<PAGE> 1
Registration No. 333
---------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
Merchants and Manufacturers Bancorporation, Inc.
(Exact name of registrant as specified in its charter)
Wisconsin 6712 39-1413328
(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation Industrial Identification
or organization) Classification No.)
Code Number)
14100 West National Avenues
New Berlin, Wisconsin 53151
(262) 827-6700
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
----------
Michael J. Murry
Chairman of the Board of Directors
Merchants and Manufacturers Bancorporation, Inc.
14100 W. National Avenue
New Berlin, Wisconsin 53151
(262) 827-6700
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------
Copies of all correspondence to:
Erich Mildenberg John Knight
Davis & Kuelthau, S.C. Boardman, Suhr, Curry & Field, LLP
111 East Kilbourn Avenue 1 South Pinckney Street
Milwaukee, Wisconsin 53202 Madison, Wisconsin 53701
(414) 276-0200 (608) 257-9521
Approximate date of commencement of proposed sale to the public: As
soon as practicable after this Registration Statement becomes effective and all
other conditions to the Merger (as defined herein) have been satisfied or
waived.
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If the securities being registered on this Form are offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box { }.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering { }.
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering { }.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Each Proposed Proposed
Class of Maximum Maximum Amount
Securities Amount Offering Aggregate of
to be to be Price Offering Registra-
Registered(1) Registered(2) per Share Price tion Fee (3)
<S> <C> <C> <C> <C>
Common 459,680 Not Not $1,440.00
Stock, $1.00 Shares Applicable Applicable
par value
</TABLE>
(1) This Registration Statement relates to securities of the Registrant
issuable to holders of common stock of CBOC, Inc ("CBOC") in the
proposed merger of CBOC with and into a wholly-owned subsidiary of
Registrant (the "Merger").
(2) The actual number of shares of common stock, $1.00 par value of
Merchants and Manufacturers Bancorporation, Inc. ("Merchants") to be
issued in connection with the Merger will be determined based on the
number of shares of common stock, $1.00 par value of CBOC outstanding
immediately prior to the effective date of the merger multiplied by the
exchange ratio specified by that certain Agreement and Plan of Merger,
dated August 1, 2000, by and between Merchants, Merchants Merger Corp.
("Merger Corp.") and CBOC and will further be determined by the number
of shares of CBOC stock as to which dissenters' rights will be
perfected, if any.
(3) Pursuant to Rule 457(f)(2), the registration fee was computed on the
basis of $5,454,000, the book value of CBOC stock to be exchanged in
the Merger as of June 30, 2000, the latest practicable date.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE> 3
[CBOC, Inc. Letterhead]
Date:
Dear CBOC Stockholder:
You are cordially invited to attend our special meeting of shareholders to be
held on , 2000, at p.m. (local time) at Community Bank of Oconto
County, 500 Cherry Avenue, Oconto Falls, Wisconsin. At the special meeting you
will vote on a proposal to approve the merger of CBOC, Inc. and Merchants Merger
Corp.
If the merger is completed, you will receive not less than 4.701 or more than
5.746 shares of Merchants and Manufacturers Bancorporation, Inc. common stock
for each share of CBOC common stock you own. The exact number of shares of
Merchants stock you will receive will be based on the average of market
quotations of Merchants stock over 20 trading days before the day on which the
merger occurs. In the merger, Merchants will issue up to 459,680 shares of its
common stock. On October 20, 2000, the bid price of Merchants common stock was
$28.75, making 5.746 shares of Merchants common stock worth $165.20. The
Merchants common stock is quoted in the Milwaukee Journal/Sentinel under "Other
Stocks." The price of Merchants common stock will, however, fluctuate between
now and the merger date.
Merchants common stock is quoted on the "Pink Sheets," an inter-broker quotation
medium and in the "Over the Counter Bulletin Board" an electronic quotation
service. The maximum total number of Merchants common stock to be issued in the
merger have been registered under the Securities Act of 1933 and the laws of the
states where such registration is required.
After the merger, CBOC stockholders will own about 18% of the combined company's
common stock and Merchants stockholders will own about 82% of the combined
company's stock, assuming the maximum of 459,680 shares of Merchants common
stock is issued in the merger.
The merger will be tax-free to you for federal income tax purposes, except for
taxes on cash received for fractional shares or cash received if you exercise
dissenters' rights.
As a result of the merger, Merchants will become the owner of Community Bank of
Oconto County, Oconto Falls, Wisconsin.
CBOC's Board of Directors has approved the merger and recommends that you vote
for the merger.
The enclosed proxy statement/prospectus provides you with detailed information
about the merger. We encourage you to read the entire document carefully. You
can also get information about Merchants from publicly available documents
Merchants has filed with the SEC.
Your vote is very important. Whether or not you plan to attend this meeting,
please take the time to vote by completing and mailing the enclosed proxy card
to us in the envelope we have provided.
Very truly yours,
-------------------------------------
Thomas Ebenreiter
President and Chief Executive Officer
CBOC, Inc.
<PAGE> 4
THIS DOCUMENT INCORPORATES BUSINESS AND FINANCIAL INFORMATION ABOUT MERCHANTS
AND MANUFACTURERS BANCORPORATION, INC. THAT IS NOT INCLUDED IN OR DELIVERED WITH
THIS DOCUMENT BUT IS INCORPORATED BY REFERENCE. YOU MAY OBTAIN THE INCORPORATED
INFORMATION WITHOUT CHARGE BY WRITING TO OR CALLING:
MERCHANTS AND MANUFACTURERS BANCORPORATION, INC.
14100 WEST NATIONAL AVENUE
NEW BERLIN, WI 53151
ATTENTION: MICHAEL J. MURRY, CHAIRMAN OF THE BOARD
TELEPHONE: (262) 827-6700
TO OBTAIN TIMELY DELIVERY, YOU MUST REQUEST THE INFORMATION NO LATER THAN 5
BUSINESS DAYS BEFORE THE DATE ON WHICH YOU MUST MAKE YOUR INVESTMENT DECISION.
IF YOU WOULD LIKE TO REQUEST DOCUMENTS FROM MERCHANTS, PLEASE DO SO BY ,
2000, TO RECEIVE THEM BEFORE THE SPECIAL MEETING OF SHAREHOLDERS OF CBOC, INC.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS
PROXY STATEMENT/PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE SECURITIES OFFERED IN THE MERGER ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER
OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
THIS PROXY STATEMENT/PROSPECTUS IS DATED , 2000 AND WAS MAILED
WITH A PROXY CARD ON OR ABOUT , 2000.
<PAGE> 5
CBOC, INC.
500 Cherry Avenue
Oconto Falls, WI 54154
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD , 2000
TO THE SHAREHOLDERS OF CBOC, INC.
A special meeting of shareholders of CBOC, Inc. ("CBOC") will be held
at Community Bank of Oconto County, Oconto Falls, Wisconsin on ,
2000, at .m. for the purpose of voting on the following matters:
1. To approve the Agreement and Plan of Merger dated as of August
1, 2000, as amended by the First Amendment to the Agreement
and Plan of Merger dated as of October 25, 2000, among
Merchants and Manufacturers Bancorporation, Inc.
("Merchants"), Merchants Merger Corp. ("Merger Corp."), a
wholly-owned subsidiary of Merchants and CBOC (the "Merger
Agreement") and the related Plan of Merger providing for the
merger of CBOC with and into Merger Corp. ("the Merger"). (A
copy of the Merger Agreement and Plan of Merger is attached as
Exhibits A and A-1 hereto).
2. To transact such other business as may properly come before
the meeting.
THE DIRECTORS OF CBOC HAVE APPROVED THE MERGER AGREEMENT AND RECOMMEND
THAT THE SHAREHOLDERS APPROVE THE MERGER AGREEMENT AND PLAN OF MERGER.
Any shareholder desiring to exercise dissenters' rights and be paid in
cash for the fair value of his or her shares of CBOC common stock in accordance
with the provisions of the Wisconsin Business Corporation Law (i) must file a
written notice of intention to demand payment for his or her shares before the
vote is taken at the special meeting of shareholders, (ii) must not vote in
favor of the merger, and (iii) must otherwise comply with the procedures set
forth in Subchapter XIII of the Wisconsin Business Corporation Law, a copy of
which is attached as Exhibit D to the Proxy Statement/Prospectus. See "THE
Merger-Dissenters' Rights" in the accompanying Proxy Statement/Prospectus.
The Board of Directors has fixed the close of business on ,
2000, as the record date for the determination of CBOC shareholders entitled to
notice of and to vote at the special meeting and any adjournment thereof.
Whether or not you plan to attend the special meeting, holders of CBOC
common stock are asked to please complete, date and sign the enclosed proxy
card, which is solicited by the Board of Directors of CBOC, and return it
promptly in the accompanying envelope. No postage is required if mailed in the
United States. The giving of such proxy does not affect your right to vote in
person in the event you attend the special meeting. You may revoke the proxy at
any time prior to its exercise in the manner described in the Proxy
Statement/Prospectus.
<PAGE> 6
The special meeting may be postponed or adjourned from time to time
without any notice other than by announcement at the special meeting of any
postponement or adjournment thereof, and any and all business for which notice
is hereby given may be transacted at such postponed or adjourned special
meeting.
THE AFFIRMATIVE VOTE OF THE HOLDERS OF AT LEAST A MAJORITY OF THE
OUTSTANDING SHARES OF CBOC COMMON STOCK IS REQUIRED FOR APPROVAL OF THE MERGER
AGREEMENT AND PLAN OF MERGER. YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF
SHARES YOU OWN.
Shareholders are invited to attend the special meeting.
BY ORDER OF THE BOARD OF DIRECTORS
-------------------------------------------
Thomas Ebenreiter
President and Chief Executive Officer
Oconto Falls, Wisconsin
, 2000
---------
PLEASE DO NOT SEND YOUR STOCK CERTIFICATES AT THIS TIME. IF THE MERGER IS
CONSUMMATED, YOU WILL BE SENT INSTRUCTIONS REGARDING THE SURRENDER OF YOUR
STOCK CERTIFICATES.
<PAGE> 7
Merchants and Manufacturers Bancorporation, Inc.
CBOC, Inc.
Proxy Statement/Prospectus
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SUMMARY .........................................................................................................1
Merchants and Manufacturers Bancorporation, Inc..........................................................1
CBOC, Inc................................................................................................1
The Special Meeting .....................................................................................1
Votes Required...........................................................................................1
Directors of CBOC Have Agreed to Vote for the Merger.....................................................2
Reasons for the Merger; Recommendation of the Board of Directors of CBOC.................................2
The Merger ..............................................................................................2
General..................................................................................................2
What CBOC Shareholders will receive in the Merger........................................................2
Post-Merger Dividend Policy of Merchants.................................................................3
What we need to do to complete the Merger................................................................3
Exchange of Stock Certificates...........................................................................3
Termination of the Merger Agreement......................................................................4
Reimbursement of Expenses................................................................................4
Break-Up Fee.............................................................................................4
Interests of CBOC Officers and Directors in the Merger...................................................4
Financial Consultant Says the Merger is Fair.............................................................4
Dissenting Shareholders' Rights..........................................................................4
The Merger will be Tax Free..............................................................................5
Certain Considerations...................................................................................5
Regulatory Approvals.....................................................................................5
COMPARATIVE BOOK VALUES, DIVIDENDS AND EARNINGS PER COMMON SHARE..................................................5
COMPARATIVE STOCK PRICES AND DIVIDENDS............................................................................7
SELECTED HISTORICAL AND PRO FORMA DATA............................................................................8
THE SPECIAL MEETING..............................................................................................13
Date, Place and Time....................................................................................13
Matters to Be Considered at the Special Meeting.........................................................13
Required Vote...........................................................................................13
Voting of Proxies.......................................................................................13
Revocability of Proxies.................................................................................13
Record Date; Stock Entitled to Vote; Quorum.............................................................13
Solicitation of Proxies.................................................................................14
</TABLE>
i
<PAGE> 8
<TABLE>
<S> <C>
THE Merger.......................................................................................................14
Background of the Merger................................................................................14
Reasons for the Merger; Recommendation of Board of Directors of CBOC....................................16
Certain Considerations..................................................................................18
Opinion of CBOC Financial Advisor.......................................................................19
Marshall's analysis............................................................................20
Analysis of Selected Comparable Transactions...................................................21
Analysis of CBOC Valuation Multiples...........................................................21
Analysis of Publicly Traded Companies Comparable to CBOC.......................................21
Discounted Earnings Analysis...................................................................22
Analysis of Merchants..........................................................................22
Pro Forma Merger Analysis......................................................................23
Stock Trading Analysis.........................................................................23
Contribution Analysis..........................................................................23
Interests of Certain Persons in the Merger..............................................................24
Merger Consideration....................................................................................24
Regulatory Approvals Required...........................................................................26
Federal ......................................................................................26
Wisconsin......................................................................................26
General ......................................................................................27
The Effective Time......................................................................................27
Conversion of Shares, Procedure for Exchange of Certificates; Fractional Shares.........................28
Description of Merchants Common Stock Issuable in the Merger............................................30
General ......................................................................................30
Dividend Rights................................................................................30
Voting Rights..................................................................................30
Rights Upon Liquidation........................................................................30
Miscellaneous..................................................................................30
Comparison of Shareholder Rights........................................................................30
Authorized Capital Stock.......................................................................31
Required Vote..................................................................................31
Classified Board of Directors..................................................................31
Removal of Directors...........................................................................32
Newly Created Directorships and Vacancies on the Board of Directors............................32
Certain Business Combinations..................................................................32
Resale of Merchants Common Stock Issued Pursuant to the Merger..........................................33
Pre-Merger Dividend Policy .............................................................................33
Post-Merger Dividend Policy.............................................................................33
Conduct of Business Pending the Merger..................................................................34
Certain Material Federal Income Tax Consequences........................................................34
Anticipated Accounting Treatment........................................................................35
Dissenters' Rights......................................................................................35
The Voting Agreement....................................................................................37
Other Related Party Transactions........................................................................37
Management after the Merger.............................................................................37
CERTAIN PROVISIONS OF THE Merger Agreement.......................................................................38
The Merger..............................................................................................38
</TABLE>
ii
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<TABLE>
<S> <C>
Representations and Warranties..........................................................................38
Certain Covenants.......................................................................................38
No Solicitation of Transactions.........................................................................40
Conditions to Consummation of the Merger................................................................41
Termination.............................................................................................41
Amendment and Waiver....................................................................................42
Expenses ...............................................................................................42
Break-Up Fee............................................................................................42
CERTAIN PROVISIONS OF THE VOTING AGREEMENT.......................................................................43
CERTAIN INFORMATION CONCERNING MERCHANTS.........................................................................44
CERTAIN INFORMATION CONCERNING CBOC..............................................................................45
Ownership of CBOC Common Stock..........................................................................45
EXPERTS ........................................................................................................46
LEGAL OPINIONS...................................................................................................47
FUTURE SHAREHOLDER PROPOSALS.....................................................................................47
WHERE YOU CAN FIND MORE INFORMATION..............................................................................47
FORWARD-LOOKING STATEMENTS.......................................................................................49
INDEX OF EXHIBITS
Exhibit A - Agreement and Plan of Merger with First Amendment..........................................A-1
Exhibit A-1 - Plan of Merger.........................................................................A-1-1
Exhibit B - Voting Agreement...........................................................................B-1
Exhibit C - Opinion of Marshall Financial Consulting, LLC..............................................C-1
Exhibit D - Subchapter XIII of Wisconsin Business Corporation Law......................................D-1
Exhibit E - CBOC Bancorp., Inc. and Subsidiary Financial
Statements and Management's Discussion and Analysis
of Financial Condition and Results of Operations......................................E-1
</TABLE>
iii
<PAGE> 10
SUMMARY
This summary highlights selected information from this document. It
does not contain all the information that is important to you. To understand the
merger fully, you should carefully read this entire document and the other
documents to which the document refers you. See "WHERE YOU CAN FIND MORE
INFORMATION"on pages . We have included page numbers parenthetically to
direct you to a more complete description of the topics presented in this
summary.
MERCHANTS AND MANUFACTURERS BANCORPORATION, INC. (pages )
Merchants and Manufacturers Bancorporation, Inc. is a Wisconsin
multi-bank financial holding company with 4 subsidiary banks operating a total
of 20 facilities in Milwaukee, Waukesha and Ozaukee Counties. Merchants also
owns 2 non-bank subsidiaries, Lincoln Neighborhood Redevelopment Corporation,
which was organized for the purpose of redeveloping and rejuvenating certain
areas in the City of Milwaukee and M&M Services, Inc., which provides
operational services to the Banks.
At June 30, 2000, Merchants had assets of $515 million, net loans of
$410 million, total deposits of $383 million and shareholders' equity of $41
million.
The principal executive office of Merchants is located at 14100 West
National Avenue, New Berlin, Wisconsin, 53151, and its telephone number is (262)
827-6700.
CBOC, INC. (pages )
CBOC, Inc. is a bank holding company and serves as the holding company
for Community Bank of Oconto County, a Wisconsin commercial bank.
At June 30, 2000, CBOC had total consolidated assets of $57 million,
loans of $34 million, deposits of $47 million and equity of $5.5 million. The
Bank operates from its main office in Oconto Falls, Wisconsin and a branch in
Gillett, Wisconsin.
The principal executive office of CBOC is located at 500 Cherry Avenue,
Oconto Falls, Wisconsin 54154 and its telephone number is (920) 846-2810. The
main office of Community Bank of Oconto County is located at the same address.
THE SPECIAL MEETING (pages )
A special meeting of the shareholders of CBOC will be held at the
Community Bank of Oconto County, 500 Cherry Avenue, Oconto Falls, Wisconsin, on
, 2000, at p.m., local time. The close of business on
, 2000, is the record date for determining the shareholders of
record of CBOC entitled to notice of and to vote at the CBOC special meeting and
any postponement or adjournment thereof. The purpose of the CBOC special meeting
is to consider and vote upon the merger and other matters that may come before
the CBOC special meeting.
Shareholders of Merchants are not required to approve the merger.
VOTES REQUIRED (page )
The Wisconsin Business Corporation Law requires that the merger be
approved by the majority of outstanding shares of CBOC common stock.
-1-
<PAGE> 11
As of the record date, there were 80,000 shares of CBOC common stock
outstanding. As of the record date, directors and executive officers of CBOC
held or exercised voting control over approximately 40% of the outstanding
shares of CBOC common stock.
DIRECTORS OF CBOC HAVE AGREED TO VOTE FOR THE MERGER (pages )
Merchants has entered into a voting agreement with each of the
directors of CBOC. The directors have agreed to vote their shares in favor of
the merger and against any acquisition of control of by a third party. The
voting agreements may have the effect of discouraging persons who might now or
in the future be interested in acquiring all of or a significant interest in
CBOC from considering such an acquisition. The voting agreements are intended to
increase the likelihood that the merger will be consummated.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF CBOC (pages )
The Board of Directors of CBOC believes that the merger is fair to you
and in your best interests. They recommend that holders of CBOC common stock
vote FOR approval of the merger.
THE MERGER (pages )
GENERAL.
Under the terms of the merger agreement, CBOC, will merge into
Merchants Merger Corp. As a result of the merger, Community Bank of Oconto
County will become a wholly-owned subsidiary of Merchants Merger Corp. which, in
turn is a wholly-owned subsidiary of Merchants and Manufacturers Bancorporation,
Inc. The merger agreement with amendment is attached to this document as Exhibit
A and the plan of merger is attached as Exhibit A-1 to this document. We
encourage you to read the merger agreement and the plan of merger. They are the
legal documents governing the merger.
WHAT CBOC SHAREHOLDERS WILL RECEIVE IN THE MERGER (pages )
As a shareholder of CBOC, you will receive Merchants common stock for
your CBOC stock, unless you dissent from the merger and follow the statutory
procedure for perfecting your dissenters' rights. The number of shares of
Merchants common stock you will receive will be computed as follows:
1. If the daily average price of Merchants common stock is
between $31.50 and $38.50, the number of shares of Merchants
common stock you receive will be $181.00 divided by the daily
average price.
2. If the daily average price of Merchants common stock is
between $28.00 and $31.50, you will receive 5.746 shares of
Merchants common stock.
3. If the daily average price of Merchants common stock is
between $38.50 and $42.00, you will receive 4.701 shares of
Merchants common stock.
4. If the daily average price is less than $28.00 or greater than
$42.00, then Merchants and CBOC will make a good faith effort
to renegotiate the number of shares you will receive for your
CBOC stock.
The daily average price is the daily average of the bid and ask
quotations of Merchants common stock as published in the Milwaukee Journal
Sentinel during 20 trading days before the merger. The 20 daily averages will be
totaled and divided by 20 to determine the daily average price.
-2-
<PAGE> 12
You should note that the market price of Merchants common stock may
fluctuate prior to consummation of the merger. You will therefore not know when
you vote on the merger what the Merchants shares you receive will be worth when
issued to you. The market value of the Merchants shares you will receive at the
time of the merger could be higher or lower than the current market value.
On October 20, 2000, the bid price for Merchants common stock was
$28.75 per share and the ask price was $29.75 per share. Shareholders of CBOC
should obtain current price quotations for Merchants common stock.
POST-MERGER DIVIDEND POLICY OF MERCHANTS (page )
It is presently expected that dividend payments will continue at
Merchants' current quarterly dividend rate of $0.15 per share. Merchants' Board
of Directors determines the level of dividends to be declared each quarter based
on various economic and financial factors.
WHAT WE NEED TO DO TO COMPLETE THE MERGER (pages )
The completion of the merger depends on a number of conditions being
met, including the following:
1. Shareholders of CBOC vote in favor of the agreement and plan
of merger.
2. We receive all necessary regulatory approvals.
3. Receipt by us of a legal opinion that, for United States
federal income tax purposes, Merchants and Manufacturers
Bancorporation, Inc., CBOC, Inc., Merchants Merger Corp. and
CBOC shareholders who exchange their shares of CBOC common
stock for shares of Merchants common stock, will not recognize
any gain or loss as a result of the merger, except in
connection with the payment of cash instead of fractional
shares. The tax opinion will be subject to various
limitations, and we recommend that you read the fuller
description of material tax consequences on pages .
4. Receipt by Merchants of a letter from its independent
accountant that the merger will qualify for "pooling of
interests" accounting treatment.
5. The absence of any injunction or legal restraint blocking the
merger.
Where the law permits, Merchants and Manufacturers Bancorporation, Inc.
or CBOC, Inc. could decide to complete the merger even though one or more of
these conditions has not been met. We cannot be certain when (or if) the
conditions to the merger will be satisfied or waived, or that the merger will be
completed.
EXCHANGE OF STOCK CERTIFICATES (pages ).
At or prior to the time the merger becomes effective, Merchants and
Manufacturers Bancorporation, Inc. will deposit with Firstar Trust Company
certificates representing the shares of Merchants common stock to be issued in
accordance with the terms of the merger agreement.
After the merger becomes effective, Firstar Trust Company will mail to
each CBOC shareholder instructions on how to exchange CBOC stock for Merchants
common stock.
-3-
<PAGE> 13
TERMINATION OF THE MERGER AGREEMENT. (page )
The Boards of Directors of Merchants and CBOC can agree at any time to
terminate the agreement and plan of merger without completing the merger. Other
reasons for terminating the merger are discussed on page of this document.
REIMBURSEMENT OF EXPENSES. (pages )
Except in case of a breach of the merger agreement, CBOC and Merchants
will pay their own expenses in connection with the merger.
BREAK-UP FEE (page )
If the merger agreement is terminated because CBOC failed to support
the merger or failed to oppose an offer from a third party to acquire it, then
CBOC must pay Merchants a break-up fee. If the Merchants Board of Directors
withdraws or modifies its approval of the merger, then Merchants must pay the
break-up fee to CBOC. The break-up fee is $225,000.
CBOC OFFICERS AND DIRECTORS HAVE INTERESTS IN THE MERGER THAT ARE DIFFERENT FROM
YOURS (pages )
When considering the recommendation of the CBOC Board, you should be
aware that some of the directors and officers of CBOC have interests in the
merger that are different from, or in addition to, your interests as
stockholders in CBOC. These interests exist because of the employment agreement
that President Thomas Ebenreiter and Community Bank of Oconto County have
entered into as of June 30, 2000. The agreement provides the officer with
severance benefits if his employment is terminated after the merger.
The interests also arise from provisions in the merger agreement
relating to the appointment of three CBOC directors to the Merchants Board. Our
directors were aware of these interests and considered them in approving the
merger.
FINANCIAL CONSULTANT SAYS THE EXCHANGE RATIO IS FAIR FROM A FINANCIAL POINT OF
VIEW (pages )
Marshall Financial Consulting LLC delivered to the CBOC Board its
written opinion that the consideration you will receive for your CBOC stock is
fair, from a financial point of view, to the CBOC shareholders. The written
opinion of Marshall is attached as Exhibit C to this document. We encourage you
to read the opinion in its entirety. For a description of the assumptions made
and matters considered by Marshall, see "THE MERGER-Opinion of Financial
Advisor" and Exhibit C.
DISSENTING SHAREHOLDERS' RIGHTS (pages )
If you follow certain procedural requirements, you may be entitled to
receive cash in the amount of the fair value of your CBOC shares instead of the
shares of Merchants common stock offered in the merger. The fair value of the
shares of CBOC common stock will be determined under Wisconsin law which defines
"fair value" as "-- the value of the shares immediately before the effectuation
of the corporate action to which the dissenter objects, excluding any
appreciation or depreciation in anticipation of the corporate action unless
exclusion would be inequitable."
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<PAGE> 14
IF YOU WANT TO EXERCISE DISSENTERS' RIGHTS YOU MUST NOT VOTE IN FAVOR
OF THE MERGER AGREEMENT AND MUST COMPLY WITH ALL OF THE PROCEDURAL REQUIREMENTS
PROVIDED BY WISCONSIN LAW. A COPY OF THE DISSENTERS' RIGHTS STATUTE IS ATTACHED
AS EXHIBIT D TO THIS DOCUMENT. WE ENCOURAGE YOU TO READ THE STATUTE CAREFULLY
AND TO CONSULT WITH LEGAL COUNSEL IF YOU DESIRE TO EXERCISE YOUR DISSENTERS'
RIGHTS.
THE MERGER WILL BE TAX-FREE TO YOU (pages )
The merger will be tax-free to CBOC shareholders for federal income tax
purposes, except for taxes on cash received for a fractional share or cash
received if you exercise dissenters' rights. The merger will also be tax-free to
CBOC and Merchants for federal income tax purposes. However, because tax matters
are complicated, and tax results may vary among shareholders, we urge you to
contact your own tax advisor to understand fully how the merger will affect you.
REGULATORY APPROVALS NEEDED (pages )
The merger is subject to the approval of the Federal Reserve Board and
the Wisconsin Department of Financial Institutions.
CERTAIN CONSIDERATIONS (pages )
In deciding whether to vote in favor of the merger agreement, you
should carefully evaluate the matters discussed in the section under "THE MERGER
- Certain Considerations."
COMPARATIVE BOOK VALUES, DIVIDENDS AND EARNINGS PER COMMON SHARE
The following tables present selected comparative per common share data
for Merchants Common Stock for the years ended December 31, 1999, 1998 and 1997
and the six months ended June 30, 2000, and CBOC Common Stock for the years
ended December 31, 1999, 1998 and 1997 and the six months ended June 30, 2000 on
both a historical and pro forma basis giving effect to the Merger. The pro forma
information has been prepared on the basis of accounting for the merger as a
pooling-of-interests. The information is derived from the consolidated
historical financial statements of Merchants and CBOC, including the related
notes thereto, included or incorporated by reference in this Proxy
Statement/Prospectus. This information should be read in conjunction with such
historical financial statements and the related notes thereto. See
"INCORPORATION OF CERTAIN INFORMATION BY REFERENCE" and "CONSOLIDATED FINANCIAL
STATEMENTS."
This information is not necessarily indicative of the results of the
future operations of the combined entity or the actual results that would have
occurred had the merger been consummated prior to the periods indicated.
-5-
<PAGE> 15
Merchants Common Stock
<TABLE>
<CAPTION>
At or For the Six At or For the Year
Months Ended June Ended December 31,
30, 2000 (unaudited)
1999 1998 1997
<S> <C> <C> <C> <C>
Historical:
Net income $ 1.01 $ 1.62 $ 1.86 $ 1.69
Cash dividends declared 0.35 0.57 0.49 0.38
Book value 19.76 19.16 19.02 17.90
Pro forma combined:
Net income (1) $ 0.95 $ 1.58 $ 1.77 $ 1.60
Cash dividends declared (2) 0.35 0.57 0.49 0.38
Book value 18.35 17.80 17.60 16.46
</TABLE>
CBOC Common Stock
<TABLE>
<CAPTION>
At or for the Six At or for the Year
Months Ended June Ended December 31,
30, 2000 (unaudited)
1999 1998 1997
Historical: (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net income $ 4.03 $ 8.25 $ 7.89 $ 7.06
Cash dividends declared 1.50 3.00 2.50 2.00
Book value 68.16 66.36 64.30 58.29
Equivalent pro forma
combined: (3)
Net income $ 0.70 $ 1.43 $ 1.37 $ 1.23
Cash dividends declared 0.26 0.52 0.43 0.35
Book Value 11.85 11.54 11.18 10.14
</TABLE>
(1) Pro forma net income was computed assuming 2,564,141; 2,566,262;
2,530,897 and 2,464,492 fully diluted shares of Merchants outstanding
for the periods ended June 30, 2000, December 31, 1999 1998 and 1997,
respectively.
(2) Based on historical dividends of Merchants.
(3) The pro forma equivalent per share data for CBOC has been computed by
multiplying the pro forma combined per share information by 5.746,
which represents the exchange ratio assuming that the Daily Average
Price of Merchants is between $31.50 and $28.00.
-6-
<PAGE> 16
COMPARATIVE STOCK PRICES AND DIVIDENDS
Merchants Common Stock
Merchants Common Stock is quoted on the "Pink Sheets," an inter-broker
quotation medium and in the "Over the Counter Bulletin Board," an electronic
quotation service. Merchants Common Stock is quoted in the "Other Stocks"
section of the Milwaukee Journal Sentinel. The following table sets forth, for
the periods indicated, the High and Low Bid quotations per share as furnished by
Robert W. Baird, Inc., a Wisconsin investment banking firm, and the regular cash
dividends declared for Merchants Common Stock as adjusted to reflect stock
dividends. It should be noted that such Bid quotations do not necessarily
represent actual sales.
<TABLE>
<CAPTION>
MERCHANTS Common Stock
----------------------
HIGH LOW
BID BID DIVIDEND
----- ----- --------
<S> <C> <C> <C>
1997
----
First quarter $19.24 $ 16.97 $ 0.12
Second Quarter 20.00 18.79 0.12
Third Quarter 20.15 19.55 0.12
Fourth Quarter 28.48 20.15 0.12
1998
----
First Quarter $30.30 $ 27.88 $ 0.12
Second Quarter 33.64 28.64 0.13
Third Quarter 35.45 28.10 0.15
Fourth Quarter 39.50 34.63 0.20
1999
----
First Quarter $43.00 $ 38.00 $ 0.15
Second Quarter 43.00 41.50 0.15
Third Quarter 44.00 41.00 0.15
Fourth Quarter 42.50 35.50 0.15
2000
----
First Quarter $ 38.50 $ 34.00 $ 0.15
Second Quarter 38.00 35.00 0.20
</TABLE>
-7-
<PAGE> 17
On July 31, 2000, the last trading day before the announcement of the
signing of the Merger Agreement, the Bid price of Merchants Common Stock as
reported in the Milwaukee Journal Sentinel was $33.75 per share. On October 20,
2000, the latest practicable date before the filing of the Proxy
Statement/Prospectus with the Commission, the Bid price of Merchants Common
Stock as reported was $28.75 per share. Assuming the Merger had occurred on such
date, at the Bid price the equivalent market value per share of CBOC Common
Stock, calculated by multiplying the Bid price of Merchants Common Stock by the
applicable exchange rate of 5.746, would have been $165.20 which represents
242.4% of June 30, 2000 book value of CBOC and a price to earnings ratio of
20.5x, based on CBOC's annualized net income for the first 6 months of 2000. See
also "THE MERGER-Opinion of CBOC Financial Advisor." Shareholders are urged to
obtain current market prices for Merchants Common Stock. No assurance can be
given as to the market price of Merchants Common Stock prior to the Effective
Time or after consummation of the Merger.
On October 20, 2000, there were approximately 1,032 holders of record
and beneficial owners of Merchants Common Stock.
CBOC Common Stock
CBOC Common Stock is not listed on any exchange or quoted in the
over-the-counter market. There is no established trading market for CBOC Common
Stock. In the opinion of CBOC, due to the lack of an active market for CBOC
Common Stock, transactions in CBOC Common Stock of which CBOC is aware are not
frequent enough to produce representative prices.
The Board of Directors of CBOC declared the following per-share
dividends in 1997, 1998, 1999 and during the first half of 2000, respectively:
$2.00, $2.50, $3.00 and $1.50. Pursuant to the Merger Agreement, the ability of
CBOC to pay dividends on CBOC Common Stock prior to the Effective Time has been
restricted to the payment of dividends in the ordinary course consistent with
past practice.
On the Record Date, there were 122 holders of record of CBOC Common
Stock.
SELECTED HISTORICAL AND PRO FORMA DATA
The summary below sets forth selected historical and other data and
selected unaudited pro forma financial data. The financial data should be read
in conjunction with the historical consolidated financial statements and related
notes thereto of Merchants and CBOC and in conjunction with the unaudited pro
forma combined financial statements and related notes thereto of Merchants as
the surviving corporation in the Merger included elsewhere in this Proxy
Statement/Prospectus. See "CONSOLIDATED FINANCIAL STATEMENTS" and "UNAUDITED PRO
FORMA CONSOLIDATED FINANCIAL INFORMATION."
-8-
<PAGE> 18
Selected Historical Financial and Other Data (In thousands, except per-share
data)
Merchants
<TABLE>
<CAPTION>
At or for the Six At or for the Year
Months Ended June Ended December 31,
30, (unaudited)
2000 1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets $515,436 $453,103 $474,383 $441,486 $391,685 $358,694 $347,991
Loans, Net 409,918 331,324 363,435 312,761 281,058 241,515 215,409
Investment
securities 62,852 67,005 66,129 67,752 66,827 63,448 74,695
Deposits 381,639 381,099 377,333 372,118 337,429 302,387 296,489
Borrowings 87,438 28,758 53,398 27,333 15,392 21,017 16,597
Shareholders'
equity 41,586 39,934 40,426 39,437 36,772 32,691 32,055
Interest income 18,204 15,362 31,728 30,449 27,820 25,639 24,459
Interest 8,786 6,855 13,999 14,117 12,495 11,600 11,042
expense
Provision for
loan losses 344 136 956 314 227 605 156
Other income 1,575 1,403 3,491 3,307 2,507 2,370 2,079
Other expenses 7,552 7,368 14,956 13,433 12,270 12,566 11,534
Income tax 979 783 1,905 2,042 1,955 1,090 1,373
Net income 2,116 1,623 3,403 3,850 3,380 2,148 2,433
</TABLE>
-9-
<PAGE> 19
CBOC
<TABLE>
<CAPTION>
At or for the Six At or for the Year
Months Ended June Ended December 31,
30, (unaudited)
2000 1999 1999 1998 1997 1996 1995
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
------------ ------------ ------------ --------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets $56,693 $55,276 $58,885 $53,316 $48,906 $44,467 $42,563
Loans 33,891 29,465 30,717 30,120 27,307 26,248 26,234
receivable,
net
Investment
securities 18,131 15,554 19,250 12,696 12,579 11,447 13,118
Deposit
accounts 49,686 49,374 52,892 47,740 43,607 39,612 38,077
Borrowed 1,262 509 381 174 424 294 573
funds
Shareholders'
equity 5,453 5,164 5,309 5,144 4,663 4,240 3,728
Interest income 2,008 1,828 3,777 3,616 3,354 3,282 3,187
Interest 1,061 911 1,864 1,861 1,661 1,622 1,642
expense
Provision for
loan losses 18 -- 18 34 29 38 70
Other
income 195 164 317 382 326 321 88
Other
expenses 700 675 1,327 1,274 1,197 1,048 1,004
Income tax 102 94 224 198 228 288 216
Net income 322 312 661 631 565 607 343
</TABLE>
-10-
<PAGE> 20
PRO FORMA DATA REFLECTING THE CBOC MERGER
In the following tables, we provide unaudited pro forma condensed
combined financial data of Merchants and subsidiaries which includes the
historical data for Merchants and CBOC. The data are based on an assumption that
Merchants Common Shares are issued for one hundred percent (100%) of CBOC shares
outstanding on June 30, 2000, at an exchange rate of 5.746 shares of Merchants
for each share of CBOC. Operating results data assumes that this transaction
occurred on the first day of each period shown, whereas financial condition data
assumes that this transaction occurred at the date indicated. The per share
information is calculated assuming the number of shares outstanding is unchanged
throughout each respective time period.
In accordance with generally accepted accounting principals, the Merger
will be accounted for using the pooling of interests method. Accordingly, the
recorded assets and liabilities of both Merchants and CBOC will be carried
forward at their recorded amounts and their historical operating results will be
unchanged for the prior periods being reported on. No goodwill will be recorded
as a result of this transaction.
We present this pro forma data as an illustration only. It does not
necessarily indicate the financial position or financial results that would have
actually been reported if the Merger had occurred as of, or at, the beginning of
the periods presented, nor does it necessarily indicate future financial
position or results of operations. The pro forma results of operations neither
assume nor incorporate any benefits from cost savings or synergies of operations
of the combined companies.
Selected Unaudited Pro Forma Financial Data
($ in thousands except per share data)
<TABLE>
<CAPTION>
For the Six
Months Ended For the Year Ended
June 30, December 31,
2000 1999 1999 1998 1997
---------------- ------------------ ---------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Income Statement
Interest Income $20,212 $17,190 $35,505 $34,065 $31,174
Interest Expense 9,847 7,766 15,863 15,978 14,156
Net Interest
Income 10,365 9,424 19,642 18,087 17,018
Loss Provision 362 136 974 348 256
Other Income 1,770 1,567 3,808 3,689 2,833
Other Expense 8,252 8,043 16,283 14,707 13,467
Income Before Tax 3,521 2,812 6,193 6,721 6,128
Income Tax 1,081 877 2,129 2,240 2,183
Net Income 2,440 1,935 4,064 4,481 3,945
Per Share
Basic earnings per
share $ 0.95 $ 0.76 $ 1.58 $ 1.77 $ 1.60
Diluted earnings
per share 0.94 0.74 1.56 1.73 1.57
</TABLE>
-11-
<PAGE> 21
<TABLE>
<CAPTION>
At the Six At the Year Ended
Months ended June 30 December 31
Balance Sheet 2000 1999 1999 1998 1997
---------------- ------------------ ---------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Loans-Net $443,809 $360,789 $394,152 $342,881 $308,365
Assets 572,129 508,379 533,268 494,802 440,591
Deposits 431,325 430,473 430,254 419,858 380,856
Shareholders'
Equity 47,039 45,098 45,735 44,581 41,435
Weighted Average
Shares
Basic weighted 2,564 2,562 2,566 2,531 2,464
average shares
outstanding
Diluted weighted 2,585 2,610 2,613 2,594 2,519
average shares
outstanding
</TABLE>
-12-
<PAGE> 22
THE SPECIAL MEETING
Date, Place and Time
A special meeting will be held at the Community Bank of Oconto County,
500 Cherry Avenue, Oconto Falls, Wisconsin, on , 2000 p.m.
(local time) (the "Special Meeting").
Matters to Be Considered at the Special Meeting.
At the Special Meeting, holders of CBOC Common Stock will consider and
vote upon a proposal to approve the Merger Agreement and Plan of Merger and any
other matters that may properly come before the Special Meeting. For a detailed
description of the Merger and the Merger Agreement, see "The Merger" and
"Certain Provisions of the Merger Agreement."
Required Vote
The affirmative vote of the holders of a majority of the outstanding
shares of CBOC Common Stock entitled to vote at the Special Meeting is required
to approve the Merger Agreement. Each share of CBOC Common Stock outstanding on
the Record Date (as defined herein) is entitled to one vote. Shareholders of
Merchants are not required to approve the Merger Agreement and no further
corporate authorization by Merchants is required to consummate the Merger.
Pursuant to the Voting Agreement, the directors who have voting power
with respect to a total of 30,185 shares or approximately 37.7% of CBOC Common
Stock entitled to vote at the Special Meeting have agreed, among other things,
to vote their shares in favor of the approval and adoption of the Merger
Agreement and against certain other transactions.
Voting of Proxies
Shares represented by properly executed proxies for CBOC Common Stock
received in time for the Special Meeting will be voted at the Special Meeting in
the manner specified by the holders thereof. Proxies which do not contain voting
instructions will be voted FOR approval of the Merger Agreement and Plan of
Merger.
It is not expected that any matter other than that referred to herein
will be brought before the Special Meeting. If, however, other matters are
properly presented, the persons named as proxies will vote in accordance with
their judgment with respect to such matters.
Revocability of Proxies
The grant of a proxy on the enclosed form of proxy does not preclude a
shareholder from voting in person. A shareholder may revoke a proxy at any time
prior to its exercise by delivering to the Secretary of CBOC a duly executed
proxy or revocation of proxy bearing a later date or by voting in person at the
Special Meeting. Attendance at the Special Meeting will not of itself constitute
revocation of a proxy.
Record Date; Stock Entitled to Vote; Quorum
Only holders of record of CBOC Common Stock at the close of business on
, 2000 (the "Record Date") will be entitled to receive notice of and
to vote at the Special Meeting.
At the Record Date, 80,000 shares of CBOC Common Stock were
outstanding. Shares representing a majority of the outstanding shares of CBOC
Common Stock entitled to vote must be represented in person
-13-
<PAGE> 23
or by proxy at the Special Meeting in order for a quorum to be present.
Abstentions will be treated as shares that are present and entitled to vote for
purposes of determining the presence of a quorum but as unvoted for purposes of
determining the approval of the Merger Agreement and Plan of Merger. If a broker
or other holder of record indicates on the proxy that it does not have
discretionary authority as to certain shares to vote on a particular matter,
those shares will not be considered as present and entitled to vote with respect
to that matter.
Solicitation of Proxies
CBOC will bear the cost of the solicitation of proxies from its
shareholders, except that Merchants will be responsible for the cost of printing
this Proxy Statement/Prospectus and all regulatory filing fees in connection
therewith. In addition to solicitation by mail, the directors, officers and
employees of CBOC may solicit proxies from shareholders of CBOC by telephone or
telegram, or in person, but will receive no additional compensation for such
services.
SHAREHOLDERS SHOULD NOT RETURN THEIR STOCK CERTIFICATES WITH THEIR
PROXY CARDS. AS SOON AS PRACTICABLE FOLLOWING THE EFFECTIVE TIME, CBOC
SHAREHOLDERS WILL BE PROVIDED WITH MATERIALS RELATING TO THE EXCHANGE OF THEIR
STOCK CERTIFICATES. SEE "THE MERGER - CONVERSION OF SHARES; PROCEDURES FOR
EXCHANGE OF CERTIFICATES; FRACTIONAL SHARES."
THE MERGER
Background of the Merger
For the past several years, the Board of Directors of CBOC has
monitored the changes in the banking industry and the future of independent
banks in smaller communities in Wisconsin.
The CBOC Board considered the increasing competition in the banking
industry, the need for ever-larger capital expenditures to provide desired
customer services, the general reduction in support for community banks by some
of their corresponding banks and the increasingly complex regulatory and market
structure. The CBOC Board recognized that the banking industry has substantially
changed in recent years and that changes of equal or greater magnitude are
likely in the future.
