<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 13, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
RESOURCE BANCSHARES MORTGAGE GROUP, INC.
(Exact name of registrant as specified in its charter)
---------------------
<TABLE>
<S> <C> <C>
DELAWARE 6162 57-0962375
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
7909 PARKLANE ROAD
COLUMBIA, SOUTH CAROLINA 29223
(803) 741-3000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------------
EDWARD J. SEBASTIAN
CHAIRMAN
RESOURCE BANCSHARES MORTGAGE GROUP, INC.
7909 PARKLANE ROAD
COLUMBIA, SOUTH CAROLINA 29223
(803) 741-3000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------
<TABLE>
<S> <C> <C>
COPIES TO:
RUSSELL B. RICHARDS JOHN W. CURRIE JOHN J. OBERDORF
KING & SPALDING MCNAIR LAW FIRM, P.A. ST. JOHN & WAYNE, L.L.C.
191 PEACHTREE STREET 1301 GERVAIS STREET 17TH FLOOR 2 PENN PLAZA EAST
ATLANTA, GA 30303 COLUMBIA, SC 29201 NEWARK, NJ 07105
(404) 572-4600 (803) 799-9800 (201) 491-3600
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable following the effectiveness of this Registration Statement.
If any securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=============================================================================================================================
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) FEE(1)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value per
share.......................... 30,779,578 $3.53 $108,756,000 $32,957
========================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee and
computed pursuant to Rule 457(f)(2) under the Securities Act of 1933, as
amended, based on, respectively, the aggregate book values of the shares of
voting common stock and non-voting common stock of Resource Bancshares
Corporation and shares of Class A Common Stock and Class B Common Stock of
Walsh Holding Co., Inc. to be converted into the right to receive shares of
common stock of Resource Bancshares Mortgage Group, Inc. upon consummation
of the two mergers. The aggregate book value of such shares of common stock
as of March 31, 1997, was $108,756,000.
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
RESOURCE BANCSHARES MORTGAGE GROUP, INC.
CROSS REFERENCE TABLE
LOCATION IN JOINT PROXY STATEMENT/PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS OF FORM S-4
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION IN FORM S-4 LOCATION IN JOINT PROXY STATEMENT/PROSPECTUS
- ----------------------------------- --------------------------------------------
<C> <S> <C>
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus... Outside Front Cover of Joint Proxy Statement/
Prospectus; Facing Page of Registration Statement
2. Inside Front and Outside Back Cover Pages
of Prospectus............................ Available Information; Incorporation of Certain
Documents by Reference; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information............ Summary; Risk Factors
4. Terms of the Transaction................... Summary; The RBC Merger; The WSI Merger
5. Pro Forma Financial Information............ Summary; Unaudited Pro Forma Condensed Combined
Financial Statements
6. Material Contacts With the Company Being
Acquired................................. Summary; The RBC Merger; The WSI Merger
7. Additional Information Required For
Reoffering by Persons and Parties Deemed
to be Underwriters....................... Not Applicable
8. Interests of Named Experts and Counsel..... Legal Matters
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. Not Applicable
10. Information With Respect to S-3
Registrants.............................. Summary; Business of RBMG
11. Incorporation of Certain Information by
Reference................................ Incorporation of Certain Documents by Reference
12. Information With Respect to S-2 or S-3
Registrants.............................. Not Applicable
13. Incorporation of Certain Information by
Reference................................ Not Applicable
14. Information With Respect to Registrants
Other Than S-3 or S-2 Companies.......... Not Applicable
15. Information With Respect to S-3
Companies................................ Not Applicable
16. Information With Respect to S-2 or S-3
Companies................................ Not Applicable
17. Information With Respect to Companies Other
Than S-3 or S-2 Companies................ Summary; Business of RBC; Management's Discussion
and Analysis of Financial Condition and Results of
Operations of RBC; RBC Common Stock Ownership by
Management and Principal Stockholders; Business of
WSI; Management's Discussion and Analysis of
Financial Condition and Results of Operations of
WSI; WSI Common Stock Ownership by Management and
Principal Stockholders; Index to Financial
Statements
18. Information if Proxies, Consents or
Authorizations are to be Solicited....... Summary; The RBC Merger; The WSI Merger; The RBC
Special Meeting; The RBMG Special Meeting; The WSI
Special Meeting; Stockholder Proposals
19. Information if Proxies, Consents or
Authorizations are not to be Solicited,
or in an Exchange Offer.................. Not Applicable
</TABLE>
<PAGE> 3
RESOURCE BANCSHARES MORTGAGE GROUP, INC.
7909 PARKLANE ROAD
COLUMBIA, SOUTH CAROLINA 29223
, 1997
Dear Stockholder:
You are cordially invited to attend a special meeting of the stockholders
(the "Special Meeting") of Resource Bancshares Mortgage Group, Inc. ("RBMG") to
be held on , , 1997, at , local time, at the
offices of King & Spalding, 191 Peachtree Street, Atlanta, Georgia 30303.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve and adopt (i) the Agreement of Merger (the "RBC Merger
Agreement"), dated as of April 18, 1997, among RBMG, RBC Merger Sub, Inc., a
South Carolina corporation and a wholly owned subsidiary of RBMG ("RBC Merger
Sub"), and Resource Bancshares Corporation, a South Carolina corporation
("RBC"), pursuant to which RBC Merger Sub would be merged with and into RBC (the
"RBC Merger"), (ii) the RBC Merger and (iii) the issuance of shares of common
stock, par value $.01 per share, of RBMG ("RBMG Common Stock") in connection
therewith (the "RBC Stock Issuance"). RBC would be the surviving corporation in
the RBC Merger and would become a wholly owned subsidiary of RBMG. If the RBC
Merger is consummated, each outstanding share of voting common stock, par value
$.01 per share, and non-voting common stock, par value $.01 per share, of RBC
will be converted into the right to receive 1.08026 shares (the "RBC Exchange
Ratio") of RBMG Common Stock, with cash being paid in lieu of fractional shares.
At the Special Meeting, you will also be asked to consider and vote upon a
proposal to approve and adopt (i) the Agreement of Merger (the "WSI Merger
Agreement" and, together with the RBC Merger Agreement, the "Merger
Agreements"), dated as of April 18, 1997, among RBMG, Carolina Merger Sub, Inc.,
a Delaware corporation and a wholly owned subsidiary of RBMG ("Carolina Merger
Sub"), Walsh Holding Co., Inc., a Delaware corporation ("WSI"), and Robert C.
Walsh, the principal stockholder of WSI, pursuant to which Carolina Merger Sub
would be merged with and into WSI (the "WSI Merger" and, together with the RBC
Merger, the "Mergers"), (ii) the WSI Merger and (iii) the issuance of shares of
RBMG Common Stock in connection therewith (the "WSI Stock Issuance"). WSI would
be the surviving corporation in the WSI Merger and would become a wholly owned
subsidiary of RBMG. If the WSI Merger is consummated, each outstanding share of
class A common stock, par value $.01 per share, and class B common stock, par
value $.01 per share ("WSI Class B Common Stock"), of WSI will be converted into
(a) the right to receive 175,164.30 shares of RBMG Common Stock (the "WSI
Exchange Ratio") and (b) the right to receive on a deferred basis 19,462.70
additional shares of RBMG Common Stock (the "WSI Escrow Stock Ratio" and,
together with the WSI Exchange Ratio, the "WSI Exchange Ratios"), with cash
being paid in lieu of fractional shares. If the RBC Merger is approved and
occurs prior to the effective time of the WSI Merger, the WSI Exchange Ratio
will be 192,460.50 and the WSI Escrow Stock Ratio will be 21,384.50. In
addition, if the WSI Merger is consummated, the holder of a warrant (the "WSI
Warrant") to purchase shares of WSI Class B Common Stock will receive a warrant
to purchase a number of shares of class B common stock, par value $.01 per
share, of RBMG ("RBMG Class B Common Stock") equal to the number of shares of
WSI Class B Common Stock covered by the WSI Warrant multiplied by the sum of the
WSI Exchange Ratios.
At the Special Meeting and in connection with the RBC Merger, you will also
be asked to consider and vote upon a proposal to approve and adopt an amendment
to RBMG's Restated Certificate of Incorporation (the "RBC Amendment") pursuant
to which the number of shares of RBMG Common Stock that RBMG would be authorized
to issue would be increased from 25,000,000 shares to 50,000,000 shares.
Additionally, at the Special Meeting and in connection with the WSI Merger, you
will be asked to consider and vote upon a proposal to approve and adopt an
amendment to RBMG's Restated Certificate of Incorporation (the "WSI Amendment"
and, together with the RBC Amendment, the "Amendments") pursuant to which (i)
the number of authorized shares
<PAGE> 4
of RBMG Common Stock would be increased from 50,000,000 shares (25,000,000
shares if the RBC Amendment has not become effective) to 100,000,000 shares,
(ii) 12,000,000 shares of the RBMG Class B Common Stock would be authorized and
(iii) the name of RBMG would be changed to "BCA Financial Corp."
The Merger Agreements and the Amendments have been approved and adopted by
the Board of Directors of RBMG, and the Merger Agreements, the Mergers, the RBC
Stock Issuance, the WSI Stock Issuance and the Amendments are each subject to
the approval by a majority of the outstanding shares of RBMG Common Stock
entitled to vote at the Special Meeting. The Board of Directors of RBMG has
received a written opinion dated April 18, 1997, of Prudential Securities
Incorporated, to the effect that, as of the date of such opinion and based upon
and subject to certain matters stated therein, the RBC Exchange Ratio was fair,
from a financial point of view, to the stockholders of RBMG. The Board of
Directors of RBMG has also received a written opinion, dated April 18, 1997, of
Prudential Securities Incorporated, to the effect that, as of the date of such
opinion and based upon and subject to certain matters stated therein, the WSI
Exchange Ratios, taken together, were fair, from a financial point of view, to
the stockholders of RBMG.
THE APPROVAL AND ADOPTION OF EACH OF THE RBC MERGER AGREEMENT, THE RBC
MERGER, THE RBC STOCK ISSUANCE AND THE RBC AMENDMENT IS CONTINGENT UPON THE
APPROVAL AND ADOPTION OF ALL OF THE RBC MERGER AGREEMENT, THE RBC MERGER, THE
RBC STOCK ISSUANCE AND THE RBC AMENDMENT. UNLESS EACH OF THE RBC MERGER
AGREEMENT, THE RBC MERGER, THE RBC STOCK ISSUANCE AND THE RBC AMENDMENT IS
APPROVED AND ADOPTED BY THE STOCKHOLDERS AT THE SPECIAL MEETING, NONE OF THEM
WILL BE EFFECTED BY RBMG.
THE APPROVAL AND ADOPTION OF EACH OF THE WSI MERGER AGREEMENT, THE WSI
MERGER, THE WSI STOCK ISSUANCE AND THE WSI AMENDMENT IS CONTINGENT UPON THE
APPROVAL AND ADOPTION OF ALL OF THE WSI MERGER AGREEMENT, THE WSI MERGER, THE
WSI STOCK ISSUANCE AND THE WSI AMENDMENT. UNLESS EACH OF THE WSI MERGER
AGREEMENT, THE WSI MERGER, THE WSI STOCK ISSUANCE AND THE WSI AMENDMENT IS
APPROVED AND ADOPTED BY THE STOCKHOLDERS AT THE SPECIAL MEETING, NONE OF THEM
WILL BE EFFECTED BY RBMG.
THE APPROVAL AND ADOPTION OF EACH OF THE RBC MERGER AND THE WSI MERGER (AND
THE RESPECTIVE MATTERS RELATING THERETO) ARE NOT CONTINGENT UPON THE APPROVAL
AND ADOPTION OF THE OTHER. STOCKHOLDERS MAY VOTE DIFFERENTLY ON THE PROPOSALS
RELATING TO THE RBC MERGER AND THOSE RELATING TO THE WSI MERGER.
THE BOARD OF DIRECTORS HAS DETERMINED THAT EACH OF THE PROPOSED MERGERS AND
RESPECTIVE AMENDMENTS SEPARATELY IS IN THE BEST INTERESTS OF RBMG AND ITS
STOCKHOLDERS, HAS UNANIMOUSLY APPROVED AND ADOPTED THE MERGER AGREEMENTS AND THE
AMENDMENTS AND RECOMMENDS THAT YOU VOTE FOR THE PROPOSALS TO APPROVE AND ADOPT
THE MERGER AGREEMENTS, THE MERGERS, THE RBC STOCK ISSUANCE, THE WSI STOCK
ISSUANCE AND THE AMENDMENTS.
Details of the respective backgrounds and reasons for each of the proposed
Mergers appear in and are explained in the accompanying Joint Proxy
Statement/Prospectus. Additional information regarding RBC, WSI and RBMG also is
set forth in the Joint Proxy Statement/Prospectus and, with respect to RBMG,
incorporated therein by reference to other documents.
2
<PAGE> 5
It is important that your shares be represented at the Special Meeting
either in person or by proxy. Whether or not you plan to attend the Special
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage prepaid envelope. If you attend the Special Meeting, you
may vote in person if you wish, even if you have previously returned your proxy
card. Your prompt cooperation will be greatly appreciated.
I strongly support each of the Mergers and join with the other members of
the Board of Directors in enthusiastically recommending each of the Mergers to
you. We urge you to vote in favor of the approval and adoption of the Mergers,
as well as each of the other proposals referred to herein. If you should have
any questions regarding either of the Mergers, please contact Steven F. Herbert,
Chief Financial Officer, at (803) 741-3000.
Sincerely,
Edward J. Sebastian
Chairman of the Board and Chief
Executive Officer
3
<PAGE> 6
RESOURCE BANCSHARES CORPORATION
1901 MAIN STREET, SUITE 650
COLUMBIA, SOUTH CAROLINA 29201
, 1997
Dear Stockholder:
You are cordially invited to attend a special meeting of the stockholders
(the "Special Meeting") of Resource Bancshares Corporation ("RBC") to be held on
, , 1997, at , local time, at the offices of King &
Spalding, 191 Peachtree Street, Atlanta, Georgia 30303.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve and adopt (i) the Agreement of Merger (the "RBC Merger
Agreement"), dated as of April 18, 1997, among RBC, Resource Bancshares Mortgage
Group, Inc., a Delaware corporation ("RBMG"), and RBC Merger Sub, Inc., a South
Carolina corporation and a wholly owned subsidiary of RBMG ("RBC Merger Sub"),
pursuant to which RBC Merger Sub would be merged with and into RBC (the "RBC
Merger"), and (ii) the RBC Merger. Pursuant to the RBC Merger Agreement, RBC
would be the surviving corporation in the RBC Merger and would become a wholly
owned subsidiary of RBMG. If the RBC Merger is consummated, each outstanding
share of voting common stock, par value $.01 per share ("RBC Voting Common
Stock"), and non-voting common stock, par value $.01 per share ("RBC Non-Voting
Common Stock"), of RBC will be converted into the right to receive 1.08026
shares (the "RBC Exchange Ratio") of common stock, par value $.01 per share, of
RBMG ("RBMG Common Stock"), with cash being paid in lieu of any fractional
shares.
The RBC Merger Agreement has been approved and adopted by the Board of
Directors of RBC, and the RBC Merger Agreement and the RBC Merger are subject to
approval by the holders of (i) a majority of the shares of RBC Voting Common
Stock entitled to vote at the RBC Special Meeting, voting separately, and (ii) a
majority of the shares of RBC Non-Voting Common Stock entitled to vote at the
Special Meeting, voting separately. The Board of Directors of RBC has received a
written opinion, dated April 18, 1997, of Montgomery Securities to the effect
that, as of the date of such opinion and based upon and subject to certain
matters stated therein, the RBC Exchange Ratio was fair, from a financial point
of view, to RBC's stockholders. The Board of Directors of RBC has also received
a written opinion of McNair Law Firm, P.A. to the effect that, based upon and
subject to the assumptions, qualifications and limitations stated therein, the
RBC Merger will qualify as a tax-free reorganization for federal income tax
purposes and that no gain or loss will be recognized by RBC stockholders upon
the receipt of shares of RBMG Common Stock pursuant to the RBC Merger.
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE PROPOSED RBC MERGER IS IN
THE BEST INTERESTS OF RBC AND ITS STOCKHOLDERS, HAS UNANIMOUSLY APPROVED AND
ADOPTED THE RBC MERGER AGREEMENT AND RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL
TO APPROVE AND ADOPT THE RBC MERGER AGREEMENT AND THE RBC MERGER.
Details of the background and reasons for the proposed RBC Merger appear in
and are explained in the accompanying Joint Proxy Statement/Prospectus.
Additional information regarding RBC and RBMG also is set forth in the Joint
Proxy Statement/Prospectus and, with respect to RBMG, incorporated therein by
reference to other documents. The Joint Proxy Statement/Prospectus also contains
information regarding the Agreement of Merger, dated as of April 18, 1997, among
RBMG, Carolina Merger Sub, Inc. ("Carolina Merger Sub"), a Delaware corporation
and a wholly owned subsidiary of RBMG, Walsh Holding Co., Inc., a Delaware
corporation ("WSI"), and Robert C. Walsh, the principal stockholder of WSI,
pursuant to which Carolina Merger Sub would be merged with and into WSI and WSI
would become a wholly owned subsidiary of RBMG.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. Whether or not you plan to attend the Special
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage prepaid envelope. If you attend the Special Meeting, you
may vote in person if you wish, even if you have previously returned your proxy
card. Your prompt cooperation will be greatly appreciated.
I strongly support the RBC Merger and join with the other members of the
Board of Directors in enthusiastically recommending the RBC Merger to you. We
urge you to vote in favor of the approval and
<PAGE> 7
adoption of the RBC Merger Agreement and the RBC Merger. If you should have any
questions regarding the RBC Merger, please contact Melissa A. Ard, Chief
Financial Officer, at (803) 252-1907.
Sincerely,
Edward J. Sebastian
Chairman of the Board and Chief
Executive Officer
2
<PAGE> 8
WALSH HOLDING CO., INC.
4 CAMPUS DRIVE
PARSIPPANY, NEW JERSEY 07054
, 1997
Dear Stockholder:
You are cordially invited to attend a special meeting of stockholders (the
"Special Meeting") of Walsh Holding Co., Inc. ("WSI") to be held at a.m.,
local time, on , , 1997 at the offices of WSI located at 4
Campus Drive, Parsippany, New Jersey 07054. At the Special Meeting, you will be
asked to consider and vote upon a proposal to approve and adopt (i) the
Agreement of Merger (the "WSI Merger Agreement"), dated as of April 18, 1997,
among Resource Bancshares Mortgage Group, Inc., a Delaware corporation ("RBMG"),
Carolina Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary
of RBMG ("Carolina Merger Sub"), WSI and Robert C. Walsh, providing for the
merger of Carolina Merger Sub with and into WSI, resulting in WSI becoming a
wholly owned subsidiary of RBMG (the "WSI Merger") and (ii) the WSI Merger.
As a result of the WSI Merger and subject to the exchange procedures
described in the attached Joint Proxy Statement/Prospectus, all of the
outstanding shares of WSI's (a) class A common stock, par value $.01 per share
(the "WSI Class A Common Stock"), and (b) class B common stock, par value $.01
per share (the "WSI Class B Common Stock"), will be converted into and be
exchangeable for (i) 175,164.30 shares of common stock, par value $.01 per
share, of RBMG ("RBMG Common Stock") (such ratio of the shares of WSI Class A
Common Stock and WSI Class B Common Stock to shares of RBMG Common Stock being
referred to as the "WSI Exchange Ratio"), and (ii) the right to receive on a
deferred basis and pursuant to the terms of a certain Escrow Trust Agreement (as
defined in the WSI Merger Agreement) 19,462.70 additional shares of RBMG Common
Stock (such ratio of the shares of WSI Class A Common Stock and WSI Class B
Common Stock to shares of RBMG Common Stock being referred to as the "WSI Escrow
Stock Ratio" and, together with the WSI Exchange Ratio, the "WSI Exchange
Ratios"). Notwithstanding the immediately preceding sentence, if the acquisition
of Resource Bancshares Corporation ("RBC") by RBMG, pursuant to the terms of
that certain Agreement of Merger, dated as of April 18, 1997, among RBMG, RBC
and RBC Merger Sub, Inc. (the "RBC Merger"), occurs prior to the WSI Merger then
the WSI Exchange Ratio will be 192,460.50 and the WSI Escrow Stock Ratio will be
21,384.50. Cash will be paid in lieu of any fractional shares. In addition, an
outstanding warrant (the "WSI Warrant") to purchase shares of WSI Class B Common
Stock will be exchanged for a warrant to purchase a number of shares of class B
common stock, par value $.01 per share, of RBMG equal to the number of shares of
WSI Class B Common Stock issuable upon exercise of the WSI Warrant multiplied by
the sum of the WSI Exchange Ratios. The Board of Directors of WSI has received a
written opinion of St. John & Wayne, LLC to the effect that, based upon and
subject to the assumptions, qualifications and limitations stated therein, the
WSI Merger will qualify as a tax-free reorganization for federal income tax
purposes and that no gain or loss will be recognized by WSI stockholders upon
the receipt of shares of RBMG Common Stock pursuant to the WSI Merger.
YOUR BOARD OF DIRECTORS HAS DETERMINED, AFTER DUE DELIBERATION, THAT THE
WSI MERGER IS IN THE BEST INTERESTS OF WSI AND ITS STOCKHOLDERS AND THAT THE
CONSIDERATION TO BE PAID TO WSI'S STOCKHOLDERS PURSUANT TO THE TERMS OF THE WSI
MERGER AGREEMENT IS FAIR, FROM A FINANCIAL POINT OF VIEW. THE BOARD OF DIRECTORS
HAS APPROVED AND ADOPTED THE TERMS OF THE WSI MERGER AGREEMENT AND RECOMMENDS
THAT WSI'S STOCKHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE WSI
MERGER AGREEMENT AND THE WSI MERGER.
Approval of the WSI Merger Agreement and the WSI Merger requires the
approval of a majority of the outstanding shares of WSI Class A Common Stock.
Certain stockholders, including the Principal Stockholder, holding in the
aggregate approximately 93% of the outstanding WSI Class A Common Stock have
granted an irrevocable proxy to RBMG to vote their shares at the Special
Meeting. If RBMG elects to exercise this proxy, it
<PAGE> 9
must vote such shares in favor of the proposal to approve and adopt the WSI
Merger Agreement and the WSI Merger at the Special Meeting. RBMG has indicated
that it intends to exercise the proxy and vote such shares in favor of such
proposal. Consummation of the WSI Merger is subject to the satisfaction of
certain other conditions.
The Notice of Meeting and the Joint Proxy Statement/Prospectus describing
the WSI Merger in greater detail are attached hereto. Additional information
regarding RBMG, the RBC Merger and WSI is also set forth in the accompanying
Joint Proxy Statement/Prospectus. Whether or not you plan to attend, it is
important that your shares are represented at the Special Meeting. Please give
this information your careful consideration and complete, date, sign and return
promptly your proxy card in the enclosed envelope. You may attend the Special
Meeting and vote your shares in person if you wish, even though you have
previously returned your proxy.
Sincerely,
Robert C. Walsh
President, Chief Executive Officer and
Chairman of the Board of Directors
2
<PAGE> 10
RESOURCE BANCSHARES MORTGAGE GROUP, INC.
7909 Parklane Road
Columbia, South Carolina 29223
---------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 1997
---------------------
TO THE STOCKHOLDERS OF RESOURCE BANCSHARES MORTGAGE GROUP, INC.:
Notice is hereby given that a special meeting of stockholders (the "Special
Meeting") of Resource Bancshares Mortgage Group, Inc. ("RBMG") will be held on
, 1997, at , local time, at the offices of King & Spalding,
191 Peachtree Street, Atlanta, Georgia 30303, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt (a) the
Agreement of Merger (the "RBC Merger Agreement"), dated as of April 18,
1997, among RBMG, RBC Merger Sub, Inc., a South Carolina corporation and a
wholly owned subsidiary of RBMG ("RBC Merger Sub"), and Resource Bancshares
Corporation, a South Carolina corporation ("RBC"), pursuant to which RBC
Merger Sub would be merged with and into RBC (the "RBC Merger"), (b) the RBC
Merger and (c) the issuance of shares of common stock, par value $.01 per
share, of RBMG ("RBMG Common Stock") in connection therewith (the "RBC Stock
Issuance"). If the RBC Merger is consummated, each outstanding share of
voting common stock, par value $.01 per share, and non-voting common stock,
par value $.01 per share, of RBC will be converted into the right to receive
1.08026 shares of RBMG Common Stock, with cash being paid in lieu of
fractional shares.
2. To consider and vote upon a proposal to approve and adopt (a) the
Agreement of Merger (the "WSI Merger Agreement"), dated as of April 18,
1997, among RBMG, Carolina Merger Sub, Inc., a Delaware corporation and a
wholly owned subsidiary of RBMG ("Carolina Merger Sub"), Walsh Holding Co.,
Inc., a Delaware corporation ("WSI"), and Robert C. Walsh, the principal
stockholder of WSI, pursuant to which Carolina Merger Sub would be merged
with and into WSI (the "WSI Merger"), (b) the WSI Merger and (c) the
issuance of shares of RBMG Common Stock in connection therewith (the "WSI
Stock Issuance"). If the WSI Merger Agreement is consummated, each
outstanding share of class A common stock, par value $.01 per share, and
class B common stock, par value $.01 per share, of WSI will be converted
into (i) the right to receive 175,164.30 shares of RBMG Common Stock (the
"WSI Exchange Ratio") and (ii) the right to receive on a deferred basis
19,462.70 additional shares of RBMG Common Stock (the "WSI Escrow Stock
Ratio"), with cash being paid in lieu of fractional shares. If the RBC
Merger is approved and occurs prior to the effective time of the WSI Merger,
the WSI Exchange Ratio will be 192,460.50 and the WSI Escrow Stock Ratio
will be 21,384.50.
3. To consider and vote upon a proposal to approve and adopt an
amendment to RBMG's Restated Certificate of Incorporation (the "RBC
Amendment") pursuant to which the number of shares of authorized RBMG Common
Stock would be increased from 25,000,000 shares to 50,000,000 shares
immediately prior to the RBC Merger. Approval and adoption of the RBC
Amendment is contingent upon the approval and adoption of the RBC Merger
Agreement, the RBC Merger and the RBC Stock Issuance, and the approval and
adoption of the RBC Merger Agreement, the RBC Merger and the RBC Stock
Issuance is contingent upon the approval and adoption of the RBC Amendment.
4. To consider and vote upon a proposal to approve and adopt an
amendment to RBMG's Restated Certificate of Incorporation (the "WSI
Amendment") pursuant to which (i) the number of authorized shares of RBMG
Common Stock would be increased from 50,000,000 shares (25,000,000 shares if
the RBC Amendment has not become effective) to 100,000,000 shares, (ii)
12,000,000 shares of class B common stock, par value $.01 per share, would
be authorized, and (iii) the name of RBMG would be changed to "BCA Financial
Corp." Approval and adoption of the WSI Amendment is contingent upon the
approval and adoption of the WSI Merger Agreement, the WSI Merger and the
WSI Stock Issuance, and the approval and adoption of the WSI Merger
Agreement, the WSI Merger and the WSI Stock Issuance is contingent upon the
approval and adoption of the WSI Amendment.
5. To transact such other business as may properly come before the
Special Meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on , 1997
as the record date for the determination of stockholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment or
postponement thereof. From , 1997 until the date of the Special
Meeting, a list of stockholders entitled to vote at the Special Meeting will be
available for inspection by stockholders of record during business hours at the
place of the Special Meeting and will also be available at the Special Meeting.
Your attention is directed to the Joint Proxy Statement/Prospectus submitted
with this Notice.
By Order of the Board of Directors,
John W. Currie
Secretary
Columbia, South Carolina
, 1997
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH,
EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 11
RESOURCE BANCSHARES CORPORATION
1901 Main Street, Suite 650
Columbia, South Carolina 29201
---------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 1997
---------------------
TO THE STOCKHOLDERS OF RESOURCE BANCSHARES CORPORATION:
Notice is hereby given that a special meeting of the stockholders (the
"Special Meeting") of Resource Bancshares Corporation ("RBC") will be held on
, , 1997, at , local time, at the offices of King &
Spalding, 191 Peachtree Street, Atlanta, Georgia 30303, for the following
purposes:
1. To consider and vote upon a proposal to approve and adopt (a) the
Agreement of Merger (the "RBC Merger Agreement"), dated as of April 18,
1997, among RBC, Resource Bancshares Mortgage Group, Inc. ("RBMG") and RBC
Merger Sub, Inc., a wholly owned subsidiary of RBMG ("RBC Merger Sub"),
pursuant to which RBC Merger Sub would be merged with and into RBC (the
"RBC Merger"), and (b) the RBC Merger. If the RBC Merger is consummated,
each outstanding share of voting common stock, par value $.01 per share
("RBC Voting Common Stock"), and nonvoting common stock, par value $.01 per
share ("RBC Non-Voting Common Stock"), of RBC will be converted into the
right to receive 1.08026 shares of common stock, par value $.01 per share,
of RBMG, with cash being paid in lieu of fractional shares.
2. To transact such other business as may properly come before the
Special Meeting or any adjournment or postponement thereof.
HOLDERS OF SHARES OF RBC VOTING COMMON STOCK AND RBC NON-VOTING COMMON
STOCK HAVE THE RIGHT TO DISSENT FROM THE RBC MERGER AND RECEIVE PAYMENT FOR THE
STATUTORY "FAIR VALUE" OF THEIR SHARES UPON COMPLIANCE WITH THE PROVISIONS OF
THE SOUTH CAROLINA BUSINESS CORPORATION ACT REGARDING DISSENTERS' RIGHTS, A COPY
OF WHICH IS ATTACHED AS ANNEX E TO THE ACCOMPANYING JOINT PROXY STATEMENT/
PROSPECTUS AND IS SUMMARIZED THEREIN UNDER THE CAPTION "THE RBC MERGER --
DISSENTERS' RIGHTS."
The Board of Directors has fixed the close of business on ,
1997 as the record date for the determination of stockholders entitled to
receive notice of and to vote at the Special Meeting and at any adjournment or
postponement thereof. From , 1997 until the date of the Special
Meeting, a list of stockholders entitled to vote at the Special Meeting will be
available at the offices of RBC for examination during normal business hours by
any stockholder.
Please do not send in your RBC stock certificates at this time. If the RBC
Merger is consummated, you will receive transmittal instructions for the
surrender and exchange of your RBC stock certificates from the exchange agent
shortly after the effective time of the RBC Merger.
Your attention is directed to the Joint Proxy Statement/Prospectus
submitted with this Notice.
By Order of the Board of Directors
John W. Currie
Secretary
Columbia, South Carolina
, 1997
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH,
EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 12
WALSH HOLDING CO., INC.
4 Campus Drive
Parsippany, New Jersey 07724
---------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 1997
---------------------
TO THE STOCKHOLDERS OF WALSH HOLDING CO., INC.:
Notice is hereby given that a special meeting (the "Special Meeting") of
holders of class A common stock, par value $.01 per share ("WSI Class A Common
Stock") of Walsh Holding Co., Inc., a Delaware corporation ("WSI"), will be held
at local time, on , , 1997, at WSI's offices at 4
Campus Drive, Parsippany, New Jersey 07224, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt (i) the
Agreement of Merger (the "WSI Merger Agreement"), dated as of April 18,
1997, among WSI, Resource Bancshares Mortgage Group, Inc. ("RBMG"), a
Delaware corporation, Carolina Merger Sub, Inc., a Delaware corporation and
a wholly owned subsidiary of RBMG ("Carolina Merger Sub"), and Robert C.
Walsh, the principal stockholder of WSI, pursuant to which Carolina Merger
Sub would be merged with and into WSI (the "WSI Merger") and (ii) the WSI
Merger. If the WSI Merger Agreement is consummated, each outstanding share
of WSI Class A Common Stock and Class B common stock, par value $.01 per
share, of WSI would be converted into (i) the right to receive 175,164.30
shares (the "WSI Exchange Ratio") of common stock, par value $.01 per
share, of RBMG ("RBMG Common Stock") and (ii) the right to receive on a
deferred basis 19,462.70 additional shares (the "WSI Escrow Stock Ratio")
of RBMG Common Stock, with cash being paid in lieu of fractional shares. If
the merger of Resource Bancshares Corporation with a subsidiary of RBMG
occurs prior to the effective time of the WSI Merger, the WSI Exchange
Ratio will be 192,460.50 and the WSI Escrow Stock Ratio will be 21,384.50.
2. To transact such other business as may properly come before the
Special Meeting or any adjournment or postponement thereof.
Only holders of record of WSI Class A Common Stock at the close of business
on , 1997, are entitled to notice of and to vote at the Special
Meeting. Your attention is directed to the accompanying Joint Proxy
Statement/Prospectus for greater detail concerning the WSI Merger.
HOLDERS OF WSI COMMON STOCK HAVE THE RIGHT TO DISSENT FROM THE WSI MERGER
AND RECEIVE PAYMENT FOR THE STATUTORY "FAIR VALUE" OF THEIR SHARES UPON
COMPLIANCE WITH THE PROVISIONS OF SECTION 262 OF THE DELAWARE GENERAL
CORPORATION LAW REGARDING APPRAISAL RIGHTS, A COPY OF WHICH IS ATTACHED AS ANNEX
F TO THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS AND IS SUMMARIZED THEREIN
UNDER THE CAPTION "THE WSI MERGER -- APPRAISAL RIGHTS."
Whether or not you plan to attend the Special Meeting, please complete,
date, sign and return promptly your proxy card in the enclosed envelope. If you
attend the Special Meeting, you may revoke your proxy and vote in person if you
wish.
Please do not send in your WSI stock certificates at this time. If the WSI
Merger is consummated, you will receive transmittal instructions for the
surrender and exchange of your WSI stock certificates from the exchange agent
shortly after the effective time of the WSI Merger.
By Order of the Board of Directors
Robert C. Walsh,
Secretary
Parsippany, New Jersey
, 1997
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH,
EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 13
JOINT PROXY STATEMENT
RESOURCE BANCSHARES MORTGAGE GROUP, INC.
RESOURCE BANCSHARES CORPORATION
WALSH HOLDING CO., INC.
PROSPECTUS
RESOURCE BANCSHARES MORTGAGE GROUP, INC.
COMMON STOCK, PAR VALUE $.01 PER SHARE
---------------------
RBMG SPECIAL MEETING
This Joint Proxy Statement/Prospectus is being furnished to stockholders of
Resource Bancshares Mortgage Group, Inc. ("RBMG") in connection with the
solicitation of proxies by the Board of Directors of RBMG (the "RBMG Board") for
use at a special meeting of stockholders of RBMG ("RBMG Stockholders") to be
held on , , 1997 and at any adjournment or postponement
thereof (the "RBMG Special Meeting"). At the RBMG Special Meeting, the RBMG
Stockholders will be asked to consider and vote upon a proposal to approve and
adopt (i) the Agreement of Merger (the "RBC Merger Agreement"), dated as of
April 18, 1997, among RBMG, RBC Merger Sub, Inc., a South Carolina corporation
and a wholly owned subsidiary of RBMG ("RBC Merger Sub"), and Resource
Bancshares Corporation, a South Carolina corporation ("RBC"), pursuant to which
RBC Merger Sub would be merged with and into RBC (the "RBC Merger"), (ii) the
RBC Merger and (iii) the issuance of shares of common stock, par value $.01 per
share, of RBMG ("RBMG Common Stock") in connection therewith (the "RBC Stock
Issuance"). RBC would be the surviving corporation in the RBC Merger and would
become a wholly owned subsidiary of RBMG. If the RBC Merger is consummated, each
outstanding share of voting common stock, par value $.01 per share, of RBC ("RBC
Voting Common Stock") and non-voting common stock, par value $.01 per share, of
RBC ("RBC Non-Voting Common Stock", and, together with RBC Voting Common Stock,
"RBC Common Stock") will be converted into the right to receive 1.08026 shares
(the "RBC Exchange Ratio") of RBMG Common Stock, with cash being paid in lieu of
fractional shares.
At the RBMG Special Meeting, the RBMG Stockholders will also be asked to
consider and vote upon a proposal to approve and adopt (i) the Agreement of
Merger (the "WSI Merger Agreement" and, together with the RBC Merger Agreement,
the "Merger Agreements"), dated as of April 18, 1997, among RBMG, Carolina
Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of RBMG
("Carolina Merger Sub"), Walsh Holding Co., Inc., a Delaware corporation
("WSI"), and Robert C. Walsh, the principal stockholder of WSI (the "Principal
Stockholder"), pursuant to which Carolina Merger Sub would be merged with and
into WSI (the "WSI Merger" and, together with the RBC Merger, the "Mergers"),
(ii) the WSI Merger and (iii) the issuance of shares of RBMG Common Stock in
connection therewith (the "WSI Stock Issuance"). WSI would be the surviving
corporation in the WSI Merger and would become a wholly owned subsidiary of
RBMG. If the WSI Merger is consummated, each outstanding share of class A common
stock, par value $.01 per share ("WSI Class A Common Stock"), and class B common
stock, par value $.01 per share, of WSI ("WSI Class B Common Stock", and
together with the WSI Class A Common Stock, "WSI Common Stock") will be
converted into (i) the right to receive 175,164.30 shares (the "WSI Exchange
Ratio") of RBMG Common Stock and (ii) the right to receive on a deferred basis
19,462.70 additional shares (the "WSI Escrow Stock Ratio" and, together with the
WSI Exchange Ratio, the "WSI Exchange Ratios") of RBMG Common Stock, with cash
being paid in lieu of fractional shares. If the RBC Merger is approved and
occurs prior to the effective time of the WSI Merger (the "WSI Effective Time"),
the WSI Exchange Ratio will be 192,460.50 and the WSI Escrow Stock Ratio will be
21,384.50.
At the RBMG Special Meeting and in connection with the RBC Merger, the RBMG
Stockholders will also be asked to consider and vote upon a proposal to approve
and adopt an amendment to RBMG's Restated Certificate of Incorporation (the "RBC
Amendment"), pursuant to which the number of shares of RBMG Common Stock that
RBMG would be authorized to issue would be increased from 25,000,000 shares to
50,000,000 shares. The approval and adoption of the RBC Amendment is contingent
upon the approval and adoption of the RBC Merger Agreement, the RBC Merger and
the RBC Stock Issuance, and the approval and adoption of the RBC Merger, the RBC
Merger Agreement and the RBC Stock Issuance is contingent upon the approval and
adoption of the RBC Amendment.
(continued on next page)
SEE "RISK FACTORS" ON PAGE 28 FOR A DISCUSSION OF CERTAIN INFORMATION RELEVANT
TO OWNERSHIP OF
RBMG COMMON STOCK AND THE RESPECTIVE MERGERS.
---------------------
THE SHARES OF RBMG COMMON STOCK TO BE ISSUED IN THE RBC MERGER AND THE WSI
MERGER HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS IS , 1997, AND IT
IS FIRST BEING MAILED OR OTHERWISE DELIVERED TO RBMG STOCKHOLDERS, RBC
STOCKHOLDERS AND WSI STOCKHOLDERS ON OR ABOUT , 1997.
<PAGE> 14
(continued from preceding page)
At the RBMG Special Meeting and in connection with the WSI Merger, the RBMG
Stockholders will also be asked to consider and vote upon a proposal to approve
and adopt an amendment to RBMG's Restated Certificate of Incorporation (the "WSI
Amendment" and, together with the RBC Amendment, "the Amendments"), pursuant to
which (i) the number of authorized shares of RBMG Common Stock would be
increased from 50,000,000 shares (25,000,000 shares if the RBC Amendment has not
become effective) to 100,000,000 shares, (ii) 12,000,000 shares of Class B
common stock, par value $.01 per share ("RBMG Class B Common Stock"), would be
authorized, and (iii) the name of RBMG would be changed to "BCA Financial Corp."
The approval and adoption of the WSI Amendment is contingent upon the approval
and adoption of the WSI Merger, the WSI Merger Agreement and the WSI Stock
Issuance, and the approval and adoption of the WSI Merger Agreement, the WSI
Merger and the WSI Stock Issuance is contingent upon the approval and adoption
of the WSI Amendment.
THE APPROVAL AND ADOPTION OF EACH OF THE RBC MERGER AND THE WSI MERGER (AND
THE RESPECTIVE MATTERS RELATING THERETO) ARE NOT CONTINGENT UPON THE APPROVAL
AND ADOPTION OF THE OTHER. RBMG STOCKHOLDERS MAY VOTE DIFFERENTLY ON THE
PROPOSALS RELATING TO THE RBC MERGER AND THOSE RELATING TO THE WSI MERGER.
RBC SPECIAL MEETING
This Joint Proxy Statement/Prospectus is also being furnished to holders of
RBC Voting Common Stock and RBC Non-Voting Common Stock ("RBC Stockholders") in
connection with the solicitation of proxies by the Board of Directors of RBC
(the "RBC Board") for use at a special meeting of RBC Stockholders to be held on
, 1997 and at any adjournment or postponement thereof (the "RBC
Special Meeting"). At the RBC Special Meeting, the RBC Stockholders will be
asked to consider and vote upon a proposal to approve and adopt the RBC Merger
Agreement and the RBC Merger.
WSI SPECIAL MEETING
This Joint Proxy Statement/Prospectus is also being furnished to holders of
WSI Class A Common Stock (the "WSI Stockholders") in connection with the
solicitation of proxies by the Board of Directors of WSI (the "WSI Board") for
use at a special meeting of WSI Stockholders to be held on ,
, 1997 and at any adjournment or postponement thereof (the "WSI
Special Meeting"). At the WSI Special Meeting, the WSI Stockholders will be
asked to consider and vote upon a proposal to approve and adopt the WSI Merger
Agreement and the WSI Merger. Certain stockholders, including WSI's executive
officers, who own in the aggregate approximately 93% of the outstanding WSI
Class A Common Stock, have entered into an Irrevocable Proxy Agreement (the
"Proxy Agreement") with RBMG pursuant to which they have granted to RBMG an
irrevocable proxy to vote the shares of WSI Class A Common Stock held by them at
the WSI Special Meeting. If RBMG elects to exercise this proxy, it must vote
such shares in favor of the proposal to approve and adopt the WSI Merger
Agreement and the WSI Merger. RBMG has indicated that it intends to exercise the
proxy and vote such shares in favor of such proposal. See "The WSI
Merger -- Certain Agreements In Connection With the WSI Merger -- Irrevocable
Proxy Agreement."
RBMG has filed a Registration Statement on Form S-4 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with the Securities and Exchange Commission (the "Commission") covering the
shares of RBMG Common Stock to be issued in connection with each of the Mergers.
This Joint Proxy Statement/Prospectus also constitutes the prospectus of RBMG
filed as part of the Registration Statement relating to the issuance of shares
of RBMG Common Stock to RBC Stockholders and WSI Stockholders pursuant to the
terms of the respective Merger Agreements.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN AS CONTAINED HEREIN IN CONNECTION WITH THE OFFER OF
RBMG COMMON STOCK TO BE ISSUED IN CONNECTION WITH EACH OF THE MERGERS, AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY RBMG, RBC, WSI OR ANY OTHER PERSON. THIS JOINT PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO PURCHASE RBMG COMMON STOCK IN ANY JURISDICTION IN WHICH SUCH OFFER
OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT WOULD BE
UNLAWFUL. NEITHER THE DELIVERY OF THIS JOINT PROXY STATEMENT/PROSPECTUS NOR ANY
DISTRIBUTION OF SUCH RBMG COMMON STOCK SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
ii
<PAGE> 15
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in the Summary and under the captions "Risk Factors,"
"The RBC Merger," "The WSI Merger," and elsewhere in this Joint Proxy
Statement/Prospectus constitute "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of RBMG, RBC and
WSI or industry results to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Such factors include, among others, the following: general economic
and business conditions; adverse changes in the industry; competition with other
companies; government actions and initiatives; and other changes and factors
referenced in this Joint Proxy Statement/Prospectus. See "Risk Factors."
AVAILABLE INFORMATION
RBMG is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information filed with the
Commission by RBMG can be inspected and copied at the office of the Commission
at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, or at its Regional
Offices located at 7 World Trade Center, Suite 1300, New York, New York 10048,
and 500 West Madison Street, Suite 1400, Chicago, Illinois, 60661-2511, and
copies of such materials can be obtained from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission also maintains a web site on the Internet that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission and that is located at
http://www.sec.gov.
RBMG has filed with the Commission the Registration Statement under the
Securities Act. This Joint Proxy Statement/Prospectus does not contain all of
the information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission. For
further information relating to RBMG and the shares of RBMG Common Stock offered
hereby, reference is hereby made to the Registration Statement, including the
exhibits and schedules thereto, which may be inspected without charge at the
office of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and
copies of which may be obtained from the Commission at prescribed rates.
Statements contained in this Joint Proxy Statement/Prospectus as to the contents
of any contract or other document referred to are not necessarily complete and
in each instance reference is made to the copy of such contract or document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission by RBMG are
incorporated by reference into this Joint Proxy Statement/Prospectus:
(i) RBMG's Annual Report on Form 10-K for the year ended December 31,
1996, filed on March 28, 1997, as amended by the Form 10-K/A filed on April
30, 1997;
(ii) RBMG's Quarterly Report on Form 10-Q for the quarter ended March
31, 1997, filed on May 15, 1997;
(iii) RBMG's Report on Form 8-K filed on April 21, 1997; and
(iv) The description of the RBMG Common Stock contained in RBMG's
Registration Statement on Form 8-A filed on May 18, 1993.
In addition, all documents filed by RBMG pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Joint Proxy
Statement/Prospectus and prior to the later of the date of the RBMG Special
Meeting, the RBC Special Meeting or the WSI Special Meeting shall be deemed to
be incorporated by reference into this Joint Proxy Statement/Prospectus and to
be a part hereof from the date of filing of such
iii
<PAGE> 16
documents. Any statements contained in a document incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this Joint
Proxy Statement/Prospectus to the extent that a statement contained herein (or
in any other subsequently filed document which also is incorporated by reference
herein) modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed to constitute a part of this Joint Proxy
Statement/Prospectus except as so modified or superseded.
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF THESE DOCUMENTS
(OTHER THAN EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS) ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RESOURCE BANCSHARES MORTGAGE GROUP, INC.,
INVESTOR RELATIONS, 7909 PARKLANE ROAD, COLUMBIA, SOUTH CAROLINA 29223, (803)
741-3000. TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY SUCH REQUEST SHOULD BE
MADE BY , 1997.
iv
<PAGE> 17
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS........... iii
AVAILABLE INFORMATION....................................... iii
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. iii
SUMMARY..................................................... 1
The Parties............................................... 1
General Information....................................... 2
The RBMG Special Meeting.................................. 3
The RBC Special Meeting................................... 4
The WSI Special Meeting................................... 5
The RBC Merger............................................ 7
The WSI Merger............................................ 12
The Charter Amendments.................................... 19
The RBMG Rights Plan...................................... 20
Markets and Market Prices................................. 21
Equivalent and Pro Forma Per Common Share Data............ 22
Selected Historical Financial Data........................ 24
RISK FACTORS................................................ 28
Risks Associated with the Mergers......................... 28
Risks Relating Generally Both to Business of RBMG and to
Business of WSI........................................ 29
Risks Relating to Business of RBMG........................ 31
Risks Relating to Business of WSI......................... 36
Risks Relating to Business of RBC......................... 39
GENERAL INFORMATION......................................... 42
THE RBMG SPECIAL MEETING.................................... 42
Time, Date, Place and Purpose............................. 42
Record Date and Shares Entitled to Vote................... 42
Vote Required; Security Ownership of Management........... 42
Solicitation and Revocation of Proxies.................... 43
THE RBC SPECIAL MEETING..................................... 44
Time, Date, Place and Purpose............................. 44
Record Date and Shares Entitled to Vote................... 44
Vote Required; Security Ownership of Management........... 44
Solicitation and Revocation of Proxies.................... 44
THE WSI SPECIAL MEETING..................................... 45
Time, Date, Place and Purpose............................. 45
Record Date and Shares Entitled to Vote................... 45
Vote Required; Security Ownership of Management........... 45
Solicitation and Revocation of Proxies.................... 46
THE RBC MERGER.............................................. 46
Background of the RBC Merger.............................. 46
Terms of the RBC Merger Agreement......................... 49
Effective Time of the RBC Merger and Exchange of Shares... 51
Opinion of RBC's Financial Advisor........................ 52
Recommendation of the RBC Board........................... 55
Opinion of RBMG's Financial Advisor....................... 55
Recommendation of the RBMG Board.......................... 59
Reasons for the RBC Merger................................ 60
Regulatory Approvals Required............................. 61
Interests of Certain Persons in the RBC Merger............ 61
</TABLE>
v
<PAGE> 18
<TABLE>
<S> <C>
Accounting Treatment.................................................................................... 62
Certain Federal Income Tax Consequences................................................................. 62
Resale of RBMG Common Stock............................................................................. 63
Comparison of Rights of Holders of RBMG Common Stock and RBC Common Stock............................... 63
Dissenters' Rights...................................................................................... 72
THE WSI MERGER............................................................................................ 74
Background of the WSI Merger............................................................................ 74
Terms of the WSI Merger Agreement....................................................................... 76
Effective Time of the WSI Merger and Exchange of Shares................................................. 80
Recommendation of WSI Board............................................................................. 80
Opinion of RBMG's Financial Advisor..................................................................... 81
Recommendation of the RBMG Board........................................................................ 84
Reasons for the WSI Merger.............................................................................. 84
Certain Agreements in Connection with the WSI Merger.................................................... 86
Regulatory Approvals Required........................................................................... 93
Interests of Certain Persons in the WSI Merger.......................................................... 93
Accounting Treatment.................................................................................... 94
Certain Federal Income Tax Consequences................................................................. 95
Resale of RBMG Common Stock............................................................................. 96
Comparison of Rights of Holders of RBMG Common Stock and WSI Common Stock............................... 97
Appraisal Rights........................................................................................ 101
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS............................................... 104
BUSINESS OF RBMG.......................................................................................... 117
BUSINESS OF RBC........................................................................................... 117
General................................................................................................. 117
Small Ticket Equipment Leasing Business................................................................. 117
Commercial Mortgage Banking Business.................................................................... 118
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF RBC.............. 120
Background.............................................................................................. 120
Small Ticket Equipment Leasing.......................................................................... 120
Commercial Mortgage Banking............................................................................. 121
Investment in RBMG...................................................................................... 121
Credit Card Operations.................................................................................. 122
Results of Operations -- Three Months Ended March 31, 1997, Compared to Three Months Ended March 31,
1996................................................................................................. 122
Results of Operations -- Year Ended December 31, 1996, Compared to Year Ended December 31, 1995......... 124
Results of Operations -- Year Ended December 31, 1995, Compared to Year Ended December 31, 1994......... 126
Liquidity and Capital Resources......................................................................... 128
RBC COMMON STOCK OWNERSHIP BY MANAGEMENT AND PRINCIPAL STOCKHOLDERS....................................... 129
Principal Stockholders.................................................................................. 129
Stock Ownership of RBC's Directors and Executive Officers............................................... 131
BUSINESS OF WSI........................................................................................... 133
Loan Originations and Purchases......................................................................... 133
Loan Underwriting....................................................................................... 135
Loan Production by Borrower Risk Classification......................................................... 136
Financing and Sale of Loans............................................................................. 136
Loan Servicing and Collections.......................................................................... 137
</TABLE>
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<TABLE>
<S> <C>
Marketing............................................................................................... 138
Walsh Property, Inc..................................................................................... 138
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF WSI.............. 139
General................................................................................................. 139
Results of Operations................................................................................... 140
Liquidity and Capital Resources......................................................................... 142
WSI COMMON STOCK OWNERSHIP BY MANAGEMENT AND PRINCIPAL STOCKHOLDERS....................................... 145
DIRECTORS AND EXECUTIVE OFFICERS.......................................................................... 146
Executive Compensation.................................................................................. 147
Employment Agreements................................................................................... 147
THE CHARTER AMENDMENTS.................................................................................... 147
General................................................................................................. 147
RBC Amendment........................................................................................... 148
WSI Amendment........................................................................................... 148
Recommendations of the RBMG Board....................................................................... 149
EXPERTS................................................................................................... 149
LEGAL MATTERS............................................................................................. 150
STOCKHOLDER PROPOSALS..................................................................................... 150
INDEX TO FINANCIAL STATEMENTS............................................................................. F-1
ANNEX A: RBC MERGER AGREEMENT............................................................................. A-1
ANNEX B: WSI MERGER AGREEMENT............................................................................. B-1
ANNEX C: AMENDMENT TO RBMG RESTATED CERTIFICATE OF INCORPORATION RELATING TO THE RBC MERGER............... C-1
ANNEX D: AMENDMENT TO RBMG RESTATED CERTIFICATE OF INCORPORATION RELATING TO THE WSI MERGER............... D-1
ANNEX E: CHAPTER 13 OF THE SOUTH CAROLINA BUSINESS CORPORATION ACT........................................ E-1
ANNEX F: SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW.............................................. F-1
ANNEX G: OPINION OF PRUDENTIAL SECURITIES INCORPORATED AS TO THE RBC MERGER............................... G-1
ANNEX H: OPINION OF PRUDENTIAL SECURITIES INCORPORATED AS TO THE WSI MERGER............................... H-1
ANNEX I: OPINION OF MONTGOMERY SECURITIES................................................................. I-1
</TABLE>
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<PAGE> 20
SUMMARY
The following is a summary of certain information contained, or
incorporated by reference, elsewhere in this Joint Proxy Statement/Prospectus.
This summary is not intended to be complete and is qualified in its entirety by
reference to, and should be read in conjunction with, the detailed information
and financial statements appearing elsewhere, or incorporated by reference, in
this Joint Proxy Statement/Prospectus. Each stockholder is urged to read this
Joint Proxy Statement/Prospectus and the Annexes hereto in their entirety and
with care.
THE PARTIES
RBMG
RBMG is a full-service residential mortgage company that originates and
purchases conforming loans through a network of approximately 897 correspondent
lenders, 2,423 wholesale brokers and six retail offices. RBMG generally pools
the mortgages it originates or purchases, creating mortgage-backed securities,
and sells these securities to financial institutions throughout the United
States. RBMG retains in its portfolio or sells to other approved servicers,
generally the largest servicers in the country, the mortgage servicing rights
associated with the loans it originates or purchases. RBMG originates and
services loans made to borrowers located in 48 states and the District of
Columbia. See "Business of RBMG."
