<PAGE>
As filed with the Securities and Exchange Commission on December 19, 1997
Registration No.333- ______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
COMMERCIAL FEDERAL CORPORATION
(Exact name of the registrant as specified in its articles of incorporation)
Nebraska 6135 47-0658852
(State or other jurisdiction of (Primary Standard (IRS Employer
incorporation or organization) Industrial Classification Identification No.)
Code Number)
2120 South 72nd Street
Omaha, Nebraska 68124
(402) 554-9200
(Address, including zip code, and telephone number,
including area code, of the registrant's principal executive offices)
Mr. James A. Laphen, President
Commercial Federal Corporation
2120 South 72nd Street
Omaha, Nebraska 68124
(402) 390-5361
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies of all communications to:
Cynthia R. Cross, Esquire Richard Fisch, Esquire
Housley Kantarian & Bronstein, P.C. AND Malizia, Spidi, Sloane & Fisch, P.C.
1220 19th Street, N.W., Suite 700 1301 K Street, N.W., Suite 700 East
Washington, D.C. 20036 Washington, D.C. 20005
Approximate date of commencement of proposed sale of the securities to the
public: At the Acquisition Merger Effective Time, as defined in the
Reorganization and Merger Agreement dated as of September 2, 1997 by and among
the Registrant, Commercial Federal Bank, a Federal Savings Bank, Mid Continent
Bancshares, Inc. and Mid Continent Federal Savings Bank, attached as Annex A to
the Prospectus/Proxy 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 number of the earlier effective
registration statement for the same offering. [_] ________________
If this form is a post-effective amendment filed pursuant to Rule 462(b) under
the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [_] ________________
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 Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
Calculation of Registration Fee
<TABLE>
<CAPTION>
==========================================================================================================================
Proposed maximum Proposed maximum Amount
Title of each class of Amount to offering price aggregate offering of
securities to be registered be registered per unit price registration fee
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.01 par value (and
associated stock purchase rights) (1) 2,760,136 shares (2) N/A $96,163,953 (3) $28,369 (3)
==========================================================================================================================
</TABLE>
(1) Prior to the occurrence of certain events, the stock purchase rights will
not be evidenced separately from the common stock.
(2) Represents the estimated maximum number of shares of common stock, par value
$.01 per share, of Commercial Federal Corporation ("Commercial"), expected
to be issued in exchange for up to 2,116,750 shares of common stock, par
value $.10 per share, of Mid Continent Bancshares, Inc. ("Mid Continent"),
upon consummation of the merger of Mid Continent with and into Commercial,
described herein.
(3) Estimated solely for the purpose of calculating the registration fee. The
registration fee has been computed pursuant to Rule 457(f)(1) under the
Securities Act of 1933, as amended, based on the average of the high and low
prices ($45.43) of shares of Mid Continent common stock on December __,
1997.
================================================================================
<PAGE>
[MID CONTINENT BANCSHARES, INC. LETTERHEAD]
January 7, 1998
Dear Fellow Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders (the
"Meeting") of Mid Continent Bancshares, Inc. ("Mid Continent"), which will be
held at the [El Dorado Country Club, 1100 Country Club Lane, El Dorado, Kansas]
on February 24, 1998, at 2:00 p.m. At the meeting, you will be asked to
consider and vote upon a Reorganization and Merger Agreement, dated September 2,
1997 (the "Merger Agreement"), by and among Commercial Federal Corporation
("Commercial") and Commercial Federal Bank, a Federal Savings Bank (the "Bank"),
and Mid Continent and Mid-Continent Federal Savings Bank ("Mid-Continent
Savings"), under which Mid Continent will be merged (the "Merger") with and into
Commercial. Upon consummation of the Merger, each outstanding share of Mid
Continent's common stock will be converted into the right to receive Commercial
common stock and cash in lieu of fractional shares of Commercial common stock,
based upon an exchange ratio, all as more fully described in the accompanying
Prospectus/Proxy Statement. As part of the vote on the Merger, you will also be
asked to consider and vote upon the approval and adoption of an amendment to Mid
Continent's Articles of Incorporation (the "Mid Continent Articles") which would
repeal Article 12 of the Mid Continent Articles in its entirety. Article 12 of
the Mid Continent Articles currently imposes restrictions on the acquisition of
more than 10% of Mid Continent's outstanding common stock. If the Merger is not
consummated, the Mid Continent Articles will not be amended.
In addition, you will be asked to consider and vote upon (i) a proposal to
adjourn the Meeting to permit further solicitation, if necessary, to approve the
Merger and the Merger Agreement or the Articles Amendment (ii) the election of
two directors of Mid Continent, and (iii) the ratification of the appointment of
Deloitte & Touche LLP as independent auditors of Mid Continent for the fiscal
year ending September 30, 1998.
Enclosed with this letter are a Notice of Annual Meeting of Mid Continent's
stockholders and the Prospectus/Proxy Statement, which describes in detail the
proposed Merger, the background of the Merger, and other related information.
Also enclosed is a proxy solicited by Mid Continent's Board of Directors in
connection with the Meeting.
RP Financial, LC., an investment banking firm, has issued its opinion to
Mid Continent's board of directors regarding the fairness, from a financial
point of view, of the consideration to be received by the stockholders of Mid
Continent pursuant to the Merger Agreement as of the date of such opinion. A
copy of the opinion is attached as Annex B to the Prospectus/Proxy Statement.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE PROPOSED MERGER AND
RECOMMENDS THAT STOCKHOLDERS VOTE THEIR SHARES "FOR" APPROVAL OF THE MERGER, THE
AMENDMENT TO THE MID CONTINENT ARTICLES, AND THE OTHER PROPOSALS PRESENTED. THE
BOARD OF DIRECTORS BELIEVES THAT THE PROPOSED MERGER IS IN THE BEST INTEREST OF
MID CONTINENT AND ITS STOCKHOLDERS. THE AFFIRMATIVE VOTE OF EIGHTY PERCENT
(80%) OF MID CONTINENT'S OUTSTANDING SHARES ENTITLED TO VOTE IS NECESSARY TO
APPROVE THE ARTICLES AMENDMENT REQUIRED FOR THE MERGER. ACCORDINGLY, FAILURE TO
VOTE, EITHER BY FAILING TO RETURN YOUR PROXY CARD OR FAILING TO VOTE IN PERSON
AT THE MEETING WILL HAVE THE EFFECT OF A VOTE AGAINST THE MERGER.
<PAGE>
We urge you to consider carefully all of the materials in the
Prospectus/Proxy Statement and to execute and return the enclosed proxy as soon
as possible. If you attend the Meeting, you may vote in person if you wish,
even though you have previously returned your proxy.
Sincerely,
Richard T. Pottorff
Chairman of the Board, President
and Chief Executive Officer
PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME. YOU WILL RECEIVE
INSTRUCTIONS FOLLOWING THE MERGER FOR EXCHANGE OF STOCK CERTIFICATES.
<PAGE>
MID CONTINENT BANCSHARES, INC.
124 West Central
El Dorado, Kansas 67042
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 24, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of Mid Continent Bancshares, Inc. ("Mid Continent") will be held on
February 24, 1998, at the [El Dorado Country Club, 1100 Country Club Lane, El
Dorado, Kansas] at 2:00 p.m. local time, for the purpose of considering and
voting upon the following:
1. A proposal to approve the Reorganization and Merger Agreement (the "Merger
Agreement") dated September 2, 1997, by and among Commercial Federal
Corporation ("Commercial"), Commercial Federal Bank, a Federal Savings Bank
(the "Bank"), Mid Continent, and Mid-Continent Federal Savings Bank ("Mid-
Continent Savings"), pursuant to which Mid Continent will be merged with
and into Commercial (the "Merger"), and stockholders of Mid Continent will
receive Commercial Common Stock, and cash in lieu of fractional shares of
Commercial Common Stock, for each share of Mid Continent Common Stock held
by them, based upon an exchange ratio as more fully described in the
accompanying Prospectus/Proxy Statement.
2. A proposal to approve an amendment to Mid Continent's Articles of
Incorporation in connection with the Merger Agreement (the "Articles
Amendment"). The Articles Amendment would repeal the five year prohibition
against acquisition of more than 10% of Mid Continent's Common Stock
contained in Article 12 of the Mid Continent Articles. The Merger will not
be consummated without approval of the Articles Amendment.
3. A proposal to adjourn the Meeting to permit further solicitation in the
event that an insufficient number of shares is present in person or by
proxy to approve the Merger and the Merger Agreement or the Articles
Amendment.
4. The election of two directors of Mid Continent.
5. The ratification of the appointment of Deloitte & Touche llp as independent
auditors of Mid Continent for the fiscal year ending September 30, 1998.
The transaction of such other matters as may properly come before the
Meeting or any adjournments thereof may also be acted upon. The Board of
Directors is not aware of any other business to come before the Meeting. Any
action may be taken on the foregoing proposals at the Meeting on the date
specified above or on any date or dates to which, by original or later
adjournment, the Meeting may be adjourned.
Only stockholders of record at the close of business on the record date,
January 5, 1998, are entitled to notice of and to vote at the Meeting and any
adjournments thereof. The affirmative vote of not less than eighty percent
(80%) of outstanding Mid Continent Common Stock entitled to vote is necessary to
approve the Articles
<PAGE>
Amendment required for the Merger. Accordingly, failure to vote either by
failing to return your proxy or failing to vote in person at the Meeting will
have the same effect as a vote against the Articles Amendment. In the event
there are not sufficient shares represented for a quorum or votes to approve the
Merger and the Merger Agreement or the Articles Amendment at the Meeting, Mid
Continent's Board of Directors may adjourn the Meeting to permit further
solicitation. We urge you to execute and return the enclosed proxy as soon as
possible to ensure that your shares will be represented at the Meeting.
By Order of the Board of Directors
Cheryl A. Wilkerson
Secretary
El Dorado, Kansas
January 7,1998
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR EACH OF THE
PROPOSALS STATED ABOVE. PLEASE SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY
AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON. YOU MAY
REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS VOTED AT THE MEETING.
<PAGE>
Prospectus/Proxy Statement
----------------------------------
COMMERCIAL FEDERAL CORPORATION
Prospectus
Up to 2,760,136 Shares of Common Stock
par value $.01 per share
(subject to adjustment)
----------------------------------
----------------------------------
MID CONTINENT BANCSHARES, INC.
Proxy Statement
For Annual Meeting of Stockholders
To Be Held on February 24, 1998
----------------------------------
This Prospectus/Proxy Statement is being furnished to the holders of the
common stock, par value $.10 per share ("Mid Continent Common Stock") of Mid
Continent Bancshares, Inc. ("Mid Continent") in connection with the solicitation
of proxies by Mid Continent's Board of Directors for use at its annual meeting
of stockholders (the "Annual Meeting") to be held at the [El Dorado Country
Club, 1100 Country Club Lane, El Dorado, Kansas], on Tuesday, February 24, 1998
at 2:00 p.m., local time.
The purposes of the Annual Meeting and the matters to be acted upon are:
(i) to consider and vote upon the proposed merger of Mid Continent into
Commercial Federal Corporation ("Commercial"), with Commercial as the surviving
corporation (the "Acquisition Merger"), in accordance with a Reorganization and
Merger Agreement dated September 2, 1997 by and between Commercial; Commercial
Federal Bank, a Federal Savings Bank (the "Bank"), the wholly-owned savings
institution subsidiary of Commercial; Mid Continent; and Mid-Continent Federal
Savings Bank ("Mid-Continent Savings"), the wholly-owned savings institution
subsidiary of Mid Continent, dated September 2, 1997 (the "Merger Agreement"),
which sets forth the terms and conditions of the Acquisition Merger and also
provides for the subsequent merger of Mid-Continent Savings into the Bank; (ii)
to approve and adopt an amendment to Mid Continent's Articles of Incorporation
(the "Mid Continent Articles") that would repeal the five year prohibition
against acquisition of more than 10% of Mid Continent Common Stock that is
contained in Article 12 of the Articles (the "Articles Amendment"); (iii) to
consider and vote upon adjournment of the Annual Meeting if necessary to permit
further solicitation of proxies in the event that there are not sufficient votes
at the time of the Annual Meeting to approve the Merger and the Merger Agreement
or the Articles Amendment; (iv) to elect two directors of Mid Continent; (v) to
ratify the appointment of Deloitte & Touche LLP as independent auditors of Mid
Continent for the fiscal year ending September 30, 1998; and (vi) to consider
and vote upon such other business as may properly come before the Annual Meeting
or any adjournments thereof.
Pursuant to the Merger Agreement, each share of Mid Continent Common Stock
outstanding at the effective time of the Acquisition Merger (the "Acquisition
Merger Effective Time") will be converted into the right to receive a number of
shares of Commercial Common Stock, par value $.01 per share (the "Commercial
Common Stock") (such number of shares referred to as the "Exchange Ratio") based
upon the "Average NYSE Closing Price" of Commercial Common Stock (i.e., the
arithmetic mean of the per share closing price of the Commercial Common Stock as
reported on the New York Stock Exchange ("NYSE") for a 20-day period preceding
the effective time of the Acquisition Merger (the "Determination Period")) as
follows: (i) if the Average NYSE Closing Price is greater than $29.33, the
Exchange Ratio shall be 1.3039 of shares of Commercial Common Stock; (ii) if
the Average NYSE Closing Price is equal to or greater than $24.00 but equal to
or less than $29.33, the Exchange Ratio shall be that number of shares of
Commercial Common Stock equal to the quotient that results by dividing $38.25 by
the Average NYSE Closing Price; and (iii) if
<PAGE>
the Average Closing Price is less than $24.00, the Exchange Ratio shall be
1.5937 shares of Commercial Common Stock; provided, however, that if the
Average NYSE Closing Price is less than $22.00, Mid Continent will have the
right to terminate the Merger Agreement unless Commercial elects to adjust the
Exchange Ratio to equal $35.08 divided by the Average NYSE Closing Price. The
shares of Commercial Common Stock and cash paid in lieu of fractional shares to
be received by holders of Mid Continent Common Stock pursuant to the Merger
Agreement are referred to herein as the "Merger Consideration"). Based on the
closing price per share of Commercial Common Stock on the NYSE on January __,
1998, of $_____, each share of Mid Continent Common Stock would be exchanged for
1.3039 shares of Commercial Common Stock. Cash will be paid in lieu of
fractional shares.
The number of shares of Commercial Common Stock to be received by Mid
Continent stockholders, the Average NYSE Closing Price, as well as all per share
data included herein with respect to Commercial have been adjusted to reflect a
three-for-two stock split effected in the form of a 50% stock dividend declared
by Commercial on November 17, 1997 and distributed on December 15, 1997 to
stockholders of record as of November 28, 1997. Fractional shares resulting from
the stock split were paid in cash.
Commercial has filed a registration statement on Form S-4 (the
"Registration Statement") with the Securities and Exchange Commission (the
"Commission") pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the shares of the Commercial Common Stock to
be issued upon consummation of the Acquisition Merger. See "Available
Information." This Prospectus/Proxy Statement constitutes a prospectus of
Commercial with respect to the issuance of shares of Commercial Common Stock to
the stockholders of Mid Continent upon consummation of the Acquisition Merger.
THE BOARD OF DIRECTORS OF MID CONTINENT BELIEVES THAT THE ACQUISITION
MERGER IS IN THE BEST INTERESTS OF MID CONTINENT'S STOCKHOLDERS AND UNANIMOUSLY
RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE APPROVAL OF THE ACQUISITION MERGER,
INCLUDING THE MERGER AGREEMENT, AND THE ARTICLES AMENDMENT.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, THE OFFICE OF THRIFT SUPERVISION, THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY STATE AGENCY, NOR HAS SUCH COMMISSION, OFFICE,
CORPORATION OR AGENCY PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE SHARES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR DEPOSITS AND ARE NOT
INSURED BY THE SAVINGS ASSOCIATION INSURANCE FUND, THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
This Prospectus/Proxy Statement and the accompanying proxy card are first
being sent to the stockholders of Mid Continent on or about January 7, 1998.
This Prospectus/Proxy Statement does not cover any resales of the
Commercial Common Stock offered hereby to be received by the stockholders deemed
to be affiliates of Commercial or Mid Continent upon consummation of the
Acquisition Merger. No person is authorized to make use of this
Prospectus/Proxy Statement in connection with such resales, although such
securities may be traded without the use of this Proxy Statement/Prospectus by
those stockholders of Commercial not deemed to be affiliates of Commercial or
Mid Continent.
The date of this Prospectus/Proxy Statement is January __, 1998
<PAGE>
PROSPECTUS/PROXY STATEMENT
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
AVAILABLE INFORMATION................................................................................
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE......................................................
SUMMARY..............................................................................................
The Annual Meeting of Mid Continent Stockholders.....................................................
Commercial Federal Corporation and Commercial Federal Bank, a Federal Savings Bank...................
Mid Continent Bancshares, Inc. and Mid-Continent Federal Savings Bank................................
The Merger...........................................................................................
Comparison of Stockholder Rights.....................................................................
Adjournment of Annual Meeting........................................................................
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
OF COMMERCIAL FEDERAL CORPORATION..................................................................
Financial Condition Data and Capital Ratios..........................................................
Operating Data.......................................................................................
Operating Ratios and Other Data......................................................................
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
OF MID CONTINENT BANCSHARES, INC. .................................................................
Financial Condition Data and Capital Ratios..........................................................
Operating Data.......................................................................................
Operating Ratios and Other Data......................................................................
UNAUDITED PRO FORMA COMBINED PER SHARE DATA..........................................................
INFORMATION CONCERNING THE ANNUAL MEETING............................................................
General..............................................................................................
Record Date; Vote Required...........................................................................
Voting of Proxies; Revocability of Proxies; Solicitation of Proxies..................................
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE OF MID CONTINENT.............................
COMMERCIAL FEDERAL CORPORATION AND
COMMERCIAL FEDERAL BANK, A FEDERAL SAVINGS BANK....................................................
MID CONTINENT BANCSHARES, INC. AND
MID-CONTINENT FEDERAL SAVINGS BANK.................................................................
PROPOSAL 1 -- THE MERGER.............................................................................
General..............................................................................................
Background of the Merger.............................................................................
Reasons for the Merger and Recommendation of Mid Continent Board of Directors........................
Opinion of Financial Advisor.........................................................................
Conversion of Mid Continent Common Stock.............................................................
Treatment of Mid Continent Stock Options.............................................................
No Dissenters' Appraisal Rights......................................................................
The Bank Merger......................................................................................
Management after the Merger..........................................................................
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS (Continued) Page
----
<S> <C>
Representations and Warranties.......................................................................
Covenants Pending the Acquisition Merger.............................................................
Conditions to Consummation of the Merger.............................................................
Amendment or Termination of the Merger Agreement.....................................................
Expenses and Termination Fee.........................................................................
Required Regulatory Approvals........................................................................
Closing; Merger Effective Times......................................................................
Employee Benefit Plans after the Merger..............................................................
Interests of Certain Persons in the Merger...........................................................
Federal Income Tax Consequences......................................................................
Accounting Treatment.................................................................................
Resale of Commercial Common Stock; Restrictions on Transfer..........................................
New York Stock Exchange Listing......................................................................
Vote Required........................................................................................
MID CONTINENT VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF........................................
COMMON STOCK PRICES AND DIVIDENDS....................................................................
COMPARISON OF STOCKHOLDER RIGHTS.....................................................................
PROPOSAL 2 -- ARTICLES AMENDMENT.....................................................................
PROPOSAL 3 -- ADJOURNMENT OF ANNUAL MEETING..........................................................
PROPOSAL 4 -- ELECTION OF DIRECTORS..................................................................
PROPOSAL 5 -- RATIFICATION OF APPOINTMENT OF MID CONTINENT AUDITORS..................................
SOLICITATION OF PROXIES..............................................................................
STOCKHOLDER PROPOSALS................................................................................
MID CONTINENT FORM 10-K..............................................................................
LEGAL MATTERS........................................................................................
EXPERTS..............................................................................................
OTHER MATTERS........................................................................................
ANNEX:
Annex A -- Reorganization and Merger Agreement (excluding exhibits)............................. A-1
Annex B -- Opinion of RP Financial, L.C. ....................................................... B-1
Annex C -- Text of Article 12 of Articles of Incorporation of Mid Continent Bancshares, Inc.,
as proposed to be amended.......................................................... C-1
</TABLE>
ii
<PAGE>
No person is authorized to give any information or make any representation
other than those contained or incorporated in this Prospectus/Proxy Statement,
and, if given or made, such information or representation should not be relied
upon as having been authorized. This Prospectus/Proxy Statement does not
constitute an offer to exchange or sell, or a solicitation of an offer to
exchange or purchase, the securities offered by this Prospectus/Proxy Statement,
or the solicitation of a proxy, in any jurisdiction in which such offer or
solicitation is not authorized or to or from any person to whom it is unlawful
to make such offer or solicitation. The information contained in this
Prospectus/Proxy Statement speaks as of the date hereof unless otherwise
specifically indicated. Information contained in this Prospectus/Proxy Statement
regarding Commercial has been furnished by Commercial, and information herein
regarding Mid Continent has been furnished by Mid Continent. Neither Commercial
nor Mid Continent warrants the accuracy or completeness of information relating
to the other party.
AVAILABLE INFORMATION
Commercial has filed with the Commission the Registration Statement under
the Securities Act relating to the shares of Commercial Common Stock to be
issued in connection with the Acquisition Merger. This Prospectus/Proxy
Statement does not contain all the information set forth in the Registration
Statement, certain portions of which have been omitted pursuant to the rules and
regulations of the Commission. The information omitted may be obtained from the
public reference facilities of the Commission or inspected and copied at the
principal or regional offices of the Commission at the addresses listed below.
Commercial and Mid Continent are subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and, in
accordance therewith, file reports, proxy statements and other information with
the Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at its regional offices at Northwestern Atrium Center, 500 West
Madison, Suite 1400, Chicago, Illinois 60601, and World Trade Center, 13th
Floor, New York, New York 10048. Copies of such materials also can be obtained
from the Commission's Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Reports, proxy statements and other
information that have been filed electronically with the Commission may also be
obtained from the Commission's Website, the address of which is
http://www.sec.gov. In addition, the Commercial Common Stock is listed and
traded on the New York Stock Exchange. Reports, proxy statements and other
information regarding Commercial may be inspected at the offices of the New York
Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission by Commercial
(File No. 1-11515) are hereby incorporated by reference in this Prospectus/Proxy
Statement:
(i) Commercial's Annual Report on Form 10-K for the fiscal year ended
June 30, 1997;
(ii) Commercial's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997;
(iii) Commercial's Current Reports on Form 8-K dated August 18, 1997,
September 2, 1997, September 11, 1997, November 18, 1997 and December
8, 1997; and
(iv) the description of the Commercial Common Stock set forth at Item 1 of
Commercial's registration statement on Form 8-A dated July 17, 1995;
1
<PAGE>
The following documents previously filed with the Commission by Mid
Continent (File No. 0-23620) are hereby incorporated by reference in this
Prospectus/Proxy Statement:
(i) Mid Continent's Annual Report on Form 10-K for the fiscal year ended
September 30, 1996;
(ii) Mid Continent's Quarterly Reports on Form 10-Q for the quarters
ended December 31, 1996, March 31, 1997 and June 30, 1997; and
(iii) Mid Continent's Current Report on Form 8-K dated September 4, 1997.
In addition, Mid Continent's 1997 Annual Report to Stockholders accompanies
this Prospectus/Proxy Statement and is incorporated herein by reference.
All documents subsequently filed by Commercial with the Commission pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
of this Prospectus/Proxy Statement and prior to the date of the Annual Meeting
shall be deemed to be incorporated by reference in this Prospectus/Proxy
Statement and to be part hereof from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus/Proxy Statement to the extent that a statement
contained herein or in any subsequently filed document which also is or is
deemed to be incorporated herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed to constitute a part of
this Prospectus/Proxy Statement, except as so modified or superseded.
This Prospectus/Proxy Statement incorporates by reference other documents
relating to Commercial and Mid Continent which are not presented herein or
delivered herewith. These documents are available upon request without charge,
in the case of documents relating to Commercial, directed to Mr. Gary L. Matter,
Commercial's Corporate Secretary, 2120 South 72nd Street, Omaha, Nebraska 68124,
telephone (402) 390-5176 or, in the case of documents relating to Mid Continent,
to Richard O. Nelson, Vice President, Mid Continent, 124 W. Central, El Dorado,
Kansas 67042, telephone (316) 321-2700. In order to ensure timely delivery of
any requested documents, the request should be made no later than the close of
business on February __, 1998.
2
<PAGE>
SUMMARY
This summary does not purport to be complete and is qualified in its
entirety by the detailed information and definitions appearing elsewhere herein,
the annexes hereto and documents incorporated by reference herein.
The Annual Meeting of Mid Continent Stockholders
The Annual Meeting will be held on Tuesday, February 24, 1998 at 2:00 p.m.
at the [El Dorado Country Club, 1100 Country Club Lane, El Dorado, Kansas]. At
the Annual Meeting, stockholders of Mid Continent will consider and vote upon
proposals (1) to approve the Acquisition Merger and the Merger Agreement; (2) to
approve the Articles Amendment; (3) to adjourn the Annual Meeting if necessary
to permit further solicitation of proxies in the event that there are not
sufficient votes at the time of the Annual Meeting to approve the Acquisition
Merger and Merger Agreement or the Articles Amendment; (4) to elect two
directors of Mid Continent; (5) to ratify the appointment of Deloitte & Touche
LLP as independent auditors of Mid Continent for the fiscal year ending
September 30, 1998; and (6) to vote upon any other business which may be
properly brought before the Annual Meeting. Stockholders of record at the close
of business on January 5, 1998 (the "Record Date") will be entitled to one vote
for each share then so held. The presence, in person or by proxy, of a majority
of the total number of outstanding shares of Mid Continent Common Stock is
necessary to constitute a quorum at the Annual Meeting. The affirmative vote of
the holders of at least a majority of the issued and outstanding shares of Mid
Continent Common Stock is required to approve the Acquisition Merger and the
Merger Agreement, whereas the affirmative vote of at least 80% of the issued and
outstanding shares of Mid Continent Common Stock is required to approve the
Articles Amendment. The affirmative vote of a majority of the shares of Mid
Continent Common Stock represented and voting at the Annual Meeting is required
to approve an adjournment of the Annual Meeting. Mid Continent's directors and
executive officers are expected to vote all of the 227,188 (11.38%) shares of
Mid Continent's outstanding Common Stock beneficially owned by them as of the
Record Date "FOR" approval of the Acquisition Merger and the Merger Agreement,
"FOR" approval of the Articles Amendment and "FOR" approval of the other
proposals.
For additional information, see "Information Concerning the Annual
Meeting" herein.
Commercial Federal Corporation and Commercial Federal Bank, a Federal Savings
Bank
Commercial is a unitary non-diversified savings and loan holding company
whose primary asset is the Bank, which is one of the largest depository
institutions in the Midwest. At September 30, 1997, Commercial had total assets
of $7.2 billion and total stockholders' equity of $444.3 million. Based upon
total assets at that date, Commercial was the 13th largest publicly held thrift
holding company in the United States. Commercial is a consumer-oriented
financial institution that emphasizes single-family residential and construction
real estate lending, consumer lending, commercial real estate lending, retail
deposit activities, including demand deposit accounts, and mortgage banking. At
November 30, 1997, Commercial operated 34 branch offices in Nebraska, 21 branch
offices in greater metropolitan Denver, Colorado, 19 branch offices in Oklahoma,
27 branch offices in Kansas and seven branch offices in Iowa. Throughout its 110
year history, Commercial has emphasized customer service. To serve its
customers, Commercial conducts loan origination activities through its 108
branch office network, loan offices of its wholly-owned mortgage banking
subsidiary and a nationwide correspondent network of mortgage loan originators.
Commercial also provides insurance and securities brokerage and other retail
financial services.
Commercial's strategy for growth emphasizes both internal and external
growth. Operations focus on increasing deposits, including demand accounts,
making loans (primarily single-family mortgage and consumer loans), community
banking, and providing customers with a full array of financial products and a
high level of customer service. As part of its long-term strategic plan,
Commercial intends to expand its operations within its market areas either
through direct marketing efforts aimed at increasing market share, branch
expansions, or opening additional branches. Commercial's retail strategy will
continue to be centered on attracting new customers and selling both new
3
<PAGE>
and existing customers multiple products and services. Additionally, Commercial
will continue to build and leverage an infrastructure designed to increase fee
and other income.
Complementing its strategy of internal growth, Commercial continues to
grow its present five-state franchise through an ongoing program of selective
acquisitions of other financial institutions. Future acquisition candidates will
be selected based on the extent to which the candidates can enhance Commercial's
retail presence in new or underserved markets and complement Commercial's
existing retail network.
Commercial's principal executive offices are located at 2120 South 72nd
Street, Omaha, Nebraska 68124, and its telephone number is (402) 554-9200.
For additional information, see "Commercial Federal Corporation and
Commercial Federal Bank, a Federal Savings Bank" herein.
Mid Continent Bancshares, Inc. and Mid-Continent Federal Savings Bank
Mid Continent. Mid Continent is a unitary savings and loan holding company
that was incorporated in January 1994 under the laws of the State of Kansas for
the purpose of acquiring all of the issued and outstanding common stock of Mid-
Continent Savings. This acquisition occurred in June 1994 at the time Mid
Continent changed its name from Mid Continent Federal Savings and Loan
Association of El Dorado, simultaneously converted from a mutual to stock
institution, and sold all of its outstanding capital stock to Mid Continent and
Mid Continent made its initial public offering of common stock. As of September
30, 1997, Mid Continent had total assets of $405.3 million, total deposits of
$236.3 million, and stockholders' equity of $40.0 million. The only subsidiary
of Mid Continent is Mid-Continent Savings. Mid-Continent Savings has one
subsidiary, Laredo Investment, Inc. which markets tax deferred annuities.
Mid Continent's and Mid-Continent Savings' executive offices are located
at 124 West Central, El Dorado, Kansas 67042 and their telephone number is (316)
321-2700.
Mid-Continent Savings. Mid-Continent Savings is a federally chartered
capital stock savings bank headquartered in El Dorado, Kansas. Mid-Continent
Savings was founded in 1925 as a Kansas chartered savings and loan association
under the name Mid-Continent Savings and Loan Association. In 1935, Mid-
Continent Savings adopted a federal charter and change its name to Mid Continent
Federal Savings and Loan Association of El Dorado. In June 1994, Mid-Continent
Savings converted from a federally chartered mutual savings and loan association
to its current form, a federally chartered capital stock savings bank subsidiary
of a savings and loan holding company. Mid-Continent Savings' deposits are
federally insured by the Federal Deposit Insurance Corporation ("FDIC").
Mid-Continent Savings is primarily engaged in the business of attracting
retail deposits from the general public and investing those deposits, together
with funds generated from operations, primarily in one- to four-family
residential mortgage loans. Mid-Continent Savings has offices in El Dorado,
Newton, Winfield, Augusta, Derby, and Wichita, Kansas, which are located in its
primary market area of Butler, Cowley, Sedgwick, and Harvey Counties in the
State of Kansas. The counties of Butler, Cowley, Sedgwick and Harvey, Kansas are
Mid-Continent Savings' primary market area for deposits and are located in south
central Kansas. This area was founded on agriculture and the oil and gas
industry, which continue to play a major role in the local economy. At September
30, 1997, Mid-Continent Savings reported total assets of approximately $405.3
million, loans of approximately $233.3 million, total deposits of approximately
$236.5 million and stockholders' equity of $36.2 million.
For additional information, see "Mid Continent Bancshares, Inc. and Mid-
Continent Federal Savings Bank" herein and Mid Continent's 1997 Annual Report to
Stockholders, which accompanies this Prospectus/Proxy Statement.
4
<PAGE>
The Merger
General. The Merger Agreement provides for the acquisition of Mid
Continent by Commercial, and the subsequent merger of Mid-Continent Savings into
the Bank, as follows: (i) Mid Continent will merge into Commercial, with
Commercial as the surviving corporation, pursuant to which the outstanding
shares of Mid Continent Common Stock will be converted into shares of Commercial
Common Stock and cash in lieu of fractional shares as set forth below under
" -- Conversion of Mid Continent Common Stock" (the "Acquisition Merger"); and
(ii) Mid-Continent Savings will, following the Acquisition Merger, merge into
the Bank, with the Bank as the surviving savings institution (the "Bank Merger")
(collectively, the "Merger"). At the Acquisition Merger Effective Time, Mid
Continent will have merged into Commercial. Upon the consummation of the Bank
Merger (the "Bank Merger Effective Time"), Mid-Continent Savings will have
merged into the Bank, Commercial will be the resulting savings institution
holding company, and the Bank will be the resulting subsidiary savings
institution. It is anticipated that the Bank Merger Effective Time will occur
immediately following the Acquisition Merger Effective Time.
The Board of Directors of Mid Continent considered the Merger and the
terms of the Merger Agreement, including the Exchange Ratio, in light of
economic, financial, legal, market and other factors and concluded that the
Merger is in the best interests of Mid Continent and its stockholders. The Board
of Directors of Mid Continent recommends that Mid Continent's stockholders vote
FOR approval of the Merger Agreement and the Merger.
For additional information, see "Proposal 1 -- The Merger -- General,"
" -- Background of the Merger" and " -- Reasons for the Merger and
Recommendations of the Mid Continent Board of Directors" herein and the Merger
Agreement attached as Annex A hereto.
Financial Advisor and Opinion of Financial Advisor. The Board of Directors
of Mid Continent has received a written opinion of RP Financial, L.C. ("RP
Financial"), Mid Continent's financial advisor, that, as of the date of such
opinion, based upon and subject to the assumptions, factors and limitations set
forth therein, the consideration to be received by holders of Mid Continent
Common Stock in the Acquisition Merger is fair from a financial point of view.
As discussed in "Proposal 1 -- The Merger -- Reasons for the Merger and
Recommendation of Mid Continent Board of Directors," RP Financial's opinion and
presentations were among the factors considered by Mid Continent's Board of
Directors in reaching the determination to approve the Merger Agreement. A copy
of the RP Financial opinion dated January ___, 1998 is attached as Annex B
hereto, and the description set forth herein is qualified in its entirety by
reference to this opinion. See "Proposal 1 -- The Merger -- Opinion of Financial
Advisor."
Conversion of Mid Continent Common Stock. Pursuant to the Merger
Agreement, each share of Mid Continent Common Stock outstanding at the
Acquisition Merger Effective Time (other than shares owned or held by
Commercial) will be converted into the right to receive a number of shares of
Commercial Common Stock (such number of shares referred to as the "Exchange
Ratio") based upon the "Average NYSE Closing Price" of Commercial Common Stock
(i.e., the arithmetic mean of the per share closing price of the Commercial
Common Stock as reported on the NYSE for the twenty-fifth through the sixth
trading day immediately preceding the later of (A) the date on which all
requisite federal and state regulatory approvals required to consummate the
transactions contemplated by the Merger Agreement are obtained, (B) the date of
the Annual Meeting, or (C) the 25th day of the month immediately preceding the
month in which the parties have scheduled in writing the closing of the
Acquisition Merger to occur, or the next succeeding business day (the
"Determination Period")) as follows: (i) if the Average NYSE Closing Price is
equal to or greater than $24.00 but equal to or less than $29.33, then the
Exchange Ratio shall be such number of shares of Commercial Common Stock equal
to the quotient that results by dividing $38.25 by the Average NYSE Closing
Price (a maximum of 1.5937 and a minimum of 1.3039 shares of Commercial Common
Stock); (ii) if the Average NYSE Closing Price is greater than $29.33, the
Exchange Ratio shall be 1.3039 shares of Commercial Common Stock; (iii) if the
Average NYSE Closing Price is less than $24.00, then the Exchange Ratio shall be
1.5937 shares of Commercial Common Stock; provided, however, that if the
Average NYSE Closing Price is less than $22.00 Mid Continent will have the right
to terminate the Merger Agreement unless Commercial elects to adjust the
Exchange Ratio to equal $38.05 divided by the Average NYSE Closing Price. Based
on the closing price per share of Commercial Common Stock on the NYSE on January
__, 1998 of $_____, each share of Mid Continent Common Stock would be exchanged
for _____ shares of
5
<PAGE>
Commercial Common Stock. Such Exchange Ratio may increase or decrease depending
on the Average NYSE Closing Price of Commercial Common Stock. Cash will be paid
in lieu of fractional shares. Shares of Mid Continent Common Stock owned or held
by Commercial or a subsidiary (other than in a fiduciary capacity) would be
cancelled. For additional information, see "Proposal 1 -- The Merger --
Conversion of Mid Continent Common Stock" herein.
The number of shares of Commercial Common Stock to be received by Mid
Continent stockholders, the Average NYSE Closing Price, as well as all per share
data included herein with respect to Commercial have been adjusted to reflect a
three-for-two stock split effected in the form of a 50% stock dividend declared
by Commercial on November 17, 1997 and distributed on December 15, 1997 to
stockholders of record as of November 28, 1997. Fractional shares resulting from
the stock split were paid in cash.
Treatment of Mid Continent Stock Options. Immediately prior to the
Acquisition Merger Effective Time, each holder of an option outstanding under
Mid Continent's 1994 Stock Option Plan (the "Mid Continent Option Plan") shall,
except as provided in the next paragraph, continue outstanding as an option to
purchase, in place of the purchase of each share of Mid Continent Common Stock,
the number of shares of Commercial Common Stock that would have been received by
the optionee in the Merger had the option been exercised in full (without regard
to any limitations contained therein on exercise) for shares of Mid Continent
Common Stock immediately prior to the Acquisition Merger upon the same terms and
conditions under the relevant option as were applicable immediately prior to the
Acquisition Merger Effective Time, except for appropriate pro rata adjustments
as to the relevant option price for shares of Commercial Common Stock
substituted therefor so that the aggregate option exercise price of shares
subject to an option immediately following the assumption and substitution shall
be the same as the aggregate option exercise price for such shares immediately
prior to such assumption and substitution.
Notwithstanding the foregoing, in the event Commercial advises Mid
Continent in writing no less than 45 days prior to the closing of the
Acquisition Merger that the Merger will not be accounted for as a pooling of
interests, then each holder of an outstanding option under the Mid Continent
Option Plan shall, in cancellation of such option (such cancellation to be
reflected in a written agreement), receive from Mid Continent, immediately prior
to the Acquisition Merger Effective Time, in lieu of the Commercial stock option
referred to in the preceding paragraph, a cash payment in the amount of the per
share value of the Merger Consideration, less the exercise price of such option,
net of any cash which must be withheld under federal and state income tax
requirements. For additional information, see "Proposal 1 -- The Merger --
Treatment of Mid Continent Stock Options" and "-- Interests of Certain Persons
in the Merger" herein.
Dissenters' Appraisal Rights. Under Kansas law, stockholders of Mid
Continent will not have any dissenters' rights of appraisal as a result of the
matters to be voted upon at the Annual Meeting. See "Proposal 1 -- The Merger --
No Dissenters' Appraisal Rights."
Conditions to the Merger. The obligations of Commercial and Mid Continent
to effect the Merger are jointly subject to a number of conditions regarding,
among other things, stockholder and regulatory approval of the Merger and
receipt of an opinion with respect to the tax effects of the Merger. The
obligations of Commercial and the Bank to effect the Merger are subject to a
number of additional conditions regarding, among other things, (i) receipt of a
customary legal opinion from Mid Continent's legal counsel; (ii) receipt by Mid
Continent and Mid-Continent Savings of certain third party consents and
approvals; (iii) receipt of a letter from Mid Continent's independent auditors
regarding certain financial information included in this Prospectus/Proxy
Statement and other matters; (iv) the absence of material adverse changes in the
financial condition, business or results of operations of Mid Continent and its
subsidiaries; (v) the accuracy of Mid Continent's and Mid-Continent Savings'
representations and their performance of obligations and compliance with
covenants and conditions under the Merger Agreement; (vi) the absence of any
material pending litigation; and (vii) the receipt of all required governmental
approvals without the imposition of any conditions which Commercial and the Bank
determine to be unduly burdensome on the conduct of the business of Commercial
or the Bank. The obligations of Mid Continent and Mid-Continent Savings to
effect the Acquisition Merger and the transactions contemplated in the Merger
Agreement are subject to a number of additional conditions regarding, among
other things, (i) receipt of a customary legal opinion from Commercial's legal
counsel; (ii)
6
<PAGE>
the accuracy of Commercial's and the Bank's representations and warranties and
their performance of obligations and compliance with covenants and conditions
under the Merger Agreement; (iii) receipt by Commercial and the Bank of certain
third party consents and approvals; and (iv) receipt of approval for listing on
the NYSE of the shares of Commercial Common Stock issuable pursuant to the
Merger Agreement, subject to official notice of issuance. For additional
information, see "Proposal 1 -- The Merger -- Conditions to Consummation of the
Merger" herein.
Required Regulatory Approvals. The Merger is subject to the approval of
the OTS. Following OTS approval of the Merger, the U.S. Department of Justice
may review the Merger and raise objections on antitrust grounds, though
objections on such grounds are not expected. For additional information, see
"Proposal 1 -- The Merger -- Required Regulatory Approvals" herein.
Termination of the Merger. The Merger Agreement may be terminated at any
time before the Acquisition Merger Effective Time, whether before or after
approval by Mid Continent stockholders, in a number of circumstances, including:
(a) by mutual consent of the parties; (b) at the election of either party, if
the closing of the Merger shall not have occurred on or before May 1, 1998; (c)
by either party upon the occurrence of an event which renders satisfaction of
one or more of the conditions to the obligations of the other party impossible;
(d) by Mid Continent at any time during the two business days commencing on the
business day immediately following the end of the Determination Period, if the
Average Closing Price of Commercial Common Stock is less than $22.00; provided,
however, that Mid Continent shall not be entitled to terminate the Merger
Agreement on this basis if Commercial exercises its option to adjust the
Exchange Ratio so that it equals the number obtained by dividing $35.08 by the
Average NYSE Closing Price of Commercial Common Stock; (e) by either party if
the shareholders of Mid Continent do not approve the Articles Amendment, in
which event Commercial shall be entitled to receive $200,000 from Mid Continent;
or (f) by Mid Continent, in the event the fiduciary duties of its Board of
Directors require such termination in connection with entering into an agreement
with a third party. In the event the Merger Agreement is terminated by Mid
Continent and, prior to such termination, a "Termination Event" (as such term is
defined herein) has occurred (except if such termination is due to (1) the
noncompliance of Commercial or the Bank with their obligations under the Merger
Agreement, (2) the decline of the Average NYSE Closing Price to below $22.00, or
(3) the failure to obtain Mid Continent shareholders' approval of the Articles
Amendment), Mid Continent will be obligated to pay a termination fee in the
amount of $3.0 million, inclusive of any expense reimbursements that may
otherwise be due under the Merger Agreement. For additional information, see
"Proposal 1 -- The Merger -- Amendment or Termination of the Merger Agreement"
and "-- Expenses and Termination Fee" herein.
Interests of Certain Persons in the Merger. Shares of Mid Continent Common
Stock held by directors, officers and employees of Mid Continent will be
converted into Commercial Common Stock under the Merger Agreement on the same
basis as shares held by other Mid Continent stockholders. Directors, officers
and employees of Mid Continent who hold unexercised options to purchase Mid
Continent Common Stock under the Mid Continent Option Plan at the Acquisition
Merger Effective Time will have their stock options converted into options to
purchase shares of Commercial Common Stock or cash in accordance with the terms
of the Merger Agreement.
At the Record Date, officers and directors of Mid Continent held options
to purchase 79,422 shares of Mid Continent Common Stock with exercise prices of
$11.75 per share.
It is also currently anticipated that Richard T. Pottorff, the Chairman
and Chief Executive Officer of Mid Continent, will become entitled to a
severance payment under his current employment agreements as a result of the
Merger. Mr. Pottorff will also receive $12,500 per month for three years under a
consulting agreement to be entered into with Commercial effective as of the
closing of the Merger. Further, Mid Continent officers Mr. Larry Goddard and Mr.
Harold Siemens may also become entitled to severance payments in connection with
the Merger, and will receive certain bonuses as of the effective date of the
Merger and possibly thereafter.
7
<PAGE>
Mid Continent's directors will receive certain payments in connection with
terminating Mid-Continent's Director Consultation and Retirement Plan and
Directors Change in Control Severance Plan. In addition, Commercial has agreed
to provide indemnification and insurance coverage to Mid Continent's directors
and officers on certain terms provided in the Merger Agreement.
For additional information, see "Proposal 1 -- The Merger -- Management
after the Merger," "-- Employee Benefit Plans after the Merger" and
"--Interests of Certain Persons in the Merger" herein.
Federal Income Tax Consequences. Commercial and Mid Continent will rely
upon an opinion of Deloitte & Touche llp, tax advisor to Commercial, to the
effect that, among other things, (i) the Acquisition Merger should be treated
for federal income tax purposes as a tax-free reorganization under Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"); (ii) the
gain, if any, to be realized by a Mid Continent shareholder who receives
Commercial Common Stock and cash in lieu of fractional shares in exchange for
Mid Continent Common Stock should be recognized, but not in excess of the amount
of cash received; and (iii) cash received by Mid Continent stockholders in lieu
of fractional share interests in Commercial Common Stock should be treated as
having been received as distributions in full payment in exchange for the
fractional share interests in Commercial Common Stock which they would otherwise
be entitled to receive and should qualify as capital gain or loss if the
stockholders held Mid Continent Common Stock as a capital asset at the
Acquisition Merger Effective Time. For additional information, see "Proposal 1
The Merger -- Federal Income Tax Consequences" herein.
Accounting Treatment. Commercial expects the Merger to be accounted for as
a pooling of interests, under which the recorded assets and liabilities of
Commercial and Mid Continent will be carried forward to the surviving
corporation in the Merger (Commercial) at their recorded amounts; income of the
surviving corporation will include income of Commercial and Mid Continent for
the entire fiscal year in which the Merger occurs; and the reported income of
Commercial and Mid Continent for prior periods will be combined and restated as
retained earnings of the surviving corporation (Commercial). See "Proposal 1
- -- The Merger -- Accounting Treatment."
Comparison of Stockholder Rights
Upon consummation of the Merger, holders of Mid Continent Common Stock,
whose rights are presently governed by Kansas law and the Mid Continent Articles
and bylaws, and indirectly Mid-Continent Savings' charter and bylaws, will
become stockholders of Commercial, a Nebraska corporation. Accordingly, their
rights will be governed by the articles of incorporation and bylaws of
Commercial and indirectly by the Bank's charter and bylaws. Certain differences
arise from the differences between the Mid Continent Articles and bylaws and the
articles of incorporation and bylaws of Commercial and between the charter and
bylaws of Mid-Continent Savings and the Bank. In addition, Commercial has in
effect a shareholder rights plan. For additional information, see "Comparison of
Stockholder Rights" herein.
Adjournment of Annual Meeting
In the event that there are not sufficient votes to approve the
Acquisition Merger and Merger Agreement or the Articles Amendment at the time of
the Annual Meeting, stockholders of Mid Continent will consider and vote upon a
proposal to adjourn the Annual Meeting for the solicitation of additional votes
in favor of such proposals. A majority of the shares of Mid Continent Common
Stock represented and voting at the Annual Meeting is required in order to
approve any such adjournment. Mid Continent's Board of Directors unanimously
recommends that stockholders vote FOR the proposal to adjourn the Annual Meeting
if necessary to permit further solicitation of proxies.
For additional information, see "Proposal 3 -- Adjournment of Annual
Meeting" herein.
8
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION OF
COMMERCIAL FEDERAL CORPORATION
The following summary consolidated financial data of Commercial is as of
and for the years ended June 30, 1997, 1996, 1995, 1994 and 1993. This
information has been derived from and should be read in conjunction with
Commercial's Consolidated Financial Statements and the Notes thereto, as well as
the information under the caption "Selected Consolidated Financial Data"
contained in Commercial's Annual Report on Form 10-K for the fiscal year ended
June 30, 1997, which is incorporated herein by reference. The following summary
consolidated interim financial data for the three months ended September 30,
1997 and 1996 has been derived from unaudited consolidated interim financial
statements which, in the opinion of management, include all adjustments
(consisting of normal recurring adjustments), considered necessary for a fair
presentation. The summary consolidated financial data for the three months ended
September 30, 1997 and 1996 should be read in conjunction with Commercial's
unaudited Consolidated Financial Statements and the Notes thereto for the three
months ended September 30, 1997 and 1996 included in Commercial's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1997, which is
incorporated herein by reference. The consolidated financial data for the three
months ended September 30, 1997 is not necessarily indicative of the operating
results to be expected for the entire fiscal year. On November 17, 1997, the
Board of Directors of Commercial authorized a three-for-two stock split to be
effected in the form of a 50 percent stock dividend to stockholders of record on
November 28, 1997. Par value remained at $.01 per share. The stock dividend was
distributed on December 15, 1997. Fractional shares resulting from the stock
split were paid in cash. All per share data and stock prices for all periods
presented in this Prospectus/Proxy Statement have been adjusted on a retroactive
basis to reflect the effect of this three-for-two stock split.
Financial Condition Data and Capital Ratios:
<TABLE>
<CAPTION>
At At June 30,
September 30, --------------------------------------------------------------
1997 1997 1996 1995 1994 1993
------------- ------ ------ ------ ------ ------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Total assets..................................... $7,207,143 $7,096,665 $6,607,670 $6,569,579 $5,982,307 $5,262,336
Investment securities/(1)/....................... 472,164 399,057 253,043 300,481 290,807 254,889
Mortgage-backed securities/(2)/.................. 1,034,615 1,025,763 1,180,046 1,364,907 1,350,402 952,539
Loans receivable, net/(3)/....................... 5,291,820 5,258,739 4,813,164 4,540,692 3,970,626 3,655,740
Goodwill and core value of deposits.............. 46,631 48,178 40,734 37,263 67,661 87,946
Deposits......................................... 4,258,902 4,378,919 4,304,576 4,011,323 3,675,825 2,731,127
Advances from Federal Home Loan Bank............. 1,715,312 1,415,506 1,350,290 1,787,352 1,625,456 1,868,779
Securities sold under agreements to repurchase... 564,294 639,294 380,755 208,373 157,432 154,862
Other borrowings................................. 103,900 128,982 58,546 65,303 66,640 76,966
Stockholders' equity............................. 444,273 426,106 413,277 337,614 304,568 297,848
Book value per common share/(4)/................. 13.72 13.18 12.17 10.51 9.56 9.46
Tangible book value per common share/(4)//(5)/... 12.28 11.69 10.97 9.35 7.44 6.66
Regulatory capital ratios of the Bank:
Tangible capital............................... 6.44% 6.31% 6.18% 5.16% 4.69% 4.62%
Core capital (Tier 1 capital).................. 6.59% 6.47% 6.41% 5.47% 5.53% 5.93%
Risk-based capital:
Tier 1 capital............................. 12.91% 12.79% 12.56% 12.02% 12.18% 11.93%
Total capital.............................. 13.92% 13.81% 13.62% 13.12% 13.16% 12.81%
</TABLE>
- --------------------
/(1)/ Includes investment securities available for sale totaling $98.4 million,
$19.9 million, $9.9 million, $3.0 million, $5.4 million and $1.3 million,
respectively at September 30, 1997 and June 30, 1997, 1996, 1995, 1994 and
1993.
/(2)/ Includes mortgage-backed securities available for sale totaling $231.5
million, $195.8 million, $263.2 million, $37.0 million, $45.0 million and
$41.3 million, respectively, at September 30, 1997 and June 30, 1997,
1996, 1995, 1994 and 1993.
/(3)/ Includes loans held for sale totaling $92.0 million, $68.7 million, $89.4
million, $113.4 million, $187.7 million and $171.8 million, respectively,
at September 30, 1997 and June 30, 1997, 1996, 1995, 1994 and 1993.
/(4)/ On November 17, 1997, the Board of Directors of Commercial authorized a
three-for-two stock split to be effected in the form of a 50 percent stock
dividend to stockholders of record on November 28, 1997. Par value
remained at $.01 per share. The stock dividend was distributed on December
15, 1997. Fractional shares resulting from the stock split were paid in
cash. All per share data and stock prices for all periods presented have
been adjusted on a retroactive basis to reflect the effect of this three-
for-two stock split.
/(5)/ Calculated by dividing stockholders' equity, reduced by the amount of
goodwill and core value of deposits, by the number of shares of common
stock outstanding at the respective dates.
