants in the Merger Agreement, the Option
will 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 will expire on the thirtieth business day after such injunction, order
or restraint has been dissolved or when such injunction, order or restraint
has become permanent and is no longer subject to appeal, as the case may be;
and (iii) any such exercise will be subject to compliance with applicable
law, including the BHCA.
A "Purchase Event" means any of the following events: (i) CBT or any
of its subsidiaries, without having received prior written consent from MBI,
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, consolidation or similar transaction
involving CBT or any of its subsidiaries, (B) purchase, lease or otherwise
acquire 15% or more of the assets of CBT 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 15% or more of the voting power of CBT or any of its
subsidiaries; (ii) any person (other than MBI or any subsidiary of MBI, or
CBT or any subsidiary of CBT in a fiduciary capacity) has acquired beneficial
ownership or the right to acquire beneficial ownership of 15% or more of the
voting power of CBT; or (iii) the holders of CBT Common Stock have not
approved the Merger Agreement at the Special Meeting, the Special Meeting has
not been held or is canceled prior to termination of the Merger Agreement in
accordance with its terms or the CBT Board of Directors has withdrawn or
modified in a manner adverse to MBI the recommendation of the CBT Board of
Directors with respect to the Merger Agreement, in each case after an
Extension Event (as defined below).
An "Extension Event" means any of the following events: (i) a Purchase
Event described in (i) or (ii) of the preceding paragraph; (ii) any person
(other than MBI or any of its subsidiaries) has "commenced" (as such term is
defined in Rule 14d-2 under the Exchange Act) or has filed a registration
statement under the Securities Act with respect to a tender offer or exchange
offer to purchase shares of CBT Common Stock such that, upon consummation of
such offer, such person would have beneficial ownership or the right to
acquire beneficial ownership of 15% or more of the voting power of CBT; or
(iii) any person (other than MBI or any subsidiary of MBI, or CBT or any
subsidiary of CBT in a fiduciary capacity) has publicly announced its
willingness or a proposal or 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.
Subject to regulatory approval, upon the occurrence of a Purchase Event
and until 12 months thereafter (but not later than the termination of the
Option pursuant to the terms of the Option Agreement), CBT shall be required,
upon MBI's request, to repurchase any shares of CBT Common Stock purchased by
MBI, at a price equal to the greater of the market price or the highest price
per share at which a tender or exchange offer has been made for shares of CBT
Common Stock (the "Market Price"), or to purchase the Option for the amount
by which the Market Price exceeds the Option Price.
At the request of CBT during the first six-month period commencing 12
months following the first occurrence of a Purchase Event, CBT may repurchase
from MBI, and MBI shall sell
- 23 -
<PAGE> 29
to CBT, all (but not less than all) of the CBT Common Stock acquired by MBI
pursuant to the Option at a price per share equal to the greater of (i) Market
Price or (ii) the sum of (A) the aggregate purchase price of such shares plus
(B) interest on the aggregate purchase price paid for such shares from the date
of purchase to the date of repurchase, less any dividends received on such
shares.
To the best of each of MBI's and CBT's knowledge, no Purchase Event or
Extension Event has occurred as of the date of this Proxy
Statement/Prospectus.
Voting Agreements. MBI and eighteen of the nineteen directors of CBT
executed a separate Voting Agreement pursuant to which each such director
agreed that he will vote all of the shares of CBT Common Stock that he then
owned, controlled or subsequently acquires in favor of the approval of the
Merger Agreement at the Special Meeting. In addition, until the earliest to
occur of the Effective Time, the termination of the Voting Agreements or the
abandonment of the Merger, each such director further agreed that he will not
vote any such shares in favor of the approval of any other competing
acquisition proposal involving CBT and a third party. Each such director
also agreed that he will not transfer shares of CBT Common Stock unless,
prior to such transfer, the transferee executes an agreement in substantially
the same form as the Voting Agreement. As of the Record Date, such directors
owned beneficially, directly or indirectly, an aggregate of ------- shares of
CBT Common Stock, or approximately ----% of the issued and outstanding
shares.
Interests of Certain Persons in the Merger
Employment Agreements. Each of William J. Jones, President and Chief
Executive Officer of CBT; Philip M. Benson, Senior Vice President of Citizens;
Lawrence R. Durbin, Senior Vice President of CBT; Brian R. Griesbach, Senior
Vice President of CBT; M. Leon Johnson, President and Chief Executive Officer
of FCC; and C. Thomas Murrell, III, Executive Vice President and Chief Credit
Officer of CBT have entered into Employment Agreements with MBI pursuant to
which each such executive officer will continue to be employed by MBI or its
affiliates following the consummation of the Merger.
Pursuant to Mr. Jones' Employment Agreement, MBI will engage Mr. Jones
as Chairman, President and Chief Executive Officer of the Franchise and as a
member of the Board of Directors of the Franchise Banks for a period of
commencing at the Effective Time and continuing until December 31, 2000. In
consideration of such services, Mr. Jones will receive an annual base salary
of $200,000, inclusive of all customary directors' fees, subject to increases
based on annual performance review. Mr. Jones will also be eligible to
participate in MBI's incentive compensation plan, which will provide Mr.
Jones with an initial bonus opportunity of up to 40% of his base salary and a
guaranteed annual bonus payment of $50,000 for fiscal years 1998, 1999 and
2000, and will be entitled to the employee benefits, customary perquisites
and stock option opportunities equivalent to those provided by MBI to
similarly situated senior officers. In addition, in the event that Mr.
Jones is employed by MBI on the twelve- and twenty-four-month anniversaries
of the Effective Time, MBI will pay to Mr. Jones two cash transition bonuses
of $100,000 on each such anniversary. If, on or before the first anniversary
of the Effective Time: (i) Mr. Jones' employment is terminated involuntarily
by MBI or the Franchise Banks other than for "cause" (as defined in such
Employment Agreement); (ii) Mr. Jones voluntarily terminates his employment
for "good reason" (as defined in such Employment Agreement); or (iii) Mr.
Jones dies or becomes permanently disabled, Mr. Jones will be entitled to
receive, in addition to the remaining portion of his earned annual base
salary for any period prior to termination that is unpaid on the date of
termination, a cash payment equal to $500,000, plus any portion of the
transition bonuses that remains
- 24 -
<PAGE> 30
unpaid as of the date of termination. Pursuant to his Employment Agreement, Mr.
Jones has also agreed not to compete with MBI or its affiliates while engaged by
MBI or, if Mr. Jones' employment is terminated for any reason prior to the
twenty-four-month anniversary of the Effective Time, for an additional period
commencing on the date of termination and ending on the second anniversary of
the termination.
Pursuant to the Employment Agreements with Messrs. Johnson and Murrell,
commencing at the Effective Time, MBI will engage such executive officers as
senior officers of the Franchise. In consideration of such services, the
executive officers will receive annual base salaries of $113,300 and $127,300,
respectively. Future base salary increases will be subject to annual
performance reviews. In addition, in the event that such officers are
employed with the Franchise on the twelve-month anniversary of the Effective
Time, such executive officers will receive a one-time cash payment of $28,000
and $32,000, respectively. If, on or before the twelve-month anniversary of
the Effective Time (i) either of such executive officers' engagements with the
Franchise is terminated involuntarily by MBI other than for "cause" (as
defined in such Employment Agreements), (ii) either of such officers
voluntarily terminates his engagement for "good reason" (as defined in such
Employment Agreements) or (iii) either of such officers dies or becomes
permanently disabled, then such officer will be entitled to receive the
remaining portion of his base salary through the twelve-month anniversary of
the Effective Time and the one-time cash payment due to such officer on the
twelve-month anniversary of the Effective Time. During the period that such
officers are employed by MBI, such officers will be entitled to receive
employee benefits and customary perquisites equivalent to those provided by
MBI to similarly situated senior officers. The employement agreements with
Messrs. Benson, Durbin and Griesbach contain terms similar to those with
Messrs. Johnson and Murrell.
In addition to the Employment Agreements described above, MBI has also
entered into similar employment agreements with twelve additional less senior
officers of CBT or its subsidiaries.
Severance Agreement. CBT is party to a Severance Agreement with John E.
Sircy, Executive Vice President and Chief Operating Officer, which provides for
the payment of certain benefits to Mr. Sircy upon the termination of his
employment with CBT within twenty-four months following a change in control of
CBT. Pursuant to the Merger Agreement, MBI has agreed to cause Ameribanc to
honor the Severance Agreement in accordance with its terms following the
Effective Time.
Pursuant to the Severance Agreement, if, following a change in control
of CBT, as defined below, Mr. Sircy's employment is terminated by CBT for cause,
disability or death, or is voluntarily terminated by Mr. Sircy for other than
good reason, as defined below, he would be entitled to all compensation earned
or accrued through the termination date but not paid. If, following a change in
control, Mr. Sircy's employment is terminated for any other reason (including by
Mr. Sircy for good reason), he would be entitled to (i) all accrued compensation
earned or accrued through the termination date, (ii) a payment equal to two
times annual base salary, (iii) immediate vesting of all outstanding stock
options, (iv) benefits under all medical, hospitalization, vision and dental
plans in which he participates for a period of two years or until comparable
coverage began under any plan of a new employer, (v) an award under CBT's
incentive compensation plan equal to the amount which he would have received in
the year of termination prorated to the date of termination, (vi) reimbursement
of reasonable moving expenses, (vii) reasonable attorney fees and other
expenses, if any, incurred to enforce the provisions of the Severance Agreement,
and (viii) all benefits payable under CBT's retirement plans.
- 25 -
<PAGE> 31
For purposes of the Severance Agreement, a change in control of CBT
generally includes: (i) the acquisition by any person of 20 percent or more of
the combined voting power of CBT's outstanding securities; (ii) the cessation of
the members of CBT's Board of Directors on June 28, 1995 (or such other newly
elected directors whose election was approved by at least two-thirds of the CBT
Board) for any reason to constitute at least a majority of the members of the
CBT Board; and (iii) the approval by CBT's shareholders of (subject to certain
exceptions) a merger, consolidation, reorganization or share exchange, or
agreement for the sale of all or substantially all of the assets of CBT.
Good reason is generally defined to include certain (i) changes in duties,
responsibilities, offices, base salary or employee fringe benefits; (ii) a
failure to provide employee benefits or salary increase which are comparable to
those provided to similarly situated employees; (iii) a relocation of Mr.
Sircy's office of more than 50 miles; (iv) CBT's failure to obtain the
assumption of the Severance Agreements by any successor to CBT, and (v) any
termination of employment which is not effected pursuant to the notice and other
provisions of the Severance Agreement.
Indemnification. MBI also has agreed that the Merger will not diminish
any indemnification obligations of CBT or any of its subsidiaries in favor of
the employees, agents, directors or officers or CBT or any of its
subsidiaries existing as of the Effective Time by operation of law or by
virtue of the Articles of Incorporation, by-laws, contracts, resolutions or
other agreements or documents of CBT or any of its subsidiaries in effect as
of the Effective Time. To the extent that CBT's existing directors' and
officers' liability insurance policy provides coverage for the acts or
omissions of the directors and officers of CBT and any of its subsidiaries
prior to the Effective Time, CBT has agreed to give to such insurance carrier
and to MBI notice of any potential claims thereunder. On and after the
Effective Time, MBI's directors' and officers' liability insurance policy
will provide coverage for the prior acts of the directors and officers of CBT
and any of its subsidiaries.
Background of and Reasons for the Merger; Board Recommendations
Background of the Merger. In connection with CBT's periodic
assessments of its strategic alternatives, the CBT Board of Directors has
considered a range of possible strate-gies for enhancing the interests of CBT
and CBT stockholders, including remaining independent either at CBT's current
size or seeking to grow through acquisitions of smaller in-market
institutions and expansion of its consumer credit subsidiary, pursuing a
merger of equals type transaction with a similarly sized institution or
seeking a strategic partnership with a larger institution. William J. Jones,
President and Chief Executive Officer of CBT, from time to time has engaged
in exploratory discussions with his counterparts at various other regional
bank holding companies concerning the strategic directions of CBT and such
other companies and the extent to which compatibility of such strategic
directions might present opportunities for strategic partnerships or other
business combinations in light of the rapid pace of consolidation and change
in the financial services industry.
On October 16, 1997, the CBT Executive Committee held a meeting to
review CBT's strategic alternatives. At this meeting, CBT senior management
and representatives of two investment banking firms provided an in-depth
review of the current banking environment, an analysis of recent merger and
acquisition activity and current trends in the financial services industry,
and an analysis of CBT's strategic position and competitive strengths and
weaknesses. The representatives also provided a detailed review of CBT's
principal strategic alternatives, including potential merger partners in
various
- 26 -
<PAGE> 32
merger scenarios, and the implied valuations for CBT were it to be acquired by
another bank holding company in a premium acquisition. The Executive Committee
concluded that the information presented indicated that CBT had several options
available to it, including both remaining independent at the present time and
seeking an acquisition offer.
At a regularly scheduled meeting of the CBT Board of Directors on
October 22, 1997, CBT's management made presentations to the CBT Board of
Directors which included a review and analysis of CBT's strategic
alternatives. These included primarily (i) continued growth in earnings by
CBT on an independent basis, including acquisition of smaller institutions
from time to time and various other assumptions, (ii) a merger of equals type
transaction, and (iii) a merger with or sale to a larger banking
organization. The presentation (which included representatives of Morgan
Stanley present for part of the meeting) also included an overview of the
competitive environment in the financial services industry and an analysis of
the current financial services mergers and acquisitions market and
expectations as to future developments. At this meeting, the Board of
Directors assessed the potential financial effects of remaining independent
compared to seeking a merger partner in the near term. Management also
discussed with the Board of Directors of CBT, CBT's recent financial
perfor-mance and the competitive challenges facing CBT.
The Board of Directors continued its review and analysis of CBT's
strategic alternatives at a meeting held on October 31, 1997. At the
meeting, the Board of Directors reconstituted the Executive Committee and
appointed six outside directors to the Committee. David Paxton was named
Chairman of the Board of Directors. Based on the information presented and
discussed at this meeting, the Board of Directors authorized the Executive
Committee to conduct an in-depth review and evaluation of CBT's strategic
alternatives and to report back to the full Board of Directors with
recommenda-tions. The Board of Directors also authorized the Executive
Committee to retain an investment advisor and the Executive Committee
subsequently retained Morgan Stanley as investment advisor to assist in this
task.
On November 12, 1997, the Executive Committee held a meeting to
continue its review of strategic alternatives, as directed by the Board of
Directors. At this meeting, representatives of Morgan Stanley provided an
overview of certain financial and business information relating to certain
other bank holding companies which could be considered potential merger
partners for CBT, if the decision was made to seek a merger partner. The
advisors also indicated that if a strategic merger of CBT with a larger bank
holding company were to be considered at the present time, several bank
holding companies which would appear to be potential merger partners would
likely not be able to participate fully in the process because of pending or
recently completed major acquisitions. At the conclusion of the meeting, the
Committee authorized Chairman Paxton and Mr. Jones to work with
representatives of Morgan Stanley to begin preliminary discussions with a
limited number of potential merger partners to ascertain their interest in an
affiliation with CBT.
Commencing in mid-November 1997, Morgan Stanley obtained
confidentiality agreements and thereafter delivered confidential materials
regarding CBT to MBI and three other bank holding companies identified by CBT
as potential strategic merger partners. Each bank holding company was asked
to submit its indication of interest regarding a potential strategic merger
with CBT. Three of the bank holding companies, including MBI, submitted
preliminary non-binding indications of interest to acquire CBT.
At a meeting of the Executive Committee on December 23, 1997, Morgan
Stanley reported on the status of the indications of interest received. The
Executive Committee discussed at this meeting its strategy in response to the
indications of interest and authorized Morgan Stanley to proceed in an effort
to pursue further the indications of interest. Following the meeting, Morgan
Stanley representatives pursued discussions with the three companies,
including MBI. These discussions led to discussions between representatives
of the three companies and management of CBT.
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At an Executive Committee meeting on December 31, 1997, management and
Morgan Stanley reported that two of the three companies had modified their
indications of interest. The Committee reviewed the indications of interest
in detail. After considerable discussion, management and the Executive
Committee concluded that, in their opinion, MBI's indication of interest
provided the most value to the stockholders of CBT and that MBI appeared to
be the most suitable merger partner for CBT. The Committee then instruct-ed
management to proceed with due diligence and the negotiation of a definitive
agreement with MBI to be presented to the full CBT Board of Directors for
consideration the following week. Over the next several days,
representatives of MBI and CBT and their respective advisors conducted due
diligence and negotiated the terms of the Merger Agreement and related
agreements.
During the afternoon of January 9, 1998, the CBT Board of Directors
(with all the directors but two in attendance) met to discuss and review the
proposed transaction with MBI. At this meeting, Chairman Paxton updated the
directors regarding developments since the last Board of Directors meeting
and discussed the reasons for considering a merger transaction with MBI at
that time. Chairman Paxton outlined the principal terms of the proposed
transaction. Senior management of CBT and CBT's outside financial advisors
reviewed with the CBT Board of Directors the results of their due diligence
of MBI and the financial terms of the proposed transaction with MBI. CBT's
counsel reviewed the Merger Agreement, the Option Agreement and the Voting
Agreements negotiated with MBI and reported that MBI was firm on a customary
stock option arrangement as a condition of the transaction. Representatives
of Morgan Stanley rendered their oral opinion to the effect that, as of such
date and based upon and subject to the procedures followed, assumptions made,
matters considered and limitations on the review undertaken, the
consideration to be received by the holders of CBT Common Stock in the Merger
was fair to them from a financial point of view. At the conclusion of the
presentation and after further discussion among the directors, the meeting
was adjourned to permit the directors to complete their review and
consideration of the proposed transaction.
On the morning of Saturday, January 10, 1998, the CBT Board of Directors
reconvened. After further discussion among the directors, the CBT
Board of Directors concluded that the Merger Agreement was in the best
interests of CBT and its stockholders. The Board of Directors approved the
Merger Agreement, the Option Agreement and related matters, with all the
directors voting in favor, with one abstention. The Board of Directors
directed that the Merger Agreement be submitted to a vote of the shareholders
of CBT with the favorable recommendation of the Board of Directors. After
such meeting, MBI and CBT executed the Merger Agreement and the Option
Agreement and the directors of CBT executed the Voting Agreements.
CBT's Reasons and Board Recommendation. In reaching its conclusion to
approve the Merger Agreement and the transactions contemplated thereby,
including the Option Agreement, the CBT Board of Directors consulted with
CBT's senior management, as well as its financial and legal advisors, and
considered various factors, including the following:
(i) Information concerning the business, operations, financial
condition, earnings and prospects of both CBT and MBI, including the
long term equity growth potential of CBT as compared to MBI;
(ii) The terms of the Merger Agreement and related agreements,
the projected current value of CBT in a freely negotiated transaction,
an estimate of the
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<PAGE> 34
future value of CBT as an independent entity, and the relationship of the
market value of MBI Common Stock to the market value, tangible book value
and earnings per share of CBT Common Stock. The Board of Directors also
determined that the Merger offered to CBT stockholders the prospect of
higher dividends and a higher trading value due to the greater liquidity
of MBI Common Stock, which is traded on the NYSE and the prospects for
future growth of MBI;
(iii) The expectation that the Merger will be tax-free for
federal income tax purposes to CBT and its stockholders, who will
receive MBI Common Stock in the Merger, and that the Merger will
qualify as a pooling-of-interests for accounting and financial
reporting purposes;
(iv) The competitive environment for financial institutions
generally;
(v) The general impact that the Merger is expected to have on
CBT's various constituencies, including its customers, employees and
communities. The Board of Directors of CBT noted that such a business
combination will likely enhance the competitiveness of CBT and the
ability of CBT to serve its depositors, customers and the communities
in which it operates;
(vi) Similarities between the community banking philosophies of
CBT and MBI, including MBI's policy to emphasize the local character of
community banks;
(vii) A comparison of the terms of the Merger with comparable
transactions;
(viii) The financial presentation of Morgan Stanley to the CBT
directors on January 9 and January 10, 1998, including the opinion of
such financial advisor rendered to the CBT Board of Directors on
January 10, 1998 to the effect that, as of such date and based upon and
subject to the procedures followed, assumptions made, matters
considered and limitations on the review undertaken, the consideration
to be received by the holders of CBT Common Stock in the Merger was
fair to them from a financial point of view; and
(ix) The financial effect on CBT's shareholders of CBT's
continued independence as compared to the benefits of the proposed
transaction.
In view of the wide variety of material factors considered in
connection with its evaluation of the Merger, the Board of Directors of CBT
did not find it practicable to, and did not, quantify or otherwise attempt to
assign any relative weight to the various factors considered. In addition,
individual directors may have given differing weights to different factors.
FOR THE REASONS DESCRIBED ABOVE, THE CBT BOARD OF DIRECTORS APPROVED
THE MERGER AGREEMENT AND BELIEVES THE MERGER IS FAIR TO, AND IS IN THE BEST
INTERESTS OF, CBT'S STOCKHOLDERS. ACCORDINGLY THE CBT BOARD OF DIRECTORS
RECOMMENDS THAT HOLDERS OF CBT COMMON STOCK VOTE FOR THE MERGER AGREEMENT.
---
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<PAGE> 35
MBI's Reasons and Board Recommendations. The Executive Committee of
the Board of Directors of MBI considered a number of factors, including,
among other things, the financial condition of CBT and projected synergies
that are anticipated to result from the Merger. The Executive Committee
concluded that the Merger presents an unique opportunity for MBI to increase
its presence in western Kentucky through the acquisition of an established
banking organization having operations in the targeted area and enhance MBI's
ability to compete in the increasingly competitive banking and financial
services industry. MBI's decision to pursue discussions with CBT was
primarily a result of MBI's assessment of the value of CBT's banking
franchise, its substantial asset base within that area and the compatibility
of the businesses of the two banking organizations.
Opinion of Financial Advisor to CBT
CBT retained Morgan Stanley to act as CBT's financial advisor in
connection with the Merger and related matters based upon its qualifications,
expertise and reputation. At the January 9, 1998 meeting of the Board of
Directors of CBT, Morgan Stanley delivered an oral opinion to the effect
that, as of such date and subject to certain considerations set forth in the
written opinion of Morgan Stanley, dated January 10, 1998, the Exchange Ratio
pursuant to the Merger Agreement is fair from a financial point of view to
the holders of CBT Common Stock. Morgan Stanley subsequently confirmed its
January 10, 1998 opinion by delivery to the Board of Directors of CBT of a
written opinion, dated as of the date of this Proxy Statement/Prospectus.