For the year ended December 31, 1996, RBMG purchased or originated
approximately $10.0 billion of agency-eligible mortgage loans to rank as the
eleventh-largest residential mortgage originator in the country. Also during
1996, RBMG sold servicing rights associated with substantially all of its loan
production (approximately $9.5 billion of underlying unpaid mortgage loan
principal balances were sold), positioning itself among the largest national
suppliers of mortgage servicing rights within the still-consolidating mortgage
servicing industry. At December 31, 1996, RBMG was ranked as the 51st largest
servicer of mortgage loans based upon its servicing portfolio of approximately
$6.7 billion.
RBMG continues to emphasize correspondent and, to a lesser degree,
wholesale mortgage banking as its primary business focus, which enables it to
enter and exit geographic markets without incurring significant startup costs or
additional fixed expenses, thereby facilitating maintenance of one of the
industry's lowest-cost operating structures. Approximately 93% of RBMG's 1996
loan production was purchased through its correspondent and wholesale channels,
and RBMG was ranked as the sixth-largest correspondent/broker originator for
1996.
RBMG is incorporated under the laws of the State of Delaware. RBMG Common
Stock is traded on the Nasdaq National Market under the symbol "REMI." Unless
the context otherwise requires, references to RBMG include RBMG and its
subsidiaries. RBMG's corporate offices are located at 7909 Parklane Road,
Columbia, South Carolina 29223, and its telephone number is (803) 741-3000.
RBC
RBC, a financial services company, originates and purchases, sells and
services small ticket equipment leases and originates for investors and services
commercial mortgage loans. In addition, RBC invests in financial services
companies and owns approximately 36.5% of the outstanding RBMG Common Stock and
11% of Intek Information, Inc. ("Intek"), a teleservicing company. See "Business
of RBC."
RBC, through its Republic Leasing Company division, ("Republic Leasing"),
originated and purchased $63 million of small ticket equipment leases during
1996 through a network of approximately 285 brokers. During 1996, Republic
Leasing sold approximately $70 million and was servicing approximately $130
million of such leases at December 31, 1996.
During 1996, RBC, through Laureate Realty Services, Inc., a second-tier
wholly owned subsidiary ("Laureate Realty"), originated approximately $509
million of commercial mortgage loans. Based on its June 30, 1996 servicing
portfolio of $2.2 billion, Laureate Realty was ranked as the 20th largest
commercial mortgage loan servicer. At December 31, 1996, Laureate Realty was
servicing approximately $2.3 billion of commercial
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<PAGE> 21
mortgage loans. At March 31, 1997, Laureate Realty was servicing approximately
$2.4 billion of commercial mortgage loans.
RBC is incorporated under the laws of the State of South Carolina. There is
no trading market for the shares of RBC Common Stock. Unless the context
otherwise requires, references to RBC include RBC and its subsidiaries. RBC's
corporate offices are located at 1901 Main Street, Suite 650, Columbia, South
Carolina 29201, and its telephone number is (803) 799-2256.
WSI
WSI is a specialty finance mortgage company which, for the year ended
December 31, 1996, purchased or originated approximately $660 million of
non-conforming, or sub-prime, mortgage loans to rank as the twenty-third largest
sub-prime originator in the nation. WSI also sells and securitizes all
originated and purchased loans and the servicing rights associated with such
loans, substantially all of which are secured by first mortgage liens on
one-to-four family residences. WSI generally focuses on lending to individuals
who have impaired or limited credit histories or unverifiable income to finance
the purchase of a home, to consolidate debt, to finance home improvements and to
pay for education. At March 31, 1997, WSI was operating through 10 branches
located in nine states throughout the country. See "Business of WSI."
WSI focuses exclusively on the origination and purchase of non-conforming
loans through a network of approximately 1,600 correspondent lenders (i.e.,
mortgage bankers), substantially all of whom primarily originate conforming
agency-eligible mortgage loans. This enables WSI to acquire its non-conforming
loans at low purchase premiums from customers who are not strategically focused
on originating non-conforming products, while facilitating maintenance of a
limited branch network and one of the industry's lowest-cost operating
structures. Approximately 93% of 1996 loan production was purchased through the
correspondent network.
WSI is incorporated under the laws of the State of Delaware. There is no
trading market for the shares of WSI Common Stock. Unless the context otherwise
requires, references to WSI include WSI and its subsidiaries. WSI's corporate
offices are located at 4 Campus Drive, Parsippany, New Jersey 07054, and its
telephone number is (201) 538-9300.
GENERAL INFORMATION
This Joint Proxy Statement/Prospectus is being furnished to (i) the RBMG
Stockholders in connection with the solicitation of proxies by the RBMG Board
for approval and adoption of (A) the RBC Merger Agreement, the RBC Merger and
the RBC Stock Issuance, (B) the WSI Merger Agreement, the WSI Merger and the WSI
Stock Issuance, (C) the RBC Amendment and (D) the WSI Amendment; (ii) the RBC
Stockholders in connection with the solicitation of proxies by the RBC Board for
approval and adoption of the RBC Merger Agreement and the RBC Merger; and (iii)
the WSI Stockholders in connection with the solicitation of proxies by the WSI
Board for approval and adoption of the WSI Merger Agreement and the WSI Merger.
If the RBC Merger is consummated, each outstanding share of RBC Voting
Common Stock and RBC Non-Voting Common Stock (other than treasury shares, shares
of RBC Common Stock held by RBC Stockholders who perfect their dissenters'
rights under South Carolina law and shares of RBC Common Stock owned by RBMG or
any wholly owned subsidiary of RBMG) will be converted into the right to receive
such number of shares of RBMG Common Stock equal to the RBC Exchange Ratio, with
cash being paid in lieu of any fractional shares. Pursuant to the Articles of
Incorporation of RBC (the "RBC Articles"), immediately prior to the effective
time of the RBC Merger (the "RBC Effective Time"), each outstanding share of RBC
Non-Voting Common Stock will automatically convert into one share of RBC Voting
Common Stock.
If the WSI Merger is consummated, each outstanding share of WSI Class A
Common Stock and WSI Class B Common Stock (other than treasury shares, shares of
WSI Common Stock held by WSI Stockholders who perfect their appraisal rights
under Delaware law and shares of WSI Common Stock owned by RBMG or any wholly
owned subsidiary of RBMG) will be converted into (i) the right to receive such
number of shares of RBMG Common Stock equal to the WSI Exchange Ratio and (ii)
the right to receive on a deferred basis such
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<PAGE> 22
number of shares of RBMG Common Stock equal to the WSI Escrow Stock Ratio, with
cash being paid in lieu of any fractional shares.
This Joint Proxy Statement/Prospectus also constitutes the Prospectus of
RBMG with respect to the shares of RBMG Common Stock to be issued in each of the
Mergers. Information in this Joint Proxy Statement/Prospectus with respect to
RBMG has been supplied by RBMG. The information with respect to RBC and WSI has
been supplied by RBC and WSI, respectively.
THE RBMG SPECIAL MEETING
TIME, DATE, PLACE AND PURPOSE
The RBMG Special Meeting will be held on , , 1997,
at , local time, at the offices of King & Spalding, 191 Peachtree Street,
Atlanta, Georgia 30303. At the RBMG Special Meeting, RBMG Stockholders will be
asked to consider and vote upon proposals to approve and adopt (i) the RBC
Merger Agreement, the RBC Merger and the RBC Stock Issuance, (ii) the WSI Merger
Agreement, the WSI Merger and the WSI Stock Issuance, (iii) the RBC Amendment
and (iv) the WSI Amendment. Copies of the RBC Merger Agreement, the WSI Merger
Agreement, the RBC Amendment and the WSI Amendment are attached hereto as Annex
A, Annex B, Annex C and Annex D, respectively, and are incorporated herein by
reference.
RECORD DATE AND SHARES ENTITLED TO VOTE
Only holders of record of shares of RBMG Common Stock at the close of
business on (the "RBMG Record Date") are entitled to notice of
and to vote at the RBMG Special Meeting and any adjournment or postponement
thereof. As of such date, there were shares of RBMG Common Stock
issued and outstanding held by approximately holders of record. Holders of
record of RBMG Common Stock on the RBMG Record Date for the RBMG Special Meeting
are entitled to one vote per share on any matter that may properly come before
the RBMG Special Meeting.
VOTE REQUIRED; SECURITY OWNERSHIP OF MANAGEMENT
The presence in person or by proxy of the holders of a majority of the
shares of RBMG Common Stock issued and outstanding as of the RBMG Record Date
and entitled to vote at the RBMG Special Meeting is necessary to constitute a
quorum at the RBMG Special Meeting. The affirmative vote of the holders of a
majority of the shares of RBMG Common Stock issued and outstanding as of the
RBMG Record Date, voting in person or by proxy, is necessary to approve and
adopt each of the Merger Agreements, the Mergers, the RBC Stock Issuance, the
WSI Stock Issuance and the Amendments. Accordingly, a failure to vote or an
abstention will have the same effect as a negative vote. As of the RBMG Record
Date, the executive officers and directors of RBMG and their affiliates
beneficially owned an aggregate of shares of RBMG Common Stock, or
approximately % of the shares of RBMG Common Stock then outstanding. Each
of the executive officers and directors of RBMG has advised RBMG that he intends
to vote his shares of RBMG Common Stock in favor of each of the proposals to
approve and adopt the Merger Agreements, the Mergers, the RBC Stock Issuance,
the WSI Stock Issuance and the Amendments. RBC owns approximately 36.5% of the
outstanding RBMG Common Stock. The RBC Board has not yet authorized the voting
(either for, against or abstention) of the shares of RBMG Common Stock owned by
RBC in connection with the Merger Agreements, the Mergers, the RBC Stock
Issuance, the WSI Stock Issuance and the Amendments.
THE APPROVAL AND ADOPTION OF EACH OF THE RBC MERGER AGREEMENT, THE RBC
MERGER, THE RBC STOCK ISSUANCE AND THE RBC AMENDMENT IS CONTINGENT UPON THE
APPROVAL AND ADOPTION OF ALL OF THE RBC MERGER AGREEMENT, THE RBC MERGER, THE
RBC STOCK ISSUANCE AND THE RBC AMENDMENT. UNLESS EACH OF THE RBC MERGER
AGREEMENT, THE RBC MERGER, THE RBC STOCK ISSUANCE AND THE RBC AMENDMENT IS
APPROVED AND ADOPTED BY THE RBMG STOCKHOLDERS AT THE RBMG SPECIAL MEETING, NONE
OF THEM WILL BE EFFECTED BY RBMG.
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<PAGE> 23
THE APPROVAL AND ADOPTION OF EACH OF THE WSI MERGER AGREEMENT, THE WSI
MERGER, THE WSI STOCK ISSUANCE AND THE WSI AMENDMENT IS CONTINGENT UPON THE
APPROVAL AND ADOPTION OF ALL OF THE WSI MERGER AGREEMENT, THE WSI MERGER, THE
WSI STOCK ISSUANCE AND THE WSI AMENDMENT. UNLESS EACH OF THE WSI MERGER
AGREEMENT, THE WSI MERGER, THE WSI STOCK ISSUANCE AND THE WSI AMENDMENT IS
APPROVED AND ADOPTED BY THE RBMG STOCKHOLDERS AT THE RBMG SPECIAL MEETING, NONE
OF THEM WILL BE EFFECTED BY RBMG.
THE APPROVAL AND ADOPTION OF EACH OF THE RBC MERGER AND THE WSI MERGER (AND
THE RESPECTIVE MATTERS RELATING THERETO) ARE NOT CONTINGENT UPON THE APPROVAL
AND ADOPTION OF THE OTHER. RBMG STOCKHOLDERS MAY VOTE DIFFERENTLY ON THE
PROPOSALS RELATING TO THE RBC MERGER AND THOSE RELATING TO THE WSI MERGER.
SOLICITATION AND REVOCATION OF PROXIES
A form of proxy for the RBMG Special Meeting is enclosed with the copies of
this Joint Proxy Statement/ Prospectus being sent to RBMG Stockholders. All
shares of RBMG Common Stock held of record as of the RBMG Record Date
represented by properly executed proxies will, unless such proxies have been
previously revoked, be voted in accordance with the instructions indicated on
such proxies. If no instructions are indicated, such shares will be voted FOR
each of the proposals to approve and adopt the Merger Agreements, the Mergers,
the RBC Stock Issuance, the WSI Stock Issuance and the Amendments and, in the
discretion of the proxy holder, as to any other matter which may properly come
before the RBMG Special Meeting.
The RBMG Board is not aware of any other matters which may be presented for
action at the RBMG Special Meeting, but if other matters do come properly before
the RBMG Special Meeting it is intended that shares represented by proxies in
the accompanying form will be voted by the persons named in the proxy in
accordance with their best judgment. Any proxy given pursuant to this
solicitation may be revoked in writing by the person giving it at any time
before the proxy is exercised by giving notice to the RBMG Secretary or by
submitting a proxy having a later date or by such person appearing at the RBMG
Special Meeting and electing to vote in person.
THE RBC SPECIAL MEETING
TIME, DATE, PLACE AND PURPOSE
The RBC Special Meeting will be held on , , 1997
at , local time, at the offices of King & Spalding, 191 Peachtree Street,
Atlanta, Georgia 30303. At the RBC Special Meeting, holders of RBC Common Stock
will be asked to consider and vote upon a proposal to approve and adopt the RBC
Merger Agreement and the RBC Merger. A copy of the RBC Merger Agreement is
attached hereto as Annex A and is incorporated herein by reference.
RECORD DATE AND SHARES ENTITLED TO VOTE
Only holders of record of shares of RBC Voting Common Stock and RBC
Non-Voting Common Stock at the close of business on (the "RBC
Record Date") are entitled to notice of and to vote at the RBC Special Meeting.
As of such date, there were 7,121,245 shares of RBC Voting Common Stock issued
and outstanding held by approximately 182 holders of record and 1,577,788 shares
of RBC Non-Voting Common Stock issued and outstanding and held by six holders of
record. Holders of record of RBC Voting Common Stock on the RBC Record Date for
the RBC Special Meeting are entitled to one vote per share on any matter that
may properly come before the RBC Special Meeting. Holders of record of RBC
Non-Voting Common Stock on the RBC Record Date for the RBC Special Meeting are
entitled to one vote per share only with respect to the approval and adoption of
the RBC Merger Agreement and the RBC Merger.
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<PAGE> 24
VOTE REQUIRED; SECURITY OWNERSHIP OF MANAGEMENT
The presence in person or by proxy of the holders of (i) a majority of the
shares of RBC Voting Common Stock issued and outstanding as of the RBC Record
Date and entitled to vote at the RBC Special Meeting and (ii) a majority of the
shares of RBC Non-Voting Common Stock issued and outstanding as of the RBC
Record Date and entitled to vote at the RBC Special Meeting is necessary to
constitute a quorum at the RBC Special Meeting. The affirmative vote of the
holders of (i) a majority of the shares of RBC Voting Common Stock entitled to
vote at the RBC Special Meeting, voting separately, and (ii) a majority of the
shares of RBC Non-Voting Common Stock entitled to vote at the RBC Special
Meeting, voting separately, is necessary to approve and adopt the RBC Merger
Agreement and the RBC Merger. Accordingly, a failure to vote or an abstention
will have the same effect as a negative vote. As of the RBC Record Date, the
executive officers and directors of RBC and their affiliates beneficially owned
an aggregate of shares of RBC Voting Common Stock, or approximately
% of the shares of RBC Voting Common Stock then outstanding, and
shares of RBC Non-Voting Common Stock, or approximately % of the shares of
RBC Non-Voting Common Stock then outstanding. Each of the executive officers and
directors of RBC has advised RBC that he intends to vote his shares of RBC
Common Stock to approve and adopt the RBC Merger Agreement and the RBC Merger.
SOLICITATION AND REVOCATION OF PROXIES
A form of proxy for the RBC Special Meeting is enclosed with the copies of
this Joint Proxy Statement/ Prospectus being sent to RBC Stockholders. All
shares of RBC Common Stock held of record as of the RBC Record Date, represented
by properly executed proxies will, unless such proxies have been previously
revoked, be voted in accordance with the instructions indicated on such proxies.
If no instructions are indicated, such shares will be voted FOR the proposal to
approve and adopt the RBC Merger Agreement and the RBC Merger and, with respect
to shares of RBC Voting Common Stock, in the discretion of the proxy holder, as
to any other matter which may properly come before the RBC Special Meeting.
The RBC Board is not aware of any other matters which may be presented for
action at the RBC Special Meeting, but if other matters do come properly before
the RBC Special Meeting it is intended that shares of RBC Voting Common Stock
represented by proxies in the accompanying form will be voted by the persons
named in the proxy in accordance with their best judgment. Any proxy given
pursuant to this solicitation may be revoked in writing by the person giving it
at any time before the proxy is exercised by giving notice to the RBC Secretary
or by submitting a proxy having a later date or by such person appearing at the
RBC Special Meeting and electing to vote in person.
THE WSI SPECIAL MEETING
TIME, DATE, PLACE AND PURPOSE
The WSI Special Meeting will be held on , , 1997
at , local time, at the offices of WSI located at 4 Campus Drive,
Parsippany, New Jersey 07054. At the WSI Special Meeting, holders of WSI Class A
Common Stock will be asked to consider and vote upon a proposal to approve and
adopt the WSI Merger Agreement and the WSI Merger. A copy of the WSI Merger
Agreement is attached hereto as Annex B and is incorporated herein by reference.
RECORD DATE AND SHARES ENTITLED TO VOTE
Only holders of record of shares of WSI Class A Common Stock at the close
of business on , 1997 (the "WSI Record Date") are entitled to notice
of and to vote at the WSI Special Meeting. As of such date, there were 75 shares
of WSI Class A Common Stock issued and outstanding held by 19 holders of record,
and no shares of WSI Class B Common Stock outstanding. Holders of record of WSI
Class A Common Stock on the WSI Record Date for the WSI Special Meeting are
entitled to one vote per share on any matter that may properly come before the
WSI Special Meeting.
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<PAGE> 25
VOTE REQUIRED; SECURITY OWNERSHIP OF MANAGEMENT
The presence in person or by proxy of the holders of a majority of the
shares of WSI Class A Common Stock issued and outstanding as of the WSI Record
Date and entitled to vote at the WSI Special Meeting is necessary to constitute
a quorum at the WSI Special Meeting. The affirmative vote of the holders of a
majority of the shares of WSI Class A Common Stock entitled to vote at the WSI
Special Meeting is necessary to approve and adopt the WSI Merger Agreement and
the WSI Merger. Accordingly, a failure to vote or an abstention will have the
same effect as a negative vote. As of the WSI Record Date, the executive
officers and directors of WSI and their affiliates beneficially owned an
aggregate of 70.06 shares of WSI Class A Common Stock, or approximately 93% of
the shares of WSI Class A Common Stock then outstanding. Certain stockholders,
including WSI's executive officers, who as of the WSI Record Date owned in the
aggregate approximately 93% of the outstanding WSI Class A Common Stock, have
entered into the Proxy Agreement with RBMG pursuant to which they have granted
to RBMG an irrevocable proxy to vote the shares of WSI Class A Common Stock held
by them at the WSI Special Meeting. If RBMG elects to exercise this proxy, it
must vote such shares in favor of the proposal to approve and adopt the WSI
Merger Agreement and the WSI Merger. RBMG has indicated that it intends to
exercise the proxy and vote such shares in favor of such proposal. See "The WSI
Merger -- Certain Agreements in Connection with the WSI Merger -- Irrevocable
Proxy Agreement."
SOLICITATION AND REVOCATION OF PROXIES
A form of proxy for the WSI Special Meeting is enclosed with the copies of
this Joint Proxy Statement/ Prospectus being sent to WSI Stockholders. All
shares of WSI Class A Common Stock held of record as of the WSI Record Date,
represented by properly executed proxies, will, unless such proxies have been
previously revoked, be voted in accordance with the instructions indicated on
such proxies. If no such instructions are indicated, such shares will be voted
FOR the proposal to approve and adopt the WSI Merger Agreement and the WSI
Merger and, in the discretion of the proxy holder, as to any other matter which
may properly come before the WSI Special Meeting.
The WSI Board is not aware of any other matters which may be presented for
action at the WSI Special Meeting, but if other matters do come properly before
the WSI Special Meeting it is intended that shares represented by proxies in the
accompanying form will be voted by the persons named in the proxy in accordance
with their best judgment. Any proxy given pursuant to this solicitation may be
revoked in writing by the person giving it at any time before the proxy is
exercised by giving notice to the WSI Secretary or by submitting a proxy having
a later date or by such person appearing at the WSI Special Meeting and electing
to vote in person.
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<PAGE> 26
THE RBC MERGER
BACKGROUND OF THE RBC MERGER
Between 1989 and 1993, RBC operated a residential mortgage banking business
as a division of a bank subsidiary. On June 3, 1993, RBC transferred the assets
and liabilities of its residential mortgage banking business to RBMG, a new
wholly owned subsidiary of RBC, and RBMG simultaneously sold 58% of its common
stock in an initial public offering. Accordingly, immediately thereafter RBC
owned 42% of the outstanding RBMG Common Stock. In conjunction with its ongoing
strategic planning and commencing in 1994, RBC had been considering various
alternatives to provide liquidity for its stockholders. Since September 1995,
RBMG had been examining a range of strategic options to diversify its lines of
business. During 1995 and 1996, management of RBMG and RBC periodically met to
discuss various strategic alternatives, some of which contemplated various
combinations of RBMG's and RBC's distinct business activities. On January 23 and
January 25, 1997, management of RBMG and RBC met to discuss the possibility of a
business combination between RBMG and RBC. Following those meetings, the RBMG
Board appointed a Special Committee of the RBMG Board (the "RBMG Special
Committee") to consider and evaluate the proposed acquisition of RBC and the
proposed business combination with WSI. On January 29, 1997, the parties were
authorized to commence due diligence investigations of the proposed transaction
with RBC. On February 10, 1997, RBC selected Montgomery Securities to act as its
financial advisor. On February 13, 1997, the RBMG Special Committee approved the
engagement of Prudential Securities Incorporated ("Prudential Securities") to
serve as its financial advisor to assist in evaluating each of the proposed
transactions on its respective merits. Over the next two months, discussions
ensued regarding the terms of a possible merger between RBMG and RBC. A
definitive merger agreement was executed on April 18, 1997.
TERMS OF THE RBC MERGER AGREEMENT
General. The RBC Merger Agreement provides that, following approval of the
RBC Merger Agreement by the stockholders of RBC and RBMG and the satisfaction or
waiver of the other conditions to the RBC Merger, RBC Merger Sub will be merged
with and into RBC at the RBC Effective Time in accordance with the South
Carolina Business Corporation Act (the "SCBCA"). RBC will be the surviving
corporation in the RBC Merger. As a result of the RBC Merger, the separate
corporate existence of RBC Merger Sub will cease, and RBC will become a wholly
owned subsidiary of RBMG.
Conversion of Shares. The RBC Merger Agreement provides that each share of
RBC Voting Common Stock and RBC Non-Voting Common Stock issued and outstanding
immediately before the RBC Effective Time (other than treasury shares, shares of
RBC Common Stock held by RBC Stockholders who perfect their dissenters' rights
under South Carolina law and shares of RBC Common Stock owned by RBMG or any
wholly owned subsidiary of RBMG) and all rights in respect thereof shall, at the
RBC Effective Time, be converted into and become exchangeable for 1.08026 shares
(the "RBC Exchange Ratio") of RBMG Common Stock, with cash being paid in lieu of
fractional shares. The RBC Exchange Ratio is subject to adjustment in the event
of certain changes in the number of outstanding shares of RBC Voting Common
Stock and RBC Non-Voting Common Stock or RBMG Common Stock. See "The RBC
Merger -- Terms of the RBC Merger Agreement -- Conversion of Shares."
Directors and Officers of RBC following the RBC Merger. The officers of
RBC immediately prior to the RBC Effective Time will continue to serve in their
respective offices after the RBC Effective Time. The directors of RBC Merger Sub
immediately prior to the RBC Effective Time will become the directors of RBC as
of the RBC Effective Time. The directors of RBC Merger Sub are Edward J.
Sebastian and David W. Johnson, Jr.
Indemnification Obligations. RBMG has agreed in the RBC Merger Agreement
to indemnify certain officers and directors of RBC and RBMG for a period of six
years against liabilities arising prior to the RBC Effective Time or arising out
of the RBC Merger. See "The RBC Merger -- Terms of the RBC Merger
Agreement -- Indemnification Obligations."
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<PAGE> 27
No Solicitation. The RBC Merger Agreement provides that RBC may not
solicit or facilitate mergers, sales of significant assets, tender offers or
similar transactions with other persons prior to the RBC Effective Time. See
"The RBC Merger -- Terms of the RBC Merger Agreement -- No Solicitation."
Conditions to RBC Merger. In addition to certain customary conditions,
consummation of the RBC Merger is subject to the satisfaction of, or, if
permitted by applicable law, the waiver of, among others, the following
conditions: (i) the effectiveness of the Registration Statement; (ii) the
approval of the RBC Merger Agreement, the RBC Merger and the RBC Amendment by
the RBMG Stockholders and approval of the RBC Merger Agreement and the RBC
Merger by the RBC Stockholders; (iii) receipt of certain regulatory approvals;
and (iv) receipt of an opinion of McNair Law Firm, P.A or King & Spalding to the
effect that the RBC Merger will be treated for federal income tax purposes as a
reorganization qualifying under the provisions of Section 368(a) of the United
States Internal Revenue Code of 1986, as amended (the "Code"), and that the RBC
Stockholders will recognize no gain or loss upon the receipt of shares of RBMG
Common Stock in exchange for shares of RBC Voting Common Stock or RBC Non-Voting
Common Stock in the RBC Merger. See "The RBC Merger -- Terms of the RBC Merger
Agreement -- Conditions to RBC Merger."
Amendment. The RBC Merger Agreement may be amended at any time prior to
the RBC Effective Time by written agreement of the parties, except that, without
securing any stockholder approval required by Delaware or South Carolina law, no
amendment may be made that would (i) reduce the amount or change the type of
consideration to be received by the RBC Stockholders, (ii) materially and
adversely affect RBC or RBMG or the RBC Stockholders or the RBMG Stockholders,
or (iii) change any term of the RBC Articles or the Restated Certificate of
Incorporation of RBMG (the "RBMG Certificate") except as contemplated by the RBC
Merger Agreement.
Termination. The RBC Merger Agreement may be terminated and the RBC Merger
abandoned at any time prior to the RBC Effective Time (i) by mutual written
consent of the RBC Board and the RBMG Board, (ii) by RBC or RBMG if the RBC
Effective Time shall not have occurred on or before November 1, 1997 (or, in
certain circumstances, December 1, 1997), (iii) by RBC or RBMG in the event of
government action prohibiting the RBC Merger; or (iv) by RBC or RBMG, if the RBC
Merger Agreement and the RBC Merger shall fail to be approved by the RBC
Stockholders or the RBMG Stockholders. See "The RBC Merger -- Terms of the RBC
Merger Agreement -- Termination."
Fees and Expenses. All expenses incurred in connection with the RBC
Merger, including financial advisory fees, independent accountants fees and
legal fees, will be paid by the party incurring such expenses, whether or not
the RBC Merger is consummated, except that all expenses relating to filing fees
pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), printing, filing and mailing the Registration Statement and the
Joint Proxy Statement/Prospectus and all Commission and other regulatory filing
fees incurred in connection with the Registration Statement and the Joint Proxy
Statement/Prospectus will be borne equally by RBC and RBMG. See "The RBC
Merger -- Terms of the RBC Merger Agreement -- Fees and Expenses."
EFFECTIVE TIME OF THE RBC MERGER AND EXCHANGE OF SHARES
Effective Time of the RBC Merger. The RBC Merger will become effective by
filing articles of merger with the Secretary of State of the State of South
Carolina in such form as required by, and executed in accordance with, the
relevant provisions of the SCBCA. The RBC Merger Agreement provides that the
parties thereto will cause such articles of merger to be filed after each of the
conditions to consummation of the RBC Merger has been satisfied or, if
permissible, waived. The RBC Merger cannot become effective until the RBMG
Stockholders have approved and adopted the RBC Merger Agreement, the RBC Merger,
the RBC Stock Issuance and the RBC Amendment and the RBC Stockholders have
approved and adopted the RBC Merger Agreement and the RBC Merger, and all
required regulatory approvals and actions have been obtained and taken. Thus,
there can be no assurance as to whether or when the RBC Merger will become
effective.
Exchange of RBC Stock Certificates. Promptly following the RBC Effective
Time, instructions and a letter of transmittal will be furnished to all RBC
Stockholders for use in exchanging their stock certificates for certificates
evidencing the shares of RBMG Common Stock they will be entitled to receive as a
result of the RBC
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Merger. RBC STOCKHOLDERS SHOULD NOT SUBMIT THEIR STOCK CERTIFICATES FOR EXCHANGE
UNTIL THEY RECEIVE INSTRUCTIONS AND THE LETTER OF TRANSMITTAL.
OPINION OF RBC'S FINANCIAL ADVISOR
Montgomery Securities has delivered a written opinion, dated April 18,
1997, to the RBC Board that, as of the date of such opinion and based upon and
subject to certain matters stated therein, the RBC Exchange Ratio is fair, from
a financial point of view, to the RBC Stockholders. The full text of the written
opinion of Montgomery Securities, which sets forth the assumptions made, matters
considered and limitations on the review undertaken, is attached as Annex I to
this Joint Proxy Statement/Prospectus and should be read carefully in its
entirety. See "The RBC Merger -- Opinion of RBC's Financial Advisor."
RECOMMENDATION OF RBC BOARD
THE RBC BOARD HAS DETERMINED THAT THE RBC MERGER IS IN THE BEST INTERESTS
OF RBC AND ITS STOCKHOLDERS, HAS APPROVED AND ADOPTED THE RBC MERGER AGREEMENT
AND RECOMMENDS THAT THE RBC STOCKHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND
ADOPT THE RBC MERGER AGREEMENT AND THE RBC MERGER.
OPINION OF RBMG'S FINANCIAL ADVISOR
Prudential Securities has delivered a written opinion, dated April 18,
1997, to the RBMG Board that, as of the date of such opinion and based upon and
subject to certain matters stated therein, the RBC Exchange Ratio was fair, from
a financial point of view, to the RBMG Stockholders. The full text of the
written opinion of Prudential Securities, which sets forth the assumptions made,
matters considered and limitations on the review undertaken, is attached as
Annex G to this Joint Proxy Statement/Prospectus and should be read carefully in
its entirety. See "The RBC Merger -- Opinion of RBMG's Financial Advisor."
RECOMMENDATION OF RBMG BOARD
THE RBMG BOARD HAS DETERMINED THAT THE RBC MERGER IS IN THE BEST INTERESTS
OF RBMG AND ITS STOCKHOLDERS, HAS APPROVED AND ADOPTED THE RBC MERGER AGREEMENT
AND RECOMMENDS THAT THE RBMG STOCKHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND
ADOPT THE RBC MERGER AGREEMENT, THE RBC MERGER AND THE RBC STOCK ISSUANCE.
REASONS FOR THE RBC MERGER
RBC. In approving and adopting the RBC Merger Agreement and formulating
its recommendation that the RBC Stockholders approve and adopt the RBC Merger
Agreement and the RBC Merger, the RBC Board considered a number of factors,
including, without limitation, the following:
(i) the business, financial results and prospects of RBMG, assuming
the proposed WSI Merger is not consummated, including, without limitation,
its earnings history, balance sheet, access to the capital markets and the
expected performance of RBMG Common Stock;
(ii) the business, financial results and prospects of RBMG, assuming
the proposed WSI Merger is consummated, including, without limitation, its
earnings prospects, balance sheet, access to capital markets, and the
expected performance of RBMG Common Stock;
(iii) the business, financial results and prospects of RBC and its
businesses including, without limitation, the importance of greater
financial resources and enhanced operational and administrative support to
expand and add value to the equipment leasing and commercial mortgage
banking businesses;
(iv) the terms and conditions of the RBC Merger Agreement, including
the amount and form of consideration to be received by the RBC Stockholders
and the nature of the parties' representations, warranties, covenants and
agreements;
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(v) the opinion of Montgomery Securities as to the fairness, from a
financial point of view, of the RBC Exchange Ratio to the RBC Stockholders;
(vi) the expectation that the RBC Merger will be tax-free for federal
income tax purposes to the RBC Stockholders; and
(vii) the absence of an active trading market for RBC Common Stock and
the expectation that the RBC Merger will provide the RBC Stockholders with
greater liquidity in their investment.
In view of the number of factors considered by the RBC Board, the RBC Board
did not deem it practicable to assign relative weights to the various factors
considered.
RBMG. In determining to recommend that the RBMG Stockholders approve and
adopt the RBC Merger Agreement, the RBC Merger and the RBC Stock Issuance, the
RBMG Special Committee and the RBMG Board, respectively, considered a number of
factors, including, without limitation, the following:
(i) the expectation that the small ticket equipment leasing and
commercial mortgage origination and servicing operations of RBC will allow
RBMG to diversify into new markets that can support an aggressive
growth-oriented strategy, especially in view of the current size and
relative youth of those operations;
(ii) the expectation that the RBC Merger will complement existing
product and service offerings of RBMG;
(iii) the expectation that the lease production platform of RBC will
be highly compatible with RBMG management's strategic objective of
mitigating earnings volatility by maintaining a low-cost and variable
operating cost structure;
(iv) the expectation that the lease production platform of RBC will be
highly compatible with RBMG management's strategic objective to position
RBMG as an efficient provider of secondary market access to smaller
producers of loan products;
(v) the expectation that the RBC Merger would result in the
realization of certain synergies among the businesses of RBMG and RBC,
particularly in the areas of financing costs and operational and
administrative support;
(vi) the terms and conditions of the RBC Merger Agreement, including
the amount and form of consideration to be given to the RBC Stockholders
within the context of the business, financial results and prospects of RBC
and RBMG and the nature of the parties' representations, warranties,
covenants and agreements; and
(vii) the opinion of Prudential Securities as to the fairness, from a
financial point of view, of the RBC Exchange Ratio to the RBMG
Stockholders.
In view of the number of factors considered by the RBMG Board and the RBMG
Special Committee, neither deemed it practicable to assign relative weights to
the various factors considered.
REGULATORY APPROVALS REQUIRED
Under the RBC Merger Agreement, the obligations of both RBMG and RBC to
consummate the RBC Merger are conditioned upon receipt of all required
regulatory approvals. Under the HSR Act and the rules promulgated thereunder by
the Federal Trade Commission (the "FTC"), the RBC Merger may not be consummated
unless notification has been given and certain information has been furnished to
the FTC and the Antitrust Division of the Department of Justice (the "Antitrust
Division") and the waiting period has expired or been terminated. Pursuant to
the HSR Act, on , 1997, RBMG and RBC each filed a Notification and
Report Form with the FTC and the Antitrust Division for review in connection
with the RBC Merger. The 30-day waiting period under the HSR Act applicable to
the RBC Merger will expire on , 1997, unless the RBC Merger is
investigated or opposed by the FTC or the Antitrust Division. There can be no
assurance that the RBC Merger will not be investigated or opposed by the FTC or
the Antitrust Division. See "The RBC Merger -- Regulatory Approvals Required."
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INTERESTS OF CERTAIN PERSONS IN THE RBC MERGER
In considering the RBC Merger, holders of RBMG Common Stock and RBC Common
Stock should be aware that certain executive officers and directors of RBMG and
RBC have certain interests that may present them with potential conflicts of
interest with respect to the RBC Merger. See "The RBC Merger -- Interests of
Certain Persons in the RBC Merger."
ACCOUNTING TREATMENT
The RBC Merger will be accounted for under the "purchase" method of
accounting, as described in Accounting Principles Board Opinion No. 16 and the
interpretations thereof, pursuant to which the assets and liabilities of RBC
will be adjusted to their respective fair values at the date of acquisition and
included with those of RBMG as of the RBC Effective Time. Net income of RBMG
subsequent to the RBC Effective Time will include net income of RBC, and the
historical results of operations of RBMG for periods prior to the RBC Effective
Time will not be restated.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
RBMG and RBC expect the RBC Merger to be a tax-free reorganization for
federal income tax purposes so that no gain or loss will be recognized by the
RBC Stockholders, except in respect of cash received in lieu of fractional
shares and upon the exercise of dissenters' rights. McNair Law Firm, P.A. has
issued an opinion to RBC that, subject to the assumptions, qualifications and
limitations set forth therein, the RBC Merger will qualify as a tax-free
reorganization for federal income tax purposes under Section 368 of the Code.
Each RBC Stockholder should consult his own tax advisor as to the tax
consequences of the RBC Merger to him under applicable tax law. See "The RBC
Merger -- Certain Federal Income Tax Consequences."
RESALE OF RBMG COMMON STOCK
Shares of RBMG Common Stock to be issued to RBC Stockholders in connection
with the RBC Merger will be freely transferable under the Securities Act, except
for shares issued to any person or entity who, at the time of the RBC Merger,
may be deemed an "affiliate" of RBC within the meaning of Rule 145 under the
Securities Act ("Rule 145"). In general, affiliates of RBC include its executive
officers and directors and any other person or entity who controls, is
controlled by or is under common control with RBC. Rule 145, among other things,
imposes certain restrictions upon the resale of securities received by
affiliates in connection with certain reclassifications, mergers, consolidations
or asset transfers. These restrictions will consist of volume and manner of sale
restrictions on the resale of shares of RBMG Common Stock issued to such persons
and entities. RBMG may place legends on certificates representing shares of RBMG
Common Stock that are issued to such RBC Stockholders in the RBC Merger to
restrict such transfers.
COMPARISON OF RIGHTS OF HOLDERS OF RBMG COMMON STOCK AND RBC COMMON STOCK
The rights of RBC Stockholders currently are determined by reference to the
SCBCA and the RBC Articles and Bylaws (the "RBC Bylaws"). Upon consummation of
the RBC Merger, and to the extent they receive shares of RBMG Common Stock, RBC
Stockholders will become stockholders of RBMG, a Delaware corporation. The
rights of RBC Stockholders will thereafter be governed by applicable Delaware
law ("Delaware Law"), including the Delaware General Corporation Law (the
"DGCL"), and the RBMG Certificate and the Amended and Restated Bylaws of RBMG
(the "RBMG Bylaws"). See "The RBC Merger -- Comparison of Rights of Holders of
RBMG Common Stock and RBC Common Stock."
DISSENTERS' RIGHTS
Pursuant to Chapter 13 of the SCBCA (the "South Carolina Dissenters' Rights
Statute"), the holders of shares of RBC Common Stock are entitled to dissent
from the approval of the RBC Merger Agreement and the RBC Merger and to receive
payment of the fair value of their shares of RBC Common Stock in the event the
RBC Merger is consummated, upon compliance with the provisions of the South
Carolina Dissenters' Rights Statute. Holders of RBC Common Stock who wish to
assert their dissenters' rights must (i) deliver to RBC, before the
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vote on the RBC Merger and the RBC Merger Agreement is taken, written notice of
their intent to demand payment for their shares in the event the RBC Merger is
consummated, (ii) not vote such shares in favor of approval and adoption of the
RBC Merger and the RBC Merger Agreement, and (iii) comply with the further
provisions of the South Carolina Dissenters' Rights Statute. The delivery of a
proxy or a vote against approval and adoption of the RBC Merger and the RBC
Merger Agreement will not constitute such notice nor will a failure to vote
against such approval and adoption constitute a waiver of dissenters' rights.
Any deviation from the procedures set forth in the South Carolina Dissenters'
Rights Statute could result in the forfeiture of dissenters' rights.
Accordingly, RBC Stockholders wishing to dissent from approval of the RBC Merger
and the RBC Merger Agreement are urged to read carefully "The RBC
Merger -- Dissenters' Rights" and the copy of the South Carolina Dissenters'
Rights Statute set forth in Annex E to this Joint Proxy Statement/Prospectus and
to consult with their own legal advisors. Holders of RBMG Common Stock are not
entitled to appraisal rights under Delaware law in connection with the RBC
Merger.
THE WSI MERGER
BACKGROUND OF THE WSI MERGER
During 1996, as part of ongoing strategic planning to diversify its lines
of business, RBMG began examining options for expansion into the non-conforming
mortgage business. On January 23 and January 25, 1997, management of RBMG and
WSI met to explore the possibility of a business combination between RBMG and
WSI. Following those meetings, the RBMG Board appointed the RBMG Special
Committee to consider and evaluate the proposed business combination with WSI
and the proposed acquisition of RBC. On February 3, 1997, the parties commenced
due diligence investigations of the proposed transaction with WSI. On February
13, 1997, the RBMG Special Committee approved the engagement of Prudential
Securities to serve as financial advisor and to assist in evaluating each of the
proposed transactions on its respective merits. Over the next two months,
discussions ensued regarding the terms of a possible merger between RBMG and
WSI. A definitive merger agreement was executed on April 18, 1997. Prior to
January 1997, there had been no discussions between RBMG and WSI regarding a
possible transaction, and there had been no transactions between the parties.
TERMS OF THE WSI MERGER AGREEMENT
General. The WSI Merger Agreement provides that, following approval of the
WSI Merger Agreement by the stockholders of WSI and RBMG and the satisfaction or
waiver of the other conditions to the WSI Merger, Carolina Merger Sub will be
merged with and into WSI at the WSI Effective Time in accordance with the DGCL.
WSI will be the surviving corporation in the WSI Merger. As a result of the WSI
Merger, the separate corporate existence of Carolina Merger Sub will cease, and
WSI will become a wholly owned subsidiary of RBMG.
Conversion of Shares. Each share of WSI Class A Common Stock and each
share of WSI Class B Common Stock issued and outstanding immediately before the
WSI Effective Time (other than treasury shares, shares of WSI Common Stock held
by WSI Stockholders who perfect their appraisal rights under Delaware law and
shares of WSI Common Stock owned by RBMG or any wholly owned subsidiary of RBMG)
and all rights in respect thereof shall, at the WSI Effective Time, be converted
into and become exchangeable for (i) 175,164.30 shares (the "WSI Exchange
Ratio") of RBMG Common Stock and (ii) the right to receive on a deferred basis
and pursuant to the terms of the Escrow Agreement (as defined in "The WSI
Merger -- Certain Agreements in Connection with the WSI Merger -- Escrow
Agreement.") 19,462.70 additional shares (the "WSI Escrow Stock Ratio") of RBMG
Common Stock, with cash being paid in lieu of fractional shares. If the RBC
Merger is approved and occurs prior to the WSI Effective Time, then the WSI
Exchange Ratio will be 192,460.50 and the WSI Escrow Stock Ratio will be
21,384.50. The WSI Exchange Ratios are subject to adjustment in the event of
certain changes in the number of outstanding shares of WSI Common Stock or RBMG
Common Stock. See "The WSI Merger -- Terms of the WSI Merger
Agreement -- Conversion of Shares."
Issuance of the RBMG Warrant. Greenwich Capital Financial Products, Inc.
("Greenwich") holds a warrant (the "WSI Warrant"), which represents the right to
purchase 24.99 shares of WSI Class B Common Stock. In connection with the WSI
Merger, if the WSI Warrant or any portion thereof remains outstanding
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immediately prior to the WSI Effective Time, the WSI Warrant will be cancelled
and RBMG will issue to Greenwich a Stock Purchase Warrant (the "RBMG Warrant"),
representing the right to purchase such number of shares of RBMG Class B Common
Stock equal to the number of shares of WSI Class B Common Stock covered by the
WSI Warrant as of the WSI Effective Time multiplied by the sum of the WSI
Exchange Ratios. See "The WSI Merger -- Certain Agreements in Connection with
the WSI Merger -- The RBMG Warrant." To the extent the WSI Warrant is exercised
prior to the WSI Effective Time, shares of WSI Class B Common Stock issued to
Greenwich will be converted into shares of RBMG Common Stock pursuant to the WSI
Exchange Ratios. On April 18, 1997, Greenwich delivered to WSI notice of its
election to exercise, immediately prior to the WSI Effective Time, its right
under the WSI Warrant to purchase that number of shares of WSI Class B Common
Stock which would be convertible into 4.9% of the issued and outstanding shares
of RBMG Common Stock in accordance with the WSI Merger Agreement.
Board of Directors. The WSI Merger Agreement provides that, at the WSI
Effective Time, the total number of persons serving on the RBMG Board will be
eight and will consist of Edward J. Sebastian, James Walsh, Robert C. Walsh,
John J. Oberdorf, David W. Johnson, Jr., William Biggs, and two additional
persons to be nominated by Edward J. Sebastian and David W. Johnson, Jr. and
approved by the RBMG Board, including approval of a majority of John C. Baker,
Stuart M. Cable, Boyd M. Guttery and John O. Wolcott. See "Directors and
Executive Officers." The WSI Merger Agreement provides that the directors of
Carolina Merger Sub immediately prior to the WSI Effective Time will become the
directors of WSI as of the WSI Effective Time. The directors of Carolina Merger
Sub are Edward J. Sebastian and David W. Johnson, Jr. It is anticipated that
Robert C. Walsh and James Walsh will be named additional directors of WSI after
the WSI Effective Time.
Executive Officers. The WSI Merger Agreement provides that at the WSI
Effective Time, Edward J. Sebastian will hold the position of Chairman and Chief
Executive Officer of RBMG, Robert C. Walsh will hold the position of President
of RBMG and David W. Johnson, Jr. will hold the position of Vice Chairman of
RBMG and Managing Director of RBMG's prime mortgage lending operations. The WSI
Merger Agreement provides that the officers of WSI immediately prior to the WSI
Effective Time will continue to serve in their respective offices after the WSI
Effective Time.
Indemnification Obligations. RBMG has agreed in the WSI Merger Agreement
to indemnify certain officers and directors of WSI and RBMG for a period of six
years from the WSI Effective Time against liabilities arising prior to the WSI
Effective Time or arising out of the WSI Merger. See "The WSI Merger -- Terms of
the WSI Merger Agreement -- Indemnification Obligations."
No Solicitation. The WSI Merger Agreement provides that neither RBMG nor
WSI will, directly or indirectly, solicit or, with certain exceptions,
facilitate mergers, sales of significant assets, tender offers or similar
transactions with other persons prior to the WSI Effective Time. See "The WSI
Merger -- Terms of the WSI Merger Agreement -- No Solicitation."
Conditions to the WSI Merger. In addition to certain customary conditions,
consummation of the WSI Merger is subject to the satisfaction of, or, if
permitted by applicable law, the waiver of, among others, the following
conditions: (i) the effectiveness of the Registration Statement; (ii) the
approval of the WSI Merger Agreement, the WSI Merger, and the WSI Amendment by
the RBMG Stockholders and approval of the WSI Merger Agreement and the WSI
Merger by the WSI Stockholders; (iii) receipt of certain regulatory approvals;
(iv) receipt of written advice of Price Waterhouse LLP and KPMG Peat Marwick LLP
that such firms concur with, respectively, RBMG and WSI management's conclusion
as to the absence of conditions precluding the use of pooling-of-interests
accounting in connection with the WSI Merger; (v) receipt of an opinion of St.
John & Wayne, L.L.C. or King & Spalding to the effect that the WSI Merger will
be treated for federal income tax purposes as a reorganization qualifying under
the provisions of Section 368(a) of the Code and that the WSI Stockholders will
recognize no gain or loss upon the receipt of shares of RBMG Common Stock in
exchange for shares of WSI Class A Common Stock or WSI Class B Common Stock in
the WSI Merger; (vi) receipt by RBMG or WSI of one or more commitments
reasonably satisfactory to the Chief Executive Officer of RBMG and the Chief
Executive Officer of WSI which provide a warehouse facility for the sub-prime
mortgage business of at least $300 million from and after the WSI Effective
Time; and (vii) the execution and delivery of certain
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agreements to be executed and delivered in connection with the WSI Merger. See
"The WSI Merger -- Terms of the WSI Merger Agreement -- Conditions to the WSI
Merger."
Amendment. The WSI Merger Agreement may be amended at any time prior to
the WSI Effective Time by written agreement of the parties thereto, except that,
without securing any stockholder approval required by Delaware law, no amendment
may be made that would (i) reduce the amount or change the type of consideration
to be received by the WSI Stockholders, (ii) materially and adversely affect WSI
or RBMG or the WSI Stockholders or the RBMG Stockholders or (iii) change any
term of the Certificate of Incorporation of WSI or RBMG, except as contemplated
by the WSI Merger Agreement.
Termination. The WSI Merger Agreement may be terminated and the WSI Merger
abandoned at any time prior to the WSI Effective Time (i) by mutual written
consent of the WSI Board and the RBMG Board, (ii) by WSI or RBMG if the WSI
Effective Time shall not have occurred on or before November 1, 1997 (or, in
certain circumstances, December 1, 1997), (iii) by WSI or RBMG in the event of
government action prohibiting the WSI Merger; (iv) by WSI if, in certain
circumstances involving a Competing Transaction (as defined in "The WSI
Merger -- Terms of the WSI Merger Agreement -- No Solicitation"), the RBMG Board
withdraws, modifies or changes its recommendation of the WSI Merger Agreement
and the WSI Merger in a manner adverse to WSI or its stockholders; (v) by WSI or
RBMG, if the WSI Merger Agreement and the WSI Merger shall fail to be approved
by the WSI Stockholders or the RBMG Stockholders; (vi) by RBMG, if the RBMG
Board shall withdraw, modify or change its recommendation of the approval of the
WSI Merger Agreement and the WSI Merger in certain circumstances involving a
Competing Transaction; or (vii) by WSI or RBMG, if the closing price per share
of RBMG Common Stock, as reported by the Nasdaq National Market, for any 10
consecutive trading days during the period from April 18, 1997 until the last
trading day prior to the RBMG Special Meeting is less than $12.00. See "The WSI
Merger -- Terms of the WSI Merger Agreement -- Termination."
Fees and Expenses. All expenses incurred in connection with the WSI
Merger, including financial advisory fees, independent accountants' fees and
legal fees, will be paid by the party incurring such expenses, whether or not
the WSI Merger is consummated, except that all expenses relating to filing fees
pursuant to the HSR Act, printing, filing and mailing the Registration Statement
and the Joint Proxy Statement/Prospectus and all Commission and other regulatory
filing fees incurred in connection with the Registration Statement and the Joint
Proxy Statement/Prospectus will be borne equally by WSI and RBMG. In addition,
RBMG has agreed to pay to WSI $10,000,000 in the event that the WSI Merger
Agreement is terminated under certain circumstances involving a Competing
Transaction. See "The WSI Merger -- Terms of the WSI Merger Agreement -- Fees
and Expenses."
EFFECTIVE TIME OF THE WSI MERGER AND EXCHANGE OF SHARES
Effective Time of the WSI Merger. The WSI Merger will become effective by
filing a certificate of merger with the Secretary of State of the State of
Delaware in such form as required by, and executed in accordance with the
relevant provisions of, the DGCL. The WSI Merger Agreement provides that the
parties thereto will cause such certificate of merger to be filed after each of
the conditions to consummation of the WSI Merger has been satisfied or, if
permissible, waived. The WSI Merger cannot become effective until the RBMG
Stockholders have approved and adopted the WSI Merger Agreement, the WSI Merger,
the WSI Stock Issuance, and the WSI Amendment, and the WSI Stockholders have
approved and adopted the WSI Merger Agreement and the WSI Merger, and all
required regulatory approvals and actions have been obtained and taken. Thus,
there can be no assurance as to whether or when the WSI Merger will become
effective. In addition, if the RBC Merger is consummated prior to the WSI
Effective Time, it is contemplated that the WSI Merger would not occur earlier
than 35 days after the RBC Effective Time.
Exchange of WSI Stock Certificates. Promptly following the WSI Effective
Time, instructions and a letter of transmittal will be furnished to all WSI
Stockholders for use in exchanging their stock certificates for certificates
evidencing the shares of RBMG Common Stock they will be entitled to receive as a
result of the WSI Merger. WSI STOCKHOLDERS SHOULD NOT SUBMIT THEIR STOCK
CERTIFICATES FOR EXCHANGE UNTIL INSTRUCTIONS AND THE LETTER OF TRANSMITTAL ARE
RECEIVED.
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RECOMMENDATION OF WSI BOARD
THE WSI BOARD HAS DETERMINED THAT THE WSI MERGER IS IN THE BEST INTERESTS
OF WSI AND ITS STOCKHOLDERS, HAS APPROVED AND ADOPTED THE WSI MERGER AGREEMENT,
AND RECOMMENDS THAT THE WSI STOCKHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND
ADOPT THE WSI MERGER AGREEMENT AND THE WSI MERGER.
OPINION OF RBMG'S FINANCIAL ADVISOR
Prudential Securities has delivered a written opinion, dated April 18,
1997, to the RBMG Board that, as of the date of such opinion and based upon and
subject to certain matters stated therein, the WSI Exchange Ratios, taken
together, were fair, from a financial point of view, to the RBMG Stockholders.
The full text of the written opinion of Prudential Securities, which sets forth
the assumptions made, matters considered and limitations on the review
undertaken, is attached as Annex H to this Joint Proxy Statement/Prospectus and
should be read carefully in its entirety. See "The WSI Merger -- Opinion of
RBMG's Financial Advisor."
RECOMMENDATION OF RBMG BOARD
THE RBMG BOARD HAS DETERMINED THAT THE WSI MERGER IS IN THE BEST INTERESTS
OF RBMG AND ITS STOCKHOLDERS, HAS APPROVED AND ADOPTED THE WSI MERGER AGREEMENT,
AND RECOMMENDS THAT THE RBMG STOCKHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND
ADOPT THE WSI MERGER AGREEMENT, THE WSI MERGER AND THE WSI STOCK ISSUANCE.
REASONS FOR THE WSI MERGER
WSI. On April 4, 1997, the WSI Board, consisting solely of Robert C.
Walsh, convened to consider the WSI Merger Agreement. After deliberating with
respect to the WSI Merger and the other terms and conditions of the WSI Merger
Agreement, the WSI Board approved and adopted the WSI Merger, subject to final
negotiation of the definitive WSI Merger Agreement, as being in the best
interests of WSI and its stockholders. In reaching its conclusion to approve and
adopt the WSI Merger Agreement, the WSI Board considered all factors it deemed
material, including, without limitation, the following:
(i) the financial condition, business and prospects of RBMG,
including, but not limited to, its growth in earnings, its relatively
strong balance sheet and its access to the capital markets;
(ii) the current operating environment in the non-conforming home
equity industry and the importance of financial resources to being able to
capitalize on developing opportunities in this industry;
(iii) the potential to substantially increase non-conforming loan
production by providing WSI, which has traditionally focused on serving the
non-conforming lending needs of conforming brokers and mortgage bankers,
with access to RBMG's extensive network of conforming brokers and mortgage
bankers;
(iv) the ability to strengthen the competitive position of each of WSI
and RBMG by virtue of the combined company's ability to offer a full
spectrum of loan products (both conforming and non-conforming) to its
customers;
(v) the ability to enhance the combined company's results of
operations, financial condition and prospects by diversifying its earnings,
reducing its exposure to certain concentrations or business cycles in their
stand-alone businesses and combining the financial, managerial and other
resources of the two companies;
(vi) the terms of the WSI Merger Agreement, including the ability of
the WSI Stockholders to receive shares of common stock of the combined
company that would be registered under the Securities Act and
15
<PAGE> 35
generally received on a tax-free basis. See "The WSI Merger -- Certain
Federal Income Tax Consequences";
(vii) the business and financial alternatives available to WSI,
including (a) remaining a stand-alone entity that would finance its growth
by operating on a cash flow positive or neutral basis or by issuing equity
or debt in the capital markets or (b) effecting a business combination with
another party; and
(viii) the trading value of selected publicly traded non-conforming
lenders and the transaction value of selected mergers and acquisitions
involving non-conforming home equity lenders.
