<PAGE>
As filed with the Securities and Exchange Commission on May 1, 1998
Registration No.333-49967
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1
TO
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)
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NEBRASKA 6135 47-0658852
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(State or other jurisdiction of (Primary Standard Industrial (IRS Employer Identification No.)
incorporation or organization) Classification Code Number)
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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 GREGORY A. GEHLMANN, 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 Effective Time, as defined in the Reorganization and Merger
Agreement dated as of March 9, 1998 by and among the Registrant, Commercial
Federal Bank, a Federal Savings Bank, First Colorado Bancorp, Inc. and First
Federal Bank of Colorado, attached as Annex A to the Prospectus/Joint 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.
<PAGE>
[COMMERCIAL FEDERAL CORPORATION LETTERHEAD]
May 14, 1998
SPECIAL MEETING
JULY 3, 1998
Dear Fellow Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders of
Commercial Federal Corporation ("Commercial") to be held on Friday, July 3,
1998, at __:__ .m. at ________________, ___________________, _____________,
Omaha, Nebraska. Your Board of Directors and Management look forward to
greeting personally those stockholders able to attend.
At this meeting, as set forth in the accompanying Notice of Special Meeting
and Prospectus/Joint Proxy Statement, stockholders will be asked to consider and
act upon a Reorganization and Merger Agreement, dated March 9, 1998 (the "Merger
Agreement"), by and among Commercial, Commercial Federal Bank, a Federal Savings
Bank (the "Bank"), and First Colorado Bancorp, Inc. ("First Colorado") and First
Federal Bank of Colorado ("First Federal"), under which First Colorado will be
merged (the "Merger") with and into Commercial and First Federal will be merged
with and into the Bank with the Bank as the surviving institution. Upon
consummation of the Merger, each outstanding share of First Colorado'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 (the "Exchange Ratio"), all as more fully described in the
accompanying Prospectus/Joint Proxy Statement. You will also be asked to
consider and vote upon the approval and adoption of an amendment to Commercial's
Articles of Incorporation to increase the number of authorized shares of
Commercial common stock (the "Articles Amendment") and to approve an amendment
to Commercial's 1996 Stock Option and Incentive Plan.
Merrill Lynch an investment banking firm, has issued its opinion to
Commercial's Board of Directors regarding the fairness of the Exchange Ratio
pursuant to the Merger Agreement as of the date of the Merger Agreement. Such
opinion was updated as of the date hereof. A copy of the opinion, as updated,
is attached as Annex D to the Prospectus/Joint Proxy Statement.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE PROPOSED MERGER AND
RECOMMENDS THAT STOCKHOLDERS VOTE THEIR SHARES "FOR" APPROVAL OF THE MERGER
AGREEMENT AND THE MERGER AND THE AMENDMENT TO COMMERCIAL'S ARTICLES. THE BOARD
OF DIRECTORS BELIEVES THAT THE PROPOSED MERGER IS IN THE BEST INTEREST OF
COMMERCIAL AND ITS STOCKHOLDERS.
Your vote is important, regardless of the number of shares you own. We
urge you to sign, date and mail the enclosed proxy as soon as possible, even if
you currently plan to attend the annual meeting. This will not prevent you from
voting in person, but will assure that your vote is counted if you are unable to
attend the meeting.
On behalf of your Board of Directors, thank you for your continued support.
Sincerely,
William A. Fitzgerald James A. Laphen
Chairman of the Board and President and
Chief Executive Officer Chief Operating Officer
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[LETTER TO FIRST COLORADO STOCKHOLDERS]
May 14, 1998
Dear Fellow Stockholder:
You are cordially invited to attend the Special Meeting of Stockholders
(the "Meeting") of First Colorado Bancorp, Inc. ("First Colorado"), which will
be held at the Arvada Center for the Arts and Humanities, 6901 Wadsworth
Boulevard, Arvada, Colorado on Monday, July 13, 1998, at 3:00 p.m. At the
meeting, you will be asked to consider and vote upon a Reorganization and Merger
Agreement, dated March 9, 1998 (the "Merger Agreement"), by and among Commercial
Federal Corporation ("Commercial") and Commercial Federal Bank, a Federal
Savings Bank (the "Bank"), and First Colorado and First Federal Bank of Colorado
("First Federal"), under which First Colorado will be merged (the "Merger") with
and into Commercial. Upon consummation of the Merger, each outstanding share of
First Colorado'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 (the "Exchange Ratio"), all as more
fully described in the accompanying Prospectus/Joint Proxy Statement.
Enclosed with this letter are a Notice of Special Meeting, the
Prospectus/Joint 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 First Colorado's Board of Directors in connection with the
Meeting.
The Wallach Company, Inc., an investment banking firm, has issued its
opinion to First Colorado's Board of Directors regarding the fairness, from a
financial point of view, of the Exchange Ratio pursuant to the Merger Agreement.
A copy of the opinion is attached as Annex C to the Prospectus/Joint Proxy
Statement.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE PROPOSED MERGER AND
MERGER AGREEMENT AND RECOMMENDS THAT STOCKHOLDERS VOTE THEIR SHARES "FOR"
APPROVAL OF THE MERGER AND MERGER AGREEMENT. THE BOARD OF DIRECTORS BELIEVES
THAT THE PROPOSED MERGER IS IN THE BEST INTEREST OF FIRST COLORADO AND ITS
STOCKHOLDERS. THE AFFIRMATIVE VOTE OF A MAJORITY OF FIRST COLORADO'S
OUTSTANDING SHARES ENTITLED TO VOTE IS NECESSARY TO APPROVE THE MERGER AND THE
MERGER AGREEMENT. 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.
We urge you to consider carefully all of the materials in the
Prospectus/Joint 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,
Malcolm E. Collier, Jr.
Chairman of the Board, Chief
Executive Officer and President
PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME. YOU WILL RECEIVE
INSTRUCTIONS FOLLOWING THE MERGER FOR EXCHANGE OF STOCK CERTIFICATES.
<PAGE>
COMMERCIAL FEDERAL CORPORATION
2120 SOUTH 72ND STREET
OMAHA, NEBRASKA 68124
(402) 554-9200
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 3, 1998
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the
"Commercial Special Meeting") of Commercial Federal Corporation ("Commercial")
will be held on Friday, July 3, 1998, at _______________, ____________, Omaha,
Nebraska at :__.m. local time, for the purpose of considering and voting upon
the following:
A proxy card and a Prospectus/Joint Proxy Statement are enclosed herewith.
The Commercial Special Meeting is for the purpose of considering and acting
upon:
1. A proposal to approve the Reorganization and Merger Agreement (the "Merger
Agreement") dated March 9, 1998, by and among Commercial, Commercial
Federal Bank, a Federal Savings Bank (the "Bank"), First Colorado Bancorp,
Inc. ("First Colorado"), and First Federal Bank of Colorado ("First
Federal"), pursuant to which First Colorado will be merged with and into
Commercial (the "Merger"), and stockholders of First Colorado will receive
Commercial Common Stock, and cash in lieu of fractional shares of
Commercial Common Stock, for each share of First Colorado Common Stock held
by them, based upon an exchange ratio and to approve an amendment to
Commercial's Articles of Incorporation to increase the number of authorized
shares of Commercial Common Stock from 50,000,000 to 70,000,000 with such
additional shares to be issued in the Merger, as more fully described in
the accompanying Prospectus/Joint Proxy Statement;
2. An amendment to Commercial's Articles of Incorporation to increase the
number of authorized shares of common stock from 70,000,000 shares to
120,000,000 shares;
3. An amendment to Commercial's 1996 Stock Option and Incentive Plan to
increase the number of shares reserved thereunder; and
4. To consider and vote upon such other business as may properly come before
the Commercial Special Meeting.
NOTE: The Board of Directors is not aware of any other business to come
before the Commercial Special Meeting, or any adjournment or postponement
thereof.
Any action may be taken on the foregoing matters at the Commercial Special
Meeting on the date specified above or on any date or dates to which, by
original or later adjournment or postponement, the Commercial Special Meeting
may be adjourned or postponed. Pursuant to the Bylaws, the Board of Directors
has fixed the close of business on ___________, 1998, as the record date for
determination of the stockholders entitled to notice of and to vote at the
Commercial Special Meeting and any adjournments or postponements thereof.
You are requested to sign and date the enclosed form of proxy which is
solicited by the Board of Directors and to mail it promptly in the enclosed
postage-paid envelope. The proxy will not be used if you attend and vote at the
Commercial Special Meeting in person.
BY ORDER OF THE BOARD OF DIRECTORS
GARY L. MATTER
SECRETARY
Omaha, Nebraska
May 14, 1998
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FIRST COLORADO BANCORP, INC.
215 SOUTH WADSWORTH BOULEVARD
LAKEWOOD, COLORADO 80226
(303) 232-2121
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 13, 1998
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the "First
Colorado Special Meeting") of First Colorado Bancorp, Inc. ("First Colorado")
will be held on July 13, 1998, at the Arvada Center for the Arts and Humanities,
6901 Wadsworth Boulevard, Arvada, Colorado at 3:00 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 March 9, 1998, by and among Commercial Federal
Corporation ("Commercial"), Commercial Federal Bank, a Federal Savings Bank
(the "Bank"), First Colorado, and First Federal Bank of Colorado ("First
Federal"), pursuant to which First Colorado will be merged with and into
Commercial (the "Merger"), and stockholders of First Colorado will receive
shares of the common stock, $.01 par value per share of Commercial (the
"Commercial Common Stock") and cash in lieu of fractional shares of
Commercial Common Stock, for each share of the common stock, $.10 par value
per share of First Colorado (the "First Colorado Common Stock") held by
them, based upon an exchange ratio as more fully described in the
accompanying Prospectus/Joint Proxy Statement.
2. To consider and vote upon such other business as may properly come before
the First Colorado Special Meeting.
The transaction of such other matters as may properly come before the First
Colorado Special 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 First
Colorado Special 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,
May 5, 1998, are entitled to notice of and to vote at the First Colorado Special
Meeting and any adjournments thereof. The affirmative vote of a majority of
outstanding First Colorado Common Stock entitled to vote is necessary to approve
the Merger and the Merger Agreement. Accordingly, failure to vote either by
failing to return your proxy or failing to vote in person at the First Colorado
Special Meeting will have the same effect as a vote against the Merger Agreement
and Merger. We urge you to execute and return the enclosed proxy as soon as
possible to ensure that your shares will be represented at the First Colorado
Special Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Elaine M. Samuelson
Secretary
Lakewood, Colorado
May 14, 1998
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF
THE PROPOSAL STATED ABOVE. PLEASE SIGN AND RETURN THE ENCLOSED PROXY AS
PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE FIRST COLORADO
SPECIAL MEETING IN PERSON. YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS
VOTED AT THE FIRST COLORADO SPECIAL MEETING.
<PAGE>
PROSPECTUS/JOINT PROXY STATEMENT
_________________________________________________________
COMMERCIAL FEDERAL CORPORATION
PROSPECTUS
UP TO 19,439,562 SHARES OF COMMON STOCK
PAR VALUE $.01 PER SHARE (SUBJECT TO ADJUSTMENT)
_________________________________________________________
_________________________________________________________
COMMERCIAL FEDERAL CORPORATION
FIRST COLORADO BANCORP, INC.
PROXY STATEMENT
FOR SPECIAL MEETINGS OF STOCKHOLDERS TO BE HELD
ON JULY 3, 1998 AND JULY 13, 1998, RESPECTIVELY
This Prospectus/Joint Proxy Statement relates to approximately 19,439,562
shares of the common stock, $.01 par value per share (the "Commercial Common
Stock") of Commercial Federal Corporation ("Commercial") which are issuable to
the stockholders of First Colorado Bancorp, Inc. ("First Colorado") upon
consummation of the proposed merger of First Colorado with and into Commercial
with Commercial as the surviving corporation (the "Merger"), in accordance with
a Reorganization and Merger Agreement dated March 9, 1998 (the "Merger
Agreement"), by and among Commercial; Commercial Federal Bank, a Federal Savings
Bank (the "Bank"), the wholly-owned savings institution subsidiary of
Commercial; First Colorado; and First Federal Bank of Colorado ("First
Federal"), the wholly-owned savings institution subsidiary of First Colorado,
which sets forth the terms and conditions of the Merger and also provides for
the subsequent merger of First Federal into the Bank (the "Bank Merger").
Pursuant to the Merger Agreement, each share of the common stock, $.10 par
value per share, of First Colorado (the "First Colorado Common Stock")
outstanding at the effective time of the Merger (the "Effective Time") 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") equal to the
quotient obtained by dividing 30 by the "Average NYSE Closing Price" (as such
term is defined below); provided that, if such quotient is greater than .9677,
then the Exchange Ratio shall equal .9677 or if such quotient is less than
.7895, then the Exchange Ratio shall be .7895. The term Average NYSE Closing
Price is defined in the Merger Agreement as the arithmetic mean (carried to four
decimal places) of the closing prices per share of Commercial Common Stock as
reported on the New York Stock Exchange ("NYSE") composite tape (as reported in
The Wall Street Journal or, if not reported therein, in another mutually agreed
upon authoritative source) for the 15 trading days ending on (and including) the
fifth trading day immediately preceding the closing date of the Merger (the
"Closing Date").
This Prospectus also serves as a Joint Proxy Statement of Commercial and
First Colorado and is being furnished to the stockholders of Commercial and
First Colorado in connection with the solicitation of proxies by the Boards of
Directors of Commercial and First Colorado for use at their respective special
meetings of stockholders (including any adjournments or postponements thereof),
to be held on July 3, 1998 and July 13, 1998, respectively (collectively, the
"Special Meetings"), to consider and vote upon the Merger Agreement and the
Merger and, in the case of Commercial, the amendment to Article IV of its
Articles of Incorporation to increase the number of authorized shares of
Commercial Common Stock (the "Articles Amendment") and to amend the Commercial
Federal Corporation 1996 Stock Option and Incentive Plan to increase the number
of shares reserved for issuance thereunder (the "Option Plan Amendment").
<PAGE>
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 Merger. See "Available Information." This
Prospectus/Joint Proxy Statement constitutes a prospectus of Commercial with
respect to the issuance of shares of Commercial Common Stock to the stockholders
of First Colorado upon consummation of the Merger.
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/JOINT 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/Joint Proxy Statement and the accompanying proxy card are
first being sent to the stockholders of Commercial and First Colorado on or
about May 14, 1998.
This Prospectus/Joint 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 First Colorado upon consummation of the
Merger. No person is authorized to make use of this Prospectus/Joint Proxy
Statement in connection with such resales, although such securities may be
traded without the use of this Prospectus/Joint Proxy Statement by those
stockholders of Commercial not deemed to be affiliates of Commercial or First
Colorado.
THE DATE OF THIS PROSPECTUS/JOINT PROXY STATEMENT IS _____________, 1998
<PAGE>
PROSPECTUS/JOINT PROXY STATEMENT
TABLE OF CONTENTS
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Page
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AVAILABLE INFORMATION...................................................... 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................ 2
SUMMARY.................................................................... 3
The Parties................................................................ 3
Special Meetings........................................................... 4
The Merger................................................................. 5
Comparison of Stockholder Rights........................................... 9
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
OF COMMERCIAL FEDERAL CORPORATION........................................ 10
Financial Condition Data and Capital Ratios................................ 10
Operating Data............................................................. 11
Operating Ratios and Other Data............................................ 12
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
OF FIRST COLORADO BANCORP, INC........................................... 13
Financial Condition Data and Capital Ratios................................ 13
Operating Data............................................................. 14
Operating Ratios and Other Data............................................ 14
UNAUDITED PRO FORMA COMBINED PER SHARE DATA................................ 15
UNAUDITED HISTORICAL PRO FORMA COMBINED FINANCIAL INFORMATION.............. 17
Unaudited Historical Pro Forma Combined Statement of Financial Condition... 17
Unaudited Historical Pro Forma Condensed Combined Statements of Operations. 21
THE SPECIAL MEETINGS....................................................... 28
Commercial Federal Corporation Special Meeting............................. 28
First Colorado Bancorp, Inc. Special Meeting............................... 29
COMMERCIAL FEDERAL CORPORATION AND
COMMERCIAL FEDERAL BANK, A FEDERAL SAVINGS BANK.......................... 30
FIRST COLORADO BANCORP, INC. AND
FIRST FEDERAL BANK OF COLORADO........................................... 32
THE MERGER................................................................. 33
General.................................................................... 33
Background of the Merger................................................... 33
Reasons for the Merger and Recommendations of Boards of Directors.......... 34
Opinion of First Colorado's Financial Advisor.............................. 35
Opinion of Commercial Financial Advisor.................................... 38
Conversion of First Colorado Common Stock.................................. 44
Treatment of First Colorado Stock Options.................................. 45
No Dissenters' Appraisal Rights............................................ 45
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TABLE OF CONTENTS (Continued Page
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The Bank Merger............................................................. 46
Management after the Merger................................................. 46
Representations and Warranties.............................................. 46
Covenants Pending the Merger................................................ 46
No Solicitation............................................................. 49
Conditions to Consummation of the Merger.................................... 49
Amendment or Termination of the Merger Agreement............................ 50
Expenses.................................................................... 51
Required Regulatory Approvals............................................... 51
Closing; Merger Effective Times............................................. 51
Employee Benefit Plans after the Merger..................................... 52
Interests of Certain Persons in the Merger.................................. 52
Federal Income Tax Consequences............................................. 54
Accounting Treatment........................................................ 56
Issuance of Shares from the Treasury........................................ 56
Resale of Commercial Common Stock; Restrictions on Transfer................. 57
New York Stock Exchange Listing............................................. 57
Stock Option Agreement...................................................... 57
COMMON STOCK PRICES AND DIVIDENDS........................................... 59
COMPARISON OF STOCKHOLDER RIGHTS............................................ 61
COMMERCIAL ARTICLES AMENDMENT............................................... 67
COMMERCIAL OPTION PLAN AMENDMENT............................................ 69
STOCKHOLDER PROPOSALS....................................................... 70
LEGAL MATTERS............................................................... 70
EXPERTS..................................................................... 70
OTHER MATTERS............................................................... 71
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ANNEX:
Annex A -- Reorganization and Merger Agreement (excluding exhibits)
Annex B -- Stock Option Agreement
Annex C -- Opinion of The Wallach Company, Inc.
Annex D -- Opinion of Merrill Lynch
ii
<PAGE>
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION
OTHER THAN THOSE CONTAINED OR INCORPORATED IN THIS PROSPECTUS/JOINT PROXY
STATEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS/JOINT 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/JOINT 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/JOINT PROXY STATEMENT SPEAKS AS OF THE DATE HEREOF UNLESS OTHERWISE
SPECIFICALLY INDICATED. INFORMATION CONTAINED IN THIS PROSPECTUS/JOINT PROXY
STATEMENT REGARDING COMMERCIAL HAS BEEN FURNISHED BY COMMERCIAL, AND INFORMATION
HEREIN REGARDING FIRST COLORADO HAS BEEN FURNISHED BY FIRST COLORADO. NEITHER
COMMERCIAL NOR FIRST COLORADO 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 Merger. This Prospectus/Joint 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 First Colorado 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/Joint
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 quarters ended
September 30, 1997 and December 31, 1997;
(iii) Commercial's Current Reports on Form 8-K dated August 18, 1997,
September 2, 1997, September 11, 1997, November 18, 1997, December 8,
1997, December 15, 1997, February 11, 1998 and March 9, 1998; and
1
<PAGE>
(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;
The following documents previously filed with the Commission by First
Colorado (File No. 0-27126) are hereby incorporated by reference in this
Prospectus/Joint Proxy Statement:
(i) First Colorado's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997; and
(ii) First Colorado's Current Report on Form 8-K dated March 9, 1998.
All documents subsequently filed by Commercial and First Colorado 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/Joint Proxy Statement and prior to the
date of the Special Meetings shall be deemed to be incorporated by reference in
this Prospectus/Joint 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/Joint 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/Joint Proxy Statement, except as so modified or superseded.
THIS PROSPECTUS/JOINT PROXY STATEMENT INCORPORATES BY REFERENCE OTHER
DOCUMENTS RELATING TO COMMERCIAL AND FIRST COLORADO 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 FIRST COLORADO, TO ELAINE M. SAMUELSON, SECRETARY, FIRST COLORADO BANCORP,
INC., 215 SOUTH WADSWORTH BOULEVARD, LAKEWOOD, COLORADO 80226, TELEPHONE (303)
232-2121. IN ORDER TO ENSURE TIMELY DELIVERY OF ANY REQUESTED DOCUMENTS, THE
REQUEST SHOULD BE MADE NO LATER THAN THE CLOSE OF BUSINESS ON JULY 6, 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 PARTIES
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 December 31, 1997, Commercial had total assets
of $7.2 billion and total stockholders' equity of $458.4 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
March 31, 1998, after its completed acquisitions of First National Bank Shares,
LTD. ("First National") (January 30, 1998), Liberty Financial Corporation
("Liberty") (February 13, 1998) and Mid Continent Bancshares, Inc. ("Mid
Continent") (February 27, 1998) and including anticipated branch consolidations,
Commercial operated 34 branch offices in Nebraska, 21 branch offices in greater
metropolitan Denver, Colorado, 19 branch offices in Oklahoma, 38 branch offices
in Kansas, 45 branch offices in Iowa and seven branch offices in Arizona.
Throughout its 111 year history, Commercial has emphasized customer service. To
serve its customers, Commercial conducts loan origination activities through its
164 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 six-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.
FIRST COLORADO BANCORP, INC. AND FIRST FEDERAL BANK OF COLORADO. First
Colorado is a Colorado corporation organized in September 1995, at the direction
of the Board of Directors of First Federal to facilitate the conversion of First
Savings Capital, M.H.C. ("Mutual Holding Company") from the mutual to stock form
of ownership and to acquire and hold all of the capital stock of First Federal
(collectively, the "Conversion and Reorganization"). Prior to the consummation
of the Conversion and Reorganization, the Mutual Holding Company was the
majority shareholder of First Federal and upon consummation of the Conversion
and Reorganization, the Mutual Holding Company was merged with and into First
Federal. First Colorado acquired First Federal as a wholly owned subsidiary
upon the consummation
3
<PAGE>
of the Conversion and Reorganization on December 29, 1995. In connection with
the Conversion and Reorganization, First Colorado sold 13,403,798 shares of
First Colorado Common Stock to the public in an initial public offering and
issued 6,619,539 shares in exchange for the outstanding shares of First Federal
held by persons other than the Mutual Holding Company. As of December 31, 1997,
First Colorado had total assets of $1.6 billion, total deposits of $1.2 billion,
and shareholders' equity of $209.3 million or 13.5% of total assets.
First Colorado is a unitary savings and loan holding company. The primary
activity of First Colorado is holding the common stock of First Federal. First
Colorado has no significant assets other than all of the outstanding shares of
First Federal common stock, the note evidencing First Colorado's $10.5 million
loan to First Federal's Employee Stock Ownership Plan, and the portion of the
net proceeds from the initial public offering of First Colorado Common Stock
retained by First Colorado, which have been invested in a $3.6 million loan to
First Federal and in deposits in First Federal and in a stock repurchase program
resulting in the repurchase of 3.7 million shares of First Colorado common stock
for $58.9 million (3.3 million shares with a cost of $53.6 million at December
31, 1997).
First Federal is a federally chartered stock savings bank, originally
chartered by the State of Colorado as the Cooperative Building and Loan
Association on April 25, 1885. In connection with the Conversion and
Reorganization, First Federal changed its name from First Federal Savings Bank
of Colorado to its current name and became a wholly owned subsidiary of First
Colorado. A federal charter was granted to First Federal in 1934, the same year
that deposit accounts became federally insured and First Federal became a member
of the Federal Home Loan Bank ("FHLB") System.
First Federal's deposits are insured by the FDIC under the Savings
Association Insurance Fund ("SAIF"), and First Federal is regulated by the
Office of Thrift Supervision (the "OTS").
The principal business of First Federal is the acceptance of savings
deposits from the general public and the origination and purchase of mortgage
loans for the purpose of constructing, financing or refinancing one-to-four-
family residences and other improved residential and commercial real estate.
First Federal is also active in the origination of home equity loans. First
Federal's income is derived largely from interest on interest-earning assets
such as loans, mortgage-backed securities and investments. Its principal
expenses are interest paid on deposits and borrowings, operating expenses and
provisions for loan losses.
First Colorado's and First Federal's executive offices are located at 215
S. Wadsworth Boulevard, Lakewood, Colorado 80226 and their telephone number is
(303) 232-2121.
THE SPECIAL MEETINGS
COMMERCIAL. The Commercial Special Meeting will be held on Friday, July 3,
1998 at _:__ _.m. at _________________, ________________, Omaha, Nebraska. At
the Commercial Special Meeting, stockholders of Commercial will consider and
vote upon proposals (1) to approve the Merger and the Merger Agreement; (2) to
approve the Articles Amendment; (3) to vote upon any other business which may be
properly brought before the Commercial Special Meeting. Stockholders of record
at the close of business on ___________, 1998 (the "Commercial 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
Commercial Common Stock is necessary to constitute a quorum at the Commercial
Special Meeting. The affirmative vote of the holders of at least two-thirds of
the issued and outstanding shares of Commercial Common Stock is required to
approve the Merger and the Merger Agreement, whereas the affirmative vote of at
least a majority of the votes cast is required to approve the Articles
Amendment. Commercial's directors and executive officers are expected to vote
all of the _______ (_____%) shares of Commercial's outstanding Common Stock
beneficially owned by them as of the Record Date "FOR" approval of the Merger
and the Merger Agreement, "FOR" approval of the Articles Amendment and "FOR"
approval of the Option Plan Amendment.
4
<PAGE>
FIRST COLORADO. The First Colorado Special Meeting will be held on Monday,
July 13, 1998 at 3:00 p.m. at the Arvada Center for the Arts and Humanities,
6901 Wadsworth Boulevard, Arvada, Colorado. At the First Colorado Special
Meeting, stockholders of First Colorado will consider and vote upon proposals
(1) to approve the Merger and the Merger Agreement; and (2) to vote upon any
other business which may be properly brought before the First Colorado Special
Meeting. Stockholders of record at the close of business on May 5, 1998 (the
"First Colorado 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 shares of First Colorado Common Stock entitled to vote is necessary to
constitute a quorum at the First Colorado Special Meeting. The affirmative vote
of the holders of at least a majority of the issued and outstanding shares of
First Colorado Common Stock is required to approve the Merger and the Merger
Agreement. First Colorado's directors and executive officers are expected to
vote all of the 939,902 shares (5.6% of First Colorado's outstanding Common
Stock) beneficially owned by them as of the Record Date "FOR" approval of the
Merger and the Merger Agreement (excluding shares underlying options).
For additional information, see the "The Special Meetings" herein.
THE MERGER
GENERAL. The Merger Agreement provides for the acquisition of First
Colorado by Commercial, and the subsequent merger of First Federal into the
Bank, as follows: (i) First Colorado will merge into Commercial, with
Commercial as the surviving corporation, pursuant to which the outstanding
shares of First Colorado 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 First Colorado Common Stock"; and (ii) First Federal
will, following the Merger, merge into the Bank, with the Bank as the surviving
savings institution. At the Effective Time, First Colorado will have merged
into Commercial. Upon the consummation of the Bank Merger (the "Bank Merger
Effective Time"), First Federal 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 Effective Time.
CONVERSION OF FIRST COLORADO COMMON STOCK. Pursuant to the Merger
Agreement, each share of First Colorado Common Stock outstanding at the
Effective Time (other than shares owned or held by First Colorado, Commercial or
any of the other subsidiaries other than in a fiduciary capacity or as a result
of debts previously contracted) 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") equal to the quotient obtained by dividing 30 by the
Average NYSE Closing Price; provided that, if such quotient is greater than
.9677, then the Exchange Ratio shall equal .9677 or if such quotient is less
than .7895, then the Exchange Ratio shall be .7895.
Based on the closing price per share of Commercial Common Stock on the NYSE
on May 5, 1998 of $_____, each share of First Colorado Common Stock would be
exchanged for ______ shares of Commercial Common Stock. The 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 First
Colorado Common Stock owned or held by Commercial or a subsidiary (other than in
a fiduciary capacity or pursuant to a debt previously contracted) would be
canceled. For additional information, see "The Merger -- Conversion of First
Colorado Common Stock" herein.
TREATMENT OF FIRST COLORADO STOCK OPTIONS. At the Effective Time, each
option outstanding under First Colorado's stock option plans shall be converted
into an option to purchase the number of shares of Commercial Common Stock equal
to the number of shares of First Colorado Common Stock issuable immediately
prior to the Effective Time upon exercise of such option (without regard to
restrictions on exercisability) multiplied by the Exchange Ratio upon the same
terms and conditions under the relevant option as were applicable immediately
prior to the Effective Time, except that the exercise price will be equal to the
exercise price of the option prior to the Effective Time divided by the Exchange
Ratio.
5
<PAGE>
For additional information, see "The Merger -- Treatment of First Colorado
Stock Options" and "-- Interests of Certain Persons in the Merger" herein.
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS OF
COMMERCIAL AND FIRST COLORADO. The Board of Directors of First Colorado
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 First Colorado and its
stockholders. The Board of Directors of Commercial believe that the Merger
Agreement and the Merger and the issuance of Commercial Common Stock pursuant to
the Merger Agreement are in the best interests of Commercial and its
stockholders. Each Board has approved the matters to be approved by its
respective stockholders. THE FIRST COLORADO BOARD RECOMMENDS THAT FIRST
COLORADO STOCKHOLDERS VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT AND THE
MERGER. THE COMMERCIAL BOARD RECOMMENDS THAT COMMERCIAL STOCKHOLDERS VOTE "FOR"
APPROVAL OF THE MERGER AGREEMENT AND THE MERGER AND "FOR" APPROVAL OF THE
ARTICLES AMENDMENT.
For additional information, see "The Merger -- General," " -- Background of
the Merger" and " -- Reasons for the Merger and Recommendations of the Boards of
Directors" herein and the Merger Agreement attached as Annex A hereto.
OPINIONS OF FINANCIAL ADVISORS. The Board of Directors of First Colorado
has received a written opinion of The Wallach Company, Inc. ("Wallach"), First
Colorado'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
Exchange Ratio is fair to the stockholders of First Colorado from a financial
point of view. As discussed in "The Merger -- Reasons for the Merger and
Recommendation of First Colorado Board of Directors," Wallach's opinion and
presentations were among the factors considered by First Colorado's Board of
Directors in reaching the determination to approve the Merger Agreement.
Wallach's opinion is updated as of the date hereof. A copy of Wallach's
opinion dated May 14, 1998 is attached as Annex C hereto, and the description
set forth herein is qualified in its entirety by reference to this opinion. See
"The Merger -- Opinion of First Colorado's Financial Advisor."
Similarly, Merrill Lynch has rendered an opinion to Commercial that, based
on and subject to the procedures, matters and limitations described in its
option and such other matters as it considered relevant as of the date of its
opinion, the Exchange Ratio is fair, from a financial point of view, to the
stockholders of Commercial. As discussed in "The Merger -- Reasons for the
Merger and Recommendations of the Boards of Directors -- Commercial's Reasons
for the Merger," Merrill Lynch's opinion and presentations were among the
factors considered by Commercial's Board of Directors in reaching the
determination to approve the Merger Agreement. See "The Merger -- Opinion of
Commercial's Financial Advisor" and Annex D hereto.
EFFECTIVE TIME. The Merger shall become effective on the date and at the
time on which articles of merger are filed with the Secretaries of State of the
States of Nebraska and Colorado in such form as required by, and in accordance
with, the relevant provisions of the Nebraska Business Corporation Act ("NBCA")
and the Colorado Business Corporation Act ("CBCA"), respectively. Subject to
the terms and conditions of the Merger Agreement, the Effective Time shall occur
on any such date as Commercial shall notify First Colorado in writing (such
notice to be at least five full trading days in advance of the Effective Time)
but in any event (i) not earlier than the later of (x) the satisfaction or
waiver of all conditions set forth in Article VII of the Merger Agreement and
(y) July 24, 1998 (such later date being referred to herein as the "Approval
Date") and (ii) subject to clause (i),not later than the first business day of
the first full calendar month commencing at least five full trading days after
the Approval Date, or at such other time as Commercial and First Colorado shall
agree.
DISSENTERS' APPRAISAL RIGHTS. Under Colorado law, stockholders of First
Colorado will not have any dissenters' rights of appraisal as a result of the
matters to be voted upon at the First Colorado Special Meeting. See "The Merger
- -- No Dissenters' Appraisal Rights."
6
<PAGE>
CONDITIONS TO THE MERGER. The obligations of Commercial and First Colorado
to effect the Merger are jointly subject to a number of conditions regarding,
among other things, (i) approval by the stockholders of First Colorado and
Commercial of the Merger; (ii) receipt of all required regulatory approvals;
(iii) the receipt by Commercial and First Colorado of a letter from Deloitte &
Touche llp stating that the Merger will qualify to be accounted for as a pooling
of interests; (iv) receipt of an opinion with respect to the tax effects of the
Merger; and (v) an effective registration statement. The obligations of
Commercial and the Bank to effect the Merger are subject to a number of
additional conditions regarding, among other things, (i) each of First Colorado
and First Federal having performed or complied in all material respects with
their respective agreements, covenants and obligations contained in the Merger
Agreement; (ii) the continued accuracy of each of the representations and
warranties of First Colorado and First Federal as contained in the Merger
Agreement; and (iii) receipt of a letter from First Colorado's independent
accountants regarding certain financial information included in this
Prospectus/Joint Proxy Statement and other matters. The obligations of First
Colorado and First Federal to effect the Merger and the transactions
contemplated in the Merger Agreement are subject to a number of additional
conditions regarding, among other things, (i) the continued accuracy of
Commercial's and the Bank's representations and warranties as set forth in the
Merger Agreement; and (ii) the performance of Commercial and the Bank of their
respective obligations and compliance with covenants and conditions under the
Merger Agreement. For additional information, see "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
"The Merger -- Required Regulatory Approvals" herein.
TERMINATION OF THE MERGER. The Merger Agreement may be terminated at any
time before the Effective Time, whether before or after approval by the
stockholders of Commercial or First Colorado, in certain circumstances,
including: (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
February 28, 1999; (iii) by either party if the terminating party cannot satisfy
a condition on or before February 28, 1999, unless caused by a breach of a
covenant or agreement of the terminating party under the Merger Agreement; (iv)
by either party upon occurrence of a material breach of any of the covenants or
agreements or any of the representations or warranties in the Merger Agreement;
(v) by Commercial, if the First Colorado Board withdraws, modifies or changes in
any manner adverse to Commercial its recommendation with respect to the Merger
and the Merger Agreement; and (vi) by First Colorado at any time during the two
trading day period commencing on the fourth day prior to the Closing Date, and
if (A) the Average NYSE Closing Price of Commercial Common Stock is less than
the product of the Starting Price ($34.875) and .85, and (B) the number obtained
by dividing the Average NYSE Closing Price of Commercial Common Stock by $34.875
is less than the "Index Ratio" (as such term is defined below); provided,
however, that First Colorado 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 lessor of (a) the quotient obtained by
dividing the product of .85, the Starting Price and .9677 by the Average NYSE
Closing Price of Commercial Common Stock, or (b) the quotient obtained by
dividing the product of the Index Ratio, the Starting Price and .9677 by the
Average NYSE Closing Price of Commercial Common Stock. For purposes of this
provision, the term "Index Ratio" is defined in the Merger Agreement as the
number equal to the product of (x) the quotient (carried to four decimal places)
obtained by dividing (A) the "Average Index Price" (as defined below) by (B) the
"Index Price" (as defined below) on the February 24, 1998, and (y) .90. The
term "Average Index Price" is defined in the Merger Agreement as the arithmetic
mean (carried to four decimal places) of the Index Prices for the fifteen
trading days ending on (and including) the fifth trading day immediately
preceding the Closing Date. The term "Index Price" is defined as, with respect
to a given date, the weighted average (weighted based on the number of fully-
diluted shares outstanding as last disclosed in publicly available documents
filed by the respective companies) of the closing prices on such date of the
companies comprising the Merrill Lynch Thrift Index, set forth in an exhibit to
the Merger Agreement, on such date, appropriately adjusted to reflect any stock
dividend, reclassification, recapitalization, split-up, combination, exchanges
of shares or similar transaction declared or effected by any of such companies
between February 24, 1998 and the close of business on the fifth trading day
immediately preceding the Closing Date.
7
<PAGE>
For additional information, see "The Merger -- Amendment or Termination of
the Merger Agreement" herein.
INTERESTS OF CERTAIN PERSONS IN THE MERGER. Shares of First Colorado
Common Stock held by directors, officers and employees of First Colorado will be
converted into Commercial Common Stock under the Merger Agreement on the same
basis as shares held by other First Colorado stockholders. Directors, officers
and employees of First Colorado who hold unexercised options to purchase First
Colorado Common Stock under the First Colorado Option Plan at the Effective Time
will have their stock options converted into options to purchase shares of
Commercial Common Stock in accordance with the terms of the Merger Agreement.
At the Record Date, officers and directors of First Colorado held options to
purchase 1,461,620 shares of First Colorado Common Stock with an average
exercise price of $12.72 per share. Certain directors and officers have
previously been awarded shares of restricted stock under the First Colorado
Management Stock Bonus Plan, subject to a five-year vesting schedule, the
vesting of such shares will be accelerated as a result of the execution of the
Merger Agreement.
Certain members of First Colorado's management and Board of Directors may
have interests in the Merger in addition to their interests as stockholders of
First Colorado generally. Those interests relate to, among other things, the
appointment of Malcolm E. Collier, Jr. Chairman and Chief Executive Officer of
First Colorado to Commercial's Board of Directors, the creation of an advisory
board of Commercial for the existing members of the Board of Directors of First
Colorado, a $250,000 contribution to a foundation established by First Colorado
and provisions in the Merger Agreement regarding indemnification and director
and officer insurance.
For additional information, see "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 First Colorado will rely
upon an opinion of Wachtell, Lipton, Rosen & Katz, to the effect that, among
other things, (i) the Merger will constitute a "reorganization" with the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code");
(ii) no gain or loss will be recognized by First Colorado shareholders who
receive solely Commercial Common Stock in exchange for shares of First Colorado
Common Stock (except with respect to cash received in lieu of a fractional share
interest in Commercial Common Stock). For additional information, see "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 First Colorado 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 First Colorado for
the entire fiscal year in which the Merger occurs; and the reported revenues and
expenses of Commercial and First Colorado for all prior periods presented will
be combined and restated as revenues and expenses of the surviving corporation
(Commercial). Pursuant to the Merger Agreement, the receipt of a letter from
Deloitte & Touche llp stating that the Merger will qualify as a pooling of
interests is a condition to the obligations of the Parties to consummate the
Merger. See "The Merger -- Accounting Treatment."
STOCK OPTION AGREEMENT. As a condition to Commercial's entry into the
Merger Agreement, Commercial and First Colorado entered into a Stock Option
Agreement dated March 9, 1998 (the "Stock Option Agreement"), pursuant to which
First Colorado granted to Commercial an option to purchase 3,348,533 shares
(19.9% of the outstanding shares of First Colorado Common Stock, excluding
shares to be issued pursuant to the Stock Option Agreement), subject to
adjustment, of authorized First Colorado Common Stock upon or after the
occurrence of a "Purchase Event" (defined herein). The exercise price per share
is equal to $24.125, subject to adjustment. The Stock Option Agreement also
contains provisions which may require First Colorado to repurchase the option
from Commercial or the holder of the option together with all shares of First
Colorado Common Stock purchased by Commercial pursuant to the Stock Option
8
<PAGE>
Agreement. The Stock Option Agreement is intended to increase the likelihood
that the Merger will be consummated in accordance with the terms of the Merger
Agreement. Consequently, certain aspects of the Stock Option Agreement may
have the effect of discouraging persons who otherwise might be interested in
acquiring all or a significant interest in First Colorado from considering or
proposing such an acquisition, even if such persons were prepared to pay for the
First Colorado Common Stock a price in excess of that being paid by Commercial
in the Merger. For additional information, see "The Merger -- Stock Option
Agreement" and the Stock Option Agreement, which is attached hereto as Annex B.
COMPARISON OF STOCKHOLDER RIGHTS
Upon consummation of the Merger, holders of First Colorado Common Stock,
whose rights are presently governed by Colorado law and First Colorado's
Articles of Incorporation and Bylaws, and indirectly First Federal Charter and
Bylaws, will become stockholders of Commercial, a Nebraska corporation.
Accordingly, their rights will be governed by the Nebraska Business Corporation
Act and the Articles of Incorporation and Bylaws of Commercial, and indirectly
by the Bank's Charter and Bylaws. Certain differences arise from the change in
governing law, as well as from differences between the Articles of Incorporation
and Bylaws of First Colorado and the Articles of Incorporation and Bylaws of
Commercial and between the Charter and Bylaws of First Federal and the Bank. In
addition, both Commercial and First Colorado have adopted shareholder rights
plans. Certain differences exist between the Commercial shareholder rights plan
and the First Colorado shareholder rights plan. For detailed information in
this regard, see "Comparison of Stockholder Rights" herein.
9
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION OF
COMMERCIAL FEDERAL CORPORATION
The following summary historical consolidated financial data of Commercial
is as of and for the years ended June 30, 1997, 1996, 1995, 1994 and 1993. The
financial data presented below has not been restated, nor is such financial data
required to be restated, for the recently completed mergers with Liberty
(completed February 13, 1998) and Mid Continent (completed February 27, 1998)
which were accounted for as poolings of interests. 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 six months ended December 31, 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 six months ended December 31, 1997 and 1996
should be read in conjunction with Commercial's unaudited Consolidated Financial
Statements and the Notes thereto for the six months ended December 31, 1997 and
1996 included in Commercial's Quarterly Report on Form 10-Q for the quarter
ended December 31, 1997, which is incorporated herein by reference. The
consolidated financial data for the six months ended December 31, 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% 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 prior to December 15, 1997,
presented in this Prospectus/Joint 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
December 31
1997
------------
(Unaudited)
Total assets........................................ $ 7,189,342
Investment securities (1)........................... 445,013
Mortgage-backed securities (2)...................... 1,031,945
Loans receivable, net (3)........................... 5,307,086
Goodwill and core value of deposits................. 45,074
Deposits............................................ 4,248,932
Advances from Federal Home Loan Bank................ 1,716,829
Securities sold under agreements to repurchase..... 564,294
Other borrowings.................................... 102,304
Stockholders' equity................................ 458,421
Book value per common share (4)..................... 14.06
Tangible book value per common share(4)(5).......... 12.68
Regulatory capital ratios of the Bank:
Tangible capital.................................. 6.69%
Core capital (Tier 1 capital)..................... 6.83%
Risk-based capital:
Tier 1 capital................................ 13.38%
Total capital................................. 14.40%
Principal balance of loans serviced for others...... 5,798,600
<CAPTION>
At June 30,
----------------------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ----------- ----------- ----------- -----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Total assets........................................ $7,096,665 $ 6,607,670 $ 6,569,579 $ 5,982,307 $ 5,262,336
Investment securities (1)........................... 399,057 253,043 300,481 290,807 254,889
Mortgage-backed securities (2)...................... 1,025,763 1,180,046 1,364,907 1,350,402 952,539
Loans receivable, net (3)........................... 5,258,739 4,813,164 4,540,692 3,970,626 3,655,740
Goodwill and core value of deposits................. 48,178 40,734 37,263 67,661 87,946
Deposits............................................ 4,378,919 4,304,576 4,011,323 3,675,825 2,731,127
Advances from Federal Home Loan Bank................ 1,415,506 1,350,290 1,787,352 1,625,456 1,868,779
Securities sold under agreements to repurchase..... 639,294 380,755 208,373 157,432 154,862
Other borrowings.................................... 128,982 58,546 65,303 66,640 76,966
Stockholders' equity................................ 426,106 413,277 337,614 304,568 297,848
Book value per common share (4)..................... 13.18 12.17 10.51 9.56 9.46
Tangible book value per common share(4)(5).......... 11.69 10.97 9.35 7.44 6.66
Regulatory capital ratios of the Bank:
Tangible capital.................................. 6.31% 6.18% 5.16% 4.69% 4.62%
Core capital (Tier 1 capital)..................... 6.47% 6.41% 5.47% 5.53% 5.93%
Risk-based capital:
Tier 1 capital................................ 12.79% 12.56% 12.02% 12.18% 11.93%
Total capital................................. 13.81% 13.62% 13.12% 13.16% 12.81%
Principal balance of loans serviced for others...... 5,951,800 5,869,800 5,151,100 4,635,945 4,327,354
</TABLE>
- --------------
(1) Includes investment securities available for sale totaling $96.0 million,
$19.9 million, $9.9 million, $3.0 million, $5.4 million and $1.3 million,
respectively at December 31, 1997 and June 30, 1997, 1996, 1995, 1994 and
1993.
(2) Includes mortgage-backed securities available for sale totaling $191.7
million, $195.8 million, $263.2 million, $37.0 million, $45.0 million and
$41.3 million, respectively, at December 31, 1997 and June 30, 1997, 1996,
1995, 1994 and 1993.
(3) Includes loans held for sale totaling $57.9 million, $68.7 million, $89.4
million, $113.4 million, $187.7 million and $171.8 million, respectively, at
December 31, 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 prior to December 15, 1997,
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.
10
<PAGE>
COMMERCIAL FEDERAL CORPORATION
OPERATING DATA:
<TABLE>
<CAPTION>
Six Months Ended
December 31,
--------------------------
1997 1996
---------- ----------
(Unaudited)
<S> <C> <C>
Interest income............................. $ 266,030 $ 250,533
Interest expense............................ 179,473 167,944
---------- ----------
Net interest income......................... 86,557 82,589
Provision for loan losses................... (4,100) (3,766)
Loan servicing fees......................... 15,565 14,771
Retail fees and charges..................... 8,984 7,916
Real estate operations...................... 797 1,134
Gain (loss) on sales of loans............... 364 127
Gain (loss) on sales of securities, net..... 1,026 100
Gain on sale of loan servicing rights....... 380 --
Other operating income...................... 6,589 4,297
General and administrative expenses......... 59,239 57,703
Federal deposit insurance special assessment -- 27,062
Amortization of goodwill and core value of
deposits.................................. 3,104 5,125
Valuation adjustment and accelerated
amortization of goodwill.................. -- --
---------- ----------
Income before income taxes, extraordinary
items and cumulative effects of changes in
accounting principles..................... 53,819 17,278
Provision for income taxes.................. 18,951 5,838
---------- ----------
Income before extraordinary items and
cumulative effects of changes in
accounting principles..................... 34,868 11,440
Extraordinary items (1)..................... -- (583)
Cumulative effects of changes in
accounting principles (2)................. -- --
---------- ----------
Net income ................................. $ 34,868 $ 10,857
========== ==========
Earnings per share (basic) (3):
Income before extraordinary items and
cumulative effects of changes in
accounting principles................... $ 1.08 $ .35
Extraordinary items (1)................... -- (.02)
Cumulative effects of changes in
accounting principles (2).............. -- --
---------- ----------
Net income ............................... $ 1.08 $ .33
========== ==========
Earnings per share (dilutive) (3):
Income before extraordinary items and
cumulative effects of changes in
accounting principles................... $ 1.06 $ .35
Extraordinary items (1)................... -- (.02)
Cumulative effects of changes in
accounting principles (2).............. -- --
---------- ----------
Net income ............................... $ 1.06 $ .33
========== ==========
<CAPTION>
Year Ended June 30,
---------------------------------------------------------------------
1997 1996 1995 1994 1993
--------- ---------- ---------- ---------- ----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Interest income............................. $ 505,050 $ 491,092 $ 454,368 $ 393,854 $ 404,628
Interest expense............................ 337,047 328,317 304,526 256,102 276,584
--------- ---------- ---------- ---------- ----------
Net interest income......................... 168,003 162,775 149,842 137,752 128,044
Provision for loan losses................... (8,121) (6,107) (6,408) (6,248) (6,185)
Loan servicing fees......................... 30,350 27,891 24,731 22,227 18,776
Retail fees and charges..................... 16,114 12,747 9,547 9,155 7,874
Real estate operations...................... 1,016 172 1,490 (1,449) (5,243)
Gain (loss) on sales of loans............... 386 164 (1,695) 1,433 1,194
Gain (loss) on sales of securities, net..... 390 253 (41) 220 (231)
Gain on sale of loan servicing rights....... -- 452 3,519 5,929 6,903
Other operating income...................... 10,223 7,967 7,515 7,178 5,169
General and administrative expenses......... 112,931 114,517 102,554 94,115 89,560
Federal deposit insurance special assessment 27,062 -- -- -- --
Amortization of goodwill and core value of
deposits.................................. 9,855 9,529 10,262 14,131 10,544
Valuation adjustment and accelerated
amortization of goodwill.................. -- -- 21,357 52,703 --
--------- ---------- ---------- ---------- ----------
Income before income taxes, extraordinary
items and cumulative effects of changes in
accounting principles..................... 68,513 82,268 54,327 15,248 56,197
Provision for income taxes.................. 23,836 26,962 23,146 16,875 22,081
--------- ---------- ---------- ---------- ----------
Income before extraordinary items and
cumulative effects of changes in
accounting principles..................... 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 ................................. $ 44,094 $ 55,306 $ 31,181 $ 4,970 $ 34,116
========= ========== ========== ========== ==========
Earnings per share (basic) (3):
Income before extraordinary items and
cumulative effects of changes in
accounting principles................... $ 1.38 $ 1.68 $ .98 $ (.05) $ 1.18
Extraordinary items (1)................... (.02) -- -- -- --
Cumulative effects of changes in
accounting principles (2).............. -- -- -- .21 --
--------- ---------- ---------- ---------- ----------
Net income ............................... $ 1.36 $ 1.68 $ .98 $ .16 $ 1.18
========= ========== ========== ========== ==========
Earnings per share (dilutive) (3):
Income before extraordinary items and
cumulative effects of changes in
accounting principles................... $ 1.36 $ 1.66 $ .96 $ (.05) $ 1.08
Extraordinary items (1)................... (.02) -- -- -- --
Cumulative effects of changes in
accounting principles (2).............. -- -- -- .20 --
--------- ---------- ---------- ---------- ----------
Net income ............................... $ 1.34 $ 1.66 $ .96 $ .15 $ 1.08
========= ========== ========== ========== ==========
</TABLE>
(Table continued on following page)
11
<PAGE>
COMMERCIAL FEDERAL CORPORATION
<TABLE>
<CAPTION>
Six Months Ended
December 31 Year Ended June 30,
-------------------- --------------------------------------------------------
1997 1996 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- -------- --------
(Unaudited) (Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA (CONTINUED):
Dividends declared per common share (3)..... $ .102 $ .092 $ .185 $ .178 $ -- $ -- $ --
========== ========== ========== ========== ========== ========== ==========
Weighted average basic common shares
outstanding (3)........................... 32,404,454 32,467,709 32,374,625 32,908,722 31,924,073 31,607,096 28,915,170
========== ========== ========== ========== ========== ========== ==========
Weighted average diluted common shares
outstanding (3)........................... 32,970,111 32,933,820 32,857,440 33,406,071 32,430,600 32,255,691 31,604,743
========== ========== ========== ========== ========== ========== ==========
OPERATING RATIOS AND OTHER DATA:
Net interest rate spread during period...... 2.36% 2.43% 2.39% 2.34% 2.26% 2.43% 2.57%
Net yield on interest-earning assets........ 2.52% 2.56% 2.57% 2.58% 2.46% 2.59% 2.65%
Return on average assets (4)................ .97% .32% .65% .84% .49% .09% .67%
Return on average equity (4)................ 15.84% 5.54% 11.04% 14.74% 9.98% 1.54% 12.39%
Dividend payout ratio (5) ................ 9.62% 27.88% 13.81% 10.72% -- -- --
Total number of branches at end of period... 108 105 107 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 prior to December 15, 1997,
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 six month periods ended
December 31, 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 six months ended December
31, 1996 are .90% and 15.48%, 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 effect 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 dilutive 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
12
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION OF
FIRST COLORADO BANCORP, INC.