The full text of Morgan Stanley's opinion dated as of the date of this
Proxy Statement/Prospectus, which sets forth, among other things, assumptions
made, procedures followed, matters considered, and limitations on the review
undertaken, is attached as Annex A to this Proxy Statement/Prospectus.
-------
Holders of CBT Common Stock are urged to, and should, read the Morgan Stanley
opinion carefully and in its entirety. Morgan Stanley's opinion is directed
to the Board of Directors of CBT and the fairness of the Exchange Ratio in
the Agreement from a financial point of view to holders of CBT Common Stock,
and it does not address any other aspect of the Merger nor does it constitute
a recommendation to any holder of CBT Common Stock as to how to vote at the
Special Meeting. The summary of the opinion of Morgan Stanley set forth
herein is qualified in its entirety by reference to the full text of such
opinion, which is attached as Annex A to this Proxy Statement/Prospectus.
-------
In arriving at its opinion, Morgan Stanley, among other things: (i)
reviewed certain publicly available financial statements and other
information concerning CBT and MBI; (ii) reviewed certain internal financial
statements and other financial and operating data concerning CBT prepared by
the management of CBT; (iii) analyzed certain financial projections prepared
by the management of CBT; (iv) discussed the past and current operations and
financial conditions and the prospects of CBT and MBI with senior executives
of CBT and MBI, respectively; (v) reviewed the reported prices for CBT Common
Stock and MBI Common Stock; (vi) compared the financial performance of CBT
and MBI and the prices of CBT Common Stock and MBI Common Stock with those of
certain other comparable publicly-traded companies and their securities;
(vii) discussed the results of regulatory examinations of CBT and MBI with
senior management of the respective companies; (viii) discussed with senior
managements of CBT and MBI the strategic objectives of the Merger and their
estimates of the synergies and other benefits of the Merger for the combined
company; (ix) analyzed the pro forma impact of the Merger on the combined
company's earnings per share, consolidated capitalization and financial
ratios; (x) reviewed the financial terms, to the extent publicly available,
of certain comparable merger
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<PAGE> 36
transactions; (xi) participated in discussions and negotiations among
representatives of CBT and MBI and their financial and legal advisors; (xii)
reviewed the Merger Agreement and certain related documents; and (xiii)
performed such other analyses and considered such other factors as it deemed
appropriate.
Morgan Stanley assumed and relied upon, without independent
verification, the accuracy and completeness of the information reviewed by it
for the purposes of its opinion. With respect to the financial projections,
including the synergies and other benefits expected to result from the
Merger, Morgan Stanley assumed that they were reasonably prepared on bases
reflecting the best currently available estimates and judgments of the future
financial performance of CBT and MBI. Morgan Stanley did not make any
independent valuation or appraisal of the assets or liabilities of CBT or
MBI, nor was it furnished any such appraisals, and Morgan Stanley did not
examine any individual loan credit files of CBT or MBI. In addition, Morgan
Stanley assumed the Merger will be consummated substantially in accordance
with the terms set forth in the Merger Agreement. Morgan Stanley's opinions
are based on economic, market and other conditions as in effect on, and the
information made available to it as of, the date of its opinion.
The following is a summary of the material financial analyses performed
by Morgan Stanley in connection with its presentation to the Board of
Directors of CBT on January 9, 1998, its oral opinion to the Board of
Directors of CBT on January 9, 1998 and its written opinion to the Board of
Directors of CBT dated January 10, 1998. The following summary does not
purport to be a complete description of the analyses underlying the opinion
of Morgan Stanley.
Overview of CBT Profitability and Stock Price Performance. Morgan
Stanley presented an overview of CBT, which included a comparison of
profitability of CBT to: (x) corresponding data for the six members of a
peer group comprised of the following six bank holding companies: Farmers
Capital Bank Corporation, Community Trust Bancorp, Inc., National City
Bancshares, Inc., Mid-America Bancorp, Trans Financial, Inc. and Area
Bancshares Corporation (the "Regional Peer Group"); and (y) corresponding
mean data, including: (i) price to 1997 and 1998 estimated earnings per
share; and (ii) price to book value.
Comparable Company Analysis. Comparable company analysis analyzes a
company's operating performance relative to a group of publicly traded peers.
Based on relative performance and outlook for a company versus its peers,
this analysis enables an implied unaffected market trading value to be
determined. Morgan Stanley analyzed the operating performance of CBT relative
to (x) the Regional Peer Group; and (y) corresponding mean data for the 35
regional banks comprising the Morgan Stanley Regional Bank Index (the "Morgan
Stanley Regional Bank Index"), including net interest margin.
Morgan Stanley analyzed the relative performance and value of CBT by
comparing certain market trading statistics for CBT with those of companies
comprising the Regional Peer Group and the Morgan Stanley Regional Bank
Index. Historical financial information used in calculating the market price
to book value multiples for the comparable company analysis was as of
September 30, 1997, and market information used in calculating the multiples
for the comparable company analysis was as of January 8, 1998. Earnings per
share estimates for CBT were based on CBT's management forecast; the earnings
per share estimates for Farmers Capital Bank Corporation, Mid-America Bancorp
and Area Bancshares Corporation were based on their respective 1996 actual
earnings per share grown at 12% per annum; and the earnings per share
estimates for Community Trust Bancorp, Inc., National City
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<PAGE> 37
Bancshares, Inc., Trans Financial, Inc. and the Morgan Stanley Regional Bank
Index were based on Institutional Brokers Estimate System ("IBES") mean
estimates as of January 8, 1998.
The market price to estimated 1997 and 1998 earnings per share
multiples for CBT were 20.2x and 18.4x, respectively, compared to median
multiples of 18.9x and 16.9x, respectively, for the Regional Peer Group and
multiples of 19.1x and 17.1x, respectively, for the Morgan Stanley Regional
Bank Index. The market price to book value multiple for CBT was 2.2x,
compared to a median multiple of 2.1x for the Regional Peer Group and a
multiple of 3.3x for the Morgan Stanley Regional Bank Index. The implied
range of values for CBT Common Stock derived from the comparable company
analysis, based on a range of market price to book value multiples of 1.9x to
2.2x and market price to 1998 earnings per share multiples of 15x to 17x, was
approximately $27.00 to approximately $33.00 per share.
Dividend Discount Analysis. Morgan Stanley performed a dividend
discount analysis to determine a range of present values per share of CBT
Common Stock assuming CBT continued to operate as a stand-alone entity. This
range was determined by adding (i) the present value of the estimated future
dividend stream that CBT could generate over the five-year period from 1998
through 2002 and (ii) the present value of the "terminal value" of CBT Common
Stock at the end of 2002. To determine a projected dividend stream, Morgan
Stanley assumed an equity to assets ratio of 8.0%. Morgan Stanley used
earnings per share estimates for CBT prepared by CBT Management for 1998 and
assumed between a 9% and 11% growth rate in earnings per share thereafter
(based on long-term growth rate estimates for CBT prepared by CBT
management). The "terminal value" of CBT Common Stock at the end of the
five-year period was 15x to 17x projected net income for CBT in 2003. The
dividend stream and terminal value were discounted to present values using a
discount rate between 12% to 14%, based upon CBT's risk characteristics. Using
this analysis, the fully diluted stand-alone value of CBT Common Stock ranged
from approximately $29.00 per share to approximately $34.00 per share.
Value of Potential Cost Savings and Revenue Enhancements. In order to
estimate an implied acquisition value of the CBT Common Stock, the potential
value of future cost savings was estimated by Morgan Stanley using the same
present value calculation as used in the dividend discount analysis. Based on
discussions with CBT management, Morgan Stanley determined the net
theoretical present value of such estimated cost savings. The estimates for
such cost savings ranged from 15 to 25% of CBT's projected expense base of
$32 million estimated for 1998. Based on a discount rate of between 12 to
14%, fully phased-in cost savings by 1999 and a perpetual annual expense
growth rate of 4.0%, the range of present values for the cost savings was
approximately $5.10 to approximately $8.49 per share of CBT Common Stock.
Implied Acquisition Value. As part of its analysis of the acquisition
valuation, Morgan Stanley assumed that the net present value of the estimated
cost savings described above was added to a stand-alone value of CBT Common
Stock of $29.00 to $32.00 (based on the dividend discount analysis). Based on
this analysis, Morgan Stanley estimated the implied acquisition value of CBT
Common Stock to range from $34.00 to $37.00 per share, assuming a 15% cost
savings.
Comparable Transaction Analysis. Using publicly available information,
Morgan Stanley performed an analysis of certain merger and acquisition
transactions involving selected bank holding companies that, in Morgan
Stanley's judgment, were deemed comparable for purposes of this analysis in
order to obtain a valuation range for CBT Common Stock. Morgan Stanley also
compared the multiples of market value, book value and estimated earnings per
share implied by the consideration to be received by CBT shareholders in the
Merger with corresponding multiples indicated for 2 bank
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<PAGE> 38
holding company merger and acquisition transactions announced in 1995 (the "1995
Transactions"), 3 bank holding company merger and acquisition transactions
announced in 1996 (the "1996 Transactions"), and 8 bank holding company
merger and acquisition transactions announced in 1997 (the "1997
Transactions," and together with the 1995 Transactions and the 1996
Transactions, the "Comparable Transactions"). The 1995 Transactions consisted
of the following (acquiror/acquiree): Crestar Financial Corporation/Loyola
Capital Corporation and MBI/Hawkeye Bancorporation. The 1996 Transactions
consisted of the following (presented as acquiror/acquiree): Magna Group,
Inc./Homeland Bankshares Corporation, First Virginia Banks, Inc./Premier
Bankshares Corporation and Keystone Financial, Inc./Financial Trust Corp. The
1997 Transactions consisted of the following (acquiror/acquiree): Area
Bancshares Corporation/Cardinal Bancshares, Inc., Union Planters
Corporation/Magna Bancorp, Inc., Union Planters Corporation/Capital
Bancorporation, Inc., Fulton Financial Corporation/Keystone Heritage Group,
Inc., United Bankshares, Inc./George Mason Bankshares, Inc., Star Banc
Corporation/Great Financial Corporation, Union Planters Corporation/
Peoples First Corporation, One Valley Bancorp, Inc./FFVA Financial
Corporation.
The indicated price to book value multiple in the Merger was 2.3x
compared to median price to book value multiples of 1.7x, 2.1x and 2.4x for
the 1995 Transactions, the 1996 Transactions and the 1997 Transactions,
respectively. The indicated price to projected earnings per share multiple in
the Merger was 19.2x compared to median price to projected earnings per share
multiples of 16.3x, 15.1x and 19.3x for the 1995 Transactions, the 1996
Transactions and the 1997 Transactions, respectively. The indicated premium
to market price multiple in the Merger was approximately 1.03x, compared to
median premium to market price multiples of 1.1x, 1.3x and 1.2x for the 1995
Transactions, the 1996 Transactions and the 1997 Transactions, respectively.
For the Comparable Transactions, the price to book value multiples ranged
from 1.5x to 3.2x, the price to projected earnings per share multiples ranged
from 13.7x to 23.0x, and the premium to market value multiples ranged from
0.9x to 1.5x. Using a range of price to estimated earnings per share
multiples of 17x to 20x, and a range of price to book value multiples of 2.2x
to 2.4x, Morgan Stanley estimated a range for the acquisition value of CBT
Common Stock of $30.00 to $36.00 per share.
The price to projected earnings per share multiples used in the
comparable transaction analysis were computed based on IBES estimates of the
acquired company's earnings per share prior to announcement of the
transaction. The premium to market value multiples used in the comparable
transaction analysis were computed based on the closing price of the acquired
company's common stock on the date immediately preceding the announcement
date of the transaction. The price to book value, price to projected earnings
per share and premium to market value multiples indicated in the Merger were
calculated based on the Exchange Ratio of 0.6513, the closing prices of MBI
Common Stock and CBT Common Stock on the NYSE at January 9, 1998 of $52.75
and $33.25, respectively, and management's estimates for CBT's 1998 earnings
per share of $1.79.
No company or transaction used in the comparable company or comparable
transaction analyses is identical to CBT or the Merger. Accordingly, an
analysis of the results of the foregoing necessarily involves complex
considerations and judgments concerning differences in financial and
operating characteristics of CBT and other factors that could affect the
public trading value of the companies to which they are being compared.
Mathematical analysis (such as determining the average or median) is not in
itself a meaningful method of using comparable company or comparable
transaction data.
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Financial Impact Analysis. Morgan Stanley performed an analysis
involving the hypothetical acquisition transaction between CBT and MBI. The
analysis examined the impact on MBI's 1999 earnings per share of a
hypothetical business combination transaction in which CBT shareholders
received MBI Common Stock at an exchange ratio of 0.6513. The analysis also
examined the impact on CBT's 1999 earnings per share, 1999 book value per
share and 1999 dividends per share. For purposes of the analysis, Morgan
Stanley assumed that each transaction would be a stock-for-stock merger
transaction accounted for as a pooling-of-interests and that cost savings of
15% of CBT's expense base could be achieved as a result of the transaction
and would be fully phased in by 1999. Morgan Stanley's assumptions concerning
the level of cost savings which could be achieved in the various hypothetical
transactions were based upon its review of the estimated cost savings
achieved in a number of large bank holding company merger transactions which
Morgan Stanley deemed comparable to the hypothetical transactions and the
range of potential divestitures which might be required by regulators in
connection with a potential acquisition of CBT.
In connection with its opinion dated as of the date of this Proxy
Statement/Prospectus, Morgan Stanley confirmed the appropriateness of its
reliance on the analyses used to render its January 10, 1998 opinion by
performing procedures to update certain of such analyses and by reviewing the
assumptions upon which such analyses were based and the factors considered in
connection therewith.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. In
arriving at its opinion, Morgan Stanley considered the results of all its
analyses as a whole and did not attribute any particular weight to any
analysis or factor considered by it. Morgan Stanley believes that selecting
any portion of its analyses, without considering all analyses, would create
an incomplete view of the process underlying its opinion. In addition,
Morgan Stanley 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 Morgan
Stanley's view of the actual value of CBT or MBI.
In performing its analyses, Morgan Stanley made numerous assumptions
with respect to industry performance, general business and economic
conditions and other matters, many of which are beyond the control of MBI or
CBT. The analyses performed by Morgan Stanley are not necessarily indicative
of actual values, which may be significantly more or less favorable than
suggested by such analyses. Such analyses were prepared solely as a part of
Morgan Stanley's analysis of the fairness from a financial point of view of
the Exchange Ratio pursuant to the Merger Agreement to the holders of CBT
Common Stock and were conducted in connection with the delivery of Morgan
Stanley's opinion. The analyses do not purport to be appraisals or to
reflect the prices at which CBT might actually be sold.
As described above, Morgan Stanley's opinion and the information
provided by Morgan Stanley to the Board of Directors of CBT were two of a
number of factors taken into consideration by the Board of Directors of CBT
in making its determination to recommend approval of the Agreement and the
transactions contemplated thereby. Consequently, the Morgan Stanley analyses
described above should not be viewed as determinative of the opinion of the
entire Board of Directors of CBT of the view of CBT management with respect
to the value of CBT. The Exchange Ratio pursuant to the Agreement was
determined through negotiation between CBT and its advisors and MBI, and was
approved by the entire Board of Directors of CBT.
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<PAGE> 40
The Board of Directors of CBT retained Morgan Stanley based upon its
experience and expertise. Morgan Stanley is an internationally recognized
investment banking and advisory firm. As part of its investment banking
business, Morgan Stanley is regularly engaged in the valuation of businesses
and securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuation for estate, corporate
and other purposes. In the course of its business, Morgan Stanley and its
affiliates may actively trade the debt and equity securities of CBT and MBI
for their own account and for the accounts of customers and, accordingly, may
at times hold a long or short positions in such securities.
Pursuant to a letter dated November 11, 1997, CBT has agreed to pay
Morgan Stanley: (i) an advisory fee estimated to be $75,000, which is
payable if the Merger is not consummated; and (ii) a transaction fee payable
upon consummation of the Merger calculated as a percentage of the aggregate
value of the transaction based upon the average share price of MBI for the
ten trading days prior to the Closing Date. Assuming the Merger was
consummated on ------------, 1998, based upon the MBI share price of
- --------------, the transaction fee payable would be approximately $[2.5]
million. In addition, CBT has agreed, among other things, to reimburse
Morgan Stanley for all reasonable out-of-pocket expenses incurred in
connection with the services provided by Morgan Stanley, and to indemnify and
hold harmless Morgan Stanley and certain related parties from and against
certain liabilities and expenses, which may include certain liabilities under
the federal securities laws, in connection with its engagement.
Conditions of the Merger
The respective obligations of MBI, Ameribanc and CBT to consummate the
Merger are subject to the satisfaction of certain mutual conditions,
including the following:
(1) The Merger Agreement shall be approved by the requisite
vote of holders of CBT Common Stock at the Special Meeting.
(2) The Merger Agreement and the transactions contemplated
therein shall have been approved by the Federal Reserve Board, the
Kentucky Department of Financial Institutions, and any other federal
and/or state regulatory agency whose approval is required for the
consummation of the transactions contemplated therein, and all waiting
periods after such approvals required by law or regulation shall have
expired.
(3) The Registration Statement of which this Proxy
Statement/Prospectus is a part, registering shares of MBI Common Stock
to be issued in the Merger, shall have been declared effective and not
be subject to a stop order or any threatened stop order.
(4) None of CBT, MBI or Ameribanc shall be subject to any
order, decree or injunction of a court or agency of competent
jurisdiction that enjoins or prohibits the consummation of the Merger.
(5) CBT, MBI and Ameribanc each shall have received from
Thompson Coburn an opinion (which opinion shall not have been withdrawn
at or prior to the Effective Time) reasonably satisfactory in form and
substance to it to the effect that (i) the Merger will constitute a
reorganization within the meaning of Section 368 of the Code, (ii) each
of MBI and Ameribanc, on the one hand, and CBT, on the other, will
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<PAGE> 41
constitute a "party to the reorganization" within the meaning of
Section 368 of the Code, and (iii) consequently, Code Sections 361, 362
and 1032 will apply to the parties to the reorganization as
appropriate, subject to any applicable statutory, regulatory or
judicial limitations, and to the effect that, as a result of the
Merger, except with respect to cash received in lieu of fractional
share interests, and assuming that the MBI Common Stock is a capital
asset in the hands of the holder thereof at the effective time (A)
holders of CBT Common Stock who receive MBI Common Stock in the Merger
will not recognize gain or loss for federal income tax purposes, (B)
the basis of such MBI Common Stock will equal the basis of the CBT
Common Stock for which it is exchanged and (C) the holding period of
such MBI Common Stock will include the holding period of the CBT Common
Stock for which it is exchanged.
The obligation of MBI and Ameribanc to consummate the Merger is subject
to the satisfaction, unless waived, of certain other conditions, including
the following:
(1) The representations and warranties of CBT made in the
Merger Agreement shall be true and correct in all material respects 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, (ii) where the facts that caused the failure of any
representation or warranty to be so true and correct have not resulted,
and are not likely to result, in a Material Adverse Effect (as defined
in the Merger Agreement) on CBT and its subsidiaries, taken as a whole,
and (iii) for the effect of transactions contemplated by the Merger
Agreement, and all obligations required to be performed by CBT prior to
the Effective Time shall have been performed in all material respects,
and MBI shall have received a certificate of the Chief Executive
Officer and Chief Financial Officer of CBT to that effect.
(2) CBT shall have obtained any and all material permits,
authorizations, consents, waivers and approvals required of CBT for the
lawful consummation of the Merger.
(3) MBI and Ameribanc shall have received a letter of KPMG Peat
Marwick LLP, reasonably satisfactory in form and substance to MBI and
Ameribanc, to the effect that the Merger will qualify for pooling-of-
interests accounting treatment, which letter shall not have been
withdrawn at or prior to the Effective Time.
(4) Wyatt, Tarrant & Combs, counsel to CBT, shall have delivered
to MBI an opinion dated as of the Closing Date or a mutually
agreeable earlier date regarding certain legal matters.
(5) Since January 10, 1998, there shall have been no Material
Adverse Effect on CBT and its subsidiaries, taken as a whole.
CBT's obligation to consummate the Merger is subject to the
satisfaction, unless waived, of certain other conditions, including the
following:
(1) The representations and warranties of MBI and Ameribanc
made in the Merger Agreement shall be true and correct, in all material
respects, as of the Effective
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<PAGE> 42
Time except (i) to the extent such representations and warranties are by
their express provisions made as of a specific date or period, (ii) where
the facts that caused the failure of any representation or warranty to be
so true and correct have not resulted, and are not likely to result, in a
Material Adverse Effect on MBI and its subsidiaries, taken as a whole, and
(iii) for the effect of transactions contemplated by the Merger Agreement,
and all obligations required to be performed by MBI and Ameribanc prior to
the Effective Time shall have been performed in all material respects, and
CBT shall have received a certificate from any Executive Vice President
of MBI to that effect.
(2) MBI and Ameribanc shall have obtained any and all material
permits, authorizations, consents, waivers and approvals required of
MBI or Ameribanc for the lawful consummation of the Merger.
(3) Since January 10, 1998, there shall have been no Material
Adverse Effect on MBI and its subsidiaries, taken as a whole.
(4) Thompson Coburn, counsel to MBI, shall have delivered to
CBT an opinion dated as of the Closing Date or a mutually agreeable
earlier date regarding certain legal matters.
(5) The shares of MBI Common Stock to be issued in connection
with the Merger shall have been approved for listing on the NYSE,
subject to official notice of issuance.