The foregoing discussion of the factors considered by the WSI Board is not
intended to be exhaustive, but is believed to include all material factors
considered by the WSI Board. In reaching its determination to approve the WSI
Merger, the WSI Board did not assign any relative or specific weights to the
foregoing factors. Throughout the negotiations and its deliberations, the WSI
Board received the advice of counsel and its investment banker.
RBMG. In determining to recommend that the RBMG Stockholders approve and
adopt the WSI Merger Agreement, the WSI Merger and the WSI Stock Issuance, the
RBMG Board and the RBMG Special Committee considered a number of factors,
including, without limitation, the following:
(i) the expectation that a significant market cross-selling
opportunity will exist for WSI to originate non-conforming mortgage loans
through RBMG's origination network and for RBMG to originate conforming
mortgage loans through WSI's origination network;
(ii) the expectation that the WSI Merger will enhance RBMG's ability
to pursue its strategic objective of becoming a top 10 originator in both
the conforming and non-conforming residential mortgage markets;
(iii) the expectation that the non-conforming mortgage operations of
WSI will accelerate RBMG's planned diversification into the non-conforming
market, which can support an aggressive growth-oriented strategy,
especially since WSI currently has branch offices in only nine states, thus
allowing for considerable continuing geographic expansion;
(iv) the expectation that the WSI Merger will complement existing RBMG
product and service offerings;
(v) the expectation that WSI's loan production platform will be highly
compatible with RBMG management's strategic objective of mitigating
earnings volatility by maintaining a low-cost and variable operating cost
structure;
(vi) the expectation that the non-conforming mortgage origination
market tends to be countercyclical to the conforming mortgage origination
market, which should tend to mitigate earnings volatility across variable
loan production environments;
(vii) the expectation that WSI's loan production platform will be
highly compatible with RBMG management's strategic objective to position
RBMG as an efficient provider of secondary market access to smaller
producers of loan products;
(viii) the expectation that the WSI Merger would significantly broaden
the depth and experience of the RBMG management team, enabling RBMG to take
more immediate advantage of its market opportunities in the non-conforming
market;
(ix) the expectation that the WSI Merger would result in a larger
market capitalization and higher visibility among stock market
participants;
(x) the expectation that the WSI Merger would result in the
realization of certain synergies among the businesses of RBMG and WSI,
particularly in the areas of loan servicing, financing costs and
operational and administrative support;
(xi) the terms and conditions of the WSI Merger Agreement, including
the amount and form of consideration to be given to the WSI Stockholders
within the context of the business, financial results and
16
<PAGE> 36
prospects of WSI and RBMG and the nature of the parties' representations,
warranties, covenants and agreements; and
(xii) the opinion of Prudential Securities as to the fairness, from a
financial point of view, of the WSI Exchange Ratios to the RBMG
Stockholders.
In view of the number of factors considered by the RBMG Board and the RBMG
Special Committee, neither deemed it practicable to assign relative weights to
the various factors considered.
CERTAIN AGREEMENTS IN CONNECTION WITH THE WSI MERGER
Certain additional agreements have been and will be entered into in
connection with the consummation of the WSI Merger, including an indemnification
agreement, the Proxy Agreement, the Escrow Agreement (as hereinafter defined), a
registration rights agreement, a stockholders agreement, employment agreements
and non-compete agreements. See "The WSI Merger -- Certain Agreements in
Connection with the WSI Merger."
REGULATORY APPROVALS REQUIRED
Under the WSI Merger Agreement, the obligations of both RBMG and WSI to
consummate the WSI Merger are conditioned upon receipt of all required
regulatory approvals. Under the HSR Act and the rules promulgated thereunder by
the FTC, the WSI Merger may not be consummated unless notification has been
given and certain information has been furnished to the FTC and the Antitrust
Division and the waiting period has expired or been terminated. Pursuant to the
HSR Act, on , 1997, RBMG and WSI each filed a Notification and
Report Form with the FTC and the Antitrust Division for review in connection
with the WSI Merger. The 30-day waiting period under the HSR Act applicable to
the WSI Merger will expire on , 1997, unless the WSI Merger is
investigated or opposed by the FTC or the Antitrust Division. There can be no
assurance that the WSI Merger will not be investigated or opposed by the FTC or
the Antitrust Division.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the WSI Merger, holders of RBMG Common Stock and WSI Common
Stock should be aware that certain executive officers and directors of RBMG and
WSI have certain interests that may present them with potential conflicts of
interest with respect to the WSI Merger. See "The WSI Merger -- Interests of
Certain Persons in the WSI Merger."
ACCOUNTING TREATMENT
The WSI Merger is expected to qualify as a "pooling of interests" for
accounting purposes. The obligations of each of RBMG and WSI to consummate the
WSI Merger are conditioned upon the receipt of written advice from (i) Price
Waterhouse LLP, that, in accordance with U.S. generally accepted accounting
principles ("U.S. GAAP"), based upon discussions with officials responsible for
financial and accounting matters and information furnished to Price Waterhouse
LLP, Price Waterhouse LLP concurs with management's conclusion that no
conditions relating to RBMG or WSI exist that would preclude RBMG's accounting
for the WSI Merger as a pooling of interests, and (ii) KPMG Peat Marwick LLP,
that as of the WSI Effective Time, based upon inquiries and their examination of
the financial statements of WSI, they are not aware of any conditions relating
to WSI that would preclude the use of pooling of interests accounting in
connection with the WSI Merger. Under the pooling of interests method of
accounting, the recorded amounts of the assets and liabilities of WSI will be
combined with those of RBMG and carried forward at their previously recorded
amounts. See "The WSI Merger -- Accounting Treatment."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
RBMG and WSI expect the WSI Merger to be a tax-free reorganization for
federal income tax purposes so that no gain or loss will be recognized by the
WSI Stockholders, except in respect of cash received in lieu of
17
<PAGE> 37
fractional shares and upon exercise of appraisal rights. St. John & Wayne,
L.L.C. has issued an opinion to WSI that, subject to the assumptions,
qualifications and limitations set forth therein, the WSI Merger will qualify as
a tax-free reorganization for federal income tax purposes under Section 368 of
the Code. Each WSI Stockholder should consult his own tax advisor as to the tax
consequences of the WSI Merger to him under applicable tax law. See "The WSI
Merger -- Certain Federal Income Tax Consequences."
RESALE OF RBMG COMMON STOCK
Shares of RBMG Common Stock to be issued to WSI Stockholders in connection
with the WSI Merger will be freely transferable under the Securities Act, except
for shares issued to any person or entity who, at the time of the WSI Merger,
may be deemed an "affiliate" of WSI within the meaning of Rule 145. In general,
affiliates of WSI include its executive officers and directors and any other
person or entity who controls, is controlled by or is under common control with
WSI. Rule 145, among other things, imposes certain restrictions upon the resale
of securities received by affiliates in connection with certain
reclassifications, mergers, consolidations or asset transfers. These
restrictions will consist of volume and manner of sale restrictions on the
resale of shares of RBMG Common Stock issued to such persons and entities. RBMG
may place legends on certificates representing shares of RBMG Common Stock that
are issued to WSI Stockholders in the WSI Merger to restrict such transfers. WSI
has agreed in the WSI Merger Agreement to use its reasonable efforts to cause
each "affiliate" of WSI to deliver to RBMG prior to the WSI Effective Time a
written statement to the effect that such person will not sell any shares of
RBMG Common Stock received in the WSI Merger except in accordance with the
applicable provisions of the Securities Act and the rules and regulations of the
Commission, including the accounting criteria for pooling of interests
transactions in the Commission's Codification of Financial Reporting Policies.
See "The WSI Merger -- Resale of RBMG Common Stock."
WSI Stockholders who are subject to the resale restrictions of Rule 145
will be entitled to certain demand and piggy-back registration rights with
respect to the shares of RBMG Common Stock issued to them pursuant to the WSI
Merger Agreement. See "The WSI Merger -- Certain Agreements in Connection with
the WSI Merger -- Registration Rights Agreement."
COMPARISON OF RIGHTS OF HOLDERS OF RBMG COMMON STOCK AND WSI COMMON STOCK
The rights of WSI Stockholders currently are determined by reference to the
DGCL and the Certificate of Incorporation and Bylaws of WSI (the "WSI
Certificate" and the "WSI Bylaws," respectively). Upon consummation of the WSI
Merger, and to the extent they receive shares of RBMG Common Stock, WSI
Stockholders will become stockholders of RBMG, also a Delaware corporation. The
rights of WSI Stockholders will thereafter be governed by the RBMG Certificate
and the RBMG Bylaws. See "The WSI Merger -- Comparison of Rights of Holders of
RBMG Common Stock and WSI Common Stock."
APPRAISAL RIGHTS
Pursuant to Section 262 of the DGCL, the holders of WSI Common Stock are
entitled to appraisal rights and to receive payment of the fair value of their
shares (excluding any element of value arising from the accomplishment or
expectation of the WSI Merger), in the event the WSI Merger is consummated, upon
compliance with the provisions of Section 262 of the DGCL. Holders of WSI Common
Stock who wish to assert their appraisal rights (i) must deliver to WSI, before
the vote on the WSI Merger Agreement is taken, a written demand for appraisal of
such stockholder's shares and (ii) must not vote in favor of the WSI Merger. The
delivery of a proxy or vote against approval and adoption of the WSI Merger
Agreement will not constitute such a demand. Any deviation from the procedures
set forth in Section 262 of the DGCL could result in the forfeiture of statutory
appraisal rights. Accordingly, WSI Stockholders wishing to dissent from approval
of the WSI Merger Agreement are urged to read carefully "The WSI
Merger -- Appraisal Rights" and the copy of Section 262 of the DGCL set forth in
Annex F to this Joint Proxy Statement/Prospectus and to consult with their own
legal advisors. Holders of RBMG Common Stock are not entitled to appraisal
rights in connection with the WSI Merger.
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<PAGE> 38
THE CHARTER AMENDMENTS
GENERAL
In connection with the RBC Merger and the WSI Merger, the RBMG Board has
unanimously declared advisable and approved and adopted the RBC Amendment and
the WSI Amendment, respectively. The approval and adoption of the RBC Amendment
by the RBMG Stockholders is contingent on the approval and adoption of the RBC
Merger Agreement, the RBC Merger and the RBC Stock Issuance by the RBMG
Stockholders. Similarly, the approval and adoption of the WSI Amendment by the
RBMG Stockholders is contingent on the approval and adoption of the WSI Merger
Agreement, the WSI Merger and the WSI Stock Issuance by the RBMG Stockholders.
However, the approval and adoption of the RBC Amendment by the RBMG Stockholders
is not contingent upon the approval and adoption of the WSI Amendment by the
RBMG Stockholders, and the approval and adoption of the WSI Amendment by the
RBMG Stockholders is not contingent upon the approval and adoption of the RBC
Amendment by the RBMG Stockholders. Copies of the RBC Amendment and the WSI
Amendment are attached to this Joint Proxy Statement/Prospectus as Annexes C and
D, respectively, and are incorporated by reference into this Joint Proxy
Statement/Prospectus. RBMG Stockholders are urged to read the RBC Amendment and
the WSI Amendment in their entirety.
RBC AMENDMENT
RBMG is currently authorized to issue 25,000,000 shares of RBMG Common
Stock. The RBC Amendment, if it becomes effective, would increase the number of
shares of RBMG Common Stock that RBMG is authorized to issue from 25,000,000
shares to 50,000,000 shares. Assuming that the RBC Amendment is approved and
adopted and the RBC Merger is consummated (but not the WSI Merger), as of May
31, 1997, 20,347,046 shares of authorized RBMG Common Stock would remain
available for future issuance. RBMG currently does not have a sufficient number
of authorized but unissued shares of RBMG Common Stock to consummate the RBC
Merger. In addition, the RBMG Board believes that the increased flexibility
provided by the RBC Amendment will enable RBMG to respond to possible
acquisitions, financing needs and other business opportunities, to effect stock
dividends or stock splits and to provide appropriate equity-based compensation.
The RBMG Board could issue such additional shares of RBMG Common Stock at such
times and on such terms and conditions as it deemed appropriate and desirable,
without further action by the stockholders of RBMG, unless such approval were
required by applicable law, the RBMG Certificate, the RBMG Bylaws or any stock
exchange or market on which RBMG securities may then be listed or traded. See
"The Charter Amendments -- RBC Amendment."
WSI AMENDMENT
The WSI Amendment, if it becomes effective, would increase the number of
shares of common stock that RBMG is authorized to issue from 50,000,000 shares
(25,000,000 if the RBC Amendment does not become effective) to 100,000,000
shares and would authorize 12,000,000 shares of the RBMG Class B Common Stock.
In addition, the WSI Amendment, if it becomes effective, would change the name
of RBMG to "BCA Financial Corp." Assuming that the WSI Amendment is approved and
adopted and the Mergers are consummated, as of May 31, 1997, 48,962,546 shares
of RBMG Common Stock and 12,000,000 shares of RBMG Class B Common Stock
(60,283,529 shares of RBMG Common Stock and 12,000,000 shares of RBMG Class B
Common Stock if the RBC Merger is not consummated) would remain available for
future issuance. RBMG currently does not have a sufficient number of authorized
but unissued shares of RBMG Common Stock to consummate the WSI Merger. In
addition, the RBMG Board believes that the increased flexibility provided by the
WSI Amendment would enable RBMG to respond to possible acquisitions, financing
needs and other business opportunities, to effect stock dividends or stock
splits and to provide appropriate equity-based compensation. The RBMG Board
could issue such additional shares of common stock at such times and on such
terms and conditions as it deemed appropriate and desirable, without further
action by the RBMG Stockholders, unless such approval were required by
applicable law, the RBMG Certificate, the RBMG Bylaws, or any stock exchange or
market on which RBMG securities may then be listed or traded.
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<PAGE> 39
The shares of RBMG Class B Common Stock would be issuable upon exercise of
the RBMG Warrant and would be identical to shares of RBMG Common Stock in all
respects, except that shares of RBMG Class B Common Stock (i) would not have any
voting rights other than in certain limited circumstances and (ii) would be
convertible for no consideration at the option of the holder thereof at any time
into shares of RBMG Common Stock. See "The Charter Amendments -- WSI Amendment."
RECOMMENDATION OF THE RBMG BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF RBMG HAS DECLARED THE RBC AMENDMENT AND THE WSI
AMENDMENT ADVISABLE AND DETERMINED THAT THEY ARE IN THE BEST INTERESTS OF RBMG
AND ITS STOCKHOLDERS, HAS UNANIMOUSLY APPROVED AND ADOPTED THE RBC AMENDMENT AND
THE WSI AMENDMENT AND RECOMMENDS THAT RBMG STOCKHOLDERS VOTE FOR EACH OF THE
PROPOSALS TO APPROVE AND ADOPT THE RBC AMENDMENT AND THE WSI AMENDMENT.
THE RBMG RIGHTS PLAN
On , 1997, the RBMG Board approved a rights agreement setting
forth the terms of a stockholder rights plan (the "RBMG Rights Plan"). The RBMG
Board intends to set a record date and distribute the rights under the RBMG
Rights Plan prior to the effective time of either the RBC Merger or the WSI
Merger. Under the terms of the RBMG Rights Plan, one preferred stock purchase
right (a "Right") is attached to each outstanding share of RBMG Common Stock
(and RBMG Class B Common Stock, if the WSI Amendment is approved). Under the
terms of the RBMG Rights Plan, each Right entitles the holder to purchase from
RBMG a unit consisting of one one-hundredth of a share (a "Unit") of Junior
Cumulative Preferred Stock, par value $.01 per share, at a purchase price of
$200 per Unit (the "Purchase Price"), subject to adjustment. The Rights contain
provisions that are designed to protect the stockholders in the event of certain
unsolicited attempts to acquire RBMG, including a gradual accumulation of shares
in the open market, a partial or two-tier tender offer that does not treat all
stockholders equally, and other takeover tactics which the RBMG Board believes
may be abusive and not in the best interests of stockholders. Distribution of
Rights will not alter the financial strength of RBMG or interfere with its
business plans. The distribution of the Rights is not dilutive, does not affect
reported earnings per share, is not taxable either to the recipient or to RBMG
and will not change the way in which stockholders can currently trade shares of
RBMG Common Stock. The Rights may be redeemed by RBMG at $0.01 per Right prior
to their expiration on , 2007.
After the WSI Merger, Robert C. Walsh and his affiliates will beneficially
own approximately 29.3% of the outstanding RBMG Common Stock. Accordingly, the
RBMG Rights Plan exempts Robert C. Walsh and certain of his affiliates from
causing a distribution event under the RBMG Rights Plan, provided Robert C.
Walsh and such affiliates do not acquire, while the beneficial owner of %
of the outstanding RBMG Common Stock, additional shares representing more than
% of the outstanding RBMG Common Stock. To the extent Robert C. Walsh and
such affiliates subsequently reduce their ownership percentage of RBMG Common
Stock to below %, Robert C. Walsh and such affiliates will be subject to
the same threshold ( %) applicable to all other stockholders. See "Risk
Factors" and "The WSI Merger -- Certain Agreements in Connection with the WSI
Merger."
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<PAGE> 40
MARKETS AND MARKET PRICES
RBMG. RBMG Common Stock is listed on the Nasdaq National Market under the
symbol "REMI."
The following table sets forth for the calendar quarter indicated (i) the
high and low sales prices per share (as retroactively adjusted for the five
percent stock dividends issued on May 8, 1995 and August 31, 1995, respectively,
the ten percent stock dividend issued on June 30, 1995, and the seven percent
stock dividend issued on September 24, 1996) of RBMG Common Stock as reported on
the Nasdaq National Market and (ii) the dividends declared.
<TABLE>
<CAPTION>
RBMG COMMON STOCK
------------------------------
HIGH LOW DIVIDEND
-------- -------- --------
<S> <C> <C> <C>
FISCAL YEAR 1995
First Quarter ended March 31, 1995.......................... $ 8.4769 $ 6.1650 $
Second Quarter ended June 30, 1995.......................... 11.3485 7.6870
Third Quarter ended September 30, 1995...................... 17.0561 10.0134
Fourth Quarter ended December 31, 1995...................... 15.6542 12.6168
FISCAL YEAR 1996
First Quarter ended March 31, 1996.......................... 17.0561 12.9089
Second Quarter ended June 30, 1996.......................... 14.8364 10.1635
Third Quarter ended September 30, 1996...................... 14.2500 10.6308 0.03
Fourth Quarter ended December 31, 1996...................... 15.7500 12.8750 0.03
FISCAL YEAR 1997
First Quarter ended March 31, 1997.......................... 17.6250 13.1250 0.03
Second Quarter (through June 11, 1997)...................... 17.5000 12.6250 0.03
</TABLE>
On April 18, 1997, the last trading date prior to the public announcement
of the Mergers, the closing sale price of RBMG Common Stock on the Nasdaq
National Market was $16.75 per share. On June 11, 1997, the last trading day for
which prices were available at the time of the printing of this Joint Proxy
Statement/Prospectus, the closing sale price of RBMG Common Stock on the Nasdaq
National Market was $15.125 per share. RBMG is subject to certain financing
agreements which restrict the ability of RBMG to pay dividends.
RBC. RBC is privately held, and there is no established public market for
the RBC Common Stock. As of the date of this Joint Proxy Statement/Prospectus,
there were approximately 182 holders of record of RBC Voting Common Stock and
six holders of record of RBC Non-Voting Common Stock. RBC declared cash
dividends of $.25 and $.30 per share during the second and third quarters of
1995, respectively. No other cash dividends were declared in 1995, and no cash
dividends have been declared by RBC since December 31, 1995. In addition, RBC is
subject to certain financing agreements which restrict the ability of RBC to pay
dividends.
WSI. WSI is privately held, and there is no public market for the WSI
Common Stock. As of the date of this Joint Proxy Statement/Prospectus, there
were 19 holders of record of WSI Class A Common Stock, and no shares of WSI
Class B Common Stock were issued and outstanding. It has been the policy of the
WSI Board to retain earnings for use in the maintenance and expansion of WSI's
business. WSI has never declared any cash dividends. Furthermore, WSI is subject
to certain financing agreements which restrict the ability of WSI to pay
dividends.
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<PAGE> 41
EQUIVALENT AND PRO FORMA PER COMMON SHARE DATA
(UNAUDITED)
The following table presents selected, comparative, unaudited per common
share data for (i) RBMG Common Stock, on a historical basis, on a pro forma
basis giving effect only to the RBC Merger, on a pro forma basis giving effect
only to the WSI Merger and on a pro forma basis giving effect to both the RBC
Merger and the WSI Merger, (ii) RBC Common Stock on a historical basis and on a
pro forma basis giving effect only to the RBC Merger and (iii) WSI Common Stock
on a historical basis, on a pro forma basis giving effect only to the WSI Merger
and on a pro forma basis giving effect to both the RBC Merger and the WSI
Merger.
The equivalent and pro forma per common share data included in the
following table presents, as applicable, the assumed consummation of the RBC
Merger as of January 1, 1996 with a spin-off of RBC's credit card subsidiary,
Resource Processing Group, Inc. ("RPG") as of January 1, 1996, and the assumed
consummation of the WSI Merger as of April 1, 1996, the effective date of the
leveraged buyout of GF Mortgage Corp. and GF Property Corp., the predecessor
entities to WSI.
The pro forma information is not necessarily indicative of the results of
the future operations of any of RBMG, RBC or WSI or of the actual results that
would have occurred had the RBC Merger (and spin-off of RPG) or the WSI Merger
been consummated on January 1, 1996 or April 1, 1996, respectively. The
information is derived from, and should be read in conjunction with, the
historical consolidated financial statements of RBMG, including related notes
thereto, which are incorporated herein by reference, the historical consolidated
financial statements of RBC, including related notes thereto, which are included
in this Joint Proxy Statement/ Prospectus, and the historical consolidated
financial statements of WSI, including related notes thereto, which are included
in this Joint Proxy Statement/Prospectus. See "Available Information" and
"Incorporation of Certain Documents by Reference" and "Unaudited Pro Forma
Condensed Combined Financial Statements."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------- THREE MONTHS ENDED
1994 1995 1996 MARCH 31, 1997
----- ----- ---------- ------------------
<S> <C> <C> <C> <C>
NET INCOME PER COMMON SHARE:
RBMG historical(1)(2)............................. $1.16 $0.92 $ 1.08 $ 0.23
RBMG pro forma (RBC Merger only).................. N/A N/A 0.88 0.20
RBMG pro forma (WSI Merger only)(3)............... N/A N/A 0.83 0.55
RBMG pro forma (RBC Merger and WSI Merger)(3)..... N/A N/A 0.70 0.50
RBC historical.................................... N/A N/A 0.85 0.22
RBC equivalent pro forma (RBC Merger only)(4)..... N/A N/A 0.95 0.22
WSI historical(5)(6).............................. N/A N/A 81,998.20 183,818.38
WSI equivalent pro forma (WSI Merger only)(7)..... N/A N/A 161,540.41 107,044.85
WSI equivalent pro forma (RBC Merger and WSI
Merger)(8)...................................... N/A N/A 149,691.50 106,922.50
CASH DIVIDENDS PER COMMON SHARE:
RBMG historical(9)................................ N/A N/A 0.06 0.03
RBMG pro forma (RBC Merger only).................. N/A N/A 0.06 0.03
RBMG pro forma (WSI Merger only).................. N/A N/A 0.06 0.03
RBMG pro forma (RBC Merger and WSI Merger)........ N/A N/A 0.06 0.03
RBC historical.................................... 0.50 0.55 N/A N/A
RBC equivalent pro forma (RBC Merger only)(4)..... N/A N/A 0.06 0.03
WSI historical.................................... N/A N/A N/A N/A
WSI equivalent pro forma (WSI Merger only)(7)..... N/A N/A 11,677.62 5,838.81
WSI equivalent pro forma (RBC Merger and WSI
Merger)(8)...................................... N/A N/A 12,830.70 6,415.35
</TABLE>
22
<PAGE> 42
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ -------------
<S> <C> <C>
BOOK VALUE PER COMMON SHARE:
RBMG historical(2).......................................... $ 8.16 $ 8.37
RBMG pro forma (RBC Merger only)............................ N/A 8.84
RBMG pro forma (WSI Merger only)(3)......................... N/A 4.86
RBMG pro forma (RBC Merger and WSI Merger)(3)............... N/A 5.04
RBC historical.............................................. 9.30 9.65
RBC equivalent pro forma (RBC Merger only)(4)............... N/A 9.55
WSI historical(10).......................................... 112,668.36 357,720.00
WSI equivalent pro forma (WSI Merger only)(7)............... N/A 945,887.22
WSI equivalent pro forma (RBC Merger and WSI Merger)(8)..... N/A 1,077,778.80
</TABLE>
- ---------------
N/A -- Not applicable or not required
(1) Beginning in the first quarter of 1997, RBMG was required to prospectively
report net income per common share on a primary earnings per common share
basis. Accordingly, the weighted average shares outstanding for the three
months ended March 31, 1997, includes common stock equivalents while such
equivalents are excluded for prior periods presented.
(2) Per common share amounts for RBMG have been adjusted to reflect the five
percent stock dividends issued on each of March 8, 1994, September 12,
1994, May 8, 1995 and August 31, 1995, the ten percent stock dividend
issued on June 30, 1995, and the seven percent stock dividend issued on
September 24, 1996.
(3) Per common share amounts for RBMG on a pro forma basis treat shares of RBMG
Common Stock, potentially issuable pursuant to the conversion of the WSI
Warrant, as issued and outstanding common stock equivalents.
(4) The equivalent pro forma per common share data for RBC are computed by
multiplying RBMG pro forma (RBC Merger only) information by 1.08026, the
RBC Exchange Ratio.
(5) The data for WSI for 1996 is for the period from April 1, 1996, the
effective date of the leveraged buyout of GF Mortgage Corp. and GF Property
Corp., the predecessor entities to WSI, to December 31, 1996.
(6) Per common share amounts for WSI treat shares of WSI Common Stock,
potentially issuable pursuant to the WSI Warrant, as issued and outstanding
common stock equivalents.
(7) The equivalent pro forma per common share data for WSI are computed by
multiplying RBMG pro forma (WSI Merger only) information by 194,627, the
sum of the applicable WSI Exchange Ratios, assuming the RBC Merger is not
consummated.
(8) The equivalent pro forma per common share data for WSI are computed by
multiplying RBMG pro forma (WSI Merger and RBC Merger) information by
213,845, the sum of the applicable WSI Exchange Ratios assuming the RBC
Merger is consummated.
(9) RBMG began paying a regular quarterly cash dividend in the third quarter of
1996.
(10) Historical book value per common share data for WSI are computed excluding
shares of WSI Common Stock potentially issuable pursuant to the WSI
Warrant.
23
<PAGE> 43
SELECTED HISTORICAL FINANCIAL DATA
(UNAUDITED)
The following tables present for RBMG, RBC and WSI selected consolidated
financial data for each of the years in the five year period ended December 31,
1996, and for the three month periods ended March 31, 1996 and 1997. The
information for RBMG has been derived from the consolidated financial statements
of RBMG, including the unaudited consolidated financial statements of RBMG
incorporated in this Joint Proxy Statement/ Prospectus by reference to RBMG's
Quarterly Report on Form 10-Q for the three months ended March 31, 1997 and the
audited consolidated financial statements of RBMG incorporated in this Joint
Proxy Statement/Prospectus by reference to RBMG's 1996 Annual Report on Form
10-K for the year ended December 31, 1996, and should be read in conjunction
therewith and the notes thereto. The information for RBC has been derived from
the consolidated financial statements of RBC, including the unaudited
consolidated financial statements of RBC for the three month periods ended March
31, 1996 and 1997 and the audited consolidated financial statements of RBC for
each of the years in the three year period ended December 31, 1996 included
elsewhere in this Joint Proxy Statement/Prospectus and should be read in
conjunction therewith and the notes thereto. The information for WSI has been
derived from the consolidated financial statements of WSI, including the
unaudited consolidated financial statements of WSI for the three months ended
March 31, 1997 and the audited consolidated financial statements of WSI for the
period from April 1, 1996 (the effective date of the leveraged buyout of GF
Mortgage Corp. and GF Property Corp., the predecessor entities to WSI) to
December 31, 1996 included elsewhere in this Joint Proxy Statement/Prospectus
and should be read in conjunction therewith and the notes thereto. The combined
information for GF Mortgage Corp. and GF Property Corp., has been derived from
the combined financial statements of GF Mortgage Corp. and GF Property Corp.,
including the audited combined financial statements as of and for the three
month period ended March 31, 1996 and for each of the years in the two year
period ended December 31, 1995 included elsewhere in this Joint Proxy
Statement/Prospectus and should be read in conjunction therewith and the notes
thereto. Historical results are not necessarily indicative of results expected
for any future period. In the opinion of the managements of RBMG, RBC and WSI,
all adjustments, consisting only of normal recurring adjustments necessary to
arrive at a fair statement of interim results of operations of RBMG, RBC and WSI
have been included. See "Available Information" and "Incorporation of Certain
Documents by Reference."
24
<PAGE> 44
RBMG
<TABLE>
<CAPTION>
AT OR FOR THE THREE
MONTHS ENDED
AT OR FOR THE YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------------------- ------------------------
1992 1993 1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
INCOME STATEMENT
Net interest income................... $ 9,200 $ 9,616 $ 7,686 $ 8,635 $ 16,902 $ 3,243 $ 3,735
Net gain on sale of mortgage loans.... 2,262 2,167 1,160 33,822 79,178 18,533 17,027
Gain on sale of mortgage servicing
rights.............................. 17,491 29,202 33,375 7,346 1,105 66 1,491
Loan servicing fees................... 3,216 6,128 14,196 24,205 28,763 7,130 7,535
Total revenues........................ 32,826 47,756 56,622 76,697 126,617 29,050 30,057
Salary and employee benefits.......... 10,048 12,203 15,986 31,199 55,578 12,666 12,264
Total expenses (including taxes)...... 21,576 30,176 38,579 62,478 106,994 24,590 25,587
Net income............................ 11,250 17,580 18,043 14,219 19,623 4,460 4,470
PER COMMON SHARE DATA(2)
Net income per common share(3)........ $ N/A $ 0.80(1) $ 1.16 $ 0.92 $ 1.08 $ 0.28 $ 0.23
Market value per common share at
period end.......................... N/A 7.43 8.09 13.32 14.25 14.60 15.75
Book value per common share at period
end................................. N/A 4.04 5.21 6.00 8.16 7.58 8.37
Cash dividends declared per common
share............................... 0.06 0.03
Weighted average shares
outstanding(3)...................... N/A 15,486,795 15,498,607 15,411,036 18,240,994 16,010,745 19,553,072
BALANCE SHEET
Mortgage loans held for sale and
mortgage-backed securities.......... $ 330,305 $ 587,208 $ 119,044 $1,035,229 $ 802,335 $1,096,644 $ 983,622
Mortgage servicing rights, net........ 10,630 15,123 65,840 99,912 109,815 100,845 130,006
Total assets.......................... 364,328 639,425 237,631 1,231,097 1,028,394 1,306,341 1,234,691
Long-term borrowings.................. 22,000 65,530 24,000
Total liabilities..................... 344,388 576,942 157,017 1,137,693 871,093 1,160,288 1,073,015
Stockholders' equity and parent equity
in the division..................... 19,940 62,483 80,614 93,404 157,301 146,053 161,676
OPERATING DATA
Total loan production................. $2,458,302 $4,239,100 $2,875,265 $7,135,774 $9,995,725 $3,043,560 $2,169,288
Total servicing portfolio (including
subservicing)....................... 1,830,825 3,049,270 5,876,508 7,821,736 8,658,742 9,148,985 9,413,766
Return on average assets.............. N/A(4) N/A(4) 5.25% 1.95% 1.91% 1.48% 1.87%
Return on average equity.............. N/A(4) N/A(4) 25.98% 17.00% 14.43% 17.52% 11.27%
</TABLE>
- ---------------
N/A -- Not applicable
(1) RBMG's initial public offering was consummated on June 3, 1993. Net income
per common share for 1993 was calculated based on net income subsequent to
the date of the initial public offering through December 31, 1993, of
$12,465.
(2) Amounts have been adjusted to reflect the five percent stock dividends
issued on each of March 8, 1994, September 12, 1994, May 8, 1995 and August
31, 1995, the ten percent stock dividend issued on June 30, 1995, and the
seven percent stock dividend issued on September 24, 1996.
(3) Beginning in the first quarter of 1997, RBMG was required to prospectively
report net income per common share on a primary net income per common share
basis. Accordingly, the weighted average shares outstanding for the three
months ended March 31, 1997, includes common stock equivalents while such
equivalents are excluded for the prior periods presented.
(4) Because of the significantly different capital structure of RBMG prior to
its initial public offering, these statistics are not comparatively
meaningful for periods prior to, and including the date on which the initial
public offering was consummated.
25
<PAGE> 45
RBC
<TABLE>
<CAPTION>
AT OR FOR THE THREE
MONTHS ENDED
AT OR FOR THE YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------------- ------------------------
1992(1) 1993 1994 1995 1996 1996 1997
-------- -------- -------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
Net interest income................... $ 46,339 $ 13,762 $ 7,085 $ 9,893 $ 8,130 $ 2,785 $ 1,242
Net gain on sale of leases............ 1,617 3,124 19 476
Credit card fees...................... 7,420 6,723 23,140 11,637 18,424 3,087
Commercial mortgage loan origination
fees................................ 244 3,082 4,416 295 477
Commercial mortgage loan and lease
servicing fees...................... 9 1,014 2,508 469 858
Equity in undistributed earnings of
RBMG................................ 5,153 7,510 5,885 7,424 1,854 1,775
Gain on sale of RBMG Common Stock..... 20,521 2,456 2,456
Revenues of retail banking business... 2,454
Gain on sale of retail banking
business............................ 8,878 9,931
Gain on sale of mortgages and mortgage
servicing rights.................... 18,059 368
Gain (loss) on sale of credit cards... 9,178 (101)
Total revenues........................ 87,893 59,919 51,295 34,469 47,603 11,310 6,435
Salary and employee benefits.......... 26,319 15,618 9,537 11,526 18,360 3,607 2,483
Provision for loan and lease losses... 18,566 6,084 2,000 2,985 2,391 1,015 390
Total expenses (including taxes)...... 78,841 43,535 37,094 27,765 40,350 8,339 4,547
Net income............................ 9,052 16,384 14,201 6,704 7,253 2,971 1,888
PER COMMON SHARE DATA
Net income per common share........... $ 1.14 $ 1.93 $ 1.65 $ 0.78 $ 0.85 $ 0.35 $ 0.22
Book value per common share at
period-end.......................... 7.91 8.36 9.35 9.70 9.43 10.04 9.65
Cash dividends declared per common
share............................... 1.05 .50 .55 (2)
BALANCE SHEET
Loans and lease receivables, net...... $167,831 $159,333 $ 93,931 $ 111,885 $ 55,583 $ 113,591 $ 46,709
Investment in RBMG.................... N/A 25,974 33,484 39,369 61,820 56,679 63,374
Total assets.......................... 669,430 459,236 177,931 197,038 140,128 196,612 133,722
Long-term borrowings.................. 38,611 11,380
Total liabilities..................... 606,512 388,237 97,385 113,531 60,089 110,134 51,795
Stockholders' equity.................. 62,918 70,999 80,546 83,507 80,039 86,478 81,927
OPERATING DATA
Total commercial mortgage loan
originations........................ $ $ $ 21,468 $ 317,940 $ 509,415 $ 68,780 $ 76,472
Total lease production................ 15,524 34,518 75,505 94,334 63,284 15,905 10,532
Commercial mortgage loan servicing
portfolio........................... 107,691 1,464,360 2,334,451 1,504,774 2,400,990
Lease servicing portfolio (including
servicing for third parties)........ 25,889 44,460 88,066 135,430 129,860 135,604 125,010
</TABLE>
- ---------------
(1) Includes the balance sheet and/or results of operations of the mortgage
banking business of the former banking subsidiaries of RBC, which were
spun-out to form RBMG in connection with its initial public offering in
1993.
(2) As of the close of business on December 31, 1996, RBC effected a spin-off of
its credit card processing subsidiary, RPG, through a distribution of RPG's
common stock to RBC Stockholders, which was accounted for as a non-cash
dividend in-kind.
26
<PAGE> 46
WSI
<TABLE>
<CAPTION>
GF MORTGAGE CORP. AND GF PROPERTY CORP.
COMBINED(1) WALSH HOLDING CO., INC.(1)
----------------------------------------------- -----------------------------
AT OR FROM AT OR FOR AT OR FOR THE
INCEPTION THE THREE AT OR FOR THE THREE
(JUNE 14, AT OR FOR THE YEAR MONTHS NINE MONTHS MONTHS
1993) TO ENDED DECEMBER 31, ENDED ENDED ENDED
DECEMBER 31, -------------------- MARCH 31, DECEMBER 31, MARCH 31,
1993 1994 1995 1996 1996(2) 1997
------------ -------- -------- --------- ------------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
Net interest income....................... $ 276 $ 83 $ 954 $ 525 $ 3,074 $ 277
Net gain on sales and securitizations of
mortgage loans and loan fees............ 136 7,563 9,738 3,752 26,343 35,799
Total revenues............................ 412 7,646 10,692 4,277 29,893 36,076
Salary and employee benefits.............. 4,541 4,585 2,225 8,757 3,192
Total expenses (including taxes).......... 169 7,271 8,630 3,983 21,694 17,696
Net income................................ 243 375 2,062 159 8,199 18,380
PER COMMON SHARE DATA
Net income per common share(3)............ N/A N/A N/A N/A $ 81,998 $183,818
Book value per common share at period
end..................................... N/A N/A N/A N/A 112,668 357,720
Cash dividends declared per common
share................................... N/A N/A N/A N/A
BALANCE SHEET
Mortgage loans held for sale.............. $ $ 38,229 $ 79,240 $136,293 $253,366 $117,395
Residual certificates..................... 9,861 38,241
Total assets.............................. 22,764 45,275 84,015 140,313 284,080 168,757
Total liabilities......................... 21,771 34,407 70,285 126,424 275,631 141,928
Stockholders' equity...................... 993 10,868 13,730 13,889 8,449 26,829
OPERATING DATA
Total loan production..................... $ 100 $ 68,700 $299,500 $123,211 $536,863 $242,435
Whole loan sales.......................... 42,800 245,500 63,218 291,274 28,386
Loans sold through securitizations........ 113,944 333,738
</TABLE>
- ---------------
N/A -- Not applicable
(1) Effective April 1, 1996, Walsh Holding Co., Inc. acquired GF Mortgage Corp.
and GF Property Corp. in a leveraged buyout transaction. The combined
financial statements thereof represent the predecessor entities of WSI.
(2) For the period from inception (April 1, 1996) through December 31, 1996.
(3) Net income per common share amounts treat shares of WSI Common Stock
potentially issuable pursuant to the WSI Warrant as issued and outstanding
common stock equivalents.
27
<PAGE> 47
RISK FACTORS
In addition to the other information included in or incorporated by
reference into this Joint Proxy Statement/Prospectus and the annexes hereto, the
following factors should be considered carefully in evaluating each of the
proposed Mergers.
RISKS ASSOCIATED WITH THE MERGERS
Fixed Exchange Ratios
The RBC Exchange Ratio, the WSI Exchange Ratio and the WSI Escrow Stock
Ratio are expressed in the Merger Agreements as fixed ratios. Accordingly, the
exchange ratios will not be adjusted in the event of any increase or decrease in
the price of RBMG Common Stock. The sales price of RBMG Common Stock may vary
from its sales price at the date of this Joint Proxy Statement/Prospectus and
the dates of the RBMG Special Meeting, the RBC Special Meeting and the WSI
Special Meeting. Such variations may be the result of changes in the business,
operations, or prospects of RBMG, RBC or WSI, market assessments of the
likelihood that the Mergers will be consummated and the timing thereof, general
market and economic conditions, and other factors. There can be no assurance
that the price of RBMG Common Stock on the date of this Joint Proxy Statement/
Prospectus or the dates of the RBC Special Meeting and the WSI Special Meeting
will be indicative of its price at the RBC Effective Time and the WSI Effective
Time, respectively. The effective time of each merger will occur as soon as
practicable following the meetings and the satisfaction or waiver of the
conditions set forth in the respective merger agreements. If the RBC Merger is
consummated prior to the WSI Effective Time, it is contemplated that the WSI
Merger would not occur earlier than 35 days after the RBC Effective Time.
Stockholders of RBC and WSI are urged to obtain current market quotations for
RBMG Common Stock.
Uncertainties in Integrating Business Operations
In determining that the Mergers are advisable and in the best interests of
its stockholders, each of the RBMG Special Committee, the RBMG Board, the RBC
Board and the WSI Board considered certain benefits expected to result from the
consummation thereof. See "The RBC Merger -- Reasons for the RBC Merger" and
"The WSI Merger -- Reasons for the WSI Merger." There can be no assurance that
any or all of such benefits will be realized as rapidly as currently expected or
at all.
Interests of Certain Persons in the Mergers
In considering the recommendation of the RBC Merger by the RBMG Special
Committee, the RBMG Board and the RBC Board, stockholders should be aware that
certain directors and executive officers of RBMG and RBC have certain interests
that may present them with potential conflicts of interest with respect to the
RBC Merger. See "The RBC Merger -- Interests of Certain Persons in the RBC
Merger."
In considering the recommendation of the WSI Merger by the RBMG Special
Committee, the RBMG Board and the WSI Board, stockholders should be aware that
certain directors and executive officers of RBMG and WSI have certain interests
in the WSI Merger that may present them with potential conflicts of interest
with respect to the WSI Merger. See "The WSI Merger -- Interests of Certain
Persons in the WSI Merger."
Control of RBMG by Management and Principal Stockholder
The WSI Merger Agreement provides that, at the WSI Effective Time, Robert
C. Walsh will serve as President and as a director of RBMG. As a result of the
WSI Merger and whether or not the RBC Merger occurs, Robert C. Walsh and his
affiliates will own approximately 29.3% of the outstanding shares of RBMG Common
Stock. As a result, Robert C. Walsh and his affiliates will exercise
considerable influence in any matters submitted to a vote of stockholders and
over the management and policies of RBMG.
28
<PAGE> 48
RISKS RELATING GENERALLY BOTH TO BUSINESS OF RBMG AND TO BUSINESS OF WSI
General Business Risks
Each of RBMG's business and WSI's business is subject to various business
risks, including competition from other mortgage companies and other financial
institutions. Economic conditions affect the consumer's decision to buy or sell
residences as well as the number of residential mortgage loan delinquencies and
foreclosures, the value of collateral supporting loan portfolios, administrative
costs in evaluating and processing mortgage loan applications, and the cost and
availability of funds that mortgage banking companies rely upon to make or
purchase loans. Changes in the level of consumer confidence, tax laws, real
estate values, prevailing interest rates and investment returns expected by the
financial community could make mortgage loans of the types originated or
purchased by RBMG or WSI, as the case may be, less attractive to borrowers or
investors. Competition also may be affected by fluctuations in interest rates,
general economic conditions, and localized economic conditions.
RBMG and WSI each continues to face the same challenges as other companies
within the mortgage banking industry and as such neither is immune from
significant volume declines precipitated by changes in interest rates or other
factors beyond their respective control.
Competition
The mortgage banking business is highly competitive. Each of RBMG and WSI
competes with other mortgage banking companies, commercial banks, savings
associations, credit unions and other financial institutions in every aspect of
its business, including funding and purchasing loans from mortgage brokers,
purchasing loans from correspondents and, in the case of RBMG, acquiring loan
servicing rights. Each of RBMG and WSI competes with mortgage banking companies
and other financial institutions that may have greater financial resources,
better operating efficiencies and longer operating histories than either RBMG or
WSI. Furthermore, increasing consolidation in the mortgage industry is leading
to an increased market share for the largest mortgage companies. At the same
time, the Federal National Mortgage Association ("FNMA") and the Federal Home
Loan Mortgage Corporation ("FHLMC") are developing technologies and business
practices that could reduce their reliance on large mortgage companies for loan
production and enable them to access smaller producers for volume. To the extent
that market pricing becomes more competitive, RBMG or WSI may be unable to
achieve its planned level of originations and RBMG may be unable to consummate
acquisitions of servicing rights at a satisfactory cost.
In addition, the current level of gains realized by WSI and its competitors
on the sale of the type of loans they originate and purchase is attracting and
may continue to attract additional competitors into the sub-prime mortgage
market. As a consequence, WSI in the future may be faced with increasing pricing
pressure from competitors seeking to purchase loans from WSI's network of
mortgage bankers, which could result in higher costs to WSI to purchase its loan
volume, thereby lowering gain on loan sales and adversely impacting
profitability. Furthermore, establishing a broker and mortgage banker-sourced
loan business typically requires a substantially smaller commitment of capital
and personnel resources than a direct-sourced loan business. This relatively
lower barrier to entry permits new competitors easier access to the broker and
mortgage banker-sourced loan market.
Increased competition could also have the possible effects of (i) lowering
gains that may be realized on WSI's loan sales, (ii) reducing the volume of
WSI's loan originations and loan sales, (iii) increasing the demand for WSI's
experienced personnel and the potential that such personnel will be recruited by
WSI's competitors, and (iv) lowering the industry standard for sub-prime
underwriting guidelines (for example, by providing for less stringent
loan-to-value ratios) as competitors attempt to increase or maintain market
share in the face of increased competition.
Due to the foregoing considerations, there can be no assurance that either
RBMG or WSI will be able to continue to compete successfully in the markets they
serve. Inability to compete successfully would have a material adverse effect on
the results of operations and financial condition of RBMG or WSI, as the case
may be.
29
<PAGE> 49
Regulation, Possible Changes and Related Matters
RBMG's mortgage banking business is subject to the rules and regulations of
the Department of Housing and Urban Development ("HUD"), the Federal Housing
Administration ("FHA"), the Veterans Administration ("VA"), FNMA, FHLMC, the
Governmental National Mortgage Association ("GNMA"), and other regulatory
agencies with respect to originating, processing, underwriting, selling,
securitizing, and servicing mortgage loans. WSI's mortgage banking business is
subject to the rules and regulations of HUD. In addition, there are other
federal and state statutes and regulations affecting the activities of both RBMG
and WSI. These rules and regulations, among other things, impose licensing
obligations on RBMG and WSI, prohibit discrimination and establish underwriting
guidelines that include provisions for inspections and appraisals, require
credit reports on prospective borrowers, establish eligibility criteria for
mortgage loans, and fix maximum loan amounts.
Moreover, lenders such as RBMG are required annually to submit audited
financial statements to FNMA, FHLMC, GNMA, HUD, and various state regulatory
authorities, and to comply with each regulatory entity's financial requirements.
RBMG's business is also subject to examination by FNMA, FHLMC, GNMA and state
regulatory authorities at all times to assure compliance with applicable
regulations, policies, and procedures. Lenders such as WSI are required to
submit audited financial statements to HUD and various state regulatory
authorities, and to comply with each regulatory entity's financial requirements.
WSI's business is also subject to examination by HUD and state regulatory
authorities at all times to assure compliance with applicable regulations,
policies, and procedures.
Mortgage origination activities, which are conducted by each of RBMG and
WSI, are subject to the provisions of various federal and state statutes
including, among others, the Equal Credit Opportunity Act, the Federal
Truth-in-Lending Act (including, with respect to loans of the type originated or
purchased by WSI, the Home Ownership and Equity Protection Act of 1994), the
Federal Equal Credit Opportunity Act, the Fair Credit Reporting Act of 1970, the
Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act of 1974
("RESPA"), the Fair Housing Act, and the regulations promulgated thereunder,
which, among other provisions, prohibit discrimination, prohibit unfair and
deceptive trade practices, and require the disclosure of certain basic
information to mortgagors concerning credit terms and settlement costs, limit
fees and charges paid by borrowers and lenders, and otherwise regulate terms and
conditions of credit and the procedures by which credit is offered and
administered. RBMG is further subject to federal and state laws and regulations
governing the activities involved in servicing mortgage loans, including RESPA,
the Federal Debt Collection Practices Act (with respect to the servicing of
loans that are in default when the right to service is acquired by RBMG), as
well as other federal and state statutes and regulations affecting RBMG's
servicing activities. These statutes and regulations, among other things,
regulate assessment, collection, foreclosure and claims handling, and investment
and interest payments on escrow balances.
Failure to comply with any of the foregoing requirements regulating
mortgage origination or mortgage servicing activities can lead to loss of
approved status, termination of servicing contracts without compensation to the
servicer, demands for indemnification or mortgage loan repurchases, certain
rights of rescission for borrowers, class action lawsuits, and administrative
enforcement actions. Such regulatory requirements are subject to change from
time to time and may in the future become more restrictive, thereby making
compliance more difficult or expensive or otherwise restricting the ability of
each of RBMG and WSI to conduct their respective businesses as such businesses
are now conducted.
Litigation Affecting the Mortgage Banking Industry
In recent years, the mortgage banking industry has been subject to class
action lawsuits that allege violations of federal and state laws and
regulations, including the propriety of collecting and paying various fees and
charges and the calculation of escrow amounts. Most recently, at least 35
purported class action lawsuits have been commenced against various mortgage
companies alleging, inter alia, that the payment of certain fees to mortgage
brokers violates the anti-kickback provisions of RESPA. If these cases are
resolved against the lenders, it may cause an industry-wide change in the way
independent mortgage brokers are compensated. Such a change may have a material
adverse effect on RBMG, WSI and the entire mortgage lending industry. Class
action lawsuits may continue to be filed in the future against the mortgage
banking industry generally. No prediction can
30
<PAGE> 50
be made as to whether the ultimate decisions in any of these class actions will
be adverse to the defendant mortgage companies.
Environmental Matters
In the course of their respective businesses, through the foreclosure
process each of RBMG and WSI has acquired, and may acquire in the future,
properties securing loans that are in default. Although each of RBMG and WSI
lends to owners of residential properties, there is a risk that RBMG or WSI, as
the case may be, could be required to investigate and cleanup hazardous or toxic
substances or chemical releases at such properties after its acquisition, and
may be held liable to a governmental entity or to third-parties for property
damage, personal injury and investigation cleanup costs incurred by such parties
in connection with the contamination.
To date, neither RBMG nor WSI has been required to perform any
investigation or cleanup activities of any material nature, nor has either been
subject to any environmental claims. No assurance can be given, however, that
this will remain the case in the future.
Dependence Upon Independent Mortgage Brokers and Mortgage Bankers
Each of RBMG and WSI depends largely upon independent mortgage bankers,
including smaller mortgage companies and commercial banks, and, to a lesser
extent, upon independent mortgage brokers, for its originations and purchases of
mortgage loans. Substantially all of the independent mortgage brokers and
mortgage bankers with whom each of RBMG and WSI does business deal with multiple
loan originators for each prospective borrower. Wholesale originators, such as
RBMG and WSI, compete for business based upon pricing, service, loan fees and
costs, and other factors. RBMG's and WSI's competitors also seek to establish
relationships with such independent mortgage bankers and mortgage brokers, none
of whom is obligated by contract or otherwise to continue to do business with
RBMG or WSI. In addition, each of RBMG and WSI expects the volume of broker and
mortgage banker-sourced loans purchased by it to increase. Future operating and
financial results of RBMG and WSI may be more susceptible to fluctuations in the
volume and cost of their respective broker and mortgage banker-sourced loans
resulting from, among other things, competition from other purchasers of such
loans.
RISKS RELATING TO BUSINESS OF RBMG
Net Interest Income
RBMG's loans held for sale are generally funded by borrowings under its
revolving warehouse credit line. RBMG's net warehouse interest income is the
difference between the interest income it earns on loans held for sale
(generally based on long-term interest rates) and the interest it pays on its
borrowings (generally based on short-term interest rates). The factors that can
affect this spread include interest rates charged by lenders, the relationship
between long-term and short-term interest rates and the use of compensating
balances (escrow funds held on deposit with lending banks) to decrease interest
rates charged on borrowed funds. There can be no assurance that this spread will
not decrease from its current level. A decrease in the spread would have a
negative effect on RBMG's net interest income.
RBMG's net income reflects a reduction in interest expense on its
borrowings with depository institutions for escrow funds placed with such
institutions. Net income could be adversely affected to the extent that proposed
revisions of applicable bank regulations cause these escrow accounts to be
recharacterized as demand deposit accounts, thereby requiring reserves to be
established with Federal Reserve Banks, which would reduce the amount of the
reduction in RBMG's interest expense on its borrowings. Other regulatory changes
or interpretations that change the ability of RBMG to receive credit for escrow
balances would adversely affect RBMG.
In addition, certain states require that interest be paid to mortgagors on
escrow funds deposited by them to cover mortgage-related payments such as
property taxes and insurance premiums. Federal legislation has in the past been
introduced that would, if enacted, revise current escrow regulations and
establish a uniform interest payment requirement in all states. If such federal
legislation were enacted or if additional states enact legislation
31
<PAGE> 51
relating to payment of, or increases in the rate of, interest on escrow
balances, or if such legislation were retroactively applied to loans in RBMG's
servicing portfolio, RBMG's earnings would be adversely affected.
Volume of Mortgage Loans Produced
During periods of declining interest rates, RBMG typically experiences an
increase in loan originations because of increased home purchases and,
particularly, increased refinancing activity. During 1990 to 1993, a period of
generally declining interest rates, refinancing activity as a percentage of
total originations in the industry increased from 23% in 1990 to 55% in 1993. In
contrast, refinancing activity decreased to 32% of total originations in 1994,
25% in 1995 and 29% in 1996 as the result of generally increasing interest
rates. Increases in interest rates in the future may adversely affect
refinancing activity, which could have an adverse effect on RBMG's origination
revenues.