In that connection, the CBOC Board discussed from time to time the
possibility of combining with another bank or bank holding company, forming an
expanded bank holding company, and making suitable acquisitions and growing
internally. As a result of these discussions, the CBOC Board realized that it
would not be possible to realize sufficient growth through small acquisitions
and internally-generated growth to effectively compete with the large
competitors in its market.
The CBOC Board thus concluded that a combination with another bank or
bank holding company would provide the size and the necessary resources for the
Bank to remain an effective competitor in its market and to properly service its
community.
The Board believed that it was very important for the Bank to retain
its identity as a separately chartered community bank, to retain the name of
Community Bank of Oconto County along with its local management, and to maintain
regular, ongoing input from the local community. Based on its review of other
transactions, the Board felt that the Bank's customers and the community would
suffer a reduction in service
-14-
<PAGE> 24
by a sale of the Bank and its conversion to a branch of another bank, resulting
in the decision-making process being moved out of the local community to a
corporate headquarters in another location.
To that end, members of the CBOC management and Board periodically
contacted and were contacted by various banks and holding companies regarding
the possible acquisition of CBOC. Finally, in mid-1999, the CBOC Board engaged
Marshall Financial Consulting, LLC ("Marshall") as an advisor to assist in the
preparation and distribution of information packages about CBOC and the Bank to
a limited number of prospective acquirers in order to solicit an offer for CBOC
at a fair and adequate price. By April, 2000, after soliciting 17 potential
purchasers, 11 of whom received the information packages, the Board received
final proposals from three companies ranging between $9,339,000 or $116.74 per
share of CBOC Common Stock, and $15,000,000 or $187.50 per share of CBOC Common
Stock.
Despite receiving an offer from another company, ("Other Company") for
a greater purchase price ($15,000,000 in Other Company's common stock, based on
then current stock-values), the CBOC Board determined that it was in the best
interests of CBOC and its shareholders to accept Merchants offer of $14,480,000
or $181.00 per share of CBOC Common Stock, to be received in the form of shares
of Merchants' Common Stock, based on then-current stock values. This decision
was made after the CBOC Board of Directors engaged in extensive discussions with
both Merchants and the Other Company regarding post-merger operational matters
and the merger consideration. CBOC's Board found that the Merchants' community
banking philosophy more closely resembled CBOC's. CBOC's Board was aware that
Merchants' subsidiary banks were operating under local control and with local
autonomy. CBOC's Board was also mindful of the desire of many of its
shareholders and customers to retain a community-oriented bank with local
control. CBOC's Board believes that Merchants will be more likely to retain the
Bank's name, to operate the Bank with essentially current staff and management,
to solicit local input on decisions regarding banking services, to provide
better banking services to the Oconto County community and to ultimately help
the local community grow and prosper.
The Board also received an offer from the "Other Company" of
$13,000,000 in cash, but decided against the offer for the reasons listed above
and because of the negative tax consequences that a cash-based acquisition would
have on CBOC shareholders.
As a result of the combination with Merchants, because of the greater
resources of the Merchants organization, Community Bank of Oconto County will be
able to more effectively service many business customers in its market area
which it had difficulty accommodating in the past. In addition, the CBOC Board
believes that the shareholders of CBOC will enjoy greater liquidity for their
stock and a means of accurately valuing their investment through a transaction
with Merchants.
As part of the deliberation process, the CBOC Board engaged Marshall as
a financial advisor to assist it in evaluating the Merchants stock and advise it
on the fairness of the exchange, from a financial point of view. A discussion of
Marshall's opinion regarding the exchange is found below.
During the period from January through July, 2000, the Merchants Board
and Merchants Executive Committee held several meetings which culminated in the
approval of a definitive merger agreement by the Merchants Board on July 19,
2000.
After further discussions, an Agreement and Plan of Merger ("Merger
Agreement") embodying the terms of the previous proposal was negotiated with the
assistance of legal counsel and executed by Merchants and CBOC as of August 1,
2000. The parties issued a joint press release announcing the
-15-
<PAGE> 25
transaction. The transaction remains subject to regulatory and shareholder
approval and other conditions set forth in the Merger Agreement.
The Board of Directors of CBOC has approved the Merger Agreement and
believes that the proposed Merger is in the best of CBOC and its shareholders.
Accordingly, the CBOC Board recommends that the shareholders of CBOC vote in
favor of the adoption of the Merger Agreement as discussed herein.
REASONS FOR THE MERGER; RECOMMENDATION OF BOARD OF DIRECTORS OF CBOC
Merchants. The Merchants Board has concluded that the Merger would be
in the best interests of Merchants and its shareholders. In reaching this
determination, the Merchants Board considered many factors including the
following:
(i) The Merger meets Merchants' strategic objectives of
maintaining and strengthening a locally owned and operated
community-oriented financial institution.
(ii) The Merger will create a significantly larger financial
institution that will have capabilities to offer a wider array of
financial products and services.
For instance, CBOC's current customers will have access to the products
and services offered by Merchants and, conversely, CBOC will offer its
products and services to Merchants' customers. Moreover, the combined
resources of the two companies will improve the efficiencies associated
with the development of new products and services to be offered by
Merchants.
(iii) Merchants will have immediate access to the Oconto County
market which is currently served by Merchants on a limited basis.
(iv) The similarities between the operations of Merchants and CBOC
will result in cost savings and more efficient utilization of resources
and technology thereby offering economies of scale not currently
available to Merchants.
(v) The size and capital structure of Merchants following the
Merger will provide greater opportunities and flexibility in responding
to the rapidly changing industry for financial service providers.
(vi) The asset size, capital position, management strength and
market position of Merchants will enable the combined company to remain
competitive and take advantage of current and emerging opportunities
for growth and profitability.
(vii) The opinion of Merchants that the consideration to be paid
by Merchants in the Merger is fair, from a financial point of view, to
Merchants and its shareholders.
Numerous factors were considered by the Merchants Board in approving the terms
of the Merger. These factors included information concerning the financial
structure, results of operations, and prospects of Merchants and CBOC; the
capital adequacy of the resulting entity; the composition of the businesses of
the two organizations; the overall compatibility of the management and employees
of the organizations; the outlook for the organizations in the rapidly changing
financial services industry; the relationship of the consideration to be paid in
the Merger to market prices and the book value and earnings per share of CBOC
and the financial terms of certain other recent business combinations in the
banking industry.
-16-
<PAGE> 26
CBOC. In considering the Merger, the Directors of CBOC reviewed the
terms and conditions of the proposed Merger Agreement, along with certain
business and financial information relating to Merchants and CBOC. In addition,
the Board of Directors of CBOC determined to approve the proposed transaction
primarily because the Merger will increase the financial strength of the Bank by
enabling it to better serve its depositors and customers, while at the same time
allowing the Bank to retain its identity as a community bank and retain the name
of Community Bank of Oconto County along with local management, to provide
additional opportunities for professional advancement for the Bank's employees,
and to be more competitive with other bank subsidiaries of large bank holding
companies currently doing business in Oconto County or which might locate in the
community. The Directors of CBOC also concluded that the Merger will enhance
both the long-term and short-term value of CBOC shareholders' investment. Among
the factors important to the directors of CBOC in determining to approve the
Merger, were:
(i) The increased opportunity and resources to serve the Bank's
customers;
(ii) The possibility for career enhancement which employees of
CBOC and the Bank might be provided as a result of the Merger;
(iii) The increased resources and expertise to keep the Bank
competitive and meet the ever-changing demands of the banking industry;
(iv) Merchants' commitment to community banking and to serving the
needs of the local Oconto County community;
(v) The marketability and liquidity of Merchants' Common Stock and
the consistent dividend history and rate of dividends of the Merchants
Common Stock to be received in the Merger as compared to the
illiquidity and lack of marketability of CBOC Common Stock;
(vi) The tax-free nature of the Merger for federal income tax
purposes which would permit CBOC's shareholders who receive shares of
Merchants Common Stock to defer federal income taxation under certain
circumstances.
(vii) The potential for future appreciation of Merchants' Common
Stock due to Merchants' greater market presence and financial
resources; and
(viii) The financial terms of other recent business combinations
in the financial services industry.
(ix) The opinion of Marshall that the consideration to be paid by
Merchants in the Merger is fair, from a financial point of view, to
CBOC and its shareholders.
See "THE MERGER - Certain Material Federal Income Tax Consequences."
While each member of CBOC's Board of Directors evaluated each of the
foregoing as well as other factors, the Board of Directors collectively did not
assign any specific or relative weights to the factors considered and did not
make any determination with respect to any individual factor. CBOC's Board of
Directors collectively made its determination with respect to the Merger based
on its unanimous conclusion that the Merger, in light of the factors which each
of them individually considered is appropriate, fair and in the best interest of
CBOC's shareholders.
-17-
<PAGE> 27
The Board of Directors of CBOC has determined that the terms of the
Merger are fair to and in the best interests of CBOC and its shareholders for
the reasons stated immediately above.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND RECOMMENDS A VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
Certain Considerations
In deciding whether to vote in favor of the Merger, the CBOC
shareholders should consider the following factors, in addition to the other
matters set forth herein.
(i) Uncertain Legislative and Regulatory Environment. The banking
and financial services businesses in which CBOC and Merchants engage
are highly regulated. The laws and regulations affecting such
businesses may be changed in the future. Such changes could affect the
ability of banks to engage in nationwide branch banking and the ability
of bank holding companies to engage in non-banking businesses, such as
securities underwriting and insurance, in which they have been allowed
to engage only on a limited basis. Such changes may also affect the
capital that banks and bank holding companies are required to maintain,
the premiums paid for or the availability of deposit insurance or other
matters directly affecting earnings. Neither CBOC nor Merchants can
predict what changes will occur and the effect that any such changes
would have on the ability of the combined entity to compete effectively
or to take advantage of new opportunities after the Merger.
(ii) Competition. The markets in which CBOC and Merchants operate
are highly competitive. Competition in such markets is likely to
increase in light of the changing legislative and regulatory
environment in which CBOC and Merchants operate. In addition,
consolidation and mergers in the banking industry are expected to
continue, resulting in stronger and more effective competitors. Neither
CBOC nor Merchants can predict the degree to which competition in the
industry will increase in the future or the effect any such increased
competition will have on the combined entity.
(iii) Rapid Technological Changes. Evolving technology will play a
major role in the processing and delivery of financial services. The
effective use of new technology will enable banking and financial
service businesses to improve information concerning their customers
and markets. It will also enable them to reduce overhead expenses while
improving the quality of service to customers. Communications
technology will substantially improve the ability of financial
institutions to exchange information with their customers and
employees. Banks and financial institutions that are unwilling or
unable to access this evolving new technology could experience lower
earnings and a loss of customers.
(iv) Uncertain Economic Environment. Banks and financial service
companies in the Midwest have experienced a relatively long period of
price stability and a growing economy. Price stability enables banks to
better protect themselves against interest rate risks. A strong economy
enhances the opportunity of the commercial sector of the economy to
improve earnings and performance. It also provides an environment for
financial institutions to experience positive and profitable growth.
Potentially adverse economic changes present additional risks for banks
and financial service companies.
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(v) Nature of Business. The financial performance of CBOC results
primarily from its retail banking activities located in Oconto County.
CBOC shareholders who receive shares of Merchants Common Stock will own
an interest in a diversified multi-bank holding company currently
operating 20 banking offices located in Milwaukee, Waukesha and Ozaukee
Counties, which is engaged in several non-banking businesses. Financial
performance of Merchants is accordingly dependent on its activities and
the economic factors in such markets and businesses.
(vi) Business Combinations. Merchants seeks additional expansion
opportunities and accordingly may enter into business combinations with
banking and non-banking entities involving the issuance of its shares
or payment of cash consideration which may not require a vote of
holders of Merchants Common Stock at the time of such additional
acquisitions.
(vii) Share Price Fluctuation. The price of shares of CBOC Common
Stock is based essentially upon the financial condition of CBOC and the
market value for similar non-publicly traded bank holding companies and
other factors. The share price of Merchants Common Stock is by nature
more subject to the general price fluctuations in the market for
publicly-traded equity securities. Such fluctuations are not
necessarily related to a change in the financial performance or
condition of Merchants.
(viii) Loan Losses. Losses on loans is a risk inherent in the
banking business. Although Merchants maintain a reserve to absorb
future loan losses, we cannot predict such losses with certainty.
Therefore, we cannot predict whether the reserve for loan losses will
be adequate. If additions to the loan losses reserve should be required
at some future time, our earnings could be adversely affected at that
time.
(ix) Future Needs for Capital. In order to fund its expansion
plans, or to provide capital to support internal growth of its
subsidiaries, or to raise funds for other general corporate purposes,
Merchants may, from time to time, issue additional securities,
including debt instruments. The issuance of debt instruments (such as
notes or debentures) may have an adverse effect on future earnings of
Merchants if the return on the proceeds of the debt securities is
inadequate in relation to the interest expense. Additionally, in the
event Merchants defaults in the payment of principal or interest on
such debt securities, the dividend and liquidation rights of holders of
Merchants Common Stock are likely to be subordinated to the rights of
the holders of such debt instruments. At this time, Merchants is
actively involved in planning the future issuance of debentures.
However, no definitive, required legal action has been taken in the
matter at this time.
Merchants may also satisfy future needs for additional capital funds
through the issuance of additional equity capital (such as common
stock). In that event, holders of Merchants Common Stock may experience
dilution in ownership and per-share earnings.
Opinion of CBOC Financial Advisor
The CBOC Board retained Marshall Financial Consulting LLC ("Marshall")
to act as its financial advisor in connection with the Merger and to assist it
in its examination of the fairness, from a financial point of view, of the
Merger Consideration to the holders of CBOC Common Stock. On July 22, 2000,
Marshall rendered its opinion to the CBOC Board (subsequently confirmed as of
the date of this Proxy
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Statement/Prospectus) to the effect that the Merger Consideration was fair, from
a financial point of view, to the holders of CBOC Common Stock.
THE FULL TEXT OF MARSHALL'S OPINION, WHICH SETS FORTH THE ASSUMPTIONS
MADE, GENERAL PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS ON THE
SCOPE OF REVIEW UNDERTAKEN BY MARSHALL IN RENDERING ITS OPINION, IS ATTACHED AS
EXHIBIT C TO THIS PROXY STATEMENT/PROSPECTUS. THE MARSHALL OPINION IS DIRECTED
ONLY TO THE FAIRNESS OF THE MERGER CONSIDERATION FROM A FINANCIAL POINT OF VIEW
TO THE HOLDERS OF CBOC COMMON STOCK AND DOES NOT CONSTITUTE A RECOMMENDATION TO
ANY CBOC SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE WITH RESPECT TO THE
MERGER. THE SUMMARY OF THE MARSHALL OPINION SET FORTH IN THIS PROXY
STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT
OF THE OPINION ATTACHED AS AN EXHIBIT HERETO, AND SHAREHOLDERS OF CBOC SHOULD
READ THE MARSHALL OPINION CAREFULLY AND IN ITS ENTIRETY.
Marshall's analysis. In conducting its investigation and analysis and
in arriving at its opinion, Marshall reviewed such information and took into
account such financial and economic factors as it deemed relevant. In doing so,
Marshall, among other things; (i) reviewed certain internal information,
primarily financial in nature, including projections, as well as publicly
available information, including but not limited to CBOC's and Merchants' recent
filings with regulatory authorities; (ii) reviewed the Merger Agreement; (iii)
compared the historical market prices and trading activity of CBOC and Merchants
Common Stock with those of certain other publicly traded companies Marshall
deemed relevant; (iv) compared the financial position and operation results of
CBOC and Merchants with those of other publicly traded companies Marshall deemed
relevant; (v) compared the proposed financial terms of the Merger with the
financial terms of certain other business combinations involving banking
institutions Marshall deemed relevant; and (vi) reviewed certain potential pro
forma effects of the Merger on Merchants. Marshall held discussions with certain
members of CBOC's and Merchants' senior management concerning CBOC's and
Merchants' historical and current financial condition and operating results, as
well as the future prospects of CBOC and Merchants, respectively. Marshall had
been requested to, and did, solicit third party indications of interest in
acquiring all of CBOC. Marshall solicited 17 potential purchasers and 11 of such
executed a confidentiality agreement and received the offering brochure of CBOC.
Marshall received three written offers from the 11 recipients of the brochures.
Marshall analyzed the three offers and reviewed such offers with CBOC's Board of
Directors. Marshall also considered such other information, financial studies,
analysis and investigations and financial, economic and market criteria as
Marshall deemed relevant for the preparation of its opinion. The Merger
consideration was determined by CBOC and Merchants in arm's-length
negotiations. CBOC did not place any limitation upon Marshall with respect to
the procedures followed or factors considered by Marshall in rendering its
opinion.
In arriving at its opinion, Marshall assumed and relied upon the
accuracy and completeness of all of the financial and other information that was
publicly available or provided to it by or on behalf of CBOC and Merchants, and
was not engaged to independently verify any such information. Marshall assumed,
with CBOC's and Merchants' consent, that (i) all material assets and liabilities
(contingent or otherwise, known or unknown) of CBOC and Merchants are set forth
in their respective financial statements; (ii) the Merger will be accounted for
under the pooling of interest method of accounting; (iii) the Merger will be
consummated in accordance with the terms of the Merger Agreement without any
additional amendments thereto and without waiver of any condition; (iv) the
prospective cost savings and revenue enhancements contemplated by management of
both companies following the Merger will be realized; and (v) all shareholder
and required regulatory approvals will be obtained in a timely manner. Marshall
also assumed
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that the financial forecasts examined by it were reasonably prepared on bases
reflecting the best available estimates and good faith judgments of CBOC's and
Merchants' respective senior management, as to future performance of their
respective companies. Marshall did not undertake or obtain an independent
evaluation or appraisal of any of the assets or liabilities (contingent or
otherwise) of CBOC or Merchants, nor did it make a physical inspection of the
properties or facilities of CBOC or Merchants. Marshall's opinion necessarily
was based upon economic, monetary and market conditions as they existed and
could be evaluated on the date thereof, and did not predict or take into account
any changes which may occur, or information which may become available, after
the date thereof. Furthermore, Marshall expressed no opinion as to the pricing
or trading range at which shares of Merchants' securities would trade following
the date of such opinion.
Analysis of Selected Comparable Transactions. Marshall reviewed a
selected group of thirty completed or pending acquisitions of banks or bank
holding companies that were announced since January 1, 1997. Marshall focused on
transactions where the acquired entity had a transaction value of less than $25
million. The assets of the comparables ranged from $38.7 million to $282.2
million with the median being $74.7 million and the mean being $89.1 million.
The equity to asset ratio for the comparables ranged from 6.57% to 21.27% with
the median and the mean being 10.57% and 10.99% respectively. The return on
average assets for the comparables ranged from .28% to 2.95% with the median and
the mean being 1.28% and 1.32%, respectively. The comparables' return on equity
ranged from 3.02% to 27.34% with the median and the mean being 11.50% and
12.77%, respectively. The price to book of the comparables ranged from 115.38%
to 382.37% with the median and the mean being 200.55% and 204.43%, respectively.
The price to tangible book for the comparables ranged from 115.38% to 383.11%
with the median and the mean being 204.65% and 205.75%, respectively. The
comparables' price to latest twelve months net income ranged from 10.14x to
42.46x with the median being 17.44x and the mean being 17.00x, respectively. The
tangible premium to core deposits for the comparable companies ranged from 1.97%
to 36.74% with the median and mean being 12.14% and 13.05%, respectively.
Analysis of CBOC Valuation Multiples. Marshall calculated the "Implied
Equity Value Per Share" reflected by the terms of the Merger to be $181 for each
share of CBOC Common Stock, obtained by dividing $181 by assumed Merchants'
Daily Average Price (as defined in the Merger Agreement) ranging from $31.50 per
Merchants' share to $38.50 per Merchants' share. Marshall then calculated the
"Implied Total Equity Value: to be $14,480,000 million, obtained by multiplying
the Implied Equity Value Per Share by the total number of outstanding shares of
CBOC Common Stock. In performing its analysis, Marshall used, among other items,
operating statistics for CBOC's twelve months through December 31, 1999 and
March 31, 2000. Marshall calculated multiples of the Implied Total Equity Value
to CBOC's earnings per share, book value, tangible book value and tangible
premium to core deposits. The calculations resulted in ratios of the Implied
Total Equity Value to net income ("P/E Ratios") of 21.86x based on December 31,
1999 results, and 19.13x based on December 31, 2000 estimated earning, 274.20%
of book value, 274.20% of tangible book value and an 18.72% tangible premium to
core deposits.
As no comparative group or transaction from any comparative group is
identical to the Merger, Marshall indicated to the CBOC Board that the analyses
described above are not mathematical, but rather involve complex consideration
and judgments concerning differences in operating and financial characteristics
including, among other things, differences in revenue composition and earnings
performance among CBOC and Merchants and the selected companies and transactions
reviewed.
Analysis of Publicly Traded Companies Comparable to CBOC. Marshall
reviewed certain publicly available financial and stock market information for
certain publicly traded companies which Marshall deemed relevant. These
companies consisted of: Princeton National Bancorp, Inc., Northern States
Financial
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Corp., Union Bancorp, Inc., Amcore Financial, Inc., Old Second Bancorp, Inc.,
First Merchants Corp., Shoreline Financial Corp., Independent Bank Corp., Gold
Bancorporation Corp, Inc. and German American Bancorp ("Comparable Companies").
The data described below for such group is as of December 31, 1999 and March 31,
2000 and is compared to CBOC's financial information, as reported, as of
December 31, 1999 and March 31, 2000.
Marshall noted that the equity to assets for CBOC was 9.60% compared
with a median of 7.86% and a mean of 8.60% for the Comparable Companies. The
equity to assets for the Comparable Companies ranged from a high of 10.13% to a
low of 6.48%. Marshall also noted the following operating performance statistics
for CBOC compared to the Comparable Companies: (i) the net interest margin for
CBOC was 3.88% compared to a median of 4.15% and a mean of 4.10%. (The range for
net interest margin of the Comparable Companies was a high of 4.47% to a low of
3.55%); (ii) the efficiency ratio for CBOC was 58.78% compared to a median of
68.84% and a mean of 68.40% for the Comparable Companies. (The range for the
efficiency ratio for the Comparable Companies was 45.13% to 89.40%); (iii) the
return on average assets for CBOC was 1.26% compared to a median of 1.26% and a
mean of 1.40% for the Comparable Companies. (The range on average assets was
.34% and 1.66% for the Comparable Companies), (iv) the return on average equity
for CBOC was 13.23% compared to a median of 12.04% and a mean of 12.18% for the
Comparable Companies. (The range for the return on average equity was 4.97% to
17.18% for the Comparable Companies.)
Discounted Earnings Analysis. Marshall performed a discounted earnings
analysis of CBOC on a stand-alone basis using CBOC management's projections of
future earnings for the five-year period ending December 31, 2004. Marshall
estimated terminal values for CBOC using asset growth rates of 4.00%, return on
average assets of 1.25%, cash dividend payout ratio of 35% of earning in 2000,
2001, 2002, 2003, and 2004, discount rates of 9%, 11% and 13%, and terminal book
value multiples of 110%, 120% and 130%. Based upon projections, Marshall
calculated an implied per share price from $106 to $140 per share of CBOC Common
Stock. Marshall noted that the discounted earnings 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 ratios, dividend payout rates, terminal values
and discount rates.
Analysis of Merchants. In order to assess the relative public market
valuation of the Merchants Common Stock to be issued in the Merger, Marshall
reviewed certain publicly available financial information of the most recently
reported period as of March 31, 2000 for Merchants and stock market information
of certain selected publicly traded companies which Marshall deemed relevant.
Such comparable companies consist of Princeton National Bancorp, Inc., Northern
States Financial Corp., Union Bancorp, Inc., Amcore Financial, Inc., Old Second
Bancorp, Inc., First Merchants Corp., Shoreline Financial Corp., Independent
Bank Corp., Gold Bancorporation Corp, Inc. and German American Bancorp (the
"Merchants' Comparable Companies"). The data described below for such group is
as of December 31, 1999 and March 31, 2000. Marshall noted the following
operating performance statistics for Merchants compared to the Merchants
Comparable Companies: (i) Merchants' net interest margin was 3.69% compared to a
median of 4.15% and a mean 4.10% for the Merchants' Comparable Companies (the
range for net interest margin was 3.55% to 4.47% for the Merchants' Comparable
Companies); (ii) the efficiency ratio for Merchants was 67.00% compared with a
median of 68.84% and a mean of 68.40% for the Merchants' Comparable Companies
(The range for the efficiency ratio was 45.13% to 89.40% for the Merchants'
Comparable Companies); (iii) the return on average assets for Merchants was .76%
compared to a median of 1.26% and a mean of 1.40% for the Merchants' Comparable
Companies (The range for the return on average assets was .34% to 1.66% for the
Merchants' Comparable Companies); (iv) the return on average
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Comparable Companies (The range for the return on average equity was 4.97% to
17.18% for the Merchants' Comparable Companies); (v) the ratio of non-performing
assets to total assets for Merchants was .50% compared with a median of .44% and
a mean of .51% for the Merchants' Comparable Companies (The range for the
non-performing assets to total assets was .20% to .88% for the Merchants'
Comparable Companies).
Pro Forma Merger Analysis. Marshall prepared a pro forma analysis of
the financial impact of the Merger. Using financial forecasts for CBOC (prepared
by CBOC's management) and Merchants (prepared by Merchants' management),
Marshall compared Merchants' earnings per share and book value on a stand- alone
basis to earnings and book value of the combined companies on a pro forma basis.
Without any synergies, this analysis indicated that the Merger would be dilutive
to earnings per share in 2000 by 9.4%. Merchants furnished Marshall with certain
projections for the year ended December 31, 2001. Such projections show that the
transaction is not dilutive to earnings per share in 2001. The analysis shows
that it is dilutive to book value per share by 6.8% at March 31, 2000.
Stock Trading Analysis. Marshall reviewed the historical trading prices
and volume of Merchants Common Stock for the three years ending December 31,
1999 and six months ended June 30,2000. The price of Merchants Common Stock
ranged from a high to a low from January 1, 1997 through December 31, 1997 of
$29.09 to $16.97, from $42.50 to $25.00 January 1, 1998 through December 31,
1998, from $44.00 to $35.50, January 1, 1999 through December 31, 1999, and
$39.00 to $34.50 from January 1, 2000 to June 30, 2000, respectively. The
trading volumes in calendar year 1997, 1998, 1999 and the six months ended June
30, 2000 were 54,185, 98,565, 159,600 and 147,100 shares, respectively.
Merchants furnished Marshall with certain projections for the year ended
December 31, 2001. Such projections show that the transaction is not dilutive to
earnings per share in 2001.
Contribution Analysis. Marshall analyzed the contribution of each of
CBOC and Merchants to the pro forma company of assets, deposits, net income,
estimated net income, tangible equity and ownership at or through December 31,
1999. Marshall calculated that: Merchants would contribute 89.98% and CBOC
10.02% of assets; Merchants would contribute 88.22% and CBOC 11.78% of deposits;
Merchants would contribute 86.09% and CBOC 13.91% of 1999 net income, Merchants
would contribute 86.77% and CBOC 13.23% of forecasted 2000 net income; Merchants
would contribute 88.51% and CBOC 11.49% of tangible equity; and Merchants would
represent 84.06% and CBOC 15.94% based on the issuance by Merchants of 413,680
shares out of a pro forma total of 2,595,018 shares.
In connection with its written opinion dated October ___, 2000,
Marshall confirmed the appropriateness of its reliance on the analyses used to
render its opinion dated July 22, 2000, by performing procedures to update
certain of its analyses and by reviewing assumptions on which such analyses were
based and the factors considered therewith.
The summary of the opinion set forth above does not purport to be a
complete description of the presentation of Marshall to the CBOC Board or the
analyses performed by Marshall. The preparation of a fairness opinion is a
complex process and is not susceptible to partial analysis or summary
description. Marshall believes that its analyses must be considered as a whole
and that selecting portions of its analyses, without considering all factors and
analyses would create an incomplete view of the processes underlying the
analyses conducted by Marshall and its opinion. Marshall did not attempt to
assign particular weights to particular analyses. Any estimates contained in
Marshall's analyses are not necessarily indicative of actual values, which may
be significantly more or less favorable than as set forth therein. Estimates of
values of companies do not purport to be appraisals or necessarily to reflect
the prices at which companies may actually be sold. Because such estimates are
inherently subject to uncertainty. Marshall does not assume responsibility for
their accuracy.
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Marshall, as part of its investment banking business, is engaged in the
evaluation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements, and valuations for estate, corporate
and other purposes. CBOC retained Marshall because of its experience and
expertise in the valuation of businesses and their securities in connection with
mergers and acquisitions.
Pursuant to an agreement, dated August 25, 1999, between CBOC and
Marshall, CBOC has paid Marshall a non-refundable retainer fee of $10,000, a fee
of $25,000 for rendering its opinion dated July 22, 2000, and will pay a closing
fee of 1/2 of 1% of the consideration paid for the common stock of CBOC, less
the $35,000 previously paid. CBOC also has agreed to reimburse Marshall for
certain of its out-of-pocket expenses incurred in connection with its
engagement. Additionally, CBOC has agreed to indemnify Marshall against certain
liabilities, including liabilities under the federal securities laws, incurred
in connection with the engagement of Marshall by CBOC.
Interests of Certain Persons in the Merger
Assuming that the Merger is consummated, the Directors of Merchants
immediately prior to the Effective Time will be the directors of Merchants at
the Effective Time, each to hold office in accordance with the Amended Articles
of Incorporation and By-Laws of Merchants. The officers of Merchants immediately
prior to the Effective Time will be the officers of Merchants at the Effective
Time, in each case until their respective successors are duly elected and
qualified.
Upon consummation of the Merger, Mr. Thomas Ebenreiter, Chairman of the
Board of Directors and President and Chief Executive Officer of CBOC and the
Bank will be elected to the Board of Directors of Merchants. In addition, Mr.
Richard Pamperin and Mr. Michael Judge, Directors of CBOC and the Bank will be
elected to the Board of Directors of Merchants. As of June 30, 2000, Mr.
Ebenreiter has entered into an employment agreement with the Bank which will
continue after the Bank becomes a subsidiary of Merchants as a result of the
Merger. The employment agreement will continue for two years (unless sooner
terminated as provided in the employment agreement). The employment agreement
provides for Mr. Ebenreiter to serve as president and chief executive officer of
the Bank on a full-time basis during the first year and on a half-time basis
during the second year of the agreement. In addition to an annual base salary,
Mr. Ebenreiter will be entitled to such other benefits as are generally made
available to other officers serving in comparable positions at the Bank or other
subsidiaries of Merchants. Mr. Ebenreiter has agreed not to compete with the
Bank or its affiliates during the employment period and for two years after
termination of employment with the Bank.
Merchants (through the Bank as employer) will succeed to the Bank's
obligations with respect to the employment agreement. The Boards of Directors of
Merchants and CBOC were aware of these interests and took them into account in
approving the Merger Agreement.
Merger Consideration
Upon consummation of the Merger, each share of CBOC Common Stock
outstanding at the Effective Time will be converted into the right to receive
shares of Merchants Common Stock subject to the provisions with respect to
fractional shares or unless dissenters' rights have been perfected. The number
of shares of Merchants Common Stock to be received by shareholders of CBOC for
each share of CBOC Common Stock will be computed as follows:
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1. If the Daily Average Price of Merchants Common Stock is
between $31.50 and $38.50, each share of CBOC Common Stock
will be exchanged for the number of shares of Merchants Common
Stock equal to $181.00 divided by the Daily Average Price.
2. If the Daily Average Price of Merchants Common Stock is
between $28.00 and $31.50, each share of CBOC Common Stock
will be exchanged for 5.746 shares of Merchants Common Stock.
3. If the Daily Average Price of Merchants Common Stock is
between $38.50 and $42.00, each share of CBOC Common Stock
will be exchanged for 4.701 shares of Merchants Common Stock.
4. If the Daily Average Price is less than $28.00 or greater than
$42.00, then Merchants and CBOC will make a good faith effort
to renegotiate the Merger Consideration.
The Daily Average Price is the daily average of the "Bid" and "Ask" quotations
of Merchants Common Stock as published in the Milwaukee Journal Sentinel (or
obtained from another source acceptable to Merchants and CBOC if such quotations
are not published in the Milwaukee Journal Sentinel) on each of the twenty (20)
trading days preceding the fifth day prior to the Effective Time. On each of
such 20 trading days, the Bid and Ask prices will be averaged to calculate the
market quotation for that day, and the resulting twenty (20) market quotations
will be summed and the result divided by twenty (20) to determine the Daily
Average Price. In the event that "Ask" quotations are not listed, or if the
"Ask" price exceeds the "Bid" price by more than $2.00 on any of the 20 trading
days used to compute the Daily Average Price, then the "Bid" quotes will be used
on those days to calculate the Daily Average Price. If the Daily Average Price
is less than $28.00 or greater than $42.00, then Merchants and CBOC will make a
good faith effort to promptly renegotiate the exchange ratio.
Because the market value of Merchants Common Stock at the Effective
Time is not known at this time, the actual value that Merchants would pay and
CBOC shareholders would receive in the Merger and whether Merchants and CBOC
will renegotiate the exchange ratio will not be known until the scheduled
closing date or shortly before the Effective Time, respectively. It is currently
anticipated that, if approved by CBOC shareholders, the Merger will be completed
in the fourth calendar quarter of 2000, although no assurance as to the time of
completion can be given.
In the event that the Daily Average Price is less than $28.00 or
greater than $42.00 and it becomes necessary to renegotiate the exchange ratio,
Merchants' Board is likely to consult with its legal and financial advisors
regarding the fairness of such renegotiated ratio.
In addition, the Merchants' Board and its advisors would consider many
of the same factors they considered in determining whether to approve and adopt
the Merger Agreement in the first instance. In particular, the Merchants Board
of Directors would analyze, among other factors, the relationship of the
consideration to be paid by Merchants to the market price and book value and
earnings per share of CBOC, the financial terms of recent business combinations
in the banking industry and the dilutive or accretive effect of the renegotiated
exchange ratio on Merchants' future earnings and book value.
In the event it becomes necessary to renegotiate the exchange ratio
pursuant to the terms of the Merger Agreement, the CBOC Board of Directors is
likely to consult with its legal and financial advisors to determine the
fairness of a renegotiated exchange ratio. Shareholders of CBOC should note that
the
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fairness opinion obtained by the CBOC Board and included as Exhibit "C" to this
Proxy Statement/Prospectus does not express an opinion as to the fairness of the
Merger, from a financial point of view, in the event that the Daily Average
Price of Merchants Common Stock is less than $28.00 or more than $42.00. No
assurance can be given that a fairness opinion regarding such renegotiated
exchange ratio can be obtained. In making a determination on a renegotiated
exchange ratio, the CBOC Board of Directors would consider many of the same
factors it considered in determining whether to approve and accept the Merger
Agreement in the first instance. In particular, the CBOC Board would analyze,
among other factors, whether the then current consideration to be received in
the Merger would deliver more value to the shareholders than could be expected
if CBOC were to continue as an independent entity. In addition, the CBOC Board
would consider whether, in light of then prevailing market and other industry
conditions, the renegotiated exchange ratio is fair from a financial point of
view to the CBOC shareholders.
Regulatory Approvals Required
Federal. The Merger is subject to prior approval by the Federal Reserve
Board under the BHC Act, which requires that the Federal Reserve Board take into
consideration, among other factors, the financial and managerial resources and
future prospects of the respective institutions and the convenience and needs of
the communities to be served. The BHC Act prohibits the Federal Reserve Board
from approving the Merger if it would result in a monopoly or be in furtherance
of any combination or conspiracy to monopolize or to attempt to monopolize the
business of banking in any part of the United States, or if its effect in any
section of the country may be to substantially lessen competition or to tend to
create a monopoly, or if it would in any other manner be a restraint of trade,
unless the Federal Reserve Board finds that the anti-competitive effects of the
Merger are clearly outweighed in the public interest by the probable effect of
the transaction in meeting the convenience and needs of the communities to be
served. It is highly improbable that the Merger poses any antitrust issues. The
Federal Reserve Board also has the authority to deny an application if it
concludes that the combined organization would have an inadequate capital
position. Furthermore, the Federal Reserve Board must also assess the records of
the subsidiary banks of Merchants and CBOC under the Community Reinvestment Act
of 1977, as amended (the "CRA"). The CRA requires that the Federal Reserve Board
analyze, and take into account when evaluating an application, each bank's
record of meeting the credit needs of its local communities, including low and
moderate income neighborhoods, consistent with safe and sound operation.
Under the BHC Act, the Merger may not be consummated until up to 30
days following the date of Federal Reserve Board approval, during which time the
United States Department of Justice may challenge the Merger on antitrust
grounds. Although a challenge is highly improbable, there can be no assurance
that the Department of Justice will not challenge the Merger or, if such a
challenge is made, as to the result thereof. The commencement of an antitrust
action would stay the effectiveness of the Federal Reserve Board's approval
unless a court specifically orders otherwise. The BHC Act provides for the
publication of notice and public comment on the applications and authorizes the
regulatory agency to permit interested parties to intervene in the proceedings.
Merger Corp. and Merchants have filed an application with the Federal
Reserve Bank of Chicago (the "Federal Reserve Bank") that was accepted for
filing by the Federal Reserve Bank on October 23, 2000.
Merger Corp. and Merchants are awaiting approval of their application
from the Federal Reserve Bank.
Wisconsin. The Merger is also subject to the prior approval by the
Wisconsin Department of Financial Institutions ("DFI") under Section 221.0901 of
the Wisconsin Statutes which requires that the DFI
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take into consideration (i) the financial and managerial resources and future
prospects of the respective institutions and whether the transaction would be
contrary to the best interests of the shareholders or customers of the bank or
bank holding company to be acquired; (ii) whether the action would be
detrimental to the safety and soundness of the respective institutions or any
subsidiary or affiliate of the respective institutions; (iii) the record of
performance, management, financial responsibility and integrity, and the CRA
rating of the applicant; and (iv) whether upon consummation of the transaction,
the applicant would control in excess of 30% of the total amount of deposits of
insured depository institutions in Wisconsin as specified under federal banking
law.
Merger Corp. and Merchants have filed an application with the DFI on
October 11, 2000. Merchants and Merger Corp. are awaiting approval of their
application from the DFI. The Merger may be consummated at any time within one
year of the date approval was granted by the DFI (subject to the foregoing
federal approvals).
General. The Merger cannot proceed in the absence of all requisite
regulatory approvals and compliance with any waiting periods contained in such
approvals. See "Conditions to Consummation of the Merger." In the Merger
Agreement, Merchants and CBOC have agreed to take all reasonable actions
necessary to comply promptly with all legal requirements which may be imposed
with respect to the Merger, including furnishing information to the Federal
Reserve Board or in connection with approvals or filings with other governmental
entities. Merchants and CBOC have also agreed to take all reasonable action
necessary to obtain approvals of the Federal Reserve Board, the DFI and other
governmental entities. However, the obligation to take reasonable actions is not
to be construed as including an obligation to accept any terms or conditions to
an agreement or other approval of, or any exemption by, any party that are not
customarily contained in approvals of similar transactions granted by such
regulators or if Merchants in good faith determines that such terms or
conditions would have a material adverse effect on its business or financial
condition or would materially detract from the value of CBOC to Merchants.
Merchants and CBOC are not aware of any other governmental approvals or
actions that are required for consummation of the Merger except as described
above. Should any other approval or action be required, it is presently
contemplated that such approval or action would be sought. There can be no
assurance that any such approval or action, if needed, could be obtained and, if
such approvals or actions are obtained, there can be no assurance as to the
timing thereof.
The Effective Time
The Merger will become effective as of the later of (a) the date
articles of Merger are filed with the DFI or (b) the effective date and time of
the Merger as set forth in such Articles of Merger, (the later of (a) and (b)
being the "Effective Time"). The filing of the articles of Merger with respect
to the Merger will occur as promptly as practicable after the satisfaction or,
if permissible, waiver of the conditions to the Merger as set forth in the
Merger Agreement. The Merger Agreement may be terminated by either party if,
among other reasons, the Merger shall not have been consummated on or before
December 31, 2000, unless such condition is waived. Upon consummation of the
Merger, CBOC will be merged into Merger Corp. and will not continue its separate
existence or operations, to which Merger Corp. as the surviving corporation will
succeed. See "CERTAIN PROVISIONS OF THE MERGER AGREEMENT - Conditions to
Consummation of the Merger" and "CERTAIN PROVISIONS OF THE MERGER AGREEMENT -
Termination."
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Conversion of Shares, Procedure for Exchange of Certificates; Fractional Shares
At the Effective Time and without any action on the part of Merchants,
CBOC or the holders of CBOC Common Stock, each share of CBOC Common Stock issued
and outstanding immediately prior to the Effective Time (other than shares held
by CBOC shareholders exercising their dissenters rights under the WBCL) shall be
converted into the right to receive shares of Merchants Common Stock. See "THE
Merger -- Dissenters' Rights." All such shares of CBOC Common Stock shall no
longer be outstanding and shall automatically be canceled and retired and shall
cease to exist, and each stock certificate previously representing any such
shares of CBOC Common Stock (other than shares held by dissenting shareholders
as described above) shall thereafter represent the right to receive a
certificate representing shares of Merchants Common Stock into which such CBOC
Common Stock has been converted. Certificates previously representing shares of
CBOC Common Stock shall be exchanged for certificates representing whole shares
of Merchants Common Stock upon the surrender of such certificates as provided
below. No fractional shares of Merchants Common Stock will be issued, and, in
lieu thereof, a cash payment will be made as provided below.
As of the Effective Time, Merchants shall deposit, or cause to be
deposited with Firstar Trust Company, Milwaukee, Wisconsin (the "Exchange
Agent"), for the benefit of the holders of shares of CBOC Common Stock and for
exchange in accordance with the terms of the Merger Agreement, certificates
representing the shares of Merchants Common Stock (such certificates for shares
of Merchants Common Stock, together with any dividends or distributions with
respect thereto (the "Exchange Fund") issuable pursuant to the terms of the
Merger Agreement.
As soon as reasonably practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of a certificate which
immediately prior to the Effective Time represented outstanding shares of CBOC
Common Stock whose shares were converted into the right to receive shares of
Merchants Common Stock, (i) a letter of transmittal and (ii) instructions for
use in effecting the surrender of CBOC Certificates in exchange for certificates
representing shares of Merchants Common Stock. Upon surrender of a certificate
previously representing shares of CBOC Common Stock to the Exchange Agent
together with such duly executed letter of transmittal, the holder of such
certificate shall receive in exchange therefore a certificate representing that
number of whole shares of Merchants Common Stock to which such holder is
entitled and the certificate so surrendered shall forthwith be canceled. In the
event of a transfer of ownership of shares which is not registered in the
transfer records of CBOC, a certificate representing the proper number of shares
of Merchants Common Stock may be issued to a transferee if the certificate
representing such shares is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. Until surrendered, each
certificate previously representing shares of CBOC Common Stock shall be deemed
at any time after the Effective Time to represent only the right to receive upon
such surrender a certificate representing shares of Merchants Common Stock and
cash in lieu of any fractional shares of Merchants Common Stock as described
below.
CBOC SHAREHOLDERS SHOULD NOT FORWARD THEIR STOCK CERTIFICATES TO THE
EXCHANGE AGENT WITHOUT A LETTER OF TRANSMITTAL NOR RETURN THEIR STOCK
CERTIFICATES WITH THE ENCLOSED PROXY.