The following summary consolidated financial data of First Colorado is at
and for the dates indicated. This information has been derived from and should
be read in conjunction with First Colorado's Consolidated Financial Statements
and the Notes thereto, contained in First Colorado's Annual Report on Form 10-K
for the fiscal year ended December 31, 1997, which is incorporated herein by
reference.
FINANCIAL CONDITION DATA AND CAPITAL RATIOS:
<TABLE>
<CAPTION>
At December 31,
---------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Total assets............... $1,556,026 $1,514,088 $1,482,497 $1,302,879 $1,224,119
Investment securities/FHLB
stock..................... 91,172 82,295 87,608 70,086 89,605
Mortgage-backed securities
(1)....................... 216,382 281,289 310,886 403,694 433,870
Loans receivable, net (1).. 1,164,602 1,061,524 931,159 759,943 606,543
Goodwill/core deposit
intangible (2)............ 4,251 2,757 3,018 3,289 3,571
Deposits (1)(3)(4)......... 1,182,727 1,135,823 1,080,289 1,018,687 1,031,783
Advances from FHLB (1)..... 122,410 122,515 125,670 141,948 59,450
Stockholders' equity (5)... 209,309 216,624 238,718 108,014 98,690
Book value per common share 12.45 11.91 NM NM NM
Regulatory capital ratios of
First Federal:
Tangible capital.......... 12.25% 11.87% 11.38% 7.99% 7.71%
Core capital.............. 12.49% 12.03% 11.56% 8.22% 7.98%
Risk-based capital........ 23.76% 23.84% 24.14% 17.42% 16.78%
Principal balance of loans
serviced
for others................ 132,197 145,563 144,105 156,533 183,306
</TABLE>
________________
NM Not meaningful as a result of the Conversion and Reorganization completed
December 29, 1995.
(1) Mortgage loans in the amount of $28.9 million, non-mortgage loans in the
amount of $6.2 million, mortgage-backed securities in the amount of $0.5
million, deposits in the amount of $30.0 million, and FHLB advances in the
amount of $6.9 million, were acquired in 1997.
(2) Reflects the acquisition of Delta Federal Savings FSB on September 30,
1997, effective October 1, 1998.
(3) Deposits in the amount of $45.6 million were sold in 1994.
(4) Deposits in the amount of $162.2 million were purchased in 1993.
(5) Includes $117.6 million from the net proceeds from the sale of First
Colorado Common Stock in December 1995, in connection with the conversion
and reorganization.
13
<PAGE>
FIRST COLORADO BANCORP, INC.
OPERATING DATA:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Interest income ...................... $ 107,948 $ 104,628 $ 94,263 $ 79,255 $ 73,841
Interest expense ..................... 60,014 57,194 58,863 42,785 37,392
------------ ------------ ------------ ------------ ------------
Net interest income .................. 47,934 47,434 35,400 36,470 36,449
Provision (credit) for losses on loans (739) 1,143 (495) (411) 193
Fees and service charges ............. 5,336 4,773 4,195 3,818 3,704
Gain (loss) on sales of loans, net ... 251 218 (1) 146 961
Gain (loss) on sales of securities,
net ............................... 1,260 -- (381) 317 --
Other operating income ............... 1,335 507 1,393 931 373
General and administrative expenses .. 25,116 23,484 21,317 20,656 17,589
Federal deposit insurance special
assessment(1) ..................... -- 7,022 -- -- --
------------ ------------ ------------ ------------ ------------
Earnings before income taxes ......... 31,739 21,283 19,784 21,437 23,705
Provision for income taxes ........... 11,825 7,911 7,146 7,891 8,850
------------ ------------ ------------ ------------ ------------
Net earnings ......................... $ 19,914 $ 13,372 $ 12,638 $ 13,546 $ 14,855
============ ============ ============ ============ ============
EARNINGS PER SHARE:
Earnings per common share ............ $ 1.29 $ .74 $ 2.00 NM NM
============ ============ ============ ============ ============
Earnings per common share, assuming
dilution .......................... $ 1.25 $ .73 $ 1.96 NM NM
============ ============ ============ ============ ============
Dividends declared per common share .. $ .46 $ .325 NM NM NM
============ ============ ============ ============ ============
Weighted average common
shares ............................ 15,407,378 18,064,252 6,325,611 NM NM
============ ============ ============ ============ ============
Weighted average common shares,
assuming dilution ................. 15,962,262 18,354,268 6,433,838 NM NM
============ ============ ============ ============ ============
OPERATING RATIOS AND OTHER DATA:
Net interest rate spread during period 2.74% 2.68% 2.41% 2.82% 3.21%
Net interest margin .................. 3.29% 3.33% 2.71% 3.04% 3.43%
Return on average assets ............. 1.31% .89% .92% 1.08% 1.33%
Return on average equity ............. 9.92% 5.72% 11.03% 13.03% 16.25%
Dividend payout ratio ................ 38.37% 46.94% NM NM NM
Total number of branches at end
of period ....................... 27 26 25 23 23
</TABLE>
_______________
NM Not meaningful as a result of the Conversion and Reorganization completed
December 29, 1995.
(1) Consists of a one-time special assessment imposed on all members of the
SAIF.
14
<PAGE>
UNAUDITED PRO FORMA COMBINED PER SHARE DATA
The following table presents selected per share data for Commercial and
First Colorado on a historical and pro forma combined basis as if the Merger had
been effective as of the dates or the beginning of the periods indicated.
The 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 or loss from continuing
operations, dividends and book value are computed by multiplying the pro forma
combined amounts by the Exchange Ratio of .8247, assuming that the Average NYSE
Closing Price is $36.375 per share. See "The Merger -- Conversion of First
Colorado Common Stock." Such pro forma amounts also assume that 1,800,000
shares of First Colorado Common Stock will be issued prior to the Effective Time
and exchanged for Commercial Common Stock based on the Exchange Ratio of .8247
(or 1,484,460 shares). See "The Merger -- Issuance of Shares from the
Treasury."
Historical information for Commercial and First Colorado is derived from
the respective consolidated financial statements incorporated by reference
herein, and the pro forma combined information is derived from the pro forma
financial information elsewhere herein. In addition, historical information for
Commercial has been adjusted, as applicable, to reflect (i) the merger with
First National, completed January 30, 1998 and accounted for as a purchase, (ii)
the merger with Liberty completed February 13, 1998 and accounted for as a
pooling of interests, (iii) the merger with Mid Continent completed February 27,
1998, and accounted for as a pooling of interests, and (iv) the pending mergers
with Perpetual Midwest Financial, Inc. ("Perpetual") (expected completion May
1998 and to be accounted for as a pooling of interests) and AmerUs Bank
("AmerUs") (expected completion date in the third calendar quarter of 1998 and
to be accounted for as a purchase) (collectively, the "Previously Announced
Mergers"). The pro forma results of the Previously Announced Mergers and the
Merger are not necessarily indicative of the results that would have occurred if
such transactions had occurred at the beginning of the periods indicated or
which may be obtained in the future. The information on the following page
should be read in conjunction with such historical consolidated financial
statements of Commercial and First Colorado.
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/Joint
Proxy Statement have been adjusted on a retroactive basis to reflect the effect
of this three-for-two stock split.
15
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended
December 31, Year Ended June 30,
------------- ---------------------------
1997 1996 1997 1996 1995
------ ----- ------ --------- --------
<S> <C> <C> <C> <C> <C>
Diluted earnings per common share:
Commercial historical................... $ 1.06 $ .35 $ 1.36 $1.66 $ .96
Commercial (as adjusted for Previously
Announced Mergers)..................... .93 .26 1.17 1.58 1.02
First Colorado historical............... .69 .23 .77 1.96 NM
Pro forma combined (1).................. .89 .26 1.08 1.32 .94
First Colorado pro forma equivalent..... .73 .21 .89 1.09 .78
Dividends declared per common share:
Commercial historical................... .102 .092 .185 .178 --
Commercial (as adjusted for Previously
Announced Mergers)..................... .205 .082 .171 .333 .020
First Colorado historical............... .250 .170 .380 NM NM
Pro forma combined (2).................. .222 .112 .240 .234 .014
First Colorado pro forma equivalent..... .183 .092 .198 .193 .012
</TABLE>
<TABLE>
<CAPTION>
At At
December 31, June 30,
1997 1997
------------ ----------
<S> <C> <C>
Book value per common share:
Commercial historical................... $14.06 $13.18
Commercial (as adjusted for Previously
Announced Mergers)..................... 15.58 14.67
First Colorado historical............... 12.45 11.76
Pro forma combined (3).................. 15.94 15.08
First Colorado pro forma equivalent..... 13.15 12.44
</TABLE>
_____________
(1) Diluted earnings per common share presented in the above table is based
upon an Exchange Ratio of .8247 (assuming that the Average NYSE Closing
Price is $36.375) and the issuance of 14,656,267 shares of Commercial
Common Stock for the six months ended December 31, 1997 and 16,047,577
shares for the six months ended December 31, 1996. Shares were also
assumed to be issued at the Exchange Ratio of .8247 for the years ended
June 30, 1997, 1996 and 1995 and totaled 15,332,938, 17,997,706 and
17,997,706, respectively.
(2) Pro forma combined dividends declared per common share presented in the
above table are based upon an Exchange Ratio of .8247 (assuming that the
Average NYSE Closing Price is $36.375) and the issuance of 15,346,324
shares of Commercial Common Stock as of December 31, 1997 and 16,480,893
shares as of December 31, 1996. Shares were also assumed to be issued at
the Exchange Ratio of .8247 as of June 30, 1997, 1996 and 1995 and totaled
15,142,667, 17,997,706 and 17,997,706, respectively.
(3) Pro forma combined book value per common share presented in the above table
is based upon an Exchange Ratio of .8247, net proceeds totaling $51,260,000
increasing stockholders' equity from the issuance of 1,800,000 shares of
First Colorado Common Stock to be issued prior to the Effective Time and
the issuance of 15,346,324 shares of Commercial Common Stock as of December
31, 1997 and 15,142,667 shares as of June 30, 1997 resulting in 59,144,412
and 58,663,764 pro forma shares of Commercial Common Stock outstanding as
of December 31, 1997 and June 30, 1997, respectively.
NM Not meaningful as a result of the Conversion and Reorganization completed
December 29, 1995.
16
<PAGE>
UNAUDITED HISTORICAL PRO FORMA COMBINED FINANCIAL INFORMATION
UNAUDITED HISTORICAL PRO FORMA COMBINED STATEMENT OF FINANCIAL CONDITION
The following unaudited historical pro forma combined statement of
financial condition of Commercial has been prepared based upon the historical
consolidated statements of financial condition of Commercial, the Previously
Announced Mergers and First Colorado as of December 31, 1997 giving effect to
the Merger to be accounted for as a pooling of interests. Pro forma
adjustments, and the assumptions on which they are based, are described in the
accompanying notes to the unaudited historical pro forma combined statement of
financial condition.
The unaudited historical pro forma combined statement of financial
condition presented on the following page does not include any expected cost
savings or the benefits of related synergies as a result of the mergers of the
companies, does not reflect any nonrecurring merger transaction costs, nor does
it reflect any purchase accounting adjustments other than those described in the
accompanying notes, and is not necessarily indicative of the actual financial
position that would have occurred had the mergers of the companies been
consummated on December 31, 1997 or that may be obtained in the future.
The unaudited historical pro forma combined statement of financial
condition as of December 31, 1997 should be read in conjunction with the
historical consolidated financial statements and notes thereto of Commercial and
First Colorado incorporated by reference herein.
17
<PAGE>
UNAUDITED HISTORICAL PRO FORMA COMBINED STATEMENT OF FINANCIAL CONDITION AT
DECEMBER 31, 1997
<TABLE>
<CAPTION>
Historical
-------------------------------------------
First National,
Liberty,
Mid Continent Pro Forma
Commercial and Perpetual AmerUs Adjustments
---------- ------------- ------------ -----------
(In thousands)
<S> <C> <C> <C> <C>
ASSETS:
Cash........................................................ $ 27,591 $ 71,451 $ 35,888 $ 95,750 A
(95,750) A
Investment securities available for sale.................... 95,974 111,660 33,012 --
Mortgage-backed securities available for sale............... 191,731 36,605 104,110 --
Loans held for sale......................................... 57,935 22,736 40,240 2,193 D
Investment securities held to maturity...................... 349,039 67,150 -- --
Mortgage-backed securities held to maturity................. 840,214 26,320 -- --
Loans and leases receivable, net............................ 5,249,151 1,189,406 1,191,677 18,839 D
Federal Home Loan Bank stock................................ 94,538 13,092 18,634 --
Interest receivable, net.................................... 45,315 14,732 12,742 --
Real estate................................................. 17,014 2,235 2,197 --
Premises and equipment...................................... 85,369 23,537 19,980 --
Prepaid expenses and other assets........................... 90,397 31,603 16,987 --
Goodwill and core value of deposits, net of
accumulated amortization................................. 45,074 7,020 1,816 22,794 C
(1,816) D
102,768 D
---------- ----------- ------------ ----------
Total Assets................................................ $7,189,342 $ 1,617,547 $ 1,477,283 $ 144,778
========== =========== ============ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities:
Deposits................................................. $4,248,932 $ 1,289,537 $ 963,380 $ 6,238 D
Advances from Federal Home Loan Bank..................... 1,716,829 139,431 366,565 95,750 A
2,515 D
Securities sold under agreements to repurchase........... 564,294 771 15,866 --
Other borrowings......................................... 102,304 23,565 -- 40,000 A
Interest payable......................................... 28,193 7,150 7,872 --
Other liabilities........................................ 70,369 18,799 22,484 2,500 C
13,463 D
---------- ----------- ------------ ----------
Total liabilities........................................ 6,730,921 1,479,253 1,376,167 160,466
Commitments and contingencies............................... -- -- -- --
<CAPTION>
Pro Forma
Commercial
and Previously Pro Forma
Announced First Colorado Pro Forma
Mergers First Colorado Adjustments Combined
-------------- --------------- ----------- -----------
(In thousands)
<S> <C> <C> <C> <C>
ASSETS:
Cash........................................................ $ 134,930 $ 44,657 $ 51,260 E $ 230,847
Investment securities available for sale.................... 240,646 5,951 -- 246,597
Mortgage-backed securities available for sale............... 332,446 6,839 -- 339,285
Loans held for sale......................................... 123,104 950 -- 124,054
Investment securities held to maturity...................... 416,189 73,944 -- 490,133
Mortgage-backed securities held to maturity................. 866,534 209,543 -- 1,076,077
Loans and leases receivable, net............................ 7,649,073 1,163,652 -- 8,812,725
Federal Home Loan Bank stock................................ 126,264 11,277 -- 137,541
Interest receivable, net.................................... 72,789 8,356 -- 81,145
Real estate................................................. 21,446 1,422 -- 22,868
Premises and equipment...................................... 128,886 23,606 -- 152,492
Prepaid expenses and other assets........................... 138,987 1,578 -- 140,565
Goodwill and core value of deposits, net of
accumulated amortization................................. 177,656 4,251 -- 181,907
------------ ----------- ----------- ------------
Total Assets................................................ $ 10,428,950 $ 1,556,026 $ 51,260 $ 12,036,236
============ =========== =========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities:
Deposits................................................. $ 6,508,087 $ 1,182,727 $ -- $ 7,690,814
Advances from Federal Home Loan Bank..................... 2,321,090 122,410 -- 2,443,500
Securities sold under agreements to repurchase........... 580,931 -- -- 580,931
Other borrowings......................................... 165,869 4,479 -- 170,348
Interest payable......................................... 43,215 -- -- 43,215
Other liabilities........................................ 127,615 37,101 -- 164,716
------------ ----------- ----------- ------------
Total liabilities........................................ 9,746,807 1,346,717 -- 11,093,524
Commitments and contingencies............................... -- -- -- --
</TABLE>
(Table continued on following page)
(footnotes on page 20)
18
<PAGE>
<TABLE>
<CAPTION>
Historical
-------------------------------------------
First National,
Liberty,
Mid Continent Pro Forma
Commercial and Perpetual AmerUs Adjustments
---------- ------------- ------------ -----------
(In thousands)
<S> <C> <C> <C> <C>
Stockholders' Equity:
Preferred stock.......................................... -- -- -- --
Common stock............................................. 326 9,013 3 (9,016) B
112 B
Additional paid-in capital and unearned ESOP shares...... 147,316 54,050 44,929 (50,858) B
97,372 B
Retained earnings........................................ 309,984 82,515 57,227 (62,315) B
Unrealized holding gain (loss) on securities available
for sale, net........................................ 795 1,718 (1,043) 15 B
---------- ----------- ------------ ----------
458,421 147,296 101,116 (24,690)
Less treasury stock, at cost............................. -- (9,002) -- 9,002 B
---------- ----------- ----------- ----------
Total stockholders' equity............................... 458,421 138,294 101,116 (15,688)
---------- ----------- ------------ ----------
Total Liabilities and Stockholders' Equity.................. $7,189,342 $ 1,617,547 $ 1,477,283 $ 144,778
========== =========== ============ ==========
<CAPTION>
Pro Forma
Commercial
and Previously Pro Forma
Announced First Colorado Pro Forma
Mergers First Colorado Adjustments Combined
----------------- -------------- ----------- -----------
(In thousands)
<S> <C> <C> <C> <C>
Stockholders' Equity:
Preferred stock.......................................... -- -- -- --
Common stock............................................. 438 2,013 180 E 591
(2,193) F
153 F
Additional paid-in capital and unearned ESOP shares ..... 292,809 141,186 51,080 E 433,553
(51,369) F
(153) F
Retained earnings........................................ 387,411 119,887 -- 507,298
Unrealized holding gain (loss) on securities available
for sale, net........................................ 1,485 (215) -- 1,270
------------ ----------- ----------- ------------
682,143 262,871 (2,302) 942,712
Less treasury stock, at cost............................. -- (53,562) 53,562 F --
------------ ----------- ----------- ------------
Total stockholders' equity............................... 682,143 209,309 51,260 942,712
------------ ----------- ----------- ------------
Total Liabilities and Stockholders' Equity.................. $ 10,428,950 $ 1,556,026 $ 51,260 $ 12,036,236
============ =========== =========== ============
</TABLE>
(Footnotes on following page)
19
<PAGE>
- --------------------
A Represents the cash portion to be paid and the purchase notes totaling
$40,000,000 to be executed for the purchase of AmerUs' common stock.
These pro forma adjustments assume that the cash portion to be paid for
AmerUs' common stock is funded from borrowing short-term advances from
the Federal Home Loan Bank.
B Represents the surrender, cancellation and exchange of the net
outstanding common stock of the Previously Announced Mergers resulting
in the issuance of approximately 11,199,118 shares of Commercial Common
Stock (or $112,000 at $.01 par value). These pro forma adjustments
represent the elimination of the stockholders' equity accounts of First
National and AmerUs since these transactions are accounted for as
purchases. A cash equivalent payment in lieu of issuing Commercial
Common Stock in exchange for AmerUs' common stock is subject to
election by Commercial. This unaudited historical pro forma combined
statement of financial position does not assume such cash equivalent
payment.
C The acquisition of First National was accounted for as a purchase. The
estimated excess of the purchase price over the fair value of the net
assets acquired of First National on a pro forma basis totaled
$22,794,000 of which $6,237,000 is allocated to core value of deposits
and $16,557,000 to goodwill for these unaudited historical pro forma
combined financial statements.
D The acquisition of AmerUs will be accounted for as a purchase. These
pro forma adjustments represent the estimated fair value of AmerUs'
related assets and liabilities. The estimated excess of the purchase
price over the fair value of the net assets acquired on a pro forma
basis totaled $102,768,000 of which $45,790,000 is allocated to core
value of deposits and $56,978,000 to goodwill for these unaudited
historical pro forma combined financial statements.
E Represents the 1,800,000 shares of First Colorado Common Stock to be
issued (assuming the Average NYSE Closing Price is $36.375) prior to
the Effective Time using the following pro forma estimates:
<TABLE>
<S> <C>
Total consideration (1,800,000 shares x $29.50 per share)............................. $ 53,100,000
Less estimated commissions and other expenses of issuance and distribution........... (1,840,000)
---------------
Net cash proceeds..................................................................... $ 51,260,000
===============
Accounting for the transaction:
Par value ($.10 per share)........................................................ $ 180,000
Additional paid-in capital........................................................ 51,080,000
---------------
$ 51,260,000
===============
</TABLE>
The purpose of the issuance of the 1,800,000 shares of First Colorado
Common Stock is so that the Merger will be eligible for pooling of
interests accounting treatment. For purposes of these pro forma
adjustments, the net cash proceeds remain in non-interest-earning
assets. See "The Merger -- Issuance of Shares from the Treasury."
F Represents the tax-free exchange of .8247 shares (assuming the Average
NYSE Closing Price is $36.375) of Commercial Common Stock for each
share of First Colorado Common Stock (16,808,372 net outstanding
shares) surrendered in connection with this acquisition, adjusted for
the Treasury Stock Issuance (1,800,000 shares), resulting in 15,346,324
shares of Commercial Common Stock issued. See "The Merger -- Conversion
of First Colorado Common Stock." No consideration was given for
fractional shares in these pro forma adjustments. Fractional shares
will be paid in cash.
Nonrecurring pre-tax expenses and charges estimated to approximate $23.5 million
and $25.0 million, respectively, associated with the Previously Announced
Mergers and the First Colorado Merger are not included in this unaudited
historical pro forma combined statement of financial condition.
20
<PAGE>
UNAUDITED HISTORICAL PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
The following unaudited historical pro forma condensed combined statements
of operations of Commercial have been prepared based upon the historical results
of operations of Commercial, the Previously Announced Mergers and the Merger for
the six months ended December 31, 1997 and 1996 and for the fiscal years ended
June 30, 1997, 1996 and 1995 giving effect to the Merger accounted for as a
pooling of interests. Pro forma adjustments, and the assumptions on which they
are based, are described in the accompanying notes to the unaudited historical
pro forma condensed combined statements of operations. The unaudited historical
pro forma condensed combined statements present the combined revenues and
expenses, and pro forma adjustments, of Commercial, the Previously Announced
Mergers and First Colorado as if those companies had been merged as of the
beginning of the June 30, 1995 fiscal year for the Liberty, Mid Continent,
Perpetual and First Colorado acquisitions accounted for as pooling of interests
and as of the beginning of the June 30, 1997 fiscal year for the First National
and AmerUs acquisitions accounted for as purchases. THE UNAUDITED HISTORICAL PRO
FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS AND DILUTED EARNINGS PER SHARE
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996 AND FOR THE FISCAL YEARS
ENDED JUNE 30, 1997, 1996 AND 1995 PRESENTED ON THE FOLLOWING PAGES DO NOT
INCLUDE ANY EXPECTED COST SAVINGS OR THE BENEFITS OF RELATED SYNERGIES AS A
RESULT OF THE MERGERS OF THE COMPANIES, DO NOT REFLECT ANY NONRECURRING MERGER
TRANSACTION COSTS, NOR DO THEY REFLECT ANY PURCHASE ACCOUNTING ADJUSTMENTS OTHER
THAN THOSE DESCRIBED IN THE ACCOMPANYING NOTES, AND ARE NOT NECESSARILY
INDICATIVE OF THE RESULTS THAT WOULD HAVE OCCURRED IF THE MERGERS OF THE
COMPANIES HAD OCCURRED AS OF THE BEGINNING OF THE FISCAL YEAR ENDED JUNE 30,
1995 FOR THE LIBERTY, MID CONTINENT, PERPETUAL AND FIRST COLORADO ACQUISITIONS
ACCOUNTED FOR AS POOLING OF INTERESTS AND AS OF THE BEGINNING OF THE FISCAL
YEAR ENDED JUNE 30, 1997 FOR THE FIRST NATIONAL AND AMERUS ACQUISITIONS
ACCOUNTED FOR AS PURCHASES, OR WHICH MAY BE OBTAINED IN THE FUTURE.
The unaudited historical pro forma condensed combined statements of
operations for the six months ended December 31, 1997 and 1996 and for the
fiscal years ended June 30, 1997, 1996 and 1995 should be read in conjunction
with the historical consolidated financial statements and notes thereto of
Commercial and First Colorado incorporated by reference herein.
21
<PAGE>
UNAUDITED HISTORICAL PRO FORMA COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Six Months Ended December 31, 1997
-------------------------------------------
Historical
-------------------------------------------
First National,
Liberty,
Mid Continent
Commercial and Perpetual AmerUs
---------- ------------- ------------
<S> <C> <C> <C>
(In thousands, except per share data)
Interest income............................................. $ 266,030 $ 61,398 $ 58,735
Interest expense............................................ 179,473 34,661 34,344
----------- ----------- ------------
Net interest income......................................... 86,557 26,737 24,391
Provision for loan losses................................... 4,100 4,970 3,729
----------- ----------- ------------
Net interest income after provision for loan losses......... 82,457 21,767 20,662
Noninterest income.......................................... 33,705 13,172 12,268
Noninterest expense......................................... 62,343 25,267 21,908
----------- ----------- ------------
Income before income taxes.................................. 53,819 9,672 11,022
Provision for income taxes.................................. 18,951 3,782 4,304
----------- ----------- ------------
Net income from continuing operations....................... $ 34,868 $ 5,890 $ 6,718
=========== =========== ============
Diluted earnings per common share........................... $ 1.06 $ .47 $ 26.87
=========== =========== ============
Weighted average diluted common shares outstanding.......... 32,970,111 12,609,668 250,000
=========== =========== ============
<CAPTION>
For the Six Months Ended December 31, 1997
---------------------------------------------------------------
Pro Forma
Commercial
and Previously Historical
Pro Forma Announced -------------- Pro Forma
Adjustments Mergers First Colorado Combined
----------- ------------- -------------- --------
<S> <C> <C> <C> <C>
(In thousands, except per share data)
Interest income............................................. $ (2,157) A $ 384,006 $ 55,000 $ 439,006
Interest expense............................................ 1,731 A 250,209 30,615 280,824
------------ ------------ ----------- -----------
Net interest income......................................... (3,888) 133,797 24,385 158,182
Provision for loan losses................................... -- 12,799 (1,293) 11,506
------------ ------------ ----------- -----------
Net interest income after provision for loan losses......... (3,888) 120,998 25,678 146,676
Noninterest income.......................................... -- 59,145 5,393 64,538
Noninterest expense......................................... 5,155 A 114,673 13,414 128,087
------------ ------------ ----------- -----------
Income before income taxes.................................. (9,043) 65,470 17,657 83,127
Provision for income taxes.................................. (2,593) 24,444 6,583 31,027
------------ ------------ ----------- -----------
Net income from continuing operations....................... $ (6,450) $ 41,026 $ 11,074 $ 52,100
============ ============ =========== ===========
Diluted earnings per common share........................... $ .93 $ .69 $ .89 B
============ =========== ===========
Weighted average diluted common shares outstanding.......... 44,116,606 15,971,635 58,772,873 B
============ =========== ===========
</TABLE>
(footnotes on page 27)
22
<PAGE>
UNAUDITED HISTORICAL PRO FORMA COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Six Months Ended December 31, 1997
---------------------------------------------
Historical
---------------------------------------------
First National,
Liberty,
Mid Continent
Commercial and Perpetual AmerUs
---------- ------------- ------------
<S> <C> <C> <C>
(In thousands, except per share data)
Interest income............................................. $ 250,533 $ 59,126 $ 51,064
Interest expense............................................ 167,944 31,958 28,779
----------- ----------- ------------
Net interest income......................................... 82,589 27,168 22,285
Provision for loan losses................................... 3,766 1,947 1,690
----------- ----------- ------------
Net interest income after provision for loan losses......... 78,823 25,221 20,595
Noninterest income.......................................... 28,345 5,201 11,572
Noninterest expense......................................... 89,890 23,672 26,064
----------- ----------- ------------
Income before income taxes.................................. 17,278 6,750 6,103
Provision for income taxes.................................. 5,838 2,741 2,256
----------- ----------- ------------
Net income from continuing operations....................... $ 11,440 $ 4,009 $ 3,847
=========== =========== ============
Diluted earnings per common share........................... $ .35 $ .32 $ 15.39
=========== =========== ============
Weighted average diluted common shares outstanding.......... 32,933,820 12,484,026 250,000
=========== =========== ============
<CAPTION>
For the Six Months Ended December 31, 1996
-------------------------------------------------------------
Pro Forma
Commercial
and Previously Historical
Pro Forma Announced -------------- Pro Forma
Adjustments Mergers First Colorado Combined
----------- ------------ -------------- --------
<S> <C> <C> <C> <C>
(In thousands, except per share data)
Interest income............................................. $ (3,635) A $ 357,088 $ 52,992 $ 410,080
Interest expense............................................ 1,839 A 230,520 29,263 259,783
------------ ------------ ----------- -----------
Net interest income......................................... (5,474) 126,568 23,729 150,297
Provision for loan losses................................... -- 7,403 836 8,239
------------ ------------ ----------- -----------
Net interest income after provision for loan losses......... (5,474) 119,165 22,893 142,058
Noninterest income.......................................... -- 45,118 2,729 47,847
Noninterest expense......................................... 5,740 A 145,366 18,904 164,270
------------ ------------ ----------- -----------
Income before income taxes.................................. (11,214) 18,917 6,718 25,635
Provision for income taxes.................................. (3,375) 7,460 2,610 10,070
------------ ------------ ----------- -----------
Net income from continuing operations....................... $ (7,839) $ 11,457 $ 4,108 $ 15,565
============ ============ =========== ===========
Diluted earnings per common share........................... $ .26 $ .23 $ .26 B
============ =========== ===========
Weighted average diluted common shares outstanding.......... 44,036,299 17,658,685 60,083,876 B
============ =========== ===========
</TABLE>
(footnotes on page 27)
23
<PAGE>
UNAUDITED HISTORICAL PRO FORMA COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Year Ended June 30, 1997
---------------------------------------------
Historical
---------------------------------------------
First National,
Liberty,
Mid Continent
Commercial and Perpetual AmerUs
---------- ------------- --------------
<S> <C> <C> <C>
(In thousands, except per share data)
Interest income............................................. $ 505,050 $ 117,533 $ 105,758
Interest expense............................................ 337,047 64,971 60,358
----------- ----------- ------------
Net interest income......................................... 168,003 52,562 45,400
Provision for loan losses................................... 8,121 4,274 6,365
----------- ----------- ------------
Net interest income after provision for loan losses......... 159,882 48,288 39,035
Noninterest income.......................................... 58,479 16,332 25,663
Noninterest expense......................................... 149,848 46,241 47,651
----------- ----------- ------------
Income before income taxes.................................. 68,513 18,379 17,047
Provision for income taxes.................................. 23,836 6,727 6,373
----------- ----------- ------------
Net income from continuing operations....................... $ 44,677 $ 11,652 $ 10,674
=========== =========== ============
Diluted earnings per common share.......................... $ 1.36 $ .92 $ 42.70
=========== =========== ============
Weighted average diluted common shares outstanding.......... 32,857,440 12,605,560 250,000
=========== =========== ============
<CAPTION>
For the Year Ended June 30, 1997
----------------------------------------------------------------
Pro Forma
Commercial
and Previously Historical
Pro Forma Announced -------------- Pro Forma
Adjustments Mergers First Colorado Combined
----------- -------------- -------------- --------
<S> <C> <C> <C> <C>
(In thousands, except per share data)
Interest income............................................. $ (7,269) A $ 721,072 $ 105,940 $ 827,012
Interest expense............................................ 3,635 A 466,011 58,662 524,673
------------ ------------ ----------- -----------
Net interest income......................................... (10,904) 255,061 47,278 302,339
Provision for loan losses................................... -- 18,760 1,390 20,150
------------ ------------ ----------- -----------
Net interest income after provision for loan losses......... (10,904) 236,301 45,888 282,189
Noninterest income.......................................... -- 100,474 5,518 105,992
Noninterest expense......................................... 11,482 A 255,222 30,606 285,828
------------ ------------ ----------- -----------
Income before income taxes.................................. (22,386) 81,553 20,800 102,353
Provision for income taxes.................................. (6,734) 30,202 7,852 38,054
------------ ------------ ----------- -----------
Net income from continuing operations....................... $ (15,652) $ 51,351 $ 12,948 $ 64,299
============ ============ =========== ===========
Diluted earnings per common share.......................... $ 1.17 $ .77 $ 1.08 B
============ =========== ===========
Weighted average diluted common shares outstanding.......... 44,066,907 16,792,141 59,399,845 B
============ =========== ===========
</TABLE>
(footnotes on page 27)
24
<PAGE>
UNAUDITED HISTORICAL PRO FORMA COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Year Ended June 30, 1996
-------------------------------------------------------------------------
Historical Pro Forma
-------------------------- Commercial
Liberty, and Previously Historical
Mid Continent Announced -------------- Pro Forma
Commercial and Perpetual Mergers First Colorado Combined
---------- ------------- ----------- -------------- --------
<S> <C> <C> <C> <C> <C>
(In thousands, except per share data)
Interest income....................................... $ 491,092 $ 88,115 $ 579,207 $ 94,263 $ 673,470
Interest expense...................................... 328,317 50,263 378,580 58,863 437,443
----------- ----------- ----------- ---------- ------------
Net interest income................................... 162,775 37,852 200,627 35,400 236,027
Provision for loan losses............................. 6,107 1,104 7,211 (495) 6,716
----------- ----------- ----------- ----------- ------------
Net interest income after provision for loan losses... 156,668 36,748 193,416 35,895 229,311
Noninterest income.................................... 49,646 13,997 63,643 5,206 68,849
Noninterest expense................................... 124,046 34,077 158,123 21,317 179,440
----------- ----------- ----------- ---------- ------------
Income before income taxes............................ 82,268 16,668 98,936 19,784 118,720
Provision for income taxes............................ 26,962 5,779 32,741 7,146 39,887
----------- ----------- ----------- ---------- ------------
Net income from continuing operations................. $ 55,306 $ 10,889 $ 66,195 $ 12,638 $ 78,833
=========== =========== =========== ========== ============
Diluted earnings per common share.................... $ 1.66 $ .86 $ 1.58 $ 1.96 $ 1.32 B
=========== =========== =========== ========== ============
Weighted average diluted common shares outstanding.... 33,406,071 12,721,389 41,799,441 6,433,838 59,797,147 B
=========== =========== =========== ========== ============
</TABLE>
(footnotes on page 27)
25
<PAGE>
UNAUDITED HISTORICAL PRO FORMA COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Year Ended June 30, 1995
-------------------------------------------------------------------------
Historical Pro Forma
--------------------------- Commercial
Liberty, and Previously Historical
Mid Continent Announced -------------- Pro Forma
Commercial and Perpetual Mergers First Colorado Combined
---------- ------------- ----------- -------------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Interest income....................................... $ 454,368 $ 71,029 $ 525,397 $ 79,255 $ 604,652
Interest expense...................................... 304,526 36,816 341,342 42,785 384,127
----------- ----------- ----------- ---------- ------------
Net interest income................................... 149,842 34,213 184,055 36,470 220,525
Provision for loan losses............................. 6,408 1,122 7,530 (411) 7,119
----------- ----------- ----------- ---------- ------------
Net interest income after provision for loan losses... 143,434 33,091 176,525 36,881 213,406
Noninterest income.................................... 45,066 12,781 57,847 5,212 63,059
Noninterest expense................................... 134,173 29,588 163,761 20,656 184,417
----------- ----------- ----------- ---------- ------------
Income before income taxes............................ 54,327 16,284 70,611 21,437 92,048
Provision for income taxes............................ 23,146 5,826 28,972 7,891 36,863
----------- ----------- ----------- ---------- ------------
Net income from continuing operations................. $ 31,181 $ 10,458 $ 41,639 $ 13,546 $ 55,185
=========== =========== =========== ========== ============
Diluted earnings per common share..................... $ .96 $ .81 $ 1.02 NM $ .94 B
=========== =========== =========== ========== ============
Weighted average diluted common shares outstanding.... 32,430,600 12,886,531 40,858,793 NM 58,856,499 B
=========== =========== =========== ========== ============
</TABLE>
(footnotes on page 27)
26
<PAGE>
_______________
A For the pro forma adjustments the acquisitions of First National and AmerUs
are accounted for as purchases. The acquisitions of Liberty, Mid Continent,
Perpetual and First Colorado are accounted for as pooling of interests. The
pro forma adjustments below represent the estimated fair value of the related
assets and liabilities of First National and AmerUs.
The excess of the purchase price over the fair value of the net assets of
First National acquired on a pro forma basis totaled $22,794,000 of which
$6,237,000 is allocated to core value of deposits and $16,557,000 to goodwill
for these unaudited historical pro forma combined financial statements. Net
income was reduced for the accelerated amortization expense of core value of
deposits over a 10-year period and for the straight line amortization expense
of goodwill over a 20-year period.
The excess of the purchase price over the fair value of the net assets of
AmerUs acquired on a pro forma basis totaled $102,768,000 of which
$45,790,000 is allocated to core value of deposits and $56,978,000 to
goodwill for these unaudited historical pro forma combined financial
statements. Net income was reduced for the accelerated amortization expense
of core value of deposits over a 10-year period and for the straight line
amortization expense of goodwill over a 20-year period; and an adjustment was
made to interest expense on short-term advances from the Federal Home Loan
Bank assumed to have been used to partially fund the purchase of the common
stock of AmerUs in this transaction.
The effect of amortization of the pro forma purchase accounting adjustments
for First National and AmerUs for the six months ended December 31, 1997 and
1996 and for the fiscal year ended June 30, 1997 assuming these acquisitions
had been consummated as of the beginning of fiscal year 1997 are as follows:
<TABLE>
<CAPTION>
For the Six Months Ended For the
December 31, Year Ended
--------------------------
1997 1996 June 30, 1997
------------ ------------ --------------
<S> <C> <C> <C>
Interest income:
Purchase accounting adjustments on loans............. $(2,157,000) $(3,635,000) $(7,269,000)
=========== =========== ===========
Interest expense:
Purchase accounting adjustments on deposits.......... $(1,934,000) $(1,653,000) $(3,306,000)
Purchase accounting adjustments on advances
from Federal Home Loan Bank........................ (578,000) (692,000) (1,383,000)
Interest on advances from the Federal
Home Loan Bank borrowed to fund the cash
portion for the purchase of AmerUs common stock.. 2,829,000 2,746,000 5,448,000
Interest on Purchase Notes payable to Group for the
purchase of AmerUs common stock................... 1,414,000 1,438,000 2,876,000
----------- ----------- -----------
$ 1,731,000 $ 1,839,000 $ 3,635,000
=========== =========== ===========
Noninterest expense:
First National -
Amortization of core value of deposits............ $ 398,000 $ 468,000 $ 936,000
Amortization of goodwill.......................... 414,000 414,000 828,000
----------- ----------- -----------
812,000 882,000 1,764,000
----------- ----------- -----------
AmerUs -
Amortization of core value of deposits............ 2,919,000 3,434,000 6,869,000
Amortization of goodwill.......................... 1,424,000 1,424,000 2,849,000
----------- ----------- -----------
4,343,000 4,858,000 9,718,000
----------- ----------- -----------
$ 5,155,000 $ 5,740,000 $11,482,000
=========== =========== ===========
</TABLE>
B Pro forma combined diluted earnings per common share and weighted average
diluted common shares outstanding are based upon an Exchange Ratio of .8247
and the additional issuance of 1,800,000 shares of First Colorado Common
Stock prior to the Effective Time. The Exchange Ratio of .8247 is based on
the assumption that the Average NYSE Closing Price is $36.375. See "The
Merger -- Conversion of First Colorado Common Stock" and " -- Issuance of
Shares from the Treasury" for additional information. Such pro forma
assumptions result in the issuance of Commercial weighted average shares of
common stock totaling 14,656,267, 16,047,577, 15,332,938, 17,997,706 and
17,997,706, respectively, for the six months ended December 31, 1997 and
1996 and for the years ended June 30, 1997, 1996 and 1995.
NM Not meaningful as a result of the Conversion and Reorganization completed
December 29, 1995.
Nonrecurring pre-tax expenses and charges estimated to approximate $23.5 million
and $25.0 million, respectively, associated with the Previously Announced
Mergers and the First Colorado Merger are not included in this unaudited
historical pro forma combined statements of operations.
27
<PAGE>
THE SPECIAL MEETINGS
COMMERCIAL FEDERAL CORPORATION SPECIAL MEETING
DATE, TIME AND PLACE. This Prospectus/Joint Proxy Statement is being
furnished to the stockholders of Commercial as part of the solicitation of
proxies by its Board of Directors from holders of the outstanding shares of
Commercial Common Stock for use at the Commercial Special Meeting to be held on
July 3, 1998, and any adjournments thereof. This Prospectus/Joint Proxy
Statement, and the accompanying proxy card, are first being mailed to
stockholders of Commercial on or about May 14, 1998.
MATTERS TO BE CONSIDERED. The principal purposes of the Special Meeting
are to consider and vote upon the approval of the Articles Amendment as well as
the Merger, pursuant to which First Colorado will merge into Commercial, and the
Merger Agreement among Commercial, the Bank, First Colorado and First Federal,
which sets forth the terms and conditions of the Merger and also provides for
the Bank Merger. Stockholders of Commercial will also be asked to approve an
amendment to Commercial's Articles of Incorporation to increase the number of
authorized shares of Commercial Common Stock from 50,000,000 shares to
120,000,000 shares.
RECORD DATE; VOTE REQUIRED. The Board of Directors of Commercial has fixed
the close of business on _____________, 1998, as the Commercial Record Date for
determining stockholders entitled to notice of and to vote at the Special
Meeting, and accordingly, only holders of Commercial Common Stock of record at
the close of business on that day will be entitled to notice of and to vote at
the Special Meeting. The number of shares of Commercial Common Stock
outstanding on the Commercial Record Date was __________.
Each holder of record of shares of Commercial Common Stock on the
Commercial Record Date will be entitled to cast one vote per share on the
proposals presented at the Commercial Special Meeting. Such vote may be
exercised in person or by proxy. The presence in person or by proxy of a
majority of the shares of Commercial Common Stock entitled to vote at the
Commercial Special Meeting is necessary to constitute a quorum. Abstentions and
broker non-votes will be treated as shares present at the Commercial Special
Meeting for purposes of determining the presence of a quorum.
The affirmative of the holders of two-thirds of the outstanding shares of
Commercial Common Stock is required for approval and adoption of the Merger
Agreement, the Merger and an amendment to Commercial's Articles of Incorporation
to increase the number of authorized shares from 50,000,000 to 70,000,000 to
facilitate the Merger. The affirmative vote of a majority of the shares cast is
required to approve the Articles Amendment.
As of the Commercial Record Date, the directors and executive officers of
Commercial and their affiliates beneficially owned in the aggregate _________
shares of Commercial Common Stock (excluding shares underlying stock options),
or approximately ___% of the outstanding shares of Commercial Common Stock
entitled to vote at the Commercial Special Meeting. It is anticipated that such
directors and executive officers will vote their shares of Commercial Common
Stock "FOR" approval of the Merger Agreement and the Merger and "FOR" approval
of the Articles Amendment.
VOTING OF PROXIES; REVOCABILITY OF PROXIES; SOLICITATION OF PROXIES.
Shares of Commercial Common Stock represented by properly executed proxies
received prior to or at the Commercial Special Meeting will, unless such proxies
have been revoked, be voted at the Commercial Special Meeting and any
adjournments or postponements thereof in accordance with the instructions given
in the proxies. If no instructions are given on a properly executed proxy, the
shares will be voted "FOR" approval of the Merger and the Merger Agreement and
"FOR" approval of the Articles Amendment.
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Any proxy given pursuant to this solicitation or otherwise may be revoked
by the person giving written notice of such revocation on or before the taking
of the vote at the Commercial Special Meeting, by execution of a later dated
proxy or by attendance at the Commercial Special Meeting and voting in person.
Attendance at the Commercial Special Meeting will not in itself constitute the
revocation of a proxy.
If any other matters are properly presented at the Commercial Special
Meeting, the persons named in the proxy or acting thereunder will have
discretion to vote on such matters in accordance with their best judgment. As
of the date hereof, the Commercial Board is not aware of any other matters that
may be brought before the Commercial Special Meeting.
In addition to solicitations by mail, directors, officers and regular
employees of Commercial may solicit proxies personally or by telegraph,
telephone or other electronic means without additional compensation. Commercial
has retained D.F. King & Co., Inc., a professional proxy solicitation firm, to
assist in the solicitation of proxies by mail, personally or by telephone or
other means of communication, for a fee estimated at $______ plus expenses.
FIRST COLORADO BANCORP, INC. SPECIAL MEETING
DATE, TIME AND PLACE. This Prospectus/Joint Proxy Statement is being
furnished to the stockholders of First Colorado as part of the solicitation of
proxies by its Board of Directors from holders of the outstanding shares of
First Colorado Common Stock for use at the First Colorado Special Meeting to be
held on July 13, 1998, and any adjournments thereof. This Prospectus/Joint
Proxy Statement, and the accompanying proxy card, are first being mailed to
stockholders of First Colorado on or about May 14, 1998.
MATTERS TO BE CONSIDERED. The principal purposes of the Special Meeting
are to consider and vote upon the approval of the Merger, pursuant to which
First Colorado will merge into Commercial, and the Merger Agreement among
Commercial, the Bank, First Colorado and First Federal, which sets forth the
terms and conditions of the Merger and also provides for the Bank Merger. See
"The Merger -- Conversion of First Colorado Common Stock." The Merger is
subject to certain conditions, including regulatory approval of the OTS.
RECORD DATE; VOTE REQUIRED. The Board of Directors of First Colorado has
fixed the close of business on May 5, 1998, as the Record Date for determining
stockholders entitled to notice of and to vote at the Special Meeting, and
accordingly, only holders of First Colorado Common Stock of record at the close
of business on that day will be entitled to notice of and to vote at the Special
Meeting. The number of shares of First Colorado Common Stock outstanding on the
Record Date was _________.
Each holder of record of shares of First Colorado Common Stock on the First
Colorado Record Date will be entitled to cast one vote per share on the
proposals presented at the First Colorado Special Meeting. Such vote may be
exercised in person or by proxy. The presence in person or by proxy of a
majority of the shares of First Colorado Common Stock entitled to vote at the
First Colorado Special Meeting is necessary to constitute a quorum. Abstentions
and broker non-votes will be treated as shares present at the First Colorado
Special Meeting for purposes of determining the presence of a quorum.
The affirmative vote of the holders of a majority of the outstanding shares
of First Colorado Common Stock is required for approval of the Merger Agreement
and the Merger.
As of the First Colorado Record Date, the directors and executive officers
of First Colorado and their affiliates beneficially owned in the aggregate
939,902 shares of First Colorado Common Stock (excluding shares underlying stock
options), or approximately 5.6% of the outstanding shares of First Colorado
Common Stock entitled to vote at the First Colorado Special Meeting. It is
anticipated that such directors and executive officers will vote their shares of
First Colorado Common Stock "FOR" approval of the Merger Agreement and the
Merger.
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VOTING OF PROXIES; REVOCABILITY OF PROXIES; SOLICITATION OF PROXIES.
Shares of First Colorado Common Stock represented by properly executed proxies
received prior to or at the First Colorado Special Meeting will, unless such
proxies have been revoked, be voted at the First Colorado Special Meeting and
any adjournments or postponements thereof in accordance with the instructions
given in the proxies. If no instructions are given on a properly executed
proxy, the shares will be voted "FOR" approval of the Merger and the Merger
Agreement.
Any proxy given pursuant to this solicitation or otherwise may be revoked
by the person giving written notice of such revocation on or before the taking
of the vote at the First Colorado Special Meeting, by execution of a later dated
proxy or by attendance at the First Colorado Special Meeting and voting in
person. Attendance at the First Colorado Special Meeting will not in itself
constitute the revocation of a proxy.
If any other matters are properly presented at the First Colorado Special
Meeting, the persons named in the proxy or acting thereunder will have
discretion to vote on such matters in accordance with their best judgment. As
of the date hereof, the First Colorado Board is not aware of any other matters
that may be brought before the First Colorado Special Meeting.
In addition to solicitations by mail, directors, officers and regular
employees of First Colorado may solicit proxies personally or by telegraph,
telephone or other electronic means without additional compensation. First
Colorado has retained Morrow & Co., a professional proxy solicitation firm, to
assist in the solicitation of proxies by mail, personally or by telephone or
other means of communication, for a fee estimated at $4,000 plus expenses.