Representations and Warranties
The Merger Agreement contains extensive representations and warranties
by CBT, MBI and Ameribanc. These include, among other things,
representations and warranties of CBT as to (i) the organization and good
standing of it and its subsidiaries, (ii) its capital structure, (iii) its
authority relative to the execution and delivery of, and performance of its
obligations under, the Merger Agreement, (iv) the documents, including
financial statements and other reports, filed by CBT with the applicable
regulatory authorities, (v) title to and condition of assets, (vi) real
property, (vii) taxes, (viii) the absence of material adverse changes since
September 30, 1997, (ix) loans, commitments and contracts, (x) the absence of
material conflicts between its obligations under the Merger Agreement and its
charter documents and material contracts to which it is a party or by which
it is bound, (xi) litigation, (xii) directors' and officers' insurance,
(xiii) compliance with laws, (xiv) labor, (xv) the existence of certain
material interests of certain persons, (xvi) allowance for loan and lease
losses and non-performing assets, (xvii) employee benefit plans and related
matters, (xviii) the conduct of CBT and its subsidiaries from and after
September 30, 1997, (xix) the absence of undisclosed liabilities, (xx) the
accuracy of the information supplied by CBT for inclusion in this Proxy
Statement/Prospectus and related documents, (xxi) the absence of registration
obligations with respect to CBT Common Stock, (xxii) the absence of actions
that would jeopardize the qualification of the transactions contemplated by
the Merger Agreement as a reorganization or for pooling-of-interests
accounting treatment or jeopardize the receipt of certain regulatory
approvals, (xxiii) obligations to brokers and finders, (xxiv) the absence of
interest rate management instruments, (xxv) the accuracy of the statements
contained in the Merger Agreement and related documents and (xxvi) Year 2000
compliance for all computer software and hardware.
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<PAGE> 43
MBI's and Ameribanc's representations and warranties include, among
other things, those as to (i) their respective organization and good
standing, (ii) the capital structure of MBI, (iii) their authority relative
to the execution and delivery of, and performance of their respective
obligations under, the Merger Agreement, (iv) the documents, including
financial statements and other reports, filed by MBI with applicable
regulatory authorities, (v) the absence of material adverse changes since
September 30, 1997, (vi) the accuracy of the information supplied by MBI or
Ameribanc for inclusion in this Proxy Statement/Prospectus and related
documents, (vii) the absence of obligations to brokers and finders and (viii)
the accuracy of the statements contained in the Merger Agreement and related
documents.
Termination, Waiver and Amendment of the Merger Agreement
The Merger Agreement may be terminated at any time prior to the Closing
Date, whether before or after approval by the shareholders of CBT, (i) by
mutual consent of the Executive Committee of the Board of Directors of MBI
and the Board of Directors of CBT, or (ii) unilaterally by the Executive
Committee of the Board of Directors of MBI or the Board of Directors of CBT:
(A) at any time after December 31, 1998, if the Merger has not been
consummated by such date (provided that the terminating party is not then in
material breach of any representation, warranty, covenant or other agreement
contained in the Merger Agreement); (B) if the Federal Reserve Board or any
other Regulatory Authority whose approval is required for consummation of the
Merger shall have issued a final nonappealable denial of such approval; (C)
if the shareholders of CBT shall not have approved the Merger Agreement at
the Special Meeting; or (D) in the event of a material volitional breach by
the other party of any representation, warranty or agreement contained in the
Merger Agreement, which breach is not cured within 30 days after written
notice thereof is given to the party committing such breach or is not waived
by such other party. In addition, the Executive Committee of the Board of
Directors of Mercantile may terminate the Merger Agreement in certain
circumstances if environmental investigations of all real property owned,
leased or operated by CBT as of January 10, 1998 indicate that the estimated
cost of corrective or remedial action with regard to such properties would
exceed $1,000,000 in the aggregate. No assurance can be given that the
Merger will be consummated on or before December 31, 1998 or that MBI or CBT
will not elect to terminate the Merger Agreement if the Merger has not been
consummated on or before such date.
In the event of the termination of the Merger Agreement, it shall
become void and there shall be no liability on the part of any party or their
respective officers and directors, except that (i) confidentiality and
indemnification obligations shall survive termination, (ii) MBI shall pay all
printing, mailing and filing expenses with respect to the Registration
Statement and this Proxy Statement/Prospectus and (iii) in the case of
termination due to continued material volitional breach after notice and
opportunity to cure, the breaching party shall not be relieved of liability
to the non-breaching party arising from the intentional, deliberate or
willful breach of any representation, warranty, covenant or agreement
contained in the Merger Agreement.
Any provision of the Merger Agreement, including, without limitation,
the conditions to the consummation of the Merger and the restrictions
described under "- Business Pending the Merger," may be (i) waived in writing
at any time by the party that is, or whose shareholders or shareholders are,
entitled to the benefits thereof, or (ii) amended at any time by written
agreement of the parties approved by or on behalf of their respective Boards
of Directors or Executive Committees, whether before or after the Special
Meeting; provided, however, that after approval of the Merger Agreement by
the shareholders of CBT at the Special Meeting, no such modification may (i)
alter or change the amount or
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<PAGE> 44
kind of consideration to be received by the CBT shareholders pursuant to the
Merger, or (ii) adversely affect the tax treatment to CBT shareholders as a
result of receiving the shares of MBI Common Stock in the Merger.
Indemnification
CBT, MBI and Ameribanc have agreed to indemnify each other and the
officers, directors and controlling persons of each other against any losses,
claims, damages or liabilities to which any such party may become subject
under federal or state laws or regulations, to the extent that such loss,
claim, damage or liability is based primarily upon information furnished to
the party subject to such liability by the other party, or out of an omission
by such other party to state a necessary or material fact in the Registration
Statement of which this Proxy Statement/Prospectus is a part.
Closing Date
The Merger will be consummated and become effective upon the later of
(i) the issuance of a certificate of merger by the Office of the Secretary of
State of the State of Missouri or (ii) the filing of articles of merger with
the Office of the Secretary of State of the Commonwealth of Kentucky. Under
the Merger Agreement, unless otherwise agreed to by the parties, the Closing
Date shall occur on such date as MBI shall notify CBT in writing but: (i) not
earlier than the Approval Date, which shall occur upon (a) the receipt of the
requisite approval of the Merger Agreement by the shareholders of CBT and (b)
the approval of the Merger by the Federal Reserve Board and any other
Regulatory Agency whose approval is required, and the satisfaction of all
waiting periods for such approvals; and (ii) not later than the first
business day of the first full calendar month beginning at least five
business days after the Approval Date.
Surrender of CBT Stock Certificates and Receipt of MBI Common Stock
At the Effective Time, each outstanding share of CBT Common Stock will
be converted into the right to receive 0.6513 of a share of MBI Common Stock.
See "- General Description of the Merger." Each holder of CBT Common Stock,
upon submission to the Exchange Agent of a properly executed letter of
transmittal and surrender to the Exchange Agent of the stock certificate(s)
formerly representing shares of CBT Common Stock, will be entitled to receive
a stock certificate(s) evidencing the shares of MBI Common Stock to which
such shareholder is entitled.
As soon as practicable following the Effective Time, the Exchange Agent
will mail to each CBT shareholder of record as of the Effective Time
notification of the effectiveness of the Merger. The Exchange Agent also
will provide a letter of transmittal and instructions as to the procedure for
the surrender of the stock certificates evidencing the CBT Common Stock and
the receipt of shares of MBI Common Stock. It will be the responsibility of
each holder of CBT shares to submit all certificates formerly evidencing such
holder's shares of CBT Common Stock to the Exchange Agent. No dividends or
other distributions will be paid to a former CBT shareholder with respect to
shares of MBI Common Stock until such shareholder's properly completed letter
of transmittal and stock certificates formerly representing CBT Common Stock,
or, in lieu thereof, such evidence of a lost, stolen or destroyed certificate
and/or such insurance bond as the Exchange Agent may reasonably require, are
delivered to the Exchange Agent. All dividends or other distributions on the
MBI Common Stock declared between the Closing Date and the date of the
surrender of a CBT stock certificate will be held for the benefit of
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<PAGE> 45
the shareholder and will be paid to the shareholder, without interest thereon,
upon the surrender of such stock certificate(s) or documentation and/or
insurance bond in lieu thereof.
Fractional Shares
No fractional shares of MBI Common Stock will be issued to the former
shareholders of CBT in connection with the Merger. Each holder of CBT Common
Stock who otherwise would have been entitled to receive a fraction of a share
of MBI Common Stock shall 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 NYSE Composite Tape on the
Closing Date as reported in The Wall Street Journal. Cash received by CBT
shareholders in lieu of fractional shares may give rise to taxable income.
See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER."
Regulatory Approval
In addition to the approval of the Merger Agreement by the CBT
shareholders, the obligations of the parties to effect the Merger are subject
to prior approval of the Federal Reserve Board and the Kentucky Commissioner.
As a bank holding company, MBI is subject to regulation under the BHCA. MBI
will file all required applications seeking approval of the Merger with the
Regulatory Authorities.
Under the BHCA, the Federal Reserve Board can withhold approval of the
Merger if, among other things, it determines that the effect of the Merger
would be to substantially lessen competition in the relevant market. In
addition, the Federal Reserve Board is required to consider whether the
combined organization meets the requirements of the Community Reinvestment
Act of 1977, as amended, by assessing the involved entities' respective
records of meeting the credit needs of the local communities in which they
are chartered, consistent with the safe and sound operation of such
institutions. In its review, the Federal Reserve Board also is required to
examine the financial and managerial resources and future prospects of the
combined organization and analyze the capital structure and soundness of the
resulting entity. The Federal Reserve Board has the authority to deny an
application if it concludes that the combined organization would have
inadequate capital. MBI will also file an application with the Kentucky
Commissioner, which will review factors similar to those considered by the
Federal Reserve Board.
The Merger cannot be consummated prior to receipt of all required
approvals. There can be no assurance that required regulatory approvals for
the Merger will be obtained, and, if the Merger is approved, as to the date
of such approvals or whether the approvals will contain any unacceptable
conditions. There can likewise be no assurance that the United States
Department of Justice will not challenge the Merger during the waiting period
set aside for such challenges after receipt of approval from the Federal
Reserve Board. See "SUPERVISION AND REGULATION."
MBI and CBT 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. There can be no assurance that
any necessary regulatory approvals or actions will be timely received or
taken, that no action will be brought challenging such approval or action or,
if such a challenge is brought, as to the result thereof, or that any such
approval or action will not be conditioned in a manner that would cause the
parties to abandon the Merger. See "SUPERVISION AND REGULATION."
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<PAGE> 46
Business Pending the Merger
The Merger Agreement provides that, during the period from January 10,
1998 to the Effective Time, CBT and each of its subsidiaries will conduct
their respective businesses according to the ordinary and usual course
consistent with past practices and use their best efforts to maintain and
preserve their respective business organizations, employees and advantageous
business relationships and retain the services of their officers and key
employees.
Furthermore, from January 10, 1998 to the Effective Time, except as
provided in the Merger Agreement, CBT will not, and will not permit any of
its subsidiaries to, without the prior written consent of MBI and Ameribanc:
(1) declare, set aside or pay any dividends or other
distributions, directly or indirectly, in respect of its capital stock
(other than dividends from CBT subsidiaries to CBT or to other CBT
subsidiaries), except that CBT may declare and pay regular quarterly
cash dividends of $0.14 per share provided, however, that CBT may not
declare or pay a quarterly dividend for any quarter in which CBT
shareholders will be entitled to receive a regular quarterly dividend
on the shares of MBI Common Stock to be issued in the Merger;
(2) enter into or amend any employment, severance or similar
agreement or arrangement with any director, officer or employee, or
materially modify any of the CBT 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, and except for such increases of which CBT notifies
MBI and Ameribanc in writing and which MBI and Ameribanc do not
disapprove within ten days of the receipt of such notice;
(3) authorize, recommend, 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;
(4) propose or adopt any amendments to its Articles of
Incorporation or other charter document or by-laws;
(5) issue, sell, grant, confer or award any capital stock
options, warrants, conversion rights or other rights, except CBT may
issue shares of CBT Common Stock upon exercise of CBT options
outstanding on January 10, 1998 and pursuant to the Option Agreement,
or effect any stock split or adjust, combine, reclassify or otherwise
change its capitalization as it existed on January 10, 1998;
(6) purchase, redeem, retire, repurchase or exchange, or
otherwise acquire or dispose of, directly or indirectly, any capital
stock, options, warrants, conversion
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<PAGE> 47
rights or other rights, whether pursuant to the terms of such capital
stock, options, warrants, conversion rights or other rights or otherwise;
(7) (i) without first consulting with and obtaining the written
consent of MBI, cause or permit Citizens to 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 $1,000,000 or in any amount which,
when aggregated with any and all loans or credit commitments of CBT and
its subsidiaries to such person or entity, would be equal to or in
excess of $1,000,000; provided, however, that CBT or any of its
subsidiaries may make any such loan or credit commitment in the event
(A) CBT or any of its subsidiaries has delivered to MBI and Ameribanc
or their designated representative a notice of its intention to make
such loan and such information as MBI and Ameribanc or their designated
representative may reasonably require in respect thereof and (B) MBI
and Ameribanc or their designated representative shall not have
reasonably objected to such loan by giving written or facsimile notice
of such objection within two (2) business days following the delivery
to MBI and Ameribanc or their designated representative of the notice
of intention and information as aforesaid; provided further, however,
that nothing shall prohibit CBT or any of its subsidiaries from
honoring any contractual obligation in existence on the date of the
Merger Agreement. Notwithstanding the above, CBT shall be authorized,
without first consulting with MBI and Ameribanc or obtaining MBI and
Ameribanc'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 shall not be in excess of the
lesser of ten percent (10%) of such Pre-Existing Facilities or $25,000;
(8) directly or indirectly, including through its officers,
directors, employees or other representatives:
(i) initiate, solicit or encourage any discussions,
inquiries or proposals with any third party (other than MBI or
Ameribanc) relating to the disposition of any significant portion
of the business or assets of CBT or any of its subsidiaries or
the acquisition of the capital stock (or rights or options
exercisable for, or securities convertible or exchangeable into,
capital stock) of CBT or any of its subsidiaries or the merger of
CBT or any of its subsidiaries with any person (other than MBI or
Ameribanc) or any similar transaction (each such transaction
being referred to herein as an "Acquisition Transaction"), or
(ii) provide any third party with information or
assistance or negotiate with any third party with respect to an
Acquisition Transaction, and CBT shall promptly notify MBI orally
of all the relevant details relating to all inquiries,
indications of interest and proposals which it or any of its
subsidiaries may receive with respect to any Acquisition
Transaction;
(9) take any action that would (i) materially impede or delay
the consummation of the transactions contemplated by the Merger
Agreement or the ability
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<PAGE> 48
of MBI and Ameribanc or CBT 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, (ii) prevent or impede the Merger from qualifying as a
reorganization within the meaning of Section 368 of the Code or (iii)
prevent the Merger from qualifying for pooling-of-interests accounting
treatment;
(10) other than in the ordinary course of business consistent
with past practice, incur any indebtedness for borrowed money or
assume, guarantee, endorse or otherwise as an accommodation become
responsible or liable for the obligations of any other individual,
corporation or other entity;
(11) materially restructure or change its investment securities
portfolio, through purchases, sales or otherwise, or the manner in
which the portfolio is classified or reported, or execute individual
investment transactions for its own account of greater than $2,000,000
for U.S. Treasury or Federal Agency Securities and $250,000 for all
other investment instruments;
(12) agree in writing or otherwise to take any of the foregoing
actions or engage in any activity, enter into any transaction or
knowingly take or omit to take any other action which would make any of
CBT's 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 act; or
(13) enter into, increase or renew any loan or credit commitment
(including standby letters of credit) to any executive officer or
director of CBT or any subsidiary of CBT, any holder of 10% or more of
the outstanding shares of CBT Common Stock, or any entity controlled,
directly or indirectly, by any of the foregoing or engage in any
transaction with any of the foregoing which is of the type or nature
sought to be regulated in 12 U.S.C. Section 371c and 12 U.S.C. Section
371c-1, without first obtaining the prior written consent of MBI and
Ameribanc, which consent shall not be unreasonably withheld.
The Merger Agreement also provides that during the period from January
10, 1998 to the Effective Time, MBI and Ameribanc shall not, and shall not
permit any of their subsidiaries to, without the prior written consent of
CBT, agree in writing or otherwise take any action that is prohibited of CBT
by subsections (9) and (12) above.
Accounting Treatment
The Merger is intended to be accounted for under the pooling-of-interests
method of accounting. It is a condition to MBI's and Ameribanc's consummation
of the Merger, unless otherwise waived, that KPMG Peat Marwick
LLP, MBI's independent accountants, deliver to MBI and Ameribanc a letter
stating that the Merger will qualify for pooling-of-interests accounting
treatment.
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<PAGE> 49
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
-----------------------------------------------------
The following discussion is based upon an opinion of Thompson Coburn,
counsel to MBI ("Counsel"), and except as otherwise indicated, reflects
Counsel's opinion. The discussion is a general summary of the material
United States federal income tax ("federal income tax") consequences of the
Merger to certain CBT shareholders and does not purport to be a complete
analysis or listing of all potential tax considerations or consequences
relevant to a decision whether to vote for the approval of the Merger. The
discussion does not address all aspects of federal income taxation that may
be applicable to CBT shareholders in light of their status or personal
investment circumstances, nor does it address the federal income tax
consequences of the Merger that are applicable to CBT shareholders subject to
special federal income tax treatment, including (without limitation) foreign
persons, insurance companies, tax-exempt entities, retirement plans, dealers
in securities, persons who acquired their CBT Common Stock pursuant to the
exercise of employee stock options or otherwise as compensation, and persons
who hold their CBT Common Stock as part of a "straddle," "hedge" or
"conversion transaction." Each shareholder's individual circumstances may
affect the tax consequences of the Merger to such shareholder. In addition,
the discussion does not address the effect of any applicable state, local or
foreign tax laws, or the effect of any federal tax laws other than those
pertaining to the federal income tax. As a result, each CBT shareholder is
urged to consult his or her own tax advisor to determine the specific tax
consequences of the Merger to such shareholder. The discussion assumes that
shares of CBT Common Stock are held as capital assets (within the meaning of
Section 1221 of the Code) at the Effective Time.
CBT has received an opinion from Counsel to the effect that, assuming
the Merger occurs in accordance with the Merger Agreement, the Merger will
constitute a "reorganization" for federal income tax purposes with the
following federal income tax consequences:
(1) CBT shareholders will recognize no gain or loss as a result
of the exchange of their CBT Common Stock solely for shares of MBI
Common Stock pursuant to the Merger, except with respect to cash
received in lieu of fractional shares, if any, as discussed below.
(2) The aggregate adjusted tax basis of the shares of MBI
Common Stock received by each CBT shareholder in the Merger (including
any fractional share of MBI Common Stock deemed to be received, as
described in paragraph 4 below) will be equal to the aggregate adjusted
tax basis of the shares of CBT Common Stock surrendered.
(3) The holding period of the shares of MBI Common Stock
received by each CBT shareholder in the Merger (including any
fractional share of MBI Common Stock deemed to be received, as
described in paragraph 4 below) will include the holding period of the
shares of CBT Common Stock exchanged therefor.
(4) A CBT shareholder 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 by such shareholder 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.
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<PAGE> 50
Counsel's opinion is subject to the conditions and assumptions stated
therein and relies upon various representations made by MBI, CBT and certain
shareholders of CBT. If any of these representations or assumptions is
inaccurate, the tax consequences of the Merger could differ from those
described herein. Counsel's opinion also is based upon the Code, regulations
proposed or promulgated thereunder, judicial precedent relating thereto, and
current administrative rulings and practice, all of which are subject to
change. Any such change, which may or may not be retroactive, could alter
the tax consequences discussed herein. The opinion is available without
charge upon written request to Jon W. Bilstrom, General Counsel and
Secretary, Mercantile Bancorporation Inc., P.O. Box 524, St. Louis, Missouri
63166-0524. The receipt of Counsel's opinion again as of the Closing Date is
a condition to the consummation of the Merger. An opinion of counsel, unlike
a private letter ruling from the Internal Revenue Service (the "Service"),
has no binding effect on the Service. The Service could take a position
contrary to Counsel's opinion and, if the matter were litigated, a court may
reach a decision contrary to the opinion. Neither MBI nor CBT has requested
an advance ruling as to the federal income tax consequences of the Merger,
and the Service is not expected to issue such a ruling.
THE FOREGOING IS A GENERAL DISCUSSION OF THE MATERIAL FEDERAL INCOME
TAX CONSEQUENCES OF THE MERGER TO CERTAIN CBT SHAREHOLDERS AND IS INCLUDED
FOR GENERAL INFORMATION ONLY. THE FOREGOING DISCUSSION DOES NOT TAKE INTO
ACCOUNT THE PARTICULAR FACTS AND CIRCUMSTANCES OF EACH CBT SHAREHOLDER'S TAX
STATUS AND ATTRIBUTES. AS A RESULT, THE FEDERAL INCOME TAX CONSEQUENCES
ADDRESSED IN THE FOREGOING DISCUSSION MAY NOT APPLY TO EACH CBT SHAREHOLDER.
ACCORDINGLY, EACH CBT SHAREHOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE MERGER, 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.
RIGHTS OF DISSENTING SHAREHOLDERS OF CBT
----------------------------------------
Under Kentucky law, a shareholder entitled to vote on the Merger may
dissent and obtain payment of the fair value of his or her shares if the
Merger is approved by the shareholders of CBT. Generally, dissenters' rights
are a shareholder's sole remedy for objecting to the Merger Agreement. The
following summary is not intended to and does not constitute a complete
statement or summary of each provision of the Kentucky Revised Statutes
relating to the rights of dissenting shareholders and is qualified in its
entirety by reference to Subtitle 13 of the Kentucky Act which is attached as
Annex B hereto. Accordingly, any holder of CBT Common Stock intending to
- -------
exercise dissenters' rights is urged to review Annex B carefully and to
-------
consult his or her own legal counsel. Each step must be taken in strict
compliance with the applicable provisions of the statutes in order for a
holder of CBT Common Stock to perfect dissenters' rights.
A shareholder wishing to exercise dissenters' rights must deliver
to CBT, prior to the vote on the Merger at the Special Meeting, a written
notice of intent to demand payment for his or her shares if the Merger is
consummated and must refrain from voting in favor of the Merger. The written
notice of intent must be given in addition to and separate from any vote, in
person or by proxy, against approval of the Merger Agreement; a vote, in
person or by proxy, against approval of the Merger Agreement will not
constitute such a written notice. The written notice of intent should be
sent to CBT
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<PAGE> 51
Corporation, 333 Broadway, Paducah, Kentucky 42001, Attention: Secretary. It
is recommended that all required documents to be delivered by mail be sent
registered or certified mail with return receipt requested.