No dividends or other distributions declared or made after the
Effective Time with respect to Merchants Common Stock with a record date after
the Effective Time shall be paid to the holder of any unsurrendered certificate
of CBOC Common Stock with respect to the shares of Merchants Common Stock
represented thereby, and no cash payment in lieu of fractional shares shall be
paid to any such holder, until
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such certificate is surrendered. Subject to the effect of applicable laws,
following surrender of any such certificate, there shall be paid to the holder
of said certificate, which represents whole shares of Merchants Common Stock
issued in exchange therefor, without interest, (i) promptly, the amount of cash
payable with respect to a fractional share of Merchants Common Stock to which
such holder is entitled and the amount of dividends or other distributions with
a record date after the Effective Time paid with respect to such whole shares of
Merchants Common Stock, and (ii) at the appropriate payment date, the amount of
dividends or other distributions, with a record date after the Effective Time,
but prior to surrender and a payment date occurring after surrender, payable
with respect to such whole shares of Merchants Common Stock.
All shares of Merchants Common Stock issued upon conversion of the
shares of CBOC Common Stock (including any cash paid for fractional shares)
shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of CBOC Common Stock.
No certificates or scrip representing fractional shares of Merchants
Common Stock shall be issued upon the surrender for exchange of CBOC Common
Stock certificates, and such fractional share interest will not entitle the
owner thereof to vote or to any rights of a shareholder of Merchants. Each
holder of a fractional share interest shall be paid an amount in cash equal to
the product obtained by multiplying such fractional share interest to which such
holder would otherwise be entitled by the Bid price of a share of Merchants
Common Stock as published in the Milwaukee Journal Sentinel on the date of the
Effective Time. As soon as practicable after the determination of the amount of
cash, if any, to be paid to holders of fractional share interests, the Exchange
Agent shall notify Merchants and Merchants shall make available such amounts to
such holders of such fractional share interests subject to and in accordance
with the terms of the Merger Agreement, as relevant.
Any portion of the Exchange Fund which remains undistributed to the
shareholders of CBOC for six months after the Effective Time shall be delivered
to Merchants, upon demand, and any shareholders of CBOC who have not theretofore
complied with the procedures described above shall thereafter look only to
Merchants for payment of their claim for Merchants Common Stock, any cash in
lieu of fractional shares of Merchants Common Stock and any dividends or
distributions with respect to Merchants Common Stock.
Neither Merchants nor CBOC shall be liable to any holder of shares of
CBOC Common Stock for any such shares of CBOC Common Stock (or dividends or
distributions with respect thereto) or cash delivered to a public official
pursuant to any abandoned property, escheat or similar law.
Merchants shall be entitled to deduct and withhold from any cash
consideration payable pursuant to the Merger Agreement to any holder of shares
of CBOC Common Stock such amounts as Merchants is required to deduct and
withhold with respect to the making of such payment under the Internal Revenue
Code of 1986, as amended (the "Code"), or any provision of state, local or
foreign tax law.
At the Effective Time the stock transfer books of CBOC shall be closed,
and there shall be no further registration of transfers of shares of CBOC Common
Stock thereafter on said record books. From and after the Effective Time, the
holders of certificates of CBOC Common Stock shall cease to have any rights with
respect to such shares of CBOC Common Stock except as otherwise provided in the
Merger Agreement, or by law. On or after the Effective Time, any certificate of
CBOC Common Stock presented to the Exchange Agent or Merchants for any reason
shall be converted into shares of Merchants Common Stock in accordance with the
terms of the Merger Agreement as described above.
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Persons who hold Merchants Common Stock prior to the Merger will not
need to exchange their existing certificates representing shares of Merchants
Common Stock for new stock certificates.
Description of Merchants Common Stock issuable in the Merger.
The following description of Merchants Common Stock issuable in the
Merger is a summary and is qualified in its entirety by reference to the terms
of such security, which is incorporated by reference herein and is set forth in
full in Merchants Amended Articles of Incorporation (the "Merchants Articles").
The description set forth below is subject in all respects to the WBCL and the
Merchants Articles.
Firstar Trust Company, Milwaukee, Wisconsin, is the transfer agent and
registrar for all outstanding Merchants Common Stock.
THE FOLLOWING DESCRIPTION OF MERCHANTS COMMON STOCK SHOULD BE READ
CAREFULLY BY CBOC SHAREHOLDERS SINCE, AT THE EFFECTIVE TIME, EACH ISSUED AND
OUTSTANDING SHARE OF CBOC COMMON STOCK WILL BE CONVERTED INTO THE RIGHT TO
RECEIVE SHARES OF MERCHANTS COMMON STOCK AT THE EXCHANGE RATIO DESCRIBED ABOVE
UNDER "MERGER CONSIDERATION".
General. Merchants has one class of common stock, the Merchants Common
Stock. Of the 6,000,000 shares of Merchants Common Stock authorized, 2,104,459
shares were outstanding as of August 1, 2000 (the date of the Merger Agreement),
exclusive of shares held in its treasury. The Merchants Articles do not provide
authorization for the issuance of preferred stock.
Dividend Rights. Dividends on Merchants Common Stock will be payable
out of the assets of Merchants legally available therefor as, if and when
declared by the Merchants Board of Directors. No share of Merchants Common Stock
is entitled to any preferential treatment with respect to dividends.
Voting Rights. Each holder of Merchants Common Stock will be entitled
at each shareholders' meeting of Merchants, as to each matter to be voted upon,
to cast one vote, in person or by proxy, for each share of Merchants Common
Stock registered in his or her name on the stock transfer books of Merchants.
Such voting rights are not cumulative.
Rights Upon Liquidation. In the event of liquidation, dissolution or
winding up of Merchants, whether voluntary or involuntary, the holders of
Merchants Common Stock will be entitled to receive all assets of Merchants
remaining for distribution to its shareholders, on a pro rata basis. Since
Merchants has no preferred stock, the rights of holders of Merchants Common
Stock to receive dividends or payment in the event of liquidation or dissolution
are not subject to prior satisfaction of the rights of any other shareholders.
Miscellaneous. Shares of Merchants Common Stock are not convertible
into shares of any other class of capital stock. Shares of Merchants Common
Stock are not entitled to any preemptive or subscription rights. The issued and
outstanding shares of Merchants Common Stock are fully paid and nonassessable
(except as otherwise provided under the WBCL).
Comparison of Shareholder Rights
The following is a summary of material differences between the rights
of holders of CBOC Common Stock and Merchants Common Stock. As CBOC and
Merchants are both incorporated under the laws of the State of Wisconsin, rights
of shareholders are substantially similar. Differences in the rights of
shareholders
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of CBOC and Merchants arise from differences between the provisions of the
Merchants Articles and By- laws and those of CBOC. Shareholders of CBOC, whose
rights are governed by CBOC's Articles of Incorporation, By-laws and the WBCL
will, on consummation of the Merger, become shareholders of Merchants. Their
rights as Merchants shareholders will then be governed by Merchants' Articles of
Incorporation and By-laws and by the WBCL. The following is a summary of the
material differences between the rights of shareholders of CBOC and the rights
of shareholders of Merchants.
Authorized Capital Stock
CBOC. Under CBOC's Articles of Incorporation, the aggregate number of
shares which it is authorized to issue is 250,000 shares of one class of common
stock, $1.00 par value. All shares of CBOC Common Stock are identical in rights
and have one vote. The holders of CBOC Common Stock are entitled to such
dividends as may be declared from time to time by the Board of Directors of CBOC
from funds available therefor and upon liquidation are entitled to receive pro
rata all assets of CBOC available for distribution to such holders, CBOC has no
authorized shares of preferred stock and, accordingly, the rights of holders of
CBOC Common Stock to receive dividends or payment in the event of voluntary or
involuntary dissolution, liquidation or winding up of CBOC are not subject to
the prior satisfaction of the rights of any other shareholders.
Merchants. Under Merchants' Articles of Incorporation, Merchants is
authorized to issue 6,000,000 shares of common stock, par value $1.00 per share.
All shares of Merchants Common Stock are identical in rights and have one vote.
For a description of Merchants Common Stock, see "THE MERGER - Description of
Merchants Common Stock Issuable in the Merger."
Required Vote
CBOC. Pursuant to the WBCL, the affirmative vote of a majority of the
shares of CBOC Common Stock is generally required to adopt amendments to CBOC's
Articles of Incorporation or approve mergers and certain other extraordinary
transactions. However, Article 5 of CBOC's Articles of Incorporation (relating
to CBOC's Board of Directors) requires the affirmative vote of 80% of the
outstanding shares of all classes of CBOC stock entitled to vote thereon.
Merchants. Pursuant to the Merchants' Articles of Incorporation, any
Merger, consolidation of Merchants with one or more other corporations, or any
sale, lease or exchange of all or substantially all of the assets of Merchants
requires the affirmative vote of at least eighty percent (80%) of the
outstanding shares of Merchants. However, the matters described in the preceding
sentence require the affirmative vote of a majority of the outstanding shares of
Merchants if such matters have the prior approval of a majority of the Board of
Directors of Merchants. The foregoing provisions may only be amended by the
affirmative vote of not less than eighty percent (80%) of the outstanding shares
of Merchants Common Stock unless such amendment was approved in advance by a
majority of the Directors of Merchants, in which case the affirmative vote of a
majority of the outstanding shares of Merchants Common Stock is required for
adoption of the amendments. All other provisions of the Merchants Articles of
Incorporation may be amended by the affirmative vote of a majority of the
outstanding shares of Merchants Common Stock.
Classified Board of Directors
CBOC. Pursuant to Article 5 of CBOC's Articles of Incorporation, CBOC's
Board of Directors is divided into three classes as nearly equal in number as
possible, with the Directors in each class serving for staggered three-year
terms. Pursuant to Article 5 and Section 3.02 of CBOC's By-laws, CBOC's Board
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consists of not less then three (3) nor more than twelve (12) members, with the
exact number fixed from time to time by the Board. The present Board of CBOC
consists of ten (10) members. At each annual meeting, the successors to the
class of Directors whose term expires at the time of such meeting are elected
for three year terms. Article 5 requires the affirmative vote of 80% of the
outstanding shares of all classes of CBOC stock entitled to vote thereon.
Section 3.02 of CBOC's By-laws requires the affirmative vote or consent of the
holders of four-fifths of the shares of all classes of CBOC stock entitled to
vote on such amendment; provided, however, that if any class or series of shares
is entitled to vote on the amendment as a class, such amendment requires the
affirmative vote of four-fifths of the shares of each class of shares and series
entitled to vote on the amendment as a class and of the total shares entitled to
vote on the amendment.
Merchants. Pursuant to the Articles of Incorporation of Merchants, the
Board of Directors of Merchants is divided into three (3) classes as nearly
equal in number as possible, with the directors in each class serving for
staggered three-year terms. Merchants' Board consists of not less than eleven
(11) nor more than twenty (20), the exact number to be determined at each annual
meeting of shareholders or, within such limits by a majority of the Board of
Directors. At each annual meeting of shareholders, the successors of the class
whose term expires at the time of such meeting are elected for three-year terms.
The present Board of Directors of Merchants consists of fifteen (15) members.
Removal of Directors
CBOC. Pursuant to Article 5 of CBOC's Articles of Incorporation, any
director may be removed from office by the affirmative vote of 80% of the
outstanding shares entitled to vote for the election of such director.
Merchants. The By-laws of Merchants provide that any director may be
removed from office by the affirmative vote of a majority of the shares
outstanding entitled to vote for the election of such director taken at a
special meeting of shareholders called for that purpose.
Newly Created Directorships and Vacancies on the Board of Directors
CBOC. Any vacancy occurring in the Board of Directors, including a
vacancy created by an increase in the number of Directors, may be filled by the
shareholders by affirmative vote of a majority of the outstanding shares
entitled to vote. During such time as the shareholders fail or are unable to
fill such vacancies, then and until the shareholders act, (i) the Board of
Directors may fill the vacancy by the act of a majority of the Directors present
at a meeting in which a quorum is present; or (ii) if the Directors remaining in
office constitute fewer than a quorum of the Board, they may fill the vacancy by
the affirmative vote of a majority of all Directors remaining in office.
Merchants. Pursuant to Merchants' Articles of Incorporation, a majority
of the Board of Directors may fill any vacancy on the Board.
Certain Business Combinations
CBOC. CBOC's Articles of Incorporation and Bylaws do not contain any
supermajority voting provisions relating to the approval by holders of CBOC
Common Stock of Mergers or other business combinations.
Merchants. Article XI of Merchants' Articles provides that an
affirmative vote of eighty percent (80%) of Merchants' outstanding shares is
required to approve any Merger or consolidation of Merchants
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with one or more other corporations or any sale, lease or exchange of all or
substantially all of the assets of Merchants. The 80% voting requirement does
not apply if a majority of Merchants Directors approve the transaction prior to
the mailing of the notice of the meeting of shareholders at which the matter is
to be voted on. In that case, the affirmative vote of a majority of the
outstanding shares of Merchants Common Stock is required. The foregoing
provision may only be amended, modified or repealed by the affirmative vote of
not less than eighty percent (80%) of the outstanding shares of Merchants Common
Stock unless such amendment or modification has been approved by the Board of
Directors. In that case, the affirmative vote of a majority of the outstanding
shares of Merchants Common Stock is required.
Resale of Merchants Common Stock Issued Pursuant to the Merger
The Merchants Common Stock issued pursuant to the Merger will be
registered under the Securities Act and be freely tradeable under the Securities
Act except for shares issued to any shareholder of CBOC who may be deemed to be
an "affiliate" of CBOC for purposes of Rule 145 under the Securities Act. Each
affiliate identified by CBOC will enter into an agreement with Merchants
providing that such affiliate will be subject to Rule 145(d) of the Securities
Act and shall not transfer any Merchants Common Stock received in the Merger
except in compliance with the Securities Act. In order to comply with pooling of
interests requirements, such persons shall agree to make no disposition of any
shares of CBOC Common Stock or Merchants Common Stock (or any interests therein)
during the period beginning 30 days before the Effective Time and ending when
the financial results for at least 30 days of combined operations of CBOC and
Merchants after the Effective Time have been published. This Proxy
Statement/Prospectus does not cover resales of Merchants Common Stock received
by any person who may be deemed to be an affiliate of CBOC. The foregoing
restrictions are expected to apply to the directors and executive officers of
CBOC.
Pre-Merger Dividend Policy
CBOC. Pursuant to the Merger Agreement, except for dividends paid in
the ordinary course and consistent with past practice, CBOC is prohibited from
declaring or paying any dividend on, or making any other distribution in respect
of, its outstanding shares of capital stock without the prior written consent of
Merchants.
Merchants. Merchants expects to continue to declare, until the
Effective Time, its regularly scheduled dividends.
Post-Merger Dividend Policy
It is the current intention of the Board of Directors of Merchants to
continue to declare cash dividends on the Merchants Common Stock following the
Merger. During the first three quarters of the year 2000, Merchants paid a
quarterly dividend of $0.15, $0.20 and $0.15, respectively, in each case per
share. It is expected that Merchants will pay a quarterly dividend of $0.15 per
share in the fourth quarter of 2000. Shareholders should note that future
dividends will be determined by the Merchants Board of Directors in light of the
earnings and financial condition of Merchants and its subsidiaries and other
factors, including applicable governmental regulations and policies. In that
regard, Merchants is a legal entity separate and distinct from its banking and
non-banking subsidiaries, and the principal sources of Merchants' income are
dividends and fees from such subsidiaries. The payment of dividends by
Merchants' banking subsidiaries is subject to certain restrictions under
applicable governmental regulations.
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Conduct of Business Pending the Merger
Pursuant to the Merger Agreement, CBOC has agreed to carry on its
business, and the business of its subsidiary, in the usual, regular and ordinary
course in substantially the same manner as conducted prior to the execution of
the Merger Agreement, subject to certain covenants and other agreements agreed
to by CBOC in the Merger Agreement. See "CERTAIN PROVISIONS OF THE MERGER
AGREEMENT - Certain Covenants."
Certain Material Federal Income Tax Consequences
Merchants and CBOC have received an opinion of Davis & Kuelthau, S.C.,
Counsel for Merchants that the Merger will qualify as a tax-free reorganization
under Section 368(a)(1)(A) of the Code and that each of Merchants and CBOC will
be a party to such reorganization within the meaning of Section 368(b) of the
Code. Accordingly, CBOC, Merchants and Merger Corp. will recognize no gain or
loss for federal income tax purposes as a result of the Merger, and no gain or
loss will be recognized by any holder of CBOC Common Stock upon receipt of
Merchants Common Stock pursuant to the Merger (except upon the receipt of cash
in lieu of fractional shares of Merchants Common Stock). The Internal Revenue
Service ("Service") has not been asked to rule upon the tax consequences of the
Merger and such request will not be made. The opinion of Davis & Kuelthau, S.C.
is based entirely upon the Code, regulations now in effect thereunder, current
administrative rulings and practice, and judicial authority, all of which are
subject to change. Unlike a ruling from the Service, an opinion of an advisor is
not binding on the Service and there can be no assurance, and none is hereby
given, that the Service will not take a position contrary to one or more
positions reflected herein or that the opinion will be upheld by the courts if
challenged by the Service.
EACH SHAREHOLDER OF CBOC IS URGED TO CONSULT HIS OR HER OWN TAX AND FINANCIAL
ADVISORS AS TO THE EFFECT OF SUCH FEDERAL INCOME TAX CONSEQUENCES ON HIS OR HER
OWN PARTICULAR FACTS AND CIRCUMSTANCES AND ALSO AS TO ANY STATE, LOCAL, FOREIGN
OR OTHER TAX CONSEQUENCES ARISING OUT OF THE MERGER.
Based upon the opinion of Davis & Kuelthau, S.C. which in turn is based
upon various representations and subject to various assumptions and
qualifications, the following federal income tax consequences to the
shareholders of CBOC will result from the Merger:
(i) Provided that the Merger of CBOC with and into Merger
Corp. qualifies as a statutory Merger under applicable law, the Merger
will qualify as a reorganization within the meaning of Sections
368(a)(1)(A) and 368(a)(2)(D) of the Code, and CBOC, Merchants and
Merger Corp. will each be "a party to a reorganization" within the
meaning of Section 368(b) of the Code for purposes of this
reorganization.
(ii) No gain or loss will be recognized by the holders of CBOC
Common Stock upon the exchange of CBOC Common Stock solely for
Merchants Common Stock pursuant to the Merger, except with respect to
cash received in lieu of fractional shares of Merchants Common Stock.
(iii) A CBOC shareholder's aggregate basis in the Merchants
Common Stock received in the Merger will be the same as the aggregate
basis of CBOC Common Stock exchanged therefor.
(iv) The holding period of the Merchants Common Stock received
by a holder of CBOC Common Stock pursuant to the Merger will include
the period during which CBOC Common Stock
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exchanged therefor was held, provided that the CBOC Common Stock
surrendered was held as a capital asset as of the time of the Merger.
(v) The receipt by a holder of CBOC Common Stock of cash in
lieu of a fractional share of Merchants Common Stock will be treated as
if he or she received such fractional share from Merchants and then had
it redeemed for cash. Such receipt of cash will be treated under
Section 302(b)(1) of the Code as full payment in exchange for the
fractional share.
The foregoing is only a general description of certain material federal
income tax consequences of the Merger for holders of CBOC Common Stock who are
citizens or residents of the United States and who hold their shares as capital
assets, without regard to the particular facts and circumstances of the tax
situation of each holder of the CBOC Common Stock. It does not discuss all of
the consequences that may be relevant to holders of CBOC Common Stock entitled
to special treatment under the Code (such as insurance companies, financial
institutions, dealers in securities, tax-exempt organizations or foreign
persons). The summary set forth above does not purport to be a complete analysis
of all potential tax effects of the transactions contemplated by the Merger
Agreement or the Merger itself. No information is provided herein with respect
to the application and effect of state, local and foreign tax laws and the
possible effects of changes in federal laws or other tax laws.
Anticipated Accounting Treatment
The business combination resulting from the Merger is expected to
qualify as a "pooling of interests" for accounting and financial reporting
purposes. Under this method of accounting, the recorded assets and liabilities
of Merchants and CBOC will be carried forward to the combined corporation at
their recorded amounts; income of the combined corporation will include income
of Merchants and CBOC for the entire fiscal year in which the combination
occurs.
The Merger Agreement provides that a condition to the consummation of
the Merger is the receipt of the opinion of the independent public accountants
of Merchants to the effect that the Merger qualifies for "pooling of interests"
accounting treatment.
Dissenters' Rights
Under the provisions of Subchapter XIII of the WBCL, a copy of which is
attached to this Proxy Statement/Prospectus as Exhibit D and which provisions
are incorporated herein by reference, any holder of record or beneficial holder
of CBOC Common Stock has the right to dissent from the Merger and demand payment
of the "fair value" of his or her shares in cash as determined pursuant to
Subchapter XIII of the WBCL ("Dissenters' Rights"). Set forth below is a summary
of the procedures relating to the exercise of Dissenters' Rights. This summary
does not purport to be a complete statement of the provisions of Subchapter XIII
of the WBCL and shareholders wishing to dissent from the Merger are urged to
review Exhibit D in its entirety.
Any shareholder who wishes to assert Dissenters' Rights must deliver a
written notice of his or her intent to exercise such right to CBOC, Inc., 500
Cherry Avenue, Oconto Falls, WI 54154, Attention: Mr. Thomas Ebenreiter,
President, before the vote on the Merger Agreement is taken at the Special
Meeting. A PROXY OR VOTE AGAINST THE MERGER AGREEMENT WILL NOT, BY ITSELF, BE
REGARDED AS A WRITTEN NOTICE OF INTENT TO DEMAND PAYMENT FOR PURPOSES OF
ASSERTING DISSENTERS' RIGHTS.
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Furthermore, a CBOC shareholder wishing to assert Dissenters' Rights
may not vote his or her shares in favor of the Merger.
A record holder of CBOC Common Stock may assert Dissenters' Rights as
to fewer than all shares registered in that shareholder's name only if the
holder dissents with respect to all shares beneficially owned by any one person
and notifies CBOC in writing of the name and address of each person on whose
behalf the shareholder asserts such Dissenters' Rights.
A beneficial shareholder may assert Dissenters' Rights as to shares
held on the shareholder's behalf only if, in addition to meeting the other
requirements to dissent, the beneficial shareholder (i) submits to CBOC the
record shareholder's written consent to the dissent not later than the time the
beneficial shareholder asserts Dissenters' Rights and (ii) asserts Dissenters'
Rights with respect to all shares of which the shareholder is the beneficial
shareholder or over which the beneficial shareholder has power to direct the
vote.
If the Merger Agreement is approved by the requisite vote of holders of
CBOC Common Stock, CBOC is required to send a notice (the "Dissenters' Notice")
to all dissenting shareholders containing payment demand and stock certificate
surrender information (the "Payment Demand") within 10 days after such approval.
The return date (the "Payment Demand Date") specified by CBOC for receiving the
Payment Demand from dissenting shareholders may not be less than thirty (30) nor
more than sixty (60) days after the date on which the Dissenters' Notice was
first sent. Upon receipt of the Dissenters' Notice, each dissenting shareholder
must return his payment demand and Certificate for CBOC Common Stock no later
than the Payment Demand Date as provided in the Dissenters' Notice and certify
whether he or she acquired beneficial ownership of the shares prior to the first
public announcement of the terms of the Merger on August 9, 2000. A Payment
Demand may not be withdrawn without CBOC's consent.
If the Merger is effectuated, Merchants upon such effectuation, will
pay each dissenting shareholder who properly complied with the statutory
requirements of Subchapter XIII of the WBCL, the amount that Merchants estimates
to be the fair value of such dissenting shareholder's shares, plus accrued
interest from the Effective Time; provided that, with respect to shares acquired
after the first public announcement of the Merger, Merchants may elect to
withhold payment until either such shareholder accepts Merchants offer of fair
value or a court determines the fair value of such shares.
If the Merger is not effectuated within sixty (60) days of the Payment
Demand Date, CBOC will return all deposited certificates to dissenting
shareholders. If the Merger is thereafter effected, CBOC will send a new
Dissenters' Notice within ten (10) days of effecting the Merger and repeat the
payment demand procedure described above.
If any dissenting shareholder is dissatisfied with Merchants'
determination of "fair value," such dissenting shareholder may notify Merchants
in writing of his or her own estimate of the fair value of his or her shares and
the amount of interest due. A dissenting shareholder must assert this right
within thirty (30) days after Merchants makes or offers payment for his or her
shares or the right is waived. Merchants may either accept such dissenting
shareholder's estimate of fair value or commence a proceeding in the Wisconsin
Circuit Court of Oconto County to determine the fair value of the shares of all
dissenting shareholders whose own estimates of fair value are not accepted by
Merchants.
Shareholders of CBOC considering exercising dissenters' rights should
bear in mind that the "fair value" to be paid for their CBOC stock is defined
under Section 180.1301 of the WBCL as "... the value of the shares immediately
before the effectuation of the corporate action to which the dissenter objects,
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excluding any appreciation or depreciation in anticipation of the corporate
action unless exclusion would be inequitable."
In the event any holder of CBOC Common Stock fails to perfect his or
her rights to dissent by failing to comply strictly with the applicable
statutory requirements of Subchapter XIII of the WBCL, he or she will be bound
by the terms of the Merger Agreement and will not be entitled to payment for his
or her shares under Subchapter XIII of the WBCL. ANY HOLDER OF CBOC COMMON STOCK
WHO WISHES TO OBJECT TO THE TRANSACTION AND DEMAND PAYMENT IN CASH FOR HIS OR
HER SHARES SHOULD CONSIDER CONSULTING HIS OR HER OWN LEGAL ADVISOR.
Because an executed proxy relating to CBOC Common Stock on which no
voting direction is given will be voted at the Special Meeting in favor of the
Merger, a dissenting shareholder who wishes to have his or her shares of CBOC
Common Stock represented by Proxy at the Special Meeting but preserve his or her
dissenters' rights must mark his or her proxy either to vote against the Merger
or to abstain form voting thereon, in addition to the foregoing requirements.
The Voting Agreement
Pursuant to the Voting Agreement, attached hereto as Exhibit B, the
execution of which was a condition to Merchants entering into the Merger
Agreement, the directors of CBOC have agreed to vote their shares (i) in favor
of the adoption and approval of the Merger Agreement and the Merger and (ii)
against any Competing Transaction. See "CERTAIN PROVISIONS OF THE VOTING
AGREEMENT."
Anti-Takeover Effect of the Voting Agreement. The Voting Agreement may
have the effect of discouraging persons who might now or in the future be
interested in acquiring all of or a significant interest in CBOC from
considering or proposing such an acquisition, even if such persons were prepared
to pay a higher price per share for CBOC's Common Stock than the price per share
implicit in the exchange ratios described under "Merger Consideration" above.
Other Related Party Transactions
In the ordinary course of conducting their banking and financial
service businesses, each of Merchants, CBOC and their respective subsidiaries,
may do business and engage in banking transaction with the other party and its
subsidiaries, which may include, but not be limited to, interests or
participation in loans and interbank advances.
Management after the Merger
In the Merger, CBOC will be merged into Merger Corp. and the separate
corporate existence of CBOC will cease. Merchants will thereby acquire control
of the Bank through Merger Corp.
The officers and directors of Merger Corp. prior to the Merger will
continue as officers and directors of the surviving corporation. The officers
and directors of the Bank prior to the Effective Time will continue as officers
and directors after the Effective Time until their successors shall have been
duly elected and qualified, unless they resign or are removed under the
provisions of Bank's Articles of Incorporation or Bylaws.
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CERTAIN PROVISIONS OF THE MERGER AGREEMENT
The following is a brief summary of certain provisions of the Merger
Agreement and Plan of Merger, which are attached as Exhibits A and A-1 to this
Proxy Statement/Prospectus and are incorporated herein by reference. Such
summary is qualified in its entirety by reference to the Merger Agreement and
Plan of Merger.
The Merger
The Merger Agreement provides that, following the approval of the
Merger Agreement by the shareholders of CBOC and the satisfaction or waiver of
the other conditions to the Merger, CBOC will be merged with and into Merger
Corp. If the Merger Agreement is approved by the shareholders of CBOC, the
Merger will become effective upon the Effective Time.
At the Effective Time, pursuant to the Merger Agreement, each
outstanding share of CBOC Common Stock will be converted into the right to
receive the number of shares of Merchants Common Stock as described under
"Merger Consideration" above, subject to renegotiation of the exchange ratio if
the Daily Average Price (as defined above) of Merchants Common Stock is less
than $28.00 or greater than $42.00. See "THE MERGER-Merger Consideration." With
regard to the treatment of fractional share interests, see "The Merger -
Conversion of Shares; Procedure for Exchange of Certificates; Fractional
Shares."
Representations and Warranties
The Merger Agreement contains customary representations and warranties
relating to, among other things, (i) each of Merchants' and CBOC's and their
respective subsidiaries' organization and similar corporate matters; (ii) each
of Merchants' and CBOC's capital structure; (iii) authorization, execution,
delivery, performance and enforceability of the Merger Agreement and other
related matters; (iv) documents filed by Merchants with the Commission and with
the Federal Reserve Board and state banking authorities and the accuracy of
information contained therein; (v) the accuracy of information supplied by each
of Merchants and CBOC in connection with the Registration Statement and this
Proxy Statement/Prospectus; (vi) compliance with laws including employment and
lending laws; (vii) no material pending or threatened litigation except as
otherwise disclosed by Merchants and CBOC; (viii) filing of tax returns and
payment of taxes; (ix) certain material contracts and contracts relating to
certain employment, consulting and benefits matters of CBOC; (x) retirement and
other employee plans and matters of CBOC relating to ERISA; (xi) the absence of
any burdensome contracts, agreements or restrictions; (xii) the absence of
certain material changes or events since December 31, 1999, relating to the
incurrence of a material adverse effect in the business operations, properties
(including intangible properties), condition (financial or otherwise), assets or
liabilities (including contingent liabilities) of Merchants or its subsidiaries,
taken as a whole, and CBOC or its subsidiaries, taken as a whole; (xiii)
maintenance of books of account and accounting controls, loan documentation and
disclosure; (xiv) no action taken that would prevent using the "pooling of
interests" method to account for the Merger or which would prevent the Merger
from qualifying as a tax-free reorganization under the Code; (xv) certain
environmental matters relating to the properties of CBOC; (xvi) good title to
the properties of CBOC and its subsidiaries, free of liens except as specified;
and (xvii) certain insurance matters.
Certain Covenants
Pursuant to the Merger Agreement, Merchants and CBOC have each agreed
that prior to the Effective Time (and unless the prior written consent of the
other shall have been obtained) each of them and
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their respective subsidiaries will operate their respective businesses in a
manner that does not violate any law. In addition, CBOC has agreed that prior to
the Effective Time, CBOC will not propose or adopt any amendments to its
corporate charter or bylaws in any way materially adverse to Merchants.
Pursuant to the Merger Agreement, Merchants and CBOC have each agreed
that prior to the Effective Time (and unless the prior written consent of
Merchants shall have been obtained) CBOC and its subsidiaries will (i) carry on
business in the usual, regular and ordinary course consistent with past
practice, (ii) use reasonable efforts to preserve intact their business
organization and assets (and all rights associated therewith), (iii) use
reasonable efforts to maintain and keep their properties in good repair and
condition, (iv) use reasonable efforts to keep all insurance and bonds in full
force and effect, (v) perform in all material respects all obligations under all
material contracts, leases and documents relating to or affecting the assets,
properties and business of CBOC and its subsidiaries, (vi) purchase and sell
securities in accordance with past practices, (vii) maintain as of the date on
which all conditions have been met and until the Effective Time, a loan loss
reserve of not less than 1.2% of period ending loans, (viii) fully expense on
its financial statement all expenses payable as a result of the consummation of
the Merger (ix) obtain an independent audit of its financial statements for the
year ended December 31, 1999; and (x) comply with and perform in all material
respects all obligations and duties imposed by all applicable laws. CBOC has
also agreed that prior to the Effective Time (and unless the prior written
consent of Merchants shall have been obtained), neither CBOC nor its
subsidiaries will: (i) grant any increase in compensation or bonuses (other than
as specified in the Merger Agreement) or retirement benefits to any employee or
otherwise adopt, enter into, amend or modify any employee benefit plan, or enter
into or amend any employment, severance or similar agreement with any director
or officer (other than as is consistent with the normal policy of CBOC); (ii)
declare or pay any dividend on its outstanding shares of capital stock except in
the ordinary course, consistent with past practices; (iii) redeem, purchase or
otherwise acquire any shares of CBOC capital stock; (iv) merge or consolidate
with or into any other corporation or bank; (v) purchase or otherwise acquire
any assets or stock of any corporation, bank or other business; (vi) liquidate,
sell, dispose of, or encumber any assets or acquire any assets, other than in
the ordinary course of business consistent with past practice; (vii) split,
combine or reclassify any of the capital stock of CBOC or issue, authorize or
propose the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock; (viii) issue, deliver, award,
grant or sell, or authorize or propose the issuance, delivery, award, grant or
sale of, any shares of any class of CBOC Common Stock or any rights, warrants or
options to acquire, any such shares; (ix) purchase any shares of Merchants
Common Stock (except in a fiduciary capacity for the account of its customers;
(x) change any of its methods of accounting, or methods of reporting income or
deductions for federal income tax purposes, in effect at December 31, 1999,
except as may be required by law or generally accepted accounting principles;
(xi) change any lending, investment, liability management or other material
policies concerning the business or operations of CBOC or any subsidiary in any
material respect; (xii) organize any new subsidiaries or enter into any new
non-bank line of business or make any material changes in its operations; (xiii)
take any action which is or is reasonably likely to adversely affect the ability
of Merchants or Merger Corp. to obtain any necessary approvals of governmental
authorities required for the transactions contemplated hereby, adversely affect
CBOC's ability to perform its covenants and agreements under the Merger
Agreement or result in any of the conditions to the Merger not being satisfied;
(xiv) incur or assume any material obligation or liability, or make any loan
(excluding loan renewals of a loan not then classified as "substandard,"
"doubtful," "loss," "other loans especially mentioned" or any comparable
classifications by CBOC, the Bank or banking regulators) or investment
(excluding U.S. Treasury Securities and municipal loans) in any amount greater
than $100,000 for securities or $500,000 for loans; (xv) assume, guarantee,
endorse or otherwise become liable or responsible for the obligations of any
other person or entity; (xvi) mortgage, license, pledge or grant a security
interest in any of its material assets or allow to exist any material lien
thereon, except (A) liabilities and obligations incurred in the ordinary course
of business consistent with past practices and in amounts not material to CBOC
or its subsidiaries taken as a whole, and
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(B) as may be required under existing agreements to which CBOC or any subsidiary
is a party; (xvii) acquire assets (including equipment)or securities in excess
of $25,000 in the aggregate (excluding loans to customer and investments
permitted above); (xviii) enter into any other contract or agreement involving
annual payments by CBOC or a subsidiary in excess of $20,000; (xix) pay,
discharge, or satisfy any debts or claims not in the ordinary course of business
and consistent with past practices and in no event with a value in excess of
$20,000 individually; (xx) settle any claim, action, suit, litigation,
proceeding, arbitration, investigation or controversy of any kind, for any
amount in excess of $25,000 or in any manner which would restrict in any
material respect the operations or business of CBOC or its subsidiaries; (xxi)
purchase any new financial product or instrument which involves entering into a
contract with a term of six months or longer; or xxii) take any action or fail
to take any action which individually or in the aggregate can be expected to
have a material adverse effect on CBOC or its subsidiaries, taken as whole.
No Solicitation of Transactions
The Merger Agreement provides that CBOC and its respective subsidiaries
will not initiate, solicit or encourage (including by way of furnishing
information or assistance), or take any other action to facilitate, any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to any Competing Transaction or negotiate with any person in
furtherance of such inquiries or to obtain a Competing Transaction, or agree to
or endorse any Competing Transaction, or authorize or permit any of its
officers, directors or employees or any investment banker, financial advisor,
attorney, accountant or other representative retained by it or any of its
subsidiaries to take any such action. CBOC must promptly notify Merchants orally
and in writing of all of the relevant details relating to all inquiries and
proposals which it may receive relating to any of such matters. Notwithstanding
the foregoing, the Board of Directors of CBOC is not prohibited from (i)
furnishing or permitting any of its officers, directors, employees, investment
bankers, financial advisors, attorneys, accountants or other representatives to
furnish information to any party that requests information as to CBOC if the
Board of Directors of CBOC, after consultation with and based upon the written
advice of independent legal counsel, determines in good faith that such action
is required for the Board of Directors of CBOC to comply with its fiduciary
duties to shareholders imposed by law, and if prior to furnishing such
information to such party, CBOC receives from such party an executed
confidentiality agreement in reasonably customary form.
For purposes of the Merger Agreement, a "Competing Transaction" shall
mean any of the following involving CBOC or any of CBOC's subsidiaries: (i) any
Merger, consolidation, share exchange, business combination, or other similar
transactions; (ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition of 10% or more of assets in a single transaction or series of
transactions, excluding from the calculation of such percentage any such
transactions undertaken in the ordinary course of business and consistent with
past practice; (iii) any sale of 10% or more of shares of capital stock (or
securities convertible or exchangeable into or otherwise evidencing, or any
agreement or instrument evidencing, the right to acquire capital stock); (iv)
any tender offer or exchange offer for 10% or more of outstanding shares of
capital stock; (v) any solicitation of proxies in opposition to approval by
CBOC's shareholders of the Merger; (vi) the filing of an acquisition application
(or the giving of acquisition notice) whether in draft or final form under the
BHC Act or the Change in Bank Control Act with respect to CBOC or its
subsidiaries; (vii) any person shall have acquired beneficial ownership or the
right to acquire beneficial ownership of, or any "group" (as such term is
defined under Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder) shall have been formed which beneficially owns or has
the right to acquire beneficial ownership of 10% or more of the then outstanding
shares of capital stock; or (viii) any public announcement of a proposal, plan
or intention to do any of the foregoing.
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Conditions to Consummation of the Merger
The respective obligations of each party to effect the Merger is
subject to various conditions which include, in addition to other customary
closing conditions, the following: (i) the Merger shall have been approved by
the holders of CBOC Common Stock; (ii) the Registration Statement shall have
been declared effective by the Commission under the Securities Act (and no stop
order suspending the effectiveness of the Registration Statement shall have been
issued) and Merchants shall also have received all other federal and state
securities permits and authorizations necessary to issue Merchants Common Stock
pursuant to the Merger Agreement; (iii) the Merger shall have been approved by
the Federal Reserve Board and the DFI, which approvals shall not contain any
condition which is not reasonably satisfactory to Merchants or CBOC and any
waiting periods with respect to the Merger shall have expired; and (iv) there
shall not be any injunction or restraining order preventing the consummation of
the Merger in effect.
In addition, Merchants' or CBOC's respective obligation to effect the
Merger is subject to one or more of the following additional conditions (any of
which may be waived by such party): (i) the representations and warranties of
the other party to the Merger Agreement shall be true and correct in all
material respects and the other party shall have performed in all material
respects all agreements and covenants required to be performed by it under the
Merger Agreement and any agreements entered into in connection therewith, and
the other party shall have obtained all material consents and approvals required
to consummate the Merger; (ii) there shall not be any pending action, proceeding
or investigation before any court or administrative agency or by any government
agency or any other person (a) challenging or seeking material damages in
connection with the Merger or the conversion of CBOC Common Stock into Merchants
Common Stock pursuant to the Merger, or (b) seeking to restrain, prohibit or
limit the exercise of full rights of ownership or operation by Merchants or is
subsidiaries of all or any portion of the business or assets of CBOC or any of
its subsidiaries, which in either case is reasonably likely to have a material
adverse effect on either CBOC and its subsidiaries, taken as a whole, or
Merchants and its subsidiaries, taken as a whole; (iii) the parties shall have
received the opinion of independent counsel to Merchants that the Merger will be
treated for federal income tax purposes as a "reorganization" within the meaning
of Section 368(a) of the Code (see "The Merger - Certain Material Federal Income
Tax Consequences," above); (iv) Merchants shall have received an opinion from
Ernst & Young, LLP to the effect that the Merger qualifies for "pooling of
interests" accounting treatment; (v) Merchants and CBOC shall have received the
opinion of counsel regarding certain issues under the Securities Act and the
WBCL; (vi) Merchants shall have received from each affiliate of CBOC a signed
letter regarding certain restrictions on the resale of Merchants Common Stock
under Rule 145 of the Securities Act; (vii) Merchants shall have received from
Ernst & Young LLP "Comfort Letters" dated as of the date of mailing of the Proxy
Statement/Prospectus and the Closing Date, covering matters customary in
transactions such as the Merger; (viii) Merchants shall have received from the
Directors of CBOC the Voting Agreement discussed. See "CERTAIN PROVISIONS OF THE
VOTING AGREEMENT." (ix) no material adverse change in the current staff of
executive officers of Merchants shall occur prior to the Effective Time.
Termination
The Merger Agreement may be terminated at any time prior to the
Effective Time by the applicable Board of Directors, whether before or after
approval of the matters presented in connection with the Merger by the
shareholders of CBOC: (i) by mutual consent of Merchants and CBOC; (ii) by
either CBOC or Merchants (x) if there has been a breach in any material respect
of any representation, warranty, covenant or agreement on the part of CBOC, on
the one hand, or Merchants, on the other hand, respectively set forth in the
Merger Agreement, or (y) if any representation or warranty of CBOC, on the one
hand, or Merchants on the other hand, respectively, shall be discovered to have
become untrue in any material respect, in either
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case which breach or other condition has not been cured within 10 business days
following receipt by the non-terminating party of notice of such breach or other
condition (provided that he Merger Agreement may not be terminated by the
breaching party or party making any representation or warranty which shall have
become untrue in any material respect); (iii) by either Merchants or CBOC if any
permanent injunction preventing the consummation of the Merger shall have become
final and nonappealable; (iv) by either Merchants or CBOC if the Federal Reserve
Board or the DFI denied approval of the Merger and neither Merchants nor CBOC
has, within thirty (30) days after the entry of such order denying approval,
filed a petition seeking review of such order as provided by applicable law; (v)
by either Merchants or CBOC if the Merger has not been consummated by December
31, 2000, for a reason other than the failure of the terminating party to comply
with its obligations under the Merger Agreement; (vi) by either Merchants or
CBOC if the required approval of the shareholders of CBOC has not been obtained;
(vii) by either Merchants or CBOC if applicable conditions have not been
satisfied or waived by December 31, 2000; (viii) by either Merchants or CBOC if
they are unable to renegotiate the Merger Consideration; if required under
Section 1.06(c)(4) of the Merger Agreement.
In the event of termination of the Merger Agreement by either CBOC or
Merchants, other than as a result of a material breach by the non-terminating
party, each party will pay its own expenses and the Merger Agreement will become
void and there will be no liability or obligation on the part of Merchants or
CBOC other than under certain specified provisions of the Merger Agreement
dealing with confidential treatment of non-public information. In the event of
termination of the Merger Agreement by a material breach, in addition to other
remedies at law or equity for breach, the party to have breached will reimburse
the non-breaching parties their expenses under the Merger Agreement.
Amendment and Waiver
The Merger Agreement may be amended at any time prior to the Effective
Time by action taken or authorized by the respective Boards of Directors of
Merchants and CBOC (except that after the Merger Agreement shall have been
approved by the shareholders of CBOC, no amendment may be entered into which
would reduce the amount or change the consideration into which each share of
CBOC Common Stock shall be converted upon consummation of the Merger without
further shareholder approval). At any time prior to the Effective Time the
parties may extend the time for the performance of any of the obligations or
other acts of the other party hereto, waive any inaccuracies in the
representations and warranties contained in the Merger Agreement or in any
document delivered pursuant to the Merger Agreement and waive compliance with
any of the agreements or conditions contained in the Merger Agreement.
Expenses
Whether or not the Merger is consummated, all costs and expenses
incurred in connection with the Merger Agreement and the transactions
contemplated thereby shall be paid by the party incurring such expense, except
if the Merger Agreement is terminated due to the breach of the Merger Agreement
by either party thereto, then, in addition to other remedies at law or equity
for breach of the Merger Agreement, the party so found to have breached the
Merger Agreement shall indemnify the other party for its respective expenses.