COMMERCIAL FEDERAL CORPORATION AND
COMMERCIAL FEDERAL SAVINGS 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 December 31, 1997, Commercial had total assets
of $7.2 billion and total stockholders' equity of $458.4 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
March 31, 1998, after its completed acquisition of First National (January 30,
1998), Liberty (February 13, 1998) and Mid Continent (February 27, 1998) and
including anticipated branch consolidations, Commercial operated 34 branch
offices in Nebraska, 21 branch offices in greater metropolitan Denver, Colorado,
19 branch offices in Oklahoma, 38 branch offices in Kansas, 45 branch offices in
Iowa and seven branch offices in Arizona. Throughout its 111 year history,
Commercial has emphasized customer service. To serve its customers, Commercial
conducts loan origination activities through its 164 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 six-state franchise through an ongoing program of selective
acquisitions of other financial institutions.
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PENDING AND RECENTLY COMPLETED ACQUISITIONS. In addition to the Merger,
Commercial entered into definitive agreements to acquire five other financial
institution holding companies: First National, a bank holding company; Liberty,
a commercial bank and thrift holding company; Mid Continent, a savings and loan
holding company, Perpetual Midwest Financial, Inc. ("Perpetual"), a federally
chartered savings bank headquartered in Cedar Rapids, Iowa and AmerUs Bank, a
federally chartered savings bank headquartered in Des Moines, Iowa. The
acquisition of First National, headquartered in Great Bend, Kansas, was
completed January 30, 1998, the acquisition of Liberty, headquartered in West
Des Moines, Iowa, was completed February 13, 1998 and the acquisition of Mid
Continent, headquartered in El Dorado, Kansas, was completed February 27, 1998.
Under the terms of the First National agreement, all of the outstanding shares
of First National's common stock were exchanged for 992,842 shares of Commercial
Common Stock for total consideration of approximately $32.3 million. First
National operated seven branch offices in Kansas and at January 30, 1998 had
assets of approximately $147.8 million, deposits of approximately $131.3 million
and stockholders' equity of approximately $12.0 million. This acquisition was
accounted for as a purchase. Under the terms of the Liberty agreement, all of
the outstanding shares of Liberty common stock were exchanged for 4,015,555
shares of Commercial Common Stock for total consideration of approximately
$136.3 million. This acquisition was accounted for as a pooling. Under the
terms of the Mid Continent agreement, all of the outstanding shares of Mid
Continent's common stock were exchanged for approximately 2,641,945 shares of
Commercial Common Stock for total consideration of approximately $93.5 million.
This acquisition was accounted for as a pooling. Under the terms of the
Perpetual agreement, all of the outstanding shares of Perpetual's common stock
will be exchanged for approximately 1,633,067 shares of Commercial Common Stock
for total consideration of approximately $57.6 million. It is expected that
this acquisition will be accounted for as a pooling of interests. Together
with AmerUs, these five pending or recently completed acquisitions will add 115
branches (before any consolidation) to Commercial's existing network and
approximately $3.1 billion in total assets, approximately $2.3 billion in
deposits and approximately $1.9 billion in loans serviced for others. Liberty
operated seven bank subsidiaries and one thrift subsidiary with 38 branch
locations in Iowa and seven branch locations in the Tucson, Arizona metropolitan
area. Mid Continent operated ten branch offices in Kansas. Perpetual operates
five branch offices in Iowa. AmerUs Bank operates 27 branches in Iowa, eight
branches in Missouri, six branches in Nebraska, four branches in Kansas, two
branches in Minnesota and one branch in South Dakota. 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.
NEW DIRECTOR. Effective February 13, 1998, Mr. William A. Krause, the
former Chairman and a director of Liberty, was appointed to the Board of
Directors of Commercial for a term to expire at Commercial's 1998 annual meeting
of stockholders in November 1998. Mr. Krause has also been appointed to the
Board of Directors of the Bank. Upon consummation of the Merger, it is expected
that Malcolm Collier, Chairman of First Colorado, will become a director of
Commercial. See "The Merger -- Management after the Merger."
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 Reports on Form 10-Q for the quarters ended September 30, 1997 and
December 31, 1997 and the Current Reports on Form 8-K dated August 18, 1997,
September 2, 1997, September 11, 1997, November 18, 1997, December 8, 1997,
December 15, 1997, February 11, 1998 and March 9, 1998, all of which are
incorporated by reference herein.
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FIRST COLORADO BANCORP, INC. AND
FIRST FEDERAL BANK OF COLORADO
First Colorado is a Colorado corporation organized in September 1995, at
the direction of the Board of Directors of First Federal to facilitate the
conversion of the Mutual Holding Company and to effect the Conversion and
Reorganization. Prior to the consummation of the Conversion and Reorganization,
the Mutual Holding Company was the majority shareholder of First Federal and
upon consummation of the Conversion and Reorganization, the Mutual Holding
Company was merged with and into First Federal. The Company acquired First
Federal as a wholly owned subsidiary upon the consummation of the Conversion and
Reorganization on December 29, 1995. In connection with the Conversion and
Reorganization, First Colorado sold 13,403,798 shares of First Colorado Common
Stock to the public in an initial public offering and issued 6,619,539 shares in
exchange for the outstanding shares of First Federal held by persons other than
the Mutual Holding Company. As of December 31, 1997, First Colorado had total
assets of $1.6 billion, total deposits of $1.2 billion, and shareholders' equity
of $209.3 million or 13.5% of total assets.
First Colorado is a unitary savings and loan holding company. The primary
activity of First Colorado is holding the common stock of First Federal. First
Colorado has no significant assets other than all of the outstanding shares of
First Federal common stock, the note evidencing First Colorado's $10.5 million
loan to First Federal's Employee Stock Ownership Plan, and the portion of the
net proceeds from the initial public offering of First Colorado Common Stock
retained by First Colorado, which have been invested in a $3.6 million loan to
First Federal and in deposits in First Federal and in a stock repurchase program
resulting in the repurchase of 3.7 million shares of First Colorado common stock
for $58.9 million (3.3 million shares with a cost of $53.6 million at December
31, 1997).
First Federal is a federally chartered stock savings bank, originally
chartered by the State of Colorado as the Cooperative Building and Loan
Association on April 25, 1885. In connection with the Conversion and
Reorganization, First Federal changed its name from First Federal Savings Bank
of Colorado to its current name and became a wholly owned subsidiary of First
Colorado. A federal charter was granted to First Federal in 1934, the same year
that deposit accounts became federally insured and First Federal became a member
of the FHLB.
First Federal's deposits are insured by the FDIC under the SAIF, and First
Federal is regulated by the OTS.
The principal business of First Federal is the acceptance of savings
deposits from the general public and the origination and purchase of mortgage
loans for the purpose of constructing, financing or refinancing one-to-four-
family residences and other improved residential and commercial real estate.
First Federal is also active in the origination of home equity loans. First
Federal's income is derived largely from interest on interest-earning assets
such as loans, mortgage-backed securities and investments. Its principal
expenses are interest paid on deposits and borrowings, operating expenses and
provisions for loan losses.
First Colorado's and First Federal's executive offices are located at 215
S. Wadsworth Boulevard, Lakewood, Colorado 80226 and their telephone number is
(303) 232-2121.
For additional information regarding First Colorado and First Federal see
the Annual Report on Form 10-K and Current Report on Form 8-K dated March 9,
1998 which are incorporated herein by reference.
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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 or the related Stock Option
Agreement, including the exhibits thereto, is qualified in its entirety by
reference to the full text of the Merger Agreement and the related Stock Option
Agreement, which are attached as Annexes A and B, respectively, to this
Prospectus/Joint Proxy Statement and is incorporated by reference herein.
GENERAL
The Merger Agreement provides for the acquisition of First Colorado by
Commercial, and the subsequent merger of First Federal into the Bank, as
follows: (i) First Colorado will merge into Commercial, with Commercial as the
surviving corporation, pursuant to which the outstanding shares of First
Colorado's Common Stock would be converted into shares of Commercial Common
Stock as set forth below (the Merger); and (ii) First Federal will then merge
into the Bank, with the Bank as the surviving savings institution (the Bank
Merger). Upon the consummation of the Merger (the Effective Time), First
Colorado will have merged into Commercial. Upon the consummation of the Bank
Merger (the Bank Merger Effective Time), First Federal 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 Effective Time. For additional information regarding the Merger, see the
Merger Agreement, which is attached as Annex A hereto.
Stockholders of First Colorado and Commercial are being asked to approve
the Merger Agreement and the Merger. The affirmative vote of a majority of the
outstanding shares of First Colorado Common Stock is required for First
Colorado's stockholders to approve the Merger Agreement and the Merger. The
affirmative vote of two-thirds of the issued and outstanding shares of
Commercial Common Stock is required for Commercial's stockholders to approve the
Merger Agreement and the Merger. Approval by the stockholders of Commercial of
the Merger and the Merger Agreement will also constitute approval of an
amendment to Commercial's Articles of Incorporation to increase the number of
authorized shares of Commercial Common Stock from 50,000,000 to 70,000,000.
Such additional shares represent the approximate number of additional shares of
Commercial Common Stock to be issued in the Merger.
BACKGROUND OF THE MERGER
In October 1997, after considering First Colorado's financial performance,
the strong financial institution merger and acquisition market in Colorado, and
the strong economy and stock market, the First Colorado Board approved the
engagement of Wallach to act as representative for First Colorado to explore the
market and contact potential acquirors to determine the feasibility and
economics of a merger of First Colorado with a major bank holding company.
Wallach was formally engaged on October 24, 1997 to approach a selected
group of prospective purchasers, assist in structuring and negotiating a
possible business combination transaction, and render its opinion regarding the
fairness from a financial point of view, of the Exchange Ratio proposed to be
received by the stockholders of First Colorado in such transaction.
In December 1997, First Colorado's management with assistance from Wallach,
identified the eleven companies believed to be the most likely to acquire First
Colorado in a tax-free exchange of stock at a price acceptable to First
Colorado. In January 1998, Wallach contacted eleven potential merger candidates
to determine their interest in First Colorado and based on discussions and
meetings with Wallach, eight parties elected to receive additional information
about First Colorado, four parties met with management, three parties submitted
formal indications of interest, while three other parties only submitted verbal
indications of value. An analysis of the preliminary proposals was presented by
Wallach to the Board on February 23, 1998. The Board engaged in a comprehensive
discussion and
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analysis of the following factors in determining with which merger candidate to
proceed: (a) the Board's obligation to enhance the benefit to First Colorado's
stockholders; (b) the market risk and opportunity associated with a stock-for-
stock transaction; (c) the wherewithal of the parties to complete the
transaction; (d) the tax consequences of the transaction to First Colorado's
stockholders; (e) the proposed terms of a definitive agreement; and (f) the
effect of the proposed transaction on employees, customers and the community.
After completing its analysis, the Board authorized negotiations with
Commercial.
During the week of March 2nd, Commercial completed a detailed onsite due
diligence on First Colorado. In addition, on March 5th First Colorado personnel,
Wallach personnel and First Colorado's legal representatives traveled to Omaha
to perform due diligence on Commercial.
After negotiating the terms of a definitive agreement, the Board met again
on March 8, 1998 to review the Merger Agreement and consider the transaction
with Commercial. The Board determined that the Commercial offer would produce
the most favorable benefit to First Colorado's stockholders based primarily upon
the transaction by a stock for stock exchange whereby income taxes could be
deferred, its being the highest value in nominal terms, the good prospects for
long-term growth in Commercial's stock, and Commercial's history of effectively
completing acquisitions. Further, the Board felt that the proposed transaction
with Commercial offered a greater likelihood of stability in the operations of
the Bank, thereby benefitting employees, customers and the community. As a
result, the Board authorized signing the Merger Agreement.
REASONS FOR THE MERGER AND RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
FIRST COLORADO'S REASONS FOR THE MERGER. The First Colorado Board
believes that the Merger is fair to, and in the best interests of, First
Colorado and its stockholders. Accordingly, the Board unanimously approved the
Merger Agreement and Merger and recommends that First Colorado stockholders vote
FOR the approval and adoption of the Merger Agreement and Merger.
- ---
In reaching its determination that the Merger is fair to, and in the best
interests of, First Colorado and its stockholders, the Board considered a number
of factors including, without limitation, the following:
(i) the current condition and growth prospects of First Colorado and its
subsidiary bank, its historical results of operations and its prospective
results of operations were First Colorado to remain independent;
(ii) the economic, business and competitive climate for banking and
financial institutions in Colorado, with special consideration given to recent
transactions that have increased the competitive environment in the financial
services and banking industry;
(iii) the monetary value of the stock offered to First Colorado
stockholders by Commercial (a) in absolute terms, (b) as compared to the value
of other stock-for-stock offers received by First Colorado from qualified and
informed potential acquirers, whose offers were each less than Commercial's
offer, and (c) as compared to recent mergers and acquisitions involving other
banking and financial institutions in Colorado and Nationally;
(iv) the potential market value, liquidity and dividend yield of First
Colorado Common Stock if First Colorado were to remain independent;
(v) the historically greater liquidity represented by the Commercial
Common Stock to be received in the Merger;
(vi) the greater financial and management resources and customer product
offerings of Commercial which could increase the competitiveness of the combined
institution in First Colorado's market area and its ability to serve the
depositors, customers and communities currently served by First Colorado;
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(vii) the historical results of operations and financial condition of
Commercial and the future prospects for Commercial, including anticipated
benefits of the Merger;
(viii) the future growth prospects of Commercial following the Merger;
(ix) the fact that the Merger will be a tax-free exchange to First Colorado
stockholders for federal income tax purposes; and
(x) the presentation of Wallach and the fact that Wallach would render
an opinion that the Exchange Ratio to be received in the Merger by First
Colorado's stockholders was fair to such holders from a financial point of view.
THE FIRST COLORADO BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
MERGER AGREEMENT AND THE MERGER BE APPROVED BY ALL STOCKHOLDERS OF FIRST
COLORADO.
COMMERCIAL'S REASONS FOR THE MERGER. In approving the Merger Agreement and
the Merger, the Commercial Board considered a number of factors concerning the
benefits of the Merger including:
(i) the information presented to the directors by management of
Commercial with respect to the business, operations, earnings, asset quality and
financial condition of First Colorado;
(ii) the financial terms of the Merger, including the relationship of the
value of the merger consideration to the market value, tangible book value and
earnings per share of the First Colorado Common Stock;
(iii) the nonfinancial terms of the Merger, including the treatment of
the Merger as a tax-free exchange of First Colorado Common Stock for Commercial
Common Stock for federal income tax purposes;
(iv) the attractiveness of the First Colorado franchise, the market
position of First Colorado and the compatibility of the franchise of First
Colorado with the operations of Commercial; and
(v) the opinion rendered by Merrill Lynch as to the fairness, from a
financial point of view, of the Exchange Ratio to the holders of Commercial
Common Stock.
The foregoing discussion includes all the material factors considered by
the Commercial Board in determining to recommend that stockholders approve the
Merger and the Merger Agreement. The Commercial Board did not quantify or
otherwise attempt to assign relative or specific weights to the factors
considered in reaching its determination that the Merger and the Merger
Agreement are in the best interests of stockholders.
COMMERCIAL'S BOARD OF DIRECTORS RECOMMENDS THAT COMMERCIAL STOCKHOLDERS
VOTE "FOR" APPROVAL OF THE MERGER AND THE MERGER AGREEMENT.
OPINION OF FIRST COLORADO'S FINANCIAL ADVISOR
First Colorado has received an opinion from Wallach that, as of the date of
this Prospectus/Joint Proxy Statement, the Exchange Ratio to be received from
Commercial was fair to the First Colorado stockholders from a financial point of
view. The full text of Wallach's opinion dated as of the date of this
Prospectus/Joint Proxy Statement, which sets forth matters considered in
connection with such opinion, is attached hereto as Annex C and should be read
in its entirety by First Colorado's stockholders. This summary of the opinion
is qualified in its entirety by reference to the full text of the opinion.
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The First Colorado Board retained Wallach as its financial advisor on the
basis of the firm's experience and expertise with the financial services and
banking industry and with transactions similar to the Merger.
In connection with delivering its fairness opinion, Wallach, among other
things, did the following:
(i) reviewed certain publicly available financial statements and other
financial information not publicly available of First Colorado;
(ii) reviewed the current condition and growth prospects for First
Colorado and its subsidiary operations, including financial projections prepared
by First Colorado management;
(iii) discussed with First Colorado management the past and current
operations and financial conditions of First Colorado and the prospects of First
Colorado if it were to remain independent;
(iv) reviewed First Colorado's historical stock trading activity and
considered the prospect for value, liquidity, dividend yield and growth if First
Colorado were to remain independent;
(v) evaluated the economic, financial and competitive climate for
financial institutions in Colorado, with special consideration given to recent
transactions that may have increased the competitive environment in the
financial services and banking industry;
(vi) reviewed the process used leading to the Commercial offer, including
a review of the potential acquirors contacted and their responses relative to a
potential acquisition of First Colorado;
(vii) compared the various offers received from interested parties and
determined that the Commercial offer represented the highest value in absolute
terms;
(viii) compared the Commercial offer to recent transactions involving
other institutions of similar size, to the extent publicly available;
(ix) examined the price and trading activity for Commercial;
(x) reviewed the implications for First Colorado stockholders receiving
Commercial stock with regards to prospects for value, liquidity, dividend yield
and growth;
(xi) met with Commercial management and reviewed certain publicly
available financial statements and other information not publicly available of
Commercial, visited certain Commercial facilities in Omaha, and discussed the
prospects of Commercial with Commercial's management; and
(xii) reviewed the Merger Agreement.
Neither Commercial nor First Colorado imposed any limitations upon the
scope of the investigation performed by Wallach in formulating its opinion. In
rendering its opinion, Wallach did not independently verify the asset quality
and financial condition of Commercial or First Colorado, but instead relied upon
the data provided by or on behalf of Commercial and First Colorado to be true
and accurate in all material respects.
Wallach relied without independent verification upon the accuracy and
completeness of all the financial and other information reviewed by it for
purposes of the fairness opinion. The fairness opinion is necessarily based on
information as of the date thereof. The fairness opinion is directed only to
the Exchange Ratio to be received by First Colorado stockholders for their
shares if the Merger is consummated and does not constitute a recommendation to
any First Colorado stockholder as to how such stockholder should vote at the
First Colorado Special Meeting.
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Following is a brief summary of the material analyses utilized by Wallach
in arriving at its fairness opinion. This summary does not purport to be a
complete description of the analyses performed by Wallach.
IMPLIED COMMERCIAL OFFER PRICE. The closing stock price of Commercial was
$34.0625 on March 6, 1998, the last closing date prior to the March 8 meeting in
which the Board evaluated Commercial's final proposal and the date of Wallach's
initial fairness opinion. Based on the Exchange Ratio, the resulting Commercial
offer price for each share of First Colorado Common Stock was $30.00. The
implied multiple of trailing 12-month earnings of First Colorado for the period
ended December 31, 1997, was 26.09. The implied multiple of book value at
December 31, 1997, was 241.0%.
COMPARISON WITH THE OTHER OFFERS. Wallach compared the Commercial offer to
the other formal offers received from two major bank holding companies and the
verbal indications of value received from three major financial institutions.
The other offers involved stock-for-stock mergers, pursuant to which First
Colorado's stockholders would receive stock of the acquiror having a value less
than Commercial's offer. Wallach's examination of the offers included, but was
not limited to, a comparison of pricing, the underlying securities and the
implications for liquidity.
ANALYSIS OF SELECTED THRIFT MERGERS. Wallach also reviewed publicly
available information on eight national thrift merger and acquisition
transactions known by Wallach to have occurred since January 1, 1997, for which
Wallach believed the sellers were similar to First Colorado in size, market and
financial performance. Wallach compared certain percentages and multiples
implied by the Commercial offer with comparable percentages and multiples for
these transactions. The average price offered in these transactions as a
multiple of trailing earnings was 22.96 as compared to 26.09 associated with the
Commercial offer at the time of the March 8, 1998 First Colorado Board Meeting.
The average equity to assets ratio for the group of acquired companies was 10.2%
as compared to First Colorado's equity to assets ratio, at December 31, 1997, of
13.5%. Since First Colorado had a materially higher capital level than most of
the similar acquired companies, Wallach chose to use the adjusted capital method
when comparing price to book value ratios. The adjusted capital method adjusts
the banks capital level to a normalized level of 7.5% of assets, under the
assumption that an acquirer will not assign a multiple of value for excess
capital. The average multiple of adjusted book value in these transactions was
260.9%, as compared to 352.9% associated with the Commercial offer at the time
of the March 8, 1998 First Colorado Board Meeting.
ANALYSIS OF SELECTED THRIFT MERGERS SUBSEQUENT TO THE MARCH 8, 1998 BOARD
MEETING. Subsequent to the March 8, 1998 Board meeting, Wallach revised its
analysis to include a recently announced transaction and to exclude a
transaction that was announced in March of 1997. Wallach reviewed publicly
available information on eight national thrift merger and acquisition
transactions known by Wallach to have occurred between April 1, 1997 and April
1, 1998, for which Wallach believed the sellers were similar to First Colorado
in size, market and financial performance. Wallach compared certain percentages
and multiples implied by the Commercial offer with comparable percentages and
multiples for these transactions. The average price offered in these
transactions as a multiple of trailing earnings was 23.00 as compared to 26.09
associated with the Commercial offer at the time of the March 8, 1998 First
Colorado Board Meeting. The average equity to assets ratio for the group of
acquired companies was 9.4% as compared to First Colorado's equity to assets
ratio, at December 31, 1997, of 13.5%. Since First Colorado again had a
materially higher capital level than the similar acquired companies, Wallach
chose to use the adjusted capital method when comparing price to book value
ratios. The adjusted capital method adjusts the banks capital level to a
normalized level of 7.5% of assets, under the assumption that an acquirer will
not assign a multiple of value for excess capital. The average multiple of
adjusted book value in these transactions was 266.5%, as compared to 352.9%
associated with the Commercial offer at the time of the March 8, 1998 First
Colorado Board Meeting.
COMMERCIAL STOCK TRADING HISTORY AND VALUATION. Wallach examined the
history of trading prices for Commercial compared to a select group of nine
other large regional bank holding companies who are active in acquisitions in
the Rocky Mountain region. The "Index Group" is comprised of Banc One
Corporation, Community First Bankshares, First Security Corporation, KeyCorp,
Norwest Corporation, TCF Financial Corporation, U.S. Bancorp, Wells Fargo & Co,
and Zions Bancorporation. Wallach also examined the valuation of Commercial
relative to the Index
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Group in relation to earnings, book value, dividend yield and other factors. For
projected earnings Wallach used the average of published analyst estimates. The
analysis showed, among other things, that for the trailing 12-month period ended
December 31, 1997, and projected 1998 and 1999 calendar years, based on stock
prices at March 6, 1998, the price to earnings ratio for Commercial was 16.5,
15.6 and 13.6 respectively, compared to 22.3, 18.3 and 16.0 for the Index Group,
respectively. Based on Commercial stock price on March 6, 1998, the price to
book value for Commercial was 249.9% compared to 352.6% for the Index Group and
the common dividend yield for Commercial was 0.65% compared to 1.86% for the
Index Group. As of March 6, 1998, the consensus of research analysts'
projections of five years' earnings growth rate was 12.0% for Commercial
compared to 12.6% for the Index Group. The return on average equity for the
twelve months ended December 31, 1997, was 11.04% for Commercial compared to
18.38% for the Index Group. The ratio of equity to assets for Commercial was
6.41% compared to 8.51% for the Index Group.
SUBSEQUENT COMMERCIAL OFFER PRICE. The closing stock price of Commercial
was [$_____] on __________, 1998, the date of Wallach's second fairness opinion.
Based on the Exchange Ratio, the resulting Commercial offer price for each share
of First Colorado Common Stock was $_____. The implied multiple of trailing 12-
month earnings of First Colorado for the period ended December 31, 1997, was
__________. The implied multiple of book value at December 31, 1997, was
__________.
Wallach is of the opinion that the Exchange Ratio is fair to First Colorado
stockholders from a financial point of view.
Wallach believes that its analyses and the summary set forth above must be
considered as a whole and that selecting portions of its analyses and the
factors considered by them could create an incomplete view of the process
underlying the preparation of its fairness opinion. No company or transaction
used in the company comparable transaction analysis is identical to First
Colorado, Commercial or the Merger. Accordingly, in its analysis Wallach used
complex considerations and judgments concerning differences in financial and
operating characteristics of the companies and other factors that could affect
the public trading value or the acquisition value of the companies to which they
are being compared.
For Wallach's services in connection with preparing a plan for obtaining
acquisition offers for First Colorado, soliciting and negotiating such
acquisition offers, rendering its opinion as to the fairness of the Exchange
Ratio to First Colorado's stockholders from a financial point of view and for
certain other advisory services in connection therewith, First Colorado has
agreed to pay Wallach certain fees. Wallach will receive a cash fee upon the
effectiveness of the Merger equal to 0.75% of the first $300 million and 1.00%
of the amount in excess of $300 million received by First Colorado stockholders
in the transaction based on the value of the Commercial Common Stock issued to
First Colorado's stockholders in the Merger. From November 1997 to the effective
date of the Merger Wallach has or will receive a monthly retainer of $7,500,
which amounts will be credited against the transaction fee due at the
effectiveness of the Merger. Wallach has also received reimbursement of its
actual out-of-pocket expenses and First Colorado has agreed to indemnify Wallach
against certain liabilities, including liabilities under securities laws.
OPINION OF COMMERCIAL'S FINANCIAL ADVISOR
On February 12, 1998, Commercial engaged Merrill Lynch to act as its
exclusive financial advisor in connection with the Merger. Pursuant to the
terms of its engagement, Merrill Lynch agreed to assist Commercial in analyzing,
structuring, negotiating and effecting an acquisition transaction with First
Colorado. Commercial selected Merrill Lynch because Merrill Lynch is a
nationally recognized investment banking firm with substantial experience in
transactions similar to the Merger and was familiar with Commercial and its
business. As part of its investment banking business, Merrill Lynch is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions.
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As part of its engagement, representatives of Merrill Lynch were present at
the meeting of the Commercial Board of Directors (the "Commercial Board") held
on March 6, 1998 at which the Commercial Board considered the Merger and
approved the Merger Agreement. At that meeting, Merrill Lynch rendered its
written opinion that, as of such date, the Exchange Ratio was fair to Commercial
from a financial point of view. Such opinion was reconfirmed in writing as of
the date of this Prospectus/Joint Proxy Statement.
The full text of Merrill Lynch's written opinion ( the "Merrill Lynch
Opinion"), dated as of the date of this Prospectus/Joint Proxy Statement, is
attached hereto as Annex D and is incorporated herein by reference. The
description of the Merrill Lynch Opinion set forth herein is qualified in its
entirety by reference to the full text of the Merrill Lynch Opinion set forth in
Annex D. Commercial stockholders are urged to read the Merrill Lynch Opinion in
its entirety for a description of the procedures followed, assumptions made,
matters considered, and qualifications and limitations on the review undertaken,
by Merrill Lynch in connection therewith.
THE MERRILL LYNCH OPINION IS DIRECTED TO THE COMMERCIAL BOARD AND ADDRESSES
ONLY THE FAIRNESS FROM A FINANCIAL POINT OF VIEW OF THE EXCHANGE RATIO TO
COMMERCIAL. IT DOES NOT ADDRESS THE MERITS OF THE UNDERLYING BUSINESS DECISION
OF COMMERCIAL TO ENGAGE IN THE MERGER AND DOES NOT CONSTITUTE A RECOMMENDATION
TO ANY COMMERCIAL STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE
COMMERCIAL SPECIAL MEETING WITH RESPECT TO THE MERGER OR ANY OTHER MATTER IN
CONNECTION THEREWITH.
Merrill Lynch has informed Commercial that in arriving at its written
opinion, Merrill Lynch, among other things: (1) reviewed certain publicly-
available business and financial information relating to Commercial and First
Colorado that Merrill Lynch deemed to be relevant, (2) reviewed certain
information, including financial forecasts, relating to the businesses,
earnings, assets, liabilities and prospects of Commercial and First Colorado
furnished to Merrill Lynch by senior management of Commercial, as well as the
amount and timing of cost savings and related expenses and revenue enhancement
expected to result from the Merger furnished to Merrill Lynch by senior
management of Commercial and First Colorado (the "Expected Synergies"); (3)
conducted discussions with members of the senior management of Commercial and
First Colorado concerning the foregoing, including the respective businesses,
prospects, regulatory conditions and contingencies of Commercial and First
Colorado before and after giving effect to the Merger and the Expected
Synergies; (4) reviewed the market prices and valuation multiples for Commercial
Common Stock and First Colorado Common Stock compared them with those of certain
publicly-traded companies which Merrill Lynch deemed to be relevant; (5)
reviewed the results of operations of Commercial and First Colorado and compared
them with those of certain publicly-traded companies which Merrill Lynch deemed
relevant; (6) compared the proposed financial terms of the Merger with the
financial terms of certain other transactions which Merrill Lynch deemed to be
relevant; (7) reviewed the potential pro forma impact of the Merger; (8)
reviewed a draft of the Merger Agreement; and (9) reviewed such other financial
studies and analyses and took into account such other matters as Merrill Lynch
deemed necessary, including an assessment of general economic, market and
monetary conditions.
In preparing the Merrill Lynch Opinion, Merrill Lynch assumed and relied on
the accuracy and completeness of all information supplied or otherwise made
available to Merrill Lynch, discussed with or reviewed by or for Merrill Lynch,
or publicly available. Merrill Lynch has not assumed responsibility for
independently verifying such information, has not undertaken an independent
evaluation or appraisal of the assets or liabilities, contingent or otherwise,
of Commercial or First Colorado or any of their subsidiaries and was not
furnished with any such evaluation or appraisal. Merrill Lynch is not an expert
in the evaluation of allowances for credit or loan losses and neither made an
independent evaluation of the adequacy of the allowances for credit or loan
losses of Commercial or First Colorado, nor reviewed any individual credit or
loan files relating to Commercial or First Colorado and, as a result, Merrill
Lynch has assumed that the aggregate allowance for credit or loan losses for
both of Commercial and First Colorado is adequate to cover such losses and will
be adequate on a pro forma basis for the combined entity. In addition, Merrill
Lynch has not assumed any obligation to conduct, nor has it conducted, any
physical inspection of the properties or facilities of
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Commercial or First Colorado. With respect to financial forecast information,
including, without limitation, financial forecasts, evaluations of contingencies
and projections regarding under-performing and non-performing assets, net
charge-offs, adequacy of reserves and future economic conditions and Expected
Synergies, furnished to or discussed with Merrill Lynch by Commercial or First
Colorado, Merrill Lynch has, with Commercial's consent, assumed that they have
been reasonably prepared and reflect the best currently available estimates,
allocations and judgments of the senior management of Commercial and First
Colorado as to the expected performance of Commercial, First Colorado or the
combined entity, as the case may be, and the Expected Synergies and expressed no
opinion as to such financial forecast information or the Expected Synergies or
the assumptions upon which they were based. The Merrill Lynch Opinion is
predicated on the Merger receiving the tax and accounting treatment contemplated
in the Merger Agreement and was necessarily based on economic, market and other
conditions as in effect on, and the information made available to Merrill Lynch,
as of the date hereof.
Merrill Lynch has also assumed that in the course of obtaining the
necessary regulatory or other consents or approvals (contractual or otherwise)
for the Merger, no restrictions, including any amendments or modifications, will
be imposed that will have a material adverse affect on the contemplated benefits
of the Merger, including the Expected Synergies. The Merrill Lynch Opinion was
also rendered without regard to the necessity for, or level of, any obligations,
undertakings or divestitures which may be imposed or required in the course of
obtaining regulatory approvals for the Merger.
In connection with rendering the Merrill Lynch Opinion, Merrill Lynch
performed a variety of financial analyses, including those summarized below. The
summary set forth below does not purport to be a complete description of the
analyses performed by Merrill Lynch in this regard, although it describes all
material analyses performed by Merrill Lynch in connection therewith. The
preparation of a fairness opinion involves various determinations as to the most
appropriate and relevant methods of financial analysis and the application of
these methods to the particular circumstances and, therefore, such an opinion is
not readily susceptible to a partial analysis or summary description.
Accordingly, notwithstanding the separate analyses summarized below, Merrill
Lynch believes that its analyses must be considered as a whole and that
selecting portions of the analyses and factors considered by it, without
considering all such analyses and factors, or attempting to ascribe relative
weights to some or all such analyses and factors, could create an incomplete
view of the evaluation process underlying the Merrill Lynch Opinion.
In performing its analyses, Merrill Lynch made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Commercial or First
Colorado. The analyses performed by Merrill Lynch are not necessarily indicative
of actual values or actual future results, which may be significantly more or
less favorable than suggested by such analyses. Such analyses were prepared
solely as part of Merrill Lynch's analysis of the fairness of the Exchange Ratio
to Commercial from a financial point of view and were provided to the Commercial
Board in connection with the delivery of the Merrill Lynch Opinion. Merrill
Lynch gave the various analyses described below similar weight and did not draw
any specific conclusions from or with regard to any one method or analysis. With
respect to the comparison of selected comparable companies analysis and the
analysis of selected thrift merger transactions summarized below, no public-
company utilized as a comparison is identical to Commercial or First Colorado
and no transaction is identical to the Merger. Accordingly, an analysis of
publicly traded comparable companies and comparable business combinations is not
mathematical; rather it involves complex considerations and judgments concerning
the differences in financial and operating characteristics of the companies and
other factors that could affect the public trading values or announced merger
transaction values, as the case may be, of Commercial, First Colorado and the
companies to which they are being compared. The analyses do not purport to be
appraisals or to reflect the prices at which Commercial might actually be sold
or the prices at which any securities may trade at the present time or at any
time in the future. In addition, as described below, the Merrill Lynch Opinion
was one of many factors taken into consideration by the Commercial Board in
making its determination to approve the Merger Agreement. Consequently, the
Merrill Lynch analyses described below should not be viewed as determinative of
the decision of the Commercial Board or Commercial's management with respect to
the Merger.
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The projections furnished to Merrill Lynch and used by it in certain of its
analyses were prepared by the senior management of Commercial. Commercial does
not publicly disclose internal management projections of the type provided to
Merrill Lynch in connection with its review of the Merger, and as a result, such
projections were not prepared with a view towards public disclosure. The
projections were based on numerous variables and assumptions which are
inherently uncertain, including, without limitation, factors related to general
economic and competitive conditions, and accordingly, actual results could vary
significantly from those set forth in such projections.
The following is a summary of the material analyses presented by Merrill
Lynch to the Commercial Board on March 6, 1998, in connection with the Merrill
Lynch Opinion dated the date hereof.
SUMMARY OF PROPOSAL. Merrill Lynch reviewed the terms of the proposed
transaction, including the Exchange Ratio and the implied aggregate transaction
value. Based on this implied transaction value, Merrill Lynch calculated the
price to market, price to book value, price to tangible book value, implied
deposit premium (defined as the transaction value minus the tangible book value
divided by total deposits) and price to 1998 estimated earnings (based on
Commercial management estimates) multiples for First Colorado in the Merger
based on such implied total transaction value. This analysis yielded a price to
market multiple of 1.20x , a price to book value multiple of 2.34x, a price to
tangible book value multiple of 2.38x, an implied deposit premium of 25.79%, and
a price to projected 1998 earnings (based on Commercial management estimates)
multiple of 23.3x.
PRO FORMA MERGER ANALYSIS. Based on projections provided by Commercial,
Merrill Lynch analyzed certain pro forma effects of the Merger. Assuming a price
per share of Commercial Common Stock of $35.00, this analysis indicated that the
transaction would be accretive to Commercial 1998 estimated earnings per share
and accretive to Commercial estimated earnings per share thereafter, and that
the Merger would be accretive to Commercial's book value and tangible book value
per share. In this analysis, Merrill Lynch assumed that Commercial performed in
accordance with the earnings forecasts and Expected Synergies provided to
Merrill Lynch by Commercial's senior management.
DISCOUNTED DIVIDEND STREAM ANALYSIS - FIRST COLORADO. Using a discounted
dividend stream analysis, Merrill Lynch estimated the present value of the
future streams of after-tax cash flows that First Colorado could produce and
distribute to stockholders ("dividendable net income"). In this analysis,
Merrill Lynch assumed after-tax Expected Synergies of $5.9 million in 1999 and
an after-tax restructuring charge of $3.0 million in 1998. Merrill Lynch also
assumed that First Colorado performed in accordance with earnings forecasts
provided to Merrill Lynch by Commercial's senior management and that First
Colorado's tangible common equity to tangible asset ratio would be maintained at
a minimum 5.0% level. Merrill Lynch estimated the terminal values for the
Commercial Common Stock at 14.00 to 16.00 times First Colorado's 2003 estimated
operating income (defined as net income before amortization of intangibles). The
dividendable net income streams and terminal values were then discounted to
present values using different discount rates (ranging from 12.0% to 13.0%)
chosen to reflect different assumptions regarding required rates of return of
holders or prospective buyers of First Colorado Common Stock. This discounted
dividend stream analysis indicated a net present value per share of First
Colorado Common Stock reference range of $28.46 to $31.65. As indicated above,
this analysis was based on Commercial senior management estimates and is not
necessarily indicative of actual values or actual future results and does not
purport to reflect the prices at which any securities may trade at the present
or at any time in the future. Merrill Lynch noted that the discounted dividend
stream analysis was included because it is a widely used valuation methodology,
but noted that the results of such methodology are highly dependent upon the
numerous assumptions that must be made, including earnings growth rates,
dividend payout rates, terminal values and discount rates.
ANALYSIS OF SELECTED THRIFT MERGER TRANSACTIONS - FIRST COLORADO. Merrill
Lynch reviewed publicly available information regarding the thrift merger
transactions with a value greater than $400 million which had occurred in the
United States since January 1, 1997 that it deemed to be relevant. Merrill Lynch
compared the price to book value, price to tangible book value, price to
trailing twelve months' earnings and the implied deposit premium paid in the
Merger and in such selected thrift merger transactions. This analysis yielded a
range of (i) price to book value multiples of 1.51x to 4.80x with a mean of
2.47x (compared with a multiple of 2.34x for First Colorado in the Merger), (ii)
price to
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tangible book value multiples of 1.51x to 4.80x with a mean of 2.59x (compared
with a multiple of 2.38x for First Colorado in the Merger), (iii) price to
trailing twelve months' earnings multiples of 17.06x to 35.00x with a mean of
30.81x (compared with a multiple of 24.59x for First Colorado in the merger),
and (iv) implied deposit premiums paid of 8.46% to 43.83% with a mean of 21.57%
(compared with an implied deposit premium of 25.79% for First Colorado in the
Merger).
Merrill Lynch also reviewed publicly available information regarding
selected thrift merger transactions with a value greater than $400 million which
had occurred in the Midwest and Southwest region of the U.S. (defined as
Colorado, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Michigan,
Minnesota, Missouri, Nebraska, New Mexico, North Dakota, Ohio, Oklahoma, South
Dakota, Texas, Utah and Wisconsin) since January 1, 1997 that it deemed to be
relevant. Merrill Lynch compared the price to book value, price to tangible book
value, price to trailing twelve months' earnings and the implied deposit premium
paid in the Merger and in such selected thrift merger transactions. This
analysis yielded a range of (i) price to book value multiples of 1.51x to 3.39x
with a mean of 2.13x (compared with a multiple of 2.34x for First Colorado in
the Merger); (ii) price to tangible book value multiples of 1.51x to 3.73x with
a mean of 2.23x (compared with a multiple of 2.38x for First Colorado in the
Merger); (iii) price to trailing twelve months' earnings multiples of 17.06x to
33.33x with a mean of 26.44x (compared with a multiple of 24.59x for First
Colorado in the Merger); and (iv) implied deposit premiums paid of 9.97% to
38.87% with a mean of 20.85% (compared with an implied deposit premium of 25.79%
for First Colorado in the Merger).
No company or transaction used in the above analysis as a comparison is
identical to First Colorado or the Merger, respectively. Accordingly, an
analysis of the results of the foregoing necessarily involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and other factors that could affect the public
trading values or announced merger transaction values, as the case may be, of
the companies to which they are being compared.
COMPARISON OF SELECTED COMPARABLE COMPANIES - FIRST COLORADO. Merrill Lynch
compared selected operating and stock market results of First Colorado to the
publicly available corresponding data of certain other companies which Merrill
Lynch deemed to be relevant, including Advantage Bancorp, Inc., Alliance Bancorp
Inc., Anchor BanCorp Wisconsin, D&N Financial Corp., First Indiana Corp., First
Federal Capital Corp. and St. Francis Capital Corp (collectively, the "First
Colorado Composite"). This comparison showed, among other things, that at or for
the twelve months ended December 31, 1997 (i) First Colorado's net interest
margin was 3.29% compared to a mean 3.21% for the First Colorado Composite; (ii)
First Colorado's efficiency ratio (defined as noninterest expense divided by the
sum of noninterest income and net interest income before provision for loan
losses) was 46.71% compared to a mean of 59.98% for the First Colorado
Composite; (iii) First Colorado's return on average assets was 1.31% compared to
a mean of 0.88% for the First Colorado Composite; and (iv) First Colorado's
return on average equity was 9.92% compared to a mean of 11.62% for the First
Colorado Composite. This comparison also indicated that (i) at December 31,
1997, (A) First Colorado's tangible equity to tangible asset ratio was 13.22%
compared to a mean of 7.77% for the First Colorado Composite, (B) First
Colorado's ratio of equity to assets was 13.46% compared with a mean of 8.07%
for the First Colorado Composite, (C) First Colorado's Core Capital ratio was
23.40% compared with a mean of 12.09% for the First Colorado Composite, (D)
First Colorado's ratio of nonperforming loans to total loans was .18% compared
with a mean of .58% for the First Colorado Composite, (E) First Colorado's ratio
of nonperforming assets to total assets was .15% compared with a mean of .60%
for the First Colorado Composite, (F) First Colorado's ratio of loan loss
reserves to nonperforming assets was 201.71% compared with a mean of 143.73% for
the First Colorado Composite, (G) First Colorado's ratio of loan loss reserves
to nonperforming loans was 223.19% compared with a mean of 201.80% for the First
Colorado Composite, (ii) assuming a First Colorado stock price of $25.00 (A) the
ratio of First Colorado's market price to estimated earnings for the twelve
month period ending December 31, 1998 was 20.83x compared to a mean of 17.90x
and for the First Colorado Composite (assuming reported average earnings
estimates based on data from First Call for the First Colorado Composite and
assuming management estimates for First Colorado), (B) First Colorado's ratio of
market price to estimated earnings for the twelve month period ending December
31, 1999 was 19.08x compared to a mean of 16.74x for the First Colorado
Composite, (C) First Colorado's ratio of market price to book value per share at
December 31, 1997 was 1.77x compared to a mean of 2.27x for the First Colorado
Composite,
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(D) First Colorado's ratio of market price to tangible book value per share at
December 31, 1997 was 1.79x compared to a mean of 2.36x for the First Colorado
Composite, and (E) First Colorado's dividend yield was 2.08% compared to a mean
of 1.17% for the First Colorado Composite.
DISCOUNTED DIVIDEND STREAM ANALYSIS - COMMERCIAL. Using a discounted
dividend stream analysis, Merrill Lynch estimated Commercial's dividendable net
income of Commercial on a stand-alone basis from 1998 through 2003. In this
analysis, Merrill Lynch assumed that Commercial performed in accordance with the
earnings forecasts provided to Merrill Lynch by Commercial's senior management
and that Commercial's tangible common equity to tangible asset ratio would be
maintained at a minimum 5.00% level. Merrill Lynch estimated the terminal values
for the Commercial Common Stock at 14.00 to 16.00 times Commercial's 2003
estimated operating income (defined as net income before amortization of
intangibles). The dividendable net income streams and terminal values were then
discounted to present values using different discount rates (ranging from 12.0%
to 14.0%) chosen to reflect different assumptions regarding required rates of
return of holders or prospective buyers of Commercial Common Stock. This
discounted dividend stream analysis indicated a net present value per share
reference range of $31.95 to $38.42 per share for Commercial Common Stock. As
indicated above, this analysis was based on Commercial senior management
estimates and is not necessarily indicative of actual values or actual future
results and does not purport to reflect the prices at which any securities may
trade at the present or at any time in the future. Merrill Lynch noted that the
discounted dividend stream analysis was included because it is a widely used
valuation methodology, but noted that the results of such methodology are highly
dependent upon the numerous assumptions that must be made, including earnings
growth rates, dividend payout rates, terminal values and discount rates.
COMPARISON OF SELECTED COMPARABLE COMPANIES - COMMERCIAL. Merrill Lynch
compared selected operating and stock market results of Commercial to the
publicly available corresponding data of certain other companies which Merrill
Lynch deemed to be relevant, including St. Paul Bancorp Inc., Charter One
Financial, Sovereign Bancorp Inc., People's Bank (MHC), Bank United Corp.,
Peoples Heritage Financial Group, Webster Financial Corp. and TCF Financial
(collectively the "Commercial Composite"). This comparison showed, among other
things, that as for the twelve months ended December 31, 1997 (i) Commercial's
net interest margin was 2.57% compared with a mean 3.47% for the Commercial
Composite; (ii) Commercial's efficiency ratio (defined as noninterest expenses
divided by the sum of noninterest income and net interest income before
provision for loan losses) was 48.42% compared with a mean of 55.96% for the
Commercial Composite; (iii) Commercial's return on average assets was 1.01%
compared to a mean of 0.99% for the Commercial Composite; and (iv) Commercial's
return on average equity was 16.74% compared to a mean of 13.36% for the
Commercial Composite. This comparison also indicated that (i) at December 31,
1997, (A) Commercial's tangible equity to tangible asset ratio was 4.97%
compared to a mean of 5.98% for the Commercial Composite, (B) Commercial's ratio
of equity to assets was 6.55% compared with a mean of 7.13% for the Commercial
Composite, (C) Commercial's Core Capital ratio was 14.70% compared with a mean
of 11.50% for the Commercial Composite, (D) Commercial's ratio of nonperforming
loans to total loans was .71% compared with a mean of .57% for the Commercial
Composite, (E) Commercial's ratio of nonperforming assets to total assets was
.75% compared with a mean of .60% for the Commercial Composite, (F) Commercial's
ratio of loan loss reserves to nonperforming assets was 81.80% compared with a
mean of 129.01% for the Commercial Composite, (G) Commercial's ratio of loan
loss reserves to nonperforming loans was 124.97% compared with a mean of 164.26%
for the Commercial Composite, (ii) assuming a Commercial share price of $35.00
(A) the ratio of Commercial's market price to estimated earnings for the twelve
month period ending December 31, 1998 was 15.28x compared to a mean of 16.54x
for the Commercial Composite (assuming reported average earnings estimates based
on data from First Call for the Commercial Composite and assuming management
estimates for Commercial), (B) Commercial's ratio of market price to estimated
earnings for the twelve month period ending December 31, 1999 was 14.00x
compared to a mean of 14.76x for the Commercial Composite), (C) Commercial's
ratio of market price to book value per share at December 31, 1997 was 2.35x
compared to a mean of 2.64x for the Commercial Composite, (D) Commercial's ratio
of market price to tangible book value per share at December 31, 1997 was 3.09x
compared to a mean of 3.04x for the Commercial Composite, and (E) Commercial's
dividend yield was .69% compared to a mean of 1.38% for the Commercial
Composite.
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In connection with the Merrill Lynch Opinion (dated as of the date of this
Prospectus/Joint Proxy Statement), Merrill Lynch performed procedures to update,
as necessary, certain of the analyses described above and reviewed the
assumptions on which such analyses described above were based and the factors
considered in connection therewith. Merrill Lynch did not perform any analyses
in addition to those described above in updating the Merrill Lynch Opinion.
Merrill Lynch has been retained by the Commercial Board as an independent
contractor to act as financial advisor to Commercial in connection with the
Merger. Merrill Lynch is a nationally recognized investment banking firm which,
among other things, regularly engages in the valuation of businesses and
securities, including financial institutions, in connection with mergers and
acquisitions. In addition, within the past two years, Merrill Lynch has provided
financial advisory, investment banking and other services to Commercial and has
received fees for the rendering of such services. In the ordinary course of
business, Merrill Lynch and its affiliates may trade debt and/or equity
securities of Commercial or First Colorado for their own accounts and for the
accounts of customers and, accordingly, may from time to time hold a long or
short position in such securities.
Commercial and Merrill Lynch have entered into a letter agreement dated
February 12, 1998 relating to the services to be provided by Merrill Lynch in
connection with the Merger. Commercial has agreed to pay Merrill Lynch fees as
follows: (i) a fee of $100,000, contingent upon and payable in cash upon the
execution of a definitive agreement to effect the Merger and, (ii) an additional
fee of $3,000,000 contingent upon and payable in cash upon the completion of the
Merger. Any fees previously paid to Merrill Lynch pursuant to clause (i) will be
deducted from any fees to which Merrill Lynch is entitled pursuant to clause
(ii). In such agreement, Commercial also agreed to reimburse Merrill Lynch for
its reasonable out-of-pocket expenses incurred in connection with its advisory
work, including the reasonable fees and disbursements of its legal counsel, and
to indemnify Merrill Lynch against certain liabilities relating to or arising
out of the Merger, including liabilities under the securities laws. Merrill
Lynch will also receive a fee for the reissuance by First Colorado of
approximately 1,800,000 shares of First Colorado Common Stock prior to the
Effective Time of the Merger. See " -- Issuance of Shares from the
Treasury."
CONVERSION OF FIRST COLORADO COMMON STOCK
EXCHANGE RATIO. Each share of First Colorado Common Stock issued and
outstanding at the Effective Time (other than shares owned or held by First
Colorado or Commercial or any of their subsidiaries, other than in a fiduciary
capacity or pursuant to a debt previously contracted) 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) equal to the
quotient obtained by dividing 30 by the Average NYSE Closing Price; provided
that, if such quotient is greater than .9677, then the Exchange Ratio shall
equal .9677 or if such quotient is less than .7895, then the Exchange Ratio
shall be .7895.
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
of the closing prices per share of Commercial Common Stock for the five full
trading days immediately preceding the Closing Date as reported on the NYSE
consolidated tape as reported in The Wall Street Journal or, if not reported
therein, in another mutually agreed upon authoritative source.