9
<PAGE>
COMMERCIAL FEDERAL CORPORATION
Operating Data:
<TABLE>
<CAPTION>
Three Months Ended
September 30, Year Ended June 30,
------------------ ---------------------------------------------------
1997 1996 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- ------- -------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income..................................... $132,352 $122,786 $505,050 $491,092 $454,368 $393,854 $404,628
Interest expense.................................... 89,350 82,494 337,047 328,317 304,526 256,102 276,584
-------- -------- -------- -------- -------- -------- --------
Net interest income................................. 43,002 40,292 168,003 162,775 149,842 137,752 128,044
Provision for loan losses........................... (2,100) (1,658) (8,121) (6,107) (6,408) (6,248) (6,185)
Loan servicing fees................................. 7,772 7,327 30,350 27,891 24,731 22,227 18,776
Retail fees and charges............................. 4,367 3,923 16,114 12,747 9,547 9,155 7,874
Real estate operations.............................. (174) 216 1,016 172 1,490 (1,449) (5,243)
Gain (loss) on sales of loans....................... 232 105 386 164 (1,695) 1,433 1,194
Gain (loss) on sales of investment securities, net.. -- -- 390 253 (41) 220 (231)
Gain on sale of loan servicing rights............... 355 -- -- 452 3,519 5,929 6,903
Other operating income.............................. 3,566 2,032 10,223 7,967 7,515 7,178 5,169
General and administrative expenses................. 29,105 29,322 112,931 114,517 102,554 94,115 89,560
Federal deposit insurance special assessment........ -- 27,062 27,062 -- -- -- --
Amortization of goodwill and core value of
deposits.......................................... 1,547 2,385 9,855 9,529 10,262 14,131 10,544
Valuation adjustment and accelerated
amortization of goodwill.......................... -- -- -- -- 21,357 52,703 --
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes, extraordinary
items and cumulative effects of changes
in accounting principles.......................... 26,368 (6,532) 68,513 82,268 54,327 15,248 56,197
Provision (benefit) for income taxes................ 9,260 (2,482) 23,836 26,962 23,146 16,875 22,081
-------- -------- -------- -------- -------- -------- --------
Income (loss) before extraordinary items
and cumulative effects of changes
in accounting principles.......................... 17,108 (4,050) 44,677 55,306 31,181 (1,627) 34,116
Extraordinary items (1)............................. -- -- (583) -- -- -- --
Cumulative effects of changes in
accounting principles (2)......................... -- -- -- -- -- 6,597 --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)................................... $ 17,108 $ (4,050) $ 44,094 $ 55,306 $ 31,181 $ 4,970 $ 34,116
======== ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings per share (fully diluted) (3):
Income (loss) before extraordinary
items and cumulative effects of
changes in accounting principles........ $ .52 $ (.12) $ 1.36 $ 1.65 $ .96 $ (.05) $ 1.08
Extraordinary items (1)................... -- -- (.02) -- -- -- --
Cumulative effects of changes in
accounting principles (2).............. -- -- -- -- -- .20 --
---------- ---------- ----------- ---------- ---------- ---------- ----------
Net income (loss)......................... $ .52 $ (.12) $ 1.34 $ 1.65 $ .96 $ .15 $ 1.08
========== ========== =========== ========== ========== ========== ==========
Dividends declared per common share (3)..... $ .047 $ .045 $ .185 $ .178 $ -- $ -- $ --
========== ========== =========== ========== ========== ========== ==========
Weighted average common shares outstanding
(fully diluted) (3)....................... 32,997,937 33,214,825 32,881,971 33,417,702 32,437,468 32,262,850 31,684,542
=========== ========== ========== ========== ========== ========== ==========
</TABLE>
(Table continued on following page)
10
<PAGE>
COMMERCIAL FEDERAL CORPORATION
<TABLE>
<CAPTION>
Three Months Ended
September 30, Year Ended June 30,
------------------------------ ----------------------------------------
1997 1996 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- ------- -------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Ratios and Other Data:
Net interest rate spread during period..... 2.36% 2.40% 2.39% 2.34% 2.26% 2.43% 2.57%
Net yield on interest-earning assets....... 2.52% 2.54% 2.57% 2.58% 2.46% 2.59% 2.65%
Return on average assets (4)............... .96% NM .65% .84% .49% .09% .67%
Return on average equity (4)............... 15.83% NM 11.04% 14.74% 9.98% 1.54% 12.39%
Dividend payout ratio (5).................. 8.97% NM 13.78% 10.75% -- -- --
Total number of branches at end of period.. 107 98 107 98 89 73 55
</TABLE>
- ---------------------
(1) Represents the loss on early retirement of debt, net of income tax
benefits.
(2) Represents the cumulative effect of the change in the method of accounting
for income taxes less the cumulative effect of the changes in accounting
for postretirement benefits, net of income tax benefit.
(3) On November 17, 1997, the Board of Directors of Commercial authorized a
three-for-two stock split to be effected in the form of a 50 percent stock
dividend to stockholders of record on November 28, 1997. Par value
remained at $.01 per share. The stock dividend was distributed on December
15, 1997. Fractional shares resulting from the stock split were paid in
cash. All per share data and stock prices for all periods presented have
been adjusted on a retroactive basis to reflect the effect of this three-
for-two stock split.
(4) Based on the average daily balances during the three month periods ended
September 30, 1997 and 1996 and fiscal years 1997, 1996, 1995 and 1994 and
on average monthly balances for fiscal year 1993. Return on average assets
(ROA) and return on average equity (ROE) for the three months ended
September 30, 1996 are .90% and 15.23%, respectively, excluding the after-
tax effect of the nonrecurring expenses totaling $17.3 million, $1.5
million and $103,000 associated with the Savings Association Insurance Fund
special assessment, the repurchase of 2,812,725 shares of Commercial's
common stock and the change in income taxes for tax bad debt reserves,
respectively. ROA and ROE for fiscal year 1997 are .93% and 15.91%,
respectively, excluding the after-tax effect of the nonrecurring expenses
totaling $17.3 million, $1.5 million, $583,000 and $103,000, associated
with the Savings Association Insurance Fund special assessment, the
repurchase of 2,812,725 shares of Commercial's common stock, the loss on
early retirement of debt and the change in income taxes for tax bad debt
reserves, respectively. ROA and ROE for fiscal year 1996 are .90% and
15.68%, respectively, excluding the after-tax of the nonrecurring expenses
totaling $2.9 million and $585,000 associated with Railroad Financial
Corporation merger and the Corporation's 1995 proxy contest, respectively.
ROA and ROE for fiscal year 1995 are .83% and 16.82%, respectively,
excluding the accelerated amortization of goodwill totaling $21.4 million.
ROA and ROE for fiscal year 1994 are .75% and 13.11%, respectively,
excluding the after-tax effect of the intangible assets valuation
adjustment and the cumulative effects of changes in accounting principles
totaling $43.9 million and $6.6 million, respectively.
(5) Represents dividends declared per share divided by net income per share.
Commercial established a quarterly common stock cash dividend policy on
October 4, 1995, and paid its first dividend on October 31, 1995.
11
<PAGE>
MID CONTINENT BANCSHARES, INC.
The following summary consolidated financial data of Mid Continent is at
and for the dates indicated. This information has been derived from and should
be read in conjunction with Mid Continent's Consolidated Financial Statements
and the Notes thereto, as well as the information under the caption "Selected
Consolidated Financial Data" contained in Mid Continent's Annual Report for the
fiscal year ended September 30, 1997, which accompanies this Prospectus/Proxy
Statement and is incorporated herein by reference.
Financial Condition Data and Capital Ratios:
<TABLE>
<CAPTION>
At September 30,
----------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- ------- --------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Total assets............................ $ 405,262 $ 340,186 $ 270,923 $202,628 $170,012
Investment securities................... 86,065 90,562 56,449 24,374 15,144
Mortgage-backed securities.............. 28,124 34,383 40,004 45,030 42,856
Loans receivable, net (1)............... 247,205 184,876 146,904 107,770 84,357
Mortgage servicing rights............... 13,615 12,496 11,625 6,312 3,243
Goodwill................................ -- 22 83 161 252
Deposits................................ 236,333 214,493 195,716 154,764 145,838
Advances from FHLB...................... 121,800 81,700 33,000 9,000 7,500
Stockholders' equity.................... 39,982 36,807 36,735 35,208 12,792
Book value per common share (2)......... 20.38 18.25 16.94 15.66 --
Regulatory capital ratios of the Bank:
Tangible capital.................... 8.9% 9.3% 10.2% 11.8% 7.1%
Core capital........................ 8.9% 9.3% 10.2% 11.9% 7.3%
Risk-based capital.................. 22.6% 24.5% 27.3% 30.3% 20.6%
Principal balance of loans serviced
for others........................... 1,291,331 1,229,153 1,189,892 908,112 580,768
</TABLE>
- ----------------
(1) Includes loans held for sale totaling $13.9 million, $13.7 million, $22.1
million, $5.5 million and $27.7 million, respectively, at September 30,
1997, 1996, 1995, 1994 and 1993.
(2) Book value per common share is stockholders' equity divided by the number
of common shares issued and outstanding, net of any treasury shares, at
September 30 of the respective years.
12
<PAGE>
MID CONTINENT BANCSHARES, INC.
<TABLE>
<CAPTION>
Year Ended September 30,
------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ----------- ---------- ---------- --------
(Dollars in thousands, except per share data)
Operating Data:
<S> <C> <C> <C> <C> <C>
Interest income........................ $ 26,047 $ 20,173 $ 16,225 $ 11,549 $ 12,885
Interest expense....................... 16,834 12,268 9,004 5,944 7,376
---------- ----------- ---------- ---------- --------
Net interest income.................... 9,213 7,905 7,221 5,605 5,509
Provision for loan losses.............. (143) (75) (224) (6) (154)
Loan servicing fees, net of
amortization of mortgage
servicing rights...................... 3,099 3,128 3,102 1,790 1,125
Retail fees and charges................ 3,067 2,539 1,846 1,032 618
Gain on sales of loans................. 1,194 1,367 706 896 2,596
Gain on sale of loan
servicing rights...................... -- -- 1,961 -- --
Other operating income................. 159 138 139 83 358
General and administrative
expenses.............................. 9,720 8,870 8,124 6,249 5,530
Federal deposit insurance
special assessment (1)................ -- 1,053 -- -- --
Amortization of goodwill............... 22 60 78 91 102
---------- ----------- ---------- ---------- --------
Income before income taxes
and cumulative effect of
change in accounting
principle............................. 6,847 5,019 6,549 3,060 4,420
Provision for income taxes............. 2,677 1,893 2,443 1,195 1,616
---------- ----------- ---------- ---------- --------
Income before cumulative
effect of change
in accounting principles.............. 4,170 3,126 4,106 1,865 2,804
Cumulative effect of change
in accounting principle (2)........... -- -- -- 136 --
---------- ----------- ---------- ---------- --------
Net income............................. $ 4,170 $ 3,126 $ 4,106 $ 2,001 $ 2,804
========== =========== ========== ========== ========
Earnings per share:
Income before cumulative
effect of change in
accounting principle (3).............. $ 2.15 $ 1.59 $ 1.97 $ 0.30 $ --
Cumulative effect of change
in accounting principle (2) -- -- -- -- --
---------- ----------- ---------- ---------- --------
Net income (3)..................... $ 2.15 $ 1.59 $ 1.97 $ 0.30 $ --
========== =========== ========== ========== ========
Dividends declared per common
share......................... $ 0.40 $ 0.40 $ 0.40 $ -- $ --
========== =========== ========== ========== ========
Weighted average common shares
outstanding (4)............. 1,938,765 1,962,849 2,087,668 2,114,894 --
========== =========== ========== ========== ========
</TABLE>
(Table continued on following page)
13
<PAGE>
MID CONTINENT BANCSHARES, INC.
<TABLE>
<CAPTION>
Year Ended September 30,
----------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- ------- --------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Operating Ratios and Other Data:
Net interest rate spread during
period............................ 2.38% 2.55% 2.87% 3.11% 3.23%
Net yield on interest-earning
assets............................ 2.64% 2.92% 3.32% 3.39% 3.38%
Return on average assets (5)....... 1.11% 1.07% 1.75% 1.14% 1.61%
Return on average equity (5)....... 10.95% 8.54% 11.86% 10.54% 24.12%
Dividend payout ratio (6).......... 18.60% 25.16% 20.30% -- --
Total number of branches at end of
period.......................... 10 8 7 6 6
</TABLE>
- --------------
(1) For 1996, includes a $1,053 one time assessment to recapitalize the SAIF
insurance fund.
(2) The cumulative effect of accounting change reflects the adoption of SFAS
No. 109 (accounting for income taxes) for fiscal year 1994.
(3) Earnings per share is based on net income subsequent to Mid-Continent
Savings' mutual to stock conversion which occurred on June 27, 1994.
(4) Weighted average common shares outstanding for 1994 is for the period
subsequent to conversion on June 27, 1994.
(5) Based on the average daily balance during fiscal years 1997, 1996 and 1995
and on average monthly balances for fiscal year 1994 and 1993. Return on
average assets and return on average equity for fiscal year 1996 are 1.30%
and 10.33%, respectively, excluding the after-tax effect of the
nonrecurring expenses of $1,053, associated with the SAIF special
assessment.
(6) Represents dividends declared per share divided by net income per share.
Mid Continent declared its first dividend in December 1994.
14
<PAGE>
UNAUDITED PRO FORMA COMBINED PER SHARE DATA
The following table presents selected per share data for Commercial and Mid
Continent on a historical and pro forma combined basis as if the Acquisition
Merger had been effective as of the dates or the beginning of the periods
indicated.
The Acquisition Merger is expected to be accounted for under the pooling of
interests method, and pro forma data is derived in accordance with such method.
Such pro forma equivalent per share amounts as to net income (loss) from
continuing operations, dividends and book value are computed by multiplying the
pro forma combined amounts by the Exchange Ratio of 1.3039.
Historical information for Commercial and Mid Continent is derived from the
respective consolidated financial statements incorporated by reference herein or
included elsewhere herein. The pro forma results might not be indicative of the
results that would have occurred if the Acquisition Merger had occurred at the
beginning of the periods indicated or which may be obtained in the future. The
information below should be read in conjunction with such historical
consolidated financial statements of Commercial and Mid Continent.
On November 17, 1997, the Board of Directors of Commercial authorized a
three-for-two stock split to be effected in the form of a 50 percent stock
dividend to stockholders of record on November 28, 1997. Par value remained at
$.01 per share. The stock dividend was distributed on December 15, 1997.
Fractional shares resulting from the stock split were paid in cash. All per
share data and stock prices for all periods presented in this Prospectus/Proxy
Statement have been adjusted on a retroactive basis to reflect the effect of
this three-for-two stock split.
<TABLE>
<CAPTION>
Three Months Ended
September 30, Year Ended June 30,
------------------ -----------------------------
1997 1996 1997 1996 1995
------ ------ ------- ------ ------
<S> <C> <C> <C> <C> <C>
Net income (loss) per common share:
Commercial historical................. $ .52 $ (.12) $ 1.34 $ 1.65 $ .96
Mid Continent historical.............. .50 .24 1.88 1.97 .95
Pro forma combined (1)................ .51 (.10) 1.35 1.64 .94
Mid Continent pro forma equivalent.... .67 (.13) 1.76 2.14 1.23
Dividends declared per common share:
Commercial historical................. .047 .045 .185 .178 --
Mid Continent historical.............. .100 .100 .400 .400 --
Pro forma combined (2)................ .050 .050 .190 .180 --
Mid Continent pro forma equivalent.... .070 .070 .250 .230 --
<CAPTION>
At At
September 30, June 30,
1997 1997
------------- ----------
<S> <C> <C>
Book value per common share:
Commercial historical................. $ 13.72 $ 13.18
Mid Continent historical.............. 20.38 19.59
Pro forma combined (3)................ 13.86 13.32
Mid Continent pro forma equivalent.... 18.07 17.37
</TABLE>
- -------------
(1) Per share presented in the above table is based upon an Exchange Ratio of
1.3039 and the issuance of 2,543,586 shares of Commercial Common Stock for
the three months ended September 30, 1997 and 2,523,429 shares for the
three months ended September 30, 1996. Shares issued at the Exchange Ratio
for the years ended June 30, 1997, 1996 and 1995 were 2,522,616, 2,722,110
and 2,757,610, respectively.
(2) Pro forma combined dividends declared per common share presented in the
above table are based upon an Exchange Ratio of 1.3039 and the issuance of
2,558,190 shares of Commercial Common Stock as of September 30, 1997 and
2,629,640 shares as of September 30, 1996. Shares issued at the Exchange
Ratio as of June 30, 1997 and 1996 were 2,553,362 and 2,827,181,
respectively.
(3) Pro forma combined book value per common share presented in the above table
is based upon an Exchange Ratio of 1.3039 and the issuance of 2,558,190
shares of Commercial Common Stock as of September 30, 1997 and 2,553,362 as
of June 30, 1997.
15
<PAGE>
INFORMATION CONCERNING THE ANNUAL MEETING
General
This Prospectus/Proxy Statement is being furnished to the stockholders of
Mid Continent as part of the solicitation of proxies by its Board of Directors
from holders of the outstanding shares of Mid Continent Common Stock for use at
the Annual Meeting to be held on February 24, 1998, and any adjournments
thereof. This Prospectus/Proxy Statement, and the accompanying proxy card, are
first being mailed to stockholders of Mid Continent on or about January 7,
1998.
The principal purposes of the Annual Meeting are to consider and vote upon
the approval of the Articles Amendment as well as the Acquisition Merger,
pursuant to which Mid Continent will merge into Commercial, and the Merger
Agreement among Commercial, the Bank, Mid Continent and Mid-Continent Savings,
which sets forth the terms and conditions of the Acquisition Merger and also
provides for the Bank Merger. See "Proposal 1 -- The Merger -- Conversion of
Mid Continent Common Stock." The Merger is subject to certain conditions,
including regulatory approval of the OTS.
In addition to approval of the Articles Amendment and the Acquisition
Merger and Merger Agreement, the stockholders of Mid Continent may be asked to
approve a proposal to adjourn the Annual Meeting if necessary to permit further
solicitation of proxies in the event that there are not sufficient votes at the
time of the Annual Meeting to approve the Articles Amendment and the Acquisition
Merger and Merger Agreement. Stockholders will also be asked to consider and
vote upon the election of two directors of Mid Continent and the ratification of
the appointment of Deloitte & Touche LLP as independent auditors of Mid
Continent for the fiscal year ending September 30, 1998.
In this Prospectus/Proxy Statement, the terms "Commercial" and "Mid
Continent" refer to the parent corporation only or to both the parent
corporation and its subsidiaries, depending on the context.
Record Date; Vote Required
The Board of Directors of Mid Continent has fixed the close of business on
January 5, 1998, as the Record Date for determining stockholders entitled to
notice of and to vote at the Annual Meeting, and accordingly, only holders of
Mid Continent Common Stock of record at the close of business on that day will
be entitled to notice of and to vote at the Annual Meeting. The number of
shares of Common Stock outstanding on the Record Date was 1,996,562, each of
such shares being entitled to one vote.
As to the approval of the Merger Agreement, by checking the appropriate
box, a stockholder may: (i) vote "FOR" approval of the Merger Agreement, (ii)
vote "AGAINST" approval of the Merger Agreement, or (iii) "ABSTAIN." Because
the affirmative vote of the holders of a majority of the outstanding shares of
Mid Continent Common Stock entitled to vote on the Merger Agreement is required
to approve the Merger Agreement and the transactions contemplated thereby,
abstentions will have the effect of a vote against the Merger Agreement.
However, the Merger will not be consummated unless eighty percent (80%) of the
outstanding shares of Mid Continent Common Stock entitled to vote are voted for
the Articles Amendment. In addition, brokers who hold shares in street name for
individuals who are the beneficial owners of such shares are prohibited from
giving a proxy to vote shares held for such individuals on the Merger Agreement
without specific instructions from such individuals. The failure of such
individuals to provide specific instructions with respect to their shares of Mid
Continent Common Stock to their broker will have the effect of a vote against
the Merger Agreement.
As to the proposal to approve the Articles Amendment, a stockholder may:
(i) vote "FOR" the Articles Amendment, (ii) vote "AGAINST" the Articles
Amendment or (iii) "ABSTAIN." Because the affirmative vote of the holders of
eighty percent (80%) of the outstanding shares of Mid Continent Common Stock
entitled to vote is required to approve the Articles Amendment, abstentions will
have the effect of a vote against the Articles Amendment.
16
<PAGE>
In addition, brokers who hold shares in street name for individuals who are the
beneficial owners of such shares are prohibited from giving a proxy to vote
shares held for such individuals on the Articles Amendment without specific
instructions from such individuals. The failure of such individuals to provide
specific instructions with respect to their shares of Mid Continent Common Stock
to their broker will have the effect of a vote against the Articles Amendment.
As to the proposal to adjourn the Annual Meeting in the event that there is
an insufficient number of shares present in person or by proxy to approve the
Merger Agreement or the Articles Amendment, a stockholder may: (i) vote "FOR"
the adjournment, (ii) vote "AGAINST" the adjournment or (iii) "ABSTAIN."
Approval of the adjournment requires the affirmative vote of the holders of a
majority of Mid Continent Common Stock present in person or by proxy at the
Meeting, without regard to broker non-votes (shares for which a broker indicates
on the proxy that it does not have discretionary authority as to such shares to
vote on such matter). Proxies marked "ABSTAIN" will have the same effect as a
vote against the proposal to adjourn the Meeting.
As to the election of directors, the proxy being provided by Mid
Continent's Board of Directors enables a stockholder to vote for the election of
the nominees proposed by the Board, or to withhold authority to vote for one or
more of the nominees being proposed. Under Kansas law and Mid Continent's
Bylaws, directors are elected by a plurality of votes cast, without respect to
either (i) broker non-votes or (ii) proxies as to which authority to vote for
one or more of the nominees being proposed is withheld.
As to the ratification of the appointment of independent auditors, by
checking the appropriate box, a stockholder may: (i) vote "FOR" ratification,
(ii) vote "AGAINST" ratification, or (iii) "ABSTAIN." Ratification of the
appointment of Deloitte & Touche LLP requires the affirmative vote of a majority
of Mid Continent Common Stock cast at the Annual Meeting without regard to
broker non-votes, or proxies marked "ABSTAIN" as to that matter.
The directors and executive officers of Mid Continent (including certain of
their related interests) beneficially own, as of the Record Date, and are
entitled to vote at the Annual Meeting 227,188 (11.38%) shares of Mid Continent
Common Stock. See "Mid Continent Voting Securities and Principal Holders
Thereof."
Voting of Proxies; Revocability of Proxies; Solicitation of Proxies
After having been submitted, the enclosed proxy may be revoked by the
person giving it, at any time before it is exercised, by: (i) submitting written
notice of revocation of such proxy to the Secretary of Mid Continent, (ii)
submitting a proxy having a later date, or (iii) appearing at the Annual Meeting
and requesting a return of the proxy. All shares represented by valid proxies
will be exercised in the manner specified thereon. If no specification is made,
duly executed proxies will be voted "FOR" each of the proposals submitted.
The solicitation is being made by Mid Continent. Directors, officers and
employees of Mid Continent may solicit proxies from Mid Continent stockholders,
either personally or by telephone, telegraph or other form of communication.
Such persons will receive no additional compensation for such services. All
expenses associated with the solicitation of proxies will be paid by Mid
Continent including the charges and expenses of brokerage houses and other
custodians, nominees, and fiduciaries for forwarding solicitation material to
beneficial owners of Mid Continent Common Stock held of record by such persons.
D.F. King & Co., Inc. will assist in the solicitation of proxies by Mid
Continent for a fee of $4,000 plus reasonable expenses associated with such
solicitation.
Absence of Dissenters' Appraisal Rights
In accordance with the Kansas General Corporation Code, holders of Mid
Continent Common Stock will not be entitled to dissenter or appraisal rights.
17
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE OF MID CONTINENT
Section 16(a) of the Exchange Act requires Mid Continent executive officers
and directors, and persons who own more than ten percent of Mid Continent Common
Stock, to file reports of ownership and changes in ownership of Mid Continent
Common Stock, on Forms 3, 4, and 5, with the Commission and to provide copies of
those Forms 3, 4, and 5 to Mid Continent. Mid Continent is not aware of any
beneficial owner, as defined under Section 16(a), of more than ten percent of
Mid Continent Common Stock.
Based upon a review of the copies of the forms furnished to Mid Continent,
or written representations from certain reporting persons that no Forms 5 were
required, Mid Continent believes that all Section 16(a) filing requirements
applicable to its executive officers and directors were complied with during the
fiscal year ended September 30, 1997.
COMMERCIAL FEDERAL CORPORATION AND
COMMERCIAL FEDERAL BANK, A FEDERAL SAVINGS BANK
Commercial is a unitary non-diversified savings and loan holding company
whose primary asset is the Bank, which is one of the largest depository
institutions in the Midwest. At September 30, 1997, Commercial had total assets
of $7.2 billion and total stockholders' equity of $444.3 million. Based upon
total assets at that date, Commercial was the 13th largest publicly held thrift
holding company in the United States. Commercial is a consumer-oriented
financial institution that emphasizes single-family residential and construction
real estate lending, consumer lending, commercial real estate lending, retail
deposit activities, including demand deposit accounts, and mortgage banking. At
November 30, 1997, Commercial operated 34 branch offices in Nebraska, 21 branch
offices in greater metropolitan Denver, Colorado, 19 branch offices in Oklahoma,
27 branch offices in Kansas and seven branch offices in Iowa. Throughout its
110 year history, Commercial has emphasized customer service. To serve its
customers, Commercial conducts loan origination activities through its 108
branch office network, loan offices of its wholly-owned mortgage banking
subsidiary and a nationwide correspondent network of mortgage loan originators.
Commercial also provides insurance and securities brokerage and other retail
financial services.
Commercial's strategy for growth emphasizes both internal and external
growth. Operations focus on increasing deposits, including demand accounts,
making loans (primarily single-family mortgage and consumer loans), community
banking, and providing customers with a full array of financial products and a
high level of customer service. As part of its long-term strategic plan,
Commercial intends to expand its operations within its market areas either
through direct marketing efforts aimed at increasing market share, branch
expansions, or opening additional branches. Commercial's retail strategy will
continue to be centered on attracting new customers and selling both new and
existing customers multiple products and services. Additionally, Commercial
will continue to build and leverage an infrastructure designed to increase fee
and other income.
Complementing its strategy of internal growth, Commercial continues to grow
its present five-state franchise through an ongoing program of selective
acquisitions of other financial institutions.
Pending Acquisitions. In addition to the Merger, Commercial has entered
into definitive agreements to acquire two other financial institution holding
companies: Liberty Financial Corporation, a commercial bank and thrift holding
company; and First National Bank Shares, LTD, a bank holding company. Together
with Mid Continent, these three pending acquisitions will add 59 branches to
Commercial's existing network and approximately $1.2 billion in total assets,
approximately $924.0 million in deposits and approximately $1.3 billion in loans
serviced for others. Liberty Financial Corporation, headquartered in West Des
Moines, Iowa, operates seven bank subsidiaries and one thrift subsidiary with 36
branch locations in Iowa and six branch locations in the Tucson, Arizona
metropolitan area. First National Bank Shares, LTD, headquartered in Great
Bend, Kansas, operates seven branch offices in Kansas. Future
18
<PAGE>
acquisition candidates will be selected based on the extent to which the
candidates can enhance Commercial's retail presence in new or underserved
markets and complement Commercial's existing retail network.
On December 15, 1997, the Company entered into a definitive agreement to
acquire Perpetual Midwest Financial, Inc. ("Perpetual"), the holding company of
Perpetual Savings Bank, FSB ("Perpetual Savings"), headquartered in Cedar
Rapids, Iowa. In this transaction the Company will acquire through a tax-free
exchange all 1,872,925 shares of Perpetual's common stock. Perpetual
shareholders will receive 0.8636 shares of the Company's common stock for each
outstanding share of Perpetual common stock. Following the merger of Perpetual
into the Company, Perpetual Savings will be merged into the Bank. Perpetual
Savings currently operates four branch locations in Cedar Rapids, Iowa and one
branch in Iowa City, Iowa. At September 30, 1997, Perpetual had assets of
approximately $401.7 million, deposits of approximately $310.1 million and
stockholders' equity of approximately $34.2 million. The acquisition is subject
to regulatory approvals, approval by Perpetual's shareholders and other
conditions. It is expected to be completed late in the second quarter of 1998.
Recent Events. On November 18, 1997, Commercial announced at its 1997
Annual Meeting that stockholders had approved proposals to amend Commercial's
Articles of Incorporation to (i) increase the number of authorized shares of
Commercial Common Stock from 25,000,000 shares to 50,000,000 shares, and (ii)
establish a variable range for the number of members of the Board of Directors
of from nine to 12 members.
In addition, Commercial announced that its Board of Directors had
authorized a three-for-two stock split to be effected in the form of a 50
percent stock dividend. Par value remained at $.01 per share. Fractional
shares were paid in cash. The Board also declared a quarterly cash dividend of
$.055 per share of Commercial Common Stock which represents an increase of 17.9%
from the September 30, 1997 quarter when Commercial paid a cash dividend of
$.0467 per share, after adjusting for the three-for-two stock split. The stock
dividend was distributed on December 15, 1997 to stockholders of record as of
November 28, 1997. The cash dividend for the quarter ended December 31, 1997,
payable to stockholders of record as of December 31, 1997, will be paid on
January 14, 1998. All per share data and stock prices presented in this
Prospectus/Proxy Statement have been adjusted on a retroactive basis to reflect
the effect of this three-for-two stock split.
Commercial's principal executive offices are located at 2120 South 72nd
Street, Omaha, Nebraska 68124, and its telephone number is (402) 554-9200.
For additional information regarding Commercial and the Bank, see
Commercial's Annual Report on Form 10-K for the fiscal year ended June 30, 1997,
Quarterly Report on Form 10-Q for the quarter ended September 30, 1997 and the
Current Reports on Form 8-K dated August 18, 1997, September 2, 1997, September
11, 1997, November 18, 1997 and December 8, 1997, all of which are incorporated
by reference herein.
MID CONTINENT BANCSHARES, INC. AND
MID-CONTINENT FEDERAL SAVINGS BANK
Mid Continent is a unitary savings and loan holding company that was
incorporated in January 1994 under the laws of the State of Kansas for the
purpose of acquiring all of the issued and outstanding common stock of Mid-
Continent Savings. This acquisition occurred in June 1994 at the time Mid
Continent changed its name from Mid Continent Federal Savings and Loan
Association of El Dorado, simultaneously converted from a mutual to stock
institution, and sold all of its outstanding capital stock to Mid Continent and
Mid Continent made its initial public offering of common stock. As of September
30, 1997, Mid Continent had total assets of $405.3 million, total deposits of
$236.3 million, and stockholders' equity of $40.0 million. The only subsidiary
of Mid Continent is Mid-Continent Savings. Mid-Continent Savings has one
subsidiary, Laredo Investment, Inc.
Mid Continent's and Mid-Continent Savings' executive offices are located at
124 West Central, El Dorado, Kansas 67042 and their telephone number is (316)
321-2700.
Mid-Continent Savings. Mid-Continent Savings is a federally chartered
capital stock savings bank headquartered in El Dorado, Kansas. Mid-Continent
Savings was founded in 1925 as a Kansas chartered savings and loan association
under the name Mid-Continent Savings and Loan Association. In 1935, Mid-
Continent Savings adopted a federal charter and change its name to Mid Continent
Federal Savings and Loan Association of El Dorado. In June 1994, Mid-Continent
Savings converted from a federally chartered mutual savings and loan association
to its current form, a federally chartered capital stock savings bank subsidiary
of a savings and loan holding company. Mid-Continent Savings' deposits are
federally insured by the Federal Deposit Insurance Corporation ("FDIC").
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Mid-Continent Savings is primarily engaged in attracting retail deposits
from the general public and investing those deposits, together with funds
generated from operations, primarily in one- to four-family residential mortgage
loans and, to a lesser extent, to originate consumer and construction loans.
Mid-Continent Savings has offices in El Dorado, Newton, Winfield, Augusta, Derby
and Wichita, Kansas, which are located in its primary market area of Butler,
Cowley, Sedgwick, and Harvey Counties in the State of Kansas. The counties of
Butler, Cowley, Sedgwick and Harvey, Kansas are Mid-Continent Savings' primary
market area for deposits and are located in south central Kansas. This area was
founded on agriculture and the oil and gas industry, which continue to play a
major role in the local economy. At September 30, 1997, Mid-Continent Savings
reported total assets of approximately $405.3 million, loans of approximately
$233.3 million, total deposits of approximately $236.5 million and stockholders'
equity of $36.2 million.
For additional information regarding Mid Continent, including its
consolidated financial statements and related notes as of September 30, 1997,
see Mid Continent's 1997 Annual Report to Stockholders, which is incorporated by
reference herein and delivered herewith.
PROPOSAL 1 -- THE MERGER
(Approval of the Merger and Merger Agreement)
The following information with respect to the Merger, insofar as it relates
to matters contained in the Merger Agreement, including the exhibits thereto, is
qualified in its entirety by reference to the full text of such agreement, which
is attached as Annex A to this Prospectus/Proxy Statement and is incorporated by
reference herein.
General
The Merger Agreement provides for the acquisition of Mid Continent by
Commercial, and the subsequent merger of Mid-Continent Savings into the Bank, as
follows: (i) Mid Continent will merge into Commercial, with Commercial as the
surviving corporation, pursuant to which the outstanding shares of Mid
Continent's Common Stock would be converted into shares of Commercial Common
Stock as set forth below (the Acquisition Merger); and (ii) Mid-Continent
Savings will then merge into the Bank, with the Bank as the surviving savings
institution (the Bank Merger) (collectively, the Merger). Upon the consummation
of the Acquisition Merger (the Acquisition Merger Effective Time), Mid Continent
will have merged into Commercial. Upon the consummation of the Bank Merger (the
Bank Merger Effective Time), Mid-Continent Savings will have merged into the
Bank, Commercial will be the resulting savings institution holding company, and
the Bank will be the resulting subsidiary savings institution. It is
anticipated that the Bank Merger Effective Time will occur immediately following
the Acquisition Merger Effective Time. For additional information regarding the
Merger, see the Merger Agreement, which is attached as Annex A hereto.
Stockholders of Mid Continent are being asked to approve the Merger
Agreement and the Acquisition Merger. The affirmative vote of a majority of the
outstanding shares of Mid Continent Common Stock is required for Mid Continent's
stockholders to approve the Merger Agreement and the Acquisition Merger. The
Merger will not be consummated, however, unless the Articles Amendment which is
the subject of Proposal 2 herein is approved by at least 80% of the outstanding
shares of Mid Continent Common Stock.
Background of the Merger
Mid Continent is a unitary savings and loan holding company that was
incorporated in January 1994 under the laws of the State of Kansas for the
purpose of acquiring all of the issued and outstanding common stock of Mid-
Continent Savings. This acquisition occurred in June 1994 at the time Mid
Continent changed its name from Mid Continent Federal Savings and Loan
Association of El Dorado, simultaneously converted from a mutual to stock
institution, and sold all of its outstanding capital stock to Mid Continent.
Mid Continent directs and plans the activities of Mid-Continent Savings, Mid
Continent's primary asset.
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Mid-Continent Savings is a federally chartered capital stock savings bank
headquartered in El Dorado, Kansas, and is in the principal business of
attracting deposits from the general public and using those funds to originate
and sell real estate loans on one-to-four family residences and, to a lesser
extent, to originate consumer and construction loans for its portfolio. Mid-
Continent Savings also purchases one-to-four family residential loans. Mid-
Continent Savings has offices in El Dorado, Newton, Winfield, Augusta, Derby and
Wichita, Kansas, which are located in its primary market area of Butler, Cowley,
Sedgwick, and Harvey Counties in the State of Kansas. The counties of Butler,
Cowley, Sedgwick, and Harvey, Kansas are Mid-Continent Savings' primary market
area for deposits and are located in south central Kansas. This area was
founded on agriculture and the oil and gas industry, which continue to play a
major role in the local economy. Mid-Continent Savings' deposits are insured up
to the maximum allowable amount by the FDIC.
In connection with its normal strategic planning process, Mid Continent
continuously reviewed its strategic business alternatives, devoting particular
attention to the continuing consolidation and increasing competition in the
banking and financial services industries in the Midwest U.S. regional market.
The Midwest U.S. regional market is home to several large, aggressive regional
commercial banking entities, and the banking market in Kansas in particular has
been subject to significant consolidation in recent years. As a result,
competition in the local banking and financial services industries has
intensified, especially for smaller institutions like Mid Continent.
In late 1996, as part of its normal planning process, Mid Continent's Board
retained RP Financial to provide strategic planning assistance, including an
overview of the market for bank and thrift mergers, an assessment of Mid
Continent's then current strategic business plan, and a preliminary estimate of
Mid Continent's market value were it to pursue a strategic merger transaction.
On December 12, 1996, RP Financial presented to Mid Continent's Board the
results of its analysis, including an assessment of Mid Continent's then current
strategic plan and a preliminary estimate of Mid Continent's merger value that
ranged from $29 to $32 per share. Periodically during 1997, at the request of
Mid Continent's Board, RP Financial provided verbal updates to Mid Continent's
Board on trends in the market for bank and thrift mergers.
During calendar 1997, Mid Continent was informally approached by two
financial institutions, including Commercial, seeking to discuss the possibility
of pursuing a negotiated merger with Mid Continent or taking a substantial
ownership position in Mid Continent. The discussions that took place with the
two institutions (hereinafter "Institution No. 1" and Commercial) are summarized
as follows. During the summer of 1997, Mid Continent was approached by
Institution No. 1, a publicly traded regional bank holding company ("BHC") with
approximately $300 million in total assets, that discussed the possibility of a
negotiated merger with Mid Continent whereby Mid Continent shareholders would
receive common stock of Institution No. 1 as consideration for their shares.
Mid Continent's Board elected not to engage in discussions with Institution No.
1 because: (i) the aggregate level of consideration that was discussed could not
be reasonably quantified owing to the illiquid nature of Institution No. 1's
common stock; and, (ii) Mid Continent's Board was uncertain that the future
prospects of the pro forma merged company would be sufficiently superior to
stand-alone operations.
During the course of 1997, Mr. Pottorff was contacted a number of times by
Mr. William A. Fitzgerald, Chairman and Chief Executive Officer of Commercial,
for the purposes of discussing the possibility of a negotiated merger between
Mid Continent and Commercial. Through the spring of 1997, Mid Continent elected
not to engage in formal discussions with Commercial because the aggregate
consideration indicated in the discussions was insufficient relative to the
shareholder value anticipated to be created by Mid Continent's stand-alone
strategic plan. During the summer of 1997, Commercial initiated a series of
discussions that included a range of aggregate merger consideration that
exceeded the shareholder value indicated by Mid Continent's stand-alone
strategic plan. In a June 26, 1997 meeting, Mid Continent's Board authorized
management to continue discussions with Commercial with the objective of
exploring further the form and amount of merger consideration and other possible
merger terms. Mid Continent retained RP Financial as its financial advisor in
July 1997 for the purpose of evaluating the Commercial offer.
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At the same time, Mid Continent's Board requested that RP Financial perform
a limited market survey of other potential merger partners to ascertain the
level of interest in pursuing a transaction with Mid Continent. Concurrent with
the ongoing discussions between Mid Continent and Commercial, RP Financial
contacted two large regional BHCs (hereinafter, "Institution No. 2" and
"Institution No. 3"), selected by virtue of their substantial market presence in
the Midwest U.S., their active acquisition strategies in the Midwest U.S., and
their ability to pay a competitive price. RP Financial provided both
institutions with confidential information and sought a verbal expression of
interest in exploring a potential merger transaction with Mid Continent.
Neither Institution No. 2 nor Institution No. 3 expressed an interest in
pursuing a merger with Mid Continent.
During July and August 1997, senior management and the financial advisors
of each of Mid Continent and Commercial continued to discuss the financial and
other terms of the proposed Merger, including the form and amount of
consideration to be offered, the Exchange Ratio, the treatment of Mid Continent
stock options, the termination provisions, and issues relating to the management
and operations of Mid Continent following the Merger. During this period, Mid
Continent, Commercial, and their respective legal counsel and financial advisors
conducted reciprocal due diligence analyses. During this period, the form and
amount of consideration and the Exchange Ratio was determined on the basis of
arms-length-negotiation between Mid Continent representatives, the Commercial
representatives and the financial advisors. Throughout the foregoing process,
management advised and informed the Board of Directors of Mid Continent of
developments and was directed by the Board to pursue discussions.
On July 31, 1997 the Board of Directors of Mid Continent met with senior
management of Mid Continent. Management reviewed with the Board of Directors
the alternative strategies for the future operation of Mid Continent and Mid-
Continent Savings including the potential of a merger with Commercial. On this
same date, the full Board of Directors of Mid Continent met with senior
management and RP Financial representatives included via teleconference.
Management repeated the review of alternative strategies for the future
operation of Mid Continent previously discussed with Mid Continent's Executive
Committee. RP Financial addressed the Board on these strategies and reviewed
with the Board the tentative proposal of Commercial. RP Financial also briefed
the Board on the general climate of the merger/acquisitions market place and
reported on all contacts with other financial institutions by RP Financial
acting in Mid Continent's behalf. The Board directed senior management to
continue negotiations with Commercial, including the conduct of due diligence by
both parties.
Through the month of August 1997, senior management of both institutions,
with the assistance of RP Financial and outside counsel, negotiated a form of
definitive merger agreement. Draft copies of the proposed agreement were
distributed to the Board of Directors of Mid Continent for their review.
On September 2, 1997, the Board of Directors reviewed the proposal and met
with RP Financial and Mid Continent's attorneys to discuss and review the final
proposal, including the form of agreement which had previously been distributed
to the Board of Directors for its review. RP Financial presented a detailed
analysis of the final proposal to the Board of Directors and concluded that in
RP Financial's opinion Commercial's proposal was fair to Mid Continent's
stockholders from a financial point of view.
On September 2, 1997, at a meeting of Mid Continent's Board of Directors,
Mr. Pottorff reviewed with Mid Continent's Board the reasons for, and the
potential benefits of the Merger; Mid Continent's legal counsel reviewed the
terms of the Merger Agreement, related agreements and the transactions
contemplated thereby; and RP Financial made a presentation regarding the
financial terms of the Merger Agreement and the fairness, from a financial point
of view, of the Merger Consideration to holders of Mid Continent Common Stock.
After a thorough discussion and consideration of the factors discussed below
under "Reasons for the Merger and Recommendation of the Board of Directors", Mid
Continent Board unanimously approved the Merger Agreement and the transactions
contemplated thereby, and authorized the execution of the Merger Agreement. The
Merger Agreement was entered into on September 2, 1997.
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Reasons for the Merger and Recommendation of the Mid Continent Board of
Directors
In reaching its conclusion to approve the Merger, Mid Continent's Board of
Directors considered a number of factors. Mid Continent Board did not assign
any relative or specific weights to the factors considered. Among other things,
Mid Continent's Board considered: (i) the Merger consideration in relation to
the book value, assets and earnings of Mid Continent and Commercial; (ii)
information concerning the financial condition, results of operations and
prospects of Mid Continent, including the return on assets and return on equity
of Mid Continent; (iii) the financial terms of other recent business
combinations in the banking industry; and (iv) the opinion of RP Financial as to
the fairness of the Exchange Ratios to Mid Continent stockholders from a
financial point of view.
Mid Continent's Board of Directors believes that the terms of the Merger
Agreement, which are the product of arms-length negotiations between Commercial
and Mid Continent, are in the best interest of Mid Continent and its
stockholders. In the course of reaching its determination, Mid Continent's
Board of Directors consulted with legal counsel with respect to its legal
duties, the terms of the Merger Agreement and the issues related thereto; with
its financial advisor with respect to the financial aspects and fairness of the
transaction; and with senior management regarding, among other things,
operational matters.
In reaching its determination to approve the Merger Agreement, Mid
Continent's Board of Directors considered all factors it deemed material, which
are the following:
(a) Mid Continent's Board of Directors analyzed information with respect
to the financial condition, results of operations, businesses and prospects of
Mid Continent and Commercial. In this regard, Mid Continent's Board of
Directors analyzed the options of selling Mid Continent or continuing on a
stand-alone basis. The range of values on a sale basis were determined to
generally exceed the present value of Mid Continent shares on a stand-alone
basis under business strategies which could be reasonably implemented by Mid
Continent.
(b) Mid Continent's Board of Directors considered the written opinion of
RP Financial that, as of September 2, 1997, the Merger Consideration was fair to
Mid Continent stockholders from a financial point of view. See "-- Opinion of
Financial Advisor."
(c) Mid Continent's Board of Directors considered the current operating
environment, including, but not limited to, the continued merger and increasing
competition in the banking and financial services industries, the prospect for
further changes in these industries, and the importance of being able to
capitalize on developing opportunities in these industries. This information
has been periodically reviewed by Mid Continent's Board of Directors at its
regular board meetings and was also discussed between Mid Continent's Board of
Directors and Mid Continent's various advisors.
(d) Mid Continent's Board of Directors considered the other terms of the
Merger Agreement and exhibits, including the tax-free nature of the transaction.
(e) Mid Continent's Board of Directors considered the detailed financial
analyses and other information with respect to Mid Continent and Commercial
discussed by RP Financial, as well as the Board's knowledge of Mid Continent,
Commercial and their respective businesses. In this regard, the latest
publicly-available financial and other information for Mid Continent and
Commercial were analyzed, including a comparison to publicly-available financial
and other information for other similar institutions.
(f) Mid Continent's Board of Directors considered the value of Mid
Continent Common Stock if Mid Continent continued as a stand-alone entity
compared to the effect of Mid Continent combining with Commercial in light of
the factors summarized above and the current economic and financial environment,
including, but not limited
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to, other possible strategic alternatives, the results of the contacts and
discussions between Mid Continent and its financial advisor and various third
parties and the belief of Mid Continent's Board of Directors and management that
the Merger offered the best transaction available to Mid Continent and its
stockholders.
(g) Mid Continent's Board considered the likelihood of the Merger being
approved by the appropriate regulatory authorities, including factors such as
market share analysis, Commercial's Community Reinvestment Act rating at that
time and the estimated pro forma financial impact of the Merger on Commercial.
The foregoing discussion of the information and factors considered by Mid
Continent's Board of Directors is not intended to be exhaustive, but constitutes
the material factors considered by Mid Continent's Board of Directors. In
reaching its determination to approve and recommend the Merger Agreement, Mid
Continent's Board of Directors did not assign any relative or specific weights
to the foregoing factors, and individual directors may have weighted factors
differently. After deliberating with respect to the Merger and the other
transactions contemplated by the Merger Agreement, considering, among other
things, the matters discussed above and the opinion of RP Financial referred to
above, Mid Continent's Board of Directors approved and adopted the Merger
Agreement and the transactions contemplated thereby as being in the best
interests of Mid Continent and its stockholders.
THE MID CONTINENT BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE MERGER
AGREEMENT AND THE MERGER BE ADOPTED AND APPROVED BY ALL SHAREHOLDERS OF MID
CONTINENT.
Opinion of Financial Advisor
Mid Continent's Board of Directors retained RP Financial in July 1997 to
provide certain financial advisory and investment banking services to Mid
Continent in conjunction with the Merger, including the rendering of an opinion
with respect to the fairness of the Merger Consideration from a financial point
of view to holders of Mid Continent Common Stock. In requesting RP Financial's
advice and opinion, Mid Continent's Board of Directors did not give any special
instructions to, or impose any limitations upon the scope of the investigation
which RP Financial might wish to conduct to enable it to give its opinion. RP
Financial was selected by Mid Continent to act as its financial advisor because
of RP Financial's expertise in the valuation of businesses and their securities
for a variety of purposes including its expertise in connection with mergers and
acquisitions of savings and loan associations, savings banks, and savings and
loan holding companies.
On September 2, 1997, at the meeting in which Mid Continent's Board
approved and adopted the Merger Agreement and the transactions contemplated
thereby, RP Financial rendered its opinion to Mid Continent's Board that, as of
such date, the Merger Consideration was fair to holders of Mid Continent Common
Stock from a financial point of view. That opinion was updated as of the date
of this Prospectus/Proxy Statement. In connection with its opinion dated the
date of this Prospectus/Proxy Statement, RP Financial also confirmed the
appropriateness of its reliance on the analysis used to render its September 2,
1997 opinion by performing procedures to confirm the appropriateness of such
analyses and by reviewing the assumptions on which such analyses were based and
the factors considered in connection therewith.
The full text of the opinion of RP Financial, which sets forth the
assumptions made, matters considered and limitations on the review undertaken,
is attached as Annex B to this Prospectus/Proxy Statement and is incorporated
herein by reference. Holders of Mid Continent Common Stock are urged to read
the opinion in its entirety.
THE OPINION OF RP FINANCIAL IS DIRECTED TO MID CONTINENT'S BOARD OF
DIRECTORS IN ITS CONSIDERATION OF THE MERGER CONSIDERATION AS DESCRIBED IN THE
MERGER AGREEMENT, AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER OF
MID CONTINENT AS TO ANY ACTION THAT SUCH SHAREHOLDER SHOULD TAKE IN CONNECTION
WITH THE MERGER AGREEMENT, OR OTHERWISE. IT IS FURTHER
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UNDERSTOOD THAT THE OPINION OF RP FINANCIAL IS BASED ON MARKET CONDITIONS AND
OTHER CIRCUMSTANCES EXISTING ON THE DATE THEREOF.
The opinion states that RP Financial reviewed the following material: (1)
the Merger Agreement and the draft copy of the Prospectus/Proxy Statement dated
as of _____________, 1998; (2) financial and other information for Mid
Continent, all with regard to balance sheet and off-balance sheet composition,
profitability, interest rates, volumes, maturities, trends, credit risk,
interest rate risk, liquidity risk and operations including: (a) audited
financial statements for the fiscal years ended September 30, 1994 through 1997,
(b) shareholder, regulatory and internal financial and other reports through
September 30, 1997, (c) the two most recent proxy statements for Mid Continent,
(d) internal budgets, financial projections and EPS forecasts prepared by
management and third parties, (e) Mid Continent's management comments regarding
past and current business, operations, financial condition, and future
prospects, and (f) the potential amount, timing and nature of the recovery of
damages from the U.S. Government related to Mid Continent's supervisory goodwill
claim; and (3) financial and other information for Commercial including: (a)
audited financial statements for the fiscal years ended June 30, 1995 through
1997, incorporated in Annual Reports to Shareholders, (b) Form 10-K as of June
30, 1997, Form 10-Q as of September 30, 1997, and interim results and
developments through September 30, 1997 released in press release form, (c)
regulatory and internal financial and other reports through June 30, 1997, (d)
internal budgets and financial projections prepared by management of Commercial
and third parties, (e) Commercial's management comments regarding past and
current business, operations, financial condition, and future prospects, (f)
press releases and other public information available regarding the terms and
anticipated financial impact of Commercial's acquisitions announced immediately
prior to and subsequent to the execution of the Agreement, and (g) the potential
amount, timing and nature of the recovery of damages from the U.S. Government
related to Commercial's supervisory goodwill claim.
In addition, RP Financial stated that it reviewed financial, operational,
market area and stock price and trading characteristics for Mid Continent and
Commercial relative to publicly-traded savings institutions with comparable
resources, financial condition, earnings, operations and markets. RP Financial
also considered the economic and demographic characteristics in the local market
area, and the potential impact of the regulatory, legislative and economic
environments on operations for Mid Continent and Commercial and the public
perception of the thrift industry. In rendering its opinion, RP Financial
stated that it relied, without independent verification, on the accuracy and
completeness of the information concerning Mid Continent and Commercial
furnished by the respective institutions to RP Financial for review, as well as
publicly-available information regarding other financial institutions and
economic and demographic data. RP Financial stated that Mid Continent and
Commercial did not restrict RP Financial as to the material it was permitted to
review. The opinion further states that RP Financial did not perform or obtain
any independent appraisals or evaluations of the assets and liabilities and
potential and/or contingent liabilities of Mid Continent or Commercial. RP
Financial further indicated that the financial forecasts and budgets reviewed by
RP Financial were prepared by the managements of Mid Continent and Commercial;
that neither Mid Continent nor Commercial publicly discloses internal management
forecasts or budgets of the type provided to RP Financial in connection with the
review of the Merger; and such financial forecasts were not prepared with a view
towards public disclosure. The financial forecasts and budgets were based upon
numerous variables and assumptions which are inherently uncertain, including
without limitation factors related to general economic and competitive
conditions, as well as trends in asset quality. Accordingly, RP Financial
cautioned that actual results could vary significantly from those set forth in
such financial forecasts.
In connection with rendering its opinion dated September 2, 1997 and
updated as of the date of this Prospectus/Proxy Statement, RP Financial
performed a variety of analyses, which are summarized below. The preparation of
a fairness opinion is a complex process involving subjective judgments and is
not necessarily susceptible to partial analyses or summary description. RP
Financial stated that its analyses must be considered as a whole and that
selecting portions of such analyses and of the factors considered by RP
Financial without considering all such analyses and factors could create an
incomplete view of the process underlying RP Financial's opinion. In its
analyses, RP Financial made numerous assumptions with respect to industry
performance, business and economic conditions, applicable laws and regulations,
and other matters, many of which are beyond the control of Mid Continent. Any
estimates contained in RP Financial's analyses are not necessarily indicative of
future results or values, which may be
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significantly more or less favorable than such estimates. No company or
transaction utilized in RP Financial's analyses was identical to Mid Continent,
Commercial or the Merger. None of the analyses performed by RP Financial was
assigned a greater significance by RP Financial than any other.
The following is a summary of the material financial analyses performed by
RP Financial in connection with providing its opinion of September 2, 1997.
(a) Transaction Summary. RP Financial summarized the terms of the Merger,
including the conversion of each share of Mid Continent Common Stock into the
right to receive Commercial Common Stock pursuant to the Exchange Ratio. RP
Financial also summarized the formula for calculating the Exchange Ratio, the
treatment of the outstanding options to acquire Mid Continent Common Stock, the
termination provisions incorporated in the Merger Agreement, and the pricing
ratios indicated by the Merger Consideration relative to the tangible book
value, historical earnings, projected earnings, assets and deposits of Mid
Continent.