Break-Up Fee
Provided that Merchants has not breached in any material respect its
obligations under the Merger Agreement, CBOC is obligated to pay to Merchants a
fee ("Break-Up Fee") equal to $225,000, if (A) the Board of Directors of CBOC
(i) withdraws, modifies or amends its approval or recommendation of the
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Merger Agreement; (ii) does not at the appropriate time recommend that the
shareholders of CBOC vote in favor of the Merger Agreement or withdraws or
modifies such recommendation or (iii) does not include such voting
recommendation in the Proxy Statement/Prospectus or (B) CBOC initiates, solicits
or encourages or takes any other action to lead to any Competing Transaction see
"CERTAIN PROVISIONS OF THE Merger Agreement - No Solicitation of Transactions."
Provided that CBOC has not breached in any material respect its
obligations under the Merger Agreement, Merchants is obligated to pay to CBOC
the Break-Up Fee if the Board of Directors of Merchants withdraws, modifies or
amends in any respect its approval of the Merger Agreement.
CERTAIN PROVISIONS OF THE VOTING AGREEMENT
The following is a brief summary of certain provisions of the Voting
Agreement, which is attached as Exhibit B to this Proxy Statement/Prospectus and
is incorporated herein by reference. The following summary is qualified in its
entirety by reference to the Voting Agreement.
Merchants has entered into the Voting Agreement with Directors of CBOC
and related parties ("directors"). The directors hold 30,185 shares representing
approximately 37.7% of the total voting power of CBOC Common Stock. The Voting
Agreement provides that the directors, in consideration of the substantial
expenses incurred by Merchants in connection with the Merger Agreement and as a
condition to Merchants entering into the Merger Agreement, shall vote or cause
to be voted or express a written consent with respect to all of such director's
shares:
(a) in favor of adoption and approval of the Merger Agreement
and the Merger at every meeting of shareholders of CBOC at which such
matters are considered and at every adjournment thereof and in
connection with every proposal to take action by written consent with
respect thereto, and
(b) against any other Competing Transaction at every meeting
of shareholders of CBOC at which such matters are considered and at
every adjournment thereof and in connection with every proposal to take
action by written consent with respect thereto.
The Voting Agreement also provides that:
(a) Each of the directors agrees that such director will not,
nor will such director permit any entity under such director's control,
to deposit any of such director's shares in a voting trust or subject
any of their shares to any agreement, arrangement or understanding with
respect to the voting of such shares inconsistent with the Voting
Agreement.
(b) During the term of the Voting Agreement, each director
agrees not to sell, assign, transfer or dispose (except by means of
certain gifts) of such director's shares.
The Voting Agreement shall terminate upon the earlier of (a) the
Effective Time of the Merger and (b) the date on which the Merger Agreement is
terminated in accordance with its terms. Upon such termination, no party shall
have any further obligations or liabilities under the Voting Agreement; provided
that termination shall not relieve any party from liability for any breach of
the Voting Agreement prior to such termination.
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The Voting Agreement binds the actions of the signatories thereto only
in their capacity as shareholders of CBOC, and such shareholders/directors of
CBOC were not and could not be contractually bound to abrogate their fiduciary
duties as directors of CBOC. Accordingly, while such shareholders/directors are,
under the Voting Agreement, contractually bound to vote as a shareholder in
favor of the Merger and against a Competing Transaction should one be presented,
their fiduciary duties as directors nevertheless require them to act, in their
capacity as directors, in the best interests of CBOC when they decided to
approve and adopt the Merger Agreement. In addition, such shareholders/directors
will continue to be bound by their fiduciary duties as directors of CBOC with
respect to any decisions they may take in connection with the Merger or
otherwise.
CERTAIN INFORMATION CONCERNING MERCHANTS
Merchants is a registered financial holding company pursuant to the BHC
Act. It was incorporated in Wisconsin in 1982 and pursuant to permission from
the Federal Reserve Board acquired Lincoln State Bank, Milwaukee, Wisconsin and
Franklin State Bank, Franklin, Wisconsin. In 1993 Merchants acquired Lincoln
Savings Bank which was renamed Lincoln Community Bank. In 1999, Merchants
acquired the Grafton State Bank. The four subsidiary banks operate a total of
nineteen facilities in Milwaukee, Waukesha and Ozaukee Counties. In addition, to
the four banks, Merchants owns and operates two non-bank subsidiaries, Lincoln
Neighborhood Redevelopment Corporation, which was organized to redevelop and
rejuvenate certain areas of the City of Milwaukee; and M&M Services, Inc. which
provides operational services to the subsidiary banks. Merchants provides advice
and specialized services to its bank and nonbank subsidiaries in various areas
including auditing, data processing, marketing/advertising, investments,
personnel services and other financial services closely related to banking. The
respective Boards of Directors and officers of the subsidiaries retain overall
control of and responsibility for their organizations.
As of June 30, 2000, Merchants had consolidated assets of $515 million
and the subsidiary banks had deposits of $383 million.
Merchants, through its subsidiaries, provides a complete range of
retail banking services to individuals and small-to-medium-size businesses.
These services include checking and savings accounts, NOW, and money market
deposit accounts, business loans, personal loans, residential and condominium
mortgage loans, loans for education, MasterCard, VISA and other
consumer-oriented financial services, including IRA and Keogh accounts, safe
deposit and night depository facilities. Automated teller machines, which
provide 24 hour banking services to customers of Merchants have been installed
in many locations in the Merchants service areas. Among the services designed
specifically to meet the needs of small-and medium-size businesses are various
types of specialized financing, cash management services and transfer/collection
facilities.
The Merchants subsidiaries provide lending, depository and related
financial services to commercial, industrial, financial and governmental
customers. In the lending area, these include term loans, revolving credit
arrangements, letters of credit, inventory and accounts receivable financing and
real estate construction lending.
Additional emphasis is given to non-credit services for commercial
customers, such as advice and assistance in the placement of securities,
corporate cash management and financial planning. Merchants subsidiaries make
available check clearing, safekeeping, loan participation, lines of credit,
portfolio analyses, data processing and other services.
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<PAGE> 54
Grafton State Bank provides certain mortgage banking services including
the origination, underwriting, closing, and the temporary warehousing of
mortgage loans and the sale of loans to investors. The primary focus is on
one-to-four-family residential and multi-family properties, all of which
mortgage loans are saleable into the secondary mortgage market.
Merchants and the Merchants subsidiaries are not dependent upon a
single or a few customers, the loss of which would have a material adverse
effect on Merchants. No material portion of Merchants or Merchants subsidiaries'
business is seasonal.
At June 30, 2000, Merchants and its subsidiaries, as a group, employed
172 full-time and 81 part-time employees.
CERTAIN INFORMATION CONCERNING CBOC
CBOC is a bank holding company incorporated under the laws of the State
of Wisconsin with its principal office in Oconto Falls, Wisconsin. CBOC owns all
the issued and outstanding stock of the Bank, a Wisconsin banking corporation.
As of June 30, 2000, CBOC had total assets of approximately $57 million and the
Bank had deposits of approximately $50 million.
The Bank is a full-service bank serving the banking needs of Oconto
County and the eastern portion of Shawano County which is included in the
Gillett School District. The Bank provides commercial banking services and
products, including savings and demand deposits, real estate, commercial and
consumer loans, collection and safe deposit services and other services tailored
to meet the needs of the individual and business customer.
The Bank owns its main banking premises located at 500 Cherry Avenue,
Oconto Falls, Wisconsin. The Bank operates an additional branch facility at 202
East Main Street in the community of Gillett, Wisconsin (the "Gillett Branch").
The Gillett Branch operates 3 inside teller stations and 1 drive-up window.
CBOC and the Bank are not dependent upon a single or a few customers,
the loss of which would have a material adverse effect on CBOC or the Bank. No
material portion of CBOC's or the Bank's business is seasonal.
At June 30, 2000, CBOC and the Bank employed approximately 17 full-time
and 13 part-time employees.
OWNERSHIP OF CBOC COMMON STOCK
The following table sets forth information regarding the beneficial
ownership of CBOC Common Stock as of the Record Date by each director, certain
executive officers, all directors and executive officers of CBOC as a group and
each person who is known by CBOC to be the beneficial owner of more than 5% of
CBOC Common Stock. Directors and executive officers are deemed to own all shares
of CBOC Common Stock which may be owned in joint tenancy, but a spouse, in the
names of minor children or in revocable trusts for which the individual has
voting and investment power. The address for each of the directors is the
executive offices of CBOC.
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<PAGE> 55
<TABLE>
<CAPTION>
NAME OF NUMBER OF PERCENT OF
BENEFICIAL OWNER SHARES CLASS
<S> <C> <C>
Don E. Baker 50 .1%
Donald Bartels 1,200 1.5%
Thomas C. Ebenreiter 4,420 5.5%
Rodney T. Goodell 8,000 10.0%
Dale Halla (held by Hohako & 1,675 2.1%
Co. FBO Dale Halla)
Michael T. Judge 150 .2%
Richard Pamperin 4,074 5.1%
Donald Peterson 1,840 2.3%
James Sharpe 1,400 1.8%
Michael M. Staszak (3,961
shares held by Oconto Falls
Insurance Center) 5,511 6.9%
Everett Yoap 3,540 4.4%
All Directors and executive
officers as a group (11 persons) 31,860 39.8%
Thomas E. Rogers Marital Trust 4,000 5.0%
c/o Peter T. Rogers, Trustee
P. O. Box 497
Marion, WI 54950-0497
</TABLE>
EXPERTS
The consolidated financial statements of Merchants incorporated by
reference in Merchants and Manufacturers Bancorporation, Inc.'s Annual Report
(Form 10-K) for the year ended December 31, 1999, have been audited by Ernst &
Young, LLP, independent auditors, as set forth in their report thereon
incorporated by reference and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
The consolidated financial statements of CBOC as of December 31, 1999,
and for the year then ended have been included in this Proxy
Statement/Prospectus and in the registration statement in reliance upon the
report of Ernst & Young, LLP, independent auditors given on the authority of
said firm as experts in accounting and auditing.
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<PAGE> 56
Merchants has retained Davis & Kuelthau, S.C. to render an opinion on
the federal income tax consequences of the Merger and in connection therewith,
Davis & Kuelthau, S.C. has reviewed the discussion herein entitled "THE MERGER -
Certain Material Federal Income Tax Consequences." Such opinion has been
included in the registration statement in reliance upon the authority of said
firm as experts in tax matters.
LEGAL OPINIONS
The validity of the shares issued in connection with the Merger will be
passed upon for Merchants by Davis & Kuelthau, S.C., Milwaukee, Wisconsin.
Certain other legal matters in connection with the Merger will be passed upon
for Merchants by Davis & Kuelthau, S.C. and for CBOC by Boardman, Suhr, Curry &
Field, LLP, Madison, Wisconsin.
FUTURE SHAREHOLDER PROPOSALS
If the Merger is consummated, shareholders of CBOC will become
shareholders of Merchants. Pursuant to Rule 14a-(8) promulgated under the
Securities Exchange Act of 1934, Merchants shareholders may present proper
proposals for inclusion in Merchants proxy statement for consideration at the
next annual meeting of its shareholders by submitting their proposals to
Merchants in a timely manner. Shareholders of CBOC who become shareholders of
Merchants may present proposals for inclusion in Merchants' proxy statement for
its year 2001 Annual Meeting as the 2000 Annual Meeting of Merchants has been
held.
WHERE YOU CAN FIND MORE INFORMATION
Merchants is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, and at the following Regional Offices of the
Commission: Midwest Regional Office, Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661; and Northeast Regional Office, 7 World
Trade Center, Suite 1300, New York, New York 10048. Copies of such material may
also be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, the
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. The address of such Web site is http://www.sec.gov.
This Proxy Statement/Prospectus does not contain all of the information
set forth in the Registration Statement on Form S-4 and exhibits thereto (the
"Registration Statement") covering the securities offered hereby which Merchants
has filed with the Commission, certain portions of which have been omitted
pursuant to the rules and regulations of the Commission, and to which portions
reference is hereby made for further information with respect to Merchants and
the securities offered hereby. The Registration Statement is available for
inspection and copying as set forth above. Statements contained in this Proxy
Statement/ Prospectus or in any document incorporated by reference in this Proxy
Statement/Prospectus as to the contents of any contract or other document
referred to herein or therein are not necessarily complete, and, in each
instance, reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement or such other document, each such
statement being qualified in all respects by such reference.
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<PAGE> 57
All information concerning Merchants included in this Proxy
Statement/Prospectus has been furnished by Merchants, and all information
concerning CBOC included in this Proxy Statement/Prospectus has been furnished
by CBOC.
No person is authorized to give any information or make any
representation not contained in this Proxy Statement/Prospectus and, if given or
made, the information or representation should not be relied upon as having been
authorized by Merchants or CBOC. This Proxy Statement/Prospectus does not
constitute an offer to sell or a solicitation of an offer to purchase the
securities offered hereby, or the solicitation of a proxy, in any jurisdiction
to or from any person to whom it is unlawful to make such offer or solicitation
of an offer or proxy in such jurisdiction. Neither the delivery of this Proxy
Statement/ Prospectus nor any distribution of the securities to which this Proxy
Statement/Prospectus relates shall, under any circumstances, create any
implication that there has been no change in the affairs of Merchants or CBOC
since the date of this Proxy Statement/Prospectus.
The Commission allows us to "incorporate by reference" information into
this Proxy Statement/Prospectus, which means that we can disclose information to
you by referring you to another document filed separately with the Commission.
The information that we incorporate by reference is deemed to be part of this
Proxy Statement/Prospectus, except for any information superseded by information
contained in this Proxy Statement/Prospectus. This Proxy Statement/Prospectus
incorporates by reference the documents listed below that Merchants has
previously filed with the Commission. Those documents contain important
information about Merchants and its financial condition.
a) Merchants' Annual Report on Form 10-K for the fiscal year ended
December 31, 1999, as amended.
b) Merchants' Quarterly Report on Form 10-Q for the quarter ended
March 31, 2000.
c) Merchants' Quarterly Report on Form 10-Q for the quarter ended
June 30, 2000.
d) Merchants Notice of Annual Meeting and Proxy Statement dated May
5, 2000.
e) Merchants' Current Report on Form 8-K filed on January 14, 2000,
as amended on March 31, 2000.
Merchants is also incorporating by reference all additional documents
that it will file with the Commission between the date of this Proxy
Statement/Prospectus and the date of the Special Meeting of the shareholders of
CBOC.
Documents which Merchants incorporates by reference are available from
Merchants without charge, excluding all exhibits unless Merchants has
specifically incorporated by reference an exhibit in this Proxy
Statement/Prospectus. Shareholders may obtain documents incorporated by
reference in this Proxy Statement/Prospectus by requesting them in writing or by
telephone from Merchants at the following address:
Merchants and Manufacturers Bancorporation, Inc.
14100 West National Avenue
New Berlin, WI 53151
Attention: Michael J. Murry, Chairman of the Board
Telephone (262)827-6700
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<PAGE> 58
If you would like to request documents from Merchants, please do so by
, 2000, to receive them before the Special Meeting.
FORWARD-LOOKING STATEMENTS
Cautionary Statement for Purposes of the Private Litigation Reform Act
of 1995.
This Proxy Statement/Prospectus (including information incorporated by
reference herein), information included in, or incorporated by reference from
future filings by Merchants with the Commission, and information contained in
written material, press releases and oral statements issued or made by or on
behalf of Merchants or CBOC contain, or may contain, certain "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, including statements
concerning plans, objectives and future events or performance, and other
statements which are other than statements of historical fact. Forward-looking
statements include information concerning possible or assumed future results of
operations of Merchants and CBOC set forth under "THE Merger-Reasons for the
Merger" and "THE MERGER-Opinion of CBOC Financial Advisor" and those preceded
by, followed by or that include the words "believes," "expects," "anticipates,"
"may," "will," "should," "intend," "estimate," "potential" or similar
expressions. For those statements, Merchants and CBOC claim the protection of
the safe harbor provisions for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995. It should be understood that
the following important factors, in addition to those discussed elsewhere in
this document and in the documents incorporated by reference, could affect the
future results of Merchants and CBOC, and could cause those results to differ
materially from those expressed in such forward-looking statements. Factors that
may cause actual results to differ materially from those contemplated by such
forward-looking statements include, but are not limited to, the following: (i)
failure to fully realize or to realize within the expected time frame expected
cost savings from the Merger; (ii) lower than expected income or revenues
following the Merger, or higher than expected operating costs; (iii) a
significant increase in competitive pressure in the banking and financial
services industry; (iv) business disruption related to the Merger (both before
and after completion); (v) greater than expected costs or difficulties related
to the integration of the management of Merchants and CBOC; (vi) litigation
costs and delays caused by litigation; (vii) higher than anticipated costs in
completing the Merger; (viii) unanticipated regulatory delays or constraints or
changes in the proposed transaction required by regulatory authorities; (ix)
reduction in interest margins due to changes in the interest rate environment;
(x) poorer than expected general economic conditions, including acquisition and
growth opportunities, either nationally or in the states in which the combined
company will be doing business; (xi) legislation or regulatory changes which
adversely affect the businesses in which the combined company would be engaged;
and (xii) other unanticipated occurrences which may delay the consummation of
the Merger, increase the costs related to the Merger or decrease the expected
financial benefits of the Merger. Except as may be required under federal law,
we undertake no obligation to publicly update any forward-looking statements for
any reason, even if new information becomes available or other events occur. In
addition, our past results of operations do not necessarily indicate our future
results.
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<PAGE> 59
EXHIBIT A
AGREEMENT AND PLAN OF MERGER AND FIRST AMENDMENT
<PAGE> 60
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
MERCHANTS AND MANUFACTURERS BANCORPORATION, INC.
MERCHANTS MERGER CORP.
AND
CBOC, INC.
DATED AS OF AUGUST 1, 2000
<PAGE> 61
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I
THE MERGER
SECTION 1.01. The Merger.................................................................................2
SECTION 1.02. Effective Time.............................................................................2
SECTION 1.03. Effect of the Merger.......................................................................2
SECTION 1.04. Articles of Incorporation and Bylaws.......................................................2
SECTION 1.05. Directors and Officers.....................................................................2
SECTION 1.06. Conversion of Securities...................................................................3
SECTION 1.07. Exchange of Certificates...................................................................4
SECTION 1.08. Stock Transfer Books.......................................................................6
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 2.01. Organization and Qualification of the Company; Subsidiary..................................7
SECTION 2.02. Articles of Incorporation and Bylaws.......................................................7
SECTION 2.03. Capitalization.............................................................................7
SECTION 2.04. Authority..................................................................................8
SECTION 2.05. No Conflict; Required Filings and Consents.................................................8
SECTION 2.06. Compliance; Permits........................................................................9
SECTION 2.07. Banking Reports and Financial Statements...................................................9
SECTION 2.08. Absence of Certain Changes or Events......................................................10
SECTION 2.09. Absence of Litigation.....................................................................10
SECTION 2.10. Employee Benefit Plans....................................................................11
SECTION 2.11. Employment Contracts; Material Contracts..................................................13
SECTION 2.12. Registration Statement; Proxy Statement...................................................13
SECTION 2.13. Title to Property.........................................................................13
SECTION 2.14. Compliance with Environmental Laws........................................................14
SECTION 2.15. Absence of Agreements.....................................................................15
SECTION 2.16. Taxes.....................................................................................16
SECTION 2.17. Insurance.................................................................................16
SECTION 2.18. Absence of Adverse Agreements.............................................................17
SECTION 2.19. Internal Controls and Records.............................................................17
SECTION 2.20. Loans.....................................................................................17
SECTION 2.21. Labor Matters.............................................................................18
SECTION 2.22. Brokers...................................................................................18
SECTION 2.23. Accounting and Tax Matters................................................................18
SECTION 2.24. Full Disclosure...........................................................................18
SECTION 2.25. Vote Required.............................................................................18
</TABLE>
A-2
<PAGE> 62
<TABLE>
<S> <C>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MERCHANTS
SECTION 3.01. Organization and Qualification............................................................19
SECTION 3.02. Articles of Incorporation and Bylaws......................................................19
SECTION 3.03. Capitalization............................................................................19
SECTION 3.04. Authority.................................................................................19
SECTION 3.05. No Conflict; Required Filings and Consents................................................20
SECTION 3.06. Compliance; Permits.......................................................................20
SECTION 3.07. Securities Reports; Financial Statements..................................................21
SECTION 3.08. Absence of Certain Changes or Events......................................................21
SECTION 3.09. Absence of Litigation.....................................................................22
SECTION 3.10. Registration Statement; Proxy Statement...................................................22
SECTION 3.11. Absence of Agreements.....................................................................22
SECTION 3.12. Taxes.....................................................................................23
SECTION 3.13. Brokers...................................................................................23
SECTION 3.14. Accounting and Tax Matters................................................................23
SECTION 3.15. Full Disclosure...........................................................................23
SECTION 3.16 Vote Required..............................................................................23
ARTICLE IV
COVENANTS OF THE COMPANY
SECTION 4.01. Affirmative Covenants.....................................................................24
SECTION 4.02. Negative Covenants........................................................................25
SECTION 4.03. Access and Information....................................................................27
SECTION 4.04. Affiliates; Accounting and Tax Treatment..................................................28
SECTION 4.05. Expenses..................................................................................28
SECTION 4.06. Delivery of Shareholder List..............................................................28
ARTICLE V
COVENANTS OF MERCHANTS
SECTION 5.01. Affirmative Covenants.....................................................................29
SECTION 5.02. Access and Information....................................................................29
SECTION 5.03. Accounting and Tax Treatment.............................................................29
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Registration Statement...................................................................30
SECTION 6.02. Meeting of the Shareholders..............................................................30
SECTION 6.03. Appropriate Action; Consents; Filings....................................................31
SECTION 6.04. Notification of Certain Matters..........................................................31
</TABLE>
A-3
<PAGE> 63
<TABLE>
<CAPTION>
<S> <C>
SECTION 6.05. Public Announcements.....................................................................31
SECTION 6.06. Environmental Matters....................................................................32
SECTION 6.07. Break-Up Fee.............................................................................32
SECTION 6.08. Employment Agreement.....................................................................32
ARTICLE VII
CONDITIONS OF MERGER
SECTION 7.01. Conditions to Obligation of Each Party to Effect the Merger..............................33
SECTION 7.02. Additional Conditions to Obligations of Merchants........................................34
SECTION 7.03. Additional Conditions to Obligations of the Company......................................35
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination..............................................................................36
SECTION 8.02. Effect of Termination....................................................................38
SECTION 8.03. Amendment................................................................................38
SECTION 8.04. Waiver...................................................................................38
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Non-Survival of Representations, Warranties and Agreements...............................39
SECTION 9.02. Disclosure Schedules.....................................................................39
SECTION 9.03. Notices..................................................................................39
SECTION 9.04. Certain Definitions......................................................................40
SECTION 9.05. Headings.................................................................................41
SECTION 9.06. Severability.............................................................................41
SECTION 9.07. Entire Agreement.........................................................................41
SECTION 9.08. Assignment...............................................................................41
SECTION 9.09. Parties in Interest......................................................................41
SECTION 9.10. Governing Law............................................................................41
SECTION 9.11. Counterparts.............................................................................42
</TABLE>
A-4
<PAGE> 64
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 1, 2000, (the
"Agreement"), among MERCHANTS AND MANUFACTURERS BANCORPORATION, INC., a
Wisconsin corporation ("Merchants"), Merchants Merger Corp., a Wisconsin
corporation, ("Merger Corp.") and CBOC, INC., a Wisconsin corporation
("Company").
W I T N E S S E T H:
WHEREAS, the Company is a bank holding company, the wholly-owned
subsidiary of which is the Community Bank of Oconto County located in Oconto
Falls, Wisconsin (the "Bank"); and
WHEREAS, the Company upon the terms and subject to the conditions of
this Agreement and in accordance with the Wisconsin Business Corporation Act
("Wisconsin Law"), will merge with and into Merger Corp., a wholly-owned
subsidiary of Merchants (the "Merger"); and
WHEREAS, the Company and its Board of Directors have determined that
the Merger will enhance the ability of the Bank to better serve its customers
and increase the financial strength of the Bank; and
WHEREAS, the Board of Directors of the Company believes that the Merger
with Merger Corp. will benefit the shareholders and the employees of the Company
and the Bank; and
WHEREAS, the respective Board of Directors of Merchants, Merger Corp.
and the Company have determined that the Merger pursuant and subject to the
terms and conditions of this Agreement is fair to and in the best interests of
the respective corporations and their shareholders, and have approved and
adopted this Agreement and the transactions contemplated hereby; and
WHEREAS, the Board of Directors of the Company has, subject to its
fiduciary duties under applicable law, resolved to recommend approval of the
Merger by the shareholders of the Company; and
WHEREAS, Merger Corp. and the Company intend to effect a merger that
qualifies for pooling-of-interests accounting treatment and as a tax-free
reorganization under the Internal Revenue Code of 1986, as amended (the "Code");
and
WHEREAS, as a condition and inducement to Merchants' willingness to
enter into this Agreement, Merchants and certain shareholders of the Company are
concurrently with the execution and delivery hereof, entering into a Voting
Agreement dated as of the date hereof (the "Voting Agreement"), pursuant to
which such shareholders shall make certain agreements with respect to the voting
of their shares of Company Common Stock.
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<PAGE> 65
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Merchants, Merger Corp. and the Company hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with Wisconsin Law, at the
Effective-Time (as defined in Section 1.02) the Company shall be merged with and
into Merger Corp. As a result of the Merger, the separate corporate existence of
the Company shall cease and Merger Corp. shall continue as the surviving
corporation of the Merger (the "Surviving Corporation").
SECTION 1.02. EFFECTIVE TIME. As promptly as practicable after the
satisfaction or, if permissible, waiver of the conditions set forth in Article
VII, the parties hereto shall cause the Merger to be consummated by filing
Articles of Merger (the "Articles of Merger") with the Department of Financial
Institutions of the State of Wisconsin, in such form as required by, and
executed in accordance with the relevant provisions of Wisconsin Law and shall
take all such further actions as may be required by law to make the Merger
effective.
The later of the date and time of the filing of the Articles of Merger
or the effective date and time of the Merger as set forth in such Articles of
Merger is hereinafter referred to as the "Effective Time."
SECTION 1.03. EFFECT OF THE MERGER. At the Effective Time, the effect
of the Merger shall be as provided in the applicable provisions of Wisconsin
Law. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time, except as otherwise provided herein, all the property,
rights, privileges, powers and franchises of Merger Corp. and the Company shall
vest in the Surviving Corporation, and all debts, liabilities and duties of
Merger Corp. and the Company shall become the debts, liabilities and duties of
the Surviving Corporation.
SECTION 1.04. ARTICLES OF INCORPORATION AND BYLAWS. At the Effective
Time, the Articles of Incorporation and the Bylaws of Merger Corp., as in effect
immediately prior to the Effective Time, shall be the Articles of Incorporation
and the Bylaws of the Surviving Corporation, copies of which are attached.
SECTION 1.05. DIRECTORS AND OFFICERS. The directors of Merger Corp.
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation, and the officers of
Merger Corp. immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation, in each case until their respective
successors are duly elected or appointed and qualified.
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<PAGE> 66
SECTION 1.06. CONVERSION OF SECURITIES. At the Effective Time, by
virtue of the Merger and without any action on the part of Merchants, Merger
Corp., the Company, or the holders of any of the following securities:
(a) Each share of the common stock $1.00 par value, of the Company
("Company Common Stock") (all issued and outstanding shares of the Company
Common Stock being hereinafter collectively referred to as the "Shares") issued
and outstanding immediately prior to the Effective Time (other than (i) Shares
owned by Merchants, Merger Corp. or the Company or any direct or indirect
subsidiary of Merchants, Merger Corp. or the Company and (ii) any Dissenting
Shares (as defined in Section 1.06 (e)) shall be canceled and extinguished and
be converted into and become a right to receive $181.00 per share (the "Merger
Consideration"), to be paid in the manner provided in Section 1.06 (c) below.
(b) Each share of the Company Common Stock issued and outstanding
immediately prior to the Effective Time and owned by Merchants, Merger Corp. or
the Company or any direct or indirect subsidiary of Merchants, Merger Corp. or
the Company shall be canceled and extinguished and no payment shall be made with
respect thereto.
(c) The Merger Consideration of $181.00 per share of Company
Common Stock shall be paid in the form of shares of $1.00 par
value voting common stock of Merchants ("Merchants Common
Stock"). The number of shares of Merchants Common Stock to be
received by shareholders of the Company for each share of
Company Common Stock shall be as follows:
1. If the Daily Average Price (as defined below) is between
$31.50 and $38.50, each share of Company Common Stock will be
exchanged for the number of shares of Merchants Common Stock
equal to $181.00 divided by the Daily Average Price.
2. If the Daily Average Price is between $28.00 and $31.50, each
share of Company Common Stock will be exchanged for 5.746
shares of Merchants Common Stock.
3. If the Daily Average Price is between $38.50 and $42.00, each
share of Company Common Stock will be exchanged for 4.701
shares of Merchants Common Stock.
4. If the Daily Average Price is less than $28.00 or greater than
$42.00, then Merchants and the Company will make a good faith
effort to renegotiate the Merger Consideration.
The Daily Average Price of a share of Merchants Common Stock
will be equal to the daily average of the "bid" and "ask"
quotations of Merchants Common Stock as published in the
Milwaukee Journal/Sentinel (or obtained from another source
acceptable to Merchants and the Company if such quotations are
not published in the Milwaukee Journal/Sentinel) on each of
the twenty (20) trading days preceding the fifth (5th) day
prior to the Effective Time. On each of the twenty (20)
trading days prior to the fifth (5th) day before the Effective
Time, all "bid" and "ask" quotations
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<PAGE> 67
will be averaged to calculate the market quotation for that
day (the "Average Quote"). The resulting twenty (20) Average
Quotes will be used to calculate an arithmetic, unweighted
average. The twenty (20) Average Quotes will be summed and the
result divided by twenty (20) to determine the Daily Average
Price of Merchants Common Stock to be used for purposes of the
payment of the Merger Consideration. In the event that "ask"
quotations are not available, or if the "ask" price exceeds
the "bid" price by more than $2.00, on any of the twenty (20)
trading days used to compute the Daily Average Price, then the
"bid" quotes shall be used on those days to calculate the
Daily Average Price.
(d) No fractional shares of Merchants Common Stock and no certificates
or scrip certificates therefor shall be issued to represent any such fractional
interest, and any holder thereof shall be paid an amount pursuant to Section
1.07 hereof.
(e) Each Share which shall be issued and outstanding as of the
Effective Time and held by a shareholder who has validly perfected dissenter's
rights in accordance with Wisconsin Law, shall not be converted into or
represent a right to receive the Merger Consideration pursuant to this Section
1.06 (all such Shares are hereinafter called "Dissenting Shares"). The Company
shall give Merchants prompt notice upon receipt by the Company of any written
notice from any such shareholder of the Company ("Dissenting Shareholder"). The
Company agrees that prior to the Effective Time, it will not, except with prior
written consent of Merchants, voluntarily make any payment with respect to, or
settle or offer to settle, any request for withdrawal pursuant to the exercise
of dissenter's rights. Each Dissenting Shareholder who becomes entitled,
pursuant to the provisions of applicable law, to payment for his or her Shares
shall receive payment therefor from Merchants (but only after the amount thereof
shall be agreed upon or finally determined pursuant to the provisions of
applicable law). If any Dissenting Shareholder shall fail to perfect or shall
effectively withdraw or lose his or her right to receive the value of his or her
Shares, his or her Shares shall be thereupon be deemed to have been canceled as
of the Effective Time and converted into the right to receive the Merger
Consideration in accordance with the provisions of this Section 1.06.
SECTION 1.07. EXCHANGE OF CERTIFICATES.
(a) Exchange Agent. As of the Effective Time, Merchants shall deposit,
or shall cause to be deposited, with Firstar Trust Company (the "Exchange
Agent"), and such deposit shall be solely for the benefit of the holders of
Shares, for exchange in accordance with this Article I through the Exchange
Agent, the aggregate Merger Consideration consisting of certificates
representing the shares of Merchants Common Stock and cash (such certificates
for shares of Merchants Common Stock, and cash, together with any dividends or
distributions with respect thereto, being hereinafter referred to as the
"Exchange Fund") issuable or payable, as the case may be, pursuant to Section
1.06 in exchange for outstanding Shares.
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(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail or personally deliver to each
holder of record (or his or her attorney- in-fact) of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding Shares (the "Certificates"), whose Shares were converted into the
right to receive the Merger Consideration pursuant to Section 1.06 and cash in
lieu of fractional shares (if any), (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in such form and have such other provisions as Merchants may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for the applicable amount and form of Merger
Consideration. Upon surrender of a Certificate for cancellation to the Exchange
Agent, together with such letter of transmittal, duly executed, the holder of
such Certificate shall be entitled to receive in exchange therefor the
applicable amount and form of the Merger Consideration which such holder has the
right to receive in respect of the Certificate surrendered pursuant to the
provisions of this Article I (after taking into account all Shares then held by
such holder) and cash in lieu of fractional shares (if any), and the Certificate
so surrendered shall forthwith be canceled. In the event of a transfer of
ownership of Shares which is not registered in the transfer records of the
Company, a certificate representing the proper number of shares of Merchants
Common Stock may be issued (or cash may be paid in lieu of fractional shares, if
applicable), to a transferee if the Certificate representing such Shares is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Certificates surrendered for exchange by any
affiliate of the Company shall not be exchanged for certificates representing
shares of Merchants Common Stock until Merchants has received a written
agreement from such person as provided in Section 4.04 hereof. Until surrendered
as contemplated by this Section 1.07, each Certificate shall be deemed at any
time after the Effective Time to represent only the right to receive upon such
surrender the applicable amount and form of the Merger Consideration and cash in
lieu of any fractional shares of Merchants Common Stock as contemplated by
Section 1.07(e).
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the Effective Time with respect to
Merchants Common Stock with a record date after the Effective Time shall be paid
to the holder of any unsurrendered Certificate with respect to the shares of
Merchants Common Stock represented thereby, and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to Section 1.07(e),
until the holder of such Certificate shall surrender such Certificate. 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 Merchants Common Stock issued in exchange therefor, without interest, (i)
promptly, the amount of any cash payable with respect to a fractional share of
Merchants Common Stock to which such holder is entitled pursuant to Section
1.07(e) and the amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such whole shares of
Merchants Common Stock, and (ii) at the appropriate payment date, the amount of
dividends or other distributions, with a record date after the Effective Time
but prior to surrender and a payment date occurring after surrender, payable
with respect to such whole shares of Merchants Common Stock.
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(d) No Further Rights in the Shares. All shares of Merchants Common
Stock issued and cash paid, as the case may be, upon conversion of the Shares in
accordance with the terms hereof (including any cash paid pursuant to Section
1.07(e)) shall be deemed to have been issued or paid in full satisfaction of all
rights pertaining to such Shares.
(e) No Fractional Shares. No certificates or scrip representing
fractional shares of Merchants Common Stock shall be issued upon the surrender
for exchange of Certificates, and such fractional share interest will not
entitle the owner thereof to vote or to any rights of a shareholder of
Merchants. Each holder of a fractional share interest shall be paid an amount in
cash equal to the product obtained by multiplying such fractional share interest
to which such holder (after taking into account all fractional share interests
then held by such holder) would otherwise be entitled by the "Order Date Price."
For purposes hereof, the "Order Date Price" shall mean the "Bid" price of a
share of Merchants Common Stock published in the Milwaukee Journal/Sentinel on
the date of the Effective Time.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the shareholders of the Company for six (6)
months after the Effective Time shall be delivered to Merchants, upon demand,
and any shareholders of the Company who have not theretofore complied with this
Article I shall thereafter look only to Merchants for payment of their claim to
the applicable amount and form of the Merger Consideration, any cash in lieu of
fractional shares of Merchants Common Stock and any dividends or distributions
with respect to Merchants Common Stock.
(g) Liability. Neither Merchants, Merger Corp. nor the Company shall be
liable to any holder of Shares for any such Shares (or dividends or
distributions with respect thereto) or cash delivered to a public official
pursuant to any abandoned property, escheat or similar law.
(h) Withholding Rights. Merchants shall be entitled to deduct and
withhold from any cash consideration payable pursuant to this Agreement to any
holder of Shares such amounts as Merchants is required to deduct and withhold
with respect to the making of such payment under the Code, or any provision of
state, local or foreign tax law. To the extent that amounts are so withheld by
Merchants, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Shares in respect of which
such deduction and withholding was made by Merchants.
SECTION 1.08. STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of Shares thereafter on the records of the Company.
From and after the Effective Time, the holders of certificates evidencing
ownership of Shares outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to such Shares except as otherwise
provided herein or by law. On or after the Effective Time, any Certificates
presented to the Exchange Agent or Merchants for any reason shall be converted
into shares of Merchants Common Stock or cash, as the case may be, in accordance
with this Article I.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Disclosure Schedule attached hereto (the
"Company Disclosure Schedule"), the Company hereby represents and warrants to
Merchants and Merger Corp. as of the date of this Agreement, that:
SECTION 2.01. ORGANIZATION AND QUALIFICATION OF THE COMPANY;
SUBSIDIARY. The Company is a corporation duly organized and validly existing
under the laws of the State of Wisconsin. The Bank is a duly organized and
validly existing Wisconsin bank. The Bank is the only subsidiary of the Company.
The Company and Bank each have the requisite corporate power and authority and
are in possession of all franchises, grants, authorizations, licenses, permits,
easements, consents, certificates, approvals and orders ("Company Approvals")
necessary to own, lease and operate its properties and to carry on its business
as it is now being conducted, except where the failure to be so organized,
existing and in good standing or to have such power, authority and Company
Approvals would not, individually or in the aggregate, have a Material Adverse
Effect (as defined below) on the Company and the Bank, taken as a whole. The
term "Material Adverse Effect" as used in this Agreement shall mean any change
or effect that is or is reasonably likely to be materially adverse to a party's
business, operations, properties (including intangible properties), condition
(financial or otherwise), assets or liabilities (including contingent
liabilities). Neither the Company nor the Bank has received notice of
proceedings relating to the revocation or modification of any Company Approvals.
The Company and the Bank are duly qualified or licensed as foreign corporations
to do business, and are in good standing, in each jurisdiction where the
character of their properties owned, leased or operated by them or the nature of
their activities makes such qualification or licensing necessary, except for
such failures to be so duly qualified or licensed and in good standing that
would not, either individually or in the aggregate, have a Material Adverse
Effect on the Company or the Bank, taken as a whole. The Company is registered
with the Federal Reserve Board as a one bank holding company under the Bank
Holding Company Act of 1956, as amended (the "BHCA"). Except for the Bank, the
Company holds no interest, either directly or indirectly, in any other entity.
SECTION 2.02. ARTICLES OF INCORPORATION AND BYLAWS. The Company has
heretofore furnished to Merchants a complete and correct copy of the Articles of
Incorporation and the Bylaws, as amended or restated, of the Company and the
Bank and such Articles of Incorporation and Bylaws of the Company and the Bank
are in full force and effect and neither the Company nor the Bank is in
violation of any of the provisions of its Articles of Incorporation or Bylaws.
SECTION 2.03. CAPITALIZATION.
(a) Capitalization of the Company. The authorized capital stock of the
Company consists of 250,000 shares of Common Stock, par value $1.00 per share.
As of the date of this Agreement, (i) 80,000 shares of the Company's Common
Stock are issued and outstanding, all of which are validly issued, fully paid
and non-assessable (except as provided in section 180.0622(2)(b) of the
Wisconsin Business Corporation Law), and all of which have been issued in
compliance with
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applicable securities laws, and (ii) no shares of the Company's Common Stock are
held in the Company's treasury. Except as set forth in the Company's Disclosure
Schedule at Section 2.03(a), as of the date of this Agreement, there are no
options, warrants or other rights, agreements, arrangements or commitments of
any character relating to the issued or unissued capital stock of the Company or
obligating the Company to issue or sell any shares of capital stock of, or other
equity interests in the Company. There are no obligations, contingent or
otherwise, of the Company to repurchase, redeem or otherwise acquire any shares
of the Company's Common Stock or to provide funds to or make any investment (in
the form of a loan, capital contribution or otherwise) in any other entity.
(b) Capitalization of the Bank. The authorized capital stock of the
Bank consists of 4,000 shares of common stock, par value $320.00 per share. As
of the date of this Agreement, (i) 4,000 shares of the Bank's common stock are
issued and outstanding, all of which are validly issued, fully paid and
non-assessable, (except as provided in Section 220.07 of the Wisconsin Statutes)
and all of which have been issued in compliance with applicable securities laws,
and (ii) the Company owns all of the Bank's capital stock. Except as set forth
in the Company's Disclosure Schedule at Section 2.03(b), as of the date of this
Agreement, there are no options, warrants or other rights, agreements,
arrangements or commitments of any character relating to the issued or unissued
capital stock of the Bank or obligating the Bank to issue or sell any shares of
capital stock of, or other equity interests in the Bank. There are no
obligations, contingent or otherwise, of the Bank to repurchase, redeem or
otherwise acquire any shares of the Bank's capital stock or to provide funds to
or make any investment (in the form of a loan, capital contribution or
otherwise) in any other entity.
SECTION 2.04. AUTHORITY. The Company has the requisite corporate power
and authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby The execution
and delivery of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby (other than, with respect to the
Merger, the approval and adoption of this Agreement by the holders of a majority
of the outstanding shares of the Company's Common Stock in accordance with
Wisconsin Law and the Company's Articles of Incorporation and Bylaws). This
Agreement has been duly and validly executed and delivered by the Company and,
assuming the due authorization, execution and delivery by Merchants, and Merger
Corp., constitutes the legal, valid and binding obligation of the Company
enforceable in accordance with its terms.
SECTION 2.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) To the best knowledge of the Company, after inquiry of its
executive officers, the execution and delivery of this Agreement by the Company
does not, and the performance of this Agreement by the Company shall not, (i)
conflict with or violate the Articles of Incorporation or Bylaws of the Company
or the Bank, (ii) conflict with or violate any domestic (federal, state or
local) law, statute, ordinance, rule, regulation, order, judgment or decree
(collectively, "Laws") applicable to the Company or the Bank, or by which their
respective properties are bound or affected, or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
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would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or encumbrance on any of the properties or assets of the Company or the Bank
pursuant to any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the
Company or the Bank is a party or by which the Company or the Bank or its or any
of their respective properties are bound or affected, except for any such
breaches, defaults or other occurrences that would not, individually or in the
aggregate, have a Material Adverse Effect on the Company or the Bank, taken as a
whole.
(b) To the best knowledge of the Company, after inquiry of its
executive officers, the execution and delivery of this Agreement by the Company
does not, and the performance of this Agreement by the Company shall not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, domestic or foreign,
except (i) for applicable requirements, if any, of the Securities Act of 1933,
as amended (the "Securities Act"), and the Securities Exchange of 1934, as
amended (the "Exchange Act"), state securities or blue sky laws ("Blue Sky
Laws"), BHCA, the state and federal banking laws and regulations, and the filing
and recordation of appropriate merger or other documents as required by
Wisconsin Law and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or delay consummation of the Merger, or otherwise prevent the Company
from performing its obligations under this Agreement, and would not have a
Material Adverse Effect on the Company or the Bank, taken as a whole.
SECTION 2.06. COMPLIANCE; PERMITS. To the best knowledge of the Company
after inquiry of its executive officers, neither the Company nor the Bank is in
conflict with, or in default or violation of, (a) any law applicable to the
Company or the Bank or by which any of their respective properties are bound or
affected, or (b) any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which the
Company or the Bank is a party or by which the Company or the Bank or any of
their respective properties are bound or affected, except for any such
conflicts, defaults or violations which would not, individually or in the
aggregate, have a Material Adverse Effect on the Company or the Bank, taken as a
whole.