EXCHANGE OF FIRST COLORADO STOCK CERTIFICATES. _______________________ 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 Effective Time, the Exchange Agent will send a notice and
transmittal form to each First Colorado stockholder of record at such date whose
First Colorado Common Stock has been converted into Commercial Common Stock,
advising such stockholder of the effectiveness of the Merger and the procedure
for surrendering to the Exchange Agent outstanding certificates formerly
evidencing First Colorado Common Stock in exchange for new
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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 First Colorado Common Stock certificates should surrender their
certificates in accordance with the specified procedures. Upon surrender, each
First Colorado Common Stock certificate will be canceled.
Until surrendered, certificates that prior to the Effective Time
represented outstanding shares of First Colorado 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 First Colorado 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 Effective Time will be paid to the holders of
such certificates. However, upon surrender of such certificates, there will be
paid to the record 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 FIRST COLORADO COMMON STOCK SHOULD NOT SURRENDER THEIR
CERTIFICATES UNTIL THEY RECEIVE WRITTEN INSTRUCTIONS FROM THE EXCHANGE AGENT.
Any shares of First Colorado Common Stock owned or held by First Colorado
or Commercial or any of their subsidiaries (other than in a fiduciary capacity
or pursuant to a debt previously contracted) at the Effective Time will cease to
exist, and the certificates for such shares will be canceled.
TREATMENT OF FIRST COLORADO STOCK OPTIONS
Immediately prior to the Effective Time, each holder of an option
outstanding under the First Colorado Option Plan shall continue outstanding as
an option to purchase, in place of the purchase of each share of First Colorado
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 First Colorado Common Stock immediately prior to the Merger upon the
same terms and conditions under the relevant option as were applicable
immediately prior to the Effective Time, except that the exercise price of each
such option shall be adjusted to equal the exercise price which existed under
the terms of such option prior to the Effective Time divided by the Exchange
Ratio.
See " -- Interests of Certain Persons in the Merger" for information
regarding outstanding First Colorado stock options.
NO DISSENTERS' APPRAISAL RIGHTS
In accordance with the CBCA, First Colorado'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 Merger, First Federal 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 First Federal and the Bank
dated March 9, 1998. At the Bank Merger Effective Time, the shares of First
Federal 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 First Federal and all branch offices of the Bank and former branch
offices of First Federal 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 executive officers of Commercial and the Bank will not be
affected by the Merger, with the exception that Malcolm E. Collier is expected
to become a director of Commercial.
REPRESENTATIONS AND WARRANTIES
Commercial and the Bank, and First Colorado and First Federal, 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 compliance and timely filing of all regulatory documents
with governmental authorities; 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/Joint 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/Joint Proxy Statement; disclosure of
financial advisory, brokerage, finders and similar fees; the absence of
undisclosed material pending or threatened litigation; their standing under and
compliance with applicable federal, state or local law, including compliance
with federal securities laws and state and federal tax laws, among others;
certain tax matters; their authority to enter into the Merger Agreement and to
undertake the transactions contemplated by it; that the execution and
performance of their respective obligations under the Merger Agreement will not
result in any violation, conflict or breach of default; actions taken to comply
with accounting and tax treatment of the Merger; and the accuracy of all
information provided to each other in connection with the Merger. First
Colorado and First Federal have made additional representations as to the
absence of undisclosed employment agreements or arrangements and employee
benefits; absence of any undisclosed material contracts; absence of any material
contract defaults; the lack of undisclosed derivative contracts; the absence of
known environmental hazards and claims; the adequacy of certain types of
insurance; the quality of First Federal's loan portfolio; and ownership of all
real property and undisturbed possession of all material leases; 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 MERGER
In the Merger Agreement, Commercial, the Bank, First Colorado and First
Federal have agreed to use their reasonable 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
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agents reasonable access (to the extent lawful) to all of the premises, books,
records and employees of it and its subsidiaries 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. In addition, the parties have
agreed to use their reasonable best efforts to promptly prepare and file all
necessary documentation, to effect all applications, notices, petitions, filings
and to obtain as promptly as practicable all permits, consents, approvals,
waivers and authorizations of all third parties and governmental authorities
which are necessary to consummate the transactions contemplated by the Merger
Agreement. Further, from the date of the Merger Agreement and continuing through
the Closing Date, except as required by applicable law or with the prior written
consent of the parties, no party shall take any action which, or fail to take
any action the failure of which to be taken, would, or could reasonably be
expected to, (i) result in any of the representations and warranties set forth
in the Merger Agreement on the part of the party taking or failing to take such
action being or becoming untrue in any material respect; (ii) result in any
conditions to the closing set forth in the Merger Agreement not being satisfied;
or (iii) adversely affect or materially delay the receipt of any of the
requisite regulatory approvals or the consummation of the Merger and the other
transactions contemplated thereby. First Colorado has also agreed to cause First
Federal to perform and comply with all of the obligations, covenants and
agreements as provided in the Merger Agreement, to be performed or complied with
by First Federal at or prior to the Closing.
Pursuant to the Merger Agreement, First Colorado and its subsidiaries,
including First Federal, will conduct their business only in the ordinary
course, and maintain their books and records in accordance with past practices,
preserve its present business organization and relationships, keep available the
present services of its employees and preserve its rights, franchises, goodwill
and relations with its customers and others with whom they conduct business.
In addition, except as expressly contemplated and permitted by the Merger
Agreement, First Colorado and its subsidiaries shall not, without the prior
written consent of Commercial:
(i) amend its articles of incorporation, charter or bylaws (or
comparable governing instruments) or merge with or into or consolidate with any
other person, subdivide, combine or in any way reclassify any shares of its
capital stock, or change in any manner the rights of its outstanding capital
stock;
(ii) issue or sell or purchase any shares of its capital stock, or
issue or sell or purchase any option, warrant, convertible or exchangeable
security, right, subscription, call, unsatisfied pre-emptive right or other
agreement or right of any kind to purchase or otherwise acquire (including,
without limitation, by exchange or conversion) (each a "Right") any shares of
its capital stock (except that First Colorado may issue shares of its common
stock upon (i) exercise of First Colorado stock options outstanding on the date
of the Merger Agreement or (ii) as previously disclosed in the Merger
Agreement);
(iii) waive any right of value to its business other than a waiver,
together with all other such waivers, that would not have a material adverse
effect;
(iv) make any change in its accounting methods or practices for tax
or accounting purposes or make any change in depreciation or amortization
policies or rates adopted by it for tax or accounting purposes, except in each
case as required by generally accepted accounting principles or applicable law;
(v) materially change, or agree to change, any of its lending
activities, policies or practices, except as required by applicable law or by
any governmental authority;
(vi) make any loan or advance to any of its affiliates, officers,
directors, employees, consultants, agents or other representatives (other than
travel advances made in the ordinary course of business consistent with past
practice), or make any other loan or advance otherwise than in the ordinary
course of business consistent with past practice;
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(vii) sell, offer to sell, abandon or make any other disposition of
any of its material assets, including selling or closing any branches; or grant
or suffer any encumbrance on any of its material assets;
(viii) except in the ordinary course of business consistent with past
practice, incur or assume, or agree to incur or assume, any liability or
obligation (whether or not currently due and payable) relating to its business
or any of its assets;
(ix) create, renew, amend, terminate or cancel, or take any other
action that may result in the creation, renewal, amendment, termination or
cancellation of, any contract with any of its affiliates;
(x) declare, set aside or pay any dividends or declare or make any
other distributions of any kind on or in respect of its capital stock (other
than dividends from a First Colorado subsidiary to First Colorado or another
First Colorado subsidiary), or make any direct or indirect redemption,
retirement, purchase or other acquisition of any shares of its capital stock or
Rights, provided that First Colorado may declare and pay its regular quarterly
cash dividends on the First Colorado Common Stock of not more than $.13 per
share per quarterly period, provided further that the parties agree that after
the date of the Merger Agreement, each of First Colorado and Commercial shall
coordinate with the other the declaration of any dividends and the record dates
and payment dates relating thereto, so that holders of First Colorado Common
Stock shall not receive two dividends, or fail to receive one dividend, for any
single calendar quarter with respect to their shares of First Colorado Common
Stock and any shares of Commercial Common Stock any such holder receives in
exchange therefor in the Merger;
(xi) create, renew, amend, terminate or cancel, or take any other
action that may result in the creation, renewal, amendment, termination or
cancellation of, any contract, except in the ordinary course of business
consistent with past practice and as would not, in the aggregate, have a
material adverse effect; enter into or amend any contract pursuant to which it
agrees to indemnify any party on behalf of its business or pursuant to which it
agrees to refrain from competing with any party with respect to its business;
(xii) except as previously disclosed to Commercial, adopt, amend,
renew, terminate or accelerate or vest benefits under any First Colorado
employee benefit plan or benefit arrangement or any other employee program,
plan, agreement, arrangement or policy between First Colorado or a First
Colorado subsidiary and one or more of employees of First Colorado or a First
Colorado subsidiary, except as required by applicable law;
(xiii) commit any act or omission which constitutes a breach or
default under any contract or license to which it is a party or by which it or
any of its properties or assets is bound except as would not have, in the
aggregate, a material adverse effect;
(xiv) acquire in any manner, including by way of merger,
consolidation or purchase of an equity interest or assets, any business or any
corporation, partnership, association or other business organization or division
thereof (other than by way of foreclosures or acquisitions of control in a bona
fide fiduciary capacity or in satisfaction of debts previously contracted in
good faith, in each case in the ordinary and usual course of business consistent
with past practice);
(xv) increase the salary or wages of any employees of First Colorado
or of any First Colorado subsidiary; or pay any incentive, bonus or similar
payments to employees other than as required by the terms of any First Colorado
employee benefit plan or benefit arrangement in effect as of the date of the
Merger Agreement and previously disclosed in the Merger Agreement;
(xvi) 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;
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(xvii) make any investment which would cause First Federal 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;
(xviii) change its existing investment guidelines as previously
disclosed in the Merger Agreement, except as required by applicable law or any
governmental authority, or the manner in which its investment securities
portfolio is classified or reported;
(xix) authorize or make capital expenditures in excess of $100,000,
individually, or $500,000, in the aggregate;
(xx) take any action that or fail to take any action the result of
which would (but without giving effect to any actions taken or agreed to be
taken by Commercial or any of its affiliates)(i) prevent Commercial from
accounting for the Merger as a pooling of interests for accounting and financial
reporting purposes or (ii) prevent the Merger from qualifying as a
"reorganization" under Section 368(a) of the Code; or
(xxi) agree (by contract or otherwise) to do any of the foregoing.
NO SOLICITATION
Pursuant to the Merger Agreement, First Colorado or any of its affiliates
shall not directly or indirectly solicit, encourage or facilitate inquiries or
proposals or initiate or participate in any negotiations with a person
concerning the acquisition or purchase of all or a material portion of the
assets of First Colorado or any of its subsidiaries (a "third party proposal").
However, First Colorado's Board may authorize or permit its representatives to
furnish certain nonpublic information or participate in such discussions if
failure to do so would constitute a violation of the Board's fiduciary duties
under applicable law. First Colorado has agreed to give prompt written notice
to Commercial upon becoming aware of any third party proposal and furnish to
Commercial copies of all information regarding the terms of any third party
proposal.
CONDITIONS TO CONSUMMATION OF THE MERGER
Pursuant to the Merger Agreement, the obligations of Commercial, the Bank,
First Colorado and First Federal to effect the Merger are subject to the
following conditions:
(i) no statute, rule, regulation, order, injunction, decree or
other applicable law shall have been enacted, entered, issued, promulgated or
enforced by any governmental authority which prohibits, restricts or makes
illegal consummation of the Merger pursuant hereto (an "Injunction") and which
remains in effect; and no proceeding initiated by any governmental authority
seeking an Injunction shall be pending;
(ii) all consents, waivers, authorizations and approvals required
from all governmental authorities to consummate the Merger shall have been
obtained and shall remain in full force and effect and all waiting periods under
applicable law in respect thereof shall have expired or terminated;
(iii) the Merger, the Merger Agreement and the transactions
contemplated thereby shall have been approved by the Commercial stockholders and
the First Colorado stockholders, in each case, in the manner required by
applicable law;
(iv) the Commission shall have declared the registration statement
effective; and on the Closing Date and at the Effective Time, no stop order
suspending the effectiveness of the registration statement shall have been
issued and no proceedings for that purpose shall have been initiated or then
threatened by the Commission;
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(v) the shares of Commercial Common Stock, if any, to be issued as
Merger Consideration in the Merger shall have been approved for listing on the
NYSE, subject to official notice of issuance; and
(vi) Commercial and First Colorado shall have received a letter, in
form and substance reasonably satisfactory to Commercial, from Wachtell, Lipton,
Rosen & Katz, dated the date of the Proxy Statement and confirmed in writing at
the Effective Time, as to certain federal income tax and accounting matters with
respect to the Merger.
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: (i) Commercial shall have received a letter
from First Colorado's independent public accountants regarding certain financial
information included in this Prospectus/Joint Proxy Statement and other matters;
(ii) the representations and warranties of First Colorado and First Federal set
forth in the Merger Agreement shall be true and correct in all material respects
as of the date of the Merger Agreement and (except to the extent such
representation and warranty speaks of an earlier date) as of the Closing Date as
though made on and as of the Closing Date and First Colorado and First Federal
shall have performed and complied in all material respects, with each agreement,
covenant, obligation and condition required in the Merger Agreement at or prior
to the Closing Date; (iv) First Colorado shall have delivered to Commercial and
the Bank a certificate, dated as of the Closing Date, and signed by its chief
executive officer and chief financial officer confirming the satisfaction of the
conditions set forth in (ii) and (iii) above; and (v) Commercial shall have
received executed written undertakings from all affiliates of First Colorado at
least 45 days prior to the date of First Colorado's meeting of stockholders to
approve the Merger, for determining the qualification of the Merger as a pooling
of interest for accounting and financial reporting purposes.
The obligations of First Colorado and First Federal to effect the Merger
and the transactions contemplated in the Merger Agreement are subject to the
following additional conditions: (i) the representations and warranties of
Commercial and the Bank set forth in the Merger Agreement shall be true and
correct in all material respects as of the date of the Merger Agreement and
(except to the extent such representation and warranty speaks of an earlier
date) as of the Closing Date as though made on and as of the Closing Date; (ii)
Commercial and the Bank shall have performed and complied in all material
respects with each agreement, covenant, obligation and condition required in the
Merger Agreement at or prior to the Closing Date; and (iii) Commercial shall
have delivered to First Colorado and First Federal a certificate, dated as of
the Closing Date, and signed by its chief executive officer and chief financial
officer confirming the satisfaction of the conditions contained in (i) and (ii)
above dated as of the Closing Date.
There can be no assurance that the conditions to consummation of the Merger
will be satisfied. 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 Effective
Time, whether before or after approval by stockholders; (i) by mutual written
consent of the parties; (ii) at the election of either party, if the closing of
the Merger shall not have occurred on or before February 28, 1999, provided that
the right to terminate under this provision shall not be available to any party
whose failure or whose affiliate's failure to perform any covenant of an
obligation under the Merger Agreement has been the cause of, or has resulted in,
the failure of the closing to occur on or before such date; (iii) by either
party if a condition to the terminating party's obligation to close as set forth
in the Merger Agreement cannot be satisfied prior to February 28, 1999, unless
caused by the breach of any covenant or agreement under the Merger Agreement (x)
by First Colorado or First Federal, in the case of a termination by First
Colorado, or (y) by Commercial or the Bank, in the case of termination by
Commercial; (iv) by either party (provided that none of the terminating party or
any of its affiliates is not then in material breach of any representation,
warranty, covenant or other agreement contained in the Merger Agreement) if
there shall have been a material breach of any of the covenants or agreements or
any of the representations or warranties in the Merger Agreement on the part of
First Colorado or First Federal, in the case of a termination by Commercial, or
on the part of Commercial or the Bank, in the
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case of a termination by First Colorado, which breach is not cured within 30
days following written notice given by the terminating party to the party
committing such breach, or, by its nature, cannot be cured prior to February 28,
1999, and which breach would entitle the terminating party to not consummate the
Merger; (v) by Commercial if First Colorado's Board shall withdraw, modify or
change in a manner adverse to Commercial its recommendation with respect to the
Merger, the Merger Agreement or the transactions contemplated thereby; or (vi)
by First Colorado at any time during the two trading day period commencing with
the fourth trading day prior to the Closing Date and if (A) the Average NYSE
Closing Price of Commercial Common Stock is less than the product of the
Starting Price ($34.875) and .85, and (B) the number obtained by dividing the
Average NYSE Closing Price by $34.875 is less than the Index Ratio; provided,
however, that First Colorado 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 lesser of (a) the quotient obtained by
dividing the product of .85, the Starting Price and .9677 by the Average NYSE
Closing Price of Commercial Common Stock, or (b) the quotient obtained by
dividing the product of the Index Ratio, the Starting Price and .9677 by the
Average NYSE Closing Price.
The representations, warranties, covenants and agreements of the parties
set forth in the Merger Agreement shall not survive the Effective Time, and
shall be terminated and extinguished at that time. If the Merger Agreement is
terminated and the Merger and the transactions contemplated thereby are not
consummated, the Merger Agreement shall become void and of no further force and
effect, without any liability on the part of any party hereto, except for the
payment of expenses and provisions regarding confidentiality and announcements
to the public. Notwithstanding the foregoing, none of the parties are relieved
of liability for a willful breach of any provision of the Merger Agreement.
The Merger Agreement may be amended, whether before or after approval by
stockholders of Commercial or First Colorado, by an agreement in writing
executed in the same manner as the Merger Agreement and authorized or ratified
by the Boards of Directors of First Colorado and Commercial, except that after
approval of the Merger Agreement by First Colorado's stockholders, no such
amendment shall be made which would require further approval and authorization
by Commercial's stockholders and First Colorado's stockholders.
EXPENSES
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.
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/Joint 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 Commercial's and First Colorado'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
The Merger shall become effective on the date and at the time on which
articles of merger are filed with the Secretaries of State of the States of
Nebraska and Colorado in such form as required by, and in accordance with, the
relevant provisions of the NBCA and the CBCA, respectively. Subject to the terms
and conditions of the Merger Agreement, the Effective Time shall occur on any
such date as Commercial shall notify First Colorado in writing (such
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notice to be at least five full trading days in advance of the Effective Time)
but in any event (i) not earlier than the later of (x) the satisfaction or
waiver of all conditions set forth in Article VII of the Merger Agreement and
(y) July 24, 1998 (such later date being referred to herein as the "Approval
Date") and (ii) subject to clause (i),not later than the first business day of
the first full calendar month commencing at least five full trading days after
the Approval Date, or at such other time as Commercial and First Colorado shall
agree.
EMPLOYEE BENEFIT PLANS AFTER THE MERGER
To the extent permitted by applicable law, the employees of First Colorado
and First Federal 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 First
Colorado or First Federal 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 First
Colorado or First Federal, and (iv) have no obligation to provide benefits under
any Commercial plan or program that are duplicative of benefits that employees
of First Colorado or First Federal receive under a similar plan or program
maintained by First Colorado or First Federal after the Merger.
Under the Merger Agreement, Commercial shall honor all accrued vacation and
sick leave for the employees of First Colorado 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 First Federal
1996 Management Stock Bonus Plan, as well as First Federal's qualified pension
plans, and will fulfill all obligations to participants thereunder in accordance
with the terms of such plans.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of First Colorado's management and its Board of Directors
may be deemed to have certain interests in the Merger in addition to their
interests as stockholders of First Colorado generally. First Colorado's Board of
Directors was aware of these interests and considered them, among other matters,
in unanimously approving the Merger Agreement. See " -- Reasons for the Merger
and Recommendation of First Colorado Board of Directors."
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STOCK OPTIONS. The following table sets forth as of May 5, 1998
information regarding outstanding options under the First Colorado Option Plans
held by directors and executive officers of First Colorado and First Federal.
These options have vested in accordance with their terms. For a description of
the manner in which these options will be treated in connection with the Merger,
see " -- Treatment of First Colorado Stock Options."
<TABLE>
<CAPTION>
Options Options Exercisable Aggregate
Options Currently Upon Merger Value of
Held Exercisable Consummation (1) Such Options (2)
------ ----------- ---------------- -----------------
<S> <C> <C> <C> <C>
Directors:
E. William Foerster, Jr. 12,000 12,000 12,000
Leeon E. Hayden 12,000 12,000 12,000
Robert W. Richards 76,064 76,064 76,064
Malcolm E. Collier, Jr. 141,201 141,201 141,201
John J. Nicholl 12,000 12,000 12,000
Robert T. Person, Jr. 12,000 12,000 12,000
Polly Baca -- -- --
Steven Burkholder 12,000 12,000 12,000
James R. Wexels 12,000 12,000 12,000
Executive Officers Who are
Not Directors:
Brian L. Johnson 60,900 60,900 60,900
Elaine M. Samuelson 50,062 50,062 50,062
James A. Rooney 53,000 53,000 53,000
Robert A. Francis 45,912 45,912 45,912
Robert P. Easterly 43,000 43,000 43,000
</TABLE>
______________
(1) Pursuant to the terms of First Colorado's stock option plans, vesting of
certain options was accelerated due to the Merger.
(2) Based on the closing price of First Colorado Common Stock ($__.__) on the
Record Date.
RESTRICTED STOCK. First Colorado Common Stock awards previously awarded to
persons under the First Federal Management Stock Bonus Plan ("MSBP") for
Directors, Officers and employees immediately vest in the event of a "change in
control." For purposes of such Plans, the execution of the Merger Agreement
constitutes a "change in control." As of May 4, 1998, Mr. Collier, Mr. Richards
and the other executive officers of First Colorado (5 persons) and the non-
executive officer directors of First Colorado (7 persons) would receive 12,000,
9,000, 32,400 and 3,600 shares of First Colorado Common Stock, respectively,
due to acceleration of unvested awards pursuant to the MSBP (assuming the Merger
takes place after July 24, 1998). Based on an Exchange Ratio of ________,
Commercial Common Stock to be received by the executive officers and directors
due to acceleration of unvested benefits would be ________ shares of Commercial
Common Stock in the aggregate.
SEVERANCE BENEFITS. Commercial has agreed that for a period of twelve (12)
months following the Effective Time, to provide severance benefits (one week of
base salary per year of service with First Colorado, First Federal, Commercial,
or Commercial Subsidiary, but (i) not less than two (2) weeks severance and (ii)
not more than an aggregate of twelve (12) weeks severance), and to recognize and
carry forward, as of the Effective Time, all sick leave and vacation accrued
during the twelve (12) month period ending on, and including, the Closing Date
under the respective policies of First Colorado and First Federal, to Eligible
Employees (First Colorado and First Federal employees who became employees of
Commercial or a Commercial subsidiary as of the Effective Time), provided that
such Eligible Employee is not entitled to any severance benefits under any
contract as a result or in respect of such termination.
53
<PAGE>
CHANGE-IN-CONTROL PAYMENTS. Commercial has agreed to honor and perform on
all of the obligations of First Colorado and First Federal under the terms of
severance agreements, previously disclosed to Commercial, between management
employees and First Colorado and First Federal that existed as of the date the
Merger Agreement was executed, provided that First Colorado makes payments due
as of or prior to the Effective Time. At the Effective Time, it is anticipated
that payments to Malcolm E. Collier, Jr., under his severance agreement will
equal approximately $620,000.
In connection with the Merger, the First Federal Employee Stock Ownership
Plan and Trust (the "ESOP") will be terminated and all participant accounts will
become fully vested and non-forfeitable. The termination of the ESOP will
require the ESOP trustee to use a certain portion of the proceeds received from
the exchange of shares of First Colorado Common Stock pursuant to the Merger
Agreement to repay the related outstanding debt. Pursuant to the ESOP, any
amounts remaining after the repayment of the debt will be distributed to the
ESOP participants.
INDEMNIFICATION; DIRECTORS AND OFFICERS INSURANCE. Commercial has agreed to
indemnify defend and hold harmless, and advance expenses for present and former
directors and officers of First Colorado against all losses, expenses, claims,
damages or liabilities arising from any acts or omissions by such person
occurring prior to the Effective Time to the same extent they are indemnified
under First Colorado's Articles of Incorporation and Bylaws in effect at the
date of the Merger Agreement or arising by operation of law for a period of
three years following the Effective Time or until the expiration of the
applicable statute of limitations, but in no event beyond six years following
the Effective Time. In addition, with respect to policies of officers' or
directors' of First Colorado immediately prior to the Effective Time, Commercial
has agreed to continue coverage under First Colorado's existing directors' and
officers' liability insurance policies for a period of at least 3 years with
respect to matters occurring prior to the Effective Time, provided that
Commercial is not obligated to pay aggregate premiums in excess of $100,000.
BOARD MEMBERSHIP. Promptly following the Effective Time, Commercial has
agreed to appoint Mr. Malcolm E. Collier, Jr. as a director of Commercial for a
term to expire at the 1998 Annual Meeting, as required under the Nebraska
Business Corporation Act. Mr. Collier will be entitled to receive director's
fees equal to at least $500 per meeting. Instead of accepting the appointment as
a director, Mr. Collier may elect to become a director emeritus for a period of
not less than 36 months.
ADVISORY BOARD. Each director serving on the First Colorado Board of
Directors as of the date the Merger Agreement was executed will be invited to
serve on an advisory board to Commercial for a period of not less than twelve
(12) months following the Effective Time. Those directors serving on the
advisory board that are not employees of Commercial or a Commercial subsidiary
following the Effective Time will be entitled to receive a fee of $500 per
meeting.
CHARITABLE FOUNDATION. In connection with the Merger, First Colorado will
establish a charitable foundation and contribute $250,000 to such foundation.
FEDERAL INCOME TAX CONSEQUENCES
Commercial and First Colorado will rely upon an opinion of Wachtell,
Lipton, Rosen & Katz, to the effect that, under currently applicable United
States federal income tax law, (i) the Merger will constitute a "reorganization"
within the meaning of Section 368(a) of the Code, and (ii) no gain or loss will
be recognized by First Colorado shareholders who receive solely Commercial
Common Stock in exchange for shares of First Colorado Common Stock pursuant to
the Merger (except with respect to cash received in lieu of a fractional share
interest in Commercial Common Stock). Based upon such opinion, Commercial and
First Colorado are of the view that:
. the Merger should qualify as a reorganization within the meaning of
Section 368(a)(1)(A) of the Code. First Colorado and Commercial
should each be a "party to a reorganization" within the meaning of
Section 368(b) of the Code;
. First Colorado 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;
54
<PAGE>
. no gain or loss should be recognized by First Colorado upon the
distribution of the Commercial Common Stock to the First Colorado
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
First Colorado's assets in exchange for Commercial Common Stock, and
the assumption by Commercial of First Colorado's liabilities, by
reason of the application of Section 1032(a) of the Code;
. the basis of the assets of First Colorado in the hands of Commercial
should be the same as the basis of such assets in the hands of First
Colorado 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 First
Colorado should include the holding period of such property in the
hands of First Colorado 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 First Colorado
stockholders upon the exchange of their First Colorado 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 First Colorado stockholder would otherwise be entitled to
receive) to be received by a First Colorado stockholder who exchanges
First Colorado Common Stock for Commercial Common Stock should be the
same as the basis of First Colorado 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 First Colorado stockholders should, in each
instance, include the holding period of the First Colorado shares
surrendered in the Merger, provided First Colorado 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
First Colorado 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);
. 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 First Colorado as of the date or dates of transfer; any
deficit in earnings and profits of either Commercial or First Colorado
should be used only to offset earnings and profits accumulated after
the date or dates of transfer;
. cash received by a stockholder of First Colorado otherwise entitled to
receive a fractional share of Commercial Common Stock in exchange for
his First Colorado 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 First
Colorado
55
<PAGE>
stockholder, provided First Colorado 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 Wachtell, Lipton, Rosen & Katz has no binding effect on the IRS.
The opinion of Wachtell, Lipton, Rosen & Katz is filed with the Commission as an
exhibit to Commercial's registration statement on Form S-4 of which this
Prospectus/Joint Proxy Statement is a part. See "Additional Information."
Pursuant to the Merger Agreement, receipt of an opinion of Wachtell, Lipton,
Rosen & Katz, dated the Closing Date, to the same effect as the opinion filed
with the Form S-4 is a condition to the obligations of the Parties to consummate
the Merger.
Cash payments made to the holders of First Colorado Common Stock upon the
exchange thereof in connection with the Merger (other than certain exempt
entities and persons) will be subject to a 31.0% backup withholding tax under
federal income tax law unless certain requirements are met. Generally,
Commercial will be required to deduct and withhold the tax if (i) the
stockholder fails to furnish a taxpayer identification number ("TIN") or fails
to certify under penalty of perjury that such TIN is correct, (ii) the IRS
notifies Commercial that the TIN furnished by the stockholder is incorrect,
(iii) the IRS notifies Commercial that the stockholder has failed to report
interest, dividends or original issue discount in the past, or (iv) there has
been a failure by the stockholder to certify under penalty of perjury that such
stockholder is not subject to the 31.0% backup withholding tax. Any amounts
withheld in collection of the 31.0% backup withholding tax will reduce the
federal income tax liability of the stockholders from whom such tax was
withheld. The TIN of an individual stockholder is that stockholder's Social
Security number.
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 FIRST COLORADO STOCKHOLDER'S SITUATION. EACH FIRST
COLORADO 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 First Colorado 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 First Colorado for the entire fiscal year in which the Merger
occurs; and the reported revenues and expenses of Commercial and First Colorado
for all prior periods presented will be combined and restated as revenues and
expenses of the surviving corporation (Commercial). Pursuant to the Merger
Agreement, the receipt of a letter from Deloitte & Touche llp stating that the
Merger will qualify as a pooling of interests is a condition to the obligations
of the Parties to consummate the Merger.
ISSUANCE OF SHARES FROM THE TREASURY
Prior to the Effective Time of the Merger, it is intended that First
Colorado will reissue approximately 1,800,000 shares of First Colorado Common
Stock currently held as treasury stock in a private placement. The shares will
be reissued in order to permit the Merger to qualify for pooling of interests
accounting treatment. See " -- Accounting Treatment." At the Effective Time of
the Merger, such shares will be outstanding and will therefore convert into
shares of Commercial Common Stock and cash in lieu of fractional shares in
accordance with the Exchange Ratio.
56
<PAGE>
RESALE OF COMMERCIAL COMMON STOCK; RESTRICTIONS ON TRANSFER
The shares of Commercial Common Stock to be issued in the 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 First Colorado 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 First Colorado or Commercial).
Affiliates may not sell their shares of Commercial Common Stock acquired in
connection with the 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.
First Colorado 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 First Colorado 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.
STOCK OPTION AGREEMENT
As a condition to Commercial's entry into the Merger Agreement, First
Colorado and Commercial entered into the Stock Option Agreement pursuant to
which First Colorado granted to Commercial an irrevocable option (the "Option")
to purchase from First Colorado 3,348,533 authorized but unissued shares, under
certain circumstances and subject to adjustment, of First Colorado Common Stock
at a price per share of $24.125 (the "Purchase Price"), payable in cash. The
shares of First Colorado Common Stock subject to the Option would equal 19.9% of
outstanding First Colorado Common Stock before giving effect to the exercise
price of the Option and 16.6% of the outstanding First Colorado Common Stock
after giving effect to the exercise of the Option. Under the Stock Option
Agreement, Commercial may exercise the Option, in whole or in part, when a
"Purchase Event" (defined below) occurs.
A "Purchase Event" includes any of the following: (i) First Colorado or
any First Colorado subsidiary, without having received prior written consent
from Commercial, shall have entered into, authorized, recommended, proposed or
publicly announced its intention to enter into, authorize, recommend, or
propose, an agreement, arrangement or understanding with any Person (other than
Commercial or any Commercial subsidiary) to (A) effect a merger or consolidation
or similar transaction involving First Colorado or any First Colorado subsidiary
(other than internal mergers, reorganizing actions, consolidations or
dissolutions involving only existing First Colorado Subsidiaries), (B) purchase,
lease or otherwise acquire existing First Colorado Subsidiaries, (C) purchase,
lease or otherwise acquire 20% or more of the assets of First Colorado or any
First Colorado subsidiary or (D) purchase or otherwise acquire (including by way
of merger, consolidation, share exchange or similar transaction) Beneficial
Ownership of securities representing 20% or more of the voting power of First
Colorado or any First Colorado subsidiary; (ii) any Person (other than
Commercial or any Commercial subsidiary or any Person acting in concert with
Commercial; or First Colorado or any First Colorado subsidiary in a fiduciary
capacity) shall have acquired Beneficial Ownership of 20% or more of the voting
power of First Colorado or any First Colorado subsidiary; or (iii) First
Colorado's Board of Directors shall have withdrawn, modified or changed the
recommendation of First Colorado's Board of Directors with respect to the Merger
in a manner adverse to Commercial, the Merger Agreement or the transactions
contemplated thereby, unless the Board of Directors of First Colorado reasonably
determines in good faith not to so recommend based upon the advice of counsel,
which counsel is reasonably acceptable to Commercial, to the effect that to so
recommend would constitute a violation of the Board's fiduciary duties under
applicable law, in each case after an "Extension Event".
For the purposes of the Stock Option Agreement, the term Extension Event
means (i) a Purchase Event of the type in clauses (i) and (ii) above; (ii) any
Person (other than Commercial or any Commercial subsidiary) shall have
57
<PAGE>
"commenced" (as such term is defined in Rule 14d-2 under the Exchange Act), or
shall have filed a registration statement under the Securities Act with respect
to, a tender offer or exchange offer to purchase shares of First Colorado Common
Stock such that, upon consummation of the right to acquire Beneficial Ownership
of 10% or more of the voting power of First Colorado or any First Colorado
subsidiary; or (iii) any Person (other than Commercial or any Commercial
subsidiary; or First Colorado or any First Colorado subsidiary in a fiduciary
capacity) shall have publicly announced its willingness, or shall have publicly
announced a bona fide proposal, or publicly disclosed an intention to make a
bona fide proposal, to make an offer described in clause (ii) above or to engage
in a transaction described in clause (i) above.
If First Colorado intends to exercise the Option upon the occurrence of a
Purchase Event then Colorado must give written notice specifying (i) the total
number of shares it intends to purchase pursuant to such exercise and (ii) a
place and date not earlier than three Business Days nor later than 60 calendar
days from the Notice Date for the closing of such purchase. To the extent that
the Option shall not have been exercised following a Purchase Event, it shall
terminate and be of no further force and effect upon certain conditions set
forth in the Stock Option Agreement which is attached hereto as Annex B.
The Stock Option Agreement also contains a provision whereby First
Colorado, or any successor, is required upon request by Commercial to repurchase
the Option together with all shares of First Colorado Common Stock purchased by
Commercial at a price equal to the sum of (i) the aggregate Purchase Price paid
by Commercial for any shares of First Colorado Common Stock acquired pursuant to
the Option; (ii) the difference between (A) the "Market/Tender Offer Price" for
shares of First Colorado Common Stock (defined as the greater of the highest
price per share at which a tender or exchange offer has been made for shares of
First Colorado Common Stock or the highest closing mean of the "bid" and the
"ask" price per share of First Colorado Common Stock reported by Nasdaq for any
day within that portion of the Repurchase Period, which precedes the date
Commercial gives notice of the repurchase) and (B) the Purchase price, subject
to adjustment, multiplied by the number or shares of First Colorado Common Stock
with respect to which the Option has not been exercised, but only if the
Market/Tender Offer Price is greater than such Purchase Price; (iii) the
difference between the Market/Tender Offer Price and the Purchase Price paid by
Commercial for any shares of First Colorado Common Stock purchased pursuant to
the exercise of the Option, multiplied by the number of shares so purchased, but
only if the Market/Tender Offer Price exceeds the Purchase Price; and (iv)
Commercial's reasonable out-of-pocket expenses incurred in connection with the
transactions contemplated by the Merger Agreement, including without limitation,
legal, accounting and investment banking fees; provided, however, that if such
price is greater than an amount (the "Maximum Repurchase Price") equal to the
sum of (x) $20 million and (y) the sum set forth in (i) above, then such price
shall be deemed to be the Maximum Repurchase Price. In the event Commercial
exercises its right to compel First Colorado to repurchase the Option and all
shares of First Colorado Common Stock acquired by Commercial through the Option,
First Colorado must transfer the required funds to Commercial within 10 days,
whereupon Commercial will surrender the Option and certificates evidencing
shares of First Colorado Common Stock purchased thereunder.
Except where Commercial has exercised its right to have First Colorado to
repurchase the Option and any Common Stock, First Colorado may, for the six
month period after the thirteen months following the Purchase Event, repurchase
from Commercial, and Commercial shall sell to First Colorado, all of the First
Colorado Common Stock acquired by Commercial pursuant to the Stock Option
Agreement and with respect to which Commercial has beneficial ownership at the
time of the repurchase. The price per share paid by First Colorado to repurchase
the Option or any shares of First Colorado Common Stock issued to Commercial
will be equal to the greater of (i) 110% of the Market/Render Offer Price, (ii)
the Per Share repurchase price or (iii) the quotient obtained by dividing the
sum of (A) the aggregate Purchase Price paid for the shares so repurchased plus
(B) interest on the aggregate Purchase Price paid for the shares so repurchased
from the date of purchase to the date of repurchase at the highest rate of
interest announced by Commercial as its prime or base lending or reference rate
during such period, less any dividends received on the shares so repurchased,
plus (C) Commercial's reasonable out-of-pocket expenses incurred in connection
with the transactions contemplated by the Merger Agreement, including, without
limitation, legal, accounting and investment banking fees by the number of
shares so repurchased.
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<PAGE>
If, at any time after the occurrence of a Purchase Event and prior to the
earlier of the expiration of 18 months immediately following such Purchase Event
or the expiration or termination of the Option, Commercial shall desire to sell,
assign, transfer or otherwise dispose of the Option or all or any of the shares
of First Colorado Common Stock acquired by it pursuant to the Option, then First
Colorado will have a Right of First Refusal. Commercial must give First Colorado
written notice of the proposed transaction (the "Offeror's Notice"), which
identifies the proposed transferee, and sets forth the terms of the proposed
transaction. An Offeror's Notice shall be deemed an offer by Commercial to First
Colorado, which may be accepted within 10 business days of the receipt by First
Colorado of such Offeror's Notice, on the same terms and conditions and at the
same price at which Commercial is proposing to transfer the Option or such
shares to a third party. First Colorado does not have the Right of Refusal where
the amount transferred or sold is 2% or less of the voting power of First
Colorado or where the sale of First Colorado stock is by a person to whom
Commercial has sold shares of First Colorado Common Stock that were issued upon
exercise of the Option.
The Stock Option Agreement is intended to increase the likelihood that the
Merger will be consummated in accordance with the terms of the Merger Agreement.
Consequently, certain aspects of the Stock Option Agreement may have the effect
of discouraging persons who otherwise might be interested in acquiring all or a
significant interest in First Colorado from considering or proposing such an
acquisition, even if such persons were prepared to pay for the First Colorado
Common Stock a price in excess of that being paid by Commercial in the Merger.
COMMON STOCK PRICES AND DIVIDENDS
The Commercial Common Stock is currently traded on the NYSE under the
symbol "CFB." First Colorado Common Stock is traded on the Nasdaq National
Market and is quoted under the symbol "FFBA."
The following table sets forth (1) the comparative market prices of
Commercial Common Stock and First Colorado 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 First
Colorado 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/Joint
Proxy Statement have been adjusted on a retroactive basis to reflect the effect
of this three-for-two stock split.
59
<PAGE>
<TABLE>
<CAPTION>
Commercial First Colorado
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 $ -- NM NM NM
December 31, 1995 16.78 14.39 .090 NM NM NM
1996
- ----
March 31, 1996 17.28 15.55 .045 $12.500 $ 11.00 $.075
June 30, 1996 17.28 16.39 .045 13.750 11.750 .080
September 30, 1996 19.11 16.00 .045 15.625 12.500 .080
December 31, 1996 21.55 18.61 .047 17.875 14.9375 .090
1997
- ----
March 31, 1997 26.00 20.75 .047 18.875 16.500 .100
June 30, 1997 25.08 20.75 .047 19.875 16.000 .110
September 30, 1997 32.125 25.08 .047 21.500 17.375 .120
December 31, 1997 36.50 31.375 .055 26.125 19.8125 .130
1998
- ----
March 31, 1998 36.375 30.00 .055 29.000 22.50 .130
June 30, 1998
(through May __, 1998)
</TABLE>
_______________
NM Not meaningful as a result of the Conversion and Reorganization completed
December 29, 1995.
On March 6, 1998, 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 $34.0625 per share and the reported closing sale
price for First Colorado Common Stock was $28.25 per share. On ________ __,
1998, the closing sale price for Commercial Common Stock was $_____ per share
and the closing sale price for First Colorado Common Stock was $_____ per share.
Based on an Exchange Ratio of _____, the pro forma market value of the shares of
Commercial Common Stock to be received for each share of First Colorado Common
Stock was $_____ as of March 6, 1998 and $_____ as of ________ __, 1998.
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COMPARISON OF STOCKHOLDER RIGHTS
INTRODUCTION. Upon consummation of the Merger, the holders of First
Colorado Common Stock, whose rights are presently governed by Colorado law and
the First Colorado 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 First Colorado 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 First Colorado . 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, par
value $.01 per share, and 10,000,000 shares of preferred stock, par value $0.01
per share. Approval by the stockholders of Commercial of the Merger and the
Merger Agreement will also constitute approval of an amendment to Commercial's
Articles of Incorporation to increase the number of authorized shares of
Commercial Common Stock from 50,000,000 to 70,000,000. Such additional shares
represent the approximate number of additional shares of Commercial Common Stock
to be issued in the Merger. At the Commercial Special Meeting, stockholders of
Commercial will also be asked to approve an amendment to Commercial 's Articles
of Incorporation to increase the number of authorized shares of Commercial
Common Stock from 70,000,000 shares to 120,000,000 shares. See "Commercial
Articles Amendment." The First Colorado Articles authorize the issuance of
50,000,000 shares of common stock, par value $.10 per share, and 25,000,000
shares of preferred stock, par value $.10 per share. On the Record Date,
__________ and ____________ shares of Commercial Common Stock and First Colorado
Common Stock, respectively, were issued and outstanding. Neither Commercial nor
First Colorado had any shares of preferred stock outstanding. Under Commercial's
Articles of Incorporation and First Colorado's Articles of Incorporation,
Commercial and First Colorado are authorized to issue additional shares of
capital stock up to the amount authorized without stockholder approval. Pursuant
to the requirements of the NYSE, however, stockholder approval is required prior
to the issuance by Commercial of shares of Commercial Common Stock in an amount
that exceeds 20% of the shares outstanding immediately prior to the
issuance.
VOTING RIGHTS. Holders of First Colorado Common Stock are entitled to one
vote per share on all matters submitted to vote to the stockholders. There is
no cumulative voting. The First Colorado 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, except when the acquisition by a
holder of 10% or greater of First Colorado Common Stock is approved by a
majority of the Continuing Directors.
Holders of Commercial Common Stock are entitled to one vote per share on
all matters submitted to vote to the stockholders, other than during the
election of directors, where voting rights are cumulative.
PREEMPTIVE RIGHTS. Neither the holders of First Colorado Common Stock nor
the holders of Commercial Common Stock have any preemptive or preferential right
to purchase or to subscribe for additional shares of First Colorado Common Stock
or Commercial Common Stock, respectively, or any other securities that either
First Colorado or Commercial may issue.
NUMBER AND TERMS OF DIRECTORS. The Boards of Directors of both First
Colorado and Commercial are classified into three terms, so that only one class
is elected at each annual meeting of stockholders. First Colorado's Board
consists of between three and fifteen persons with the precise number to be
specified in the Bylaws (currently nine). Action to change the number of First
Colorado directors requires at least a two-thirds vote of the directors then in
office. Commercial's Board of Directors consists of between nine and 12 persons
with the precise number to be specified in
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the Bylaws (currently ten). 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.
REMOVAL OF DIRECTORS. The First Colorado Articles provide for removal of
any director only for cause by an affirmative vote of at least eighty percent
(80%) of the outstanding shares entitled to vote generally in the election of
directors. 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.
INDEMNIFICATION/INSURANCE. The First Colorado Articles provide for
indemnification of any person who was or is a party or is threatened to be a
made a party to any threatened, pending, or completed action, suit, or
proceeding, including actions by or in the right of First Colorado, whether
civil, criminal, administrative, or investigative, by reason of the fact that
such person is or was a director, officer, employee, fiduciary or agent of First
Colorado, or was serving at the request of First Colorado as a director,
officer, employee, fiduciary or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against expenses (including attorneys'
fees), judgements, fines, and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit, or proceeding to
the full extent permissible under Colorado law, provided that the First Colorado
Board of Directors determines that the standards of Colorado law governing
indemnification have been satisfied.
The First Colorado Articles also include a provision providing for the
purchase and maintenance of insurance on behalf of any person who is or was a
director, officer, employee, fiduciary or agent of First Colorado, or who, while
a director, officer, employee, fiduciary or agent of First Colorado, is or was
serving at the request of First Colorado as a director, officer, employee,
fiduciary or agent of another corporation, partnership, joint venture, trust,
employee benefit plan, or other enterprise, against any liability asserted
against him or incurred by him in that capacity, or arising out of his status as
such, whether or not First Colorado would have the power to indemnify him
against such liability under the provisions of Colorado law.
The Commercial Articles provide for indemnification, to the extent
permitted by law, to any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, including to the
extent permitted by law an action by or in the right of Commercial, by reason of
the fact that such person is or was a director, officer, employee, agent of
Commercial, or serving at the request of Commercial as a director, officer,
employee, or agent of an employee benefit plan. Such person will be indemnified
against expenses, including attorney fees, judgments, fines, and amounts paid in
settlement, provided that such person acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of Commercial,
and with respect to a criminal proceeding, there is no reasonable cause to
believe his conduct was unlawful.
In Commercial's Articles, Commercial has reserved the right to purchase and
maintain insurance on behalf of any person who is a director, officer, employee,
or agent of the corporation against any liability asserted against such person
because of the capacity in which they served Commercial.
DIRECTOR LIABILITY. Under the First Colorado Articles directors have no
liability to First Colorado or its stockholders for monetary damages for breach
of fiduciary duty as a director, provided that a director's liability for the
following is not eliminated: (i) for any breach of the director's duty of
loyalty to First Colorado or its stockholders, (ii) for acts or omissions not
made in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) acts specified in Section 7-108-403 of the Colorado
Business Corporation Act pertaining to unlawful distributions, or (iv) for any
transaction from which a director derived an improper personal benefit. If the
Colorado Business Corporation Act is amended after the effective date of these
Articles to further eliminate or limit the personal liability of directors, then
the liability of a director of First Colorado will be eliminated or limited to
the fullest extent permitted by the Colorado Business Corporation Act, as so
amended.
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Commercial's Articles provide that "Outside Directors" (members of the
Board of Directors of Commercial who are not officers or persons who control
management through management agreements, voting trusts, or directorships in
related corporations) will not be held personally liable to Commercial, or
Commercial's stockholders for monetary damages for breach of fiduciary damages
as a director, and will be indemnified for monetary damages, including attorney
fees, except where the Outside Director has (i) committed an act or omission not
in good faith, involving intentional misconduct, (ii) derived an improper direct
or indirect financial benefit, (iii) approved payment of a dividend or approved
a stock repurchase in violation of the NBCA, and (iv) committed any act or
omission which violates declaratory or injunctive order obtained by Commercial
or a stockholder.
SPECIAL MEETINGS. Under First Colorado's Articles and Bylaws, special
meetings of stockholders may only be called by the Chairman of the Board, a
majority of the Board of Directors, a committee of the Board of Directors given
the power to call a special meeting or by written demand of the holder or
holders of at least ten percent (10%) of all votes entitled to be cast at the
special meeting. A special meeting of Commercial's stockholders 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 COMBINATIONS. The First Colorado 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 stockholders," as defined, which are not approved
in advance by at least two-thirds of those members of First Colorado's Board of
Directors who were directors prior to the time the "principal stockholder"
became a principal stockholder. 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 stockholder" became a
principal stockholder approve the business combination; the stockholder
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 XIV without amendment, alteration, or deletion, in the
successor to First Colorado; and where there is not a transfer of all or
substantially all of First Colorado's assets to a wholly-owned subsidiary.
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 stockholders other than a principal stockholder (
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 stockholder.
RESTRICTION ON ACQUISITION OF SECURITIES. The First Colorado Articles
provide that in no event shall any record owner of any First Colorado 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 First Colorado 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 First Capital
Savings from mutual to stock form, except when the acquisition by a holder of
10% or greater of First Colorado Common Stock during the five year period
following the conversion is approved by a majority of the Continuing Directors.
Commercial's Articles do not contain a similar provision.
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AUTHORIZED PREFERRED STOCK. The First Colorado Articles authorize
25,000,000 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 July 24, 1996, the Board of Directors of First Colorado
adopted a Rights Agreement (the "Rights Agreement") in which a dividend of one
Preferred Share Purchase Right (a "Right") for each outstanding share of First
Colorado common stock, par value $.10 per share ("Common Stock"), was declared
for those stockholders of record on August 5, 1996. Each Right entitles the
registered holder to purchase from First Colorado one one-hundredth of a share
of First Colorado's Junior Participating Preferred Stock, Series A, par value
$10 per share ("Preferred Share") at a price of $41 per one one-hundredth of a
Preferred Share ("Purchase Price").
The Rights Agreement becomes exercisable upon the earlier of (i) 10 days
following a public announcement that a person or group of affiliated or
associated persons ("Acquiring Person") have acquired beneficial ownership of
15% or more of the outstanding Common Stock or more than such person or group
held on August 5, 1996, if such person or group held to 15% or more of the
outstanding Common Stock on such date or (ii) 10 business days (or such later
date as may be determined by action of the Board of Directors of First Colorado
prior to such time as any Person becomes an Acquiring Person) following the
commencement of, or announcement of an intention to make a tender offer or
exchange offer upon the consummation of which would result in the beneficial
ownership by a person or group of 15% or more of such outstanding shares of
Common Stock or more than such person held on August 5, 1996, if such person or
group held 15% or more of the outstanding Common Stock on such date.