(b) Comparable Transactions Analysis. In this analysis, RP Financial
conducted an evaluation of the financial terms, financial and operating
condition and market area of recent business combinations among comparable
thrift institutions both pending and completed. In conjunction with its
analysis, RP Financial considered the multiples of tangible book value, earnings
and assets implied by the terms in such completed and pending transactions
involving selling companies whose financial characteristics were comparable to
those of Mid Continent including two comparable groups: (1) companies operating
in the Midwest U.S. with total assets between $250 million and $750 million and
completed/announced in 1996 or 1997, representing a total of ten (10)
transactions ("Comparable Group No. 1"); and (2) companies operating throughout
the U.S. with total assets between $250 million and $750 million and
completed/announced during 1997 ("Comparable Group No. 2). The median tangible
price-to-book value ratios indicated by Comparable Group No. 1 and Comparable
Group No. 2 were 143% and 182%, respectively, versus a tangible price-to-book
value ratio of approximately 202% indicated by the Merger Consideration based on
June 30, 1997 financial data adjusted to reflect the full dilutive impact of
stock options. The median price-to-assets ratios indicated by the Comparable
Group No. 1 and Comparable Group No. 2 were 14.6% and 15.2%, respectively,
versus a price-to-assets ratio of approximately 19.8% indicated by the Merger
Consideration based on June 30, 1997 financial data adjusted to reflect the
impact of stock options. The median price-to-earnings multiples indicated by
the Comparable Group No. 1 and Comparable Group No. 2 were 19.4 times and 17.9
times, respectively, based on trailing twelve month earnings (with trailing
twelve month earnings and price-to-earnings multiples adjusted to eliminate the
impact of the one time SAIF assessment), versus a price-to-earnings multiple of
approximately 18.7 times indicated by the Merger Consideration relative to Mid
Continent's June 30, 1997 trailing twelve month earnings, adjusted to omit the
one time SAIF assessment. The pricing ratios based on tangible book value,
earnings and trailing twelve month earnings indicated by the Merger
Consideration were comparable to or exceeded the median pricing ratios indicated
by the Comparable Group No. 1 and No. 2, which RP Financial cited in support of
its fairness conclusions.
(c) Discounted Cash Flow Analysis. RP Financial prepared several
discounted cash flow ("DCF") analyses, all of which incorporated a five and one
quarter year financial projection and cash flow analysis to shareholders. The
DCF analyses incorporated several specific factors reflecting the operating
environment of Mid Continent on a stand-alone basis, including growth prospects
in the local market, the level of competition from other financial institutions,
and future earnings estimates for Mid Continent under a stand-alone business
plan without the benefits of the Merger. The projections of future cash flows
to shareholders included the continued payment of cash dividends during interim
years and the receipt of consideration at the end of five and one quarter years,
assuming a terminal value for Mid Continent Common Stock equal to an assumed
merger value. The merger value reflected an estimate of the price that could be
received for Mid Continent Common Stock assuming Mid Continent's Board of
Directors sought to pursue a merger transaction at the end of five and one
quarter years, including an orderly marketing of Mid Continent to potential
merger partners and receipt of a control premium by the holders of Mid Continent
Common Stock. In the "base case" operating scenario, the projections of future
cash flows assumed continued payment of cash dividends, asset growth of 10.0%
annually, a return on average assets ranging from 1.11% of average assets to
1.05% of average assets, and realization of a terminal value at the end of five
and one quarter years of operations equal
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to 190% of book value per share (assumed to be the "current market merger value"
based on comparable group transaction data). The cash flow represented by the
dividends and terminal value was discounted to present value using a discount
rate of 10%. The "base case" DCF analysis indicated a present value to
stockholders of $35.05 per share (assuming a current market merger value of 190%
of book value). In addition to the "base case" operating scenario, RP Financial
prepared DCF analyses assuming different operating scenarios. Under the
conservative operating scenario, in which earnings were projected at 90% of the
"base case", the DCF analysis indicated a present value to stockholders of
$33.19 per share. Under the aggressive operating scenario, in which earnings
were projected at 110% of the "base case", the DCF analysis indicated a present
value to stockholders of $36.91 per share. RP Financial concluded that, since
the Merger Consideration exceeded the present value of future cash flows
accruing to holders of Mid Continent Common Stock under all scenarios assuming
the current market merger value, the DCF analyses supported its fairness
conclusions.
(d) Impact Analysis. RP Financial evaluated the projected financial impact
of the Merger on the balance sheet, income statement and per share financial
measures of Mid Continent. RP Financial's analysis considered the financial
condition and operations of Mid Continent and Commercial at June 30, 1997
(Commercial's financial condition and operations were considered on a pro forma
basis giving effect to the previously announced acquisition of Liberty Financial
Corporation) and the pro forma impact of the Merger. RP Financial calculated
the impact analysis at two price levels for the Commercial Common Stock: (1) the
upper limit, at which the holders of Mid Continent Common Stock would receive
approximately 1.3039 shares of Commercial Common Stock pursuant to the Exchange
Ratio formula; and (2) the lower limit, at which the holders of Mid Continent
Common Stock would receive approximately 1.5937 shares of Commercial Common
Stock pursuant to the Exchange Ratio formula. At any point between the upper
and lower limits, RP Financial estimated that holders of Mid Continent Common
Stock would realize accretion in market value of approximately 27 percent, which
represents the difference between the Merger Consideration and the most recent
trading price for Mid Continent Common Stock prior to execution of the
Agreement. RP Financial estimated that holders of Mid Continent Common Stock
would incur dilution of 23 percent and 7 percent in book value per share at the
upper and lower limits, respectively. RP Financial further estimated that
holders of Mid Continent Common Stock would realize accretion of 25 percent and
51 percent in projected earnings per share at the upper and lower limits,
respectively, would realize accretion of 81 percent and 118 percent in the
amount of supervisory goodwill write-off per share (a proxy for the potential
recovery of damages from the U.S. Government related to supervisory goodwill
claims), and would realize dilution of 40 percent and 20 percent, respectively,
in dividends per shares and the upper and lower limits. Moreover, the holders
of Mid Continent Common Stock would enjoy a stronger return on equity (ROE) on a
pro forma basis relative to stand-alone operations. RP Financial considered
both the impact of the Merger on the overall financial measures of Mid Continent
as well as the impact of the Merger on the per share financial measures of Mid
Continent in support of the fairness issue.
In addition to these financial analyses, RP Financial considered several
other considerations in its fairness conclusions. Such other financial
considerations included the greater market capitalization of the merged company
relative to Mid Continent on a stand-alone basis; the significantly greater
liquidity in the shares relative to the shares of Mid Continent Common Stock
without the Merger; the likelihood of greater potential stock price appreciation
in the Commercial shares relative to the shares of Mid Continent Common Stock
without the Merger; and the potential benefits to Mid Continent of the greater
geographic and operating diversification of the merged company relative to Mid
Continent on a stand-alone basis.
On the basis of these analyses and other considerations, RP Financial
concluded that the Merger Consideration, as described in the Merger Agreement,
is fair to the shareholders of Mid Continent from a financial point of view. As
described above, RP Financial's opinion and presentation to Mid Continent's
Board of Directors was one of many factors taken into consideration by Mid
Continent's Board of Directors in making its determination to approve the Merger
Agreement. Although the foregoing summary describes the material components of
the analyses presented by RP Financial to Mid Continent's Board, it does not
purport to be a complete description of all the analyses performed by RP
Financial and is qualified by reference to the written opinion of RP Financial
set forth as Appendix II hereto, which the Mid Continent shareholders are urged
to read in its entirety.
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Pursuant to a letter dated July 22, 1997 (the "RP Financial Engagement
Letter"), RP Financial estimates that it will receive from Mid Continent total
fees of $150,000, of which $100,000 has been paid to date, plus reimbursement of
certain out-of-pocket expenses, for its services in connection with the Merger.
In addition, Mid Continent has agreed to indemnify RP Financial against certain
liabilities, including liabilities under the federal securities laws.
In preparing its analysis, RP Financial made numerous assumptions with
respect to industry performance, business and economic conditions and other
matters, many of which are beyond the control of RP Financial and Mid Continent.
The analyses performed by RP Financial are not necessarily indicative of actual
values or future results, which may be significantly more or less favorable than
suggested by such analyses and do not purport to be appraisals or reflect the
prices at which a business may be sold.
Conversion of Mid Continent Common Stock
Exchange Ratio. Each share of Mid Continent Common Stock issued and
outstanding at the Acquisition Merger Effective Time (other than shares owned or
held by Commercial) will be converted into and represent solely the right to
receive a number of shares of Commercial Common Stock (such number of shares
referred to as the Exchange Ratio) based upon the "Average NYSE Closing Price"
of Commercial Common Stock (i.e., the arithmetic mean of the per share closing
price of the Commercial Common Stock as reported on the NYSE for the
Determination Period) as follows: (i) if the Average NYSE Closing Price is
greater than $29.33, the Exchange Ratio shall be 1.3039 of shares of Commercial
Common Stock; (ii) if the Average NYSE Closing Price is equal to or greater than
$24.00 but equal to or less than $29.33, the Exchange Ratio shall be that number
of shares of Commercial Common Stock equal to the quotient that results by
dividing $38.25 by the Average NYSE Closing Price; and (iii) if the Average
Closing Price is less than $24.00, the Exchange Ratio shall be 1.5937 shares of
Commercial Common Stock; provided, however, that if the Average NYSE Closing
Price is less than $22.00, Mid Continent will have the right to terminate the
Merger Agreement unless Commercial elects to adjust the Exchange Ratio to equal
$35.08 divided by the Average NYSE Closing Price.
No Fractional Shares. No fractional shares of Commercial Common Stock will
be issued in the Merger. Instead, cash will be paid in lieu of any fractional
share interests of Commercial Common Stock resulting from the Merger. No
dividend or distribution with respect to Commercial Common Stock will be payable
on or with respect to any fractional share interests, and no fractional share
interest will entitle the owner thereof to vote or to any other rights of a
stockholder of Commercial. The applicable cash value of each fractional share
interest will be equal to the product of such fraction multiplied by the Average
NYSE Closing Price for shares of Commercial Common Stock.
Exchange of Mid Continent Stock Certificates. Harris Trust and Savings
Bank is expected to act as the exchange agent (the "Exchange Agent") to effect
the exchange of stock certificates in connection with the Merger. As soon as
practicable after the Acquisition Merger Effective Time but not later than 10
business days thereafter, the Exchange Agent will send a notice and transmittal
form to each Mid Continent stockholder of record at such date whose Mid
Continent Common Stock has been converted into Commercial Common Stock, advising
such stockholder of the effectiveness of the Acquisition Merger and the
procedure for surrendering to the Exchange Agent outstanding certificates
formerly evidencing Mid Continent Common Stock in exchange for new certificates
of Commercial Common Stock and for cash in lieu of any fractional interest.
Promptly following receipt of such notice and transmittal form, holders of Mid
Continent Common Stock certificates should surrender their certificates in
accordance with the specified procedures. Upon surrender, each Mid Continent
Common Stock certificate will be canceled.
Until surrendered, certificates that prior to the Acquisition Merger
Effective Time represented outstanding shares of Mid Continent Common Stock will
be deemed for all corporate purposes to evidence the right to receive cash and
the ownership of the number of whole shares of Commercial Common Stock into
which such shares of Mid Continent Common Stock have been converted. Until such
certificates are so surrendered, no dividend payable to holders of Commercial
Common Stock as of any record date subsequent to the Acquisition Merger
Effective Time will be paid to the holders of such certificates. However, upon
surrender of such certificates, there will be paid to the record
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holder of the certificates of Commercial Common Stock issued in exchange
therefor the amount of dividends that theretofore have become payable with
respect to such shares of Commercial Common Stock along with the amount of cash,
if any, payable to the holder in lieu of fractional shares. No interest will be
payable with respect to such dividends or cash paid in lieu of fractional
shares.
If any certificate for shares of Commercial Common Stock is to be issued in
a name other than the name in which the surrendered certificate is registered,
it will be a condition of issuance that the certificate so surrendered is
properly endorsed and otherwise in proper form for transfer and that the person
requesting the issuance of such certificate either pay to the Exchange Agent any
transfer or other taxes required by reason of the issuance of the certificate in
a name other than the registered holder of the certificate surrendered or
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not payable.
Holders of Mid Continent Common Stock should NOT surrender their
certificates until they receive written instructions from the Exchange Agent.
Any shares of Mid Continent Common Stock owned or held by Commercial or any
of its subsidiaries (other than in a fiduciary capacity) or by Mid Continent or
any of its subsidiaries (other than in a fiduciary capacity) at the Acquisition
Merger Effective Time will cease to exist, and the certificates for such shares
will be canceled.
Treatment of Mid Continent Stock Options
Immediately prior to the Acquisition Merger Effective Time, each holder of
an option outstanding under the Mid Continent Option Plan shall, except as
provided in the next paragraph, continue outstanding as an option to purchase,
in place of the purchase of each share of Mid Continent Common Stock, the number
of shares of Commercial Common Stock that would have been received by the
optionee in the Merger had the option been exercised in full (without regard to
any limitations contained therein on exercise) for shares of Mid Continent
Common Stock immediately prior to the Acquisition Merger upon the same terms and
conditions under the relevant option as were applicable immediately prior to the
Acquisition Merger Effective Time, except for appropriate pro rata adjustments
as to the relevant option price for shares of Commercial Common Stock
substituted therefor so that the aggregate option exercise price of shares
subject to an option immediately following the assumption and substitution shall
be the same as the aggregate option exercise price for such shares immediately
prior to such assumption and substitution.
Notwithstanding the foregoing, in the event Commercial advises Mid
Continent in writing no less than 45 days prior to the closing of the
Acquisition Merger that the Merger will not be accounted for as a pooling of
interests, then each holder of an outstanding option under the Mid Continent
Option Plan shall, in cancellation of such option (such cancellation to be
reflected in a written agreement), receive from Mid Continent, immediately prior
to the Acquisition Merger Effective Time, in lieu of the Commercial stock option
referred to in the preceding paragraph, a cash payment in the amount of the per
share value of the Merger Consideration, less the exercise price of such option,
net of any cash which must be withheld under federal and state income tax
requirements.
See " -- Interests of Certain Persons in the Merger" for information
regarding outstanding Mid Continent stock options.
No Dissenters' Appraisal Rights
In accordance with the Kansas General Corporation Code, Mid Continent's
stockholders do not have dissenters' rights of appraisal in connection with the
transactions contemplated by the Merger Agreement.
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The Bank Merger
Following the Acquisition Merger, Mid-Continent Savings will merge into the
Bank, as a result of which the Bank will be the surviving savings institution.
The Bank Merger will be undertaken subject to and upon the terms and conditions
contained in the Merger Agreement and in the Plan of Merger between Mid-
Continent Savings and the Bank dated September 2, 1997. At the Bank Merger
Effective Time, the shares of Mid-Continent Savings Common Stock issued and
outstanding immediately prior thereto will be canceled and the shares of capital
stock of the Bank outstanding immediately prior thereto will constitute the only
outstanding shares of capital stock of the Bank following consummation of the
Bank Merger, the charter and bylaws of the Bank in effect immediately before the
Bank Merger will be the charter and bylaws of the Bank immediately after the
Bank Merger, the current home office of the Bank will continue to be the home
office of the Bank, and the former home office of Mid-Continent Savings and all
branch offices of the Bank and former branch offices of Mid-Continent Savings
will be branch offices of the Bank. Following the Bank Merger, the Bank will
continue to operate under the name "Commercial Federal Bank, a Federal Savings
Bank." For additional information, see " -- Management after the Merger,"
"-- Employee Benefit Plans after the Merger" and " -- Interests of Certain
Persons in the Merger."
The obligations of the parties to consummate the Bank Merger are subject to
the receipt of OTS approval of the Bank Merger.
Management after the Merger
The directors and officers of Commercial and the Bank will not be affected
by the Merger, with the exception that Mr. Larry Goddard will hold the office of
First Vice President of the Bank and Mr. Harold Siemens will hold the office of
First Vice President of the Bank.
Representations and Warranties
Commercial and the Bank, and Mid Continent and Mid-Continent Savings, have
given certain representations and warranties to each other in the Merger
Agreement relating to, among other things, the following: the validity of their
organization; authorized capital; the ownership, organization and status of
their subsidiaries; the accuracy and completeness of certain internal books and
records and of their financial statements, reports and material relating to them
included in this Prospectus/Proxy Statement; the absence of any undisclosed
material adverse change in their business, financial conditions or results of
operations; the accuracy and completeness of information contained in this
Prospectus/Proxy Statement; disclosure of financial advisory, brokerage, finders
and similar fees; the absence of undisclosed material pending or threatened
litigation; the adequacy of certain types of insurance; their standing under and
compliance with applicable state and federal law, including compliance with
federal securities laws and state and federal tax laws, among others; certain
tax matters; ownership of all of their real property and undisturbed possession
of all material leases; their authority to enter into the Merger Agreement and
to undertake the transactions contemplated by it; the lack of undisclosed
derivative contracts and the accuracy of all information provided to each other
in connection with the Merger. Mid Continent and Mid-Continent Savings have
made additional representations as to the absence of undisclosed employment
agreements or arrangements and employee benefits; absence of any material
contract defaults; the absence of environmental hazards and claims; the quality
of Mid-Continent Savings' loan portfolio; and the adequacy of the present
carrying values of any real estate investments, joint ventures, construction
loans or other investments or loans under generally accepted accounting
principles.
Covenants Pending the Acquisition Merger
In the Merger Agreement, Commercial, the Bank, Mid Continent and Mid-
Continent Savings have agreed to use their best efforts, and to take all actions
necessary or appropriate, to consummate the transactions contemplated by the
Merger Agreement. Each party has also agreed to give to the other party and its
respective representatives and agents full access (to the extent lawful) to all
of the premises, books, records and employees of it and its subsidiaries
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at all reasonable times, and to furnish and cause its subsidiaries to furnish to
the other party and its respective agents or representatives access to and true
and complete copies of such financial and operating data and all documents with
respect to matters to which reference is made in the Merger Agreement.
Pursuant to the Merger Agreement, Mid Continent and its subsidiaries,
including Mid-Continent Savings, will conduct their business only in the
ordinary course, and maintain their books and records in accordance with past
practices and not take any action that would (i) adversely affect the ability to
obtain any governmental approvals contemplated in the Merger Agreement, or (ii)
adversely affect Mid Continent's ability to perform its obligations under the
Merger Agreement. Further, Mid Continent has agreed that it will not, without
the prior written consent of Commercial: (i) declare, set aside or pay any
dividend or make any other distribution with respect to Mid Continent's capital
stock, except for the declaration and payment of regular quarterly cash
dividends in an amount not to exceed $.10 per share of Mid Continent Common
Stock with respect to any full calender quarter after September 2, 1997;
provided, however, that in the event the Merger occurs on or before March 31,
1998, then Mid Continent shareholders shall be entitled to receive Commercial's
regular quarterly cash dividend for the March 31, 1998 quarter and shall not be
entitled to receive a dividend from Mid Continent for such quarter to be paid
during April 1998; (ii) reacquire any of Mid Continent's outstanding shares of
capital stock; (iii) issue or sell or buy any shares of capital stock of the Mid
Continent or any Mid Continent subsidiary, except shares of Mid Continent Common
Stock issued pursuant to the Mid Continent Option Plan; (iv) effect any stock
split, stock dividend or other reclassification of Mid Continent's Common Stock;
or (v) grant any options or issue any warrants exercisable for or securities
convertible or exchangeable into capital stock of Mid Continent or any Mid
Continent subsidiary or grant any stock appreciation or other rights with
respect to shares of capital stock of Mid Continent or of any Mid Continent
subsidiary.
In addition, pursuant to the Merger Agreement, Mid Continent and its
subsidiaries shall not, without the prior written consent of Commercial:
(i) sell or dispose of any significant assets of Mid Continent or of any
Mid Continent subsidiary other than in the ordinary course of business
consistent with past practices;
(ii) merge or consolidate Mid Continent or any Mid Continent subsidiary
with or otherwise acquire any other entity, or file any applications or make any
contract with respect to branching by Mid-Continent Savings (whether de novo,
purchase, sale or relocation) or acquire or construct, or enter into any
agreement to acquire or construct, any interest in real property (other than
with respect to security interests in properties securing loans and properties
acquired in settlement of loans in the ordinary course) or improvements to real
property;
(iii) change the articles or certificate of incorporation, charter
documents or other governing instruments of Mid Continent or any Mid Continent
subsidiary, except as provided in the Merger Agreement;
(iv) grant to any executive officer, director or employee of Mid Continent
or any Mid Continent subsidiary any increase in annual compensation, or any
bonus type payment, except in accordance with existing compensation guidelines
of Mid Continent (as described in the Merger Agreement) and except as otherwise
described in the Merger Agreement or as determined in accordance with Mid
Continent's existing bonus plan (as in effect on September 2, 1997, but pro
rated to the date of the closing of the Merger and calculated without regard to
expenses incurred as a result of the Merger);
(v) adopt any new or amend or terminate any existing employee benefit
plans or arrangements of any type except as described in the Merger Agreement;
(vi) except as described in the Merger Agreement, authorize severance pay
or other benefits for any officer, director or employee of Mid Continent or any
Mid Continent subsidiary;
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(vii) incur any material indebtedness or obligation or enter into or
extend any material agreement or lease, except in the ordinary course of
business consistent with past practices;
(viii) engage in any lending activities other than in the ordinary course
of business consistent with past practices;
(ix) form any new subsidiary or cause or permit a material change in the
activities presently conducted by any Mid Continent subsidiary or make
additional investments in subsidiaries;
(x) purchase any debt securities or derivative securities, including CMO
or REMIC products, that are defined as "high risk mortgage securities" under OTS
Thrift Bulletin No. 52 dated January 10, 1992 as revised or purchase any
derivatives contracts or structured notes;
(xi) purchase any equity securities other than Federal Home Loan Bank
stock;
(xii) make any investment which would cause Mid-Continent Savings to not
be a qualified thrift lender under Section 10(m) of the HOLA, or not to be a
"domestic building and loan association" as defined in Section 7701(a)(19) of
the Code;
(xiii) make any loan with a principal balance of $750,000 or more;
(xiv) authorize capital expenditures other than in the ordinary course of
business;
(xv) adopt or implement any change in its accounting principles, practices
or methods other than as may be required by generally accepted accounting
principles or by a regulatory authority or adopt or implement any change in its
methods of accounting for Federal income tax purposes; or
(xvi) make any loan in which participation interests therein are to be
sold to other persons or entities or acquire a participation interest in a loan
originated by another person or entity in excess of $200,000.
Notwithstanding the foregoing, Mid-Continent Savings is permitted to engage
in any of the foregoing activities exclusively with the Bank.
Pursuant to the Merger Agreement, Mid Continent also shall not authorize or
permit any representative of Mid Continent or any subsidiary to initiate contact
with any person or entity in an effort to solicit, initiate or encourage any
"takeover proposal" (generally, any proposal other than as contemplated by the
Merger Agreement, for a merger or other business combination involving Mid
Continent or Mid-Continent Savings, for the acquisition of a 10.0% or greater
equity interest in Mid Continent or Mid-Continent Savings or for the acquisition
of a substantial portion of the assets of Mid Continent or Mid-Continent
Savings) or, except as the fiduciary duties of Mid Continent's Board of
Directors may otherwise require, cooperate with, negotiate with or enter into an
agreement with any party relating to a takeover proposal. Further, Mid
Continent has agreed to give prompt written notice to Commercial upon becoming
aware of any takeover proposal.
Conditions to Consummation of the Merger
Pursuant to the Merger Agreement, the obligations of Commercial, the Bank,
Mid Continent and Mid-Continent Savings to effect the Acquisition Merger and the
Bank Merger are subject to the following conditions:
(i) holders of the outstanding shares of Mid Continent Common Stock shall
have approved the Articles Amendment, the Merger Agreement and the Acquisition
Merger;
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(ii) the Articles Amendment shall be effective under the Kansas General
Corporation Code and the necessary amendment to Mid-Continent Savings' Charter
shall be effective under applicable law;
(iii) no order, decree or injunction shall have been entered and remain in
force restraining or prohibiting the Merger in any legal, administrative,
arbitration, investigatory or other proceedings by any governmental or judicial
or other authority;
(iv) to the extent required by applicable law or regulation, all approvals
of or filings with any governmental authority, including without limitation
those of the OTS, the FDIC, the Federal Trade Commission, the Department of
Justice, the Commission, and any state securities or blue sky authorities, shall
have been obtained or made and any waiting periods shall have expired in
connection with the consummation of the Merger and all other statutory or
regulatory requirements for the valid consummation of the Merger and related
transactions shall have been satisfied;
(v) the Registration Statement of which this Prospectus/Proxy Statement is
a part shall have been declared effective and shall not be subject to a stop
order of the Commission and, if the offer and sale of Commercial's Common Stock
in the Merger pursuant to the Merger Agreement is subject to the blue sky laws
of any state, shall not be subject to a stop order of any state securities
commissioner; and
(vi) receipt of either an opinion of Deloitte & Touche LLP, in form and
content reasonably satisfactory to Commercial and Mid Continent, and upon which
Mid Continent shareholders may rely, as to certain of the federal income tax
consequences of the Acquisition Merger and the Bank Merger (see " --Federal
Income Tax Consequences").
The obligations of Commercial and the Bank to effect the Merger and the
transactions contemplated in the Merger Agreement are subject to the following
additional conditions, among others, any of which may be waived by Commercial
and the Bank: (i) Commercial shall have received from Mid Continent's counsel
an opinion dated as of the closing date of the Merger covering certain matters;
(ii) Mid Continent and Mid-Continent Savings shall have obtained all necessary
third party consents or approvals in connection with the Merger, the absence of
which would materially and adversely affect Mid Continent and its subsidiaries,
taken as a whole; (iii) Commercial shall have received a letter from Mid
Continent's independent public accountants regarding certain financial
information included in this Prospectus/Proxy Statement and other matters; (iv)
between the date of the Merger Agreement and the closing date of the Merger,
there shall not have occurred any material adverse change in the financial
condition, business or results of operations of Mid Continent and any Mid
Continent subsidiaries, taken as a whole, other than any such change
attributable to or resulting from any change in law, regulation or generally
accepted accounting principles which impairs both Mid Continent and Commercial
in a substantially similar manner, and other than any such change attributable
to or resulting from changes in economic conditions applicable to depository
institutions generally or in general levels of interest rates effecting both Mid
Continent and Commercial to a similar extent and in a similar manner; (v) the
representations and warranties of Mid Continent and Mid-Continent Savings shall
be true in all material respects at the Acquisition Merger Effective Time with
the same effect as though made at the Acquisition Merger Effective Time (or on
the date when made in the case of any representation or warranty which
specifically relates to an earlier date); Mid Continent and Mid-Continent
Savings shall have performed all obligations and complied with each covenant, in
all material respects, and all conditions under the Merger Agreement on their
parts to be performed or complied with at or prior to the Acquisition Merger
Effective Time; and Mid Continent shall have delivered to Commercial a
certificate, dated the Acquisition Merger Effective Time and signed by its chief
executive officer and chief financial officer, to such effect; (vi) neither Mid
Continent nor any of its subsidiaries shall be a party to any pending
litigation, reasonably probable of being determined adversely to Mid Continent
or any Mid Continent subsidiary, which would have a material adverse effect on
the business, financial condition or results of operations of Mid Continent and
its subsidiaries, taken as a whole; (vii) all governmental approvals required by
the Merger Agreement to consummate the transactions contemplated thereby shall
have been obtained without the imposition of any conditions (excluding any
conditions
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relating to or affecting whether the Acquisition Merger qualifies as a pooling
of interests for accounting purposes) which Commercial and the Bank reasonably
and in good faith determine to be unduly burdensome upon the conduct of the
business of Commercial or the Bank and, in the reasonable judgment of
Commercial, substantially diminish the benefits expected to be received by
Commercial from the transactions contemplated by the Merger Agreement; and
(viii) Commercial shall have received letter agreements from all affiliates of
Mid Continent regarding restrictions on resale of Commercial Common Stock
received by them in the Merger to ensure compliance with applicable resale
restrictions imposed under the federal securities laws.
The obligations of Mid Continent and Mid-Continent Savings to effect the
Acquisition Merger and the transactions contemplated in the Merger Agreement are
subject to the following additional conditions, among others, any of which may
be waived by Mid Continent and Mid-Continent Savings: (i) Mid Continent shall
have received from counsel to Commercial opinions dated as of the closing date
of the Merger covering certain matters; (ii) the representations and warranties
of Commercial and the Bank shall be true in all material respects at the
Acquisition Merger Effective Time with the same effect as though made at the
Acquisition Merger Effective Time (or on the date when made in the case of any
representation or warranty which specifically relates to an earlier date);
Commercial and the Bank shall have performed all obligations and complied with
each covenant, in all material respects, and all conditions under the Merger
Agreement on their parts to be performed or complied with at or prior to the
Acquisition Merger Effective Time; and Commercial shall have delivered to Mid
Continent a certificate, dated the Acquisition Merger Effective Time and signed
by its chief executive officer and chief financial officer, to such effect;
(iii) a certificate for the required number of whole shares of Commercial Common
Stock, as determined in accordance with the Merger Agreement, and cash for
fractional share interests shall have been delivered to the Exchange Agent; (iv)
in addition to governmental approvals, Commercial and the Bank shall have
obtained all necessary third party consents or approvals in connection with the
Merger, the absence of which would materially and adversely affect Commercial
and its subsidiaries, taken as a whole; and (v) the shares of Commercial Common
Stock issuable pursuant to the Merger Agreement shall have been approved for
listing on the NYSE, subject to official notice of issuance.
There can be no assurance that the conditions to consummation of the Merger
will be satisfied or waived. In the event the conditions to either party's
obligations become impossible to satisfy in any material respect, the other
party may elect to terminate the Merger Agreement. See " -- Amendment or
Termination of the Merger Agreement."
Amendment or Termination of the Merger Agreement
The Merger Agreement may be terminated at any time before the Acquisition
Merger Effective Time, whether before or after approval by stockholders; (i) by
mutual consent of the parties; (ii) at the election of either party, if the
closing of the Merger shall not have occurred on or before May 1, 1998 or such
later date as may be agreed to in writing by the parties, provided that the
right to terminate under this provision shall not be available to any party
whose failure to perform an obligation has been the cause of, or has resulted
in, the failure of the closing to occur on or before such date; (iii) by
Commercial upon delivery of written notice of termination to Mid Continent if
any event occurs which renders impossible satisfaction in any material respect
of one or more of the conditions to the obligations of Commercial to effect the
Merger as set forth in the Merger Agreement and noncompliance is not waived by
Commercial; (iv) by Mid Continent upon delivery of written notice of termination
to Commercial if any event occurs which renders impossible satisfaction in any
material respect of one or more of the conditions to the obligations of Mid
Continent to effect the Merger set forth in the Merger Agreement and
noncompliance is not waived by Mid Continent; (v) by Mid Continent at any time
during the two business days commencing on the business day immediately
following the end of the Determination Period, if the Average NYSE Closing Price
of Commercial Common Stock is less than $22.00; provided, however, that Mid
Continent shall not be entitled to terminate the Merger Agreement on this basis
if Commercial exercises its option to adjust the Exchange Ratio so that it
equals the number obtained by dividing $35.08 by the Average NYSE Closing Price
of Commercial Common Stock; (vi) by either Mid Continent or Commercial if the
shareholders of Mid Continent do not approve the Articles Amendment, in which
event Mid Continent shall pay Commercial a fee of $200,000; and (vii) by Mid
Continent in connection with entering into a definitive agreement to pursue a
"superior proposal," as defined in the Merger Agreement, in which case
Commercial shall be entitled to
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a termination fee of $3.0 million, inclusive of any expense reimbursements that
may otherwise be due under the Merger Agreement (see " -- Expenses and
Termination Fee").
The representations, warranties and agreements of the parties set forth in
the Merger Agreement shall not survive the Acquisition Merger Effective Time,
and shall be terminated and extinguished at that time. From and after that
time, none of the parties shall have any liability to the other on account of
any breach or failure of any of those representations, warranties and
agreements, except with respect to agreements of the parties which by their
terms are intended to be performed after that time and with respect to liability
for fraud, deception or intentional misrepresentation.
The Merger Agreement may be amended, whether before or after approval by
stockholders of Mid Continent, by an agreement in writing executed in the same
manner as the Merger Agreement and authorized or ratified by the Boards of
Directors of Mid Continent and Commercial, except that after approval of the
Merger Agreement by Mid Continent's stockholders, no such amendment without
further approval by Mid Continent's stockholders may change the amount or form
of the consideration to be received by Mid Continent's stockholders in the
Merger.
Expenses and Termination Fee
Each of the parties to the Merger Agreement will bear and pay all costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated thereunder; provided, however, that Commercial shall pay the
expenses related to filing the Registration Statement and Commercial and Mid-
Continent Savings shall equally apportion the expenses for printing and mailing
this Prospectus/Proxy Statement.
In order to induce Commercial and the Bank to enter into the Merger
Agreement and as a means of compensating Commercial and the Bank for the
substantial direct and indirect monetary and other costs incurred and to be
incurred in connection with the Merger Agreement and the transactions
contemplated thereby, Mid Continent and Mid-Continent Savings agreed pursuant to
the Merger Agreement that if the Merger Agreement is terminated under the
circumstances described in subparagraphs (i), (ii), (iii) or (vii) of the first
paragraph under "Amendment or Termination of the Merger Agreement" above and
prior to such termination a Termination Event, as defined in the Merger
Agreement, shall have occurred, Mid Continent or Mid-Continent Savings will upon
demand pay to Commercial or the Bank in immediately available funds $3.0
million, inclusive of any expense reimbursements that may otherwise be due and
payable in accordance with the Merger Agreement.
For purposes of the Merger Agreement, a Termination Event shall mean either
of the following:
(1) Mid Continent, without having received Commercial's prior written
consent, shall have entered into a written agreement to engage in an Acquisition
Transaction (as defined below) with any person other than Commercial or any
affiliate of Commercial or the Board of Directors of Mid Continent shall have
recommended that the shareholders of Mid Continent approve or accept any
Acquisition Transaction with any person other than Commercial or any affiliate
of Commercial. For purposes of the Merger Agreement "Acquisition Transaction"
shall mean (x) a merger or consolidation, or any similar transaction, involving
Mid Continent or any of its subsidiaries, (y) a purchase, lease or other
acquisition of all or substantially all of the assets of Mid Continent or any of
its subsidiaries or (z) a purchase or other acquisition (including by way of
merger, consolidation, share exchange or otherwise) of securities representing
50% or more of the equity securities of Mid Continent or any of its
subsidiaries; or (2) After a bona fide written proposal is made by any person
other than Commercial or any affiliate of Commercial to Mid Continent or its
shareholders to engage in an Acquisition Transaction, either (A) Mid Continent
shall have breached any covenant or obligation contained in the Merger Agreement
and such breach would entitle Commercial to terminate the Merger Agreement or
(B) the holders of Mid Continent Common Stock shall not have approved the Merger
Agreement at the Annual Meeting under circumstances in which Mid Continent's
Board of Directors has failed to make all reasonable efforts to obtain the
favorable vote of Mid Continent shareholders on the Merger, including failure to
recommend the Merger to Mid Continent shareholders, such meeting shall not have
been held in a timely
35
<PAGE>
manner or shall have been postponed, delayed or enjoined prior to termination of
the Merger Agreement except as a result of a judicial or administrative
proceeding or Mid Continent's Board of Directors shall have withdrawn or
modified in a manner adverse to Commercial the recommendation of Mid Continent's
Board of Directors with respect to the Merger Agreement.
Required Regulatory Approvals
The Merger is subject to the approval of the OTS. Commercial has filed an
application with the OTS for approval of the Merger. As of the date of this
Prospectus/Proxy Statement, the approval of the OTS has not been received.
There can be no assurance as to the timing of such approval, if given, or as to
the conditions, if any, on which approval will be given. In addition, the
approval, if and when granted, may contain conditions which Commercial may find
unduly burdensome. When such approval is received, material changes to the
Merger Agreement, material conditions, or other changes of a material nature may
be imposed by regulatory authorities in connection therewith which could require
a resolicitation of Mid Continent's stockholders for approval. Following OTS
approval of the Merger, the U.S. Department of Justice may review the Merger and
raise objections on antitrust grounds, though objections on such grounds are not
expected. If the required regulatory approvals are not obtained, the Merger
Agreement will be terminated, and the Merger will not occur.
Closing; Merger Effective Times
As soon as practicable following the satisfaction or waiver of all
conditions of the Merger Agreement but in no event later than thirty (30) days
following such satisfaction or waiver (unless otherwise agreed by the parties),
a closing shall take place at which the parties thereto will exchange documents
required by the Merger Agreement. Immediately following the closing, and on the
same day if practicable, the Acquisition Merger shall become effective at the
latest to occur of the time (i) the Nebraska articles of merger are filed with
the appropriate authorities in Nebraska or (ii) the agreement or certificate of
merger is filed with the appropriate authorities of Kansas. Following the
Acquisition Merger, the Bank Merger shall become effective at the time the
articles of combination for such merger are endorsed by the OTS.
Employee Benefit Plans after the Merger
To the extent permitted by applicable law, the employees of Mid Continent
and Mid-Continent Savings who become employees of Commercial and/or the Bank
("Continuing Employees") shall be eligible to participate in all benefit plans
sponsored by Commercial or the Bank to the same extent as other similarly
situated employees of Commercial and the Bank; provided that Commercial shall
(i) give the Continuing Employees full credit for prior service with Mid
Continent or Mid-Continent Savings with respect to determination of eligibility
to participate, vesting, and benefit levels under the welfare plans sponsored by
Commercial or the Bank, and with respect to determination of eligibility and
vesting, but not benefit accruals under 401(k) plans sponsored by Commercial or
the Bank, (ii) continue their employment and regular salary in effect on the
date of closing of the Merger until the earlier to occur of their voluntary
termination of employment and the date twelve (12) months after the Closing, and
(iii) not subject the Continuing Employees to any uninsured waiting period or
exclusion for pre-existing conditions that was not in effect, on the effective
date of the Merger, under a medical or dental insurance plan maintained by Mid
Continent or Mid-Continent Savings, and (iv) have no obligation to provide
benefits under any Commercial plan or program that are duplicative of benefits
that employees of Mid Continent or Mid-Continent Savings receive under a
similar plan or program maintained by Mid Continent or Mid-Continent Savings
after the Merger.
Under the Merger Agreement, Commercial shall honor all accrued vacation and
sick leave for the employees of Mid Continent and its subsidiaries following the
Merger, subject both to expiration within one year of the Merger and to
Commercial's policies, from the closing of the Merger forward, applicable to the
accrual of vacation pay and sick leave. Commercial will honor the Mid Continent
Management Long Term Retention Plan as well as Mid-
36
<PAGE>
Continent Savings' defined benefit pension plan, and will fulfill all
obligations to participants thereunder in accordance with the terms of such
plans.
Interests of Certain Persons in the Merger
Mid Continent Stock Options. The following table sets forth as of December
10, 1997 information regarding outstanding options under the Mid Continent
Option Plan held by directors and executive officers of Mid Continent and Mid-
Continent Savings. For a description of the manner in which these options will
be treated in connection with the Merger, see " -- Treatment of Mid Continent
Stock Options."
<TABLE>
<CAPTION>
Principal Position Outstanding Stock
Name with Mid-Continent Savings Option Shares
- ---- -------------------------- -----------------
<S> <C> <C>
Richard T. Pottorff Chairman, President and CEO 16,942
Larry R. Goddard Executive Vice President, CFO and COO 21,557
Thomas C. Hand Director 11,241
Kenneth B. Dellett Director 11,241
Ronald J. McGraw Director 11,241
David L. Walter Vice President and Treasurer 7,200
------
Total 79,422
======
</TABLE>
Severance Benefits. Commercial has agreed in the Merger Agreement to give
any employee of Mid-Continent Savings that the Bank does not intend to continue
to employ for a period of at least one year following the Merger ("Temporary
Transitional Employees") written notice of such intention not less than 30 days
prior to the closing date of the Merger, in which case Mid Continent shall pay
to such employees as of the closing date any sums due under the Mid Continent
Change in Control Severance Plan or Change in Control Severance Agreements and
sums payable for accrued vacation.
With the exception of Temporary Transitional Employees, Commercial agrees
that for a period of twelve (12) months following the Acquisition Merger
Effective Time, any employee of Mid Continent or Mid-Continent Savings who is
not, and has not been, a party to an employment or severance agreement with Mid
Continent or Mid-Continent Savings and whose employment is involuntarily
terminated by Commercial for a reason other than just cause on or after the
Acquisition Merger Effective Time shall be entitled to receive both payment for
accrued vacation time (provided such accrued vacation time does not exceed five
weeks) and continued payment of salary in effect as of the closing of the Merger
through the remainder of the one year period after the closing, but in no event
shall such individual receive payments of less than the benefits payable under
the Mid Continent Federal Savings Bank Change in Control Severance Plan, which
plan shall become null and void 18 months after the closing, and the value of
all accrued vacation pay for such employee.
Commercial has agreed that on or prior to the date of closing, Mid
Continent shall make payments to Mid Continent directors in connection with
terminating the Mid Continent Federal Savings Bank Directors Consultation and
Retirement Plan and Directors Change in Control Severance Plan. Payments to Mid
Continent's directors in connection with terminating these plans are expected to
aggregate approximately $309,300.
As of the closing date of the Merger, Mid-Continent Savings will terminate
the employment of Richard T. Pottorff and pay him all severance due and owing
under his employment agreement, subject to the limitations imposed by Section
280G of the Internal Revenue Code. Such payment is estimated to total
approximately $910,874. On or before the closing date of the Merger, Commercial
and Mr. Pottorff will enter into a three-year consulting agreement under which
Mr. Pottorff will render consulting services to Commercial on matters regarding
the business affairs and operations of Commercial as they relate to former
operations of Mid Continent, particularly matters regarding
37
<PAGE>
Mid Continent's pending goodwill claim against the United States government. Mr.
Pottorff will receive compensation of $12,500 per month under this agreement.
It is the intention of both Mid Continent and Commercial to terminate Mid-
Continent Savings' employment agreement with Larry Goddard and change in control
severance agreement with Harold Siemens effective as of the closing of the
Merger and to provide for such agreements to be replaced by similar agreements
between the Bank and such individuals on mutually acceptable terms to be
negotiated by the parties prior to closing. In the event no such replacement
agreements have been executed by the 30th day prior to closing, then on or prior
to the closing date, Mid-Continent Savings may renew the employment agreement
with Mr. Goddard for a period not to exceed 36 months from the closing date and
shall renew the term of the change in control severance agreement with Mr.
Siemens for a term not to exceed 24 months from the closing date. Since the
Merger would constitute a change in control of Mid Continent for purposes of
these agreements, Messrs. Goddard and Siemens would be entitled to severance
payments in the event of termination of their employment under certain
circumstances following the Merger. Such payments are estimated to total
$524,774 and $179,015, respectively. See Proposal 4 -- Election of Directors --
Executive Compensation -- Employment Agreements."
Retention Bonus. Pursuant to the Merger Agreement, Mid Continent will, on
or before the closing date of the Merger, pay $44,000 and $40,000 as retention
bonuses to Mr. Larry Goddard and Mr. Harold Siemens, respectively. On the one
year anniversary date of the closing date of the Merger, Mr. Goddard will be
paid an additional retention bonus of $44,000 by Commercial. On the one year
anniversary date of the closing of the Merger, Mr. Siemens will be paid an
additional retention bonus of $40,000 by Commercial. Payment of the additional
retention bonuses is subject to Mr. Goddard and Mr. Siemens remaining employees
of Commercial. During the first two years following the Merger, neither Mr.
Goddard nor Mr. Siemens will participate in Commercial's bonus program.
Employee Stock Ownership Plan. Mid Continent maintains the ESOP for the
exclusive benefit of participating employees. The ESOP will terminate, as of the
date of the Merger, and the ESOP will allocate and distribute plan assets to
plan participants and beneficiaries in accordance with its terms. At September
30, 1997, the estimated benefits payable to Messrs. Richard T. Pottorff, Larry
R. Goddard, and Harold Siemens are $104,109, $77,536, and $73,768, respectively.
These ESOP payments will be made in connection with their interests as
participants in the ESOP.
Restricted Stock. Certain Mid Continent officers and employees have been
awarded shares of restricted stock under the Mid Continent Management Stock
Bonus Plan. All previously awarded restricted shares have vested. As of the
effective date of the Merger, the Management Stock Bonus Plan will terminate,
and any restricted stock previously awarded to officers and employees of Mid
Continent will be converted into shares of Commercial Common Stock in accordance
with the terms of the Merger Agreement.
Indemnification of and Continued Insurance Coverage for Mid Continent
Management. Pursuant to the Merger Agreement, Commercial has agreed that for a
period of three years following the Acquisition Merger Effective Time, the
Merger will not affect or diminish any of Mid Continent's duties and obligations
of indemnification existing as of the Acquisition Merger Effective Time in favor
of employees, agents, directors or officers of Mid Continent or any of its
subsidiaries arising by virtue of Mid Continent's Articles or bylaws in the form
in effect at the date of the Merger Agreement or arising by operation of law.
Commercial will cause the persons serving as officers and directors of Mid
Continent immediately prior to the Acquisition Merger Effective Time to be
covered for a period of 18 months from the Acquisition Merger Effective Time by
the directors' and officers' liability insurance policy maintained by Mid
Continent (provided that Commercial may substitute therefor policies of at least
the same coverage and amounts containing terms and conditions which are not
materially less advantageous than such policy) with respect to acts or omissions
occurring prior to the Acquisition Merger Effective Time which were committed by
such officers and directors in their capacity as such; however, in no event will
Commercial be required to expend more than 150% of the amount currently expended
by Mid Continent on an annual basis to maintain or procure insurance coverage
for such 18 month period pursuant to the Merger Agreement.
38
<PAGE>
Federal Income Tax Consequences
Commercial and Mid Continent will rely upon an opinion of Deloitte & Touche
LLP, tax advisor to Commercial, to the following effect:
. the Acquisition Merger should qualify as a reorganization within the
meaning of Section 368(a)(1)(A) of the Code. Mid Continent and
Commercial should each be a "party to a reorganization" within the
meaning of Section 368(b) of the Code;
. Mid Continent should recognize no gain or loss on the transfer of its
assets to Commercial in exchange for the Commercial Common Stock,
cash, if any, and the assumption of its liabilities by Commercial, by
reason of the application of Sections 361(a), 361(b) and 357(a) of the
Code;
. no gain or loss should be recognized by Mid Continent upon the
distribution of the Commercial Common Stock to the Mid Continent
stockholders, by reason of the application of Section 361(c)(1) of the
Code;
. no gain or loss should be recognized by Commercial on the receipt of
Mid Continent's assets in exchange for Commercial Common Stock, and
the assumption by Commercial of Mid Continent's liabilities, by reason
of the application of Section 1032(a) of the Code;
. the basis of the assets of Mid Continent in the hands of Commercial
should be the same as the basis of such assets in the hands of Mid
Continent immediately prior to the Merger, by reason of the
application of Section 362(b) of the Code;
. the holding period of the property acquired by Commercial from Mid
Continent should include the holding period of such property in the
hands of Mid Continent immediately prior to the Merger, by reason of
the application of Section 1223(2) of the Code;
. no gain or loss should be recognized by the former Mid Continent
stockholders upon the exchange of their Mid Continent Common Stock for
the Commercial Common Stock (including fractional shares which they
otherwise might be entitled to receive) by reason of the application
of Code Section 354(a);
. the basis of the Commercial Common Stock (including fractional share
interests a Mid Continent stockholder would otherwise be entitled to
receive) to be received by a Mid Continent stockholder who exchanges
Mid Continent Common Stock for Commercial Common Stock should be the
same as the basis of Mid Continent Common Stock surrendered in the
Merger by reason of Code Section 358(a)(1);
. the holding period of the Commercial Common Stock (including
fractional shares which they otherwise might be entitled to receive)
to be received by Mid Continent stockholders should, in each instance,
include the holding period of the Mid Continent shares surrendered in
the Merger, provided Mid Continent stock was held as a capital asset
on the date of the Merger, by reason of the application of Code
Section 1223(1);
. Commercial as the survivor should succeed to and take into account as
of the close of the day of the distribution or transfer the items of
Mid Continent described in Code Section 381(c), subject to the
conditions and limitations specified in Code Sections 381(b) and
381(c), by reason of the application of Code Section 381(a)(2);
39
<PAGE>
. as provided in Code Section 381(c)(2) and Regulation Section
1.381(c)(2)-1, Commercial as the survivor should succeed to and take
into account the earnings and profits, or deficit in earnings and
profits, of Mid Continent as of the date or dates of transfer; any
deficit in earnings and profits of either Commercial or Mid Continent
should be used only to offset earnings and profits accumulated after
the date or dates of transfer;
. cash received by a stockholder of Mid Continent otherwise entitled to
receive a fractional share of Commercial Common Stock in exchange for
his Mid Continent stock should be treated as if the fractional shares
were distributed as part of the Merger and then were redeemed by
Commercial. These cash payments should be treated as having been
received as distributions in full payment in exchange for the stock
redeemed as provided in Code Section 302(a). This receipt of cash
should result in gain or loss measured by the difference between the
basis of such fractional share interest and the cash received. Such
gain or loss should be capital gain or loss to the former Mid
Continent stockholder, provided Mid Continent stock was a capital
asset in such former stockholder's hands and as such, will be subject
to the provisions and limitations of Subchapter P of Chapter 1 of the
Code (Rev. Rul. 66-365 and Rev. Rul. 77-41).
The opinion of Deloitte & Touche LLP has no binding effect on the IRS. The
opinion of Deloitte & Touche LLP is filed with the Commission as an exhibit to
Commercial's registration statement on Form S-4 of which this Prospectus/Proxy
Statement is a part. See " -- Additional Information."
THE FOREGOING CONSTITUTES ONLY A GENERAL DESCRIPTION OF THE FEDERAL INCOME
TAX CONSEQUENCES OF THE MERGER, WITHOUT CONSIDERATION OF THE PARTICULAR FACTS
AND CIRCUMSTANCES OF EACH MID CONTINENT STOCKHOLDER'S SITUATION. EACH MID
CONTINENT STOCKHOLDER IS ENCOURAGED TO CONSULT HIS OR HER OWN TAX AND FINANCIAL
ADVISORS AS TO PARTICULAR FACTS AND CIRCUMSTANCES WHICH MAY BE UNIQUE TO SUCH
STOCKHOLDER AND NOT COMMON TO STOCKHOLDERS AS A WHOLE AND ALSO AS TO ANY ESTATE,
GIFT, STATE, LOCAL OR FOREIGN TAX CONSEQUENCES ARISING OUT OF THE MERGER AND/OR
ANY SALE THEREAFTER OF COMMERCIAL COMMON STOCK RECEIVED IN THE MERGER.
Accounting Treatment
The Merger is expected to be accounted for as a pooling of interests in
accordance with generally accepted accounting principles, under which the
recorded assets and liabilities of Commercial and Mid Continent will be carried
forward to the surviving corporation in the Merger (Commercial) at their
recorded amounts; income of the surviving corporation will include income of
Commercial and Mid Continent for the entire fiscal year in which the Merger
occurs; and the reported income of Commercial and Mid Continent for prior
periods will be combined and restated as retained earnings of the surviving
corporation (Commercial).
Resale of Commercial Common Stock; Restrictions on Transfer
The shares of Commercial Common Stock to be issued in the Acquisition
Merger will be registered under the Securities Act and will be freely
transferable under the Securities Act, except for shares issued to any
stockholder who may be deemed to be an "affiliate" of Mid Continent or
Commercial for purposes of Rule 145 under the Securities Act (generally,
individuals or entities that control, are controlled by or are under common
control with Mid Continent or Commercial). Affiliates may not sell their shares
of Commercial Common Stock acquired in connection with the Acquisition Merger
except pursuant to an effective registration statement under the Securities Act
covering such shares or in compliance with Rule 145 or another applicable
exemption from the registration requirements of the Securities Act.
40
<PAGE>
Mid Continent has agreed in the Merger Agreement to use its best efforts to
cause each director, executive officer and other person who is an affiliate (for
purposes of Rule 145) of Mid Continent to deliver to Commercial a written
agreement intended to ensure compliance with the Securities Act.
New York Stock Exchange Listing
Commercial Common Stock is traded on the NYSE under the symbol "CFB". It is
expected that Commercial Common Stock will continue to be quoted on the NYSE
under the symbol "CFB" following the Merger.
Vote Required
The affirmative vote of at least a majority of the outstanding Mid
Continent Common Stock is required for Mid Continent's stockholders to approve
the Merger Agreement and the Acquisition Merger. Each share of Mid Continent
Common Stock outstanding at the close of business on the Record Date is entitled
to one vote on each matter to be considered at such meeting. Mid Continent's
directors and executive officers, and their affiliates, are expected to vote
substantially all of the 209,750 shares of Mid Continent's outstanding Common
Stock, beneficially owned by them as of the Record Date for approval of the
Acquisition Merger and the Merger Agreement.
41
<PAGE>
MID CONTINENT VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Persons and groups owning in excess of 5% of Mid Continent Common Stock are
required to file certain reports regarding such ownership pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The following
table sets forth, as of the Record Date, certain information as to Mid Continent
Common Stock beneficially owned by persons and groups in excess of 5% of Mid
Continent Common Stock and the ownership of all executive officers and directors
of Mid Continent as a group. Management knows of no person other than those set
forth below who owns more than 5% of the outstanding shares of Mid Continent
Common Stock at the Record Date.
<TABLE>
<CAPTION>
Amount and Percent of Shares of
Nature of Mid Continent Common
Name and Address of Beneficial Owner Beneficial Ownership Stock Outstanding
- ------------------------------------ -------------------- --------------------
<S> <C> <C>
Mid-Continent Federal Savings Bank
Employee Stock Ownership Plan Trust
("ESOP")
124 West Central
El Dorado, Kansas (1) 133,829 6.70%
Wellington Management Company, LLP
75 State Street
Boston, Massachusetts (2) 269,400 13.49%
First Financial Fund, Inc.