Sales of Mortgage Loans
Gains or losses on sales of mortgage loans may result from changes in
interest rates from the time the interest rate on a customer's mortgage loan
application is established to the time RBMG sells the loan. At any given time,
RBMG has committed to sell substantially all of its mortgage loans that are
closed and a percentage of the mortgage loans that are not yet closed but for
which the interest rate has been established ("pipeline loans"). To manage the
interest rate risk of RBMG's pipeline loans, RBMG continuously projects the
percentage of the pipeline loans it expects to close and, on the basis of such
projections, enters into forward sales commitments to sell such loans. To reduce
the effect of such interest rate changes, RBMG employs a variety of techniques,
currently consisting of a combination of mandatory forward sales commitments for
mortgage-backed securities and put and call option contracts on treasuries.
If interest rates make an unanticipated change, the actual percentage of
pipeline loans that close may differ from the projected percentage. A sudden
increase in interest rates can cause a higher percentage of pipeline loans to
close than projected. To the degree that this may not have been anticipated,
RBMG may not have made forward sales commitments to sell these additional loans
and consequently may incur significant losses upon their sale at current market
prices, adversely affecting results of operations. Likewise, if a lower
percentage of pipeline loans closes than was projected, due to a sudden decrease
in interest rates or otherwise, RBMG may have committed to sell more loans than
actually close and as a result may incur significant losses in fulfilling these
commitments, adversely affecting results of operations. This risk is greater
during times of volatility of interest rates.
Forward Sale Arrangements
In connection with its mortgage loan sales and mortgage servicing rights
sales programs, which involve the sale of mortgage loans, mortgage-backed
securities and servicing rights on a forward or other deferred delivery and
payment basis, RBMG has credit risk exposure to the extent purchasers are unable
to meet the terms of their forward purchase contracts. As is customary in the
marketplace, none of the forward payment obligations of any of RBMG's
counterparties is currently secured or subject to margin requirements. Although
RBMG has never suffered a loss as a result of a default by a forward contract
counterparty, RBMG attempts to limit its credit exposure on forward sales
arrangements on mortgage loans and mortgage-backed securities by entering into
forward contracts only with institutions that RBMG believes are acceptable
credit risks and by limiting exposure to any single counterparty by selling to a
number of investors. For example, it is RBMG's current policy based on RBMG's
current size that not more than the lesser of (i) $350 million or (ii) 40% of
the total of the forward purchase contracts outstanding at any time be with any
single counterparty. All counterparties are obligated to settle their sales in
accordance with the terms of the related forward sale agreement. RBMG also
attempts to limit its exposure on flow servicing sales by only selling to
institutions that RBMG believes are acceptable credit risks.
Value of Mortgage Servicing Rights
The value of RBMG's servicing portfolio may be adversely affected if
mortgage interest rates decline and loan prepayments increase. In periods of
declining interest rates, the economic advantages to borrowers of
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refinancing their mortgage loans become greater. Increases in the rate of
mortgage loan prepayments reduce the period during which RBMG receives servicing
income from such loans. RBMG capitalizes the cost of the acquisition of
servicing rights from third parties and began in 1996 to capitalize servicing
rights on loans that it originates. The value of servicing rights is based upon
the net present value of future cash flows. If the rate of prepayment of the
related loans exceeds the rate assumed by RBMG, due to a significant reduction
in interest rates or otherwise, the value of the RBMG servicing portfolio will
decrease and accelerated amortization of servicing rights or recognition of an
impairment provision may become necessary, thereby decreasing earnings. RBMG
attempts to mitigate these risks with respect to the value of its servicing
rights by maintaining a portfolio of interest rate option contracts whose value
tends to increase in periods of declining interest rates thus mitigating the
decline in value typical during the same period with respect to servicing
rights. However, there can be no assurance that RBMG's efforts to mitigate these
risks will prevent value loss or impairment provisions.
Sales of Mortgage Servicing Rights
The prices obtained by RBMG upon the sale of its mortgage servicing rights
depend upon a number of factors, including the general supply of and demand for
mortgage servicing rights, as well as prepayment and delinquency rates on the
portfolio of mortgage servicing rights being sold. Interest rate changes can
affect the ability to sell, or the profitability of a sale of, mortgage
servicing rights to a third party. Purchasers of mortgage servicing rights
analyze a variety of factors, including prepayment sensitivity of loans
underlying servicing rights, to determine the purchase price they are willing to
pay. Thus, in periods of declining interest rates, sales of mortgage servicing
rights related to higher interest rate loans may be less profitable than sales
of mortgage servicing rights related to lower interest rate loans as it is
possible that such higher interest rate loans will be refinanced. Because these
factors are largely beyond the control of RBMG, there can be no assurance that
the current level of profitability from the sale of mortgage servicing rights
will be maintained.
Fluctuations in Performance
RBMG's operating results can fluctuate substantially from period to period
as a result of a number of factors, including the volume of loan production,
interest rates, the level of amortization of mortgage servicing rights required
by prepayment rates and the performance of RBMG's servicing portfolio hedge,
which currently consists primarily of interest rate option contracts for ten
year CMT floors. In particular, RBMG's results are strongly influenced by the
level of loan production, which is influenced by the interest rate environment
and other economic factors. Accordingly, the net income of RBMG may fluctuate
substantially from period to period.
Liabilities Under Representations and Warranties
In the ordinary course of business, RBMG makes representations and
warranties to the purchasers and insurers of its mortgage loans and the
purchasers of mortgage servicing rights regarding compliance with laws,
regulations and program standards and as to accuracy of information. Under
certain circumstances, RBMG may become liable for certain damages or may be
required to repurchase a loan if there has been a breach of representations or
warranties. RBMG generally receives similar representations and warranties from
the correspondents from whom it purchases loans. However, in the event of
breaches of such representations and warranties, RBMG is subject to the risk
that a correspondent may not have the financial capacity to repurchase loans
when called upon to do so by RBMG or otherwise respond to demands made by RBMG.
Although RBMG has not incurred losses in any material respect as a result of
mortgage loan repurchases due to breaches in representations and warranties,
there can be no assurance that RBMG will not experience such losses in the
future.
Delinquency and Default Risks
RBMG's profitability may be negatively impacted by economic downturns as
during such periods the frequency of loan defaults tends to increase. RBMG
originates and purchases conventional loans as well as loans insured by FHA or
partially guaranteed by VA. In the case of conventional loans, RBMG is generally
at risk for any mortgage loan default from origination or purchase by RBMG, as
the case may be, until the loan is sold (typically less than 45 days). Once RBMG
sells the loan, the risk of loss from mortgage loan default and
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foreclosure generally passes to the purchaser or insurer of the loan. RBMG has
from the time an FHA or VA mortgage loan is originated or purchased until the
first payment is due, a minimum of 31 days, to request insurance or a guarantee
certificate from the FHA and the VA, respectively. Once the insurance or the
guarantee certificate is issued, RBMG has no risk of default or foreclosure
except with respect to certain losses related to foreclosures of FHA mortgage
loans and losses that exceed the VA's guarantee limitation.
RBMG is also affected by mortgage loan delinquencies and defaults on the
mortgage loans that it services. Under certain types of servicing contracts,
particularly contracts to service loans that have been pooled or securitized,
the servicer must advance all or part of the scheduled payments to the owner of
the loan, even when loan payments are delinquent. Also, to protect their liens
on mortgaged properties, owners of mortgage loans usually require the servicer
to advance mortgage and hazard insurance and tax payments on schedule even if
sufficient escrow funds are unavailable.
With respect to VA loans, the VA guarantees the initial losses on a loan.
The guaranteed amount generally ranges from 20% to 35% of the original principal
balance. Before each foreclosure sale, the VA determines whether to bid to
purchase the foreclosed loan by comparing the estimated net sale proceeds to the
outstanding principal balance and the servicer's accumulated reimbursable costs
and fees. If this amount is a loss and exceeds the guaranteed amount, the VA
typically issues a no-bid and pays the servicer the guaranteed amount. Whenever
a no-bid is issued, the servicer absorbs the loss, if any, in excess of the sum
of the guaranteed principal and amounts recovered at the foreclosure sale.
RBMG's historical delinquency and foreclosure rate experience on VA loans has
generally been consistent with that of the industry.
In the case of loans insured by the FHA, RBMG will not be reimbursed for
certain amounts if foreclosure becomes necessary. Such amounts include interest
on the mortgage loan for the first two months subsequent to the loan becoming
delinquent and a portion of the costs of foreclosure (generally the unreimbursed
amount of such costs is limited to one-third).
With respect to VA loans, FHA loans and conventional loans, the servicer
generally is reimbursed ultimately by the mortgage loan owner or from
liquidation proceeds. However, in the interim, the servicer must absorb the cost
of funds advanced during the time the advance is outstanding. Further, the
servicer must bear the increased costs of attempting to collect on delinquent
and defaulted mortgage loans. In addition, if a default is not cured, the
mortgage loan will be extinguished as a result of foreclosure proceedings and
any servicing income ceased. As a consequence, RBMG will forego servicing income
from the time such loan becomes delinquent until it is foreclosed upon or is
brought current. RBMG maintains a reserve for possible losses at a level
considered adequate to provide for known and inherent risks related to
foreclosure and disposition losses. RBMG's evaluation of an adequate level of
foreclosure reserves considers past loss experience, industry loss experience,
geographic and product concentrations, delinquency trends, economic conditions
and other relevant factors. While RBMG uses the best currently available
information to make such evaluation, future adjustments to the foreclosure
reserve will be required as conditions and assumptions are revised in response
to changes in trends and the other factors and assumptions relevant to RBMG's
evaluation.
Availability of Funding Sources; Substantial Leverage
RBMG requires substantial financing for its business operations. Such
financing is currently provided primarily under (i) a 364-day secured mortgage
warehousing revolving credit agreement, dated as of July 31, 1996, and entered
into by RBMG and The Bank of New York, as agent, and the several banks
identified on the signature pages thereto (the "Bank Credit Agreement"), (ii) a
364-day secured revolving term credit agreement, dated as of July 31, 1996, and
entered into by RBMG and The Bank of New York, as agent, and the several banks
identified on the signature pages thereto (the "Term Agreement"), and (iii) an
uncommitted gestation financing facility, dated November 1, 1995, and entered
into by RBMG and Chase Manhattan Corporation (the "Gestation Facility"). As of
May 31, 1997, RBMG had aggregate outstanding indebtedness of approximately
$470,000,000, and $100,000,000 of additional availability under the Bank Credit
Agreement, had aggregate outstanding indebtedness of approximately $42,200,000
and $157,800,000 of availability under the Term Agreement and had aggregate
outstanding indebtedness of approximately $293,026,000 and $906,974,000 of
availability under the
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Gestation Facility. RBMG may incur additional indebtedness in the future,
subject to certain limitations contained in the instruments governing its
current indebtedness.
The degree to which RBMG is leveraged could have important consequences to
holders of RBMG Common Stock, including the following: (i) RBMG's ability to
grow will depend on its ability to obtain additional financing in the future for
originating loans, investment in servicing rights, working capital, capital
expenditures and general corporate purposes; (ii) a substantial portion of
RBMG's cash flow from operations must be dedicated to the payment of the
principal of and interest on its indebtedness, thereby reducing the funds
available to finance operations or pay cash dividends; and (iii) RBMG may be
more highly leveraged than certain of its competitors, which may place RBMG at a
competitive disadvantage and make it more vulnerable to economic downturns.
To the extent that RBMG is not successful in negotiating renewals of its
borrowings or in arranging new financing, it may have to curtail its origination
activities and/or sell significant portions of its servicing portfolio, which
would have a material adverse effect on RBMG's business and results of
operations. Among the factors that will affect RBMG's ability to refinance its
bank credit and term facilities are financial market conditions and the value
and performance of RBMG prior to the time of such refinancing. There can be no
assurance that any such refinancing can be successfully completed at
advantageous rates or at all.
Federal Programs; Availability of Active Secondary Market
RBMG's ability to generate funds by sales of mortgage-backed securities is
largely dependent upon the continuation of programs administered by FNMA, FHLMC
and GNMA, which facilitate the issuance of such securities, as well as RBMG's
continued eligibility to participate in such programs. In addition,
approximately 42% (based on 1996 mortgage loan production) of RBMG's business is
dependent upon the continuation of various programs administered by the FHA,
which insures mortgage loans, and the VA, which partially guarantees mortgage
loans. Although RBMG is not aware of any proposed discontinuation of, or
significant reduction in, the operation of such programs, any such changes could
have a material adverse effect on RBMG's operations. RBMG anticipates that it
will continue to remain eligible to participate in such programs, but any
significant impairment of such eligibility would materially adversely affect its
operations. In addition, the mortgage loan products eligible for such programs
may be changed from time to time by the sponsor. The profitability of specific
types of mortgage loan products may vary depending on a number of factors,
including the administrative costs to RBMG of originating or purchasing such
types of mortgage loans.
There can be no assurance that RBMG will be successful in effecting the
sale of mortgage loans at the historic price or volume levels in any particular
future periods. Any significant change in the secondary market level of activity
or underwriting criteria of FNMA, FHLMC or private investors could have a
material adverse effect on the gain or loss on sales of mortgage loans recorded
by RBMG and therefore on RBMG's results of operations.
Effect of Certain Charter and Bylaw Provisions; Possible Issuance of Preferred
Stock; Stockholders Agreement
Certain provisions of the RBMG Certificate and the RBMG Bylaws could delay
or frustrate the removal of incumbent directors and could make more difficult a
merger, tender offer or proxy contest involving RBMG, even if such events could
be beneficial to the interests of the stockholders. For example, the RBMG
Certificate and the RBMG Bylaws provide certain limitations on the calling of a
special meeting of stockholders and the RBMG Bylaws require advance notice
before certain proposals can be considered at stockholder meetings. Pursuant to
the RBMG Certificate, shares of preferred stock may be issued in the future
without further stockholder approval and upon such terms and conditions, and
having such rights, privileges and preferences, as the RBMG Board may determine.
The ability to issue preferred stock, including in connection with the RBMG
Rights Plan (See "The WSI Merger -- Certain Agreements in Connection with the
WSI Merger -- The RBMG Rights Plan"), provides desirable flexibility in
connection with acquisitions and other corporate transactions. However, the
rights of the holders of RBMG Common Stock will be subject to, and may be
adversely affected by, any preferred stock that may be issued in the future, and
the issuance of preferred stock could have the effect of making it more
difficult for a third party to acquire, or of discouraging a third party from
acquiring, a majority of the outstanding voting
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stock of RBMG. RBMG has no present plans to issue any shares of preferred stock.
In connection with the WSI Merger, RBMG and certain WSI Stockholders will enter
into the Stockholders Agreement (as defined in "The WSI Merger -- Certain
Agreements in Connection with the WSI Merger -- Stockholders Agreement")
providing for the composition of the RBMG Board following the WSI Merger. The
Stockholders Agreement could have the effect of making a change in the
composition of the RBMG Board more difficult and thereby hindering a change of
control transaction.
Dependence on Key Individuals
The success of RBMG is in large part dependent upon the efforts of Edward
J. Sebastian, Chairman and Chief Executive Officer, and David W. Johnson, Jr.,
Vice Chairman and Managing Director. The loss of the services of either of these
two officers could have a material adverse effect upon RBMG if a suitable
replacement could not be quickly retained. RBMG has obtained key man life
insurance policies on Mr. Sebastian in the amount of $2,000,000 and Mr. Johnson
in the amount of $5,000,000. RBMG also has entered into certain employment and
employment related agreements with Mr. Johnson.
RISKS RELATING TO BUSINESS OF WSI
Limited Operating History
WSI's operating subsidiary commenced its current operations of purchasing,
originating, and selling and securitizing non-conforming mortgage loans in 1994
and, therefore, has a limited operating history. Although WSI has experienced
substantial growth in mortgage loan originations and total revenues, and
expansion of its independent mortgage banker network and regional sales offices,
there can be no assurance that these rates of growth will be sustainable or
indicative of future results or that WSI will continue to be profitable in the
future.
Absence of Seasoned Loan Product; Uncertainty of Credit Quality
Prior to September 1996, all of WSI's loan sales were made on a servicing
released whole loan basis, resulting in the transfer of the attendant mortgage
servicing rights to the purchasers of such loans. WSI has generally sold
mortgage loans in the secondary market on a whole loan basis to institutional
purchasers after holding the loans for a relatively short period of time prior
to sale, and as a result, WSI is unable to determine with any degree of
accuracy, the delinquency, foreclosure, loss or prepayment rates on such loans.
Similarly, the loans securitized and sold by WSI in its first securitization
completed in September 1996 and the three additional securitization transactions
completed in the first quarter of 1997 were recently purchased or originated
loans and, as a result, any delinquency, foreclosure, loss or prepayment
information relating to such loans is not believed by WSI to be indicative of
results to be experienced in the future. As a result, at this time WSI is unable
to accurately quantify the rates of delinquency, foreclosure, loss and
prepayments on its loans and assess whether WSI's underwriting guidelines and
quality control criteria serve to maintain delinquency and foreclosure ratios,
and loss and prepayment rates at acceptable levels. In the event that pools of
loans sold in securitizations experience higher delinquencies, foreclosures,
losses or prepayments than anticipated, there could be a material adverse effect
on WSI's results of operations and financial condition due to several factors
such as anticipated increases in credit enhancement levels that may be required
in future securitizations involving WSI loans, as well as the adverse impact to
the value of the residual interests held by WSI.
Risks Related to Lower Credit-Grade Borrowers
Loans made to non-conventional borrowers typically entail a higher risk of
delinquency and higher losses than loans made to borrowers who utilize
conventional mortgage sources. As a consequence, the risk of foreclosure
increases with loans made to credit-impaired borrowers. Although foreclosure
sales are typically public sales, third-party purchasers rarely bid in excess of
the lender's lien because of the difficulty of determining the exact status of
title to the property, the possible deterioration of the property during the
foreclosure proceedings and the requirement that the purchaser pay for the
property in cash or by cashiers check. Thus, the foreclosing lender often
purchases the property from the trustee or referee for an amount equal to the
sum of the principal amount outstanding under the loan, accrued and unpaid
interest and expenses of foreclosure.
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Depending on market conditions, the ultimate proceeds of the sale may not equal
WSI's investment in the property.
While WSI believes that the underwriting criteria it employs enable it to
mitigate the higher risks inherent in loans made to non-conventional borrowers,
no assurance can be given that such criteria will afford adequate protection
against such risks. In the event that pools of loans sold in securitizations by
WSI experience higher delinquencies, foreclosures or losses than anticipated,
there could be a material adverse effect on WSI's results of operations or
financial condition due to several factors such as anticipated increases in
credit enhancement levels that may be required in future securitizations
involving WSI loans, as well as the adverse impact to the value of the residual
interests held by WSI because the related loan pools experience higher losses
thereby reducing the amount of cash available to WSI as the residual interest
owner.
Effect of Adverse Economic Conditions
WSI's business may be adversely affected by periods of economic slowdown or
recession, which may be accompanied by decreased demand for consumer credit and
by declining real estate values. Any material decline in real estate values
reduces the ability of borrowers to use home equity to support borrowings. A
decline in real estate values also increases the loan-to-value ratios of loans
previously made by WSI, thereby weakening collateral coverage and increasing the
possibility of a loss in the event of a borrower default. In addition,
delinquencies, foreclosures and losses generally increase during economic
slowdowns or recessions. WSI's actual rates of delinquencies, foreclosures and
losses on such loans could be higher than mortgage industry averages in general
under adverse economic conditions since WSI focuses on borrowers who are unable
to obtain mortgage financing from conventional mortgage sources due to credit
impairment or poor credit history. A sustained period of adverse economic
conditions may increase delinquencies, foreclosures and losses which could
adversely affect WSI's results of operations and financial condition.
Changes in Interest Rates
WSI's future profitability may be directly affected by the levels of and
fluctuations in interest rates, which affect WSI's ability to earn a spread
between interest received on its loans held for sale and the cost of borrowings
under WSI's warehouse line. The profitability of WSI is likely to be adversely
affected during any period of unexpected or rapid changes in interest rates.
Such interest rate increase would have the effect of reducing the value of loans
held for sale and would adversely affect the interest rate differential between
newly originated loans and the pass-through rate on loans that are securitized.
Conversely, a significant decline in interest rates may increase prepayments and
require WSI to write down the value of its residual certificates on loans that
have been securitized, thereby negatively impacting earnings. Furthermore,
inverse or flattened interest yield curves could have an adverse impact on WSI's
profitability because WSI offers loans based on long-term rates while the
warehouse line of credit facility bears a short-term interest rate and
securitizations bear medium-term rates.
Future Dependence on Securitization; Impact on Quarterly Operating Results
Prior to September 1996, all of WSI's loan sales were completed on a whole
loan basis to institutional purchasers for a cash premium. Since September 1996,
WSI has implemented a loan sale strategy that focuses on sales through
securitizations. In implementing this strategy, WSI completed a securitization
in September 1996 of $113 million of loans and three securitizations in the
first quarter of 1997 aggregating $333.7 million all through private offerings.
Under this strategy, WSI will rely significantly on securitization to generate
cash proceeds for repayment of its warehouse credit facility and to enable WSI
to originate and purchase additional loans. Several factors will affect WSI's
ability to complete securitizations, including conditions in the securities
markets generally, conditions in the mortgage-backed securities markets
specifically, the credit quality of WSI's servicing portfolio and WSI's ability
to obtain credit enhancement. Any substantial delays in accessing, or reductions
in the size or the anticipated availability of, the securitization market for
WSI's loans could have a material adverse effect on WSI's results of operations
and financial condition.
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WSI currently derives a majority of its revenues from securitizations. If
WSI were unable to securitize profitably a sufficient number of its loans in a
particular financial reporting period, WSI's revenues for such period would
decline, which could result in lower income or a loss for such period. WSI's
revenues may vary on a quarterly basis due to other factors, including the
volume of WSI's loan purchases and originations, the differences between WSI's
cost of funds and the average interest rates of purchased or originated loans,
the pass-through rate for regular interests issued in securitizations, and the
timing and size of the securitizations.
Residual Certificates
At March 31, 1997, WSI's balance sheet reflected the fair value of residual
certificates of approximately $38.2 million. WSI records as an investment its
retained interest in its securitized loans (residual certificates) and derives a
substantial portion of its income by recognizing gains upon sales of regular
Real Estate Mortgage Investment Conduit ("REMIC") interests in loans through
securitizations. Realization of the value of these residual certificates in cash
is subject to the prepayment and loss characteristics of the underlying loans
and to the timing and ultimate realization of the stream of cash flows
associated therewith. WSI estimates future cash flows from these residual
certificates, values them utilizing assumptions that it believes are consistent
with those that would be utilized by an unaffiliated third party purchaser, and
records them as trading securities at fair value in accordance with SFAS No.
115, "Accounting for Certain Debt and Equity Securities" and SFAS No. 125
"Accounting for Transfers and Servicing of Financial Assets and Extinguishment
of Liabilities." If actual experience differs from the assumptions used in the
determination of the fair value of these assets, future cash flows and earnings
could be negatively impacted and WSI would be required to write down the fair
value of its residual certificates. No assurance can be given that residual
certificates could be sold at their reported fair value, if at all.
Concentration of Operations in New Jersey
Approximately 31% and 24% of the dollar volume of the loans originated or
purchased by WSI during the nine months ended December 31, 1996 and the three
months ended March 31, 1997, respectively, were secured by residential
properties located in New Jersey. Although WSI continues to expand its branch
offices and network of independent mortgage bankers outside New Jersey, a
significant portion of WSI's loan purchase and origination volume is likely to
be based in New Jersey for the foreseeable future. Consequently, WSI's results
of operations and financial conditions are dependent upon general trends in the
New Jersey economy and its residential real estate market. Residential real
estate market declines may adversely affect the values of the property securing
loans such that principal balances of the loans, together with any primary
financing on the mortgage properties, may equal or exceed the value of the
mortgage properties. The existence of adverse economic conditions in New Jersey
could have a material adverse effect on WSI's results of operations and
financial condition.
Contingent Risks
Although WSI sells on a nonrecourse basis substantially all loans that it
purchases and originates, WSI remains subject to some degree of credit risk on
substantially all loans it purchases or originates. Pending the sale of the
loans, WSI is subject to the various business risks associated with lending,
including borrower default, foreclosure and a decline in the value of loans to
potential purchasers resulting from an increase in interest rates. Moreover, the
documents governing WSI's existing and anticipated securitizations require WSI
to commit to repurchase or replace loans that do not conform to the
representations and warranties made by WSI at the time of sale. Similarly, WSI's
sales of whole loans are made pursuant to agreements that generally provide for
recourse by the purchaser against WSI in the event of a breach of a
representation or warranty made by WSI, any fraud or misrepresentation during
the mortgage loan origination process or for an early prepayment of the loan.
Risks of Contracted Servicing
WSI currently contracts for the servicing of all loans it purchases,
originates, and holds for sale with Temple-Inland Mortgage Corporation
("Temple-Inland"). In addition, WSI sold to Temple-Inland, in separate
transactions, the servicing rights for the loans included in each of the
securitizations completed in September
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1996 and in the first quarter of 1997. WSI anticipates that it will continue to
negotiate the sale of servicing rights for loans included in a securitization
with Temple-Inland on a transaction-by-transaction basis. However, no assurance
can be given that WSI will be successful in negotiating for such servicing
functions for proposed securitizations on terms favorable to WSI. In addition,
as with any mortgage originator that relies on an external service provider, WSI
is subject to the risks associated with inadequate or untimely services. WSI
regularly reviews the delinquencies of its servicing portfolio. Many of WSI's
borrowers require notices and reminders to keep their loans current and to
prevent delinquencies and foreclosures. A substantial increase in WSI's
delinquency rate or foreclosure rate could adversely affect its ability to
profitably access the capital markets for its financing needs, including future
securitizations.
Risk of Competition from Government-Sponsored Entities
In the future, WSI may also face competition from, among others,
government-sponsored entities that may enter the sub-prime mortgage market.
Existing or new loan purchase programs may be expanded by FNMA, FHLMC or GNMA to
include sub-prime mortgages, particularly those in the "A-" category, which
constitute a significant portion of WSI's loan production.
Elimination of Deductibility of Mortgage Interest Could Adversely Affect
Results of Operations
Members of Congress and government officials have from time to time
suggested the elimination of the mortgage interest deduction for federal income
tax purposes, either entirely or in part, based on borrower income, type of loan
or principal amount. Because many of WSI's loans are made to borrowers for the
purpose of consolidating consumer debt or financing other consumer needs, the
competitive advantages of tax deductible interest, when compared with
alternative sources of financing, could be eliminated or seriously impaired by
such government action. Accordingly, the reduction or elimination of these tax
benefits could have a material adverse effect on the demand for the kind of
loans offered by WSI.
Ability of WSI to Implement its Growth Strategy
WSI's growth strategy involves expanding its independent mortgage
banker-sourced loan business through increased penetration into existing markets
and expansion into new markets while maintaining its customary premiums on sale,
interest rate spreads and underwriting criteria. Implementation of this strategy
will depend in large part on WSI's ability to (i) expand its independent
mortgage banker network in markets with a sufficient concentration of borrowers
meeting WSI's underwriting criteria, (ii) hire, train and retain skilled
employees, and (iii) continue to expand in the face of increasing competition
from other mortgage lenders. There can be no assurance that WSI will be able to
implement these growth strategies, or that such strategies will be effective.
See "Business of WSI."
Dependence on Key Individuals
WSI's growth and development to date have been dependent upon the services
of certain members of its senior management. The loss of the services of one or
more of such members of senior management of WSI could have a material adverse
effect on WSI if suitable replacements could not be quickly retained. See "WSI
Common Stock Ownership by Management and Principal Stockholders, Directors and
Officers -- Employment Agreements."
RISKS RELATING TO BUSINESS OF RBC
Business Risks Similar to those of RBMG and WSI
RBC's business is subject to a number of business risks that are similar to
those discussed above with respect to RBMG and WSI, including competition from
other equipment leasing and commercial mortgage banking companies, many of which
are better capitalized, changes in economic conditions, potential liabilities
under representations and warranties made in connection with the origination of
leases and commercial mortgage loans and delinquency and default risks. Changes
in interest rates also can have a variety of effects on RBC's business. In
particular, changes in interest rates affect the volume of originations, and the
profitability of,
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equipment leases and commercial mortgage loans. Furthermore, RBC's equipment
leasing business depends largely on independent lease brokers who are not
contractually obligated to do business with RBC. As a result of these and other
factors, RBC's operating results can fluctuate substantially from period to
period.
Dependence on RBMG
RBC's recent earnings have been largely attributable to RBMG and could be
adversely affected by the future performance and corporate actions of RBMG. For
the years 1994, 1995 and 1996, and the three months ended March 31, 1996 and
1997, RBMG accounted for 37.7%, 76.6%, 128.0%, 121.6% and 80.6%, respectively,
of RBC's pre-tax income and 52.9%, 87.8%, 136.2%, 145.1% and 94.0%,
respectively, of its net income. In addition, if the WSI Merger is consummated,
but not the RBC Merger, RBC's equity interest in RBMG will be lowered to 18.6%.
Dependence on Single Equipment Lease Client
The growth and profitability of RBC's equipment lease business are
dependent to a large extent on its ability to sell leases to and service leases
for third parties. Currently, RBC has in place an agreement to offer to sell
equipment leases to only one client; however, neither party is obligated to buy
or sell. The client has acquired leases monthly since December 1996, but there
is no assurance of future sales. This client accounted for 65% and 75%,
respectively, of lease non-interest revenues for 1996 and the three months ended
March 31, 1997. RBC has a $50 million revolving credit facility that expires in
August 1997 and which RBC expects to renew or replace upon termination. RBC uses
the proceeds of the credit facility to acquire leases and hold such leases until
they are sold. RBC's ability to acquire leases depends upon RBC's ability to
maintain its revolving credit facility or similar financing and to periodically
sell leases held by it. While RBC believes that it will be able to maintain such
financing and to acquire and sell sufficient equipment lease receivables to
enable its equipment leasing business to be profitable, there can be no
assurance that it will be able to do so. There can be no assurance that RBC will
be able to obtain other equipment lease clients, which could have a material
adverse effect on the business and results of operations of RBC.
Concentration in Commercial Mortgage Loan Business
At March 31, 1997, approximately 47% of the commercial mortgage loans
serviced by Laureate Realty were owned by one investor. That investor accounted
for 32% of RBC's 1996 commercial mortgage fees and 22% of RBC's commercial
mortgage fees during the quarter ended March 31, 1997. The loss of this investor
as a client could have a material adverse effect on the business and results of
operations of RBC.
Availability of Funding Sources; Substantial Leverage
RBC requires substantial financing for its business operations. Such
financing is currently provided primarily under a $50 million equipment lease
facility and two commercial mortgage loan facilities totalling $16.5 million.
All of the facilities expire in August 1997 and there can be no assurance that
the facilities will be renewed on comparable terms, or at all. RBC may incur
additional indebtedness in the future, subject to certain limitations contained
in the instruments governing its current indebtedness.
The degree to which RBC is leveraged could have important consequences to
holders of RBC Common Stock, including the following: (ii) RBC's ability to grow
will depend on its ability to obtain additional financing in the future for
originating equipment leases and commercial mortgage loans, working capital,
capital expenditures and general corporate purposes; (ii) a substantial portion
of RBC's cash flow from operations must be dedicated to the payment of the
principal of and interest on its indebtedness, thereby reducing the funds
available to finance operations or pay cash dividends; and (iii) RBC is more
highly leveraged than certain of its competitors, which may place RBC at a
competitive disadvantage and make it more vulnerable to economic downturns.
To the extent that RBC is not successful in negotiating renewals of its
borrowings or in arranging new financing, it may have to curtail its business
activities, which would have a material adverse effect on RBC's business and its
results of operations. Among the factors that will affect RBC's ability to
refinance its bank credit
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facilities are financial market conditions and the value and performance of RBC
prior to the time of such refinancing. There can be no assurance that any such
refinancing will be successfully completed.
Certain Provisions in Governing Documents
RBC has adopted several provisions in its Articles of Incorporation that
may have the effect of discouraging or preventing hostile take-over attempts.
These provisions include requirements for super-majority votes to approve
certain business combination transactions unless such transactions are approved
by a majority of disinterested directors or unless such transactions meet
certain minimum price, form of consideration and procedural requirements. To the
extent these provisions are effective, they may tend to reduce the value of
shares of RBC Common Stock.
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GENERAL INFORMATION
This Joint Proxy Statement/Prospectus is being furnished to (i) the RBMG
Stockholders in connection with the solicitation of proxies by the RBMG Board
for approval and adoption of (A) the RBC Merger Agreement, the RBC Merger and
the RBC Stock Issuance, (B) the WSI Merger Agreement, the WSI Merger and the WSI
Stock Issuance, (C) the RBC Amendment and (D) the WSI Amendment; (ii) the RBC
Stockholders in connection with the solicitation of proxies by the RBC Board for
approval and adoption of the RBC Merger Agreement and the RBC Merger; and (iii)
the WSI Stockholders in connection with the solicitation of proxies by the WSI
Board for approval and adoption of the WSI Merger Agreement and the WSI Merger.
If the RBC Merger is consummated, each outstanding share of RBC Voting
Common Stock and RBC Non-Voting Common Stock (other than treasury shares, shares
of RBC Common Stock held by RBC Stockholders who perfect their dissenters'
rights under South Carolina law and shares of RBC Common Stock owned by RBMG or
any wholly owned subsidiary of RBMG) will be converted into the right to receive
such number of shares of RBMG Common Stock equal to the RBC Exchange Ratio, with
cash being paid in lieu of any fractional shares. Pursuant to the RBC Articles,
immediately prior to the RBC Effective Time, each share of RBC Non-Voting Common
Stock will automatically convert into one share of RBC Voting Common Stock.
If the WSI Merger is consummated, each outstanding share of WSI Class A
Common Stock and WSI Class B Common Stock (other than treasury shares, shares of
WSI Common Stock held by WSI Stockholders who perfect their appraisal rights
under Delaware law and shares of WSI Common Stock owned by RBMG or any wholly
owned subsidiary of RBMG) will be converted into (i) the right to receive such
number of shares of RBMG Common Stock equal to the WSI Exchange Ratio and (ii)
the right to receive on a deferred basis such number of shares of RBMG Common
Stock equal to the WSI Escrow Stock Ratio, with cash being paid in lieu of any
fractional shares.
This Joint Proxy Statement/Prospectus also constitutes the Prospectus of
RBMG with respect to the shares of RBMG Common Stock to be issued in each of the
Mergers. Information in this Joint Proxy Statement/Prospectus with respect to
RBMG has been supplied by RBMG. The information with respect to RBC and WSI has
been supplied by RBC and WSI, respectively.
THE RBMG SPECIAL MEETING
TIME, DATE, PLACE AND PURPOSE
The RBMG Special Meeting will be held on , , 1997, at
, local time, at the offices of King & Spalding, 191 Peachtree Street,
Atlanta, Georgia 30303. At the RBMG Special Meeting, holders of RBMG Common
Stock will be asked to consider and vote upon proposals to approve and adopt (i)
the RBC Merger Agreement, the RBC Merger and the RBC Stock Issuance, (ii) the
WSI Merger Agreement, the WSI Merger and the WSI Stock Issuance, (iii) the RBC
Amendment and (iv) the WSI Amendment. Copies of the RBC Merger Agreement, the
WSI Merger Agreement, the RBC Amendment and the WSI Amendment are attached
hereto as Annex A, Annex B, Annex C and Annex D, respectively, and are
incorporated herein by reference.
RECORD DATE AND SHARES ENTITLED TO VOTE
Only holders of record of shares of RBMG Common Stock at the close of
business on the RBMG Record Date are entitled to notice of and to vote at the
RBMG Special Meeting and any adjournment or postponement thereof. As of such
date, there were shares of RBMG Common Stock issued and outstanding held
by approximately holders of record. Holders of record of RBMG Common
Stock on the RBMG Record Date for the RBMG Special Meeting are entitled to one
vote per share on any matter that may properly come before the RBMG Special
Meeting.
VOTE REQUIRED; SECURITY OWNERSHIP OF MANAGEMENT
The presence in person or by proxy of the holders of a majority of the
shares of RBMG Common Stock issued and outstanding as of the RBMG Record Date
and entitled to vote at the RBMG Special Meeting is
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necessary to constitute a quorum at the RBMG Special Meeting. The affirmative
vote of the holders of a majority of the shares of RBMG Common Stock issued and
outstanding as of the RBMG Record Date, voting in person or by proxy, is
necessary to approve and adopt each of the Merger Agreements, the Mergers, the
RBC Stock Issuance, the WSI Stock Issuance and the Amendments. Accordingly, a
failure to vote or an abstention will have the same effect as a negative vote.
As of the RBMG Record Date, the executive officers and directors of RBMG and
their affiliates beneficially owned an aggregate of shares of RBMG Common
Stock, or approximately % of the shares of RBMG Common Stock then
outstanding. Each of the executive officers and directors of RBMG has advised
RBMG that he intends to vote his shares of RBMG Common Stock in favor of each of
the proposals to approve and adopt the Merger Agreements, the Mergers, the RBC
Stock Issuance, the WSI Stock Issuance and the Amendments. RBC owns
approximately 36.5% of the outstanding RBMG Common Stock. The RBC Board has not
yet authorized the voting (either for, against or abstention) of the shares of
RBMG Common Stock owned by RBC in connection with each of the Merger Agreements,
the Mergers, the RBC Stock Issuance, the WSI Stock Issuance and the Amendments.
THE APPROVAL AND ADOPTION OF EACH OF THE RBC MERGER AGREEMENT, THE RBC
MERGER, THE RBC STOCK ISSUANCE AND THE RBC AMENDMENT IS CONTINGENT UPON THE
APPROVAL AND ADOPTION OF ALL OF THE RBC MERGER AGREEMENT, THE RBC MERGER, THE
RBC STOCK ISSUANCE AND THE RBC AMENDMENT. UNLESS EACH OF THE RBC MERGER
AGREEMENT, THE RBC MERGER, THE RBC STOCK ISSUANCE AND THE RBC AMENDMENT IS
APPROVED AND ADOPTED BY THE RBMG STOCKHOLDERS AT THE RBMG SPECIAL MEETING, NONE
OF THEM WILL BE EFFECTED BY RBMG.
THE APPROVAL AND ADOPTION OF EACH OF THE WSI MERGER AGREEMENT, THE WSI
MERGER, THE WSI STOCK ISSUANCE AND THE WSI AMENDMENT IS CONTINGENT UPON THE
APPROVAL AND ADOPTION OF ALL OF THE WSI MERGER AGREEMENT, THE WSI MERGER, THE
WSI STOCK ISSUANCE AND THE WSI AMENDMENT. UNLESS EACH OF THE WSI MERGER
AGREEMENT, THE WSI MERGER, THE WSI STOCK ISSUANCE AND THE WSI AMENDMENT IS
APPROVED AND ADOPTED BY THE RBMG STOCKHOLDERS AT THE RBMG SPECIAL MEETING, NONE
OF THEM WILL BE EFFECTED BY RBMG.
THE APPROVAL AND ADOPTION OF EACH OF THE RBC MERGER AND THE WSI MERGER (AND
THE RESPECTIVE MATTERS RELATING THERETO) ARE NOT CONTINGENT UPON THE APPROVAL
AND ADOPTION OF THE OTHER. RBMG STOCKHOLDERS MAY VOTE DIFFERENTLY ON THE
PROPOSALS RELATING TO THE RBC MERGER AND THOSE RELATING TO THE WSI MERGER.
SOLICITATION AND REVOCATION OF PROXIES
A form of proxy for the RBMG Special Meeting is enclosed with the copies of
this Joint Proxy Statement/ Prospectus being sent to RBMG Stockholders. All
shares of RBMG Common Stock held of record as of the RBMG Record Date,
represented by properly executed proxies will, unless such proxies have been
previously revoked, be voted in accordance with the instructions indicated on
such proxies. If no instructions are indicated, such shares will be voted FOR
each of the proposals to approve and adopt the Merger Agreements, the Mergers,
the RBC Stock Issuance, the WSI Stock Issuance and the Amendments and, in the
discretion of the proxy holder, as to any other matter which may properly come
before the RBMG Special Meeting.
The RBMG Board is not aware of any other matters which may be presented for
action at the RBMG Special Meeting, but if other matters do come properly before
the RBMG Special Meeting it is intended that shares represented by proxies in
the accompanying form will be voted by the persons named in the proxy in
accordance with their best judgment. Any proxy given pursuant to this
solicitation may be revoked in writing by the person giving it at any time
before the proxy is exercised by giving notice to the RBMG Secretary or by
submitting a proxy having a later date or by such person appearing at the RBMG
Special Meeting and electing to vote in person.
Abstentions will be counted as present for purposes of determining whether
a quorum is present. If a broker or nominee indicates on its proxy that it does
not have discretionary authority to vote on a particular matter as to
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certain shares, those shares will be counted as present for purposes of a quorum
but will not be considered as present and entitled to vote with respect to such
matter.
The cost of soliciting proxies from the RBMG Stockholders will be borne by
RBMG. Proxies may be solicited by personal interview, mail and telephone by
certain of RBMG's executive officers, directors and regular employees, without
additional compensation. In addition, RBMG may reimburse brokerage firms and
other persons representing beneficial owners of shares of RBMG Common Stock for
their expenses in forwarding solicitation materials to beneficial owners.
THE RBC SPECIAL MEETING
TIME, DATE, PLACE AND PURPOSE
The RBC Special Meeting will be held on , , 1997,
at , local time, at the offices of King & Spalding, 191 Peachtree
Street, Atlanta, Georgia 30303. At the RBC Special Meeting, holders of RBC
Common Stock will be asked to consider and vote upon a proposal to approve and
adopt the RBC Merger Agreement and the RBC Merger. A copy of the RBC Merger
Agreement is attached hereto as Annex A and is incorporated herein by reference.
RECORD DATE AND SHARES ENTITLED TO VOTE
Only holders of record of shares of RBC Voting Common Stock and RBC
Non-voting Common Stock at the close of business on the RBC Record Date are
entitled to notice of and to vote at the RBC Special Meeting. As of such date,
there were 7,121,245 shares of RBC Voting Common Stock issued and outstanding
held by approximately 182 holders of record and 1,577,788 shares of RBC
Non-Voting Common Stock issued and outstanding held by six holders of record.
Holders of record of RBC Voting Common Stock on the RBC Record Date for the RBC
Special Meeting are entitled to one vote per share on any matter that may
properly come before the RBC Special Meeting. Holders of record of RBC
Non-Voting Common Stock on the RBC Record Date for the RBC Special Meeting are
entitled to one vote per share only with respect to the approval and adoption of
the RBC Merger Agreement and the RBC Merger.
VOTE REQUIRED; SECURITY OWNERSHIP OF MANAGEMENT
The presence in person or by proxy of the holders of (i) a majority of the
shares of RBC Voting Common Stock issued and outstanding as of the RBC Record
Date and entitled to vote at the RBC Special Meeting and (ii) a majority of the
shares of RBC Non-Voting Common Stock issued and outstanding as of the RBC
Record Date and entitled to vote at the RBC Special Meeting is necessary to
constitute a quorum at the RBC Special Meeting. The affirmative vote of the
holders of (i) a majority of the shares of RBC Voting Common Stock entitled to
vote at the RBC Special Meeting, voting separately, and (ii) a majority of the
shares of RBC Non-Voting Common Stock entitled to vote at the RBC Special
Meeting, voting separately, is necessary to approve and adopt the RBC Merger
Agreement and the RBC Merger. Accordingly, a failure to vote or an abstention
will have the same effect as a negative vote. As of the RBC Record Date, the
executive officers and directors of RBC and their affiliates beneficially owned
an aggregate of shares of RBC Voting Common Stock, or approximately
% of the shares of RBC Voting Common Stock then outstanding, and
shares of RBC Non-Voting Common Stock, or approximately % of the shares of
RBC Non-Voting Common Stock then outstanding. Each of the executive officers and
directors of RBC has advised RBC that he intends to vote his shares of RBC
Common Stock to approve and adopt the RBC Merger Agreement and the RBC Merger.
SOLICITATION AND REVOCATION OF PROXIES
A form of proxy for the RBC Special Meeting is enclosed with the copies of
this Joint Proxy Statement/ Prospectus being sent to RBC Stockholders. All
shares of RBC Common Stock held of record as of the RBC Record Date, represented
by properly executed proxies will, unless such proxies have been previously
revoked, be voted in accordance with the instructions indicated on such proxies.
If no instructions are indicated, such shares will be voted FOR the proposal to
approve and adopt the RBC Merger Agreement and the RBC Merger and, with
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respect to shares of RBC Voting Common Stock, in the discretion of the proxy
holder, as to any other matter which may properly come before the RBC Special
Meeting.
The RBC Board is not aware of any other matters which may be presented for
action at the RBC Special Meeting, but if other matters do come properly before
the RBC Special Meeting it is intended that shares of RBC Voting Common Stock
represented by proxies in the accompanying form will be voted by the persons
named in the proxy in accordance with their best judgment. Any proxy given
pursuant to this solicitation may be revoked in writing by the person giving it
at any time before the proxy is exercised by giving notice to the RBC Secretary
or by submitting a proxy having a later date or by such person appearing at the
RBC Special Meeting and electing to vote in person.
Abstentions will be counted as present for purposes of determining whether
a quorum is present. If a broker or nominee indicates on its proxy that it does
not have discretionary authority to vote on a particular matter as to certain
shares, those shares will be counted as present for purposes of a quorum but
will not be considered as present and entitled to vote with respect to such
matter.
The cost of soliciting proxies from the RBC Stockholders will be borne by
RBC. Proxies may be solicited by personal interview, mail and telephone by
certain of RBC's executive officers, directors and regular employees, without
additional compensation. In addition, RBC may reimburse brokerage firms and
other persons representing beneficial owners of shares of RBC Common Stock for
their expenses in forwarding solicitation materials to beneficial owners.
THE WSI SPECIAL MEETING
TIME, DATE, PLACE AND PURPOSE
The WSI Special Meeting will be held on , , 1997,
at , local time, at the offices of WSI at 4 Campus Drive, Parsippany, New
Jersey 07224. At the WSI Special Meeting, holders of WSI Class A Common Stock
will be asked to consider and vote upon a proposal to approve and adopt the WSI
Merger Agreement and the WSI Merger. A copy of the WSI Merger Agreement is
attached hereto as Annex B and is incorporated herein by reference.
RECORD DATE AND SHARES ENTITLED TO VOTE
Only holders of record of shares of WSI Class A Common Stock at the close
of business on the WSI Record Date are entitled to notice of and to vote at the
WSI Special Meeting. As of such date, there were 75 shares of WSI Class A Common
Stock issued and outstanding held by 19 holders of record, and no shares of WSI
Class B Common Stock outstanding. Holders of record of WSI Class A Common Stock
on the WSI Record Date for the WSI Special Meeting are entitled to one vote per
share on any matter that may properly come before the WSI Special Meeting.
VOTE REQUIRED; SECURITY OWNERSHIP OF MANAGEMENT
The presence in person or by proxy of the holders of a majority of the
shares of WSI Class A Common Stock issued and outstanding as of the WSI Record
Date and entitled to vote at the WSI Special Meeting is necessary to constitute
a quorum at the WSI Special Meeting. The affirmative vote of the holders of a
majority of the shares of WSI Class A Common Stock entitled to vote at the WSI
Special Meeting is necessary to approve and adopt the WSI Merger Agreement and
the WSI Merger. Accordingly, a failure to vote or an abstention will have the
same effect as a negative vote. As of the WSI Record Date, the executive
officers and directors of WSI and their affiliates beneficially owned an
aggregate of 70.06 shares of WSI Class A Common Stock, or approximately 93% of
the shares of WSI Class A Common Stock then outstanding. Certain stockholders,
including WSI's executive officers, who as of the WSI Record Date owned in the
aggregate approximately 93% of the outstanding WSI Class A Common Stock, have
entered into the Proxy Agreement with RBMG pursuant to which they have granted
to RBMG an irrevocable proxy to vote the shares of WSI Class A Common Stock held
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by them at the WSI Special Meeting. If RBMG elects to exercise this proxy, it
must vote such shares in favor of the proposal to approve and adopt the WSI
Merger Agreement and the WSI Merger. RBMG has indicated that it intends to
exercise the proxy and vote such shares in favor of such proposal. See "The WSI
Merger -- Certain Agreements in Connection with the WSI Merger -- Irrevocable
Proxy Agreement."
SOLICITATION AND REVOCATION OF PROXIES
A form of proxy for the WSI Special Meeting is enclosed with the copies of
this Joint Proxy Statement/ Prospectus being sent to WSI Stockholders. All
shares of WSI Class A Common Stock held of record as of the WSI Record Date,
represented by properly executed proxies will, unless such proxies have been
previously revoked, be voted in accordance with the instructions indicated on
such proxies. If no such instructions are indicated, such shares will be voted
FOR the proposal to approve and adopt the WSI Merger Agreement and the WSI
Merger and, in the discretion of the proxy holder, as to any other matter which
may properly come before the WSI Special Meeting.
The WSI Board is not aware of any other matters which may be presented for
action at the WSI Special Meeting, but if other matters do come properly before
the WSI Special Meeting it is intended that shares represented by proxies in the
accompanying form will be voted by the persons named in the proxy in accordance
with their best judgment. Any proxy given pursuant to this solicitation may be
revoked in writing by the person giving it at any time before the proxy is
exercised by giving notice to the WSI Secretary or by submitting a proxy having
a later date or by such person appearing at the WSI Special Meeting and electing
to vote in person.
Abstentions will be counted as present for purposes of determining whether
a quorum is present. If a broker or nominee indicates on its proxy that it does
not have discretionary authority to vote on a particular matter as to certain
shares, those shares will be counted as present for purposes of a quorum but
will not be considered as present and entitled to vote with respect to such
matter.
The cost of soliciting proxies from the WSI Stockholders will be borne by
WSI. Proxies may be solicited by personal interview, mail and telephone by
certain of WSI's executive officers, directors and regular employees, without
additional compensation. In addition, WSI may reimburse brokerage firms and
other persons representing beneficial owners of shares of WSI Common Stock for
their expenses in forwarding solicitation materials to beneficial owners.
THE RBC MERGER
BACKGROUND OF THE RBC MERGER
Between 1989 and 1993, RBC operated a residential mortgage banking business
as a division of a bank subsidiary. On June 3, 1993, RBC transferred the assets
and liabilities of its residential mortgage banking business to RBMG, a new
wholly owned subsidiary of RBC, and RBMG simultaneously sold 58% of its common
stock in an initial public offering. Accordingly, immediately thereafter RBC
owned 42% of the outstanding RBMG Common Stock. In conjunction with its ongoing
strategic planning and commencing in 1994, RBC had been considering various
alternatives to provide liquidity for its stockholders. Since September 1995,
RBMG had been examining a range of strategic options to diversify its lines of
business. During 1995 and 1996, management of RBMG and RBC periodically met to
discuss various strategic alternatives, some of which contemplated various
combinations of RBMG's and RBC's distinct business activities. On January 23 and
January 25, 1997, management of RBMG and RBC met to discuss the possibility of a
business combination between RBMG and RBC. As a result of the January 25
meeting, the parties determined to commence negotiations and due diligence
activities in connection with a business combination between RBMG and RBC.
Following the January 25 meeting, the RBMG Board met on January 29, 1997,
and determined to appoint the RBMG Special Committee to consider and evaluate
proposals relating to a business combination with RBC and make recommendations
to the RBMG Board with respect to such a transaction. The RBMG Special Committee
was also authorized to consider and evaluate proposals relating to a business
combination with WSI and make recommendations to the RBMG Board with respect to
such a transaction. The members of the RBMG
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Special Committee were Boyd M. Guttery and John O. Wolcott. The RBMG Special
Committee was authorized by the RBMG Board to retain an investment banking firm
to act as its financial advisor and independent legal counsel and other
professional advisors. On January 29, 1997, the RBMG Special Committee held its
first meeting and selected King & Spalding to serve as its independent legal
counsel. On January 29, 1997, the parties were authorized to commence due
diligence investigations of the proposed transaction with RBC.
The RBMG Special Committee met again on January 30, 1997, with a
representative of King & Spalding. At the meeting, the RBMG Special Committee
discussed the status of the discussions with RBC and WSI and scheduled a meeting
among the parties and their advisors on February 2, 1997.
On February 2, 1997, a meeting was held among representatives of King &
Spalding, counsel for the RBMG Special Committee, representatives of McNair Law
Firm, P.A., counsel for RBC, representatives of St. John & Wayne, L.L.C.,
counsel for WSI, a representative of Prudential Securities, proposed financial
advisor for the RBMG Special Committee, representatives of Price Waterhouse LLP,
independent accountants for RBMG and RBC, representatives of KPMG Peat Marwick
LLP, independent accountants for WSI, and a representative of National
Westminster Bank, Plc, financial advisor for WSI. At the meeting, the parties
discussed and summarized the tax, accounting and structural issues that would
need to be addressed in connection with each of the proposed RBC Merger and the
proposed WSI Merger. The parties also discussed the steps necessary to complete
such transactions and the related time schedules and how the separate
transactions would relate to each other.
On February 3, 1997, the RBMG Special Committee met with its counsel and
reviewed the discussions which took place at the meeting the previous day. The
RBMG Special Committee discussed investment banking firms which were candidates
to serve as financial advisors to the RBMG Special Committee. On February 4,
1997, the RBMG Special Committee met again to discuss investment banking firms.
On February 5, 1997, representatives of Prudential Securities made a
presentation to the members of the RBMG Special Committee concerning that firm's
qualifications to serve as financial advisor to the RBMG Special Committee. On
February 6 and February 7, 1997, the RBMG Special Committee met to review the
proposed engagement letter with Prudential Securities.
In February 1997, RBMG entered into a confidentiality agreement with RBC
and WSI regarding confidential information of RBMG, RBC and WSI, and the parties
began exchanging confidential information regarding RBMG, RBC and WSI.
On February 9, 1997, the RBMG Special Committee and representatives of RBMG
met with representatives of RBC and WSI and their respective advisors to review
initial drafts of the principal agreements relating to each of the proposed RBC
Merger and the proposed WSI Merger. Negotiations on the terms of the principal
agreements continued between the RBMG Special Committee, on the one hand, and
each of RBC and WSI, on the other, over the next several weeks.
On February 10, 1997, management of RBC retained Montgomery Securities to
serve as financial advisor to RBC.
On February 13, 1997, the RBC Board met with its counsel and
representatives of Montgomery Securities to discuss the proposed transactions.
At the meeting, Montgomery Securities presented a preliminary report.
On February 13, 1997, the RBMG Special Committee met with its counsel and
representatives of Prudential Securities and Price Waterhouse LLP. The RBMG
Special Committee approved the engagement of Prudential Securities to serve as
its financial advisor and assist in evaluating each of the proposed RBC Merger
and the proposed WSI Merger on their respective merits. Prudential Securities
confirmed that it would discuss with the RBMG Special Committee the other
strategic alternatives available to RBMG.