CBT SHAREHOLDERS ELECTING TO EXERCISE THEIR DISSENTERS' RIGHTS UNDER
SUBTITLE 13 OF THE KENTUCKY ACT MUST NOT VOTE FOR APPROVAL OF THE MERGER
AGREEMENT. A VOTE BY A SHAREHOLDER AGAINST APPROVAL OF THE MERGER AGREEMENT
IS NOT REQUIRED IN ORDER FOR THAT SHAREHOLDER TO EXERCISE DISSENTERS' RIGHTS.
HOWEVER, IF A SHAREHOLDER RETURNS A SIGNED PROXY FORM BUT DOES NOT SPECIFY A
VOTE AGAINST APPROVAL OF THE MERGER AGREEMENT OR A DIRECTION TO ABSTAIN, THE
PROXY FORM, IF NOT REVOKED, WILL BE VOTED FOR APPROVAL OF THE MERGER
AGREEMENT, WHICH WILL HAVE THE EFFECT OF WAIVING THAT SHAREHOLDER'S
DISSENTERS' RIGHTS.
If the Merger is approved, within ten days after the Special Meeting
(or any adjournment thereof), CBT will send to all shareholders exercising
their dissenters' rights a dissenters' notice which states where the
shareholder must send a demand for payment and where and when his or her
share certificates must be deposited; encloses a form for demanding payment
to be completed by the dissenter and returned to CBT; informs holders of
uncertificated shares to what extent transfer of the shares will be
restricted after the payment demand is received; establishes the date (not
less than 30 no more than 60 days after the delivery of the dissenters'
notice) by which CBT must receive the demand for payment from the
shareholder; and encloses a copy of Subtitle 13 of the Kentucky Act. After a
shareholder receives the dissenters' notice, he or she must deliver the
demand for payment to CBT and deposit his or her shares in accordance with
the dissenters' notice.
Upon its receipt of the demand for payment, CBT will send to each
dissenting shareholder a statement containing an estimate by CBT of the fair
value of the dissenter's shares as of the day before the date of the Special
Meeting, and payment based on that estimate plus accrued interest. The
payment will be accompanied by an explanation of how interest was calculated
along with the balance sheet of CBT as of the end of the most recent fiscal
year, an income statement, a statement of changes in shareholders' equity and
the latest available interim financial statement, if any. In addition, the
dissenter will be informed of his or her right to demand payment according to
the dissenter's own estimate of the fair value.
CBT is not required to send payment with the statement of its estimate
of fair value to a dissenter who was not a beneficial owner of the shares at
the time of the first public announcement of the Merger Agreement, but rather
may offer to purchase the shares based on the estimate. Any such owner must
either accept that amount in full satisfaction or proceed with the exercise
of his or her dissenters' rights.
Within 30 days after CBT has delivered its estimate of fair value, a
dissenting shareholder may notify CBT of his or her own estimate of the fair
value of the shares and demand payment of the balance due under such
estimate.
If an agreement is not reached as to the fair value of the shares, then
within 60 days after receiving the dissenter's payment demand, CBT must file
a petition in the circuit court of McCracken County, Kentucky requesting the
court to determine the fair value of the shares and the accrued interest.
- 46 -
<PAGE> 52
If CBT fails to institute such a proceeding, it will be required to pay each
dissenter whose demand remains unsettled the amount demanded.
Each dissenting CBT shareholder who is a party to the proceeding is
entitled to the amount, if any, by which the court finds the fair value of
his or her shares, plus interest, exceeds the amount paid by CBT. In an
appraisal proceeding, the county circuit court will determine all costs of
the proceeding, including the reasonable compensation and expenses of
appraisers appointed by the court. The court will assess costs against CBT,
except that the court may assess costs against all or some of the dissenters,
in amounts the court finds equitable, to the extent the court finds the
dissenters acted arbitrarily, vexatiously or not in good faith in demanding
payment. The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable as
follows: (i) against CBT and in favor of any or all dissenters, if the court
finds CBT did not substantially comply with the statutory requirements set
forth in Sections 271B.13-200 through 271B.13-280 of the Kentucky Revised
Statutes; or (ii) against either CBT or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses
are assessed acted arbitrarily, vexatiously or not in good faith with respect
to the rights provided by Subtitle 13 of the Kentucky Act. If the court finds
that the services of counsel for any dissenter were of substantial benefit to
other dissenters similarly situated, and that the fees for those services
should not be assessed against CBT, the court may award to such counsel
reasonable fees to be paid out of the amounts awarded the dissenters who
benefited.
If CBT does not consummate the Merger within 60 days after the deadline
for demanding payment and depositing certificates, it must return all
deposited shares and release any transfer restrictions imposed on
uncertificated shares. If CBT fails to do so, the dissenter may nevertheless
proceed with the exercise of his or her dissenters' rights, and CBT will have
no further right to terminate the dissenters' rights by returning deposited
shares.
A record shareholder may dissent as to less than all of the shares
registered in his or her name only if he or she dissents with respect to all
of the shares beneficially owned by any one person and notifies CBT in
writing of the name and address of each person on whose behalf the
shareholder is asserting dissenters' rights. In that event, such dissenters'
rights shall be determined as if the shares as to which the shareholder has
dissented and the shareholder's other shares were registered in the names of
different shareholders.
A beneficial shareholder may assert dissenters' rights as to shares
held on his or her behalf only if he or she submits to CBT the record
shareholder's written consent to the dissent no later than the time such
beneficial shareholder asserts his or her dissenters' rights, and he or she
dissents as to all shares of which he or she is the beneficial owner or over
which he or she has the power to direct the vote.
SHAREHOLDERS OF CBT SHOULD BE AWARE THAT FAILURE TO PROCEED IN
ACCORDANCE WITH THE PROVISIONS OF SUBCHAPTER 13 OF THE KENTUCKY ACT WILL
RESULT IN A LOSS OF ALL DISSENTERS' RIGHTS AND RESULT IN THEIR BEING BOUND BY
THE MERGER AGREEMENT AND THE MERGER.
- 47 -
<PAGE> 53
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 CBT and the corresponding pro forma and
pro forma equivalent per share amounts giving effect to the proposed Merger
and the recently completed acquisition of Roosevelt. The data presented is
based upon the consolidated financial statements and related notes of MBI and
CBT included in this Proxy Statement/Prospectus or in documents incorporated
herein by reference, 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. 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 proposed Merger or the recently completed
acquisition of Roosevelt had been consummated prior to the periods indicated.
- 48 -
<PAGE> 54
<TABLE>
<CAPTION>
MBI/ MBI/ MBI/ MBI/
CBT CBT All Entities All Entities
MBI CBT Pro Forma Pro Forma Pro Forma Pro Forma
Reported Reported Combined<F1> Equivalent<F2> Combined<F3> Equivalent<F2>
-------- -------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Book Value per Share:
December 31, 1997 $18.47 $15.27 $18.38 $11.97 $17.77 $11.57
Cash Dividends Declared per Share:
Year ended December 31, 1997 $1.148 $ .52 $1.148 $ .75 $1.148 $ .75
Year ended December 31, 1996 1.092 .50 1.092 .71 1.092 .71
Year ended December 31, 1995 .88 .46 .88 .57 .88 .57
Basic Earnings per Share:
Year ended December 31, 1997 $ 1.68 $ 1.63 $ 1.71 $ 1.11 $ 1.55 $ 1.01
Year ended December 31, 1996 2.11 1.48 2.12 1.38 2.13 1.39
Year ended December 31, 1995 2.41 1.52 2.41 1.57 2.38 1.55
Diluted Earnings per Share:
Year ended December 31, 1997 $ 1.65 $ 1.62 $ 1.68 $ 1.09 $ 1.52 $ .99
Year ended December 31, 1996 2.08 1.47 2.09 1.36 2.10 1.37
Year ended December 31, 1995 2.37 1.51 2.37 1.54 2.34 1.52
Market Price per Share:
At January 9, 1998<F4> $52.75 $33.25 $52.75 $34.36 $52.75 $34.36
At April 14, 1998<F4> 56.56 35.69 56.56 36.84 56.56 36.84
<FN>
- ------------
<F1> Includes the effect of pro forma adjustments for CBT, as appropriate.
See "PRO FORMA FINANCIAL INFORMATION - Notes to Pro Forma Combined
Consolidated Financial Statements."
<F2> Based on the pro forma combined per share amounts multiplied by 0.6513,
the Exchange Ratio applicable to one share of CBT Common Stock in the
Merger. Further explanation of the assumptions used in the preparation
of the pro forma combined consolidated financial statements is included
in the notes to pro forma combined consolidated financial statements.
See "PRO FORMA FINANCIAL INFORMATION - Notes to Pro Forma Combined
Consolidated Financial Statements."
<F3> Includes the effect of pro forma adjustments for CBT, Firstbank and
Roosevelt, as appropriate. Due to the immateriality of the financial
condition and results of operations of Horizon and HomeCorp to that of
MBI, does not include the effect of pro forma adjustments for Horizon
and HomeCorp. See "PRO FORMA FINANCIAL INFORMATION--Notes to Pro Forma
Combined Consolidated Financial Statements."
<F4> The market value of MBI Common Stock disclosed as of January 9, 1998,
the last trading day preceding the public announcement of the Merger,
and as of April 14, 1998, the latest available date prior to the filing of
the Registration Statement, is based on the last sale price as reported on
the NYSE Composite Tape. The market value of CBT Common Stock disclosed
as of January 9, 1998, the last day on which CBT common stock traded
preceding the public announcement of the Merger, and as of April 14, 1998,
the last available date prior to filing of the Registration Statement, is
based upon the last sale price as reported on the Nasdaq National Market.
</TABLE>
- 49 -
<PAGE> 55
Pro Forma Combined Consolidated Financial Statements (Unaudited)
Recent Acquisitions. 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 that summarizes such completed and
pending acquisitions, including the name of the acquired entity, the date of
consummation of the acquisition, the assets and deposits of the acquired
entities at the date of consummation for the completed acquisitions, the
consideration paid in cash and/or shares of MBI Common Stock and the
accounting method utilized.
<TABLE>
ACQUISITIONS COMPLETED BY MBI (1995-present)
<CAPTION>
Consideration
-------------------
Gross Accounting
Name Date Assets Deposits Cash Shares Method
- ---- ---- ------ -------- ---- ------ ------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
HomeCorp, Inc. Mar. 2 1998 $ 335,137 $ 309,157 $ 14 854,760 Pooling<F1>
Horizon Bancorp, Inc.. Feb. 2, 1998 536,507 454,230 2 2,549,970<F3> Pooling<F1>
Roosevelt Financial Group, Inc. July 1, 1997 7,251,985 5,317,514 374,477 18,948,884 Purchase
Mark Twain Bancshares, Inc. Apr. 25, 1997 3,227,972 2,519,474 73 24,088,713 Pooling
Regional Bancshares, Inc. Mar. 5, 1997 171,979 135,954 12,300 900,625 Purchase
TODAY'S Bancorp, Inc. Nov. 7, 1996 501,418 432,104 34,912 1,690,587 Purchase
First Financial Corporation of America Nov. 1, 1996 87,649 76,791 3,253 388,113 Purchase
Peoples State Bank Aug. 22, 1996 95,657 75,149 -- 488,756 Purchase
Metro Savings Bank, F.S.B. Mar. 7, 1996 80,857 73,843 5 296,853 Purchase
Security Bank of Conway, F.S.B. Feb. 9, 1996 102,502 89,697 1 482,946 Purchase
Hawkeye Bancorporation Jan. 2, 1996 1,978,540 1,739,811 80 11,838,294 Pooling
First Sterling Bancorp, Inc. Jan. 2, 1996 167,610 147,588 1 782,126 Pooling<F1>
Southwest Bancshares, Inc. Aug. 1, 1995 187,701 155,628 1 1,012,463 Pooling<F1>
AmeriFirst Bancorporation, Inc. Aug. 1, 1995 155,521 130,179 1 992,034 Pooling<F1>
Plains Spirit Financial Corporation July 7, 1995 400,754 276,887 6,697 1,951,770 Purchase
TCBankshares, Inc. May 1, 1995 1,422,798 1,217,740 -- 7,124,999<F2> Pooling
Central Mortgage Bancshares, Inc. May 1, 1995 654,584 571,105 8 3,806,585 Pooling
UNSL Financial Corp. Jan. 3, 1995 508,346 380,716 11 2,367,161 Pooling
Wedge Bank Jan. 3, 1995 195,716 152,865 1 1,454,931 Pooling<F1>
<CAPTION>
PENDING ACQUISITIONS BY MBI
<S> <C> <C> <C> <C> <C>
CBT Corporation. 3rd Qtr. 1998 $1,078,475 $ 746,520 5,399,763<F3> Pooling
Firstbank of Illinois Co. 3rd Qtr. 1998 2,281,818 1,982,046 13,799,799<F3> Pooling
<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> Estimated number of shares to be issued in acquisition.
</TABLE>
Pro Forma Financial Statements. The following unaudited pro forma
combined consolidated balance sheet gives effect to the Merger as if it were
consummated on December 31, 1997.
The pro forma combined consolidated income statements for the years
ended December 31, 1997, 1996 and 1995 set forth the results of operations of
MBI combined with the results
- 50 -
<PAGE> 56
of operations of CBT and Firstbank as if the respective mergers had occurred as
of the first day of the period presented.
MBI acquired Roosevelt on July 1, 1997, which acquisition was accounted
for under the purchase method of accounting. Accordingly, the historical
results of operations of MBI include the results of operations of Roosevelt
from July 1, 1997 forward. Consistent with the Commission's rules regarding
the treatment of acquisitions accounted for as purchases in pro forma
presentations, the pro forma combined consolidated income statement for the
year ended December 31, 1997 includes the results of operations of Roosevelt
but the pro forma combined consolidated income statements for the years ended
December 31, 1996 and 1995 do not.
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 and with the historical financial
statements of MBI and CBT. These pro forma combined consolidated financial
statements may not be indicative of the results of operations that actually
would have occurred if the completed and proposed acquisitions had been
consummated on the dates assumed above or of the results of operations that
may be achieved in the future.
Due to the immateriality of the results of operations of Horizon and
HomeCorp to that of MBI, individually and in the aggregate, the unaudited pro
forma combined consolidated financial statements contained herein do not
reflect the completed acquisitions of Horizon and HomeCorp for any period
prior to the acquisition date of such entities.
- 51 -
<PAGE> 57
<TABLE>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(Thousands)
(Unaudited)
<CAPTION>
MBI/CBT
Pro Forma
CBT Combined
MBI<F1> CBT Adjustments Consolidated
------- --- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks $ 1,171,727 $ 52,870 $ (28,240)<F2> $ 1,179,907
(16,450)<F5>
Due from banks - interest bearing 240,578 -- 240,578
Federal funds sold and repurchase agreements 292,384 -- 292,384
Investments in debt and equity securities
Trading 70,486 -- 70,486
Available-for-sale 7,225,638 203,923 7,429,561
Held-to-maturity 249,434 60,146 309,580
----------- ---------- --------- -----------
Total 7,545,558 264,069 -- 7,809,627
Loans and leases 19,199,917 731,194 19,931,111
Reserve for possible loan losses (254,983) (9,243) (5,100)<F5> (269,326)
----------- ---------- --------- -----------
Net Loans and Leases 18,944,934 721,951 (5,100) 19,661,785
Intangible assets 807,666 5,802 813,468
Other assets 952,564 33,783 120,080 <F3> 986,347
(120,080)<F4>
----------- ---------- --------- -----------
Total Assets $29,955,411 $1,078,475 $ (49,790) $30,984,096
=========== ========== ========= ===========
LIABILITIES
Deposits
Non-interest bearing $ 3,586,011 $ 79,540 $ $ 3,665,551
Interest bearing 17,908,477 666,980 18,575,457
Foreign 585,439 -- 585,439
----------- ---------- --------- -----------
Total Deposits 22,079,927 746,520 -- 22,826,447
Short-term borrowings 3,465,822 147,507 3,613,329
Bank notes 175,000 -- 175,000
Long-term debt 1,319,153 48,990 1,368,143
Company-obligated mandatorily redeemable preferred
securities of Mercantile Capital Trust I 150,000 -- 150,000
Other liabilities 355,340 15,378 (7,758)<F5> 362,960
----------- ---------- --------- -----------
Total Liabilities 27,545,242 958,395 (7,758) 28,495,879
SHAREHOLDERS' EQUITY
Common stock 1,307 4,100 49 <F3> 1,356
(4,100)<F4>
Capital surplus 940,197 16,043 (8,146)<F3> 932,051
(16,043)<F4>
Retained earnings 1,474,670 99,937 99,937 <F3> 1,560,815
(99,937)<F4>
(13,792)<F5>
Treasury stock (6,005) -- (28,240)<F2> (6,005)
28,240 <F3>
----------- ---------- --------- -----------
Total Shareholders' Equity 2,410,169 120,080 (42,032) 2,488,217
----------- ---------- --------- -----------
Total Liabilities and Shareholders'
Equity $29,955,411 $1,078,475 $ (49,790) $30,984,096
=========== ========== ========= ===========
<CAPTION>
Colonial
Bank and MBI/All Entities
Duchesne Pro Forma
Firstbank Bank Combined
Firstbank Adjustments Divestitures<F9> Consolidated
--------- ----------- ---------------- ------------
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks $ 104,339 $ (69,689)<F6> $ 12,366 $ 1,193,473
(33,450)<F5>
Due from banks - interest bearing 3,545 (198) 243,925
Federal funds sold and repurchase agreements -- (4,200) 288,184
Investments in debt and equity securities
Trading -- -- 70,486
Available-for-sale 628,322 (74,035) 7,983,848
Held-to-maturity 26,824 (4,908) 331,496
---------- --------- ---------- -----------
Total 655,146 -- (78,943) 8,385,830
Loans and leases 1,427,304 (213,816) 21,144,599
Reserve for possible loan losses (19,939) (5,000)<F5> 3,145 (291,120)
---------- --------- ---------- -----------
Net Loans and Leases 1,407,365 (5,000) (210,671) 20,853,479
Intangible assets 24,768 -- 838,236
Other assets 86,655 232,573 <F7> (8,994) 1,064,008
(232,573)<F8>
---------- --------- ---------- -----------
Total Assets $2,281,818 $(108,139) $ (290,640) $32,867,135
========== ========= ========== ===========
LIABILITIES
Deposits
Non-interest bearing $ 300,166 $ $ (60,879) $ 3,904,838
Interest bearing 1,681,880 (227,901) 20,029,436
Foreign -- -- 585,439
---------- --------- ---------- -----------
Total Deposits 1,982,046 -- (288,780) 24,519,713
Short-term borrowings 47,266 (223) 3,660,372
Bank notes -- -- 175,000
Long-term debt 2 -- 1,368,145
Company-obligated mandatorily redeemable preferred
securities of Mercantile Capital Trust I -- -- 150,000
Other liabilities 19,931 (13,842)<F5> (1,637) 367,412
---------- --------- ---------- -----------
Total Liabilities 2,049,245 (13,842) (290,640) 30,240,642
SHAREHOLDERS' EQUITY
Common stock 15,794 124 <F7> 1,480
(15,794)<F8>
Capital surplus 41,980 (13,127)<F7> 918,924
(41,980)<F8>
Retained earnings 175,887 175,887 <F7> 1,712,094
(175,887)<F8>
(24,608)<F5>
Treasury stock (1,088) (69,689)<F6> (6,005)
69,689 <F7>
1,088 <F8>
---------- --------- ---------- -----------
Total Shareholders' Equity 232,573 (94,297) 2,626,493
---------- --------- ---------- -----------
Total Liabilities and Shareholders'
Equity $2,281,818 $(108,139) $ (290,640) $32,867,135
========== ========= ========== ===========
See Notes to Pro Forma Combined Consolidated Financial Statements.
</TABLE>
- 52 -
<PAGE> 58
<TABLE>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED INCOME STATEMENT
For the Year Ended December 31, 1997
(Thousands except per share data)
(Unaudited)
<CAPTION>
MBI/CBT
Pro Forma
CBT Combined
MBI<F1> CBT Adjustments Consolidated
------- --- ----------- ------------
<S> <C> <C> <C> <C>
Interest Income $1,878,194 $83,984 $(1,412)<F10> $1,960,766
Interest Expense 957,690 40,616 998,306
---------- ------- ------- ----------
Net Interest Income 920,504 43,368 (1,412) 962,460
Provision for Possible Loan Losses 79,309 4,088 83,397
---------- ------- ------- ----------
Net Interest Income after Provision
for Possible Loan Losses 841,195 39,280 (1,412) 879,063
Other Income
Trust 96,055 2,247 98,302
Service charges 98,733 3,338 102,071
Credit card fees 20,480 -- 20,480
Net loss from financial instruments -- -- --
Securities gains 6,985 22 7,007
Other 156,431 4,214 160,645
---------- ------- ------- ----------
Total Other Income 378,684 9,821 -- 388,505
Other Expense
Salaries and employee benefits 414,882 16,434 431,316
Net occupancy and equipment 118,758 3,841 122,599
Loss on the sale of credit card loans 50,000 -- 50,000
Other 311,140 10,779 321,919
---------- ------- ------- ----------
Total Other Expense 894,780 31,054 -- 925,834
---------- ------- ------- ----------
Income Before Income Taxes 325,099 18,047 (1,412) 341,734
Income Taxes 120,506 5,201 (508)<F11> 125,199
---------- ------- ------- ----------
Net Income $ 204,593 $12,846 $ (904) $ 216,535
========== ======= ======= ==========
Per Share Data<F20>
Basic Earnings per Share $ 1.68 $ 1.71
Diluted Earnings per Share 1.65 1.68
<CAPTION>
Roosevelt MBI/All Entities
For the six Roosevelt/ Pro Forma
months ended Firstbank Combined
Firstbank June 30, 1997 Adjustments<F14> Consolidated
--------- ------------- ---------------- ------------
<S> <C> <C> <C> <C>
Interest Income $157,373 $272,169 $ (3,484)<F12> $2,386,824
Interest Expense 71,472 178,306 858 <F15> 1,264,664
15,722 <F16>
-------- -------- -------- ----------
Net Interest Income 85,901 93,863 (20,064) 1,122,160
Provision for Possible Loan Losses 2,958 3,474 89,829
-------- -------- -------- ----------
Net Interest Income after Provision
for Possible Loan Losses 82,943 90,389 (20,064) 1,032,331
Other Income
Trust 5,010 -- 103,312
Service charges 7,441 13,018 122,530
Credit card fees -- -- 20,480
Net loss from financial instruments -- (35,630) (35,630)
Securities gains 636 -- 7,643
Other 11,531 10,038 182,214
-------- -------- -------- ----------
Total Other Income 24,618 (12,574) 400,549
Other Expense
Salaries and employee benefits 35,009 23,717 490,042
Net occupancy and equipment 10,082 9,291 141,972
Loss on the sale of credit card loans -- -- 50,000
Other 16,030 36,555 20,269 <F17> 394,773
-------- -------- -------- ----------
Total Other Expense 61,121 69,563 20,269 1,076,787
-------- -------- -------- ----------
Income Before Income Taxes 46,440 8,252 (40,333) 356,093
Income Taxes 16,796 7,630 (1,254)<F13> 142,402
(5,969)<F18>
-------- -------- -------- ----------
Net Income $ 29,644 $ 622 $(33,110) $ 213,691
======== ======== ======== ==========
Per Share Data<F20>
Basic Earnings per Share $ 1.55
Diluted Earnings per Share 1.52
See Notes to Pro Forma Combined Consolidated Financial Statements.