One Seaport Plaza - 25th Floor
New York, New York (3) 181,000 9.07%
Mentor Partners, L.P.
500 Park Avenue
New York, New York (4) 167,500 8.39%
Peter B. Cannell & Co., Inc.
919 Third Avenue
New York, New York (5) 124,950 6.26%
Emprise Financial Corporation
211 North Broadway
Wichita, Kansas (6) 120,000 6.01%
All Directors and Executive Officers
as a Group (8 persons)(7) 306,610 15.36%
- --------------------
</TABLE>
(1) The ESOP purchased such shares for the exclusive benefit of plan employee
participants with funds borrowed from Mid Continent. These shares are held
in a suspense account and will be allocated among ESOP participants annually
on the basis of compensation as the ESOP debt is repaid. The ESOP Trustee
must vote all shares allocated to participant accounts under the ESOP as
directed by participants. Unallocated shares and shares for which no timely
voting directors is received will be voted by the ESOP Trustee as directed
by the ESOP Committee. As of the Record Date, 32,910 shares have been
allocated under the ESOP to participant accounts.
(2) Based on a Schedule 13G filed January 24, 1997. Amount shown may include
some or all of the shares of Mid Continent Common Stock held by First
Financial Fund, Inc.
(3) Based on an amended Schedule 13G filed February 14, 1997.
(4) Based on a Schedule 13D filed September 23, 1997.
(5) Based on a Schedule 13G filed February 10, 1997.
(6) Based on a Schedule 13D filed June 13, 1997.
(7) Includes shares of Mid Continent Common Stock held directly as well as by
spouses or minor children, in trust and other indirect ownership, over which
shares the individuals effectively exercise sole voting and investment
power, unless otherwise indicated. Includes options that may be exercised
within 60 days of the Record Date to purchase 79,422 shares of Mid Continent
Common Stock held by executive officers and directors granted under the Mid
Continent Option Plan. Excludes 127,599 shares (133,829 shares less 6,230
shares allocated to executive officers) held by the ESOP over which certain
directors, as trustees to the ESOP, exercise shared voting and investment
power. Such individuals disclaim beneficial ownership with respect to such
shares held by the ESOP.
42
<PAGE>
COMMON STOCK PRICES AND DIVIDENDS
The Commercial Common Stock is currently traded on the NYSE under the
symbol "CFB." Mid Continent Common Stock is traded on the Nasdaq National
Market and is quoted under the symbol "MCBS."
The following table sets forth (1) the comparative market prices of
Commercial Common Stock and Mid Continent Common Stock for the periods
indicated, indicated by the high and low closing sales prices for the common
stock of each company as reported on the Nasdaq National Market for Mid
Continent and as reported on the NYSE for Commercial and (2) the dividends per
share declared on such stock.
On November 17, 1997, the Board of Directors of Commercial authorized a
three-for-two stock split to be effected in the form of a 50 percent stock
dividend to stockholders of record on November 28, 1997. Par value remained at
$.01 per share. The stock dividend was distributed on December 15, 1997.
Fractional shares resulting from the stock split were paid in cash. All per
share data and stock prices for all periods presented in this Prospectus/Proxy
Statement have been adjusted on a retroactive basis to reflect the effect of
this three-for-two stock split.
<TABLE>
<CAPTION>
Commercial Mid Continent
Common Stock Common Stock
----------------------------- ------------------------------
Quarter Ended High Low Dividends High Low Dividends
- ------------- ---- --- --------- ---- --- ---------
<S> <C> <C> <C> <C> <C> <C>
1995
- ----
September 30, 1995 $ 16.45 $ 12.05 $ -- $ 19.125 $ 15.50 $.10
December 31, 1995 16.78 14.39 .089 18.50 17.00 .10
1996
- ----
March 31, 1996 17.28 15.55 .045 18.50 17.375 .10
June 30, 1996 17.28 16.39 .045 19.25 17.875 .10
September 30, 1996 19.11 16.00 .045 19.375 17.50 .10
December 31, 1996 21.55 18.61 .047 25.50 18.75 .10
1997
- ----
March 31, 1997 26.00 20.75 .047 27.125 23.375 .10
June 30, 1997 25.08 20.75 .047 29.25 25.125 .10
September 30, 1997 32.125 25.08 .047 38.875 28.75 .10
December 31, 1997 .055
1998
- ----
March 31, 1998
(through January __, 1998
</TABLE>
On August 29, 1997, the last trading day preceding the public announcement
of the execution of the Merger Agreement, the reported closing sale price of
Commercial Common Stock was $28.04 per share and the reported closing sale price
for Mid Continent Common Stock was $29.75 per share. On January __, 1998, the
closing sale price for Commercial Common Stock was $_____ per share and the
closing sale price for Mid Continent Common Stock was $_____ per share. Based on
an Exchange Ratio of 1.30395, the pro forma market value of the shares of
Commercial Common Stock to be received for each share of Mid Continent Common
Stock was $36.56 as of August 29, 1997 and $_____ as of January __, 1998.
43
<PAGE>
COMPARISON OF STOCKHOLDER RIGHTS
Introduction. Upon consummation of the Merger, the holders of Mid
Continent Common Stock, whose rights are presently governed by Kansas law and
the Mid Continent Articles and Bylaws, will become stockholders of Commercial, a
Nebraska corporation. Accordingly, their rights will be governed by Nebraska
law and the Articles of Incorporation (as amended by the stockholders of
Commercial on November 18, 1997) and Bylaws of Commercial. Certain differences
arise between the Mid Continent Articles and Bylaws and the Articles of
Incorporation and Bylaws of Commercial. The following discussion is not
intended to be a complete statement of all differences affecting the rights of
stockholders, but summarizes material differences and is qualified in its
entirety by reference to the Articles of Incorporation, as amended, and Bylaws
of Commercial and the Articles and the Bylaws of Mid Continent . See "Available
Information."
Issuance of Capital Stock. The Articles of Incorporation of Commercial
authorize the issuance of 50,000,000 shares of Commercial Common Stock and
10,000,000 shares of preferred stock, par value $0.01 per share. The Mid
Continent Articles authorize the issuance of 20,000,000 shares of stock, par
value $.10 per share, and 10,000,000 shares of preferred stock, no par value.
On January __, 1998, _____ and 1,996,562 shares of Commercial Common Stock and
Mid Continent Common Stock, respectively, were issued and outstanding. Neither
Commercial nor Mid Continent had any shares of preferred stock outstanding.
Under Commercial's Articles of Incorporation and the Mid Continent Articles,
Commercial and Mid Continent are authorized to issue additional shares of
capital stock up to the amount authorized without stockholder approval.
Voting Rights. Holders of Mid Continent Common Stock are entitled to one
vote per share on all matters submitted to vote to the shareholders. There is
no cumulative voting. The Mid Continent Articles limit the voting rights of
persons acquiring beneficial ownership, directly or indirectly, in excess of 10%
of the outstanding Common Stock. Those shares owned by a holder in excess of 10%
are not entitled nor permitted to any vote. These provisions are proposed to be
amended in connection with the Merger. See "Proposal 2 - Articles Amendment."
Holders of Commercial Common Stock are entitled to one vote per share on
all matters submitted to vote to the shareholders, other than during the
election of directors, where voting rights are cumulative.
Preemptive Rights. Neither the holders of Mid Continent Common Stock nor
the holders of Commercial Common Stock have any preemptive or preferential right
to purchase or to subscribe for additional shares of Mid Continent Common Stock
or Commercial Common Stock, respectively, or any other securities that either
Mid Continent or Commercial may issue.
Number and Terms of Directors. The Boards of Directors of both Mid
Continent and Commercial are classified into three terms, so that only one class
is elected at each annual meeting of shareholders. Commercial's Board of
Directors consists of between nine and twelve persons with the precise number to
be specified in the Bylaws. Action to change the number of directors must be by
the affirmative vote of not less than 75% of all outstanding shares of
Commercial Common Stock. Mid Continent's Board consists of between five and
fifteen persons with the precise number to be specified in the Bylaws. Action
to change the number of Mid Continent directors requires a 60% vote of the
directors then in office.
Removal of Directors. The Mid Continent Articles provide for removal of any
director only for cause by an affirmative vote of not less than a majority of
total votes eligible to be cast by stockholders. Cause for removal may exist
where the director has been declared of unsound mind by an order of the court of
competent jurisdiction, the director has been convicted of a felony or an
offense punishable for a term of one year in prison, or the director has been
deemed liable by a court of competent jurisdiction for gross negligence or
misconduct in performance of his or her duties as director of Mid Continent.
The Articles and Bylaws of Commercial provide for removal of any director or the
entire Board of Directors at any time with an affirmative vote of the holders of
seventy-five percent (75%) or more of the shares entitled to vote.
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Special Meetings. Under Mid Continent's Bylaws, special meetings of
shareholders may only be called by resolution of the Board of Directors, the
Chairman of the Board, or the President. A special meeting of Commercial's
shareholders may be called for any purpose and at any time by a majority of the
members of the Board of Directors, by the holders of seventy-five percent (75%)
or more of shares entitled to vote at such meeting, or by a committee of the
Board of Directors which has been duly designated by the Board of Directors to
have the power to call such special meetings. No other person or persons may
call special meetings.
Approval of Business Combination. The Mid Continent Articles require the
affirmative vote of the holders of not less than eighty percent (80%) of the
outstanding shares of voting stock for approval of certain business combination
transactions with "principal shareholders," as defined, which are not approved
in advance by at least two-thirds of Mid Continent's disinterested directors. A
majority vote of holders instead of the supermajority provision requiring eighty
percent (80%) vote is required when the following occur: where two-thirds of the
members of the Board of Directors, who were directors prior to the time when the
"principal shareholder" became a principal shareholder approve the business
combination; the shareholder percentage ownership in the shares of stock
entitled to vote in the election of directors does not change; the proposed
business combination includes the provisions in Article XIII without amendment,
alteration, or deletion, in the successor to Mid Continent; and where there is
not a transfer of all or substantially all of Mid Continent's assets to a
wholly-owned subsidiary. There is no impediment to a shareholder objecting to
the business combination or asserting his or her appraisal rights. The Kansas
Statutes Annotated shall not apply to Mid Continent for "Control Share
Acquisitions" and for "Business Combinations with Interested Shareholders" in
Chapter 17, Article 12.
Commercial's Articles of Incorporation require that any merger,
reorganization, or consolidation, or any sale, lease, exchange, mortgage,
pledge, transfer or other disposition of at least 25% of the fair market value
of the total assets of Commercial with any affiliate or any person who
beneficially owns in the aggregate 20% or more of the outstanding shares of
voting stock of Commercial must first be approved by the affirmative vote of the
holders of not less than 75% of the outstanding shares of voting stock and the
affirmative vote of the holders of not less than a majority of the outstanding
shares of voting stock held by shareholders other than a principal shareholder (
a person who owns at least 20% of the outstanding shares of Commercial's voting
stock). Commercial's Articles of Incorporation also require that certain fair
price criteria designed to ensure that Commercial's stockholders receive a fair
price for their shares in a business combination bet met, unless a business
combination is first approved by three-quarters of the board of directors who
were directors prior to the time the person became a principal shareholder.
Restriction on Acquisition of Securities. The Mid Continent Articles
provide that in no event shall any record owner of any Mid Continent Common
Stock which is beneficially owned, directly or indirectly, by such person be
entitled or permitted to vote any shares in excess of ten percent (10%) of the
outstanding shares of Common Stock. The Mid Continent Articles also provide for
a restriction upon beneficial ownership in excess of ten percent (10%) of any
class of a security for the five years following the conversion of Mid-
Continent Savings from mutual to stock form. See "Proposal 2 - Articles
Amendment." Commercial's Articles do not contain a similar provision.
Authorized Preferred Stock. The Mid Continent Articles authorize
10,000,000 shares of serial preferred stock. The Board of Directors may,
subject to applicable be law and the rules of the Nasdaq, authorize the issuance
of preferred stock at such times, for such purposes and for such consideration
as it may deem advisable without further stockholder approval. Commercial's
Articles of Incorporation authorize the issuance of 10,000,000 shares of
preferred stock. The Board of Directors of Commercial could issue these shares
of preferred stock, without stockholder approval.
Rights Plan. On December 19, 1988, the Board of Directors of Commercial
adopted a Shareholder Rights Plan (the "Rights Plan") and declared a
distribution of stock purchase rights (the "Rights") payable to shareholders of
record on December 30, 1988. The Rights consist of primary rights (the "Primary
Rights"), which generally entitle the holders thereof to purchase shares of
Commercial Common Stock at 20% of the market price of such shares in the event
any person acquires an interest in 15% or more of Commercial Common Stock
without complying with a procedure intended to ensure fair treatment of all
shareholders of Commercial, and secondary rights (the "Secondary Rights"), which
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generally entitle the holders thereof to purchase shares of Series A Junior
Participating Cumulative Preferred Stock of Commercial (the "Preferred Shares")
in the event a person acquires an interest in 25% or more of the outstanding
shares of Commercial Common Stock without complying with such procedural
requirements. The December 30, 1988 distribution consisted of one Primary Right
and One Secondary Right for each share of Commercial Common Stock outstanding on
that date and, subject to adjustment under certain circumstances, unless the
Rights expire or are earlier redeemed, one Primary Right and one Secondary Right
shall be issued with each share of Commercial Common Stock issued following
December 30, 1988 until the Rights become exercisable under the terms of the
Rights Plan.
The Primary Rights will become exercisable, subject to extension, 10
business days following a public announcement that any person (other than
certain entities who beneficially owned more than 15% of Commercial's
outstanding Commercial Common Stock as of the date of adoption of the Rights
Plan and certain persons who acquire their shares directly from Commercial) has
acquired, or has obtained the right to acquire, beneficial ownership of 15% or
more of the outstanding shares of Commercial Common Stock and has not complied
with the procedural requirements set forth in the Rights Plan (such person being
referred to as a "15% Person"). Secondary Rights will become exercisable upon
the earlier of (i) one business day following a public announcement that any
person (other than Commercial or certain related entities) has acquired, or has
obtained the right to acquire, beneficial ownership of 25% or more of the
outstanding shares of Commercial Common Stock, provided that such acquisition is
not deemed a "Fair Offer," as described in the Rights Plan (such person being
known as a "25% Person"), or (ii) one business day following the commencement of
a tender offer, other than a Fair Offer, or exchange offer, the consummation of
which would result in the beneficial ownership of 25% or more of the outstanding
shares of Commercial Common Stock by any person other than Commercial or certain
related entities. A public announcement for this purpose shall be made by
Commercial or, as the case may be, by a 15% Person or a 25% Person.
The number of shares which may be purchased upon exercise of each Primary
Right is determined by dividing (i) that number of shares which equals 50% of
the outstanding shares of Commercial Common Stock, as of the date a person
became a 15% Person, by (ii) the number of Primary Rights outstanding, exclusive
of Primary Rights beneficially owned by the 15% Person, which shall become void.
The per share exercise price of shares issued upon the exercise of a Primary
Right is 20% of the market price of such shares as of the date the 15% Person
became a 15% Person.
Unless the Secondary Rights are earlier redeemed, in the event a person
becomes a 25% Person, each holder of a Secondary Right (other than Secondary
Rights beneficially owned by such 25% Person, which will thereafter become void)
will have the Right to purchase one-hundredth of a share of Preferred Shares at
a price of $42.00 per one-hundredth of a share. Unless the Secondary Rights
are earlier redeemed, in the event that (i) Commercial is the surviving
corporation in a merger with a 25% Person and Commercial Common Stock is not
changed or exchanged in such merger, (ii) a 25% Person engages in one of a
number of "self dealing" transactions, including certain preferential sales,
transfers or exchanges of Commercial assets or securities, (iii) during such
time as there is a 25% Person, there shall be any reclassification of securities
or recapitalization of Commercial or any merger or consolidation of Commercial
with any of its subsidiaries or any other transaction or series of transactions
which has the effect of increasing by more than 1% the proportionate share of
the outstanding shares of any class of equity securities or of securities
exercisable for or convertible into securities of Commercial or any of its
subsidiaries which is beneficially owned by a 25% Person, or (iv) a person
(other than Commercial or certain related entities) becomes the beneficial owner
of 25% or more of the outstanding shares of Commercial Common Stock (other than
pursuant to certain transactions set forth in the Rights Plan), then each holder
of a Secondary Right will have the right to receive, upon exercise and payment
of the Secondary Right exercise price, Commercial Common Stock having a value
equal to two times the then current Secondary Right exercise price.
In the event Commercial is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earnings
power is sold, each holder of a Secondary Right will thereafter have the right
to receive, upon the exercise and payment of the Secondary Right exercise price,
that number of shares of common stock of the acquiring company which at the time
of such transaction has a value equal to two times the then current Secondary
Right exercise price.
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A majority of the independent directors of Commercial may authorize the
redemption of either or both of the Primary or Secondary Rights at a price of
$0.01 per Right at any time prior to the close of business on the tenth business
day, subject to extension, following the date of a public announcement that any
person has become a 15% Person, other than pursuant to certain cash tender
offers described in the Rights Plan, and at any time prior to the public
announcement that any person has become a 25% Person, other than pursuant to
such a cash tender offer. Commercial's right of redemption with respect to the
Secondary Rights will be reinstated if each 25% Person reduces its beneficial
ownership to less than 15% of Commercial Common Stock in a transaction not
involving a purchase by Commercial or its subsidiaries. Immediately upon any
redemption of the Rights, the right to exercise the Rights will terminate and
the only right of the holders thereof will be to receive the redemption price.
The terms of the Rights may be amended by the Board of Directors of
Commercial without the consent of the holders of the Rights, except that
following the date on which the Rights become exercisable, such amendment may
not adversely affect the interests of the holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of Commercial (other than rights resulting from such
holder's ownership of Commercial Common Stock), including, without limitation,
the right to vote or to receive dividends.
The Rights have certain anti-takeover effects. The Rights could cause
substantial dilution to a person or group that attempts to acquire Commercial
without conditioning the offer on the Rights being redeemed or substantially all
of the Rights being acquired.
Mid Continent does not have any similar shareholder rights plan.
Amendment of Bylaws. The Board of Directors of Mid Continent may adopt,
alter, amend, or repeal the Bylaws by a majority vote of directors present at a
regular or special meeting. Shareholders may also adopt, alter, amend or repeal
the Bylaws by affirmative vote of holders of majority of shares entitled to vote
generally in the election of directors, except where the shareholders are
proposing to adopt, alter, amend or repeal Sections 2.3, 4.1, 4.2, 4.4, and 4.5
of the Bylaws and Articles VIII, IX, and XIII of the Bylaws, then a
supermajority vote of eighty percent (80%) is required of shareholders.
The Board of Directors of Commercial are authorized to make, repeal, alter,
amend or rescind any or all of the Bylaws of the corporation. Shareholders may
make, repeal, alter, amend or rescind the Bylaws only upon a seventy-five
percent (75%) or more of the total voting power of outstanding shares of each
class of capital stock entitled to vote.
Amendment of Articles of Incorporation. In the Mid Continent Articles, the
right to amend, alter, change or repeal any provision of the Mid Continent
Articles is reserved, provided that first there is an resolution adopted by a
majority of the board of directors, and then the matter is subsequently approved
by an affirmative vote of a majority of shareholders entitled to vote at the
election of directors, except where the amendment, alteration, change or act to
repeal the Mid Continent Articles is inconsistent with Articles 5, 7, 8, 9, 10,
11, 12, 13, and 14 , then the shareholder approval must be at least eighty
percent (80%) of the shares entitled to vote at the election of directors.
Commercial in its Articles reserved the right to amend, alter, change, or
repeal any provision contained in its Articles of Incorporation except in
Article VII (dealing with the number of directors of the corporation), Article
VIII (dealing with the classified board of directors), Article IX (dealing with
the removal of directors), Article X (dealing with filing vacancies on the Board
of Directors and newly created directorships), Article XI (dealing with the
power to call special meetings of the shareholders), Article XII ( dealing with
the amount of stock which can be acquired), Article XIII (dealing with the
approval of Business Combinations),Article XIV (dealing with the market price of
stock involved in any business combination), Article XV (dealing with the
amendment to Bylaws by directors and by shareholders) and Article XVI ( the
provision explaining these exceptions), may not be repealed or amended in any
respect, unless such repeal or amendment is approved by the affirmative vote of
the holders of not less than seventy-five percent (75%) of
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all outstanding shares of stock of the corporation entitled to vote generally,
other than in the election of directors, and the affirmative vote of the holders
of not less than a majority of the outstanding shares of stock of the
corporation entitled to vote generally, other than election of directors and
other than Principal Shareholders.
Advance Notice Requirements for Nominations of Directors and Presentation
of New Business at Annual Meeting of Stockholders. The Mid Continent Articles
permit shareholder nominations of candidates for the election of directors.
Nominations by shareholders shall be made in writing and delivered, or mailed
and received, by the Secretary of the Corporation not less than sixty (60) days
prior to the anniversary date of the preceding annual meeting. The written
notice by the stockholder must include the name, age, business address,
residence, principal occupation, the class and number of shares the candidate
beneficially owns and any information required in Schedule 14A for nominees for
election of directors. The stockholder making the proposal must provide his or
her name and address as it appears on the transfer books, as well as any other
stockholder that person knows is supporting the nomination.
The Commercial Bylaws provide that any shareholder entitled to vote in the
election of directors may make nominations for the election of directors and
proposals for new business to be taken up at any annual or special meeting.
Shareholder nominations for the election of directors must be delivered by first
class U.S. Mail, postage prepaid, to the Secretary of the Corporation not less
than sixty (60) days prior to such meeting. The nomination must set forth the
name, age, business address, residence, the principal occupation of the nominee,
and the number of shares the nominee beneficially owns. Proposals by
shareholders must be delivered to the Secretary of the corporation in writing
setting forth a brief description of the business desired to be brought before
the meeting and the reasons for conducting such business at the meeting, the
name and address of shareholder making the proposal, the class and number of
shares beneficially owned by the shareholder proposing such business, and any
material interest of the shareholder in such business not less than sixty (60)
days prior to the annual or special meeting to the Secretary.
Action of Shareholders Without a Meeting. The Mid Continent Articles and
Bylaws provide that no action required to be taken or which may be taken at any
annual or special meeting of stockholders of the corporation may be taken
without a meeting. The power for shareholders to consent in writing to take
action without a meeting is expressly denied.
The Bylaws of Commercial permit any action required to be taken at a
meeting of the shareholders, or any action which may be taken at a meeting of
the shareholders, may be taken without a meeting if a consent in writing,
setting for the action so taken, shall be signed by all of the shareholders
entitled to vote. Such written shareholder consent will have the effect of a
unanimous shareholder vote.
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PROPOSAL 2 -- ARTICLES AMENDMENT
(Amendment of the Mid Continent Articles of Incorporation)
General
No amendment, addition, alteration, change or repeal of the Mid Continent
Articles may be made, unless first proposed by the Board of Directors of Mid
Continent pursuant to a resolution adopted by the affirmative vote of a majority
of the directors then in office, and thereafter is approved by the holders of a
majority (except as provided below) of the shares of Mid Continent Common Stock
entitled to vote generally in an election of directors, voting together as a
single class. However, the affirmative vote of the holders of at least eighty
percent (80%) of the shares of Mid Continent Common Stock entitled to vote
generally in an election of directors, voting together as a single class, is
required to amend, adopt, alter, change or repeal certain other provisions of
the Mid Continent Articles, including Article 12 of the Mid Continent Articles.
Amendment of Article 12
Currently, Article 12 of the Mid Continent Articles provides that no person
shall directly or indirectly offer to acquire or acquire the beneficial
ownership of more than ten percent of an equity security of Mid Continent (the
"Beneficial Ownership Limitation") for the five year period commencing on the
date Mid-Continent Savings completed its mutual to stock conversion. Further,
in the event shares of Mid Continent Common Stock are acquired in violation of
the Beneficial Ownership Limitation, all shares beneficially owned by any person
in excess of ten percent are considered shares owned in excess of the limit (the
"Limit"). Persons owning shares in excess of the Limit are not entitled or
permitted to vote such shares in excess of the Limit and may have their voting
rights reduced below the Limit pursuant to Article 12.
In order to permit and facilitate the consummation of the Merger, Article
12 of the Mid Continent Articles must be amended. The Merger Agreement, which
Mid Continent's Board of Directors has unanimously approved, provides that Mid
Continent shall amend the Mid Continent Articles in accordance with applicable
law to remove the five year prohibition in Article 12 that would not otherwise
expire until June 1999. On September 2, 1997, the Board of Directors of Mid
Continent unanimously adopted the Articles Amendment and directed that it be
submitted to a vote of stockholders. A copy of Article 12 of the Mid Continent
Articles incorporating the proposed Articles Amendment is attached as Annex C to
this Prospectus/Proxy Statement.
The Articles Amendment would allow a person to directly or indirectly offer
to acquire or acquire the beneficial ownership of more than ten percent of any
class of equity security of Mid Continent prior to June 1999. The Articles
Amendment would not, however, eliminate the reduction in voting that may result
from ownership of shares in excess of the Limit and all other provisions of
Article 12 would remain intact after the Articles Amendment.
Approval of the proposed Articles Amendment by Mid Continent's shareholders
is a condition to consummating the Merger, and failure to approve the Articles
Amendment would prevent consummation of the Merger regardless of whether the
Merger receives shareholder approval. If the Articles Amendment is approved by
Mid Continent shareholders, it is expected to become effective immediately prior
to consummation of the Merger. In the event the Merger is not approved by the
stockholders of Mid Continent or the Merger is not consummated for any other
reason, the Articles Amendment would not become effective, and Article 12 would
continue in effect as it currently exists.
THE BOARD OF DIRECTORS OF MID CONTINENT RECOMMENDS THAT STOCKHOLDERS OF MID
CONTINENT VOTE FOR THE ARTICLES AMENDMENT. APPROVAL OF THE ARTICLES AMENDMENT
---
REQUIRES THE AFFIRMATIVE VOTE OF THE HOLDERS OF EIGHTY PERCENT (80%) OF THE
OUTSTANDING SHARES OF MID CONTINENT COMMON STOCK.
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PROPOSAL 3 -- ADJOURNMENT OF ANNUAL MEETING
In the event there is an insufficient number of shares present in person or
by proxy at the Annual Meeting to approve the Merger Agreement or the Articles
Amendment, or both, the Mid Continent Board of Directors intends to adjourn the
Annual Meeting to a later date. The place and date to which the Annual Meeting
would be adjourned would be announced at the Annual Meeting.
The effect of any such adjournment would be to permit Mid Continent to
solicit additional proxies for approval of the Merger Agreement and the Articles
Amendment. While such an adjournment would not invalidate any proxies
previously filed, including those voting against the Merger Agreement or the
Articles Amendment, it would give Mid Continent the opportunity to solicit
additional proxies in favor of the Merger Agreement and the Articles Amendment
if necessary.
MID CONTINENT'S BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
ADJOURNMENT UNDER THE CIRCUMSTANCES DESCRIBED HEREIN. APPROVAL OF THE
ADJOURNMENT REQUIRES THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE
SHARES OF MID CONTINENT COMMON STOCK PRESENT IN PERSON OR BY PROXY AT THE ANNUAL
MEETING.
PROPOSAL 4 -- ELECTION OF DIRECTORS
The Mid Continent Articles require that directors of Mid Continent be
divided into three classes, as nearly equal in number as possible, each class to
serve for a three year period, with approximately one-third of the directors
elected each year. Mid Continent's Board of Directors currently consists of six
members. Two directors will be elected at the Annual Meeting, each to serve
for a three-year term, or until his successor has been elected and qualified.
Should the number of directors of Mid Continent be reduced, the
directorship(s) eliminated shall be allocated among classes appropriate so that
the number of directors in each class is as specified in the immediately
preceding paragraph. Notwithstanding the foregoing, no decrease in the number
of directors shall have the effect of shortening the term of any incumbent
director.
Ron J. McGraw and Larry R. Goddard have been nominated by the Mid Continent
Board of Directors to serve as directors. Messrs. McGraw and Goddard are
currently members of the Mid Continent Board of Directors. It is intended that
the persons named in the proxies solicited by the Board will vote for the
election of the named nominees. If a nominee is unable to serve, the shares
represented by all valid proxies will be voted for the election of such
substitute as the Board of Directors may recommend or the size of the Board may
be reduced to eliminate the vacancy. At this time, the Board knows of no reason
why a nominee might be unavailable to serve.
The following table sets forth the nominees and the directors continuing in
office, their name, age, the year they first became a director of Mid Continent
or Mid-Continent Savings, the expiration date of their current term as a
director, and the number and percentage of shares of Mid Continent Common Stock
beneficially owned. Each director of Mid Continent is also a member of the
Board of Directors of Mid-Continent Savings.
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<TABLE>
<CAPTION>
Shares of
Year First Current Mid Continent Common
Elected or Term to Stock Beneficially Percent
Name Age(1) Appointed(2) Expire Owned (3)(4)(5) of Class
- ---- ------ ------------ ------- -------------------- --------
<S> <C> <C> <C> <C> <C>
BOARD NOMINEES FOR TERM TO EXPIRE IN 2001
Ron J. McGraw 58 1981 1998 43,639 (6) 2.19%
Larry R. Goddard 51 1994 1998 55,082 (7) 2.76%
DIRECTORS CONTINUING IN OFFICE
Richard T. Pottorff 63 1978 2000 82,293 (8) 4.12%
Kenneth B. Dellett 67 1975 2000 33,737 1.69%
Thomas C. Hand 67 1986 1999 32,737 (6) 1.64%
Donald Adlesperger 68 1994 1999 21,000 1.05%
EXECUTIVE OFFICER WHO IS NOT A DIRECTOR
Harold G. Siemens 48 - - 25,273 1.27%
</TABLE>
- --------------
(1) At September 30, 1997.
(2) Refers to the year the individual first became a director of Mid Continent
or Mid-Continent Savings. All directors of Mid-Continent Savings became
directors of Mid Continent when it was incorporated in January 1994.
(3) Includes shares of Mid Continent Common Stock held directly as well as by
spouses or minor children, in trust and other indirect ownership, over
which shares the individuals effectively exercise sole voting and
investment power, unless otherwise indicated.
(4) Beneficial ownership as of the Record Date.
(5) Excludes shares of Mid Continent Common Stock held by the Mid Continent
Management Stock Bonus Plan over which Directors Dellett, Hand and McGraw
exercise shared voting and dispositive power solely by reason of serving as
a trustee.
(6) Excludes 133,829 shares of Mid Continent Common Stock held under the ESOP
for which such individual serves as a member of the ESOP Committee or as an
ESOP Trustee. Such individual disclaims beneficial ownership with respect
to such shares held in a fiduciary capacity. Includes 11,241 shares of Mid
Continent Common Stock that may be acquired through the exercise of stock
options which are currently exercisable.
(7) Includes 21,557 shares of Common stock that may be acquired through the
exercise of stock options which are currently exercisable.
(8) Includes 16,942 shares of Mid Continent Common Stock that may be acquired
through the exercise of stock options which are currently exercisable.
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The principal occupation for the last five years of each director, each
nominee for director and each executive officer of Mid Continent is set forth
below.
Ron J. McGraw has been a Director of Mid Continent since 1981 and of Mid
Continent since its incorporation in January 1994. Mr. McGraw is also
President, Chairman of the Board and a majority owner of Sunflower Roofing,
Inc., a roofing contractor. Mr. McGraw was a Board member of the Susan B. Allen
Memorial Hospital for 15 years and a Member of the El Dorado Chamber of
Commerce.
Larry R. Goddard has been with Mid Continent since 1978 and has served as a
Director of Mid Continent and Mid Continent since 1994. Mr. Goddard is a past
President of the Mid-West Savings Conference and has served as Chairman of the
Real Estate Mortgage Committee of the Heartland Community Bankers Association.
He is also a member of the Lions Club, a member of the Partners in Education, a
director of El Dorado, Inc., and a member of the Community Action for Retail &
Revitalization Board.
Richard T. Pottorff has served as a Director and Officer of Mid Continent
since 1978 and of Mid Continent since its incorporation in January 1994. Mr.
Pottorff is also a past Director of the FHLB of Topeka and has served as a
member of the El Dorado Chamber of Commerce, the Wichita Association of Real
Estate Brokers and the Wichita Homebuilders Association. In addition, Mr.
Pottorff is the Chairman of the Federal and State Affairs Committee of the
Heartland Community Bankers Association. Mr. Pottorff is also a past Chairman
of the Heartland Community Bankers Association.
Kenneth B. Dellett has been a Director of Mid Continent since 1975 and of
Mid Continent since its incorporation in January 1994. Dr. Dellett is retired
from being self employed as a physician. He is a past member of the El Dorado
Chamber of Commerce. Dr. Dellett is also a member of the University of Kansas
Medical Alumni Association and the Kansas City Society of Ophthalmology and
Otolaryngology.
Thomas C. Hand has served as a Director of Mid Continent since 1986 and of
Mid Continent since its incorporation in January 1994. Mr. Hand is the
President, Chief Executive Officer and majority owner of OTASCO of El Dorado,
Inc., a real estate company doing business as Hand Realty Company. He is the
past President of the Board of Directors of the Susan B. Allen Hospital and is
currently the Secretary/Treasurer of the El Dorado Area Hospital Services
Foundation.
Donald Adlesperger has served as a Director of Mid Continent and Mid
Continent since 1994. Mr. Adlesperger is President of Triple A Builders Supply,
which includes stores in El Dorado, Augusta, and Newton, and also the Big A
Supply Wholesale Electric Store in El Dorado. Mr. Adlesperger is a Past
Commissioner for the City of El Dorado.
Harold G. Siemens has been with Mid Continent since 1983. He is a founding
Director and past President of the Kansas Mortgage Banking Association and a
Director of the Mid-West Savings Conference. Mr. Siemens is also a member of
the Real Estate Mortgage Committee of the Heartland Community Bankers, the
Wichita Area Association of Realtors and the Wichita Area Builders Association.
Meetings and Committees of the Board of Directors
The Board of Directors of Mid Continent conducts its business through
meetings of the Board and through activities of its committees. All committees
act for both Mid Continent and Mid-Continent Savings. During the fiscal year
ended September 30, 1997, the Board of Directors held twelve regular meetings
and one special meeting. No director attended fewer than 75% of the total
meetings of the Board of Directors of Mid Continent and committees during the
time such director served during the fiscal year ended September 30, 1997.
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Mid Continent's full Board of Directors acts as a nominating committee for
selecting the management nominees for election as directors in accordance with
the Bylaws. This is not a standing committee. In its deliberations, the
Nominating Committee considers the candidate's knowledge of the banking business
and involvement in community, business and civic affairs, and also considers
whether the candidate would allow the Board to continue its geographic diversity
that provides for adequate representation of each of its market areas. A
stockholder recommending a nominee must provide written notice delivered to, or
mailed and received at, the Secretary of Mid Continent not less than 60 days
prior to the anniversary date of the immediately preceding annual meeting of
stockholders of Mid Continent. The notice must set forth certain information,
including but not limited to name, age, business, and residence address and
ownership interest of both the stockholder and the nominee, as set forth more
fully in Article 7.F of the Mid Continent Articles. During fiscal year 1997,
the Board of Directors met once as the Nominating Committee.
The Audit Committee is comprised of Directors Dellett, McGraw, Hand and
Adlesperger. The Audit Committee annually selects the independent auditors and
meets with such auditors to discuss the annual audit. The Audit Committee is
further responsible for internal controls for financial reporting. The Audit
Committee, a standing committee, met four times in fiscal year 1997.
Directors' Compensation
Each member of the Board of Directors of Mid-Continent Savings currently is
paid a fee of $900 per month plus $200 for each meeting attended, except that
President Richard T. Pottorff and Executive Vice President Larry Goddard receive
only the $900 Director's fee. Each non-employee member of Mid Continent's Board
of Directors receives a Director's fee of $100 per quarter. Mid-Continent
Savings paid a total of $74,400 and Mid Continent paid a total of $1,600 in
director's fees for the fiscal year ended September 30, 1997.
Outside Director Consultation and Retirement Plan. Mid Continent's Board
maintains a consultation and retirement plan (the "Consultation Plan") to
provide retirement benefits to directors of Mid Continent who are not officers
or employees ("Outside Directors"), which became effective on January 1, 1995.
The Outside Directors have provided expertise in enabling Mid Continent to
experience successful growth and profitability. Any director who has served as
an Outside Director for at least ten years as of January 1, 1994, is a
participant in the Consultation Plan. Within 30 days of a participant's
termination as a director with Mid Continent upon attainment of the mandatory
retirement age 75, any participant who has agreed to provide consulting services
to Mid Continent thereafter shall be designated as a consulting director. A
consulting director will be paid a $300 monthly stipend under the Consultation
Plan for a period of 120 months. If the consulting director shall not survive
to receive all 120 payments, such payments shall nevertheless be made to the
surviving spouse, if applicable, or secondarily to the participant's estate. At
the expiration of the period for which the participant is entitled to benefits,
his status as a consulting director shall cease. In the event of the death,
disability, or retirement on or after age 65 of a director having completed at
least 10 years of service or in the event of a change of control of Mid
Continent whereby a director shall no longer remain a director of Mid Continent
or the successor entity, then benefits payable shall commence as if such
director shall have actually attained age 75. The Consultation Plan is
unfunded. All benefits payable under the plan will be paid by Mid Continent
from current assets. There are no tax consequences to either the director or
Mid Continent prior to payment of benefits. Upon receipt of payment of
benefits, the director will recognize taxable ordinary income in the amount of
such payment received and Mid Continent will be entitled to recognize a tax-
deductible compensation expense.
53
<PAGE>
Executive Compensation
Summary Compensation Table. The following table sets forth the cash and
non-cash compensation awarded to or earned by the Chief Executive Officer of Mid
Continent and the two other executive officers of Mid-Continent Savings whose
salary and bonus exceeded $100,000 for the fiscal years provided below. Mid
Continent has no full-time employees, relying upon employees of Mid-Continent
Savings for the limited services required by Mid Continent. All compensation
shown in the following table was paid by Mid Continent.
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards
----------------------------- -----------------------
Securities
Restricted Underlying
Name and Other Annual Stock Options/ All Other
Principal Position Year Salary Bonus Compensation(1) Awards($) SARs(#) Compensation(3)
- ------------------ ---- ------ ----- --------------- ----------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard T. Pottorff 1997 $116,900 $30,686 $14,004 $ -- -- $23,764
President and Chief 1996 $114,500 $33,911 $13,885 $ -- -- $21,905
Executive Officer 1995 $114,500 $ 5,250 $ 2,581 $192,312(2) 37,895 $10,694
Larry R. Goddard 1997 $ 88,500 $22,520 $14,157 $ -- -- $13,488
Chief Operating 1996 $ 86,000 $24,889 $12,911 $ -- -- $17,395
Officer and Chief 1995 $ 86,000 $ 3,321 $ 2,519 $147,933(2) 24,405 $ 8,155
Financial Officer
Harold G. Siemens 1997 $ 86,900 $15,500 $ 3,000 $ -- -- $15,157
Senior Vice 1996 $ 84,400 $16,504 $ 3,000 $ -- -- $14,860
President-Lending 1995 $ 82,000 $ 2,526 $ 3,000 $ 72,803(2) 10,606 $ 7,533
</TABLE>
- --------------------
(1) Includes the value of certain other benefits, such as travel expenses,
automobile allowances, and club membership fees. For fiscal years 1996 and
1997, for each of Messrs. Pottorff and Goddard, includes $10,800 in
director's fees.
(2) Calculated by multiplying the number of shares of restricted stock by the
closing price of $11.75 on January 27, 1995, the date of grant.
(3) For Mr. Pottorff, for fiscal year 1995, consists of an allocation of 485.67
shares of Mid Continent Common Stock under the ESOP valued at $5,342 (based
upon Mid Continent Common Stock's closing price of $11.00 on December 30,
1994), Mid Continent payment to the pension plan of $4,365, and the dollar
value of insurance premiums paid by Mid Continent of $987; for fiscal year
1996, consists of an allocation of 904.33 shares of Mid Continent Common
Stock under the ESOP valued at $16,730 (based upon Mid Continent Common
Stock's closing price of $18.50 on December 29, 1995), Mid Continent payment
to the pension plan of $3,792, and the dollar value of insurance premiums
paid by Mid Continent of $1,383; and for fiscal year 1997 consists of an
allocation of 772 shares of Mid Continent Common Stock under the ESOP valued
at $18,046 (based upon Mid Continent Common Stock's closing price of $23.375
on December 31, 1996), Mid Continent's payment to the pension plan of
$4,335, and the dollar value of insurance premiums paid by Mid Continent of
$1,383.
For Mr. Goddard, for fiscal year 1995, consists of an allocation of 398.06
shares of Mid Continent Common Stock under the ESOP valued at $4,379 (based
upon Mid Continent Common Stock's closing price of $11.00 on December 30,
1994), Mid Continent payment to the pension plan of $3,566, and the dollar
value of insurance premiums paid by Mid Continent of $210; for fiscal year
1996, consists of an allocation of 785.04 shares of Mid Continent Common
Stock under the ESOP valued at $14,523 (based upon Mid Continent Common
Stock's closing price of $18.50 on December 29, 1995), Mid Continent payment
to the pension plan of $2,597, and the dollar value of insurance premiums
paid by Mid Continent of $275; and for fiscal year 1997, consists of an
allocation of 422 shares of Mid Continent Common Stock under the ESOP valued
at $9,864 (based upon Mid Continent Common Stock's closing price of $23.375
on December 31, 1996), Mid Continent payment to the pension plan of $3,229
dollar value of insurance premiums paid by Mid Continent of $395.
For Mr. Siemens, for fiscal year 1995, consists of an allocation of 369.51
shares of Mid Continent Common Stock under the ESOP valued at $4,065 (based
upon Mid Continent Common Stock's closing price of $11.00 on December 30,
1994), Mid Continent payment to the pension plan of $3,306, and the dollar
value of insurance premiums paid by Mid Continent of $162; for fiscal year
1996, consists of an allocation of 652.11 shares of Mid Continent Common
Stock under the ESOP valued at $12,064 (based upon Mid Continent Common
Stock's closing price of $18.50 on December 29, 1995), Mid Continent payment
to the pension plan of $2,542, and the dollar value of insurance premiums
paid by Mid Continent of $254; and for fiscal year 1997, consists of an
allocation of 507 shares of Mid Continent Common Stock under the ESOP valued
at $11,851 (based upon Mid Continent Common Stock's closing price of $23.375
on December 31, 1996), Mid Continent payment to the pension plan of $3,044,
and the dollar value of insurance premiums paid by Mid Continent of $262.
54
<PAGE>
Employment Agreements. Mid Continent has an employment agreement with
Richard T. Pottorff, President and Chief Executive Officer. The employment
agreement is for a term of three years. The employment agreement is terminable
by Mid Continent for just cause. Just cause is defined in the agreement as
termination by reason of personal dishonesty; incompetence; willful misconduct;
breach of a fiduciary duty involving personal profit; intentional failure to
perform stated duties; willful violation of any law, rule, regulation (other
than traffic violations or similar offenses); entering into a final cease-and-
desist order; or material breach of any provision of the agreement. If the
agreement is terminated for just cause, Mr. Pottorff only receives his salary up
to the date of termination. If Mid Continent terminates the agreement without
just cause, Mr. Pottorff is entitled to a continuation of salary from the date
of termination through the remaining term of the agreement.
The agreement provides that in the event of involuntary termination of
employment in connection with, or within one year after, any change in control
of Mid Continent. Mr. Pottorff will be paid a lump sum equal to 2.99 times his
average taxable compensation paid during the five years prior to the change in
control. If a lump sum payment had been made as of September 30, 1997, Mr.
Pottorff would have received a payment of up to $910,874. The payment would be
an expense to Mid Continent, reducing net income and Mid Continent's capital by
that amount as of the date of acquisition. The employment agreement may be
renewed if the Board of Directors determines that Mr. Pottorff has met the
Board's requirements and standards.
The Merger Agreement provides that Mr. Pottorff's employment agreement
shall be terminated as of the closing date of the Merger, and Mr. Pottorff shall
receive the change in control payment described above. Mr. Pottorff has entered
into a consulting agreement with Commercial to be effective following the
Merger. See "Proposal 1 -- The Merger -- Interests of Certain Persons in the
Merger."
Mid Continent has entered into a similar agreement with Larry R. Goddard
that provides for a base salary of $88,500 and, if a lump sum had been paid as
of September 30, 1997 due to a change in control, Mr. Goddard would have
received a payment of up to $524,774. The payment would be an expense to Mid
Continent, reducing net income and Mid Continent's capital by that amount as of
the date of acquisition. Mid Continent has also entered into a Change in
Control Severance Agreement with Mr. Harold Siemens which provides for certain
payments and benefits in the event his employment with Mid Continent is
terminated upon consummation of or within 24 months following a change of
control as defined in the severance agreement. At September 30, 1997, the
estimated change of control payment to Mr. Siemens under this agreement would be
$179,015. The payment would be an expense to Mid Continent, reducing net income
and Mid Continent's capital by that amount as of the date of acquisition.
For a discussion of these agreements in relation to the Merger, see
"Proposal 1 -- The Merger -- Interests of Certain Persons in the Merger."
55
<PAGE>
Option Year-End Value Table. The following table sets forth certain
information regarding the value of options as of September 30, 1997 held by the
Chief Executive Officer of Mid Continent and the two other executive officers
named on the Summary Compensation Table.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities
Number Underlying Unexercised Value of Unexercised
of Shares Options/SARs in-the-Money Options/SARs
Acquired on Value at Fiscal Year-End at Fiscal Year-End (1)
Name Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Richard T. Pottorff 0 $0 37,895 / 0 $1,004,218 / $ 0
Larry R. Goddard 0 $0 24,405 / 0 $ 646,733 / $ 0
Harold G. Siemens 0 $0 10,606 / 0 $ 281,059 / $ 0
</TABLE>
- ----------------
(1) Based upon the difference between an exercise price of $11.75 and the
closing price of Mid Continent Common Stock on September 30, 1997 of
$38.25.
56
<PAGE>
Pension Plan. Mid Continent sponsors a tax-qualified defined benefit
pension plan (the "Pension Plan"). All full-time employees of Mid Continent are
eligible to participate after working 1,000 hours during one year of service and
attainment of age 21. A qualifying employee becomes fully vested in the Pension
Plan upon completion of five years of service. The Pension Plan is intended to
comply with ERISA.
The Pension Plan provides for monthly payments to each participating
employee at normal retirement age (age 65). The monthly benefits payable under
the Pension Plan are equal to, for all plan years after 1976, 2.35% of the first
$833 of monthly compensation during the plan year plus 2.95% of that portion of
monthly compensation during the plan year that exceeds $833. A participant may
elect an early retirement at age 60 with 10 years of service, and may elect to
receive a reduced monthly benefit. Benefits are paid for a period of up to 180
months following retirement. The Pension Plan also provides for payments in the
event of disability or death. The estimated annual benefits payable upon the
retirement of Messrs. Pottorff, Goddard and Siemens (at normal retirement age)
are $60,548, $79,352 and $80,744 respectively. Benefits are payable in the form
of various annuity alternatives, including a joint and survivor option, or in a
lump-sum amount. Benefits under the Pension Plan are not subject to offset for
Social Security benefits.
Compensation Committee Interlocks and Insider Participation
For the fiscal year ended September 30, 1997, the Compensation Committee
consisted of Messrs. Pottorff, Dellett, McGraw, Hand, and Adlesperger. The
Compensation Committee, a standing committee, meets annually and reviews
performance, industry salary surveys and the recommendations of management
concerning compensation prior to the time such matters are considered by the
Board of Directors. Mr. Richard T. Pottorff is the Chairman of the Board,
President and Chief Executive Officer of Mid Continent. Mr. Pottorff does not
participate in Compensation Committee matters involving his compensation.
Report of the Compensation Committee on Executive Compensation
The executive officers of Mid Continent consist of Mr. Richard T. Pottorff
(President, Chief Executive Officer), Larry R. Goddard (Executive Vice
President, Chief Operating Officer and Chief Financial Officer), and Harold G.
Siemens (Senior Vice President).
The Compensation Committee meets annually to review compensation paid to
executive officers and to determine the compensation levels for all employees.
The Compensation Committee reviews various published surveys of compensation
paid to employees performing similar duties for depository institutions and
their holding companies, with a particular focus on the level of compensation
paid by comparable institutions in and around Mid Continent's market area,
including institutions with total assets of between $100 million and $400
million. Although the Compensation Committee does not specifically set
compensation levels for executive officers based on whether particular financial
goals have been achieved by Mid Continent the Compensation Committee does
consider the overall profitability of Mid Continent when making these decisions.
With respect to each particular employee, his or her particular contributions to
Mid Continent over the past year are also evaluated.
During the fiscal year ended September 30, 1997, Richard T. Pottorff,
President and Chief Executive Officer, received an increase in salary from
$114,500 to $116,900. The Compensation Committee considers the annual
compensation paid to chief executive officers of financial institutions in the
State of Kansas and surrounding states with assets of between $100 million and
$400 million and the individual job performance of such individual in
consideration of its specific salary decision with respect to compensation to be
paid to the President in the future.
Compensation Committee for the fiscal year ended September 30, 1997:
Richard T. Pottorff
Kenneth B. Dellett
Ron J. McGraw
Thomas C. Hand
Donald Adlesperger
57
<PAGE>
Stock Performance Graph
Set forth below is a stock performance graph comparing the cumulative total
shareholder return on Mid Continent Common Stock with (a) the total return index
for domestic companies listed on The Nasdaq Stock Market and (b) the total
return index for banks listed on The Nasdaq Stock Market. These total return
indices of The Nasdaq Stock Market are computed by the Center for Research in
Securities Prices at the University of Chicago. All three investment
comparisons assume the investment of $100 as of June 27, 1994 (the date of
initial issuance of Mid Continent Common Stock) and the reinvestment of
dividends when paid. In the stock performance graph below, the periods compared
were June 27, 1994 and Mid Continent's fiscal year ends of September 30, 1994,
1995, 1996, and 1997.
There can be no assurance that Mid Continent's future stock performance
will be the same or similar to the historical stock performance shown in the
graph below. Mid Continent neither makes nor endorses any predictions as to
stock performance.
Cumulative Return Comparison
[LINE GRAPH APPEARS HERE]
<TABLE>
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
6/27/94 9/30/94 9/30/95 9/30/96 9/30/97
- ------------------------------------------------------------------------------
CRSP Nasdaq U.S. Index $100.00 $108.85 $150.35 $178.41 $244.87
- ------------------------------------------------------------------------------
CRSP Nasdaq Bank Index $100.00 $101.91 $128.49 $163.97 $273.14
- ------------------------------------------------------------------------------
Mid Continent Bancshares, Inc. $100.00 $102.24 $168.74 $176.65 $361.57
- ------------------------------------------------------------------------------
</TABLE>
58
<PAGE>
Certain Relationships and Related Transactions
Mid Continent, like many financial institutions, has followed a policy of
granting various types of loans to officers, directors and employees. The loans
have been made in the ordinary course of business and on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with Mid Continent's other customers, and do not
involve more than the normal risk of collectibility, nor present other
unfavorable features. All loans by Mid Continent to its directors and executive
officers are subject to OTS regulations restricting loans and other transactions
with affiliated persons of Mid Continent.
MID CONTINENT'S BOARD RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE
NOMINEES FOR DIRECTOR. ELECTION OF THE NOMINEES FOR DIRECTOR REQUIRES THE
AFFIRMATIVE VOTE OF A PLURALITY OF THE VOTES CAST AT THE MEETING.
PROPOSAL 5 -- RATIFICATION OF APPOINTMENT OF MID CONTINENT AUDITORS
Deloitte & Touche LLP was Mid Continent's independent auditors for the 1997
fiscal year. The Board of Directors has approved the selection of Deloitte &
Touche LLP as its auditors for the 1998 fiscal year, subject to ratification by
Mid Continent's stockholders. Representatives of Deloitte & Touche LLP will not
be present at the Meeting to respond to stockholders' questions, and as a result
will not have an opportunity to make a statement at the Meeting.
RATIFICATION OF THE APPOINTMENT OF THE AUDITORS REQUIRES THE AFFIRMATIVE VOTE OF
A MAJORITY OF THE VOTES CAST BY THE STOCKHOLDERS OF MID CONTINENT AT THE ANNUAL
MEETING. THE BOARD OF DIRECTORS OF MID CONTINENT RECOMMENDS THAT STOCKHOLDERS
VOTE "FOR" THE RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS MID
CONTINENT'S AUDITORS FOR THE 1998 FISCAL YEAR.
SOLICITATION OF PROXIES
The cost of soliciting proxies will be borne by Mid Continent. Mid
Continent will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of Mid Continent Common Stock. In addition to
solicitations by mail, directors, officers and regular employees of Mid
Continent may solicit proxies personally or by telegraph or telephone without
additional compensation.
D. F. King & Co., Inc. will assist in the solicitation of proxies by Mid
Continent for a fee of $4,000 plus reasonable expenses associated with such
solicitation.
Mid Continent's 1997 Annual Report to Stockholders, including financial
statements, accompanies this Prospectus/Proxy Statement.