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each holder of a Preferred Share will be entitled to a minimum
preferential quarterly divided payment equal to the greater of $1 per share or
100 times the dividend declared per Common Share. In the event of liquidation,
each holder of a Preferred Share will be entitled to the greater of $100 per
share or 100 times the payment made per Common Share. Each Preferred Share will
have 100 votes voting together with the shares of Common Stock. Finally, in the
event of any merger, consolidation or other transaction in which shares of
Common Stock are exchanged, each Preferred Share will be entitled to receive 100
times the amount received per Common Share.
However, at any time prior to the acquisition by a person or group of
affiliated or associated persons of beneficial ownership of 15% or more of the
outstanding shares of Common Stock, the Board of Directors of the First Colorado
may redeem the rights in whole, but not in part, at a price of $.01 per Right
(the Redemption Price"). The redemption of the Rights may be made effective at
such time, on such basis and with such conditions as the Board of Directors in
its sole discretion may establish. Immediately upon any redemption of the
Rights, the right to exercise the Rights will terminate and the only right of
the holders of Rights will be to receive the Redemption Price.
In the event that First Colorado is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power are sold, proper provision will be made so that each holder of a Right
will thereafter have the right to receive, upon the exercise thereof at the then
current exercise price of the Right, that number of shares of common stock of
the acquiring company which at the time of such transaction will have a market
value of two times the exercise price of the Right. In the event that any person
or group of affiliated or associated persons becomes an Acquiring Person proper
provision shall be made so that each holder of a Right, other than Rights
beneficially owned by the Acquiring Person (which will thereafter be void), will
thereafter have the right to receive upon exercise that number of shares of
Common Stock having a market value of two times the exercise price of the Right.
At any time after the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 15% or more of the outstanding
shares of Common Stock and prior to the acquisition by such person or group of
50% or more of the outstanding shares of Common Stock, the Board of Directors of
First Colorado may exchange the Rights
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(other than Rights owned by such person or group which have been void), in whole
or in part, at an exchange ratio of one Common Share or one one-hundredth of a
Preferred Share per Right, subject to adjustment.
The terms of the Rights may be amended by the Board of Directors of First
Colorado without the consent of the holders of the Rights, including an
amendment to lower certain thresholds described above, except that from and
after such time as any person becomes an Acquiring Person no such amendment may
adversely affect the interests of the holders of the Rights.
Prior to entering into the Merger Agreement, on March 8, 1998, the First
Colorado Board voted to amend the Rights Agreement to permit the Merger to take
place.
On December 19, 1988, the Board of Directors of Commercial adopted a
Stockholder Rights Plan (the "Rights Plan") and declared a distribution of stock
purchase rights (the "Rights") payable to stockholders 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 stockholders of Commercial,
and secondary rights (the "Secondary Rights"), which 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
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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.
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. The Rights will attach to shares of Commercial
Common Stock exchanged for shares of First Colorado Common Stock in the
Merger.
AMENDMENT OF BYLAWS. The Board of Directors of First Colorado may adopt,
alter, amend, or repeal the Bylaws by a majority vote of directors present at a
regular or special meeting. Stockholders may also adopt, alter, amend or repeal
the Bylaws by affirmative vote of holders of eighty percent (80%) of shares
entitled to vote generally in the election of directors.
The Board of Directors of Commercial are authorized to make, repeal, alter,
amend or rescind any or all of the Bylaws of the corporation. Stockholders 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.
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AMENDMENTS OF ARTICLES OF INCORPORATION. In the First Colorado Articles,
First Colorado reserves the right to repeal, alter, amend or rescind any
provision contained in the Articles in the manner proscribed under Colorado law,
subject to the reservation set forth in the Articles. Under the Colorado
Business Corporation Act, the First Colorado Board of Directors or the holders
of shares representing at least ten percent (10%) of votes entitled to be cast
on an amendment, may propose to amend the First Colorado Articles for submission
to the stockholders. Approval of such an amendment to the First Colorado
Articles requires a majority vote of shares outstanding, except where the
amendment, alteration, change or act to repeal the First Colorado Articles is
inconsistent with Articles IX (dealing with meetings of stockholders, cumulative
voting and proxies), X (dealing with nominations and stockholder proposals), XI
(dealing with qualifications of directors), XII (dealing with removal of
directors), XIII (dealing with limitations on voting rights), XIV (dealing with
approvals of business combinations), XV (dealing with fair price provisions),
XVI (dealing with evaluations of offers), XVII (dealing with elimination or
limitation of officers' and directors' liability), XVIII (dealing with
indemnification), XIX (dealing with amendments to the bylaws), and XX (dealing
with amendments to the articles), then the stockholder approval must be at least
eighty percent (80%) of the shares entitled to vote at the election of
directors.
Commercial reserves the right to amend, alter, change or repeal any
provision contained in its Articles in the manner prescribed under the Nebraska
Business Corporation Act, except that 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 stockholders), 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 the Bylaws
by directors and by stockholders) 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 75% of all outstanding shares of Commercial Common Stock 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
Commercial Common Stock entitled to vote generally, other than in the 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 First Colorado Articles
permit stockholder nominations of candidates for the election of directors.
Nominations by stockholders must be made in writing and delivered, or mailed and
received, at the principal office of First Colorado 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, the names of any other
stockholder that person knows is supporting the nomination, and the number of
shares beneficially owned by the nominating stockholder, as well as, the number
of shares of those persons who such nominating stockholder knows to be
supporting the nomination.
The Commercial Bylaws provide that any stockholder 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.
Stockholder 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
stockholders 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 stockholder making the proposal, the class and number of
shares beneficially owned by the stockholder proposing such business, and any
material interest of the stockholder in such business not less than sixty (60)
days prior to the annual or special meeting to the Secretary.
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COMMERCIAL ARTICLES AMENDMENT
GENERAL. Commercial is currently authorized to issue 50,000,000 shares of
Commercial Common Stock. Approval by the stockholders of Commercial of the
Merger and the Merger Agreement will also constitute approval of an amendment to
Commercial's Articles of Incorporation to increase the number of authorized
shares of Commercial Common Stock from 50,000,000 to 70,000,000. Such additional
shares represent the approximate number of additional shares of Commercial
Common Stock to be issued in the Merger. Commercial's Board of Directors
recommends that stockholders approve a further amendment to Article IV of
Commercial's Articles of Incorporation that would increase the authorized shares
of Common Stock from 70,000,000 shares to 120,000,000 shares. The number of
authorized shares of preferred stock will remain at 10,000,000 shares. If the
Merger, the Merger Agreement and the Articles Amendment is approved by
Commercial's stockholders, the first sentence of ARTICLE IV of Commercial's
Articles of Incorporation as amended will read as follows:
The aggregate number of shares of common stock which this corporation shall
have authority to issue is 120,000,000 shares, having a par value of $.01
each.
If the Merger and the Merger Agreement are not approved but the Articles
Amendment is approved, the total number of authorized shares of Commercial
Common Stock will only be increased to 100,000,000 shares.
PURPOSE. Commercial proposes to increase the number of authorized shares
of Commercial Common Stock to 120,000,000 shares to provide additional shares
for general corporate purposes, including for issuance in connection with the
Merger and Commercial's pending acquisition of AmerUs and possible future
acquisitions, stock dividends and splits, raising additional capital and
issuances pursuant to employee stock benefit plans.
At Commercial's 1997 Annual Meeting, stockholders of Commercial approved an
increase in the number of authorized shares of Commercial Common Stock from
25,000,000 shares to 50,000,000 shares. Subsequent to the Annual Meeting, in
December 1997, Commercial approved and paid a three-for-two stock split effected
in the form of a 50% stock dividend to stockholders which resulted in the
issuance of ________ shares of Commercial Common Stock. Commercial also
consummated three stock acquisitions during the first quarter of calendar year
1998 bringing to six the number of acquisitions it has consummated at least
partially for stock since 1993. As of the date of this Prospectus/Joint Proxy
Statement, there were ________ shares of Commercial Common Stock outstanding, an
additional ___________ shares were reserved for issuance pursuant to various
stock-based employee benefit plans and an anticipated __________ shares of
Commercial Common Stock expected to be issued in connection with its pending
acquisitions of Perpetual, AmerUs and First Colorado. Commercial would not be
able to consummate all of these acquisitions without approval of the Articles
Amendment.
The Board of Directors believes that an increase in the total number of
authorized shares of Commercial Common Stock above the level necessary to
consummate the pending acquisitions will better enable Commercial to meet its
future needs, and give it greater flexibility in responding quickly to
advantageous business opportunities in the future including possible future
acquisition opportunities. As of the date hereof, however, there are no present
agreements for issuing a material number of additional shares of Commercial
Common Stock from the currently authorized shares of Commercial Common Stock or
the additional shares of Commercial Common Stock proposed to be authorized
pursuant to the Articles Amendment other than the Perpetual, AmerUs and First
Colorado acquisitions.
DILUTION. Commercial's issuance of shares of Commercial Common Stock,
including the additional shares that will be authorized if the proposed Articles
Amendment is adopted, may dilute the present equity ownership position of
current holders of Commercial Common Stock and may be made without stockholder
approval, unless otherwise required by applicable laws or stock exchange
regulation. Under existing New York Stock Exchange regulations, approval of a
majority of the holders of Commercial Common Stock would be required in
connection with any transaction or series of related transactions that would
result in the original issuance of additional shares of Commercial Common Stock,
other than in a public offering for cash, (i) if the Commercial Common Stock
(including securities
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convertible into or exercisable for Commercial Common Stock) has, or will have
upon issuance, voting power equal to or in excess of 20% of the voting power
outstanding before the issuance of such Commercial Common Stock; (ii) if the
number of shares of Commercial Common Stock to be issued is or will be equal to
or in excess of 20% of the number of shares outstanding before the issuance of
the Commercial Common Stock; or (iii) if the issuance would result in a change
in control of Commercial.
POTENTIAL ANTI-TAKEOVER EFFECTS. The additional authorized but unissued
shares of the Commercial Common Stock that would become available if the
Articles Amendment is approved could be used, whether alone or in tandem with
Commercial's Shareholder Rights Plan, described below, to make a change in
control of Commercial more difficult and expensive. Under certain circumstances,
such shares could be used to create impediments or to frustrate persons seeking
to cause a takeover or to otherwise gain control of Commercial. Such shares
could be sold to purchasers who might side with the Board in opposing a takeover
bid that the Board determines not to be in the best interests of Commercial and
its stockholders. The Articles Amendment might also have the effect of
discouraging an attempt by another person or entity, through the acquisition of
a substantial number of shares of Commercial's Common Stock, to acquire control
of Commercial with a view to consummating a merger, sale of all or any part of
Commercial's assets, or a similar transaction, since the issuance of new shares
could be used to dilute the stock ownership of such person or entity.
Commercial also has in effect a plan (the "Rights Plan") pursuant to which
each holder of Commercial Common Stock outstanding on December 19, 1988 (the
initial record date for the Rights Plan) and thereafter has received, and each
future holder of shares of Commercial Common Stock will receive, a dividend of
one stock purchase right (a "Right"). The Rights consist of primary rights
("Primary Rights"), which generally entitle the holders 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 the outstanding shares of
Commercial Common Stock without complying with a procedure intended to ensure
fair treatment of all stockholders of Commercial, and secondary rights (the
"Secondary Rights"), which generally entitle the holders thereof to purchase
shares of Commercial's Series A Junior Participating Preferred Stock ("Junior
Preferred Stock") 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 Rights are designed to protect the interests of
Commercial and its stockholders against coercive takeover tactics, by
encouraging potential acquirors to negotiate with the Board of Directors acting
on behalf of all stockholders. The Rights Plan may also, but is not intended to,
deter potential acquirors. The approval of the Articles Amendment, together with
the Rights Plan, may also deter such takeover proposals, given the potential
cumulative dilutive effect on an acquiror's ownership of Commercial Common Stock
if any additional shares of Commercial Common Stock authorized by the Articles
Amendment and shares of Junior Preferred Stock pursuant to the Rights were
issued. See "-- Dilution."
RECOMMENDATION; VOTE REQUIRED. The Board of Directors believes that the
Articles Amendment is in the best interests of the stockholders of Commercial.
Approval of this proposal requires a vote in favor of the Articles Amendment by
the holders of a majority of the votes cast at the Commercial Special Meeting.
THE BOARD OF DIRECTORS OF COMMERCIAL RECOMMENDS THAT STOCKHOLDERS VOTE
FOR---THE PROPOSAL TO AMEND THE ARTICLES OF INCORPORATION TO INCREASE THE NUMBER
OF AUTHORIZED SHARES OF COMMERCIAL COMMON STOCK.
COMMERCIAL OPTION PLAN AMENDMENT
GENERAL. At the 1996 Annual Meeting of Stockholders of Commercial,
stockholders approved the Commercial Federal Corporation 1996 Stock Option and
Incentive Plan (the "Option Plan"). The Board of Directors is seeking
stockholder approval of an amendment to the Option Plan to increase the number
of shares available for grant thereunder.
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SHARES AVAILABLE FOR GRANT. The Option Plan currently authorizes the
issuance of up to _____ shares of Commercial Common Stock (after adjustments for
the three-for-two stock splits paid on December __, 1996 and December 15, 1997)
upon the exercise of stock options or through the grant of shares of restricted
stock. As of May __, 1998, options to purchase _____ shares of Commercial Common
Stock have been granted under the Option Plan. In addition, restricted stock
awards for _____ shares have been granted. The proposed Option Plan Amendment
would increase the number of shares available for grant thereunder to
______________ shares.
PURPOSE OF THE AMENDMENT. The purpose of the Option Plan is to advance the
interests of Commercial by providing directors and employees of Commercial with
an opportunity to acquire shares of Commercial Common Stock. By encouraging such
stock ownership, Commercial seeks to attract, retain and motivate the best
available personnel and to provide additional incentives for such individuals to
promote the success of Commercial.
As a result of its recently completed and pending acquisition, Commercial
expects to increase the number of personnel eligible for grants under the Option
Plan and is therefore seeking approval of the Option Plan Amendment to increase
the number of shares available for grants thereunder, commensurate with
Commercial's growth.
DESCRIPTION OF THE OPTION PLAN
Effective Date. The Option Plan became effective on November 18, 1996,
the date of approval by Commercial's stockholders (the "Effective Date").
Administration. The Option Plan is administered by a committee (the
"Committee"), appointed by the Board of Directors, consisting of at least two
non-employee directors (within the meaning of Rule 16b-3 of the Exchange Act) of
Commercial. The Committee has discretionary authority to select participants
and grant awards, to determine the form and content of any awards made under the
Option Plan, to interpret the Option Plan, to prescribe, amend and rescind rules
and regulations relating to the Option Plan, and to make other decisions
necessary or advisable in connection with administering the Option Plan. All
decisions, determinations, and interpretations of the Committee are final and
conclusive on all persons affected thereby. Members of the Committee will be
indemnified to the full extent permissible under Commercial's governing
instruments in connection with any claims or other actions relating to any
action taken under the Option Plan.
Eligible Persons; Types of Awards. Under the Option Plan, the Committee
may grant stock options ("Options"), stock appreciation rights ("SARs") and
restricted stock ("Restricted Stock") (collectively, "Awards") to such directors
(including members of the Committee) and employees as the Committee shall
designate. Members of the Committee are eligible to receive Awards. As of May
__, 1998, Commercial and its affiliates had ___ employees and nine non-employee
directors who were eligible to participate in the Option Plan. Non-employee
directors subsequently elected to the Board would also be eligible to
participate in the Option Plan.
Shares Available for Grants. Upon approval of the Option Plan
Amendment,________ shares of Commercial Common Stock for issuance upon the
exercise of Options or SARs or the grant of Restricted Stock. Such shares may
either be newly-issued shares, treasury shares or shares held in a grantor trust
created by Commercial. In the event of any merger, consolidation,
recapitalization, reorganization, reclassification, stock dividend, split-up,
combination of shares, or similar event in which the number or kind of shares is
changed without receipt or payment of consideration by Commercial, the Committee
will adjust the number and kind of shares reserved for issuance under the Option
Plan, the number and kind of shares subject to outstanding Awards and the
exercise prices of such Awards. Generally, the number of shares as to which
SARs are granted are charged against the aggregate number of shares available
for grant under the Option Plan, provided that, in the case of an SAR granted in
conjunction with an Option, under circumstances in which the exercise of the SAR
results in termination of the Option and vice versa, only the number of shares
of Commercial Common Stock subject to the Option shall be charged against the
aggregate number of shares of Commercial Common Stock remaining available under
the Option Plan. If Awards should expire, become unexercisable, or be forfeited
for any reason without having been exercised, the shares of Commercial Common
Stock subject to such Awards shall, unless the Option Plan shall have been
terminated, be available for the grant of additional Awards under the Option
Plan.
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Options. Options may be either incentive stock options ("ISOs") as defined
in Section 422 of the Internal Revenue Code, or options that are not ISOs ("Non-
ISOs"). The exercise price as to any Option may not be less than the fair
market value (determined under the Option Plan) of the optioned shares on the
date of grant. In the case of a participant who owns more than 10% of the
outstanding Commercial Common Stock on the date of grant, such exercise price
may not be less than 110% of fair market value of the shares. Notwithstanding
the foregoing, the Committee may grant discounted Non-ISOs ("Discounted Non-
ISOs") to directors or officers selected by the Committee who have previously
elected to defer cash compensation at a per-share discounted exercise price
equal to the fair market value of the Commercial Common Stock underlying the
Discounted Non-ISOs on the date of grant less the amount of cash compensation
deferred during the calendar year divided by the number of shares that may be
purchased pursuant to the Discounted Non-ISO. As required by federal tax laws,
to the extent that the aggregate fair market value (determined when an ISO is
granted) of the Commercial Common Stock with respect to which ISOs are
exercisable by an optionee for the first time during any calendar year (under
all plans of Commercial and of any subsidiary) exceeds $100,000, the Options
granted in excess of $100,000 will be treated as Non-ISOs, and not as ISOs.
SARs. An SAR may be granted in tandem with all or part of any Option
granted under the Option Plan, or without any relationship to any Option. An
SAR granted in tandem with an ISO must expire no later than the ISO, must have
the same exercise price as the ISO and may be exercised only when the ISO is
exercisable and when the fair market value of the shares subject to the ISO
exceeds the exercise price of the ISO. An SAR granted in tandem with an Option
may be an alternative right whereby the exercise of the SAR cancels the
participant's right to exercise the Option to the extent of the number of shares
with respect to which the SAR is exercised and, correspondingly, the exercise of
the Option terminates the SAR to the extent of the number of shares purchased
upon exercise of the Option. Regardless of whether an SAR is granted in tandem
with an Option, exercise of the SAR will entitle the optionee to receive, as the
Committee prescribes in the grant, all or a percentage of the difference between
(i) the fair market value of the shares of Commercial Common Stock subject to
the SAR at the time of its exercise, and (ii) the fair market value of such
shares at the time the SAR was granted (or, in the case of SARs granted in
tandem with Options, the exercise price). The exercise price as to any
particular SAR may not be less than the fair market value of the optioned shares
on the date of grant.
Exercise of Options and SARs. The exercise of Options and SARs will be
subject to such terms and conditions as are established by the Committee in a
written agreement between the Committee and the optionee. Unless otherwise
provided by the Committee in a stock option agreement, all Options shall be
immediately exercisable. In the absence of Committee action to the contrary, an
otherwise unexpired ISO shall cease to be exercisable upon (i) an optionee's
termination of continuing service to the Company for "just cause" (as defined in
the Option Plan), (ii) the date three months (one year in the instance of Non-
ISOs) after an optionee terminates service for a reason other than just cause,
death, or disability, (iii) the date one year after an optionee terminates
service due to disability, or (iv) the date two years after an optionee
terminates service due to death. Except as otherwise provided in an agreement,
a Non-ISO may be exercised by a participant only during the period during which
he or she has maintained continuous service from the date of grant, provided
that such Non-ISO shall (i) expire immediately if the participant's continuous
service terminates due to just cause and (ii) continue to be exercisable for one
year following his or her termination of continuous service for any reason other
than death. In the event of the participant's death, then to the extent that
the participant would have been entitled to exercise the Non-ISO immediately
prior to his or her death, such Non-ISO of the deceased participant may be
exercised within two years from the date of his or her death (but not later than
the date on which the Non-ISO would otherwise expire) by the personal
representatives of his or her estate or person or person to whom his or her
rights under such Non-ISO shall have passed by will or by laws of descent and
distribution. In no event, however, may an Option or SAR be exercised later
than the date that it would otherwise expire. An individual's service as an
advisory director or director emeritus shall be deemed to be service as a
director, for purposes of determining eligibility to exercise an Option or SAR.
An optionee may exercise Options or SARs, subject to provisions relative to
their termination and limitations on their exercise, only by (i) written notice
of intent to exercise the Option or SAR with respect to a specified number of
shares of Commercial Common Stock, and (ii) in the case of Options, payment to
Commercial (contemporaneously with delivery of such notice) in cash, in
Commercial Common Stock, or a combination of cash and Commercial Common Stock,
of the amount of the exercise price for the number of shares with respect to
which the Option is then being exercised plus applicable withholding taxes.
Commercial Common Stock utilized in full or partial payment of the exercise
price for Options shall be valued at its market value at the date of exercise,
and may consist of shares subject to the Option being exercised. Upon exercise
of an Option, Commercial may, in the discretion of the Committee, pay to the
participant a cash amount up to but not exceeding the amount of dividends, if
any, declared on the underlying shares between the date of grant and the date of
exercise of the Option.
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Restricted Stock. The Committee has broad discretion at the time of making
a Restricted Stock grant to determined a period during which the shares granted
will be subject to restrictions (the "Restriction Period") and the conditions
that must be satisfied in order for the shares of Restricted Stock to become
unrestricted (i.e., vested and nonforfeitable). For example, the Committee may
condition vesting upon a grantee's continuous service to Commercial or upon the
attainment of specific corporate, divisional or individual standards or goals.
The Restriction Period may be no longer than five years and may differ among
participants and may have different expiration dates with respect to portions of
shares of Restricted Stock covered by the same Award.
The Committee shall determine the percentage of the award of Restricted
Stock which shall vest in the participant in the event of death, disability or
retirement prior to the expiration of the Restriction Period or the satisfaction
of the restrictions applicable to an award of Restricted Stock. Notwithstanding
the Restriction Period and the restrictions imposed by the Committee on the
Restricted Stock, the Committee may shorten the Restriction Period or waive any
restrictions if the Committee concludes that it is in the best interests of
Commercial to do so.
Until a grantee's interest vests, his or her Restricted Stock is
nontransferable and forfeitable. Nevertheless, the grantee is entitled to vote
the Restricted Stock and to receive dividends and other distributions made with
respect to the Restricted Stock. To the extent that a grantee becomes vested in
his or her Restricted Stock at any time and has satisfied applicable income tax
withholding obligations, Commercial will deliver unrestricted shares of
Commercial Common Stock to the grantee. At the end of the Restriction Period,
the grantee will forfeit to Commercial any shares of Restricted Stock as to
which he or she did not earn a vested interest during the Restriction Period.
Change in Control. Notwithstanding the provisions of any Award which
provide for its exercise or vesting in installments, all shares of Restricted
Stock shall become fully vested upon a "change in control," and all Options and
SARs shall be immediately exercisable and fully vested. With respect to
Options, at the time of a change in control, the optionee shall, at the
discretion of the Committee, be entitled to receive cash in an amount equal to
the excess of the fair market value of the Commercial Common Stock subject to
such Option over the exercise price of such shares, in exchange for the
cancellation of such Options by the optionee.
For purposes of the Option Plan, "change in control" means any one of the
following events: (1) the ownership, holding or power to vote more than 20% of
Commercial's voting stock or the voting stock of the Bank; (2) the acquisition
of the ability to control of the election of a majority of Commercial's or the
Bank's directors; (3) the acquisition of a controlling influence over the
management or policies of Commercial or the Bank by any person or by persons
acting as a group within the meaning of Section 13(d) of the Securities Exchange
Act of 1934, as amended (except in the case of the foregoing, ownership or
control of the Bank or its directors by Commercial itself shall not constitute a
"change in control"); or (4) during any period of two consecutive years,
individuals (the "Continuing Directors") who at the beginning of such period
constitute the Board of Directors of Commercial or the Bank (the "Existing
Board") cease for any reason to constitute at least two-thirds thereof, provided
that any individual whose election or nomination for election as a member of the
Existing Board was approved by a vote of at least two-thirds of the Continuing
Directors then in office shall be considered a Continuing Director. For
purposes of defining "change in control," the term "person" refers to an
individual or a corporation, partnership, trust, association, joint venture,
pool, syndicate, sole proprietorship, unincorporated organization or any other
form of entity not specifically listed.
Although these provisions are included in the Option Plan primarily for the
protection of an employee-optionee in the event of a change in control of
Commercial, they may also be regarded as having a takeover defensive effect,
which may reduce Commercial's vulnerability to hostile takeover attempts and
certain other transactions which have not been negotiated with and approved by
the Board of Directors.
Conditions on Issuance of Shares. The Committee will have the
discretionary authority to impose, in agreements, such restrictions on shares of
Commercial Common Stock issued pursuant to the Option Plan as it may deem
appropriate or desirable, including but not limited to the authority to impose a
right of first refusal or to establish repurchase rights or both of these
restrictions. In addition, the Committee may not issue shares unless the
issuance complies with applicable securities laws, and to that end may require
that a participant make certain representations or warranties.
Nontransferability. Awards may not be sold, pledged, assigned,
hypothecated, transferred or disposed of in any manner other than by will or by
the laws of descent and distribution. Notwithstanding the foregoing, to the
extent
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permissible under Rule 16b-3 of the Exchange Act, a participant who receives
Non-ISOs may transfer such Non-ISOs to his or her spouse, lineal ascendants,
lineal descendants, or to a duly established trust, provided that, except in
certain limited circumstances, such Non-ISOs may not be transferred again. Non-
ISOs which are transferred shall be exercisable by the transferee subject to the
same terms and conditions as would have applied to such Non-ISOs in the hands of
the participant that originally received the grant.
Effect of Dissolution and Related Transactions. In the event of (i) the
liquidation or dissolution of Commercial, (ii) a merger or consolidation in
which Commercial is not the surviving entity, or (iii) the sale or disposition
of all or substantially all of Commercial's assets (any of the foregoing to be
referred to herein as a "Transaction"), all outstanding Awards, together with
the exercise prices thereof, will be equitably adjusted for any change or
exchange of shares for a different number or kind of shares which results from
the Transaction. However, any such adjustment will be made in such a manner as
to not constitute a modification, within the meaning of Section 424(h) of the
Internal Revenue Code, of outstanding ISOs.
Duration of the Option Plan and Grants. The Option Plan has a term of 10
years from the Effective Date, after which date no Awards may be granted. The
maximum term for an Award is 10 years from the date of grant, except that the
maximum term of an ISO (and an SAR granted in tandem with an ISO) may not exceed
five years if the optionee owns more than 10% of the Commercial Common Stock on
the date of grant. The expiration of the Option Plan, or its termination by the
Committee, will not affect any Award previously granted.
Amendment and Termination of the Option Plan. The Board of Directors of
Commercial may from time to time amend the terms of the Option Plan and, with
respect to any shares at the time not subject to Awards, suspend or terminate
the Option Plan. No amendment, suspension, or termination of the Option Plan
will, without the consent of any affected holders of an Award, alter or impair
any rights or obligations under any Award previously granted.
Financial Effects of Awards. Commercial will receive no monetary
consideration for the granting of Awards under the Option Plan. It will receive
no monetary consideration other than the option price for shares of Commercial
Common Stock issued to optionees upon the exercise of their Options, and will
receive no monetary consideration upon the exercise of SARs. Under current
accounting standards, recognition of compensation expense is not required when
Options are granted at an exercise price equal to or exceeding the fair market
value of the Commercial Common Stock on the date the Option is granted.
The granting of SARs will require charges to the income of Commercial based
on the amount of the appreciation, if any, in the market price of the Commercial
Common Stock to which the SARs relate over the exercise price of those shares
for the particular income period. If the market price of the Commercial Common
Stock declines subsequent to a charge against earnings due to estimated
appreciation in the Commercial Common Stock subject to SARs, the amount of the
decline will reverse such prior charges against earnings (but not by more than
the aggregate of such prior charges).
Discounted Non-ISOs will require charges to the income of Commercial based
on the aggregate difference between the fair market value of the Commercial
Common Stock underlying the Discounted Non-ISO and the total exercise price
payable pursuant to such Discounted Non-ISO.
FEDERAL INCOME TAX CONSEQUENCES
ISOs. An optionee recognizes no taxable income upon the grant of ISOs. If
the optionee holds the Option shares for at least two years from the date the
ISO is granted, and for one year from the date the ISO is exercised, any gain
realized on the sale of the shares received upon exercise of such ISO is taxed
as long-term capital gain. However, the difference between the fair market
value of the Commercial Common Stock at the date of exercise and the exercise
price of the ISO will be treated by the optionee as an item of tax preference in
the year of exercise for purposes of the alternative minimum tax. If an
optionee disposes of the shares before the expiration of either of the two
special holding periods noted above, the disposition is a "disqualifying
disposition." In this event, the optionee will be required, at the time of the
disposition of the Commercial Common Stock, to treat the lesser of the gain
realized or the difference
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between the exercise price and the fair market value of the Commercial Common
Stock at the date of exercise as ordinary income and the excess, if any, as
capital gain.
Commercial will not be entitled to any deduction for federal income tax
purposes as a result of the grant or exercise of an ISO, regardless of whether
or not the exercise of the ISO results in liability to the optionee for
alternative minimum tax. However, if an optionee has ordinary income taxable as
compensation as a result of a disqualifying disposition, Commercial will be
entitled to deduct an equivalent amount.
Non-ISOs. An optionee will not recognize taxable income upon the grant of
a Non-ISO. In the case of such a Non-ISO, an optionee will recognize ordinary
income upon the exercise of the Non-ISO in an amount equal to the difference
between the fair market value of the shares on the date of exercise and the
option price (or, if the optionee is subject to certain restrictions imposed by
federal securities laws, upon the lapse of those restrictions unless the
optionee makes a special tax election within 30 days after the date of exercise
to have the general rule apply). Upon a subsequent disposition of such shares,
any amount received by the optionee in excess of the fair market value of the
shares as of the exercise will be taxed as capital gain. Commercial will be
entitled to a deduction for federal income tax purposes at the same time and in
the same amount as the ordinary income recognized by the optionee in connection
with the exercise of a Non-ISO. Although no assurances can be given, Discounted
Non-ISOs are expected to be treated in the same manner as Non-ISOs for federal
income tax purposes.
SARs. The grant of an SAR has no tax effect on the optionee or Commercial.
Upon exercise of the SARs, however, any cash or Commercial Common Stock received
by the optionee in connection with the surrender of his or her SAR will be
treated as compensation income to the optionee, and Commercial will be entitled
to a business expense deduction for tax purposes for the amounts treated as
compensation income.
- -----------------------------------------------------------------------------
EXPECTED AWARDS. If stockholder approval of the Option Plan Amendment is
obtained, Commercial expects to make a one-time grant of 50 stock options to
each full-time employee who has not received an award under the Option Plan. A
grant of 25 stock options will be made to all part-time employees who have not
received awards under the Option Plan and are not covered by an incentive
program maintained by Commercial. Based on its number of employees at May __,
1998, a total of _______ stock options will be granted to such individuals. See
"New Plan Benefits."
RECOMMENDATION; VOTE REQUIRED. The Board of Directors has determined that
the Option Plan Amendment is in the best interests of stockholders of
Commercial. A favorable vote of a majority of the shares eligible to be cast at
the Commercial Special Meeting is required to approve the Option Plan
Amendment.
THE BOARD OF DIRECTORS OF COMMERCIAL RECOMMENDS THAT STOCKHOLDERS VOTE FOR
---
THE PROPOSAL TO AMEND THE OPTION PLAN TO INCREASE THE NUMBER OF SHARES OF
COMMERCIAL COMMON STOCK RESERVED FOR AWARDS UNDER THE OPTION PLAN.
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STOCKHOLDER PROPOSALS
First Colorado 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
First Colorado's proxy materials for next year's Annual Meeting of stockholders,
if held, any stockholder proposal to take action at such meeting must be
received at First Colorado's executive offices at 215 S. Wadsworth Boulevard,
Lakewood, Colorado 80226, no later than December 1, 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, stockholders of First Colorado will
become stockholders of Commercial. In order to be eligible for inclusion in
Commercial's proxy materials for next year's Annual Meeting of stockholders 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.
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 First Colorado by Malizia, Spidi, Sloane & Fisch, P.C., Washington, D.C.
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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/Joint 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 First Colorado as of December 31,
1997 and 1996 and for each of the years in the three year period ended December
31, 1997, have been incorporated by reference herein from First Colorado's
Annual Report on Form 10-K for the fiscal year ended December 31, 1997 in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
OTHER MATTERS
The First Colorado Board of Directors is not aware of any business to come
before the Special Meeting other than those matters described in this
Prospectus/Joint Proxy Statement. However, if any other matter should properly
come before the Special Meeting, it is intended that holders of the proxies will
act in accordance with their best judgment.
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================================================================================
REORGANIZATION AND MERGER AGREEMENT
BY AND AMONG
COMMERCIAL FEDERAL CORPORATION,
COMMERCIAL FEDERAL BANK, A FEDERAL SAVINGS BANK,
FIRST COLORADO BANCORP, INC.
AND
FIRST FEDERAL BANK OF COLORADO
DATED AS OF MARCH 9, 1998
================================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
ARTICLE I
CERTAIN DEFINITIONS
<S> <C> <C>
Section 1.1 Definitions.............................................................. 2
ARTICLE II
THE PARENT MERGER
Section 2.1 The Parent Merger........................................................ 8
Section 2.2 Closing.................................................................. 8
Section 2.3 Effective Time........................................................... 8
Section 2.4 Additional Actions....................................................... 9
Section 2.5 Articles of Incorporation and Bylaws..................................... 9
Section 2.6 Boards of Directors and Officers......................................... 9
Section 2.7 Conversion of Securities................................................. 9
Section 2.8 Exchange Procedures...................................................... 10
Section 2.9 No Fractional Shares..................................................... 11
Section 2.10 Anti-Dilution Adjustments................................................ 12
Section 2.11 Dissenting Shares........................................................ 12
Section 2.12 Treatment of Stock Options............................................... 12
Section 2.13 Reservation of Right to Revise Transaction............................... 13
ARTICLE III
THE BANK MERGER
Section 3.1 The Bank Merger.......................................................... 13
Section 3.2 Liquidation Account...................................................... 13
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
BANCORP AND THE COMPANY
Section 4.1 Organization, Good Standing, Authority, Insurance, Etc................... 14
Section 4.2 Capitalization........................................................... 14
Section 4.3 Ownership of Subsidiaries................................................ 15
Section 4.4 Financial Statements and Reports......................................... 15
Section 4.5 Absence of Changes....................................................... 16
Section 4.6 No Broker's or Finder's Fees............................................. 16
Section 4.7 Litigation and Other Proceedings......................................... 16
Section 4.8 Compliance with Law...................................................... 17
Section 4.9 Corporate Actions........................................................ 17
Section 4.10 Authority................................................................ 17
</TABLE>
-i-
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<TABLE>
<S> <C> <C>
Section 4.11 Employment Arrangements.................................................. 18
Section 4.12 Employee Benefits........................................................ 18
Section 4.13 Information Furnished; Registration Statement............................ 20
Section 4.14 Property and Assets...................................................... 20
Section 4.15 Agreements and Instruments............................................... 21
Section 4.16 Material Contract Defaults............................................... 21
Section 4.17 Tax Matters.............................................................. 21
Section 4.18 Environmental Matters.................................................... 22
Section 4.19 Loan Portfolio; Portfolio Management..................................... 22
Section 4.20 Real Estate Loans and Investments........................................ 23
Section 4.21 Derivatives Contracts.................................................... 23
Section 4.22 Insurance................................................................ 24
Section 4.23 Accounting and Tax Treatment............................................. 24
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF COMMERCIAL AND THE BANK
Section 5.1 Organization, Good Standing, Authority, Insurance, Etc................... 24
Section 5.2 Capitalization........................................................... 25
Section 5.3 Ownership of Subsidiaries................................................ 25
Section 5.4 Financial Statements and Reports......................................... 26
Section 5.5 No Broker's or Finder's Fees............................................. 26
Section 5.6 Litigation and Other Proceedings......................................... 27
Section 5.7 Compliance With Law...................................................... 27
Section 5.8 Corporate Actions........................................................ 27
Section 5.9 Authority................................................................ 27
Section 5.10 Information Furnished; Registration Statement............................ 28
Section 5.11 Agreements and Instruments............................................... 28
Section 5.12 Tax Matters.............................................................. 28
Section 5.13 Accounting and Tax Treatment............................................. 29
ARTICLE VI
COVENANTS
Section 6.1 Conduct of Business by Bancorp........................................... 29
Section 6.2 Maintenance of Records................................................... 32
Section 6.3 Employees; Employee Benefits............................................. 32
Section 6.4 Efforts of Parties to Close.............................................. 33
Section 6.5 Confidentiality and Announcements........................................ 33
Section 6.6 Access; Certain Communications........................................... 34
Section 6.7 Regulatory Matters; Third Party Consents................................. 34
Section 6.8 Notification of Certain Matters.......................................... 36
Section 6.9 Expenses................................................................. 36
Section 6.10 Third Party Proposals.................................................... 37
</TABLE>
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<TABLE>
<S> <C> <C>
Section 6.11 Stock Listing............................................................ 37
Section 6.12 Integration; Conforming Entries.......................................... 38
Section 6.13 Pooling-of-Interests and Tax-Free Treatment.............................. 38
Section 6.14 Agreements of Affiliates................................................. 38
Section 6.15 Stockholder Approval..................................................... 39
Section 6.16 Indemnification.......................................................... 39
Section 6.17 D&O Insurance............................................................ 40
Section 6.18 Takeover Provisions Inapplicable......................................... 40
Section 6.19 Environmental Reports.................................................... 40
ARTICLE VII
CONDITIONS TO CONSUMMATION
OF THE MERGER
Section 7.1 Mutual Conditions........................................................ 41
Section 7.2 Conditions to Commercial's and the Bank's Obligations.................... 42
Section 7.3 Conditions to Bancorp's and the Company's Obligations.................... 43
ARTICLE VIII
TERMINATION
Section 8.1 Termination.............................................................. 44
Section 8.2 Survival After Termination............................................... 45
ARTICLE IX
MISCELLANEOUS
Section 9.1 Amendments; Waiver....................................................... 45
Section 9.2 Entire Agreement......................................................... 46
Section 9.3 Non-Survival of Representations, Warranties and Agreements............... 46
Section 9.4 Interpretation........................................................... 46
Section 9.5 Severability............................................................. 46
Section 9.6 Notices.................................................................. 46
Section 9.7 Binding Effect; Persons Benefiting; No Assignment........................ 47
Section 9.8 Counterparts............................................................. 48
Section 9.9 Governing Law............................................................ 48
Section 9.10 Specific Performance..................................................... 48
Section 9.11 WAIVER OF JURY TRIAL..................................................... 48
Annex A Merrill Lynch Thrift Index
Exhibit A Stock Option Agreement
Exhibit B Form of Affiliate Agreement
Exhibit C Bank Plan of Merger
</TABLE>
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<PAGE>
REORGANIZATION AND MERGER AGREEMENT
REORGANIZATION AND MERGER AGREEMENT, dated as of March 9, 1998 (the
"Agreement"), by and among Commercial Federal Corporation, a Nebraska
corporation ("Commercial"), Commercial Federal Bank, A Federal Savings Bank, a
federally chartered savings bank and wholly-owned subsidiary of Commercial (the
"Bank"), First Colorado Bancorp, Inc., a Colorado corporation (the "Bancorp"),
and First Federal Bank of Colorado, a federally chartered savings bank and
wholly-owned subsidiary of Bancorp (the "Company").
WHEREAS, Commercial, a non-diversified, unitary savings and loan
holding company, with its principal offices in Omaha, Nebraska, owns all of the
issued and outstanding capital stock of the Bank, with its principal offices in
Omaha, Nebraska;
WHEREAS, Bancorp, a unitary savings and loan holding company, with its
principal offices in Lakewood, Colorado, owns all of the issued and outstanding
capital stock of the Company, with its principal offices in Lakewood Colorado;
WHEREAS, Commercial and Bancorp desire to combine their respective
holding companies through a tax-free exchange so that the respective
shareholders of both Commercial and Bancorp will have an equity ownership in the
combined holding company;
WHEREAS, following the combination of Commercial and Bancorp, it is
intended that the Bank and the Company will be merged such that the combined
holding company will retain the advantage of 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, to accomplish the foregoing, the Board of Directors of
Bancorp (the "Bancorp Board") and the Board of Directors of Commercial (the
"Commercial Board") have approved the merger (the "Parent Merger") of Bancorp
with and into Commercial, pursuant to the terms and subject to the conditions of
this Agreement, and the Commercial Board has approved the merger of the Company
with and into the Bank (the "Bank Merger" and, together with the Parent Merger,
the "Merger") which shall occur as soon as practicable following consummation of
the Parent Merger;
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
the Code (as defined below) and this Agreement shall constitute a plan of
reorganization pursuant to Section 368 of the Code;
WHEREAS, it is intended that the Merger shall qualify for pooling-of-
interests accounting treatment;
<PAGE>
WHEREAS, as a condition to, and immediately prior to, execution of
this Agreement, Commercial and Bancorp have entered into a stock option
agreement (the "Stock Option Agreement") in the form attached hereto as Exhibit
A; and
WHEREAS, the parties desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated by this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and
subject to the conditions and other terms herein set forth, and intending to be
legally bound hereby, the parties hereto hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. Definitions. For all purposes of this Agreement, the
-----------
following terms shall have the respective meanings set forth in this Section 1.1
(such definitions to be equally applicable to both the singular and plural forms
of the terms herein defined):
"Acquisition Proposal" shall have the meaning set forth in Section
6.10.
"Adjustment Election" shall have the meaning set forth in Section
8.1(a)(vi).
"Affiliate" shall mean any individual, partnership, corporation,
entity or other Person that directly, or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control with,
the Person specified.
"Agreement" shall have the meaning set forth on the first page hereof.
"Applicable Law" shall mean any domestic or foreign federal, state or
local statute, law, ordinance, rule, administrative interpretation, regulation,
order, writ, injunction, directive, judgment, decree, policy, guideline or other
requirement applicable to Commercial, Bancorp, the Company or any of their
respective Affiliates, properties, assets, officers, directors, employees or
agents, as the case may be.
"Approval Date" shall have the meaning set forth in Section 2.3.
"Asset Classification" shall have the meaning set forth in Section
4.19.
"Average Index Price" shall mean the arithmetic mean (carried to four
decimal places) of the Index Prices for the fifteen trading days ending on (and
including) the fifth trading day immediately preceding the Closing Date.
"Average NYSE Closing Price" shall mean the arithmetic mean (carried
to four decimal places) of the closing prices per share of Commercial Common
Stock as reported on the
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NYSE Composite Tape (as reported in The Wall Street Journal or, if not reported
-----------------------
therein, in another mutually agreed upon authoritative source) for the fifteen
trading days ending on (and including) the fifth trading day immediately
preceding the Closing Date.
"Bancorp" has the meaning set forth on the first page hereof and
includes any direct or indirect successor or assign.
"Bancorp Board" has the meaning set forth on the first page hereof.
"Bancorp Common Stock" shall mean the common stock, par value $0.10
per share, of Bancorp, together with the Rights attached thereto pursuant to the
Bancorp Rights Agreement.
"Bancorp Employee Benefit Plan" has the meaning set forth in Section
4.12(a).
"Bancorp Material Adverse Effect" shall mean, with respect to Bancorp
or any of its Affiliates, a material adverse effect on (i) the business,
financial condition or results of operations of Bancorp and the Bancorp
Subsidiaries taken as a whole or (ii) the ability of Bancorp or the Company to
complete the transactions contemplated hereby; provided, however, that a Bancorp
-------- -------
Material Adverse Effect shall not be defined to include (w) any change
attributable to or resulting from any change in Applicable Law or GAAP or
regulatory accounting principles, including, but not limited to, changes
resulting from amendments to or modifications of any Applicable Law relating to
the bad debt reserve of or deduction taken by thrift institutions or any special
insurance premium assessments by the FDIC on SAIF-insured deposits, in each case
which affects thrift institutions generally, or (x) 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 thrift institutions generally, (y) expenses related to consummation of
the Merger which are otherwise permitted under this Agreement (or set forth in
the Bancorp Disclosure Schedule), including, but not limited to, preparation,
legal, investment banking and auditing fees, or (z) the cost of establishing a
$250,000 charitable foundation in the manner Previously Disclosed.
"Bancorp Option" shall have the meaning set forth in Section 2.12.
"Bancorp Preferred Stock" shall have the meaning set forth in Section
4.2.
"Bancorp Property" shall have the meaning set forth in Section 6.19.
"Bancorp Rights Agreement" shall mean that certain Rights Agreement,
dated as of July 24, 1996, by and between Bancorp and American Securities
Transfer & Trust, Incorporated, as rights agent.
"Bancorp Subsidiary" and "Bancorp Subsidiaries" shall have the
respective meanings set forth in Section 4.1.
"Bank" has the meaning set forth on the first page hereof and includes
any direct or indirect successor or assign.
"Bank Merger" has the meaning set forth on the first page hereof.
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<PAGE>
"Bank Plan of Merger" shall have the meaning set forth in Section 3.1.
"Business Day" shall mean any day that the NYSE is normally open for
trading and that is not a Saturday, a Sunday or a day on which banks in the
States of Nebraska and Colorado are generally closed for regular banking
business.
"CBCA" shall have the meaning set forth in Section 2.1.
"Certificates" shall have the meaning set forth in Section 2.8.
"Closing" shall have the meaning set forth in Section 2.2.
"Closing Date" shall have the meaning set forth in Section 2.2.
"Code" shall mean the Internal Revenue Code of 1986, as amended,
together with the Treasury regulations thereunder.
"Commercial" has the meaning set forth on the first page hereof and
includes any direct or indirect successor or assign.
"Commercial Board" has the meaning set forth on the first page hereof.
"Commercial Common Stock" shall mean the common stock, par value $0.01
per share, of Commercial, together with the Rights attached thereto pursuant to
the Shareholder Rights Agreement, dated as of December 19, 1988, by and between
Commercial and Manufacturers Hanover Trust Company, as Rights Agent.
"Commercial Material Adverse Effect" shall mean, with respect to
Commercial or any of its Affiliates, a material adverse effect on (i) the
business, financial condition, prospects or results of operations of Commercial
and the Commercial Subsidiaries taken as a whole or (ii) the ability of
Commercial to complete the transactions contemplated hereby; provided, however,
-------- -------
that a Commercial Material Adverse Effect shall not be deemed to include (x) any
change attributable to or resulting from any change in Applicable Law or GAAP or
regulatory accounting principles, including, but not limited to, changes
resulting from amendments to or modifications of any Applicable Law relating to
the bad debt reserve of or deduction taken by thrift institutions or any special
insurance premium assessments by the FDIC on SAIF-insured deposits, in each case
which affects thrift institutions generally, or (y) 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 thrift institutions generally.
"Commercial Plans" shall have the meaning set forth in Section 6.5.
"Commercial Property" shall have the meaning set forth in Section
6.19.
"Commercial Subsidiary" and "Commercial Subsidiaries" shall have the
respective meanings set forth in Section 5.1.
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<PAGE>
"Company" shall have the meaning set forth on the first page hereof
and includes any direct or indirect successor or assign.
"Confidentiality Agreements" shall mean those certain letter
agreements, dated January 22, 1998 and March 4, 1998, relating to confidential
information provided by the parties to each other and their respective
Affiliates and Representatives.
"Contract" has the meaning set forth in Section 4.10.
"Current Property" shall have the meaning set forth in Section 6.19.
"Derivatives Contract" shall mean the meaning set forth in Section
4.21.
"Dissenting Shares" shall have the meaning set forth in Section 2.11.
"Effective Time" shall have the meaning set forth in Section 2.3.
"Encumbrance" shall mean any lien, pledge, security interest, claim,
charge, easement, limitation, commitment, encroachment, restriction or
encumbrance of any kind or nature whatsoever.
"Environmental Firm" shall have the meaning set forth in Section 6.19.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations thereunder.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC thereunder.
"Exchange Agent" shall have the meaning set forth in Section 2.8.
"Exchange Option" shall have the meaning set forth in Section 2.12.
"Exchange Ratio" shall mean, subject to Sections 2.10 and 8.1(a)(vi),
either (i) if Commercial has not made an Adjustment Election, then the quotient
(carried to four decimal places) obtained by dividing (x) 30 by (y) the Average
NYSE Closing Price, provided that if such quotient is greater than .9677, then
--------
the Exchange Ratio as calculated under this clause (i) shall be .9677, and
provided further that if such quotient is less than .7895, then the Exchange
- --------
Ratio as calculated under this clause (i) shall be .7895, or (ii) if Commercial
has made an Adjustment Election, the lesser of (x) the quotient (carried to four
decimal places) obtained by dividing (A) the product of .85, the Starting Price
and .9677 by (B) the Average NYSE Closing Price and (y) the quotient (carried
to four decimal places) obtained by dividing (A) the product of the Index Ratio,
the Starting Price and .9677 by (B) the Average NYSE Closing Price.
"Facility Property" shall have the meaning set forth in Section 6.19.
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<PAGE>
"FDIC" shall mean the Federal Deposit Insurance Corporation and any
successor thereto.
"GAAP" shall mean generally accepted accounting principles as used in
the United States of America as in effect at the time any applicable financial
statements were prepared or any act requiring the application of GAAP was
performed.
"Governmental Authority" shall mean any government, any state or other
political subdivision thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
including the SEC or any other government authority, agency, department, board,
commission or instrumentality of the United States, any State of the United
States or any political subdivision thereof, and any court or tribunal of
competent jurisdiction, and any governmental or non-governmental self-regulatory
organization, agency or authority (including the NYSE and the National
Association of Securities Dealers, Inc.).
"HOLA" shall mean the Home Owners' Loan Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Index Price" shall mean, with respect to a given date, the weighted
average (weighted based on the number of fully-diluted shares outstanding as
last disclosed in publicly available Regulatory Documents filed by the
respective companies) of the closing prices on such date of the companies
comprising the Merrill Lynch Thrift Index, set forth as Annex A hereto, on such
date, appropriately adjusted to reflect any stock dividend, reclassification,
recapitalization, split-up, combination, exchanges of shares or similar
transaction declared or effected by any of such companies between the Starting
Date and the close of business on the fifth trading day immediately preceding
the Closing Date.