SECTION 2.07. BANKING REPORTS AND FINANCIAL STATEMENTS.
(a) The Company and the Bank have timely filed all forms, reports and
documents required to be filed with the Federal Reserve Board, the Wisconsin
Department of Financial Institutions and any other applicable federal or state
securities or banking authorities (all such reports and statements are
collectively referred to as the "Company Reports"). The Company Reports,
including all Company Reports filed after the date of this Agreement, (i) were
or will be prepared in accordance with the requirements of applicable law and
(ii) did not at the time they were filed, or will not at the time they are
filed, contain any untrue statement of material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(b) Each of the consolidated financial statements of the Company
(including, in each case, any related notes thereto) delivered to Merchants
whether or not contained in the Company Reports (the "Financial Statements"),
including, but not limited to, any Company Reports filed since
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the date of this Agreement and prior to or at the Effective Time, have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods involved (except as may be indicated
in the notes thereto) and each fairly presents the consolidated financial
position of the Company and the Bank as of the respective dates thereof and the
consolidated results of its operations and changes in financial position for the
periods indicated, except that any unaudited interim financial statements were
or are subject to normal and recurring year-end adjustments which were not or
are not expected to be material in amount.
(c) Except as and to the extent set forth on the consolidated balance
sheets of the Company and the Bank as of December 31, 1999 and March 31, 2000,
including all notes thereto (the "Company Balance Sheet"), neither the Company
nor the Bank has any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) that would be required to be reflected on a
balance sheet, or in the notes thereto, prepared in accordance with generally
accepted accounting principles, except (i) for liabilities or obligations
incurred in the ordinary course of business, that would not, individually or in
the aggregate have a Material Adverse Effect on the Company or the Bank, taken
as a whole, or (ii) as otherwise reflected in the reports referred to in Section
2.07(a) hereof.
SECTION 2.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in the Financial Statements, since December 31, 1999, to the date of this
Agreement, the Company and the Bank have conducted their businesses only in the
ordinary course and in a manner consistent with past practice and, since
December 31, 1999, there has not been (a) any change in the financial condition,
results of operations or business of the Company or the Bank having a Material
Adverse Effect on the Company or the Bank, taken as a whole, (b) any damage,
destruction or loss (whether or not covered by insurance) with respect to any
assets of the Company or the Bank having a Material Adverse Effect on the
Company or the Bank, taken as a whole, (c) any change by the Company or the Bank
in their accounting methods, principles or practices, except for compliance with
applicable new requirements of the Financial Accounting Standards Board, (d) any
revaluation by the Company or the Bank of any of their material assets in any
material respect, (e) any entry by the Company or the Bank into any commitment
or transactions material to the Company or the Bank, taken as a whole, other
than in the ordinary course and other than this Agreement, (f) any declaration,
setting aside or payment of any dividends (other than dividends paid in the
ordinary course, consistent with past practice) or distributions in respect of
shares of the Company's Common Stock or any redemption, purchase or other
acquisition of any of its securities or any of the securities of the Bank, or
(g) any increase in or establishment of any bonus, insurance, severance,
deferred compensation, pension, retirement, profit sharing, stock option
(including, without limitation, the granting of stock options, stock
appreciation rights, performance awards, or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in compensation
payable or to become payable to any officers or key employees of the Company or
the Bank, other than in the ordinary course consistent with past practice and
the employment agreement disclosed in Disclosure Schedule 2.11.
SECTION 2.09. ABSENCE OF LITIGATION. Except as disclosed in the
Company's Disclosure Schedule at Section 2.09, (a) neither the Company nor the
Bank is subject to any continuing order of, or written agreement or memorandum
of understanding with, or continuing material investigation
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by, any federal or state banking authority or other governmental entity, or any
judgment, order, writ, injunction, decree or award of any governmental entity or
arbitrator, including, without limitation, cease-and-desist or other orders of
any bank regulatory authority, (b) there is no claim of any kind, action, suit,
litigation, proceeding, arbitration, investigation, or controversy affecting the
Company or the Bank pending or, to the knowledge of the Company, threatened, and
(c) there are no uncured material violations, or violations with respect to
which material refunds or restitutions may be required, cited in any compliance
report to the Company or the Bank as a result of the examination by any
regulatory authority.
SECTION 2.10. EMPLOYEE BENEFIT PLANS.
(a) The Company Disclosure Schedule at Section 2.10 lists all "employee
pension benefit plans," as such term is defined in section 3(2) of the Employee
Retirement Income Security Act of 1974 (ERISA) without regard to any exemptions
from any requirements thereunder issued by the United States Department of Labor
in regulations or otherwise, maintained, sponsored or contributed to by the
Company or the Bank (the "Pension Plans"). The term "Pension Plan" shall also
include any terminated "employee pension benefit plan" previously maintained,
sponsored or contributed to by the Company or the Bank which, as of the
Effective Time, has not distributed all of its assets in full satisfaction of
accrued benefits and/or obligations.
(b) The Company Disclosure Schedule at Section 2.10 lists all "employee
welfare benefit plans," as defined in ERISA section 3(1) without regard to any
exemptions from any requirements thereunder issued by the United States
Department of Labor in regulations or otherwise, maintained, sponsored or
contributed to by the Company or the Bank (the "Welfare Plans"). The term
"Welfare Plans" shall also include any terminated employee welfare benefit plan
previously maintained, sponsored or contributed to by the Company or the Bank
which, as of the Effective Time, has not distributed all of its assets and/or
satisfied all of its obligations.
(c) The Company has made available to Merchants true and complete
copies of the documents governing each of the Pension Plans and Welfare Plans as
in effect at the Effective Time.
(d) The Company Disclosure Schedule at Section 2.10 lists all plans or
programs to provide fringe benefits to the Company's and Bank's employees (other
than Pension Plans and Welfare Plans) including, but not limited to vacation,
sick leave, disability, medical, hospitalization, life insurance and other
insurance plans or related benefits (the "Fringe Benefit Plans").
(e) The Company has made available to Merchants true and complete
copies of the documents governing each Fringe Benefit Plan.
(f) The Company has no direct or indirect, formal or informal, plan,
fund or program to change any Pension Plan, Welfare Plan or Fringe Benefit Plan
that would affect any of the Company's or the Bank's employees. Neither the
Company nor the Bank has made a material modification, within the meaning of
ERISA Section 102 and the regulations thereunder, to any existing Pension Plan,
Welfare Plan or Fringe Benefit Plan which is not set forth in the Pension Plan,
Welfare Plan or Fringe Benefit Plan documents provided to Merchants.
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(g) For purposes of this Section 2.10, "Company" shall include the
Company, the Bank and all members of any controlled group of corporations
(within the meaning of Code section 414(b), relevant Treasury Regulations and
Pension Benefit Guaranty Corporation regulations issued pursuant to ERISA
Section 4001), any group of trades or businesses under common control (within
the meaning of Code Section 414(c), relevant Treasury Regulations and Pension
Benefit Guaranty Corporation regulations issued pursuant to ERISA Section 4001)
and any affiliated service group (within the meaning of Code Section 414(m) and
relevant Treasury Regulations and proposed Treasury Regulations) of which the
Company or any Subsidiary is a member.
(h) Neither the Company nor the Bank has ever been obligated to
contribute to any multi-employer plan within the meaning of ERISA Section
3(37).
(i) To the Company's knowledge, the Pension Plans, Welfare Plans and
Fringe Benefit Plans and the trusts and other funding vehicles related to the
Pension Plans, Welfare Plans and Fringe Benefit Plans have been administered in
all material respects in compliance with the applicable requirements of ERISA,
the Code, the plan documents and all other applicable rules, regulations and
laws. To the Company's knowledge, the Pension Plans, Welfare Plans and Fringe
Benefit Plans and the trusts or other funding vehicles related to the Pension
Plans, Welfare Plans and Fringe Benefit Plans meet all applicable requirements,
in form and in operation required for favorable tax treatment under the Code.
All required contributions pursuant to the Pension Plans, Welfare Plans and
Fringe Benefit Plans for all periods prior to the Effective Time have been made
or will be made prior to the Effective Time. There are no pending or, to the
Company's knowledge, threatened claims, lawsuits or arbitrations which have been
asserted or instituted against the Pension Plans, Welfare Plans or Fringe
Benefit Plans or any fiduciaries thereof with respect to their duties to the
Pension Plans, Welfare Plans or Fringe Benefit Plans or the assets of any of the
trusts under any Pension Plans, Welfare Plans or Fringe Benefit Plans. To the
Company's knowledge, no representations or communications with respect to
participation, eligibility for benefits, vesting, benefit accrual or coverage
under the Pension Plans, Welfare Plans or Fringe Benefit Plans have been made to
the Company's or the Bank's employees other than those which are in accordance
with the terms of such Pension Plans, Welfare Plans or Fringe Benefit Plans in
effect immediately prior to the Effective Time.
(j) With respect to any Welfare Plan which is a "group health plan" as
defined in Code Section 4980B, the Company and the Bank have complied with the
continuation coverage requirements of Code Section 4980B for any periods prior
to the Effective Time.
(k) The Company has furnished to Merchants copies of all documents
relating to the Pension Plans, Welfare Plans or Fringe Benefit Plans, including,
but not limited to, the following: any service provider agreements, any
investment management agreements, fiduciary insurance policies, fidelity bonds,
rules, regulations or policies of the trustees or any committee thereunder, all
of which are true and complete.
(1) Since December 31, 1974, to the Company's knowledge, no fiduciary
of the Pension Plans or Welfare Plans has engaged in any "prohibited
transaction" (as defined in ERISA Section
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406 or Code Section 4975) nor has any fiduciary breached any fiduciary
responsibility, as described in Part 4 of Title I of ERISA with respect to such
Pension Plans or Welfare Plans.
(m) The Company has no knowledge of the occurrence of any event with
respect to any Pension Plan which could result in a liability of the Company,
any subsidiary or any member of the Company's controlled group to the Pension
Benefit Guaranty Corporation ("PBGC"), other than the timely payment of premiums
pursuant to Section 4007 of ERISA. All required PBGC premiums have been paid for
the periods through the Effective Time.
(n) Except as set forth in the Company's Disclosure Schedule at Section
2.10, no Welfare Plan or Fringe Benefit Plan provides any form of
post-retirement health benefits to retired employees of the Company or the Bank,
other than benefits required to be provided pursuant to Code Section 4980B.
SECTION 2.11. EMPLOYMENT CONTRACTS; MATERIAL CONTRACTS. Except as set
forth in the Company Disclosure Schedule at Section 2.11, neither the Company
nor the Bank is a party to or bound by (a) any employment or consulting
contract; (b) any contract or commitment for capital expenditures in excess of
$10,000.00 for any one (1) project, or (c) contracts or commitments for the
purchase of materials or supplies or for the performance of services over a
period of more than sixty (60) days from the date of this Agreement.
SECTION 2.12. REGISTRATION STATEMENT; PROXY STATEMENT. None of the
information supplied or to be supplied by the Company for inclusion in (a) the
Registration Statement (as defined in Section 6.01), (b) the Proxy Statement/
Prospectus (as defined in Section 6.01), or (c) any other document to be filed
with the Securities and Exchange Commission (the "SEC") or other regulatory
authority in connection with the transactions contemplated hereby, at the
respective times such documents are filed and, in the case of the Registration
Statement, when it becomes effective and at the Effective Time, and with respect
to the Proxy Statement/Prospectus, when mailed, shall be false or misleading
with respect to any material fact, or omit to state any material fact necessary
in order to make the statements therein not misleading. In the case of the Proxy
Statement/Prospectus or any amendment thereof or supplement thereto, none of
such information at the time of the Company's shareholders meeting (pursuant to
Section 6.02) (the "Meeting") shall be false or misleading with respect to any
material fact or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of any
proxy for the Meeting.
SECTION 2.13. TITLE TO PROPERTY. The Company Disclosure Schedule at
Section 2.13 correctly identifies all real property owned and leased by the
Company and the Bank. The Company and the Bank each has good and defensible
title to all of their properties and assets, real and personal, tangible and
intangible free and clear of all mortgage liens, and free and clear of all other
liens, charges and encumbrances except liens for taxes not yet due and payable,
pledges to secure deposits and borrowings from the Federal Home Loan Bank and
such minor imperfections of title, if any, as to not materially detract from the
value of or interfere with the present use of the property affected thereby or
which, individually or in the aggregate, would not have a Material Adverse
Effect on the Company or the Bank, taken as a whole; and all leases pursuant to
which the Company or the
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Bank leases from others real or personal property including, without limitation,
leases for branch offices are in good standing, valid and effective in
accordance with their respective terms, and there is not, under any of such
leases, any existing material default or event of default (or event which with
notice or lapse of time, or both, would constitute a material default and in
respect of which the Company or the Bank has not taken adequate steps to prevent
such a default from occurring). The Company's and the Bank's buildings and
equipment in regular use have been reasonably maintained and are in good and
serviceable condition, reasonable wear and tear excepted. To the Company's
knowledge, none of the buildings, structures or appurtenances owned or leased by
the Company or the Bank for their operation or maintenance as now operated or
maintained, contravenes any zoning ordinances or other administrative
regulations (whether or not permitted because of prior non- conforming use) or
violates any restrictive covenant or any provision of law, the effect of which
would materially interfere with or prevent the continued use of such properties
for the purposes for which they are now being used or would materially and
adversely affect the value thereof.
SECTION 2.14. COMPLIANCE WITH ENVIRONMENTAL LAWS.
(a) The term "Company's Property" shall mean any real property and
improvements currently owned, leased, used, operated or occupied by the Company
or the Bank, including properties acquired by foreclosure, properties which the
Bank has a present right to acquire upon foreclosure and which are owned by
customers of the Bank who have received written notification of default, or
properties held or operated in a fiduciary or managerial capacity;
(b) The term "Environmental Claims" shall mean any and all
administrative, regulatory or judicial actions, suits, demands, demand letters,
claims, liens, notices of noncompliance or violation, investigations or
proceedings relating in any way to any Environmental Law or Environmental
Permit;
(c) The term "Environmental Laws" shall mean all federal, state and
local laws including statutes, regulations and other governmental restrictions
and requirements relating to the discharge of air pollutants, water pollutants
or process wastewater or the disposal of solid or hazardous waste or otherwise
relating to the environment or hazardous substances or employee health and
safety.
(d) The term "Environmental Permits" shall mean all permits, approvals,
identification numbers, licenses and other authorizations required under any
applicable Environmental Law.
(e) The term "Hazardous Substances" shall mean all hazardous and toxic
substances, wastes and materials; any pollutants or contaminants (including,
without limitation, petroleum products, asbestos and raw materials which include
hazardous constituents); and any other similar substances or materials which are
regulated under Environmental Laws.
(f) The Environmental Permits (if any) are in full force and effect
and, to the Company's knowledge, constitute all permits, licenses, approvals and
consents relating to Environmental Laws or Hazardous Substances required for the
conduct of the Company's and Bank's businesses and the use of the Company's
Property (as presently conducted and used) in compliance with Environmental
Laws.
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(g) The Company and the Bank have filed all reports, returns and other
filings required to be filed with respect to the Company's Property under
Environmental Laws and the Environmental Permits except where the failure to do
so would not have a material adverse effect on the Company's or Bank's,
businesses or financial condition, taken as a whole.
(h) Except as set forth in the Company's Disclosure Schedule at Section
2.14(h), to the Company's knowledge, the business of the Company and the Bank
and the Company's Property have been and are being operated by the Company and
the Bank in accordance with all Environmental Laws and Environmental Permits and
neither the Company nor the Bank has received any written notice nor does the
Company or the Bank have knowledge that the Company's Property is not in
material compliance with all Environmental Laws and Environmental Permits and no
proceeding for the suspension, revocation or cancellation of any Environmental
Permit is pending or, to the Company's knowledge, threatened.
(i) Except as set forth in the Company's Disclosure Schedule at Section
2.14(i), there are no actions pending, or to the Company's knowledge, threatened
against the Company or any of the Subsidiaries (naming the Company or the Bank),
which in any case assert or allege (i) the Company or the Bank (naming the
Company or the Bank) violated any Environmental Law or Environmental Permit or
are in default with respect to any Environmental Permit or any order, writ,
judgment, variance, award or decree of any government authority; (ii) the
Company or the Bank is required to clean up or take remedial or other response
action due to the disposal, discharge or other release of any Hazardous
Substance on the Company's Property or elsewhere; or (iii) the Company or the
Bank is required to contribute to the cost of any past, present or future
cleanup or remedial or other response action which arises out of or is related
to the disposal, discharge or other release of any Hazardous Substance by the
Company, the Bank or others. The Company, the Bank, and the Company's Property
are not subject to any judgment, stipulation, order, decree or agreement arising
under Environmental Laws.
(j) Except as set forth in the Company's Disclosure Schedule at Section
2.14(j), with respect to the period during which the Company or the Bank
occupied the Company's Property (i) no Hazardous Substances have been treated,
recycled or disposed of by the Company or the Bank (intentionally or
unintentionally) on, under or at the Company's Property; (ii) there has been no
release or threatened release by the Company or the Bank of any Hazardous
Substance from the Company's Property; (iii) to the Company's knowledge, there
have been no activities on the Company's Property which would subject Merchants,
its subsidiaries, or any subsequent occupier of the Company's Property to
damages, penalties, injunctive relief or cleanup costs under any Environmental
Laws or common law theory of liability.
SECTION 2.15. ABSENCE OF AGREEMENTS. Neither the Company nor the Bank
is a party to any written agreement or memorandum of understanding with, or a
party to any commitment letter or similar undertaking to, or is subject to any
order or directive by, or is a recipient of any extraordinary supervisory letter
which restricts materially the conduct of its business (including any contract
containing covenants which limit the ability of the Company or the Bank to
compete in any line of business or with any person or which involve any
restriction of the geographical area in which, or method by which, the Company
or the Bank may carry on its business), or in any manner
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relates to its capital adequacy, its credit policies or its management nor has
the Company or the Bank been advised that any federal, state or governmental
agency is contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order, decree, agreement,
memorandum of understanding, extraordinary supervisory letter, commitment letter
or similar submission.
SECTION 2.16. TAXES. The Company and the Bank have timely filed all Tax
Returns (as defined below) required to be filed by them, and the Company and the
Bank have timely paid and discharged all Taxes (as defined below) due in
connection with or with respect to the filing of such Tax Returns and have
timely paid all other Taxes as are due, except such as are being contested in
good faith by appropriate proceedings and with respect to which the Company is
maintaining reserves adequate for their payment. To the best knowledge of the
Company, the liability for Taxes set forth on each such Tax Return adequately
reflects the Taxes required to be reflected on such Tax Return. For purposes of
this Agreement, "Tax" or "Taxes" shall mean taxes, charges, fees levies, and
other governmental assessments and impositions of any kind, payable to any
federal, state, local or foreign governmental entity or taxing authority or
agency, including, without limitation, (a) income, franchise, profits, gross
receipts, estimated, ad valorem, value added, sales, use, service, real or
personal property, capital stock, license, payroll, withholding, disability,
employment, social security, workers compensation, unemployment compensation,
utility, severance, production, excise, stamp, occupation, premiums, windfall
profits, transfer and gains taxes, (b) customs duties, imposts, charges, levies
or other similar assessments of any kind, and (c) interest, penalties and
additions to tax imposed with respect thereto, and "Tax Returns" shall mean
returns, reports, and information statements with respect to Taxes required to
be filed with the United States Internal Revenue Service (the "IRS") or any
other governmental entity or taxing authority or agency, domestic or foreign,
including, without limitation, consolidated, combined and unitary tax returns.
Neither the IRS nor any other governmental entity or taxing authority or agency
is now asserting, either through audits, administrative proceedings, court
proceedings or otherwise, or, to the best of the Company's knowledge,
threatening to assert against the Company or the Bank any deficiency or claim
for additional Taxes. Neither the Company nor the Bank has granted any waiver of
any statute of limitation with respect to, or any extension of a period for the
assessment of any tax. There are no tax liens on any assets of the Company or
the Bank. Neither the Company nor the Bank has received a ruling or entered into
an agreement with the IRS or any other governmental entity or taxing authority
or agency that would have a Material Adverse Effect on the Company or the Bank,
taken as a whole, after the Effective Time. The accruals and reserves for taxes
reflected in the Company's Balance Sheet are adequate to cover all Taxes
accruable by the Company and the Bank on a consolidated basis through the date
thereof (including Taxes being contested) in accordance with generally accepted
accounting principles. Except as may be set forth in the Company Disclosure
Schedule at Section 2.16, no agreements relating to allocating or sharing of
Taxes exist between the Company and the Bank.
SECTION 2.17. INSURANCE. Complete and correct copies of all material
policies of fire, product or other liability, workers' compensation and other
similar forms of insurance owned or held by the Company and the Bank have been
delivered to Merchants. Subject to expirations and renewals of insurance
policies in the ordinary course of business, all such policies are in full force
and effect, all premiums with respect thereto covering all periods up to and
including the date as of
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which this representation is being made have been paid (other-than retrospective
premiums which may be payable with respect to workers' compensation insurance
policies), and no notice of cancellation or termination has been received with
respect to any such policy. Such policies are and shall remain valid,
outstanding and enforceable policies, and will not be terminated prior to the
Effective Time. To the best knowledge of the Company, the insurance policies to
which the Company or the Bank are parties are sufficient for compliance with all
material requirements of law and all material agreements to which the Company or
the Bank are parties and will be maintained by the Company and the Bank until
the Effective Time. Neither the Company nor the Bank has been refused any
insurance with respect to any material assets or operations, nor has coverage
been limited in any respect material to their operations by any insurance
carrier to which they have applied for any such insurance or with which they
have carried insurance during the last five (5) years.
SECTION 2.18. ABSENCE OF ADVERSE AGREEMENTS. Neither the Company nor
the Bank is a party to any agreement or instrument or any judgment, order or
decree or any rule or regulation of any court which materially and adversely
affects or in the future may have a Material Adverse Effect on the financial
condition, results or operations, assets, business or prospects of the Company
or the Bank, taken as a whole.
SECTION 2.19. INTERNAL CONTROLS AND RECORDS. The Company and the Bank
maintain books of account which accurately and validly reflect, in all material
respects, all loans, mortgages, collateral and other business transactions and
maintain accounting controls sufficient to ensure that all such transactions are
(a) in all material respects, executed in accordance with its management's
general or specific authorization, and (b) recorded in conformity with generally
accepted accounting principles. There is no amendment to any agreement,
collateral document or security which is not fully reflected in the books and
records of the Company or the Bank.
SECTION 2.20. LOANS. Except as disclosed in the Company Disclosure
Schedule at Section 2.20, (a) the Bank is not a party to any written or oral
loan agreement, note or borrowing arrangement which has been classified as
"substandard," "doubtful," "loss," "other loans especially mentioned" or any
comparable classifications by the Company or the Bank or banking regulators; (b)
neither the Company nor the Bank is a party to any written or oral loan
agreement, note, or borrowing arrangement, including any loan guaranty, with any
director or executive officer of the Company or the Bank, or any person,
corporation or enterprise controlling, controlled by or under common control
with any of the foregoing; or (c) to the Company's knowledge, neither the
Company nor the Bank is a party to any written or oral loan agreement, note or
borrowing arrangement in violation of any law, regulation or rule of any
governmental authority and which violation could have a Material Adverse Effect
on the Company or the Bank, taken as a whole.
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SECTION 2.21. LABOR MATTERS.
(a) To the Company's knowledge, the Company and the Bank are in
compliance with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and are not
engaged in any unfair labor practice; (b) there is no unfair labor practice
complaint against the Company or the Bank pending before the National Labor
Relations Board; (c) there is no labor strike, dispute, slowdown, representation
campaign or work stoppage actually pending or threatened against or affecting
the Company or the Bank; (d) no grievance or arbitration proceeding arising out
of or under collective bargaining agreements is pending and no claim therefor
has been asserted against the Company or the Bank; and (e) neither the Company
nor the Bank is experiencing any material work stoppage.
SECTION 2.22. BROKERS. Except as set forth in the Company's Disclosure
Schedule at Section 2.22, no broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company or the Bank.
SECTION 2.23. ACCOUNTING AND TAX MATTERS.
(a) To the best knowledge of the Company, neither the Company nor the
Bank has through the date of this Agreement taken or agreed to take any action
that would prevent Merchants from accounting for the business combination to be
effected by the Merger as a pooling-of-interests or would prevent the Merger
from qualifying as a reorganization under Section 368(a)(1)(A) of the Code.
(b) To the best knowledge of the Company, there is no plan or intention
on the part of shareholders of the Company who will receive Merchants Common
Stock to sell or otherwise dispose of an amount of Merchants Common Stock to be
received in the Merger which would reduce their ownership of Merchants Common
Stock to a number of shares having in the aggregate a value at the time of the
Merger of less than fifty percent (50%) of the total value of the Company's
Common Stock outstanding immediately prior to the Merger.
SECTION 2.24. FULL DISCLOSURE. No statement contained in any document,
certificate, or other writing furnished or to be furnished by or at the
direction of the Company to Merchants in, or pursuant to the provisions of, this
Agreement contains or shall contain any untrue statement of a material fact or
omits or shall omit to state any material fact necessary, in light of the
circumstances under which it was made, in order to make the statements herein or
therein not misleading.
SECTION 2.25. VOTE REQUIRED. The affirmative vote of a majority of the
votes that holders of the outstanding shares of the Company's Common Stock are
entitled to cast is the only vote of the holders of any class or series of the
Company's capital stock necessary to approve the Merger.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MERCHANTS
AND MERGER CORP.
Except as set forth in the Disclosure Schedule attached hereto (the
"Merchants Disclosure Schedule"), Merchants and Merger Corp. hereby represent
and warrant to the Company that:
SECTION 3.01. ORGANIZATION AND QUALIFICATION. Merchants and Merger
Corp. are financial holding companies duly organized and validly existing under
the laws of the State of Wisconsin. Merchants and Merger Corp. are registered
with the Federal Reserve Board as financial holding companies under the BHCA.
Merchants and Merger Corp. have the requisite corporate power and authority and
are in possession of all franchises, grants, authorizations, licenses, permits,
easements, consents, certificates, approvals and orders (the "Merchants
Approvals") necessary to own, lease and operate their properties and to carry on
their businesses as they are now being conducted, including appropriate
authorizations from the Federal Reserve Board, except where the failure to be so
organized and existing or to have such power, authority and Merchants Approvals
would not, individually or in the aggregate, have a Material Adverse Effect on
Merchants or Merger Corp. taken as a whole. Merchants or Merger Corp. have not
received any notice of proceedings relating to the revocation or modification of
any such Merchants Approvals. Merchants and Merger Corp. are duly qualified or
licensed as foreign corporations to do business, and are in good standing, in
each jurisdiction where the character of properties owned, leased or operated by
them or the nature of their activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and in
good standing that would not, either individually or in the aggregate, have a
Material Adverse Effect on Merchants or Merger Corp.
SECTION 3.02. ARTICLES OF INCORPORATION AND BYLAWS. Merchants and
Merger Corp. have heretofore made available to the Company a complete and
correct copy of their Articles of Incorporation and Bylaws, as amended or
restated. Such Articles of Incorporation and Bylaws are in full force and
effect. Merchants and Merger Corp. are not in violation of any of the provisions
of their Articles of Incorporation or Bylaws.
SECTION 3.03. CAPITALIZATION. The outstanding capital stock of
Merchants is, and the shares of Merchant's Common Stock to be issued pursuant to
the Merger, when so issued, will be, duly authorized, validly issued, fully paid
and non-assessable, (except as provided in Section 180.0622(2)(b) of Wisconsin
Business Corporation Law) fully registered under the Securities Act and have
not, and will not have, been issued in violation of the preemptive rights of any
person.
SECTION 3.04. AUTHORITY. Merchants and Merger Corp. have the requisite
corporate power and authority to execute and deliver this Agreement and to
perform their obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Merchants
and Merger Corp. and the consummation by Merchants and Merger Corp. of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of Merchants and Merger Corp. and no
other corporate proceedings on the part of Merchants or Merger Corp. are
necessary to authorize this Agreement or to consummate
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the transactions so contemplated hereby. This Agreement has been duly and
validly executed and delivered by Merchants and Merger Corp. and, assuming the
due authorization, execution and delivery by the Company, constitutes the legal,
valid and binding obligation of Merchants and Merger Corp.
SECTION 3.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) To the best knowledge of Merchants and Merger Corp., the execution
and delivery of this Agreement by Merchants and Merger Corp. does not, and the
performance of this Agreement by Merchants and Merger Corp. shall not, (i)
conflict with or violate the Articles of Incorporation or Bylaws of Merchants or
Merger Corp., (ii) conflict with or violate any laws applicable to Merchants and
Merger Corp. or by which their properties are bound or affected, or (iii) result
in any breach of or constitute a default (or an event that with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of
Merchants or Merger Corp. pursuant to any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Merchants or Merger Corp. is a party or by which Merchants
or Merger Corp. or their properties are bound or affected, except for any such
breaches, defaults or other occurrences that would not, individually or in the
aggregate, have a Material Adverse Effect on Merchants and/or Merger Corp.
(b) To the best knowledge of Merchants and Merger Corp., the execution
and delivery of this Agreement by Merchants and Merger Corp. does not, and the
performance of this Agreement by Merchants or Merger Corp. shall not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, domestic or foreign,
except (i) for applicable requirements of the Securities Act, the Exchange Act,
Blue Sky Laws, the BHCA, the federal and state banking laws and the filing and
recordation of appropriate merger or other documents as required by Wisconsin
Law, and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or delay consummation of the Merger, or otherwise prevent Merchants and
Merger Corp. from performing their obligations under this Agreement, and would
not have a Material Adverse Effect on Merchants and/or Merger Corp.
SECTION 3.06. COMPLIANCE; PERMITS. To the best knowledge of Merchants
and Merger Corp., Merchants and Merger Corp. are not in conflict with, or in
default or violation of (a) any Law applicable to Merchants or Merger Corp. or
by which their property is bound or affected, or (b) any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Merchants or Merger Corp. is a party or by
which Merchants or Merger Corp. or any of their properties are bound or
affected, except for any such conflicts, defaults or violations which would not,
individually or in the aggregate, have a Material Adverse Effect on Merchants
and/or Merger Corp.
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SECTION 3.07. SECURITIES REPORTS; FINANCIAL STATEMENTS.
(a) As of the date of this Agreement, Merchants has made available to
the Company in the form filed with the SEC(i) its Annual Reports on Form 10-K
for the fiscal years ended December 31, 1996, 1997, 1998 and 1999, respectively,
(ii) Quarterly Report on Form 10-Q for the period ended March 31, 2000, (iii)
all definitive proxy statements relating to Merchants meetings of shareholders
(whether annual or special) held since December 31, 1995, (iv) all Reports on
Form 8-K filed by Merchants with the SEC since December 31, 1995, (v) all other
reports or registration statements filed by Merchants with the SEC since
December 31, 1995, and (vi) all amendments and supplements to all such reports
and registration statements filed by Merchants with the SEC since December 31,
1995, (collectively, the "Merchants SEC Reports"). The Merchants' SEC Reports,
including all Merchants SEC Reports filed after the date of this Agreement, (i)
were or will be prepared in accordance with the requirements of applicable law
and (ii) did not at the time they were filed, or will not at the time they are
filed, contain any untrue statement of material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Merchants SEC Reports,
including any SEC Reports filed since the date of this Agreement and prior to or
on the Effective Time, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto) and each fairly
presents the consolidated financial position of Merchants and its subsidiaries
as of the respective dates thereof and the consolidated results of its
operations and changes in financial position for the periods indicated, except
that any unaudited interim financial statements were or are subject to normal
and recurring year-end adjustments which were not or are not expected to be
material in amount.
(c) Except as set forth on the consolidated balance sheet of Merchants
and its subsidiaries as of December 31, 1999, including all notes thereto,
neither Merchants nor its subsidiaries have any liabilities or obligations of
any nature (whether accrued, absolute, contingent or otherwise) that would be
required to be reflected on a balance sheet, or in the notes thereto, prepared
in accordance with generally accepted accounting principles, except for
liabilities or obligations incurred in the ordinary course of business since
December 31, 1999, that would not have a Material Adverse Effect on Merchants.
SECTION 3.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in the Merchants SEC Reports filed prior to the date of this Agreement, since
December 31, 1999, to the date of this Agreement, Merchants and its subsidiaries
have conducted their businesses only in the ordinary course and in a manner
consistent with past practice and, since December 31, 1999, there has not been
(a) any change in the financial condition, results of operations or business of
Merchants or its subsidiaries having a Material Adverse Effect on Merchants or
its subsidiaries, taken as a whole, (b) any damage, destruction or loss (whether
or not covered by insurance) with respect to any assets of Merchants or its
subsidiaries having a Material Adverse Effect on Merchants or its subsidiaries,
taken as a whole, (c) any change by Merchants in its accounting methods,
principles or practices, (d) any revaluation by Merchants of any of its material
assets in any material respect,
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or (e) to the date of this Agreement, any entry by Merchants or any of its
subsidiaries into any commitment or transactions material to Merchants or its
subsidiaries, taken as a whole, provided, however, that any acquisition by
Merchants or any of its subsidiaries of any other entity in exchange for
Merchants Common Stock or any other class of capital stock shall be deemed
material for purposes of this Agreement.
SECTION 3.09. ABSENCE OF LITIGATION. Except as disclosed in the
Merchants Disclosure Schedule at Section 3.09, there is no claim, action, suit,
litigation, proceeding, arbitration, investigation, or controversy of any kind
affecting Merchants or any of Merchants' subsidiaries pending or, to the
knowledge of Merchants, threatened, except for matters which will not have, and
cannot reasonably be expected to have, a Material Adverse Effect on Merchants or
its subsidiaries taken as a whole, and there are no uncured material violations,
or violations with respect to which material refunds or restitutions may be
required, cited in any compliance report to Merchants or any of Merchants'
subsidiaries as a result of an examination by any regulatory authority.
SECTION 3.10. REGISTRATION STATEMENT; PROXY STATEMENT. None of the
information supplied or to be supplied by Merchants for inclusion in (a) the
Registration Statement (as defined in Section 6.01) (b) the Proxy
Statement/Prospectus (as defined in Section 6.01), or (c) any other document to
be filed with the SEC or other regulatory authority in connection with the
transactions contemplated hereby, at the respective time such documents are
filed and, in the case of the Registration Statement, when it becomes effective
and at the Effective Time, and with respect to the Proxy Statement/Prospectus,
when mailed, shall be false or misleading with respect to any material fact, or
omit to state any material fact necessary in order to make the statements
therein not misleading. In the case of the Proxy Statement/Prospectus or any
amendment thereof or supplement thereto, none of such information at the time of
the shareholder meeting (as provided for in Section 6.02) shall be false or
misleading with respect to any material fact, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of any proxy for the shareholder meeting (as provided for in
Section 6.02). All documents filed with the SEC or other regulatory authority by
Merchants in connection with the Merger shall comply as to form in all material
respects with the provisions of applicable law.
SECTION 3.11. ABSENCE OF AGREEMENTS. Neither Merchants nor any of its
subsidiaries is a party to any written agreement or memorandum of understanding
with, or a party to any commitment letter or similar undertaking to, or is
subject to any order or directive by, or is a recipient of any extraordinary
supervisory letter which restricts materially the conduct of its business
(including any contract containing covenants which limit the ability of
Merchants or its subsidiaries to compete in any line of business or with any
person or which involve any restriction of the geographical area in which, or
any method by which, Merchants or its subsidiaries may carry on their business
(other than as may be required by Law or applicable regulatory authorities)), or
in any manner relates to their capital adequacy, their credit policies or
management, except for those the existence of which has been disclosed to the
Company prior to the date of this Agreement, nor has Merchants or any of its
subsidiaries been advised that any federal, state or governmental agency is
contemplating issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such order, decree, agreement, memorandum of
understanding, extraordinary supervisory letter, commitment letter or similar
submission.
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SECTION 3.12. TAXES. Merchants and its subsidiaries have timely filed
all Tax Returns required to be filed by them, and Merchants and its subsidiaries
have timely paid and discharged all Taxes due in connection with or with respect
to the filing of such Tax Returns and have timely paid all other Taxes as are
due, except such as are being contested in good faith by appropriate proceedings
and with respect to which Merchants is maintaining reserves adequate for their
payment. To the best knowledge of Merchants, the liability for Taxes set forth
on each such Tax Return adequately reflects the Taxes required to be reflected
on such Tax Return. Neither the IRS nor any other governmental entity or taxing
authority or agency is now asserting, either through audits or administrative
proceedings, court proceedings or otherwise, or, to the best of Merchants'
knowledge, threatening to assert against Merchants or any of its subsidiaries
any deficiency or claim for additional Taxes. Neither Merchants nor any of its
subsidiaries has granted any waiver of any statute of limitations with respect
to, or any extension of a period for the assessment of, any Tax. There are no
tax liens on any assets of Merchants or any of its subsidiaries. Neither
Merchants nor any of its subsidiaries has received a ruling or entered into an
agreement with the IRS or any other governmental entity or taxing authority or
agency that would have a Material Adverse Effect on Merchants or its
subsidiaries, taken as a whole, after the Effective Time. The accruals and
reserves for taxes reflected in the Merchants Balance Sheet are adequate to
cover all Taxes accruable through the date thereof (including Taxes being
contested) in accordance with generally accepted accounting principles. Except
as set forth in Merchants Disclosure Schedule, at Section 3.12, no agreements
relating to allocating or sharing of Taxes exist among Merchants and its
subsidiaries and no tax indemnities given by Merchants or its subsidiaries in
connection with a sale of stock or assets remain in effect. Except as disclosed
in the Merchants Disclosure Schedule at Section 3.12, neither Merchants nor any
of its subsidiaries is required to include in income either (i) any amount in
respect of any adjustment under Section 481 of the Code, or (ii) any installment
sale gain. Neither Merchants nor any of its subsidiaries has made an election
under Section 341(f) of the Code.
SECTION 3.13. BROKERS. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Merchants or Merger Corp.
SECTION 3.14. ACCOUNTING AND TAX MATTERS. To the best knowledge of
Merchants, neither Merchants nor any of its affiliates has through the date of
this Agreement taken or agreed to take any action that would prevent Merchants
from accounting for the business combination to be effected by the Merger as a
pooling-of-interests or would prevent the Merger from qualifying as a
reorganization under Section 368(a)(1)(A) of the Code.
SECTION 3.15. FULL DISCLOSURE. No statement contained in any document,
certificate, or other writing furnished or to be furnished by or at the
direction of Merchants to the Company in, or pursuant to the provisions of, this
Agreement contains or shall contain any untrue statement of a material fact or
omits or shall omit to state any material fact necessary, in the light of the
circumstances under which it has been made, in order to make the statements
herein or therein not misleading.
SECTION 3.16. VOTE REQUIRED. Pursuant to applicable provisions of
Wisconsin law, no vote of the shareholders of the Surviving Corporation is
required to approve the Merger.
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ARTICLE IV
COVENANTS OF THE COMPANY
SECTION 4.01. AFFIRMATIVE COVENANTS. The Company hereby covenants and
agrees with Merchants and Merger Corp. that prior to the Effective Time, unless
the prior written consent of Merchants shall have been obtained and except as
otherwise contemplated herein, it will and/or it will cause the Bank to:
(a) Operate its business only in the usual, regular and ordinary course
consistent with past practices;
(b) Use reasonable efforts to preserve intact its business organization
and assets, to maintain its rights and franchises, to retain the services of its
officers and key employees and to maintain its relationships with customers;
(c) Use reasonable efforts to maintain and keep its properties in as
good repair and condition as at present, ordinary wear and tear excepted;
(d) Use reasonable efforts to keep in full force and effect insurance
and bonds comparable in amount and scope of coverage to that now maintained by
it;
(e) Perform in all material respects all obligations required to be
performed by it under all material contracts, leases, and documents relating to
or affecting its assets, properties, and business;
(f) Purchase and sell securities in accordance with past practices of
the Bank;
(g) With respect to the Bank, maintain as of the date on which all of
the conditions set forth in Article VII have been satisfied or waived and
thereafter a loan loss reserve of not less than 1.2 percent of loans;
(h) Use reasonable efforts to comply with and perform in all material
respects all obligations and duties imposed upon it by all applicable laws;
(i) Obtain an independent audit of its financial statements for the
year ended December 31, 1999 and for such additional years as may be required by
governmental agencies;
(j) Fully expense as of the date on which all conditions set forth in
Article VII have been satisfied or waived all expenses (including fees) incurred
in connection with the consummation of the transaction contemplated hereby.