On February 20, 1997, the RBMG Special Committee met with its counsel and
representatives of Prudential Securities to discuss the status of the
negotiations with RBC on the proposed RBC Merger Agreement and with WSI on the
proposed WSI Merger Agreement.
On February 25, 1997, the RBMG Special Committee met with its counsel and
representatives of Prudential Securities. Prudential Securities made a
preliminary report to the RBMG Special Committee as to the status of
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the proposed RBC Merger and the proposed WSI Merger. On February 26, 1997, the
RBMG Special Committee met with its counsel and representatives of Prudential
Securities, RBMG and RBC. At that meeting, Prudential Securities presented its
preliminary reports on the proposed RBC Merger and the proposed WSI Merger to
representatives of RBMG and RBC and responded to questions.
On March 3, 1997, the RBMG Special Committee met with its counsel,
representatives of Prudential Securities, Price Waterhouse LLP, RBMG, RBC and
counsel for RBC. Price Waterhouse LLP and Prudential Securities discussed the
structural issues relating to the proposed RBC Merger and the proposed WSI
Merger.
On March 6, 1997, the RBMG Special Committee met with its counsel,
representatives of Prudential Securities, Price Waterhouse LLP and RBMG. The
advisors to the RBMG Special Committee reviewed the proposed RBC Merger and the
proposed WSI Merger, and the RBMG Special Committee reviewed the status of the
separate negotiations with RBC and WSI.
During the week of March 10, 1997, representatives of the RBMG Special
Committee met with representatives of RBC to discuss the proposed terms of the
RBC Merger. The parties discussed proposed term sheets relating to the structure
of the proposed RBC Merger and the proposed WSI Merger.
On March 17, 1997, the RBMG Special Committee met with its counsel and
reviewed the proposed term sheets and timetables for the proposed RBC Merger and
the proposed WSI Merger.
On March 18, 1997, the RBC Board met with its counsel, a representative of
Montgomery Securities and representatives of RBMG. The representatives of RBMG
joined the meeting solely to discuss the proposed WSI Merger and then left the
meeting. Management of RBC, counsel for RBC and the representative of Montgomery
Securities reviewed the status of negotiations and discussed alternative
strategies for RBC. Montgomery Securities presented an updated report.
On April 1, 1997, the RBMG Special Committee met with its counsel and
representatives of Prudential Securities and Price Waterhouse LLP. The RBMG
Special Committee reviewed the status of negotiations with RBC and its advisors
and discussed with Price Waterhouse LLP the issues relating to the accounting
treatment of the proposed RBC Merger. The RBMG Special Committee also reviewed
the status of negotiations with WSI and its advisors and discussed with Price
Waterhouse LLP the issues relating to the accounting treatment of the proposed
WSI Merger.
On April 4, 1997, the RBC Board met with its counsel, representatives of
Montgomery Securities and a representative of Wachtell, Lipton, Rosen & Katz,
special counsel to RBC. At that meeting, the advisors to the RBC Board reviewed
the status of the proposed RBC Merger and of the separate proposed WSI Merger.
On April 9, 1997, the RBC Board met with its counsel, its special counsel
and a representative of Montgomery Securities. Management of RBC and the
advisors reviewed the status of the proposed RBC Merger and of the separate
proposed WSI Merger. Montgomery Securities reviewed the analyses performed by it
in connection with its fairness opinion. The RBC Board engaged the advisors in a
thorough discussion of the terms of the proposed RBC Merger. Montgomery
Securities then delivered orally its opinion to the RBC Board to the effect
that, as of such date and based upon and subject to certain matters stated, the
RBC Exchange Ratio was fair, from a financial point of view, to the RBC
Stockholders. After thorough discussion of the terms of the proposed RBC Merger
and such recommendation, the RBC Board unanimously approved the RBC Merger and
authorized the execution and delivery of the RBC Merger Agreement subject to
negotiation of the final terms of the RBC Merger Agreement and the submission of
the RBC Merger Agreement and the RBC Merger to the RBC Stockholders.
On April 17, 1997, the RBMG Special Committee met with its counsel to
discuss the status of the negotiations on the RBC Merger Agreement and the
principal agreements related to the proposed WSI Merger and the open issues
relating to RBMG's due diligence examination of RBC and WSI.
On Friday, April 18, 1997, the RBMG Special Committee and management of
RBMG and RBC met to discuss the final terms of the proposed RBC Merger. During
the day on April 18, 1997, negotiations on the RBC Merger Agreement were
concluded. The RBMG Special Committee and the RBMG Board met on the evening of
April 18, 1997. Prudential Securities reviewed with the RBMG Special Committee
and the RBMG Board the
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financial analyses performed by Prudential Securities in connection with its
fairness opinion. The RBMG Special Committee and the RBMG Board engaged
Prudential Securities in a thorough discussion of the final terms of the
proposed RBC Merger. Prudential Securities then delivered its opinion to the
RBMG Special Committee and the RBMG Board to the effect that, as of such date
and based upon and subject to certain matters stated in such opinion, the RBC
Exchange Ratio was fair, from a financial point of view, to the RBMG
Stockholders. The RBMG Special Committee then met separately from the full RBMG
Board. At that meeting, the RBMG Special Committee unanimously approved the RBC
Merger Agreement. Immediately after the RBMG Special Committee meeting
adjourned, the full RBMG Board met and reviewed the terms of the proposed RBC
Merger and the recommendation of the RBMG Special Committee with its advisors.
After thorough discussion of the terms of the proposed RBC Merger and such
recommendation, the full RBMG Board unanimously approved the RBC Merger
Agreement and authorized the execution and delivery of the RBC Merger Agreement
and the submission of the RBC Merger Agreement and the RBC Merger to the RBMG
Stockholders for approval and adoption.
After the RBMG Board meeting ended in the evening of April 18, 1997, RBMG,
RBC and RBC Merger Sub executed the RBC Merger Agreement. On Monday, April 21,
1997, the parties issued a joint press release announcing the RBC Merger and the
WSI Merger.
TERMS OF THE RBC MERGER AGREEMENT
General. The RBC Merger Agreement provides that, following approval and
adoption of the RBC Merger Agreement by the stockholders of RBC and RBMG and the
satisfaction or waiver of the other conditions to the RBC Merger, RBC Merger Sub
will be merged with and into RBC at the RBC Effective Time in accordance with
the SCBCA. RBC will be the surviving corporation in the RBC Merger. As a result
of the RBC Merger, the separate corporate existence of RBC Merger Sub will
cease, and RBC will become a wholly owned subsidiary of RBMG.
Conversion of Shares. The RBC Merger Agreement provides that each share of
RBC Voting Common Stock and RBC Non-Voting Common Stock issued and outstanding
immediately before the RBC Effective Time (other than treasury shares, shares of
RBC Common Stock held by RBC Stockholders who perfect their dissenters' rights
under South Carolina law and shares of RBC Common Stock owned by RBMG or any
wholly owned subsidiary of RBMG) and all rights in respect thereof, shall, at
the RBC Effective Time, be converted into and become exchangeable for 1.08026
shares (the "RBC Exchange Ratio") of RBMG Common Stock, with cash being paid in
lieu of any fractional shares. Pursuant to the RBC Articles, immediately prior
to the RBC Effective Time, each outstanding share of RBC Non-Voting Common Stock
will automatically convert into one share of RBC Voting Common Stock. The RBC
Exchange Ratio is subject to adjustment in accordance with the RBC Merger
Agreement. In the event of any change in the number of outstanding shares of RBC
Voting Common Stock and RBC Non-Voting Common Stock or RBMG Common Stock by
reason of any reclassification, recapitalization, split-up, combination or
exchange of shares, or any dividend payable in stock or other securities is
declared the record date of which is prior to the RBC Effective Time, the RBC
Exchange Ratio shall be appropriately adjusted to provide the holders of RBC
Voting Common Stock and RBC Non-Voting Common Stock the same economic effect as
contemplated by the RBC Merger Agreement prior to such action. Cash will be paid
in lieu of fractional shares of RBMG Common Stock in an amount equal to the
fractional share interest multiplied by the arithmetic average of the closing
price for a share of RBMG Common Stock on the Nasdaq National Market for each of
the 10 trading days immediately prior to the RBC Effective Time.
Each outstanding share of RBC Common Stock as to which a written notice of
election to dissent from the RBC Merger is filed in accordance with the South
Carolina Dissenters' Rights Statute, at or prior to the RBC Special Meeting and
not withdrawn at or prior to the RBC Special Meeting and which is not voted in
favor of the RBC Merger, will not be converted into or represent a right to
receive RBMG Common Stock under the RBC Merger Agreement unless and until the
holder shall have failed to perfect, or shall have effectively withdrawn his
right to appraisal, at which time his shares shall be converted into RBMG Common
Stock like any other shares of outstanding RBC Common Stock.
Directors and Officers of RBC following the RBC Merger. The officers of
RBC immediately prior to the RBC Effective Time will continue to serve in their
respective offices after the RBC Effective Time. The directors
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of RBC Merger Sub immediately prior to the RBC Effective Time will become the
directors of RBC as of the RBC Effective Time. The directors of RBC Merger Sub
are Edward J. Sebastian and David W. Johnson, Jr.
Indemnification Obligations. The RBC Merger Agreement provides that the
provisions of the RBC Articles of Incorporation and the RBMG Certificate
relating to indemnification of officers and directors shall not be amended,
repealed or otherwise modified for a period of six years from the RBC Effective
Time in any manner that would affect adversely the rights thereunder of
individuals who are at or who were at any time prior to the RBC Effective Time
directors, officers, employees, fiduciaries or agents of RBC or RBMG. RBMG also
agreed in the RBC Merger Agreement to indemnify each present and former director
and officer of RBC and RBMG, determined as of the RBC Effective Time, (i) from
and after the RBC Effective Time, against any liabilities arising out of or
pertaining to matters existing or occurring at or prior to the RBC Effective
Time to the fullest extent that RBC and RBMG would have been permitted under
South Carolina and Delaware law, respectively, and their respective charter
documents to indemnify such parties and (ii) for a period of six years after the
date of the RBC Merger Agreement, against any liabilities arising out of or
pertaining to the transactions contemplated by the RBC Merger Agreement, to the
fullest extent permitted under applicable law.
No Solicitation. The RBC Merger Agreement provides that RBC shall not
directly or indirectly solicit, initiate or knowingly encourage (including by
way of furnishing non-public information) any inquiries or the making of any
proposal or offer that constitutes or may reasonably be expected to lead to (i)
a merger, consolidation, share exchange, business combination or other similar
transaction, (ii) any sale, lease, exchange, transfer or other disposition of 50
percent or more of the assets of RBC and its subsidiaries as a whole or (iii) a
tender offer or exchange offer for 50 percent or more of the outstanding voting
securities of RBC, other than the RBC Merger.
Conditions to the RBC Merger. The obligations of both RBMG and RBC to
consummate the RBC Merger are subject to the satisfaction or, if permitted by
applicable law, the waiver of the following conditions: (i) the effectiveness of
the Registration Statement under the Securities Act and the absence of any stop
order suspending the effectiveness of the Registration Statement or any
proceedings by the Commission for such purpose; (ii) the approval of the RBC
Merger Agreement, the RBC Merger, the RBC Amendment by the RBMG Stockholders in
accordance with the DGCL and the Nasdaq National Market rules; (iii) the
approval of the RBC Merger Agreement and the RBC Merger by the RBC Stockholders
in accordance with the SCBCA; (iv) the absence of any order, writ, injunction or
decree by any court of competent jurisdiction or governmental entity to the
effect that the RBC Merger is illegal or otherwise prohibiting its consummation;
(v) the termination or expiration of the applicable waiting period under the HSR
Act; (vi) the receipt of all consents, approvals and authorizations legally
required to be obtained to consummate the RBC Merger (other than consents,
approvals and authorizations the failure to obtain which would not result in a
change in or have an effect on the business of RBC or RBMG that is or is
reasonably likely to be materially adverse to the business, assets, liabilities,
condition or results of operations of RBMG and its subsidiaries as a whole);
(vii) the receipt of all permits or approvals required by state securities or
blue sky laws to carry out the RBC Merger; and (viii) the shares of RBMG Common
Stock into which the RBC Common Stock will be converted pursuant to the RBC
Merger Agreement shall have been authorized for listing on the Nasdaq National
Market, subject to official notice of issuance.
In addition to the foregoing, the obligation of RBC to consummate the RBC
Merger is subject to the satisfaction of or, if permitted by applicable law, the
waiver of the following conditions: (i) each of the representations and
warranties of RBMG contained in the RBC Merger Agreement that is qualified by
materiality shall be true and correct on and as of the RBC Effective Time; as if
made at and as of the RBC Effective Time (other than representations and
warranties that address matters only as of a certain date, which shall be true
and correct as of such certain date), and each of the representations and
warranties that is not so qualified shall be true and correct in all material
respects on and as of the RBC Effective Time as if made at and as of the RBC
Effective Time (other than representations and warranties that address matters
only as of a certain date, which shall be true and correct in all material
respects as of such certain date), in each case except as contemplated or
permitted by the RBC Merger Agreement, and RBC shall have received a certificate
of the Chairman or President and the Chief Financial Officer of RBMG to such
effect; (ii) RBMG shall have performed or complied in all material respects with
all material agreements and covenants required by the RBC Merger Agreement to be
performed or complied with by RBMG on or prior to the RBC Effective Time and RBC
shall have received a certificate of the
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Chairman or President and Chief Financial Officer of RBMG to that effect; and
(iii) McNair Law Firm, P.A. or King & Spalding shall have issued its opinion,
such opinion dated on or about the RBC Effective Time and on or about the date
that is two business days prior to the date the Joint Proxy Statement/Prospectus
is first mailed to RBMG Stockholders, addressed to RBC and reasonably
satisfactory to it, to the effect that, based upon customary representations of
RBC and RBMG and customary assumptions, the RBC Merger will be treated for
federal income tax purposes as a reorganization qualifying under the provisions
of Section 368(a) of the Code and that the RBC Stockholders will recognize no
gain or loss upon the receipt of shares of RBMG Common Stock in exchange for
shares of RBC Voting Common Stock or RBC Non-Voting Common Stock in the RBC
Merger, which opinion shall not have been withdrawn or modified in any material
respect.
In addition, the obligation of RBMG to consummate the RBC Merger is subject
to the satisfaction of or, if permitted by applicable law, the waiver of the
following condition: since January 1, 1997, there shall not have occurred any
change in or effect on the business of RBC and its subsidiaries that is or is
reasonably likely to be materially adverse to the business, assets, liabilities,
condition or results of operations of RBC and its subsidiaries taken as a whole
(an "RBC Material Adverse Effect") or, since the date of the RBC Merger
Agreement, an inaccuracy of the representations and warranties of RBC or the
failure of RBC to comply with or perform its agreements and covenants required
by the RBC Merger Agreement, in either case, which results in an RBC Material
Adverse Effect, other than an RBC Material Adverse Effect that may be
compensated for by adjusting the RBC Exchange Ratio (which adjustment is agreed
to by the parties).
Amendment. The RBC Merger Agreement may be amended at any time prior to
the RBC Effective Time by written agreement of the parties, except that, without
securing any stockholder approval required by Delaware or South Carolina law, no
amendment may be made that would (i) reduce the amount or change the type of
consideration to be received by the RBC Stockholders, (ii) materially and
adversely affect RBC or RBMG or the RBC Stockholders or the RBMG Stockholders,
or (iii) change any term of the RBC Articles or the RBMG Certificate except as
contemplated by the RBC Merger Agreement.
Termination. The RBC Merger Agreement may be terminated and the RBC Merger
abandoned at any time prior to the RBC Effective Time (i) by mutual written
consent of the RBC Board and the RBMG Board, (ii) by RBC or RBMG if the RBC
Effective Time shall not have occurred on or before November 1, 1997 (or, in
certain circumstances, December 1, 1997), (iii) by RBC or RBMG in the event of
government action prohibiting the RBC Merger or (iv) by RBC or RBMG, if the RBC
Merger Agreement and the RBC Merger shall fail to be approved by the RBC
Stockholders or the RBMG Stockholders.
Fees and Expenses. All expenses incurred in connection with the RBC Merger
Agreement and the RBC Merger, including financial advisory fees, independent
accountants fees and legal fees, will be paid by the party incurring such
expenses, whether or not the RBC Merger is consummated, except that all expenses
relating to filing fees pursuant to the HSR Act, printing, filing and mailing
the Registration Statement and the Joint Proxy Statement/Prospectus and all
Commission and other regulatory filing fees incurred in connection with the
Registration Statement and the Joint Proxy Statement/Prospectus will be borne
equally by RBC and RBMG.
EFFECTIVE TIME OF THE RBC MERGER AND EXCHANGE OF SHARES
Effective Time of the RBC Merger. The RBC Merger will become effective by
filing articles of merger with the Secretary of State of the State of South
Carolina in such form as required by, and executed in accordance with, the
relevant provisions of the SCBCA. The RBC Merger Agreement provides that the
parties thereto will cause such articles of merger to be filed after each of the
conditions to consummation of the RBC Merger has been satisfied or, if
permissible, waived. The RBC Merger cannot become effective until the RBMG
Stockholders have approved and adopted the RBC Merger Agreement, the RBC Merger,
the RBC Stock Issuance and the RBC Amendment and the RBC Stockholders have
approved and adopted the RBC Merger Agreement and the RBC Merger, and all
required regulatory approvals and actions have been obtained and taken. Thus,
there can be no assurance as to whether or when the RBC Merger will become
effective.
Exchange of RBC Stock Certificates. Promptly following the RBC Effective
Time, instructions and a letter of transmittal will be furnished to all RBC
Stockholders for use in exchanging their stock certificates for certificates
evidencing the shares of RBMG Common Stock they will be entitled to receive as a
result of the RBC
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Merger. RBC STOCKHOLDERS SHOULD NOT SUBMIT THEIR STOCK CERTIFICATES FOR EXCHANGE
UNTIL INSTRUCTIONS AND THE LETTER OF TRANSMITTAL ARE RECEIVED.
OPINION OF RBC'S FINANCIAL ADVISOR
General. Pursuant to an engagement letter dated March 10, 1997 (the "RBC
Engagement Letter"), RBC engaged Montgomery Securities to evaluate a potential
sale of RBC to RBMG. As part of its engagement, Montgomery Securities agreed, if
requested by RBC, to render to the RBC Board a fairness opinion with respect to
a potential sale of RBC. Montgomery Securities is a nationally recognized
investment banking firm and, as part of its investment banking activities, is
regularly engaged in the valuation of businesses and their securities in
connection with merger transactions and other types of acquisitions, negotiated
underwritings, private placements and valuations for corporate and other
purposes. RBC selected Montgomery Securities to render the opinion on the basis
of its experience and expertise in transactions similar to the RBC Merger and
its reputation in the banking and investment communities. Montgomery Securities
was not retained nor did it advise RBC with respect to alternatives to the RBC
Merger. Further, Montgomery Securities was not requested to nor did it solicit
or assist RBC in soliciting indications of interest from third parties for all
or any part of RBC.
Montgomery Securities was not retained to provide an opinion as to the
fairness of the consideration to be paid by RBMG in the WSI Merger.
Consequently, Montgomery Securities expressed no view concerning the fairness of
the consideration being paid by RBMG in the WSI Merger or the effect of such
merger on the RBC Stockholders, except insofar as the WSI Merger affects the
consideration being received by the RBC Stockholders in the RBC Merger. In
requesting the opinion of Montgomery Securities, the RBC Board neither gave any
special instructions to Montgomery Securities nor imposed any limitations upon
the scope of the investigation that Montgomery Securities deemed necessary to
enable it to deliver the RBC Opinion.
At a meeting of the RBC Board on April 9, 1997, Montgomery Securities
delivered its oral opinion that, as of the date of such opinion, the
consideration to be received by the RBC Stockholders pursuant to the RBC Merger
was fair to the RBC Stockholders from a financial point of view. The opinion
expressed by Montgomery Securities was given irrespective of whether or not the
WSI Merger is consummated. Montgomery Securities's oral opinion was subsequently
confirmed in writing as of April 18, 1997.
THE FULL TEXT OF MONTGOMERY SECURITIES' WRITTEN OPINION TO THE RBC BOARD,
DATED APRIL 18, 1997, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED,
AND LIMITATIONS OF THE REVIEW BY MONTGOMERY SECURITIES, IS ATTACHED HERETO AS
ANNEX I AND IS INCORPORATED HEREIN BY REFERENCE. THE FOLLOWING SUMMARY OF
MONTGOMERY SECURITIES' OPINION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FULL TEXT OF THE OPINION, WHICH SHOULD BE READ CAREFULLY AND IN ITS ENTIRETY. IN
FURNISHING SUCH OPINION, MONTGOMERY SECURITIES DOES NOT ADMIT THAT IT IS AN
EXPERT WITH RESPECT TO THE REGISTRATION STATEMENT OF WHICH THIS JOINT PROXY
STATEMENT/PROSPECTUS IS A PART WITHIN THE MEANING OF THE TERM "EXPERTS" AS USED
IN THE SECURITIES ACT AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER.
MONTGOMERY SECURITIES' OPINION IS ADDRESSED TO THE RBC BOARD, COVERS ONLY THE
FAIRNESS OF THE CONSIDERATION TO BE RECEIVED BY RBC STOCKHOLDERS FROM A
FINANCIAL POINT OF VIEW AS OF THE DATE OF THE OPINION AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY HOLDER OF THE RBC COMMON STOCK AS TO HOW SUCH RBC
STOCKHOLDER SHOULD VOTE AT THE RBC SPECIAL MEETING.
In connection with its April 18, 1997 opinion, Montgomery Securities, among
other things: (i) reviewed certain publicly available financial and other data
with respect to RBMG including the consolidated financial statements for recent
years and interim periods to December 31, 1996, and certain other relevant
financial and operating data relating to RBC, RBMG and WSI made available to
Montgomery Securities from published sources and from the internal records of
RBC, RBMG and WSI and its predecessor, including the consolidated financial
statements of RBC and WSI and its predecessor for recent years and interim
periods to December 31, 1996; (ii) reviewed the financial terms and conditions
of the RBC Merger Agreement and the WSI Merger Agreement; (iii) reviewed certain
publicly available information concerning the trading of, and the trading market
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for, RBMG Common Stock; (iv) compared RBMG, WSI and RBC from a financial point
of view with certain other companies in the mortgage banking and equipment
leasing industries which Montgomery Securities deemed to be relevant; (v)
reviewed and discussed with representatives of the management of RBC, RBMG and
WSI certain information of a business and financial nature regarding RBC, RBMG
and WSI furnished to Montgomery Securities by them, including financial
projections and related assumptions of RBC, RBMG and WSI; (vi) made inquiries
regarding and discussed the RBC Merger, the RBC Merger Agreement, the WSI
Merger, the WSI Merger Agreement and other matters related thereto with RBC's
counsel; and (vii) performed such other analyses and examinations as Montgomery
Securities deemed appropriate.
In connection with Montgomery Securities' review, Montgomery Securities did
not assume any obligation independently to verify the foregoing information and
relied on its being accurate and complete in all material respects. With respect
to the financial projections for RBC, RBMG and WSI provided to Montgomery
Securities by their respective managements, upon their advice and with RBC's
consent, Montgomery Securities assumed for purposes of its opinion that the
projections were reasonably prepared on bases reflecting the best available
estimates and judgment of their respective managements at the time of
preparation as to the financial performance of RBC, RBMG and WSI and that they
provided a reasonable basis from which Montgomery Securities could form its
opinion. Montgomery Securities also assumed that there were no material changes
in RBC's, RBMG's or WSI's assets, financial condition, results of operations,
business or prospects since the respective dates of their last financial
statements made available to Montgomery Securities.
Montgomery Securities is not an expert in the evaluation of loan portfolios
for purposes of assessing the adequacy of the allowances for losses with respect
thereto and assumed, with RBC's consent, that such allowances for each of RBC,
RBMG, and WSI were in the aggregate adequate to cover such losses. In addition,
Montgomery Securities did not assume responsibility for reviewing any individual
credit files, or for making an independent evaluation, appraisal or physical
inspection of any of the assets or liabilities (contingent or otherwise) of RBC,
RBMG or WSI, nor was Montgomery Securities furnished with any such appraisals.
Similarly, Montgomery Securities, with RBC's consent, did not assume any
responsibility for reviewing any aspect of the loan securitization programs of
RBC, RBMG or WSI and assumed, for purposes of its opinion, that each such
program was conducted in full compliance with all applicable regulations.
Further, Montgomery Securities did not make an independent evaluation of the
reasonableness of the projections utilized in each of such securitization
programs and assumed that such projections were based on assumptions that were
reasonable and have been properly presented in the financial statements in
accordance with generally accepted accounting principles and all applicable
accounting standards and have been recorded on the applicable financial
statements on a reasonable basis. Finally, Montgomery Securities' opinion was
based on economic, monetary and market and other conditions as in effect on, and
the information made available to Montgomery Securities as of, the date of the
opinion. Accordingly, although subsequent developments may affect the opinion,
Montgomery Securities has not assumed any obligation to update, revise or
reaffirm its opinion.
With respect to the legal and financial reporting matters related to the
transactions we have relied upon the advice given by the independent accountants
and counsel to the RBC Board, the RBMG Board and the RBMG Special Committee and
have not undertaken any independent investigation of such matters. Montgomery
Securities assumed that both the RBC Merger and the WSI Merger would be
consummated in a manner that complies in all respects with the applicable
provisions of the Securities Act, the Exchange Act and all other applicable
federal and state statutes, rules and regulations. RBC informed Montgomery
Securities, and Montgomery Securities assumed, that the RBC Merger would be
recorded as a purchase under generally accepted accounting principles and that
the WSI Merger would be treated as a pooling-of-interests transaction under
generally accepted accounting principles. Further, RBC informed Montgomery
Securities, and Montgomery Securities assumed, that each of the RBC Merger and
the WSI Merger, when consummated, would be treated as a tax-free reorganization
under Section 368(a) of the Code.
Set forth below is a brief summary of the report presented by Montgomery
Securities to the RBC Board on April 9, 1997, in connection with its opinion.
For purposes of the report, Montgomery Securities assumed 20.2 million shares of
RBMG Common Stock outstanding, 7.4 million shares of RBMG Common Stock already
owned by RBC, 2.0 million additional shares of RBMG Common Stock to be issued by
RBMG to RBC
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Stockholders in the RBC Merger, and 21.3 million shares of RBMG Common Stock to
be issued by RBMG to WSI Stockholders in the WSI Merger and RBC balance sheet
figures as of December 31, 1996.
Component Liquidation Valuation of RBC's Operating Assets. Montgomery
Securities independently valued various operating components of RBC and added
the independent values to determine the valuation of RBC as a whole. The pieces
for which Montgomery Securities determined a value for were: (i) Republic
Leasing; (ii) Laureate Realty; (iii) RBC's investment in Intek; and (iv) the
liquidation value of the remaining non-operating assets of RBC. Montgomery
Securities compared Republic Leasing to companies Montgomery Securities deemed
relevant in the equipment leasing industry. Applying a median 1997 price to
earnings multiple from those leasing companies of 13.6x and reasonable private
company and liquidity discounts to the estimated 1997 earnings of Republic
Leasing yielded a valuation range of $11.6 million to $21.8 million. For
Laureate Realty, Montgomery Securities applied a reasonable range of the amount
for which Laureate Realty could sell its servicing portfolio and developed a
range of value from $8.2 million to $10.5 million. This range was based upon a
private bid RBC received in 1996. RBC had recently sold 5,000 shares of
preferred stock of Intek for $1.7 million. Based upon this price, the indicated
value of RBC's 15,000 remaining shares plus the 5,000 shares RBC sold would have
been $7.0 million. In the event that RBC had to liquidate its remaining holdings
quickly, Montgomery Securities applied a 50% illiquidity discount on the 15,000
remaining shares, yielding a total value for RBC's 15,000 shares plus the 5,000
shares RBC sold of $4.4 million. Lastly, Montgomery Securities estimated the
cost to liquidate the remaining non-operating assets on the balance sheet.
Included in the non-operating asset value are cash, notes receivable and other
assets totaling $4.9 million, accrued expenses, income taxes payable and other
liabilities totaling $6.2 million and certain off-balance sheet liabilities
which Montgomery Securities estimated at a value of between $250,000 and
$500,000. The net estimated cost to liquidate the above-mentioned balance sheet
items was between $1.5 million and $1.7 million. Adding the values of all of
RBC's components yielded a valuation range of $22.6 million to $37.5 million.
The value of the two million additional shares of RBMG Common Stock to be issued
in the RBC Merger fell within this range. At April 7, 1997, the value of the
additional two million shares was approximately $27.8 million, based on RBMG's
Common Stock price of $13.875.
Dilution Analysis. A dilution analysis was performed solely for the
purpose of determining the fairness of the consideration to be paid to RBC
Shareholders. Using earnings estimates and projected growth rates for RBC, RBMG
and WSI provided by their respective managements, Montgomery Securities compared
estimated reported earnings per share ("EPS") of RBMG Common Stock on a
stand-alone basis to EPS of the common stock for the pro forma combined
companies for the calendar years 1997 and 1998. Montgomery Securities noted
that, based upon various earnings scenarios provided to Montgomery Securities by
RBMG's management, the contemplated Mergers would be accretive to RBMG's EPS in
1997 and 1998. These estimates were used for purposes of this analysis only and
are not necessarily indicative of expected results or plans of RBC, RBMG, WSI or
the combined institutions.
The summary set forth above does not purport to be a complete description
of the presentation by Montgomery Securities to the RBC Board or of the analyses
performed by Montgomery Securities. The preparation of a fairness opinion is not
necessarily susceptible to partial analysis or summary description. Montgomery
Securities believes that its analyses and the summary set forth above must be
considered as a whole and that selecting a portion of its analyses and factors,
without considering all analyses and factors, would create an incomplete view of
the process underlying the analyses set forth in its presentation to the RBC
Board. In addition, Montgomery Securities may have given various analyses more
or less weight than other analyses and may have deemed various assumptions more
or less probable than other assumptions, so that the ranges of valuations
resulting from any particular analysis described above should not be taken to be
Montgomery Securities's view of the actual value of RBC or the combined
companies. The fact that any specific analysis has been referred to in the
summary above is not meant to indicate that such analysis was given greater
weight than any other analysis.
In performing its analyses, Montgomery Securities made numerous assumptions
with respect to industry performance, general business and economic conditions
and other matters, many of which are beyond the control of RBC, RBMG and WSI.
The analyses performed by Montgomery Securities are not necessarily indicative
of actual values or actual future results, which may be significantly more or
less favorable than suggested by such
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analyses. Such analyses were prepared solely as part of Montgomery Securities'
analysis of the fairness of the consideration to be received by the RBC
Stockholders in the RBC Merger and were provided to the RBC Board in connection
with the delivery of Montgomery Securities' opinion. The analyses do not purport
to be appraisals or to reflect the prices at which a company might actually be
sold or the prices at which any securities may trade at the present time or any
time in the future. The projections used in Montgomery Securities's analyses are
based on numerous variables and assumptions which are inherently unpredictable
and must be considered not certain of occurrence as projected. Accordingly,
actual results could vary significantly from those set forth in such
projections.
As described below under "The RBC Merger -- Reasons for the RBC Merger,"
Montgomery Securities' opinion and presentation to the RBC Board were among the
many factors taken into consideration by the RBC Board in making its
determination to approve the RBC Merger Agreement.
Pursuant to the RBC Engagement Letter, RBC paid Montgomery Securities a fee
of $50,000 upon the signing of the RBC Engagement Letter and $250,000 upon
delivery of its April 18, 1997 fairness opinion. In addition, Montgomery
Securities will receive approximately $1,200,000 upon the closing of the RBC
Merger. RBC has also agreed to reimburse Montgomery Securities for its
reasonable out-of-pocket expenses, including any fees and disbursements for
Montgomery Securities' legal counsel and other experts retained by Montgomery
Securities. RBC has agreed to indemnify Montgomery Securities, its affiliates
and their respective partners, directors, officers, agents, consultants,
employees and controlling persons against certain liabilities, including
liabilities under the federal securities laws.
Montgomery Securities has performed investment banking services for both
RBC and RBMG, including a secondary equity offering for RBMG in 1996. Fees for
such services over the past two years total $1,887,691.
In the ordinary course of its business, Montgomery Securities may trade
equity securities of RBMG for its own account and for the accounts of customers
and, accordingly, may at any time hold long or short positions in such
securities.
RECOMMENDATION OF THE RBC BOARD
THE RBC BOARD HAS DETERMINED THAT THE RBC MERGER IS IN THE BEST INTERESTS
OF RBC AND ITS STOCKHOLDERS, HAS APPROVED AND ADOPTED THE RBC MERGER AGREEMENT
AND RECOMMENDS THAT THE RBC STOCKHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND
ADOPT THE RBC MERGER AGREEMENT AND THE RBC MERGER.
OPINION OF RBMG'S FINANCIAL ADVISOR
On April 18, 1997, Prudential Securities delivered a written opinion (the
"RBC Opinion") to the RBMG Board that, as of such date, the RBC Exchange Ratio
was fair from a financial point of view to the RBMG Stockholders. Prudential
Securities made a presentation of the financial analysis underlying the RBC
Opinion at a special meeting of the RBMG Board and the RBMG Special Committee
held on April 18, 1997 and provided the members of the RBMG Board and the RBMG
Special Committee with a detailed report setting forth the financial analysis
underlying the RBC Opinion. This analysis, as presented to the RBMG Board and
the RBMG Special Committee, is summarized below. All of the members of the RBMG
Board and the RBMG Special Committee were present at the meeting, and each RBMG
Board member and each RBMG Special Committee member had the opportunity to ask
questions regarding the report. Prudential Securities discussed with the RBMG
Board and the RBMG Special Committee the information in the report, and the
financial data and other factors considered by Prudential Securities in
conducting its analysis, all of which are summarized below.
In requesting the RBC Opinion, neither the RBMG Special Committee nor the
RBMG Board gave any special instructions to Prudential Securities or imposed any
limitations upon the scope of the investigation that Prudential Securities
deemed necessary to enable it to deliver the RBC Opinion. A copy of the RBC
Opinion, which sets forth the assumptions made, matters considered and limits on
the review undertaken, is attached to this Joint Proxy Statement/Prospectus as
Annex G and is incorporated herein by reference. The summary of the RBC Opinion
set forth below is qualified in its entirety by reference to the full text of
the RBC Opinion.
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THE RBC OPINION IS DIRECTED ONLY TO THE FAIRNESS OF THE RBC EXCHANGE RATIO
TO THE RBMG STOCKHOLDERS FROM A FINANCIAL POINT OF VIEW. THE RBC OPINION WAS
DELIVERED FOR THE INFORMATION OF THE RBMG BOARD AND THE RBMG SPECIAL COMMITTEE
AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY RBMG STOCKHOLDER AS TO HOW SUCH
STOCKHOLDER SHOULD VOTE AT THE RBMG SPECIAL MEETING. RBMG STOCKHOLDERS ARE URGED
TO READ THE RBC OPINION IN ITS ENTIRETY.
In conducting its analysis and arriving at the RBC Opinion, Prudential
Securities reviewed such information and considered such financial data and
other factors as Prudential Securities deemed relevant under the circumstances
including the following: (i) the execution copy of the RBC Merger Agreement;
(ii) certain publicly available historical, financial and operating data
concerning RBMG, including the Annual Report on Form 10-K of RBMG for the years
ended December 31, 1996, 1995 and 1994, RBMG's Proxy Statement for the Annual
Meeting of Stockholders held on April 25, 1996, RBMG's Prospectus, dated March
11, 1996, relating to the sale of 3,512,961 shares of RBMG Common Stock and
RBMG's Prospectus, dated May 25, 1993, relating to the initial public offering
of RBMG Common Stock; (iii) certain historical, financial and operating data
concerning RBC, including the audited consolidated financial statements of RBC
and its subsidiaries for the years ended December 31, 1996, 1995 and 1994; (iv)
certain information of RBMG, including projected financial data prepared by the
management of RBMG; (v) certain information of RBC, including projected
financial data prepared by the management of RBC; (vi) certain information of
RBC, including closing documents relating to the February 3, 1997 repurchase by
Intek of 5,000 shares of Intek Series A Preferred Stock (the "Intek Preferred
Stock") owned by RBC; (vii) the pro forma financial impact of the RBC Merger on
RBMG; (viii) publicly available financial, operating and stock market data
concerning certain companies engaged in businesses Prudential Securities deemed
comparable to RBC; (ix) publicly available financial, operating and stock market
data concerning certain companies engaged in businesses Prudential Securities
deemed comparable to Republic Leasing; (x) the financial terms of certain recent
transactions that Prudential Securities deemed relevant; and (xi) other
financial studies, analyses and investigations that Prudential Securities deemed
appropriate.
Representatives of Prudential Securities met with the management of RBMG
and RBC to discuss (i) the prospects for their respective businesses, (ii) their
estimates for such businesses' future financial performance, (iii) the financial
impact of the RBC Merger on the respective companies and (iv) such other matters
that Prudential Securities deemed relevant.
In connection with its review and analysis and in arriving at its opinion,
Prudential Securities assumed and relied upon the accuracy and completeness of
the financial data and other information provided to it by RBMG and RBC and did
not undertake any independent verification of such information or any valuation
or appraisal of any assets or liabilities of RBMG or RBC. With respect to
certain financial projections furnished by RBMG and RBC, Prudential Securities
assumed that the projections reflect the best currently available estimates and
judgments of each respective management as to the expected future financial
performance of RBMG and RBC. Prudential Securities did not undertake any
independent analysis to verify the reasonableness of the assumptions underlying
these projections. Further, the RBC Opinion was necessarily based on information
that was available to Prudential Securities and on economic, financial, market
and other conditions as they existed and could be evaluated on the date of the
RBC Opinion.
In arriving at the RBC Opinion, Prudential Securities performed a variety
of financial analyses, including those summarized herein. The summary set forth
below of the analyses presented to the RMBG Special Committee and the RBMG Board
at their April 18, 1997 special meeting does not purport to be a complete
description of the analyses performed. The preparation of a fairness opinion is
a complex process that involves various determinations as to the most
appropriate and relevant methods of financial analysis and the application of
these methods to the particular circumstance, and therefore, such an opinion is
not necessarily susceptible to partial analysis or summary description.
Prudential Securities believes that its analysis must be considered as a whole
and that selecting portions thereof or portions of the factors considered by it,
without considering all analyses and factors, could create an incomplete view of
the evaluation process underlying the RBC Opinion. Prudential Securities made
numerous assumptions with respect to industry performance, general business,
economic, market and financial conditions and other matters, many of which are
beyond the control of RBMG and RBC. Any estimates contained in Prudential
Securities' analyses are not necessarily indicative of actual
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values or future results, which may be significantly more or less favorable than
suggested by such analyses. Additionally, estimates of the values of businesses
or securities do not purport to be appraisals or necessarily reflect the prices
at which such businesses or securities may be sold. Accordingly, such analyses
and estimates are inherently subject to substantial uncertainty. Subject to the
foregoing, the following is a summary of the material financial analyses
performed by Prudential Securities in arriving at the RBC Opinion.
The RBC Exchange Ratio is defined such that RBMG will issue to RBC
Stockholders a number of shares of RBMG Common Stock approximately equal to the
number of shares of RBMG Common Stock owned by RBC (the "RBC Block") plus 2.0
million shares of RBMG Common Stock (the "Incremental Shares"). Prudential
Securities did not engage in a valuation of the RBC Block because such shares
were deemed to have a value essentially equivalent to the difference between the
total number of shares issuable to the RBC Stockholders and the Incremental
Shares. As such, Prudential Securities' analysis of estimated equity valuation
ranges for RBC focused on comparisons of various valuation measures to the RBC
Incremental Equity Purchase Price ("IPP"), defined as the Incremental Shares
multiplied by the RBMG Common Stock price. As of the close of business on April
16, 1997, the IPP was $29.3 million.
Comparable Company Analysis. Prudential Securities conducted a comparable
company analysis to establish implied ranges of equity values for RBC based upon
recognized financial ratios. Prudential Securities selected publicly-traded
diversified financial services companies whose lines of business and operations
made them, in Prudential Securities' judgment, as nearly comparable to RBC as
practicable. An analysis of comparable companies is not purely mathematical;
rather it involves complex considerations and judgments concerning similarities
and differences in financial, operational and other characteristics of
potentially comparable companies. In this regard, Prudential Securities noted
that although the companies selected were considered similar to RBC, none of the
companies had the same recent operating history, management makeup, size, type
or combination of businesses as RBC. This analysis was believed by Prudential
Securities to be a reasonable method of valuation in light of the absence of
market data regarding similar private companies.
For the purposes of this analysis, Prudential Securities treated the
following diversified financial services companies as comparable to RBC:
Amresco, Inc.; Emergent Group, Inc.; Litchfield Financial Corp.; Matrix Capital
Corporation; and Resource America, Inc. (collectively, the "RBC Comparables").
Prudential Securities analyzed publicly available historical and projected
financial results for each of the RBC Comparables, including multiples of
current stock price to estimated calendar year 1997 earnings per share ("1997
EPS") and multiples of equity market value ("EMV") (defined as fully diluted
shares outstanding multiplied by share price) to book value ("BV"). All of the
trading multiples for the RBC Comparables were based on closing stock prices on
April 16, 1997, and all of the 1997 EPS estimates were published by First Call,
an on-line database service ("First Call") available to subscribers which
compiles earnings estimates developed by research analysts. The estimates
published by First Call were not prepared in connection with the RBC Merger or
at the request of Prudential Securities. BV was measured as of December 31,
1996.
Prudential Securities performed a similar analysis for RBC by determining
the multiples implied by the RBC IPP of $29.3 million as of April 16, 1997. This
analysis generated an estimated IPP to 1997 projected net income multiple of
10.5x for RBC compared to high, low, mean and median share price 1997 EPS
multiples for the RBC Comparables of 13.3x, 7.3x, 10.4x and 10.6x, respectively.
The IPP to BV multiple for RBC was 1.6x compared to the high, low, mean and
median EMV to BV multiples for the RBC Comparables of 2.4x, 1.5x, 2.0x, 1.9x,
respectively.
Liquidation Analysis. Prudential Securities also performed a liquidation
analysis in order to determine implied equity valuation ranges for RBC based
upon implied equity valuation ranges for each of RBC's separate operations. For
the purposes of this analysis, Prudential Securities analyzed potential equity
valuation ranges for each of the following RBC operations: (i) the equipment
leasing business of Republic Leasing; (ii) the commercial mortgage operation of
Laureate Realty; and (iii) the ownership of 15,000 shares of Intek Preferred
Stock.
(i) Prudential Securities conducted a comparable company analysis to
establish an implied equity valuation range for Republic Leasing. Prudential
Securities selected publicly-traded equipment leasing companies whose lines of
business and operations made them, in Prudential Securities' judgment, as nearly
comparable to Republic
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Leasing as practicable. Prudential Securities treated the following companies as
comparable to Republic Leasing: DVI, Inc.; Financial Federal Corp.; Leasing
Solutions, Inc.; MLC Holdings, Inc.; Sunrise Resources, Inc.; and Trans Leasing
International, Inc. (collectively, the "Republic Comparables"). In this regard,
Prudential Securities noted that although the companies selected were considered
similar to Republic Leasing, none of the companies had the same recent operating
history, management makeup, size, type or combination of businesses as Republic
Leasing. This analysis was believed by Prudential Securities to be a reasonable
method of valuation in light of the absence of market data regarding similar
private companies.
Using publicly available financial information, Prudential Securities
examined the share price to calendar year 1996 EPS and projected 1997 EPS
multiples for the Republic Comparables. All of the trading multiples of the
Republic Comparables were based on closing stock prices on April 16, 1997, and
all of the 1997 EPS estimates were published by First Call. The estimates
published by First Call were not prepared in connection with the RBC Merger or
at the request of Prudential Securities. The Republic Comparables companies
analysis generated high, low, mean and median share price 1996 EPS multiples of
20.4x, 8.6x, 13.1x and 12.3x. These multiples were applied to Republic Leasing's
1996 net income to produce implied high, low, mean and median implied equity
valuations for Republic Leasing of $59.8 million, $25.3 million, $38.5 million
and $36.0 million. The comparable companies analysis resulted in high, low, mean
and median share price to 1997 EPS multiples of 11.5x, 6.6x, 9.8x, 11.2x.
Application of these multiples to Republic Leasing's projected 1997 net income
produced implied high, low, mean and median equity valuations for Republic
Leasing of $34.6 million, $19.7 million, $29.3 million and $33.5 million.
Prudential Securities also conducted a comparable transactions analysis to
establish implied equity valuation ranges for Republic Leasing. Prudential
Securities analyzed recent merger and acquisition transactions involving
companies Prudential Securities deemed to be reasonably similar to Republic
Leasing. For the purposes of this analysis, Prudential Securities treated the
following acquisitions as comparable: Winthrop Resources Corp. by TCF Financial
Corp. and Financing for Science International by Finova Group (collectively, the
"Republic Comparable Transactions"). For each of these transactions, Prudential
Securities examined the relationship between the equity purchase price ("EPP")
and the Latest Twelve Months Net Income ("LTM NI") and the estimated Forward
Twelve Months Net Income ("FTM NI") of each acquired company. The EPP to LTM NI
multiple for the Republic Comparable Transactions was 24.0x. Utilizing this
ratio and Republic Leasing's 1996 net income resulted in an implied equity
valuation for Republic Leasing of $70.6 million. The high, low, mean and median
EPP to FTM NI multiples for the Republic Comparable Transactions were 18.3x,
11.3x, 14.8x and 14.8x, respectively. Application of these multiples to Republic
Leasing's projected 1997 net income produced high, low, mean and median implied
equity valuations for Republic Leasing of $54.9 million, $33.9 million, $44.4
million and $44.4 million. Calculating the mean of each high and low implied
equity valuation from both the Republic Comparables and the Republic Comparable
Transactions resulted in a mean high and low implied equity valuation for
Republic Leasing ranging from $49.8 million to $26.3 million.
(ii) Prudential Securities conducted a comparable transactions analysis to
determine an implied equity valuation range for Laureate Realty. Prudential
Securities examined recent acquisitions of commercial mortgage servicing
portfolios that it deemed reasonably similar to Laureate Realty's portfolio.
Prudential Securities treated the following acquisitions as comparable: WMF
Holdings by NHP, Inc. and LJ Melody Co. by CB Commercial Holdings, Inc.
(collectively, the "Laureate Comparable Transactions"). Using publicly available
information, Prudential Securities determined the relationship between the EPP
and the aggregate dollar size of each acquired company's servicing portfolio
("Portfolio"). This generated high and low EPP to Portfolio ratios for the
Laureate Comparable Transactions of 0.67% and 0.46%. Application of these ratios
to Laureate Realty's Portfolio yielded an implied equity valuation range for
Laureate of $15.6 million to $10.7 million.
(iii) On February 3, 1997, Intek agreed to repurchase 5,000 shares of Intek
Preferred Stock from RBC for $1.7 million in connection with an equity
investment in Intek by an unrelated third party (the "Intek Transactions"). As
of April 18, 1997, RBC owned 15,000 shares of Intek Preferred Stock. Although
the Intek Preferred Stock is not publicly-traded, the Intek Transactions
established an implied equity valuation for the remaining 15,000 shares of Intek
Preferred Stock. Based on the per share valuation of the Intek Preferred Stock
in the Intek Transactions, RBC's remaining Intek ownership has an implied equity
valuation of $5.2 million. A 25% discount was applied to this implied equity
valuation to establish a range of potential equity valuations. This
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resulted in implied high and low equity valuations for RBC's remaining Intek
Preferred Stock of $5.2 million and $3.9 million, respectively.
Prudential Securities determined a range of implied equity liquidation
values for RBC by calculating the sum of the high and low implied equity
valuations for each of RBC's operations. Due to the relatively small size of RBC
and the lack of a public marketplace for the RBC Common Stock, Prudential
Securities applied a 30% discount to the total high and total low implied equity
valuations for RBC, resulting in implied equity valuations ranging from $49.4
million to $28.7 million. The IPP for RBC of $29.3 million, on April 16, 1997,
is within this range.
Pro Forma Earnings Per Share. Prudential Securities also analyzed the pro
forma effect of the RBC Merger on RBMG's 1997 EPS. An analysis of anticipated
future results based on projections provided by RBMG's management and RBC's
management for their respective companies indicated that the RBC Merger slightly
decreases RBMG's pro forma 1997 EPS. Projected financial and other information
concerning RBMG and RBC and the impact of the RBC Merger upon the holders of
RBMG Common Stock are not necessarily indicative of future results. All
projected financial information is subject to numerous contingencies, many of
which are beyond the control of the management of RBMG and RBC.
The RBMG Special Committee selected Prudential Securities as financial
advisor because Prudential Securities is a nationally recognized investment
banking firm that is regularly engaged in the evaluation of businesses and their
securities in connection with mergers and acquisitions and for other purposes
and has substantial experience in transactions similar to the RBC Merger.
Pursuant to the terms of an engagement letter, dated February 12, 1997 as
amended on April 18, 1997, between RBMG and Prudential Securities, Prudential
Securities received a retainer fee of $125,000 and an additional advisory fee of
$375,000 upon the execution of the RBC Merger Agreement. Prudential Securities
will receive additional compensation for its advisory services of $500,000 upon
consummation of the RBC Merger. In addition, the engagement letter with
Prudential Securities provides that RBMG will reimburse Prudential Securities
for its reasonable out-of-pocket and incidental expenses, including all fees and
disbursements of Prudential Securities' legal counsel incurred in connection
with the services provided by Prudential Securities, and will indemnify and hold
Prudential Securities and certain related persons harmless to the full extent
lawful from and against certain liabilities, including liability under
securities laws or otherwise relating to or arising out of the RBC Merger or
Prudential Securities' engagement.
In the past Prudential Securities has provided other advisory services for
RBMG and received customary compensation for such services. In addition,
Prudential Securities is engaged to provide advisory services in connection with
the WSI Merger and has received and will receive customary compensation for such
services. In the ordinary course of business, Prudential Securities may actively
trade the securities of RBMG for its own account and for the accounts of
customers and, accordingly, may at any time hold long or short positions in such
securities.
RECOMMENDATION OF THE RBMG BOARD
THE RBMG BOARD HAS DETERMINED THAT THE RBC MERGER IS IN THE BEST INTERESTS
OF RBMG AND ITS STOCKHOLDERS, HAS APPROVED AND ADOPTED THE RBC MERGER AGREEMENT
AND RECOMMENDS THAT THE RBMG STOCKHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND
ADOPT THE RBC MERGER AGREEMENT, THE RBC MERGER AND THE RBC STOCK ISSUANCE.
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REASONS FOR THE RBC MERGER
RBC. In approving and adopting the RBC Merger Agreement and formulating
its recommendation that the RBC Stockholders approve and adopt the RBC Merger
Agreement and the RBC Merger, the RBC Board considered a number of factors,
including, without limitation, the following:
(i) the business, financial results and prospects of RBMG, assuming
the proposed WSI Merger is not consummated, including, without limitation,
its earnings history, balance sheet, access to the capital markets and the
expected performance of RBMG Common Stock;
(ii) the business, financial results and prospects of RBMG, assuming
the proposed WSI Merger is consummated, including, without limitation, its
earnings prospects, balance sheet, access to capital markets, and the
expected performance of RBMG Common Stock;
(iii) the business, financial results and prospects of RBC and its
businesses including, without limitation, the importance of greater
financial resources and enhanced operational and administrative support to
expand and add value to the equipment leasing and commercial mortgage
banking businesses;
(iv) the terms and conditions of the RBC Merger Agreement, including
the amount and form of consideration to be received by the RBC Stockholders
and the nature of the parties' representations, warranties, covenants and
agreements;
(v) the opinion of Montgomery Securities as to the fairness, from a
financial point of view, of the RBC Exchange Ratio to the RBC Stockholders;
(vi) the expectation that the RBC Merger will be tax-free for federal
income tax purposes to the RBC Stockholders; and
(vii) the absence of an active trading market for RBC Common Stock and
the expectation that the RBC Merger will provide the RBC Stockholders with
greater liquidity in their investment.
In view of the number of factors considered by the RBC Board, the RBC Board
did not deem it practicable to assign relative weights to the various factors
considered.
RBMG. In determining to recommend that the RBMG Stockholders approve and
adopt the RBC Merger Agreement, the RBC Merger and the RBC Stock Issuance, the
RBMG Special Committee and the RBMG Board, respectively, considered a number of
factors, including, without limitation, the following:
(i) the observation that continuing achievement of RBMG's aggressive
growth-oriented goals would become increasingly difficult over time insofar
as RBMG continued to focus solely within its existing markets. Accordingly,
during 1996, RBMG's strategic planning became increasingly focused on
diversification into new markets. Management of RBMG advised the RBMG
Special Committee and the RBMG Board of its expectation that the small
ticket equipment leasing and commercial mortgage banking operations of RBC
will allow RBMG to diversify into new markets which can support an
aggressive growth-oriented strategy, especially in view of the current size
and relative youth of those operations;
(ii) the expectation that the RBC Merger will complement existing
product and service offerings of RBMG;
(iii) the observation that (a) historically, RBMG has attempted to
mitigate earnings volatility across variable loan production environments
by generating loan production primarily through correspondent and wholesale
broker channels, which involve lower fixed costs and capital investment
requirements and (b) RBC's small ticket equipment leasing operation
currently has no branch offices and acquires all of its lease production
through independent brokers. Management of RBMG advised the RBMG Special
Committee and the RBMG Board of its expectation that RBC's lease production
platform would prove to be highly-compatible with RBMG's strategic
objective of mitigating earnings volatility by maintaining a low-cost and
variable operating cost structure;
(iv) the observation that RBMG has positioned itself as an efficient
provider of secondary market access to smaller producers of loans based on
RBMG management's belief that this segment is underserved
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and that the originations market will remain highly-fragmented (because
these producers are the most efficient and provide the consumer with a
higher quality of personal service). Management of RBMG advised the RBMG
Special Committee and the RBMG Board of its expectation that similar
dynamics are at work within the small ticket equipment leasing industry and
that RBC's lease production operation will be highly-compatible with RBMG's
objective to position itself as an efficient provider of secondary market
access to smaller producers of loan products;
(v) the expectation that the RBC Merger would result in the
realization of certain synergies among the businesses of RBMG and RBC,
particularly in the areas of financing costs and operational and
administrative support;
(vi) the terms and conditions of the RBC Merger Agreement, including
the amount and form of consideration to be given to the RBC Stockholders
within the context of the business, financial results and prospects of RBC
and RBMG and the nature of the parties' representations, warranties,
covenants and agreements; and
(vii) the opinion of Prudential Securities as to the fairness, from a
financial point of view, of the RBC Exchange Ratio to the RBMG
Stockholders.