"Index Ratio" shall mean the number equal to the product of (x) the
quotient (carried to four decimal places) obtained by dividing (A) the Average
Index Price by (B) the Index Price on the Starting Date, and (y) .90.
"IRS" shall mean the Internal Revenue Service and any successor
thereto.
"Merger" has the meaning set forth on the first page hereof.
"Merger Consideration" shall have the meaning set forth in Section
2.13.
"NBCA" shall have the meaning set forth in Section 2.1.
"NYSE" means the New York Stock Exchange, Inc. and any successor
thereto.
"OTS" shall mean the Office of Thrift Supervision and any successor
thereto.
"Parent Merger" has the meaning set forth on the first page hereof.
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<PAGE>
"Person" shall mean any individual, corporation, company, partnership
(limited or general), joint venture, association, trust or other entity or
similar contractual arrangement or relationship.
"Previously Disclosed" by a party shall mean information set forth in
a schedule (with respect to Bancorp and the Company, the "Bancorp Disclosure
Schedule"; and with respect to Commercial, the "Commercial Disclosure
Schedule"), correspondingly enumerated to the representations, warranties or
covenants to which such information relates, that is delivered by such party to
the other party contemporaneously with the execution of this Agreement and
specifically designated as information "Previously Disclosed" pursuant to this
Agreement.
"Price Termination Notice" shall have the meaning set forth in Section
8.1(a)(vi).
"Prospectus" shall have the meaning set forth in Section 4.13.
"Proxy Statement" shall have the meaning set forth in Section 4.13.
"Records" shall mean, with respect to any Person, all records and
original documents (and copies thereof) in the Person's possession, or in the
possession of an Affiliate of such Person, as of the Closing Date (a) which
pertain to or are utilized by such Person or Affiliate to administer, reflect,
monitor, evidence or record information respecting the business or conduct of
Bancorp or the Bancorp Subsidiaries, or (b) necessary or appropriate for Bancorp
or the Bancorp Subsidiaries to comply with any Applicable Law, and shall include
in the case of (a) and (b) above, all such records maintained on electronic or
magnetic media, or in the electronic data base system of or used by such Person
or Affiliate.
"Registration Statement" shall have the meaning set forth in Section
4.13.
"Regulatory Documents" shall mean, with respect to a Person, all
forms, reports, registration statements, schedules and other documents filed, or
required to be filed by such Person with any Governmental Authority or pursuant
to any Applicable Law.
"Representatives" shall have the meaning set forth in Section 6.10.
"Right" shall have the meaning set forth in Section 6.1(ii).
"SAIF" shall have the meaning set forth in Section 4.1 and any
successor thereto.
"SEC" shall mean the Securities and Exchange Commission and any
successor thereto.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations of the SEC thereunder.
"Starting Date" shall mean February 24, 1998.
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<PAGE>
"Starting Price" shall mean $34.875 (the closing price per share of
Commercial Common Stock as reported on the NYSE Composite Tape on the Starting
Date).
"Stock Option Agreement" has the meaning set forth on the first page
hereof.
"Structured Note" shall have the meaning set forth in Section 4.21.
"Surviving Corporation" shall have the meaning set forth in Section
2.1.
"Tax Return" shall mean any return, report, information statement,
schedule or other document (including any related or supporting information and
including any Form 1099 or other document or report required to be provided to
third parties) with respect to Taxes, including any document required to be
retained or provided to any governmental authority pursuant to 31 U.S.C.
Sections 5311-5328 and regulations promulgated thereunder.
"Taxes" shall mean all federal, provincial, territorial, state,
municipal, local, foreign or other taxes, imposts, rates, levies, assessments
and other charges (and all interest and penalties thereon), including, without
limitation, all income, excise, franchise, gains, capital, real property, goods
and services, transfer, value added, gross receipts, windfall profits,
severance, ad valorem, personal property, production, sales, use, license,
stamp, documentary stamp, mortgage recording, employment, payroll, social
security, unemployment, disability, estimated or withholding taxes, and all
customs and import duties, and all interest, penalties and losses thereon or
associated therewith or associated with any Tax Return.
ARTICLE II
THE PARENT MERGER
Section 2.1. The Parent Merger. Subject to the terms and conditions
-----------------
of this Agreement and to the HOLA, Bancorp shall be merged with and into
Commercial in accordance with the Nebraska Business Corporation Act (the "NBCA")
and the Colorado Business Corporations Act (the "CBCA"), and thereafter the
separate corporate existence of Bancorp shall cease. Commercial shall be the
surviving corporation of the Parent Merger (sometimes referred to herein as the
"Surviving Corporation") and shall continue to be governed by the laws of the
State of Nebraska. The Parent Merger shall have the effects set forth in the
applicable provisions of the NBCA.
Section 2.2. Closing. The closing (the "Closing") of the Parent
-------
Merger shall take place at the offices of Commercial, 2120 South 72nd Street,
Omaha, Nebraska (including by mail, fax or otherwise as reasonably agreed to by
the parties hereto), prior to the Effective Time on the date that the Effective
Time occurs (the "Closing Date").
Section 2.3. Effective Time. The Parent Merger shall become
--------------
effective on the date and at the time (the "Effective Time") on which
appropriate documents in respect of the Parent Merger are filed with the
Secretaries of State of the States of Nebraska and Colorado in such form as
required by, and in accordance with, the relevant provisions of the NBCA and
CBCA, respec-
-8-
<PAGE>
tively. Subject to the terms and conditions of this Agreement, the Effective
Time shall occur on any such date as Commercial shall notify Bancorp in writing
(such notice to be at least five full trading days in advance of the Effective
Time) but (i) not earlier than the later of (x) the satisfaction or waiver of
all conditions set forth in Article VII and (y) July 24, 1998 (such later date
being referred to herein as the "Approval Date") and (ii) subject to clause (i),
not later than the first Business Day of the first full calendar month
commencing at least five full trading days after the Approval Date, or at such
other time as Commercial and Bancorp shall agree.
Section 2.4. Additional Actions. If, at any time after the Effective
------------------
Time, the Surviving Corporation shall consider or be advised that any further
deeds, assignments or assurances or any other acts are necessary or desirable to
(i) vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of Commercial or Bancorp or (ii) otherwise carry out the
purposes of this Agreement, Bancorp and each of its officers and directors shall
be deemed to have granted to the Surviving Corporation an irrevocable power of
attorney to execute and deliver all such deeds, assignments or assurances and to
do all acts necessary or desirable to vest, perfect or confirm title and
possession to such rights, properties or assets in the Surviving Corporation and
otherwise to carry out the purposes of this Agreement, and the officers and
directors of the Surviving Corporation are authorized in the name of Bancorp or
otherwise to take any and all such action.
Section 2.5. Articles of Incorporation and Bylaws. The Articles of
------------------------------------
Incorporation and Bylaws of Commercial in effect immediately prior to the
Effective Time shall be the Articles of Incorporation and Bylaws of the
Surviving Corporation following the Parent Merger until otherwise amended or
repealed.
Section 2.6. Boards of Directors and Officers. At the Effective
--------------------------------
Time, the directors and officers of Commercial immediately prior to the
Effective Time shall continue to be directors and officers, respectively, of the
Surviving Corporation following the Parent Merger; such directors and officers
shall hold office in accordance with the Surviving Corporation's Bylaws and
applicable law. Promptly following the Effective Time, (i) Malcolm E. Collier,
Jr., President, CEO and Chairman of Bancorp, shall be invited to serve as an
additional member of the Commercial Board (or, at Mr. Collier's election, a
director emeritus for a period of not less than 36 months) and, upon acceptance
thereof and appointment thereon, shall be entitled to receive director fees (of
no less than $500 per meeting) on the same basis as other non-employee directors
of Commercial, and (ii) each other director serving on the Bancorp Board as of
the date hereof and as of the Effective Time shall be invited to serve on an
advisory board to Commercial for a period of not less than 12 months following
the Effective Time and, upon acceptance thereof and appointment thereon, each
such director serving on such advisory board who is not an employee of
Commercial or a Commercial Subsidiary following the Effective Time shall be
entitled to receive a meeting fee of $500 per meeting for such service, such
advisory board to meet not less frequently than 4 times a year.
Section 2.7. Conversion of Securities. At the Effective Time, by
------------------------
virtue of the Parent Merger and without any action on the part of Commercial,
Bancorp or the holder of any of the following securities:
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<PAGE>
(i) Each share of the Commercial Common Stock that is issued and
outstanding immediately prior to the Effective Time shall remain outstanding and
shall be unchanged after the Parent Merger; and
(ii) Subject to Sections 2.9, 2.10 and 2.11 hereof, each share of
Bancorp Common Stock issued and outstanding immediately prior to the Effective
Time shall cease to be outstanding and shall be converted into and become the
right to receive a number of shares of Commercial Common Stock equal to the
Exchange Ratio, provided, however, that any shares of Bancorp Common Stock held
-------- -------
by Bancorp, Commercial or any of their respective Subsidiaries, in each case
other than in a fiduciary capacity or as a result of debts previously
contracted, shall be canceled and shall not be exchanged for shares of
Commercial Common Stock.
Section 2.8. Exchange Procedures. (a) At or prior to the Effective
-------------------
Time, Commercial shall deposit, or shall cause to be deposited, with the
Exchange Agent, for the benefit of the holders of certificates of Bancorp Common
Stock for exchange in accordance with this Article II, certificates representing
the shares of Commercial Common Stock and an estimated amount of cash to be paid
in lieu of fractional shares to be paid pursuant to this Article II in exchange
for outstanding shares of Bancorp Common Stock.
(b) Holders of record of certificates which immediately prior to
the Effective Time represented outstanding shares of Bancorp Common Stock (the
"Certificates") shall be instructed to tender such Certificates to Commercial,
or to an exchange agent designated by Commercial (the "Exchange Agent"),
pursuant to a letter of transmittal that Commercial shall deliver or cause to be
delivered to such holders as promptly as practicable following the Effective
Time. Such letter of transmittal shall specify that risk of loss and title to
Certificates shall pass only upon delivery of such Certificates to Commercial or
the Exchange Agent.
(c) Subject to Section 2.9, after the Effective Time, each holder of
a Certificate(s) that surrenders such Certificate(s) to Commercial, or to the
Exchange Agent, will, upon acceptance thereof by Commercial or the Exchange
Agent, be entitled to (x) a certificate or certificates representing the number
of whole shares of Commercial Common Stock into which the shares represented by
the Certificate(s) so surrendered (aggregating all Certificates surrendered by
such holder) shall have been converted pursuant to this Agreement and (y) a
check representing the amount of any cash in lieu of fractional shares, if any,
and dividends and distributions, if any, which such holder has the right to
receive hereunder with respect to the Certificate(s) so surrendered, in each
case after giving effect to any required withholding tax.
(d) Commercial or, at the election of Commercial, the Exchange Agent
shall accept Certificates upon compliance with such reasonable terms and
conditions as Commercial or the Exchange Agent may impose to effect an orderly
exchange thereof in accordance with customary exchange practices. Certificates
shall be appropriately endorsed or accompanied by such instruments of transfer
as Commercial or the Exchange Agent may reasonably require.
(e) All shares of Commercial Common Stock issued upon surrender of
Certificates in accordance with the terms hereof (including any cash paid
pursuant to this Article II) shall be deemed to have been in full satisfaction
of all rights pertaining to such shares of Bancorp
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<PAGE>
Common Stock represented thereby. After the Effective Time, holders of
Certificates shall cease to have rights with respect to the shares previously
represented by such Certificates, and their sole rights shall be to exchange
such Certificates for the consideration provided for in this Agreement.
(f) After the Effective Time, there shall be no further transfer on
the records of Bancorp of Certificates, and if such Certificates are presented
to Bancorp for transfer, they shall be canceled against delivery of the
consideration provided therefor in this Agreement. Commercial shall not be
obligated to deliver the consideration to which any former holder of Bancorp
Common Stock is entitled as a result of the Parent Merger until such holder
surrenders the Certificates as provided herein. Certificates surrendered for
exchange by any person constituting an "affiliate" of Bancorp for purposes of
Rule 145 of the Securities Act, shall not be exchanged for certificates
representing Commercial Common Stock until Commercial has received a written
agreement from such person in the form attached hereto as Exhibit B. Neither the
Exchange Agent nor any party to this Agreement nor any Affiliate thereof shall
be liable to any holder of stock represented by any Certificate for any
consideration paid to a public official pursuant to applicable abandoned
property, escheat or similar laws. Commercial and the Exchange Agent shall be
entitled to rely upon the stock transfer books of Bancorp to establish the
identity of those persons entitled to receive consideration specified in this
Agreement, which books shall be conclusive with respect thereto. In the event of
a dispute with respect to ownership of stock represented by any Certificate,
Commercial and the Exchange Agent shall be entitled to deposit any consideration
represented thereby in escrow with an independent third party and thereafter be
relieved with respect to any claims thereto.
(g) Notwithstanding any other provisions of this Agreement, no
dividends or other distributions declared or made after the Effective Time with
respect to Commercial Common Stock having a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate, and no cash
payment in lieu of fractional shares shall be paid to any such holder, until the
holder shall surrender such Certificate as provided in this Section 2.8. Subject
to the effect of Applicable Laws, following surrender of any such Certificate,
there shall be paid to the holder of the certificates representing whole shares
of Commercial Common Stock issued in exchange therefor, without interest, (i) at
the time of such surrender, the amount of dividends or other distributions with
a record date on or after the Effective Time theretofore payable with respect to
such whole shares of Commercial Common Stock and not paid, less the amount of
any withholding taxes which may be required thereon, and (ii) at the appropriate
payment date subsequent to surrender, the amount of dividends or other
distributions with a record date on or after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole shares of Commercial Common Stock, less the amount of any withholding
taxes which may be required thereon.
Section 2.9. No Fractional Shares. Notwithstanding any other
--------------------
provision of this Agreement, neither certificates nor scrip for fractional
shares of Commercial Common Stock shall be issued in the Parent Merger. Each
holder who otherwise would have been entitled to a fraction of a share of
Commercial Common Stock shall receive in lieu thereof cash (without interest) in
an amount determined by multiplying the fractional share interest to which such
holder would other-
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<PAGE>
wise be entitled by the average of the closing prices per share of Commercial
Common Stock for the five full trading days immediately preceding the
Closing Date as reported on the NYSE Consolidated Tape (as reported in The Wall
--------
Street Journal or, if not reported therein, in another mutually agreed upon
- --------------
authoritative source). No such holder shall be entitled to dividends, voting
rights or any other rights in respect of any fractional share.
Section 2.10. Anti-Dilution Adjustments. In the event that prior
-------------------------
to the Effective Time Commercial shall (or shall establish a record date prior
to the Effective Time for the following) declare a stock dividend or other
distribution payable in Commercial Common Stock or securities convertible into
Commercial Common Stock or a distribution otherwise Previously Disclosed,
or effect a stock split, reclassification, combination or other change with
respect to Commercial Common Stock, the Exchange Ratio or the Merger
Consideration (in each case, as defined herein), as the case may be, shall be
appropriately adjusted to reflect such dividend, distribution, stock split,
reclassification, combination or other change, such that the shareholders of
Bancorp shall be entitled to same as if the Effective Time had occurred prior
thereto.
2.11. Dissenting Shares. Notwithstanding anything in this Agreement
-----------------
to the contrary, any shares of Bancorp Common Stock which are issued and
outstanding immediately prior to the Effective Time and with respect to which
the holder thereof shall have perfected any appraisal rights under the CBCA (the
"Dissenting Shares") shall not be converted into or be exchangeable for the
right to receive the Merger Consideration (but instead shall be converted into
the right to receive payment from the Surviving Corporation with respect to such
Dissenting Shares in accordance with the CBCA), unless and until such holder
shall have failed to perfect or shall have effectively withdrawn or lost their
rights to appraisal under the CBCA. Bancorp shall give prompt notice to
Commercial of any demands received by Bancorp for appraisal of shares of Bancorp
Common Stock, and Commercial shall have the right to participate in all
negotiations and proceedings with respect to such demands. Bancorp shall not,
except with the prior written consent of Commercial, make any payment with
respect to, or settle or offer to settle, any such demands.
Section 2.12. Treatment of Stock Options. (a) Prior to the
--------------------------
Effective Time, Commercial and Bancorp shall take all such actions as may be
necessary to cause each unexpired and unexercised option under stock option
plans of Bancorp in effect on the date hereof which has been granted to current
or former directors, officers or employees of Bancorp by Bancorp (each, a
"Bancorp Option") to be automatically converted at the Effective Time into an
option (an "Exchange Option") to purchase that number of shares of Commercial
Common Stock equal to the number of shares of Bancorp Common Stock issuable
immediately prior to the Effective Time upon exercise of the Bancorp Option
(without regard to actual restrictions on exercisability) multiplied by the
Exchange Ratio (fractional shares as a result thereof to be subject to the terms
of the respective Bancorp Options and the terms of the plans governing same),
with an exercise price equal to the exercise price which existed under the
corresponding Bancorp Option divided by the Exchange Ratio, and with other terms
and conditions that are the same as the terms and conditions of such Bancorp
Option immediately before the Effective Time, provided that with respect to any
--------
Bancorp Option that is an "incentive stock option" within the meaning of Section
422 of the Code, the foregoing conversion shall be carried out in a manner
satisfying the requirements of Section
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<PAGE>
424(a) of the Code. In connection with the issuance of Exchange Options,
Commercial shall (i) reserve for issuance the number of shares of Commercial
Common Stock that will become subject to Exchange Options pursuant to this
Section 2.12 and (ii) from and after the Effective Time, upon exercise of
Exchange Options, make available for issuance all shares of Commercial Common
Stock covered thereby, subject to the terms and conditions applicable thereto.
(b) Bancorp agrees to issue treasury shares of Bancorp, to the extent
available, upon the exercise of Bancorp Options prior to the Effective Time.
(c) Commercial agrees to file with the SEC within one month after the
Closing Date a registration statement on Form S-8 or other appropriate form
under the Securities Act to register shares of Commercial Common Stock issuable
upon exercise of the Exchange Options and use its reasonable efforts to cause
such registration statement to remain effective until the exercise or expiration
of all of such Exchange Options.
Section 2.13. Reservation of Right to Revise Transaction.
------------------------------------------
Commercial may at any time change the method of effecting the acquisition of
Bancorp or the Bancorp Subsidiaries by Commercial, and Bancorp shall cooperate
in such efforts, if and to the extent Commercial deems such change to be
desirable and subject to Bancorp's approval (which approval shall not be
unreasonably withheld); provided, however, that no such change shall (A) alter
-------- -------
or change the amount or kind of consideration to be issued to holders of Bancorp
Common Stock as provided for in this Agreement (the "Merger Consideration"), (B)
adversely affect the tax treatment to Bancorp's shareholders as a result of
receiving the Merger Consideration, (C) adversely affect the qualification of
the Merger as a pooling of interests for accounting and financial reporting
purposes or (D) materially delay the consummation of the transactions
contemplated by this Agreement.
ARTICLE III
THE BANK MERGER
Section 3.1. The Bank Merger. As soon as practicable following the
---------------
Effective Time, the Company shall be merged with and into the Bank pursuant to
the terms and conditions set forth herein and in the Plan of Merger attached
hereto as Exhibit C (the "Bank Plan of Merger") and pursuant to 12 U.S.C. (S)(S)
1467a(s) and 1828(c) and (S) 552.13 of the rules and regulations of the OTS
promulgated thereunder, and the separate existence of the Company shall
thereupon cease, the Bank shall be the surviving institution in the Merger and
shall retain the name "Commercial Federal Bank, A Federal Savings Bank", all of
the Bank's rights, privileges, powers, immunities, purposes and franchises shall
continue unaffected by the Bank Merger and the Bank shall continue at the
effective time of the Bank Merger to be regulated by the OTS.
Section 3.2. Liquidation Account. The liquidation account
-------------------
established by the Company pursuant to the plan of conversion adopted in
connection with its conversion from mutual to stock form shall, to the extent
required by Applicable Law, continue to be maintained by the Bank after the
Effective Time for the benefit of those persons and entities who were savings
account holders of the Company on the eligibility and supplemental eligibility
record dates for such conversion and who continue from time to time to have
rights therein. If required by the
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<PAGE>
rules and regulations of the OTS, the Bank shall amend its charter to
specifically provide for the continuation of the liquidation account previously
established by the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
BANCORP AND THE COMPANY
Bancorp and the Company jointly and severally represent and warrant
to Commercial and the Bank, except as otherwise Previously Disclosed, as
follows:
Section 4.1 Organization, Good Standing, Authority, Insurance, Etc.
------------------------------------------------------
(a) Bancorp is a corporation duly organized, validly existing and in good
standing under the laws of the State of Colorado, and is duly registered as a
savings and loan holding company with the OTS under the HOLA. The Company is a
federal savings bank. Each "subsidiary" of Bancorp within the meaning of Section
10(a)(1)(G) of HOLA (individually a "Bancorp Subsidiary" and collectively the
"Bancorp Subsidiaries"), has been Previously Disclosed. Each of the Bancorp
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
the Bancorp Disclosure Schedule. Each of Bancorp and the Bancorp Subsidiaries
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, except for such failure or failures to be so qualified or licensed as
would not, in the aggregate, have a Bancorp Material Adverse Effect. Bancorp has
made available to Commercial a true, complete and correct copy of the articles
of incorporation, charter, or other organizing documents and of the by-laws, as
in effect on the date of this Agreement, of Bancorp and each Bancorp Subsidiary.
Each of Bancorp and the Bancorp Subsidiaries 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 Bancorp Material
Adverse Effect. The Company is a member in good standing of the Federal Home
Loan Bank of Topeka, and all eligible accounts issued by the Company are insured
by the FDIC through the Savings Association Insurance Fund ("SAIF") to the
maximum extent permitted under Applicable Law, and all premiums and assessments
required in connection therewith have been paid by the Company. The Company 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.
(b) The minute books of Bancorp and the Bancorp Subsidiaries contain
records of all meetings and other corporate actions held or taken of their
respective shareholders and Boards of Directors (including the committees of
such Boards) since January 1, 1996, which records are complete and accurate in
all material respects and have been made available to Commercial.
Section 4.2. Capitalization. The authorized capital stock of
--------------
Bancorp consists of 50,000,000 shares of Bancorp Common Stock, of which
16,826,798 shares were issued and outstanding as of the date of this Agreement,
and 25,000,000 shares of preferred stock, par value of
-14-
<PAGE>
$.10 per share ("Bancorp Preferred Stock"), of which no shares were outstanding
as of the date of this Agreement. As of the date of this Agreement, no shares of
Bancorp Preferred Stock were reserved for issuance, except for 1,500,000 shares
of Series A Junior Participating Preferred Stock reserved for issuance upon
exercise of the Rights distributed to the holders of Bancorp Common Stock
pursuant to the Bancorp Rights Agreement. No other class or series of capital
stock of Bancorp is or has been authorized. As of the date of this Agreement,
there were 3,707,458 shares of Bancorp Common Stock and no shares of Bancorp
Preferred Stock held in Bancorp's treasury and, except as Previously Disclosed,
there were no shares of Bancorp Common Stock reserved for issuance. As of
immediately prior to the Effective Time, there will be no more than 1,807,458
shares of Bancorp Common Stock held in Bancorp's treasury. All issued and
outstanding shares of Bancorp Common Stock are duly authorized, validly issued,
fully paid, nonassessable and free of preemptive rights. As of the date of this
Agreement, except as Previously Disclosed, there are no outstanding Rights to
purchase or acquire any capital stock of Bancorp and no oral or written
agreement, contract, arrangement, understanding, plan or instrument of any kind
to which Bancorp 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
Bancorp.
Section 4.3. Ownership of Subsidiaries. All the outstanding shares
-------------------------
of the capital stock or other ownership interests in all of the Bancorp
Subsidiaries are validly issued, fully paid, nonassessable and owned
beneficially and of record by Bancorp or a Bancorp Subsidiary free and clear of
any Encumbrance. There are no outstanding Rights to purchase or acquire any
capital stock of any Bancorp Subsidiary and no oral or written agreement,
contract, arrangement, understanding, plan or instrument of any kind to which
any of Bancorp 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
Bancorp Subsidiaries. Neither Bancorp nor any Bancorp Subsidiary owns any of the
capital stock or other equity securities (including any Rights with respect to
such securities) of or profit participations in any Person or "company" (as
defined in Section 10(a)(1)(C) of the HOLA) other than the Federal Home Loan
Bank of Topeka and the Bancorp Subsidiaries.
Section 4.4. Financial Statements and Reports. For the past three
--------------------------------
years, Bancorp and the Bancorp Subsidiaries have timely filed all Regulatory
Documents required to be filed by them, except to the extent that all failures
to so file, in the aggregate, would not have a Bancorp Material Adverse Effect;
and all such documents, as finally amended, complied in all material respects
with applicable requirements of Applicable 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 (i) are in accordance with Bancorp's books and records and those of
any of the Bancorp Subsidiaries, which books and records are complete and
accurate in all material respects and have been maintained in all material
respects in accordance with Applicable Law, and (ii) present fairly the
consolidated financial position and the consolidated results of operations and
cash flows of Bancorp as of the dates and for the periods indicated in
accordance with GAAP consistently applied during the periods involved (except
for the omission of notes to unaudited statements, year-end adjustments to
interim results normal in nature and amount and changes in GAAP and except where
regulatory
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<PAGE>
reporting requirements provide otherwise). The audited consolidated financial
statements of Bancorp as of December 31, 1996 and for the three years then ended
last filed by Bancorp as part of a publicly available Regulatory Document
disclose 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 Bancorp and the Bancorp Subsidiaries required to be
reflected in such financial statements according to GAAP, other than liabilities
which are not, in the aggregate, material to Bancorp and the Bancorp
Subsidiaries, taken as a whole, and 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 in accordance with GAAP, if any, as of such date.
Except for (i) those liabilities that are fully reflected or reserved against on
Bancorp's audited consolidated balance sheet last filed by Bancorp as part of a
publicly available Regulatory Document and (ii) liabilities incurred in the
ordinary course of business since the date of such audited consolidated balance
sheet and which would not have, individually or in the aggregate, a Bancorp
Material Adverse Effect, Bancorp has no liabilities or obligations of any
nature, whether absolute, accrued, contingent or otherwise and whether due or to
become due, which are or would be required by GAAP to be shown on its
consolidated balance sheet.
Section 4.5. Absence of Changes. (a) Except as disclosed in
------------------
publicly available Regulatory Documents filed by Bancorp prior to the date of
this Agreement, since December 31, 1996, there has been no event, occurrence,
development, fact or set of circumstances of any nature existing or, to the
knowledge of Bancorp, threatened which, individually or in the aggregate, has
had or could reasonably be expected to have a Bancorp Material Adverse Effect.
(b) Except as Previously Disclosed, since September 30, 1997, each of
Bancorp and the Bancorp Subsidiaries has owned and operated its respective
assets, properties and businesses in the ordinary course of business and
consistent with past practice and has not taken any action or suffered any event
that if taken or suffered after the date hereof would violate Section 6.1 of
this Agreement.
Section 4.6. No Broker's or Finder's Fees. No agent, broker,
----------------------------
investment banker, Person or firm acting on behalf or under authority of Bancorp
or any of the Bancorp 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 or by
the Stock Option Agreement, except Bancorp has engaged The Wallach Company, an
investment banking firm, to provide financial advisory services.
Section 4.7. Litigation and Other Proceedings. (a) Except for
--------------------------------
matters which would not have, in the aggregate, a Bancorp Material Adverse
Effect, neither Bancorp nor any Bancorp Subsidiary is a defendant in, nor is any
of its property subject to, any pending or, to the knowledge of Bancorp,
threatened claim, action, suit, investigation or proceeding. There is no
judicial order, judgment or decree to which any of Bancorp, the Bancorp
Subsidiaries or their respective properties is subject which has had or could
reasonably be expected to have a Bancorp Material Adverse Effect.
-16-
<PAGE>
(b) All pending claims, actions, suits, investigations and
proceedings in which Bancorp or any Bancorp Subsidiary is a defendant and all
judicial orders, judgments or decrees to which Bancorp or any Bancorp Subsidiary
is subject have been Previously Disclosed.
Section 4.8. Compliance with Law. Bancorp and the Bancorp
-------------------
Subsidiaries have been in compliance in all respects with all Applicable Laws,
except where such non-compliance would not have, in the aggregate, a Bancorp
Material Adverse Effect, and neither the Company nor any Bancorp Subsidiary has
received notice from any Governmental Authority of any material violation of,
and does not know of any material violations of, any Applicable Law.
Section 4.9. Corporate Actions. (a) The Boards of Directors of
-----------------
Bancorp and the Company have duly authorized their respective officers to
execute and deliver (as appropriate) this Agreement, the Stock Option Agreement
and the Bank Plan of Merger and to take all action necessary to consummate the
Merger and the other transactions contemplated hereby and thereby. Except for
obtaining the requisite approval of the Bancorp shareholders as contemplated
hereby, all corporate authorization by the Boards of Directors and shareholders
of Bancorp and the Company required for the consummation of the Merger and the
transactions contemplated hereby and by the Stock Option Agreement has been
obtained. The Bancorp Board and Bancorp have taken all necessary steps to render
the Bancorp Rights Agreement inapplicable to the Merger and the transactions
contemplated by this Agreement and by the Stock Option Agreement (including,
such that the Rights related thereto will not be distributed, become exercisable
or be triggered in any way as a result of the execution of this Agreement or the
Stock Option Agreement or the consummation of the transactions contemplated
hereby or thereby).
(b) The Boards of Directors of Bancorp and the Company have taken or
will take all necessary action to exempt this Agreement, the Stock Option
Agreement and the Bank Plan of Merger and the transactions contemplated hereby
and thereby from (i) any applicable state takeover laws, (ii) any Applicable
Laws limiting or restricting the voting rights of shareholders, (iii) any
Applicable 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 of similar type, and (iv) any
provision in its or any of the Bancorp Subsidiaries' articles of incorporation,
charter or by-laws (A) restricting or limiting stock ownership or the voting
rights of shareholders or (B) 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 of similar type.
Section 4.10. Authority. Except as Previously Disclosed, the
---------
execution, delivery and performance by each of Bancorp and the Company of their
respective obligations under this Agreement and the Stock Option Agreement and
the consummation thereby of the transaction contemplated hereby and thereby do
not, and will not, violate or conflict with any of the provisions of, or
constitute a breach or default (or an event which, with notice or lapse of time,
or both, would constitute a breach or default) under, terminate, give any Person
the right to terminate, modify or accelerate payment or performance under or
result in the creation of any Encumbrance upon any of the respective properties
or assets of Bancorp or any Bancorp Subsidiary under (i) the articles of
incorporation, charter or by-laws of Bancorp or any Bancorp Subsidiary, (ii)
subject to the Gov-
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<PAGE>
ernmental Approvals and the approval of Bancorp shareholders described below,
any Applicable Law to which Bancorp or any of the Bancorp Subsidiaries is
subject or (iii) except, in each case, where such violation, conflict, breach,
default, termination (or right to terminate), modification, acceleration or
Encumbrance would not, individually or in the aggregate, have a Bancorp Material
Adverse Effect, any agreement, lease, contract, note, mortgage, indenture,
arrangement or other obligation or instrument, whether oral or written
("Contract"), to which Bancorp or any of the Bancorp Subsidiaries is a party or
is subject or by which any of their properties or assets is bound or affected.
The parties acknowledge that the consummation of the Merger and the other
transactions contemplated hereby is subject to various regulatory approvals.
Each of Bancorp and the Company has all requisite corporate power and authority
to enter into this Agreement, the Stock Option Agreement and the Bank Plan of
Merger, as the case may be, and to perform its respective obligations hereunder
and thereunder. Other than the filings, notices, approvals and consents with or
of the Governmental Authorities as Previously Disclosed (the "Governmental
Approvals") and the requisite approval of Bancorp shareholders as contemplated
hereby, no filings, notices, approvals or consents are required on behalf of
Bancorp, the Company or any Bancorp Subsidiary in connection with the
consummation of the transactions contemplated by this Agreement, the Stock
Option Agreement or the Bank Plan of Merger. Neither Bancorp nor the Company has
knowledge of any reason why the Governmental Approvals cannot be obtained or
granted on a timely basis. The only vote of Bancorp shareholders required to
approve the Merger, this Agreement and the transactions contemplated hereby is
the affirmative vote of the holders of at least a majority of the shares of
Bancorp Common Stock entitled to vote at a meeting called for such purpose. This
Agreement, the Stock Option Agreement and the Bank Plan of Merger constitute the
valid and binding obligations of Bancorp and the Company, as the case may be,
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.
Section 4.11. Employment Arrangements. Except as Previously
-----------------------
Disclosed, there are no employment, incentive compensation, severance or other
agreements, plans or arrangements with any current or former directors, officers
or employees of Bancorp or any Bancorp Subsidiary which may not be terminated
without penalty or liability (including any augmentation or acceleration of
benefits) on thirty (30) days' or less notice to such Person. Except as
Previously Disclosed, neither the execution of this Agreement or the Stock
Option Agreement nor the consummation of the transactions contemplated hereby or
thereby will (either alone or upon the occurrence of additional events or acts)
result in, cause the accelerated vesting or delivery of, or increase the amount
or value of, any payment or benefit to any employee, officer or director of
Bancorp or any Bancorp Subsidiary. Except as Previously Disclosed, no amount
paid or payable to directors, officers or employees of Bancorp or the Bancorp
Subsidiaries in connection with the transactions contemplated hereby (either
solely as a result of such transactions or as a result of such transactions in
conjunction with any other event) will cause the imposition of excise taxes
under Section 4999 of the Code or the disallowance of a deduction pursuant to
Sections 162, 280G or any other section of the Code.
Section 4.12. Employee Benefits. (a) Neither Bancorp nor any of
-----------------
the Bancorp Subsidiaries maintains, contributes to or sponsors any funded
deferred compensation plans (including profit sharing, pension, savings or stock
bonus plans), unfunded deferred compensation
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<PAGE>
arrangements or employee benefit plans as defined in Section 3(3) of ERISA,
other than any plans ("Bancorp Employee Benefit Plans") Previously Disclosed
(true and correct copies of which have been delivered to Commercial). Except as
Previously Disclosed, neither Bancorp nor any of the Bancorp Subsidiaries (i)
provides health, medical, death or survivor benefits to any former employee or
beneficiary thereof, or (ii) 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").
(b) All Bancorp Employee Benefit Plans and Benefit Arrangements which
are in effect were in effect for substantially all of calendar year 1997 and,
except as Previously Disclosed, there has been no material amendment thereof
(other than amendments required to comply with Applicable Law) and, except as
disclosed in publicly available Regulatory Documents filed by Bancorp prior to
the date of this Agreement, no material increase in the cost thereof or benefits
payable thereunder on or after January 1, 1997.
(c) To the knowledge of Bancorp, with respect to all Bancorp Employee
Benefit Plans and Benefit Arrangements, Bancorp and each Bancorp Subsidiary are
in substantial compliance with the requirements prescribed by any and all
Applicable Laws currently in effect, including but not limited to ERISA and the
Code, applicable to such Bancorp Employee Benefit Plans or Benefit Arrangements.
None of the Bancorp Employee Benefit Plans which are defined benefit pension
plans have incurred any "accumulated funding deficiency" (whether or not waived)
as that term is defined in Section 412 of the Code and the fair market value of
the assets of each such plan equals or exceeds the accrued liabilities of such
plan. To the best knowledge of Bancorp and the Company, there are not now nor
have there been any non-exempt "prohibited transactions," as such term is
defined in Section 4975 of the Code or Section 406 of ERISA, involving the
Bancorp Employee Benefit Plans which could subject Bancorp or any of the Bancorp
Subsidiaries to the penalty or Tax imposed under Section 502(i) of ERISA or
Section 4975 of the Code. No Bancorp Employee Benefit Plan which is subject to
Title IV of ERISA has been completely or partially terminated; no proceedings to
completely or partially terminate any Bancorp Employee Benefit Plan have been
instituted within the meaning of Subtitle C of said Title IV of ERISA; and no
reportable event, within the meaning of Section 4043(c) of said Subtitle C for
which the 30-day notice requirement of ERISA has not been waived, has occurred
with respect to any Bancorp Employee Benefit Plan. No Bancorp Employee Benefit
Plan or Benefit Arrangement is a "multiemployer plan" within the meaning of
Section 4001(a)(3) of ERISA or a plan that has two or more contributing sponsors
at least two of whom are not under common control, within the meaning of Section
4063 of ERISA. Neither Bancorp nor any Bancorp Subsidiary has engaged in any
transaction described in Section 4069 of ERISA within the last five years. There
does not now exist, nor do any circumstances exist that could result in, any
liability of Bancorp or any Bancorp Subsidiary (or any entity, trade or business
that is or was at any time required to be aggregated with Bancorp or any Bancorp
Subsidiary under Section 414(b), (c), (m) or (o) of the Code) under Title IV of
ERISA, Section 302 of ERISA, Sections 412 and 4971 of the Code, the
continuation coverage requirements of Section 601 et seq. of ERISA and Section
-- ---
4980B of the Code, and similar provisions of foreign laws or regulations, other
than such liabilities that
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<PAGE>
arise solely out of, or relate solely to, the Bancorp Employee Benefit Plans or
Benefit Arrangements, that would be a liability of Bancorp, a Bancorp
Subsidiary, Commercial or the Bank following consummation of the Merger. Neither
Bancorp nor any Bancorp Subsidiary has failed to make any contribution or pay
any amount due and owing as required by the terms of any Bancorp Employee
Benefit Plan or Benefit Arrangement. None of Bancorp or any of the Bancorp
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. To the knowledge of Bancorp, the
Bancorp Employee Benefit Plans intended to be qualified under Section 401(a) of
the Code are so qualified, and Bancorp is not aware of any fact which would
adversely affect the qualified status of such plans.
Section 4.13. Information Furnished; Registration Statement. (a) To
---------------------------------------------
the best knowledge of Bancorp, 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 Bancorp
or any of its Affiliates to Commercial pursuant to this Agreement contains or
will 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.
(b) None of the information provided by Bancorp or any Bancorp
Subsidiary for inclusion in the registration statement on Form S-4 to be filed
with the SEC by Commercial under the Securities Act relating to shares of
Commercial Common Stock to be issued in the Merger, including the prospectus
(the "Prospectus") relating to such issuance and the joint proxy statement and
forms of proxy relating to the vote of Commercial shareholders and Bancorp
shareholders with respect to the Merger (as amended, supplemented or modified,
the "Proxy Statement") contained therein (such registration statement as
amended, supplemented or modified, the "Registration Statement"), at the time
the Registration Statement becomes effective or, in the case of the Proxy
Statement, at the date of mailing, will 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 therein, in light of the
circumstances under which they are made, not misleading. Each of the
Registration Statement and Proxy Statement, except for such portions thereof
that relate only to Commercial or a Commercial Subsidiary, will comply as to
form in all material respects with the provisions of the Securities Act and
Exchange Act, as applicable.
Section 4.14. Property and Assets. Bancorp and the Bancorp
-------------------
Subsidiaries have good and marketable title to all of their real property
reflected in the consolidated financial statements last filed by Bancorp as part
of a publicly available Regulatory Document or acquired subsequent thereto, free
and clear of all Encumbrances, except for (a) such items reflected in such
financial statements or in the notes thereto, (b) liens for current taxes not
yet delinquent, (c) customary title exceptions that have no material adverse
effect upon the current use of such property, (d) property sold or transferred
in the ordinary course of business consistent with past practice since the date
of such financial statements and (e) as otherwise Previously Disclosed. Bancorp
and the Bancorp 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 Bancorp nor any Bancorp Subsidiary is in default in any respect under
any
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<PAGE>
such lease, except where such failure to be valid and binding and in full force
and effect, or where such default, would not have, in the aggregate, a Bancorp
Material Adverse Effect. No consent of the lessor of any material real property
or material personal property lease is required for consummation of the Merger.
There has been no physical loss, damage or destruction, whether or not covered
by insurance, affecting the real properties of Bancorp and the Bancorp
Subsidiaries since December 31, 1996, except such loss, damage or destruction
which would not have, in the aggregate, a Bancorp Material Adverse Effect. All
property and assets material to their businesses and currently used by Bancorp
and the Bancorp Subsidiaries are, in all material respects, in good operating
condition and repair, normal wear and tear excepted.
Section 4.15. Agreements and Instruments. Except as Previously
--------------------------
Disclosed, neither Bancorp nor any Bancorp Subsidiary is a party to (a) any
material Contract, (b) any Contract relating to the borrowing of money by
Bancorp or any Bancorp Subsidiary or the guarantee by Bancorp or any Bancorp
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 Contract to
make loans or for the provision, purchase or sale of goods, services or property
between Bancorp or any Bancorp Subsidiary and any director or officer of Bancorp
or and Bancorp Subsidiary, or any member of the immediate family or Affiliate of
any of the foregoing (other than loans or deposits made on an arm's-length basis
in the ordinary course of business), (d) any Contract with or concerning any
labor or employee organization, (e) any Contract between Bancorp or any Bancorp
Subsidiary and any Affiliate thereof (other than Contracts solely between
Bancorp and a Bancorp Subsidiary or solely between Bancorp Subsidiaries), (f)
any agreements, directives, orders, or similar arrangements between or involving
Bancorp or any Bancorp Subsidiary and any Governmental Authority, (g) any
Contract with respect to the employment, retention or severance of any
directors, officers, employees or consultants, (h) any Contract which materially
restricts the conduct of any line of business by Bancorp or any current or
future Affiliates thereof or (i) any Contract pursuant to which Bancorp or any
Bancorp Subsidiary is or may become obligated to invest in or contribute capital
to any Bancorp Subsidiary.
Section 4.16. Material Contract Defaults. Neither Bancorp nor any
--------------------------
Bancorp Subsidiary nor, to the knowledge of Bancorp and the Company, the other
party thereto is in default in any respect under any Contract to which any of
Bancorp or the Bancorp Subsidiaries 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, other than any
such default or defaults which would not have, in the aggregate, a Bancorp
Material Adverse Effect, 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.
All material Contracts to which Bancorp or any of the Bancorp Subsidiaries is a
party are valid, binding and in full force and effect.
Section 4.17. Tax Matters. (a) Bancorp, each of the Bancorp
-----------
Subsidiaries and any affiliated group (within the meaning of Section 1504(a) of
the Code) of which Bancorp or any of the Bancorp Subsidiaries is a member 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; such Tax Returns are true, correct and complete in all
material respects; the current status of audits of such Tax Returns by the IRS
and other applicable agen-
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<PAGE>
cies has been Previously Disclosed; and there is no agreement by Bancorp or any
Bancorp Subsidiary for the waiver or extension of time 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 Bancorp and the Company, threatening
to assert any deficiency or claim for additional Taxes, nor to the knowledge of
Bancorp or the Company is there any basis for any such assertion or claim.
Bancorp and each of the Bancorp 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. Bancorp and each Bancorp Subsidiary have
complied 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 Bancorp or any of the Bancorp Subsidiaries for any
period or periods through and including September 30, 1997, has been made and is
reflected on the September 30, 1997 consolidated financial statements last filed
by Bancorp as part of a publicly available Regulatory Document and has been or
will be made with respect to periods ending after September 30, 1997.
Section 4.18. Environmental Matters. To the knowledge of Bancorp,
---------------------
neither Bancorp nor any Bancorp 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 Bancorp nor any Bancorp Subsidiary has
knowledge of, nor has Bancorp or any Bancorp Subsidiary received written notice
from any Governmental Authority of, any conditions, activities, practices or
incidents which are reasonably likely to interfere with or prevent compliance or
continued compliance by Bancorp or any Bancorp Subsidiary 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 on the part of Bancorp or any Bancorp Subsidiary,
or otherwise form the basis of any claim, action, suit, proceeding, hearing or
investigation against or of Bancorp or any Bancorp Subsidiary, based on or
related 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 the best knowledge of Bancorp and the Company,
threatened against Bancorp or any Bancorp Subsidiary relating in any way to such
hazardous substance laws or any regulation, order, decree, judgment or
injunction issued, entered, promulgated or approved thereunder. To the knowledge
of Bancorp and the Company, none of Bancorp or the Bancorp Subsidiaries has made
or participated in any loan to any Person who is subject to any civil, criminal
or administrative claim, action, suit, proceeding, hearing or investigation
relating in any way to such hazardous substance laws or any regulation, order,
decree, judgment or injunction issued, entered, promulgated or approved
thereunder and relating to the property secured by such loan.
Section 4.19. Loan Portfolio; Portfolio Management. (a) All evidences
------------------------------------
of indebtedness reflected as assets in the consolidated financial statements
last filed by Bancorp as part of a publicly available Regulatory Document or
acquired since such date, are (except with respect to those assets which are no
longer assets of Bancorp or any Bancorp Subsidiary) binding obliga-
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<PAGE>
tions 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 Bancorp or any Bancorp Subsidiary. 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. All
loans originated or purchased by Bancorp or any Bancorp Subsidiaries 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). Bancorp and the Bancorp Subsidiaries administer their loan and
investment portfolios (including, but not limited to, adjustments to adjustable
mortgage loans) in accordance with all Applicable Laws and the terms of
applicable instruments. The records of Bancorp and the Bancorp Subsidiaries
regarding all loans outstanding on their books are accurate in all material
respects and the risk classification system has been established in accordance
with the requirements of the OTS.
(b) Bancorp and the Company have Previously Disclosed a list,
accurate and complete in all material respects, of the aggregate amounts of
loans, extensions of credit and other assets of Bancorp and the Bancorp
Subsidiaries that have been adversely designated, criticized or classified as of
February 28, 1998, 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 Authority 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 or
recovered by Bancorp or any of the Bancorp Subsidiaries before the date hereof.
Section 4.20. Real Estate Loans and Investments. Except for
---------------------------------
properties acquired in settlement of loans, there are no facts, circumstances or
contingencies known to Bancorp or any Bancorp Subsidiary which exist which would
require a material reduction under GAAP in the present carrying value of any of
the real estate investments, joint ventures, construction loans, other
investments or other loans of Bancorp or any Bancorp Subsidiary (either
individually or in the aggregate with other loans and investments).
Section 4.21. Derivatives Contracts. (a) Neither Bancorp nor any of
---------------------
the Bancorp 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 the consolidated
balance sheet last filed by Bancorp as part of a publicly available Regulatory
Document 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
Previously Disclosed, including a list, as applicable, of any of Bancorp's or
the Bancorp Subsidiaries' assets pledged as security for a Derivatives Contract.
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<PAGE>
(b) All Derivative Contracts to which Bancorp or any Bancorp
Subsidiary is a party or by which any of their properties or assets may be bound
were entered into in the ordinary course of business and in accordance with
prudent banking practice, based on industry-wide standards at the time, and with
counterparties believed by Bancorp or the appropriate Bancorp Subsidiaries to be
financially responsible at the time.
Section 4.22. Insurance. Bancorp and the Bancorp Subsidiaries have in
---------
effect insurance coverage with reputable insurers which, in respect of amounts,
types and risks insured, is reasonably adequate for the business in which
Bancorp and the Bancorp Subsidiaries are engaged. A schedule of all insurance
policies in effect as to Bancorp and the Bancorp Subsidiaries (the "Insurance
Policies") has been Previously Disclosed (other than policies pertaining to
secured 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
Effective Date shall have been paid on or before the 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 Bancorp's financial statements last filed by
Bancorp as part of a publicly available Regulatory Document). 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. To the
knowledge of Bancorp, neither Bancorp nor any Bancorp 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 (3) years.
Section 4.23. Accounting and Tax Treatment. Neither Bancorp nor any
----------------------------
of its Affiliates has taken or agreed to take any action that or has failed to
take any action the result of which would (but without giving effect to any
actions taken or agreed to be taken by Commercial or any of its Affiliates) (i)
prevent Commercial from accounting for the Merger as a pooling of interests for
accounting and financial reporting purposes or (ii) prevent the Merger from
qualifying as a "reorganization" under Section 368(a) of the Code.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF COMMERCIAL AND THE BANK
Commercial and the Bank jointly and severally represent and warrant
to Bancorp and the Company, except as otherwise Previously Disclosed, as
follows:
Section 5.1. Organization, Good Standing, Authority, Insurance, Etc.
------------------------------------------------------
(a) Commercial is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Nebraska, and is duly registered as a
savings and loan holding company with the OTS under the HOLA. The Bank is a
federal savings bank. Each of the subsidiaries of Commercial within the meaning
of Section 10(a)(1)(G) of HOLA (individually a "Commercial Subsidiary" and
collectively the "Commercial Subsidiaries") is duly organized, validly existing,
and in good standing
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<PAGE>
under the laws of the respective jurisdiction under which it is organized. Each
of Commercial and the Commercial Subsidiaries 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, except for
such failure or failures to be so qualified or licensed as would not, in the
aggregate, have a Commercial Material Adverse Effect. Commercial has made
available to Bancorp a true, complete and correct copy of the articles of
incorporation, charter or other organizing documents and of the by-laws of
Commercial and the Bank as in effect on the date of this Agreement. Each of
Commercial and the Commercial Subsidiaries 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 Commercial Material
Adverse Effect. 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
FDIC through the SAIF to the maximum extent permitted under Applicable Law, and
all premiums and assessments required in connection therewith have been paid by
the Bank. 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.
(b) The minute books of Commercial and the Commercial Subsidiaries
contain records of all meetings and other corporate actions held or taken of
their respective shareholders and Boards of Directors (including the committees
of such Boards) since January 1, 1996, which records are complete and accurate
in all material respects and have been made available to Bancorp.
Section 5.2. Capitalization. The authorized capital stock of
--------------
Commercial consists of 50,000,000 shares of Commercial Common Stock, of which
40,305,820 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. As of the
date of this Agreement, there were no shares of Commercial Common Stock held in
Commercial's treasury and, except as Previously Disclosed, there were no shares
of Commercial Common Stock reserved for issuance. All issued and outstanding
shares of Commercial Common Stock are duly authorized, validly issued, fully
paid, nonassessable and free of preemptive rights. As of the date of this
Agreement, except as Previously Disclosed, there are no outstanding Rights to
purchase or acquire any capital stock of Commercial and no oral or written
agreement, contract, arrangement, understanding, plan or instrument of any kind
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
Commercial. The shares of Commercial Common Stock, if any, to be issued pursuant
to the Merger will be duly authorized and validly issued and, at the Closing,
all such shares will be fully paid, nonassessable and free of preemptive rights,
with no personal liability attaching to the ownership thereof.