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SECTION 4.02. NEGATIVE COVENANTS. Except as specifically contemplated
by this Agreement, from the date of this Agreement until the Effective Time, the
Company shall not do, or permit the Bank to do, without the prior written
consent of Merchants, any of the following:
(a) (i) Except as set forth on Schedule 4.02, grant any increase in
compensation or grant any bonuses (incentive or special) to its employees as a
class, or to its officers or directors, (ii) effect any change in retirement
benefits to any class of employees or officers (unless any such change shall be
required by applicable law) which would increase its retirement benefit
liabilities, (iii) adopt, enter into, amend or modify any employee benefit plan
or make any adjustments pursuant to any employee benefit plan, or (iv) enter
into or amend any employment, severance or similar agreements or arrangements
with any directors or officers, other than as is consistent with the normal
severance policies of the Company and the Bank in effect on the date of this
Agreement;
(b) Except as set forth on Schedule 4.02, declare or pay any dividend
(other than dividends paid in the ordinary course consistent with past practice)
on, or make any other distribution in respect of, its outstanding shares of
capital stock;
(c) (i) Redeem, purchase or otherwise acquire any shares of its capital
stock or any securities or obligations convertible into or exchangeable for any
shares of its capital stock, or any options, warrants, conversion or other
rights to acquire any shares of its capital stock or any such securities or
obligations; (ii) merge with or into any other corporation or bank, permit any
other corporation or bank to merge into it or consolidate with any other
corporation or bank, or effect any reorganization or recapitalization; (iii)
purchase or otherwise acquire any assets or stock of any corporation, bank or
other business; (iv) liquidate, sell, dispose of, or encumber any assets or
acquire any assets, other than in the ordinary course of its business consistent
with past practice; or (v) split, combine or reclassify any of its capital stock
or issue or authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock;
(d) Issue, deliver, award, grant or sell, or authorize or propose the
issuance, delivery, award, grant or sale of, any shares of any class of its
capital stock (including shares held in treasury) or any rights, warrants or
options to acquire, any such shares;
(e) Initiate, solicit or encourage (including by way of furnishing
information or assistance), or take any other action to facilitate, any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Competing Transaction (as such term is defined below),
or negotiate with any person in furtherance of such inquiries or to obtain a
Competing Transaction, or agree to or endorse any Competing Transaction, or
authorize or permit any of its officers, directors or employees or any
investment banker, financial advisor, attorney, accountant or other
representative retained by it or the Bank to take any such action, and the
Company shall promptly notify Merchants orally and in writing of all of the
relevant details relating to all inquiries and proposals which it may receive
relating to any of such matters; provided, however, that nothing contained in
this subsection (e) shall prohibit the Board of Directors of the
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Company from furnishing or permitting any of its officers, directors, employees,
investment bankers, financial advisors, attorneys, accountants or other
representative to furnish information to any party that requests information as
to the Company and the Bank or taking any other action if the Board of Directors
of the Company, after consultation with and based upon the written advice of
independent legal counsel, determines in good faith that such action is required
for the Board of Directors of the Company to comply with its fiduciary duties to
shareholders imposed by law. For purposes of this Agreement, "Competing
Transaction" shall mean any of the following involving the Company or the Bank:
(i) any merger, consolidation, share exchange, business combination, or other
similar transactions; (ii) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition of ten percent or more of assets in a single transaction or
series of transactions, excluding from the calculation of the percentage
hereunder any such transactions undertaken in the ordinary course of business
and consistent with past practice; (iii) any sale of ten percent or more of
shares of capital stock (or securities convertible or exchangeable into or
otherwise evidencing, or any agreement or instrument evidencing, the right to
acquire capital stock); (iv) any tender offer or exchange offer for ten percent
or more of outstanding shares of capital stock; (v) any solicitation of proxies
in opposition to approval by the Company's shareholders of the Merger; (vi) the
filing of an acquisition application (or the giving of acquisition notice)
whether in draft or final form under the BHCA or the Change in Bank Control Act
with respect to the Company or the Bank; (vii) any person shall have acquired
beneficial ownership or the right to acquire beneficial ownership of, or any
"group" (as such term is defined under Section 13(d) of the Exchange Act and the
rules and regulations promulgated thereunder) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of, ten
percent (10%) or more of the then outstanding shares of capital stock; or (viii)
any public announcement of a proposal, plan or intention to do any of the
foregoing;
(f) Propose or adopt any amendments to the corporate charter or Bylaws
in any way materially adverse to Merchants;
(g) Except in their fiduciary capacities for the account of customers,
purchase any shares of Merchants Common Stock;
(h) Change any of its methods of accounting in effect at December 31,
1999, or change any of its methods of reporting income or deductions for federal
income tax purposes from those employed in the preparation of the federal income
tax returns for the taxable year ending December 31, 1999, except as may be
required by law or generally accepted accounting principles;
(i) Change any lending, investment, liability management or other
material policies concerning the business or operations of the Company or the
Bank in any material respect; organize any new subsidiaries or enter into any
new non-banking line of business whether or not permissible under applicable
Federal or state law, or make any material changes in its operations;
(j) (i) Incur or assume any material obligation or liability, including
without limitation any obligation for borrowed money, except for borrowings from
the Federal Home Loan Bank in accordance with the Bank's line of credit,
disclosed in Schedule 4.02, whether or not evidenced by a note, bond, debenture
or similar instrument and whether or not being incurred to
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reduce other existing liabilities, or make any loan (not including any loan
renewal of a loan not then classified as "substandard," "doubtful," "loss,"
"other loans especially mentioned" or any comparable classifications by the
Company, the Bank or banking regulators) or investment (excluding U.S. Treasury
Securities and municipal loans) in an amount greater than $500,000.00 for loans
and $100,000.00 for investments, (ii) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingent or otherwise) for the
obligations of any other person or entity; (iii) mortgage, license, pledge or
grant a security interest in any of its material assets or allow to exist any
material lien thereon; except (A) for liabilities and obligations (including
corporate debt issuances) incurred in the ordinary course of business consistent
with past practices and in amounts not material to the Company or the Bank; and
(B) as may be required under existing agreements to which the Company or the
Bank is a party; (iv) acquire assets (including equipment) or securities in
excess of $25,000.00 in the aggregate (excluding loans to customers and
investments permitted in (i) above; (v) enter into any other contract or
agreement involving annual payments by the Company or the Bank or the other
party or parties thereto in excess of $20,000.00; (vi) pay, discharge, or
satisfy any debts or claims not in the ordinary course of business and
consistent with past practices and in no event with a value in excess of
$20,000.00 individually; (vii) settle any claim, action, suit, litigation,
proceeding, arbitration, investigation or controversy of any kind, for any
amount in excess of $25,000.00 or in any manner which would restrict in any
material respect the operations or business of the Company or the Bank; (viii)
purchase any new financial product or instrument which involves entering into a
contract with a term of six months or longer; or (ix) take any action or fail to
take any action which individually or in the aggregate can be expected to have a
Material Adverse Effect on the Company or the Bank, taken as a whole; or
(k) Agree in writing or otherwise to do any of the foregoing.
SECTION 4.03. ACCESS AND INFORMATION.
(a) Upon reasonable notice, and without unreasonable disruption to the
business carried on by the Company or the Bank, the Company shall (and shall
cause the Bank to) afford to Merchants' officers, employees, accountants, legal
counsel and other representatives access, during normal business hours, to all
its properties, books, contracts, commitments and records. Prior to the
Effective Time, the Company shall (and shall cause the Bank to) furnish promptly
to Merchants (i) a copy of each Company Report filed by it (to the extent
permitted by law) after the date of this Agreement and prior to the Effective
Time pursuant to the requirements of federal or state securities laws, the BHCA,
any other federal or state banking laws or any other applicable laws promptly
after such documents are available; (ii) the monthly financial statements of the
Bank; (iii) the audited financial statements of the Company and the Bank for the
year ended December 31, 1999, if required by the SEC; (iv) a summary of any
action taken by the Board of Directors, or any committee thereof, of the Company
and the Bank; (v) all other information concerning the business, properties and
personnel of the Company or the Bank as Merchants may reasonably request.
(b) Any information provided to the Company by Merchants whether prior
to or subsequent to the date of this Agreement shall be kept confidential by the
representatives of the Company (and shall be used by them only in connection
with this Agreement and the transactions contemplated hereby) except to the
extent that (i) it was already known to such representatives when
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received, (ii) it hereafter becomes lawfully obtainable from other sources, or
(iii) it is required to be disclosed by the Company in any document required to
be filed with any government authority or agency.
SECTION 4.04. AFFILIATES; ACCOUNTING AND TAX TREATMENT. Within thirty
(30) days after the date of this Agreement, (a) the Company shall deliver to
Merchants a letter identifying all persons who are then "affiliates" of the
Company, including, without limitation, all directors and executive officers of
the Company for purposes of Rule 145 promulgated under the Securities Act and
(b). the Company shall advise the persons identified in such letter of the
resale restrictions imposed by applicable securities laws and required to cause
the Merger to qualify for pooling-of-interests accounting treatment, and shall
use reasonable efforts to obtain from each person identified in such letter a
written agreement, substantially in the form attached hereto as Exhibit 4.04.
The Company shall use reasonable efforts to obtain from any person who becomes
an affiliate of the Company after the Company's delivery of the letter referred
to above, and on or prior to the Effective Time, a written agreement
substantially in the form attached hereto as Exhibit 4.04 as soon as practicable
after attaining such status. The Company will use its reasonable best efforts to
cause the Merger to qualify for pooling-of-interests accounting treatment and as
a reorganization under Section 368(a)(1) (A) of the Code.
SECTION 4.05. EXPENSES.
(a) Except as provided in Section 8.02, below, all Expenses (as
described below) incurred by Merchants and the Company shall be borne solely and
entirely by the party which has incurred the same. Without limiting the
Company's obligations pursuant to the preceding sentence, the Company shall be
responsible for expenses in an amount not to exceed $50,000.00 in connection
with the preparation of audited financial statements as of the year ended
December 31, 1999, and related schedules for the Company and the Bank. Without
limiting Merchants' obligations pursuant to the first sentence of this
paragraph, Merchants shall be responsible for expenses of preparing, printing
and filing the Registration Statement and the Proxy Statement/Prospectus and all
SEC regulatory filing fees incurred in connection therewith.
(b) "Expenses" as used in this Agreement shall include all reasonable
out-of-pocket expenses (including without limitation, all fees and expenses of
counsel, accountants, investment bankers, experts and consultants to the party
and its affiliates) incurred by a party or on its behalf in connection with or
related to the authorization, preparation and execution of this Agreement, the
preparation of the Registration Statement and Proxy Statement/Prospectus, the
solicitation of shareholder approvals and all other matters related to the
closing of the transactions contemplated hereby.
SECTION 4.06. DELIVERY OF SHAREHOLDER LIST. The Company shall or shall
arrange to have its transfer agent deliver to Merchants or its designee, from
time to time prior to the Effective Time, a true and complete list setting forth
the names and addresses of the shareholders of the Company, their holdings of
stock as of the latest practicable date, and such other shareholder information
as Merchants may reasonably request.
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ARTICLE V
COVENANTS OF MERCHANTS
SECTION 5.01. AFFIRMATIVE COVENANTS. Merchants hereby covenants and
agrees with the Company that prior to the Effective Time, unless the prior
written consent of the Company shall have been obtained, and except as otherwise
contemplated herein it will and will cause Merger Corp. to:
(a) Maintain its corporate existence in good standing and maintain all
books and records in accordance with accounting principles and practices as
utilized in Merchants' financial Statements applied on a consistent basis;
(b) Conduct its business in a manner that does not violate any law,
except for possible violations which individually or in the aggregate do not,
and insofar as reasonably can be foreseen, in the future will not, have a
Material Adverse Effect on Merchants or its subsidiaries, taken as a whole; and
(c) Will, to the best of its ability and in all material respects, (i)
comply with applicable Blue Sky Laws and regulations, the Securities Act, and
the Exchange Act, and (ii) remain qualified under the Exchange Act and the rules
and regulations thereunder.
SECTION 5.02. ACCESS AND INFORMATION.
(a) After the date of this Agreement and prior to the Effective Time,
upon reasonable notice, Merchants shall (and shall cause each of its
subsidiaries to) furnish promptly to the Company (i) a copy of each Merchants
SEC Report filed by it or received by it (to the extent permitted by law) after
the date of this Agreement and prior to the Effective Time pursuant to the
requirements of federal or state securities laws, the BHCA, any other federal or
state banking laws or any other applicable laws promptly after such documents
are available, and (ii) all other information concerning the business,
properties and personnel of Merchants or its subsidiaries as the Company may
reasonably request.
(b) Any information provided to Merchants by the Company or the Bank,
whether prior to or subsequent to the date of this Agreement, shall be kept
confidential by the representatives of Merchants (and shall be used by them only
in connection with this Agreement and the transactions contemplated hereby)
except to the extent that (i) it was already known to such representatives when
received, (ii) it hereafter becomes lawfully obtainable from other sources, or
(iii) it is required to be disclosed by Merchants in any document required to be
filed with any government agency. Upon any termination of this Agreement
pursuant to Article VIII hereof, Merchants agrees to promptly return all
information and documents that it has obtained from the Company in connection
herewith.
SECTION 5.03. ACCOUNTING AND TAX TREATMENT. Merchants will use its best
efforts to cause the Merger to qualify for pooling-of-interests accounting
treatment and as a reorganization under Section 368(a)(1)(A) of the Code.
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SECTION 5.04. REGISTRATION STATEMENT. Merchants will use its best
efforts to cause the Registration Statement to be declared effective by the SEC
under the Securities Act and to obtain all other federal and state securities
permits and other authorizations necessary to issue Merchants Common Stock in
exchange for the Company Common Stock and to consummate the Merger.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. REGISTRATION STATEMENT. As promptly as practicable after
the execution of this Agreement, Merchants shall prepare and file a registration
statement on Form S-4 (the registration statement together with the amendments
thereto are defined as the "Registration Statement" and the prospectus and proxy
materials contained therein are defined as the "Proxy Statement/Prospectus")
with the SEC covering the Merchants Common Stock to be issued in the Merger
(subject to the immediately following sentence), with a view toward permitting
the Registration Statement to become effective as soon as reasonably
practicable. Merchants does not undertake to file post-effective amendments to
Form S-4 or to file a separate registration statement to register the sale of
Merchants Common Stock by affiliates of the Company pursuant to Rule 145
promulgated under the Securities Act. The Company will furnish to Merchants all
information concerning the Company and the Bank required to be set forth in the
Registration Statement and Merchants will provide the Company and its counsel
the opportunity to review and approve such information as set forth in the
Registration Statement and Proxy Statement/Prospectus. Merchants and the Company
will each render to the other its full cooperation in preparing, filing,
prosecuting the filing of, and amending the Registration Statement such that it
comports at all times with the requirements of the Securities Act and the
Exchange Act. Specifically, but without limitation, each will promptly advise
the other if at any time before the Effective Time any information provided by
it for inclusion in the Registration Statement appears to have been, or shall
have become, incorrect or incomplete and will furnish the information necessary
to correct such misstatement or omission. As promptly as practicable after the
effective date of the Registration Statement, the Company will mail to its
shareholders (a) the Proxy Statement/Prospectus, and (b) as promptly as
practicable after approval thereof by Merchants and the Company, such other
supplementary proxy materials as may be necessary to make the Proxy
Statement/Prospectus comply with the applicable requirements of the Securities
Act and the Exchange Act. Except as provided above and except with the prior
written consent of Merchants, the Company will not mail or otherwise furnish or
publish to shareholders of the Company any proxy solicitation material or other
material relating to the Merger that constitute a "prospectus" within the
meaning of the Securities Act. Merchants shall also take any action required to
be taken under any applicable Blue Sky Law in connection with the issuance of
the shares of Merchants Common Stock to be issued as set forth in this Agreement
and the Company and the Bank shall furnish all information concerning the
Company and the Bank, and the holders of the Company's Common Stock and other
assistance as Merchants may reasonably request in connection with such action.
SECTION 6.02. MEETING OF THE SHAREHOLDERS. The Company shall: (a) cause
a shareholders meeting to be duly called and held as soon as practicable to
consider and vote upon the
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Merger and any related matters in accordance with the applicable provision of
applicable law, (b) subject to the exception for the exercise of its fiduciary
duties in Section 4.02(e) submit this Agreement to the shareholders together
with a majority recommendation for approval by the Board of Directors of the
Company, solicit the approval thereof by the shareholders of the Company by
mailing or delivering to each shareholder a combined Proxy Statement/Prospectus,
and use its best efforts to obtain the approval and adoption of the Merger by
the requisite percentage of the Company's shareholders.
SECTION 6.03. APPROPRIATE ACTION; CONSENTS; FILINGS. The Company and
Merchants and Merger Corp. shall use all reasonable efforts to (a) take, or
cause to be taken, all appropriate action, and do, or cause to be done, all
things necessary, proper or advisable under applicable law to consummate and
make effective the transactions contemplated by this Agreement; (b) obtain all
consents, licenses, permits, waivers, approvals, authorizations or orders
required under Law (including, without limitation, all foreign and domestic
(federal, state and local) governmental and regulatory rulings and approvals and
parties to contracts) in connection with the authorization, execution and
delivery of this Agreement and the consummation by them of the transactions
contemplated hereby and thereby, including, without limitation, the Merger; and
(c) make all necessary filings, and thereafter make any other required
submissions, with respect to this Agreement and the Merger required under (i)
the Securities Act and the Exchange Act and the rules and regulations
thereunder, and any other applicable federal and state securities law, (ii) any
applicable federal or state banking laws and (iii) any other applicable law;
provided that Merchants, Merger Corp. and the Company shall cooperate with each
other in connection with the making of all such filings, including providing
copies of all such documents to the non-filing party and its advisors prior to
filing and, if requested, to accept all reasonable additions, deletions or
changes suggested in connection therewith. The Company and Merchants shall
furnish all information required on any application or other filing to be made
pursuant to the rules and regulations of any applicable law (including all
information required to be included in the Proxy Statement/Prospectus and the
Registration statement) in connection with the transactions contemplated by this
Agreement. In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement, the proper
officers and directors of each party to this Agreement shall use all reasonable
efforts to take all such necessary action.
SECTION 6.04. NOTIFICATION OF CERTAIN MATTERS. The Company shall give
prompt notice to Merchants, and Merchants shall give prompt notice to the
Company, of (a) the occurrence, or non-occurrence, of any event the occurrence,
or non-occurrence, of which would be likely to cause any representation or
warranty contained in this Agreement to be untrue or inaccurate, and (b) any
failure of the Company or Merchants, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 6.04 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
SECTION 6.05. PUBLIC ANNOUNCEMENTS. Merchants and the Company shall
consult with each other before issuing any press release or otherwise making any
public statements with respect to the Merger and shall not issue any such press
release or make any such public statement prior to such consultation and without
mutual consent of both parties, except as may be required by law.
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SECTION 6.06. ENVIRONMENTAL MATTERS. In the event Merchants or its
environmental consultants discover or determine the existence of any
environmental condition (including, without limitation, a spill, discharge or
contamination) the result of which may require investigative or remedial action
pursuant to any federal, state, or local law, statute or regulation or may be
the basis for the assertion of any third-party claims, including the claims of
governmental entities, Merchants shall promptly notify the Company thereof and
the Company shall, at its sole cost and expense, proceed with due diligence to
take reasonably appropriate action in response thereto.
SECTION 6.07. BREAK-UP FEE.
(a) Provided that Merchants has not breached in any material respect
its obligations under this Agreement, as a condition and inducement to
Merchants' willingness to enter into and perform this Agreement, the Company
shall pay Merchants a fee ("Break-Up Fee") equal to $225,000.00. The Break-Up
Fee shall be payable by the Company to Merchants only if:
(i)(A) The Board of Directors of the Company (1) shall have
withdrawn, modified or amended in any respect its approval or
recommendation of this Agreement or the transactions contemplated
thereby, or (2) shall not at the appropriate time have recommended
or shall have withdrawn, modified or amended in any respect its
recommendation that its shareholders vote in favor of this
Agreement, or (3) shall not have included such recommendation in
the Proxy Statement/Prospectus or (B) the Board of Directors of the
Company shall have resolved to do any of the foregoing; or
(ii) the Company violates Section 4.02(e) hereof.
(b) Provided that the Company has not breached in any material respect
its obligations under this Agreement, as a condition to the Company's
willingness to enter into and perform this Agreement, Merchants shall pay to the
Company the Break-Up Fee in the amount set forth in paragraph (a) above if the
Board of Directors of Merchants or Merger Corp. (1) shall have withdrawn,
modified or amended in any respect its approval of this Agreement or the
transactions contemplated thereby or (2) shall have resolved to do any of the
foregoing.
(c) The Break-Up Fee shall be paid within three (3) days subsequent to
a termination of this Agreement and shall be considered liquidated damages and
shall be payable in addition to any other damages, fees or expenses to which
either party may be entitled pursuant to the terms of this Agreement or remedies
at law or equity.
SECTION 6.08. EMPLOYMENT AGREEMENT. The Bank and Thomas C. Ebenreiter,
President of the Bank, shall execute an employment agreement for Mr. Ebenreiter
as the President and CEO of the Bank for a period of two (2) years following the
Effective Time (the "Employment Agreement"). The Employment Agreement shall
provide for the employment of Mr. Ebenreiter by the Bank on a full-time basis
for the first year of the Agreement and on a part-time basis for the
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second year of the Agreement. The salary, bonus and other benefits provided to
Mr. Ebenreiter shall be those set forth in the Employment Agreement.
SECTION 6.09. DIRECTORS OF MERCHANTS. Merchants shall recommend to its
shareholders the election of three (3) directors from the Company to the
Merchants' Board of Directors at the next annual shareholder meeting of
Merchants. Until such shareholder meeting, the Board of Directors of Merchants
shall appoint these persons to the Merchants' Board of Directors. The Directors
from the Company to be so appointed are Thomas Ebenreiter, Richard Pamperin and
Michael Judge.
ARTICLE VII
CONDITIONS OF MERGER
SECTION 7.01. CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) Effectiveness of the Registration Statement. The Registration
Statement shall have been declared effective by the SEC under the Securities
Act. No stop order suspending the effectiveness of the Registration Statement
shall have been issued by the SEC and no proceedings for that purpose shall, on
or prior to the Effective Time, have been initiated or, to the knowledge of
Merchants or the Company, threatened by the SEC. Merchants shall have received
all other federal or state securities permits and other authorizations necessary
to issue Merchants Common Stock in exchange for the Company Common Stock and to
consummate the Merger.
(b) Shareholder Approval. This Agreement and the Merger shall have been
approved and adopted by the requisite vote of the shareholders of the Company.
(c) Regulatory Approvals. The Agreement and the transactions
contemplated therein shall have been approved by the Federal Reserve Board and
the Department of Financial Institutions, which approval shall not contain any
conditions which are not reasonably satisfactory to Merchants, Merger Corp. or
the Company, all conditions required to be satisfied prior to the Effective Time
imposed by the terms of such approvals shall have been satisfied and all waiting
periods relating to such approvals shall have expired.
(d) No Order. No federal or state governmental or regulatory authority
or other agency or commission, or federal or state court of competent
jurisdiction, shall have enacted, issued promulgated, enforced or entered any
statute, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is in effect restricting,
preventing or prohibiting consummation of the transactions contemplated by this
Agreement.
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SECTION 7.02. ADDITIONAL CONDITIONS TO OBLIGATIONS OF MERCHANTS AND
MERGER CORP. The obligation of Merchants and Merger Corp. to effect the Merger
are also subject to the following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Company contained in this Agreement shall be complete and
correct in all material respects (except that where any statement in a
representation or warranty expressly includes a standard of materiality, such
statement shall be true and correct in all respects) as of the Effective Time as
though made at the Effective Time with the same force and effect as if made on
and as of the Effective Time. Merchants shall have received a certificate of the
Chief Executive Officer of the Company to that effect.
(b) Agreements and Covenants. The Company shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Effective Time.
(c) Consents Obtained. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required to be
made by the Company for the authorization, execution and delivery of this
Agreement and the consummation by it of the transactions contemplated hereby
shall have been obtained and made by the Company.
(d) No Challenge. There shall not be pending any action, proceeding or
investigation before any court or administrative agency or by any governmental
agency or any other person (i) challenging or seeking material damages in
connection with the Merger or the conversion of the Company Common Stock into
Merchants Common Stock or cash pursuant to the Merger, or (ii) seeking to
restrain, prohibit or limit the exercise of full rights of ownership or
operation by Merchants or its subsidiaries of all or any portion of the business
or assets of the Company or the Bank, which in either case is reasonably likely
to have a Material Adverse Effect on either the Company or the Bank, taken as a
whole, or Merchants or its subsidiaries, taken as a whole.
(e) Opinion of Counsel. Merchants shall have received from Boardman,
Suhr, Curry & Field, LLP or other independent counsel for the Company reasonably
satisfactory to Merchants, an opinion dated the Effective Time, in form and
substance reasonably satisfactory to Merchants, covering the matters set forth
in Exhibit 7.02(e) hereto, which opinion shall be based on such assumptions and
containing such qualifications and limitations as are appropriate and reasonably
satisfactory to Merchants.
(f) Tax Opinion. An opinion of independent counsel for Merchants, to
the effect that the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, and that
Merchants, Merger Corp. and the Company will each be a party to that
reorganization within the meaning of Section 368(b) of the Code, dated on or
about the date that is two business days prior to the date the Proxy
Statement/Prospectus is first mailed to shareholders of the Company, shall have
been delivered and shall not have been withdrawn or modified in any material
respect.
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(g) No Material Adverse Change. Since the date of this Agreement (i) no
event shall have occurred which has a Material Adverse Effect on the Company or
the Bank, and (ii) no condition, event, fact, circumstances or other occurrence
shall have occurred that may reasonably be expected to have or result in such a
Material Adverse Effect on the Company or the Bank.
(h) Pooling Opinions. Merchants shall have received an opinion from
Ernst & Young, LLP to the effect that the Merger qualifies for
pooling-of-interests accounting treatment if consummated in accordance with this
Agreement.
(i) Affiliate Agreements. Merchants shall have received from each
person who is identified in the affiliate letter as an "affiliate" of the
Company a signed affiliate agreement in the form attached hereto as Exhibit
4.04.
(j) Burdensome Condition. There shall not be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger by any federal or state governmental entity which, in
connection with the grant of any regulatory approval, imposes any condition or
restriction upon the Company, or Merchants or their respective subsidiaries (or
the Surviving Corporation or its subsidiaries after the Effective Time),
including, without limitation, any requirement to raise additional capital,
which would so materially adversely impact the economic or business benefits of
the transactions contemplated by this Agreement as to render inadvisable the
consummation of the Merger and which could not have been foreseen by the Company
or Merchants and which cannot be reasonably and without material adverse
consequences complied with by Merchants or the Company as the case may be,
within a reasonable time after notice of such event is received.
(k) Voting Agreement. Concurrently with the execution and delivery of
this Agreement, Merchants and certain shareholders of the Company shall have
executed and delivered the Voting Agreement in the form of Exhibit 7.02(k).
(l) Comfort Letters. Merchants shall have received from Ernst & Young,
LLP "comfort letters" dated as of the date of mailing of the Proxy
Statement/Prospectus and the Effective Time, covering matters customary in
transactions such as the Merger and in form and substance reasonably
satisfactory to Merchants.
SECTION 7.03. ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The
obligation of the Company to effect the Merger is also subject to the following
conditions:
(a) Representations and Warranties. Each of the representations and
warranties of Merchants and Merger Corp. contained in this Agreement shall be
complete and correct in all material respects (except that where any statement
in a representation or warranty expressly includes a statement of materiality,
such statement shall be true and correct in all respects) as of the Effective
Time as though made on and as of the Effective Time with the same force and
effect as if made on and as of the Effective Time. The Company shall have
received a certificate of the President of Merchants to that effect.
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(b) Agreements and Covenants. Merchants and Merger Corp. shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Effective Time.
(c) Consents Obtained. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required to be
made by Merchants and Merger Corp. for the authorization, execution and delivery
of this Agreement and the consummation by them of the transactions contemplated
hereby shall have been obtained and made by Merchants and Merger Corp.
(d) Opinion of Counsel. The Company shall have received from Davis &
Kuelthau, s.c. or other independent counsel for Merchants reasonably
satisfactory to the Company, an opinion dated the Effective Time, in form and
substance reasonably satisfactory to the Company, covering the matters set forth
in Exhibit 7.03(d), which opinion shall be based on such assumptions and
contains such qualifications and limitations as are appropriate and reasonably
satisfactory to the Company.
(e) Tax Opinion. An opinion of independent counsel for Merchants, to
the effect that the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, and that
Merchants, Merger Corp. and the Company will each be a party to that
reorganization within the meaning of Section 368(b) of the Code, dated on or
about the date that is two business days prior to the date the Proxy
Statement/Prospectus is first mailed to shareholders of the Company, shall have
been delivered and shall not have been withdrawn or modified in any material
respect.
(f) No Change In Executive Officers. No change in the current executive
officers of Merchants between the date of this Agreement and the Effective Time
which the Company in the exercise of its reasonable judgment would consider
materially adverse to Merchants shall have occurred.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. TERMINATION.
(a) This Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval of the matters presented in connection
with the Merger by the shareholders of the Company:
(i) By mutual written consent of Merchants, Merger Corp. and the
Company;
(ii) By Merchants, Merger Corp. or the Company (A) if there has
been a breach in any material respect (except that where any statement in a
representation or warranty expressly includes a standard of materiality, such
statement shall have been breached in any respect) of any
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representation, warranty, covenant or agreement on the part of the Company, on
the one hand, or Merchants or Merger Corp., on the other hand, respectively, set
forth in this Agreement, or (B) if any representation of warranty of the
Company, on the one hand, or Merchants, or Merger Corp. on the other hand,
respectively, shall be discovered to have become untrue in any material respect
(except that where any statement in a representation or warranty expressly
includes a standard of materiality, such statement shall have become untrue in
any respect), in either case which breach or other condition has not been cured
within 10 business days following receipt by the non-terminating party of notice
of such breach or other condition, provided, however, this Agreement may not be
terminated pursuant to this clause (ii) by the breaching party or party making
any representation or warranty which shall have become untrue in any material
respect.
(iii) By either Merchants, Merger Corp. or the Company if any
permanent injunction preventing the consummation of the Merger shall have become
final and non-appealable;
(iv) By either Merchants, Merger Corp. or the Company if the
merger shall not have been consummated before December 31, 2000, for a reason
other than the failure of the terminating party to comply with its obligations
under this Agreement.
(v) By either Merchants, Merger Corp. or the Company if the
Federal Reserve Board or the Department of Financial Institutions has denied
approval of the Merger and neither Merchants, Merger Corp. nor the Company has,
within thirty (30) days after the entry of such order denying approval, filed a
petition seeking review of such order as provided by applicable law;
(vi) By either Merchants, Merger Corp. or the Company if any
approval of the shareholders of the Company required for the consummation of the
Merger shall not have been obtained by reason of the failure to obtain the
required vote at a duly held meeting of shareholders or at any adjournment
thereof.
(vii) By either Merchants or Merger Corp. if any condition set
forth in Section 7.01 or 7.02 has not been satisfied or waived in writing by
December 31, 2000;
(viii) By either Merchants, Merger Corp. or the Company, if
Merchants and the Company are unable to renegotiate the Merger Consideration as
required under Section 1.06(c) 4, if applicable.
(ix) By the Company if any of the conditions set forth in Section
7.01 or 7.03 has not been satisfied or waived in writing by December 31, 2000.
(b) In the event of termination and abandonment by any party as
provided above, written notice shall forthwith be given to other party, which
notice shall specifically describe the basis for such termination.
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SECTION 8.02. EFFECT OF TERMINATION.
(a) If the merger is not consummated as the result of termination of
this Agreement caused otherwise than by breach of a party hereto, the Company
and Merchants each shall pay its Expenses in accordance with the terms and
conditions under paragraph 4.05(a) and as the term "Expenses" is defined in
paragraph 4.05(b) above and this Agreement shall immediately terminate, except
as set forth in Section 9.01 hereof, and neither the Company nor Merchants shall
have any liability under this Agreement for damages or otherwise, or for payment
of the Break-up Fee under Section 6.07.
(b) If termination of this Agreement shall have been caused by breach
of this Agreement by any party hereto, then, in addition to other remedies at
law or equity for breach of this Agreement, the party so found to have breached
this Agreement shall promptly (but not later than five (5) business days after
receipt of notice from the non-breaching party) pay the non-breaching party for
its documented out-of-pocket expenses and fees incurred in connection with or
related to the Merger.
Except as provided above, the foregoing subsections (a) and (b) of this
Section 8.02 are in addition to and shall not limit the obligations of the
Company and Merchants pursuant to Section 6.07 of this Agreement.
SECTION 8.03. AMENDMENT. 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 prior to the Effective Time; provided, however, that, after approval
of the Merger by the shareholders of the Company, no amendment may be made which
would change the amount or type of consideration into which each Share of
Company Common Stock shall be converted pursuant to this Agreement upon
consummation of the Merger. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
SECTION 8.04. WAIVER. At any time prior to the Effective Time, any
party hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other party hereto, (b) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto and (c) to the extent permitted by law, waive
compliance with any of the agreements or conditions contained herein. Any such
extension or waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby.
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<PAGE> 102
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Article VIII, except that the agreements set forth in Article I
shall survive the Effective Time indefinitely and those set forth in Sections
4.03(b), 4.05, 5.02(b), 8.02 and Article IX hereof shall survive termination
indefinitely.
SECTION 9.02. DISCLOSURE SCHEDULES. The schedules and information set
forth in the Disclosure Schedules specifically refer to the Section (and
paragraph, if applicable) of this Agreement to which such schedule and
information is responsive. The Disclosure Schedules shall not vary, change or
alter the literal meaning of the representations and warranties of the parties
contained in this Agreement, other than creating exceptions thereto which are
directly responsive to the language of the representations and warranties
contained in this Agreement.
SECTION 9.03. NOTICES. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made as of the date delivered or mailed if delivered personally or
mailed by registered or certified mail (postage prepaid, return receipt
requested) to the parties at the following address (or at such other address for
a party as shall be specified by like changes of address) and shall be effective
upon receipt:
(a) If to Merchants or Merger Corp.:
Merchants & Manufacturers Bancorporation, Inc.
14100 West National Avenue
New Berlin, WI 53151
Telecopier: (414) 427-5252
Attention: Michael Murry
With a copy to:
Davis & Kuelthau, S.C.
111 East Kilbourn Avenue
Milwaukee, WI 53202
Telecopier: (414) 276-0381
Attention: Erich Mildenberg
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<PAGE> 103
(b) If to Company:
CBOC, Inc.
500 Cherry Avenue
Oconto Falls, WI 54154
Telecopier: (920) 846-8348
Attention: Thomas Ebenreiter
With a copy to:
Boardman, Suhr, Curry & Field, S.C.
1 South Pinckney Street
P. O. Box 927
Madison, WI 53701-0927
Telecopier: (608) 283-1709
Attention: John E. Knight
Bernard E. Adee, Sr. Vice President
Marshall Financial Consulting LLC
5408 Sylvan View Circle W.
Sturgeon Bay, WI 54235
SECTION 9.04. CERTAIN DEFINITIONS. For purposes of this Agreement, the
term:
(a) "Affiliate" means a person that directly or indirectly, through one
or more intermediaries, controls, is controlled by, or is under common control
with, the first mentioned person; including, without limitation, any partnership
or joint venture in which the Company (either alone, or through or together with
any subsidiary) has, directly or indirectly, an interest of five (5%) or more;
(b) "Beneficial owner" with respect to any Shares, means a person who
shall be deemed to be the beneficial owner of such Shares (i) which such person
or any of its affiliates or associates beneficially owns, directly or
indirectly, (ii) which such person or any of its affiliates or associates (as
such term defined in Rule 12b-2 of the Exchange Act) has, directly or
indirectly, (A) the right to acquire (whether such right is exercisable
immediately or subject only to the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of consideration rights,
exchange rights, warranties or options, or otherwise, or (B) the right to vote
pursuant to any agreement, arrangement or understanding, (iii) which are
beneficially owned, directly or indirectly, by any other persons with whom such
person or any of its affiliates or associates has any agreement, arrangement or
understanding for the purposes of acquiring, holding, voting or disposing of any
Shares or (iv) pursuant to Section 13(d) of the Exchange Act and any rules or
regulations promulgated thereunder;
(c) 'Business day" means any day other than a day on which banks in
Wisconsin are required or authorized to be closed;
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<PAGE> 104
(d) "Control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock or as trustee or
executor, by contract or credit arrangement or otherwise; and
(e) "Person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as
defined in Section 13(d) of the "Exchange Act).
SECTION 9.05. HEADINGS. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 9.06. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
SECTION 9.07. ENTIRE AGREEMENT. This Agreement together with the
Disclosure Schedules and Exhibits hereto constitutes the entire agreement of the
parties and supersedes all prior agreements and undertakings, both written and
oral, between the parties, or any of them, with respect to the subject matter
hereof and, except as otherwise expressly provided herein, are not intended to
confer upon any other person any rights or remedies hereunder.
SECTION 9.08. ASSIGNMENT. This Agreement shall not be assigned by
operation of law or otherwise, except that Merchants may assign all or any of
its rights hereunder to any affiliate with the prior written consent of the
Company, which consent shall not be unreasonably withheld provided that no such
assignment shall relieve the assigning party of its obligations hereunder, and
the assignee agrees to be bound by the terms and conditions of this Agreement
including the requirement of conversion and delivery of the Merger Consideration
pursuant to Section 1.06 hereof.
SECTION 9.09. PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
SECTION 9.10. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Wisconsin, regardless of
the laws that might otherwise govern under the applicable principles of
conflicts of law.
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<PAGE> 105
SECTION 9.11. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which when executed shall be deemed to be an original
but all of which taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, Merchants, Merger Corp. and the Company have caused
this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
MERCHANTS & MANUFACTURERS
BANCORPORATION, INC.
By: /s/ Michael J. Murry
------------------------------------------------
Name: Michael J. Murry
Title: Chairman of the Board of Directors
MERCHANTS MERGER CORP.
By: /s/ Michael J. Murry
------------------------------------------------
Name: Michael J. Murry
Title: Chairman of the Board of Directors
CBOC, INC.
By: /s/ Thomas Ebenreiter
------------------------------------------------
Name: Thomas Ebenreiter
Title: President
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EXHIBIT A
FIRST AMENDMENT TO AGREEMENT AND
PLAN OF MERGER
This First Amendment to the Agreement and Plan of Merger (the "First
Amendment") is made as of the 25th day of October, 2000, between Merchants and
Manufacturers Bancorporation, Inc. ("Merchants'), Merchants Merger Corp.
("Merger Corp.") and CBOC, Inc. (the "Company").
RECITALS
A. Merchants, Merger Corp. and Company entered into an Agreement and
Plan of Merger dated August 1, 2.000, (the "Agreement") and a
related Plan of Merger (the "Plan").
B. Merchants, Merger Corp. and Company desire to amend the Agreement
in accordance with the terms of this First Amendment.
AGREEMENT
In consideration of the recitals and the mutual covenants contained
herein and in the Agreement, the parties agree as follows:
1. Section 6.08 of the Agreement is hereby deleted.
2. Section 6.09 of the Agreement is renumbered to be designated as
Section 6.08.
3. All other provisions of the Agreement shall remain in full force
and effect.
MERCHANTS AND MANUFACTURERS BANCORPORATION INC.
By: /s/ Michael Murry
--------------------------------------------
Name: Michael Murry
Title: Chairman of the Board of Directors
MERCHANTS MERGER CORP.
By: /s/ Michael Murry
--------------------------------------------
Name: Michael Murry
Title: Chairman of the Board of Directors
CBOC, INC.
By: /s/ Thomas Ebenreiter
--------------------------------------------
Name: Thomas Ebenreiter
Title: President and Chief Executive Officer
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<PAGE> 107
EXHIBIT A-1
PLAN OF MERGER
<PAGE> 108
EXHIBIT A-1
PLAN OF MERGER
This Plan of Merger (the "Plan of Merger") dated as of August 1, 2000,
is entered into by and between Merchants Merger Corp., a Wisconsin corporation
("Merger Corp."), and CBOC, Inc. ("CBOC"), a Wisconsin corporation, and joined
in by Merchants and Manufacturers Bancorporation, Inc., a Wisconsin corporation
("Merchants"), for certain limited purposes.
CBOC is a corporation duly organized and existing under the laws of
Wisconsin with authorized capital stock of 250,000 shares of Common Stock, $1.00
par value, of which 80,000 shares are validly issued and outstanding ("CBOC
Common Stock").
Merger Corp. is a corporation duly organized and existing under the
laws of Wisconsin with authorized capital stock of 9,000 shares of Common Stock,
$.01 par value, of which 400 shares are validly issued and outstanding, and are
owned by Merchants.
Merchants is a corporation duly organized and existing under the laws
of Wisconsin with authorized capital stock of 6,000,000 shares of common stock,
$1.00 par value, of which 2,104,459 shares are validly issued and outstanding.
Concurrently with the execution and delivery of this Plan of Merger,
Merchants, CBOC and Merger Corp. have entered into an Agreement and Plan of
Merger (the "Agreement") that contemplates the merger of CBOC with and into
Merger Corp. (the "Merger"), at the "Effective Time," as defined in Section 10
of this Plan of Merger, upon the terms and conditions provided in this Plan of
Merger.
The Boards of Directors of CBOC and Merger Corp. deem it fair and
equitable to, and in the best interests of, their respective shareholders, that
CBOC be merged with and into Merger Corp. with Merger Corp. being the surviving
corporation, on the terms and conditions herein set forth under and pursuant to
the Wisconsin Business Corporation Law. The Board of Directors of CBOC has
approved this Plan of Merger, has authorized its execution and delivery and has
directed that this Plan of Merger and the Merger be submitted to its
shareholders for approval. The Board of Directors of Merger Corp. has approved
this Plan of Merger and has authorized its execution and delivery. Merchants as
sole shareholder of Merger Corp. has approved this Plan of Merger and the
Merger.
The Board of Directors of Merchants has authorized the execution and
delivery of this Plan of Merger.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, provisions and covenants herein contained, the parties hereto adopt
and agree to the following agreements, terms and conditions relating to the
Merger and the mode of carrying the same into effect.
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<PAGE> 109
1. CBOC will be merged with and into Merger Corp., which will be the
surviving corporation (hereinafter called the "Surviving Corporation" whenever
reference is made to it as of the Effective Time or thereafter). Such Merger
will be pursuant to the provisions of and with the effect provided in the
Wisconsin Business Corporation Law.
2. Name. The name of the Surviving Corporation will be "Merchants
Merger Corp."
3. Board of Directors; Officers. The Board of Directors of the
Surviving Corporation at the Effective Time will consist of all the persons who
are directors of Merger Corp. immediately prior to the Effective Time. Such
directors will serve as directors of the Surviving Corporation until the next
annual meeting of the Surviving Corporation or until such time as their
successors have been elected and have qualified. The officers of Merger Corp.
immediately prior to the Effective Time will be the officers of the Surviving
Corporation until their successors are elected or appointed in accordance with
the Bylaws of the Surviving Corporation.
4. Articles of Incorporation. The Articles of Incorporation of Merger
Corp. as in effect immediately prior to the Effective Time will, from and after
the Effective Time, be and continue to be the Articles of Incorporation of the
Surviving Corporation until further amended as provided by law.
5. Bylaws. The Bylaws of Merger Corp. as in effect immediately prior to
the Effective Time will, from and after the Effective Time, be and continue to
be the Bylaws of the Surviving Corporation until the same are altered, amended
or rescinded as therein provided or as provided in the Articles of Incorporation
of the Surviving Corporation.
6. Effect of the Merger. At the Effective Time, CBOC will merge into
Merger Corp. which will be the Surviving Corporation, and the separate existence
of CBOC shall cease as provided in ss. 180.1106 of the Wisconsin Business
Corporation Law. The title to all property owned by each corporation shall be
vested in the Surviving Corporation without reversion or impairment and all
liabilities of each corporation shall be vested in the Surviving Corporation.
Any civil, criminal, administrative or investigatory proceedings pending against
either corporation may be continued as if the Merger did not occur or the
Surviving Corporation may be substituted in the proceeding.
7. Conversion of Common Stock of CBOC. At the Effective Time, each
share of CBOC Common Stock validly issued and outstanding immediately prior to
the Effective Time (and not held by any dissenting shareholder exercising such
shareholder's rights under Section 180.1301 et seq. of the Wisconsin Business
Corporation Law) will, by virtue of the Merger and without any action by the
holder thereof, be converted into the right to receive shares of Merchants
Common Stock in accordance with Section 1.06 of the Agreement. In the case of
any holder of CBOC Common Stock who did not vote for the Merger and who gives
notice of objection with respect to his shares of CBOC Common Stock as provided
in Section 180.1301 et seq. of the Wisconsin Business Corporation Law, each such
share of CBOC Common Stock will be converted into the right to receive the fair
value of the share as provided in such statute. At the Effective Time, the
holders of CBOC Common Stock will cease to have any rights with respect to such
stock other than the right
A-1(2)
<PAGE> 110
to receive the Merchants Common Stock as provided in this Plan of Merger or the
fair value of the stock as provided by law. The issued and outstanding shares of
Common Stock of Merchants before the Effective Time shall continue to be the
issued and outstanding shares of Common Stock of Merchants after the Effective
Time. The issued and outstanding shares of Common Stock of Merger Corp. before
the Effective Time shall continue to be the issued and outstanding shares of
common stock of Merger Corp. after the Effective Time.
8. Surrender of CBOC Common Stock Certificates Upon Merger. Each holder
of a certificate or certificates that prior to the Effective Time represented
shares of CBOC Common Stock (other than holders exercising their rights to
dissent in accordance with Section 180.1301 et seq. of the Wisconsin Business
Corporation Law) will surrender such certificate(s) to Firstar Trust Company, as
agent for Merchants, together with instructions for the issuance of shares of
Merchants Common Stock to which the holder is entitled pursuant to this Plan of
Merger. As soon as practicable after receipt of such certificates and such
instructions in form satisfactory to Firstar Trust Company, it will mail, in
accordance with such instructions and this Plan of Merger the number of shares
of Merchants Common Stock to which the holder is entitled.
9. Shareholder Approval. This Plan of Merger will be submitted to the
shareholders of CBOC and Merger Corp. for ratification, confirmation and
adoption by consent or at meetings to be called and held in accordance with the
applicable provisions of law and their respective Articles of Incorporation and
Bylaws. CBOC and Merger Corp. will proceed expeditiously and cooperate fully in
the procurement of any other consents and approvals and in the taking of any
other action, and the satisfaction of all other requirements prescribed by law
or otherwise, necessary for consummation of the Merger and the other
transactions contemplated hereby and by the Agreement on the terms herein and
therein provided.
10. Effective Time of the Merger. The Merger shall become effective on
the date on which all of the following actions shall have been taken (the
"Effective Time").