</TABLE>
- 53 -
<PAGE> 59
<TABLE>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED INCOME STATEMENT
For the Year Ended December 31, 1996
(Thousands except per share data)
(Unaudited)
<CAPTION>
MBI/CBT
Pro Forma
CBT Combined
MBI<F1> CBT Adjustments Consolidated
------- --- ----------- ------------
<S> <C> <C> <C> <C>
Interest Income $1,552,863 $77,646 $(1,412)<F10> $1,629,097
Interest Expense 724,910 36,242 761,152
---------- ------- ------- ----------
Net Interest Income 827,953 41,404 (1,412) 867,945
Provision for Possible Loan Losses 73,015 2,883 75,898
---------- ------- ------- ----------
Net Interest Income after Provision
for Possible Loan Losses 754,938 38,521 (1,412) 792,047
Other Income
Trust 86,616 2,111 88,727
Service charges 88,916 3,341 92,257
Credit card fees 27,962 -- 27,962
Securities gains(losses) (83) 35 (48)
Other 134,069 3,245 137,314
---------- ------- ------- ----------
Total Other Income 337,480 8,732 -- 346,212
Other Expense
Salaries and employee benefits 365,729 15,592 381,321
Net occupancy and equipment 103,715 3,584 107,299
Other 249,224 11,806 261,030
---------- ------- ------- ----------
Total Other Expense 718,668 30,982 -- 749,650
---------- ------- ------- ----------
Income Before Income Taxes 373,750 16,271 (1,412) 388,609
Income Taxes 128,535 4,646 (508)<F11> 132,673
---------- ------- ------- ----------
Net Income $ 245,215 $11,625 $ (904) $ 255,936
========== ======= ======= ==========
Per Share Data<F20>
Basic Earnings per Share $ 2.11 $ 2.12
Diluted Earnings per Share 2.08 2.09
<CAPTION>
MBI/All Entities
Pro Forma
Firstbank Combined
Firstbank Adjustments Consolidated
--------- ----------- ------------
<S> <C> <C> <C>
Interest Income $140,611 $(3,484)<F12> $1,766,224
Interest Expense 61,005 822,157
-------- ------- ----------
Net Interest Income 79,606 (3,484) 944,067
Provision for Possible Loan Losses 2,868 78,766
-------- ------- ----------
Net Interest Income after Provision
for Possible Loan Losses 76,738 (3,484) 865,301
Other Income
Trust 4,292 93,019
Service charges 6,651 98,908
Credit card fees -- 27,962
Securities gains(losses) 340 292
Other 10,515 147,829
-------- ------- ----------
Total Other Income 21,798 -- 368,010
Other Expense
Salaries and employee benefits 31,919 413,240
Net occupancy and equipment 9,259 116,558
Other 13,959 274,989
-------- ------- ----------
Total Other Expense 55,137 -- 804,787
-------- ------- ----------
Income Before Income Taxes 43,399 (3,484) 428,524
Income Taxes 15,526 (1,254)<F13> 146,945
-------- ------- ----------
Net Income $ 27,873 $(2,230) $ 281,579
======== ======= ==========
Per Share Data<F20>
Basic Earnings per Share $ 2.13
Diluted Earnings per Share 2.10
See Notes to Pro Forma Combined Consolidated Financial Statements.
</TABLE>
- 54 -
<PAGE> 60
<TABLE>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED INCOME STATEMENT
For the Year Ended December 31, 1995
(Thousands except per share data)
(Unaudited)
<CAPTION>
MBI/CBT
Pro Forma
CBT Combined
MBI<F1> CBT Adjustments Consolidated
------- --- ----------- ------------
<S> <C> <C> <C> <C>
Interest Income $1,516,156 $75,762 $(1,412)<F10> $1,590,506
Interest Expense 715,466 35,588 751,054
---------- ------- ------- ----------
Net Interest Income 800,690 40,174 (1,412) 839,452
Provision for Possible Loan Losses 41,533 1,106 42,639
---------- ------- ------- ----------
Net Interest Income after Provision
for Possible Loan Losses 759,157 39,068 (1,412) 796,813
Other Income
Trust 77,115 1,469 78,584
Service charges 82,459 3,656 86,115
Credit card fees 20,366 -- 20,366
Securities gains 4,338 268 4,606
Other 127,371 2,779 130,150
---------- ------- ------- ----------
Total Other Income 311,649 8,172 -- 319,821
Other Expense
Salaries and employee benefits 346,156 15,798 361,954
Net occupancy and equipment 95,896 3,045 98,941
Other 198,467 11,632 210,099
---------- ------- ------- ----------
Total Other Expense 640,519 30,475 -- 670,994
---------- ------- ------- ----------
Income Before Income Taxes 430,287 16,765 (1,412) 445,640
Income Taxes 149,898 4,741 (508)<F11> 154,131
---------- ------- ------- ----------
Net Income $ 280,389 $12,024 $ (904) $ 291,509
========== ======= ======= ==========
Per Share Data<F20>
Basic Earnings per Share $ 2.41 $ 2.41
Diluted Earnings per Share 2.37 2.37
<CAPTION>
MBI/All Entities
Pro Forma
Firstbank Combined
Firstbank Adjustments Consolidated
--------- ----------- ------------
<S> <C> <C> <C>
Interest Income $134,401 $(3,484)<F12> $1,721,423
Interest Expense 57,486 808,540
-------- ------- ----------
Net Interest Income 76,915 (3,484) 912,883
Provision for Possible Loan Losses 2,313 44,952
-------- ------- ----------
Net Interest Income after Provision
for Possible Loan Losses 74,602 (3,484) 867,931
Other Income
Trust 5,986 84,570
Service charges 5,836 91,951
Credit card fees -- 20,366
Securities gains 28 4,634
Other 8,318 138,468
-------- ------- ----------
Total Other Income 20,168 -- 339,989
Other Expense
Salaries and employee benefits 30,882 392,836
Net occupancy and equipment 9,215 108,156
Other 14,824 224,923
-------- ------- ----------
Total Other Expense 54,921 0 725,915
-------- ------- ----------
Income Before Income Taxes 39,849 (3,484) 482,005
Income Taxes 14,107 (1,254)<F13> 166,984
-------- ------- ----------
Net Income $ 25,742 $(2,230) $ 315,021
======== ======= ==========
Per Share Data<F20>
Basic Earnings per Share $ 2.38
Diluted Earnings per Share 2.34
See Notes to Pro Forma Combined Consolidated Financial Statements.
</TABLE>
- 55 -
<PAGE> 61
MERCANTILE BANCORPORATION INC.
Notes to Pro Forma Combined Consolidated Financial Statements
(Unaudited)
(1) Represents MBI restated historical consolidated financial statements
reflecting the acquisition of Mark Twain, effective April 25, 1997,
which was accounted for as a pooling-of-interests. The recently
completed acquisitions of Horizon and HomeCorp were also accounted for
as poolings-of-interests; however, due to the immateriality of the
financial condition and results of operations of Horizon and HomeCorp
to that of MBI, the historical financial statements were not restated.
Regional Bancshares, Inc. ("Regional") was accounted for as a purchase
and is included in these pro forma financial statements only from its
acquisition date forward. The full impact of Regional is immaterial to
the Pro Forma Combined Consolidated Financial Statements.
MBI completed its acquisition of Roosevelt on July 1, 1997. The
acquisition of Roosevelt was accounted for as a purchase; therefore,
historical financial statements were not restated. The full impact of
the Roosevelt acquisition is included in the pro forma combined
consolidated income statement for the year ended December 31, 1997.
All per share data reflects the 3-for-2 stock split declared by MBI on
July 16, 1997 and payable in the form of a stock dividend on October 1,
1997.
(2) In conjunction with the proposed acquisition of CBT, MBI plans to
repurchase up to 535,358 shares of MBI Common Stock in the open market.
The assumed repurchase price per share is $52.75, the closing price of
MBI Common Stock on January 9, 1998, the last trading date preceding
the public announcement of the Merger.
(3) Acquisition of CBT with 5,399,763 shares of MBI Common Stock, including
up to 535,358 reissued treasury shares, based on the Exchange Ratio of
0.6513 of a share of MBI Common Stock per share of CBT Common Stock.
The aggregate number of shares of MBI Common Stock to be issued in the
Merger was calculated as follows:
<TABLE>
<S> <C>
Shares of CBT Common Stock outstanding
as of December 31, 1997 7,862,627
Maximum number of shares of CBT
Common Stock which could be
issued pursuant to CBT's stock
option plans 428,118
-------------
Maximum number of shares of
CBT Common Stock to be
converted in the Merger 8,290,745
Exchange ratio x 0.6513
-------------
Aggregate number of shares
of MBI Common Stock
to be issued in the Merger 5,399,763
=============
</TABLE>
(4) Elimination of MBI's investment in CBT.
- 56 -
<PAGE> 62
(5) Balance sheet impact of adjustments related to the mergers with CBT and
Firstbank (see footnote 19 below). These adjustments will be initially
recorded as a credit to accrued liabilities and the reserve for
possible loan losses. Because the credit to accrued liabilities will
be paid out in cash within an estimated 18-month period following such
mergers, 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 these adjustments.
(6) In conjunction with the proposed acquisition of Firstbank, MBI plans to
repurchase up to 1,379,980 shares of MBI Common Stock in the open
market. The assumed repurchase price per share is $50.50, the closing
price of MBI Common Stock on January 30, 1998, the last trading date
preceding the public announcement of the agreement between MBI and
Firstbank.
(7) Acquisition of Firstbank with 13,799,799 shares of issued MBI Common
Stock, including up to 1,379,980 reissued treasury shares, based on the
exchange ratio of 0.8308 of a share of MBI Common Stock per share of
Firstbank common stock. The aggregate number of shares of MBI Common
Stock to be issued in connection with the acquisition of Firstbank was
calculated as follows:
<TABLE>
<S> <C>
Shares of Firstbank common stock 15,747,819
Maximum number of shares of Firstbank
common stock which could be
issued pursuant to Firstbank's
stock option plans 862,435
-------------
Maximum number of shares of
Firstbank common stock to
be converted in the acquisition 16,610,254
Exchange ratio x 0.8308
-------------
Aggregate number of shares
of MBI Common Stock
to be issued in the acquisition
of Firstbank 13,799,799
=============
</TABLE>
(8) Elimination of MBI's investment in Firstbank.
(9) Estimated balance sheet impact of sales of Firstbank subsidiaries,
Colonial Bank and Duchesne Bank, mandated by anti-trust laws. MBI
currently is in the process of evaluating such sales, and expects to
record a gain in connection with the sales. The pro forma combined
consolidated balance sheet does not reflect gain or loss relating from
such sales because the amount of gain or loss is not known at this
time.
(10) Interest income foregone as a result of MBI's repurchase of 535,358
treasury shares in connection with the Merger. The assumed interest
rate is 5%.
(11) Income tax benefit associated with interest income foregone as the
result of repurchasing shares of MBI Common Stock in connection with
the Merger. The assumed effective tax rate is 36%.
- 57 -
<PAGE> 63
(12) Interest income foregone as a result of MBI repurchasing 1,379,980
treasury shares in connection with the acquisition of Firstbank by MBI.
The assumed interest rate is 5%.
(13) Income tax benefit associated with interest income foregone as the
result of repurchasing shares in connection with the acquisition of
Firstbank by MBI. The assumed effective tax rate is 36%.
(14) The acquisition of Roosevelt was accounted for as a purchase
transaction. Included herein is the amortization of goodwill over a 15-
year period (see footnote 17 below) and interest expense related to the
issuance of subordinated debt securities and notes as described in
footnotes 15 and 16 below. The impact of interest income lost on the
cash consideration and stock buybacks is immaterial to the Pro Forma
Combined Consolidated Financial Statements. The income tax benefit
associated with taxable income statement adjustments is computed at an
effective tax rate of 36%.
(15) On January 29, 1997, MBI issued $150,000,000 of subordinated debt
securities at a floating rate equal to the three-month LIBOR plus 85
basis points. The rate assumed in calculating the expense from January
1, 1997 through January 29, 1997 for the Pro Forma Combined
Consolidated Financial Statements is 6.86%.
(16) On June 11, 1997, MBI issued $200,000,000 of 7.3% subordinated notes
due 2007, $150,000,000 of 6.8% senior notes due 2001 and $150,000,000
of 7.05% senior notes due 2004.
(17) The pro forma excess of cost over fair value of net assets acquired was
$608,076,000 for Roosevelt as of December 31, 1997. This is one-half
the annual amount of goodwill amortization, given a 15-year
amortization period.
(18) Income tax benefit associated with interest expense on debt issues (see
footnotes 15 and 16 above). The assumed effective tax rate is 36%.
(19) Upon consummation of the Merger, MBI expects to record certain
adjustments related to the Merger with an approximate pre-tax total
between $15,000,000 and $25,000,000. Upon consummation of the
acquisition of Firstbank, MBI expects to record certain adjustments
related to the acquisition with an approximate pre-tax total between
$25,000,000 and $40,000,000. The pre-tax adjustments for CBT and
Firstbank are estimated as follows:
<TABLE>
<CAPTION>
CBT Firstbank
--- ---------
($ in thousands)
<S> <C> <C>
Contract penalties, equipment abandonment costs
and transition and duplicative costs
related to system standardization
and signage $ 9,700 $14,250
Provision for possible loan losses 5,100 5,000
Accruals for severance and change of
control payments 3,500 10,600
Investment banking, legal and accounting fees 3,250 8,600
------- -------
Total $21,550 $38,450
======= =======
</TABLE>
- 58 -
<PAGE> 64
(20) Basic earnings per share was based upon the average shares listed
below:
<TABLE>
<CAPTION>
Year Ending December 31
-------------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
MBI average shares as reported 121,933,113 115,938,311 115,754,877
CBT average shares 7,862,848 7,873,182 7,928,155
Exchange Ratio x 0.6513 x 0.6513 x 0.6513
----------- ----------- -----------
MBI equivalent average shares 5,121,073 5,127,803 5,163,607
Less treasury share repurchases in
conjunction with CBT acquisition (535,358) (535,358) (535,358)
Firstbank average shares 15,599,571 15,478,554 15,502,544
Exchange ratio x 0.8308 x 0.8308 x 0.8308
----------- ----------- -----------
MBI equivalent average shares 12,960,124 12,859,583 12,879,514
Less treasury share repurchases in
conjunction with Firstbank
acquisition (1,379,980) (1,379,980) (1,379,980)
----------- ----------- -----------
Average shares outstanding for
basic earnings per share 138,098,972 132,010,359 131,882,660
=========== =========== ===========
</TABLE>
Diluted earnings per share was based upon the average shares below:
<TABLE>
<CAPTION>
Year Ending December 31
-------------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
MBI diluted shares as reported 124,338,414 117,789,773 118,059,213
MBI equivalent average shares
for CBT acquisition 5,121,073 5,127,803 5,163,607
Less treasury share repurchases in
conjunction with CBT acquisition (535,358) (535,358) (535,358)
MBI equivalent average shares
for CBT dilutive stock options 40,918 33,418 34,236
MBI equivalent average shares for
Firstbank acquisition 12,960,124 12,859,583 12,879,514
Less treasury share repurchases in
conjunction with Firstbank
acquisition (1,379,980) (1,379,980) (1,379,980)
MBI equivalent average shares
for Firstbank dilutive
stock options 246,677 185,452 178,084
----------- ----------- -----------
Average shares outstanding for
diluted earnings per share 140,791,868 134,080,691 134,399,316
=========== =========== ===========
</TABLE>
- 59 -
<PAGE> 65
INFORMATION REGARDING MBI STOCK
-------------------------------
Description of MBI Common Stock and Attached Preferred Share Purchase Rights
General. MBI has authorized 5,000,000 shares of MBI Preferred Stock,
no par value, and [200,000,000] shares of MBI Common Stock, $0.01 par value.
At February 27, 1998, MBI had no shares of MBI Preferred Stock issued and
outstanding and 133,748,539 shares of MBI Common Stock outstanding. Under
Missouri law, MBI's Board of Directors may generally approve the issuance of
authorized shares of Preferred Stock and Common Stock without shareholder
approval.
MBI's Board of Directors is also authorized to fix the number of shares
and determine the designation of any series of Preferred Stock and to
determine or alter the rights, preferences, privileges and restrictions
granted to or imposed upon any series of MBI Preferred Stock. Except for the
current designation and reservation of Series A Junior Participating
Preferred Stock pursuant to MBI's Preferred Share Purchase Rights Plan and
the anticipated designation and reservation of a Series B Junior
Participating Preferred Stock described below, MBI's Board of Directors has
not acted to designate or issue any shares of MBI Preferred Stock. 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
Board of Directors to issue shares to such persons and in such manner as may
be deemed to have an anti-takeover effect.
The following summary of the terms of MBI's capital stock does not
purport to be complete and is qualified in its entirety by reference to the
applicable provisions of MBI's Restated Articles of Incorporation, as
amended, and by-laws and Missouri law.
Dividends. The holders of MBI Common Stock are entitled to share
ratably in dividends when, as and if declared by the Board of Directors 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 MBI
Common Stock.
The Board of Directors of MBI intends to maintain its present policy of
paying quarterly cash dividends on 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 Board of Directors 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, each shareholder has cumulative voting
rights that entitle each such shareholder to the number of votes that equals
the number of shares held by the shareholder multiplied by the number of
directors to be elected. All such 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.
- 60 -
<PAGE> 66
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.
Assessment and Redemption. Shares of MBI Common Stock are and will be,
when issued, fully paid and nonassessable. Such shares do not have any
redemption provisions.
Preferred Share Purchase Rights Plan. One preferred share purchase
right is attached to each share of MBI Common Stock. The MBI Rights trade
automatically with shares of MBI Common Stock, and become exercisable and
will trade separately from the MBI Common Stock on the tenth day after public
announcement 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 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 the Board. When exercisable,
each MBI Right will entitle the holder to buy 1/100 of a share of MBI Series
A Junior Participating Preferred Stock at an exercise price of $100 per MBI
Right. In the event a person or group acquires beneficial ownership of 20%
or more of MBI Common Stock, holders of MBI 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 MBI Right. If MBI is acquired by any
person or group after the Rights become exercisable, each MBI Right will
entitle its holder to purchase stock of the acquiring company having a market
value of twice the current exercise price of each MBI Right. The MBI Rights
are designed to protect the interests of MBI and its shareholders against
coercive takeover tactics. The purpose of the MBI Rights is to encourage
potential acquirors to negotiate with MBI's Board of Directors prior to
attempting a takeover and to give the Board leverage in negotiating on behalf
of all shareholders the terms of any proposed takeover. The MBI Rights may
deter certain takeover proposals. The MBI Rights, which can be redeemed by
MBI's Board of Directors in certain circumstances, expire by their terms on
June 3, 1998. Upon expiration of the MBI Rights, MBI's Board of Directors
plans to take all action necessary to replace the MBI Rights on June 4, 1998
with substantially similar rights to purchase a newly-designated MBI Series B
Junior Participating Preferred Stock.
Classification of Board of Directors. The Board of Directors of MBI 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 Board of Directors,
classification of the Board of Directors also may 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 Board of
Directors.
Other Matters. MBI's Restated Articles of Incorporation, as amended,
and by-laws also contain provisions that: (i) require the affirmative vote
of holders of at least 75% of the voting power of all of the shares of
outstanding capital stock 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
- 61 -
<PAGE> 67
voting power of all shares of the outstanding capital stock of MBI to approve
certain "business combinations" with "interested parties" unless at least
two-thirds of the Board of Directors first approves 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 two-thirds of
the Board of Directors first approves such an amendment, alteration, change or
repeal. Such provisions may be deemed to have an anti-takeover effect.
Restrictions on Resale of MBI Stock by Affiliates
Under Rule 145 of the Securities Act of 1933, as amended (the
"Securities Act"), certain persons who receive MBI Common Stock pursuant to
the Merger and who are deemed to be "affiliates" of CBT will be limited in
their right to resell the stock so received. The term "affiliate" is defined
to include any person who, directly or indirectly, controls, or is controlled
by, or is under common control with CBT at the time the Merger is submitted
to a vote of the shareholders of CBT. Each affiliate of CBT (generally any
director or executive officer or shareholder of CBT who beneficially owns a
substantial number of outstanding shares of CBT Common Stock) who desires to
resell the MBI Common Stock received in the Merger must sell such stock
either pursuant to an effective registration statement or in accordance with
an applicable exemption, such as the applicable provisions of Rule 145(d)
under the Securities Act.
Rule 145(d) provides that persons deemed to be affiliates may resell
their stock received in the Merger pursuant to certain of the requirements of
Rule 144 under the Securities Act if such stock is sold within the first year
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 CBT may 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 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 CBT in the Merger will be
legended as to the restrictions imposed upon resale of such stock.
CBT has agreed to provide MBI with a list of those persons who may be
deemed to be affiliates at the time of the Special Meeting. CBT has agreed
to use all reasonable efforts to cause each such person to deliver to MBI
prior to the Effective Time a written agreement to the effect that no sale
will be made of any shares of MBI Common Stock received in the Merger by an
affiliate of MBI except in accordance with the Securities Act and until such
time as MBI shall first publish the financial results of at least 30 days of
post-merger combined operations of CBT and MBI. The certificates of MBI
Common Stock issued to affiliates of CBT in the Merger may contain an
appropriate restrictive legend, and appropriate stop transfer orders may be
given to the transfer agent for such certificates.