STOCKHOLDER PROPOSALS
Mid Continent will hold a 1999 annual meeting of stockholders only in the
event the Merger is not consummated. In order to be eligible for inclusion in
Mid Continent's proxy materials for next year's annual meeting of shareholders,
if held, any stockholder proposal to take action at such meeting must be
received at Mid Continent's executive offices at 124 West Central, El Dorado,
Kansas 67042, no later than September 9, 1998. Any such proposals shall be
subject to the requirements of the proxy rules under the Exchange Act. In the
event the Merger is consummated, shareholders of Mid Continent will become
shareholders of Commercial. In order to be eligible for inclusion in
Commercial's proxy materials for next year's annual meeting of shareholders of
Commercial, any stockholder proposal to take action at such meeting must be
received at Commercial's executive office at 2120 South 72nd Street, Omaha,
Nebraska 68124, no later than June 19, 1998. Any such proposal would be subject
to the requirements of the proxy rules under the Exchange Act.
59
<PAGE>
MID CONTINENT FORM 10-K
A COPY OF MID CONTINENT'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
SEPTEMBER 30, 1997 WILL BE FURNISHED WITHOUT CHARGE TO STOCKHOLDERS AS OF THE
RECORD DATE UPON WRITTEN REQUEST TO THE SECRETARY, MID CONTINENT BANCSHARES,
INC., 124 WEST CENTRAL, EL DORADO, KANSAS 67042.
LEGAL MATTERS
The legality of the Commercial Common Stock to be issued pursuant to the
Merger Agreement will be passed upon for Commercial by Fitzgerald, Schorr,
Barmettler & Brennan, P.C., Omaha, Nebraska.
Certain other legal matters in connection with the Merger will be passed
upon for Commercial by Housley Kantarian & Bronstein, P.C., Washington, D.C.,
and for Mid Continent by Malizia, Spidi, Sloane & Fisch, P.C., Washington, D.C.
EXPERTS
The consolidated financial statements of Commercial as of June 30, 1997 and
1996 and for each of the three years in the period ended June 30, 1997
incorporated in this Prospectus/Proxy Statement by reference from Commercial's
Annual Report on Form 10-K for the fiscal year ended June 30, 1997 have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated by reference herein (which report expresses an
unqualified opinion and includes an explanatory paragraph referring to a change
in the method of accounting for mortgage servicing rights in fiscal year 1996),
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
The consolidated financial statements of Mid Continent as of September 30,
1997 and 1996 and for each of the three years in the period ended September 30,
1997, have been included herein and incorporated by reference herein have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report which is incorporated by reference herein and have been so incorporated
in reliance upon the report of such firm given upon their authority, as experts
in accounting and auditing.
OTHER MATTERS
The Mid Continent Board of Directors is not aware of any business to come
before the Annual Meeting other than those matters described in this
Prospectus/Proxy Statement. However, if any other matter should properly come
before the Annual Meeting, it is intended that holders of the proxies will act
in accordance with their best judgment.
60
<PAGE>
- --------------------------------------------------------------------------------
REORGANIZATION AND MERGER AGREEMENT
BY AND AMONG
COMMERCIAL FEDERAL CORPORATION
AND
COMMERCIAL FEDERAL BANK, A FEDERAL SAVINGS BANK
AND
MID CONTINENT BANCSHARES, INC.
AND
MID-CONTINENT FEDERAL SAVINGS BANK
DATED AS OF SEPTEMBER 2, 1997
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
<S> <C> <C>
ARTICLE I THE MERGER AND RELATED MATTERS.................................... 2
1.1 Merger: Surviving Institution..................................... 2
1.2 Effective Time of the Merger...................................... 2
1.3 Conversion of Shares.............................................. 3
1.4 Surviving Corporation in the Merger............................... 4
1.5 Authorization for Issuance of Commercial Common Stock;
Exchange of Certificates...................................... 5
1.6 No Fractional Shares.............................................. 7
1.7 Shareholders' Meetings............................................ 7
1.8 Company Stock Options............................................. 8
1.9 Registration Statement; Prospectus/Proxy Statement................ 9
1.10 Cooperation; Regulatory Approvals................................. 11
1.11 Closing........................................................... 11
1.12 Closing of Transfer Books......................................... 11
1.13 Bank Merger....................................................... 11
ARTICLE II REPRESENTATIONS AND WARRANTIES OF COMPANY
AND SAVINGS................................................... 12
2.1 Organization, Good Standing, Authority, Insurance, Etc............ 12
2.2 Capitalization.................................................... 13
2.3 Ownership of Subsidiaries......................................... 13
2.4 Financial Statements and Reports.................................. 13
2.5 Absence of Changes................................................ 15
2.6 Prospectus/Proxy Statement........................................ 15
2.7 No Broker's or Finder's Fees...................................... 15
2.8 Litigation and Other Proceedings.................................. 16
2.9 Compliance with Law............................................... 16
2.10 Corporate Actions................................................. 16
2.11 Authority......................................................... 17
2.12 Employment Arrangements........................................... 17
2.13 Employee Benefits................................................. 18
2.14 Information Furnished............................................. 20
2.15 Property and Assets............................................... 20
2.16 Agreements and Instruments........................................ 20
2.17 Material Contract Defaults........................................ 21
2.18 Tax Matters....................................................... 21
2.19 Environmental Matters............................................. 21
2.20 Loan Portfolio: Portfolio Management............................. 22
2.21 Real Estate Loans and Investments................................. 22
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
2.22 Derivatives Contracts............................................. 23
2.23 Insurance......................................................... 23
ARTICLE III REPRESENTATIONS AND WARRANTIES OF COMMERCIAL
AND THE BANK.................................................. 23
3.1 Organization, Good Standing, Authority, Insurance, Etc............ 23
3.2 Capitalization.................................................... 24
3.3 Ownership of Subsidiaries......................................... 24
3.4 Financial Statements and Reports.................................. 24
3.5 Absence of Changes................................................ 25
3.6 Prospectus/Proxy Statement........................................ 26
3.7 No Broker's or Finder's Fees...................................... 26
3.8 Compliance With Law............................................... 26
3.9 Corporate Actions................................................. 27
3.10 Authority......................................................... 27
3.11 Information Furnished............................................. 27
3.12 Litigation and Other Proceedings.................................. 28
3.13 Agreements and Instruments........................................ 28
3.14 Tax Matters....................................................... 28
3.15 Property and Assets............................................... 28
3.16 Derivatives Contracts............................................. 29
3.17 Insurance......................................................... 29
ARTICLE IV COVENANTS......................................................... 29
4.1 Investigations; Access and Copies................................. 29
4.2 Conduct of Business of the Company and the Company Subsidiaries... 30
4.3 No Solicitation................................................... 31
4.4 Shareholder Approvals............................................. 32
4.5 Filing of Holding Company and Merger Applications................. 33
4.6 Consents.......................................................... 33
4.7 Resale Letter Agreements.......................................... 33
4.8 Publicity......................................................... 33
4.9 Cooperation Generally............................................. 34
4.10 Additional Financial Statements and Reports....................... 34
4.11 Stock Listing..................................................... 34
4.12 Allowance for Loan and Real Estate Owned Losses................... 34
4.13 D&O Indemnification and Insurance................................. 35
4.14 Tax Treatment..................................................... 35
4.15 Update Disclosure................................................. 35
4.16 Company's Employee Plans and Benefit Arrangements................. 36
4.17 Amendment of Savings' Federal Stock Charter....................... 37
4.18 Commercial Goodwill Claim......................................... 37
4.19 Environmental Reports............................................. 37
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE V CONDITIONS TO THE MERGER; TERMINATION
OF AGREEMENT.................................................. 38
5.1 General Conditions.............................................. 38
5.2 Conditions to Obligations of Commercial and Bank................ 39
5.3 Conditions to Obligations of Company and Savings................ 41
5.4 Termination of Agreement and Abandonment of Merger.............. 42
ARTICLE VI TERMINATION OF OBLIGATIONS; PAYMENT
OF EXPENSES................................................... 43
6.1 Termination; Lack of Survival of Representations and
Warranties.................................................... 43
6.2 Payment of Expenses............................................. 44
ARTICLE VII CERTAIN POST-MERGER AGREEMENTS.................................. 45
7.1 Reports to the SEC.............................................. 45
7.2 Employees....................................................... 45
ARTICLE VIII GENERAL......................................................... 46
8.1 Amendments...................................................... 46
8.2 Confidentiality................................................. 46
8.3 Governing Law................................................... 47
8.4 Notices......................................................... 47
8.5 No Assignment................................................... 48
8.6 Headings........................................................ 48
8.7 Counterparts.................................................... 48
8.8 Construction and Interpretation................................. 48
8.9 Entire Agreement................................................ 48
8.10 Severability.................................................... 48
8.11 No Third Party Beneficiaries.................................... 48
8.12 Enforcement of Agreement........................................ 49
Schedules:
Schedule I Disclosure Schedule for the Company and Savings...................
Schedule II Disclosure Schedule for Commercial and the Bank...................
Schedule 4.2...................................................................
Schedule 4.7...................................................................
Schedule 4.16..................................................................
Schedule 5.1(e)................................................................
Schedule 7.2...................................................................
Schedule 8.9...................................................................
Exhibits:
Exhibit 1.1(a) Acquisition Plan of Merger.....................................
Exhibit 1.1(b) Bank Plan of Merger............................................
Exhibit 5.2(a) Form of Opinion of Counsel for the Company.....................
Exhibit 5.3(a) Form of Opinion of Counsel for Commercial......................
</TABLE>
iii
<PAGE>
REORGANIZATION AND MERGER AGREEMENT
================================================================================
THIS REORGANIZATION AND MERGER AGREEMENT ("Agreement") is dated as of
September 2, 1997, by and among COMMERCIAL FEDERAL CORPORATION, a Nebraska
corporation ("Commercial"), and COMMERCIAL FEDERAL BANK, A FEDERAL SAVINGS BANK,
a Federally chartered savings bank and wholly-owned subsidiary of Commercial
("Bank"); and MID CONTINENT BANCSHARES, INC., a Kansas corporation ("Company"),
and Mid-Continent Federal Savings Bank, a Federally chartered savings bank and
wholly-owned subsidiary of Company ("Savings").
WHEREAS, Commercial, a non-diversified, unitary savings and loan holding
company, with principal offices in Omaha, Nebraska, owns all of the issued and
outstanding capital stock of Bank, with its principal offices in Omaha,
Nebraska.
WHEREAS, Company, a non-diversified, unitary savings and loan holding
company, with principal offices in El Dorado, Kansas, owns all of the issued and
outstanding capital stock of Savings, with principal offices in El Dorado,
Kansas;
WHEREAS, Commercial and Company desire to combine their respective holding
companies through a tax-free exchange so that the respective shareholders of
both Commercial and Company will have an equity ownership in the combined
holding company;
WHEREAS, following the combination of Commercial and Company, it is
intended that Bank and Savings will be merged such that the resulting holding
company will retain the advantage of a unitary savings and loan holding company
status and that the resulting savings institution will achieve certain economies
of scale and efficiencies as a result of such subsequent merger;
WHEREAS, it is intended that to accomplish this result, the Company will be
acquired by means of a merger (the "Acquisition Merger") of the Company with and
into Commercial, followed by the merger of Savings with and into the Bank (the
"Bank Merger"). The Acquisition Merger and the Bank Merger are collectively
referred to as the "Merger";
WHEREAS, it is intended that for federal income tax purposes, the Merger
shall qualify as a reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code") and this Agreement shall
constitute a plan of reorganization pursuant to Section 368 of the Code; and
WHEREAS, the Boards of Directors of Commercial and the Company (at meetings
duly called and held) have determined that this Agreement and the transactions
contemplated hereby are in the best interests of Commercial and the Company,
respectively, and their respective stockholders and have approved this
Agreement. Consummation of the Merger is subject to the
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prior approval of the Office of Thrift Supervision ("OTS") and the stockholders
of the Company, among other conditions specified herein.
NOW THEREFORE, in consideration of the premises and mutual promises
hereinafter set forth, and of other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto, intending
to be legally bound, do hereby agree as follows:
ARTICLE I
THE MERGER AND RELATED MATTERS
1.1 Merger: Surviving Institution. Subject to the terms and conditions of
-----------------------------
this Agreement, and pursuant to the provisions of the Nebraska Business
Corporation Act ("NBCA"), the Kansas General Corporation Code ("KGCC"), the Home
Owners Loan Act, as amended ("HOLA"), and the rules and regulations promulgated
thereunder (the "Thrift Regulations"), (a) at the Acquisition Merger Effective
Time (as hereinafter defined), the Company shall be merged with and into
Commercial pursuant to the terms and conditions set forth herein and in the Plan
of Merger to be set forth as Exhibit 1.1(a) attached hereto (the "Acquisition
Plan of Merger"), (b) the separate corporate existence of the Company shall
cease, and (c) thereafter, at the Bank Merger Effective Time (as hereinafter
defined) Savings shall be merged with and into the Bank pursuant to the terms
and conditions set forth herein and in a plan of merger set forth in Exhibit
1.1(b) (the "Bank Plan of Merger"). The Acquisition Merger shall have the
effects specified in the NBCA and the KGCC, Section 1.4(e) hereof and the
Acquisition Plan of Merger. Upon the consummation of the Acquisition Merger,
the separate corporate existence of the Company shall cease and Commercial shall
continue as the surviving corporation (sometimes referred to herein as the
"Surviving Corporation"). Upon consummation of the Bank Merger, the separate
existence of Savings shall cease and the Bank shall continue as the surviving
institution of the Bank Merger. The name of the Bank, as the surviving
institution of the Bank Merger, shall remain "Commercial Federal Bank, a Federal
Savings Bank". From and after the Bank Merger Effective Time, the Bank, as the
surviving institution of the Bank Merger, shall possess all of the properties
and rights and be subject to all of the liabilities and obligations of the Bank
and Savings, all as more fully described in the Thrift Regulations, Section 1.13
hereof and the Bank Plan of Merger. Commercial may at any time change the method
of effecting the Merger if and to the extent it deems such change to be
desirable, provided, however, that no such change shall (A) alter or change the
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amount or kind of consideration to be issued to holders of Company common stock
as provided for in this Agreement, (B) adversely affect the tax treatment to
Company shareholders as a result of receiving the consideration described in
Section 1.3 herein or (C) materially impede or delay the consummation of the
transactions contemplated by this Agreement.
1.2 Effective Time of the Merger. As soon as practicable after each of
----------------------------
the conditions set forth in Article V hereof have been satisfied or waived, but
in no event later than thirty (30) days following such satisfaction or waiver
(unless otherwise agreed by the parties hereto) Commercial and the Company will
file, or cause to be filed, an agreement, certificate or articles
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of merger with appropriate authorities of Kansas and Nebraska for the
Acquisition Merger and articles of combination with the OTS for the Bank Merger,
which agreement, certificate, articles of merger and articles of combination
shall in each case be in the form required by and executed in accordance with
applicable provisions of law and the Thrift Regulations, respectively. The
Acquisition Merger shall become effective at the latest to occur of the time
(i) the Nebraska articles of merger are filed with the appropriate authorities
of Nebraska or (ii) the agreement or certificate of merger is filed with the
appropriate authorities of Kansas (the "Acquisition Merger Effective Time"),
which shall be immediately following the Closing (as defined in Section 1.11
herein) and on the same day as the Closing if practicable. The Bank Merger
shall become effective at the time the articles of combination for such merger
are endorsed by the OTS pursuant to Section 552.13(k) of the Thrift Regulations
(the "Bank Merger Effective Time"). The parties shall cause the Acquisition
Merger to become effective prior to the Bank Merger.
1.3 Conversion of Shares.
--------------------
(a)(i) At the Acquisition Merger Effective Time, by virtue of the
Merger and without any action on the part of Commercial or Company or the
holders of shares of Commercial or Company common stock, each outstanding share
of Company common stock issued and outstanding at the Acquisition Merger
Effective Time shall be converted into and represent solely the right to receive
without any action by the holder, shares of Commercial Common Stock, in the
manner provided in Section 1.5 hereof, according to the following Exchange
Ratios (which shall be subject to adjustment as provided in clause (a)(iv) of
this Section (the "Merger Consideration"):
(A) If the Average NYSE Closing Price (as defined below) shall be equal to
or greater than $36.00 but equal to or less than $44.00, then the Exchange
Ratio shall be such number of shares of Commercial Common Stock equal to
the quotient (carried to four digits and rounded down) that results by
dividing $38.25 by the Average NYSE Closing Price of Commercial Common
Stock (a maximum of 1.0625 and a minimum of 0.8693 shares of Commercial
Common Stock);
(B) If the Average NYSE Closing Price (as defined below) shall be greater
than $44.00, the Exchange Ratio shall be 0.8693 shares of Commercial Common
Stock;
(C) If the Average NYSE Closing Price (as defined below) shall be less than
$36.00, then the Exchange Ratio shall be 1.0625 shares of Commercial Common
Stock; provided, however, that in the event the Exchange Ratio is adjusted
pursuant to the proviso contained in Section 5.4(e) hereof, the Exchange
Ratio shall be the Exchange Ratio as so adjusted.
(ii) Any shares of Company common stock which are owned or held by
Company or any of its subsidiaries (except shares held in any 401(k) plan of the
Company or any of its subsidiaries or otherwise held in a fiduciary capacity,
including the Savings Employee Stock Ownership Plan and the Management Stock
Ownership Plan awards whether vested or not) or by Commercial or any of
Commercial's subsidiaries (other than in a fiduciary capacity) at the
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Acquisition Merger Effective Time shall cease to exist, and the certificates for
such shares shall as promptly as practicable be canceled and no shares of
capital stock of Commercial shall be issued or exchanged therefor.
(iii) At the Acquisition Merger Effective Time, the holders of
certificates representing shares of Company common stock shall cease to have any
rights as stockholders of the Company, except the right to receive the Merger
Consideration as provided herein.
(iv) If the holders of Commercial Common Stock shall have received or
shall have become entitled to receive, without payment therefor, during the
period commencing on the date hereof and ending with the Acquisition Merger
Effective Time, additional shares of common stock or other securities for their
stock by way of a stock split, stock dividend, reclassification, combination of
shares, spinoff or similar corporate rearrangement ("Stock Adjustment"), then
the amount of Commercial Common Stock to be exchanged at the Acquisition Merger
Effective Time for Company Common Stock shall be proportionately adjusted to
take into account such Stock Adjustment. In addition, the Average NYSE Closing
Price, as defined below, shall be proportionately adjusted to compensate for any
such Stock Adjustment.
(b) The term "NYSE Closing Price" shall mean the closing price per
share (carried to four decimal places and rounded down) of the Commercial Common
Stock on the New York Stock Exchange. The term "Average NYSE Closing Price"
shall mean the arithmetic mean of the NYSE Closing Prices of the Commercial
Common Stock for the twenty-fifth through the sixth trading day, inclusive,
immediately preceding the business day prior to the later of (A) the date on
which all requisite federal and state regulatory approvals required to
consummate the transactions contemplated by this Agreement are obtained (and
Commercial shall notify the Company of the date when all such approvals are
obtained), including for this purpose the period of any requisite waiting
periods in respect thereof, (B) the date of the Company's meeting of
shareholders to be held pursuant to Section 1.7(a) herein or (C) the 25th day of
the month immediately preceding the month in which the parties have scheduled in
writing the Closing to occur, or the next succeeding business day (the
"Determination Period").
(c) Each share of Commercial Common Stock to be issued to the
Company's shareholders pursuant to this Section 1.3 shall include the
corresponding number of rights associated with the Commercial Common Stock
pursuant to the Rights Agreement dated as of December 19, 1988 by and between
Commercial and Manufacturers Hanover Trust Company, as Rights Agent ("Commercial
Rights Agreement").
1.4 Surviving Corporation in the Merger.
-----------------------------------
(a) The name of the Surviving Corporation in the Acquisition Merger
shall be Commercial Federal Corporation.
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(b) The Articles of Incorporation of Commercial as in effect
immediately prior to the Acquisition Merger Effective Time shall be the Articles
of Incorporation of the Surviving Corporation as the Surviving Corporation.
(c) The bylaws of Commercial, together with all amendments thereto, if
any, as in effect immediately prior to the Acquisition Merger Effective Time,
shall thereafter be the bylaws of the Surviving Corporation, until amended as
provided therein or by law.
(d) The directors and officers of Commercial in office immediately
prior to the Acquisition Merger Effective Time shall be the directors and
officers of the Surviving Corporation following the Acquisition Merger, until
their successors shall be duly elected and qualified.
(e) From and after the Acquisition Merger Effective Time:
(i) The Surviving Corporation shall possess all assets and property of
every description, and every interest in the assets and property, wherever
located, and the rights, privileges, immunities, powers, franchises, and
authority, of a public as well as of a private nature, of each of Commercial and
Company, and all obligations belonging or due to each of Commercial and Company,
all of which are vested in the Surviving Corporation without further act or
deed. Title to any real estate or any interest in the real estate vested in
Commercial or the Company shall not revert or in any way be impaired by reason
of the Acquisition Merger.
(ii) The Surviving Corporation shall be liable for all the obligations
of each of Commercial and Company. Any claim existing, or action or proceeding
pending, by or against the Company or Commercial, may be prosecuted to
judgement, with right of appeal, as if the Acquisition Merger had not taken
place, or the Surviving Corporation may be substituted in its place.
(iii) All the rights of creditors of each of Company and Commercial
are preserved unimpaired, and all liens upon the property of Company and
Commercial are preserved unimpaired, on only the property affected by such liens
immediately prior to the Acquisition Merger Effective Time.
1.5 Authorization for Issuance of Commercial Common Stock; Exchange of
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Certificates.
------------
(a) Commercial shall reserve or will at Closing have available for
issuance a sufficient number of shares of its common stock for the purpose of
issuing its shares to the Company's shareholders in accordance with this Article
I, including Section 1.8(a). Immediately prior to the Acquisition Merger
Effective Time, Commercial shall make available for exchange or conversion, by
transferring to an exchange agent appointed by Commercial and reasonably
satisfactory to Company (the "Exchange Agent") for the benefit of the holders of
Company common stock: (i) such number of whole shares of Commercial Common
Stock as shall be
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issuable in connection with the payment of the aggregate Stock Consideration,
and (ii) such funds as may be payable in lieu of fractional shares of Commercial
Common Stock.
(b) After the Acquisition Merger Effective Time, holders of
certificates theretofore evidencing outstanding shares of Company common stock
(other than as provided in Section 1.3(a)(ii)), upon surrender of such
certificates to the Exchange Agent, shall be entitled to receive certificates
representing the number of whole shares of Commercial Common Stock into which
shares of Company common stock theretofore represented by the certificates so
surrendered shall have been converted, as provided in Section 1.3 hereof and
cash payments in lieu of fractional shares as provided in Section 1.6 hereof.
As soon as practicable after the Acquisition Merger Effective Time but not later
than ten (10) business days thereafter, the Exchange Agent will send a notice
and transmittal form to each Company shareholder of record at the Acquisition
Merger Effective Time whose Company stock shall have been converted into
Commercial Common Stock advising such shareholder of the effectiveness of the
Acquisition Merger and the procedure for surrendering to the Exchange Agent
outstanding certificates formerly evidencing Company common stock in exchange
for new certificates for Commercial Common Stock and for cash in lieu of any
fractional interest. Upon surrender, each certificate evidencing Company common
stock shall be canceled.
(c) Until surrendered as provided in this Section 1.5, each
outstanding certificate which, prior to the Acquisition Merger Effective Time,
represented Company common stock (other than shares canceled at the Acquisition
Merger Effective Time pursuant to Section 1.3(a)(ii) hereof) will be deemed for
all purposes to evidence ownership of the number of shares of Commercial Common
Stock into which the shares of Company common stock formerly represented thereby
were converted and the right to receive cash in lieu of any fractional interest.
However, until such outstanding certificates formerly representing Company
common stock are so surrendered, no dividend or distribution payable to holders
of record of Commercial Common Stock shall be paid to any holder of such
outstanding certificates, but upon surrender of such outstanding certificates by
such holder there shall be paid to such holder the amount of any dividends or
distribution, without interest, theretofore paid with respect to such whole
shares of Commercial Common Stock, but not paid to such holder, and which
dividends or distribution had a record date occurring on or subsequent to the
Acquisition Merger Effective Time and the amount of any cash, without interest,
payable to such holder in lieu of fractional shares pursuant to Section 1.6
hereof. After the Acquisition Merger Effective Time, there shall be no further
registration of transfers on the records of the Company of outstanding
certificates formerly representing shares of Company common stock and, if a
certificate formerly representing such shares is presented to Commercial, it
shall be forwarded to the Exchange Agent for cancellation and exchange for
certificates representing shares of Commercial Common Stock as herein provided.
(d) All shares of Commercial Common Stock and cash in lieu of any
fractional shares issued and paid upon the surrender for exchange of Company
common stock in accordance with the above terms and conditions shall be deemed
to have been issued in full satisfaction of all rights pertaining to such shares
of Company common stock.
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(e) If any new certificate for Commercial Common Stock is to be issued
in the name other than that in which the certificate surrendered in exchange
thereof is registered, it shall be a condition of the issuance therefor that the
certificate surrendered in exchange shall be properly endorsed and otherwise in
proper form for transfer and that the person requesting such transfer pay to the
Exchange Agent any transfer or other taxes, if any, required by reason of the
issuance of a new certificate for shares of Commercial Common Stock in any name
other than that of the registered holder of the certificate surrendered, or
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not payable.
(f) In the event any certificate for Company common stock shall have
been lost, stolen or destroyed, the Exchange Agent shall issue in exchange for
such lost, stolen or destroyed certificate, upon the making of an affidavit of
that fact by the holder thereof, such shares of Commercial Common Stock and cash
in lieu of fractional shares, if any, as may be required pursuant hereto;
provided, however, that Commercial may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate to deliver a bond in such sum as it may reasonably direct
as indemnity against any claim that may be made against Commercial, the Company,
the Exchange Agent or any other party with respect to the certificate alleged to
have been lost, stolen or destroyed.
1.6 No Fractional Shares. Notwithstanding any term or provision hereof,
--------------------
no fractional shares of Commercial Common Stock, and no certificates or scrip
therefor, or other evidence of ownership thereof, will be issued in exchange for
any shares of Company common stock; no dividend or distribution with respect to
Commercial Common Stock shall be payable on or with respect to any fractional
share interests; and no such fractional share interest shall entitle the owner
thereof to vote or to any other rights of a shareholder of Commercial. In lieu
of such fractional share interest, any holder of Company common stock who would
otherwise be entitled to a fractional share of Commercial Common Stock will,
upon surrender of his certificate or certificates representing Company common
stock outstanding immediately prior to the Acquisition Merger Effective Time, be
paid the applicable cash value of such fractional share interest, which shall be
equal to the product of the fraction multiplied by the Average NYSE Closing
Price. For the purposes of determining any such fractional share interests, all
shares of Company common stock owned by a Company shareholder shall be combined
so as to calculate the maximum number of whole shares of Company common stock
issuable to such Company shareholder in the Acquisition Merger.
1.7 Shareholders' Meetings.
----------------------
(a) The Company shall, at the earliest practicable date but not sooner
than January 26, 1998, hold a meeting of its shareholders (the "Company
Shareholders' Meeting") to submit for shareholder approval (i) an amendment to
Article 12 of the Company's Articles of Incorporation to permit the acquisition
of more than 10% of the outstanding shares of Company common stock by Commercial
pursuant to this Agreement (the "Articles Amendment") and (ii) this Agreement
and the Acquisition Merger and all related matters necessary to the consummation
of the transactions contemplated hereby. The affirmative vote of the holders of
80% of the
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outstanding shares of Company common stock shall be required to approve the
Articles Amendment. The affirmative vote of the holders of at least a majority
of the issued and outstanding shares of Company common stock shall be required
for approval of the Acquisition Merger and all such related matters. Upon the
approval of the Articles Amendment, Savings shall take all necessary actions to
approve and effectuate a similar amendment to its Federal Stock Charter (the
"Charter Amendment").
(b) Commercial shall, at its 1997 annual meeting of shareholders,
submit for shareholder approval an amendment to Article IV of Commercial's
Articles of Incorporation increasing the number of authorized shares of
Commercial Common Stock. The affirmative vote of the holders of at least a
majority of the votes cast shall be required for approval of such amendment to
Commercial's Articles of Incorporation.
1.8 Company Stock Options.
---------------------
(a) Subject to Section 1.8(b) hereof, immediately prior to the
Acquisition Merger Effective Time, each option outstanding under the Company's
1994 Stock Option Plan (the "Company Option Plan") shall continue outstanding as
an option to purchase, in place of the purchase of each share of Company common
stock, the number of shares (rounded down to the nearest whole share) of
Commercial Common Stock that would have been received by the optionee in the
Merger had the option been exercised in full (without regard to any limitations
contained therein on exercise) for shares of Company common stock immediately
prior to the Acquisition Merger upon the same terms and conditions under the
relevant option as were applicable immediately prior to the Acquisition Merger
Effective Time, except for appropriate pro rata adjustments as to the relevant
option price for shares of Commercial common stock substituted therefor so that
the aggregate option exercise price of shares subject to an option immediately
following the assumption and substitution shall be the same as the aggregate
option exercise price for such shares immediately prior to such assumption and
substitution. It is intended that the foregoing assumption shall be undertaken
consistent with and in a manner that will not constitute a "modification" under
Section 424 of the Code as to any stock option which is an "incentive stock
option." Commercial and Company agree to take such actions as shall be
necessary to give effect to the foregoing.
At all times after the Acquisition Merger Effective Time, Commercial shall
reserve for issuance such number of shares of Commercial Common Stock as are
necessary so as to permit the exercise of options granted under the Company
Option Plan in the manner contemplated by this Agreement and the instruments
pursuant to which such options were granted. Commercial shall make all filings
required under federal and state securities laws so as to permit the exercise of
such options and the sale of the shares received by the option holder upon such
exercise.
(b) In the event Commercial advises Company in writing no less than 45
days prior to the Closing that the Merger will not be accounted for as a pooling
of interests, then each holder of an outstanding option under the Company Option
Plan shall, in cancellation of such option (such cancellation to be reflected in
a written agreement), receive from the Company,
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immediately prior to the Acquisition Merger Effective Time, in lieu of the
Commercial stock option referred to in Section 1.8(a), a cash payment in the
amount of the per share value of the Merger Consideration, less the exercise
price of such option, net of any cash which must be withheld under federal and
state income tax requirements. Immediately thereafter, the Company shall cancel
each such option. At least ten (10) business days prior to the Closing and then
immediately prior to the Closing, Company shall afford Commercial the right to
review the cash amounts proposed to be paid to optionees hereunder.
1.9 Registration Statement; Prospectus/Proxy Statement.
--------------------------------------------------
(a) For the purposes (i) of registering the Commercial Common Stock to
be issued to holders of Company common stock in connection with the Merger and
the shares issuable under the Company Option Plan pursuant to Section 1.8(a)
hereof with the Securities and Exchange Commission ("SEC") and with applicable
state securities authorities, and (ii) of holding the Company Shareholders'
Meeting, the parties hereto shall cooperate in the preparation of an appropriate
registration statement (such registration statement, together with all and any
amendments and supplements thereto, being herein referred to as the
"Registration Statement"), including the prospectus/proxy statement satisfying
all applicable requirements of applicable state laws, and of the Securities Act
of 1933, as amended (the "1933 Act") and the Securities Exchange Act of 1934, as
amended (the "1934 Act") and the rules and regulations thereunder (such
prospectus/proxy statement, together with any and all amendments or supplements
thereto, being herein referred to as the "Prospectus/Proxy Statement"). At the
election of the Company, such Prospectus/Proxy Statement may also include
information necessary to conduct the annual meeting of shareholders of the
Company.
(b) Commercial shall furnish such information concerning Commercial
and the Commercial Subsidiaries (as defined in Section 3.1 hereof) as is
necessary in order to cause the Prospectus/Proxy Statement, insofar as it
relates to such corporations, to comply with Section 1.9(a) hereof. Commercial
agrees promptly to advise the Company if at any time prior to the Company
Shareholders' Meeting any information provided by Commercial in the
Prospectus/Proxy Statement becomes incorrect or incomplete in any material
respect and to provide the information needed to correct such inaccuracy or
omission. Commercial shall promptly file such supplemental information as may
be necessary in order to cause such Prospectus/Proxy Statement, insofar as it
relates to Commercial and the Commercial Subsidiaries, to comply with Section
1.9(a).
(c) The Company shall furnish Commercial with such information
concerning the Company and the Company Subsidiaries (as defined in Section 2.1
hereof) as is necessary in order to cause the Prospectus/Proxy Statement,
insofar as it relates to such corporations, to comply with Section 1.9(a)
hereof. The Company agrees promptly to advise Commercial if at any time prior
to the Company Shareholders' Meeting any information provided by the Company in
the Prospectus/Proxy Statement becomes incorrect or incomplete in any material
respect and to provide Commercial with the information needed to correct such
inaccuracy or omission. The Company shall furnish Commercial with such
supplemental information as may be necessary in
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order to cause the Prospectus/Proxy Statement, insofar as it relates to the
Company and the Company Subsidiaries, to comply with Section 1.9(a).
(d) Commercial shall promptly file the Registration Statement with the
SEC and applicable state securities agencies. Commercial shall use all
reasonable efforts to cause the Registration Statement to become effective under
the 1933 Act and applicable state securities laws at the earliest practicable
date. The Company authorizes Commercial to utilize in the Registration
Statement the information concerning the Company and the Company Subsidiaries
provided to Commercial for the purpose of inclusion in the Prospectus/Proxy
Statement. The Company shall have the right to review and approve the form of
proxy statement included in the Registration Statement prior to its filing with
the SEC and prior to its mailing to Company shareholders. Commercial shall
advise the Company promptly when the Registration Statement has become effective
and of any supplements or amendments thereto, and Commercial shall furnish
Company with copies of all such documents. Prior to the Acquisition Merger
Effective Time or the termination of this Agreement, each party shall consult
with the other with respect to any material (including the Prospectus/Proxy
Statement) that might constitute a "prospectus" relating to the Merger within
the meaning of the 1933 Act.
(e) The Company shall consult with Commercial in order to determine
whether any directors, officers or shareholders of the Company may be deemed to
be "affiliates" of the Company ("affiliated persons") within the meaning of Rule
145 of the SEC promulgated under the 1933 Act. In the event that Commercial,
within 45 days of the Acquisition Merger Effective Time, advises Company in
writing that the Acquisition Merger shall qualify for pooling of interests
accounting treatment (and attaches an opinion of Deloitte & Touche LLP addressed
to Commercial to that effect), then Commercial and the Company shall each take
such action as may be necessary or appropriate to ensure that their respective
affiliated persons are aware of and comply with the guidelines of the SEC with
respect to the sale by affiliates of stock of companies engaging in a business
combination transaction to be accounted for as a pooling of interests as set
forth in Topic 2-E of the SEC staff accounting bulletin series. All shares of
Commercial common stock issued to such Company affiliated persons (i) in
connection with the Merger or (ii) upon exercise of options received pursuant to
Section 1.8 hereof subsequent to the Acquisition Merger Effective Time, shall
bear a legend upon the face thereof stating that transfer of the securities is
or may be restricted by the provisions of the 1933 Act and, if applicable,
pooling of interests accounting requirements, and notice shall be given to
Commercial's transfer agent of such restriction. Such legend shall be removed
(i) by delivery of a substitute certificate without such legend if such Company
affiliated person shall have delivered to Commercial upon request an affidavit
in form and substance satisfactory to Commercial necessary to enable counsel to
Commercial to furnish a legal opinion or other document requested by the
transfer agent, to the effect that such legend is not required for purposes of
the 1933 Act, or (ii) after the expiration of two years from the Acquisition
Merger Effective Time unless, in the opinion of the counsel for Commercial, such
person was an "affiliate" of Commercial within the meaning of Rule 145 within
three months prior to the expiration of such two year period. Commercial shall
use its best efforts to provide the transfer agent in a timely manner with any
required legal opinion or other documentation necessary for the sale or transfer
of any Commercial Common Stock received in
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the Merger. So long as shares of such Commercial common stock bear such legend,
no transfer of such Commercial common stock shall be allowed unless and until
the transfer agent is provided with such information as may reasonably be
requested by counsel for Commercial to assure that such transfer will not
violate applicable provisions of the 1933 Act, or rules, regulations or policies
of the SEC.
1.10 Cooperation; Regulatory Approvals. The parties shall cooperate
---------------------------------
and use reasonable best efforts to complete the transactions contemplated
hereunder at the earliest practicable date but the parties do not anticipate the
Closing to occur prior to April 1, 1998. Each party shall cause each of their
affiliates and subsidiaries to cooperate in the preparation and submission by
them, as promptly as reasonably practicable, of such applications, petitions,
and other documents and materials as any of them may reasonably deem necessary
or desirable to the OTS, Federal Trade Commission ("FTC"), Department of Justice
("DOJ"), SEC, applicable Secretary of State, other regulatory authorities,
holders of the voting shares of common stock of the Company, and any other
persons for the purpose of obtaining any approvals or consents necessary to
consummate the transactions contemplated by this Agreement. At the date hereof,
none of the parties is aware of any reason that the regulatory approvals
required to be obtained by it would not be obtained.
1.11 Closing. If (i) the Articles Amendment and this Agreement have
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been duly approved by the shareholders of the Company, and (ii) all relevant
conditions of this Agreement have been satisfied or waived, a closing (the
"Closing") shall take place as promptly as practicable thereafter at the
principal office of Commercial at which the parties hereto will exchange
certificates, opinions, letters and other documents as required hereby and will
make the filings described in Section 1.2 hereof. Such Closing will take place
as soon as practicable as agreed by the parties, provided, however, that the
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Closing shall be no more than sixty (60) days after the satisfaction or waiver
of all conditions and/or obligations contained in Article V of this Agreement.
1.12 Closing of Transfer Books. At the Acquisition Merger Effective
-------------------------
Time, the transfer books for Company common stock shall be closed, and no
transfer of shares of Company common stock shall thereafter be made on such
books.
1.13 Bank Merger.
-----------
(a) At the Bank Merger Effective Time, each share of Savings common
stock issued and outstanding immediately prior thereto shall, by virtue of the
Bank Merger, be canceled. No new shares of the capital stock or other securities
or obligations of the Bank shall be issued or be deemed issued with respect to
or in exchange for such canceled shares, and such canceled shares of Savings
Common Stock shall not be converted into any shares or other securities or
obligations of the Bank.
(b) The charter and bylaws of the Bank, as in effect immediately prior
to the Bank Merger Effective Time, shall be the charter and bylaws of the Bank,
as the surviving institution of the Bank Merger, and may thereafter be amended
in accordance with applicable law.
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(c) Except as otherwise provided herein, the directors and officers of
the Bank immediately prior to the Bank Merger Effective Time shall be the
directors and officers of the Bank, as the surviving institution of the Bank
Merger, and shall continue in office until their successors are duly elected or
otherwise duly selected.
(d) The liquidation account established by Savings pursuant to the
plan of conversion adopted in connection with its conversion from mutual to
stock form shall continue to be maintained by the Bank after the Bank Merger
Effective Time for the benefit of those persons and entities who were savings
account holders of Savings on the eligibility record date for such conversion
and who continue from time to time to have rights therein. If required by the
rules and regulations of the OTS, the Bank shall amend its charter to
specifically provide for the continuation of the liquidation account established
by Savings.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY AND SAVINGS
Company and Savings represent and warrant to Commercial and the Bank that,
except as disclosed in Schedule I attached hereto and except that Savings makes
no representations or warranties regarding Company:
2.1 Organization, Good Standing, Authority, Insurance, Etc. The Company
------------------------------------------------------
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Kansas. Section 2.1 of Schedule I lists each "subsidiary"
of the Company and Savings within the meaning of Section 10(a)(1)(G) of HOLA,
(individually a "Company Subsidiary" and collectively the "Company
Subsidiaries") (unless otherwise noted herein all references to a "Company
Subsidiary" or to the "Company Subsidiaries" shall include Savings). Each of
the Company Subsidiaries is duly organized, validly existing, and in good
standing under the laws of the respective jurisdiction under which it is
organized, as set forth in Section 2.1 of Schedule I. The Company and each
Company Subsidiary has all requisite power and authority and is duly qualified
and licensed to own, lease and operate its properties and conduct its business
as it is now being conducted. The Company has delivered to Commercial a true,
complete and correct copy of the articles of incorporation, charter, or other
organizing document and of the bylaws, as in effect on the date of this
Agreement, of Company and each Company Subsidiary. To the Company's best
knowledge, the Company and each Company Subsidiary is qualified to do business
as a foreign corporation and is in good standing in each jurisdiction in which
qualification is necessary under applicable law, except to the extent that any
failures to so qualify would not, in the aggregate, have a material adverse
effect on the business, financial condition or results of operations of the
Company and the Company Subsidiaries, taken as a whole. Savings is a member in
good standing of the Federal Home Loan Bank of Topeka and all eligible accounts
issued by Savings are insured by the Savings Association Insurance Fund ("SAIF")
to the maximum extent permitted under applicable law. Savings is a "domestic
building and loan association" as defined in Section 7701(a)(19) of the Code and
is a "qualified thrift lender" as defined in Section 10(m) of the HOLA and the
Thrift Regulations. The Company is registered as a savings and loan holding
company under the HOLA.
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The minute books of the Company and the Company's Subsidiaries contain
complete and accurate records of all meetings and other corporate actions held
or taken by their respective shareholders and Boards of Directors (including the
committees of such Boards).
2.2 Capitalization. The authorized capital stock of the Company consists
--------------
of (i) 20,000,000 shares of common stock, par value $.10 per share, of which
1,958,250 shares were issued and outstanding as of the date of this Agreement,
and (ii) 10,000,000 shares of Preferred Stock, no par value, of which no shares
were outstanding as of the date of this Agreement. All outstanding shares of
Company common stock are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights. Except for outstanding options to
purchase 165,476 shares of Company common stock under the Company Option Plan,
as of the date of this Agreement, there are no options, convertible securities,
warrants, or other rights (preemptive or otherwise) to purchase or acquire any
of the Company's capital stock from the Company and no oral or written
agreement, contract, arrangement, understanding, plan or instrument of any kind
(collectively, "Stock Contract") to which the Company or any of its affiliates
is subject with respect to the issuance, voting or sale of issued or unissued
shares of the Company's capital stock. A true and complete copy of the Company
Option Plan, as in effect on the date of this Agreement, is attached as Section
2.2 of Schedule I. Except as disclosed at Schedule 2.2, neither the Company nor
Savings is aware of any event or circumstance (excluding actions or events by
Commercial) which could disqualify the Merger from being accounted for as a
pooling of interests.
2.3 Ownership of Subsidiaries. All the outstanding shares of the capital
-------------------------
stock of the Company Subsidiaries are validly issued, fully paid, nonassessable
and owned beneficially and of record by the Company or a Company Subsidiary free
and clear of any lien, claim, charge, restriction or encumbrance (collectively,
"Encumbrance"). All of the outstanding capital stock or other ownership
interests in all of the Company Subsidiaries is owned either by the Company or
Savings. Except as set forth in Section 2.3 of Schedule I, there are no
options, convertible securities, warrants, or other rights (preemptive or
otherwise) to purchase or acquire any capital stock of any Company Subsidiary
and no contracts to which the Company or any of its affiliates is subject with
respect to the issuance, voting or sale of issued or unissued shares of the
capital stock of any of the Company Subsidiaries. Neither the Company nor any
Company Subsidiary owns any material investment of the capital stock or other
equity securities (including securities convertible or exchangeable into such
securities) of or profit participations in any "company" (as defined in Section
10(a)(1)(C) of the HOLA) other than the Federal Home Loan Bank of Topeka or
except as set forth in Section 2.3 of Schedule I.
2.4 Financial Statements and Reports.
--------------------------------
(a) No registration statement, proxy statement, schedule or report
filed by the Company or any Company Subsidiary with the SEC or the OTS under the
1933 Act or the 1934 Act ("SEC Reports"), on the date of effectiveness in the
case of such registration statements, or on the date of filing in the case of
such reports or schedules, or on the date of mailing in the case of such proxy
statements, contained any untrue statement of a material fact or omitted to
state a
13
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material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The Company and the Company Subsidiaries have timely filed all
reports and documents required to be filed by them with the SEC, the OTS, or the
Federal Deposit Insurance Corporation (the "FDIC") under various securities and
banking laws and regulations for the last five years (or such shorter period as
they may have been subject to such filing requirements), except to the extent
that all failures to so file, in the aggregate, would not have a material
adverse effect on the business, financial condition or results of operations of
the Company and the Company Subsidiaries, taken as a whole. All such documents,
as finally amended, complied in all material respects with applicable
requirements of law and, as of their respective date or the date as amended and,
with respect to the SEC Reports, did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading and, with respect to reports and documents
filed with banking regulatory agencies, were accurate in all material respects.
Except to the extent stated therein, all financial statements and schedules
included in the documents referred to in the preceding sentences (or to be
included in similar documents to be filed after the date hereof) (i) are or will
be (with respect to financial statements in respect of periods ending after
September 30, 1996) in accordance with the Company's books and records and those
of any of the Company Subsidiaries, and (ii) present (and in the case of
financial statements in respect of periods ending after September 30, 1996, will
present) fairly the consolidated statement of financial condition and the
consolidated statements of income, changes in stockholders' equity and cash
flows of the Company and the Company Subsidiaries as of the dates and for the
periods indicated in accordance with generally accepted accounting principles
applied on a basis consistent with prior periods (except for the omission of
notes to unaudited statements, year end adjustments to interim results and
changes to generally accepted accounting principles). The consolidated
financial statements of the Company at September 30, 1996 and for the three
years then ended and the consolidated financial statements for all periods
thereafter up to the Closing reflect or will reflect, as the case may be, all
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise,
whether due or to become due and regardless of when asserted), as of their
respective dates, of the Company and the Company Subsidiaries required to be
reflected in such financial statements according to generally accepted
accounting principles and contain or will contain, in the opinion of management,
adequate reserves for losses on loans and properties acquired in settlement of
loans, taxes and all other material accrued liabilities and for all reasonably
anticipated material losses, if any as of such date. There exists no set of
circumstances that could reasonably be expected to result in any liability or
obligation material to the Company or the Company Subsidiaries, taken as a
whole, except as disclosed in such consolidated financial statements at
September 30, 1996 or for transactions effected or actions occurring or omitted
to be taken after September 30, 1996 (i) in the ordinary course of business, or
(ii) as permitted by this Agreement.
(b) The Company has delivered to Commercial each SEC Report filed,
used or circulated by it with respect to periods since June 27, 1994 through the
date of this Agreement and will promptly deliver each such SEC Report filed,
used or circulated after the date hereof, each in the form (including exhibits
and any amendments thereto) filed with the SEC or the OTS (or,
14
<PAGE>
if not so filed, in the form used or circulated), including, without limitation,
its Annual Reports on Form 10-K and its Quarterly Reports on Form 10-Q.
2.5 Absence of Changes.
------------------
(a) Since September 30, 1996, there has been no material adverse
change in the business, properties, financial condition, results of operations
or assets of the Company and the Company Subsidiaries, taken as a whole. Since
September 30, 1996 and through the date hereof, there is no occurrence, event or
development of any nature existing or, to the best knowledge of the Company,
threatened, which may reasonably be expected to have a material adverse effect
upon the business, properties, financial condition, operations or assets of the
Company or any Company Subsidiary other than the effects of any such change
attributable to or resulting from any change in law, regulation or generally
accepted accounting principles or regulatory accounting principles, which
impairs both the Company and Commercial in a substantially similar manner and
other than the effects of any change attributable to or resulting from changes
in economic conditions applicable to depository institutions generally or in
general levels of interest rates affecting both the Company and Commercial to a
similar extent and in a similar manner.
(b) Since September 30, 1996, each of the Company and the Company
Subsidiaries has owned and operated their respective assets, properties and
businesses in the ordinary course of business and consistent with past practice.
2.6 Prospectus/Proxy Statement. At the time the Prospectus/ Proxy
--------------------------
Statement is mailed to the shareholders of the Company for the solicitation of
proxies for the approvals referred to in Section 1.7(a) hereof and at all times
subsequent to such mailings up to and including the times of such approval, such
Prospectus/Proxy Statement (including any supplements thereto), with respect to
all information set forth therein relating to the Company (including the Company
Subsidiaries), its shareholders and representatives, Company common stock and
all other transactions contemplated hereby, will:
(a) Comply in all material respects with applicable provisions of the
1934 Act and the rules and regulations under such Act; and
(b) Not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements contained therein, in light of the circumstances under which
it is made, not misleading.
2.7 No Broker's or Finder's Fees. No agent, broker, investment banker,
----------------------------
person or firm acting on behalf or under authority of the Company or any of the
Company Subsidiaries is or will be entitled to any broker's or finder's fee or
any other commission or similar fee directly or indirectly in connection with
the Merger or any other transaction contemplated hereby, except the Company has
engaged RP Financial, LC to provide financial advisory services and to deliver
an opinion to the effect that the consideration to be received by the Company
shareholders in the
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Merger is fair to the Company shareholders from a financial point of view. A
copy of the engagement agreement with RP Financial, LC. is attached to Section
2.7 of Schedule I.
2.8 Litigation and Other Proceedings. Except as set forth in Section 2.8
--------------------------------
of Schedule I and except for matters which would not have a material adverse
effect on the business, financial condition or results of operations of the
Company and the Company Subsidiaries taken as a whole, neither the Company nor
any Company Subsidiary is a defendant in, nor is any of its property subject to,
any pending, or, to the best knowledge of the management of the Company,
threatened, claim, action, suit, investigation, or proceeding, or subject to any
judicial order, judgment or decree.
2.9 Compliance with Law.
-------------------
(a) To the best knowledge of the Company, the Company and the Company
Subsidiaries are in compliance in all material respects with all material laws
and regulations applicable to their respective business or operations or with
respect to which compliance is a condition of engaging in the business thereof,
and neither the Company nor any Company Subsidiary has received notice from any
federal, state or local government or governmental agency of any material
violation of, and does not know of any material violations of, any of the above.
(b) To the best knowledge of the Company, the Company and each of its
Subsidiaries have all material permits, licenses, certificates of authority,
orders and approvals of, and have made all material filings, applications and
registrations with, all federal, state, local and foreign governmental or
regulatory bodies that are required in order to permit them to carry on their
respective business as they are presently conducted.
2.10 Corporate Actions.
-----------------
(a) The Boards of Directors of the Company and Savings have duly
authorized their respective officers to execute and deliver (as applicable) this
Agreement, the Acquisition Plan of Merger and the Bank Plan of Merger and to
take all action necessary to consummate the Merger and the other transactions
contemplated hereby. The Board of Directors of the Company has authorized and
directed the submission for shareholders' approval of the Articles Amendment and
this Agreement, together with the Merger and any other action requiring such
approvals. All corporate authorization by the Board of Directors of the Company
required for the consummation of the Merger has been obtained or will be given
when required by applicable law.
(b) Subject to the Articles Amendment and the approval thereof by the
Company's shareholders, the Company's Board of Directors has taken or will take
all necessary action to exempt this Agreement, the Acquisition Plan of Merger,
the Bank Plan of Merger and the transactions contemplated hereby and thereby
from, (i) any applicable state takeover laws, (ii) any Kansas laws limiting or
restricting the voting rights of shareholders, (iii) any Kansas laws requiring a
shareholder approval vote in excess of the vote normally required in
transactions of similar type not involving a "related person," "interested
shareholder" or person or entity of
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similar type, and (iv) any provision in its or any of the Company Subsidiaries'
articles/certificate of incorporation, charter or bylaws requiring a shareholder
approval vote in excess of the vote normally required in transactions of similar
type not involving a "related person," interested shareholder" or person or
entity of similar type.
2.11 Authority. The execution, delivery and performance of its
---------
obligations under this Agreement by the Company and Savings does not violate any
of the provisions of, or constitute a default under or give any person the right
to terminate or accelerate payment or performance under (i) subject to the
effectiveness of the Articles Amendment and of the amendment to Savings' Federal
Stock Charter referred to in Section 4.17 hereof (the "Charter Amendment"), the
articles of incorporation or bylaws of the Company, the articles of
incorporation, charter or bylaws of any Company Subsidiary, (ii) any regulatory
restraint on the acquisition of the Company or Savings or control thereof, (iii)
any law, rule, ordinance, or regulation or judgment, decree, order, award or
governmental or non-governmental permit or license to which it or any of the
Company Subsidiaries is subject or (iv) any other material agreement, material
lease, material contract, note, mortgage, indenture, arrangement or other
obligation or instrument ("Contract") to which the Company or any of the Company
Subsidiaries is a party or is subject or by which any of their properties or
assets is bound. The parties acknowledge that the consummation of the Merger
and the other transactions contemplated hereby is subject to various regulatory
approvals. Subject to the approval and effectiveness of the Articles Amendment
and the Charter Amendment, the Company and Savings, as applicable, have all
requisite corporate power and authority to enter into this Agreement and the
Acquisition Plan of Merger and to perform their respective obligations hereunder
and thereunder, except, with respect to this Agreement, and the Acquisition
Merger, the approval of the Company's shareholders of the Articles Amendment and
this Agreement required under applicable law and the effectiveness of the
Charter Amendment. Other than the receipt of Governmental Approvals (as defined
in Section 5.1(c)), the approval of shareholders of the Articles Amendment and
this Agreement, and the consents specified in Schedule I with respect to the
Contracts, no consents or approvals are required on behalf of Company in
connection with the consummation of the transactions contemplated by this
Agreement, the Acquisition Plan of Merger and the Bank Plan of Merger. This
Agreement, the Acquisition Plan of Merger and the Bank Plan of Merger constitute
the valid and binding obligation of the Company and Savings, as applicable, and
each is enforceable in accordance with its terms, except as enforceability may
be limited by applicable laws relating to bankruptcy, insolvency or creditors
rights generally and general principles of equity.