In view of the number of factors considered by the RBMG Board and the RBMG
Special Committee, neither deemed it practicable to assign relative weights to
the various factors considered.
REGULATORY APPROVALS REQUIRED
Under the RBC Merger Agreement, the obligations of both RBMG and RBC to
consummate the RBC Merger are conditioned upon receipt of all required
regulatory approvals. Other than as discussed below, RBMG and RBC believe that
no such regulatory and other approvals are required.
Under the HSR Act and the rules promulgated thereunder by the FTC, the RBC
Merger may not be consummated unless notification has been given and certain
information has been furnished to the FTC and the Antitrust Division and the
waiting period has expired or been terminated. Pursuant to the HSR Act, on
, 1997, RBMG and RBC each filed a Notification and Report Form with
the FTC and the Antitrust Division for review in connection with the RBC Merger.
The 30-day waiting period under the HSR Act applicable to the RBC Merger will
expire on , 1997, unless the RBC Merger is investigated or opposed
by the FTC or the Antitrust Division.
Notwithstanding the termination of the HSR Act waiting period, at any time
before or after consummation of the RBC Merger, the FTC or the Antitrust
Division could take such action under the antitrust laws as it deems necessary
or desirable in the public interest, including seeking to enjoin the
consummation of the RBC Merger or to cause the divestiture of substantial assets
of RBMG or RBC. In addition, states and private parties may also bring legal
action under the antitrust laws under certain circumstances. Based on
information available to them, RBMG and RBC believe that the RBC Merger can be
effected in compliance with federal and state antitrust laws. There can be no
assurance, however, that a challenge to the consummation of the RBC Merger based
on an alleged violation of the antitrust laws will not be made or that, if such
a challenge were made, RBMG and RBC would prevail or would not be required to
accept certain conditions, possibly including divestitures, to consummate the
RBC Merger.
INTERESTS OF CERTAIN PERSONS IN THE RBC MERGER
In considering the RBC Merger, holders of RBMG Common Stock and RBC Common
Stock should be aware that certain executive officers and directors of RBMG and
RBC have certain interests that may present them with potential conflicts of
interest with respect to the RBC Merger.
Mr. Sebastian is the Chairman and Chief Executive Officer of both RBMG and
RBC, and as of the RBC Record Date Mr. Sebastian and members of his immediate
family beneficially owned 232,472 shares of RBC Voting Common Stock and
shares of RBMG Common Stock. If the RBC Merger is consummated, Mr. Sebastian
will remain as the Chairman and Chief Executive Officer of RBMG and RBC and,
based on his
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current stock ownership of RBC and RBMG, Mr. Sebastian and members of his
immediate family would own shares of RBMG Common Stock.
Pursuant to an employment agreement with RBMG, Mr. Johnson receives an
annual bonus equal to 4% of RBMG's annual total pretax income before bonuses and
incentives. To the extent that the RBC Merger would increase RBMG's annual total
pretax income, Mr. Johnson would receive a greater bonus after the RBC Merger
and may be presented with a potential conflict of interest.
Four of the members of the RBMG Board are also members of the RBC Board. To
the extent that such directors of RBC and RBMG will continue to serve as
directors of RBC or RBMG following the RBC Merger, such directors and executive
officers may be presented with a potential conflict of interests with respect to
the RBC Merger.
ACCOUNTING TREATMENT
The RBC Merger will be accounted for under the "purchase" method of
accounting, as described in Accounting Principles Board Opinion No. 16 and the
interpretations thereof, pursuant to which the assets and liabilities of RBC
will be adjusted to their respective fair values at the date of acquisition and
included with those of RBMG as of the RBC Effective Time. Net income of RBMG
subsequent to the RBC Effective Time will include the net income of RBC, but the
historical results of operations of RBMG for periods prior to the RBC Effective
Time will not be restated.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of certain federal income tax consequences of
the RBC Merger. This discussion is based on provisions of the Code, the Treasury
Regulations thereunder and rulings and court decisions as of the date hereof,
all of which are subject to change, possibly retroactively. The discussion is
included for general information purposes only.
RBC has received an opinion (the "RBC Tax Opinion") from McNair Law Firm,
P.A., that, based upon its review of the Registration Statement of which this
Joint Proxy Statement/Prospectus is a part, certain other facts and documents
which it has considered relevant, and certain representations made to it by RBC
and RBMG, the RBC Merger will have the federal income tax consequences set forth
below:
(i) the RBC Merger will constitute a "reorganization" within the
meaning of Section 368(a) of the Code;
(ii) no gain or loss will be recognized by RBC Stockholders upon the
exchange in the RBC Merger of their shares of RBC Common Stock for RBMG
Common Stock;
(iii) the tax basis of the RBMG Common Stock received in the RBC
Merger by an RBC Stockholder will be the same as the tax basis of the RBC
Common Stock exchanged for such RBMG Common Stock;
(iv) the holding period of the RBMG Common Stock received in the RBC
Merger by an RBC Stockholder will include the holding period of such
stockholder in the RBC Common Stock exchanged for such RBMG Common Stock,
provided that the RBC Common Stock is held as a capital asset at the RBC
Effective Time;
(v) an RBC Stockholder who receives cash in the RBC Merger in lieu of
a fractional share interest in RBMG Common Stock will be treated as having
received such fractional share in the RBC Merger and then as having
exchanged such fractional share for cash in a redemption subject to Section
302 of the Code; and
(vi) if an RBC Stockholder dissents to the RBC Merger and receives
solely cash in exchange for such stockholder's RBC Common Stock, such cash
will be treated as having been received in redemption of the RBC Common
Stock (or possibly RBMG Common Stock deemed to have been received), subject
to the provisions and limitations of Section 302 of the Code.
In rendering the RBC Tax Opinion, counsel has relied upon certain written
representations as to factual matters made by appropriate officers of RBMG and
RBC and certain RBC Stockholders. Such representations are
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customary for opinions of this type; the RBC Tax Opinion cannot be relied upon,
however, if any such representation is, or later becomes, inaccurate. No ruling
from the Internal Revenue Service (the "Service") with respect to the tax
consequences of the RBC Merger has been, or will be, requested, and the RBC Tax
Opinion is not binding upon the Service or the courts. If the RBC Merger is
consummated, and it is later determined that the RBC Merger did not qualify as a
"reorganization" under the Code, then each RBC Stockholder would recognize
taxable gain or loss equal to the difference between the fair market value of
the RBMG Common Stock received by him or her in the RBC Merger and his or her
tax basis in the RBC Common Stock exchanged therefor.
The foregoing discussion of the tax consequences of the RBC Merger applies
only to an RBC Stockholder who holds RBC Common Stock as a capital asset, and
may not apply to special situations, such as RBC Stockholders, if any, who
received their RBC Common Stock upon the exercise of employee stock options or
otherwise as compensation and RBC Stockholders that are insurance companies,
securities dealers, financial institutions or foreign persons.
Any cash received in the RBC Merger by an RBC Stockholder may be subject to
backup withholding at a rate of 31 percent. Backup withholding will not apply,
however, to a taxpayer who (i) furnishes a correct taxpayer identification
number ("TIN") and certifies that he or she is not subject to backup withholding
on IRS Form W-9 (or an appropriate substitute form), (ii) provides a certificate
of foreign status on IRS Form W-8 (or an appropriate substitute form) or (iii)
is otherwise exempt from backup withholding. The Service may impose a $50
penalty upon any taxpayer who fails to provide the correct TIN, as required.
The RBC Merger will not be a taxable event to RBMG Stockholders or to RBMG.
THE FOREGOING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN UNITED
STATES FEDERAL INCOME TAX CONSEQUENCES OF THE RBC MERGER AND DOES NOT PURPORT TO
BE A COMPLETE ANALYSIS OF ALL POTENTIAL TAX EFFECTS RELEVANT TO A DECISION
WHETHER AN RBC STOCKHOLDER OR AN RBMG STOCKHOLDER SHOULD VOTE IN FAVOR OF THE
RBC MERGER. BECAUSE CERTAIN TAX CONSEQUENCES OF THE RBC MERGER MAY VARY
DEPENDING UPON THE PARTICULAR CIRCUMSTANCES OF EACH RBC STOCKHOLDER, EACH RBC
STOCKHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR TO DETERMINE THE
PARTICULAR TAX CONSEQUENCES TO SUCH STOCKHOLDER OF THE RBC MERGER (INCLUDING THE
APPLICATION AND EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS).
RESALE OF RBMG COMMON STOCK
Shares of RBMG Common Stock to be issued to RBC Stockholders in connection
with the RBC Merger will be freely transferable under the Securities Act, except
for shares issued to any person or entity who, at the time of the RBC Merger,
may be deemed an "affiliate" of RBC within the meaning of Rule 145. In general,
affiliates of RBC include its executive officers and directors and any other
person or entity who controls, is controlled by or is under common control with
RBC. Rule 145, among other things, imposes certain restrictions upon the resale
of securities received by affiliates in connection with certain
reclassifications, mergers, consolidations or asset transfers. These
restrictions will consist of volume and manner of sale restrictions on the
resale of shares of RBMG Common Stock issued to such persons and entities. RBMG
may place legends on certificates representing shares of RBMG Common Stock that
are issued to such RBC Stockholders in the RBC Merger to restrict such
transfers.
COMPARISON OF RIGHTS OF HOLDERS OF RBMG COMMON STOCK AND RBC COMMON STOCK
Upon consummation of the RBC Merger, and to the extent they receive shares
of RBMG Common Stock, stockholders of RBC, a South Carolina corporation, will
become stockholders of RBMG, a Delaware corporation. The rights of RBC
Stockholders will thereafter be governed by applicable Delaware law ("Delaware
Law"), including the DGCL, and by the RBMG Certificate and the RBMG Bylaws. The
following is a summary of the material differences between the rights of RBMG
Stockholders and RBC Stockholders pursuant to the differences in Delaware Law
and applicable South Carolina law ("South Carolina Law"), including the SCBCA,
and between the RBMG Certificate and the RBMG Bylaws, on the one hand, and the
RBC Articles and the RBC Bylaws, on the other hand. The following summary does
not purport to be a complete statement of the difference
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in the rights of RBMG Stockholders and RBC Stockholders. This summary is
qualified in its entirety by reference to the full text of the RBMG Certificate
and the RBMG Bylaws, the RBC Articles and the RBC Bylaws, the Delaware Law and
the South Carolina Law.
Authorized Capital Stock. The authorized capital stock of RBMG consists of
(i) 25,000,000 shares of RBMG Common Stock and (ii) 5,000,000 shares of
preferred stock, par value $.01 per share, of RBMG (the "RBMG Preferred Stock").
The RBMG Board is empowered to authorize by resolution or resolutions from time
to time the issuance of one or more classes or series of RBMG Preferred Stock
and to fix the voting powers, full or limited or no voting powers, and such
designations, powers, preferences and relative, participating, optimal or other
rights, if any, with respect to each such class or series of RBMG Preferred
Stock (including, without limitation, liquidation preferences, dividend rates,
conversion rights and redemption provisions), and the number of shares
constituting each such class or series, and to increase or decrease the number
of any such class or series to the extent permitted by Delaware Law. There is
currently no RBMG Preferred Stock outstanding. The authorized capital stock of
RBC consists of (i) 25,000,000 shares of RBC Voting Common Stock and (ii)
2,500,000 shares of RBC Non-Voting Common Stock.
If the RBC Amendment is adopted, the number of shares of RBMG Common Stock
that RBMG is authorized to issue would increase to 50,000,000 shares. If the WSI
Amendment is adopted, the number of shares of common stock that RBMG is
authorized to issue would increase to 112,000,000 shares consisting of
100,000,000 shares of RBMG Common Stock and 12,000,000 shares of RBMG Class B
Common Stock. For a description of the terms of the RBMG Class B Common Stock,
see "The Charter Amendments -- WSI Amendment."
Dividends and Other Distributions. Delaware Law permits a corporation to
declare and pay dividends out of its surplus (defined as net assets minus
capital) or, if there is no surplus, out of its net profits for the fiscal year
in which the dividend is declared and/or for the preceding fiscal year as long
as the amount of capital of the corporation following the declaration and
payment of the dividend is not less than the aggregate amount of the capital
represented by the issued and outstanding stock of any classes which may have a
preference upon the distribution of assets. The RBMG Certificate and the RBMG
Bylaws contain no restrictions on the payment of dividends or other
distributions.
Unless provided otherwise by its articles of incorporation, a South
Carolina corporation may pay dividends or make other distributions with respect
to its shares if after the dividend or distribution the corporation has the
ability to pay its debts as they become due and has total assets in excess of
the sum of total liabilities and all senior claims upon dissolution. The RBC
Articles and the RBC Bylaws contain no restrictions on the payment of dividends
or other distributions.
Special Meeting of Stockholders. Under Delaware Law, special meetings of
stockholders may be called by the Board of Directors or by such person or such
persons as may be authorized by the certificate of incorporation or bylaws.
Under the RBMG Certificate and the RBMG Bylaws, a special meeting of
stockholders may be called by the RBMG Board or the Chairman of the RBMG Board
only. Notwithstanding the foregoing, whenever holders of one or more classes or
series of RBMG Preferred Stock shall have the right, voting separately as a
class or series, to elect directors, such holders may call special meetings of
such holders for the purpose of electing such directors pursuant to the
certificate of designation for such classes or series.
As permitted by South Carolina Law, the RBC Bylaws provide that a special
meeting of stockholders may be called by the President, the Chairman of the RBC
Board or by a majority of the RBC Board, and shall be called by the President
upon the request of the holders of at least 10% of the outstanding shares of RBC
entitled to vote at the special meeting.
Voting Requirements Generally. Under Delaware Law, each stockholder is
entitled to one vote per share of stock, unless the certificate of incorporation
provides otherwise. The affirmative vote of the majority of shares present in
person or represented by proxy at a duly held meeting at which a quorum is
present and entitled to vote on the subject matter is deemed to be the act of
the stockholders, unless the DGCL, the certificate of incorporation or the
bylaws of the corporation specify a different voting requirement.
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The RBMG Bylaws provide that each stockholder is entitled to one vote for
each outstanding share of stock of RBMG held by such stockholder and that in all
matters other than the election of directors except as otherwise provided by
law, the vote of a majority of the shares of stock of RBMG present, in person or
by proxy, at a meeting of stockholders at which a quorum is present and then
entitled to vote on the subject matter shall be the act of the stockholders.
With certain exceptions, under South Carolina Law, each outstanding share,
regardless of class, is entitled to one vote on each matter voted on at a
shareholders' meeting, unless the articles of incorporation provide otherwise.
If the votes cast in favor of an action (other than the election of directors)
exceed the votes cast opposing the action at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter, it is deemed to be
the act of the shareholders on the matter, unless the articles of incorporation
or the SCBCA require a greater number of affirmative votes.
The RBC Bylaws provide that each outstanding share of RBC Voting Common
Stock is entitled to one vote upon each matter submitted to a vote at a meeting
of stockholders. The RBC Articles provide that shares of RBC Non-Voting Common
Stock have no voting rights except as otherwise required by law. The RBC
Articles also provide that except for certain business combinations, the vote of
a majority of the shares entitled to vote on any action for which the SCBCA
requires a greater vote unless the articles of incorporation provide otherwise
shall be the act of the stockholders on that matter. The RBC Bylaws provide that
the vote of a majority of the shares voted on any matter at a meeting of
stockholders at which a quorum is present shall be the act of the stockholders
on that matter unless the vote of a greater number is required by law or by the
RBC Articles.
Amendment of Certificate or Articles of Incorporation; Amendment of
Bylaws. Under Delaware Law, an amendment to a corporation's certificate of
incorporation requires the approval of the board of directors and the approval
of a majority of the outstanding stock entitled to vote thereon. The holders of
the outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. If any
proposed amendment would alter or change the powers, preferences or special
rights of one or more series of any class so as to affect them adversely, but
would not so affect the entire class, then only the shares of the series so
affected by the amendment will be considered a separate class for purposes of
voting by classes.
Under the RBMG Certificate, provisions in the RBMG Certificate relating to
the election of the RBMG Board, amendments of the RBMG Articles and the RBMG
Bylaws, written consents, special meetings, indemnification and special voting
requirements for certain business combinations may be amended only upon the
affirmative vote of at least 80% of the shares of RBMG Common Stock then
outstanding and entitled to vote generally in the election of directors, voting
together as a single class.
Under South Carolina Law generally, unless the articles of incorporation
require a different vote, an amendment to a corporation's articles of
incorporation must be approved by: (i) two-thirds of the votes entitled to be
cast on the amendment, regardless of the class or voting group to which the
shares belong, and (ii) two-thirds of the votes entitled to be cast on the
amendment within each voting group entitled to vote as a separate voting group
on the amendment. An amendment to the articles of incorporation that adds,
changes, or deletes a greater quorum or voting requirement must meet the same
quorum requirement and be adopted by the same vote and voting groups required to
take action under the quorum and voting requirements then in effect or proposed
to be adopted, whichever is greater. The holders of the outstanding shares of a
class are entitled to vote as a separate voting group (if shareholder voting is
otherwise required under South Carolina Law) on a proposed amendment to the RBC
Articles if the amendment would result in certain fundamental changes to the
rights and preferences of that class. South Carolina Law permits the following
provisions of a corporation's articles of incorporation to be amended by action
of the Board of Directors without shareholder approval: (i) changes in the
issued and unissued shares of an outstanding class of shares into a greater
number of whole shares, if the corporation has only that class of shares
outstanding, (ii) minor changes to the corporate name and (iii) certain minor
technical amendments.
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Under the RBC Articles, provisions in the RBC Articles relating to special
voting requirements for certain business combinations may be amended only upon
the affirmative vote of at least 80% of the shares of the then outstanding RBC
Voting Common Stock, voting together as a single class.
Under Delaware Law, an amendment to a corporation's bylaws requires the
approval of the stockholders, unless the certificate of incorporation confers
the power to amend the bylaws upon the board of directors.
The RBMG Certificate and the RBMG Bylaws provide that the RBMG Board may
adopt, amend or repeal the RBMG Bylaws. Additionally, the RBMG Certificate
provides that the stockholders may adopt, amend or repeal the RBMG Bylaws with
the affirmative vote of the holders of not less than 66 2/3% of the total voting
power of all outstanding securities of RBMG then entitled to vote generally in
the election of directors, voting together as a single class.
Under South Carolina Law, a South Carolina corporation's board of directors
may amend the corporation's bylaws unless the articles of incorporation or
bylaws reserve the power to the shareholders and except that certain types of
provisions may be amended or repealed only by the shareholders. A corporation's
shareholders may amend or repeal the corporation's bylaws even though the bylaws
may also be amended or repealed by the board of directors.
The RBC Bylaws provide that they may be amended or repealed and new bylaws
may be adopted by the affirmative vote of a majority of the RBC Board.
Action by Written Consent. Under Delaware Law, unless otherwise provided
in a corporation's certificate of incorporation, any action that may be taken at
any annual or special meeting of shareholders may be taken without a meeting and
without prior notice, if a consent in writing, setting forth the action so
taken, is signed by the holders of outstanding shares having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted.
The RBMG Certificate and the RBMG Bylaws provide that, so long as RBMG is
subject to the reporting requirements of Section 12 or 15(d) of the Exchange Act
(or any successor law), any action required or permitted to be taken at any
annual or special meeting of stockholders may be taken only upon the vote of
stockholders at an annual or special meeting duly noticed and called in
accordance with Delaware Law and may not be taken by written consent of
stockholders without a meeting.
Under South Carolina Law, shareholders may act without a meeting by
unanimous written consent. Under the RBC Bylaws, any action which is required or
permitted to be taken at a meeting of the stockholders may be taken without a
meeting if consent in writing, setting forth the action so taken, shall be
signed by all of the persons who would be entitled to vote upon such action at a
meeting, and filed with the Secretary of RBC in the minute book of RBC.
Voting in the Election of Directors. Under Delaware Law, vacancies and
newly created directorships may be filled by a majority of the directors then in
office, although less than a quorum, unless otherwise provided in the
certificate of incorporation or bylaws. If, at the time of filling any vacancy
or newly created directorship, the directors then in office constitute less than
a majority of the whole board as constituted immediately prior to such increase,
the Delaware Court of Chancery may, upon application of stockholders holding at
least ten percent of the total number of shares outstanding having the right to
vote for such directors, order an election to be held to fill any such vacancies
or newly created directorships or to replace the directors chosen by the
directors then in office.
The RBMG Bylaws provide that directors shall be elected by a plurality of
the votes of the shares present, in person or by proxy, at a meeting of the
stockholders at which a quorum is present and then entitled to vote on the
election of directors. The RBMG Certificate and the RBMG Bylaws provide that,
subject to any rights of holders of any class of RBMG Preferred Stock then
outstanding, all vacancies on the RBMG Board, including those resulting from an
increase in the number of directors, may be filled solely by a majority of the
remaining directors then in office, even if they do not constitute a quorum, or
by a sole remaining director. When one or more directors resign from the RBMG
Board effective at a future date, a majority of directors then in office,
including the directors who are to resign, may vote on filling the vacancy.
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Under South Carolina Law, unless the articles of incorporation provide
otherwise, if a vacancy occurs on a board of directors, the shareholders or the
board of directors may fill the vacancy, or 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 the directors remaining in office.
Under the RBC Bylaws, directors are elected by the vote of a majority of
the shares voted at a meeting of stockholders at which a quorum is present. The
RBC Bylaws provide that, except as otherwise expressly required by the
provisions of the SCBCA, any vacancy on the RBC Board, including those resulting
from an increase in the number of directors, may be filled solely by a majority
of the remaining directors, even if they do not constitute a quorum.
Advance Notice Requirements for Stockholder Proposals and Director
Nominations. The RBMG Bylaws establish advance notice procedures with regard to
stockholder proposals and the nomination, other than by or at the direction of
the RBMG Board or a committee thereof, of candidates for election as directors.
These procedures provide that the notice of stockholder proposals and
stockholder nominations for the election of directors at any meeting of
stockholders must be in writing and be received by the Secretary of RBMG not
less than 60 nor more than 90 days prior to the meeting (or if less than 70 days
notice or prior public disclosure of the date of the meeting is given, the
notice of stockholder proposals or nominations must be in writing and received
by the Secretary no later than the close of business on the tenth day following
the day on which notice of the meeting was mailed or public disclosure thereof
was made, whichever occurs first). RBMG may reject a stockholder proposal or
nomination that is not made in accordance with such procedures.
The RBC Articles and the RBC Bylaws do not contain any advance notice
requirements for stockholder proposals and director nominations.
Number and Qualification of Directors. Under Delaware Law, the minimum
number of directors is one. Delaware Law permits the board of directors alone to
change the authorized number, or the range, of directors by amendment to the
bylaws, unless the directors are not authorized in the certificate of
incorporation to amend the bylaws or the number of directors is fixed in the
certificate of incorporation, in which cases a change in the number of directors
may be made only upon amendment of the certificate of incorporation.
The RBMG Certificate and the RBMG Bylaws provide that the number of
directors shall be fixed from time to time by resolution adopted by a majority
of the directors then in office, but that the RBMG Board may not consist of less
than three nor more than 15 directors. The size of the RBMG Board is currently
set at seven members.
Under South Carolina Law, the minimum number of directors is one. If a
board of directors has power under the articles of incorporation or bylaws to
fix or change the number of directors, South Carolina Law allows the board of
directors to increase or decrease by thirty percent or less the number of
directors last approved by the shareholders, but only the shareholders may
increase or decrease by more than thirty percent the number of directors last
approved by the shareholders. Where a variable range is established by the
articles of incorporation or the bylaws, the number of directors may be fixed or
changed within the minimum and maximum by the shareholders or the board of
directors. After shares are issued, only the shareholders may change the range
for the size of the board or change from a fixed to a variable-range size board
or vice versa.
The RBC Bylaws provide that the number of directors of RBC shall not be
less than three nor more than 15 as determined from time to time by the RBC
Board. The size of the RBC Board is currently set at ten members.
Classification of Board. A classified board of directors is one in which a
certain number, but not all, of the directors of a corporation are elected on a
rotating basis each year. This method of electing directors makes changes in the
composition of the board of directors, and thus a potential change in control of
a corporation, a lengthier and more difficult process.
Delaware Law permits, but does not require a classified board of directors,
with staggered terms under which one-half or one-third of the directors are
elected for terms of two or three years, respectively. The RBMG Certificate
divides the RBMG Board into three classes of directors serving staggered
three-year terms. As a result, approximately one-third of the RBMG Board is
elected at each annual meeting of stockholders.
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South Carolina Law provides that when a board of directors has six or more
members, the articles of incorporation may provide for staggering their terms
into two or three classes. The RBC Articles divide the RBC Board into three
classes of directors serving staggered three-year terms when the number of
directors constituting the RBC Board is fixed at nine or more.
Removal of Directors. Under Delaware Law, a director of a corporation with
a classified board of directors may be removed only for cause, unless the
certificate of incorporation otherwise provides. The RBMG Certificate provides
that no director may be removed from office by the stockholders except for cause
with the affirmative vote of the holders of not less than a majority of the
total voting power of all outstanding securities of RBMG then entitled to vote
generally in the election of directors, voting together as a single class.
Under South Carolina Law, the shareholders may remove one or more directors
with or without cause unless the articles of incorporation provide that
directors may be removed only for cause. The RBC Articles and the RBC Bylaws do
not contain any provisions relating to the removal of directors.
Transactions Involving Officers or Directors. Under Delaware Law, no
contract or transaction between a corporation and one or more of its directors
or officers, or between a corporation and any other entity in which one or more
of its directors or officers are directors or officers, or have a financial
interest, is void or voidable if (i) the material facts as to the director's or
officer's relationship or interest and as to the contract or transaction are
disclosed or known to the board of directors or committee, which authorizes the
contract or transaction by the affirmative vote of a majority of the
disinterested directors; (ii) the material facts as to the director's or
officer's relationship or interest and as to the contract or transaction are
disclosed or known to the stockholders entitled to a vote thereon, and the
contract or transaction is specifically approved by the stockholders; or (iii)
the contract or transaction is fair as to the corporation as of the time it is
authorized, approved or ratified by the board of directors, a committee thereof
or the stockholders. A corporation may make loans to, guarantee the obligations
of or otherwise assist its officers or other employees and those of its
subsidiaries, including directors who are also officers or employees, when such
action, in the judgment of the directors, may reasonably be expected to benefit
the corporation.
The RBMG Certificate and the RBMG Bylaws do not contain any provisions
relating to transactions involving officers and directors.
Similarly, under South Carolina Law, a conflict of interest transaction,
which is defined as a transaction with the corporation in which a director of
the corporation has a direct or indirect interest, is not voidable by the
corporation solely because of the director's interest in the transaction if any
one of the following is true: (i) the material facts of the transaction and the
director's interest were disclosed or known to the board of directors or a
committee of the board of directors, and the board of directors or a committee
authorized, approved or ratified the transaction; (ii) the material facts of the
transaction and the director's interest were disclosed or known to the
shareholders entitled to vote and they authorized, approved or ratified the
transaction; or (iii) the transaction was fair to the corporation. A corporation
may lend money to or guarantee the obligation of a director of the corporation
where: (i) the particular loan or guarantee is approved by a majority of the
votes represented by the outstanding voting shares of all classes, voting as a
single voting group, except the votes of shares owned by or voted under the
control of the benefited director; or (ii) the corporation's board of directors
determines that the loan or guarantee benefits the corporation and either
approves the specific loan or guarantee or a general plan authorizing loans and
guarantees.
The RBC Articles and the RBC Bylaws do not contain any provisions relating
to transactions involving officers and directors.
Indemnification and Limitation of Liability. Under Delaware Law, a
corporation has the power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, other than an action by or in the right of the corporation,
against expenses, judgments, fines and settlements incurred in a proceeding,
other than an action by or in the right of the corporation, if the person acted
in good faith and in a manner that the person reasonably believed to be in the
best interests of the corporation or not opposed to the best interests of the
corporation, and, in the case of a criminal proceeding, had no reason to believe
that his conduct was unlawful. In the case of an action by or in the right of
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the corporation, the corporation has the power to indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, other than an action by or in the right of
the corporation, against expenses incurred in defending or settling the action
if such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the corporation;
provided, however, that no indemnification may be made when a person is adjudged
liable to the corporation, unless a court determines such person is entitled to
be indemnified for expenses, and then such indemnification may be made only to
the extent that such court shall determine. Delaware Law requires that to the
extent an officer, director, employee or agent of a corporation is successful on
the merits or otherwise in defense of any third-party or derivative proceeding,
or in defense of any claim, issue or matter therein, the corporation must
indemnify such person against expenses incurred in connection therewith.
Under Delaware Law, a corporation may adopt a provision in its certificate
of incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for (i) breaches of the director's duty of
loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends or unlawful stock repurchases or
redemptions; or (iv) transactions in which the director received an improper
personal benefit.
The RBMG Certificate provides that each person (and the heirs, executors or
administrators of such person) who was or is a party or is threatened to be made
a party to, or is involved in any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that such person is or was a director or officer of RBMG or
is or was serving at the request of RBMG as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise, shall be
indemnified and held harmless by RBMG to the fullest extent permitted by the
DGCL. The RBMG Certificate also provides that the right to indemnification
includes the right to be paid by RBMG for expenses incurred in connection with
any such proceeding in advance of its final disposition to the fullest extent
permitted by the DGCL, and that the right to indemnification conferred
thereunder is a contract right.
The RBMG Certificate also provides that RBMG may, by action of the RBMG
Board, provide indemnification to such of the employees and agents of RBMG and
such other persons serving at the request of RBMG as employees or agents of
another corporation, partnership, joint venture, trust or other enterprise to
such extent and to such effect as is permitted by the DGCL and the RBMG Board
shall determine to be appropriate.
Pursuant to the RBMG Certificate, RBMG may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
RBMG, or is or was serving at the request of RBMG as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any expense, liability or loss incurred by such person
in any such capacity or arising out of his or her status as such, whether or not
RBMG would have the power to indemnify such person against such liability under
the DGCL.
The RBMG Certificate provides that (i) the rights and authority described
above are not exclusive of any other right that any person may otherwise have or
hereafter acquire and (ii) no amendment, modification or repeal of the RBMG
Certificate, or adoption of any additional provision to the RBMG Certificate or
the RBMG Bylaws or, to the fullest extent permitted by the DGCL, any amendment,
modification or repeal of law will eliminate or reduce the effect of the
provisions in the RBMG Certificate limiting liability or indemnifying certain
persons or adversely affect any right or protection then existing thereunder in
respect of any acts or omissions occurring prior to such amendment,
modification, repeal or adoption. The RBMG Certificate provides that a director
will not be personally liable for monetary damages to RBMG or its stockholders
for breach of fiduciary duty as a director, except to the extent such exemption
from liability or limitation thereof is not permitted under the DGCL.
Under South Carolina Law, a corporation may indemnify an individual, and in
certain circumstances, must indemnify an individual, made party to a proceeding
because he is or was a director against liability incurred in the proceeding if
the person: (i) conducted himself in good faith; (ii) reasonably believed, in
the case of conduct in his official capacity with the corporation, that his
conduct was in its best interest and, in all other cases, that his conduct was
at least not opposed to its best interest; and (iii) in the case of any criminal
proceeding, had no
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reasonable cause to believe his conduct was unlawful. A South Carolina
corporation may not indemnify a director (i) in connection with a proceeding by
or in the right of the corporation in which the director was adjudged liable to
the corporation or (ii) in connection with any other proceeding charging
improper personal benefit to him, whether or not involving action in his
official capacity, in which he was adjudged liable on the basis that personal
benefit was improperly received by him. Indemnification permitted under South
Carolina Law in connection with a proceeding by or in the right of the
corporation is limited to reasonable expenses incurred in connection with the
proceeding. For the purposes of the above, a director is defined as an
individual who is or was a director of the corporation or who, while a director
of the corporation, is or was serving at the corporation's request as a
director, officer, partner, trustee, employee or agent of another foreign or
domestic corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise.
Under South Carolina Law, the articles of incorporation of certain
corporations may also contain a provision eliminating or limiting the personal
liability of a director to the corporation or its shareholders, provided that
the provision does not eliminate or limit the liability of a director for (i)
any breach of the director's duty of loyalty to the corporation or its
stockholders; (ii) acts or omissions not in good faith or which involve gross
negligence, intentional misconduct or a knowing violation of law; (iii) unlawful
payment of a dividend or an unlawful stock purchase or redemption; or (iv) any
transaction involving improper personal benefits to the director.
The RBC Bylaws contain provisions for the indemnification to the fullest
extent permitted by Section 33-8-500 et. seq. of the SCBCA, as it may be amended
from time to time, of all persons who RBC may indemnify pursuant thereto.
Pursuant to the RBC Bylaws, the RBC Board may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of RBC, or is or was serving at the request of RBC as an officer, employee
or agent of another corporation, partnership, joint venture, trust, other
enterprise or employee benefit plan against any liability asserted against him
and incurred by him in any such capacity or arising out of his status as such,
whether or not RBC would have the power to indemnify him under the provisions of
the SCBCA.
The RBC Articles provide that no director shall be personally liable to RBC
or its shareholders for monetary damages for breach of his fiduciary duty as a
director; provided, however, the foregoing shall not eliminate or limit the
liability of a director (i) for any breach of the director's duty of loyalty to
RBC or its shareholders; (ii) for acts or omissions not in good faith or which
involve gross negligence, intentional misconduct or a knowing violation of law;
(iii) imposed for unlawful distributions as set forth in Section 33-8-330 of the
SCBCA; or (iv) for any transaction from which the director derived an improper
personal benefit. The RBC Articles also provide that the above provision shall
eliminate or limit the liability of a director only to the maximum extent
permitted from time to time by the SCBCA or any successor law or laws. Any
repeal or modification of such protection by the shareholders of RBC shall not
adversely affect any right or protection of a director of RBC existing at the
time of such repeal or modification.
Mergers, Tender Offers and Sales of Substantially all of the Assets. Under
Delaware Law, the principal terms of a merger generally require the approval of
the stockholders of each of the merging corporations. Unless otherwise required
in a corporation's certificate of incorporation, Delaware Law does not require
the vote of stockholders of a constituent corporation surviving the merger if
(i) the merger agreement does not amend the existing certificate of
incorporation, (ii) each share of the surviving corporation outstanding before
the merger is an identical outstanding or treasury share after the merger and
(iii) either no shares of the surviving corporation and no securities
convertible into such stock are to be issued in the merger or the number of
shares to be issued by the surviving corporation in the merger does not exceed
20% of the shares outstanding immediately prior to the merger.
The RBMG Certificate and the RBMG Bylaws do not contain any provisions
relating to mergers, tender offers or sales of substantially all of the
corporation's assets.
In general, unless the articles of incorporation require a greater or
smaller vote (in no event less than a majority) or the board of directors
requires a greater vote, South Carolina Law requires a merger of a South
Carolina corporation to be approved by two-thirds of the total votes entitled to
be cast on the plan, regardless of
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the class or voting group to which the shares belong, and two-thirds of the
votes entitled to be cast on the plan within any separate class or other voting
group that is entitled to vote separately on the plan. Unless the articles of
incorporation specify otherwise, however, the board of directors does not need
to submit a plan of merger to the shareholders of the surviving corporation if:
(i) the articles of incorporation of the surviving corporation will not differ,
with certain exceptions, from its articles of incorporation before the merger,
(ii) each shareholder of the surviving corporation whose shares were outstanding
immediately before the effective date of the merger will hold the same number of
shares, with identical designations, preferences, limitations and relative
rights, immediately after the merger, (iii) the number of voting shares
outstanding immediately after the merger, plus the number of voting shares
issuable as a result of the merger (either by the conversion of securities
issued pursuant to the merger or the exercise of rights and warrants issued
pursuant to the merger), will not exceed by more than 20% the total number of
voting shares of the surviving corporation outstanding immediately before the
merger and (iv) the number of shares that entitle their holders to participate
without limitation in distributions ("participating shares") outstanding
immediately after the merger, plus the number of participating shares issuable
as a result of the merger (either by the conversion of securities issued
pursuant to the merger or the exercise of rights and warrants issued pursuant to
the merger), will not exceed by more than 20% the total number of participating
shares of the surviving corporation outstanding immediately before the merger.
The RBC Articles provide that except for certain business combinations, the
vote of a majority of the shares entitled to vote on any action for which the
SCBCA requires a greater vote unless the articles of incorporation provide
otherwise shall be the act of the stockholders on that matter.
Proxies. As permitted by Delaware Law, under the RBMG Bylaws, each
stockholder entitled to vote at a meeting of stockholders may authorize another
person or persons to act for him by proxy, but no such proxy shall be voted or
acted upon after three years from its date, unless the proxy provides for a
longer period.
As permitted by South Carolina Law, under the RBC Bylaws, at all meetings
of stockholders, a stockholder may vote by proxy executed in writing by the
stockholder or by his duly authorized attorney in fact. Such proxy shall be
filed with the Secretary of RBC before or at the time of the meeting. Under
South Carolina Law, unless a time of expiration is otherwise specified, an
appointment of a proxy is valid for 11 months.
Preemptive Rights. The holders of RBMG Common Stock and RBC Common Stock
have no preemptive rights.
Stockholder Inspection Rights. Under Delaware Law, any stockholder, in
person or by attorney or other agent, shall, upon written demand under oath
stating the purpose thereof, have the right during the usual hours for business
to inspect for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records, and to make copies or extracts
therefrom. A proper purpose shall mean a purpose reasonably related to such
person's interest as a stockholder.
Under South Carolina Law, any shareholder may inspect and copy certain
corporate records regardless of the shareholder's purpose, and may also inspect
and copy the corporation's accounting records, the record of shareholders,
excerpts from minutes of meetings of the board of directors (or any committee
thereof), minutes of shareholder meetings, and any action taken by the board of
directors or shareholders by written consent, if the shareholder's demand is
made in good faith and for a proper purpose, he describes with reasonable
particularity such purpose and the records he desires to inspect and the records
are directly connected with his purpose. South Carolina Law also allows
shareholders holding at least one percent of any class of shares to conduct an
inspection of a corporation's tax returns.
Anti-Takeover Provisions. Delaware Law contains provisions which impose
supermajority voting requirements for certain business combinations with a 15%
or greater stockholder within three years following the date such stockholder
became an "interested stockholder." A Delaware corporation must specifically
elect, through an amendment to its bylaws or articles of incorporation, not to
be governed by these provisions. RBMG has not made such an election with respect
to the business combinations provisions of Delaware Law, and thus they apply to
RBMG.
The RBMG Certificate generally limits RBMG's power to purchase shares of
voting stock of RBMG (i.e., capital stock having the right to vote generally on
matters relating to RBMG and any security which is convertible
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into such stock) from a holder of at least five percent of any class of voting
securities who has beneficially owned such securities for less than two years
prior to the date of such purchase or any agreement in respect thereof at a
price in excess of its fair market value, unless such purchase is approved by
the holders of a majority of the outstanding shares of voting stock of RBMG,
voting together as a single class, excluding the shares owned by such
stockholder.
South Carolina Law contains provisions which impose super majority voting
requirements or a fair pricing procedure for certain business combinations with
the beneficial owner of 10% or more of the voting power of the corporation or an
affiliate or associate of the corporation who was a 10% beneficial owner within
the two-year period before the date in question and provisions which restrict
the voting rights of persons who, through certain acquisitions ("control share
acquisitions"), are able to exercise control over certain South Carolina
corporations. A South Carolina corporation must specifically elect, through an
amendment to its bylaws or articles of incorporation, not to be governed by
these provisions. RBC has not made such an election with respect to either the
fair price or the control share acquisition provisions of South Carolina Law,
and thus both apply to RBC.
The RBC Articles generally limit RBC's power to enter into certain business
combinations with a holder (not including certain persons) of at least 10% of
any class of voting securities (i.e., capital stock having the right to vote
generally in the election of directors) who has beneficially owned such
securities for less than two years prior to the date of such business
combination or any agreement in respect thereof at a price in excess of its fair
market value, unless such purchase is approved by the holders of at least 80% of
the outstanding shares of stock of RBC entitled to vote in the election of
directors.
Quorum. Under the RBMG Bylaws, unless otherwise provided in the Delaware
Law, the RBMG Certificate or the RBMG Bylaws, the presence, in person or by
proxy, of the holders of a majority of the outstanding stock of RBMG entitled to
vote at a meeting of stockholders shall constitute a quorum for the transaction
of business.
Under the RBC Bylaws, a majority of the outstanding shares of RBC entitled
to vote, represented in person or by proxy, shall constitute a quorum at a
meeting of stockholders.
DISSENTERS' RIGHTS
Pursuant to the South Carolina Dissenters' Rights Statute, the holders of
shares of RBC Common Stock are entitled to dissent from approval of the RBC
Merger Agreement and the RBC Merger and receive payment of the fair value of
their shares in the event the RBC Merger is consummated, provided that the RBC
Stockholders comply with the provisions of the South Carolina Dissenters' Rights
Statute. Holders of RBMG Common Stock are not entitled to appraisal rights with
respect to the RBC Merger under Section 262 of the DGCL.
Under the South Carolina Dissenters' Rights Statute, only RBC Stockholders
who are entitled to vote on the RBC Merger Agreement and the RBC Merger have the
right to dissent from the RBC Merger and obtain payment of the fair value of
such holder's shares of RBC Common Stock. The South Carolina Dissenters' Rights
Statute contains detailed information as to a dissenting stockholder's right to
payment and the procedural steps to be followed by a dissenting stockholder. The
following description is only a summary of these provisions and is qualified in
its entirety by reference to the South Carolina Dissenters' Rights Statute, a
copy of which is attached to this Joint Proxy Statement/Prospectus as Annex E
and is incorporated herein by reference.
If the RBC Merger Agreement is approved by the required vote of RBC
Stockholders and the RBC Merger is consummated, each RBC Stockholder who votes
against the RBC Merger Agreement or who fails to vote and who follows the
procedures set forth in the South Carolina Dissenters' Rights Statute is
entitled to demand payment of the fair value of such holder's shares.
A stockholder electing to exercise such holder's dissenters' rights must
give notice to RBC, before the vote on the RBC Merger Agreement and the RBC
Merger at the RBC Special Meeting, of such holder's intent to demand payment for
such holder's shares if the RBC Merger is effectuated and must not vote his
shares in favor of the proposed action. A vote cast in favor of approval of the
RBC Merger Agreement and the RBC Merger by the holder of a proxy solicited
hereby, however, will not constitute a waiver of a stockholder's right to
dissent from approval of the RBC Merger Agreement, provided such stockholder
complies with the other requirements of
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the South Carolina Dissenters' Rights Statute. All notices of intent to demand
payment should be addressed to: Secretary, Resource Bancshares Corporation, 1901
Main Street, Suite 650, Columbia, South Carolina 29201. A beneficial stockholder
may assert dissenters' rights as to shares held on such holder's behalf by a
nominee only if such holder dissents with respect to all shares of which such
holder is the beneficial owner or over which such holder has the power to vote
and such holder notifies RBC in writing of the name and address of the record
holder of the shares, if known. A record stockholder may assert dissenters'
rights as to fewer than all the shares registered in such holder's name only if
such holder dissents with respect to all shares beneficially owned by any one
person and notifies RBC in writing of the name and address of each person on
whose behalf such holder asserts dissenters' rights. A dissenting stockholder
need not vote against the RBC Merger Agreement and the RBC Merger in order to
preserve such holder's dissenters' rights after filing such holder's notice of
dissent.
If the RBC Merger is authorized at the RBC Special Meeting, within ten days
thereafter, RBC will deliver a written notice to all former RBC stockholders who
notified RBC in compliance with the South Carolina Dissenters' Rights Statute
that they intend to demand payment for their shares. Such notice will: (i) state
where the payment demand must be sent and where certificates for shares of RBC
Common Stock must be deposited; (ii) supply a form for demanding payment that
includes the date of the first announcement to news media or to stockholders of
the terms of the RBC Merger and requires that the person asserting dissenters'
rights certify whether or not such holder (or the beneficial stockholder on
whose behalf he is asserting dissenters' rights) acquired beneficial ownership
of the shares before that date; (iii) set a date by which RBC must receive
payment demand; and (iv) be accompanied by a copy of the South Carolina
Dissenters' Rights Statute.
A stockholder sent the notice described above must demand payment, certify
whether such holder (or the beneficial stockholder on whose behalf he is
asserting dissenters' rights) acquired beneficial ownership of the shares before
the date set forth in the notice, and deposit his shares in accordance with the
terms of the notice. A stockholder who does not comply substantially with the
requirements that such holder demand payment and deposit such holder's shares
where certificates are required to be deposited by the appropriate date is not
entitled to payment for such holder's shares.
After consummation of the RBC Merger, or upon receipt of a payment demand,
RBC will pay each such dissenter who substantially complied with the payment
demand requirements the amount that RBC estimates to be the fair value of such
holder's shares, plus accrued interest. Such payment will be accompanied by
certain financial information regarding RBC, a statement of the estimate of the
fair value, an explanation of how the fair value and interest were calculated, a
statement of the dissenter's right to demand additional payment under the South
Carolina Dissenters' Rights Statute and a copy of the South Carolina Dissenters'
Rights Statute.
If a dissenter believes that the amount paid for such holder's shares is
less than the fair value of such holder's shares or that the interest due is
calculated incorrectly, if RBC fails to make or offer payment within 60 days
after the date set for demanding payment or if RBC, having failed to take the
proposed action, does not return the deposited certificates within sixty days
after the date set for demanding payment, the dissenter may notify RBC in
writing of such holder's own estimate of the fair value of such holder's shares
and amount of interest due and demand payment of such holder's estimate (less
any payment already received). A dissenter waives the right to demand additional
payment unless such demand is made in writing within 30 days after RBC has made
or offered payment for such holder's shares. If RBC and the dissenter do not
settle a demand for additional payment within 60 days after RBC receives the
demand, RBC must commence a proceeding for judicial appraisal of the shares or
pay the amount demanded. The costs of a court-appointed appraiser will be borne
by RBC, unless the court finds that the dissenter acted arbitrarily,
vexatiously, or not in good faith in demanding additional payment for the
dissenter's shares. The court also may assess the fees and expenses of counsel
and experts for one party against another under certain circumstances.
Because of the detailed provisions and requirements of the South Carolina
Dissenters' Rights Statute, each dissenting stockholder should consult with such
holder's own legal counsel concerning the procedures and remedies available to
such holder. Any failure to follow the detailed procedures set forth in the
South Carolina Dissenters' Rights Statute may result in the loss of a
stockholder's right to claim fair value as described herein.
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THE WSI MERGER
BACKGROUND OF THE WSI MERGER
During 1996, as part of ongoing strategic planning, RBMG began examining
options for expansion into the non-conforming mortgage business. Representatives
of RBMG met with representatives of several companies engaged in the
non-conforming mortgage business, including Robert C. Walsh, President and Chief
Executive Officer of WSI. RBMG management was examining and evaluating the
non-conforming mortgage market generally and determining whether there existed
the potential to develop strategic synergies with these companies in connection
with RBMG's entry into the non-conforming mortgage business. Based on these
discussions, RBMG determined that a business combination with WSI offered
potential synergies relating to the integration of the broker and correspondent
relationships of RBMG with those of WSI. On January 23 and January 25, 1997,
management of RBMG and WSI met to discuss the possibility of a business
combination between RBMG and WSI. Based on these discussions, the parties
determined to commence negotiation of the terms of a business combination
between RBMG and WSI. There had been no discussions between RBMG and WSI prior
to January 1997, and there were no relationships or transactions between the
parties.
Following the January 25 meeting, the RBMG Board met on January 29, 1997,
and determined to appoint the RBMG Special Committee to consider and evaluate
proposals relating to a business combination with WSI and with RBC and to make
recommendations to the RBMG Board with respect to both the WSI Merger and the
RBC Merger. The members of the RBMG Special Committee were Boyd M. Guttery and
John O. Wolcott. The RBMG Special Committee was authorized by the RBMG Board to
retain an investment banking firm to act as its financial advisor and
independent legal counsel and other professional advisors. On January 29, 1997,
the RBMG Special Committee held its first meeting and selected King & Spalding
to serve as its independent legal counsel.
The RBMG Special Committee met again on January 30, 1997, with a
representative of King & Spalding. At the meeting, the RBMG Special Committee
discussed the status of the discussions with WSI and RBC and scheduled a meeting
among the parties and their advisors on February 2, 1997.
On February 2, 1997, a meeting was held among representatives of King &
Spalding, counsel for the RBMG Special Committee, representatives of McNair Law
Firm, P.A., counsel for RBC, representatives of St. John & Wayne, L.L.C.,
counsel for WSI, a representative of Prudential Securities, proposed financial
advisor for the RBMG Special Committee, representatives of Price Waterhouse LLP,
independent accountants for RBMG and RBC, representatives of KPMG Peat Marwick
LLP, independent accountants for WSI, and a representative of National
Westminster Bank, PLC, financial advisor for WSI. At the meeting, the parties
discussed and summarized the tax, accounting and structural issues that would
need to be addressed in connection with each of the proposed WSI Merger and the
proposed RBC Merger. The parties also discussed the steps necessary to complete
such transactions and the related time schedules and how the separate
transactions would relate to each other.
On February 3, 1997, the RBMG Special Committee met with its counsel and
reviewed the discussions which took place at the meeting the previous day. The
RBMG Special Committee discussed investment banking firms which were candidates
to serve as financial advisors to the RBMG Special Committee. On February 3,
1997, the parties commenced due diligence investigations of the proposed
transaction. On February 4, 1997, the RBMG Special Committee met again to
discuss investment banking firms. On February 5, 1997, representatives of
Prudential Securities made a presentation to members of the RBMG Special
Committee concerning that firm's qualifications to serve as financial advisor to
the RBMG Special Committee. On February 6 and February 7, 1997, the RBMG Special
Committee met to review the proposed engagement letter with Prudential
Securities.
In February 1997, RBMG entered into a confidentiality agreement with WSI
and RBC regarding confidential information of RBMG, WSI and RBC, and the parties
began exchanging confidential information regarding RBMG, WSI and RBC.
On February 9, 1997, the RBMG Special Committee and representatives of RBMG
met with representatives of WSI and RBC and their respective advisors to review
initial drafts of the principal agreements relating to the proposed WSI Merger
and the proposed RBC Merger. Negotiations on the terms of the principal
agreements
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continued by telephone between the RBMG Special Committee, on the one hand, and
each of WSI and RBC, on the other, over the next several weeks.
On February 13, 1997, the RBMG Special Committee met with its counsel and
representatives of Prudential Securities and Price Waterhouse LLP. The RBMG
Special Committee approved the engagement of Prudential Securities to serve as
its financial advisor and assist in evaluating each of the proposed RBC Merger
and the proposed WSI Merger on their respective merits. Prudential Securities
made a presentation to the RBMG Special Committee regarding the non-conforming
residential mortgage industry and described the nature of its financial analysis
of the proposed transaction with WSI. Prudential Securities also confirmed that
it would discuss with the RBMG Special Committee the other strategic
alternatives available to RBMG.
On February 20, 1997, the RBMG Special Committee met with its counsel and
representatives of Prudential Securities to discuss the status of the
negotiations with WSI on the proposed WSI Merger Agreement and with RBC on the
proposed RBC Merger Agreement.
On February 25, 1997, the RBMG Special Committee met by telephone with its
counsel and representatives of Prudential Securities. Prudential Securities made
a preliminary report to the RBMG Special Committee as to the status of the
proposed WSI Merger and the proposed RBC Merger. On February 26, 1997, the RBMG
Special Committee met with its counsel and representatives of Prudential
Securities, RBMG and RBC. At that meeting, Prudential Securities presented its
preliminary reports to representatives of RBMG and RBC and responded to
questions.
On March 3, 1997, the RBMG Special Committee met by telephone with its
counsel, representatives of Prudential Securities, Price Waterhouse LLP, RBMG,
RBC and counsel for RBC. Price Waterhouse LLP and Prudential Securities
discussed the structural issues relating to the proposed WSI Merger and the RBC
Merger.
On March 6, 1997, the RBMG Special Committee met with its counsel,
representatives of Prudential Securities, Price Waterhouse LLP and RBMG. The
advisors to the RBMG Special Committee reviewed the proposed RBC Merger and
proposed WSI Merger and the RBMG Special Committee reviewed the status of the
separate negotiations with RBC and WSI.
During the week of March 10, 1997, representatives of the RBMG Special
Committee met with representatives of WSI to discuss the proposed terms of the
WSI Merger. The parties discussed proposed term sheets relating to the structure
of the proposed WSI Merger and the proposed RBC Merger.
On March 17, 1997, the RBMG Special Committee met with its counsel and
reviewed the proposed term sheets and timetables for the proposed WSI Merger and
the proposed RBC Merger.
On April 1, 1997, the RBMG Special Committee met with its counsel and
representatives of Prudential Securities and Price Waterhouse LLP. The RBMG
Special Committee reviewed the status of negotiations with WSI and its advisors
and discussed with Price Waterhouse LLP the issues relating to the accounting
treatment of the proposed WSI Merger. The RBMG Special Committee also reviewed
the status of negotiations with RBC and its advisors and discussed with Price
Waterhouse LLP the issues related to the accounting treatment of the proposed
RBC Merger.
On April 4, 1997, the WSI Board, consisting solely of Robert C. Walsh,
convened to consider the WSI Merger Agreement. After deliberating with respect
to the WSI Merger and the other terms and conditions of the WSI Merger
Agreement, the WSI Board approved and adopted the WSI Merger, subject to final
negotiation of the WSI Merger Agreement.
On April 17, 1997, the RBMG Special Committee met with its counsel to
discuss the status of the negotiations on the principal agreements relating to
the proposed WSI Merger and the proposed RBC Merger and the open issues relating
to RBMG's due diligence examination of WSI and RBC.
On Friday, April 18, 1997, the RBMG Special Committee and management of
RBMG and WSI met to discuss the final terms of the proposed WSI Merger. During
the day on April 18, 1997, negotiations on the
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principal agreements relating to the WSI Merger, including the WSI Merger
Agreement, were concluded. The RBMG Special Committee and RBMG Board met on the
evening of April 18, 1997. Prudential Securities reviewed with the RBMG Special
Committee and the RBMG Board the financial analyses performed by Prudential
Securities in connection with its fairness opinion. The RBMG Special Committee
and the RBMG Board engaged Prudential Securities in a thorough discussion of the
final terms of the proposed WSI Merger. Prudential Securities then delivered its
opinion to the RBMG Special Committee and the RBMG Board to the effect that, as
of such date and based upon and subject to certain matters stated in such
opinion, the WSI Exchange Ratios were fair, from a financial point of view, to
the RBMG Stockholders. The RBMG Special Committee then met separately from the
full RBMG Board. At that meeting, the RBMG Special Committee unanimously
approved the WSI Merger Agreement. Immediately after the RBMG Special Committee
meeting adjourned, the full RBMG Board met and reviewed the terms of the
proposed WSI Merger with its advisors, and the recommendation of the RBMG
Special Committee. After thorough discussion of the terms of the proposed WSI
Merger and such recommendation, the full RBMG Board unanimously approved the WSI
Merger Agreement and authorized the execution and delivery of the WSI Merger
Agreement and the submission of the WSI Merger Agreement and the WSI Merger to
the RBMG Stockholders for approval and adoption.