Comparison of the Rights of Shareholders of MBI and CBT
MBI is incorporated under the laws of the State of Missouri, while CBT
is incorporated under the laws of the State of Kentucky. The rights of the
shareholders of MBI are governed by MBI's Restated Articles of Incorporation,
as amended, and by-laws and Chapter 351 of the Missouri Revised Statutes (the
"Missouri Act"). The rights of CBT shareholders are governed by CBT's
Articles of Incorporation and by-laws and by the Kentucky Act. The rights of
CBT shareholders who receive shares
- 62 -
<PAGE> 68
of MBI Common Stock in the Merger will thereafter be governed by MBI's Restated
Articles of Incorporation, as amended, and by-laws and by the Missouri Act. The
material rights of such shareholders, and, where applicable, the differences
between the rights of MBI shareholders and CBT shareholders, are summarized
below.
Preferred Share Purchase Rights Plan. As described above under
"- Preferred Share Purchase Rights Plan," MBI Common Stock has attached
Rights, which may deter certain takeover proposals. CBT does not have a
rights plan.
Supermajority Provisions. MBI's Restated Articles of Incorporation, as
amended, and MBI's 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, as amended, and by-laws, removal by the
shareholders of the entire Board of Directors 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. Amendment by the shareholders of MBI's Restated
Articles of Incorporation, as amended, or by-laws relating to (i) the number
or qualification of directors; (ii) the classification of the Board of
Directors; (iii) the filling of vacancies on the Board of Directors; 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, voting together as a single class, unless such amendment has
previously been expressly approved by at least two-thirds of the Board of
Directors. The Restated Articles of Incorporation, as amended, of MBI
additionally provide that, in addition to any shareholder vote required under
the Missouri Act, 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 on the other hand. An "Interested Shareholder" is defined
generally to include any person, firm, corporation or other entity which is
the beneficial owner of 5% or more of the voting power of the outstanding
Voting Stock. If, however, at least two-thirds of the Board of Directors of
MBI approve the Business Combination, such Business Combination shall require
only the vote of shareholders as provided by Missouri law or otherwise. The
amendment of the provisions of MBI's Restated Articles 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 two-thirds of the Board of Directors. To
the extent that a potential acquiror's strategy depends on the passage of
proposals which require a supermajority vote of MBI's shareholders, such
provisions requiring a supermajority vote may have the effect of discouraging
takeover attempts that do not have Board approval by making passage of such
proposals more difficult.
CBT's Articles of Incorporation, as amended, and by-laws also contain
provisions requiring a supermajority vote of the shareholders to approve
certain proposals. Under CBT's Articles of Incorporation, as amended,
approval of a merger or consolidation with any other corporation, the sale of
substantially all of the assets of CBT or any amendment, alteration or repeal
of such provisions of the Articles of Incorporation requires the prior
affirmative vote of at least 67% of the then outstanding shares of stock of
CBT.
- 63 -
<PAGE> 69
Under the Kentucky Act, shareholders of CBT may remove one or more
directors with or without cause, provided that no director may be removed if
the number of votes sufficient to elect the director under cumulative voting
are not received in favor of the director's removal.
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. CBT's by-laws and the
Kentucky Act also provide for cumulative voting in the election of directors.
Classified Board. As described under "- Classification of Board of
Directors," the Board of Directors of MBI 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 year, the
existence of a classified Board diminishes the benefits of the cumulative
voting rights to minority shareholders. CBT does not have a classified Board
of Directors. Each of its directors is elected annually.
Anti-Takeover Statutes. The Missouri Act contains certain provisions
applicable to Missouri corporations such as MBI 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 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 "interested" (the "Acquisition Transaction")
was approved by the board of directors of the corporation on or before the
date of the Acquisition Transaction. Business Combinations may occur after
the five-year period following the Acquisition Transaction only 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 Act exempts from its provisions: (i) corporations not
having a class of voting stock registered under Section 12 of the Exchange
Act; (ii) corporations which adopt 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.
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MBI's Restated Articles of Incorporation and by-laws do not contain an election
to "opt out" of the Missouri business combination statute.
The Missouri Act 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 previously owned or controlled by the
Acquiring Person, to exercise or direct the exercise of: (i) 20% 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's shares lose the right to vote.
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.
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 by the corporation, mergers involving the
corporation which satisfy the other requirements of the Missouri Act,
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 inserting 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 contain an election to "opt out" of the
Control Share Acquisition Statute.
Dissenters' Rights. Under Section 351.455 of the Missouri Act, 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 such
shares. Under the Kentucky Act, shareholders of CBT also have the right to
dissent and demand payment of the value of such shares.
Shareholders' Right to Inspect. Under the Kentucky Act, any
shareholder may inspect any of the corporation's records specified by the
Kentucky Act if the shareholder gives the corporation written notice of his
or her demand at least five business days before the date on which the
shareholder wishes to inspect the records. Under certain circumstances, the
demand must be made in good faith and for a proper purpose, and the records
the shareholder desires to inspect must be directly related to the stated
purpose of such shareholder's inspection. A shareholder may apply to the
circuit court of the county where the corporation's principal office is
located to compel inspection in the event the shareholder's request to
examine the books and records is refused. The right of shareholders to
inspect under the Missouri Act is generally similar to that of shareholders
under the Kentucky Act.
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Size of Board of Directors. As permitted under the Missouri Act, the
number of directors on the Board of Directors of MBI is set forth in MBI's
by-laws, 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 Board of Directors, in either case, adopted by the
vote or consent of at least two-thirds of the number of directors then
authorized under the by-laws. MBI's Board of Directors currently has twelve
(12) members. Similarly to the Missouri Act, the Kentucky Act provides that a
corporation may fix the number of directors in its Articles of Incorporation
or by-laws. The number of directors on the Board of Directors of CBT is set
forth in CBT's Articles of Incorporation, which provides that the number of
directors may be fixed from time to time at not less than five and no more
than 25 by the Board of Directors at a meeting held prior to the annual
shareholders' meeting.
The supermajority vote required for the amendment of MBI's by-laws
regarding a change in the number of directors may have the effect of making
it more difficult to force an immediate change in the composition of a
majority of the Board of Directors and may be deemed to have an anti-takeover
effect.
Limitation on Director Liability. As permitted by the Kentucky Act,
CBT's Articles of Incorporation limit the liability of a director to CBT and
its shareholders for monetary damages for a breach of his duties as a
director, except for liability with respect to the following actions: (i)
for any transaction in which the director's personal financial interest is in
conflict with the financial interest of the corporation or its shareholders;
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or are known by the director to violate law; (iii) actions
involving an improper distribution in violation of KRS 271B.8-330; and (iv)
for any transaction from which the director derived an improper personal
benefit. MBI's Restated Articles of Incorporation do not address the issue
of director liability to the corporation or its shareholders.
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 the Federal Reserve Board. In addition, bank
holding companies are generally prohibited under the BHCA from engaging in
nonbanking activities, subject to certain exceptions.
MBI and its subsidiaries are subject to supervision and examination by
applicable federal and state banking 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 Office of Thrift Supervision ("OTS"), the Federal Deposit
Insurance Corporation ("FDIC"), the Office of 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.
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Certain Transactions with Affiliates
There are various legal restrictions on the extent to which a bank
holding company 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 institutions can pay to MBI without regulatory approval.
The approval of the appropriate federal or state bank regulatory agencies is
required for any dividend if the total of all dividends declared by the bank
in any calendar year would exceed the total of the institutions 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.
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 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, financial institutions and financial
institution holding companies are required to maintain capital to support
off-balance sheet activities such as loan commitments.
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
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part upon the risk assessment classification so assigned to the institution by
the FDIC. See "- FIRREA and FDICIA."
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA"), adopted in August 1989 to provide for the resolution of insolvent
savings associations, required the FDIC to establish separate deposit
insurance funds-- the 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 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 immediately after enactment of the Funds Act,
provides for the following:
(i) 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%.
(ii) Commencing January 1, 1997, BIF insured institutions were
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.
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.
(iii) The merger of the BIF and the SAIF on January 1, 1999 to
create the Deposit Insurance Fund, but only if no more savings
associations are in existence at that time. The Deposit Act also
directs the Secretary of the Treasury to conduct a study and submit
recommendations to Congress regarding the establishment of a common
charter for depository institutions.
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Proposals to Overhaul the Savings Association Industry
Proposals have been introduced in the U.S. Congress that, if adopted,
would overhaul the savings association industry. MBI cannot predict whether
these or any other legislative proposals will be enacted, or, if enacted, the
final form of the law.
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 might 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 this 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
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 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.
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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 1 capital to risk-adjusted assets of 6% or greater;
(iii) had a ratio of Tier 1 capital to adjusted total 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 association 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 1 capital
to risk-adjusted assets of 4% or greater; and (iii) had a ratio of Tier 1
capital to adjusted total 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 adjusted total assets were 3% or greater).
FDICIA also 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 regulator. 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.
The Interstate Banking and Community Development 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 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. Overall, Riegle-Neal is likely to have the
effects of increasing competition and promoting geographic diversification in
the banking industry.
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RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
-----------------------------------------
KPMG Peat Marwick LLP served as MBI's independent accountants for the
year ended December 31, 1997 and continues to serve in such capacity.
Services provided in connection with the audit function included examination
of the annual consolidated financial statements, review and consultation
regarding filings with the Commission and other regulatory authorities and
consultation on financial accounting and reporting matters.
Arthur Andersen LLP served as CBT's independent accountants for the
year ended December 31, 1997 and continues to serve in such capacity.
Services provided in connection with the audit function included examination
of the annual consolidated financial statements and consultation on financial
accounting and reporting matters. Arthur Andersen LLP intends to have a
representative present at the Special Meeting to answer relevant questions
regarding the Merger.
LEGAL MATTERS
-------------
Certain legal matters will be passed upon for MBI by Thompson Coburn,
St. Louis, Missouri and for CBT by Wyatt, Tarrant & Combs, Louisville,
Kentucky.
EXPERTS
-------
The consolidated financial statements of MBI as of December 31, 1997,
1996 and 1995, and for each of the years in the three-year period ended
December 31, 1997, incorporated by reference in MBI's Annual Report on Form
10-K have been incorporated by reference herein in reliance upon the report
of KPMG Peat Marwick LLP, independent certified public accountants, whose
report is incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
The consolidated financial statements of CBT Corporation and its
subsidiaries at December 31, 1997, 1996 and 1995, and for each of the years
then ended, included in CBT's Annual Report on Form 10-K, have been
incorporated herein in reliance upon the report of Arthur Andersen LLP,
independent auditors, whose report is incorporated by reference herein, and
upon the authority of such firm as experts in accounting and auditing.
OTHER MATTERS
-------------
The Board of Directors of CBT, at the date hereof, is not aware of any
business to be presented at the Special Meeting other than that referred to
in the Notice of Special Meeting and discussed herein. If any other matter
should properly come before the Special 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
CBT.
SHAREHOLDER PROPOSALS
---------------------
If the Merger is approved, the other conditions to the Merger are
satisfied and the Merger is consummated, shareholders of CBT will become
shareholders of MBI at the Effective Time.
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MBI shareholders may submit to MBI proposals for formal consideration at the
1999 Annual Meeting of MBI's shareholders and inclusion in MBI's proxy statement
and proxy for such meeting. All such proposals for the 1999 Annual Meeting of
MBI's shareholders must be received in writing by the Corporate Secretary at
Mercantile Bancorporation Inc., P.O. Box 524, St. Louis, Missouri 63166-0524 by
November 16, 1998.
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ANNEX A
-------
[Letterhead of Morgan Stanley & Co. Incorporated]
---------------, 1998
Board of Directors
CBT Corporation
333 Broadway
Paducah, KY 42002-2400
Members of the Board:
We understand that CBT Corporation ("CBT" or the "Company"), Mercantile
Bancorporation Inc. ("Mercantile") and Ameribanc, Inc., a wholly owned
subsidiary of Mercantile ("Merger Sub" and, collectively, with Mercantile,
the "Buyers") have entered into an Agreement and Plan of Merger dated as of
January 10, 1998 (the "Agreement"), which provides, among other things, for
the merger (the "Merger") of CBT with and into Merger Sub. Pursuant to the
Merger, each issued and outstanding share of common stock, no par value, of
CBT (the "CBT Common Stock"), other than shares held in treasury or held by
Mercantile or CBT, will be converted into the right to receive 0.6513 of a
share (the "Exchange Ratio") of common stock, par value $0.01 per share, of
Mercantile ("Mercantile Common Stock"). The terms and conditions of the
Merger are more fully set forth in the Agreement.
You have asked for our opinion as to whether the Exchange Ratio pursuant to
the Agreement is fair from a financial point of view to the holders of CBT
Common Stock (other than Mercantile and its affiliates).
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and
other information of CBT and Mercantile, respectively;
(ii) reviewed certain internal financial statements and other
financial and operating data concerning CBT and Mercantile
prepared by the managements of CBT and Mercantile,
respectively;
(iii) analyzed certain financial projections prepared by the
managements of CBT and Mercantile, respectively;
(iv) discussed the past and current operations and financial
condition and the prospects of CBT and Mercantile with senior
executives of CBT and Mercantile, respectively;
(v) reviewed the reported prices and trading activity for CBT
Common Stock and Mercantile Common Stock;
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(vi) compared the financial performance of CBT and Mercantile and
the prices and trading activity of CBT Common Stock and
Mercantile Common Stock with that of certain other comparable
publicly-traded companies and their securities;
(vii) discussed the results of regulatory examinations of CBT and
Mercantile with senior managements of the respective companies;
(viii) discussed with senior managements of CBT and Mercantile the
strategic objectives of the Merger and their estimates of the
synergies and other benefits of the Merger for the combined
company;
(ix) analyzed the pro forma impact of the Merger on the combined
company's earnings per share, consolidated capitalization and
financial ratios;
(x) reviewed the financial terms, to the extent publicly available,
of certain comparable merger transactions;
(xi) participated in discussions and negotiations among
representatives of CBT and Mercantile and their financial and
legal advisors;
(xii) reviewed the Agreement and certain related documents; and
(xiii) performed such other analyses and considered such other factors
as we have deemed appropriate.
We have assumed and relied upon without independent verification the accuracy
and completeness of the information reviewed by us for the purposes of this
opinion. With respect to the financial projections, including the cost
savings and other synergies expected to result from the Merger, we have
assumed that they have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the future financial
performance of CBT and Mercantile. We have not made any independent
valuation or appraisal of the assets or liabilities of CBT or Mercantile, nor
have we been furnished with any such appraisals and we have not examined any
individual loan credit files of CBT or Mercantile. In addition, we have
assumed the Merger will be consummated substantially in accordance with the
terms set forth in the Agreement. Our opinion is necessarily based on
economic, market and other conditions as in effect on, and the information
made available to us as of, the date hereof.
We have acted as financial advisor to the Board of Directors of CBT in
connection with this transaction and will receive a fee for our services.
It is understood that this letter is for the information of the Board of
Directors of CBT and may not be used for any other purpose without our prior
written consent, except that this opinion may be included in its entirety in
any filing made by CBT with the Securities and Exchange Commission with
respect to the Merger. In addition, we express no opinion and make no
recommendation as to how the holders of CBT Common Stock should vote at the
stockholders' meeting held in connection with the Merger.
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<PAGE> 80
Based on the foregoing, we are of the opinion on the date hereof that the
Exchange Ratio pursuant to the Agreement is fair from a financial point of
view to the holders of CBT Common Stock (other than Mercantile and its
affiliates).
Very truly yours,
MORGAN STANLEY & CO.
INCORPORATED
By: /s/ Kristen S. Huntley
-----------------------------------
Kristen S. Huntley
Managing Director
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<PAGE> 81
ANNEX B
-------
SUBTITLE 13. DISSENTERS' RIGHTS
RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
271B.13-010. Definitions. -- As used in this subtitle:
(1) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by
merger or share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under KRS 271B.13-020 and who exercises that right when and
in the manner required by KRS 271B.13-200 to 271B.13-280.
(3) "Fair value," with respect to a dissenter's shares, means the value
of the shares immediately before the effectuation of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
In any transaction subject to the requirements of KRS 271B.12-210 or exempted
by KRS 271B.12-220(2) in order to be exempt from the requirements of KRS
271B.12-210.
(4) "Interest" means from the effective date of the corporate action
until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair
and equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares
to the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner
of shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
271B.13-020. Right to dissent.
(1) A shareholder shall be entitled to dissent from, and obtain payment
of the fair value of his shares in the event of, any of the following
corporate actions:
(a) Consummation of a plan of merger to which the corporation is
a party:
1. If shareholder approval is required for the merger by
KRS 271B.11-040 or the articles of incorporation and the shareholder is
entitle to vote on the merger; or
2. If the corporation is a subsidiary that is merged with
its parent under KRS 271B.11-040;
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<PAGE> 82
(b) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be acquired, if
the shareholder is entitled to vote on the plan;
(c) Consummation of a sale or exchange of all, or substantially
all, of the property of the corporation other than in the usual and regular
course of business, if the shareholder is entitled to vote on the sale or
exchange, including a sale in dissolution, but not including a sale pursuant
to court order or a sale for cash pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed to the
shareholders within one (1) year after their date of sale;
(d) An amendment of the articles of incorporation that materially
and adversely affects rights in respect of a dissenter's shares because it:
1. Alters or abolishes a preferential right of the shares
to a distribution or in dissolution;
2. Creates, alters, or abolishes a right in respect of
redemption, including a provision respecting a sinking fund for the
redemption or repurchase, of the shares;
3. Excludes or limits the right of the shares to vote on
any matter other than a limitation by dilution through issuance of shares or
other securities with similar voting rights; or
4. Reduces the number of shares owned by the shareholder to
a fraction of a share if the fractional share so created is to be acquired
for cash under KRS 271B.6-040;
(e) Any transaction subject to the requirements of KRS
271B.12-210 or exempted by KRS 271B.12-220(2); or
(f) Any corporate action taken pursuant to a shareholder vote to
the extent the articles of incorporation, bylaws, or a resolution of the
board of directors provides that voting or nonvoting shareholders are
entitled to dissent and obtain payment for their shares.
(2) A shareholder entitled to dissent and obtain payment for his shares
under this chapter shall not challenge the corporate action creating his
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
271B.13-030. Dissent by nominees and beneficial owners.
(1) A record shareholder may assert dissenters' rights as to fewer than
all the shares registered in his name only if he shall dissent with respect
to all shares beneficially owned by any one (1) person and notify the
corporation in writing of the name and address of each person on whose behalf
he asserts dissenters' rights. The rights of a partial dissenter, under this
subsection shall be determined as if the shares as to which he dissents and
his other shares were registered in the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(a) He submits to the corporation the record shareholder's
written consent to the dissent not later than the time the beneficial
shareholder asserts dissenters' rights; and
B-2
<PAGE> 83
(b) He does so with respect to all shares of which he is the
beneficial shareholder or over which he has power to direct the vote.
PROCEDURES FOR EXERCISE OF DISSENTERS' RIGHTS
271B.13-200. Notice of dissenters' rights.
(1) If proposed corporate action creating dissenters' rights under KRS
271B.13-020 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert
dissenters' rights under this subtitle and the corporation shall undertake to
provide a copy of this subtitle to any shareholder entitled to vote at the
shareholders' meeting upon request of that shareholder.
(2) If corporate action creating dissenters' rights under KRS
271B.13-020 is taken without a vote of shareholders, the corporation shall
notify in writing all shareholders entitled to assert dissenters' rights that
the action was taken and send them the dissenters' notice described in KRS
271B.13-220.
271B.13-210. Notice of intent to demand payment.
(1) If proposed corporate action creating dissenters' rights under KRS
271B.13-020 is submitted to a vote at a shareholders' meeting, a shareholder
who wishes to assert dissenters' rights:
(a) Shall deliver to the corporation before the vote is taken
written notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(b) Shall not vote his shares in favor of the proposed action.
(2) A shareholder who does not satisfy the requirements of subsection
(1) of this section shall not be entitled to payment for his shares under
this chapter. (Enact. Acts 1988, ch. 23, sec. 127, effective January 1,
1989.)
271B.13-220. Dissenters' notice.
(1) If proposed corporate action creating dissenters' rights under KRS
271B.13-020 is authorized at a shareholders' meeting, the corporation shall
deliver a written dissenters' notice to all shareholders who satisfied the
requirements of KRS 271B.13-210.
(2) The dissenters' notice shall be sent no later than ten (10) days
after the date the proposed corporation action was authorized by the
shareholders, or, if no shareholder authorization was obtained, by the board
of directors, and shall:
(a) State where the payment demand must be sent and where and
when certificates for certified shares must be deposited;
(b) Inform holders of uncertified shares to what extent transfer
of the shares will be restricted after the payment demand is received;
B-3
<PAGE> 84
(c) Supply a form for demanding payment that includes the date of
the first announcement to news media or to shareholders of the terms of the
proposed corporate action and requires that the person asserting dissenters'
rights certify whether or not he acquired beneficial ownership of the shares
before that date;
(d) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than thirty (30), nor more than sixty
(60) days after the date the notice provided in subsection (1) of this
section is delivered; and
(e) Be accompanied by a copy of this subtitle.
271B.13-230. Duty to demand payment.
(1) A shareholder who is sent a dissenters' notice described in KRS
271B.13-220 shall demand payment, certify whether he acquired beneficial
ownership of the shares before the date required to be set forth in the
dissenters' notice pursuant to subsection (2)(c) of KRS 271B.13-220, and
deposit his certificates in accordance with the terms of the notice.
(2) The shareholder who demands payment and deposits his share
certificates under subsection (1) of this section shall retain all other
rights of a shareholder until these rights are canceled or modified by the
taking of the proposed corporate action.
(3) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice,
shall not be entitled to payment for his shares under this subtitle.
271B.13-240. Share restrictions.
(1) The corporation may restrict the transfer of uncertificated shares
from the date the demand for their payment is received until the proposed
corporate action is taken or the restrictions released under KRS 271B.13-260.
(2) The person for whom dissenters' rights are asserted as to
uncertificated shares shall retain all other rights of a shareholder until
these rights are canceled or modified by the taking of the proposed corporate
action.
271B.13-250. Payment.
(1) Except as provided in KRS 271B.13-270, as soon as the proposed
corporate action is taken, or upon receipt of a payment demand, the
corporation shall pay each dissenter who complied with KRS 271B.13-230 the
amount the corporation estimates to be the fair value of his shares, plus
accrued interest.