(a) All of the conditions precedent set forth in the
Agreement shall have been satisfied or waived and
(b) Articles of Merger (with this Plan of Merger
attached as part thereof) with respect to the Merger, setting
forth the information required by the Wisconsin Business
Corporation Law, shall be executed by the appropriate officers of
Merger Corp., and shall be received in the office of the
Department of Financial Institutions, Division of Corporations, of
the State of Wisconsin in accordance with the Wisconsin Business
Corporation Law
11. Termination. This Plan of Merger may be terminated and the Merger
abandoned by mutual consent of the respective Boards of Directors of CBOC and
Merger Corp. at any time prior to the Effective Time . If the Agreement is
terminated in accordance with its terms, then this Plan of Merger will terminate
simultaneously and the Merger will be abandoned without further action by CBOC
or Merger Corp.
A-1(3)
<PAGE> 111
12. Waivers; Amendments. Either CBOC or Merger Corp. may, at any time
prior to the Effective Time, by action taken by its Board of Directors or
officers thereunto authorized, waive the performance of any of the obligations
of the other or waive compliance by the other with any of the covenants or
conditions contained in this Plan of Merger or agree to the amendment or
modification of this Plan of Merger by an agreement in writing executed in the
same manner as this Plan of Merger; provided, however, that after a favorable
vote by or consent of the shareholders of CBOC any such action will be taken by
CBOC only if, in the opinion of its Board of Directors, such waiver, amendment
or modification will not have any material adverse effect on the benefits
intended under this Plan of Merger for the shareholders of CBOC and will not
require resolicitation of any proxies from such shareholders.
13. Captions. The captions in this Plan of Merger are for convenience
only and will not be considered a part of or affect the construction or
interpretation of any provision of this Plan of Merger. This Plan of Merger may
be executed in several counterparts, each of which will constitute one and the
same instrument.
14. Governing Law. This Plan of Merger is to be construed and
interpreted in accordance with the laws of the State of Wisconsin.
15. Reorganization. It is intended that the Merger shall be deemed a
reorganization pursuant to the provisions of Sections 368(a)(1)(A) and
368(a)(2)(D) of the Internal Revenue Code of 1986, as amended.
16. Notices. All notices given hereunder shall be in writing (including
a telecopy) and shall be mailed by first class mail, postage
prepaid, or sent by facsimile transmission or by nationally
recognized overnight delivery service, addressed as follows:
(a) If to Merchants or Merger Corp. to:
Merchants and Manufacturers Bancorporation, Inc.
Michael Murry
Chairman
14100 West National Avenue
New Berlin, WI 53151
with a copy to: Erich Mildenberg
Davis & Kuelthau, s.c.
111 East Kilbourn Avenue, Suite 1400
Milwaukee, WI 53202
(b) If to CBOC to: CBOC. Inc.
Attention: Thomas Ebenreiter
President
500 Cherry Avenue
Oconto Falls, WI 54154
A-1(4)
<PAGE> 112
with a copy to: Boardman, Suhr, Curry & Field
Attention: John Knight
1 South Pinckney Street
Madison, WI 53701-0927
Bernard Adee, Vice President
Marshall Financial Consulting, LLC
5408 Sylvan View Circle W.
Sturgeon Bay, WI 54235
IN WITNESS WHEREOF, the parties hereto have caused this Plan of Merger
to be duly executed as of the date first above written.
MERCHANTS AND MANUFACTURERS
BANCORPORATION, INC.
By:
------------------------------------------------------------
Michael J. Murry, Chairman of the Board of Directors
ATTEST:
---------------------------------------------------------
John Krawczyk, Secretary
CBOC, INC.
By:
-----------------------------------------------------------
Thomas Ebenreiter, President
ATTEST:
-------------------------------------------------------
, Secretary
MERCHANTS MERGER CORP.
By:
-----------------------------------------------------------
Michael J. Murry, Chairman of the Board of Directors
ATTEST:
-------------------------------------------------------
John Krawczyk, Secretary
A-1(5)
<PAGE> 113
EXHIBIT B
VOTING AGREEMENT
<PAGE> 114
EXHIBIT B
VOTING AGREEMENT
THIS VOTING AGREEMENT (this "Agreement"), dated as of August 1, 2000,
among the undersigned shareholders (the "Shareholders") of CBOC, INC., a
Wisconsin corporation (the "Company"), and MERCHANTS AND MANUFACTURERS
BANCORPORATION, INC., a Wisconsin corporation ("Merchants"), and MERCHANTS
MERGER CORP., a Wisconsin corporation, ("Merger Corp.).
RECITALS
The Shareholders, the Company, Merchants and Merger Corp. acknowledge
the following:
A. Concurrent with the execution of this Agreement, the Company,
Merchants and Merger Corp. have entered into an Agreement and Plan of Merger
(the "Merger Agreement"), providing for the business combination transaction
contemplated therein pursuant to which the Company will merge with and into
Merger Corp. pursuant to the terms and conditions of the Merger Agreement
("Merger").
B. Upon consummation of the Merger, the Shareholders will receive
shares of Merchants Common Stock for each share of Company Common Stock, par
value $1.00 per share (the "Company Common Stock"), owned by them.
C. The Shareholders own the shares of Company Common Stock set forth
opposite such Shareholder's respective names on Exhibit A hereto (such shares
set forth on Exhibit A, and together with all shares of Company Common Stock
subsequently acquired by any Shareholder during the term of this Agreement,
being referred to as the "Shares").
D. In order to induce Merchants to enter into the Merger Agreement and
in consideration of the substantial expenses incurred and to be incurred by
Merchants in connection therewith, the Shareholders have agreed to enter into
and perform this Voting Agreement.
AGREEMENTS
In consideration of the Recitals and the mutual agreements which
follow, Shareholders, the Company, Merchants and Merger Corp. agree as follows:
1. Agreement to Vote Shares. Subject to the exercise of their fiduciary
duties as directors as provided below, each of the Shareholders shall vote or
cause to be voted, or express a written consent with respect to, all of such
Shareholder's Shares (a) in favor of adoption and approval of the Merger
Agreement and the Merger at every meeting of the shareholders of the Company at
which such matters are considered and at every adjournment thereof and in
connection with every proposal to take action by written consent with respect
thereto and (b) against any proposal for a Competing Transaction (as such term
is defined in the Merger Agreement) at every meeting of the shareholders of the
Company at which such matters are considered and at every adjournment thereof
and in connection with every proposal to take action by written consent with
B-1
<PAGE> 115
respect thereto; provided, however, that the obligations under this paragraph
1of those Shareholders who are also directors of the Company are subject to any
action such Shareholder/directors, after consultation with their independent
legal counsel, determine, in good faith, is required to comply with their
respective fiduciary duties to shareholders imposed by law. As of the date
hereof, such Shareholder/directors (a) intend to recommend approval of the
Merger Agreement and Merger to the shareholders of the Company and (b) are aware
of no facts or circumstances existing as of the date hereof that could cause or
reasonably be expected to cause any such Shareholder/director to change such
recommendation.
2. No Voting Trusts. Each of the Shareholders agrees that such
Shareholder will not, nor will such Shareholder permit any entity under such
Shareholder's control to, deposit any of such Shareholder's Shares in a voting
trust or subject any of their Shares to any agreement, arrangement or
understanding with respect to the voting of such Shares inconsistent with this
Agreement.
3. Limitation on Sales. During the term of this Agreement, each
Shareholder agrees not to sell, assign, transfer or dispose of any such
Shareholder's Shares. Notwithstanding the foregoing, any Shareholder may, during
the term of this Agreement, make gifts of Shares to the charitable organization
of his or her choice or to members of his or her immediate family, provided any
such charitable organization or family member agrees in writing to be bound to
the terms of this Agreement.
4. Shareholders' Representations. Each Shareholder severally represents
that: (a) subject to the terms of paragraph 1, such Shareholder has the complete
and unrestricted power and unqualified right to enter into and perform the terms
of this Agreement; (b) this Agreement constitutes a valid and binding agreement
with respect to such Shareholder, enforceable against such Shareholder in
accordance with its terms; and (c) such Shareholder owns the number of Shares
indicated opposite such Shareholder's name on Exhibit A hereto, has the sole and
unrestricted voting power with respect to such Shares and such Shares are all of
the Shares directly or indirectly held by such Shareholder.
5. Specific Performance and Remedies. The parties hereto acknowledge
that it will be impossible to measure in money the damage to the other
party(ies) if a party hereto fails to comply with the obligations imposed by
this Agreement and that, in the event of such failure, the other party(ies) will
not have an adequate remedy at law or in damages. Accordingly, each party hereto
agrees that injunctive relief or other equitable remedy, in addition to remedies
at law or in damages, is the appropriate remedy for any such failure. No party
will oppose the granting of such relief on the basis that the other party(ies)
have an adequate remedy at law. Each party hereto agrees that it will not seek,
and agrees o waive any requirement for, the securing or posting of a bond in
connection with any other party's seeking or obtaining such equitable relief. In
addition to all other rights or remedies which any party hereto may have against
any other party hereto who defaults in the performance of such party's
obligations under the Agreement, such defaulting party shall be liable to the
nondefaulting party for all litigation costs and attorneys' fees incurred by the
nondefaulting party(ies) in connection with the enforcement of any of the
nondefaulting party's rights or remedies against the defaulting party.
B-2
<PAGE> 116
6. Term of the Agreement; Termination. The term of this Agreement shall
commence on the date hereof and such term and this Agreement shall terminate
upon the earlier to occur of (a) the Effective Time (as defined in the Merger
Agreement) and (b) the date on which the Merger Agreement is terminated in
accordance with its terms. Upon such termination, no party shall have any
further obligations or liabilities hereunder; provided, that such termination
shall not relieve any party from liability for any breach of this Agreement
prior to such termination.
7. Entire Agreement. This Agreement supersedes all prior agreements,
written or oral, among the parties hereto with respect to the subject matter
hereof and contains the entire agreement among the parties with respect to the
subject matter hereof. This Agreement may not be amended, supplemented or
modified, and no provisions hereof may be modified or waived, except by an
instrument in writing signed by all parties hereto. No waiver of any provisions
hereof by any party shall be deemed a waiver of any other provisions hereof by
any such party, nor shall any such waiver be deemed a continuing waiver of any
provision hereof by such party.
8. Notices. All notices, requests, claims, demands or other
communications hereunder shall be in writing and shall be deemed given when
delivered personally, upon receipt of a transmission confirmation if sent by
telecopy or like transmission and on the next business day when sent by Federal
Express, Express Mail or other reputable overnight courier service to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
If to Merchants or Merger Corp.:
Merchants and Manufacturers Bancorporation, Inc.
14100 West National Avenue
New Berlin, WI 53151
Telecopier: (414) 427-5252
Attention: Michael Murry
With a copy to:
Davis & Kuelthau, S.C.
111 E. Kilbourn Avenue
Milwaukee, WI 53202
Telecopier: (414) 276-9369
Attention: Erich Mildenberg
If to a Shareholder, to the address or telecopy number set forth for
such Shareholder on the signature page hereof:
B-3
<PAGE> 117
With a copy to:
Boardman, Suhr, Curry & Field, S.C.
1 South Pinkney Street
P. O. Box 927
Madison, WI 53701-0927
Telecopier: (608) 283-1709
Attention: John E. Knight
9. Miscellaneous.
(a) This Agreement shall be deemed a contract made under, and
for all purposes shall be construed in accordance with, the laws of the State of
Wisconsin, without reference to its conflicts of law principles.
(b) If any provision of this Agreement or the application of
such provision to any person or circumstances shall be held invalid or
unenforceable by a court of competent jurisdiction, this Agreement shall be
construed with the invalid or unenforceable provision deleted and the remainder
of this Agreement shall not be affected.
(c) This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
(d) All Section headings herein are for convenience of
reference only and are not part of this Agreement, and no construction or
reference shall be derived therefrom.
(e) In the event any Shareholder acquires any additional
Shares during the term of this Agreement, then such Shareholder agrees that the
provisions of this Agreement shall apply to such additional Shares.
(f) This Agreement shall be binding upon and inure to the
benefit of Merchants, Merger Corp. and their successors, and each Shareholder,
and Shareholder's spouse if the shares are jointly held and their respective
executors, personal representatives, administrators, heirs, legatees, guardians
and other legal representatives.
B-4
<PAGE> 118
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
<TABLE>
<S><C>
MERCHANTS MERGER CORP. MERCHANTS AND MANUFACTURERS
BANCORPORATION, INC.
/s/ Michael Murry /s/ Michael Murry
----------------------------------------- -------------------------------------------
By: Michael Murry By: Michael Murry
Its: Chairman Its: Chairman
SHAREHOLDERS:
/s/ Don E. Baker /s/ Michael T. Judge/Patricia J. Judge
----------------------------------------- -------------------------------------------
Name: Don E. Baker Name: Michael T. Judge/Patricia J. Judge
Address: 153 W. Highland Drive Address: 4511 Wyandot Tr.
Oconto Falls, WI 54154 Green Bay, WI 54313
/s/ Donald Bartels/Theodore Bartels /s/ Richard Pamperin/Patricia Pamperin
----------------------------------------- -------------------------------------------
Name: Donald Bartels/Theodore Bartels Name: Richard Pamperin/Patricia Pamperin
Address: 17097 Clubhouse Lane Address: 406 Water Street
Lakewood, WI 54138 Marion, WI 54950
/s/ Thomas C. Ebenreiter /s/ Donald Peterson/Shirley Peterson
----------------------------------------- -------------------------------------------
Name: Thomas C. Ebenreiter Name: Donald Peterson/Shirley Peterson
Address: 321 Orchard Street Address: 217 Grove Street
Gillett, WI 54124 Oconto Falls, WI 54154
/s/ Rodney T. Goodell /s/ Everett Yoap/Jacquelyn Yoap
----------------------------------------- -------------------------------------------
Name: Rodney T. Goodell Name: Everett Yoap/Jacquelyn Yoap
Address: 7233 Cty. I Address: W6748 Cty. B
Oconto Falls, WI 54154 Pound, WI 54161
/s/ James & Deborah Sharpe Rev. Tr. /s/ Everett Yoap/Janice Dittman
----------------------------------------- -------------------------------------------
Name: James Sharpe Trustee Name: Everett Yoap/Janice Dittman
Deborah Sharpe Trustee Address: W6748 Cty. B
100 E. Highland Drive Pound, WI 54161
Oconto Falls, WI 54154
Oconto Falls Insurance Center
/s/ Michael M. Staszak
-------------------------------------------
Name: Michael Staszak, Chairman
Address: 113 N. Main
Oconto Falls, WI 54154
/s/ Michael M. Staszak
-------------------------------------------
Name: Michael Staszak
Address: 113 N. Main
Oconto Falls, WI 54154
</TABLE>
B-5
<PAGE> 119
EXHIBIT A
<TABLE>
<CAPTION>
Shareholder Name Number of Shares Owned
---------------- ----------------------
<S> <C>
1. Don E. Baker 50
2. Donald & Theodore Bartels 1,200
3. Thomas C. Ebenreiter 4,420
4. Rodney T. Goodell 8,000
5. Michael & Patricia Judge 150
6. Richard & Patricia Pamperin 4,074
7. Donald & Shirley Peterson 1,840
8. James & Deborah Sharpe - Rev. Trust 1,400
9. Michael M. Staszak:
1. Michael M. Staszak 1,550
2. Oconto Falls Insurance Center 3,961
10. Everett Yoap:
1. Everett & Jacquelyn Yoap 2,340
2. Everett Yoap or Janice Dittman 1,200
------
Total Shares 30,185
</TABLE>
B-6
<PAGE> 120
EXHIBIT C
OPINION OF MARSHALL FINANCIAL CONSULTING, LLC
<PAGE> 121
EXHIBIT C
October 31, 2000
Board of Directors
CBOC, Inc.
500 Cherry Avenue
Oconto Falls, WI 54154
Gentlemen:
CBOC, Inc. ("CBOC") will enter into an Agreement and Plan of Merger (the
"Agreement") with Merchants and Manufacturers Bancorporation, Inc.
("Merchants"). Pursuant to the Agreement, at the Effective Time (as defined in
the Agreement), CBOC shall be merged with and into a wholly owned subsidiary of
Merchants and such subsidiary shall continue as the surviving corporation (the
"Merger").
Pursuant to the Agreement, each share of common stock of CBOC issued and
outstanding immediately prior to the Effective Time (as defined in the
Agreement) shall be converted into the right to receive between 4.701 shares and
5.746 shares of Merchants Common Stock (the "Consideration") provided, however,
that if the Daily Average Price (as defined in the Agreement) is less than $28
per share or greater than $42 per share, then Merchants and CBOC will make a
good faith effort to promptly renegotiate the ratio at which Merchants common
stock would be exchanged for CBOC common stock.
You have requested our opinion as to the fairness. from a financial point of
view, of the Consideration to the holders of CBOC's common stock.
Marshall Financial Consulting LLC ("Marshall"), as part of its investment
banking business, is engaged in the evaluation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements, and valuations for estate, corporate
and other purposes.
In conducting our investigation and analysis and arriving at our opinion herein,
we have reviewed such information and taken into account such financial and
economic factors, as we have deemed relevant under the circumstances. In that
connection, we have, among other things: (i) reviewed certain internal
information, primarily financial in nature, including projections, concerning
the business and operations of CBOC and Merchants furnished to us for purposes
of our analysis, as well as publicly available information including but not
limited to CBOC's and Merchants' recent filings with the regulatory authorities;
(ii) reviewed a draft of the Agreement; (iii) compared the historical market
prices and trading activity of Merchants' Common Stock with those of certain
other publicly traded companies we deemed relevant; (iv) compared the financial
position and operating results of CBOC and Merchants with those of other
publicly
C-1
<PAGE> 122
CBOC Bancorp, Inc.
October , 2000
Page 2
traded companies we deemed relevant; (v) compared the proposed financial terms
of the Merger with the financial terms of certain other business combinations
involving banking institutions we deemed relevant; and (vi) reviewed certain
potential pro forma effects of the Merger on Merchants. We have held discussions
with members of CBOC's and Merchants' respective senior management concerning
CBOC's and Merchants' historical and current financial condition and operating
results, as well as the future prospects of CBOC and Merchants, respectively.
Marshall was requested to, and did, solicit third party indications of interest
in acquiring all of CBOC. We have also considered such other information,
financial studies, analysis and investigations and financial, economic and
market criteria which we deemed relevant for the preparation of this opinion.
In arriving at our opinion, we have assumed and relied upon the accuracy and
completeness of all of the financial and other information that was publicly
available or provided to us by or on behalf of CBOC and Merchants and have not
been engaged to independently verify any such information. We have assumed, with
your consent, (i) that all material assets and liabilities (contingent or
otherwise, known or unknown) of CBOC and Merchants are as set forth in their
respective financial statements; (ii) the Merger will be accounted for under the
pooling of interests method of accounting, (iii) the Merger will be consummated
in accordance with the terms of the Agreement without any amendment thereto and
without waiver of any condition: (iv) the prospective cost savings and revenue
enhancements contemplated by management of both companies following the Merger
will be realized; and (v) all shareholder and required regulatory approvals will
be obtained in a timely manner. We have also assumed that the financial
forecasts examined by us were reasonably prepared on bases reflecting the best
available estimates and good faith judgments of CBOC's and Merchants'
respective senior management as to future performance of CBOC and Merchants,
respectively. In conducting our review, we have not undertaken nor obtained an
independent evaluation or appraisal of any of the assets or liabilities
(contingent or otherwise) of CBOC and Merchants nor have we made a physical
inspection of the properties or facilities of CBOC or Merchants. Our opinion
necessarily is based upon economic, monetary and market conditions as they exist
and can be evaluated on the date hereof, and does not predict or take into
account any changes which may occur, or information which may become available,
after the date hereof. Furthermore, we express no opinion as to the price or
trading range at which Merchants' common stock will trade following the date
hereof.
Our opinion has been prepared at the request and for the information of the
Board of Directors of CBOC, and shall not be used for any other purpose or
disclosed to any other party without the prior written consent of Marshall.
This opinion does not address the relative merits of the Merger and any other
potential transactions or business strategies considered by CBOC's Board
of Directors, and does not constitute a recommendation to any shareholder of
CBOC as to how any such shareholder should vote with respect to the Merger.
Marshall will receive a fee for rendering this opinion.
C-2
<PAGE> 123
CBOC Bancorp, Inc.
October , 2000
Page 3
Based upon and subject to the foregoing, we are of the opinion that, as of the
date hereof, the Consideration is fair, from a financial point of view, to the
holders of CBOC common stock.
Very truly yours,
MARSHALL FINANCIAL CONSULTING LLC
Robert Marshall Leonhardt Bernard E. Adee
Managing Director Senior Vice President
RML:csh
C-3
<PAGE> 124
EXHIBIT D
SUBCHAPTER XIII OF WISCONSIN BUSINESS CORPORATION LAW
<PAGE> 125
EXHIBIT D
SUBCHAPTER XIII DISSENTERS' RIGHTS
180.1301 DEFINITIONS.
In Sections 180.1301 TO 180.1331:
(1) "Beneficial shareholder" means a person who is a beneficial owner
of shares held by a nominee as the shareholder.
(1m) "Business combination" has the meaning given in Section 180.1130
(3).
(2) "Corporation" means the issuer corporation or, if the corporate
action giving rise to dissenters' rights under Section 180.1302 is a merger or
share exchange that has been effectuated, the surviving domestic corporation or
foreign corporation of the merger or the acquiring domestic corporation or
foreign corporation of the share exchange.
(3) "Dissenter" means a shareholder or beneficial shareholder who is
entitled to dissent from corporate action under Section 180.1302 and who
exercises that right when and in the manner required by Sections 180.1320 to
180.1328.
(4) "Fair value", with respect to a dissenter's shares other than in a
business combination, means the value of the shares immediately before the
effectuation of the corporate action to which the dissenter objects, excluding
any appreciation or depreciation in anticipation of the corporate action unless
exclusion would be inequitable. "Fair value", with respect to a dissenter's
shares in a business combination, means market value, as defined in Section
180.1130 (9)(a) 1. to 4.
(5) "Interest" means interest from the effectuation date of the
corporate action until the date of payment, at the average rate currently paid
by the corporation on its principal bank loans or, if none, at a rate that is
fair and equitable under all of the circumstances.
(6) "Issuer corporation" means a domestic corporation that is the
issuer of the shares held by a dissenter before the corporate action.
History: 1989 a. 303; 1991 a. 16.
180.1302 RIGHT TO DISSENT.
(1) Except as provided in sub. (4) and Section 180.1008 (3), a
shareholder or beneficial shareholder may dissent from, and obtain payment of
the fair value of his or her shares in the event of, any of the following
corporate actions:
(a) Consummation of a plan of merger to which the issuer corporation is
a party if any of the following applies:
1. Shareholder approval is required for the merger by Section 180.1103
or by the articles of incorporation.
2. The issuer corporation is a subsidiary that is merged with its
parent under Section 180.1104.
(b) Consummation of a plan of share exchange if the issuer
corporation's shares will be acquired, and the shareholder or the shareholder
holding shares on behalf of the beneficial shareholder is entitled to vote on
the plan.
D-1
<PAGE> 126
(c) Consummation of a sale or exchange of all, or substantially all, of the
property of the issuer corporation other than in the usual and regular course of
business, including a sale in dissolution, but not including any of the
following.
1. A sale pursuant to court order.
2. A sale for cash pursuant to a plan by which all or substantially all
of the net proceeds of the sale will be distributed to the shareholders within
one year after the date of sale.
(d) Except as provided in sub. (2), any other corporate action taken
pursuant to a shareholder vote to the extent that the articles of incorporation,
bylaws or a resolution of the board of directors provides that the voting or
nonvoting shareholder or beneficial shareholder may dissent and obtain payment
for his or her shares.
(2) Except as provided in sub. (4) and Section 180.1008 (3), the
articles of incorporation may allow a shareholder or beneficial shareholder to
dissent from an amendment of the articles of incorporation and obtain payment of
the fair value of his or her shares if the amendment materially and adversely
affects rights in respect of a dissenter's share because it does any of the
following:
(a) Alters or abolishes a preferential right of the shares.
(b) Creates, alters or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares.
(c) Alters or abolishes a preemptive right of the holder of shares to
acquire shares or other securities.
(d) Excludes or limits the right of the shares to vote on any matter or
to cumulate votes, other than a limitation by dilution through issuance of
shares or other securities with similar voting rights.
(e) Reduces the number of shares owned by the shareholder or beneficial
shareholder to a fraction of a share if the fractional share so created is to
be acquired for cash under Section 180.0604.
(3) Notwithstanding sub. (1) (a) to (c), if the issuer corporation is a
statutory close corporation under Sections 180.1801 to 180.1837, a shareholder
of the statutory close corporation may dissent from a corporate action and
obtain payment of the fair value of his or her shares, to the extent permitted
under sub. (1)(d) or (2) or Section 180.1803, 180.1813 (1)(d) or (2)(b),
180.1815 (3) or 180.1829(1)(c).
(4) Except in a business combination or unless the articles of
incorporation provide otherwise, subs. (1) and (2) do not apply to the holders
of shares of any class or series if the shares of the class or series are
registered on a national securities exchange or quoted on the national
association of securities dealers, inc., automated quotations system on the
record date fixed to determine the shareholders entitled to notice of a
shareholders meeting at which shareholders are to vote on the proposed corporate
action.
(5) Except as provided in Section 180.1833, a shareholder or beneficial
shareholder entitled to dissent and obtain payment for his or her shares under
Sections 180.1301 to 180.1331 may not challenge the corporate action creating
his or her entitlement unless the action is unlawful or fraudulent with respect
to the shareholder, beneficial shareholder or issuer corporation.
History: 1989 a. 303; 1991 a. 16.
D-2
<PAGE> 127
180.1303 DISSENT BY SHAREHOLDERS AND BENEFICIAL SHAREHOLDERS.
(1) A shareholder may assert dissenters' rights as to fewer than all of
the shares registered in his or her name only if the shareholder dissents with
respect to all shares beneficially owned by any one person and notifies the
corporation in writing of the name and address of each person on whose behalf he
or she asserts dissenters' rights. The rights of a shareholder who under this
subsection asserts dissenters' rights as to fewer than all of the shares
registered in his or her name are determined as if the shares as to which he or
she dissents and his or her other shares were registered in the names of
different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares
held on his or her behalf only if the beneficial shareholder does all of the
following:
(a) Submits to the corporation the shareholder's written consent to the
dissent not later than the time that the beneficial shareholder asserts
dissenters' rights.
(b) Submits the consent under par. (a) with respect to all shares of
which he or she is the beneficial shareholder.
History; 1989 a. 303.
180.1320 NOTICE OF DISSENTERS' RIGHTS.
(1) If proposed corporate action creating dissenters' rights under
Section 180.1302 is submitted to a vote at a shareholders' meeting, the meeting
notice shall state that shareholders and beneficial shareholders are or may be
entitled to assert dissenters' rights under Sections 180.1301 to 180.1331 and
shall be accompanied by a copy of those sections.
(2) If corporate action creating dissenters' rights under Section
180.1302 is authorized without a vote of shareholders, the corporation shall
notify, in writing and in accordance with Sections 180.0141, all shareholders
entitled to assert dissenters' rights that the action was authorized and send
them the dissenters' notice described in Section 180.1322.
History: 1989 a. 303.
180.1321 NOTICE OF INTENT TO DEMAND PAYMENT.
(1) If proposed corporate action creating dissenters' rights under
Section 180.1302 is submitted to a vote at a shareholders' meeting, a
shareholder or beneficial shareholder who wishes to assert dissenters' rights
shall do all of the following:
(a) Deliver to the issuer corporation before the vote is taken written
notice that complies with Section 180.0141 of the shareholder's or beneficial
shareholder's intent to demand payment for his or her shares if the proposed
action is effectuated.
(b) Not vote his or her shares in favor of the proposed action.
(2) A shareholder or beneficial shareholder who fails to satisfy sub.
(1) is not entitled to payment for his or her shares under Sections 180.1301 to
180.1331.
History: 1989 a. 303.
180.1322 DISSENTERS' NOTICE.
D-3
<PAGE> 128
(1) If proposed corporate action creating dissenters' rights under
Section 180.1302 is authorized at a shareholders' meeting, the corporation shall
deliver a written dissenters' notice to all shareholders and beneficial
shareholders who satisfied Section 180.1321.
(2) The dissenters' notice shall be sent no later than 10 days after
the corporate action is authorized at a shareholders' meeting or without a vote
of shareholders, whichever is applicable. The dissenters' notice shall comply
with Section 180.0141 and shall include or have attached all of the following:
(a) A statement indicating where the shareholder or beneficial
shareholder must send the payment demand and where and when certificates for
certificated shares must be deposited.
(b) For holders of uncertificated shares, an explanation of the extent
to which transfer of the shares will be restricted after the payment demand is
received.
(c) A form for demanding payment that includes the date of the first
announcement to news media or to shareholders of the terms of the proposed
corporate action and that requires the shareholder or beneficial shareholder
asserting dissenters' rights to certify whether he or she acquired beneficial
ownership of the shares before that date.
(d) A date by which the corporation must receive the payment demand,
which may not be fewer than 30 days nor more than 60 days after the date on
which the dissenters' notice is delivered.
(e) A copy of sections 180.1301 TO 180.1331.
History: 1989 a. 303.
180.1323 DUTY TO DEMAND PAYMENT.
(1) A shareholder or beneficial shareholder who is sent a dissenters'
notice described in Sections 180.1322, or a beneficial shareholder whose shares
are held by a nominee who is sent a dissenters' notice described in section
180.1322, must demand payment in writing and certify whether he or she acquired
beneficial ownership of the shares before the date specified in the dissenters'
notice under Sections 180.1322 (2)(c). A shareholder or beneficial shareholder
with certificated shares must also deposit his or her certificates in accordance
with the terms of the notice.
(2) A shareholder or beneficial shareholder with certificated shares
who demands payment and deposits his or her share certificates under sub. (1)
retains all other rights of a shareholder or beneficial shareholder until these
rights are canceled or modified by the effectuation of the corporate action.
(3) A shareholder or beneficial shareholder with certificated or
uncertificated shares who does not demand payment by the date set in the
dissenters' notice, or a shareholder or beneficial shareholder with certificated
shares who does not deposit his or her share certificates where required and
by the date set in the dissenters' notice, is not entitled to payment for his or
her shares under Sections 180.1301 to 180.1331.
History: 1999 a. 303.
180.1324 RESTRICTIONS ON UNCERTIFICATED SHARES.
D-4
<PAGE> 129
(1) The issuer corporation may restrict the transfer of uncertificated
shares from the date that the demand for payment for those shares is received
until the corporate action is effectuated or the restrictions released under
Section 180.1326.
(2) The shareholder or beneficial shareholder who asserts dissenter's
rights as to uncertificated shares retains all of the rights of a shareholder or
beneficial shareholder, other than those restricted under sub (1),until these
rights are canceled or modified by the effectuation of the corporate action.
History: 1989 a. 303.
180.1325 PAYMENT.
(1) Except as provided in Section 180.1327, as soon as the corporate
action is effectuated or upon receipt of a payment demand, whichever is later,
the corporation shall pay each shareholder or beneficial shareholder who has
complied with Section 180.1323 the amount that the corporation estimates to be
the fair value of his or her shares, plus accrued interest.
(2) The payment shall be accompanied by all of the following:
(a) The corporation's latest available financial statements, audited
and including footnote disclosure if available, but including not less than a
balance sheet as of the end of a fiscal year ending not more than 16 months
before the date of payment, an income statement for that year, a statement of
changes in shareholders', equity for that year and the latest available interim
financial statements, if any.
(b) A statement of the corporation's estimate of the fair value of the
shares.
(c) An explanation of how the interest was calculated.
(d) A statement of the dissenter's right to demand payment under
Section 180. 1328 if the dissenter is dissatisfied with the payment.
(e) A copy of Sections 180.1301 to 180.1331.
History: 1989 a. 303.
180.1326 FAILURE TO TAKE ACTION.
(1) If an issuer corporation does not effectuate the corporate action
within 60 days after the date set under Section 180.1322 for demanding payment,
the issuer corporation shall return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares.
(2) If after returning deposited certificates and releasing transfer
restrictions, the issuer corporation effectuates the corporate action, the
corporation shall deliver a new dissenters' notice under Section 180.1322 and
repeat the payment demand procedure.
History: 1989 a. 303.
180.1327 AFTER-ACQUIRED SHARES.
D-5
<PAGE> 130
(1) A corporation may elect to withhold payment required by Section
180.1325 from a dissenter unless the dissenter was the beneficial owner of the
shares before the date specified in the dissenters' notice under Section
180-1322(2)(c) as the date of the first announcement to news media or to
shareholders of the terms of the proposed corporate action.
(2) To the extent that the corporation elects to withhold payment under
sub. (1) after effectuating the corporate action, it shall estimate the fair
value of the shares, plus accrued interest, and shall pay this amount to each
dissenter who agrees to accept it in full satisfaction of his or her demand. The
corporation shall send with its offer a statement of its estimate of the fair
value of the shares, an explanation of how the interest was calculated, and a
statement of the dissenter's right to demand payment under Section 180.1328 if
the dissenter is dissatisfied with the offer.
History: 1989 a. 303.
180.1328 PROCEDURE IF DISSENTER DISSATISFIED WITH PAYMENT OR OFFER.
(1) A dissenter may, in the manner provided in sub. (2), notify the
corporation of the dissenter's estimate of the fair value of his or her shares
and amount of interest due, and demand payment of his or her estimate, less any
payment received under Section 180.1325, or reject the offer under Section
180.1327 and demand payment of the fair value of his or her shares and interest
due, if any of the following applies:
(a) The dissenter believes that the amount paid under Section 180.1325 or
offered under Section 180.1327 is less than the fair value of his or her shares
or that the interest due is incorrectly calculated.
(b) The corporation fails to make payment under Section 180-1325 within 60
days after the date set under Section 180.1322 for demanding payment.
(c) The issuer corporation, having failed to effectuate the corporate
action, does not return the deposited certificates or release the transfer
restrictions imposed on uncertificated shares within 60 days after the date set
under Section 180.1322 for demanding payment.
(2) A dissenter waives his or her right to demand payment under this
section unless the dissenter notifies the corporation of his or her demand
under sub. (1) in writing within 30 days after the corporation made or offered
payment for his or her shares. The notice shall comply with Section 180.0141.
History: 1989 a. 303.
180.1330 COURT ACTION.
(1) If a demand for payment under Section 180.1328 remains unsettled, the
corporation shall bring a special proceeding within 60 days after receiving the
payment demand under Section 180.1328 and petition the court to determine the
fair value of the shares and accrued interest. If the corporation does not bring
the special proceeding within the 60-day period, it shall pay each dissenter
whose demand remains unsettled the amount demanded.
(2) The corporation shall bring the special proceeding in the circuit court
for the county where its principal office or, if none in this state, its
registered office is located. If the corporation is a foreign corporation
without a registered office in this state, it shall bring the special
proceeding in the county in this state in which was located the registered
office of the issuer corporation that merged with or whose shares were acquired
by the foreign corporation.
(3) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the special proceeding.
Each party to the special proceeding shall be served with a copy of the
petition as provided in Section 801.14.
D-6
<PAGE> 131
(4) The jurisdiction of the court in which the special proceeding is
brought under sub. (2) is plenary and exclusive. The court may appoint one or
more persons as appraisers to receive evidence and recommend decision on the
question of fair value. An appraiser has the power described in the
order appointing him or her or in any amendment to the order. The dissenters are
entitled to the same discovery rights as parties in other civil proceedings.
(5) Each dissenter made a party to the special proceeding is entitled to
judgment for any of the following:
(a) The amount, if any, by which the court finds the fair value of his or
her shares, plus interest, exceeds the amount paid by the corporation.
(b) The fair value, plus accrued interest, of his or her shares acquired on
or after the date specified in the dissenter's notice under Section
180.1322(2)(c), for which the corporation elected to withhold payment under
Section 180.1327.
History: 1989 a. 303.
180.1331 COURT COSTS AND COUNSEL FEES.
(1) (a) Notwithstanding Sections 814.01 to 814.04, the court in a special
proceeding brought under Section 180.1330 shall determine all costs of the
proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court and shall assess the costs against the corporation,
except as provided in par.(b).
(b) Notwithstanding Sections 814.01 and 814.04, the court may assess costs
against all or some of the dissenters, in amounts that the court finds to be
equitable, to the extent that the court finds the dissenters acted arbitrarily,
vexatiously or not in good faith in demanding payment under Section 180.1328.
(2) The parties shall bear their own expenses of the proceeding, except
that notwithstanding Sections 814.01 to 814.04, the court may also assess the
fees and expenses of counsel and experts for the respective parties, in amounts
that the court finds to be equitable, as follows:
(a) Against the corporation and in favor of any dissenter if the court
finds that the corporation did not substantially comply with Sections 180.1320
to 180.1328.
(b) Against the corporation or against a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses
are assessed acted arbitrarily, vexatiously or not in good faith with respect to
the rights provided by this chapter.
(3) Notwithstanding Sections 814.01 to 814.04, if the court finds that the
services of counsel and experts for any dissenter were of substantial benefit to
other dissenters similarly situated, the court may award to these counsel and
experts reasonable fees to be paid out of the amounts awarded the dissenters who
were benefited.
History: 1989 a. 303
D-7
<PAGE> 132
EXHIBIT E
CBOC, INC. AND SUBSIDIARY
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SELECTED FINANCIAL DATA
(AMOUNTS IN THOUSANDS EXCEPT SHARE AND RATIO DATA)
<TABLE>
<CAPTION>
As of and for
the
six-months ended As of and for the year ended
June 30, December 31,
--------------------------------------------------------------------------------------
2000 1999 1999 1998 1997
--------------------------------------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Income statement data:
Interest income $ 2,008 $ 1,828 $ 3,777 $ 3,616 $ 3,354
Interest expense 1,060 911 1,864 1,861 1,661
--------------------------------------------------------------------------------------
Net interest income 947 917 1,913 1,755 1,694
Provision for loan losses 18 0 18 34 29
Other income 195 164 317 382 326
Other expense 700 675 1,327 1,274 1,197
--------------------------------------------------------------------------------------
Income before income taxes 424 406 885 829 794
Income tax expense 102 94 224 198 229
--------------------------------------------------------------------------------------
Net income $ 322 $ 312 $ 661 $ 631 $ 565
======================================================================================
Per common share data:
Net income per share
Basic $ 4.03 $ 3.90 $ 8.26 $ 7.89 $ 7.06
Diluted 4.03 3.90 8.26 7.89 7.06
Weighted average shares outstanding
Basic 80,000 80,000 80,000 80,000 80,000
Diluted 80,000 80,000 80,000 80,000 80,000
Cash dividends per share $ 1.50 $ 1.50 $ 3.00 $ 2.50 $ 2.00
Balance sheet data:
Total assets $ 56,693 $ 55,276 $ 58,885 $ 53,316 $ 48,906
Loans 36,050 31,372 32,564 32,292 28,968
Allowance for loan losses 482 450 465 468 435
Total deposits 49,686 49,373 52,892 47,740 43,607
Stockholders' equity 5,453 5,164 5,309 5,144 4,663
</TABLE>
CHANGES IN FINANCIAL CONDITION
Total Company assets at year-end 1999 were $58.9 million. During 1999, assets
increased by $5.6 million or 10.4% from December 31, 1998. The majority of this
increase was in investment securities, which increased by $6.5 million or 51.6%
to $19.2 million. The investment security growth experienced was primarily due
to purchases of US Agency securities which offer variable rates and the
guarantee of the US Government. The purchases of these securities were funded by
retail deposit growth.
Total loans increased $272,000 or 0.84% from December 31, 1998 to December 31,
1999. The majority of the increase in loan balances were in residential and
commercial loans located in the Company's primary market area.
Total deposits increased from $47.7 million at December 31, 1998 to $52.9
million at December 31, 1999, an increase of $5.1 million, or 10.8%. All of the
deposit growth occurred within the Company's primary market area. The majority
of the deposit increase was in additional time deposits as well as savings and
money market accounts.
Stockholders' equity increased by $165,000 million or 3.2% in 1999. This
increase resulted from Company net income of $661,000 million. The increase was
partially offset by a $240,000 dividend paid to shareholders during the period
and a $256,000 reduction in the value of securities available-for-sale.
E-1
<PAGE> 133
During the period from December 31, 1999 to June 30, 2000 total assets decreased
$2.2 million or 3.7%, from $58.9 million to $56.7 million; the majority of the
decline was in federal funds sold, which decreased $3.2 million and investment
securities which decreased $1.1 million. Total loans increased by $3.2 million
during the six-month period ended June 30, 2000.
Total deposits also decreased by $3.2 million the period from December 31, 1999
to June 30, 2000. The majority of the decline can be attributed to reductions in
money market accounts.
Stockholders' equity increased $144,000 from December 31, 1999 to June 30, 2000.
The increase resulted from $322,000 of net income. The increase in income was
partially offset by a $120,000 dividend paid to shareholders during the period
and the remainder from the decline in the market value of securities categorized
as available-for-sale.
RESULTS OF OPERATIONS FOR THE
SIX MONTHS ENDED JUNE 30, 2000 COMPARED WITH THE
SIX MONTHS ENDED JUNE 30, 1999
Net income for the six-month period ended June 30, 2000 was $322,000 compared to
$312,000 for the six months ended June 30, 1999, an increase of $10,000 or 3.2%.
Basic and diluted net income per share was $4.03 and $3.90 for the six-month
periods ended June 30, 2000 and 1999, respectively.
Net interest income increased by $30,000, or 3.2%, to $929,000. A decreased net
interest margin from 3.63% for the six-month period ending June 30, 1999 to
3.49% for the six-month period ended June 30, 2000 was offset by a $1.7 million
increase in average earning assets during the period.
The balance in the allowance for loan losses is based on management's evaluation
of the loan portfolio. Management determines the adequacy of the allowance for
loan losses based on past loan loss experience, current economic conditions,
composition of the loan portfolio, and the potential for future loss. During the
six month period ended June 30, 2000, there was $19,000 less in net charge-offs
compared with the same period in 1999. Due to increases in the loan portfolio
the provision for loan losses grew by $18,000 for the six-month period ended
June 30, 2000. Management believes the allowance is adequate to absorb any
current or future losses in the loan portfolio.
Other income increased by $30,000, or 18.5% for the first six months of 2000
compared to the first six months of 1999. This change was due to increases in
service charges on deposit accounts and increased comissions on credit life
insurance.
Operating expenses increased from $675,000 to $700,000, an increase of $25,000,
or 3.7% for the first six months of 2000 compared to the same period in 1999.
Reductions in occupancy expense and other expenses were offset by a $29,000
increase in salary and related benefit costs.
Income tax expense increased by $7,000 in the first six months of 2000 compared
with the same period in 1999 due to an increase in the before tax income.
RESULTS OF OPERATIONS FOR THE
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
Net income in 1999 totaled $661,000 or an increase of $30,000 or 4.6% over the
$631,000 earned in 1998. Net income in 1998 was $67,000 or 11.8% over the 1997
level of $565,000. On a per share basis, basic and diluted net income was $8.26,
$7.89 and $7.06 for 1999, 1998 and 1997, respectively. The growth in net income
was due largely to the growth in assets of the Company's subsidiary bank,
increased fee income, and improved operating efficiencies. At December 31, 1999,
1998 and 1997, the total assets per employee were approximately $2.8 million,
$2.5 million and $2.4 million, respectively.
E-2
<PAGE> 134
Net interest income increased $158,000, or 9.0% to $1.9 million in 1999 compared
to $1.7 million in 1998. The 1998 total represented an increase of $61,000, or
3.6% compared to 1997. The net interest margin for 1999 was 3.65% compared with
3.58% in 1998 and 3.88% in 1997. The margin has remained relatively constant
even though competitive pressures and reduced market interest rates have
produced lower loan rates as well as higher costs of retaining deposits. As the
yield on earnings assets has declined from 8.10% in 1997, 7.81% in 1998 and
7.48% in 1999, the cost of funding those earning assets has decreased as well
from 4.22% in 1997, 4.23% in 1998 and 3.83% in 1999. The level of earning assets
increased by $4.8 million from 1997 to 1998 and by $4.2 million from 1998 to
1999.