2.12 Employment Arrangements. Except as disclosed in Section 2.12 of
-----------------------
Schedule I, there are no employment, severance or other agreements, plans or
arrangements with any current or former directors, officers or employees of
Company or any Company Subsidiary which may not be terminated without penalty
(including any augmentation or acceleration of benefits) on 30 days or less
notice to such person. No payments to directors, officers or employees of the
Company or the Company Subsidiaries resulting from the transactions contemplated
hereby will cause the imposition of excise taxes under Section 4999 of the Code
or the disallowance of a deduction to the Company or any Company Subsidiary
pursuant to Sections 162 or 280G of the Code. No later than thirty (30) days
prior to consummation of the Merger, the Company shall
17
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furnish Commercial for its review (i) a computation of the amounts expected to
be payable under the employment and severance agreements disclosed in Section
2.12 of Schedule I as a result of the Merger, and (ii) a schedule reasonably
satisfactory to Commercial demonstrating that no "disqualified individual"
within the meaning of Section 280G of the Code will be receiving payments in
contravention of the representation in the preceding sentence.
2.13 Employee Benefits.
-----------------
(a) Neither the Company nor any of the Company Subsidiaries maintains
any funded deferred compensation plans (including profit sharing, pension,
savings or stock bonus plans), unfunded deferred compensation arrangements or
employee benefit plans as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), other than any plans
("Employee Plans") set forth in Section 2.13 of Schedule I (true and correct
copies of which have been delivered to Commercial). None of Company or any of
the Company Subsidiaries has incurred or reasonably expects to incur any
liability to the Pension Benefit Guaranty Corporation except for required
premium payments which, to the extent due and payable, have been paid. The
Employee Plans intended to be qualified under Section 401(a) of the Code are so
qualified, and Company is not aware of any fact which would adversely affect the
qualified status of such plans. Except as set forth in Section 2.13 of Schedule
I, neither the Company nor any of the Company Subsidiaries (a) provides health,
medical, death or survivor benefits to any former employee or beneficiary
thereof, or (b) maintains any form of current (exclusive of base salary and base
wages) or deferred compensation, bonus, stock option, stock appreciation right,
benefit, severance pay, retirement, incentive, group or individual health
insurance, welfare or similar plan or arrangement for the benefit of any single
or class of directors, officers or employees, whether active or retired
(collectively "Benefit Arrangements"). With respect to each Employee Plan and
Benefit Arrangement of the Company or any Company Subsidiary, Section 2.13 of
Schedule I sets forth as of the date of this Agreement: (i) any and all
payments more than 30 days past due, (ii) the actuarial present value,
determined and prepared in accordance with GAAP (based, where applicable, on the
same actuarial assumptions as those previously used for funding purposes, other
than turnover assumptions, and computed on the basis of a terminated plan), of
any accrued benefits or other obligations not listed elsewhere in this schedule,
including without limitation, premiums and contributions for which the Company
or any Company Subsidiary is or may be directly or indirectly liable to present
or former employees, officers, directors, and their beneficiaries, (iii) the net
fair market value of the assets held in any fund, policy, or other arrangement,
and (iv) the amount of any contribution or other obligation paid, accrued, or
payable, or reasonably expected to be payable between the date of this Agreement
and the Closing, including contributions by Savings to its Employee Stock
Ownership Plan (the "Savings ESOP") to repay its loan in accordance with past
practices (pro rated through the Closing), subject to applicable tax law
limitations. Neither the Company nor any Company Subsidiary will make any
contribution, or undertake any obligation to contribute any amount to any
Employee Plan or Benefit Arrangement other than the amounts listed in Schedule
2.13 of Schedule I and other than immaterial amounts in the ordinary course of
business and in accordance with past practice.
18
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(b) Except as set forth in Section 2.13 of Schedule I, all Employee
Plans and Benefit Arrangements which are in effect were in effect for
substantially all of calendar year 1996 and there has been no material amendment
thereof (other than amendments required to comply with applicable law) or no
material increase in the cost thereof or benefits payable thereunder on or after
January 1, 1997.
(c) To the best knowledge of the Company, each Employee Plan and
Benefit Arrangement (i) has been administered to date, and will be administered
until the Closing, in accordance with their terms and in compliance with the
Code, ERISA, and all other applicable rules and regulations, (ii) has, in a
timely, accurate, and proper manner, both filed all required government reports
and made all required employee communications, and (iii) between the date of
this Agreement and the Closing, will complete and file all such required
reports. To the best knowledge of the Company, no condition exists that could
constitute grounds for the termination of any Employee Plan under Section 4042
of ERISA; no "prohibited transaction," as defined in Section 406 of ERISA and
Section 4975 of the Code, has occurred with respect to any Employee Plan, or any
other employee benefit plan maintained by Company or any Company Subsidiary
which is covered by Title I of ERISA, which could subject any person to
liability under Title I of ERISA or to the imposition of any tax under Section
4975 of the Code nor has any Employee Plan subject to Part III of Subtitle B of
Title I of ERISA or Section 412 of the Code, or both, incurred any "accumulated
funding deficiency," as defined in Section 412 of the Code, whether or not
waived; nor has Company or any Company Subsidiary failed to make any
contribution or pay any amount due and owing as required by the terms of any
Employee Plan or Benefit Arrangement. To the best knowledge of the Company,
neither Company nor any Company Subsidiary has incurred or expects to incur,
directly or indirectly, any liability under Title IV of ERISA arising in
connection with the termination of, or a complete or partial withdrawal from,
any plan covered or previously covered by Title IV of ERISA which could
constitute a liability of Commercial, or any of its affiliates at or after the
Acquisition Merger Effective Time.
(d) On or before 15 days after execution hereof, the Company will
provide Commercial with true and complete copies of the following documents
where applicable to any Employee Plan or Benefit Arrangement: (i) each plan
document or agreement, and any amendments thereto, and related trust agreements,
insurance contracts and policies, annuity contracts, and any other funding
arrangement; (ii) the most recent summary plan description and summary of
material modifications, along with disclosure of the date of their distribution
to participants and filing with the Department of Labor; (iii) for the three
most recent plan years, Form 5500 Annual Return/Report and all actuarial and
financial reports and appraisals; (iv) the most recent determination letter
received from the Internal Revenue Service, plus any open requests and all other
rulings received from any governmental agency; and (v) with respect to any
action taken within the current and three preceding plan years, a certified copy
of all Board of Directors resolutions. Within 60 days of the date hereof, the
Company or Savings shall provide Commercial with documentation, reasonably
satisfactory to Commercial, demonstrating that the requirements of Sections
401(k), 401(m), 404, 410, 412, 415, and 416 of the Code have been satisfied by
each Employee Plan that is intended to qualify under Section 401 of the Code.
(e) The assets of Savings' defined benefit pension plan do not include
equity securities.
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<PAGE>
2.14 Information Furnished. No statement contained in any schedule,
---------------------
certificate or other document furnished (whether prior to or subsequent to the
date of this Agreement) or to be furnished in writing by or on behalf of Company
to Commercial pursuant to this Agreement contains or will contain any untrue
statement of a material fact or any material omission. No information material
to the Merger and which is necessary to make the representations and warranties
not misleading, to the best knowledge of the Company, has been withheld from
Commercial.
2.15 Property and Assets. To the best knowledge of the Company, the
-------------------
Company and the Company Subsidiaries have marketable title to all of their real
property reflected in the financial statements at September 30, 1996, referred
to in Section 2.4 hereof, or acquired subsequent thereto, free and clear of all
Encumbrances, except for (a) such items shown in such financial statements or in
the notes thereto, (b) liens for current real estate taxes not yet delinquent,
(c) customary title exceptions that have no material adverse effect upon the
value of such property, (d) property sold or transferred in the ordinary course
of business since the date of such financial statements, and (e) pledges or
liens incurred in the ordinary course of business. Company and the Company
Subsidiaries enjoy peaceful and undisturbed possession under all material leases
for the use of real property under which they are the lessee; all of such leases
are valid and binding and in full force and effect and neither Company nor any
Company Subsidiary is in default in any material respect under any such lease.
No consent of the lessor of any material real property or material personal
property lease is required for consummation of the Merger except as set forth in
Section 2.15 of Schedule I. There has been no material physical loss, damage or
destruction, whether or not covered by insurance, affecting the real properties
of Company and the Company Subsidiaries since September 30, 1996, except such
loss, damage or destruction which does not have a material adverse effect on the
Company and the Company Subsidiaries, taken as a whole. All property and assets
material to their business and currently used by Company and the Company
Subsidiaries are, in all material respects, in good operating condition and
repair, normal wear and tear excepted.
2.16 Agreements and Instruments. Except as set forth in Section 2.16
--------------------------
of Schedule I, neither the Company nor any Company Subsidiary is a party to (a)
any material agreement, arrangement or commitment not made in the ordinary
course of business, (b) any agreement, indenture or other instrument relating to
the borrowing of money by the Company or any Company Subsidiary or the guarantee
by the Company or any Company Subsidiary of any such obligation (other than
Federal Home Loan Bank advances with a maturity of one year or less from the
date hereof), (c) any agreements to make loans or for the provision, purchase or
sale of goods, services or property between Company or any Company Subsidiary
and any director or officer of Company or Savings, or any member of the
immediate family or affiliate of any of the foregoing, (d) any agreements with
or concerning any labor or employee organization to which Company or any Company
Subsidiary is a party, (e) any agreements between Company or any Company
Subsidiary and any five percent or more shareholder of Company, and (f) any
agreements, directives, orders, or similar arrangements between or involving the
Company or any Company Subsidiary and any state or federal savings institution
regulatory authority.
20
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2.17 Material Contract Defaults. Neither the Company nor any Company
--------------------------
Subsidiary nor the other party thereto is in default in any respect under any
contract, agreement, commitment, arrangement, lease, insurance policy, or other
instrument to which the Company or a Company Subsidiary is a party or by which
its respective assets, business, or operations may be bound or affected or under
which it or its respective assets, business, or operations receives benefits,
and which default is reasonably expected to have either individually or in the
aggregate a material adverse effect on the Company and any Company Subsidiary,
taken as a whole, and there has not occurred any event that, with the lapse of
time or the giving of notice or both, would constitute such a default.
2.18 Tax Matters.
-----------
(a) The Company and each of the Company Subsidiaries have duly and
properly filed all federal, state, local and other tax returns required to be
filed by them and have made timely payments of all taxes due and payable,
whether disputed or not; the current status of audits of such returns by the
Internal Revenue Service ("IRS") and other applicable agencies is as set forth
in Section 2.18 of Schedule I; and there is no agreement by the Company or any
Company Subsidiary for the extension of time or for the assessment or payment of
any taxes payable. Neither the IRS nor any other taxing authority is now
asserting or, to the best knowledge of Company, threatening to assert any
deficiency or claim for additional taxes (or interest thereon or penalties in
connection therewith), nor is the Company aware of any basis for any such asser
tion or claim. The Company and each of the Company Subsidiaries have complied
in all material respects with applicable IRS backup withholding requirements and
have filed all appropriate information reporting returns for all tax years for
which the statute of limitations has not closed. The Company and each Company
Subsidiary have complied in all material respects with all applicable state law
sales and use tax collection and reporting requirements.
(b) Adequate provision for any federal, state, local, or foreign taxes
due or to become due for the Company or any of the Company Subsidiaries for any
period or periods through and including September 30, 1996, has been made and is
reflected on the September 30, 1996 audited Company consolidated financial
statements and has been or will be made in accordance with generally accepted
accounting principles with respect to periods ending after September 30, 1996.
2.19 Environmental Matters. Except as set forth on Schedule 2.19
---------------------
hereto, to the best knowledge of the Company, neither the Company nor any
Company Subsidiary owns or leases any properties affected by toxic waste, radon
gas or other hazardous conditions or constructed in part with the use of
asbestos. Neither the Company nor any Company Subsidiary has knowledge of, nor
has the Company or any Company Subsidiary received written notice from any
governmental or regulatory body of, any conditions, activities, practices or
incidents which is reasonably likely to interfere with or prevent compliance or
continued compliance with hazardous substance laws or any regulation, order,
decree, judgment or injunction, issued, entered, promulgated or approved
thereunder, or which may give rise to any common law or legal liability, or
otherwise form the basis of any claim, action, suit, proceeding, hearing or
investigation based on or related
21
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to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling, or the emission, discharge, release or threatened
release into the environment, of any pollutant, contaminant or chemical, or
industrial, toxic or hazardous substance or waste. There is no civil, criminal
or administrative claim, action, suit, proceeding, hearing or investigation
pending or, to Company's knowledge, threatened against Company or any Company
Subsidiary relating in any way to such hazardous substance laws or any
regulation, order, decree, judgment or injunction issued, entered, promulgated
or approved thereunder.
2.20 Loan Portfolio: Portfolio Management.
-------------------------------------
(a) All evidences of indebtedness reflected as assets in the
consolidated balance sheet of Company as of December 31, 1996, or acquired since
such date, are (except with respect to those assets which are no longer assets
of the Company or any Company Subsidiary) binding obligations of the respective
obligors named therein except as enforcement may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors rights
generally, and except that the availability of equitable remedies, including
specific performance, is subject to the discretion of the court before which any
proceeding may be brought, and the payment of no material amount thereof (either
individually or in the aggregate with other evidences of indebtedness) is
subject to any defenses which have been threatened or asserted against the
Company or any Company Subsidiary. To the best knowledge of the Company, all
such indebtedness which is secured by an interest in real property is secured by
a valid and perfected mortgage lien having the priority specified in the loan
documents. To the best knowledge of the Company, all loans originated or
purchased by Savings were at the time entered into and at all times since have
been in compliance in all material respects with all applicable laws (including,
without limitation, all consumer protection laws) and regulations. Savings
administers its loan and investment portfolios (including, but not limited to,
adjustments to adjustable mortgage loans) in all material respects in accordance
with all applicable laws and regulations and the terms of applicable
instruments. The records of Savings regarding all loans outstanding on its
books are accurate in all material respects and the risk classification system
has been established in accordance with the requirements of the OTS.
(b) Section 2.20 of Schedule I sets forth a list, accurate and
complete in all material respects, of the aggregate amounts of loans, extensions
of credit and other assets of Savings and its subsidiaries that have been
adversely designated, criticized or classified by it as of June 30, 1997,
separated by category of classification or criticism (the "Asset
Classification"); and no amounts of loans, extensions of credit or other assets
that have been adversely designated, classified or criticized as of the date
hereof by any representative of any government entity as "Special Mention,"
"Substandard," "Doubtful," "Loss" or words of similar import are excluded from
the amounts disclosed in the Asset Classification, other than amounts of loans,
extensions of credit or other assets that were charged off by it or any of the
Company Subsidiaries before the date hereof.
2.21 Real Estate Loans and Investments. Except for properties
---------------------------------
acquired in settlement of loans, there are no facts, circumstances or
contingencies known to the Company or any
22
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Company Subsidiary which exist which would require a material reduction under
generally accepted accounting principles in the present carrying value of any of
the real estate investments, joint ventures, construction loans, other
investments or other loans of the Company or any Company Subsidiary (either
individually or in the aggregate with other loans and investments).
2.22 Derivatives Contracts. Neither the Company nor any of its
---------------------
Subsidiaries is a party to or has agreed to enter into an exchange-traded or
over-the-counter swap, forward, future, option, cap, floor or collar financial
contract or any other contract not included on its Balance Sheet which is a
derivatives contract (including various combinations thereof) (each, a
"Derivatives Contract") or owns securities that are identified in Thrift
Bulletin No. 65 or otherwise referred to as structured notes (each, a
"Structured Note"), except for those Derivatives Contracts and Structured Notes
set forth in Section 2.22 of Schedule I, including a list, as applicable, of any
of its or any of its Subsidiaries' assets pledged as security for a Derivatives
Contract.
2.23 Insurance. The Company and the Company Subsidiaries have in
---------
effect insurance coverage which, in respect to amounts, types and risks insured,
is reasonably adequate for the business in which the Company and the Company
Subsidiaries are engaged. A schedule of all insurance policies in effect as to
the Company and the Company Subsidiaries (the "Insurance Policies") is as set
forth on Section 2.23 of Schedule I (other than policies pertaining to mortgage
loans made in the ordinary course of business). All Insurance Policies are in
full force and effect, all premiums with respect thereto covering all periods up
to and including the date of this Agreement have been paid, such premiums
covering all periods from the date hereof up to and including the Acquisition
Merger Effective Date shall have been paid on or before the Acquisition Merger
Effective Date, to the extent then due and payable (other than retrospective
premiums which may be payable with respect to worker's compensation insurance
policies, adequate reserves for which are reflected in the Company's financial
statements). The Insurance Policies are valid, outstanding and enforceable in
accordance with their respective terms and will not in any way be affected by,
or terminated or lapsed solely by reason of, the transactions contemplated by
this Agreement. Neither the Company nor any Company Subsidiary has been refused
any insurance with respect to any material properties, assets or operations, nor
has any coverage been limited or terminated by any insurance carrier to which it
has applied for any such insurance or with which it has carried insurance during
the last three years.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMMERCIAL AND THE BANK
Commercial and the Bank represent and warrant to Company and Savings that,
except as disclosed in Schedule II attached hereto, and except that Bank makes
no representations or warranties regarding Commercial:
3.1 Organization, Good Standing, Authority, Insurance, Etc. Commercial is
------------------------------------------------------
a corporation duly organized, validly existing, and in good standing under the
laws of the State of Nebraska. Each of the subsidiaries of Commercial within
the meaning of Section 10(a)(1)(G) of
23
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HOLA (individually a "Commercial Subsidiary" and collectively the "Commercial
Subsidiaries") is duly organized, validly existing, and in good standing under
the laws of the respective jurisdiction under which it is organized. Commercial
and each Commercial Subsidiary has all requisite power and authority and is duly
qualified and licensed to own, lease and operate its properties and conduct its
business as it is now being conducted. Commercial and each Commercial
Subsidiary is qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which qualification is necessary under
applicable law, except to the extent that any failures to so qualify would not,
in the aggregate, have a material adverse effect on the business, financial
condition or results of operations of Commercial and the Commercial
Subsidiaries, taken as a whole. The Bank is a member in good standing of the
Federal Home Loan Bank of Topeka, and all eligible accounts issued by the Bank
are insured by the SAIF to the maximum extent permitted under applicable law.
The Bank is a "domestic building and loan association" as defined in Section
7701(a)(19) of the Code, and is a "qualified thrift lender" as defined in
Section 10(m) of the HOLA and the Thrift Regulations. Commercial is duly
registered as a savings and loan holding company under the HOLA.
3.2 Capitalization. The authorized capital stock of Commercial consists
--------------
of 25,000,000 shares of Commercial common stock, par value $.01 per share, of
which 21,572,168 shares were issued and outstanding as of the date of this
Agreement and 10,000,000 shares of serial preferred stock, par value of $.01 per
share, of which no shares were outstanding as of the date of this Agreement.
All outstanding shares of Commercial common stock are duly authorized, validly
issued, fully paid, nonassessable and free of preemptive rights.
3.3 Ownership of Subsidiaries. All the outstanding shares of the capital
-------------------------
stock of the Commercial Subsidiaries are validly issued, fully paid,
nonassessable and owned beneficially and of record by Commercial or a Commercial
Subsidiary free and clear of any Encumbrance. The outstanding capital stock or
other ownership interests in all of the Commercial Subsidiaries is owned either
by Commercial or the Bank. There are no options, convertible securities,
warrants, or other rights (preemptive or otherwise) to purchase or acquire any
capital stock of any Commercial Subsidiary and no contracts to which Commercial
or any of its affiliates is subject with respect to the issuance, voting or sale
of issued or unissued shares of the capital stock of any of the Commercial
Subsidiaries.
3.4 Financial Statements and Reports.
--------------------------------
(a) No registration statement, proxy statement, schedule or report
filed by Commercial or any Commercial Subsidiary with the SEC or the OTS under
the 1933 Act, or the 1934 Act, on the date of effectiveness in the case of such
registration statements, or on the date of filing in the case of such reports or
schedules, or on the date of mailing in the case of such proxy statements,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. For
the past five years, Commercial and the Commercial Subsidiaries have timely
filed all documents required to be filed by them with the SEC, the OTS, or the
FDIC under various securities and financial institution laws and
24
<PAGE>
regulations, except to the extent that all failures to so file, in the
aggregate, would not have a material adverse effect on the business, financial
condition or results of operations of Commercial and the Commercial
Subsidiaries, taken as a whole; and all such documents, as finally amended,
complied in all material respects with applicable requirements of law and, as of
their respective date or the date as amended, did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Except to the extent
stated therein, all financial statements and schedules included in the documents
referred to in the preceding sentences (or to be included in similar documents
to be filed after the date hereof) (i) are or will be (with respect to financial
statements in respect of periods ending after June 30, 1996) in accordance with
Commercial's books and records and those of any of its Subsidiaries, and (ii)
present (and in the case of financial statements in respect of periods ending
after June 30, 1996 will present) fairly the consolidated statement of financial
condition and the consolidated statements of operations, stockholders' equity
and cash flows of Commercial and the Commercial Subsidiaries as of the dates and
for the periods indicated in accordance with generally accepted accounting
principles (except for the omission of notes to unaudited statements, year end
adjustments to interim results and changes in generally accepted accounting
principles). The consolidated financial statements of Commercial as of June 30,
1996 and for the three years then ended and the consolidated financial
statements for all periods thereafter up to the Closing disclose or will
disclose, as the case may be, all liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise, whether due or due to become due and
regardless of when asserted), as of their respective dates, of Commercial and
the Commercial Subsidiaries required to be reflected in such financial
statements according to generally accepted accounting principles, other than
liabilities which are not, in the aggregate, material to Commercial and the
Commercial Subsidiaries, taken as a whole, and contain or will contain in the
opinion of management adequate reserves for losses on loans and properties
acquired in settlement of loans, taxes and all other material accrued
liabilities and for all reasonably anticipated material losses, if any as of
such date. There exists no set of circumstances that could reasonably be
expected to result in any liability or obligation material to Commercial or the
Commercial Subsidiaries, taken as a whole, except as disclosed in such
consolidated financial statements at June 30, 1996, or for transactions effected
or actions occurring or omitted to be taken after June 30, 1996, (i) in the
ordinary course of business, or (ii) as permitted by this Agreement.
(b) Commercial has delivered to the Company all periodic reports filed
with the SEC under the 1934 Act for periods since June 30, 1996 through the date
hereof and will through Closing upon written request promptly deliver copies of
1934 Act reports for future periods.
3.5 Absence of Changes. Since June 30, 1996, there has been no material
------------------
adverse change in the business, properties, financial condition, results of
operations or assets of Commercial and the Commercial Subsidiaries, taken as a
whole. Since June 30, 1996 and through the date hereof, there is no occurrence,
event or development of any nature existing or, to the best knowledge of
Commercial, threatened which may reasonably be expected to have a material
adverse effect upon the business, properties, financial condition, operations or
assets of Commercial or any Commercial Subsidiary, other than any such change
attributable to or resulting
25
<PAGE>
from any change in law, regulation or generally accepted accounting principles
or regulatory accounting principles, which impairs both the Company and
Commercial in a substantially similar manner and other than the effects of any
change attributable to or resulting from changes in economic conditions
applicable to depository institutions generally or in general levels of interest
rates affecting both the Company and Commercial to a similar extent and in a
similar manner.
Since June 30, 1996 and through the date hereof, each of Commercial
and the Commercial Subsidiaries has owned and operated their respective assets,
properties and businesses in the ordinary course of business and consistent with
past practice.
3.6 Prospectus/Proxy Statement. At the time the Registration Statement
--------------------------
becomes effective and at the time the Prospectus/Proxy Statement is mailed to
the shareholders of the Company for the solicitation of proxies for the approval
referred to in Section 1.7(a) hereof and at all times subsequent to such
mailings up to and including the times of such approval, such Registration
Statement and Prospectus/Proxy Statement (including any amendments or
supplements thereto), with respect to all information set forth therein relating
to Commercial (including the Commercial Subsidiaries) and its shareholders,
Commercial Common Stock, this Agreement, the Merger and all other transactions
contemplated hereby, will:
(a) comply in all material respects with applicable provisions of the
1933 Act, the 1934 Act and the rules and regulations under such Acts; and
(b) not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements contained therein, in light of the circumstances under which
it is made, not misleading.
3.7 No Broker's or Finder's Fees. No agent, broker, investment banker,
----------------------------
person or firm acting on behalf or under authority of Commercial or any of the
Commercial Subsidiaries is or will be entitled to any broker's or finder's fee
or any other commission or similar fee directly or indirectly in connection with
the Merger or any other transaction contemplated hereby, except Commercial has
engaged Merrill Lynch & Co., an investment banking firm, to provide financial
advisory services to Commercial.
3.8 Compliance With Law.
-------------------
(a) To the best knowledge of Commercial, Commercial and the Commercial
Subsidiaries are in compliance in all material respects with all material laws
and regulations applicable to their respective business or operations or with
respect to which compliance is a condition of engaging in the business thereof,
and neither Commercial nor any Commercial Subsidiary has received notice from
any federal, state or local government or governmental agency of any material
violation of, and does not know of any material violations of, any of the above.
(b) To the best knowledge of Commercial, Commercial and each of it
Subsidiaries have all material permits, licenses, certificates of authority,
orders and approvals of,
26
<PAGE>
and have made all material filings, applications and registrations with, all
federal, state, local and foreign governmental or regulatory bodies that are
required in order to permit it to carry on its respective business as it is
presently conducted.
3.9 Corporate Actions. The Boards of Directors of Commercial and the Bank
-----------------
have duly authorized their respective officers to execute and deliver (as
applicable) this Agreement, the Acquisition Plan of Merger, the Bank Plan of
Merger and to take all action necessary to consummate the Merger and the other
transactions contemplated hereby. All corporate authorizations by the Board of
Directors of Commercial required for the consummation of the Merger have been
obtained.
3.10 Authority. The execution, delivery and performance of this
---------
Agreement by Commercial and the Bank does not violate any of the provisions of,
or constitute a default under or give any person the right to accelerate payment
or performance under (i) the articles of incorporation or bylaws of Commercial,
the charter or bylaws of the Bank, or the articles of incorporation or bylaws of
any other Commercial Subsidiary, (ii) any regulatory restraint on the
acquisition of the Company or Savings or control thereof, (iii) any law, rule,
ordinance or regulation or judgment, decree, order, award or governmental or
non-governmental permit or license to which Commercial or any of the Commercial
Subsidiaries is subject or (iv) any other Contract to which Commercial or any of
the Commercial Subsidiaries is a party or is subject to or by which any of their
properties or assets is bound which default, termination or acceleration would
have a material adverse effect on the financial condition, business or results
of operations of Commercial and the Commercial Subsidiaries, taken as a whole.
The parties acknowledge that the consummation of the Merger and the other
transactions contemplated hereby is subject to various regulatory approvals.
Commercial and the Bank have all requisite corporate power and authority to
enter into this Agreement and to perform their obligations hereunder. Other
than the receipt of Governmental Approvals and the approval of its shareholders
of the increase in the number of authorized shares of Commercial Common Stock,
no consents or approvals are required on behalf of Commercial or any Commercial
Subsidiary in connection with the consummation of the transactions contemplated
by this Agreement or the Acquisition Plan of Merger. This Agreement, the
Acquisition Plan of Merger and the Bank Plan of Merger constitute the valid and
binding obligations of Commercial and the Bank, and are enforceable in
accordance with their terms, except as enforceability may be limited by
applicable laws relating to bankruptcy, insolvency or creditors' rights
generally and general principles of equity.
3.11 Information Furnished. No statement contained in any schedule,
---------------------
certificate or other document furnished (whether prior to or subsequent to the
date of this Agreement) or to be furnished in writing by or on behalf of
Commercial to Company pursuant to this Agreement contains or will contain any
untrue statement of a material fact or any material omission. No information
material to the Merger and which is necessary to make the representations and
warranties not misleading, to the best knowledge of Commercial, has been
withheld from the Company.
27
<PAGE>
3.12 Litigation and Other Proceedings. Except for matters which would
--------------------------------
not have a material adverse effect on the business, financial condition or
results of operations of Commercial and the Commercial Subsidiaries taken as a
whole, neither Commercial nor any Commercial Subsidiary is a defendant in, nor
is any of its property subject to, any pending, or, to the best knowledge of the
management of Commercial, threatened, claim, action, suit, investigation, or
proceeding, or subject to any judicial order, judgment or decree.
3.13 Agreements and Instruments. As of the date of this Agreement,
--------------------------
there are no agreements, directives, orders or similar arrangements between or
involving Commercial or any Commercial Subsidiary and any state or federal
savings institution regulatory authority.
3.14 Tax Matters. Commercial and each of the Commercial Subsidiaries
-----------
have duly and properly filed all federal, state, local and other tax returns
required to be filed by them and have made timely payments of all taxes due and
payable, whether disputed or not; there is no agreement by Commercial or any
Commercial Subsidiary for the extension of time or for the assessment or payment
of any taxes payable. Neither the IRS nor any other taxing authority is now
asserting or, to the best knowledge of Commercial, threatening to assert any
deficiency or claim for additional taxes (or interest thereon or penalties in
connection therewith), nor is Commercial aware of any basis for any such
assertion or claim. Commercial and each of the Commercial Subsidiaries have
complied in all material respects with applicable IRS backup withholding
requirements and have filed all appropriate information reporting returns for
all tax years for which the statute of limitations has not closed. Commercial
and each Commercial Subsidiary have complied in all material respects with all
applicable state law sales and use tax collection and reporting requirements.
3.15 Property and Assets. To the best knowledge of Commercial,
-------------------
Commercial and the Commercial Subsidiaries have marketable title to all of their
real property reflected in the financial statements at June 30, 1996, referred
to in Section 3.4 hereof, or acquired subsequent thereto, free and clear of all
Encumbrances, except for (a) such items shown in such financial statements or in
the notes thereto, (b) liens for current real estate taxes not yet delinquent,
(c) customary title exceptions that have no material adverse effect upon the
value of such property, (d) property sold or transferred in the ordinary course
of business since the date of such financial statements, and (e) pledges or
liens incurred in the ordinary course of business. Commercial and the
Commercial Subsidiaries enjoy peaceful and undisturbed possession under all
material leases for the use of real property under which they are the lessee;
all of such leases are valid and binding and in full force and effect and
neither Commercial nor any Commercial Subsidiary is in default in any material
respect under any such lease. There has been no material physical loss, damage
or destruction, whether or not covered by insurance, affecting the real
properties of Commercial and the Commercial Subsidiaries since June 30, 1996,
except such loss, damage or destruction which does not have a material adverse
effect on Commercial and Commercial Subsidiaries, taken as a whole. All property
and assets material to their business and currently used by Commercial and
Commercial Subsidiaries are, in all material respects, in good operating
condition and repair, normal wear and tear excepted.
28
<PAGE>
3.16 Derivatives Contracts Neither Commercial nor any of the
---------------------
Commercial Subsidiaries is a party to or has agreed to enter into an exchange-
traded or over-the-counter swap, forward, future, option, cap, floor or collar
financial contract or any other contract not included on its Balance Sheet which
is a derivatives contract (including various combinations thereof) (each, a
"Derivatives Contract") or owns securities that are identified in Thrift
Bulletin No. 65 or otherwise referred to as structured notes (each, a
"Structured Note"), except for those Derivatives Contracts and Structured Notes
set forth in Section 3.16 of Schedule II, including a list, as applicable, of
any of its or any of its Subsidiaries' assets pledged as security for a
Derivatives Contract.
3.17 Insurance. Commercial and Commercial Subsidiaries have in
---------
effect insurance coverage which, in respect to amounts, types and risks insured,
is reasonably adequate for the business in which Commercial and Commercial
Subsidiaries are engaged. All insurance policies in effect as to Commercial and
the Commercial Subsidiaries are in full force and effect, all premiums with
respect thereto covering all periods up to and including the date of this
Agreement have been paid, such premiums covering all periods from the date
hereof up to and including the Acquisition Merger Effective Date shall have been
paid on or before the Acquisition Merger Effective Date, to the extent then due
and payable (other than retrospective premiums which may be payable with respect
to workers' compensation insurance policies, adequate reserves for which are
reflected in Commercial's financial statements). The insurance policies are
valid, outstanding and enforceable in accordance with their respective terms and
will not in any way be affected by, or terminated or lapsed solely by reason of,
the transactions contemplated by this Agreement. Neither Commercial nor any
Commercial Subsidiary has been refused any insurance with respect to any
material properties, assets or operations, nor has any coverage been limited or
terminated by any insurance carrier to which it has applied for any such
insurance or with which it has carried insurance during the last three years.
ARTICLE IV
COVENANTS
4.1 Investigations; Access and Copies. Between the date of this Agreement
---------------------------------
and the Acquisition Merger Effective Time, each party agrees to give to the
other party and its respective representatives and agents full access (to the
extent lawful) to all of the premises, books, records and employees of it and
its subsidiaries at all reasonable times, upon not less than three days' prior
notice, and to furnish and cause its subsidiaries to furnish to the other party
and its respective agents or representatives access to and true and complete
copies of such financial and operating data, all documents with respect to
matters to which reference is made in Articles II or III of this Agreement or on
any list, schedule or certificate delivered or to be delivered in connection
herewith, and such other documents, records, or information with respect to the
business and properties of it and its subsidiaries as the other party or its
respective agents or representative shall from time to time reasonably request;
provided, however, that any such inspection (a) shall be conducted in such
- -------- -------
manner as not to interfere unreasonably with the operation of the business of
the entity inspected and (b) shall not affect any of the representations and
warranties hereunder. Each party will also give prompt written notice to the
other party of any event or development (x)
29
<PAGE>
which, had it existed or been known on the date of this Agreement, would have
been required to be disclosed under this Agreement, (y) which would cause any of
its representations and warranties contained herein to be inaccurate or
otherwise materially misleading, or (z) which materially relate to the
satisfaction of the conditions set forth in Article V of this Agreement. All
requests of Company and Savings shall be directed to Richard T. Pottorff.
4.2 Conduct of Business of the Company and the Company Subsidiaries.
---------------------------------------------------------------
Between the date of this Agreement and the Acquisition Merger Effective Time,
the Company and Savings agree:
(a) That the Company and the Company Subsidiaries shall conduct their
business only in the ordinary course, and maintain their books and records in
accordance with past practices and not to take any action that would (i)
adversely affect the ability to obtain the Governmental Approvals or (ii)
adversely affect the Company's ability to perform its obligations under this
Agreement;
(b) That the Company shall not, without the prior written consent of
Commercial: (i) declare, set aside or pay any dividend or make any other
distribution with respect to Company's capital stock, except for the declaration
and payment of regular quarterly cash dividends in an amount not to exceed $.10
per share of Company common stock with respect to any full calender quarter
after the date hereof; provided, however, that in the event the Closing occurs
on or before March 31, 1998, then Company shareholders shall be entitled to
receive Commercial's regular quarterly cash dividend for the March 31, 1998
quarter and shall not be entitled to receive a dividend from Company for such
quarter to be paid during April 1998; (ii) reacquire any of Company's
outstanding shares of capital stock; (iii) issue or sell or buy any shares of
capital stock of the Company or any Company Subsidiary, except shares of Company
common stock issued pursuant to the Company Option Plan; (iv) effect any stock
split, stock dividend or other reclassification of Company's common stock; or
(v) grant any options or issue any warrants exercisable for or securities
convertible or exchangeable into capital stock of Company or any Company
Subsidiary or grant any stock appreciation or other rights with respect to
shares of capital stock of Company or of any Company Subsidiary;
(c) That Company and the Company Subsidiaries shall not, without the
prior written consent of Commercial: (i) sell or dispose of any significant
assets of the Company or of any Company Subsidiary other than in the ordinary
course of business consistent with past practices; (ii) merge or consolidate the
Company or any Company Subsidiary with or otherwise acquire any other entity, or
file any applications or make any contract with respect to branching by Savings
(whether de novo, purchase, sale or relocation) or acquire or construct, or
enter into any agreement to acquire or construct, any interest in real property
(other than with respect to security interests in properties securing loans and
properties acquired in settlement of loans in the ordinary course) or
improvements to real property; (iii) change the articles or certificate of
incorporation, charter documents or other governing instruments of the Company
or any Company Subsidiary, except as provided in this Agreement; (iv) grant to
any executive officer, director or employee of the Company or any Company
Subsidiary any increase in annual compensation, or
30
<PAGE>
any bonus type payment, except in accordance with existing compensation
guidelines of the Company (described in Schedule 4.2(c) hereof) and except as
otherwise set forth on Schedule 4.2(c) hereof or as determined in accordance
with the Company's existing bonus plan (as in effect on the date hereof, but pro
rated to the date of Closing and calculated without regard to expenses incurred
as a result of the Merger), a copy of which plan is attached to Schedule 4.2(c);
(v) adopt any new or amend or terminate any existing Employee Plans or Benefit
Arrangements of any type except as set forth at Schedule 4.2(c); (vi) except as
set forth on Schedule 4.2(c) hereof, authorize severance pay or other benefits
for any officer, director or employee of Company or any Company Subsidiary;
(vii) incur any material indebtedness or obligation or enter into or extend any
material agreement or lease, except in the ordinary course of business
consistent with past practices; (viii) engage in any lending activities other
than in the ordinary course of business consistent with past practices; (ix)
form any new subsidiary or cause or permit a material change in the activities
presently conducted by any Company Subsidiary or make additional investments in
subsidiaries; (x) purchase any debt securities or derivative securities,
including CMO or REMIC products, that are defined as "high risk mortgage
securities" under OTS Thrift Bulletin No. 52 dated January 10, 1992 as revised
or purchase any Derivatives Contracts or Structured Notes; (xi) purchase any
equity securities other than Federal Home Loan Bank stock; (xii) make any
investment which would cause Savings to not be a qualified thrift lender under
Section 10(m) of the HOLA, or not to be a "domestic building and loan
association" as defined in Section 7701(a)(19) of the Code; (xiii) make any loan
with a principal balance of $750,000 or more; (xiv) authorize capital
expenditures other than in the ordinary course of business; (xv) adopt or
implement any change in its accounting principles, practices or methods other
than as may be required by generally accepted accounting principles or by a
regulatory authority or adopt or implement any change in its methods of
accounting for Federal income tax purposes; or (xvi) make any loan in which
participation interests therein are to be sold to other persons or entities or
acquire a participation interest in a loan originated by another person or
entity in excess of $200,000. The limitations contained in this Section 4.2(c)
shall also be deemed to constitute limitations as to the making of any
commitment with respect to any of the matters set forth in this Section 4.2(c).
Notwithstanding the foregoing, Savings may engage in any of the foregoing
activities exclusively with the Bank.
4.3 No Solicitation. The Company will not authorize any officer,
---------------
director, employee, investment banker, financial consultant, attorney,
accountant or other representative of Company or any Company Subsidiary,
directly or indirectly, to initiate contact with any person or entity in an
effort to solicit, initiate or encourage any "Takeover Proposal" (as such term
is defined below). Except as the fiduciary duties under applicable law of the
Company Board of Directors may otherwise require (as determined in consultation
with Company legal counsel), the Company will not authorize any officer,
director, employee, investment banker, financial consultant, attorney,
accountant or other representative of the Company or any Company Subsidiary,
directly or indirectly, (A) to cooperate with, or furnish or cause to be
furnished any non-public information concerning its business, properties or
assets to, any person or entity in connection with any Takeover Proposal; (B) to
negotiate any Takeover Proposal with any person or entity; or (C) to enter into
any agreement, letter of intent or agreement in principle as to any Takeover
Proposal. The Company will promptly give written notice to Commercial upon
becoming aware of any
31
<PAGE>
Takeover Proposal, such notice to contain, at a minimum, the identity of the
persons submitting the Takeover Proposal, a copy of any written inquiry or other
communication, the terms of any Takeover Proposal and any information requested
or discussions sought to be initiated. As used in this Agreement with respect
to the Company, "Takeover Proposal" shall mean any proposal, other than as
contemplated by this Agreement, for a merger or other business combination
involving the Company or Savings or for the acquisition of a ten percent (10%)
or greater equity interest in Company or Savings, or for the acquisition of a
substantial portion of the assets of Company or Savings (other than loans or
securities sold in the ordinary course).
4.4 Shareholder Approvals.
---------------------
(a) Subject to Section 1.7(a) herein, the Company shall call the
meeting of its shareholders to be held for the purpose of voting upon the
Articles Amendment, the Acquisition Merger and related matters, as referred to
in Section 1.7(a) hereof, as soon as practicable, but in no event later than
sixty (60) days after the Registration Statement becomes effective under the
1933 Act, provided that Company shall receive an opinion dated within five (5)
days of mailing the Prospectus/Proxy Statement that the Merger is fair to
Company shareholders from a financial point of view. In connection with such
meeting, the Company Board of Directors shall recommend approval of the Articles
Amendment and the Merger, except as the fiduciary duties of the Company's Board
of Directors may otherwise require. The Company shall use its best efforts to
solicit from its shareholders proxies in favor of approval and to take all other
action necessary or helpful to secure a vote of the holders of the shares of
Company common stock in favor of the Articles Amendment and the Merger, except
as the fiduciary duties of the Boards of Directors may otherwise require.
Immediately following receipt of approval of the Articles Amendment by the
Company's shareholders, the Company shall take all other actions necessary to
effectuate such amendment, including filing articles of amendment with the
proper authorities of the State of Kansas.
(b) Notwithstanding the foregoing at Section 4.4(a), the Board of
Directors of the Company, to the extent required by its fiduciary obligations
under applicable law, as determined in good faith by the Board of Directors
based on the advice of independent counsel, may (subject to the following
sentences) withdraw or modify its approval or recommendation of this Agreement
or the Merger or approve or recommend any superior proposal (as defined below),
or enter into an agreement with respect to such superior proposal, in each case
at any time after the second business day following Commercial's receipt of
written notice (in addition to the notice specified in Section 4.3 herein)
advising Commercial that the Board of Directors of the Company has received a
superior proposal, specifying the material terms and conditions of such superior
proposal and identifying the person making such superior proposal (it being
understood that any amendment to a superior proposal shall necessitate an
additional two business day period). For purposes of this Agreement, "superior
proposal" means any bona fide takeover proposal made by a third party to
acquire, directly or indirectly, for consideration consisting of cash and/or
securities, more than 50% of the shares of Company common stock then outstanding
or all or substantially all the assets of the Company and otherwise on terms
which the Board of Directors of the Company determines in its good faith
judgment (based on the advice of its financial advisor)
32
<PAGE>
to be more favorable to the Company's stockholders than the Merger and for which
financing, to the extent required, is then committed or which, in the good faith
judgment of such Board of Directors, is reasonably capable of being financed by
such third party.
(c) Nothing contained in Sections 4.3 or 4.4 shall prohibit the
Company from taking and disclosing to its stockholders a position contemplated
by Rule 14e-2(a) promulgated under the 1934 Act or from making any disclosure to
the Company's stockholders if, in the good faith judgment of the Board of
Directors of the Company based on the recommendation of independent counsel,
failure to do so would be inconsistent with applicable laws.
4.5 Filing of Holding Company and Merger Applications. Commercial shall
-------------------------------------------------
use its best efforts promptly to prepare, submit and file within ninety (90)
days of the date hereof a holding company application to the OTS pursuant to 12
C.F.R. (S)574.3 for acquisition of control of Company and Savings and a merger
application to the OTS pursuant to the Bank Merger Act and 12 C.F.R. 563.22(a)
for the Bank Merger and any other applications required to be filed in
connection with the transactions contemplated hereby.
4.6 Consents. Company and Savings will use their best efforts to obtain
--------
the consent or approval of each person whose consent or approval shall be
required in order to permit Company or Savings, as the case may be, to
consummate the Acquisition Merger and the Bank Merger.
4.7 Resale Letter Agreements. After execution of this Agreement, (i)
------------------------
Company shall use its best efforts to cause to be delivered to Commercial from
each person who may be deemed to be an "affiliate" of Company within the meaning
of Rule 145 under the 1933 Act, a written letter agreement in the form attached
at Schedule 4.7 regarding restrictions on resale of the shares of Commercial
Common Stock received by such persons in the Merger and upon exercise of options
received under Section 1.8 hereof subsequent to the Acquisition Merger Effective
Time to ensure compliance with applicable resale restrictions imposed under the
federal securities laws and, to the extent applicable, to ensure pooling of
interest accounting treatment and (ii) neither Commercial nor the Company
(including the Company Subsidiaries) shall take any action which would
materially impede or delay consummation of the Merger, or prevent the
transactions contemplated hereby from (A) qualifying for accounting treatment as
a "pooling of interests" (if applicable) or (B) qualifying as a reorganization
within the meaning of Section 368 of the Code.
4.8 Publicity. Between the date of this Agreement and the Acquisition
---------
Merger Effective Time, neither Commercial, Company or any of their subsidiaries
shall, without the prior approval of the other, issue or make, or authorize any
of its directors, employees, officers or agents to issue or make, any press
release, disclosure or statement to the press or any third party with respect to
the Merger or the transactions contemplated hereto, except as required by law.
The parties shall cooperate when issuing or making any press release, disclosure
or statement with respect to Merger or the transactions contemplated hereby,
except as required by law.
33
<PAGE>
4.9 Cooperation Generally. Between the date of this Agreement and
---------------------
the Acquisition Merger Effective Time, Commercial, Company and their
subsidiaries shall use their best efforts, and take all actions necessary or
appropriate, to consummate the Merger and the other transactions contemplated by
this Agreement at the earliest practicable date. Commercial and the Bank, on
one hand, and the Company and the Company Subsidiaries, on the other hand, agree
not to knowingly take any action that would (i) adversely effect their
respective ability to obtain the Governmental Approvals or (ii) adversely affect
their respective ability to perform their obligations under this Agreement.
4.10 Additional Financial Statements and Reports. As soon as
-------------------------------------------
reasonably practicable after they become publicly available, the Company shall
furnish to Commercial and Commercial shall furnish to the Company, respectively,
its balance sheet and related statements of operations, cash flows and
stockholders' equity for all periods prior to the Closing. Such financial
statements will be prepared in conformity with generally accepted accounting
principles applied on a consistent basis and fairly present the financial
condition, results of operations and cash flows of the Company or Commercial, as
the case may be (subject, in the case of unaudited financial statements, to (a)
normal year-end audit adjustments, (b) any other adjustments described therein
and (c) the absence of notes which, if presented, would not differ materially
from those included in its most recent audited consolidated balance sheet), and
all of such financial statements will be prepared in conformity with the
requirements of Form 10-Q or Form 10-K, as the case may be, under the 1934 Act.
4.11 Stock Listing. Commercial agrees to use all reasonable efforts
-------------
to cause to be listed on the New York Stock Exchange, subject to official notice
of issuance, the shares of Commercial Common Stock to be issued in the Merger
and the shares issuable in accordance with Section 1.8 hereto.
4.12 Allowance for Loan and Real Estate Owned Losses. At the request
-----------------------------------------------
of Commercial and in an amount specified by Commercial, immediately prior to the
Acquisition Merger Effective Time, the Company and Savings shall establish such
additional provisions for loan and real estate owned losses as may be necessary
in the sole determination of Commercial to conform the Company's and Savings'
loan and real estate owned allowance practices and methods to those of
Commercial and the Bank (as such practices and methods are to be applied to
Company and Savings from and after the Acquisition Merger Effective Time);
provided, however, that Company and Savings shall not be required to take such
action until: (i) Company and Savings provide to Commercial a written statement
dated the date of Closing certified by the Chairman of the Board, the President
and the Chief Financial Officer of the Company and Savings, that the conditions
in Sections 5.1 and 5.2 to be satisfied by the Company or Savings or both of
them have been satisfied by either or both of them or, alternatively, setting
forth in detail the circumstances that have prevented such conditions from being
satisfied (the "Reliance Certificate"), and Commercial and Bank provide to
Company and Savings a Reliance Certificate relating to the satisfaction of the
conditions in Sections 5.1 and 5.3; and (ii) Commercial and the Bank, after
reviewing the Reliance Certificate, provide the Company and Savings a written
waiver of any right either entity may have to terminate the Agreement which
waiver shall contain an express condition precedent that
34
<PAGE>
Company and Savings have established such additional provisions for loan and
real estate losses as requested by Commercial pursuant to this Section 4.12. No
additional provision for loan and real estate owned losses taken by Savings
pursuant to this Section 4.12 shall be deemed in and of itself to be a breach or
violation of any representation, warranty, covenant, condition or other
provision of this Agreement.
4.13 D&O Indemnification and Insurance. For a period of three (3)
---------------------------------
years following the Acquisition Merger Effective Time Commercial and Bank shall
indemnify, and advance expenses in matters that may be subject to
indemnification to, persons who served as directors and officers of Company or
Savings or any Company Subsidiaries on or before the Acquisition Merger
Effective Time with respect to liabilities and claims (and related expenses,
including fees and disbursements of counsel) made against them resulting from
their service as such prior to the Acquisition Merger Effective Time in
accordance with and subject to the requirements and other provisions of the
Articles of Incorporation and Bylaws of Commercial and Bank in effect on the
date of this Agreement and applicable provisions of law to the same extent as
Commercial is obligated thereunder to indemnify and advance expenses to its own
directors and officers with respect to liabilities and claims made against them
resulting from their service for Commercial and Bank. Commercial shall cause
the persons serving as officers and directors of the Company immediately prior
to the Acquisition Merger Effective Time to be covered for a period of 18 months
from the Acquisition Merger Effective Time by the directors' and officers'
liability insurance policy maintained by the Company (provided that Commercial
may substitute therefor policies of at least the same coverage and amounts
containing terms and conditions which are not materially less advantageous than
such policy) with respect to acts or omissions occurring prior to the
Acquisition Merger Effective Time which were committed by such officers and
directors in their capacity as such; provided, however, that in no event shall
Commercial be required to expend more than 150% of the amount currently expended
by the Company on an annual basis to maintain or procure insurance coverage for
such 18 month period pursuant hereto. This Section 4.13 shall be construed as
an agreement as to which the directors and officers of Company and Savings
referred to herein are intended to be third party beneficiaries and shall be
enforceable by such persons and their heirs and representatives.
4.14 Tax Treatment. Commercial and Company shall use their best
-------------
efforts to cause the Merger to qualify as a reorganization under Section
368(a)(1) of the Code. The Company agrees to consent to the form of
representation letter provided by Deloitte & Touche LLP or other tax advisor for
purposes of issuing its federal tax opinion pursuant to Section 5.1(e) of this
Agreement no later than thirty (30) days prior to the Closing.
4.15 Update Disclosure. From and after the date hereof until the
-----------------
Acquisition Merger Effective Time, the Company shall promptly, but not less
frequently than monthly, update Schedule I hereto by notice to Commercial to
reflect any matters which have occurred from and after the date hereof which, if
existing on the date hereof, would have been required to be described therein
and which, in the case of all such updates other than the last such update prior
to the Acquisition Merger Effective Time, reflect a material change from the
information provided in Schedule I as of the date hereof; provided, however,
that no such update shall affect the
35
<PAGE>
conditions to the obligation of Company and Savings to consummate the
transactions contemplated hereby, and any and all changes reflected in any such
update shall be considered in determining whether such conditions have been
satisfied.
4.16 Company's Employee Plans and Benefit Arrangements.
-------------------------------------------------
(a) Except as otherwise provided in this Section, if Commercial so
requests, the Company and any Company Subsidiary shall develop a plan and
timetable for terminating each Employee Plan and Benefit Arrangement as of the
date of Closing, and, with the advance written consent of Commercial, shall
proceed with the implementation of said termination plan and timetable. The
Company shall be solely responsible for all costs, expenses, and other
obligations whatsoever arising out of or resulting from termination of any
Employee Plan or Benefit Arrangement. Neither the Company nor any Company
Subsidiary will establish any new benefit plan or arrangement for directors,
officers, or employees, or amend (or commit to distribute any assets from) any
Employee Plan or Benefit Arrangement without Commercial's prior written
approval, except as provided at this Section 4.16 or at Section 7.2 hereof.
(b) With respect to any benefit plan that provides for vesting of
benefits, there shall be no discretionary acceleration of vesting, except as set
forth at Schedule 4.16(b), provided that vesting shall accelerate on the date of
Closing (i) pursuant to an amendment to the Savings defined benefit pension
plan, and (ii) in accordance with termination of the Mid-Continent Federal
Savings Bank Management Stock Bonus Plan and the Mid Continent Bancshares, Inc.
1994 Stock Option Plan.
(c) On or prior to the Closing Date, Savings shall make all
payments due in accordance with the Management Retention Plan and the Retirement
Income Protection Plan as detailed at Schedule 4.16(c). As of the Closing Date,
Savings shall terminate the employment of Richard T. Pottorff and make payment
of sums due and payable in accordance with the Employment Agreement between
Savings and Richard T. Pottorff. On or prior to the Closing Date, Commercial
shall enter into a Consulting Agreement with Richard T. Pottorff, to be
effective as of the Closing Date as attached at Schedule 4.16(c).
It is the intention of the parties to terminate Savings' Employment
Agreement with Larry Goddard and Change in Control Agreement with Harold Siemens
effective as of the Closing and to provide for such agreements to be replaced by
similar agreements between the Bank and such individuals on mutually acceptable
terms to be negotiated by the parties prior to Closing. In the event no such
replacement agreements have been executed by the 30/th/ day prior to Closing,
then on or prior to the Closing Date, Savings may renew the Employment Agreement
with Larry Goddard for a period not to exceed thirty-six months from the Closing
Date and shall renew the term of the Change in Control Agreement with Harold
Seimens for a term not to exceed twenty-four months from the Closing Date. Such
Board actions to renew such agreements or to enter into this Agreement shall in
no way limit or restrict either employees' rights under such respective
agreements to voluntarily terminate employment and receive compensation as a
result of such actions following a change in control of Savings, or restrict or
limit Savings' right to terminate the
36
<PAGE>
employment of such employees on or before the Closing Date and to make such
payments due under such agreements.