(2) The payment shall be accompanied by:
(a) The corporation's balance sheet as of the end of a fiscal
year ending not more than sixteen (16) months before the date of payment, an
income statement for that year, a statement of changes in shareholders'
equity for that year, and the latest available interim financial statements,
if any;
B-4
<PAGE> 85
(b) A statement of the corporation's estimate of the fair value
of the shares;
(c) An explanation of how the interest was calculated; and
(d) A statement of the dissenter's right to demand payment under
KRS 271B.13-280.
271B.13-260. Failure to take action.
(1) If the corporation does not take the proposed action within sixty
(60) days after the date set for demanding payment and depositing share
certificates, the corporation shall return the deposited certificates and
release the transfer restrictions imposed on uncertificated shares.
(2) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it shall send a new
dissenters' notice under KRS 271B.13-220 and repeat the payment demand
procedure.
271B.13-270. After-acquired shares.
(1) A corporation may elect to withhold payment required by KRS
271B.13-250 from a dissenter unless he was the beneficial owner of the shares
before the date set forth in the dissenters' notice as the date of the first
announcement to news media or to shareholders of the terms of the proposed
corporate action.
(2) To the extent the corporation elects to withhold payment under
subsection (1) of this section, after taking the proposed corporate action,
it shall estimate the fair value of the shares, plus accrued interest, and
shall pay this amount to each dissenter who agrees to accept it in full
satisfaction of his demand. The corporation shall send with its offer a
statement of its estimate of the fair value of the shares, an explanation of
how the interest was calculated, and a statement of the dissenter's right to
demand payment under KRS 271B.13-280.
271B.13-280. Procedure if shareholder dissatisfied with payment or offer.
(1) A dissenter may notify the corporation in writing of his own
estimate of the fair value of his shares and amount of interest due, and
demand payment of his estimate (less any payment under KRS 271B.13-250), or
reject the corporation's offer under KRS 271B.13-270 and demand payment of
the fair value of his shares and interest due, if:
(a) The dissenter believes that the amount paid under KRS
271B.13-250 or offered under KRS 271B.13-270 is less than the fair value of
his shares or that the interest due is incorrectly calculated;
(b) The corporation fails to make payment under KRS 271B.13-250
within sixty (60) days after the date set for demanding payment; or
(c) The corporation, having failed to take the proposed action,
does not return the deposited certificates or release the transfer
restrictions imposed on uncertificated shares within sixty (60) days after
the date set for demanding payment.
B-5
<PAGE> 86
(2) A dissenter waives his right to demand payment under this section
unless he shall notify the corporation of his demand in writing under
subsection (1) of this section within thirty (30) days after the corporation
made or offered payment for his shares.
JUDICIAL APPRAISAL OF SHARES
271B.13-300. Court action.
(1) If a demand for payment under KRS 271B.13-280 remains unsettled,
the corporation shall commence a proceeding within sixty (60) days after
receiving the payment demand and petition the court to determine the fair
value of the shares and accrued interest. If the corporation does not
commence the proceeding within the sixty (60) day period, it shall pay each
dissenter whose demand remains unsettled the amount demanded.
(2) The corporation shall commence the proceeding in the circuit court
of the county where a corporation's principal office (or, if none in this
state, its registered office) is located. If the corporation is a foreign
corporation without a registered office in this state, it shall commence the
proceeding in the county in this state where the registered office of the
domestic corporation was located.
(3) The corporation shall make all dissenters (whether or not residents
of this state) whose demands remain unsettled parties to the proceeding as in
an action against their shares and all parties shall be served with a copy of
the petition. Nonresidents may be served by registered or certified mail or
by publication as provided by law.
(4) The jurisdiction of the court in which the proceeding is commenced
under subsection (2) of this section shall be plenary and exclusive. The
court may appoint one (1) or more persons as appraisers to receive evidence
and recommend decision on the question of fair value. The appraisers have
the power described in the order appointing them, or in any amendment to it.
The dissenters shall be entitled to the same discovery rights as parties in
other civil proceedings.
(5) Each dissenter made a party to the proceeding shall be entitled to
judgment:
(a) For the amount, if any, by which the court finds the fair
value of his shares, plus interest, exceeds the amount paid by the
corporation; or
(b) For the fair value, plus accrued interest, of his
after-acquired shares for which the corporation elected to withhold payment
under KRS 271B.13-270.
271B.13-310. Court costs and counsel fees.
(1) The court in an appraisal proceeding commenced under KRS
271B.13-300 shall determine all costs of the proceeding, including the
reasonable compensation and expenses of appraisers appointed by the court. The
court shall assess the costs against the corporation, except that the court may
assess costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted
arbitrarily, vexatiously, or not in good faith in demanding payment under KRS
271B.13-280.
B-6
<PAGE> 87
(2) The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable:
(a) Against the corporation and in favor of any or all
dissenters, if the court finds the corporation did not substantially comply
with the requirements of KRS 271B.13-200 to 271B.13-280; or
(b) Against either the corporation or a dissenter, in favor of
any other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this subtitle.
(3) If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated, and that
the fees for those services should not be assessed against the corporation,
the court may award to these counsel reasonable fees to be paid out of the
amounts awarded the dissenters who were benefited.
B-7
<PAGE> 88
PROXY CBT CORPORATION
333 Broadway
Paducah, Kentucky 42001
For the Special Meeting of Shareholders to be held ------------, 1998
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned shareholder(s) of CBT CORPORATION ("CBT"), does hereby
nominate, constitute and appoint --------- and ---------- or each of them
(with full power to act alone), true and lawful proxies and attorneys-in-fact,
with full power of substitution, for the undersigned and in the name,
place and stead of the undersigned to vote all of the shares of common stock,
no par value, of CBT standing in the name of the undersigned on its books at
the close of business on ---------, 1998 at the Special Meeting of
Shareholders to be held at Madison Hall, 919 Madison Street, Paducah,
Kentucky, on -------, -----------, 1998, at ------ a.m. Central Time, and at
any adjournments or postponements thereof, with all the powers the undersigned
would possess if personally present, as follows:
1. To consider and vote upon the adoption and approval of the Agreement
and Plan of Merger, dated January 10, 1998 (the "Merger Agreement"), pursuant
to which CBT will be merged with and into Ameribanc, Inc., a Missouri
corporation and wholly owned subsidiary of Mercantile Bancorporation Inc.
("MBI"), in a transaction that would result in the business and operations of
CBT being continued through such wholly owned subsidiary, and whereby, upon
consummation of the merger, each share of CBT common stock will be converted
into the right to receive 0.6513 of a share of MBI common stock, as set forth
in detail in the accompanying Proxy Statement/Prospectus.
/ / FOR / / AGAINST / / ABSTAIN
2. To transact such other business as may properly come before the Special
Meeting or any adjournments or postponements thereof.
The Board of Directors recommends a vote FOR approval and adoption of the
Merger Agreement.
The undersigned hereby revokes any other proxies to vote at such meeting
and hereby ratifies and confirms all that the proxies and attorneys-in- fact, or
each of them, appointed hereunder may lawfully do by virtue hereof. Said
proxies and attorneys-in-fact, without limiting their general authority, are
specifically authorized to vote in accordance with their best judgment with
respect to all matters incident to the conduct of the Special Meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS GIVEN
HEREIN, THIS PROXY WILL BE VOTED "FOR" THE PROPOSAL LISTED ABOVE.
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND MAIL THIS PROXY.
RETURN USING THE ENVELOPE PROVIDED
CBT CORPORATION SPECIAL MEETING
<TABLE>
<S> <C> <C> <C>
Check appropriate box Date------------- NO. OF SHARES
Indicate changes below: -------------------------------------
Address Change? / / Name Change? / /
-------------------------------------
Signature(s) In Box
When signing as attorney, executor,
administrator, trustee or guardian,
please give your full title. If more
than one person holds the power to
vote the same shares, all must sign.
All joint owners must sign. The
undersigned hereby acknowledges
receipt of the notice of Special
Meeting and the Proxy Statement/
Prospectus (with all enclosures and
attachments), dated --------, 1998,
relating to the Special Meeting.
</TABLE>
<PAGE> 89
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
------------------------------------------
Item 20. Indemnification of Officers and Directors
- ---------------------------------------------------
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, 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 such person is fairly and reasonably entitled to indemnity
for proper expenses. Section 351.355(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
subsection (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 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 MBI provides
that MBI shall extend to its directors and executive officers the
indemnification specified in subsections (1) and (2) and 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 annual limits of $45,000,000, MBI'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 MBI, individually or collectively, or
any matter claimed against them solely by reason of their being directors or
officers of MBI.
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<PAGE> 90
Item 21. Exhibits and Financial Statement Schedules
- ----------------------------------------------------
A. Exhibits. See Exhibit Index.
--------
B. Financial Statement Schedules. Not Applicable.
-----------------------------
Item 22. Undertakings
- ----------------------
(1) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of MBI pursuant to the foregoing provisions, or
otherwise, MBI 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
MBI of expenses incurred or paid by a director, officer or controlling person
of MBI 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, MBI 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 of 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.
(2) MBI hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of MBI'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.
(3) MBI hereby undertakes as follows: that prior to any public
reoffering of the securities registered hereunder through use of a prospectus
which is a part of this Registration Statement, by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
(4) MBI undertakes that every prospectus (i) that is filed pursuant
to paragraph (3) 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 (Section 230.415 of this chapter),
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.
(5) MBI 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
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<PAGE> 91
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.
(6) MBI 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.
(7) MBI hereby undertakes:
(a) 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; notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not
exceed that which was registered) and any deviation from
the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a
20% change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective Registration Statement.
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement.
(b) That for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
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<PAGE> 92
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 April 15, 1998.
MERCANTILE BANCORPORATION INC.
By /s/ Thomas H. Jacobsen
---------------------------------
Thomas H. Jacobsen, Chairman of
the Board, 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 the offering by
Mercantile Bancorporation Inc. of shares of its common stock, and the
preferred share purchase rights which trade therewith, with respect to the
acquisition of CBT Corporation, 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 and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Thomas H. Jacobsen Chairman of the Board, April 15, 1998
- ------------------------------ President and Chief Executive
Thomas H. Jacobsen Officer
Principal Executive Officer
/s/ John Q. Arnold Vice Chairman and April 15, 1998
- ------------------------------ Chief Financial Officer
John Q. Arnold
Principal Financial Officer
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<PAGE> 93
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Michael T. Normile Senior Vice President - Finance April 15, 1998
- ------------------------------ and Control
Michael T. Normile
Principal Accounting Officer
/s/ Richard E. Beumer Director April 15, 1998
- ------------------------------
Richard E. Beumer
/s/ Harry M. Cornell, Jr. Director April 15, 1998
- ------------------------------
Harry M. Cornell, Jr.
/s/ Henry Givens, Jr. Director April 15, 1998
- ------------------------------
Dr. Henry Givens, Jr.
/s/ William A. Hall Director April 15, 1998
- ------------------------------
William A. Hall
/s/ Thomas A. Hays Director February 20, 1998
- ------------------------------
Thomas A. Hays
/s/ Frank Lyon, Jr. Director April 15, 1998
- ------------------------------
Frank Lyon, Jr.
/s/ Robert W. Murray Director April 15, 1998
- ------------------------------
Robert W. Murray
/s/ Harvey Saligman Director April 15, 1998
- ------------------------------
Harvey Saligman
/s/ Craig D. Schnuck Director April 15, 1998
- ------------------------------
Craig D. Schnuck
/s/ Alvin J. Siteman Director April 15, 1998
- ------------------------------
Alvin J. Siteman
II-5
<PAGE> 94
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Robert L. Stark Director February 20, 1998
- ------------------------------
Robert L. Stark
/s/ Patrick T. Stokes Director April 15, 1998
- ------------------------------
Patrick T. Stokes
/s/ John A. Wright Director February 19, 1998
- ------------------------------
John A. Wright
</TABLE>
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<PAGE> 95
<TABLE>
EXHIBIT INDEX
<CAPTION>
Exhibit
Number Description Page
- ------- ----------- ----
<C> <S> <C>
2.1 Agreement and Plan of Merger, dated as of January 10, 1998, by and among MBI,
Ameribanc and CBT, filed as Exhibit 2.1 to MBI's Current Report on Form 8-K dated
January 10, 1998, is incorporated herein by reference.
2.2 Stock Option Agreement, dated as of January 10, 1998, by and between MBI and CBT,
filed as Exhibit 2.2 to MBI's Current Report on Form 8-K dated January 10, 1998, is
incorporated herein by reference.
2.3 Form of Voting Agreement, dated as of January 10, 1998, and entered into by and
between MBI and certain of the shareholders of CBT, filed as Exhibit 2.3 to MBI's
Current Report on Form 8-K dated January 10, 1998, is incorporated herein by
reference.
3.1(a) MBI's Restated Articles of Incorporation, as amended and currently in effect, filed
as Exhibit 3 to MBI's Quarterly Report on Form 10-Q for the quarter ended March 31,
1997, are incorporated herein by reference.
3.1(b) Third Amended and Restated Certificate of Designation, Preferences and rights of
Series A Junior Participating Stock of MBI, filed as Exhibit 3.1(b) to MBI's Report
on Form 10-K for the year ended December 31, 1997, is incorporated herein by
reference.
3.2 MBI's by-laws, as amended and currently in effect, filed as Exhibit 3.2 to Amendment
No. 2 to MBI's Registration Statement on Form S-4 (No. 333-17757), are incorporated
herein by reference.
4.1 Form of Indenture Regarding Subordinated Securities between MBI and The First
National Bank of Chicago, Trustee, filed as Exhibit 4.1 to MBI's Report on Form 8-K
dated September 24, 1992, is incorporated herein by reference.
4.2 Rights Agreement, dated as of May 23, 1988, between MBI and Mercantile Bank, 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 as Exhibits 1 and 2 to MBI's Registration Statement No.
0-6045 on Form 8-A, dated May 24, 1988, is incorporated herein by reference.
4.3 Form of Indenture Regarding Senior Debt Securities, filed as Exhibit 4.1 to MBI's
Registration Statement on Form S-3 (No. 333-25775), is incorporated herein by
reference.
4.4 Form of Indenture Regarding Subordinated Debt Securities, filed as Exhibit 4.2 to
MBI's Registration Statement on Form S-3 (No. 333-25775), is incorporated herein by
reference.
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<PAGE> 96
<CAPTION>
Exhibit
Number Description Page
- ------- ----------- ----
<C> <S> <C>
4.5 Indenture, dated February 4, 1997, First Supplemental Indenture, dated February 4,
1997, and Supplemental Indenture of First Supplemental Indenture, dated May 22,
1997, between MBI, as issuer, and The Chase Manhattan Bank, as Indenture Trustee,
filed as Exhibits 4.5, 4.6 and 4.12, respectively, to MBI's Registration Statement
on Form S-4 (No. 333-25131), are incorporated herein by reference.
5.1 Opinion of Thompson Coburn as to the legality of the securities being registered.
8.1 Opinion of Thompson Coburn regarding certain tax matters in the Merger.
10.1 The Mercantile Bancorporation Inc. 1987 Stock Option Plan, as amended, filed as
Exhibit 10-3 to MBI's Report on Form 10-K for the year ended December 31, 1989, is
incorporated herein by reference.
10.2 The Mercantile Bancorporation Inc. Amended and Restated Executive Incentive
Compensation Plan, filed as Annex H to MBI'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 MBI's Report on Form 10-K for the year ended December 31, 1989, is
incorporated herein by reference.
10.4 The Mercantile Bancorporation Inc. 1991 Employee Incentive Plan, filed as Exhibit
10-7 to MBI's Report on Form 10-K for the year ended December 31, 1990, 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 MBI's Report on Form 10-K for the year ended December
31, 1994, is incorporated herein by reference.
10.6 The Mercantile Bancorporation Inc. Amended and Restated Stock Incentive Plan, filed
as Annex G to MBI'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 MBI'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
Exhibit 10.1 to MBI's Registration Statement on Form S-8 (file No. 339-47713), is
incorporated herein by reference.
10.9 Employment Agreement for Thomas H. Jacobsen, as amended and restated, filed as
Exhibit 10-9 to MBI's Report on Form 10-K for the year ended December 31, 1997, is
incorporated herein by reference.
II-8
<PAGE> 97
<CAPTION>
Exhibit
Number Description Page
- ------- ----------- ----
<C> <S> <C>
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 MBI's Report on Form 10-K for the year ended December 31, 1989, is incorporated
herein by reference.
10.11 The Mercantile Bancorporation Inc. Supplemental Retirement Plan, filed as Exhibit
10-12 to MBI's Report on Form 10-K for the year ended December 31, 1992, is
incorporated herein by reference.
10.12 Mercantile Bancorporation Inc. Voluntary Deferred Compensation Plan for Non-Employee
Affiliate Directors and Advisory Directors, filed as Exhibit 10.3 to MBI's
Registration Statement on Form S-8 (File No. 333-47713), is incorporated herein by
reference.
10.13 Mercantile Bancorporation Inc. Amended and Restated Stock Incentive Plan for Non-
Employee Directors, filed as Exhibit 10.2 to MBI's Registration Statement on Form S- 8
(File No. 333-47713), is incorporated herein by reference.
10.14 Agreement and Plan of Reorganization, dated October 27, 1996, by and among MBI,
Ameribanc, Inc. and Mark Twain Bancshares, Inc., filed as Exhibit 2.1 to MBI's
Report on Form 8-K filed November 6, 1996, is incorporated herein by reference.
10.15 Amendment to Agreement and Plan of Reorganization, dated January 24, 1997, by and
among MBI, Ameribanc, Inc. and Mark Twain Bancshares, Inc., filed as Exhibit 10-16
to Amendment No. 2 to MBI's Registration Statement (File No. 333-17757), is
incorporated herein by reference.
10.16 Stock Option Agreement, dated October 27, 1996, by and between MBI, as grantee, and
Mark Twain Bancshares, Inc., as issuer, filed as Exhibit 2.2 to MBI's Report on
Form 8-K filed on November 6, 1996, is incorporated herein by reference.
10.17 Agreement and Plan of Reorganization, dated December 22, 1996, by and between MBI
and Roosevelt Financial Group, Inc., filed as Exhibit 2.1 to MBI's Report on Form
8-K filed on December 30, 1996, is incorporated herein by reference.
10.18 Stock Option Agreement, dated December 22, 1996, by and between MBI, as grantee, and
Roosevelt Financial Group, Inc., as issuer, filed as Exhibit 2.1 to MBI's Report on
Form 8-K filed on December 30, 1996, is incorporated herein by reference.
10.19 Employment Agreement for Alvin J. Siteman, dated November 18, 1996, filed as Exhibit
10.3 to MBI's Report on Form 10-Q for the quarter ended March 31, 1997, is
incorporated herein by reference.
II-9
<PAGE> 98
<CAPTION>
Exhibit
Number Description Page
- ------- ----------- ----
<C> <S> <C>
10.20 Employment Agreement for John P. Dubinsky, dated October 27, 1996, filed as Exhibit
10.4 to MBI's Report on Form 10-Q for the quarter ended March 31, 1997, is
incorporated herein by reference.
10.21 Employment Agreement for Stanley J. Bradshaw, dated December 22, 1996, filed as
Exhibit 10 to MBI's Report on Form 10-Q for the quarter ended June 30, 1997, is
incorporated herein by reference.
10.22 Agreement and Plan of Reorganization, dated January 30, 1998, by and among MBI,
Ameribanc, Inc. and Firstbank of Illinois Co., filed as Exhibit 2.1 to MBI's Report
on Form 8-K filed on February 3, 1998, is incorporated herein by reference.
23.1 Consent of KPMG Peat Marwick LLP with regard to the use of its report on MBI's
financial statements.
23.2 Consent of Arthur Andersen with regard to the use of its report on CBT's financial
statements.
23.3 Consent of Morgan Stanley & Co. Incorporated.
23.4 Consent of Thompson Coburn (included in Exhibit 5.1).
24.1 Power of Attorney (included on signature page hereto).
</TABLE>
II-10
<PAGE> 1
[Letterhead of Thompson Coburn]
April 15, 1998
Mercantile Bancorporation Inc.
P.O. Box 524
St. Louis, Missouri 63166-0524
Re: Registration Statement on Form S-4
----------------------------------
Ladies and Gentlemen:
We refer you to the Registration Statement on Form S-4 filed by
Mercantile Bancorporation Inc. (the "Company") on April 15, 1998 (the
"Registration Statement") with the Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended, pertaining to the
proposed issuance by the Company of up to 5,399,763 shares of the Company's
common stock, $0.01 par value (the "Shares"), in connection with the
acquisition by merger of CBT Corporation ("CBT"), pursuant to the Agreement
and Plan of Merger, dated January 10, 1998 (the "Merger Agreement"), by and
among the Company, CBT and Ameribanc, Inc., all as provided in the
Registration Statement. In rendering the opinions set forth herein, we have
examined such corporate records of the Company, such laws and such other
information as we have deemed relevant, including the Company's Restated
Articles of Incorporation and Bylaws, as amended and currently in effect, the
resolutions adopted by the Company's Board of Directors relating to the
merger transaction, certificates received from state officials and statements
we have received from officers and representatives of the Company. In
delivering this opinion, the undersigned assumed the genuineness of all
signatures; the authenticity of all documents submitted to us as originals;
the conformity to the originals of all documents submitted to us as
certified, photostatic or conformed copies; the authenticity of the originals
of all such latter documents; and the correctness of statements submitted to
us by officers and representatives of the Company.
Based only on the foregoing, the undersigned is of the opinion that:
1. The Company has been duly incorporated and is validly existing
under the laws of the State of Missouri; and
2. The Shares to be sold by the Company, when issued as provided in
the Merger Agreement, will be validly issued, fully paid and non-assessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm in the section of
the Proxy Statement/Prospectus entitled "Legal Matters."
Very truly yours,
/s/ Thompson Coburn
<PAGE> 1
[Letterhead of Thompson Coburn]
April 15, 1998
Board of Directors
CBT Corporation
333 Broadway
Paducah, Kentucky 42001
Ladies and Gentlemen:
You have requested our opinion with regard to certain federal income
tax consequences of the proposed merger (the "Merger") of CBT Corporation
("CBT") with and into Ameribanc, Inc. ("Ameribanc"), a wholly owned
subsidiary of Mercantile Bancorporation Inc. ("MBI").