Section 5.3. Ownership of Subsidiaries. All the outstanding shares of
-------------------------
the capital stock or other ownership interests in all 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. There are no outstanding Rights to purchase or acquire
any capital stock of any Commercial Subsidiary and no oral or written agreement,
contract, ar-
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<PAGE>
rangement, understanding, plan or instrument of any kind 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.
Section 5.4. Financial Statements and Reports. For the past three
--------------------------------
years, Commercial and the Commercial Subsidiaries have timely filed all
Regulatory Documents required to be filed by them, except to the extent that all
failures to so file, in the aggregate, would not have a Commercial Material
Adverse Effect; and all such documents, as finally amended, complied in all
material respects with applicable requirements of Applicable 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 (i) are in accordance with Commercial's
books and records and those of any of the Commercial Subsidiaries, which books
and records are complete and accurate in all material respects and have been
maintained in all material respects in accordance with Applicable Law, and (ii)
present fairly the consolidated financial position and the consolidated results
of operations and cash flows of Commercial as of the dates and for the periods
indicated in accordance with GAAP consistently applied during the periods
involved (except for the omission of notes to unaudited statements, year-end
adjustments to interim results normal in nature and amount and changes in GAAP
and except where regulatory reporting requirements provide otherwise). The
consolidated financial statements of Commercial as of December 31, 1997 and for
the three years then ended last filed by Commercial as part of a publicly
available Regulatory Document disclose 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 Commercial
and the Commercial Subsidiaries required to be reflected in such financial
statements according to GAAP, other than liabilities which are not, in the
aggregate, material to Commercial and the Commercial Subsidiaries, taken as a
whole, and 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
in accordance with GAAP, if any, as of such date. Except for (i) those
liabilities that are fully reflected or reserved against on Commercial's audited
consolidated balance sheet last filed by Commercial as part of a publicly
available Regulatory Document and (ii) liabilities incurred in the ordinary
course of business since the date of such audited consolidated balance sheet and
which would not have, individually or in the aggregate, a Commercial Material
Adverse Effect, Commercial has no liabilities or obligations of any nature,
whether absolute, accrued, contingent or otherwise and whether due or to become
due, which are or would be required by GAAP to be shown on its consolidated
balance sheet.
Section 5.5. 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 or by the Stock Option Agreement, except Commercial has engaged Merrill
Lynch & Co., an investment banking firm, to provide financial advisory services.
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<PAGE>
Section 5.6. Litigation and Other Proceedings. Except for matters
--------------------------------
which would not have, in the aggregate, a Commercial Material Adverse Effect,
neither Commercial nor any Commercial Subsidiary is a defendant in, nor is any
of its property subject to, any pending, or, to the knowledge of Commercial,
threatened claim, action, suit, investigation, or proceeding. There is no
judicial order, judgment or decree to which any of Commercial, the Commercial
Subsidiaries or their respective properties is subject which has had or could
reasonably be expected to have a Commercial Material Adverse Effect.
Section 5.7. Compliance With Law. Commercial and the Commercial
-------------------
Subsidiaries have been and are in compliance in all respects with all Applicable
Laws, except where such non-compliance would not have, in the aggregate, a
Commercial Material Adverse Effect, and neither Commercial nor any Commercial
Subsidiary has received notice from any Governmental Authority of any material
violation of, and does not know of any material violations of, any Applicable
Law.
Section 5.8. Corporate Actions. The Boards of Directors of Commercial
-----------------
and the Bank have duly authorized their respective officers to execute and
deliver (as appropriate) this Agreement, the Stock Option Agreement and the Bank
Plan of Merger and to take all action necessary to consummate the Merger and the
other transactions contemplated hereby and thereby. Except for obtaining the
requisite approval of the Commercial shareholders as contemplated hereby, all
corporate authorization by the Boards of Directors of Commercial and the Bank
required for the consummation of the Merger and the transactions contemplated
hereby and by the Stock Option Agreement has been obtained.
Section 5.9. Authority. The execution, delivery and performance by
---------
Commercial of its obligations under this Agreement and the Stock Option
Agreement and the consummation thereby of the transactions contemplated hereby
and thereby do not, and will not, violate or conflict with any of the provisions
of, or constitute a breach or default (or an event which, with notice or lapse
of time, or both, would constitute a breach or default) under, terminate, give
any Person the right to terminate, modify or accelerate payment or performance
under or result in the creation of any Encumbrance upon any of the properties or
assets of Commercial under (i) the articles of incorporation, charter or by-laws
of Commercial, the Bank or any other Commercial Subsidiary, (ii) subject to the
Governmental Approvals and the approval of Commercial shareholders described
below, any Applicable Law to which Commercial or any of the Commercial
Subsidiaries is subject or (iii) except, in each case, where such violation,
conflict, breach, default, termination (or right to terminate), modification,
acceleration or Encumbrance would not, individually or in the aggregate, have a
Commercial Material Adverse Effect, any Contract to which Commercial or any of
the Commercial Subsidiaries is a party or is subject or by which any of their
properties or assets is bound or affected. The parties acknowledge that the
consummation of the Merger and the other transactions contemplated hereby is
subject to various regulatory approvals. Each of Commercial and the Bank has all
requisite corporate power and authority to enter into this Agreement, the Stock
Option Agreement and the Bank Plan of Merger, as the case may be, and to perform
its obligations hereunder and thereunder. Other than the Governmental Approvals
and the requisite approval of Commercial shareholders as contemplated hereby, no
filings, notices, approvals or consents are required on behalf of Commercial or
any Commercial Subsidiary in connection with the
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<PAGE>
consummation of the transactions contemplated by this Agreement, the Stock
Option Agreement or the Bank Plan of Merger. Commercial has no knowledge of any
reason why the Governmental Approvals cannot be obtained or granted on a timely
basis. This Agreement, the Stock Option Agreement and the Bank Plan of Merger
constitute the valid and binding obligations of Commercial and the Bank, as the
case may be, and are enforceable in accordance with their terms, except as
enforceability may be limited by Applicable Law relating to bankruptcy,
insolvency or creditors' rights generally and general principles of equity.
Section 5.10. Information Furnished; Registration Statement. (a) To
---------------------------------------------
the best knowledge of Commercial, 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 or any of its Affiliates to Bancorp pursuant to this Agreement
contains or will 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.
b) None of the information provided by Commercial or any Commercial
Subsidiary for inclusion in the Registration Statement, at the time the
Registration Statement becomes effective or, in the case of the Proxy Statement,
at the date of mailing, will 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 therein, in light of the circumstances under which
they are made, not misleading. Each of the Registration Statement and Proxy
Statement, except for such portions thereof that relate only to Bancorp or a
Bancorp Subsidiary, will comply as to form in all material respects with the
provisions of the Securities Act and Exchange Act, as applicable.
Section 5.11. 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
Governmental Authority.
Section 5.12. Tax Matters. (a) Commercial, each of the Commercial
-----------
Subsidiaries and any affiliated group (within the meaning of Section 1504(a) of
the Code) of which Commercial or any of the Commercial Subsidiaries is a member
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; and such Tax Returns are true, correct and
complete in all material respects. 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, nor to the knowledge of
Commercial is there 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 with all applicable state law sales and use Tax collection and
reporting requirements.
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<PAGE>
(b) Adequate provision for any federal, state, local or foreign Taxes
due or to become due for Commercial or any of the Commercial Subsidiaries for
any period or periods through and including December 31, 1997, has been made and
is reflected on the December 31, 1997 consolidated financial statements last
filed by Commercial as part of a publicly available Regulatory Document and has
been or will be made with respect to periods ending after December 31, 1997.
Section 5.13. Accounting and Tax Treatment. Neither Commercial nor
----------------------------
any of its Affiliates has taken or agreed to take any action that or has failed
to take any action the result of which would (but without giving effect to any
actions taken or agreed to be taken by Bancorp or any of its Affiliates) (i)
prevent Commercial from accounting for the Merger as a pooling of interests for
accounting and financial reporting purposes or (ii) prevent the Merger from
qualifying as a "reorganization" under Section 368(a) of the Code.
ARTICLE VI
COVENANTS
Section 6.1. Conduct of Business by Bancorp. During the period from
------------------------------
the date of this Agreement and continuing through the Closing Date, except as
Previously Disclosed and except as expressly contemplated and permitted by this
Agreement or with the prior written consent of Commercial (which consent shall
not be unreasonably withheld), each of Bancorp and the Bancorp Subsidiaries
shall, and Bancorp shall cause each of Bancorp and the Bancorp Subsidiaries to,
(a) carry on its business in the ordinary course consistent with past practice;
(b) use its reasonable best efforts to preserve its present business
organization and relationships; (c) use its reasonable best efforts to keep
available the present services of its employees; and (d) use its reasonable best
efforts to preserve its rights, franchises, goodwill and relations with its
customers and others with whom it conducts business. Without limiting the
generality of the foregoing, except as expressly contemplated and permitted by
this Agreement, consented to in writing by Commercial or Previously Disclosed,
none of Bancorp and the Bancorp Subsidiaries shall, and Bancorp shall not permit
any of the Bancorp Subsidiaries to, directly or indirectly:
(i) amend its articles/certificate of incorporation, charter or
bylaws (or comparable governing instruments) or merge with or into or
consolidate with any other Person, subdivide, combine or in any way
reclassify any shares of its capital stock, or change in any manner the
rights of its outstanding capital stock;
(ii) issue or sell or purchase any shares of its capital stock, or
issue or sell or purchase any option, warrant, convertible or exchangeable
security, right, subscription, call, unsatisfied pre-emptive right or other
agreement or right of any kind to purchase or otherwise acquire (including,
without limitation, by exchange or conversion) (each a "Right") any shares
of its capital stock (except that Bancorp may issue shares of Bancorp
Common Stock upon (i) exercise of Bancorp Options outstanding on the date
of this Agreement or (ii) as Previously Disclosed);
(iii) [Intentionally Omitted];
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(iv) waive any right of value to its business other than a waiver,
together with all other such waivers, that would not have a Bancorp Material
Adverse Effect;
(v) make any change in its accounting methods or practices for Tax or
accounting purposes or make any change in depreciation or amortization policies
or rates adopted by it for Tax or accounting purposes, except in each case as
required by GAAP or Applicable Law;
(vi) materially change, or agree to change, any of its lending
activities, policies or practices, except as required by Applicable Law or by
any Governmental Authority;
(vii) make any loan or advance to any of its Affiliates, officers,
directors, employees, consultants, agents or other representatives (other than
travel advances made in the ordinary course of business consistent with past
practice), or make any other loan or advance otherwise than in the ordinary
course of business consistent with past practice;
(viii) sell, offer to sell, abandon or make any other disposition of any of
its material assets, including selling or closing any branches; or grant or
suffer any Encumbrance on any of its material assets;
(ix) except in the ordinary course of business consistent with past
practice, incur or assume, or agree to incur or assume, any liability or
obligation (whether or not currently due and payable) relating to its business
or any of its assets;
(x) create, renew, amend, terminate or cancel, or take any other action
that may result in the creation, renewal, amendment, termination or cancellation
of, any Contract with any of its Affiliates;
(xi) declare, set aside or pay any dividends or declare or make any other
distributions of any kind on or in respect of its capital stock (other than
dividends from a Bancorp Subsidiary to Bancorp or another Bancorp Subsidiary),
or make any direct or indirect redemption, retirement, purchase or other
acquisition of any shares of its capital stock or Rights,
provided that Bancorp may declare and pay its regular quarterly cash dividends
- --------
on the Bancorp Common Stock of not more than $.13 per share per quarterly
period, provided further that the parties agree that after the date of this
Agreement, each of Bancorp and Commercial shall coordinate with the other the
declaration of any dividends in respects of Bancorp Common Stock and Commercial
Common Stock and the record dates and payment dates relating thereto, it being
the intention of the parties hereto that holders of Bancorp Common Stock shall
not receive two dividends, or fail to receive one dividend, for any single
calendar quarter with respect to their shares of Bancorp Common Stock and any
shares of Commercial Common Stock any such holder receives in exchange therefore
in the Merger;
(xii) create, renew, amend, terminate or cancel, or take any other action
that may result in the creation, renewal, amendment, termination or cancellation
of, any Contract, except in the ordinary course of business consistent with past
practice and as would
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<PAGE>
not, in the aggregate, have a Bancorp Material Adverse Effect; enter into or
amend any Contract pursuant to which it agrees to indemnify any party on behalf
of its business or pursuant to which it agrees to refrain from competing with
any party with respect to its business;
(xiii) except as Previously Disclosed, adopt, amend, renew, terminate or
accelerate or vest benefits under any Bancorp Employee Benefit Plan or Benefit
Arrangement or any other employee program, plan, agreement, arrangement or
policy between Bancorp or a Bancorp Subsidiary and one or more of employees of
Bancorp or a Bancorp Subsidiary, except as required by Applicable Law;
(xiv) commit any act or omission which constitutes a breach or default
under any Contract or license to which it is a party or by which it or any of
its properties or assets is bound except as would not have, in the aggregate, a
Bancorp Material Adverse Effect;
(xv) acquire in any manner, including by way of merger, consolidation or
purchase of an equity interest or assets, any business or any corporation,
partnership, association or other business organization or division thereof
(other than by way of foreclosures or acquisitions of control in a bona fide
fiduciary capacity or in satisfaction of debts previously contracted in good
faith, in each case in the ordinary and usual course of business consistent with
past practice);
(xvi) increase the salary or wages of any employees of Bancorp or of any
Bancorp Subsidiary; or pay any incentive, bonus or similar payments to employees
other than as required by the terms of any Bancorp Employee Benefit Plan or
Benefit Arrangement in effect as of the date hereof and Previously Disclosed;
(xvii) 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;
(xviii) make any investment which would cause the Company 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;
(xix) change its existing investment guidelines Previously Disclosed,
except as required by Applicable Law or any Governmental Authority, or the
manner in which its investment securities portfolio is classified or reported;
(xx) authorize or make capital expenditures in excess of $100,000,
individually, or $500,000, in the aggregate;
(xxi) [Intentionally Omitted];
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<PAGE>
(xxii) take any action that or fail to take any action the result of which
would (but without giving effect to any actions taken or agreed to be taken
by Commercial or any of its Affiliates) (i) prevent Commercial from
accounting for the Merger as a pooling of interests for accounting and
financial reporting purposes or (ii) prevent the Merger from qualifying as a
"reorganization" under Section 368(a) of the Code; or
(xxiii) agree (by Contract or otherwise) to do any of the foregoing.
Section 6.2. Maintenance of Records. Through the Closing Date, Bancorp
----------------------
and the Bancorp Subsidiaries will maintain their Records in the same manner and
with the same care that such Records have been maintained prior to the execution
of this Agreement.
Section 6.3. Employees; Employee Benefits. (a) Commercial shall, or
----------------------------
shall cause the appropriate Commercial Subsidiary to, permit employees of
Bancorp or any Bancorp Subsidiary who are employees with Bancorp or any Bancorp
Subsidiary as of immediately prior to the Effective Time and become employees of
Commercial or a Commercial Subsidiary as of the Effective Time ("Transferred
Employees") to participate in the employee benefit plans, programs and
arrangements of Commercial or the Commercial Subsidiaries, as applicable (the
"Commercial Plans"), on the same terms as such plans and benefits are offered to
similarly situated employees of Commercial or the Commercial Subsidiaries, as
applicable. Commercial shall recognize, or shall cause the appropriate
Commercial Subsidiary to recognize, each Transferred Employee's service with
Bancorp or any Bancorp Subsidiary for purposes of determining eligibility to
participate in and vest under the Commercial Plans, but not for purposes of
benefit accruals under any such plans and no such Transferred Employees or
dependents shall be subject to any uninsured waiting periods or preexisting
condition exclusions under any plan of Commercial or the Bank. Furthermore,
benefit levels under the welfare plans sponsored by Commercial or the Bank shall
be determined based upon prior service with the Company.
(b) Notwithstanding the foregoing, Commercial shall, or shall cause the
appropriate Commercial Subsidiary to, (A) provide severance benefits to
Transferred Employees who (i) were employees of Bancorp or any Bancorp
Subsidiary immediately prior to the Effective Time, (ii) are terminated without
cause as of or within 12 months after the Effective Time by Commercial or a
Commercial Subsidiary (but not upon termination by the employee or termination
for cause by Commercial or a Commercial Subsidiary) and (iii) are not otherwise
entitled to any severance benefits under any Contract as a result or in respect
of such termination, in the amounts as Previously Disclosed, which amounts, less
applicable withholding taxes, shall be paid upon the effectiveness of such
termination and (B) recognize and carry forward as of the Effective Time all
sick leave and vacation accrued by each Transferred Employee during the 12 month
period ending on (and including) the Closing Date under the respective policies
of Bancorp or the appropriate Bancorp Subsidiary (but (x) without giving effect
to any accrued benefits carried forward from any time prior to such 12-month
period under such Bancorp and Bancorp Subsidiary policies and (y) in no event
greater than such benefits as would accrue under such policies during one full
calendar year without giving effect to accrued benefits carried forward from
prior calendar years under such policies).
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<PAGE>
(c) Further, Commercial shall, or shall cause the appropriate Commercial
Subsidiary to, perform after the Effective Time all of the obligations of
Bancorp or the appropriate Bancorp Subsidiary under the terms of the severance
agreements existing as of the date hereof which are between Bancorp or a Bancorp
Subsidiary, on the one hand, and management employees of Bancorp or a Bancorp
Subsidiary, on the other hand, which have been Previously Disclosed and which by
their terms survive the Effective Time, provided, however, Bancorp or the
-------- -------
Company shall make payments due as of or prior to the Effective Time.
Section 6.4. Efforts of Parties to Close. During the period from the
---------------------------
date of this Agreement through the Closing Date, each party to this Agreement
shall take such actions as may be reasonably required to carry out the
provisions hereof and the transactions contemplated hereby and each party hereto
shall use its reasonable best efforts to fulfill or obtain the fulfillment of
the conditions precedent to the consummation of the transactions contemplated
hereby, including the execution and delivery of any documents, certificates,
instruments or other papers that are reasonably required for the consummation of
the transactions contemplated hereby. During the period from the date of this
Agreement and continuing through the Closing, except as required by Applicable
Law or with the prior written consent of the other parties to this Agreement, no
party to this Agreement shall take any action which, or fail to take any action
the failure of which to be taken, would, or could reasonably be expected to, (a)
result in any of the representations and warranties set forth in this Agreement
on the part of the party taking or failing to take such action being or becoming
untrue in any material respect; (b) result in any conditions to the Closing set
forth in Article VII not being satisfied; or (c) adversely affect or materially
delay the receipt of any of the requisite regulatory approvals or the
consummation of the Merger and the other transactions contemplated hereby.
Bancorp hereby agrees to cause the Company at or prior to the Closing to perform
and comply with all of the obligations, covenants and agreements to be performed
or complied with by the Company at or prior to the Closing as provided under
this Agreement.
Section 6.5. Confidentiality and Announcements. (a) The parties agree to
---------------------------------
be bound by and comply with the provisions set forth in the Confidentiality
Agreements, the provisions of which are hereby incorporated herein by reference.
(b) Other than as required by Applicable Law upon prior notice to the
other parties (where reasonably practicable) or with the prior consent of the
other parties, none of Bancorp, the Company, Commercial or the Bank shall, and
each of the foregoing shall cause each of its Affiliates and Representatives not
to, disclose to any Person the fact of execution and delivery hereof, any of the
contents hereof or any information with respect to the Merger or the other
transactions contemplated hereby, except that nothing herein shall prohibit any
party from providing any information to its regulatory authorities as required
by Applicable Law.
(c) Subject to Section 6.7(a) and (b), the parties to this Agreement shall
agree with each other as to the form and substance of any press release related
to this Agreement or the transactions contemplated hereby and shall consult each
other as to the form and substance of other public disclosures related hereto
and thereto.
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Section 6.6. Access; Certain Communications. Between the date of this
------------------------------
Agreement and the Closing Date, subject to any Applicable Laws relating to the
exchange of information:
(a) Bancorp and the Bancorp Subsidiaries shall afford to Commercial and
its authorized agents and representatives reasonable access, upon reasonable
notice to an executive officer of Bancorp and during normal business hours, to
all Contracts, documents and information of or relating to the assets,
liabilities, business, operations, personnel and other aspects of the business
of Bancorp and the Bancorp Subsidiaries. Bancorp and the Bancorp Subsidiaries
shall cause their personnel, attorneys and accountants to provide assistance to
Commercial in Commercial's investigation of matters relating to the Merger,
including allowing Commercial and its authorized agents and representatives
access to their operating sites and facilities and cooperating therewith in an
effort to coordinate and facilitate conversion of the Commercial and Bancorp
computer systems in anticipation of consummation of the Merger; provided,
--------
however, that Commercial's investigation shall be conducted in a manner which
- -------
does not unreasonably interfere with the normal operations, customers, and
employee relations of Bancorp and the Bancorp Subsidiaries; provided further,
-------- -------
however, that, in providing the foregoing access, Bancorp shall not be required
- -------
to jeopardize its attorney-client privilege (Bancorp hereby agreeing to use all
reasonable efforts to make appropriate alternative disclosure arrangements in
such circumstances).
(b) Commercial shall afford to Bancorp and its authorized agents and
representatives reasonable access, upon reasonable notice to an executive
officer of Commercial and during normal business hours, to all Contracts,
documents and information of or relating to the assets, liabilities, business,
operations, personnel and other aspects of relevance, in the reasonable judgment
of Commercial, to the transactions contemplated hereby. Commercial shall cause
its personnel, attorneys and accountants to provide assistance to Bancorp in
Bancorp's investigation of matters relating to the Merger, including allowing
Bancorp and its authorized agents and representatives access to its operating
sites and facilities; provided, however, that Bancorp's investigation shall be
-------- -------
conducted in a manner which does not unreasonably interfere with Commercial's
normal operations, customers, and employee relations; provided further, however,
-------- ------- -------
that, in providing the foregoing access, Commercial shall not be required to
jeopardize its attorney-client privilege (Commercial hereby agreeing to use all
reasonable efforts to make appropriate alternative disclosure arrangements in
such circumstances).
(c) The investigations of the parties pursuant to this Section 6.6 shall
not affect any of the representations or warranties contained herein.
Section 6.7. Regulatory Matters; Third Party Consents. (a) The parties to
----------------------------------------
this Agreement shall cooperate with each other and use their reasonable best
efforts promptly to prepare and file all necessary documentation, to effect all
applications, notices, petitions and filings, and to obtain as promptly as
practicable all permits, consents, approvals, waivers and authorizations of all
third parties and Governmental Authorities which are necessary or advisable to
consummate the transactions contemplated by this Agreement. If any required
consent of or waiver by any third party (excluding any Governmental Authority)
is not obtained prior to the Closing, or if the assignment of any Contract would
be ineffective or would adversely affect any material
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<PAGE>
rights or benefits thereunder so that Commercial would not in fact receive all
such rights and benefits, the parties hereto, each without cost, expense or
liability to the other, shall cooperate in good faith to seek, if possible, an
alternative arrangement to achieve the economic results intended. The parties to
this Agreement will have the right to review in advance, and will consult with
each other on, in each case subject to Applicable Laws relating to the exchange
of information, all the information relating to Commercial, the Bank, Bancorp,
the Company or the Bancorp Subsidiaries, as the case may be, which appear in any
filing made with, or written materials submitted to, any third party or any
Governmental Authority in connection with the transactions contemplated by this
Agreement; provided, however, that nothing contained herein shall be deemed to
-------- -------
provide any party to this Agreement with a right to review any information
provided to any Governmental Authority on a confidential basis in connection
with the transactions contemplated hereby. The parties to this Agreement agree
that they will consult with each other with respect to the obtaining of all
permits, consents, approvals and authorizations of all third parties and
Governmental Authorities necessary or advisable to consummate the transactions
contemplated by this Agreement and each party will keep the others apprised of
the status of matters relating to completion of the transactions contemplated
herein. The party responsible for a filing as set forth above shall promptly
deliver to the other parties hereto evidence of the filing of all applications,
filings, registrations and notifications relating thereto (except for any
confidential portions thereof), and any supplement, amendment or item of
additional information in connection therewith (except for any confidential
portions thereof). The party responsible for a filing shall also promptly
deliver to the other parties hereto a copy of each material notice, order,
opinion and other item of correspondence received by such filing party from any
Governmental Authority in respect of any such application (except for any
confidential portions thereof). In exercising the foregoing rights and
obligations, Commercial, Bancorp, the Company and the Bancorp Subsidiaries shall
each act reasonably and as promptly as practicable.
(b) Commercial shall prepare and, subject to the review and reasonable
consent of Bancorp with respect to matters relating to Bancorp or any Bancorp
Subsidiary, file with the SEC as soon as is reasonably practicable the
Registration Statement (or the equivalent in the form of preliminary proxy
material). The parties hereto shall use their reasonable best efforts (i) to
cause the Registration Statement to become effective, (ii) to maintain the
effectiveness thereof through the Effective Time, and (iii) to the extent any
such party becomes aware of any information contained or omitted from the
Registration Statement which makes any material statement contained therein
false or misleading, to file the information necessary to make such statements
in the Registration Statement not false or misleading. Commercial also shall
take such other reasonable actions (other than qualifying to do business in any
jurisdiction in which it is not so qualified) required to be taken under any
applicable state securities laws in connection with the issuance of Commercial
Common Stock under the Registration Statement as contemplated hereby. Commercial
and Bancorp shall use their respective reasonable best efforts to mail at the
earliest practicable date to Commercial shareholders and Bancorp shareholders,
respectively, a Proxy Statement, which shall include all information required
under Applicable Law to be furnished to Commercial shareholders and Bancorp
shareholders, respectively, in connection with the Merger and the transactions
contemplated hereby and shall include the recommendation of the Commercial Board
and of the Bancorp Board in favor of the Merger, this Agreement and the
transactions contemplated hereby; provided, however, that the Bancorp Board
-------- -------
shall not be required
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<PAGE>
to make such recommendation if it reasonably determines in good faith not to so
recommend based upon the advice of counsel, which counsel either is Malizia,
Spidi, Sloane & Fisch, P.C. or is otherwise reasonably acceptable to Commercial,
to the effect that to so recommend would constitute a violation of the Board's
fiduciary duties under Applicable Law.
(c) Each party to this Agreement shall, upon request, promptly furnish
each other with all information concerning themselves, Affiliates, directors,
officers and stockholders and such other matters as may be reasonably necessary
or advisable in connection with any statement (including the Registration
Statement), filing, notice or application made by or on behalf of Commercial,
the Bank, Bancorp, the Company or the Bancorp Subsidiaries to any Governmental
Authority in connection with the transactions contemplated by this Agreement.
(d) The parties to this Agreement shall promptly advise each other upon
receiving any communication from any Governmental Authority whose consent or
approval is required for consummation of the transactions contemplated by this
Agreement which causes such party to believe that there is a reasonable
likelihood that any requisite regulatory approval will not be obtained or that
the receipt of any such approval will be materially delayed.
Section 6.8. Notification of Certain Matters. (a) Each party to this
-------------------------------
Agreement shall give prompt notice to the other parties of the occurrence, or
any known failure to occur, of any event or existence of any condition that has
caused or could reasonably be expected to cause any of its representations or
warranties contained in this Agreement to be untrue or inaccurate in any
material respect at any time after the date of this Agreement, up to and
including the Closing Date, and (ii) any failure on its part to comply with or
satisfy, in any material respect, any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement.
(b) During the period from the date of this Agreement to the Closing Date,
Bancorp will promptly notify Commercial of any material change in the conduct of
its business or in the operation of the properties of Bancorp and of any
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the institution or the threat
of significant litigation involving Bancorp or any Bancorp Subsidiary, and will
keep Commercial fully informed of such events.
(c) Bancorp and the Company shall provide Commercial with true, correct
and complete copies of all financial and other information regarding Bancorp and
the Bancorp Subsidiaries provided to directors thereof in connection with any
meetings of their Boards of Directors or committees thereof, in each case as
soon as practicable, and in any event within 7 days, thereafter. Further,
Bancorp shall provide Commercial with true, correct and complete copies of
Bancorp's audited consolidated financial statements as of December 31, 1997 and
for the three years then ended promptly following completion thereof, but in any
event on or before the date such financial statements are first filed with the
SEC or any other Governmental Authority in any Regulatory Document.
Section 6.9. Expenses. Except as otherwise expressly provided herein, the
--------
parties hereto shall each bear their respective direct and indirect expenses
incurred in connection with the negotiation and preparation of this Agreement
and the consummation of the transactions
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<PAGE>
contemplated hereby (including all fees and expenses payable to or on behalf of
financial advisors, attorneys, accountants and consultants).
Section 6.10. Third Party Proposals. None of Bancorp, any of the Bancorp
---------------------
Subsidiaries, any of the Affiliates of the foregoing or any officers, directors,
employees, representatives or advisors of the foregoing ("Representatives")
shall directly or indirectly solicit, encourage or facilitate inquiries or
proposals, or enter into any definitive agreement, with respect to, or initiate
or participate in any negotiations or discussions with any Person concerning,
any acquisition or purchase of all or any material portion of the assets of, or
of any material equity interest in, Bancorp or any of the Bancorp Subsidiaries
or any merger or business combination with or involving Bancorp or any of the
Bancorp Subsidiaries other than as contemplated by this Agreement (each, an
"Acquisition Proposal") or furnish any information regarding Bancorp or the
Bancorp Subsidiaries to any such Person; provided, however, that the Board of
-------- -------
Directors of Bancorp may, and may authorize and permit its Representatives to,
furnish or cause to be furnished nonpublic information, subject to a binding
confidentiality agreement with Bancorp on substantially similar terms as the
Confidentiality Agreements, to such Person and may participate in such
discussions and negotiations directly or through its Representatives with such
Person, if (i) such Board of Directors has reasonably determined in good faith
based upon the advice of counsel, which counsel either is Malizia, Spidi, Sloane
& Fisch, P.C. or is otherwise reasonably acceptable to Commercial, to the effect
that the failure to provide such nonpublic information or participate in such
negotiations and discussions would constitute a violation of the Board's
fiduciary duties under Applicable Law and (ii) copies of all information so
furnished to such Person and the terms of such Person's Acquisition Proposal
(and any supplements or amendments thereto) are furnished promptly to
Commercial. Bancorp, the Company and any of their respective Affiliates and
Representatives shall notify Commercial immediately if any Acquisition Proposal
(including the terms thereof) is received by, any such information is requested
from or any such negotiations or discussions are sought to be initiated with any
of Bancorp, the Bancorp Subsidiaries or any of the Affiliates or Representatives
of the foregoing. Bancorp and each of the Bancorp Subsidiaries shall, and shall
cause their respective Affiliates and Representatives to, immediately cease or
cause to be terminated any existing activities, including discussions or
negotiations with any parties, conducted prior to the date hereof with respect
to any Acquisition Proposal and shall seek to have all materials distributed to
such Persons by or on behalf of Bancorp, any Bancorp Subsidiary or any of their
respective Affiliates and Representatives returned to Bancorp promptly. None of
Bancorp, the Bancorp Subsidiaries or any of their respective Affiliates and
Representatives shall amend, modify, waive or terminate, or otherwise release
any Person from, any standstill, confidentiality or similar agreement or
arrangement currently in effect with respect to Bancorp or any of the Bancorp
Subsidiaries. Bancorp and the Bancorp Subsidiaries shall cause their respective
Affiliates and Representatives to comply with the provisions of this Section
6.10. Nothing contained in this Agreement shall require Bancorp or the Bancorp
Board to take any action or fail to take any action in violation of Applicable
Laws.
6.11. Stock Listing. Commercial shall use its reasonable best efforts
-------------
to cause to be listed on the NYSE, subject to official notice of issuance, the
shares of Commercial Common Stock to be issued as Merger Consideration.
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<PAGE>
Section 6.12. Integration; Conforming Entries. (a) Bancorp and the
-------------------------------
Company, prior to the Closing, shall (i) consult and cooperate with Commercial
regarding the implementation as of the Effective Time of those policies,
procedures and systems (including computer stems) established by Commercial for
its governance and operations and for that of the Commercial Subsidiaries and
not otherwise referenced in Sections 6.12(b) and 6.12(c), including, without
limitation, policies, procedures and systems pertaining to the accounting,
asset/liability management, audit, credit, human resources, treasury and legal
functions, and (ii) at the request of Commercial, conform Bancorp's and the
Bancorp Subsidiaries' existing policies, procedures and systems to Commercial's
policies, procedures and systems or, in the absence of any existing Bancorp or
Bancorp Subsidiary policy, procedure or system regarding any function, introduce
Commercial's policies, procedures and systems in respect thereof, in each case
effective as of the Effective Time, unless to do so would cause Bancorp or any
of the Bancorp Subsidiaries to be in violation of any Applicable Law.
(b) Notwithstanding that Bancorp believes that Bancorp and the Bancorp
Subsidiaries have established all reserves and taken all provisions for possible
loan losses required by GAAP and Applicable Laws, Bancorp recognizes that
Commercial may have adopted different loan, accrual and reserve policies
(including loan classifications and levels of reserves for possible loan
losses). From and after the date of this Agreement to the Closing, Bancorp, the
Company and Commercial shall consult and cooperate with each other with respect
to conforming as of the Effective Time the loan, accrual and reserve policies of
Bancorp and the Bancorp Subsidiaries to those policies of Commercial, as
specified in each case in writing to Bancorp and the Company.
(c) Subject to Applicable Laws, Bancorp shall (i) establish and take such
reserves and accruals at such time as Commercial shall reasonably request to
conform Bancorp's loan, accrual and reserve policies to Commercial's policies,
and (ii) establish and take such accruals, reserves and charges in order to
implement such policies in respect of excess facilities and equipment capacity,
severance costs, litigation matters, write-off or write-down of various assets
and other appropriate accounting adjustments, and to recognize for financial
accounting purposes such expenses of the Merger and restructuring charges
related to or to be incurred in connection therewith, in each case at such times
as are reasonably requested by Commercial; provided, however, that on the date
-------- -------
such reserves, accruals and charges are to be taken, Commercial shall certify to
Bancorp that the conditions set forth in Sections 7.1, 7.2 and 7.3 have been
satisfied or waived (except to the extent that any waiting period associated
therewith may then have commenced but not expired); and provided further,
-------- -------
however, that Bancorp shall not be required to take any such action that is not
- -------
consistent with GAAP and regulatory accounting principles.
Section 6.13. Pooling-of-Interests and Tax-Free Treatment. Each of the
-------------------------------------------
parties hereto shall use its reasonable best efforts (i) to cause the Merger to
qualify for pooling-of-interests accounting treatment and (ii) to cause the
Merger to constitute a "reorganization" under Section 368(a) of the Code.
Section 6.14. Agreements of Affiliates. Bancorp shall cause each Person
------------------------
who may be at the Effective Time or was on the date hereof an "affiliate" of
Bancorp for purposes of
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<PAGE>
Rule 145 under the Securities Act or of determining the qualification of the
Merger as a pooling of interest for accounting and financial reporting purposes,
to execute and deliver to Commercial, no less than 45 days prior to the date of
the meeting of Bancorp shareholders to approve the Merger, the written
undertakings in the form attached hereto as Exhibit B. On or prior to such
delivery date, Bancorp shall provide Commercial with a letter specifying, to the
best of its knowledge, all of the Persons who may be deemed to be "affiliates"
of Bancorp under the preceding sentence.
Section 6.15. Stockholder Approval. Each of Commercial and Bancorp shall
--------------------
call a meeting of its shareholders to be held as soon as practicable for the
purpose of voting upon and approving the Merger, this Agreement and the
transactions contemplated hereby. The Bancorp Board shall submit for approval
of Bancorp shareholders the matters to be voted upon in order to authorize the
Merger and hereby does and will recommend the Merger, this Agreement and the
transactions contemplated hereby to Bancorp shareholders and will use its best
efforts to obtain any vote of Bancorp shareholders that is necessary for the
approval of the Merger and the approval and adoption of this Agreement and
consummation of the transactions contemplated hereby, provided that Bancorp
--------
shall have received an opinion of The Wallach Company, or such other nationally
recognized investment banking firm as is reasonably acceptable to Commercial,
dated within five days of mailing of the Proxy Statement to Bancorp shareholders
that the Exchange Ratio is fair to Bancorp shareholders from a financial point
of view (Bancorp hereby agreeing that the terms of this proviso are subject to
Bancorp's using all commercially reasonable efforts to obtain such opinion from
The Wallach Company and, if not forthcoming therefrom within a reasonable period
of time following a request made therefor, to obtain such opinion from at least
one such other reasonably acceptable investment banking firm); provided further,
-------- -------
however, that the Bancorp Board shall not be required to make such
- -------
recommendation if it reasonably determines in good faith not to so recommend
based upon the advice of counsel, which counsel either is Malizia, Spidi, Sloane
& Fisch, P.C. or is otherwise reasonably acceptable to Commercial, to the effect
that to so recommend would constitute a violation of the Board's fiduciary
duties under Applicable Law. The Commercial Board shall submit for approval of
Commercial shareholders the matters to be voted upon in order to authorize the
Merger and hereby does and will recommend the Merger, this Agreement and the
transactions contemplated hereby to Commercial shareholders and will use its
best efforts to obtain any vote of Commercial shareholders that is necessary for
the approval of the Merger and the approval and adoption of this Agreement and
consummation of the transactions contemplated hereby.
Section 6.16. Indemnification. From and after the Effective Time,
---------------
Commercial shall indemnify, defend and hold harmless, and advance expenses for,
the present and former officers and directors of Bancorp against all losses,
expenses, claims, damages or liabilities arising from any acts or omissions by
such person in his or her capacity as such occurring prior to the Effective
Time, including any of the foregoing arising out of the transactions
contemplated by this Agreement, to the fullest extent permitted or required
under the Articles of Incorporation and Bylaws of Bancorp, in each case, as in
effect on the date hereof. This Section shall be construed as an agreement as
to which the directors and officers of Bancorp and the Company referred to
herein are intended to be third party beneficiaries and shall be enforceable by
such persons and their heirs and representatives.
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<PAGE>
Section 6.17. D&O Insurance. From and after the Effective Time,
-------------
Commercial shall maintain in effect, for not less than three years, policies of
directors' and officers liability insurance providing coverage with respect to
matters occurring prior to the Effective Time, which policies shall cover those
present and former officers and directors of Bancorp that are covered by and
shall provide coverage that is no less beneficial, in the aggregate, than those
covered and that coverage provided by the current policies of Bancorp; provided,
--------
however, that Commercial shall not be required to pay aggregate premiums for
- -------
such insurance in excess of $100,000, but in such case shall purchase as much
coverage as possible for such amount.
Section 6.18. Takeover Provisions Inapplicable. Bancorp shall take
--------------------------------
all action (including, if required, redeeming all of the outstanding Rights
related to the Bancorp Rights Agreement or amending or terminating the Bancorp
Rights Agreement) so that the entering into of this Agreement and the Stock
Option Agreement and the consummation of the transactions contemplated hereby
and thereby shall not result in the grant of any rights to any person under the
Bancorp Rights Agreement to purchase or receive additional shares of capital
stock of Bancorp, Commercial or any Affiliate of the foregoing or enable or
require the Rights related thereto to be exercised, distributed or triggered in
any way.
Section 6.19. Environmental Reports. Commercial, at its expense, may
---------------------
order within thirty (30) days of the Agreement a reputable environmental firm
selected by Commercial (the "Environmental Firm") to perform a phase one
environmental investigation and/or asbestos survey on (i) each parcel of
commercial real estate ("Commercial Property") owned or leased by, (ii) each
office and premise used as a facility ("Facility Property") by, and (iii) each
property that serves as security for any commercial real estate loan having an
original principal balance greater than $500,000 made by, Bancorp or any Bancorp
Subsidiary (collectively, clauses (i), (ii) and (iii), the "Current Property");
provided, however, that Commercial shall cause the Environmental Firm to
- -------- -------
complete any such investigation or survey as soon as reasonably practicable, but
not later than sixty (60) days after the date hereof. In addition, Commercial,
at its expense, may cause the Environmental Firm to perform a phase one
environmental examination and/or asbestos survey on any Commercial Property or
Facility Property acquired, leased or used by Bancorp or any of the Bancorp
Subsidiaries after the date hereof (together with the Current Property, the
"Bancorp Property"); provided, however, that Commercial shall cause the
-------- -------
Environmental Firm to complete any such investigation or survey as soon as
reasonably practicable, but not later than fifteen (15) days after being
notified by Bancorp of the acquisition, lease or commencement of use of such
Commercial Property or Facility Property. If a phase one report provided by the
Environmental Firm recommends that a phase two environmental survey be performed
with respect to any parcel of the Bancorp Property, then Commercial, at its
expense, may cause the Environmental Firm to perform a phase two environmental
investigation of such Bancorp Property; provided, however, that Commercial shall
-------- -------
cause the Environmental Firm to complete any such phase two investigation as
soon as reasonably practicable, but not later than forty-five (45) days after
the date that such phase one report is received by Commercial. Should the cost
of taking all remedial or other corrective actions and measures (i) required by
Applicable Law or (ii) recommended by the Environmental Firm in such phase one
or phase two report or reports in light of potentially serious life, health or
safety concerns, in the aggregate, exceed the sum of $5,000,000, as reasona-
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<PAGE>
bly estimated by the Environmental Firm, or if the cost of such actions or
measures cannot be so reasonably estimated by the Environmental Firm to be such
amounts or less with any reasonable degree of certainty, Commercial shall have
the right pursuant to Section 8.1(a)(vii) hereof, for a period of fifteen (15)
Business Days following receipt of such estimate or indication that the cost of
such actions and measures cannot be so reasonably estimated, to terminate this
Agreement.
ARTICLE VII
CONDITIONS TO CONSUMMATION
OF THE MERGER
Section 7.1 Mutual Conditions. The obligations of each party to this
-----------------
Agreement to consummate the Merger shall be subject to the following conditions:
(a) No statute, rule, regulation, order, injunction, decree or other
Applicable Law shall have been enacted, entered, issued, promulgated or
enforced by any Governmental Authority which prohibits, restricts or makes
illegal consummation of the Merger pursuant hereto (an "Injunction") and
which remains in effect; and no proceeding initiated by any Governmental
Authority seeking an Injunction shall be pending;
(b) All consents, waivers, authorizations and approvals required
from all Governmental Authorities to consummate Merger shall have been
obtained and shall remain in full force and effect and all waiting periods
under Applicable Law in respect thereof shall have expired or terminated;
(c) The Merger, this Agreement and the transactions contemplated
hereby shall have been approved by the Commercial shareholders and the
Bancorp shareholders, in each case, in the manner required by Applicable
Law;
(d) The SEC shall have declared the Registration Statement effective;
and on the Closing Date and at the Effective Time, no stop order suspending
the effectiveness of the Registration Statement shall have been issued and
no proceedings for that purpose shall have been initiated or then
threatened by the SEC;
(e) The shares of Commercial Common Stock, if any, to be issued as
Merger Consideration in the Merger shall have been approved for listing on
the NYSE, subject to official notice of issuance;
(f) Commercial and Bancorp shall have received a letter, in form and
substance reasonably satisfactory to Commercial, from Deloitte & Touche
LLP, dated the date of the Proxy Statement and confirmed in writing at the
Effective Time, stating that the Merger will qualify as a pooling of
interests transaction under Opinion 16 of the Accounting Principles Board,
the interpretive releases issued pursuant thereto and the pronouncements of
the SEC thereon; and
(g) Commercial and Bancorp shall have received an opinion of
Wachtell, Lipton, Rosen & Katz, special counsel to Commercial, or of such
other reasonably quali-
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<PAGE>
fied Person as Commercial shall reasonably determine, in form and
substance reasonably acceptable to Commercial, dated the Closing Date,
substantially to the effect that, on the basis of facts, representations
and assumptions set forth in such opinion which are consistent with the
state of facts existing at the Effective Time, (i) the Merger should
constitute a "reorganization" within the meaning of Section 368(a) of the
Code and (ii) no gain or loss should be recognized by Bancorp shareholders
who receive solely Commercial Common Stock in exchange for shares of
Bancorp Common Stock pursuant to the Merger (except with respect to cash
received in lieu of a fractional share interest in Commercial Common
Stock). In rendering such opinion, counsel may require and rely upon
representations contained in certificates of officers or Bancorp,
Commercial and others.
Section 7.2. Conditions to Commercial's and the Bank's Obligations.
-----------------------------------------------------
The obligations of Commercial and the Bank to consummate the Merger shall be
subject to the following conditions:
(a) The representations and warranties of each of Bancorp and the
Company set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and (except to the
extent such representation and warranty speaks as of an earlier date) as of
the Closing Date as though made on and as of the Closing Date;
(b) Each of Bancorp and the Company shall have performed and
complied in all material respects with each agreement, covenant, obligation
and condition required by this Agreement to be performed or complied with
by it at or prior to the Closing Date;
(c) Bancorp shall have delivered to Commercial and the Bank a
certificate, dated as of the Closing Date, signed on behalf of Bancorp by
its Chief Executive Officer and Chief Financial Officer, confirming the
satisfaction of the conditions contained in paragraphs (a) and (b) of this
Section 7.2;
(d) Commercial, at its expense, shall have received from KPMG Peat
Marwick, LLP letters dated the date of mailing the Prospectus and the date
of the Closing to the effect that: (i) with respect to Bancorp they are
independent accountants within the meaning of the Securities Act and the
Exchange Act, (ii) it is their opinion that the audited financial
statements of Bancorp included in or incorporated by reference into the
Prospectus comply as to form in all material respects with the applicable
accounting requirements of the Securities Act and Exchange Act, (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 do not comply as to form in all material respects with the
applicable accounting requirements of the Securities Act and Exchange Act;
(B) said financial statements are not stated on a basis substantially
consistent with that of the audited financial statements; (C) (1) at the
date of the latest available consolidated financial statements of Bancorp
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
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<PAGE>
money of Bancorp (other than deposits and Federal Home Loan Bank advances
with a maturity of one year or less) or any decrease in the shareholders'
equity thereof as compared with amounts shown in the latest statement of
financial condition included in the Prospectus, or (2) for the period from
the date of the latest audited financial statements of Bancorp included in
or incorporated by reference into the Prospectus 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 Bancorp excluding expenses associated with the Merger or any
increase, as compared with the corresponding period in the preceding year,
in the provision for loan losses for Bancorp, (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 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 Bancorp'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 Bancorp which would cause them to believe
that the pro forma financial statements had not been properly compiled on
the pro forma basis described therein; and
(e) Each Person who may be at the Effective Time or was on the date
of this Agreement an "affiliate" of Bancorp for purposes of Rule 145 under
the Securities Act or for determining the qualification of the Merger as a
pooling of interest for accounting and financial reporting purposes shall
have executed and delivered to Commercial, at least 45 days prior to the
date of the meeting of Bancorp shareholders to approve the Merger, the
written undertakings in the form attached hereto as Exhibit B.
(f) The number of Dissenting Shares shall not be greater than 5% of
the number of shares of Bancorp Common Stock issued and outstanding as of
the date hereof.
Section 7.3 Conditions to Bancorp's and the Company's Obligations.
-----------------------------------------------------
The obligation of Bancorp and the Company to consummate the Merger shall be
subject to the following conditions:
(a) The representations and warranties of each of Commercial and the
Bank set forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and (except to the extent such
representation and warranty speaks as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date;
(b) Each of Commercial and the Bank shall have performed and
complied in all material respects with each agreement, covenant, obligation
and condition required by this Agreement to be performed or complied with
by it at or prior to the Closing Date; and
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<PAGE>
(c) Commercial shall have delivered to Bancorp and the Company a
certificate, dated as of the Closing Date, signed on behalf of Commercial
by its Chief Executive Officer and Chief Financial Officer, confirming the
satisfaction of the conditions contained in paragraphs (a) and (b) of this
Section 7.3.
ARTICLE VIII
TERMINATION
Section 8.1. Termination. (a) This Agreement may be terminated at any
-----------
time prior to the Effective Time, whether before or after approval and adoption
of this Agreement by the Commercial shareholders or Bancorp shareholders, as
follows:
(i) by written consent of the parties hereto;
(ii) by Bancorp or Commercial if a condition to the
terminating party's obligation to close set forth in Section 7.1 cannot be
satisfied prior to the date set forth in Section 8.1(a)(iv) below unless
caused by the breach of any covenant or agreement under this Agreement (x)
by Bancorp or the Company, in the case of a termination by Bancorp, or (y)
by Commercial or the Bank, in the case of termination by Commercial;
(iii) by Bancorp or Commercial (provided that none of the
--------
terminating party or any of its Affiliates is not then in material breach
of any representation, warranty, covenant or other agreement contained
herein) if there shall have been a material breach of any of the covenants
or agreements or any of the representations or warranties set forth in this
Agreement on the part of Bancorp or the Company, in the case of a
termination by Commercial, or on the part of Commercial or the Bank, in the
case of a termination by Bancorp, which breach is not cured within thirty
(30) days following written notice given by the terminating party to the
party committing such breach, or, by its nature, cannot be cured prior to
the date set forth in Section 8.1(a)(iv) below, and which breach would
entitle the terminating party to not consummate the Merger pursuant to
Article VII;
(iv) by Bancorp or Commercial, if the Closing has not
occurred on or before February 28, 1999 (provided that the right to
--------
terminate this Agreement under this Section 8.1(a)(iv) shall not be
available to any party whose failure or whose Affiliate's failure to
perform any covenant of obligation under this Agreement has been the cause
of or resulted in the failure of the Merger to occur on or before such
date);
(v) by Commercial if the Bancorp Board shall withdraw,
modify or change in a manner adverse to Commercial its recommendation with
respect to the Merger, this Agreement or the transactions contemplated
hereby;
(vi) subject to Section 8.1(b), by Bancorp by delivery of
written notice to Commercial at any time during the period beginning on
(and including) the fourth trading day immediately preceding the Closing
Date and ending on (and including) the
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<PAGE>
third trading day immediately preceding the Closing Date (a "Price
Termination Notice"), if both of the following conditions are satisfied:
(A) the Average NYSE Closing Price shall be less than the product of (x)
.85 and (y) the Starting Price, and (B) (x) the quotient obtained by
dividing the Average NYSE Closing Price by the Starting Price shall be less
than (y) the Index Ratio; provided, however, that if following a Price
-------- -------
Termination Notice Commercial shall deliver written notice to Bancorp on or
before the trading day last preceding the Closing Date that Commercial has
elected for the Exchange Ratio to be determined pursuant to clause (ii) of
the definition thereof (an "Adjustment Election"), then no termination
shall occur under this Section 8.1(a)(vi); and
(vii) by Commercial pursuant to and in accordance with the
provision of the last sentence of Section 6.19.