The provision for loan losses was $18,000 for 1999, representing a decrease of
$16,000 or 46.7% over the $34,000 of loss provision charged to operations in
1998. The 1998 provision was $5,000 more than the $29,000 provision incurred in
1997. The increase in the 1998 provision was principally a result of higher
charge-offs recorded in the period. Due to the increase in loans outstanding,
the percentage of the allowance for loan losses to total gross loans outstanding
decreased from 1.57% to 1.53% from 1997 to 1998 and from 1.53% to 1.49% from
1998 to 1999. Even though the percentage of the loan loss allowance ratio has
been declining management believes the allowance is adequate to absorb any
current or future losses in the loan portfolio.
Other income consists primarily of deposit account service charges, gains on
sales of loans and related fee income. Other income decreased by $65,000 or
17.0% in 1999 compared to 1998 and increased by $56,000 or 17.2% in 1998
compared to 1997. The decrease in 1999 other income can be attributed to a
reduction in secondary market loan fees.
Other expenses increased $53,000 or 4.2% in 1999 compared to a $77,000 or 5.8%
increase in 1998 over 1997 levels. Salary and related benefit expenses increased
by $18,000 or 2.3% in 1999 due to normal pay increases and higher benefit costs.
Similarly, salary and benefits increased by $42,000 or 5.8% from 1997 to 1998.
Occupancy expense decreased $2,000 in 1999 compared to 1998 and increased by
$24,000 or 19.5% in 1998 due partly to additional depreciation associated with
fixed asset expenditures, higher maintenance costs and increased real estate
taxes.
Income tax expense increased by $26,000 or 13.1% from 1998 to 1999 while income
taxes decreased from 1997 to 1998 by $31,000 or 13.5%. The decline in 1998
income taxes can be attributed to the increased balance of tax-exempt
securities. Income before taxes increased each year, from $794,000 in 1997 to
$830,000 in 1998 and to $885,000 in 1999. The effective income tax rate was
25.3%, 23.9% and 28.8% for 1999, 1998 and 1997, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The concept of liquidity comprises the ability of an enterprise to maintain
sufficient cash flow to meet its needs and obligations on a timely basis. Bank
liquidity must be considered in terms of the nature and mix of the institution's
sources and uses of funds. Bank liquidity is provided from several asset
categories. The asset side of the balance sheet provides liquidity through
maturities of investment securities and repayment and pay-offs of loans. Cash
and amounts due from correspondent banks, interest bearing deposits in banks,
investment securities available for sale and Federal Funds sold are primarily
sources of asset liquidity. At December 31, 1999, these categories totaled
approximately $26.2 million; these categories totaled approximately $20.8
million at June 30, 2000. The Company has no significant plans for major capital
expenditures in 2000.
Management believes that, in the current economic environment, the Bank's
liquidity position is adequate. There are no known trends, nor any known
demands, commitments, events or uncertainties that will result or are reasonably
likely to result in a material increase or decrease in the Bank's liquidity.
EFFECTS OF INFLATION
The Company's consolidated financial statements and notes thereto have been
prepared in accordance with generally accepted accounting principles, which
require the measurement of financial position and operating results in terms of
historical dollars without considering the changes in the relative purchasing
power of money over time due to inflation. The impact of inflation is reflected
in the increased cost of the Company's operations. Unlike most industrial
companies, nearly all of the assets and liabilities of the Company are monetary
in nature. As a result, interest rates have a greater impact on the Company's
performance than do the effects of general levels of inflation. Interest rates
do not necessarily move in the same direction or to the same extent as the price
of goods and services.
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<PAGE> 135
REGULATORY CAPITAL REQUIREMENTS
The Federal Reserve Board, the Company's primary regulator, has adopted
risk-based capital regulations, which require the Company to maintain a
risk-based capital/ratio of at least 8.0%. The Company's capital ratios and
those of the Bank exceed the minimum ratios required by their respective
regulators. The FDIC and the State of Wisconsin Department of Financial
Institutions examine and regulate the Bank.
Management is not aware of any pending regulatory requirements or
recommendations that, if enacted, would have a material adverse impact on the
Company's capital, liquidity, or results of operations.
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
For each period ended shown, the allowance for loan losses has been allocated to
the following categories in amounts deemed reasonably necessary to provide for
the possibility of losses being incurred within each category of loans at the
dates indicated.
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998 December 31, 1997
(Unaudited) (Unaudited)
Percent of Percent of Percent of
loans in loans in loans in
Allowance each Allowance each Allowance each
for loan category to for loan category to for loan category to
Balance at end of period applicable to: losses total loans losses total loans losses total loans
--------------------------------------------------------------------------------- --------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Commercial and commercial real estate
loans $146 31.5% $114 24.4% $ 86 19.8%
Real estate -- mortgage 229 49.2 272 58.1 278 64.0
Installment and other loans 90 19.3 82 17.5 71 16.2
------------------------------------------------------------------------------
$465 100.0% $468 100.0% $435 100.0%
==============================================================================
</TABLE>
SUMMARY OF LOAN LOSS EXPERIENCE
<TABLE>
<CAPTION>
As of and for the year ended December 31,
1998 1997
1999 Unaudited Unaudited
---------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
Loan balance at year end $31,181 $30,588 $27,742
---------------------------------------------------------
Balance of allowance for loan losses at beginning of period 468 435 405
Loans charged off:
Commercial loans -- -- --
Real estate -- mortgage loans 8 -- --
Installments and other loans 15 2 4
---------------------------------------------------------
Total loans charged off 23 2 4
Recoveries of loans previously charged off:
Commercial loans -- -- --
Real estate -- mortgage loans -- -- --
Installments and other loans 2 1 4
---------------------------------------------------------
Total recoveries 2 1 4
Net loans charged off 21 1 --
Additions to allowance for loan losses charged to operating
expense 18 34 30
---------------------------------------------------------
Balance of allowance for loan losses at end of period $ 465 $ 468 $ 435
=========================================================
Ratios:
Net charge-offs to loans outstanding at period end 0.07% 0.00% 0.01%
Net charge-offs to total allowance 4.52% 0.21% 0.92%
Allowance to year end gross loans outstanding 1.49% 1.53% 1.57%
</TABLE>
E-4
<PAGE> 136
LOAN COMPOSITION
The following table summarizes the loan composition at the end of each period.
<TABLE>
<CAPTION>
December 31,
1999 1998
Unaudited
----------------------------------
(Dollars in thousands)
<S> <C> <C>
Commercial $10,886 $ 9,776
Agricultural production 3,766 3,418
First mortgage
Residential 7,577 7,865
Commercial and multi-family 3,615 4,440
Construction 264 906
Farmland 2,301 2,152
----------------------------------
Total first mortgage 13,757 15,363
Installment and consumer 3,758 3,215
Other loans 397 520
----------------------------------
32,563 32,292
Less: allowance for loan losses 465 468
----------------------------------
Loans, net $32,099 $31,824
==================================
</TABLE>
LOAN MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES AS OF
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Loan maturities (Dollars in thousands)
After 1
through 5
1 Year or less years After 5 years Total
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial real estate $1,772 $1,843 $ 0 $ 3,615
Commercial 6,267 4,381 237 10,885
---------------------------------------------------------------------
Total $8,039 $6,224 $237 $14,500
=====================================================================
Amount over one year with:
----------------
Fixed rates $6,461
================
Floating or adjustable rates $ 0
================
</TABLE>
PAST DUE AND NONPERFORMING LOANS
The following table reflects as of the period ended the aggregate amounts of
loans past due and nonperforming.
<TABLE>
<CAPTION>
December 31,
1999 1998 1997
Unaudited Unaudited
---------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
Nonaccrual loans $-- $55 $ --
Loans contractually past due over 90 days -- 2 1
Restructured loans -- -- --
---------------------------------------------------
Total $-- $57 $ 1
==================================-================
</TABLE>
If interest on the nonaccrual loans had been accrued, such income would have
approximated $0, $3,000 and $0 for the years ended December 31, 1999, 1998 and
1997.
Loans are normally placed on non-accrual status when they become contractually
past due 90 days or more as to interest or principal payments. Previously
accrued and uncollected interest on such loans is reversed, and income is
recorded only to the extent that interest payments are substantially received in
cash and a determination has been made that the principal balance of the loan is
collectible. If collectibility of the principal is in doubt, payments received
are applied to loan principal. At December 31, 1999, 1998 and 1997 there were no
loans outstanding which were considered to be impaired, as defined in the
Statement of Accounting Standards No. 114 and 118.
E-5
<PAGE> 137
CONSOLIDATED FINANCIAL STATEMENTS
CBOC, Inc. and Subsidiary
Six months ended June 30, 2000 (unaudited) and
year ended December 31, 1999
<PAGE> 138
CBOC, Inc. and Subsidiary
Consolidated Financial Statements
Six months ended June 30, 2000 (unaudited) and
year ended December 31, 1999
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors ..........................................................................1
Consolidated Financial Statements
Consolidated Statements of Financial Condition ..........................................................2
Consolidated Statements of Income .......................................................................3
Consolidated Statements of Stockholders' Equity .........................................................4
Consolidated Statements of Cash Flows ...................................................................5
Notes to Consolidated Financial Statements ..............................................................6
</TABLE>
<PAGE> 139
Report of Independent Auditors
The Board of Directors and Stockholders
CBOC, Inc. and Subsidiary
We have audited the accompanying consolidated statements of financial condition
of CBOC, Inc. and Subsidiary (the Corporation) as of December 31, 1999, and the
related consolidated statements of income, stockholders' equity and cash flows
for the year then ended. These financial statements are the responsibility of
the Corporation's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of CBOC, Inc. and
Subsidiary at December 31, 1999, and the consolidated results of their
operations and their cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States.
By: /s/ Ernst & Young LLP
-----------------------------------
Ernst & Young LLP
August 18, 2000
Milwaukee, Wisconsin
<PAGE> 140
CBOC, Inc. and Subsidiary
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
2000 1999
(Unaudited)
------------------------------------
(Dollars In Thousands)
<S> <C> <C>
ASSETS
Cash and due from banks $ 2,711 $ 3,631
Interest-bearing deposits at other banks - 100
Federal funds sold - 3,247
------------------------------------
Cash and cash equivalents 2,711 6,978
Investment securities available-for-sale at fair value 16,454 17,868
Loans receivable, net 35,568 32,099
Premises and equipment 1,009 1,041
FHLB stock 163 160
Other assets 788 739
------------------------------------
Total assets $56,693 $58,885
====================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $49,686 $52,892
Borrowings 1,262 381
Accrued expenses and other liabilities 291 303
------------------------------------
Total liabilities 51,239 53,576
Stockholders' equity:
Common stock $1.00 par value; 250,000 shares authorized; 80,000 shares
issued; 80,000 shares outstanding 80 80
Additional paid-in capital 1,975 1,975
Net unrealized loss on securities available-for-sale (189) (132)
Retained earnings 3,588 3,386
------------------------------------
Total stockholders' equity 5,454 5,309
------------------------------------
Total liabilities and stockholders' equity $56,693 $58,885
====================================
</TABLE>
See accompanying notes.
<PAGE> 141
CBOC, Inc. and Subsidiary
Consolidated Statements of Income
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30 DECEMBER 31
2000 1999 1999
----------------------------------------------------
(Unaudited)
(Dollars In Thousands,
Except Per Share Amounts)
<S> <C> <C> <C>
Interest income:
Loans, including fees $ 1,476 $ 1,360 $2,782
Investment securities:
Taxable 302 168 320
Exempt from federal income taxes 176 162 453
Other 54 138 222
----------------------------------------------------
Total interest income 2,008 1,828 3,777
Interest expense:
Deposits 1,052 907 1,855
Borrowings 8 4 9
----------------------------------------------------
Total interest expense 1,060 911 1,864
Net interest income 947 917 1,913
Provision for loan losses 18 -- 18
----------------------------------------------------
Net interest income after provision for loan losses 929 917 1,895
Non-interest income:
Service charges on deposits 62 36 77
Service charges on loans 31 43 95
Other 102 85 145
----------------------------------------------------
195 164 317
Non-interest expenses:
Salaries and employee benefits 423 394 787
Premises and equipment 80 81 149
Data processing fees 64 60 122
Other 133 140 269
700 675 1,327
----------------------------------------------------
Income before income taxes 424 406 885
Income taxes 102 94 224
----------------------------------------------------
Net income $ 322 $ 312 $ 661
====================================================
Basic earnings per share $ 4.03 $ 3.90 $ 8.26
====================================================
Dividends per share $ 1.50 $ 1.50 $ 3.00
====================================================
</TABLE>
See accompanying notes.
<PAGE> 142
CBOC, Inc. and Subsidiary
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Common
Stock Unrealized
and Gain (Loss)
Additional on Securities
Paid-in Available-for- Retained
Capital Sale Earnings Total
-------------------------------------------------
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Balance at December 31, 1998 $2,055 $ 124 $2,965 $5,144
Comprehensive income:
Net income - - 661 661
Other comprehensive income --
Change in unrealized loss on securities
available-for-sale, net of deferred income
taxes of $170,499 - (256) - (256)
----------
Total comprehensive income 405
Cash dividends declared -- $3.00 per share - - (240) (240)
-------------------------------------------------
Balance at December 31, 1999 2,055 (132) 3,386 5,309
Comprehensive income (unaudited):
Net income - - 322 322
Other comprehensive income --
Change in unrealized loss on securities available-for-
sale, net of deferred income taxes of $38,252 - (57) - (57)
----------
Total comprehensive income 265
Cash dividends declared -- $3.00 per share (unaudited) - - (120) (120)
-------------------------------------------------
Balance at June 30, 2000 (unaudited) $2,055 $(189) $3,588 $5,454
=================================================
</TABLE>
See accompanying notes.
<PAGE> 143
CBOC, Inc. and Subsidiary
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
2000 1999 1999
(Unaudited)
----------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 322 $ 312 $ 661
Adjustments to reconcile net income to cash provided
by operating activities:
Provision for loan losses 18 -- 18
Provision for depreciation 43 38 77
Provision (benefit) for deferred taxes -- (13) (13)
Net amortization of investment securities premiums
and discounts 3 6 10
Net gain on sale of loans (9) (32) (56)
Mortgage loans originated for sale (525) (3,331) (5,382)
Proceeds from mortgage loans sold 754 3,354 5,316
Decrease (increase) in accrued interest receivable 26 (29) (130)
Increase in accrued interest payable 23 2 6
Other (69) (51) 19
----------------------------------------------------
Net cash provided by operating activities 586 256 526
INVESTING ACTIVITIES
Purchases of securities available-for-sale (2,199) (9,346) (16,188)
Proceeds from redemption and maturities of securities
available-for-sale 3,515 5,941 8,876
Net increase in loans (3,710) 911 (171)
Purchases of premises and equipment (11) (219) (281)
Proceeds from sale of premises -- -- 14
Redemption (purchases) of Federal Home Loan Bank stock (3) (12) (12)
----------------------------------------------------
Net cash used in investing activities (2,408) (2,725) (7,762)
FINANCING ACTIVITIES
Net increase (decrease) in deposits (3,206) 1,634 5,153
Net increase in borrowings 881 335 207
Payments of cash dividends to stockholders (120) (120) (240)
Decrease in federal funds sold 3,247 415 2,479
----------------------------------------------------
Net cash provided by financing activities 802 2,264 7,599
----------------------------------------------------
Increase (decrease) in cash and cash equivalents (1,020) (205) 363
Cash and cash equivalents at beginning of period 3,731 3,368 3,368
----------------------------------------------------
Cash and cash equivalents at end of period $ 2,711 $ 3,163 $ 3,731
====================================================
Supplemental cash flow information and noncash transactions:
Interest paid $ 1,038 $ 908 $ 1,798
Income taxes paid 100 76 189
</TABLE>
<PAGE> 144
CBOC, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Six months ended June 30, 2000 (unaudited) and year ended December 31, 1999
1. ACCOUNTING POLICIES
BUSINESS
CBOC, Inc. and Subsidiary (the Corporation) provides a full range of personal
and commercial financial services to customers through its wholly owned bank
subsidiary, the Community Bank of Oconto County. The Corporation is subject to
competition from other financial institutions. It is also subject to the
regulations of certain federal and state agencies and periodic examinations by
those regulatory agencies.
BASIS OF FINANCIAL STATEMENT PRESENTATION
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles and include the accounts of the
Corporation and its wholly owned subsidiary. All significant intercompany
accounts and transactions have been eliminated.
In preparing the consolidated financial statements in conformity with generally
accepted accounting principles, management is required to make estimates and
assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include amounts due from banks (both interest-bearing
and non-interest-bearing) and federal funds sold.
INVESTMENT SECURITIES
All of the Corporation's investment securities are classified as
available-for-sale and are stated at fair value, with the unrealized gains and
losses, net of tax, reported as a separate component of stockholders' equity.
The amortized cost of debt securities is adjusted for amortization of premiums
and accretion of discounts to maturity. Such amortization is included in
interest income from the related security.
<PAGE> 145
CBOC, Inc. and Subsidiary
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
Interest and dividends are included in interest income from the related
securities. Realized gains and losses and declines in value judged to be
other-than-temporary are included in net securities gains (losses). The cost of
securities sold is based on the specific identification method.
INTEREST AND FEES ON LOANS
Interest on loans is recorded as income when earned. Loans are placed on
non-accrual status, generally recognizing interest as income when received, when
in the opinion of management, the collectibility of principal or interest
becomes doubtful.
ALLOWANCE FOR LOAN LOSSES
A provision for loan losses is made when a loss is probable and can be
reasonably estimated. The provision is based on past experience and on
prevailing market conditions. Management's evaluation of loss considers various
factors including, but not limited to, general economic conditions, loan
portfolio composition and prior loss experience.
The Corporation had no impaired loans in 2000 or 1999.
A substantial portion of the Banks' loans are collateralized by real estate in
Oconto County, Wisconsin. Accordingly, the ultimate collectibility of a
substantial portion of the Banks' loan portfolio and the recovery of a
substantial portion of the carrying amount of real estate owned is susceptible
to changes in market conditions in Oconto County, Wisconsin.
Management believes that the allowance for loan losses is adequate. While
management uses available information to recognize losses, future additions to
the allowance may be necessary based on changes in economic conditions.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost, less accumulated depreciation.
Expenditures for normal repairs and maintenance are charged to operations as
incurred. The cost of premises and equipment is depreciated, using the
straight-line method, over the estimated useful lives of the assets.
<PAGE> 146
CBOC, Inc. and Subsidiary
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
EARNINGS PER SHARE INFORMATION
Earnings per share of common stock have been computed based on common stock
outstanding during each period (80,000 shares).
2. INVESTMENT SECURITIES
The following is a summary of securities:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
--------------------------------------------------------
<S> <C> <C> <C> <C>
At June 30, 2000 (unaudited):
U.S. treasury and other U.S. government
securities $ 6,020 $ 2 $132 $ 5,890
State and political subdivision certificates 8,546 15 151 8,410
Corporate bonds and commercial paper 2,202 -- 48 2,154
--------------------------------------------------------
$ 16,768 $ 17 $331 $ 16,454
========================================================
</TABLE>
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
--------------------------------------------------------
<S> <C> <C> <C> <C>
At December 31, 1999:
Mutual funds $ 101 $ -- $ -- $ 101
U.S. treasury and other U.S. government
securities 7,209 6 84 7,131
State and political subdivision certificates 8,675 21 133 8,563
Corporate bonds and commercial paper 2,103 -- 30 2,073
--------------------------------------------------------
$ 18,088 $ 27 $ 247 $ 17,868
========================================================
</TABLE>
Securities carried at $3,545 (unaudited) and $3,284 at June 30, 2000 and
December 31, 1999, respectively, were pledged principally to secure liabilities
to the Federal Reserve Bank.
<PAGE> 147
CBOC, Inc. and Subsidiary
Notes to Consolidated Financial Statements (continued)
2. INVESTMENT SECURITIES (CONTINUED)
The amortized cost and market value of securities at June 30, 2000 and December
31, 1999, by contractual maturity, are shown below. Expected maturities may
differ from contractual maturities because borrowers may have the right to call
or prepay obligations.
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
-------------------------------------------
<S> <C> <C>
At June 30, 2000 (unaudited):
Due in one year or less $ 1,603 $ 1,604
Due after one year through five years 10,611 10,387
Due after five years through ten years 3,863 3,802
Due after ten years 691 661
-------------------------------------------
$ 16,768 $ 16,454
===========================================
At December 31, 1999:
Due in one year or less $ 2,576 $ 2,575
Due after one year through five years 10,993 10,858
Due after five years through ten years 3,615 3,579
Due after ten years 904 856
-------------------------------------------
$ 18,088 $ 17,868
===========================================
</TABLE>
There were no sales of securities available for sale during 1999 or the six
months ended June 30, 2000 (unaudited).
<PAGE> 148
CBOC, Inc. and Subsidiary
Notes to Consolidated Financial Statements (continued)
3. LOANS RECEIVABLE
Loans receivable consist of the following:
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
2000 1999
(Unaudited)
------------------------------------
<S> <C> <C>
First mortgage:
Conventional single-family residential $ 8,015 $ 7,577
Commercial and multifamily residential 3,968 3,615
Construction 452 264
Farmland 2,396 2,301
------------------------------------
14,831 13,757
Agricultural loans 4,405 3,766
Commercial business loans 12,390 10,886
Consumer and installment loans 4,382 3,758
Lease financing - 389
Other 42 8
------------------------------------
36,050 32,564
Less:
Allowance for loan losses (482) (465)
------------------------------------
$ 35,568 $ 32,099
====================================
</TABLE>
Transactions in the allowance for loan losses are summarized as follows:
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
2000 1999
(Unaudited)
------------------------------------
<S> <C> <C>
Balance at beginning of period $465 $468
Provisions charged to operations 18 18
Charge-offs (2) (23)
Recoveries 1 2
------------------------------------
Balance at end of period $482 $465
====================================
</TABLE>
Total nonaccrual loans were $10 (unaudited) and $0 at June 30, 2000 and December
31, 1999, respectively.
<PAGE> 149
CBOC, Inc. and Subsidiary
Notes to Consolidated Financial Statements (continued)
4. PREMISES AND EQUIPMENT
Premises and equipment consist of the following:
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
2000 1999
(Unaudited)
------------------------------------
<S> <C> <C>
Land $ 32 $ 32
Office buildings and improvements 808 808
Furniture and equipment 582 570
------------------------------------
1,422 1,410
Less accumulated depreciation (413) (369)
------------------------------------
$ 1,009 $ 1,041
====================================
</TABLE>
5. DEPOSITS
Deposits consist of the following:
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
2000 1999
(Unaudited)
------------------------------------
<S> <C> <C>
Negotiable Order of Withdrawal accounts:
Non-interest-bearing $ 5,742 $ 5,961
Interest-bearing 2,683 2,389
Savings deposits 3,389 3,586
Money market investment accounts 12,270 16,355
Time deposits and certificate accounts 25,602 24,601
------------------------------------
$ 49,686 $ 52,892
====================================
</TABLE>
The scheduled maturities of time deposits and certificate accounts are as
follows:
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
2000 1999
(Unaudited)
------------------------------------
<S> <C> <C>
Maturities during the period ending:
In one year $19,787 $20,485
In one to three years 5,559 3,787
Thereafter 256 329
------------------------------------
$25,602 $24,601
====================================
</TABLE>
<PAGE> 150
CBOC, Inc. and Subsidiary
Notes to Consolidated Financial Statements (continued)
5. DEPOSITS (CONTINUED)
At June 30, 2000 and December 31, 1999, time deposits and certificate accounts
with balances greater than $100 amounted to $5,755 (unaudited) and $5,965,
respectively.
6. BORROWINGS
At June 30, 2000 and December 31, 1999, the Bank has overnight federal funds
purchased of $740 (unaudited) and $0, respectively, with weighted-average
interest of 7.84% (unaudited) and 0%, respectively. The Bank has treasury, tax
and loan borrowings of $522 (unaudited) and $381, respectively, with an interest
rate of 6.66% (unaudited) and 4.52%, respectively.
7. STOCKHOLDERS' EQUITY
The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory--and possibly additional discretionary--actions by
regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
that follows) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined) and of Tier 1 capital (as defined) to average
assets (as defined). Management believes, as of June 30, 2000 and December 31,
1999, that the Bank meets all capital adequacy requirements to which they are
subject.
<PAGE> 151
CBOC, Inc. and Subsidiary
Notes to Consolidated Financial Statements (continued)
7. STOCKHOLDERS' EQUITY (CONTINUED)
As of June 30, 2000 and December 31, 1999, the most recent notification from the
Federal Deposit Insurance Corporation categorized all the Banks as well
capitalized under the regulatory framework for prompt corrective action. To be
categorized as well capitalized, the Bank must maintain minimum total
risk-based, Tier I risk-based, Tier I leverage ratios as set forth in the table.
There are no conditions or events since that notification that management
believes have changed the Banks' classifications as of June 30, 2000.
<TABLE>
<CAPTION>
To Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
----------------------------------------------------------------------------
Amount Ratio Amount Ratio Amount Ratio
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AS OF JUNE 30, 2000
(unaudited)
Total Capital (to Risk-
Weighted Assets) $6,075 16.63% $2,922 8.00% $3,652 10.00%
Tier 1 Capital (to Risk-
Weighted Assets) 5,618 15.38% 1,461 4.00% 2,191 6.00%
Tier 1 Capital (to Average
Assets) 5,618 10.12% 2,220 4.00% 2,775 5.00%
</TABLE>
<TABLE>
<CAPTION>
To Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
----------------------------------------------------------------------------
Amount Ratio Amount Ratio Amount Ratio
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1999
Total Capital (to Risk-
Weighted Assets) $5,843 17.09% $2,735 8.00% $3,419 10.00%
Tier 1 Capital (to Risk-
Weighted Assets) 5,416 15.84% 1,368 4.00% 2,052 6.00%
Tier 1 Capital (to Average `
Assets) 5,416 9.64% 2,247 4.00% 2,809 5.00%
</TABLE>
8. RESTRICTIONS ON SUBSIDIARY DIVIDENDS, LOANS OR ADVANCES
Dividends are paid by the Corporation from funds which are provided by dividends
from the Bank. However, certain restrictions exist regarding the ability of the
Bank to transfer funds to the Corporation in the form of cash dividends, loans
or advances. Approval of the regulatory authorities is required to pay dividends
in excess of certain levels of the Banks' retained earnings.
<PAGE> 152
CBOC, Inc. and Subsidiary
Notes to Consolidated Financial Statements (continued)
8. RESTRICTIONS ON SUBSIDIARY DIVIDENDS, LOANS OR ADVANCES (CONTINUED)
As of June 30, 2000 and December 31, 1999, the Bank had equity of $5,454
(unaudited) and $5,309, respectively, of which $322 (unaudited) and $631,
respectively, were available for distribution to the Corporation as dividends
without prior regulatory approval.
9. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
PERIOD ENDED
JUNE 30 DECEMBER 31
2000 1999
(Unaudited)
------------------------------------
<S> <C> <C>
Current:
Federal $ 65 $143
State 33 67
------------------------------------
98 210
Deferred (benefit):
Federal 4 11
State -- 3
------------------------------------
4 14
------------------------------------
$ 102 $224
====================================
</TABLE>
The provision for income taxes differs from that computed at the federal
statutory corporate tax rate as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
JUNE 30 DECEMBER 31
2000 1999
(Unaudited)
------------------------------------
<S> <C> <C>
Income tax at statutory rate $144 $ 304
Increase (reduction) resulting from:
Tax-exempt interest income (64) (123)
State income taxes, net of federal tax benefit 22 46
Other -- (3)
------------------------------------
$102 $ 224
====================================
</TABLE>
<PAGE> 153
CBOC, Inc. and Subsidiary
Notes to Consolidated Financial Statements (continued)
9. INCOME TAXES (CONTINUED)
The components of deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
2000 1999
(Unaudited)
------------------------------------
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses $180 $173
Unrealized loss on securities 126 88
Other assets 14 14
------------------------------------
Total deferred tax assets 320 275
Deferred tax liabilities --
Depreciation 77 66
------------------------------------
Total deferred tax liabilities 77 66
------------------------------------
Net deferred tax asset $243 $209
====================================
</TABLE>
10. LOANS TO RELATED PARTIES
In the ordinary course of business, loans are granted to related parties, which
include management personnel, directors and entities in which such persons are
principal stockholders. Activity in loans to related parties is as follows:
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
2000 1999
(Unaudited)
------------------------------------
<S> <C> <C>
Balance at beginning of period $1,845 $ 2,518
Loans originated 325 575
Repayments (130) (1,248)
------------------------------------
Balance at end of period $2,040 $ 1,845
====================================
</TABLE>
<PAGE> 154
CBOC, Inc. and Subsidiary
Notes to Consolidated Financial Statements (continued)
11. LOAN COMMITMENTS AND CONTINGENT LIABILITIES
Off-balance-sheet financial instruments whose contracts represent credit and/or
interest rate risk at June 30, 2000 and December 31, 1999, are as follows:
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
2000 1999
(Unaudited)
------------------------------------
<S> <C> <C>
Commitments to originate mortgage loans (expiring
within three months) --
Adjustable rates $1,133 $1,360
Unused lines of credit:
Commercial business 2,823 4,772
Home equity (adjustable rate) 103 103
Credit cards (fixed rate) 797 728
Standby letters of credit 302 257
</TABLE>
Loan commitments and line-of-credit loans are made to accommodate the financial
needs of the Bank's customers. Standby letters of credit commit the Bank to make
payments on behalf of customers when certain specified future events occur.
These arrangements essentially have the same credit risk as that involved in
extending loans to customers, and are subject to the Bank's normal credit
policies. Collateral is obtained based on management's credit assessment of the
customer.
Since many of the commitments may expire without being drawn upon, the total
commitment amounts do not necessarily represent future cost requirements.
Management does not anticipate any losses as a result of the above related
transactions; however, the above amounts represent the maximum exposure to
credit loss for loan commitments, line-of-credit loans and standby letters of
credit.
12. MERGER PENDING
CBOC, Inc. announced in August 2000, that they have agreed in principle to merge
with Merchants and Manufacturers Bancorporation, Inc. The merger will involve an
exchange of Merchants and Manufacturers common stock for CBOC common stock. It
is also subject to approval by shareholders and regulators. The transaction is
anticipated to close by January 2001.
<PAGE> 155
CBOC, Inc. and Subsidiary
Notes to Consolidated Financial Statements (continued)
13. CBOC, INC. PARENT COMPANY ONLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
STATEMENTS OF FINANCIAL CONDITION JUNE 30 DECEMBER 31
2000 1999
(Unaudited)
------------------------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 20 $ 20
Tax benefit receivable 4 4
Investment in subsidiaries 5,430 5,285
------------------------------------
Total assets $ 5,454 $ 5,309
====================================
LIABILITIES
Total liabilities -- --
STOCKHOLDERS' EQUITY
Common stock $ 80 $ 80
Additional paid-in capital 1,975 1,975
Unrealized gain (loss) on available for sale securities (189) (132)
Retained earnings 3,588 3,386
Less treasury stock -- --
------------------------------------
Total stockholders' equity 5,454 5,309
------------------------------------
Total liabilities and stockholders' equity $ 5,454 $ 5,309
====================================
</TABLE>
<PAGE> 156
CBOC, Inc. and Subsidiary
Notes to Consolidated Financial Statements (continued)
13. CBOC, INC. PARENT COMPANY ONLY FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30 DECEMBER 31
2000 1999 1999
(Unaudited)
-------------------------------------------------
<S> <C> <C> <C>
STATEMENTS OF INCOME
Income --
Dividends from subsidiaries $120 $120 $240
-------------------------------------------------
Expenses --
Other -- -- --
-------------------------------------------------
-- -- --
-------------------------------------------------
Income before income tax benefit and
equity in undistributed net income of
subsidiaries 120 120 240
Income tax benefit -- -- --
-------------------------------------------------
Income before equity in undistributed net
income of subsidiaries 120 120 240
Equity in undistributed net income of
subsidiaries 202 192 421
-------------------------------------------------
Net income $322 $312 $661
=================================================
</TABLE>
<PAGE> 157
CBOC, Inc. and Subsidiary
Notes to Consolidated Financial Statements (continued)
13. CBOC, INC. PARENT COMPANY ONLY FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR
JUNE 30 ENDED
2000 JUNE 30 DECEMBER 31
1999 1999
(Unaudited)
-----------------------------------------------------
<S> <C> <C> <C>
CONDENSED STATEMENTS OF CASH FLOWS
OPERATING ACTIVITIES
Net income $ 322 $ 312 $ 661
Adjustments to reconcile net income to
net cash provided by operating
activities:
Equity in undistributed net income of
subsidiaries (202) (192) (421)
Other -- 20 20
------------------------------------------------------
Net cash provided by operating activities 120 140 260
FINANCING ACTIVITIES
Payment of cash dividends (120) (120) (240)
------------------------------------------------------
Net cash used by financing activities (120) (120) (240)
------------------------------------------------------
Increase in cash and cash equivalents -- 20 20
Cash and cash equivalents at beginning of
period 20 -- --
------------------------------------------------------
Cash and cash equivalents at end of period $ 20 $ 20 $ 20
======================================================
</TABLE>
<PAGE> 158
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant is incorporated under the Wisconsin Business Corporation
Law (the "WBCL"). Under Section 180.0851 of the WBCL, the Registrant shall
indemnify a director or officer, to the extent such person is successful on the
merits or otherwise in the defense of a proceeding, for all reasonable expenses
incurred in the proceeding because he or she was a director or officer of the
Registrant. In all other cases, the Registrant shall indemnify a director or
officer against liability incurred in a proceeding to which such person was a
party because he or she was a director or officer of the Registrant; unless
liability was incurred because he or she breached or failed to perform a duty
owed to the Registrant and such breach or failure to perform constitutes: (i) a
willful failure to deal fairly with the Registrant or its shareholders in
connection with a matter in which the director or officer has a material
conflict of interest; (ii) a violation of criminal law, unless the director or
officer had reasonable cause to believe his or her conduct was lawful or no
reasonable cause to believe his or her conduct was unlawful; (iii) a transaction
from which the director or officer derived an improper personal profit; or (iv)
willful misconduct. Section 180.0858 of the WBCL provides that subject to
certain limitations, the mandatory indemnification provisions do not preclude
any additional right to indemnification or allowance of expenses that a director
of officer may have under the Registrant's articles of incorporation, bylaws, a
written agreement between the director or officer and the Registrant or a
resolution of the Board of Directors or adopted by majority vote of the
Registrant's shareholders.
Section 180.0859 of the WBCL provides that it is the public policy of
the State of Wisconsin to require or permit indemnification, allowance of
expenses and insurance to the extent required or permitted under Sections
180.0850 to 18.0858 of the WBCL for any liability incurred in connection with a
proceeding involving a federal or state statute, rule or regulation regulating
the offer, sale or purchase of securities.
The Registrant's Articles of Incorporation contain no provisions in
relation to the indemnification of directors and officers of the Registrant.
Under Article X of the Registrant's By-Laws, the Registrant extends
rights of indemnification to any person who is made or threatened to be made a
party to any action or claim or proceeding by reason of the fact that such
person is or was a director, officer, employee or agent of the Registrant,
except as to matters in which he or she is finally adjudged to have been guilty
of fraud in the performance of his or her duty as such director, officer,
employee or agent. Indemnification is provided for expenses and amounts paid in
the final disposition of claims, actions, suits or proceedings including
settling of such matters. The rights of indemnification under the Registrant's
By-Laws are in addition to rights to which such persons may be entitled as a
matter of law, agreement, vote of shareholders or otherwise.
Officers and directors of the Registrant and Registrant's subsidiaries
are covered by directors' and officers' liability insurance under which they are
insured (subject to certain exceptions and limitations specified in the policy)
against expenses and liabilities arising out of proceedings to which they are
parties by reason of being or having been directors or officers of Registrant or
Registrant's subsidiaries.
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<PAGE> 159
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits. A listing of the exhibits required by Item 601 of Regulation
S-K is contained in the Exhibit Index which immediately precedes the
exhibits filed herewith.
(b) No financial statement schedules are required to be filed herewith
pursuant to Item 21(b) or (c) of this Form.
ITEM 22. UNDERTAKINGS
(a)(1) The undersigned Registrant hereby undertakes:
(i) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement: (x) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, as amended (the
"Securities Act"); (y) to reflect in the prospectus any
facts or events arising after the effective date of the
registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth
in the registration statement; (z) 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.
(ii) That, for the purpose of determining any liability under the
Securities Act, 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 such time shall be deemed to be the initial
bona fide offering thereof.
(iii) 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.
(2) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of
the registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of
the Exchange Act), that is incorporated by reference in the
registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) The undersigned registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this
registration statement, by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters,
in addition to the information called for by the other items of
the applicable form.
(4) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (3) immediately preceding, or (ii) that
purports to meet the requirements of section 10(a)(3) of
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<PAGE> 160
the Securities Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as part of an
amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining
any liability under the Securities Act, 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.
(5) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy, as expressed in the Securities Act and will
be governed by the final adjudication of such issue.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus
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 the registration statement through the date of responding to
the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject
of and included in the registration statement when it became effective.
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<PAGE> 161
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New Berlin,
State of Wisconsin, on this 6th day of November, 2000.
MERCHANTS AND MANUFACTURERS
BANCORPORATION, INC.
By: /s/ Michael J. Murry
--------------------------------------------
Michael J. Murry,
Chairman of the Board of Directors
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/Michael J. Murry Chairman of the Board of November 6, 2000
-------------------------- Directors (Principal Executive
Michael J. Murry Officer)
/s/James Bomberg President and a Director November 6, 2000
---------------------------
James Bomberg
/s/James Mroczkowski Executive Vice President, Chief November 6, 2000
--------------------------- Financial Officer, and Principal
James Mroczkowski Financial and Accounting Officer
* Director November 6, 2000
---------------------------
J. Michael Bartels
* Director November 6, 2000
---------------------------
Duane Cherek
* Director November 6, 2000
---------------------------
Thomas Gapinski
* Director November 6, 2000
---------------------------
Casimir S. Janiszewski
* Director November 6, 2000
---------------------------
James Kacmarcik
</TABLE>
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<PAGE> 162
<TABLE>
<S> <C> <C>
* Director November 6, 2000
--------------------------
David Kaczynski
* Director November 6, 2000
--------------------------
Conrad Kaminski
* Director November 6, 2000
--------------------------
Nicholas Logarakis
* Director November 6, 2000
--------------------------
Gervase Rose
* Director November 6, 2000
--------------------------
Jerome Sarnowski
* Director November 6, 2000
--------------------------
James Sass
* Director November 6, 2000
--------------------------
Thomas Sheehan
* Director November 6, 2000
--------------------------
Keith Winters
</TABLE>
*Michael J. Murry hereby signs this registration statement on November
6, 2000, on behalf of each of the indicated persons for whom he is
attorney-in-fact pursuant to a power of attorney filed herewith.
/s/ Michael J. Murry
--------------------------------------
Michael J. Murry
II-5
<PAGE> 163
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
2(a) Agreement and Plan of Merger dated as of August 1, 2000,
among the Registrant, Merchants Merger Corp. and CBOC, Inc.,
incorporated by reference to Exhibits A and A-1 to the Proxy
Statement/Prospectus of the Registrant and CBOC, Inc. (the
"Proxy Statement/Prospectus").
2(b) Voting Agreement dated as of August 1, 2000, among certain
shareholders of CBOC, Inc. and the Registrant incorporated
by reference to Exhibit B to the Proxy Statement/Prospectus.
3(a) Articles of Incorporation, as amended of Registrant
incorporated by reference to Exhibit 3(a) of Registrant's
Registration Statement on Form S-4 filed on October 4, 1999,
SEC File No. 333-86855.
3(b) Bylaws of Registrant incorporated by reference to Exhibit
3.2 of Registrant's Registration Statement on Form S-1 filed
on October 2, 1992 SEC File No. 33-53002.
4 The Registrant has outstanding certain long term debt. None
of such debt exceeds 10% of the total assets of the
Registrant and its consolidated subsidiaries. Thus, copies
of the constituent instruments defining the rights of the
holders of such debt are not included as exhibits to this
Registration Statement. The Registrant agrees to furnish
copies of such instruments to the Commission upon request.
5 Opinion of Davis & Kuelthau, S.C. regarding legality of
issuance of the Registrant's securities.
8 Opinion of Davis & Kuelthau, S.C. regarding certain federal
income tax matters
10(a) The 1996 Incentive Stock Option Plan of the Registrant
incorporated by reference to Exhibit 10(a) of Registrant's
Registration Statement on Form S-4 filed on October 4, 1999,
SEC File No. 333-86855.
10(b) Salary Continuation Agreement between Lincoln State Bank and
James Bomberg incorporated by reference to Exhibit 10(b) of
Registrant's Registration Statement on Form S-4 filed on
October 4, 1999, SEC File No. 333-86855.
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<PAGE> 164
10(c) Employment agreements between Registrant and Conrad Kaminski
and between Lincoln State Bank and James Bomberg
incorporated by reference to Exhibit 10.2 of Registrant's
Registration Statement on Form S-1 filed on October 2, 1992,
SEC File No. 33-53002.
Employment Agreements between Registrant and Michael J.
Murry, James Mroczkowski and John Krawczyk, incorporated by
reference to Exhibit 10(c) of Registrant's Registration
Statement on Form S-4 filed on October 4, 1999, SEC File No.
333-86855.
Employment Agreements between M&M Services, Inc. and Robert
Blonski and Gregory Stengel, respectively, incorporated by
reference to Exhibit 10(c) of Registrant's Registration
Statement on Form S-4 filed on October 4, 1999, SEC File No.
333-86855.
Employment Agreement between Achieve Mortgage Corporation
and Robert Donaj, incorporated by reference to Exhibit 10(c)
of Registrant's Registration Statement on Form S-4 filed on
October 4, 1999, SEC File No. 333-86855.
Employment Agreement between Grafton State Bank and Thomas
Sheehan, incorporated by reference to Exhibit 10(c) of
Registrant's Registration Statement on Form S-4 filed on
October 4, 1999, SEC File No. 333-86855.
Pursuant to Instruction 2 of Item 601 - Exhibits, Employment
Agreements between Grafton State Bank and Peter J.
Schumacher, Richard Belling and Jefford R. Larson,
respectively, are omitted. The terms of such agreements are
substantially identical in all material respects to the
agreement between Grafton State Bank and Thomas Sheehan.
The only material difference between the Sheehan Agreement
and the three omitted agreements are reflected in "Position
and Duties" and "Base Salary" as follows:
<TABLE>
<CAPTION>
Name Position Base Salary
---- -------- -----------
<S> <C> <C>
Peter J. Schumacher Controller $48,300
Richard L. Belling V.P.-Mortgages 67,000
Jefford R. Larson V.P. Commercial 62,000
Lending
</TABLE>
Employment Agreement between Registrant and Edward H.
Cichurski.
21 List of Subsidiaries of the Registrant.
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<PAGE> 165
23(a) Consent of Ernst & Young, LLP as to the financial statements
of the Registrant and CBOC, Inc..
23(b)(c) Consent of Davis & Kuelthau, S.C. incorporated by reference
to Exhibits 5 and 8.
23(d) Consent of Marshall Financial Consulting LLC, financial
adviser to CBOC, Inc.
23(e) Consent of Boardman, Suhr, Curry & Field, LLP.
23(f) Rule 438 Consent of three directors of CBOC, Inc. who will
become directors of Registrant upon completion of the
Merger.
24 Powers of Attorney.
II-8