After the RBMG Board meeting ended in the evening of April 18, 1997, RBMG,
WSI, Carolina Merger Sub and Robert C. Walsh executed the WSI Merger Agreement;
RBMG, WSI, Robert C. Walsh, Greenwich and the WSI Stockholders executed the
Indemnification Agreement; and the Walsh Stockholders (as hereinafter defined)
executed the Proxy Agreement. On Monday, April 21, 1997, the parties issued a
joint press release announcing the WSI Merger and the RBC Merger.
TERMS OF THE WSI MERGER AGREEMENT
General. The WSI Merger Agreement provides that, following approval and
adoption of the WSI Merger Agreement by the stockholders of WSI and RBMG and the
satisfaction or waiver of the other conditions to the WSI Merger, Carolina
Merger Sub will be merged with and into WSI at the WSI Effective Time in
accordance with the DGCL. WSI will be the surviving corporation in the WSI
Merger. As a result of the WSI Merger, the separate corporate existence of
Carolina Merger Sub will cease, and WSI will become a wholly owned subsidiary of
RBMG.
Conversion of Shares. Each share of WSI Class A Common Stock and each
share of WSI Class B Common Stock issued and outstanding immediately before the
WSI Effective Time (other than treasury shares, shares of WSI Common Stock held
by WSI Stockholders who perfect their appraisal rights under Delaware law and
shares of WSI Common Stock owned by RBMG or any wholly owned subsidiary of RBMG)
and all rights in respect thereof shall, at the WSI Effective Time, be converted
into and become exchangeable for (i) 175,164.30 shares (the "WSI Exchange
Ratio") of RBMG Common Stock and (ii) the right to receive on a deferred basis
and pursuant to the terms of the Escrow Agreement 19,462.70 additional shares
(the "WSI Escrow Stock Ratio") of RBMG Common Stock, with cash being paid in
lieu of fractional shares. If the RBC Merger is approved and occurs prior to the
WSI Effective Time, then the WSI Exchange Ratio will be 192,460.50 and the WSI
Escrow Stock Ratio will be 21,384.50. In the event that prior to the WSI
Effective Time the outstanding shares of RBMG Common Stock, WSI Class A Common
Stock or WSI Class B Common Stock shall be changed into a different number of
shares by reason of any reclassification, recapitalization, split-up,
combination or exchange of shares, or any dividend payable in stock or other
securities shall be declared thereon with a record date within such period, the
WSI Exchange Ratios will be adjusted to provide the holders of RBMG Common
Stock, WSI Class A Common Stock and WSI Class B Common Stock the same economic
effect as contemplated by the WSI Merger Agreement prior to such event. Cash
will be paid in lieu of fractional shares of RBMG Common Stock in an amount
equal to the fractional share interest multiplied by the arithmetic average of
the closing prices for a share of RBMG Common Stock on the Nasdaq National
Market for each of the ten trading days immediately prior to the WSI Effective
Time.
Each outstanding share of WSI Class A Common Stock or WSI Class B Common
Stock as to which a written notice of election to demand the appraisal of such
shares is filed in accordance with Section 262 of the DGCL, at or prior to the
WSI Special Meeting and not withdrawn at or prior to the WSI Special Meeting and
which is not voted in favor of the WSI Merger will not be converted into or
represent a right to receive RBMG
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Common Stock under the WSI Merger Agreement unless and until the holder shall
have failed to perfect, or shall have effectively withdrawn his or her right to
appraisal, at which time his or her shares shall be converted into RBMG Common
Stock like any other shares of outstanding WSI Class A Common Stock or WSI Class
B Common Stock.
Issuance of the RBMG Warrant. Greenwich holds the WSI Warrant, which
represents the right to purchase 24.99 shares of WSI Class B Common Stock. In
connection with the WSI Merger, if the WSI Warrant or any portion thereof
remains outstanding immediately prior to the WSI Effective Time, the WSI Warrant
will be cancelled and RBMG will issue to Greenwich the RBMG Warrant,
representing the right to purchase such number of shares of RBMG Class B Common
Stock equal to the number of shares of WSI Class B Common Stock covered by the
WSI Warrant as of the WSI Effective Time multiplied by the sum of the WSI
Exchange Ratios. See "Certain Agreements in Connection with the WSI
Merger -- The RBMG Warrant." To the extent the WSI Warrant is exercised prior to
the WSI Effective Time, shares of WSI Class B Common Stock issued to Greenwich
will be converted into shares of RBMG Common Stock pursuant to the WSI Exchange
Ratios. On April 18, 1997, Greenwich delivered to WSI notice of its election to
exercise, immediately prior to the WSI Effective Time, its right under the WSI
Warrant to purchase that number of shares of WSI Class B Common Stock which
would be convertible into 4.9% of the issued and outstanding shares of RBMG
Common Stock in accordance with the WSI Merger Agreement.
Board of Directors. The WSI Merger Agreement provides that, at the WSI
Effective Time, the total number of persons serving on the RBMG Board will be
eight and will consist of Edward J. Sebastian, James Walsh, Robert C. Walsh,
John J. Oberdorf, David W. Johnson, Jr., William Biggs, and two additional
persons to be nominated by Edward J. Sebastian and David W. Johnson, Jr. and
approved by the RBMG Board, including approval of a majority of John C. Baker,
Stuart M. Cable, Boyd M. Guttery and John O. Wolcott. See "Directors and
Executive Officers." The WSI Merger Agreement provides that the directors of
Carolina Merger Sub immediately prior to the WSI Effective Time will become the
directors of WSI as of the WSI Effective Time. The directors of Carolina Merger
Sub are Edward J. Sebastian and David W. Johnson, Jr. It is anticipated that
Robert C. Walsh and James Walsh will be named additional directors of WSI after
the WSI Effective Time.
Executive Officers. The WSI Merger Agreement provides that at the WSI
Effective Time, Edward J. Sebastian shall hold the position of Chairman and
Chief Executive Officer of RBMG, Robert C. Walsh shall hold the position of
President of RBMG and David W. Johnson, Jr. shall hold the position of Vice
Chairman of RBMG and Managing Director of RBMG's prime mortgage lending
operations. The WSI Merger Agreement provides that the officers of WSI
immediately prior to the WSI Effective Time will continue to serve in their
respective offices after the WSI Effective Time.
Indemnification Obligations. The WSI Merger Agreement provides that the
provisions of the WSI Certificate and the RBMG Certificate relating to
indemnification of officers and directors shall not be amended, repealed or
otherwise modified for a period of six years from the WSI Effective Time in any
manner that would affect adversely the rights thereunder of individuals who are
at, or were at any time prior to, the WSI Effective Time were directors,
officers, fiduciaries or agents of WSI or RBMG. RBMG also agreed in the WSI
Merger Agreement to indemnify each present and former director and officer of
WSI and RBMG, determined as of the WSI Effective Time (i) from and after the WSI
Effective Time, against any liabilities arising out of or pertaining to matters
existing or occurring at or prior to the WSI Effective Time to the fullest
extent that WSI and RBMG would have been permitted under Delaware law and their
respective charter documents to indemnify such parties and (ii) for a period of
six years after the date of the WSI Merger Agreement, against any liabilities
arising out of or pertaining to the transactions contemplated by the WSI Merger
Agreement, to the fullest extent permitted under applicable law.
No Solicitation. The WSI Merger Agreement provides that neither RBMG nor
WSI will, directly or indirectly solicit, initiate or knowingly encourage
(including by way of furnishing non-public information) or facilitate any
inquiries or the making of any proposal or offer that constitutes or may
reasonably be expected to lead to a Competing Transaction or enter into or
maintain or continue discussions or negotiations in furtherance of any Competing
Transaction, other than as may be required (in the opinion of legal counsel) by
the fiduciary duties of the RBMG Board. A "Competing Transaction" involving
either RBMG or WSI means any merger, consolidation, share exchange, business
combination or similar transaction with such party other than the WSI
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Merger or the RBC Merger, sale of 15% or more of the assets of such party or
tender offer for 15% or more of the outstanding voting securities of such party.
Conditions to the WSI Merger. The obligations of both RBMG and WSI to
consummate the WSI Merger are subject to the satisfaction or, if permitted by
applicable law, the waiver of the following conditions: (i) the Registration
Statement shall have been declared effective by the Commission and no stop order
suspending the effectiveness of the Registration Statement shall have been
issued by the Commission and no proceeding for that purpose shall have been
initiated by the Commission and not concluded or withdrawn; (ii) each of the WSI
Merger Agreement and the WSI Merger and the WSI Amendment shall have been duly
approved by the requisite vote of the RBMG Stockholders in accordance with the
DGCL and the rules and regulations of the Nasdaq National Market; (iii) each of
the WSI Merger Agreement and the WSI Merger shall have been duly approved by the
requisite vote of the WSI Stockholders in accordance with the DGCL; (iv) the
absence of any order, writ, injunction or decree issued by a court of competent
jurisdiction or governmental entity which would make the WSI Merger illegal or
would otherwise prohibit its consummation; (v) the expiration or termination of
any waiting period (and any extension thereof) applicable to the consummation of
the WSI Merger under the HSR Act or any other applicable competition, merger
control or similar law; (vi) the receipt of all consents, approvals and
authorizations legally required to be obtained to consummate the WSI Merger;
(vii) receipt of all permits or approvals required by state securities law or
blue sky laws to carry out the WSI Merger; (viii) the shares of RBMG Common
Stock into which the WSI Common Stock will be converted pursuant to the WSI
Merger Agreement and the shares of RBMG Common Stock issuable upon the exercise
of the RBMG Warrant shall have been authorized for listing on the Nasdaq
National Market, subject to official notice of issuance; (ix) RBMG or WSI shall
have obtained one or more commitments reasonably satisfactory to the Chief
Executive Officer of RBMG and the Chief Executive Officer of WSI which provide a
warehouse facility for the sub-prime mortgage business of at least $300 million
from and after the WSI Effective Time; and (x) both RBMG and WSI shall have been
advised in writing, as of the WSI Effective Time, by Price Waterhouse LLP, that,
in accordance with U.S. GAAP, based upon discussions with officials responsible
for financial and accounting matters and information furnished to Price
Waterhouse LLP, Price Waterhouse LLP concurs with management's conclusion that
no conditions relating to RBMG or WSI exist that would preclude RBMG's
accounting for the WSI Merger as a "pooling of interests," and RBMG and WSI
shall have been advised in writing, as of the WSI Effective Time, by KPMG Peat
Marwick LLP that, based upon inquiries and their examination of the financial
statements of WSI, they are not aware of any conditions relating to WSI that
would preclude the use of "pooling of interests" accounting in connection with
the WSI Merger.
In addition to the foregoing, the obligation of WSI to consummate the WSI
Merger, or to permit the consummation of the WSI Merger, is subject to the
satisfaction or, if permitted by applicable law, the waiver of the following
further conditions: (i) each of the representations and warranties of RBMG
contained in the WSI Merger Agreement that is qualified by materiality shall be
true and correct on and as of the WSI Effective Time as if made at and as of the
WSI Effective Time (other than representations and warranties that address
matters only as of a certain date, which shall be true and correct as of such
certain date) and each of the representations and warranties that is not so
qualified shall be true and correct in all material respects on and as of the
WSI Effective Time as if made at and as of the WSI Effective Time (other than
representations and warranties that address matters only as of a certain date,
which shall be true and correct in all material respects as of such certain
date), in each case except as contemplated or permitted by the WSI Merger
Agreement, and WSI shall have received a certificate of the Chairman or
President and the Chief Financial Officer of RBMG to such effect; (ii) RBMG
shall have performed or complied in all material respects with all material
agreements and covenants required by the WSI Merger Agreement to be performed or
complied with by it on or prior to the WSI Effective Time, and WSI shall have
received a certificate of the Chairman or President and the Chief Financial
Officer of RBMG to that effect; (iii) St. John & Wayne, L.L.C. or King &
Spalding shall have issued its opinion, such opinion dated on or about the WSI
Effective Time and on or about the date that is two business days prior to the
date the Joint Proxy Statement/Prospectus is first mailed to the RBMG
Stockholders, addressed to WSI, and reasonably satisfactory to it, to the effect
that, based upon customary representations of WSI and RBMG and customary
assumptions, the WSI Merger will be treated for federal income tax purposes as a
reorganization qualifying under the provisions of Section 368(a) of the Code and
that the WSI Stockholders will recognize no gain or loss upon the receipt of
shares of RBMG Common Stock in exchange for shares of WSI Class A
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Common Stock or WSI Class B Common Stock in the WSI Merger, which opinion shall
not have been withdrawn or modified in any material respect; (iv) RBMG shall
have executed the Walsh Employment Agreement (as hereinafter defined); (v) RBMG
shall have executed the Stockholders Agreement (as hereinafter defined); (vi)
RBMG shall have executed the Registration Rights Agreement (as hereinafter
defined); (vii) RBMG shall have executed the RBMG Warrant (if the WSI Warrant is
then outstanding); (viii) the Escrow Agent (as hereinafter defined), RBMG and
the Independent Committee (as hereinafter defined) shall have executed the
Escrow Agreement; and (ix) RBMG shall have received the written resignations of
such members of the RBMG Board so as to permit the reconstitution of the RBMG
Board in accordance with the WSI Merger Agreement.
In addition, the obligation of RBMG to consummate the WSI Merger is subject
to the satisfaction or, if permitted by applicable law, the waiver of the
following further conditions: (i) each of the representations and warranties of
WSI and the Principal Stockholder contained in the WSI Merger Agreement that is
qualified by materiality shall be true and correct on and as of the WSI
Effective Time as if made at and as of the WSI Effective Time (other than
representations and warranties that address matters only as of a certain date,
which shall be true and correct as of such certain date) and each of the
representations and warranties that is not so qualified shall be true and
correct in all material respects on and as of the WSI Effective Time as if made
at and as of the WSI Effective Time (other than representations and warranties
that address matters only as of a certain date, which shall be true and correct
in all material respects as of such certain date), in each case except as
contemplated or permitted by the WSI Merger Agreement, and RBMG shall have
received a certificate of the Principal Stockholder and the Chairman or
President and the Chief Financial Officer of WSI to such effect; (ii) WSI and
the Principal Stockholder shall have performed or complied in all material
respects with all material agreements and covenants required to be performed or
complied with by them on or prior to the WSI Effective Time, and RBMG shall have
received a certificate of the Principal Stockholder and the Chairman or
President and the Chief Financial Officer of WSI to that effect; (iii) the WSI
Stockholders (who are parties thereto) shall have executed the Stockholders
Agreement; (iv) the WSI Stockholders (including Greenwich) shall have executed
the Registration Rights Agreement; (v) the Escrow Agent (as hereinafter
defined), Greenwich and the Stockholder Representative shall have executed the
Escrow Agreement; (vi) each of Robert C. Walsh and the Key Employees (as
hereinafter defined) shall have executed the Key Employee Agreements (as
hereinafter defined) and the Noncompetition Agreements (as hereinafter defined);
(vii) each WSI Employee (as hereinafter defined) shall have executed the WSI
Employment Agreements (as hereinafter defined); and (viii) Greenwich shall have
surrendered the WSI Warrant (if then outstanding) in exchange for the RBMG
Warrant and terminated certain related agreements.
Amendment. The WSI Merger Agreement may be amended at any time prior to
the WSI Effective Time by written agreement of the parties thereto, except that,
without securing any Stockholder approval required by Delaware law, no amendment
may be made that would (i) reduce the amount or change the type of consideration
to be received by the WSI Stockholders, (ii) materially and adversely affect WSI
or RBMG or the WSI Stockholders or the RBMG Stockholders or (iii) change any
term of the WSI Certificate or the RBMG Certificate, except as contemplated by
the WSI Merger Agreement.
Termination. The WSI Merger Agreement may be terminated and the WSI Merger
abandoned at any time prior to the WSI Effective Time (i) by mutual written
consent of the WSI Board and the RBMG Board; (ii) by WSI or RBMG if the WSI
Effective Time shall not have occurred on or before November 1, 1997 (or, in
certain circumstances, December 1, 1997); (iii) by WSI or RBMG, if any
governmental order, writ, injunction or decree preventing the consummation of
the WSI Merger shall have been entered by any court of competent jurisdiction
and shall have become final and nonappealable; (iv) by WSI if (a) the RBMG Board
withdraws, modifies or changes its recommendation of the WSI Merger Agreement
and the WSI Merger in a manner adverse to WSI or the WSI Stockholders or shall
have resolved to do so, (b) the RBMG Board shall have recommended to the RBMG
Stockholders a Competing Transaction or shall have resolved to do so, or (c) a
tender offer or exchange offer for 15 percent or more of the outstanding shares
of capital stock of RBMG is commenced and the RBMG Board fails to recommend
against acceptance of such tender offer or exchange offer by its stockholders
(including by taking no position with respect to the acceptance of such tender
offer or exchange offer by its stockholders); (v) by WSI or RBMG, if the WSI
Merger Agreement and the WSI Merger shall fail to receive the requisite votes
for approval at the RBMG Special Meeting or the WSI Special Meeting or any
adjournment or postponement
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thereof; (vi) by RBMG, if the RBMG Board shall withdraw, modify or change its
recommendation of the approval of the WSI Merger Agreement and the WSI Merger,
and the RBMG Board determines, following consultation with outside legal counsel
(who may be RBMG's regularly engaged outside legal counsel), that failure to
take such action would be inconsistent with its duties to the RBMG Stockholders
under applicable law and prior to such determination any person (other than WSI)
shall have made a public announcement or otherwise communicated with RBMG with
respect to a Competing Transaction that, as determined by the RBMG Board after
consultation with its outside legal counsel (who may be its regularly engaged
outside legal counsel) and financial advisors, contains terms more favorable to
the stockholders of RBMG than those provided for in the WSI Merger; provided
that such termination will only be effective after RBMG has provided certain
notice to WSI and has paid the Termination Payment (as defined below); or (vii)
by WSI or RBMG, if the closing price per share of RBMG Common Stock, as reported
by the Nasdaq National Market, for any 10 consecutive trading days during the
period from April 18, 1997 until the last trading day prior to the RBMG Special
Meeting is less than $12.00.
Fees and Expenses. All expenses incurred in connection with the WSI
Merger, including all fees and expenses of counsel, independent accountants,
investment bankers, experts and consultants, will be paid by the party incurring
such expenses, whether or not the WSI Merger is consummated, except that all
expenses relating to filing fees pursuant to the HSR Act, printing, filing and
mailing the Registration Statement and the Joint Proxy Statement/Prospectus and
all Commission and other regulatory filing fees incurred in connection with the
Registration Statement and the Joint Proxy Statement/Prospectus will be borne
equally by WSI and RBMG. In addition, RBMG has agreed to pay to WSI $10,000,000
(the "Termination Payment") in the event that (i) RBMG terminates the WSI Merger
Agreement pursuant to clause (vi) of the preceding paragraph, (ii) WSI
terminates the WSI Merger Agreement pursuant to clause (iv) of the preceding
paragraph and at the time of such termination there exists a Competing
Transaction with respect to RBMG or (iii) (a) WSI terminates the WSI Merger
Agreement pursuant to clause (v) of the preceding paragraph, (b) prior to the
RBMG Special Meeting, RBMG shall have furnished information to or entered into
discussions or negotiations with respect to a Competing Transaction, and RBMG
shall not have reaffirmed its recommendation to its stockholders with respect to
the transactions contemplated by the WSI Merger Agreement and (c) within 12
months thereafter, RBMG shall enter into a definitive agreement with respect to
any Competing Transaction or any Competing Transaction is consummated.
EFFECTIVE TIME OF THE WSI MERGER AND EXCHANGE OF SHARES
Effective Time of the WSI Merger. The WSI Merger will become effective by
filing a certificate of merger with the Secretary of State of the State of
Delaware in such form as required by, and executed in accordance with the
relevant provisions of the DGCL. The WSI Merger Agreement provides that the
parties thereto will cause such certificate of merger to be filed after each of
the conditions to consummation of the WSI Merger has been satisfied or, if
permissible, waived. The WSI Merger cannot become effective until the RBMG
Stockholders have approved and adopted the WSI Merger Agreement, the WSI Merger,
the WSI Stock Issuance and the WSI Amendment, and the WSI Stockholders have
approved and adopted the WSI Merger Agreement and the WSI Merger, and all
required regulatory approvals and actions have been obtained and taken. Thus,
there can be no assurance as to whether or when the WSI Merger will become
effective. In addition, if the RBC Merger is consummated prior to the WSI
Effective Time, it is contemplated that the WSI Merger would not occur earlier
than 35 days after the RBC Effective Time.
Exchange of WSI Stock Certificates. Promptly following the WSI Effective
Time, instructions and a letter of transmittal will be furnished to all WSI
Stockholders for use in exchanging their stock certificates for certificates
evidencing the shares of RBMG Common Stock they will be entitled to receive as a
result of the WSI Merger. WSI STOCKHOLDERS SHOULD NOT SUBMIT THEIR STOCK
CERTIFICATES FOR EXCHANGE UNTIL INSTRUCTIONS AND THE LETTER OF TRANSMITTAL ARE
RECEIVED.
RECOMMENDATION OF WSI BOARD
THE WSI BOARD HAS DETERMINED THAT THE WSI MERGER IS IN THE BEST INTERESTS
OF WSI AND ITS STOCKHOLDERS, HAS APPROVED AND ADOPTED THE WSI MERGER AGREEMENT,
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AND RECOMMENDS THAT THE WSI STOCKHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND
ADOPT THE WSI MERGER AGREEMENT AND THE WSI MERGER.
OPINION OF RBMG'S FINANCIAL ADVISOR
On April 18, 1997, Prudential Securities delivered a written opinion (the
"WSI Opinion") to the RBMG Board that, as of such date, the WSI Exchange Ratios,
taken together, were fair from a financial point of view to the RBMG
Stockholders. Prudential Securities made a presentation of the financial
analysis underlying the WSI Opinion at a special meeting of the RBMG Board and
the RBMG Special Committee held on April 18, 1997 and provided the members of
the RBMG Board and the RBMG Special Committee with a detailed report setting
forth the financial analysis underlying the WSI Opinion. This analysis, as
presented to the RBMG Board and the RBMG Special Committee, is summarized below.
All of the members of the RBMG Board and the RBMG Special Committee were present
at the meeting, and each RBMG Board member and each RBMG Special Committee
member had the opportunity to ask questions regarding the report. Prudential
Securities discussed with the RBMG Board and the RBMG Special Committee the
information in the report, and the financial data and other factors considered
by Prudential Securities in conducting its analysis, all of which are summarized
below.
In requesting the WSI Opinion, neither the RBMG Special Committee nor the
RBMG Board gave any special instructions to Prudential Securities or imposed any
limitations upon the scope of the investigation that Prudential Securities
deemed necessary to enable it to deliver the WSI Opinion. A copy of the WSI
Opinion, which sets forth the assumptions made, matters considered and limits on
the review undertaken, is attached to this Joint Proxy Statement/Prospectus as
Annex H and is incorporated herein by reference. The summary of the WSI Opinion
set forth below is qualified in its entirety by reference to the full text of
the WSI Opinion.
THE WSI OPINION IS DIRECTED ONLY TO THE FAIRNESS OF THE WSI EXCHANGE RATIOS
TO THE RBMG STOCKHOLDERS FROM A FINANCIAL POINT OF VIEW. THE WSI OPINION WAS
DELIVERED FOR THE INFORMATION OF THE RBMG BOARD AND THE RBMG SPECIAL COMMITTEE
AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY RBMG STOCKHOLDER AS TO HOW SUCH
STOCKHOLDER SHOULD VOTE AT THE RBMG SPECIAL MEETING. RBMG STOCKHOLDERS ARE URGED
TO READ THE WSI OPINION IN ITS ENTIRETY.
In conducting its analysis and arriving at the WSI Opinion, Prudential
Securities reviewed such information and considered such financial data and
other factors as Prudential Securities deemed relevant under the circumstances
including the following: (i) the execution copy of the WSI Merger Agreement;
(ii) certain publicly available historical, financial and operating data
concerning RBMG including the Annual Report on Form 10-K of RBMG for the years
ended December 31, 1996, 1995 and 1994, RBMG's Proxy Statement for the Annual
Meeting of Stockholders held on April 25, 1996, RBMG's Prospectus, dated March
11, 1996, relating to the sale of 3,512,961 shares of RBMG Common Stock and
RBMG's Prospectus, dated May 25, 1993, relating to the initial public offering
of RBMG Common Stock; (iii) certain historical financial and operating data
concerning WSI and its predecessors, GF Mortgage Corp. and GF Property Corp.,
including WSI's audited financial statements for the nine months ended December
31, 1996 and the audited combined financial statements of GF Mortgage Corp. and
GF Property Corp. for the three months ended March 31, 1996; (iv) certain
information of RBMG, including projected financial data prepared by the
management of RBMG; (v) certain information of WSI, including projected
financial data prepared by the management of WSI; (vi) certain information of
WSI, including written reports regarding WSI's non-conforming mortgage loan
production for the period from January 1, 1997 to March 31, 1997, prepared by
WSI; (vii) certain information of RBMG, including estimates of the cost savings
and the incremental earnings impact of the WSI Merger on the future financial
results of RBMG, prepared by the management of RBMG; (viii) the pro forma
financial impact of the WSI Merger on RBMG; (ix) publicly available financial,
operating and stock market data concerning certain companies engaged in
businesses Prudential Securities deemed comparable to WSI or relevant to
Prudential Securities' inquiry; (x) the financial terms of certain recent
transactions Prudential Securities deemed relevant; and (xi) other financial
studies, analyses and investigations Prudential Securities deemed appropriate.
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Representatives of Prudential Securities met with the management of RBMG
and WSI to discuss (i) the prospects for their respective businesses, (ii) their
estimates for such businesses' future financial performance, (iii) the financial
impact of the WSI Merger on the respective companies and (iv) such other matters
that Prudential Securities deemed relevant.
In connection with its review and analysis and in arriving at its opinion,
Prudential Securities assumed and relied upon the accuracy and completeness of
the financial data and other information provided to it by RBMG and WSI and did
not undertake any independent verification of such information, including the
information regarding WSI's non-conforming mortgage loan production from January
1, 1997 to March 31, 1997, or any valuation or appraisal of any assets or
liabilities of RBMG or WSI. With respect to certain financial projections
furnished by RBMG and WSI, Prudential Securities assumed that the projections
reflected the best currently available estimates and judgments of each
respective management as to the expected future financial performance of RBMG
and WSI. Prudential Securities did not undertake any independent analysis to
verify the reasonableness of the assumptions underlying these projections. With
respect to the estimates of cost savings and incremental earnings impact of the
WSI Merger on RBMG, provided to Prudential Securities by the management of RBMG,
Prudential Securities assumed that the information represented management's best
currently available estimates as to the future financial impact of the WSI
Merger on RBMG and that the estimates were based on reasonable assumptions.
The WSI Opinion was necessarily based on information that was available to
Prudential Securities and on economic, financial, market and other conditions as
they existed and could be evaluated on the date of the WSI Opinion. In addition,
for the purposes of its analysis, Prudential Securities assumed that the WSI
Merger would be treated as a pooling of interests for accounting purposes.
Further, Prudential Securities assumed that a change of control, as such term
has been construed by the Delaware courts and expressed in their published
opinions, would not occur as a result of the WSI Merger, based upon its
discussions with the RBMG Special Committee and the RBMG Special Committee's
legal counsel and its review of the WSI Merger Agreement and related facts.
In arriving at the WSI Opinion, Prudential Securities performed a variety
of financial analyses, including those summarized herein. The summary set forth
below of the analyses presented to the RBMG Board at its April 18, 1997 special
meeting does not purport to be a complete description of the analyses performed.
The preparation of a fairness opinion is a complex process that involves various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of these methods to the particular circumstance and
therefore, such an opinion is not necessarily susceptible to partial analysis or
summary description. Prudential Securities believes that its analysis must be
considered as a whole and that selecting portions thereof or portions of the
factors considered by it, without considering all analyses and factors, could
create an incomplete view of the evaluation process underlying the WSI Opinion.
Prudential Securities made numerous assumptions with respect to industry
performance, general business, economic, market and financial conditions and
other matters, many of which are beyond the control of RBMG and WSI. Any
estimates contained in Prudential Securities' analyses are not necessarily
indicative of actual values or future results, which may be significantly more
or less favorable than suggested by such analyses. Additionally, estimates of
the values of businesses or securities do not purport to be appraisals or
necessarily reflect the prices at which such businesses or securities may be
sold. Accordingly, such analyses and estimates are inherently subject to
substantial uncertainty. Subject to the foregoing, the following is a summary of
the material financial analyses performed by Prudential Securities in arriving
at the WSI Opinion.
Comparable Company Analysis. Prudential Securities selected
publicly-traded non-conforming mortgage companies whose lines of business, size
and operations made them, in Prudential Securities' judgment, as nearly
comparable to WSI as practicable. An analysis of comparable companies is not
purely mathematical; rather it involves complex considerations and judgments
concerning similarities and differences in financial, operational and other
characteristics of potentially comparable companies. In this regard, Prudential
Securities noted that although the companies selected were considered similar to
WSI, none of the companies had the same recent operating history, management
makeup, size, type or combination of businesses as WSI. This analysis was
believed by Prudential Securities to be a reasonable method of valuation in
light of the absence of market data regarding similar private companies.
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For the purposes of this analysis, Prudential Securities considered the
following companies as comparable to WSI and included them in them in the
analysis: Aames Financial Corporation; CityScape Financial Corporation;
ContiFinancial Corporation; Delta Financial Corporation; FirstPlus Financial
Group, Inc. (formerly "RAC Financial Group, Inc."); IMC Mortgage Company; The
Money Store Inc.; First Alliance Corporation; Southern Pacific Funding
Corporation; and United Companies Financial Corporation (collectively, the "WSI
Comparables"). Prudential Securities analyzed publicly available historical and
projected financial results for each of the WSI Comparables, including multiples
of current stock price to 1996 EPS, and projected 1997 and 1998 EPS and
multiples of EMV to total mortgage loan originations ("Originations") during
1996. All of the trading multiples of the WSI Comparables were based on closing
stock prices on April 16, 1997, and all of the 1997 and 1998 EPS estimates were
published by First Call. The estimates published by First Call were not prepared
in connection with the WSI Merger or at the request of Prudential Securities.
Prudential Securities performed a similar analysis for WSI by determining
the relationship between the WSI purchase price ("PP") of $312.7 million (based
on RBMG's share price on April 16, 1997) and WSI's 1996 net income ("NI"), WSI's
projected 1997 and 1998 NI and WSI's 1996 Originations. The WSI multiples were
based on Prudential Securities' pro forma and projected NI estimates assuming
that WSI securitized all of its mortgage loan production in 1996, 1997 and 1998.
Based on these assumptions, the implied 1996 PP to NI multiple for WSI was 20.4x
compared to high, low, mean and median share price to 1996 EPS multiples for the
WSI Comparables of 15.2x, 7.2x, 11.8x and 12.0x. This analysis resulted in an
implied PP to 1997 NI multiple of 7.8x for WSI compared to high, low, mean and
median share price to 1997 EPS ratios of 11.7x, 5.6x, 8.5x and 9.0x for the WSI
Comparables and an implied PP to 1998 NI multiple of 5.7x for WSI compared to
high, low, mean and median share price to 1998 EPS multiples of 9.7x, 4.7x, 6.8x
and 7.0x for the WSI Comparables. The PP to Originations ratio for WSI was 47.4%
compared to high, low, mean and median EMV to Originations ratios of 85.2%,
19.9%, 38.1% and 31.0% for the WSI Comparables.
Pro Forma Earnings Per Share. Prudential Securities also analyzed the pro
forma effect of the WSI Merger on RBMG's 1997 and 1998 EPS. An analysis of
anticipated future results based on projections provided by RBMG's management
and WSI's management for their respective companies indicated that the WSI
Merger is accretive to RBMG's pro forma 1997 and 1998 EPS. Projected financial
and other information concerning RBMG and WSI and the impact of the WSI Merger
upon the holders of RBMG Common Stock are not necessarily indicative of future
results. All projected financial information is subject to numerous
contingencies, many of which are beyond the control of the management of RBMG
and WSI.
The RBMG Special Committee selected Prudential Securities as financial
advisor because Prudential Securities is a nationally recognized investment
banking firm that is regularly engaged in the evaluation of businesses and their
securities in connection with mergers and acquisitions and for other purposes
and has substantial experience in transactions similar to the WSI Merger.
Pursuant to the terms of an engagement letter, dated February 12, 1997 as
amended on April 18, 1997, between RBMG and Prudential Securities, Prudential
Securities received a retainer fee of $125,000 and an additional advisory fee of
$375,000 upon the execution of the WSI Merger Agreement. Prudential Securities
will receive additional compensation for its advisory services of $500,000 upon
consummation of the WSI Merger. In addition, the engagement letter with
Prudential Securities provides that RBMG will reimburse Prudential Securities
for its out-of-pocket and incidental expenses, including all fees and
disbursements of Prudential Securities' legal counsel incurred in connection
with the services provided by Prudential Securities, and will indemnify and hold
Prudential Securities and certain related persons harmless to the full extent
lawful from and against certain liabilities, including liability under
securities laws or otherwise relating to or arising out of the WSI Merger or
Prudential Securities' engagement.
In the past, Prudential Securities has provided other advisory services for
RBMG and received customary compensation for such services. In addition,
Prudential Securities is engaged to provide advisory services in connection with
the RBC Merger and has received and will receive customary compensation for such
services. In the ordinary course of business, Prudential Securities may actively
trade the securities of RBMG for its own account and for the accounts of
customers and, accordingly may at any time hold long or short positions in such
securities.
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RECOMMENDATION OF THE RBMG BOARD
THE RBMG BOARD HAS DETERMINED THAT THE WSI MERGER IS IN THE BEST INTERESTS
OF RBMG AND ITS STOCKHOLDERS, HAS APPROVED AND ADOPTED THE WSI MERGER AGREEMENT,
AND RECOMMENDS THAT THE RBMG STOCKHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND
ADOPT THE WSI MERGER AGREEMENT AND THE WSI MERGER.
REASONS FOR THE WSI MERGER
WSI
On April 4, 1997, the WSI Board, consisting solely of Robert C. Walsh,
convened to consider the WSI Merger Agreement. After deliberating with respect
to the WSI Merger and the other terms and conditions of the WSI Merger
Agreement, the WSI Board approved and adopted the WSI Merger, subject to final
negotiation of the definitive WSI Merger Agreement, as being in the best
interests of WSI and its stockholders. In reaching its conclusion to approve and
adopt the WSI Merger Agreement, the WSI Board considered all factors it deemed
material, including, without limitation, the following:
(i) the financial condition, business and prospects of RBMG,
including, but not limited to, its growth in earnings, its relatively
strong balance sheet and its access to the capital markets;
(ii) the current operating environment in the non-conforming home
equity industry and the importance of financial resources to being able to
capitalize on developing opportunities in this industry;
(iii) the potential to substantially increase non-conforming loan
production by providing WSI, which has traditionally focused on serving the
non-conforming lending needs of conforming brokers and mortgage bankers,
with access to RBMG's extensive network of conforming brokers and mortgage
bankers;
(iv) the ability to strengthen the competitive position of each of WSI
and RBMG by virtue of the combined company's ability to offer a full
spectrum of loan products (both conforming and non-conforming) to its
customers;
(v) the ability to enhance the combined company's results of
operations, financial condition and prospects by diversifying its earnings,
reducing its exposure to certain concentrations or business cycles in their
stand-alone businesses and combining the financial, managerial and other
resources of the two companies;
(vi) the terms of the WSI Merger Agreement, including the ability of
the WSI Stockholders to receive shares of common stock of the combined
company that would be registered under the Securities Act and generally
received on a tax-free basis. (See "Certain Federal Income Tax
Consequences");
(vii) the business and financial alternatives available to WSI,
including (a) remaining a stand-alone entity that would finance its growth
by operating on a cash flow positive or neutral basis or by issuing equity
or debt in the capital markets or (b) effecting a business combination with
another party; and
(viii) the trading value of selected publicly traded non-conforming
lenders and the transaction value of selected mergers and acquisitions
involving non-conforming home equity lenders.
The foregoing discussion of the factors considered by the WSI Board is not
intended to be exhaustive, but is believed to include all material factors
considered by the WSI Board. In reaching its determination to approve the WSI
Merger Agreement, the WSI Board did not assign any relative or specific weights
to the foregoing factors. Throughout the negotiations and its deliberations, the
WSI Board received the advice of counsel and its investment banker.
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RBMG
In determining to recommend that the RBMG Stockholders approve and adopt
the WSI Merger Agreement, the WSI Merger and the WSI Stock Issuance, the RBMG
Board and the RBMG Special Committee considered a number of factors, including,
without limitation, the following:
(i) the observation that (a) RBMG originates conforming mortgage loans
through a network which at March 31, 1997 consisted of 897 correspondents,
2,423 wholesale brokers and six retail offices, substantially all of whom
primarily originate conforming agency-eligible mortgage loans and (b) WSI
originates non-conforming mortgage loans through a network which at March
31, 1997 consisted of approximately 1,600 correspondent lenders, all of
whom also primarily originate conforming agency-eligible mortgage loans.
Management of RBMG advised the RBMG Board and the RBMG Special Committee of
its expectation that a significant market cross-selling opportunity will
exist for WSI to originate non-conforming mortgage loans through RBMG's
origination network and for RBMG to originate conforming mortgage loans
through WSI's origination network;
(ii) the expectation that the WSI Merger will enhance RBMG's ability
to pursue its strategic objective of becoming a top 10 originator in both
the conforming and non-conforming residential mortgage markets;
(iii) the observation that, continuing achievement of RBMG's
aggressive growth-oriented goals would become increasingly difficult over
time insofar as RBMG continued to focus solely within its existing markets.
Accordingly, during 1996, RBMG's strategic planning became increasingly
focused on diversification into markets. Management of RBMG advised the
RBMG Special Committee and the RBMG Board of its expectation that the
non-conforming mortgage operations of WSI will accelerate RBMG's planned
diversification into the non-conforming market, which can support an
aggressive growth-oriented strategy, especially since WSI currently has
branch offices in only nine states, allowing for considerable continuing
geographic expansion;
(iv) the expectation that the WSI Merger will complement existing
product and service offerings of RBMG;
(v) the observation that, (a) historically RBMG has attempted to
mitigate earnings volatility across variable loan production environments
by generating loan production primarily through correspondent and wholesale
broker channels, which involve lower fixed costs and capital investment
requirements and (b) WSI's non-conforming mortgage currently operates 10
branch offices and acquires substantially all of its non-conforming loan
production through correspondents and wholesale brokers. Management of RBMG
advised the RBMG Board and the RBMG Special Committee of its expectation
that WSI's loan production platform will prove to be uniquely compatible
with RBMG's strategic objective of mitigating earnings volatility by
maintaining a low-cost and variable operating cost structure;
(vi) the expectation that the non-conforming mortgage origination
market tends to be countercyclical to the conforming mortgage origination
market, which should tend to mitigate earnings volatility across variable
loan production environments;
(vii) the observation that RBMG has positioned itself as an efficient
provider of secondary market access to smaller producers of loans based on
RBMG management's belief that this segment is underserved and that the
originations market will remain highly-fragmented (because these producers
are the most efficient and provide the consumer with a higher quality of
personal service). Management of RBMG advised the RBMG Board and the RBMG
Special Committee of its expectation that similar dynamics are at work
within the non-conforming mortgage industry and that WSI's loan production
operation will be highly-compatible with RBMG's objective to position
itself as an efficient provider of secondary market access to smaller
producers of loan products;
(viii) the expectation that the WSI Merger would significantly broaden
the depth and experience of the RBMG management team, enabling RBMG to take
more immediate advantage of its market opportunities in the non-conforming
market;
(ix) the expectation that the WSI Merger would result in a larger
market capitalization and higher visibility among market participants;
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(x) the expectation that the WSI Merger would result in the
realization of certain synergies between the businesses of RBMG and WSI,
particularly in the areas of loan servicing, financing costs and
operational and administrative support;
(xi) the terms and conditions of the WSI Merger Agreement, including
the amount and form of consideration to be given to the WSI Stockholders,
within the context of the business, financial results and prospects of WSI
and RBMG and the nature of the parties' representations, warranties,
covenants and agreements; and
(xii) the opinion of Prudential Securities as to the fairness, from a
financial point of view, of the WSI Exchange Ratios to the RBMG
Stockholders.
In view of the number of factors considered by the RBMG Board and the RBMG
Special Committee, neither deemed it practicable to assign relative weights to
the various factors considered.
CERTAIN AGREEMENTS IN CONNECTION WITH THE WSI MERGER
Certain additional agreements have been and will be entered into in
connection with the consummation of the WSI Merger.
The RBMG Warrant. In connection with the WSI Merger, if the WSI Warrant
remains outstanding immediately prior to the WSI Effective Time, RBMG will issue
to Greenwich the RBMG Warrant, representing the right to purchase that number of
shares of RBMG Class B Common Stock which is equal to the number of shares of
WSI Class B Common Stock covered by the WSI Warrant as of the WSI Effective Time
multiplied by the sum of the WSI Exchange Ratios. The RBMG Warrant contains
substantially identical rights as the WSI Warrant. The exercise price of the
RBMG Warrant will be $.01 per share, and the RBMG Warrant will be exercisable in
whole or in part (subject to certain limitations imposed by the Bank Holding
Company Act of 1956, as amended, if applicable) by the holder thereof at any
time through April 17, 2001.
Indemnification Agreement. Concurrently with the execution of the WSI
Merger Agreement, RBMG, WSI, the WSI Stockholders, Greenwich and Robert C. Walsh
(together with the WSI Stockholders and Greenwich, the "WSI Holders") entered
into an Indemnification Agreement (the "Indemnification Agreement"). Pursuant to
the Indemnification Agreement, the WSI Holders agreed to jointly and severally
indemnify, defend and hold harmless RBMG and its subsidiaries and affiliates,
each of their respective officers, directors, employees, agents and
representatives and each of the heirs, executors, successors and assigns of any
of the foregoing (collectively, the "RBMG Indemnified Parties") against certain
losses arising out of or relating to any breach of any representation, warranty,
covenant, agreement or undertaking made by WSI in the WSI Merger Agreement or in
certain ancillary documents delivered pursuant to the WSI Merger Agreement (the
"WSI Representations"). In addition, pursuant to the Indemnification Agreement,
if the value (as determined by receipt of third party bids or, if not available,
an independent appraisal) of certain mortgage loans held by WSI plus all
proceeds (but excluding any payments with respect to interest) received with
respect to such mortgage loans after December 31, 1996 and prior to the closing
date of the WSI Merger Agreement (the "WSI Closing Date") is less than
$31,230,921, the WSI Holders will jointly and severally indemnify the RBMG
Indemnified Parties for the amount of such shortfall ("Shortfall"). Each WSI
Holder will also severally indemnify RBMG for certain losses relating to any
breach of any representation, warranty, covenant, agreement or undertaking made
by such WSI Holder (the "WSI Holder Representations") in the Indemnification
Agreement or any fraud or willful misconduct. All losses for which the RBMG
Indemnified Parties are entitled to indemnification under the Indemnification
Agreement are referred to as "RBMG Losses."
The period during which RBMG Indemnified Parties may make claims for
indemnification against WSI Holders is limited. Generally, an RBMG Indemnified
Party may not make any claim for indemnification for breach of WSI
Representations after the earlier of (a) April 30, 1998 or (b) the date of the
issuance of the audit report of Price Waterhouse LLP rendered with respect to
the consolidated financial statements of RBMG for the year ending December 31,
1997. Claims for indemnification arising from breaches of WSI Holder
Representations or WSI Representations relating to WSI's capitalization or
authority may not be asserted by an RBMG
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Indemnified Party after the first anniversary of the WSI Effective Time. The
amount of any claims arising out of a Shortfall will be determined at the WSI
Effective Time.
The amount of RBMG Losses which may be recovered from WSI Holders is also
subject to certain limits. WSI Holders will only be liable for losses by RBMG
Indemnified Parties for breaches of WSI Representations to the extent such
losses exceed $3,000,000 (other than RBMG Losses relating to the capitalization
of WSI and WSI's authority to enter into the WSI Merger Agreement). In addition,
the WSI Holders' indemnification obligations for RBMG Losses relating to WSI
Representations (other than RBMG Losses relating to the capitalization of WSI
and WSI's authority to enter into the WSI Merger Agreement) or a Shortfall will
be limited to the Escrow Shares (as defined below), and each WSI Holder's
indemnification obligations for such RBMG Losses will be limited to such WSI
Holder's pro rata share of the Escrow Shares. WSI Holders will be liable for
RBMG Losses relating to the capitalization of WSI and WSI's authority to enter
into the WSI Merger Agreement up to an aggregate amount equal to the total value
of the RBMG Common Stock received by the WSI Holders in the WSI Merger, based
upon the closing price per share of such RBMG Common Stock on the WSI Closing
Date. In no case will any WSI Holder's individual, aggregate liability for any
RBMG Losses exceed an amount equal to the value of the RBMG Common Stock
received by such WSI Holder in the WSI Merger, based upon the closing price per
share of such RBMG Common Stock on the WSI Closing Date. None of the foregoing
limitations will limit RBMG's ability to bring a claim for finding willful
misconduct or intentional misrepresentation against any WSI Holder.
The WSI Holders agreed in the Indemnification Agreement that a number of
shares of RBMG Common Stock (the "Escrow Shares") equal to the product obtained
by multiplying (i) the WSI Escrow Stock Ratio by (ii) the total number of issued
and outstanding shares of WSI Class A Common Stock and WSI Class B Common Stock
at the WSI Effective Time will be deposited by RBMG with the Escrow Agent
pursuant to the Escrow Agreement and that the Escrow Shares will secure the
obligations of the WSI Holders to the RBMG Indemnified Parties for RBMG Losses
relating to breaches of WSI Representations and any Shortfall. In addition, each
WSI Holder agreed to observe certain restrictions on the transfer of shares of
WSI Common Stock prior to the WSI Effective Time.
Greenwich agreed in the Indemnification Agreement to surrender any
outstanding WSI Warrant as of the WSI Effective Time to RBMG in exchange for the
RBMG Warrant, and RBMG agreed to exchange the RBMG Warrant for the WSI Warrants.
WSI and Greenwich also agreed to take all action necessary to terminate as of
the WSI Effective Time certain other agreements between WSI and Greenwich.
Greenwich also agreed (i) not to sell, transfer or otherwise dispose of any
shares of RBMG Common Stock received in the WSI Merger during the period ending
on the date on which results covering at least 30 days of combined operations of
WSI and RBMG have been published by RBMG (within the meaning of Section 201.01
of the Commission's Codification of Financial Reporting Policies), in the form
of a quarterly earnings report, an effective registration statement filed with
the Commission, a report to the Commission on Form 10-K, Form 10-Q or Form 8-K
or any other public filing or announcement which includes such combined results
of operations (such period, the "Pooling Period"), (ii) to vote any shares of
WSI Class A Common Stock received prior to the WSI Effective Time for approval
and adoption of the WSI Merger and (iii) to execute and deliver the Escrow
Agreement on the WSI Closing Date.
In the Indemnification Agreement, each WSI Holder irrevocably appointed
Robert C. Walsh as its attorney in fact (the "Representative") to act in the
place of such WSI Holder with respect to the obligations of such WSI Holder in
accordance with the terms of the Indemnification Agreement, and, among other
matters, to execute and deliver on behalf of such WSI Holder the Registration
Rights Agreement, the Escrow Agreement and any other agreement as the
Representative deems necessary or appropriate in connection with the WSI Merger.
The WSI Holders agreed in the Indemnification Agreement to keep in
confidence certain confidential information of RBMG for a period of three years
following the WSI Effective Time, and trade secrets of RBMG for an indefinite
period.
Irrevocable Proxy Agreement. Concurrently with the execution of the WSI
Merger Agreement, RBMG entered into the Proxy Agreement with certain WSI
Stockholders holding in the aggregate approximately 93% of the outstanding WSI
Class A Common Stock, pursuant to which each such WSI Stockholder granted to
RBMG an irrevocable proxy to vote the shares of WSI Class A Common Stock held by
such WSI Stockholder for
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approval and adoption of the WSI Merger Agreement and the WSI Merger at any
meeting of WSI Stockholders or by written action of WSI Stockholders. Each such
WSI Stockholder also agreed in the Proxy Agreement not to take any action
relating to a Competing Transaction and not to transfer any of the shares of WSI
Common Stock held by such WSI Stockholder before the termination of the Proxy
Agreement. The Proxy Agreement terminates on the closing of the WSI Merger or
the termination of the WSI Merger Agreement. RBMG has indicated its intention to
exercise the proxy and vote such shares at the WSI Special Meeting in favor of
the proposal to approve and adopt the WSI Merger Agreement and the WSI Merger.
Greenwich Agreement. Concurrently with the execution of the WSI Merger
Agreement, RBMG entered into an agreement (the "Greenwich Agreement") with
Greenwich pursuant to which Greenwich acknowledged that the consummation of the
WSI Merger and the issuance of the RBMG Warrant pursuant to the WSI Merger
Agreement will satisfy in full the obligations of WSI under the Warrantholder's
Agreement dated as of April 18, 1996, by and among Greenwich, Robert C. Walsh
and WSI (the "Warrantholder's Agreement") and agreed that as of the WSI
Effective Time and upon delivery of the RBMG Warrant to Greenwich, the WSI
Warrant, the WSI Warrant Agreement and the Warrantholder's Agreement will be
cancelled. RBMG and Greenwich also agreed that any WSI Class B Common Stock
outstanding and held by Greenwich as of the WSI Effective Time will be converted
into RBMG Common Stock as set forth in the WSI Merger Agreement.
Escrow Agreement. In connection with the WSI Merger, RBMG, Robert C.
Walsh, as the Representative for the WSI Stockholders, Greenwich and ,
as Escrow Agent (the "Escrow Agent"), will enter into an Escrow Trust Agreement
(the "Escrow Agreement"). All decisions and actions on behalf of RBMG under the
Escrow Agreement will be made by an independent committee of the RBMG Board
selected prior to the WSI Closing (the "Independent Committee"). Simultaneously
with the execution of the Escrow Agreement, RBMG will deliver the Escrow Shares
to the Escrow Agent. The Escrow Shares as well as any shares of RBMG Common
Stock or other securities or cash or other property issued by RBMG with respect
to the Escrow Shares (together with the Escrow Shares, the "Escrow Fund") will
be held by the Escrow Agent in trust pursuant to the Escrow Agreement. So long
as the Escrow Agent continues to hold Escrow Shares under the Escrow Agreement,
the Escrow Agent will vote such Escrow Shares as are entitled to vote at any
meeting of stockholders in the manner as the WSI Holders in proportion to their
respective percentage interests in the Escrow Shares direct, and shall pay out
any dividends (other than stock dividends) on the Escrow Shares to the WSI
Holders as provided in the Escrow Agreement.
Under the Escrow Agreement, the Escrow Shares will secure the obligations
of the WSI Holders under the Indemnification Agreement with respect to the WSI
Representations. In the event that RBMG claims a right to payment with respect
to breaches of WSI Representations under the Indemnification Agreement, RBMG
will send written notice of such claim to the Escrow Agent, Greenwich and the
Representative. As promptly as possible after RBMG has given such notice, RBMG,
Greenwich and the Representative will establish the merits and amount of such
claim in accordance with the terms of the Indemnification Agreement and, upon
final determination of the merits of such claim, will notify the Escrow Agent
and the WSI Holders (either by means of a certified copy of the judgment, a
certified copy of the arbitration decision or a written instrument executed by
RBMG, Greenwich and the Representative) of the terms of such determination (such
notice, a "Claims Notice"). After a Claims Notice has been delivered to the
Escrow Agent and the WSI Holders, the Escrow Agent will, upon the joint
direction of RBMG, Greenwich and the Representative, surrender to RBMG a
certificate representing that number of Escrow Shares equal to the quotient
obtained by dividing (i) the aggregate amount of the RBMG Losses specified in
the Claims Notice by (ii) the closing sales price of RBMG Common Stock on the
Nasdaq National Market on the WSI Closing Date.
The escrow provided for under the Escrow Agreement will terminate on the
earlier of April 30, 1998 or the date of the issuance of the audit report of
Price Waterhouse LLP rendered with respect to the consolidated financial
statements of RBMG for the year ended December 31, 1997, except that if a claim
has been asserted by RBMG with respect to a breach of a WSI Representation under
the Indemnification Agreement and remains unresolved, the escrow will continue
until the resolution of the claim in accordance with the terms of the
Indemnification Agreement. Upon termination of the escrow and after distribution
of all Escrow Shares, if any, required to be distributed to RBMG, the Escrow
Agent will deliver to each WSI Holder (i) a certificate representing the number
of whole shares of RBMG Common Stock equal to the product of (a) the aggregate
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number of Escrow Shares then subject to escrow and (b) such WSI Holder's
percentage interest in the Escrow Shares and (ii) cash in lieu of the fractional
shares of RBMG Common Stock which such WSI Holder would otherwise receive,
multiplied by the then current value of a share of RBMG Common Stock.
Stockholders Agreement. In connection with the WSI Merger, RBMG and
certain WSI Stockholders (the "Walsh Stockholders") will enter into a
Stockholders Agreement (the "Stockholders Agreement"). Pursuant to the
Stockholders Agreement, RBMG will agree to take all action necessary (i) to
cause the number of directors of RBMG to be fixed at eight and (ii) to nominate
for election to the RBMG Board at any annual or special meeting such persons as
are necessary to ensure that after such meeting (assuming all nominees are
elected) (a) so long as the Walsh Stockholders own 25% or more of the issued and
outstanding shares of RBMG Common Stock, two members of the RBMG Board are
individuals nominated by Robert C. Walsh or the Walsh Stockholders ("Walsh
Directors"), (b) so long as the Walsh Stockholders own at least 15% but less
than 25% of the issued and outstanding shares of RBMG Common Stock, one member
of the RBMG Board is a Walsh Director, (c) four members of the RBMG Board (or if
clause (b) above is applicable, five members of the RBMG Board) are Independent
Directors and (d) two members of the Board are officers of RBMG and would also
qualify as Independent Directors. An "Independent Director" is an individual who
is not related to Robert C. Walsh by blood or adoption and does not have any
material financial interest in, or any current material transactions with, any
entity other than RBMG in which Robert C. Walsh has a financial interest or is
otherwise affiliated. The Stockholders Agreement will terminate on the earlier
of (i) the tenth anniversary thereof, (ii) the date on which the Walsh
Stockholders own less than 15% of the outstanding RBMG Common Stock or (iii) the
agreement of the parties.