In connection with the preparation of our opinion, we have examined
and have relied upon the following:
(i) The Agreement and Plan of Merger by and among MBI, Ameribanc, and
CBT dated January 10, 1998, 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 April 15, 1998 (the "Registration Statement");
(iii) The representations and undertaking of MBI substantially in the
form of Exhibit A hereto;
(iv) The representations and undertakings of CBT substantially in the
form of Exhibit B hereto; and
(v) The Rights Agreement between MBI and Mercantile Bank of St. Louis
National Association, as rights agent, dated May 23, 1988.
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 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 or below is incorrect, any or all of the
federal income tax consequences described herein may be inapplicable.
<PAGE> 2
CBT Corporation
April 15, 1998
Page 2
OPINION
Subject to the foregoing, to the conditions and limitations expressed
elsewhere herein, and assuming that the Merger is consummated in accordance
with the Agreement, we are of the opinion that for federal income tax
purposes:
1. The Merger will constitute a reorganization within the meaning of
sections 368(a)(1)(A) and 368(a)(2)(D) of the Internal Revenue Code of 1986,
as amended to the date hereof (the "Code").
2. Each of MBI, Ameribanc and CBT will constitute "a party to a
reorganization" within the meaning of Code section 368(b).
3. Code sections 361, 362 and 1032 will apply to MBI, Ameribanc and CBT
as appropriate, subject to any applicable statutory, regulatory or judicial
limitations.
4. Each shareholder of CBT who exchanges, in the Merger, shares of CBT
common stock, no par value ("CBT Common Stock"), solely for shares of MBI
common stock, par value $.01 per share ("MBI Common Stock"):
a) will recognize no gain or loss as a result of the exchange,
except with regard to cash received in lieu of a fractional share, as
discussed 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
adjusted tax basis of the shares of CBT 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 holding
period of the shares of CBT Common Stock surrendered, provided that the
shares of CBT Common Stock surrendered are held as capital assets at the
time of the Merger (Code section 1223(1)).
5. Each shareholder of CBT who receives, in the Merger, 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 CBT Common Stock surrendered are held as capital assets
at the time of the Merger, 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 basis in the shares
of MBI Common Stock allocable to the fractional share (Code sections 1001
and 1222; Rev. Rul. 66-365, 1966-2 C.B. 116; Rev. Proc. 77-41, 1977-2 C.B.
574).
* * * * * * * * * * * *
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
shareholders of CBT who acquired shares of CBT Common Stock pursuant to the
exercise of employee stock options or otherwise as compensation, and (ii)
the tax consequences to special classes of shareholders, 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
<PAGE> 3
CBT Corporation
April 15, 1998
Page 3
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 described
herein may become inapplicable.
The foregoing opinion reflects our legal judgment solely on the issues
presented and discussed herein. This opinion has no official status or
binding effect of any kind. Accordingly, we cannot assure you that the
Internal Revenue Service or any court of competent jurisdiction will agree
with this opinion.
We hereby consent to the filing of this letter as an exhibit to the
Registration Statement and to all references made to this letter and to this
firm in the Registration Statement.
Very truly yours,
/s/ Thompson Coburn
<PAGE> 4
Exhibit A
CERTIFICATE
-----------
The undersigned, * , [Undersigned's Title] of Mercantile
-----------
Bancorporation Inc., a Missouri corporation ("MBI"), HEREBY CERTIFIES that
(a) I am familiar with the terms and conditions of the Agreement and Plan of
Merger by and among MBI, Ameribanc, Inc. a Missouri corporation
("Ameribanc"), and CBT Corporation, a Kentucky corporation ("CBT"), dated
January 10, 1998, including the schedules and exhibits thereto (the "Merger
Agreement"), and (b) I am aware that (i) this Certificate will be relied on
by Thompson Coburn, counsel for MBI, in rendering its opinion to CBT that
the merger of CBT with and into Ameribanc (the "Merger") will constitute a
reorganization within the meaning of section 368(a)(1) of the Internal
Revenue Code of 1986, as amended (the "Code"), and (ii) the representations
and undertaking recited herein will survive the Merger.
The undersigned HEREBY FURTHER CERTIFIES, ON BEHALF OF MBI, that:
(1) The fair market value of the MBI common stock, par value $.01 per
share ("MBI Common Stock"), to be received by each CBT shareholder in the
Merger (including cash to be received in lieu of fractional shares of MBI
Common Stock, if any) will be approximately equal to the fair market value
of the CBT common stock, no par value ("CBT Common Stock"), surrendered in
the Merger by each such shareholder.
(2) Except as otherwise set forth by the undersigned on an attachment
hereto, MBI is aware of no plan, intention or arrangement (including any
option or pledge) on the part of any holder of CBT Common Stock to sell,
exchange or otherwise dispose of any of the MBI Common Stock to be received
in the Merger, with the exception of fractional shares of MBI Common Stock
to be exchanged for cash pursuant to the Merger.
(3) Before the Merger, MBI will be in control of Ameribanc within the
meaning of section 368(c) of the Code.
(4) After the Merger, (a) Ameribanc will not issue additional shares of
its stock that would result in MBI losing control of Ameribanc within the
meaning of section 368(c) of the Code, and (b) neither Ameribanc nor any
other member of MBI's "affiliated group" (as the quoted term is defined in
Code section 1504, the "MBI Affiliated Group") will have outstanding any
warrants,
<PAGE> 5
options, convertible securities, or any other type of right (including any
preemptive right) pursuant to which any person could acquire stock in
Ameribanc that, if exercised or converted, would affect MBI's retention of
control of Ameribanc (as defined above). No stock of Ameribanc will be issued
in connection with the Merger.
(5) In the Merger, MBI and Ameribanc will tender no consideration for CBT
Common Stock other than MBI Common Stock and cash in lieu of fractional
shares of MBI Common Stock.
(6) Neither MBI nor any other member of the MBI Affiliated Group has any
plan or intention to redeem or otherwise reacquire any of the MBI Common
Stock issued to the shareholders of CBT in the Merger.
(7) Neither MBI nor any other member of the MBI Affiliated Group has any
plan or intention (a) to liquidate Ameribanc, (b) to merge Ameribanc with
and into another corporation, (c) to sell or otherwise dispose of (whether
by dividend distribution or otherwise) the stock of Ameribanc, or (d) except
for transfers described in section 368(a)(2)(C) of the Code, dispositions
made in the ordinary course of business or dispositions approved in writing
by Thompson Coburn, to cause, suffer, or permit Ameribanc to sell or
otherwise dispose of (whether by dividend distribution or otherwise) (i) any
assets of CBT acquired in the Merger, or (ii) any assets of any other member
of CBT's "affiliated group" (as the quoted term is defined in Code section
1504, the "CBT Affiliated Group").
(8) After the Merger, Ameribanc will continue the historic businesses of
CBT and the other members of the CBT Affiliated Group, or will use a
significant portion of the historic business assets of the members of the
CBT Affiliated Group in a business (no stock of any member of the CBT
Affiliated Group shall be treated as a business asset for purposes of this
representation).
(9) MBI, Ameribanc, CBT, and the shareholders of CBT will each pay their
respective expenses, if any, incurred in connection with the Merger;
provided, however, that MBI or Ameribanc may pay and assume those expenses
of CBT that are solely and directly related to the Merger in accordance with
the guidelines established in Rev. Rul. 73-54, 1973-1 C.B. 187, including
those printing expenses and filing fees described in Section 5.08 of the
Agreement.
(10) Except with regard to Transaction Costs (as defined below), neither
MBI nor any other member of the MBI Affiliated Group will pay any amount or
incur any liability to or for the benefit of, or assume or cancel any
liability of, any shareholder of CBT in connection with the Merger, and no
liability to which CBT Common Stock is subject will be extinguished as a
result of the
<PAGE> 6
Merger. For purposes of this representation, (a) the term "liability" shall
include any undertaking to pay or to cause the reduction, release, or
extinguishment of any obligation, without regard to whether any
such undertaking or obligation is contingent or legally enforceable (for
example and without limitation, the term "liability" includes an
unenforceable agreement to cause the repayment of an obligation guaranteed
by a CBT shareholder or to cause by other means the release of such
guaranty), and (b) the term "Transaction Costs" shall mean amounts paid or
liabilities incurred in connection with the Merger (i) to CBT shareholders
with respect to the MBI Common Stock (including cash in lieu of fractional
shares thereof) to be delivered in the Merger pursuant to Section 1 of the
Merger Agreement, (ii) for legal, accounting, and investment banking and/or
advisor services rendered to MBI or Ameribanc, if any, (iii) for those
expenses payable or assumable by MBI or Ameribanc in accordance with
representation 14 above, and (v) as compensation to any employee of MBI or
CBT or of any other member of the MBI Affiliated Group or the CBT Affiliated
Group for services rendered in the ordinary course of his or her employment.
(11) No indebtedness between CBT or any other member of the CBT Affiliated
Group, on the one hand, and Ameribanc or MBI or any other member of the MBI
Affiliated Group, on the other hand, exists or will exist prior to the
Merger that (a) was issued or acquired at a discount, (b) will be settled,
as a result of the Merger, at a discount, or (c) will result in the
recognition of gain under Treasury Regulation Sec. 1.1502-13. No
"installment obligation" (as the quoted term is defined for purposes of Code
section 453B), between CBT, on the one hand, and Ameribanc, on the other
hand, exists or will exist prior to the Merger that will be extinguished as
a result of the Merger.
(12) The payment of cash in lieu of fractional shares of MBI Common Stock
in the Merger will be solely for the purpose of avoiding the expense and
inconvenience to MBI of issuing fractional shares and will not represent
separately bargained-for consideration. The total cash consideration that
will be paid in the Merger to the CBT shareholders in lieu of fractional
shares of MBI Common Stock will not exceed one percent of the total
consideration that will be issued in the transaction to the CBT shareholders
in exchange for their shares of CBT Common Stock. The fractional share
interests of each CBT shareholder will be aggregated, and no CBT shareholder
will receive cash in lieu of fractional share interests in an amount equal
to or greater than the value of one full share of MBI Common Stock.
(13) All payments made in lieu of fractional shares of MBI Common Stock
will be funded with assets of MBI. No such payments will be funded with
assets of Ameribanc or CBT.
(14) None of the compensation to be paid or accrued after the Merger to or
for the benefit of any shareholder-employee of CBT will be separate
consideration for, or allocable to, any of his or her shares of CBT Common
Stock; none of the shares of MBI Common Stock received in
<PAGE> 7
the Merger by any CBT shareholder-employee will be separate consideration for,
or allocable to, any employment agreement; and all compensation to be paid or
accrued after the Merger to or for the benefit of any CBT shareholder-employee
will be for services actually rendered in the ordinary course of his or her
employment and will be commensurate with amounts paid to third parties
bargaining at arm's length for similar services.
(15) With regard to the Rights Agreement by and between MBI and Mercantile
Bank of St. Louis National Association, as rights agent, dated May 23, 1988
(the "Rights Agreement"), no "Distribution Date" (as the quoted term is
defined in the Rights Agreement) has occurred, and the Merger will not cause
the occurrence of a Distribution Date.
(16) Neither MBI nor any other member of the MBI Affiliated Group has
owned, directly, indirectly or constructively (under section 318 of the
Code), any stock of CBT within the last five years.
(17) No material terms or conditions of the Merger Agreement (including the
schedules and exhibits thereto) have been waived or modified. The Merger
Agreement represents the complete agreement among MBI, Ameribanc and CBT
regarding the Merger.
The undersigned HEREBY AGREES to immediately communicate in writing to
Thompson Coburn at One Mercantile Center, St. Louis, Missouri 63101, to the
attention of Charles H. Binger, any information that could indicate (i) any
of the foregoing representations was inaccurate when made, or (ii) any of
the foregoing representations would be inaccurate if it were made again
immediately before the Merger.
IN WITNESS WHEREOF, I have hereunto signed my name and affixed the
seal of MBI this ----- day of ------------, 1998.
------------------------------
<PAGE> 8
Exhibit B
CERTIFICATE
-----------
The undersigned, * , [Undersigned's Title] of CBT
--------------
Corporation, a Kentucky corporation ("CBT"), HEREBY CERTIFIES that (a) I am
familiar with the terms and conditions of the Agreement and Plan of Merger
by and among Mercantile Bancorporation Inc., a Missouri corporation ("MBI"),
Ameribanc, Inc., a Missouri corporation ("Ameribanc"), and CBT dated January
10, 1998, including the schedules and exhibits thereto (the "Merger
Agreement"), and (b) I am aware that (i) this Certificate will be relied on
by Thompson Coburn, counsel for MBI, in rendering its opinion to CBT that
the merger of CBT with and into Ameribanc (the "Merger") will constitute a
reorganization within the meaning of section 368(a)(1) of the Internal
Revenue Code of 1986, as amended (the "Code"), and (ii) the representations
and undertaking recited herein will survive the Merger.
The undersigned HEREBY FURTHER CERTIFIES, ON BEHALF OF CBT, that:
1 The fair market value of the MBI common stock, par value $.01 per
share ("MBI Common Stock"), to be received by each CBT shareholder in the
Merger (including cash to be received in lieu of fractional shares of MBI
Common Stock, if any) will be approximately equal to the fair market value
of the CBT common stock, no par value ("CBT Common Stock"), surrendered in
the Merger by each such shareholder.
2 With the exception of Common Stock held by Citizens Bank and Trust
Company of Paducah in a fiduciary capacity, to the best knowledge of the
undersigned, no person owns, actually or constructively within the meaning
of Code section 318, 5% or more of the CBT Common Stock. To the best
knowledge of the undersigned, there is no plan, intention or other
arrangement (including any option or pledge) on the part of the holders of
CBT Common Stock to sell, exchange or otherwise dispose of a number of
shares of MBI Common Stock received by such holders in the Merger that would
reduce such holders' aggregate ownership of MBI Common Stock to a number of
shares having a value, as of the date on which the Merger is consummated
(the "Effective Date"), of less than 50 percent of the value of all of the
formerly outstanding CBT Common Stock as of the Effective Date. For
purposes of this representation, shares of CBT Common Stock exchanged for
cash or other property, surrendered by dissenters, or exchanged for cash in
lieu of fractional shares of MBI Common Stock will be treated as outstanding
on the Effective Date. Moreover, all shares of CBT Common Stock and shares
of MBI Common Stock held by CBT shareholders and otherwise sold, redeemed,
or disposed of before or after the Effective Date will be taken into account
in making this representation.
<PAGE> 9
3 CBT will transfer to Ameribanc in the Merger assets representing at
least 90 percent of the fair market value of the net assets and at least 70
percent of the fair market value of the gross assets, in each case, that
were held by CBT immediately prior to the Merger. For purposes of this
representation, CBT assets used to pay shareholders who receive cash, and
CBT assets used to pay expenses of the Merger or to fund any redemption or
distribution within 24 months before the Merger (except for regular, normal
dividends) shall be included as assets of CBT held immediately prior to the
Merger. For purposes of this representation, (i) assets of all members of
CBT's "affiliated group" (as the quoted term is defined in Code section
1504, the "CBT Affiliated Group") shall be treated as assets of CBT, and
(ii) any asset of CBT or any other member of the CBT Affiliated Group that
is disposed of within 24 months before the Merger shall be treated as an
asset of CBT held immediately prior to the Merger, excluding for purposes of
this clause (ii) any asset disposed of in the ordinary course of business or
otherwise for fair market value consideration (other than consideration
consisting of stock or other "Equity Securities" (as the quoted term is
defined in the Merger Agreement) of CBT or any other member of the CBT
Affiliated Group).
4 At the time of the Merger and except with regard to Transaction Costs
(as defined below), each liability of CBT and each liability to which an
asset of CBT is subject will have been incurred by CBT in the ordinary
course of business and no such liability will have been incurred in
anticipation of the Merger. In addition, at the time of the Merger and
except with regard to Transaction Costs, CBT will not, directly or
indirectly, have paid (or loaned) any amount or incurred any liability to or
for the benefit of, or assumed or cancelled any liability of, any CBT
shareholder in connection with the Merger. For purposes of this
representation, (a) the term "CBT" shall be deemed also to refer to each
other member of the CBT Affiliated Group, (b) the term "liability" shall
include any undertaking to pay or to cause the reduction, release, or
extinguishment of, any obligation, without regard to whether any such
undertaking or obligation is contingent or legally enforceable (for example
and without limitation, the term "liability" includes an unenforceable
agreement to cause the repayment of an obligation guaranteed by a CBT
shareholder or to cause by other means the release of such guaranty), and
(c) the term "Transaction Costs" shall mean amounts paid or liabilities
incurred in connection with the Merger (i) to dissenters, if any, (ii) for
legal, accounting, and investment banking and/or advisor services rendered
to CBT or to any other member of the CBT Affiliated Group, if any, and (iii)
as compensation to any employee of CBT or of any other member of the CBT
Affiliated Group for services rendered in the ordinary course of his or her
employment.
5 Before the Merger, CBT will not have outstanding any warrants,
options, convertible securities, or any other type of right (including any
preemptive right) pursuant to which
<PAGE> 10
any person could acquire stock in CBT that, if exercised or converted after
the Merger, would affect MBI's retention of control of Ameribanc (within the
meaning of section 368(c) of the Code).
6 Expenses, if any, that are incurred in connection with the Merger and
are properly attributable to CBT's shareholders will be paid by those
shareholders and not by CBT. With the exception of those printing expenses
and filing fees described in Section 5.08 of the Merger Agreement, CBT will
pay its own expenses that are incurred in connection with the Merger.
7 No indebtedness between CBT or any other member of the CBT Affiliated
Group, on the one hand, and Ameribanc or MBI or any other member of MBI's
"affiliated group" (as the quoted term is defined in Code section 1504, the
"MBI Affiliated Group") on the other hand, exists or will exist prior to the
Merger that (a) was issued or acquired at a discount, (b) will be settled,
as a result of the Merger, at a discount, or (c) will result in the
recognition of gain under Treasury Regulation Sec. 1.1502-13. No
"installment obligation" (as the quoted term is defined for purposes of Code
section 453B), between CBT, on the one hand, and Ameribanc, on the other
hand, exists or will exist prior to the Merger that will be extinguished as
a result of the Merger.
8 The fair market value of the assets of CBT to be transferred to
Ameribanc will exceed the sum of the amount of liabilities to be assumed by
Ameribanc, plus the amount of liabilities, if any, to which the assets to be
transferred are subject.
9 The payment of cash in lieu of fractional shares of MBI Common Stock
will be solely for the purpose of avoiding the expense and inconvenience to
MBI of issuing fractional shares and will not represent separately
bargained-for consideration. The total cash consideration that will be paid
in the Merger to the CBT shareholders in lieu of fractional shares of MBI
Common Stock will not exceed one percent of the total consideration that
will be issued in the transaction to the CBT shareholders in exchange for
their shares of CBT Common Stock. The fractional share interests of each
CBT shareholder will be aggregated, and no CBT shareholder will receive cash
in lieu of fractional share interests in an amount equal to or greater than
the value of one full share of MBI Common Stock.
10 None of the compensation paid or accrued before the Merger to or for
the benefit of any CBT shareholder-employee will be separate consideration
for, or allocable to, any of his or her shares of CBT Common Stock; none of
the shares of MBI Common Stock received in the Merger by any CBT
shareholder-employee will be separate consideration for, or allocable to,
any employment agreement; and all compensation paid or accrued before the
Merger to or for the benefit of any CBT shareholder-employee will be for
services actually rendered in the ordinary course of his or her employment
and will be commensurate with amounts paid to third parties bargaining at
arm's length for similar services.
<PAGE> 11
11 Except for dispositions to be made in the ordinary course of business
or otherwise for fair market value consideration (other than consideration
consisting of stock or other Equity Securities of CBT or any other member of
the CBT Affiliated Group), CBT is aware of no legal or contractual
obligation that could result in a sale or other disposition (whether by
dividend distribution or otherwise) of (a) any assets of CBT acquired in the
Merger, or (b) any assets of any other member of the CBT Affiliated Group.
12 CBT is not an investment company as defined in section
368(a)(2)(F)(iii) and (iv) of the Code, or CBT meets the requirements of
section 368(a)(2)(F)(ii) of the Code.
13 No material terms or conditions of the Merger Agreement (including the
schedules and exhibits thereto) have been waived or modified. The Merger
Agreement represents the complete agreement among MBI, Ameribanc and CBT
regarding the Merger.
The undersigned HEREBY AGREES to immediately communicate in writing to
Thompson Coburn at One Mercantile Center, St. Louis, Missouri 63101, to the
attention of Charles H. Binger, any information that could indicate (i) any
of the foregoing representations was inaccurate when made, or (ii) any of
the foregoing representations would be inaccurate if it were made again
immediately before the Merger.
IN WITNESS WHEREOF, I have hereunto signed my name and affixed the
seal of CBT this ----- day of ---------------, 1998.
--------------------------------------
<PAGE> 1
Exhibit 23.1
------------
[Letterhead of KPMG Peat Marwick LLP]
To the Board of Directors and Shareholders of
Mercantile Bancorporation Inc.:
We consent to the use of our report incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
St. Louis, Missouri
April 10, 1998
<PAGE> 1
Exhibit 23.2
------------
[Letterhead of Arthur Andersen LLP]
To the Board of Directors and Shareholders of
CBT Corporation:
As independent public accountants, we hereby consent to the use of our report
on CBT Corporation and subsidiaries (and to all references to our Firm)
incorporated by reference in or made a part of this registration statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Nashville, Tennessee
April 10, 1998
<PAGE> 1
[EXHIBIT 23.3]
[Letterhead of Morgan Stanley & Co. Incorporated]
[CONSENT OF MORGAN STANLEY & CO. INCORPORATED]
April 10, 1998
CBT Corporation
333 Broadway
Paducah, KY 42001
Members of the Board:
We hereby consent to the inclusion in this Registration Statement on
Form S-4 and related Proxy Statement/Prospectus with respect to the proposed
merger of CBT Corporation with and into Ameribanc, Inc., a Missouri corporation
and wholly owned subsidiary of Mercantile Bancorporation Inc., of our opinion
letter appearing as Annex A to the Proxy Statement/Prospectus which is part
of such Registration Statement, and to the references of our firm name
therein. In giving such consent, we do not thereby admit that we come within
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations adopted by the
Securities and Exchange Commission thereunder nor do we admit that we are
experts with respect to any part of such Registration Statement within the
meaning of the term "experts" as used in the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Kristen Huntley