(b) The termination of this Agreement shall be effectuated by the
delivery by the party terminating this Agreement to each other party of a
written notice of such termination; provided, however, that a termination
-------- -------
pursuant to Section 8.1(a)(vi) shall not become effective unless both (i) an
Adjustment Election has not been made by Commercial and (ii) the time period
thereunder for making an Adjustment Election has expired. If this Agreement
terminates pursuant to this Section 8.1, it shall become null and void and have
no further force or effect, except as provided in Section 8.2.
8.2. Survival After Termination. If this Agreement is terminated in
--------------------------
accordance with Section 8.1 hereof and the transactions contemplated hereby are
not consummated, this Agreement shall become void and of no further force and
effect, without any liability on the part of any party hereto, except for the
provisions of Sections 6.5 and 6.9. Notwithstanding the foregoing, nothing in
this Section 8.2 shall relieve any party to this Agreement of liability for a
willful breach of any provision of this Agreement.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Amendments; Waiver. This Agreement may be amended by the
------------------
parties hereto, by action taken by or on behalf of their respective Boards of
Directors, at any time before or after approval of this Agreement by the
Commercial shareholders or Bancorp shareholders; provided, however, that after
-------- -------
any such approval by the Commercial shareholders or Bancorp shareholders, no
such amendment shall be made which under Applicable Law would require further
approval or authorization by the Commercial shareholders or Bancorp
shareholders, without obtaining such further approval or authorization.
Notwithstanding the foregoing, this Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto. Any
agreement on the part of any party to waive (i) any inaccuracies in the
representations and warranties contained herein made by any other party or in
any document, certificate or writing delivered pursuant hereto by any other
party, or (ii) compliance with any of the agreements, covenants or conditions
contained herein, shall be valid only if set forth in an instrument in writing
signed on behalf of such party. No such waiver shall constitute a waiver of, or
estoppel
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<PAGE>
with respect to, any subsequent or other inaccuracy, breach or failure
to strictly comply with the provisions of this Agreement. The failure of any
party at any time or times to enforce or require performance of any provision
hereof shall in no way operate as a waiver or affect the right of such party at
a later time to enforce the same.
Section 9.2. Entire Agreement. This Agreement (including Disclosure
----------------
Schedules, Annexes, Exhibits, certificates, lists and documents referred to
herein, and any documents executed by the parties simultaneously herewith or
pursuant hereto), the Stock Option Agreement, the Confidentiality Agreement and
the Bank Plan of Merger constitute the entire agreement of the parties hereto
and supersede all prior agreements and understandings, written and oral, among
the parties with respect to the subject matter hereof.
Section 9.3. Non-Survival of Representations, Warranties and
-----------------------------------------------
Agreements. No investigation by the parties hereto made heretofore or hereafter
- ----------
shall affect the representations and warranties of the parties which are
contained herein and each such representation and warranty shall survive such
investigation. The representations, warranties, covenants and agreements of the
parties contained herein shall not survive the Effective Time, except for those
covenants and agreements which by their terms contemplate performance after the
Effective Time.
Section 9.4. Interpretation. When a reference is made in this
--------------
Agreement to Sections, Annexes, Exhibits or Disclosure Schedules, such reference
shall be to a Section of or Annex or Exhibit or Disclosure Schedule to this
Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation." The phrases "the date
of this Agreement," "the date hereof" and terms of similar import, unless the
context otherwise requires, shall be deemed to refer to the date set forth in
the first paragraph of this Agreement.
Section 9.5. Severability. Any term or provision of this Agreement
------------
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction. If
any provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
Section 9.6. Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed given (a) upon delivery in person, (b)
upon transmission by telecopy (with written confirmation), (c) upon receipt if
mailed by registered or certified mail (return receipt requested), or (d) on the
business date after being delivered to a reputable overnight delivery service,
in each case, to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
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<PAGE>
If to Bancorp or the Company:
First Colorado Bancorp, Inc.
215 S. Wadsworth Boulevard
Lakewood, Colorado 80226
Telecopy: (303) 237-2601
Attention: Malcolm Collier, Jr., Chairman of the Board
With a copy to:
Malizia, Spidi, Sloane & Fisch, P.C.
1301 K Street, N.W.
Suite 700 East
Washington, D.C. 20005
Telecopy: (202) 434-4661
Attention: Samuel J. Malizia, Esq.
If to Commercial or the Bank:
Commercial Federal Corporation
2120 South 72nd Street
Omaha, Nebraska 68124
Telecopy: : (402) 390-5361
Attention: James A. Laphen, President
With copies to:
Fitzgerald, Schorr, Barmettler & Brennan, P.C.
1000 Commercial Federal Tower
2120 South 72nd Street
Omaha, Nebraska 68124
Telecopy: (402) 390-2866
Attention: Douglas Reno
and
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Telecopy: (212) 403-2000
Attention: Edward D. Herlihy, Esq.
Section 9.7. Binding Effect; Persons Benefiting; No Assignment. Subject to
-------------------------------------------------
the last sentence of this Section 9.7, this Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective successors and
permitted assigns. Except for the provisions of Sections 6.16 and 6.17, nothing
in this Agreement is intended or shall be construed
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<PAGE>
to confer upon any Person other than the parties hereto and their respective
successors and permitted assigns any right, remedy or claim under or by reason
of their Agreement or any part hereof or to create any third party
beneficiaries. This Agreement may not be assigned by any of the parties hereto
without the prior written consent of each of the other parties hereto.
Section 9.8. Counterparts. This Agreement may be executed in two or
------------
more counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same agreement, it being understood
that all of the parties need not sign the same counterpart.
Section 9.9. Governing Law. THIS AGREEMENT, THE LEGAL RELATIONS
-------------
BETWEEN THE AND THE ADJUDICATION AND THE ENFORCEMENT THEREOF, SHALL BE GOVERNED
BY AND INTERPRETED AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE
STATE OF NEBRASKA, WITHOUT REGARD TO APPLICABLE CHOICE OF LAW PROVISIONS
THEREOF.
Section 9.10. Specific Performance. The parties hereto each
--------------------
acknowledge that, in view of the uniqueness of its business and the transactions
contemplated by this Agreement, each party would not have an adequate remedy at
law for money damages in the event that the covenants to be performed hereunder
have not been performed in accordance with their terms, and therefore agree that
the other parties shall be entitled to specific enforcement of the terms hereof
in addition to any other equitable remedy to which such parties may be entitled.
Section 9.11. WAIVER OF JURY TRIAL. THE PARTIES TO THIS AGREEMENT
--------------------
AGREE TO WAIVE ANY RIGHT TO A JURY TRIAL AS TO ALL DISPUTES HEREUNDER.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
COMMERCIAL FEDERAL CORPORATION
By: /s/ James A. Laphen
------------------------------
Name: James A. Laphen
Title: President
COMMERCIAL FEDERAL BANK, A FEDERAL
SAVINGS BANK
By: /s/ James A. Laphen
------------------------------
Name: James A. Laphen
Title: President
FIRST COLORADO BANCORP, INC.
By: /s/ Brian L. Johnson
------------------------------
Name: Brian L. Johnson
Title: Executive Vice President/Treasurer
FIRST FEDERAL BANK OF COLORADO
By: /s/ Brian L. Johnson
------------------------------
Name: Brian L. Johnson
Title: Executive Vice President/CFO
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<PAGE>
ANNEX B
<PAGE>
ANNEX B
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO CERTAIN PROVISIONS
CONTAINED HEREIN AND TO RESALE RESTRICTIONS
UNDER THE SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT
----------------------
STOCK OPTION AGREEMENT ("Option Agreement") dated March 9, 1998, by
and between COMMERCIAL FEDERAL CORPORATION ("Commercial"), a Nebraska
corporation registered as a savings and loan holding company under the Home
Owners' Loan Act of 1933, as amended ("HOLA"), and FIRST COLORADO BANCORP,
INC.("Bancorp"), a Colorado corporation registered as a savings and loan holding
company under the HOLA.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Board of Directors of Commercial and the Board of
Directors of Bancorp have approved a Reorganization and Merger Agreement dated
as of even date herewith (the "Merger Agreement") providing, among other things,
for the merger of Bancorp with and into Commercial;
WHEREAS, as a condition and inducement to Commercial's entering into
the Merger Agreement, Commercial has required that Bancorp agree, and Bancorp
has agreed, to grant to Commercial the Option (as hereinafter defined);
NOW, THEREFORE, in consideration of the premises contained herein and
in the Merger Agreement, the parties agree as follows:
1. Definitions.
-----------
Capitalized terms used but not defined herein shall have the same
meanings as in the Merger Agreement.
2. Grant of Option.
---------------
Subject to the terms and conditions set forth herein, Bancorp hereby
grants to Commercial an option (the "Option") to purchase up to 3,348,533 fully
paid and nonassessable, authorized and unissued shares of Bancorp Common Stock
at a price of $24.125 per share (the "Purchase Price") payable in cash as
provided in Section 4 hereof; provided, however, that in no event shall the
number of shares of Bancorp Common Stock for which this Option is exercisable
exceed 19.9% of Bancorp's issued and outstanding shares of Bancorp Common Stock
(without giving effect to any shares subject to or issued pursuant to the
Option). The number of shares of Bancorp Common Stock that may be received upon
the exercise of the Option and the Purchase Price are subject to adjustment as
herein set forth.
<PAGE>
3. Exercise of Option.
------------------
(a) Commercial may exercise the Option, in whole or in part, at any
time or from time to time only if a Purchase Event (as defined below) shall have
occurred; provided, however, that (i) to the extent the Option shall not have
been exercised, it shall terminate and be of no further force and effect upon
the earliest to occur of (A) the Effective Time of the Merger, (B) the
termination of the Merger Agreement in accordance with any of Sections
8.1(a)(i), 8.1(a)(ii), 8.1(a)(iii) (but only upon termination by (I) Bancorp
under such Section 8.1(a)(iii) or (II) by Commercial under such Section
8.1(a)(iii) other than with respect to a willful breach by Bancorp), 8.1(a)(iv),
8.1(a)(vi) or 8.1(a)(vii) thereof, and (C) 12 months following the termination
of the Merger Agreement in accordance with any of Sections 8.1(a)(iii) (but only
upon termination by Commercial under such Section 8.1(a)(iii) with respect to a
willful breach by Bancorp) or 8.1(a)(v) thereof, provided that, with respect to
any of the foregoing, if such termination follows an Extension Event (as defined
below), the Option shall not terminate until the date that is 18 months
following such termination; (ii) if the Option cannot be exercised on such day
because of any injunction, order or similar restraint issued by a Governmental
Authority of competent jurisdiction, the Option shall expire on the 30th
Business Day after such injunction, order or restraint shall have been dissolved
or when such injunction, order or restraint shall have become permanent and no
longer subject to appeal, as the case may be; and (iii) that any such exercise
shall be subject to compliance with Applicable Law, including the HOLA. This
Option may not be exercised at any time when Commercial shall be in willful and
material breach of any of its covenants or agreements contained in the Merger
Agreement such that Bancorp shall be entitled to terminate the Merger Agreement
pursuant to Section 8.1(a)(iii) thereof.
(b) As used herein, a "Purchase Event" shall mean any of the following
events:
(i) Bancorp or any Bancorp Subsidiary, without having received prior
written consent from Commercial, shall have entered into, authorized,
recommended, proposed or publicly announced its intention to enter into,
authorize, recommend, or propose, an agreement, arrangement or
understanding with any Person (other than Commercial or any Commercial
Subsidiary) to (A) effect a merger or consolidation or similar transaction
involving Bancorp or any Bancorp Subsidiary (other than internal mergers,
reorganizing actions, consolidations or dissolutions involving only
existing Bancorp Subsidiaries), (B) purchase, lease or otherwise acquire
20% or more of the assets of Bancorp or any Bancorp Subsidiary or (C)
purchase or otherwise acquire (including by way of merger, consolidation,
share exchange or similar transaction) Beneficial Ownership of securities
representing 20% or more of the voting power of Bancorp or any Bancorp
Subsidiary;
(ii) any Person (other than Commercial or any Commercial Subsidiary or
any Person acting in concert with Commercial; or Bancorp or any Bancorp
Subsidiary in a fiduciary capacity) shall have acquired Beneficial
Ownership of 20% or more of the voting power of Bancorp or any Bancorp
Subsidiary; or
2
<PAGE>
(iii) Bancorp's Board of Directors shall have withdrawn, modified or
changed in a manner adverse to Commercial the recommendation of Bancorp's
Board of Directors with respect to the Merger, the Merger Agreement or the
transactions contemplated thereby, unless the Board of Directors of Bancorp
reasonably determines in good faith not to so recommend based upon the
advice of counsel, which counsel either is Malizia, Spidi, Sloane & Fisch,
P.C. or is otherwise reasonably acceptable to Commercial, to the effect
that to so recommend would constitute a violation of the Board's fiduciary
duties under Applicable Law, in each case after an Extension Event.
(c) As used herein, the term "Extension Event" shall mean any of the
following events:
(i) a Purchase Event of the type specified in clauses (b)(i) and
(b)(ii) above;
(ii) any Person (other than Commercial or any Commercial Subsidiary)
shall have "commenced" (as such term is defined in Rule 14d-2 under the
Exchange Act), or shall have filed a registration statement under the
Securities Act with respect to, a tender offer or exchange offer to
purchase shares of Bancorp Common Stock such that, upon consummation of
such offer, such Person would have Beneficial Ownership (as defined below)
or the right to acquire Beneficial Ownership of 10% or more of the voting
power of Bancorp or any Bancorp Subsidiary; or
(iii) any Person (other than Commercial or any Commercial Subsidiary;
or Bancorp or any Bancorp Subsidiary in a fiduciary capacity) shall have
publicly announced its willingness, or shall have publicly announced a bona
fide proposal, or publicly disclosed an intention to make a bona fide
proposal, (x) to make an offer described in clause (ii) above or (y) to
engage in a transaction described in clause (i) above.
(d) As used herein, the terms "Beneficial Ownership" and "Beneficially
Own" shall have the meanings ascribed to them in Rule 13d-3 under the Exchange
Act.
(e) In the event Commercial wishes to exercise the Option, it shall
deliver to Bancorp a written notice (the date of which being herein referred to
as the "Notice Date") specifying (i) the total number of shares it intends to
purchase pursuant to such exercise and (ii) a place and date not earlier than
three Business Days nor later than 60 calendar days from the Notice Date for the
closing of such purchase (the "Closing Date").
4. Payment and Delivery of Certificates.
------------------------------------
(a) At the closing referred to in Section 3 hereof, Commercial shall
pay to Bancorp the aggregate Purchase Price for the shares of Bancorp Common
Stock purchased pursuant to the exercise of the Option in immediately available
funds by wire transfer to a bank account designated by Bancorp.
3
<PAGE>
(b) At such closing, simultaneously with the delivery of cash as
provided in Section 4(a), Bancorp shall deliver to Commercial a certificate or
certificates representing the number of shares of Bancorp Common Stock purchased
by Commercial, registered in the name of Commercial or a nominee designated in
writing by Commercial, and Commercial shall deliver to Bancorp a letter agreeing
that Commercial shall not offer to sell, pledge or otherwise dispose of such
shares in violation of Applicable Law or the provisions of this Option
Agreement.
(c) If at the time of issuance of any Bancorp Common Stock pursuant to
any exercise of the Option, Bancorp shall have issued any share purchase rights
or similar securities to holders of Bancorp Common Stock, then each such share
of Bancorp Common Stock shall also represent rights with terms substantially the
same as and at least as favorable to Commercial as those issued to other holders
of Bancorp Common Stock.
(d) Certificates for Bancorp Common Stock delivered at any closing
hereunder shall be endorsed with a restrictive legend which shall read
substantially as follows:
The transfer of the shares represented by this certificate is subject
to certain provisions of an agreement between the registered holder
hereof and ____________________, a copy of which is on file at the
principal office of ____________________, and to resale restrictions
arising under the Securities Act of 1933 and any applicable state
securities laws. A copy of such agreement will be provided to the
holder hereof without charge upon receipt by ________ of a written
request therefor.
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if Commercial shall have
delivered to Bancorp an opinion of counsel, in form and substance reasonably
satisfactory to Bancorp and its counsel, to the effect that such legend is not
required for purposes of the Securities Act and any applicable state securities
laws.
5. Authorization, etc.
------------------
(a) Bancorp hereby represents and warrants to Commercial that:
(i) Bancorp has full corporate authority to execute and deliver this
Option Agreement and, subject to Section 11(i), to consummate the
transactions contemplated hereby;
(ii) such execution, delivery and consummation have been authorized by
the Board of Directors of Bancorp, and no other corporate proceedings are
necessary therefor;
(iii) this Option Agreement has been duly and validly executed and
delivered and represents a valid and legally binding obligation of Bancorp,
enforceable against Bancorp
4
<PAGE>
in accordance with its terms; and
(iv) Bancorp has taken all necessary corporate action to authorize and
reserve and, subject to Section 11(i), permit it to issue and, at all times
from the date hereof through the date of the exercise in full or the
expiration or termination of the Option, shall have reserved for issuance
upon exercise of the Option, 3,348,533 shares of Bancorp Common Stock, all
of which, upon issuance pursuant hereto, shall be duly authorized, validly
issued, fully paid and nonassessable, and shall be delivered free and clear
of all claims, liens, encumbrances, restrictions (other than federal and
state securities restrictions) and security interests and not subject to
any preemptive rights.
(b) Commercial hereby represents and warrants to Bancorp that:
(i) Commercial has full corporate authority to execute and deliver
this Option Agreement and, subject to Section 11(i), to consummate the
transactions contemplated hereby;
(ii) such execution, delivery and consummation have been authorized by
all requisite corporate action by Commercial, and no other corporate
proceedings are necessary therefor;
(iii) this Option Agreement has been duly and validly executed and
delivered and represents a valid and legally binding obligation of
Commercial, enforceable against Commercial in accordance with its terms;
and
(iv) any Bancorp Common Stock or other securities acquired by
Commercial upon exercise of the Option will not be taken with a view to the
public distribution thereof and will not be transferred or otherwise
disposed of except in compliance with the Securities Act.
6. Adjustment upon Changes in Capitalization.
-----------------------------------------
In the event of any change in Bancorp Common Stock by reason of stock
dividends, split-ups, recapitalizations or the like, the type and number of
shares subject to the Option, and the Purchase Price per share, as the
case may be, shall be adjusted appropriately. In the event that any additional
shares of Bancorp Common Stock are issued after the date of this Option
Agreement (other than pursuant to an event described in the preceding sentence
or pursuant to this Option Agreement), the number of shares of Bancorp Common
Stock subject to the Option shall be adjusted so that, after such issuance, it
equals at least 19.9% of the number of shares of Bancorp Common Stock then
issued and outstanding (without considering any shares subject to or issued
pursuant to the Option).
7. Repurchase.
----------
5
<PAGE>
(a) Subject to Section 11(i), at the request of Commercial at any time
commencing upon the occurrence of a Purchase Event and ending 13 months
immediately thereafter (the "Repurchase Period"), Bancorp (or any successor
entity thereof) shall repurchase the Option from Commercial together with all
(but not less than all, subject to Section 10) shares of Bancorp Common Stock
purchased by Commercial pursuant thereto with respect to which Commercial then
has Beneficial Ownership, at a price (on a per share basis, the "Per Share
Repurchase Price") equal to the sum of:
(i) The aggregate Purchase Price paid by Commercial for any shares of
Bancorp Common Stock acquired pursuant to the Option;
(ii) The difference between (A) the "Market/Tender Offer Price" for
shares of Bancorp Common Stock (defined as the higher of (x) the highest
price per share at which a tender or exchange offer has been made for
shares of Bancorp Common Stock or (y) the highest closing mean of the "bid"
and the "ask" price per share of Bancorp Common Stock reported by NASDAQ,
the automated quotation system of the National Association of Securities
Dealers, Inc., for any day within that portion of the Repurchase Period
which precedes the date Commercial gives notice of the required repurchase
under this Section 7) and (B) the Purchase Price as determined pursuant to
Section 2 hereof (subject to adjustment as provided in Section 6),
multiplied by the number of shares of Bancorp Common Stock with respect to
which the Option has not been exercised, but only if the Market/Tender
Offer Price is greater than such Purchase Price;
(iii) The difference between the Market/Tender Offer Price and the
Purchase Price paid by Commercial for any shares of Bancorp Common Stock
purchased pursuant to the exercise of the Option, multiplied by the number
of shares so purchased, but only if the Market/Tender Offer Price is
greater than such Purchase Price; and
(iv) Commercial's reasonable out-of-pocket expenses incurred in
connection with the transactions contemplated by the Merger Agreement,
including, without limitation, legal, accounting and investment banking
fees;
provided, however, that if such price is greater than an amount (the "Maximum
- -------- -------
Repurchase Price") equal to the sum of (x) $20,000,000 and (y) the amount set
forth in (i) above, then such price shall be deemed to be the Maximum Repurchase
Price for all purposes hereunder.
(b) In the event Commercial exercises its rights under this Section 7,
Bancorp shall, within 10 Business Days thereafter, pay the required amount to
Commercial by wire transfer of immediately available funds to an account
designated by Commercial and Commercial shall surrender to Bancorp the Option
and the certificates evidencing the shares of Bancorp Common Stock purchased
thereunder with respect to which Commercial then has Beneficial Ownership,
and Commercial shall warrant that it has sole record and Beneficial Ownership of
such shares and that the same are free and clear of all liens, claims, charges,
restrictions and encumbrances of any
6
<PAGE>
kind whatsoever.
(c) In determining the Market/Tender Offer Price, the value of any
consideration other than cash shall be determined by an independent nationally
recognized investment banking firm selected by Commercial and reasonably
acceptable to Bancorp.
8. Repurchase at Option of Bancorp and Right of First Refusal.
----------------------------------------------------------
(a) Except to the extent that Commercial shall have previously
exercised its rights under Section 7, at the request of Bancorp during the six-
month period commencing 13 months following the first occurrence of a Purchase
Event, Bancorp may repurchase from Commercial, and Commercial shall sell to
Bancorp, all (but not less than all, subject to Section 10) of the Bancorp
Common Stock acquired by Commercial pursuant hereto and with respect to which
Commercial has Beneficial Ownership at the time of such repurchase at a price
per share equal to the greater of (i) 110% of the Market/Tender Offer Price,
(ii) the Per Share Repurchase Price or (iii) the quotient obtained by dividing
(x) the sum of (A) the aggregate Purchase Price paid for the shares so
repurchased plus (B) interest on the aggregate Purchase Price paid for the
shares so repurchased from the date of purchase to the date of repurchase at the
highest rate of interest announced by Commercial as its prime or base lending or
reference rate during such period, less any dividends received on the shares so
repurchased, plus (C) Commercial's reasonable out-of-pocket expenses incurred in
connection with the transactions contemplated by the Merger Agreement,
including, without limitation, legal, accounting and investment banking fees by
(y) the number of shares so repurchased. Any repurchase under this Section 8(a)
shall be consummated in accordance with Section 7(b).
(b) If, at any time after the occurrence of a Purchase Event and prior
to the earlier of (i) the expiration of 18 months immediately following such
Purchase Event or (ii) the expiration or termination of the Option, Commercial
shall desire to sell, assign, transfer or otherwise dispose of the Option or all
or any of the shares of Bancorp Common Stock acquired by it pursuant to the
Option, it shall give Bancorp written notice of the proposed transaction (an
"Offeror's Notice"), identifying the proposed transferee, and setting forth the
terms of the proposed transaction. An Offeror's Notice shall be deemed an offer
by Commercial to Bancorp, which may be accepted within 10 Business Days of the
receipt of such Offeror's Notice, on the same terms and conditions and at the
same price at which Commercial is proposing to transfer the Option or such
shares to a third party. The purchase of the Option or any such shares by
Bancorp shall be closed within 10 Business Days of the date of the acceptance of
the offer and the purchase price shall be paid to Commercial by wire transfer of
immediately available funds to an account designated by Commercial. In the event
of the failure or refusal of Bancorp to purchase the Option or all the shares
covered by the Offeror's Notice or if any Governmental Authority disapproves
Bancorp's proposed purchase of the Option or such shares, Commercial may, within
60 days from the date of the Offeror's Notice, sell all, but not less than all,
of the Option or such shares to such third party at no less than the price
specified and on terms no more favorable to the purchaser than those set forth
in the Offeror's Notice. The requirements of this Section 8(b) shall not apply
to (A) any disposition as a result of
7
<PAGE>
which the proposed transferee would Beneficially Own not more than 2% of the
voting power of Bancorp or (B) any disposition of Bancorp Common Stock by a
Person to whom Commercial has sold shares of Bancorp Common Stock issued upon
exercise of the Option.
9. Registration Rights.
-------------------
At any time after a Purchase Event, Bancorp shall, if requested by any
holder or Beneficial Owner of shares of Bancorp Common Stock issued upon
exercise of the Option (except any Beneficial Owner or holder who acquired all
of such Beneficial Owner's or holder's shares in a transaction exempt from the
requirements of Section 8(b) by reason of clause (A) thereof) (each a "Holder"),
as expeditiously as possible file a registration statement on a form for general
use under the Securities Act if necessary in order to permit the sale or other
disposition of the shares of Bancorp Common Stock that have been acquired upon
exercise of the Option in accordance with the intended method of sale or other
disposition requested by any such Holder (it being understood and agreed that
any such sale or other disposition shall be effected on a widely distributed
basis so that, upon consummation thereof, no purchaser or transferee shall
Beneficially Own more than 2% of the shares of Bancorp Common Stock then
outstanding). Each such Holder shall provide all information reasonably
requested by Bancorp for inclusion in any registration statement to be filed
hereunder. Bancorp shall use its best efforts to cause such registration
statement first to become effective and then to remain effective for such period
not in excess of 180 days from the day such registration statement first becomes
effective as may be reasonably necessary to effect such sales or other
dispositions. The registration effected under this Section 9 shall be at
Bancorp's expense except for underwriting commissions and the fees and
disbursements of such Holders' counsel attributable to the registration of such
Bancorp Common Stock. In no event shall Bancorp be required to effect more than
two registrations hereunder. The filing of the registration statement hereunder
may be delayed for such period of time as may reasonably be required to
facilitate any public distribution by Bancorp of Bancorp Common Stock or if a
special audit of Bancorp would otherwise be required in connection therewith.
If requested by any such Holder in connection with such registration, Bancorp
shall become a party to any underwriting agreement relating to the sale of such
shares, but only to the extent of obligating itself in respect of
representations, warranties, indemnities and other agreements customarily
included in such underwriting agreements for parties similarly situated. Upon
receiving any request for registration under this Section 9 from any Holder,
Bancorp agrees to send a copy thereof to any other Person known to Bancorp to be
entitled to registration rights under this Section 9, in each case by promptly
mailing the same, postage prepaid, to the address of record of the Persons
entitled to receive such copies, and each such other Person, whether or not
known by Bancorp to be entitled thereto, shall be permitted to include shares of
Bancorp Common Stock with respect to which such Person is entitled to such
registration rights in such registration requested by such Holder, to the extent
reasonably practicable.
10. Severability.
------------
Any term, provision, covenant or restriction contained in this Option
Agreement held by a Governmental Authority of competent jurisdiction to be
invalid, void or unenforceable, shall
8
<PAGE>
be ineffective to the extent of such invalidity, voidness or unenforceability,
but neither the remaining terms, provisions, covenants or restrictions contained
in this Option Agreement nor the validity or enforceability thereof in any other
jurisdiction shall be affected or impaired thereby. Any term, provision,
covenant or restriction contained in this Option Agreement that is so found to
be so broad as to be unenforceable shall be interpreted to be as broad as is
enforceable. If for any reason such Governmental Authority determines that
Applicable Law will not permit Commercial or any other Person to acquire, or
Bancorp to repurchase or purchase, the full number of shares of Bancorp Common
Stock provided in Section 2 hereof (as adjusted pursuant to Section 6 hereof),
it is the express intention of the parties hereto to allow Commercial or such
other Person to acquire, or Bancorp to repurchase or purchase, such lesser
number of shares as may be permissible, without any amendment or modification
hereof.
11. Miscellaneous.
-------------
(a) Expenses. Each of the parties hereto shall pay all costs and
--------
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own financial
consultants, investment bankers, accountants and counsel, except as otherwise
provided herein.
(b) Entire Agreement. Except as otherwise expressly provided herein,
----------------
this Option Agreement and the Merger Agreement contain the entire agreement
between the parties with respect to the transactions contemplated hereunder and
supersedes all prior arrangements or understandings with respect thereto,
written or oral.
(c) Successors; No Third Party Beneficiaries. The terms and
----------------------------------------
conditions of this Option Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Option Agreement, expressed or implied, is intended to confer
upon any party, other than the parties hereto, and their respective successors
and assigns, any rights, remedies, obligations, or liabilities under or by
reason of this Option Agreement, except as expressly provided herein.
(d) Assignment. Other than as provided in Sections 8 and 9 hereof,
----------
neither of the parties hereto may sell, transfer, assign or otherwise dispose of
any of its rights or obligations under this Option Agreement or the Option
created hereunder to any other Person (whether by operation of law or
otherwise), without the express written consent of the other party.
(e) Notices. All notices or other communications which are required
-------
or permitted hereunder shall be in writing and sufficient if delivered in
accordance with Section 9.6 of the Merger Agreement (which is incorporated
herein by reference).
(f) Counterparts. This Option Agreement may be executed in
------------
counterparts, and each such counterpart shall be deemed to be an original
instrument, but both such counterparts together shall constitute but one
agreement.
9
<PAGE>
(g) Specific Performance. The parties hereto agree that if for any
--------------------
reason Commercial or Bancorp shall have failed to perform its obligations under
this Option Agreement, then either party hereto seeking to enforce this Option
Agreement against such non-performing party shall be entitled to specific
performance and injunctive and other equitable relief, and the parties hereto
further agree to waive any requirement for the securing or posting of any bond
in connection with the obtaining of any such injunctive or other equitable
relief. This provision is without prejudice to any other rights that either
party hereto may have against the other party hereto for any failure to perform
its obligations under this Option Agreement.
(h) Governing Law. This Option Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Nebraska applicable to
agreements made and entirely to be performed within such state. Nothing in this
Option Agreement shall be construed to require any party (or any subsidiary or
affiliate of any party) to take any action or fail to take any action in
violation of Applicable Law, rule or regulation.
(i) Regulatory Approvals; Section 16(b). If, in connection with (A)
-----------------------------------
the exercise of the Option under Section 3 or a sale by Commercial to a third
party under Section 8, (B) a repurchase by Bancorp under Section 7 or a
repurchase or purchase by Bancorp under Section 8, prior notification to or
approval of any Governmental Authority is required, then the required notice or
application for approval shall be promptly filed and expeditiously processed and
periods of time that otherwise would run pursuant to such Sections shall run
instead from the date on which any such required notification period has
expired or been terminated or such approval has been obtained, and in either
event, any requisite waiting period shall have passed. In the case of clause (A)
of this subsection (i), such filing shall be made by Commercial, and in the case
of clause (B) of this subsection (i), such filing shall be made by Bancorp,
provided that each of Commercial and Bancorp shall use its best efforts to make
all filings with, and to obtain consents of, all third parties and Governmental
Authorities necessary to the consummation of the transactions contemplated
hereby, including without limitation applying to the OTS under the HOLA for
approval to acquire the shares issuable hereunder. Periods of time that
otherwise would run pursuant to Sections 3, 7 or 8 shall also be extended to the
extent necessary to avoid liability under Section 16(b) of the Exchange Act.
(j) No Breach of Merger Agreement. Nothing contained in this Option
-----------------------------
Agreement shall, and performance by any party hereto of any of its obligations
under this Option Agreement in accordance with their terms shall not, constitute
a breach of any of the provisions of the Merger Agreement.
(k) Waiver and Amendment. Any provision of this Agreement may be
--------------------
waived at any time by the party that is entitled to the benefits of such
provision, but only by delivery of a written instrument executed by such party.
This Option Agreement may not be modified, amended, altered or supplemented
except upon the execution and delivery of a written agreement executed by the
parties hereto.
10
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this
Option Agreement as of the date first written above.
COMMERCIAL FEDERAL CORPORATION
By: /s/ James A. Laphen
----------------------------------
Name: James A. Laphen
Title: President
FIRST COLORADO BANCORP, INC.
By: /s/ Brian L. Johnson
----------------------------------
Name: Brian L. Johnson
Title: Executive Vice President/Treasurer
11
<PAGE>
ANNEX C
<PAGE>
Annex C
[Dated Several Days Prior to Mailing the Proxy]
The Board of Directors
First Colorado Bancorp, Inc.
215 S Wadsworth
Lakewood, CO 80226
Members of the Board
You have requested our opinion as to the fairness, from a financial
point of view, to the common stockholders of First Colorado Bancorp, Inc.
("Bancorp") of the Exchange Ratio (as defined below) in the proposed merger (the
"Merger") of Bancorp with and into Commercial Federal Corporation ("Commercial")
pursuant to the Reorganization and Merger Agreement dated March 9, 1998 (the
"Agreement"). Under the terms of the Agreement, each outstanding share of
Bancorp Common Stock, $0.10 par value, will be exchanged for shares of
Commercial Common Stock, $0.01 par value (the "Exchange Ratio") as described in
Section 1.1 in the Agreement.
In arriving at our opinion, we have, among other things:
i. reviewed certain publicly available financial
statements and other financial information not
publicly available of Bancorp;
ii. reviewed the current condition and growth prospects
for Bancorp and its subsidiary operations, including
financial projections prepared by Bancorp management;
iii. discussed with Bancorp management the past and
current operations and financial conditions of
Bancorp and the prospects of Bancorp if it were to
remain independent;
iv. reviewed Bancorp's historical stock trading activity
and considered the prospect for value, liquidity,
dividend yield and growth if Bancorp were to remain
independent;
v. evaluated the economic, banking and competitive
climate for financial institutions in Colorado, with
special consideration given to recent transactions
that may have increased the competitive environment
in the financial services, banking, and thrift
industries;
vi. reviewed the process used leading to the Commercial
offer, including a review of the potential acquirors
contracted and their responses relative to a
potential acquisition of Bancorp;
vii. compared the various offers received from interested
parties and determined that the Commercial offer
represented the highest value in absolute terms;
viii. compared the Commercial offer to recent transactions
involving other institutions of similar size, to the
extent publicly available;
<PAGE>
ix. examined the price and trading activity for
Commercial;
x. reviewed the implications for Bancorp shareholders
receiving Commercial stock with regards to prospects
for value, liquidity, dividend yield and growth;
xi. met with Commercial management and reviewed certain
publicly available financial statements and other
information not publicly available of Commercial,
visited certain Commercial facilities in Omaha, and
discussed the prospects of Commercial with
Commercial's management; and
xii. reviewed the Agreement.
Neither Commercial nor Bancorp imposed any limitations upon the scope
of the investigation performed by us in forwarding our opinion. In rendering our
opinion, we did not independently verify the asset quality and financial
condition of Commercial or Bancorp, but instead relied upon the data provided by
or on behalf of Commercial and Bancorp to be true and accurate in all material
respects.
We have assumed without independent verification the accuracy and
completeness of the financial and other information regarding Bancorp that was
provided to us or obtained from publicly available sources. We have not prepared
or acquired an independent valuation or appraisal of any of the assets of
Bancorp and we have assumed without independent verification that the aggregate
allowance for loan losses of Bancorp is adequate to cover such losses. With
respect to business plans and forecasts, we have assumed that they have been
reasonably prepared on a basis reflecting the best currently available estimates
and judgments of the management of Bancorp as to the future performance of
Bancorp, its subsidiaries and business units. Furthermore, we have assumed that
the Merger will be consummated on a timely basis in accordance with its term and
pursuant to the Agreement. We have also taken into account our assessment of
general economic, market and financial conditions as they exist, as well as our
experience in connection with similar transactions and securities valuations
generally. Our opinion necessarily is based upon conditions as they exist and
can be evaluated as of the date of this opinion.
The Wallach Company is an investment banking firm engaged in the
valuation of business and their securities in connection with mergers and
acquisitions, private placements, and valuation for corporate and other
purposes. The Wallach Company, as the Bancorp's financial advisor, assisted with
the marketing and negotiations leading to the Agreement for which it has and
will receive compensation.
Based on our analysis of the foregoing, the assumptions described above
and upon such other factors we deem relevant, it is our opinion that, as of the
date hereof, the Exchange Ratio is fair to Bancorp shareholders from a financial
point of view.
The Wallach Company, Inc.
<PAGE>
ANNEX D
<PAGE>
ANNEX D
__________ ___, 1998
Board of Directors
Commercial Federal Corporation
2120 South 72nd Street
Omaha, NE 68124
Members of the Board:
We understand that Commercial Federal Corporation ("CFB") and First
Colorado Bancorp, Inc. ("First Colorado") propose to enter into an Agreement and
Plan of Merger (the "Agreement") dated March 8, 1998 pursuant to which First
Colorado is to be merged with and into CFB in a transaction (the "Merger") in
which each outstanding share of First Colorado's common stock, par value $1.00
per share (the "First Colorado Shares"), will be converted into the right to
receive no more than 0.9677 and no less than 0.7895 shares (the "Exchange
Ratio") of the common stock, par value $0.01 per share, of CFB (the "CFB
Shares"), all as set forth more fully in the Agreement.
You have asked us whether, in our opinion, the Exchange Ratio is fair from
a financial point of view to CFB.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly-available business and financial information
relating to CFB and First Colorado that we deemed to be relevant;
(2) Reviewed certain information, including financial forecasts, relating
to the businesses, earnings, assets, liabilities and prospects of First
Colorado and CFB furnished to us by senior management of CFB and First
Colorado, as well as the amount and timing of the cost savings and related
expenses and revenue enhancements expected to result from the Merger
furnished to us by the senior management of CFB and First Colorado (the
"Expected Synergies");
(3) Conducted discussions with members of senior management of CFB and
First Colorado concerning the foregoing, including the respective
businesses, prospects, regulatory condition and contingencies of CFB and
First Colorado before and after giving effect to the Merger and the
Expected Synergies;
(4) Reviewed the market prices and valuation multiples for the CFB Shares
and First Colorado Shares and compared the CFB Shares and the First
Colorado Shares with those of certain publicly-traded companies which we
deemed to be relevant;
(5) Reviewed the results of operations of First Colorado and CFB and
compared them with those of certain publicly-traded companies which we
deemed to be relevant;
(6) Compared the proposed financial terms of the Merger with the financial
terms of certain other transactions which we deemed to be relevant;
(7) Reviewed the potential pro forma impact of the Merger;
<PAGE>
(8) Reviewed a draft of the Agreement; and
(9) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our assessment
of general economic, market and monetary conditions.
In preparing our opinion, we have assumed, with your consent, and relied on
the accuracy and completeness of all information supplied or otherwise made
available to us, discussed with or reviewed by or for us, or publicly available,
and we have not assumed responsibility for independently verifying such
information or undertaken an independent evaluation or appraisal of the assets
or liabilities of CFB or First Colorado, nor have we been furnished any such
evaluation or appraisal. We are not experts in the evaluation of allowances for
credit or loan losses and we have neither made an independent evaluation of the
adequacy of the allowance for credit or loan losses of CFB or First Colorado,
nor reviewed any individual credit or loan files relating to CFB or First
Colorado and, as a result, we have assumed that the aggregate allowance for
credit or loan losses for both CFB and First Colorado is adequate to cover such
losses and will be adequate on a pro forma basis for the combined entity. In
addition, we have not assumed any obligation to conduct, nor have we conducted,
any physical inspection of the properties or facilities of CFB or First
Colorado. With respect to the financial forecast information, including,
without limitation, financial forecasts, evaluation of contingencies and
projections regarding under-performing and non-performing assets, net charge-
offs, adequacy of reserves and future economic conditions and the Expected
Synergies, furnished to or discussed with us by CFB or First Colorado, we have
assumed that they have been reasonably prepared and reflect the best currently
available estimates, allocations and judgments of the senior management of CFB
and First Colorado as to the expected future financial performance of CFB, First
Colorado or the combined entity, as the case may be, and the Expected Synergies.
We express no opinion as to such financial forecast information or the Expected
Synergies or the assumptions upon which they were based. We have further
assumed that the Merger will qualify as a tax-free reorganization for U.S.
federal income tax purposes and will be accounted for as a pooling-of-interests.
We have also assumed that the final form of the Agreement will be substantially
similar to the last drafts reviewed by us.
Our opinion is necessarily based upon market, economic and other conditions
as in effect, and on the information made available to us as of, the date
hereof. For the purposes of rendering this opinion, we have assumed, in all
respects material to our analysis, that the representations and warranties of
each party in the Agreement and all related documents and instruments
(collectively, the "Documents") contained therein are true and correct, that
each party to the Documents will perform all of the covenants and agreements
required to be performed by such party under such Documents, and that all
conditions to the consummation of the Merger will be satisfied without waiver
thereof. We have also assumed that in the course of obtaining the necessary
regulatory or other consents or approvals (conctractual or otherwise) for the
Merger, no restrictions, including any divestiture requirements or amendment or
modifications, will be imposed that will have a material adverse effect on the
contemplated benefits of the Merger, including the Expected Synergies.
We are acting as financial advisor to CFB in connection with the Merger and
will receive a fee from CFB for our services, a significant portion of which is
contingent upon the consummation of the Merger. In addition, CFB has agreed to
indemnify us for certain liabilities arising out of our engagement. We have in
the past provided financial advisory, investment banking and other services to
CFB, and may continue to do so, and have received, and may receive, customary
fees for the rendering of such services. In addition, in the ordinary course of
our business, we also may actively trade debt and/or equity securities of CFB
and its respective affiliates and First Colorado and its affiliates for our own
account and the accounts of our customers, and therefore we may from time to
time hold a long or short position in such securities.
This option is for the use and benefit of the Board of Directors of CFB.
Our opinion does not address the merits of the underlying decision by CFB to
engage in the Merger, and does not constitute a recommendation to any
stockholder as to how such stockholder should vote on the proposed Merger.
We are not expressing any opinion herein as to the prices at which CFB
Shares will trade following the announcement or consummation of the Merger.
<PAGE>
On the basis of and subject to the foregoing, we are of the opinion that,
as the date hereof, the Exchange Ratio is fair from a financial point of view to
CFB.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
<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 stockholders.
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:
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
*2/1/ Reorganization and Merger Agreement dated March 9, 1998
*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 Wachtell, Lipton, Rosen & Katz regarding certain federal tax matters
*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
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C>
*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
*10.14/13/ Mid Continent Bancshares, Inc. 1994 Stock Option Plan
*21 /9/ Subsidiaries of Commercial Federal Corporation
23.1 Consent of Deloitte & Touche llp
23.2 Consent of Wachtell, Lipton, Rosen & Katz (contained in their
opinion filed as Exhibit 8)
*23.3 Consent of Fitzgerald, Schorr, Barmettler & Brennan, P.C. (contained in their opinion filed as Exhibit 8)
23.4 Consent of KPMG Peat Marwick LLP
*23.5 Form of Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated
*23.6 Consent of The Wallach Company, Inc.
*24 Power of Attorney (See Signature Page)
*27/14/ Financial Data Schedule
*99.1 Form of Proxy solicited by Board of Directors of Commercial Federal Corporation
*99.2 Form of Proxy solicited by Board of Directors of First Colorado
</TABLE>
______________
* Previously filed.
/1/ Incorporated by reference to Annex A to the Prospectus/Joint 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/ Incorporated by reference to the Registrant's Post-Effective Amendment to
Form S-4 under cover of Form S-8 (File No. 333-42817).
/14/ 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.
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.
II-4
<PAGE>
INSTRUCTIONS TO FORM S-4.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus/Joint 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 May 1, 1998.
COMMERCIAL FEDERAL CORPORATION
By: */s/ William A. Fitzgerald
---------------------------------------------
William A. Fitzgerald
Chairman of the Board and Chief
Executive Officer
POWER OF ATTORNEY
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.
<TABLE>
<CAPTION>
Signature Capacity Date
- --------- -------- ----
<S> <C> <C>
/s/ William A. Fitzgerald Principal Executive Officer May 1, 1998
- -------------------------------------
William A. Fitzgerald and Director
Chairman of the Board and
Chief Executive Officer
/s/ James A. Laphen Principal Financial Officer May 1, 1998
- -------------------------------------
James A. Laphen
President, Chief Operating Officer
and Chief Financial Officer
/s/ Gary L. Matter Principal Accounting Officer May 1, 1998
- -------------------------------------
Gary L. Matter
Senior Vice President, Controller
and Secretary
*/s/ Talton K. Anderson Director May 1, 1998
- -------------------------------------
Talton K. Anderson
*/s/ Michael P. Glinsky Director May 1, 1998
- -------------------------------------
Michael P. Glinsky
*/s/ William A. Krause Director May 1, 1998
- -------------------------------------
William A. Krause
*/s/ Robert F. Krohn Director May 1, 1998
- -------------------------------------
Robert F. Krohn
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
*/s/ Carl G. Mammel Director May 1, 1998
- -------------------------------------
Carl G. Mammel
*/s/ Robert S. Milligan Director May 1, 1998
- -------------------------------------
Robert S. Milligan
*/s/ James P. O'Donnell Director May 1, 1998
- -------------------------------------
James P. O'Donnell
*/s/ Robert D. Taylor Director May 1, 1998
- -------------------------------------
Robert D. Taylor
*/s/ Aldo J. Tesi Director May 1, 1998
- -------------------------------------
Aldo J. Tesi
*By: /s/ James A. Laphen
---------------------------------
James A. Laphen
Attorney-in-fact
</TABLE>
<PAGE>
EXHIBIT 8
[Letterhead of Wachtell, Lipton, Rosen & Katz]
[Form of Tax Opinion]
__________ __, 1998
Commercial Federal Corporation
2120 South 72nd Street
Omaha, Nebraska 68124
First Colorado Bancorp, Inc.
215 South Wadsworth Boulevard
Lakewood, Colorado 80226
Ladies/Gentlemen:
We have acted as special counsel to Commercial Federal Corporation, a
Nebraska corporation ("Commercial Federal"), in connection with the proposed
merger (the "Parent Merger") of First Colorado Bancorp, Inc., a Colorado
corporation ("First Colorado"), with and into Commercial Federal, upon the terms
and conditions set forth in the Reorganization and Merger Agreement, dated as of
March 9, 1998, by and among Commercial Federal, Commercial Federal Bank, A
Federal Savings Bank, a federally chartered savings bank and wholly-owned
subsidiary of Commercial Federal ("CFB"), First Colorado and First Federal Bank
of Colorado, a federally chartered savings bank and wholly-owned subsidiary of
First Colorado ("FFBC") (the "Merger Agreement"). At your request, in
connection with the filing of the Registration Statement on Form S-4 filed with
the Securities and Exchange Commission in connection with the Parent Merger (the
"Registration Statement"), we are rendering our opinion concerning certain
federal income tax consequences of the Parent Merger.
For purposes of the opinion set forth below, we have relied, with the
consent of Commercial Federal and the consent of First Colorado, upon the
accuracy and completeness of the statements and representations (which
statements and representations we have neither investigated nor verified)
contained, respectively, in the certificates of the officers of Commercial
Federal and First Colorado, dated the date hereof (copies of which are attached
hereto and which are incorporated herein by reference), and have assumed that
such certificates will be complete and accurate as of the Effective Time. We
have also relied upon the accuracy of the Registration Statement and the Joint
Proxy
<PAGE>
Commeercial Federal Corporation
First Colorado Bancorp, Inc
___________ ___, 1998
Page 2
Statement/Prospectus included therein (together, the "Proxy Statement").
Any capitalized term used and not defined herein has the meaning given to it in
the Merger Agreement.
We have also assumed that (i) the transactions contemplated by the Merger
Agreement, including the Parent Merger and the Bank Merger, will be consummated
in accordance therewith and as described in the Proxy Statement and (ii) the
Parent Merger will qualify as a statutory merger under the applicable laws of
the States of Nebraska and Colorado.
Based upon and subject to the foregoing, it is our opinion that, under
currently applicable United States federal income tax law, (i) the Parent Merger
will constitute a "reorganization" within the meaning of Section 368(a) of the
Code, and (ii) no gain or loss will be recognized by First Colorado shareholders
who receive solely Commercial Common Stock in exchange for shares of Bancorp
Common Stock pursuant to the Merger (except with respect to cash received in
lieu of a fractional share interest in Commercial Common Stock).
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement, and to the
references to us under the captions "SUMMARY -- The Merger -- Federal Income Tax
Consequences" and "MERGER --Federal Income Tax Consequences" and elsewhere in
the Proxy Statement. In giving such consent, we do not thereby admit that we
are in the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended.
This opinion may not be applicable to shareholders subject to special
treatment under U.S. federal income tax law (including, for example, non-U.S.
persons, financial institutions, dealers in securities, insurance companies or
tax-exempt entities, holders who acquired Bancorp Common Stock pursuant to the
exercise of an employee stock option or right or otherwise as compensation, and
holders who hold Bancorp Common Stock as part of a hedge, straddle or conversion
transaction).
Very truly yours,
<PAGE>
Exhibit 23.1
INDEPENDENT'S AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1, as to
Registration Statement No. 333-49967 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 an explanatory
paragraph referring to a change in the method of accounting for mortgage
servicing rights in fiscal year 1996), appearing 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
May 1, 1998
<PAGE>
Exhibit 23.4
[LETTERHEAD OF KPMG PEAT MARWICK LLP]
The Board of Directors
First Colorado Bancorp, Inc.:
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the Prospectus/Joint Proxy
Statement.
/s/ KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP
Denver, Colorado
May 1, 1998