Bank shall give any employee of Savings that the Bank does not intend
to continue to employ for a period of at least one year after the Closing
("Temporary Transitional Employees") written notice of such intention not less
than 30 days prior to the Closing Date, in which case Company shall pay to such
Temporary Transitional Employees as of the Closing any sums to be due under the
Employee Change in Control Severance Plan or Change in Control Severance
Agreements and sums payable for accrued vacation.
(d) On or prior to the date of Closing, Company shall make the
payments specified in Schedule 4.16(d), in connection with terminating the Mid-
Continent Federal Savings Bank Directors Consultation and Retirement Plan and
Directors Change in Control Severance Plan; provided that more than 30 days
before the Closing, Savings agrees to amend the Directors Change in Control
Severance Plan to reduce the term for monthly severance payments from 36 months
to 18 months.
(e) Commercial shall honor in accordance with their terms both the
Change in Control Severance Agreements and the Employee Change in Control
Severance Plan contained at Schedule 4.16(c).
(f) Following the Closing, Commercial shall honor in accordance with
its terms the Mid-Continent Federal Savings Bank Employee Stock Ownership Plan;
provided that Savings shall be entitled to repay the ESOP Note on a pro rated
basis for the period from January 1, 1998 through the Closing Date, and provided
further that the Closing Date shall be treated as the end of the plan year for
purposes of permitting an allocation of benefits based on such repayments.
4.17 Amendment of Savings' Federal Stock Charter. Company and Savings
-------------------------------------------
will take all actions necessary to effectuate an amendment to Section 8 of
Savings' Federal Stock Charter to make inapplicable to Commercial and Bank the
restrictions therein, provided that Company and Savings may make such amendment
contingent upon consummation of the Merger.
4.18 Commercial Goodwill Claim. Between the date hereof and the
-------------------------
Closing, Commercial and the Bank shall not spin-off or otherwise distribute the
rights to receive payment upon resolution of the claims against the FDIC or
other agency of the Federal government with respect to the confiscation of the
goodwill as capital of the Bank.
4.19 Environmental Reports. Commercial, at its expense, shall
---------------------
undertake within 15 days of the date hereof to order, and shall within 40 days
(subject to extension with the consent of the Company) after ordering, receive,
a Phase I Environmental Risk Report (as contemplated in OTS Thrift Bulletin #16)
("Report") on (i) all commercial real estate owned by, (ii) all offices and
premises used as facilities by, and (iii) all properties which serve as security
for any commercial real estate loan having an original principal balance of
$1,000,000 or more of, the Company and Savings. Failure to order such Report on
any particular properties within such 15 day period shall
37
<PAGE>
constitute a waiver of such condition with respect to such property. In the
event that Commercial believes in good faith that such Report indicates a
reasonable likelihood that the costs to cleanup, remove, remediate, or take any
other action necessary to bring any such property or properties into material
compliance with environmental laws exceed $475,000 in the aggregate, Commercial
shall, within 15 days of its receipt of such Report, provide Company with
written notice to that effect. Commercial shall thereafter undertake to order
within 15 days of receipt of such Report and shall within 30 days of ordering
receive a Phase II Environmental Report (as contemplated in OTS Thrift Bulleting
#16) to confirm such belief. Failure to order such Phase II report ("Phase II
Report") on any particular properties within such 15 day period shall constitute
a waiver of such condition with respect to such property. Commercial shall
within seven days of receipt of such Phase II Report either deliver written
notice to Company of its termination of this Agreement in that the aggregate
costs to cleanup, remove, remediate or take such other action necessary to bring
such properties into material compliance with the environmental laws will exceed
$475,000 determined in good faith and that Commercial shall elect to terminate
this Agreement, or Commercial shall deliver in writing notice of its waiver of
the condition contained at Section 5.2(i) hereof. Failure to deliver such
written notice of its termination of the Agreement shall constitute waiver of
this condition as provided at Section 5.2(i). Commercial shall deliver complete
copies of all Phase I and Phase II reports to Company within five days of
receipt of any such reports. The contents of such reports shall remain
confidential whether or not the Merger is consummated.
ARTICLE V
CONDITIONS TO THE MERGER; TERMINATION OF AGREEMENT
5.1 General Conditions. The obligations of Commercial, the Bank, the
------------------
Company and Savings to effect the Acquisition Merger and the Bank Merger shall
be subject to the following conditions:
(a) Stockholder Approval and Effectiveness of Articles Amendment and
----------------------------------------------------------------
Charter Amendment. The holders of the outstanding shares of Company common
- -----------------
stock shall have approved the Articles Amendment, this Agreement and the
Acquisition Merger as specified in Section 1.7(a) hereof or as otherwise
required by applicable law, the Articles Amendment shall be effective under the
KGCC and the Charter Amendment shall be effective under applicable law.
(b) No Proceedings. No order, decree or injunction shall have been
--------------
entered and remain in force restraining or prohibiting the Merger in any legal,
administrative, arbitration, investigatory or other proceedings (collectively,
"Proceedings").
(c) Government Approvals. To the extent required by applicable law or
--------------------
regulation, all approvals of or filings with any governmental authority
(collectively, "Governmental Approvals"), including without limitation those of
the OTS, the FDIC, the Federal Trade Commission, DOJ, the SEC, and any state
securities or Blue Sky authorities, shall have been obtained or made and any
waiting periods shall have expired in connection with the
38
<PAGE>
consummation of the Merger. All other statutory or regulatory requirements for
the valid consummation of the Merger and related transactions shall have been
satisfied.
(d) Registration Statement. The Registration Statement shall have
----------------------
been declared effective and shall not be subject to a stop order of the SEC and,
if the offer and sale of Commercial Common Stock in the Merger pursuant to this
Agreement is subject to the Blue Sky laws of any state, shall not be subject to
a stop order of any state securities commissioner.
(e) Federal Tax Opinion. Receipt of either an opinion of Deloitte &
-------------------
Touche LLP, or other tax advisor reasonably acceptable to Commercial and the
Company, or a private letter ruling from the IRS, in form and content reasonably
satisfactory to Commercial and the Company, and upon which Company shareholders
may rely to the effects set forth at Schedule 5.1(e) hereto.
5.2 Conditions to Obligations of Commercial and Bank. The obligations of
------------------------------------------------
Commercial and Bank to effect the Merger and the transactions contemplated
herein shall be subject to the following additional conditions to the extent not
waived:
(a) Opinion of Counsel for Company. Commercial shall have received
------------------------------
from Malizia, Spidi, Sloane & Fisch, P.C., and from a legal counsel qualified to
opine as to Kansas law matters and satisfactory to Commercial, an opinion dated
as of the Closing covering the matters to be set forth in Exhibit 5.2(a).
(b) Required Consents. In addition to Governmental Approvals, Company
-----------------
and Savings shall have obtained all necessary third party consents or approvals
in connection with the Merger, the absence of which would materially and
adversely affect Company and the Company Subsidiaries, taken as a whole; in this
connection, the Company and Savings shall use its reasonable best efforts to
obtain consents from all lessors to their respective real estate leases that may
be required for consummation of the Merger.
(c) Company Accountants' Letter. Commercial at its expense shall
---------------------------
have received from Deloitte & Touche LLP, letters dated the date of mailing the
Prospectus/Proxy Statement and the date of the Closing to the effect that: (i)
with respect to the Company they are independent accountants within the meaning
of the 1933 Act and 1934 Act and the applicable rules and regulations
thereunder, (ii) it is their opinion that the audited financial statements of
the Company included in or incorporated by reference into the Prospectus/Proxy
Statement comply as to form in all material respects with the applicable
accounting requirements of the 1933 Act and 1934 Act and the applicable
published accounting rules and regulations thereunder, (iii) on the basis of
such procedures as are set forth therein but without performing an examination
in accordance with generally accepted auditing standards nothing has come to
their attention which would cause them to believe that (A) any unaudited interim
financial statements appearing in the Prospectus/Proxy Statement do not comply
as to form in all material respects with the applicable accounting requirements
of the 1933 Act and 1934 Act and the published rules and regulations thereunder;
(B) said financial statements are not stated on a basis substantially consistent
with that
39
<PAGE>
of the audited financial statements; (C) (1) at the date of the latest available
consolidated financial statements of the Company and at a specific date not more
than five (5) business days prior to the date of each such letter there has
been, except as specified in such letter, any increase in the outstanding
capital stock, or indebtedness for borrowed money of the Company (other than
deposits and Federal Home Loan Bank advances with a maturity of one year or
less) or any decrease in the stockholders' equity thereof as compared with
amounts shown in the latest statement of financial condition included in the
Prospectus/Proxy Statement, or (2) for the period from the date of the latest
audited financial statements of the Company included in or incorporated by
reference into the Prospectus/Proxy Statement to a specific date not more than
five (5) business days prior to the date of each such letter, there were, except
as specified in such letter, any decreases, as compared with the corresponding
period in the preceding year, in consolidated net income for Company excluding
expenses associated with the Merger, including those incurred pursuant to
Section 4.16 and 7.2 hereof, or any increase, as compared with the corresponding
period in the preceding year, in the provision for loan losses for Company, (iv)
they have performed certain specific procedures as a result of which they
determined that certain information of an accounting, financial or statistical
nature included in the Prospectus/Proxy Statement and requested by Commercial
and agreed upon by such accountants, which is expressed in dollars (or
percentages obtained from such dollar amounts) and obtained from accounting
records which are subject to the internal controls of the Company's accounting
system or which has been derived directly from such accounting records by
analysis or computation is in agreement with such records or computations made
therefrom (excluding any questions of legal interpretation), and (v) on the
basis of such procedures as are set forth in such letter, nothing came to their
attention with respect to the Company which would cause them to believe that the
pro forma financial statements had not been properly compiled on the pro forma
basis described therein.
(d) No Material Adverse Change. Between the date of this Agreement
--------------------------
and the date of Closing, there shall not have occurred any material adverse
change in the financial condition, business, results of operations or assets of
Company and the Company Subsidiaries, taken as a whole, other than any such
change attributable to or resulting from any change in law, regulation or
generally accepted accounting principles which impairs both the Company and
Commercial in a substantially similar manner, and other than any such change
attributable to or resulting from changes in economic conditions applicable to
depository institutions generally or in general levels of interest rates
affecting both the Company and Commercial to a similar extent and in a similar
manner. No payments made or expenses incurred in accordance with Section 4.16
hereof shall be deemed to constitute a material adverse change under this
Section 5.2(d).
(e) Representations and Warranties to be True; Fulfillment of
---------------------------------------------------------
Covenants and Conditions. The representations and warranties of the Company and
- ------------------------
Savings shall be true in all material respects at the Acquisition Merger
Effective Time with the same effect as though made at the Acquisition Merger
Effective Time (or on the date when made in the case of any representation or
warranty which specifically relates to an earlier date); Company and Savings
shall have performed all obligations and complied with each covenant, in all
material respects, and all conditions under this Agreement on their parts to be
performed or complied with at or prior to the Acquisition Merger Effective Time;
and Company shall have delivered to Commercial a
40
<PAGE>
certificate, dated the Acquisition Merger Effective Time and signed by its chief
executive officer and chief financial officer, to such effect.
(f) No Litigation. Neither the Company nor any Company Subsidiary
-------------
shall be a party to any pending litigation, reasonably probable of being
determined adversely to the Company or any Company Subsidiary, which would have
a material adverse effect on the business, financial condition or results of
operations of the Company and the Company Subsidiaries, taken as a whole.
(g) Regulatory Approval. All Governmental Approvals required
-------------------
hereunder to consummate the transactions contemplated hereby shall have been
obtained without the imposition of any conditions (excluding any conditions
relating to or affecting whether the Acquisition Merger qualifies as a pooling
of interests for accounting purposes) which Commercial and the Bank reasonably
and in good faith determine to be unduly burdensome upon the conduct of the
business of Commercial or the Bank and, in the reasonable judgment of
Commercial, substantially diminish the benefits expected to be received by
Commercial from the transactions contemplated hereby.
(h) Affiliates Letters. Commercial shall have received the letter
------------------
agreements from all affiliates of the Company as contemplated in Section 4.7(i)
herein.
(i) Environmental Reports. Commercial shall not have exercised its
---------------------
right to terminate this Agreement pursuant to Section 4.19.
(j) Amendment to Commercial Articles of Incorporation. Commercial
-------------------------------------------------
shall have received the approval of its shareholders to amend its Articles of
Incorporation to increase the number of authorized shares of Commercial Common
Stock as contemplated in Section 1.7(b).
5.3 Conditions to Obligations of Company and Savings. The obligations of
------------------------------------------------
Company and Savings to effect the Acquisition Merger and the transactions
contemplated herein shall be subject to the following additional conditions:
(a) Opinion of Counsel for Commercial. Company shall have received
---------------------------------
from Housley Kantarian & Bronstein, P.C., special counsel to Commercial, and
Fitzgerald, Schorr, Barmettler & Brennan, an opinion dated as of the Closing
covering the matters to be set forth in Exhibit 5.3(a).
(b) Representations and Warranties to be True; Fulfillment of
---------------------------------------------------------
Covenants and Conditions. The representations and warranties of Commercial and
- ------------------------
the Bank shall be true in all material respects at the Acquisition Merger
Effective Time with the same effect as though made at the Acquisition Merger
Effective Time (or on the date when made in the case of any representation or
warranty which specifically relates to an earlier date); Commercial and the Bank
shall have performed all obligations and complied with each covenant, in all
material respects, and all conditions under this Agreement on their parts to be
performed or complied with at or prior to the Acquisition Merger Effective Time;
and Commercial shall have delivered to Company a
41
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certificate, dated the Acquisition Merger Effective Time and signed by its chief
executive officer and chief financial officer, to such effect.
(c) Commercial Common Stock. A certificate for the required number of
-----------------------
whole shares of Commercial Common Stock, as determined pursuant to Section 1.3
hereof, and cash for fractional share interests, as so determined, shall have
been delivered to the Exchange Agent.
(d) Required Consents. In addition to Governmental Approvals,
-----------------
Commercial and the Bank shall have obtained all necessary third party consents
or approvals in connection with the Merger, the absence of which would
materially and adversely affect Commercial and the Commercial Subsidiaries,
taken as a whole.
(e) NYSE Listing. The shares of Commercial Common Stock issuable
------------
pursuant to this Agreement shall have been approved for listing on the NYSE,
subject to official notice of issuance.
5.4 Termination of Agreement and Abandonment of Merger. This Agreement
--------------------------------------------------
and the Acquisition Plan of Merger may be terminated at any time before the
Acquisition Merger Effective Time, whether before or after approval thereof by
shareholders of Company, as provided below:
(a) Mutual Consent. By mutual consent of the parties, evidenced by
--------------
their written agreement.
(b) Closing Delay. At the election of either party, evidenced by
-------------
written notice, if the Closing shall not have occurred on or before May 1, 1998,
or such later date as shall have been agreed to in writing by the parties;
provided, however, that the right to terminate under this Section 5.4(b) shall
- -------- -------
not be available to any party whose failure to perform an obligation hereunder
has been the cause of, or has resulted in, the failure of the Closing to occur
on or before such date.
(c) Conditions to Commercial Performance Not Met. By Commercial upon
--------------------------------------------
delivery of written notice of termination to Company if any event occurs which
renders impossible the satisfaction in any material respect one or more of the
conditions to the obligations of Commercial and the Bank to effect the Merger
set forth in Sections 5.1 and 5.2 and noncompliance is not waived by Commercial,
provided, however, that the right to terminate under this Section 5.4(c) shall
- -------- -------
not be available to Commercial where Commercial's or Bank's failure to perform
an obligation hereunder has been the cause of, or has resulted in, the failure
of the Closing to occur on or before such date.
(d) Conditions to Company Performance Not Met. By the Company upon
-----------------------------------------
delivery of written notice of termination to Commercial if any event occurs
which renders impossible of satisfaction in any material respect one or more of
the conditions to the obligations of Company and Savings to effect the Merger
set forth in Sections 5.1 and 5.3 and noncompliance is not waived by Company,
provided, however, that the right to terminate under this Section 5.4(d) shall
- -------- -------
not be available to the Company where the Company's or Savings' failure to
perform
42
<PAGE>
an obligation hereunder has been the cause of, or has resulted in, the failure
of the Closing to occur on or before such date.
(e) Average NYSE Closing Price. By the Company at any time during
--------------------------
the two business day period commencing on the business day immediately after the
end of the Determination Period, if the Average NYSE Closing Price shall be less
than $33.00 (adjusted as indicated in Section 1.3(a)(iv)), subject, however, to
the following three sentences. If the Company elects to exercise its
termination right pursuant to this Section 5.4(e), it shall give written notice
to Commercial no later than the end of the aforementioned two business day
period. During the two business day period commencing with the business day
after its receipt of such notice, Commercial shall have the option to increase
the consideration to be received by the holders of Company common stock
hereunder, by adjusting the Exchange Ratio to equal the number (calculated to
four decimal places and rounded down) obtained by dividing (A) $35.08 by (B) the
Average NYSE Closing Price. If Commercial so elects within such two day period,
it shall give written notice to the Company no later than the end of the
aforementioned two day period of such election and the revised Exchange Ratio,
whereupon no termination shall have occurred pursuant to this Section 5.4(e) and
this Agreement shall remain in effect in accordance with its terms (except as
the Exchange Ratio shall have been so modified).
For purposes of this Section 5.4, "Average NYSE Closing Price" and
"Determination Period" shall have the meanings specified in Section 1.3(b).
(f) By either party if the shareholders of the Company do not approve
the Articles Amendment at the Company Shareholders' Meeting or adjournment
thereof, in which event Commercial shall be entitled to the fee referred to in
Section 6.2(b) hereof.
(g) By Company in connection with entering into a definitive agreement
in accordance with Section 4.4(b), provided it has complied with all provisions
thereof, in which case Commercial shall be entitled to the fee specified in
Section 6.2(c) hereof.
(h) By either party if the shareholders of Commercial do not approve
the amendment to Commercial's Articles of Incorporation referred to in Section
1.7(b) hereof by December 30, 1997, in which event Company shall be entitled to
the fee referred to in Section 6.2(b) hereof.
ARTICLE VI
TERMINATION OF OBLIGATIONS; PAYMENT OF EXPENSES
6.1 Termination; Lack of Survival of Representations and Warranties. In
---------------------------------------------------------------
the event of the termination and abandonment of this Agreement pursuant to
Section 5.4 of this Agreement, this Agreement shall become void and have no
effect, except that (i) the provisions of Sections 2.7 and 3.7 (Brokers and
Finders), 4.8 (Publicity), 4.19 (Environmental Reports; the last sentence
thereof), 6.2 (Expenses) and 8.2 (Confidentiality) of this Agreement shall
survive any such termination and abandonment, and (ii) a termination pursuant to
Sections 5.4(c), 5.4(d) or 5.4(f)
43
<PAGE>
of this Agreement shall not relieve the breaching party from liability for an
uncured intentional and willful breach of a representation, warranty, covenant,
or agreement giving rise to such termination.
The representations, warranties and agreements of the parties set forth in
this Agreement shall not survive the Acquisition Merger Effective Time, and
shall be terminated and extinguished at the Acquisition Merger Effective Time,
and from and after the Acquisition Merger Effective Time none of the parties
hereto shall have any liability to the other on account of any breach or failure
of any of those representations, warranties and agreement; provided, however,
-------- -------
that the foregoing clause shall not (i) apply to agreements of the parties which
by their terms are intended to be performed after the Acquisition Merger
Effective Time, and (ii) shall not relieve any person for liability for fraud,
deception or intentional misrepresentation.
6.2 Payment of Expenses.
-------------------
(a) Except as otherwise provided below, each of the parties hereto
shall bear and pay all costs and expenses incurred by it or on its behalf in
connection with the transactions contemplated hereunder; provided, however, that
Commercial shall pay the expenses related to filing the Registration Statement
and Commercial and Company shall equally apportion the expenses for printing and
mailing the Prospectus/Proxy Statement.
(b) Company and Savings shall pay to Commercial a fee of $200,000 if
this Agreement is terminated pursuant to Section 5.4(f) hereof. Commercial and
Bank shall pay to Company a fee of $200,000 if this Agreement is terminated
pursuant to Section 5.4(h).
(c) In order to induce Commercial and the Bank to enter into this
Agreement and as a means of compensating Commercial and the Bank for the
substantial direct and indirect monetary and other costs incurred and to be
incurred in connection with this Agreement and the transactions contemplated
hereby, the Company and Savings agree that if this Agreement is terminated in
accordance with Sections 5.4(a), 5.4(b), 5.4(c) or 5.4(g) hereof and prior to
such termination a Termination Event, as defined in paragraph (d) of this
Section 6.2, shall have occurred, the Company or Savings will upon demand pay to
Commercial or the Bank in immediately available funds $3,000,000, inclusive of
any expense reimbursements that may otherwise be due and payable in accordance
with Section 6.2 hereunder.
(d) For purposes of this Agreement, a Termination Event shall mean
either of the following:
(i) The Company or any Company Subsidiary, without having received
Commercial's prior written consent, shall have entered into a written agreement
to engage in an Acquisition Transaction (as defined below) with any person (the
term "person" for purposes of this Agreement having the meaning assigned thereto
in Sections 3(a)((9) and 13(d)(3) of the Securities Exchange Act of 1934, and
the rules and regulations thereunder) other than Commercial or any affiliate of
Commercial (the term "affiliate" for purposes of this Agreement having the
meaning
44
<PAGE>
assigned thereto in Rule 405 under the 1933 Act) or the Board of Directors of
the Company shall have recommended that the shareholders of the Company approve
or accept any Acquisition Transaction with any person other than Commercial or
any affiliate of Commercial. For purposes of this Agreement "Acquisition
Transaction" shall mean (x) a merger or consolidation, or any similar
transaction, involving the Company or any Company Subsidiary, (y) a purchase,
lease or other acquisition of all or substantially all of the assets of the
Company or any Company Subsidiary or (z) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or otherwise) of
securities representing 50% or more of the equity securities of the Company or
any Company Subsidiary; or
(ii) After a bona fide written proposal is made by any person other
than Commercial or any affiliate of Commercial to the Company or its
shareholders to engage in an Acquisition Transaction, either (A) the Company
shall have breached any covenant or obligation contained in this Agreement and
such breach would entitle Commercial to terminate this Agreement or (B) the
holders of Company common stock shall not have approved this Agreement at the
meeting of such shareholders held for the purpose of voting on this Agreement
under circumstances in which the Company's Board of Directors has failed to make
all reasonable efforts to obtain the favorable vote of Company shareholders on
the Merger, including failure to recommend the Merger to Company shareholders,
such meeting shall not have been held in a timely manner or shall have been
postponed, delayed or enjoined prior to termination of this Agreement except as
a result of a judicial or administrative proceeding or the Company's Board of
Directors shall have withdrawn or modified in a manner adverse to Commercial the
recommendation of the Company's Board of Directors with respect to this
Agreement.
ARTICLE VII
CERTAIN POST-MERGER AGREEMENTS
7.1 Reports to the SEC. Commercial shall continue to file all reports and
------------------
data with the SEC necessary to permit the shareholders of Company who may be
deemed "underwriters" (within the meaning of Rule 145 under the 1933 Act) of
Company common stock to sell the Company common stock received by them in
connection with the Merger pursuant to Rules 144 and 145(d) under such Act if
they would otherwise be so entitled.
7.2 Employees. Employees of the Company or Savings who become employees of
---------
Commercial or the Bank after the Acquisition Merger Effective Time (the
"Continuing Employees") shall be eligible to participate in all benefit plans
sponsored by Commercial or the Bank to the same extent as other similarly
situated Commercial or Bank employees; provided that Commercial shall (i) give
the Continuing Employees full credit for prior service with the Company or
Savings with respect to determination of eligibility to participate, vesting,
and benefit levels under the welfare plans sponsored by Commercial or Bank, and
with respect to determination of eligibility and vesting, but not benefit
accruals under 401(k) plans sponsored by Commercial or Bank, (ii) continue their
employment and regular salary in effect on the date of Closing until the earlier
to occur of their voluntary termination of employment and the date twelve (12)
months after the Closing, and (iii) not subject the Continuing Employees to any
uninsured waiting period or exclusion for pre-existing conditions that was not
in effect, on the Effective Date, under a medical or dental insurance plan
maintained by the Company or Savings, and (iv) have no obligation to
45
<PAGE>
provide benefits under any Commercial plan or program that are duplicative of
benefits that employees of the Company or Savings receive under a similar plan
or program maintained by the Company or Savings after the Closing.
Commercial shall honor all accrued vacation and sick leave for the
employees of Company and the Company Subsidiaries following the Closing, to the
extent listed in Schedule 7.2 hereto but subject both to expiration within one
year of the Closing and to Commercial's policies, from the Closing forward,
applicable to the accrual of vacation pay and sick leave. Commercial shall
honor the Management Long Term Retention Plan as attached at Schedule 4.16(c),
and shall make any payment required thereunder. Commercial shall honor Savings
defined benefit pension plan, and shall fulfill all obligations to participants
thereunder in accordance with the terms of such plan.
With the exception of Temporary Transitional Employees (within the meaning
of Section 4.16(c) of this Agreement), Commercial agrees that for a period of
twelve (12) months following the Acquisition Merger Effective Time, any employee
of the Company or Savings who is not, and has not been, a party to an employment
or severance agreement with Company or Savings and whose employment is
involuntarily terminated by Commercial for a reason other than just cause on or
after the Acquisition Merger Effective Time shall be entitled to receive both
payment for accrued vacation time (provided such accrued vacation time does not
exceed five weeks) and continued payment of salary in effect as of the Closing
Date through the remainder of the one year period after the Closing, but in no
event shall such individual receive payments of less than the benefits payable
under the Mid-Continent Federal Savings Bank Change in Control Severance Plan,
which Severance Plan shall become null and void 18 months after the Closing, and
the value of all accrued vacation pay for such employee.
ARTICLE VIII
GENERAL
8.1 Amendments. Subject to applicable law, this Agreement may be amended,
----------
whether before or after any relevant approval of shareholders, by an agreement
in writing executed in the same manner as this Agreement and authorized or
ratified by the Boards of Directors of the parties hereto, provided that, after
-------------
the adoption of the Agreement by the shareholders of the Company, no such
amendment without further shareholder approval may reduce the amount or change
the form of the consideration to be received by the Company shareholders in the
Merger.
8.2 Confidentiality. All information disclosed hereafter by any party to
---------------
this Agreement to any other party to this Agreement, including, without
limitation, any information obtained pursuant to Section 4.1 hereof, shall be
kept confidential by such other party and shall not be used by such other party
otherwise than as herein contemplated except to the extent that (i) it was known
by such other party when received, (ii) it is or hereafter becomes lawfully
obtainable from other sources, (iii) it is necessary or appropriate to disclose
to the OTS, the FDIC or any other regulatory authority having jurisdiction over
the parties or their subsidiaries or as may otherwise be required by law, or
(iv) to the extent such duty as to confidentiality is waived by the other party.
In the event of the termination of this Agreement, each party shall use all
reasonable efforts
46
<PAGE>
to return upon request to the other parties all documents (and reproductions
thereof) received from such other parties (and, in the case of reproductions,
all such reproductions made by the receiving party) that include information not
within the exceptions contained in the first sentence of this Section 8.2.
8.3 Governing Law. This Agreement and the legal relations between the
-------------
parties shall be governed by and construed in accordance with the laws of the
State of Nebraska without taking into account a provision regarding choice of
law, except to the extent certain matters may be governed by federal law by
reason of preemption.
8.4 Notices. Any notices or other communications required or permitted
-------
hereunder shall be sufficiently given if sent by registered mail or certified
mail, postage prepaid, addressed, if to Commercial or Bank, to
Commercial Federal Corporation
2120 South 72nd Street
Omaha, Nebraska 68124
Attention: William A. Fitzgerald, Chairman of the Board
and Chief Executive Officer
with a copy to:
Housley Kantarian & Bronstein, P.C.
Suite 700
1220 19th Street, N.W.
Washington, DC 20036
Attention: Cynthia R. Cross, Esquire
and if to Company or Savings, to
Mid Continent Bancshares, Inc.
124 W. Central
El Dorado, Kansas 67042
Attention: Richard T. Pottorff, Chairman of the Board
and Chief Executive Officer
with a copy to:
Malizia, Spidi, Sloane & Fisch, P.C.
One Franklin Square
1301 K Street, N.W.
Suite 700 East
Washington, D.C. 20005
Attention: Richard Fisch, Esquire
47
<PAGE>
or such other address as shall be furnished in writing by any such party, and
any such notice or communication shall be deemed to have been given two business
days after the date of such mailing (except that the notice of change of address
shall not be deemed to have been given until received by the addressee).
Notices may also be sent by telegram, telex, facsimile transmission or hand
delivery and in such event shall be deemed to have been given as of the date
received.
8.5 No Assignment. This Agreement may not be assigned by any of the
-------------
parties hereto, by operation of law or otherwise, without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
8.6 Headings. The description heading of the several Articles and
--------
Sections of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
8.7 Counterparts. This Agreement may be extended in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties hereto and delivered to each of the other parties hereto.
8.8 Construction and Interpretation. Except as the context otherwise
-------------------------------
requires, (a) all references herein to any state or federal regulatory agency
shall also be deemed to refer to any predecessor or successor agency, and (b)
all references to state and federal statutes or regulations shall also be deemed
to refer to any successor statute or regulation.
8.9 Entire Agreement. This Agreement, together with the schedules, lists,
----------------
exhibits and certificates required to be delivered hereunder, and any amendment
hereafter executed and delivered in accordance with Section 8.1, constitutes the
entire agreement of the parties, and supersedes any prior written or oral
agreement or understanding among any of the parties hereto pertaining to the
Merger, except for the Confidentiality and Non-Disclosure Agreement between the
Company and Commercial dated July 28, 1997, attached at Schedule 8.9, which
shall remain in full force and effect. This Agreement is not intended to confer
upon any other persons any rights or remedies hereunder except as expressly set
forth herein.
8.10 Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of the Agreement.
8.11 No Third Party Beneficiaries. Nothing in this Agreement shall
----------------------------
entitle any person (other than the Company, Savings, Commercial or the Bank and
their respective successors and assigns permitted hereby) to any claim, cause of
action, remedy or right of any kind, except as otherwise expressly provided
herein.
48
<PAGE>
8.12 Enforcement of Agreement. The parties hereto agree that
------------------------
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
49
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunder duly authorized, all as of the
date set forth above.
COMMERCIAL FEDERAL CORPORATION MID CONTINENT BANCSHARES, INC.
By: By:
----------------------------- ---------------------------------
Name: James A. Laphen Name: Richard T. Pottorff
Title: President and Chief Title: Chairman of the Board and
Operating Officer Chief Executive Officer
COMMERCIAL FEDERAL BANK, A MID-CONTINENT FEDERAL SAVINGS BANK
FEDERAL SAVINGS BANK
By: By:
----------------------------- ---------------------------------
Name: James A. Laphen Name: Richard T. Pottorff
Title: President and Chief Title: Chairman of the Board and
Operating Officer Chief Executive Officer
50
<PAGE>
September 2, 1997
Board of Directors
Mid Continent Bancshares, Inc.
124 West Central
El Dorado, Kansas 67042
Members of the Board:
You have requested RP Financial, L.C. ("RP Financial") to provide you with
its opinion as to the fairness from a financial point of view to the
shareholders of Mid Continent Bancshares, Inc., El Dorado, Kansas (the
"Company"), of the Reorganization and Merger Agreement (the "Agreement") dated
September 2, 1997, by and among Commercial Federal Corporation, a Nebraska
corporation ("Commercial") and Commercial Federal Bank, a Federal Savings Bank
(the "Bank") and the Company and Mid-Continent Federal Savings Bank ("Savings").
The Agreement is incorporated herein by reference. Unless otherwise defined,
all capitalized terms incorporated herein have the meanings ascribed to them in
the Agreement.
Summary Description of Consideration
- ------------------------------------
At the Effective Time, each issued and outstanding share of the common
stock of the Company, par value $0.10 per share ("Company Common stock"), shall
be converted into and represent solely the right to receive without any action
by the holder, shares of Commercial Common Stock according to the following
Exchange Ratios (the "Merger Consideration"): (A) If the average NYSE Closing
Price (as defined below) shall be equal to or greater than $36.00 but equal to
or less than $44.00, then the Exchange Ratio shall be such number of shares of
Commercial Common Stock equal to the quotient (carried to four digits and
rounded down) that results by dividing $38.25 by the Average NYSE Closing Price
of Commercial Common Stock (a maximum of 1.0625 and a minimum of 0.8693 shares
of Commercial Common Stock); (B) If the Average NYSE Closing Price shall be
greater than $44.00, the Exchange Ratio shall by 0.8693 shares of Commercial
Common Stock; or (C) If the Average NYSE Closing Price shall be less than
$36.00, then the Exchange Ratio shall be 1.0625 shares of Commercial Common
Stock; however, the Company shall have the right to terminate the Merger if the
Average NYSE Closing Price shall be less than $33.00, but Commercial shall have
the option to increase the consideration to be received by the holders of the
Company Common Stock by adjusting the Exchange Ratio to equal to number
(calculated to four decimal places and rounded down) obtained by dividing $35.08
by the Average NYSE Closing Price and, if Commercial so elects, no termination
shall have occurred and the Agreement shall remain in effect.
No fractional shares of Commercial Common Stock will be issued in the
Merger; instead, any holder of Company Common Stock who would otherwise be
entitled to a fractional share of Commercial Common Stock will be paid the
applicable cash value of such fractional share interest, which shall be equal to
the product of the fraction multiplied by the Average NYSE Closing Price. The
Average NYSE Closing Price shall be the arithmetic mean of the NYSE Closing
Prices (carried to four decimal places and rounded down) of the Commercial
Common Stock for the twenty-fifth through the sixth trading day, inclusive,
immediately preceding the business day prior to the later of (A) the date on
which all requisite federal and state regulatory approvals required to
consummate the transactions contemplated by the Agreement are obtained,
including for this purpose the period of any requisite waiting periods in
respect thereof, (B) the date of the Company's meeting of
<PAGE>
RP Financial, LC.
Board of Directors
September 2, 1997
Page 2
shareholders, or (C) the 25th day of the month immediately preceding the month
in which the parties have scheduled in writing the Closing to occur, or the next
succeeding business day (the "Determination Period").
RP Financial Background and Experience
- --------------------------------------
RP Financial, as part of its financial institution valuation and consulting
practice, is regularly engaged in the valuation of financial institution
securities in connection with mergers and acquisitions of commercial banks and
thrift institutions, initial and secondary stock offerings, mutual-to-stock
conversions of thrift institutions, and business valuations for other corporate
purposes for financial institutions. As specialists in the securities of
financial institutions, RP Financial has experience in, and knowledge of, the
Kansas and the Midwest U.S. markets for bank securities and financial
institutions operating in Kansas.
Materials Reviewed
- ------------------
In rendering this fairness opinion, RP Financial reviewed the following
material: (1) the Agreement; (2) financial and other information for the
Company, all with regard to balance sheet and off-balance sheet composition,
profitability, interest rates, volumes, maturities, trends, credit risk,
interest rate risk, liquidity risk and operations including: (a) audited
financial statements for the fiscal years ended September 30, 1994 through 1996,
(b) shareholder, regulatory and internal financial and other reports through
June 30, 1997, (c) the two most recent proxy statements for the Company, (d)
internal budgets, financial projections and EPS forecasts prepared by management
and third parties, (e) the Company's management comments regarding past and
current business, operations, financial condition, and future prospects, and (f)
the potential amount, timing and nature of the recovery of damages from the U.S.
Government related to the Company's supervisory goodwill claim; and (4)
financial and other information for Commercial including: (a) audited financial
statements for the fiscal years ended June 30, 1995 and 1996, incorporated in
Annual Reports to shareholders, (b) Form 10K as of June 30, 1996, Form 10Q as of
September 30, 1996, December 31, 1996 and March 31, 1997, and interim results
and developments through June 30, 1997 released in press release form, (c)
regulatory and internal financial and other reports through June 30, 1997, (d)
internal budgets and financial projections prepared by management of Commercial
and third parties, (e) Commercial's management comments regarding past and
current business, operations, financial condition, and future prospects, (f)
press releases and other public information available regarding the terms and
anticipated financial impact of Commercial's announced acquisition of Liberty
Financial Corp., West Des Moines, Iowa, announced on August 18, 1997, and (g)
the potential amount, timing and nature of the recovery of damages from the U.S.
Government related to Commercial's supervisory goodwill claim.
In addition, RP Financial reviewed financial, operational, market area and
stock price and trading characteristics (for Commercial) and the stock price and
trading information available (for the Company) relative to publicly-traded
savings institutions, respectively, with comparable resources, financial
condition, earnings, operations and markets. RP Financial also considered the
economic and demographic characteristics in the local market area, and the
potential impact of the regulatory, legislative and economic environments on
operations for the Company and Commercial and the public perception of the
thrift industry. RP Financial also considered: (a) a transaction summary of
the financial terms of the Merger, including the aggregate consideration
represented by the Exchange Ratio formula relative to fully diluted book value,
fully diluted earnings, fully diluted assets, and deposit liabilities of the
Company; (b) the financial terms, financial condition, operating performance,
and market area of other recently completed mergers and acquisitions of
comparable financial institution entities, including evaluating Midwest U.S.
transactions both generally and specifically; (c) discounted cash flow analyses
for the Company on a stand-alone basis, incorporating the current business plan
and future prospects; and (d) the pro forma impact of the Merger to the holders
of Company Common Stock (incorporating the Exchange Ratio, transaction
adjustments, anticipated impact of the Liberty Financial Corp. acquisition, and
potential earnings improvements resulting from
<PAGE>
RP Financial, LC.
Board of Directors
September 2, 1997
Page 3
consolidation), including the resulting impact to the market value per share,
tangible book value per share, earnings per share, the potential amount of the
supervisory goodwill claim per share, and dividends per share of the Company
Common Stock. RP Financial also considered the more attractive liquidity
characteristics of Commerical Common Stock relative to the Company Common Stock,
the enhanced competitive position of Commercial resulting from the Merger, the
greater return on equity of the Commercial Common Stock relative to the Company
Common Stock, and the opportunities for Commercial to increase earnings in the
future. The results of these analyses and the other factors considered were
evaluated as a whole, with the aggregate results indicating a range of financial
parameters utilized to assess the Merger Consideration as described in the
Agreement.
In rendering its opinion, RP Financial relied, without independent
verification, on the accuracy and completeness of the information concerning the
Company and Commercial furnished by the respective institutions to RP Financial
for review, as well as publicly-available information regarding other financial
institutions and economic and demographic data. Neither the Company nor
Commercial restricted RP Financial as to the material it was permitted to
review. RP Financial did not perform or obtain any independent appraisals or
evaluations of the assets and liabilities and potential and/or contingent assets
of liabilities of the Company or Commercial. The financial forecasts and budgets
reviewed by RP Financial were prepared by the managements of the Company and
Commercial. Neither the Company nor Commercial publicly discloses internal
management forecasts or budgets of the type provided to RP Financial in
connection with the review of the Merger, and such financial forecasts were not
prepared with a view towards public disclosure. The financial forecasts and
budgets were based upon numerous variables and assumptions which are inherently
uncertain, including without limitation factors related to general economic and
competitive conditions, as well as trends in asset quality. Accordingly, actual
results could vary significantly from those set forth in such financial
forecasts.
RP Financial expresses no opinion on matters of a legal, regulatory, tax or
accounting nature or the ability of the Merger as set forth in the Agreement to
be consummated. In rendering its opinion, RP Financial assumed that, in the
course of obtaining the necessary regulatory and governmental approvals for the
proposed Merger, no restriction will be imposed on Commercial that would have a
material adverse effect on the ability of the Merger to be consummated as set
forth in the Agreement.
Opinion
- -------
It is understood that this letter is directed to the Board of Directors of
the Company in its consideration of the Agreement, and does not constitute a
recommendation to any shareholder of the Company as to any action that such
shareholder should take in connection with the Agreement, or otherwise.
It is understood that this opinion is based on market conditions and other
circumstances existing on the date hereof.
It is understood that this opinion may be included in its entirety in any
communication by the Company or its Board of Directors to the stockholders of
the Company. It is also understood that this opinion may be included in its
entirety in any regulatory filing by Commercial or the Company, and that RP
Financial consents to the summary of the opinion in the proxy materials of the
Company, and any amendments thereto. Except as described above, this opinion may
not be summarized, excerpted from or otherwise publicly referred to without RP
Financial's prior written consent.
<PAGE>
RP Financial, LC.
Board of Directors
September 2, 1997
Page 4
Based upon and subject to the foregoing, and other such matters considered
relevant, it is RP Financial's opinion that, as of the date hereof, the Merger
Consideration to be received by the holders of Company Common Stock, as
described in the Agreement, is fair to such shareholders from a financial point
of view.
Respectfully submitted,
RP FINANCIAL, LC.
<PAGE>
Annex C - Mid Continent
Annex C
TEXT OF ARTICLE 12 OF ARTICLES OF INCORPORATION OF
MID CONTINENT BANCSHARES, INC., AS PROPOSED TO BE AMENDED
Article 12. Restriction on Voting the Corporation's Common Stock.
A. Voting Restriction. Unless otherwise indicated in this Article, the
-------------------
definitions and other provisions set forth in Articles 11.A, 11.B and 11.C are
also applicable to this Article 12. Notwithstanding any other provision of
these Articles of Incorporation, in no event shall any record owner of any
outstanding Common Stock which is beneficially owned, directly or indirectly, by
a Person who, as of any record date for the determination of stockholders
entitled to vote on any matter, beneficially owns in excess of 10% of the then-
outstanding shares of Common Stock (the "Limit"), be entitled, or permitted to
any vote in respect of the shares held in excess of the Limit. The number of
votes which may be cast by any record owner by virtue of the provisions hereof
in respect of Common Stock beneficially owned by such person owning shares in
excess of the Limit shall be a number equal to the total number of votes which a
single record owner of all Common Stock owned by such person would be entitled
to cast, multiplied by a fraction, the numerator of which is the number of
shares of such class or series which are both beneficially owned by such person
and owned of record by such record owner and the denominator of which is the
total number of shares of Common Stock beneficially owned by such person owning
shares in excess of the Limit.
B. Exclusions. The foregoing restrictions shall not apply to (i) the
-----------
purchase of shares by underwriters in connection with a public offering, or (ii)
the purchase of shares by a tax-qualified employee stock benefit plan.
C. Board Determinations. The Board of Directors shall have the power to
--------------------
construe and apply the provisions of this Article and to make all determinations
necessary or desirable to implement such provisions, including but not limited
to matters with respect to (i) the number of shares of Common Stock Owned by any
Person, (ii) whether a Person is an Affiliate of another, (iii) whether a Person
has an agreement, arrangement, or understanding with another as to the matters
referred to in the definition of beneficial ownership, (iv) the application of
any other definition or operative provision of the Article to the given facts,
or (v) any other matter relating to the applicability or effect of this Article.
The Board of Directors shall have the right to demand that any person who is
reasonably believed to own Common Stock in excess of the Limit (or holds of
record Common Stock beneficially owned by any person in excess of the Limit)
supply the Corporation with complete information as to (i) the record owner(s)
of all shares beneficially owned by such person who is reasonably believed to
beneficially own shares in excess of the Limit, (ii) any other factual matter
relating to the applicability or effect of this Article as may reasonably be
requested of such person. Any constructions, applications, or determinations
made by the Board of Directors, pursuant to this Article in good faith and on
the basis of such information and assistance as was then reasonably available
for such purpose shall be conclusive and binding upon the Corporation and its
stockholders.
D. Enforceability. In the event any provision (or portion thereof) of
--------------
this Article shall be found to be invalid, prohibited or unenforceable for any
reason, the remaining provisions (or portions thereof) of this Article shall
remain in full force and effect, and shall be construed as if such invalid,
prohibited or unenforceable provision had been stricken here from or otherwise
rendered inapplicable, it being the intent of this Corporation and its
stockholders that each such remaining provision (or portion thereof) of this
Article remain, to the fullest extent permitted by law, applicable and
enforceable as to all stockholders, including stockholders owning an amount of
stock over the Limit, notwithstanding any such finding.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Indemnification of directors and officers of Commercial is provided under
Article VI of the Articles of Incorporation of Commercial for judgments, fines,
settlements, and expenses, including attorney fees incurred in connection with
any threatened, pending, or completed action, suit, or proceeding, whether
civil, criminal, administrative, or investigative if such director or officer
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of Commercial and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful.
Article VI of Commercial's Articles of Incorporation provides that an
outside director shall not be personally liable to Commercial or its
stockholders for monetary damages for breach of his fiduciary duty as a director
and authorizes Commercial to indemnify such outside director against monetary
damages for such breach to the full extent permitted by law. This provision
applies to acts or omissions occurring after the effective date of the
amendment, and does not limit liability for (i) any act or omission not in good
---
faith which involves intentional misconduct or a knowing violation of law, (ii)
any transaction from which the outside director derived an improper direct or
indirect financial benefit, (iii) paying a dividend or approving a stock
repurchase in violation of the Nebraska Business Corporation Act or (iv) any act
or omission which violates a declaratory or injunctive order obtained by
Commercial or its stockholders. For purposes of Article VI, "outside director"
is defined as any member of the Board of Directors who is not an officer or a
person who may control the conduct of Commercial through management agreements,
voting trusts, directorships in related corporations or any other device or
relationship.
Commercial has purchased director and officer liability insurance that
insures directors and officers against certain liabilities in connection with
the performance of their duties as directors and officers, including liabilities
under the Securities Act of 1933, as amended, and provides for payment to
Commercial of costs incurred by it in indemnifying its directors and officers.
Under Nebraska law, indemnification of directors and officers may be
provided for judgments, fines, settlements, and expenses, including attorney's
fees, incurred in connection with any threatened, pending, or completed action,
suit, or proceeding other than an action by or in the right of Commercial. This
applies to any civil, criminal, investigative or administrative action provided
that the director or officer involved acted in good faith, 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.
Indemnification of directors and officers may be also provided for
judgments, fines, settlements, and expenses, including attorney's fees, incurred
in connection with any threatened, pending, or completed action, or suit by or
in the right of the corporation if such director or officer acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation. However, no indemnification shall be made in
respect of any claim, issue or matter in which such person is adjudged to be
liable for negligence or misconduct in the performance of his duties to the
corporation unless the court in which the action is brought deems indemnity
proper.
The grant of indemnification to a director or officer shall be determined
by a majority of a quorum of disinterested directors, by a written opinion from
independent legal counsel, or by the shareholders.
Indemnification shall be provided to any directors and officers for
expenses, including attorney's fees, actually and reasonably incurred in the
defense of any action, suit or proceeding to the extent that he or she has been
successful on the merits.
II-1
<PAGE>
Item 21. Exhibits and Financial Statement Schedules
(a) The following are filed as exhibits to this registration
statement:
Exhibit No. Description
----------- -----------
2/1/ Reorganization and Merger Agreement dated September 2,
1997
3.1/2/ Articles of Incorporation of Commercial Federal
Corporation, as Amended
3.2/3/ Bylaws of Commercial Federal Corporation, as amended
and restated
4.1/4/ Form of Certificate of Common Stock of Commercial
Federal Corporation
4.2/5/ Shareholder Rights Agreement between Commercial
Federal Corporation and Manufacturers Hanover Trust
Company
5 Opinion of Fitzgerald, Schorr, Barmettler & Brennan
regarding the legality of the securities being
registered hereby (with consent)
8 Form of Opinion of Deloitte & Touche llp regarding
certain federal tax matters (with consent)
10.1/3/ Employment Agreement with William A. Fitzgerald dated
June 8, 1995
10.2/3/ Change in Control Executive Severance Agreements with
William A. Fitzgerald and James A. Laphen, dated
June 8, 1995
10.3/3/ Form of Change in Control Executive Severance
Agreement entered into with Senior Vice Presidents and
First Vice Presidents
10.4/6/ Commercial Federal Corporation Incentive Plan
effective July 1, 1994
10.5/6/ Commercial Federal Bank Deferred Compensation Plan
effective July 1, 1994
10.6/7/ Commercial Federal Corporation 1984 Stock Option and
Incentive Plan, as Amended and Restated, Effective
August 1, 1992
10.7/8/ Stock Purchase Agreement between CAI Corporation and
Registrant, dated August 21, 1996
10.8/8/ Employment Agreement with William A. Fitzgerald, dated
May 15, 1974, as Amended February 14, 1996
10.9/8/ Commercial Federal Savings and Loan Association
Survivor Income Plan, as Amended February 14, 1996
10.10/9/ Employment Agreement with James A. Laphen dated
June 1, 1997
10.11/10/ Commercial Federal Corporation 1996 Stock Option and
Incentive Plan Effective January 30, 1997
II-2
<PAGE>
10.12/11/ Railroad Financial Corporation 1994 Stock Option and
Incentive Plan, Railroad Financial Corporation 1991
Directors' Stock Option Plan and Railroad Financial
Corporation 1986 Stock Option and Incentive Plan, as
Amended February 22, 1991
10.13/12/ Railroad Financial Corporation 1994 Stock Option and
Incentive Plan
*13 Form of Annual Report of Mid Continent Bancshares,
Inc.
21/9/ Subsidiaries of Commercial Federal Corporation
23.1 Consent of Deloitte & Touche LLP (with respect to
Commercial Federal Corporation)
23.2 Consent of Deloitte & Touche LLP (with respect to Mid
Continent Bancshares, Inc.)
23.3 Consent of Fitzgerald, Schorr, Barmettler & Brennan,
P.C. (contained in their opinion filed as Exhibit 5)
23.4 Consent of RP Financial LC.
24 Power of Attorney (See Signature Page)
27/13/ Financial Data Schedule
99.1 Form of Proxy solicited by Board of Directors of Mid
Continent Bancshares, Inc.
- ------------------
* To be filed by amendment.
/1/ Incorporated by reference to Annex A to the Prospectus/Proxy Statement
included herein.
/2/ Incorporated by reference to Registrant's Current Report on Form 8-K dated
December 8, 1997.
/3/ Incorporated by reference to Registrant's Registration Statement on Form
S-4 (File No. 33-60589)
/4/ Incorporated by reference to Registrant's Registration Statement on Form
S-1 (File No. 33-00330)
/5/ Incorporated by reference to Registrant's Current Report on Form 8-K dated
January 9, 1989
/6/ Incorporated by reference to Registrant's Annual Report on Form 10-K for
the fiscal year ended June 30, 1994 (File No. 0-13082)
/7/ Incorporated by reference to Registrant's Registration Statement on Form
S-8 (File No. 33-60448)
/8/ Incorporated by reference to Registrant's Annual Report on Form 10-K for
the fiscal year ended June 30, 1996 (File No. 1-11515)
/9/ Incorporated by reference to Registrant's Annual Report on Form 10-K for
the fiscal year ended June 30, 1997 (File No. 1-11515)
/10/ Incorporated by reference to Registrant's Registration Statement on Form
S-8 (File No. 333-20739)
/11/ Incorporated by reference to Registrant's Registration Statement on Form
S-8 (File No. 33-63221) and Post-Effective Amendment No. 1 to Registration
Statement No. 33-01333 and No. 33-10396
/12/ Incorporated by reference to Registrant's Registration Statement on Form
S-8 (File No. 33-63629)
/13/ Not required to be filed pursuant to Rule 401 of Regulation S-T
The Exhibit Index immediately precedes the attached exhibits.
II-3
<PAGE>
Item 22. Undertakings
Item 512 of Regulation S-K.
Rule 415 Offering. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement: 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. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high and of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than 20 percent
change in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; (iii) to
include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
Filings Incorporating Subsequent Exchange Act Documents By Reference. The
undersigned registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Incorporated Annual and Quarterly Reports. The undersigned registrant
hereby undertakes to deliver or cause to be delivered with the prospectus, to
each person to whom the prospectus is sent or given, the latest annual report to
security holders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3
under the Securities Exchange Act of 1934; and, where interim financial
information required to be presented by Article 3 of Regulation S-X is not set
forth in the prospectus, to deliver, or cause to be delivered to each person to
whom the prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide such interim
financial information.
Registration on Form S-4 of Securities Offered for Resale. The undersigned
registrant hereby undertakes as follows: that prior to any public offering 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.
The registrant undertakes that every prospectus (i) that is filed pursuant
to the immediately preceding paragraph, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as 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
II-4
<PAGE>
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Request for Acceleration of Effective Date. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been advised that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. If acceleration is
requested of the effective date of this registration statement pursuant to Rule
461 under the Act, in the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question to 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.
Instructions to Form S-4.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus/Proxy
Statement pursuant to Items 4, 10(b), 11 or 13 of this form, within one business
day of receipt of such request, and to send the incorporated documents by first-
class mail or other equally prompt means. This includes information contained
in documents filed subsequent to the effective date of this registration
statement through the date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the Company
being acquired involved therein, that was not the subject of and included in
this registration statement when it became effective.
II-5
<PAGE>
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 Omaha, Nebraska as of December 10,
1997.
COMMERCIAL FEDERAL CORPORATION
By:/s/ William A. Fitzgerald
-----------------------------------
William A. Fitzgerald
Chairman of the Board and Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned directors and officers of Commercial Federal
Corporation, do hereby severally constitute and appoint William A. Fitzgerald
and James A. Laphen and each of them singly, our true and lawful attorneys and
agents, to do any and all things and acts in our names in the capacities
indicated below and to execute any and all instruments for us and in our names
in the capacities indicated below which said William A. Fitzgerald and/or James
A. Laphen may deem necessary or advisable to enable Commercial Federal
Corporation to comply with the Securities Act of 1933, as amended, and any
rules, regulations and requirements of the Securities and Exchange Commission,
in connection with the registration statement on Form S-4 relating to the
offering of Commercial's Common Stock, including specifically, but not limited
to, power and authority to sign for us in our names in the capacities indicated
below the registration statement and any and all amendments (including post-
effective amendments) thereto; and we hereby ratify and confirm all that said
William A. Fitzgerald and/or James A. Laphen shall do or cause to be done by
virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and as of the dates indicated.
Signature Capacity Date
- --------- -------- ----
/s/ William A. Fitzgerald Principal Executive Officer December 10, 1997
- -------------------------- and Director
William A. Fitzgerald
Chairman of the Board and
Chief Executive Officer
/s/ James A. Laphen Principal Financial Officer December 10, 1997
- --------------------------
James A. Laphen
President, Chief Operating Officer
and Chief Financial Officer
/s/ Gary L. Matter Principal Accounting December 10, 1997
- -------------------------- Officer
Gary L. Matter
Senior Vice President,
Controller and
Secretary
/s/ Talton K. Anderson Director December 10, 1997
- --------------------------
Talton K. Anderson
<PAGE>
/s/ Michael P. Glinsky Director December 10, 1997
- --------------------------
Michael P. Glinsky
/s/ Robert F. Krohn Director December 10, 1997
- --------------------------
Robert F. Krohn
/s/ Carl G. Mammel Director December 10, 1997
- --------------------------
Carl G. Mammel
/s/ Robert S. Milligan Director December 10, 1997
- --------------------------
Robert S. Milligan
/s/ James P. O'Donnell Director December 10, 1997
- --------------------------
James P. O'Donnell
/s/ Robert D. Taylor Director December 10, 1997
- --------------------------
Robert D. Taylor
/s/ Aldo J. Tesi Director December 11, 1997
- --------------------------
Aldo J. Tesi
<PAGE>
[LETTERHEAD OF FITZGERALD, SCHORR, BARMETTLER & BRENNAN, P.C.]
December 19, 1997
Board of Directors
Commercial Federal Corporation
1500 Commercial Federal Tower
2120 South 72nd Street
Omaha, Nebraska 68124
Re: Commercial Federal Corporation
Registration Statement on S-4
------------------------------
Gentlemen:
We have acted as special counsel to Commercial Federal Corporation
("Commercial") in connection with the preparation of the Registration Statement
on Form S-4 (the "Registration Statement") filed on or about December 19, 1997,
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended relating to up to 2,760,136 authorized but unissued shares of common
stock, par value $.01 per share ("Common Stock"), of Commercial which may be
issued under the Reorganization and Merger Agreement by and between Commercial
Federal Corporation and Commercial Federal Bank and Mid Continent Bancshares,
Inc. and Mid-Continent Federal Savings Bank dated September 2, 1997 (the "Merger
Agreement"), as more fully described in the Registration Statement. You have
requested the opinion of this firm with respect to certain legal aspects of the
proposed offering.
We have examined such documents, records and matters of laws as we have deemed
necessary for purposes of this opinion, and based thereon, we are of the opinion
that the Common Stock to be issued pursuant to and in accordance with the terms
of the Merger Agreement will be duly and validly issued, fully paid, and
nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to references to our firm included under the caption
"Legal Matters" in the Prospectus which is part of the Registration Statement.
Very truly yours,
FITZGERALD, SCHORR,
BARMETTLER & BRENNAN, P.C.
By: /s/ Douglas W. Reno
---------------------------
Douglas W. Reno
<PAGE>
EXHIBIT 8
[Date]
Board of Directors
Commercial Federal Corporation
2120 South 72nd Street
P.O. Box 1103, Downtown Station
Omaha, NE 68101
Members of the Board:
Commercial Federal Corporation has requested our opinion regarding the Federal
income tax consequences of the proposed merger of Mid Continent Bancshares, Inc.
(hereinafter, Company) into Commercial Federal Corporation (hereinafter,
Commercial) and the merger of Mid-Continent Federal Savings Bank (hereinafter,
Savings); into Commercial Federal Bank (hereinafter, Bank). The conclusions
presented herein represent our understanding of the transaction as represented
to us in the Reorganization and Merger Agreement between Commercial and Bank and
Company and Savings dated September 2, 1997 (hereinafter, Merger Agreement),
your letter of representations dated ________ __, 199_, a letter of
representations dated __________ __, 199_, received from Company, a letter of
representations received from Housley, Kantarian & Bronstein dated _________ __,
199_; Form S-4 dated _______ __, 199_, the facts as set forth below, and Federal
income tax law as it exists today.
FACTS
- -----
Company is headquartered in El Dorado, Kansas, is incorporated under ____ law
and is a holding company that conducts no independent business activity.
Company's primary asset is the stock it owns in Savings. Company is authorized
to issue ___________ shares of common stock, par value $__.__ per share.
Company's stock is publicly owned and traded on the NASDAQ Stock Exchange.
Savings is incorporated under the laws of _________. Savings is a banking
institution whose principal business is the acceptance of deposits from the
general public and the origination,
<PAGE>
Board of Directors
________ __, 199_
Page 2
purchase, sale and servicing of loans to its customers. Savings is authorized to
issue __________ shares of common stock, par value $__.__ per share, and
__________ shares of preferred stock. At the merger date, Savings will have
________ shares of common stock outstanding, and ________ outstanding shares of
preferred stock. For federal income tax purposes, Savings joins in the filing of
a consolidated corporate income tax return with Company.
Commercial is headquartered in Omaha, Nebraska, is a unitary non-diversified
savings and loan holding company incorporated under Nebraska law and is a
holding company that conducts no independent business activity. Commercial's
primary asset is the stock it owns in Bank. Commercial is authorized to issue
___________ shares of common stock, par value $.01 per share and _____________
shares of preferred stock, par value $0.01 per share. At the merger date,
Commercial will have _____________ shares of common outstanding and no shares of
preferred stock outstanding. Commercial's common stock is traded over the New
York Stock Exchange.
Bank is incorporated under the laws of the United States. Bank is a savings
institution whose principal business is the acceptance of deposits from the
general public and the origination, purchase, sale and servicing of mortgage
loans for the purpose of constructing, financing or refinancing one- to four-
family dwellings, and other residential and commercial real estate. Bank is
authorized to issue ___________ shares of common stock, par value $.01 per share
and __________ shares of preferred stock, no par value. At the merger date,
Bank will have ____________ shares of common stock outstanding and no shares of
preferred stock outstanding. For federal income tax purposes, Bank joins in the
filing of a consolidated corporate income tax return with Commercial.
Commercial and Company have determined that the following business reasons exist
for the mergers:
. The mergers will help facilitate Commercial's business strategy which
emphasizes both internal and external growth.
. As a result of the general consolidation of the banking industry in Company's
market area, it has found itself subjected to intensified competition.
<PAGE>
Board of Directors
________ __, 199_
Page 3
The proposed mergers will be completed as follows and in the following order:
1) Upon approval by the shareholders of both Company and Commercial and
pursuant to the corporation laws of the States of Nebraska and Kansas,
Company will merge with and into Commercial, with Commercial surviving and
Company ceasing to exist. (Hereinafter, the merger of Company with and into
Commercial will be referred to as the Acquisition Merger.)
2) Company's shareholders will exchange each share of Company common stock for
Commercial common stock as follows:
If the Average NYSE Closing Price (as defined in the Merger Agreement) is
equal to or greater than $36.00 but equal to or less than $44.00, then
the Exchange Ratio will be such number of shares of Commercial common
stock equal to the quotient (carried to four digits and rounded down)
that results by dividing $38.25 by the Average NYSE Closing Price of
Commercial common stock (a maximum of 1.0625 and a minimum of 0.8693
shares of Commercial common stock);
If the Average NYSE Closing Price is greater than $44.00, the Exchange
Ratio will be 0.8693 shares of Commercial common stock;
If the Average NYSE Closing Price is less than $36.00, the Exchange Ratio
will be 1.0625 shares of Commercial Common Stock.
1) If the Average NYSE Closing Price is less than $33.50, Commercial will have
the option to increase the consideration to be received by the holders of
Company common stock by adjusting the Exchange Ratio to equal the number
obtained by dividing $35.08 by the Average NYSE Closing Price.
2) Commercial will not issue fractional shares. A holder of Company common
stock who would otherwise be entitled to a fractional share of Commercial
common stock will, upon surrender of his certificate(s) representing company
common stock outstanding
<PAGE>
Board of Directors
________ __, 199_
Page 4
immediately prior to the Acquisition Merger, be paid the applicable cash
value of such fractional interest. The Merger Agreement does not provide
dissenter's rights.
3) All shares of Commercial common stock to be exchanged as a result of the
Acquisition Merger will be issued to the former Company common shareholders
at the consummation of such merger. No shares will be held back or placed in
escrow due to covenants and/or assurances in the Merger Agreement.
4) Following the Acquisition Merger and pursuant to the corporation laws of the
United States, Savings will merge with and into Bank, with Bank surviving.
(Hereinafter, the merger of Savings with and into Bank will be referred to
as the Bank Merger.) As a result of the Bank Merger, the shares of Savings
common stock issued and outstanding immediately prior to the transfer will
be canceled and the shares of Bank stock outstanding immediately before the
merger will constitute the only shares of capital stock of Bank. Following
the transaction, Savings will cease to exist.
REPRESENTATIONS
- ---------------
Acquisition Merger
- ------------------
In your letter dated _______ __, 199_, the following representations of fact
were made regarding the Acquisition Merger:
. The fair market value of the Commercial stock received by each Company
shareholder will be approximately equal to the fair market value of the
Company stock surrendered in the exchange.
. Commercial has no plan or intention to re-acquire any of its stock issued in
the transaction.
. Following the transaction, Commercial intends to continue Company's historic
business or use a significant portion of Company's historic business assets
in a business.
. Commercial has no plan or intention to sell or otherwise dispose of any
assets of Company acquired in the transaction, except for the disposition of
the stock of Savings in the Bank
<PAGE>
Board of Directors
________ __, 199_
Page 5
Merger, dispositions made in the ordinary course of business, or transfers
described in Section 368(a)(2)(C)/1/.
. All references herein to Sections or Code are to the Internal Revenue Code of
1986, as amended.
. Commercial will pay its own expenses, if any, incurred in connection with the
transaction.
. There is no intercorporate indebtedness existing between Company and
Commercial that was issued, acquired, or will be settled at a discount.
. Commercial is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv). The term investment company in this context means
a corporation 50% or more of the value of whose total assets are stock and
securities and 80% of more of the value of whose total assets are assets held
for investment. In making the 50% and 80% determinations under the preceding
sentence, stock and securities in any subsidiary corporation shall be
disregarded and the parent corporation shall be deemed to own its ratable
share of the subsidiary's assets.
. The payment of cash in lieu of fractional shares of Commercial is solely for
the purpose of avoiding the expense and inconvenience to Commercial of
issuing fractional shares and does not represent separately bargained for
consideration. The total cash consideration to be paid in the transaction to
the Company shareholders, instead of issuing fractional shares of Commercial
stock, will not exceed 1% of the total consideration to be given in the
transaction to the Company shareholders in exchange for their shares of
Company stock. The fractional share interests of each Company shareholder
will be aggregated, and no Company shareholder will receive cash in an amount
equal to or greater than the value of one full share of Commercial stock.
In its letter of ___________, __, 199_, Housley, Kantarian & Bronstein indicated
that, in their opinion, the Acquisition Merger will qualify as a merger under
the applicable laws of Nebraska and Kansas.
________________
/1/ All references herein to Sections or Code are to the Internal Revenue Code
of 1986, as amended.
<PAGE>
Board of Directors
________ __, 199_
Page 6
In its letter of ________ __, 1997, Company made the following representations
of fact regarding the Acquisition Merger:
. The fair market value of the Commercial stock received by each Company
shareholder will be approximately equal to the fair market value of the
Company stock surrendered in the exchange.
. There is no plan or intention by the shareholders of Company who own 5% or
more of the Company common stock, and to the best of the knowledge of the
management of Company, there is no plan or intention on the part of the
remaining common shareholders of Company to sell, exchange, or otherwise
dispose of a number of shares of Commercial stock received in the transaction
that would reduce the Company shareholders' ownership of Commercial stock to
a number of shares having a value, as of the date of the transaction, of less
than 50% of the value of all of the formerly outstanding common stock of
Company as of the same date. For purposes of this representation, shares of
Company common stock exchanged for cash in lieu of fractional shares of
Commercial stock will be treated as outstanding Company common stock on the
date of the transaction. Moreover, shares of Company common stock and shares
of Commercial stock held by Company shareholders and otherwise sold,
redeemed, or disposed of prior or subsequent to the transaction will be
considered in making this representation.
. The liabilities of Company assumed by Commercial and the liabilities to which
the transferred assets of Company are subject were incurred by Company in the
ordinary course of its business.
. Company and the shareholders of Company will pay their respective expenses,
if any, incurred in connection with the transaction.
. There is no intercorporate indebtedness existing between Company and
Commercial that was issued, acquired, or will be settled at a discount.
. Company is not an investment company as defined in Section 368(a)(2)(F)(iii)
and (iv). The term investment company in this context means a corporation 50%
or more of the value of
<PAGE>
Board of Directors
________ __, 199_
Page 7
whose total assets are stock and securities and 80% of more of the value of
whose total assets are assets held for investment. In making the 50% and 80%
determinations under the preceding sentence, stock and securities in any
subsidiary corporation shall be disregarded and the parent corporation shall
be deemed to own its ratable share of the subsidiary's assets.
. Company is not under the jurisdiction of a Court in a Title 11 or similar
case within the meaning of Section 368(a)(3)(A).
. The fair market value of the assets of Company transferred to Commercial will
equal or exceed the sum of the liabilities assumed by Commercial plus the
amount of liabilities, if any, to which the transferred assets are subject.
. None of the compensation received by any shareholder-employees of Company
will be separate consideration for, or allocable to, any of their shares of
Company stock; none of the shares of Commercial stock received by any Company
shareholder-employees will be separate consideration for, or allocable to,
any employment agreement; and the compensation paid to any Company
shareholder-employees will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at arm's-length
for similar services.
<PAGE>
Board of Directors
________ __, 199_
Page 8
Bank Merger
- -----------
In your letter dated _________ __, 199_, the following representations of fact
were made regarding the Bank Merger:
. Following the transaction, Bank intends to continue the historic business of
Savings or use a significant portion of the historic business assets of
Savings in a business.
. Bank has no plan or intention to sell or otherwise dispose of any of the
assets of Savings acquired in the Bank Merger, except for dispositions made
in the ordinary course of business, or transfers described in Section
368(a)(2)(C).
. Commercial has no plan or intention to sell or otherwise dispose of the stock
of Bank following its merger with Savings.
. Bank, Savings and Commercial will each pay its own expenses, if any, incurred
in connection with the transaction.
. There is no intercorporate indebtedness existing between Savings and Bank
that was issued, acquired, or will be settled at a discount.
. Bank is not an investment company as defined in Section 368(a)(2)(F)(iii) and
(iv). The term investment company in this context means a corporation 50% or
more of the value of whose total assets are stock and securities and 80% of
more of the value of whose total assets are assets held for investment. In
making the 50% and 80% determinations under the preceding sentence, stock and
securities in any subsidiary corporation shall be disregarded and the parent
corporation shall be deemed to own its ratable share of the subsidiary's
assets.
In its letter of ___________, __, 199_, Housley, Kantarian & Bronstein indicated
that, in their opinion, the Bank Merger will qualify as a merger under the
applicable federal corporation laws.
In its letter of ________ __, 199_, Company made the following representations
of fact regarding the Bank Merger:
<PAGE>
Board of Directors
________ __, 199_
Page 9
. Bank will acquire at least 90% of the fair market value of the net assets and
at least 70% of the fair market value of the gross assets held by Savings
immediately prior to the transaction. For purposes of this representation,
amounts paid by Savings to dissenters, Savings' assets used to pay its
reorganization expenses, and all redemptions and distributions (except for
regular, normal dividends) made by Savings immediately preceding the
transfer, will be included as assets of Savings held immediately prior to the
transaction.
. The liabilities of Savings to be assumed by Bank and the liabilities to which
the transferred assets of Savings are subject were incurred by Savings in the
ordinary course of its business.
. Savings will pay its expenses, if any, incurred in connection with the
transaction
. There is no intercorporate indebtedness existing between Savings and Bank
that was issued, acquired, or will be settled at a discount.
. Savings is not an investment company as defined in Section 368(a)(2)(F)(iii)
and (iv). The term investment company in this context means a corporation 50%
or more of the value of whose total assets are stock and securities and 80%
of more of the value of whose total assets are assets held for investment. In
making the 50% and 80% determinations under the preceding sentence, stock and
securities in any subsidiary corporation shall be disregarded and the parent
corporation shall be deemed to own its ratable share of the subsidiary's
assets.
. Savings is not under the jurisdiction of a Court in a Title 11 or similar
case within the meaning of Section 368(a)(3)(A).
. The fair market value of the assets of Savings to be transferred to Bank will
equal or exceed the sum of the liabilities to be assumed by Bank plus the
amount of liabilities, if any, to which the transferred assets are subject.
. The total adjusted basis of the assets of Savings transferred to Bank will
equal or exceed the sum of the liabilities assumed by Bank, plus the amount
of the liabilities, if any, to which the transferred assets are subject.
<PAGE>
Board of Directors
________ __, 199_
Page 10
OPINION
- -------
Acquisition Merger
- ------------------
Based on the facts contained herein, the Merger Agreement, the representations
of facts as set forth in your letter dated ________ __, 199_; the
representations of fact contained in the letter of _______ __, 199_ from
Company; the opinion letter of _________ __, 199_ from Housley Kantarian &
Bronstein; and our assumption that the Acquisition Merger will be consummated as
described in the Merger Agreement and Form S-4 as filed with the Securities and
Exchange Commission, it is our opinion that the federal income tax consequences
of the proposed Acquisition Merger are as follows:
. The merger of Company with and into Commercial, with Commercial surviving,
should qualify as a reorganization within the meaning of Section
368(a)(1)(A). Company and Commercial should each be a "party to a
reorganization" within the meaning of Section 368(b).
. Company should recognize no gain or loss on the transfer of its assets to
Commercial in exchange for the Commercial common stock, cash, if any, and the
assumption of its liabilities by Commercial, by reason of the application of
Sections 361(a), 361(b) and 357(a).
. No gain or loss should be recognized by Company upon the distribution of the
Commercial common stock to the Company shareholders, by reason of the
application of Section 361(c)(1).
. No gain or loss should be recognized by Commercial on the receipt of
Company's assets in exchange for Commercial common stock, and the assumption
by Commercial of Company's liabilities, by reason of the application of
Section 1032(a).
<PAGE>
Board of Directors
________ __, 199_
Page 11
. The basis of the assets of Company in the hands of Commercial should be the
same as the basis of such assets in the hands of Company immediately prior to
the reorganization, by reason of the application of Section 362(b).
. The holding period of the property acquired by Commercial from Company should
include the holding period of such property in the hands of Company
immediately prior to the reorganization, by reason of the application of
Section 1223(2).
. No gain or loss should be recognized by the former Company shareholders upon
the exchange of their Company common stock for the Commercial common stock
(including fractional shares which they otherwise might be entitled to
receive), by reason of the application of Section 354(a).
. The basis of the Commercial common stock (including fractional share
interests a Company shareholder would otherwise be entitled to receive) to be
received by a Company shareholder who exchanges Company stock for Commercial
common stock should be the same as the basis of the Company stock surrendered
in the exchange by reason of Section 358(a)(1).
. The holding period of the Commercial common stock (including fractional share
interests that they would otherwise be entitled to receive) to be received by
Company shareholders should, in each instance, include the holding period of
the Company shares surrendered in the exchange, provided Company stock was
held as a capital asset on the date of the exchange, by reason of the
application of Section 1223(1).
. Commercial as the survivor should succeed to and take into account as of the
close of the day of the distribution or transfer the items of Company
described in Section 381(c), subject to the conditions and limitations
specified in Sections 381(b) and 381(c), by reason of the application of
Section 381(a)(2).
<PAGE>
Board of Directors
________ __, 199_
Page 12
. As provided in Section 381(c)(2) and Regulation Section 1.381(c)(2)-1/2/,
Commercial as the survivor should succeed to and take into account the
earnings and profits, or deficit in earnings and profits, of Company as of
the date or dates of transfer. Any deficit in earnings and profits of either
Commercial or Company should be used only to offset earnings and profits
accumulated after the date of transfer.
. Cash received by a shareholder of Company otherwise entitled to receive a
fractional share of Commercial common stock in exchange for his Company stock
should be treated as if the fractional shares were distributed as part of the
exchange and then were redeemed by Commercial. These cash payments should be
treated as having been received as distributions in full payment in exchange
for the stock redeemed as provided in Section 302(a). This receipt of cash
should result in gain or loss measured by the difference between the basis of
such fractional share interest and the cash received. Such gain or loss
should be capital gain or loss to the former Company shareholder, provided
the Company stock was a capital asset in such former shareholder's hands and
as such, will be subject to the provisions and limitations of Subchapter P of
Chapter 1 (Rev. Rul. 66-365, 1966-1 C.B. 116; and Rev. Rul. 77-41, 1977-2
C.B. 574).
Bank Merger
- -----------
Based on the facts contained herein, the Merger Agreement, the representations
of facts as set forth in your letter dated ____________ __, 199_; the
representations of fact contained in the letter of _________ __, 199_, from
Company; the opinion letter of Housley Kantarian & Bronstein of _______ __, 199_
that the Bank Merger will qualify as a merger under the applicable laws of the
United States; and our assumption that the Bank Merger will be consummated as
described in the Merger Agreement and Form S-4 as filed with the Securities and
Exchange Commission, it is our opinion that the federal income tax consequences
of the proposed Bank Merger are as follows:
___________________
/2/ All references herein to the Regulations are to the Income Tax Regulations
issued by the Department of the Treasury as of the date of this letter.
<PAGE>
Board of Directors
________ __, 199_
Page 13
. The merger of Savings with and into Bank, with Bank surviving, should qualify
as a reorganization within the meaning of Section 368(a)(1)(A). Savings and
Bank should each be a "party to a reorganization" within the meaning of
Section 368(b).
. Savings should recognize no gain or loss on the transfer of its assets to
Bank in constructive exchange for the stock of Bank and the assumption of
Savings' liabilities by Bank, by reason of the application of Sections
361(a), 357(a) and Section 357(c).
. No gain or loss should be recognized by Bank on the receipt of Savings'
assets in constructive exchange for Bank stock, and the assumption by Bank of
Savings' liabilities, by reason of the application of Section 1032(a).
. The basis of the assets of Savings in the hands of Bank should be the same as
the basis of such assets in the hands of Savings immediately prior to the
reorganization, by reason of the application of Section 362(b).
. The holding period of the property acquired by Bank from Savings should
include the holding period of such property in the hands of Savings
immediately prior to the Bank Merger, by reason of the application of Section
1223(2).
. No gain or loss should be recognized by Commercial upon the constructive
exchange of Bank stock for Savings common stock, by reason of the application
of Section 354(a)(1).
. The basis of the Bank stock held by Commercial after the Bank Merger should
be the same as the basis in the stock immediately before the merger, plus its
basis in the Savings stock canceled in the merger, by reason of the
application of Section 358(a)/3/.
. The holding period of the Bank stock constructively received by Commercial in
the transaction should include the period in which the Savings stock was held
by Commercial
______________________
/3/ The Internal Revenue Service sometimes treats reorganizations structured
like the Bank Merger as a reorganization within the meaning of Section
368(a)(1)(A) by reason of the application of Section 368(a)(2)(D) of the
Code. If the Bank Merger is a reorganization under Section 368(a)(1)(A) and
Section 368(a)(2)(D), then the basis of the Bank common stock in the hands
of Commercial will be increased, generally, by the net asset basis of
Savings. See Regulation Section 1.358-6(b) and (c) .
<PAGE>
Board of Directors
________ __, 199_
Page 14
provided the Savings stock was held as a capital asset on the date of the
exchange, by reason of the application of Section 1223(1).
. Bank as the survivor should succeed to and take into account as of the close
of the day of the distribution or transfer the items of Savings described in
Section 381(c), subject to the conditions and limitations specified in
Sections 381(b) and 381(c), by reason of the application of Section
381(a)(2). Under Regulation Section 1.381(c)(4)-1(a)(1)(ii), Bank should
succeed to and take into account the dollar amount of Savings' reserve for
bad debts accumulated in prior years under Section 593.
. As provided in Section 381(c)(2) and Regulation Section 1.381(c)(2)-1, Bank
as the survivor should succeed to and take into account the earnings and
profits, or deficit in earnings and profits, of Savings as of the date of
transfer. Any deficit in earnings and profits of either Savings or Bank
should be used only to offset earnings and profits accumulated after the date
or dates of transfer.
APPLICABLE LAW
- --------------
Section 368(a)(1)(A) provides that the term "reorganization" means a statutory
merger or consolidation. Regulation Section 1.368-2(b)(1) provides that in
order to qualify as a reorganization under Section 368(a)(1)(A), the Acquisition
Merger and the Bank Merger must be mergers effected pursuant to the applicable
state or Federal corporation laws. It has been represented that the Acquisition
Merger will qualify as a statutory merger under the applicable Nebraska and
Kansas law and that the Bank Merger will qualify as a statutory merger under the
applicable Federal law.
In addition to the requirements set forth in the statute, in order for a
transaction to be a tax-free reorganization, certain requirements set forth in
the regulations under Section 368 must also be met. Regulation Section 1.368-
1(b) provides that the purpose of the reorganization provisions of the Code is
to except from the general rule of taxability certain specifically described
exchanges incident to such readjustments of corporate structures made in one of
the particular ways
<PAGE>
Board of Directors
________ __, 199_
Page 15
specified in the Code as are required by business exigencies and which affect
only a readjustment of continuing interest in property under modified corporate
form. To qualify as a tax free reorganization under the Code, a number of
criteria must be met including 1) a valid business purpose for the transaction,
2) continuity of the business enterprise under the modified corporate form, and
3) continuity of ownership interest on the part of those persons who, directly
or indirectly, were the owners of the enterprise prior to the reorganization.
To be treated as a reorganization described in Section 368(a)(1)(A) , the
transaction must be planned and carried out for a genuine business purpose. As
enumerated in the Form S-4 filed with the Securities and Exchange Commission, a
number of business reasons exist for the Acquisition Merger and Bank Merger
including:
[INFORMATION TO BE PROVIDED BY COMMERCIAL FEDERAL.]
Accordingly, the business purpose requirement should be met for both the
Acquisition Merger and the Bank Merger.
Regulation Section 1.368-1(d) provides that continuity of business enterprise
requires that the acquiring corporation either (i) continue the acquired
corporation's historic business or (ii) use a significant portion of the
acquired corporation's historic assets in a business. It has been represented
that following the Acquisition Merger, Commercial intends to continue Company's
historic business or use a significant portion of Company's historic business
assets in a business. It has also been represented that following the Bank
Merger, Bank intends to continue Savings' historic business or use a significant
portion of Savings' historic business assets in a business.
According to Rev. Rul. 85-198, 1985-2 CB 120, the continuity of business
enterprise requirement of Regulation Section 1.368-1(d) is satisfied when the
business of a former subsidiary of a merged bank holding company is carried on
in the same manner and form indirectly, through a second tier subsidiary of the
surviving bank holding company. Though the facts are slightly different in this
case as Savings will merge into Bank instead of operating as a second tier
subsidiary of Commercial, Savings' operations will continue to be carried on
<PAGE>
Board of Directors
________ __, 199_
Page 16
indirectly through Bank. Accordingly, the continuity of business enterprise
requirement should be met for both Acquisition Merger and Bank Merger.
Under Regulation Section 1.368-1(b), there must be a continuing interest on the
part of those shareholders who, directly or indirectly, were the shareholders of
the enterprise prior to the reorganization. Rev. Proc. 77-37, 1977-2 C.B. 568
provides that the "continuity of interest" requirement of Regulation Section
1.368-1(b) is satisfied if the former shareholders of the acquired corporation
own, as a result of the transaction, stock in the acquiring corporation having a
value equal to at least 50% of the value of all of the formerly outstanding
stock of the acquired corporation as of the same date. It is not necessary that
each shareholder of the acquired corporation receive in the exchange stock of
the acquiring corporation, which is equal in value to at least 50% of the value
of his former stock interest in the acquired corporation, so long as one or more
of the shareholders of the acquired corporation have a continuing interest
through stock ownership in the acquiring corporation which is, in the aggregate,
equal in value to at least 50% of the value of all of the formerly outstanding
stock of the acquired corporation. Sales, redemptions, and other dispositions
of stock occurring prior or subsequent to the exchange which are part of the
plan of reorganization will be considered in determining whether there is a 50%
continuing interest through stock ownership as of the effective date of the
reorganization.
It has been represented that there is no plan or intention by shareholders of
Company who own 5% or more of the common stock of Company, and to the best of
the knowledge of the management of Company, there is no plan or intention on the
part of the remaining Company shareholders to sell, exchange or otherwise
dispose of Commercial common stock received in the merger such that the former
Company shareholders will afterwards own Commercial common stock having an
aggregate value which is less than 50% of the total value of all Company common
stock outstanding immediately before the merger. For purposes of this
representation, shares of Company common stock exchanged for cash in lieu of
fractional shares of Company stock will be treated as outstanding Company stock
on the date of the transaction. Moreover, shares of Company stock and shares of
Commercial stock held by Company shareholders and otherwise sold, redeemed, or
disposed of prior or subsequent to the transaction will be considered.
<PAGE>
Board of Directors
________ __, 199_
Page 17
In Rev. Rul. 68-526, 1968-2 C.B. 156, the Service held that the acquisition of
the assets of a parent corporation and its 60 percent owned subsidiary by
another corporation for stock of that corporation and the assumption of
liabilities constituted separate tax-free reorganizations when the transactions
occurred pursuant to one plan of reorganization. See also Rev. Rul. 76-528,
1976-2 C.B. 103, which indicated that continuity of interest was met in Rev.
Rul. 68-526 in the merger of the 60 percent owned subsidiary because of the
continuing interest of the shareholders of parent corporation. Although not
directly on point, if continuity is met in Rev. Rul. 68-526 it seems that
continuity of interest should be met in the Bank Merger by reason of the
shareholders of Company meeting the continuity of interest requirement in the
Acquisition Merger. In fact, although the Internal Revenue Service no longer
issues merger rulings, numerous private letter rulings have been issued in which
it has held that the continuity of interest requirement is met in the merger of
subsidiary banks following the merger of the parent bank holding companies. See
Private Letter Rulings ("PLRs") 9325026 (March 24, 1993), 9328042 (April 21,
1993), 9317027 (January 29, 1993), 9240026 (July 6, 1992), 9247016 (August 22,
1992) and 9237031 (June 16, 1992). Although private letter rulings are not
binding on the Internal Revenue Service, they do provide some indication of its
position regarding an issue.
It has also been represented that Commercial has no plan or intention to
otherwise dispose of the stock of Bank following its merger with Savings.
Accordingly, the continuity of interest requirement should be met in the
Acquisition Merger and Bank Merger.
Based on the analysis set forth above, the Acquisition Merger and the Bank
Merger should qualify as reorganizations described in Section 368(a)(1)(A).
Section 368(b)(2) provides that, in the case of a reorganization resulting from
the acquisition by one corporation of stock or properties of another, the term
"a party to a reorganization" includes both corporations. Accordingly, in the
Acquisition Merger, Company and Commercial each should be a party to a
reorganization. In addition, in the Bank Merger, Savings and Bank each should
be a party to a reorganization.
Section 361(a) provides that no gain or loss shall be recognized to a
corporation if such corporation is a party to a reorganization and exchanges
property, pursuant to a plan of
<PAGE>
Board of Directors
________ __, 199_
Page 18
reorganization, solely for stock or securities in another corporation who also
is a party to the reorganization.
Section 357(a) provides that if the taxpayer receives property which would be
permitted to be received under Section 361 without the recognition of gain if it
were the sole consideration, and as part of the consideration, another party to
the exchange assumes a liability of the taxpayer, or acquires from the taxpayer
property subject to a liability, then such assumption or acquisition shall not
be treated as money or other property, and will not prevent the exchange from
being within the provisions of Section 361.
Section 357(c) provides that in an exchange of property described under Section
368(a)(1)(D)/4/, if the sum of the liabilities assumed plus the amount of the
liabilities to which the property is subject, exceeds the basis of the property
transferred pursuant to the exchange, then such excess shall be considered gain
from the sale of a capital asset or of property which is not a capital asset, as
the case may be.
Because Company and Commercial each should be a party to a reorganization, no
gain or loss should be recognized to Company on the transfer of its property to
Commercial in exchange for Commercial common stock. In Rev. Rul. 70-240, 1970-1
C.B. 81, the Internal Revenue Service held that the transfer of property by one
corporation, X, to another, Y, where the stock of both corporations are owned
100% by one shareholder, B, is treated as a constructive issuance of Y stock.
See also Rev. Rul. 75-383, 1975-2 C.B. 127. Further, because Savings and Bank
each should be a party to a reorganization and it has been represented that the
adjusted basis of the assets transferred will exceed the sum of the liabilities
assumed, plus the
_________________
/4/ Section 368(a)(1)(D) provides that a reorganization includes a transfer by a
corporation of all or a part of its assets to another corporation if immediately
after the transfer the transferor, or one or more or its shareholders is in
control of the corporation to which the assets are transferred; but only if,
pursuant to the plan, stock or securities of the corporation to which the assets
are transferred are distributed in a transaction which qualifies under Section
354, 355 or 356. Section 354(a)(1) provides that no gain or loss will be
recognized if stock or securities in a corporation a party to a reorganization
are, pursuant to the plan of reorganization, exchanged solely for stock or
securities in such corporation or in another corporation a party to the
reorganization. Section 354(b)(1) states, in part, that the receipt of stock in
an exchange pursuant to a reorganization within the meaning of Section
368(a)(1)(D) of the Code does not give rise to gain or loss where the
corporation to which the assets are transferred acquires substantially all of
the properties of the transferor. In the Bank Merger, Bank will acquire all the
assets of Savings and Commercial will be in control of Savings and Bank, thus,
the transaction may also qualify as a reorganization under Section 368(a)(1)(D).
<PAGE>
Board of Directors
________ __, 199_
Page 19
liabilities to which the transferred assets are subject, no gain or loss
should be recognized to Savings on the transfer of its property in constructive
exchange for Bank stock in the Bank Merger.
Section 361(c)(1) provides that except as provided in Section 361(c)(2), no gain
or loss is recognized to a corporation, which is a party to a reorganization, on
the distribution to its shareholders of property pursuant to a plan of
reorganization. Section 361(c)(2) provides that the general rule of Section
361(c)(1) does not apply if the corporation distributes property other than
"qualified property". Qualified property includes stock in a corporation which
is a party to the reorganization if such stock is received by the distributing
corporation in the exchange. In the Acquisition Merger, the sole consideration
the Company shareholders receive is Commercial stock. Because Commercial should
be a party to a reorganization, and the Commercial stock is received by Company
in the Acquisition Merger, Commercial stock should be qualified stock.
Accordingly, no gain or loss should be recognized by Company on the distribution
of Commercial stock to the former Company shareholders pursuant to the Merger
Agreement. In the Bank Merger, Commercial is constructively receiving solely
Bank stock. Because Bank should be a party to a reorganization and Bank stock is
constructively received in the Bank Merger, the constructive Bank stock should
be qualified stock. Accordingly, no gain or loss should be recognized by Savings
on the distribution of the constructive Bank stock to Commercial pursuant to the
Merger Agreement.
Section 1032(a) provides that no gain or loss shall be recognized to a
corporation on the receipt of money or other property in exchange for stock of
such corporation. In the Acquisition Merger, Company will merge with and into
Commercial. Accordingly, Commercial should not recognize any gain or loss as a
result of the exchange of its stock for the property of Company. In the Bank
Merger, Savings will merge with and into Bank. Accordingly, Bank should not
recognize any gain or loss as a result of the constructive exchange of its stock
for the property of Savings.
Section 362(b) provides that if property was acquired by a corporation in
connection with a reorganization, the basis of such property is the same as it
was in the hands of the transferor, increased in the amount of gain recognized
to the transferor on such transfer. Because
<PAGE>
Board of Directors
________ __, 199_
Page 20
Commercial should receive property from Company in connection with a
reorganization within the meaning of Section 368(a)(1)(A) and Company should
recognize no gain or loss on the transfer, the basis of the assets received by
Commercial should be the same as the basis of those assets in the hands of
Company immediately prior to the Acquisition Merger. Because Bank should receive
property from Savings in connection with a reorganization under Section
368(a)(1)(A) and Bank should recognize no gain or loss on the transfer, the
basis of the assets received by Bank should be the same as the basis of those
assets in the hands of Savings immediately prior to the Bank Merger.
Section 1223(2) provides that, in determining the period for which the taxpayer
has held property, however acquired, there shall be included the period for
which such property was held by any other person, if such property has, for
purposes of determining gain or loss from a sale or exchange, the same basis (in
whole or in part) in his hands as it would have had in the hands of such other
person. Because the basis of the assets to be received by Commercial from
Company should be the same as the basis of those assets in the hands of Company
immediately prior to the transfer, the holding period for the assets of Company
to be received by Commercial should include the period during which such assets
were held by Company. Because the basis of the assets to be received by Bank
from Savings should be the basis of those assets in the hands of Savings
immediately prior to the transfer, the holding period for the assets of Savings
to be received by Bank should include the period during which such assets were
held by Savings.
Section 354(a)(1) provides that no gain or loss is recognized if stock or
securities in a corporation a party to a reorganization are, pursuant to the
plan of reorganization, exchanged solely for stock or securities of another
corporation a party to the reorganization. In the Acquisition Merger, because
Company and Commercial are each a party to a reorganization and the Company
shareholders are exchanging Company stock solely for Commercial stock, the
shareholders of Company should recognize no gain or loss on the exchange of the
Company stock for Commercial stock (including fractional share interests that
they would otherwise be entitled to receive.) In addition, because Bank and
Savings are each a party to a reorganization and Commercial should be treated as
constructively receiving solely Bank stock, Commercial should recognize no gain
or loss on the constructive exchange of Savings stock for Bank stock.
<PAGE>
Board of Directors
________ __, 199_
Page 21
Section 358(a)(1) provides that, in the case of an exchange to which Section 354
applies, the basis of the property permitted to be received under Section 354
without the recognition of gain or loss shall be the same as that of the
property exchanged, decreased by (i) the fair market value of any other property
(except money) received by the taxpayer, (ii) the amount of any money received
by the taxpayer, and (iii) the amount of loss to the taxpayer which was
recognized on such exchange, and increased by (i) the amount which was treated
as a dividend, and (ii) the amount of gain to the taxpayer which was recognized
on such exchange (not including any portion of such gain which was treated as a
dividend).
Because the Acquisition Merger should constitute an exchange to which Section
354 applies, the basis of the Commercial common stock (including the fractional
share interests that they would otherwise be entitled to receive) in the hands
of the Company shareholders should be the same as the basis of the Company stock
held immediately before the exchange.
Because the Bank Merger should constitute an exchange to which Section 354
applies, the basis of the constructive Bank common stock in the hands of
Commercial should be the same as the basis of the Savings stock exchanged. Thus,
Commercial's basis in the Bank stock should equal the basis of such stock held
immediately prior to the Bank Merger, plus its basis in the Savings stock
canceled as a result of the Bank Merger./5/
Section 1223(1) provides that, in determining the period for which the taxpayer
has held a capital asset (as defined in Section 1221 or Section 1231) received
in an exchange, there shall be included the period for which the taxpayer held
the property exchanged if the property has, for the purpose of determining gain
or loss from a sale or exchange, the same basis (in whole or in part) in its
hands as the property exchanged. Because the basis of the Commercial common
stock (including fractional share interests that they would otherwise be
entitled to receive) held by the Company shareholders following the Acquisition
Merger should have the same basis as the Company stock exchanged, and provided
the Company stock exchanged was a capital asset
__________________
/5/ The Internal Revenue Service sometimes treats reorganizations structured
like the Bank Merger as a reorganization within the meaning of Section
368(a)(1)(A) by reason of the application of Section 368(a)(2)(D) of the
Code. If the Bank Merger is a reorganization under Section 368(a)(1)(A) and
Section 368(a)(2)(D), then the basis of the Bank common stock in the hands
of Commercial will be increased, generally, by the net asset basis of
Savings. See Regulation Section 1.358-6(b) and (c).
<PAGE>
Board of Directors
________ __, 199_
Page 22
on the date of the exchange, the holding period of the Commercial common stock
should include the period for which the Company stock was held. Because the
basis of the Bank common stock constructively received by Commercial should have
the same basis as the Savings common stock, the holding period of Commercial in
the Bank common stock constructively received should include the period for
which the Savings common stock was held, provided that such stock was a capital
asset on the date of the exchange.
Section 381(a)(2) provides that in the case of the acquisition of the assets of
another corporation in a transfer to which Sections 361 and 368(a)(1)(A) apply,
the acquiring corporation succeeds to and takes into account, as of the close of
the day of such transfer, the items of the transferor described in Section
381(c), subject to the conditions and limitations specified in Section 381(b)
and (c). Regulation Section 1.381(a)-1(a) provides that the items of the
transferor described in Section 381(c), which the acquiring corporation succeeds
to and takes into account are subject to the provisions and limitations
specified in Sections 381, 382, 383, and 384 and the regulations thereunder.
Because the Acquisition Merger is a transaction to which Sections 361 and
Section 368(a)(1)(A) should apply, Commercial should succeed to and take into
account the items of Company described in Section 381(c), subject to the
conditions and limitations specified in Section 381(b) and (c). Because the
Bank Merger is a transaction to which Sections 361 and Section 368(a)(1)(A)
should apply, Bank should succeed to and take into account the items of
Savings described in Section 381(c) subject to the conditions and limitations
specified in Section 381(b) and (c).
Regulation Section 1.381(c)(4)-1(a)(1)(ii) provides that, in a transaction to
which Sections 361 and 368(a)(1)(A) apply, the acquiring corporation takes into
its accounts the dollar balances of those accounts of the transferor corporation
which represent reserves for which the transferor corporation has claimed a
deduction in computing its taxable income for taxable years ending on or before
the date of distribution. Because the Bank Merger is a transaction to which
Sections 361 and Section 368(a)(1)(A) should apply, Bank should succeed to and
take into account the dollar amount of Savings' reserve for bad debts
accumulated in prior years under Section 593.
Section 381(c)(2) and Regulation Section 1.381(c) (2)-1 provide that in the case
of a transfer described in Section 381(a), the earnings and profits of the
transferor corporation or deficit in
<PAGE>
Board of Directors
________ __, 199_
Page 23
earnings and profits, are deemed to have been received or incurred by the
acquiring corporation as of the close of the date of the transfer, except that
any deficit in earnings or profits of either the transferor or the transferee
will be used only to offset earnings and profits accumulated after the date of
the transfer. Because the merger of Company into Commercial should be a transfer
described in Section 381(a), the earnings and profits, or deficit in earnings
and profits, of Company should be deemed to have been received or incurred by
Commercial as of the close of the date of transfer, except that any deficit in
earnings and profits of Company on the one hand, or Commercial on the other
hand, should be used only to offset earnings and profits accumulated after the
date of the transfer. Because the merger of Savings with and into Bank should
also be a transfer described in Section 381(a), the earnings and profits, or
deficit in earnings and profits, of Savings should be deemed to have been
received or incurred by Bank as of the close of the date of transfer, except
that any deficit in earnings and profits of Savings on the one hand, or Bank on
the other hand, should be used only to offset earnings and profits accumulated
after the date of the transfer.
Rev. Rul. 66-365, provides that cash received by a shareholder as part of a plan
of reorganization under Section 368(a)(1)(A) , which is attributable to
fractional shares of stock of the acquiring corporation, will be treated as if
the fractional shares were distributed as part of the exchange and then were
redeemed by the acquirer. Under Section 302(a), such cash payments will be
treated as having been received as distributions in full payment in exchange for
the stock redeemed provided the redemption is not essentially equivalent to a
dividend.
Rev. Proc. 77-41, provides that the IRS will issue an advance ruling under
Section 302(a) that cash to be distributed to shareholders in lieu of fractional
share interests arising in corporate reorganizations will be treated as having
been received in part or in full payment in exchange for the stock redeemed if
the cash distribution is undertaken solely for the purpose of saving the
corporation the expense and inconvenience of issuing and transferring fractional
shares, and is not separately bargained for consideration. The purpose of the
transaction giving rise to the fractional share interest, the maximum amount of
cash that may be received by any one shareholder, and the percentage of the
total consideration that will be cash are among the factors that will be
considered in determining whether a ruling is to be issued.
<PAGE>
Board of Directors
________ __, 199_
Page 24
It has been represented that the payment of cash in lieu of fractional shares of
Commercial stock is solely for the purpose of avoiding the expense and
inconvenience to Commercial of issuing fractional shares and does not represent
separately bargained for consideration. The total cash consideration that will
be paid in the transaction to the Company shareholders instead of issuing
fractional shares of Commercial common stock will not exceed one percent of the
total consideration that will be issued in the transaction to the Company
shareholders in exchange for their shares of Company stock. The fractional
share interests of each Company shareholder will be aggregated, and no Company
shareholder will receive cash attributable to the fractional shares in an amount
equal to or greater than the value of one full share of Commercial common stock.
Accordingly, cash received by a shareholder of Company otherwise entitled to
receive a fractional share of Commercial common stock in the exchange for
Company common stock should be treated as if the fractional shares were
distributed as part of the exchange and then were redeemed by Commercial. These
cash payments should be treated as having been received as distributions in full
payment in exchange for the stock redeemed as provided in Section 302(a). The
receipt of cash should result in gain or loss measured by the difference between
the shareholder's basis of such fractional share interest exchanged and the cash
received. Such gain or loss should be capital gain or loss to a Company
shareholder, provided the Company shareholder's common stock was a capital asset
in the shareholder's hands and, as such, would be subject to the provisions and
limitations of Subchapter P of Chapter 1.
* * * * * * * * *
Our opinion is based solely upon:
. The representations, information, documents, and facts ("representations")
referred to in this letter;
. Our assumption (without independent verification or review) that all of the
representations and all of the original, copies, and signatures of documents
are accurate, true and authentic;
<PAGE>
Board of Directors
________ __, 199_
Page 25
. Our assumption (without independent verification or review) that there will
be timely execution and delivery of, and performance as required by the
representations and documents;
. Our assumption (without independent verification or review) that all
documents pertaining to the proposed transaction and provided for our review
are accurate, true and authentic.
Our opinion is limited to those expressed above and we express no opinion with
regard to any sections of the Code other than those referred to above. We
express no opinion with regard to the taxation of the proposed transaction
described herein under the laws of any state, local or foreign jurisdiction. We
express the opinions contained herein as of the date of this letter only.
We express no opinion regarding the federal income tax consequences to Company
shareholders attributable to Commercial's assumption of Company's obligation
under its 1994 Stock Option Plan.
In providing our opinion, we have necessarily relied on the relevant provisions
of the Code the regulations thereunder, and judicial and administrative
interpretations thereof which exist as of the date of this letter, all of which
are subject to change or modification by subsequent legislative, regulatory,
administrative, or judicial decisions. If there are any significant changes to
the federal income tax authorities cited above (changes for which we have no
responsibility to advise you), our opinion may become invalid and/or necessitate
(upon your request) reconsideration. Our opinion is not binding on the Internal
Revenue Service.
This opinion letter is solely for your information, for the information of your
shareholders, for the information of the Company shareholders and inclusion in
Form S-4 as filed with the Securities and Exchange Commission with regard to the
transaction described herein. Other than the uses indicated in the preceding
sentence, our opinion may not be relied upon, distributed, or disclosed by
anyone without the prior written consent of Deloitte & Touche LLP.
We hereby consent to the filing of this letter as an Exhibit to the Registration
Statement Form S-4 of Commercial Federal Corporation. We also consent to the
references to Deloitte & Touche LLP
<PAGE>
Board of Directors
________ __, 199_
Page 26
under the headings: _____________________ contained in the Prospectus/Proxy
which is part of this Registration Statement.
Sincerely,
Deloitte & Touche LLP
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Commercial Federal Corporation on Form S-4 of our report dated August 15, 1997
(September 11, 1997 as to Note 29) (which report expresses an unqualified
opinion and includes and explanatory paragraph referring to a change in the
method of accounting for mortgage servicing rights in fiscal year 1996),
incorporated by reference in the Annual Report on Form 10-K of Commercial
Federal Corporation for the year ended June 30, 1997 and to the reference to us
under the heading "Experts" in the Prospectus, which is part of this
Registration Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Omaha, Nebraska
December 16, 1997
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Commercial Federal Corporation on Form S-4 of our report of Mid Continent
Bancshares, Inc. dated November 12, 1996, (which contains an emphasis paragraph
indicating that the Company changed its method of accounting for mortgage
servicing rights for the year ended September 30, 1995 and changed its method of
accounting for income taxes for the year ended September 30, 1994), and to the
reference to us as it relates to Mid Continent Bancshares, Inc. under the
heading "Experts" in the proxy statement/prospectus, which is part of this
Registration Statement.
/s/ Deloitte & Touche LLP
- -------------------------
Deloitte & Touche LLP
Kansas City, Missouri
December 19, 1997
<PAGE>
[LETTERHEAD OF RP FINANCIAL, LC. APPEARS HERE]
December 19, 1997
Board of Directors
Mid Continent Bancshares, Inc.
124 West Central
El Dorado, Kansas 67042
Gentlemen:
We hereby consent to the use of our firm's name in the Form S-4
Registration Statement of Commercial Federal Corporation and any amendments
thereto, and the inclusion of, summary of an references to our fairness opinion
in such filings including the combined Prospectus/Proxy Statement of Commercial
Federal Corporation and Mid Continent Bancshares, Inc.
Very truly yours,
RP FINANCIAL, LC.
/s/ William E. Pommerening
----------------------------
William E. Pommerening
Managing Director
<PAGE>
MID CONTINENT BANCSHARES, INC.
ANNUAL MEETING OF STOCKHOLDERS - FEBRUARY 24, 1998
The undersigned hereby appoints the Board of Directors of Mid Continent
Bancshares, Inc. ("Mid-Continent") or its designee, with full powers of
substitution, to act as attorneys and proxies for the undersigned, to vote all
shares of Common Stock of the Company which the undersigned is entitled to vote
at the Annual Meeting of Stockholders (the "Meeting"), to be held at El Dorado
Country Club, 1100 Country Club Lane, El Dorado, Kansas, on February 24, 1998,
at 2:00 p.m. and at any and all adjournments thereof, in the following manner:
FOR AGAINST ABSTAIN
--- ------- -------
1. The proposal to approve the Reorganization [ ] [ ] [ ]
and Merger Agreement (the "Merger Agreement")
dated September 2, 1997, by and among Com-
mercial Federal Corporation ("Commercial"),
Commercial Federal Bank, a Federal Savings
Bank, Mid Continent, and Mid-Continent
Federal Savings Bank, pursuant to which Mid-
Continent will be merged with and into
Commercial, and stockholders of Mid-
Continent will receive Commercial Common
Stock, and cash in lieu of fractional
shares of Commercial Common Stock, for
each share of Mid Continent Common Stock
held by them.
2. The proposal to approve an amendment to Mid- [ ] [ ] [ ]
Continent's Articles of Incorporation in
connection with the Merger Agreement.
3. The proposal to adjourn the Meeting to [ ] [ ] [ ]
permit further solicitation in the event
that an insufficient number of shares is
present in person or by proxy to approve
the Merger Agreement or the Articles Amendment.
FOR WITHHELD
--- --------
4. The election as director of all nominees [ ] [ ]
listed below, each for a 3 year term (except
as market to the contrary):
Ron J. McGraw
Larry R. Goddard
INSTRUCTIONS: To withhold your vote for any individual nominee, insert the
- ------------
nominee's name on the line provided below.
-----------------------------------------------
FOR AGAINST ABSTAIN
--- ------- -------
5. The ratification of Deloitte & Touche LLP [ ] [ ] [ ]
as independent auditors of Mid Continent
Bancshares, Inc. for the fiscal year ending
September 30, 1998.
In their discretion, such attorney and proxies are authorized to vote upon such
other business an may properly come before the Meeting or any adjournments
thereof.
The Board of Directors recommends a vote "FOR" all of the above listed
---
propositions.
<PAGE>
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR EACH OF THE PROPOSITIONS STATED. IF ANY OTHER BUSINESS
IS PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS
PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS
OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Meeting, or
at any adjournments thereof, and after notification to the Secretary of the
Corporation at the Meeting of the stockholder's decision to terminate this
proxy, the power of said attorneys and proxies shall be deemed terminated and of
no further force and effect. The undersigned may also revoke this proxy by
filing a subsequently dated proxy or by notifying the Secretary of the
Corporation of his or her decision to terminate this proxy.
The undersigned acknowledges receipt from the Corporation prior to the
execution of this proxy of an annual report, a Notice of Annual Meeting of
Stockholders and a proxy statement dated January 7, 1998.
Please check here if you
Dated: , 1998 [ ] plan to attend the Meeting.
------------------
- -------------------------------------- --------------------------------
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
- -------------------------------------- --------------------------------
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on this proxy. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder should sign.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE PRE-PAID ENVELOP.