Registration Rights Agreement. In connection with the WSI Merger, RBMG,
Greenwich and Robert C. Walsh, acting as attorney in fact for certain
stockholders of WSI (such stockholders together with Greenwich, the "Holders")
will enter into a Registration Rights Agreement (the "Registration Rights
Agreement"). Pursuant to the Registration Rights Agreement, Holders who are
subject to the resale restrictions of Rule 145 will be entitled to certain
demand and piggyback registration rights with respect to the shares of RBMG
Common Stock issued to them pursuant to the WSI Merger Agreement or, in the case
of Greenwich, issuable upon conversion of the RBMG Warrant (the "Registrable
Securities"). Shares of RBMG Common Stock received in the WSI Merger which are
not subject to the resale restrictions of Rule 145 will not be Registrable
Securities for purposes of the Registration Rights Agreement.
Any Holder or Holders who, in the aggregate, own not less than 10%, during
the first 12 months of the Registration Rights Agreement, or 5%, at any time
thereafter, of the aggregate number of shares of Registrable Securities then
outstanding (such Holder or Holders, the "Initiating Holders") may request that
RBMG effect the registration under the Securities Act of all or a portion of
such Initiating Holders' Registrable Securities, and RBMG will give written
notice of such requested registration to all Holders of Registrable Securities.
RBMG will use its reasonable best efforts to file within 60 days of the written
request from the Initiating Holders a registration statement under the
Securities Act relating to the registration of (i) the Registrable Securities
which RBMG has been so requested to register by such Initiating Holders, (ii)
all other Registrable Securities which RBMG has been requested to register by
other Holders within 15 days after the giving of notice by RBMG and (iii) all
shares of RBMG Common Stock which RBMG may elect to register for its own account
or for the account of others. Under the Registration Rights Agreement,
Initiating Holders may request only one registration during the first year after
the WSI Effective Time (the "First Demand") and only one registration during the
second year after the WSI Effective Time (the "Second Demand"). RBMG will not be
required to register more than 2,000,000 shares of Registrable Securities
pursuant to the First Demand or more than 2,000,000 shares of Registrable
Securities pursuant to the Second Demand. RBMG may defer the effectiveness of a
registration statement covering Registrable Securities until after the
expiration of the Pooling Period.
RBMG will have the ability to defer the filing of a registration statement
relating to a demand registration in certain instances. If, at the date of
receipt of a request by the Initiating Holders, RBMG has on file a registration
statement pursuant to the Securities Act covering equity securities which has
not yet become effective, RBMG may defer the filing of any such requested
registration statement to a date not later than 120 days after the effective
date of such prior registration statement. In addition, RBMG will have the right
to defer the filing of a registration statement for a period of up to 120 days
after receipt of the request if (i) the RBMG Board or the
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Chief Executive Officer of RBMG determines (based on advice of counsel) that
such deferral is necessary to avoid premature disclosure of material non-public
information or (ii) RBMG has made a public announcement relating to a material
acquisition or business combination and the RBMG Board or the Chief Executive
Officer determines that sales of Registrable Securities prior to the
consummation of such acquisition or business combination is not in the best
interests of RBMG and its stockholders. RBMG will not be entitled to more than
one deferral in any 12 month period.
Whenever a demand registration is for an underwritten offering, RBMG will
have the right to select the managing underwriter(s) to administer the offering,
which will be a nationally recognized underwriting firm reasonably acceptable to
holders holding at least 50% of the Registrable Securities to be registered in
such offering. In connection with a demand registration, except as otherwise
prohibited by applicable law, RBMG will pay all expenses ("Registration
Expenses") relating to the registration of Registrable Securities, except for
underwriting discounts and commissions, transfer taxes, and any fees and
expenses of counsel for the Holders (but RBMG will pay for the fees and expenses
for one counsel to represent all Holders of Registrable Securities in connection
with such registration).
The number of Registrable Securities requested to be included in a
registration pursuant to the Registration Rights Agreement will be allocated pro
rata among all requesting Holders on the basis of the relative number of
Registrable Securities then held by each such Holder, up to such Holder's
requested number of Registrable Securities. If such registration involves an
underwritten offering and the managing underwriter advises RBMG in writing that
in its opinion, the number of securities requested to be included in such
registration (including any additional securities which are not Registrable
Securities) exceeds the number which can be sold in such offering, RBMG will
include in such registration (i) first, 100% of the Registrable Securities
requested to be included in such registration and (ii) second, such additional
securities, if any, which in the opinion of such managing underwriter, can also
be sold. If the number of Registrable Securities requested to be included in
such registration exceeds the number which, in the opinion of such managing
underwriter, can be sold, the number of such Registrable Securities to be
included in such registration shall be allocated pro rata among all requesting
Holders on the basis of the relative number of shares of Registrable Securities
then held by each such Holder, up to such Holder's requested number of
Registrable Securities. If the number of Registrable Securities requested to be
included in such registration is less than the number which, in the opinion of
the managing underwriter can be sold, RBMG may include in such registration an
additional number of shares of RBMG Common Stock up to the number of such shares
which, in the opinion of the managing underwriter, can be sold.
In addition to the demand registration rights, the Holders will have
piggyback registration rights as follows. If RBMG proposes after the WSI Merger
to register any shares of RBMG Common Stock under the Securities Act (except
registrations relating to an employee benefit plan or a dividend reinvestment
plan or merger or consolidation), whether or not for sale for its own account,
the Holders will have the option to request that RBMG include any of the
Registrable Securities in the offering. If such registration involves an
underwritten offering of securities of the same class as the Registrable
Securities to be included in such registration, all Holders of Registrable
Securities requesting to be included in such registration must sell their
Registrable Securities to the underwriters selected by RBMG on the same terms
and conditions as apply to RBMG with such differences as may be customary or
appropriate in combined primary and secondary offerings. Holders of Registrable
Securities may withdraw from such underwritten public offering prior to the
effective date without penalty. RBMG will not have any further obligation to
register any Registrable Securities in connection with a proposed offering if
prior to the effective date of the registration statement filed in connection
with such registration, RBMG shall determine for any reason not to proceed with
the proposed registration of the securities to be sold by it. In such instance,
RBMG will not be relieved from its obligation to pay any registration expenses
of Holders it would otherwise be required to pay.
If any such registration involves an underwritten offering and the managing
underwriter advises RBMG in writing that, in its opinion, the number and kind of
securities requested to be included in such registration exceeds the number and
kind which can be sold in such offering, so as to be likely to have an adverse
effect on the price, timing or distribution of the securities offered in such
offering as contemplated by RBMG (other than the Registrable Securities), RBMG
will include in such registration all of the securities RBMG proposes to sell,
plus such number and kind of Registrable Securities requested to be included in
such registration by selling Holders,
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which in the opinion of such managing underwriter, can be sold without having
the adverse effect referred to above. The Registrable Securities to be included
in such registration shall be allocated pro rata among all requesting Holders on
the basis of the relative number of shares of Registrable Securities held by
each requesting Holder.
In connection with a piggyback registration, RBMG will pay all expenses
relating to the registration of Registrable Securities, except for underwriter
discounts and commissions, transfer taxes and any fees and expenses of counsel
for the Holders (but RBMG will pay for the fees and expenses for one counsel to
represent all Holders of Registrable Securities in connection with such
registration).
Each Holder of Registrable Securities will agree in the Registration Rights
Agreement that, if any demand or piggyback registration shall occur in
connection with an underwritten public offering, such Holder will, if required
by the managing underwriter, not effect any sale or distribution of Registrable
Securities (other than as part of such underwritten public offering) within
seven days prior to the effective date of such registration statement or within
180 days (or such lesser period as the managing underwriter may permit) after
the effective date of such registration statement.
The registration rights of a Holder may be assigned (but only with all
related obligations) by such Holder to a transferee or assignee of such
securities who, after such assignment or transfer, holds at least 5% of the
Registrable Securities then outstanding or at least 25% of the Registrable
Securities initially issued to the assigning Holder. Such assignment will be
effective only if immediately following such transfer the further disposition of
such securities by the transferee or assignee is restricted under the Securities
Act.
Walsh Employment Agreement. Concurrently with the execution of the WSI
Merger Agreement, WSI and RBMG entered into an employment agreement with Robert
C. Walsh (the "Walsh Employment Agreement"), effective as of the WSI Effective
Time, pursuant to which WSI agreed to employ Robert C. Walsh as the President of
WSI for a period of five years commencing on the WSI Effective Time. RBMG agreed
to appoint Robert C. Walsh to serve as President of RBMG upon consummation of
the WSI Merger. Pursuant to the Walsh Employment Agreement, WSI agreed to pay
Robert C. Walsh an annual salary of $350,000, as adjusted annually for
inflation. Walsh will be entitled to receive all rights and benefits for which
he shall be eligible under any pension or other fringe benefit plan of WSI or
RBMG (other than stock option plans), a company car and five weeks vacation
annually. The Walsh Employment Agreement will terminate in the event of Robert
C. Walsh's death, and WSI may terminate the Walsh Employment Agreement (i) in
the event of Robert C. Walsh's disability or (ii) for cause in the event Robert
C. Walsh (a) embezzles funds of WSI, is convicted of, pleads guilty to or
confesses to the commission of any felony or any act of fraud, commits any act
involving moral turpitude, or is habitually intemperate, or is under the
influence of illegal drugs, (b) engages in a dishonest act to the damage or
prejudice of WSI or in conduct or activities materially damaging to the
property, business or reputation of WSI, (c) violates any of the material
provisions of the Walsh Employment Agreement or (d) commits any act or fails to
take action considered to be valid cause for termination of employment under New
Jersey law.
Key Employee Employment Agreements. Concurrently with the execution of the
WSI Merger Agreement, WSI entered into employment agreements (the "Key Employee
Agreements") with James Walsh and Elizabeth Anne Demola (the "Key Employees"),
effective as of the WSI Effective Time, pursuant to which WSI has agreed to
employ each of the Key Employees as Executive Vice Presidents of WSI for a
period of five years commencing on the WSI Effective Time. Pursuant to the Key
Employee Agreements, each Key Employee will receive an annual salary of
$150,000, as adjusted annually for inflation. Each Key Employee will also be
eligible for a bonus (if earned) pursuant to the terms of a bonus program to be
determined by the WSI Board. James Walsh will receive a monthly commission of
.05% of the aggregate principal amount of all non-conforming loans sold or
securitized by Walsh Securities, Inc. during each month. Elizabeth Anne Demola
will receive a monthly commission of .05% of the aggregate principal amount of
all non-conforming loans purchased or originated by Walsh Securities, Inc.
during each month. Each Key Employee will also be entitled to receive all rights
and benefits for which he or she shall be eligible under any pension or other
fringe benefit plan of WSI or RBMG, an automobile allowance of $1,000 per month
and five weeks vacation annually. Each Key Employee Agreement will terminate in
the event of such Key Employee's death, and WSI may terminate each Key Employee
Agreement (i) in the event of such Key Employee's disability or (ii) for cause
in the event such Key Employee
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(a) embezzles funds of WSI, is convicted of, pleads guilty to or confesses to
the commission of any felony or any act of fraud, commits any act involving
moral turpitude, or is habitually intemperate, or is under the influence of
illegal drugs, (b) engages in a dishonest act to the damage or prejudice of WSI
or in conduct or activities materially damaging to the property, business or
reputation of WSI, (c) violates any of the material provisions of the Key
Employee Agreement or (d) commits any act or fails to take action considered to
be valid cause for termination of employment under New Jersey law.
WSI Employment Agreements. In connection with the WSI Merger, WSI will
enter into employment agreements (the "WSI Employment Agreements") with certain
employees of WSI (the "WSI Employees") pursuant to which WSI will agree to
employ each WSI Employee for a term commencing on the WSI Effective Date and
terminating on December 31, 2000. Each WSI Employment Agreement will terminate
in the event of the death of the WSI Employee, and WSI may terminate each WSI
Employment Agreement upon the disability of the WSI Employee or for cause in the
event of (i) fraud, misappropriation or intentional damage to the property or
business of WSI, its subsidiaries and affiliates, (ii) action by the WSI
Employee involving willful malfeasance or gross misconduct in connection with
his employment, (iii) any action or failure to take action on the part of the
WSI Employee which is a violation of any reasonable or lawful instruction of
WSI's Chief Executive Officer or the WSI Board or is materially inconsistent
with the discharge of the WSI Employee's services and responsibilities under the
WSI Employment Agreement or (iv) the WSI Employee's conviction of, or plea of
guilty or nolo contendere to any charge of, any felony or other act of
dishonesty or crime involving moral turpitude, embezzlement, fraud or
misappropriation of funds. WSI will also be entitled to terminate any such WSI
Employment Agreement without cause upon payment of a sum at least equal to the
sum of such WSI Employee's annual base salary plus commission paid during the
preceding fiscal year. Each WSI Employee will also agree (i) to keep in
confidence confidential information of WSI during the term of such WSI
Employee's employment and for a period of one year after the term of employment,
(ii) not to solicit the business of any person or other entity to whom WSI has
sold any products or services at any time during the period beginning three
years immediately preceding the date of the WSI Employment Agreement and ending,
in most cases, on the WSI Employee's termination of employment with WSI and
(iii) not to own more than a 2% equity interest in, manage, operate or be a
director, officer, member or manager of or consultant to any business or
corporation which is conducting any business which directly competes with WSI in
a specified territory.
Noncompete and Confidentiality Agreement. Concurrently with the execution
of the WSI Merger Agreement, RBMG entered into a Noncompete and Confidentiality
Agreement (the "Noncompete Agreement") with Robert C. Walsh and each of the Key
Employees. Pursuant to the Noncompete Agreements, Mr. Walsh and each of the Key
Employees agreed to hold in confidence and not to disclose, publish or make use
of any trade secrets of WSI at any time. Mr. Walsh and each of the Key Employees
also agreed, during a period beginning at the WSI Effective Time and continuing
until the later of (i) the first anniversary of the date as of which such person
ceases to be an employee of WSI and (ii) the fifth anniversary of the date of
the Noncompete Agreement as follows: (a) to hold in confidence and not disclose,
publish or make use of, any other confidential information of WSI, (b) not to
own, operate, join, control or participate in the ownership, management,
operation or control of any business conducted under any corporate or trade name
of WSI or any name similar thereto without the prior written consent of RBMG,
(c) not, directly or by assisting others, engage in, have an equity or profit
interest in, or render services to any business conducting activities conducted
by WSI in the United States, (d) not to solicit or attempt to solicit any
business from any customers or correspondents of WSI or others having business
dealings with WSI, including actively sought prospective customers and
correspondents, for purposes of providing products or services that are
competitive with those offered by WSI and (e) not to recruit or hire away or
attempt to recruit or hire away any employee of WSI.
The RBMG Rights Plan
On , 1997, the RBMG Board approved a rights agreement setting
forth the terms of the RBMG Rights Plan. The RBMG Board intends to set a record
date and distribute the rights under the RBMG Rights Plan prior to the effective
time of either the RBC Merger or the WSI Merger. Under the terms of the RBMG
Rights Plan, one Right is attached to each outstanding share of RBMG Common
Stock (and RBMG Class B Common Stock, if the WSI Amendment is approved). Under
the terms of the RBMG Rights Plan, each Right
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entitles the holder to purchase from RBMG a Unit consisting of one one-hundredth
of a share of Junior Cumulative Preferred Stock, par value $.01 per share, at a
purchase price of $200 per Unit, subject to adjustment. The Rights contain
provisions that are designed to protect the stockholders in the event of certain
unsolicited attempts to acquire RBMG, including a gradual accumulation of shares
in the open market, a partial or two-tier tender offer that does not treat all
stockholders equally, and other takeover tactics which the RBMG Board believes
may be abusive and not in the best interests of stockholders. Distribution of
Rights will not alter the financial strength of RBMG or interfere with its
business plans. The distribution of the Rights is not dilutive, does not affect
reported earnings per share, is not taxable either to the recipient or to RBMG
and will not change the way in which stockholders can currently trade shares of
RBMG Common Stock. The Rights may be redeemed by RBMG at $0.01 per Right prior
to their expiration on , 2007.
After the WSI Merger, Robert C. Walsh and his affiliates will beneficially
own approximately 29.3% of the outstanding RBMG Common Stock. Accordingly, the
RBMG Rights Plan exempts Robert C. Walsh and certain of his affiliates from
causing a distribution event under the RBMG Rights Plan, provided Robert C.
Walsh and such affiliates do not acquire, while the beneficial owner of %
of the outstanding RBMG Common Stock, additional shares representing more than
% of the outstanding RBMG Common Stock. To the extent Robert C. Walsh and
such affiliates subsequently reduce their ownership percentage of RBMG Common
Stock to below %, Robert C. Walsh and such affiliates will be subject to
the same threshold ( %) applicable to all other stockholders. See "Risk
Factors" and "The WSI Merger -- Certain Agreements in Connection with the WSI
Merger."
REGULATORY APPROVALS REQUIRED
Under the WSI Merger Agreement, the obligations of both RBMG and WSI to
consummate the WSI Merger are conditioned upon receipt of all required
regulatory approvals. Other than as discussed below, RBMG and WSI believe that
no such regulatory and other approvals are required.
Under the HSR Act and the rules promulgated thereunder by the FTC, the WSI
Merger may not be consummated unless notification has been given and certain
information has been furnished to the FTC and the Antitrust Division and the
waiting period has expired or been terminated. Pursuant to the HSR Act, on
, 1997, RBMG and WSI each filed a Notification and Report Form with
the FTC and the Antitrust Division for review in connection with the WSI Merger.
The 30-day waiting period under the HSR Act applicable to the WSI Merger will
expire on , 1997 unless the WSI Merger is investigated or opposed by
the FTC or the Antitrust Division.
Notwithstanding the termination of the HSR Act waiting period, at any time
before or after consummation of the WSI Merger, the FTC or the Antitrust
Division could take such action under the antitrust laws as it deems necessary
or desirable in the public interest, including seeking to enjoin the
consummation of the WSI Merger or to cause the divestiture of substantial assets
of RBMG or WSI. In addition, states and private parties may also bring legal
action under the antitrust laws under certain circumstances. Based on
information available to them, RBMG and WSI believe that the WSI Merger can be
effected in compliance with federal and state antitrust laws. There can be no
assurance, however, that a challenge to the consummation of the WSI Merger based
on an alleged violation of the antitrust laws will not be made or that, if such
a challenge were made, RBMG and WSI would prevail or would not be required to
accept certain conditions, possibly including divestitures, in order to
consummate the WSI Merger.
INTERESTS OF CERTAIN PERSONS IN THE WSI MERGER
In considering the WSI Merger, holders of RBMG Common Stock and WSI Common
Stock should be aware that certain executive officers and directors of RBMG and
WSI have certain interests that may present them with potential conflicts of
interest with respect to the WSI Merger.
Edward J. Sebastian and David W. Johnson, Jr. are directors of RBMG and,
pursuant to the WSI Merger Agreement, Messrs. Sebastian and Johnson will remain
directors of RBMG after the WSI Merger. See "Terms of the WSI Merger
Agreement -- Board of Directors." Mr. Sebastian is the Chairman and Chief
Executive Officer of RBMG and Mr. Johnson is Vice Chairman and Managing Director
of RBMG and pursuant to the WSI Merger
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Agreement, Mr. Sebastian will remain Chairman and Chief Executive Officer of
RBMG and Mr. Johnson will remain Vice Chairman and Managing Director of RBMG
after the WSI Merger. See "Terms of the WSI Merger Agreement -- Executive
Officers."
Pursuant to an employment agreement with RBMG, Mr. Johnson receives an
annual bonus equal to 4% of RBMG's annual total pretax income before bonuses and
incentives. Mr. Johnson's contract also gives him the right to distribute up to
2.5% of RBMG's total pre-tax income to other RBMG employees in his sole
discretion. To the extent that the WSI Merger would increase RBMG's annual total
pretax income, Mr. Johnson would receive a greater bonus after the WSI Merger
and may be presented with a potential conflict of interest. During the course of
negotiations of the WSI Merger, the parties discussed possible changes in Mr.
Johnson's compensation arrangements, but agreed to defer resolution of these
matters until after the WSI Effective Time. It is contemplated that Mr. Johnson
and RBMG will restructure the compensation provided by Mr. Johnson's current
employment agreement to include cash-settled stock appreciation rights. It is
also contemplated that, subsequent to the consummation of the WSI Merger, RBMG
will enter into an employment agreement with Edward J. Sebastian, its Chairman,
Chief Executive Officer and Co-Founder, pursuant to which Mr. Sebastian would
receive cash compensation (which may include cash-settled stock appreciation
rights) which management believes is comparable to that paid to persons
occupying similar positions in comparable companies in this industry.
Robert C. Walsh is a director of WSI and, pursuant to the WSI Merger
Agreement, will become a director of RBMG at the WSI Effective Time. See "Terms
of the WSI Merger Agreement -- Board of Directors." Robert C. Walsh is President
and Chief Executive Officer of WSI and pursuant to the WSI Merger Agreement,
Robert C. Walsh will remain President and Chief Executive Officer of WSI after
the WSI Merger and will become President of RBMG at the WSI Effective Time. See
"Terms of the WSI Merger Agreement -- Executive Officers." Robert C. Walsh has
also entered into an employment agreement with WSI and RBMG, effective as of the
WSI Effective Time pursuant to which WSI agreed to employ Robert C. Walsh as
President of WSI for a period of five years commencing on the WSI Effective
Time, and RBMG agreed to appoint Robert C. Walsh to serve as President of RBMG
upon consummation of the WSI Merger. See "Certain Agreements in Connection with
the WSI Merger -- Walsh Employment Agreement."
James Walsh is an executive officer of WSI and, pursuant to the WSI Merger
Agreement, will become a director of RBMG at the WSI Effective Time. See "Terms
of the WSI Merger Agreement -- Board of Directors." James Walsh is Vice
President and Director of Underwriting and Operations of WSI and has entered
into an employment agreement with WSI and RBMG, effective as of the WSI
Effective Time, pursuant to which WSI agreed to employ James Walsh as an
Executive Vice President of WSI for a period of five years commencing on the WSI
Effective Time. See "Certain Agreements in Connection with the WSI Merger -- Key
Employee Employment Agreements." In addition, James Walsh is the brother of
Robert C. Walsh and Elizabeth Ann Demola.
Elizabeth Ann Demola is an executive officer of WSI. Ms. Demola has entered
into an employment agreement with WSI, effective as of the WSI Effective Time,
pursuant to which WSI agreed to employ Ms. Demola as an Executive Vice President
of WSI for a period of five years commencing on the WSI Effective Time. See
"Certain Agreements in Connection with the WSI Merger -- Key Employee Employment
Agreements." In addition, Ms. Demola is the sister of Robert C. Walsh and James
Walsh.
ACCOUNTING TREATMENT
The WSI Merger is expected to qualify as a "pooling of interests" for
accounting purposes. The obligations of each of RBMG and WSI to consummate the
WSI Merger are conditioned upon the receipt of written advice from (i) Price
Waterhouse LLP, that, in accordance with U.S. GAAP, based upon discussions with
officials responsible for financial and accounting matters and information
furnished to Price Waterhouse LLP, Price Waterhouse LLP concurs with
management's conclusion that no conditions relating to RBMG or WSI exist that
would preclude RBMG's accounting for the WSI Merger as a pooling of interests
and (ii) KPMG Peat Marwick LLP that, as of the WSI Effective Time, based upon
inquiries and their examination of the financial statements of WSI, they are not
aware of any conditions relating to WSI that would preclude the use of pooling
of interests
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accounting in connection with the WSI Merger. Accordingly, under the pooling of
interests method of accounting, the WSI Merger will be accounted for by
combining the historical balances and results of RBMG and WSI. The assets and
liabilities of WSI will be combined with those of RBMG and carried forward on
the books of RBMG at their previously recorded amounts. Net income of RBMG after
the WSI Merger will include the net income of RBMG and WSI for the entire fiscal
period in which the WSI Merger occurs. The reported net income of RBMG for prior
periods will be combined with that of WSI from the period from its inception
(April 1, 1996) through December 31, 1996 and restated as income of the combined
company.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of certain federal income tax consequences of
the WSI Merger. This discussion is based on provisions of the Code, the Treasury
Regulations thereunder, and rulings and court decisions as of the date hereof,
all of which are subject to change, possibly retroactively. The discussion is
included for general information purposes only.
WSI has received an opinion (the "WSI Tax Opinion") from St. John & Wayne,
L.L.C. that, based upon its review of the Registration Statement of which this
Joint Proxy Statement/Prospectus is a part, certain other facts and documents
which it has considered relevant, and certain representations made to it by WSI
and RBMG, the WSI Merger will have the federal income tax consequences set forth
below:
(i) the WSI Merger will constitute a "reorganization" within the
meaning of Section 368(a) of the Code;
(ii) no gain or loss will be recognized by WSI Stockholders upon the
exchange in the WSI Merger of their shares of WSI Common Stock for RBMG
Common Stock;
(iii) the tax basis of the RBMG Common Stock received in the WSI
Merger by a WSI Stockholder will be the same as the tax basis of the WSI
Common Stock exchanged for such RBMG Common Stock;
(iv) the holding period of the RBMG Common Stock received in the WSI
Merger by a WSI Stockholder will include the holding period of such
stockholder in the WSI Common Stock exchanged for such RBMG Common Stock,
provided that the WSI Common Stock is held as a capital asset at the WSI
Effective Time;
(v) a WSI Stockholder who receives cash in the WSI Merger in lieu of a
fractional share interest in RBMG Common Stock will be treated as having
received such fractional share in the WSI Merger and then as having
exchanged such fractional share for cash in a redemption subject to Section
302 of the Code; and
(vi) if a WSI Stockholder dissents to the WSI Merger and receives
solely cash in exchange for such stockholder's WSI Common Stock, such cash
will be treated as having been received in redemption of the WSI Common
Stock (or possibly RBMG Common Stock deemed to have been received), subject
to the provisions and limitations of Section 302 of the Code.
In rendering the WSI Tax Opinion, counsel has relied upon certain written
representations as to factual matters made by appropriate officers of RBMG and
WSI and certain WSI Stockholders. Such representations are customary for
opinions of this type; the WSI Tax Opinion cannot be relied upon, however, if
any such representation is, or later becomes, inaccurate. No ruling from the
Service with respect to the tax consequences of the WSI Merger has been, or will
be, requested, and the WSI Tax Opinion is not binding upon the Service or the
courts. If the WSI Merger is consummated, and it is later determined that the
WSI Merger did not qualify as a "reorganization" under the Code, then each WSI
Stockholder would recognize taxable gain or loss equal to the difference between
the fair market value of the RBMG Common Stock received by him or her in the WSI
Merger and his or her tax basis in the WSI Common Stock exchanged therefor.
The foregoing discussion of the tax consequences of the WSI Merger applies
only to a WSI Stockholder who holds WSI Common Stock as a capital asset, and may
not apply to special situations, such as WSI Stockholders, if any, who received
their WSI Common Stock upon the exercise of employee stock options or otherwise
as compensation and WSI Stockholders that are insurance companies, securities
dealers, financial institutions or foreign persons.
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The federal income tax treatment of exchanges of stock purchase warrants
(other than stock options issued as compensation for services) in tax-free
reorganizations is unclear. Thus, assuming that the WSI Warrant remains
outstanding and is not exercised prior to the WSI Merger, the federal income tax
consequences stemming from the exchange of the WSI Warrant for the RBMG Warrant
cannot be determined with certainty. Recently, the Service released a private
letter ruling (PLR 9539020 (September 27, 1994)), which held that an exchange of
options in a tax-free reorganization under circumstances apparently similar to
the present case was not a taxable event to the option holders. However, it
should be noted that a private letter ruling cannot be relied upon by third
parties, and that the Service in Revenue Ruling 78-408 took the position than an
exchange of noncompensatory stock purchase warrants in a tax-free reorganization
was taxable. For this reason, and due to the general uncertainty surrounding
warrant-for-warrant exchanges, any holder of the WSI Warrant should consult with
his own tax adviser with respect to these issues.
Any cash received in the WSI Merger by a WSI Stockholder may be subject to
backup withholding at a rate of 31 percent. Backup withholding will not apply,
however, to a taxpayer who (i) furnishes a correct TIN and certifies that he or
she is not subject to backup withholding on IRS Form W-9 (or an appropriate
substitute form), (ii) provides a certificate of foreign status on IRS Form W-8
(or an appropriate substitute form), or (iii) is otherwise exempt from backup
withholding. The Service may impose a $50 penalty upon any taxpayer who fails to
provide the correct TIN, as required.
The WSI Merger will not be a taxable event to RBMG Stockholders or to RBMG.
THE FOREGOING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN UNITED
STATES FEDERAL INCOME TAX CONSEQUENCES OF THE WSI MERGER AND DOES NOT PURPORT TO
BE A COMPLETE ANALYSIS OF ALL POTENTIAL TAX EFFECTS RELEVANT TO A DECISION
WHETHER A WSI STOCKHOLDER OR AN RBMG STOCKHOLDER SHOULD VOTE IN FAVOR OF THE WSI
MERGER. BECAUSE CERTAIN TAX CONSEQUENCES OF THE WSI MERGER MAY VARY DEPENDING
UPON THE PARTICULAR CIRCUMSTANCES OF EACH WSI STOCKHOLDER, EACH WSI STOCKHOLDER
IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR TO DETERMINE THE PARTICULAR TAX
CONSEQUENCES TO SUCH STOCKHOLDER OF THE WSI MERGER (INCLUDING THE APPLICATION
AND EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS).
RESALE OF RBMG COMMON STOCK
Shares of RBMG Common Stock to be issued to WSI Stockholders in connection
with the WSI Merger will be freely transferable under the Securities Act, except
for shares issued to any person or entity who, at the time of the WSI Merger,
may be deemed an "affiliate" of WSI within the meaning of Rule 145. In general,
affiliates of WSI include its executive officers and directors and any other
person or entity who controls, is controlled by or is under common control with
WSI. Rule 145, among other things, imposes certain restrictions upon the resale
of securities received by affiliates in connection with certain
reclassifications, mergers, consolidations or asset transfers. These
restrictions will consist of volume and manner of sale restrictions on the
resale of shares of RBMG Common Stock issued to such persons and entities. RBMG
may place legends on certificates representing shares of RBMG Common Stock that
are issued to WSI Stockholders in the WSI Merger to restrict such transfers. WSI
has agreed in the WSI Merger Agreement to use its reasonable efforts to cause
"affiliates" of WSI to deliver to RBMG prior to the WSI Effective Time a written
statement to the effect that such person will not sell any shares of RBMG Common
Stock received in the WSI Merger except in accordance with the applicable
provisions of the Securities Act and the rules and regulations of the
Commission, including the accounting criteria for pooling of interests
transactions included in the Commission's Financial Reporting Policies. Pursuant
to the Registration Rights Agreement (as defined in "Certain Agreements in
Connection with the WSI Merger -- Registration Rights Agreement"), WSI
Stockholders who are subject to the resale restrictions of Rule 145 will be
entitled to certain demand and piggyback registration rights with respect to the
shares of RBMG Common Stock issued to them in accordance with the WSI Merger
Agreement. See "Certain Agreements in Connection with the WSI
Merger -- Registration Rights Agreement."
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COMPARISON OF RIGHTS OF HOLDERS OF RBMG COMMON STOCK AND WSI COMMON STOCK
Upon consummation of the WSI Merger, and to the extent they receive shares
of RBMG Common Stock, stockholders of WSI, a Delaware corporation, will become
stockholders of RBMG, also a Delaware corporation. The rights of WSI
Stockholders will be governed by the RBMG Certificate and the RBMG Bylaws. The
following is a summary of the material differences between the rights of the
RBMG Stockholders and the WSI Stockholders pursuant to the differences between
the RBMG Certificate and the RBMG Bylaws, on the one hand, and the WSI
Certificate and the WSI Bylaws, on the other hand. The following summary does
not purport to be a complete statement of the difference in the rights of WSI
Stockholders and RBMG Stockholders. This summary is qualified in its entirety by
reference to the full text of the RBMG Certificate and the RBMG Bylaws, the WSI
Certificate and the WSI Bylaws and the Delaware Law.
Authorized Capital Stock. The authorized capital stock of RBMG consists of
(i) 25,000,000 shares of RBMG Common Stock and (ii) 5,000,000 shares of RBMG
Preferred Stock. The authorized capital stock of WSI consists of (i) 1,250
shares of WSI Class A Common Stock and (ii) 1,250 shares of WSI Class B Common
Stock. Holders of WSI Class B Common Stock do not have any voting rights except
as otherwise required by applicable law; provided, however, that holders of WSI
Class B Common Stock have the right to vote as a separate class on any merger or
consolidation of WSI with or into another entity or entities, or on any
recapitalization or reorganization, in which shares of WSI Class B Common Stock
would receive or be exchanged for consideration different on a per share basis
than that received with respect to or in exchange for shares of WSI Class A
Common Stock or would otherwise be treated differently than holders of shares of
WSI Class A Common Stock in connection with such transaction. The right of
holders of WSI Class B Common Stock to a separate class vote would not apply in
transactions in which shares of WSI Class B Common Stock would receive or be
exchanged for non-voting securities which on a per-share basis are otherwise
identical in amount and form to the voting securities received with respect to
or exchanged for the WSI Class A Common Stock, so long as (i) such non-voting
securities are convertible into such voting securities on the same terms as WSI
Class B Common Stock is convertible into WSI Class A Common Stock and (ii) all
other consideration is equal on a per share basis. In addition, holders of WSI
Class B Common Stock have the right to vote as a separate class on any amendment
or restatement of the WSI Certificate which in any way adversely affects the
rights of the WSI Class B Common Stock in a manner different than the WSI Class
A Common Stock. Shares of WSI Class B Common Stock are convertible for no
consideration at any time at the option of the holder thereof into shares of WSI
Class A Common Stock. There is currently no WSI Class B Common Stock
outstanding.
If the RBC Amendment is adopted, the number of shares of RBMG Common Stock
that RBMG is authorized to issue would increase to 50,000,000 shares. If the WSI
Amendment is adopted, the number of shares of common stock that RBMG is
authorized to issue would increase to 112,000,000 shares consisting of
100,000,000 shares of RBMG Common Stock and 12,000,000 shares of RBMG Class B
Common Stock. For a description of the terms of the RBMG Class B Common Stock,
see "The Charter Amendments -- WSI Amendment."
Dividends and Other Distributions. The RBMG Certificate and the RBMG
Bylaws contain no restrictions on the payment of dividends or other
distributions. If the WSI Amendment is adopted, the RBMG Certificate will
contain certain restrictions on the payment of dividends or other distributions.
For a description of such restrictions, see "The Charter Amendments -- WSI
Amendment."
The WSI Certificate contains no restrictions on the payment of dividends or
other distributions except if the Board of Directors declares a cash dividend or
other distribution on the WSI Class A Common Stock, the Board of Directors shall
simultaneously declare a dividend or distribution at the same rate on the WSI
Class B Common Stock, so that the WSI Class B Common Stock participates equally
with the WSI Class A Common Stock; provided that if the dividends consist of
other voting securities of WSI, WSI shall make available to each holder of WSI
Class B Common Stock, at such holder's request, dividends consisting of
nonvoting securities of WSI which are otherwise identical to the voting
securities and which are convertible into or exchangeable for such voting
securities on the same terms as the WSI Class B Common Stock is convertible into
the WSI Class A Common Stock.
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Special Meeting of Stockholders. Under the RBMG Certificate and the RBMG
Bylaws, a special meeting of stockholders may be called by the RBMG Board or the
Chairman of the RBMG Board only. Notwithstanding the foregoing, whenever holders
of one or more classes or series of RBMG Preferred Stock shall have the right,
voting separately as a class or series, to elect directors, such holders may
call special meetings of such holders for the purpose of electing such directors
pursuant to the certificate of designation for such classes or series.
The WSI Bylaws provide that special meetings of the stockholders, for any
purpose, unless otherwise prescribed by statute or by the WSI Certificate, may
be called by the president and shall be called by the president or secretary at
the request in writing of a majority of the directors or stockholders entitled
to vote. Such request shall state the purpose of the proposed meeting.
Voting Requirements Generally. The RBMG Bylaws provide that each
stockholder is entitled to one vote for each outstanding share of stock of RBMG
held by such stockholder and that in all matters other than the election of
directors, except as otherwise provided by law, the vote of a majority of the
shares of stock of RBMG present, in person or by proxy, at a meeting of
stockholders at which a quorum is present and then entitled to vote on the
subject matter shall be the act of the stockholders.
The WSI Certificate provides that each WSI Class A Common Stockholder shall
be entitled to one vote for each share of WSI Class A Common Stock held on all
matters as to which WSI Class A Common Stockholders shall be entitled to vote.
The holders of WSI Class B Common Stock have no voting rights except as
otherwise required by applicable law or in relation to certain mergers,
consolidations, recapitalizations or reorganizations.
Amendment of Certificate of Incorporation; Amendment of Bylaws. Under the
RBMG Certificate, provisions in the RBMG Certificate relating to the election of
the RBMG Board, amendments of the RBMG Articles and the RBMG Bylaws, written
consent, special meetings, indemnification and special voting requirements for
certain business combinations may be amended only upon the affirmative vote of
at least 80% of the shares of RBMG Common Stock then outstanding and entitled to
vote generally in the election of directors, voting together as a single class.
The RBMG Certificate and the RBMG Bylaws provide that the RBMG Board may
adopt, amend or repeal the RBMG Bylaws. Additionally, the stockholders may
adopt, amend or repeal the bylaws with the affirmative vote of the holders of
not less than 66 2/3% of the total voting power of all outstanding securities of
RBMG then entitled to vote generally in the election of directors, voting
together as a single class.
The WSI Certificate provides that the holders of WSI Class B Common Stock
shall have the right to vote as a separate class on any amendment or restatement
of the WSI Certificate which in any way adversely affects the rights of the WSI
Class B Common Stock in a manner different than the WSI Class A Common Stock.
The WSI Certificate also provides that the WSI Board shall have the power to
adopt, amend or repeal the WSI Bylaws. The WSI Bylaws may be altered and
repealed and bylaws may be made at any annual meeting of the stockholders or at
any special meeting thereof if notice thereof is contained in the notice of such
special meeting by the affirmative vote of a majority of the stock issued and
outstanding or entitled to vote thereat, or by the WSI Board, at any regular
meeting thereof, or at any special meeting of the WSI Board, if notice thereof
is contained in the notice of such special meeting.
Action by Written Consent. The RBMG Certificate and the RBMG Bylaws
provide that, so long as RBMG is subject to the reporting requirements of
Section 12 or 15(d) of the Exchange Act (or any successor law), any action
required or permitted to be taken at any annual or special meeting of
stockholders may be taken only upon the vote of stockholders at an annual or
special meeting duly noticed and called in accordance with Delaware Law and may
not be taken by written consent of stockholders without a meeting.
The WSI Bylaws provide that whenever the vote of stockholders at a meeting
thereof is required or permitted to be taken in connection with any corporate
action by any provisions of Delaware law or the WSI Certificate or the WSI
Bylaws, the meeting and vote of stockholders may be dispensed with, if all the
stockholders who would have been entitled to vote upon the action if such
meeting were held, shall consent in writing to such corporate action being
taken.
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Voting in the Election of Directors. The RBMG Bylaws provide that
directors shall be elected by a plurality of the votes of the shares present, in
person or by proxy, at a meeting of the stockholders at which a quorum is
present and then entitled to vote on the election of directors. The RBMG
Certificate and the RBMG Bylaws provide that, subject to any rights of holders
of any class of RBMG Preferred Stock then outstanding, all vacancies on the RBMG
Board, including those resulting from an increase in the number of directors,
may be filled solely by a majority of the remaining directors then in office,
even if they do not constitute a quorum or by a sole remaining director. When
one or more directors resign from the RBMG Board effective at a future date. a
majority of directors then in office, including the directors who are to resign,
may vote on filling the vacancy.
The WSI Bylaws provide that all elections for directors shall be decided by
plurality vote. If the office of any director becomes vacant, the remaining
directors in office, though less than a quorum, by a majority vote may appoint
any qualified person to fill such vacancy, who shall hold office for the
unexpired term and until his successor shall be duly chosen.
Advance Notice Requirements for Stockholder Proposals and Director
Nominations. The RBMG Bylaws establish advance notice procedures with regard to
stockholder proposals and the nomination, other than by or at the direction of
the RBMG Board or a committee thereof, of candidates for election as directors.
These procedures provide that the notice of stockholder proposals and
stockholder nominations for the election of directors at any meeting of
stockholders must be in writing and be received by the Secretary of RBMG not
less than 60 nor more than 90 days prior to the meeting (or if less than 70 days
notice or prior public disclosure of the date of the meeting is given, the
notice of stockholder proposals or nominations must be in writing and received
by the Secretary no later than the close of business on the tenth day following
the day on which notice of the meeting was mailed or public disclosure thereof
was made, whichever occurs first). RBMG may reject a stockholder proposal or
nomination that is not made in accordance with such procedures.
The WSI Certificate and the WSI Bylaws do not contain any advance notice
requirements for stockholder proposals and director nominations.
Number and Qualification of Directors. The RBMG Certificate and the RBMG
Bylaws provide that the number of directors shall be fixed from time to time by
resolution adopted by a majority of the directors then in office, but that the
RBMG Board may not consist of less than three nor more than 15 directors. The
size of the RBMG Board is currently set at seven members.
The WSI Bylaws provide that the number of directors shall be not less than
one nor more than 10. The number of directors may not be less than three except
that where all the shares of the corporation are owned beneficially and of
record by either one or two stockholders, the number of directors may be less
than three but not less than the number of stockholders. The number of directors
may be increased by amendment of the WSI Bylaws by the affirmative vote of a
majority of the directors, though less than a quorum, or by the affirmative vote
of a majority in interest of the stockholders, at the annual meeting or at a
special meeting called for that purpose, and by like vote the additional
directors may be chosen at such meeting to hold office until the next annual
election and until their successors are elected and qualify. The size of the WSI
Board is currently set at one member.
Classification of Board. A classified board of directors is one in which a
certain number, but not all, of the directors of a corporation are elected on a
rotating basis each year. This method of electing directors makes changes in the
composition of the board of directors, and thus a potential change in control of
a corporation, a lengthier and more difficult process.
The RBMG Certificate divides the RBMG Board into three classes of directors
serving staggered three-year terms. As a result, approximately one-third of the
RBMG Board is elected at each annual meeting of stockholders.
The WSI Certificate and the WSI Bylaws do not contain any provisions for a
classified board.
Removal of Directors. The RBMG Certificate provides that no director may
be removed from office by the stockholders except for cause with the affirmative
vote of the holders of not less than a majority of the total voting
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power of all outstanding securities of RBMG then entitled to vote generally in
the election of directors, voting together as a single class.
The WSI Bylaws provide that any director or directors may be removed either
for or without cause at any time by the affirmative vote of the holders of a
majority of all the shares of stock outstanding and entitled to vote, at a
special meeting of the stockholders called for the purpose, and the vacancies
thus created may be filled, at the meeting held for the purpose of removal, by
the affirmative vote of a majority in interest of the stockholders entitled to
vote.
Transactions Involving Officers or Directors. The RBMG Certificate, the
RBMG Bylaws, the WSI Certificate and the WSI Bylaws do not contain any
provisions relating to transactions involving officers or directors.
Indemnification and Limitation of Liability. The RBMG Certificate provides
that each person (and the heirs, executors or administrators of such person) who
was or is a party, or is threatened to be made a party to, or is involved in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
person is or was a director or officer of RBMG or is or was serving at the
request of RBMG as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise, shall be indemnified and held harmless
by RBMG to the fullest extent permitted by the DGCL. The RBMG Certificate also
provides that the right to indemnification includes the right to be paid by RBMG
for expenses incurred in connection with any such proceeding in advance of its
final disposition to the fullest extent permitted by the DGCL, and that the
right to indemnification conferred thereunder is a contract right.
The RBMG Certificate also provides that RBMG may, by action of the RBMG
Board, provide indemnification to such of the employees and agents of RBMG and
such other persons serving at the request of RBMG as employees or agents of
another corporation, partnership, joint venture, trust or other enterprise to
such extent and to such effect as is permitted by the DGCL and the RBMG Board
shall determine to be appropriate.
Pursuant to the RBMG Certificate, RBMG may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
RBMG, or is or was serving at the request of RBMG as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any expense, liability or loss incurred by such person
in any such capacity or arising out of his or her status as such, whether or not
RBMG would have the power to indemnify such person against such liability under
the DGCL.
The RBMG Certificate provides that (i) the rights and authority described
above are not exclusive of any other right that any person may otherwise have or
hereafter acquire and (ii) no amendment, modification or repeal of the RBMG
Certificate, or adoption of any additional provision of the RBMG Certificate or
the RBMG Bylaws or, to the fullest extent permitted by the DGCL, any amendment,
modification or repeal of law will eliminate or reduce the effect of the
provisions in the RBMG Certificate limiting liability or indemnifying certain
persons or adversely affect any right or protection then existing thereunder in
respect of any acts or omissions occurring prior to such amendment,
modification, repeal or adoption. The RBMG Certificate provides that a director
will not be personally liable for monetary damages to RBMG or its stockholders
for breach of fiduciary duty as a director, except to the extent such exemption
from liability or limitation thereof is not permitted under the DGCL.
The WSI Certificate provides that no director shall be personally liable to
WSI or its stockholders for monetary damages for any breach of fiduciary duty by
such director as a director. The WSI Certificate also provides that,
notwithstanding the foregoing sentence, a director shall be liable, to the
extent provided by applicable law, (i) for breach of the director's duty of
loyalty to WSI or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
pursuant to Section 174 of the DGCL or (iv) for any transaction from which the
director derived an improper personal benefit.
Mergers, Tender Offers and Sales of Substantially all of the Assets. The
RBMG Certificate and the RBMG Bylaws do not contain any provisions relating to
mergers, tender offers or sales of substantially all of the corporation's
assets.
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The WSI Certificate provides that holders of WSI Class B Common Stock shall
have the right to vote as a separate class on any merger or consolidation of WSI
with or into another entity or entities, or any recapitalization or
reorganization, in which shares of WSI Class B Common Stock would receive or be
exchanged for consideration different on a per share basis from consideration
received with respect to or in exchange for the shares of WSI Class A Common
Stock or would otherwise be treated differently from shares of WSI Class A
Common Stock in connection with such transaction, except that shares of WSI
Class B Common Stock may, without such a separate class vote, receive or be
exchanged for non-voting securities which are otherwise identical on a per share
basis in amount and form to the voting securities received with respect to or
exchanged for the WSI Class A Common Stock so long as (i) such non-voting
securities are convertible into such voting securities on the same terms as the
WSI Class B Common Stock is convertible into WSI Class A Common Stock and (ii)
all other consideration is equal on a per share basis.
Proxies. Under both the RBMG Bylaws and the WSI Bylaws, each stockholder
entitled to vote at a meeting of stockholders may authorize another person or
persons to act for him by proxy, but no such proxy shall be voted or acted upon
after three years from its date, unless the proxy provides for a longer period.
Preemptive Rights. The holders of RBMG Common Stock and WSI Common Stock
have no preemptive rights.
Anti-Takeover Provisions. The RBMG Certificate generally limits RBMG's
power to purchase shares of voting stock of RBMG (i.e., capital stock having the
right to vote generally on matters relating to RBMG and any security which is
convertible into such stock) from a holder of at least five percent of any class
of voting securities who has beneficially owned such securities for less than
two years prior to the date of such purchase or any agreement in respect thereof
at a price in excess of its fair market value, unless such purchase is approved
by the holders of a majority of the outstanding shares of voting stock of RBMG,
voting together as a single class, excluding the shares owned by such
stockholder.
The WSI Certificate and the WSI Bylaws do not contain any anti-takeover
provisions.
Quorum. Under the RBMG Bylaws, unless otherwise provided in the Delaware
Law, the RBMG Certificate or the RBMG Bylaws, the presence, in person or by
proxy, of the holders of a majority of the outstanding stock of RBMG entitled to
vote at a meeting of stockholders shall constitute a quorum for the transaction
of business.
Under the WSI Bylaws, the presence, in person or by proxy, of stockholders
holding a majority of the stock of the corporation entitled to vote shall
constitute a quorum at all meetings of the stockholders.
APPRAISAL RIGHTS
Holders of WSI Common Stock are entitled to appraisal rights under Section
262 of the DGCL in connection with the WSI Merger. A person having a beneficial
interest in shares of WSI Common Stock held of record in the name of another
person, such as a broker or nominee, must act promptly to cause the record
holder to follow the steps summarized below properly and in a timely manner to
perfect whatever appraisal rights the beneficial owner may have. Holders of RBMG
Common Stock are not entitled to appraisal rights with respect to the WSI Merger
under Section 262 of the DGCL.
The following discussion is not a complete statement of the law pertaining
to appraisal rights under the DGCL and is qualified in its entirety by the full
text of Section 262, which is reprinted in its entirety as Annex F to this Joint
Proxy Statement/Prospectus. All references in Section 262 and in this summary to
a "stockholder" are to the record holder of the shares of WSI Common Stock as to
which appraisal rights are asserted.
Under the DGCL, holders of shares of WSI Common Stock who follow the
procedures set forth in Section 262 will be entitled to have their shares of WSI
Common Stock appraised by the Delaware Court of Chancery and to receive payment
of the "fair value" of such shares, exclusive of any element of value arising
from the accomplishment or expectation of the WSI Merger, together with a fair
rate of interest, if any, as determined by such court.
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Under Section 262, where a merger is to be submitted for approval at a
meeting of stockholders, as in the case of the WSI Special Meeting, the
corporation, not less than 20 days prior to the meeting, must notify each of its
stockholders who was a stockholder on the record date of the meeting with
respect to shares for which appraisal rights are available that such appraisal
rights are available and include in such notice a copy of Section 262. This
Joint Proxy Statement/Prospectus shall constitute such notice to the holders of
shares of WSI Common Stock, and the applicable statutory provisions of the DGCL
are attached to this Joint Proxy Statement/ Prospectus as Annex F. Any
stockholder who wishes to exercise such appraisal rights or who wishes to
preserve his right to do so should review the following discussion and Annex F
carefully because failure to timely and properly comply with the procedures
specified will result in the loss of appraisal rights under the DGCL.
A holder of shares of WSI Common Stock wishing to exercise his or her
appraisal rights must deliver to WSI, before the vote on the WSI Merger
Agreement at the WSI Special Meeting, a written demand for appraisal of his or
her shares of WSI Common Stock and must not vote in favor of adoption of the WSI
Merger Agreement. Because a proxy which does not contain voting instructions
will, unless revoked, be voted for adoption of the WSI Merger Agreement, a
holder of shares of WSI Common Stock who votes by proxy and who wishes to
exercise his or her appraisal rights must (i) vote against adoption of the WSI
Merger Agreement or (ii) abstain from voting on adoption of the WSI Merger
Agreement. A vote against adoption of the WSI Merger Agreement, in person or by
proxy, will not in and of itself constitute a written demand for appraisal
satisfying the requirements of Section 262. In addition, a holder of shares of
WSI Common Stock wishing to exercise his or her appraisal rights must hold of
record such shares on the date the written demand for appraisal is made and must
continue to hold such shares until the WSI Effective Time.
Only a holder of record of shares of WSI Common Stock is entitled to assert
appraisal rights for the shares of WSI Common Stock registered in that holder's
name. A demand for appraisal should be executed by or on behalf of the holder of
record, fully and correctly, as his or her name appears on his or her stock
certificates. If the shares of WSI Common Stock are owned of record in a
fiduciary capacity, such as by a trustee, guardian or custodian, execution of
the demand should be made in that capacity, and if the shares of WSI Common
Stock are owned of record by more than one person, as in a joint tenancy or
tenancy in common, the demand should be executed by or on behalf of all joint
owners. An authorized agent, including one or more joint owners, may execute a
demand for appraisal on behalf of a holder of record; however, the agent must
identify the record owner or owners and expressly disclose the fact that, in
executing the demand, the agent is agent for such owner or owners. A record
holder such as a broker who holds shares of WSI Common Stock as nominee for
several beneficial owners may exercise appraisal rights with respect to the
shares of WSI Common Stock held for one or more beneficial owners while not
exercising such rights with respect to the shares of WSI Common Stock held for
other beneficial owners. In such case, the written demand should set forth the
number of shares of WSI Common Stock as to which appraisal is sought, and where
no number of shares of WSI Common Stock is expressly mentioned, the demand will
be presumed to cover all shares of WSI Common Stock held in the name of the
record owner. Stockholders who hold their shares of WSI Common Stock in
brokerage accounts or other nominee forms and who wish to exercise appraisal
rights are urged to consult with their brokers to determine the appropriate
procedures for the making of a demand for appraisal by such a nominee. All
written demands for appraisal should be sent or delivered to WSI at 4 Campus
Drive, Parsippany, New Jersey 07054, Attention: Secretary.
Within ten days after the WSI Effective Time, WSI, as the surviving
corporation in the WSI Merger, must send a notice as to the effectiveness of the
WSI Merger to each person who has satisfied the appropriate provisions of
Section 262 and did not vote for approval and adoption of the WSI Merger
Agreement. Within 120 days after the WSI Effective Time, but not thereafter, WSI
or any stockholder entitled to appraisal rights under Section 262 may file a
petition in the Delaware Court of Chancery demanding a determination of the fair
value of the shares of WSI Common Stock. WSI is under no obligation to, and has
no present intention to, file a petition with respect to the appraisal of the
fair value of the shares of WSI Common Stock. Accordingly, it is the obligation
of the WSI Stockholders to initiate all necessary action to perfect their
appraisal rights within the time period prescribed in Section 262.
Within 120 days after the WSI Effective Time, any stockholder who has
complied with the requirements for exercise of appraisal rights will be
entitled, upon written request, to receive from WSI a statement setting forth
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the aggregate number of shares of WSI Common Stock not voted in favor of
adoption of the WSI Merger Agreement and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such statements must be mailed within ten days after a written request therefor
has been received by WSI.
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Delaware Court of Chancery will determine which WSI Stockholders
are entitled to appraisal rights and thereafter will appraise the shares of WSI
Common Stock owned by such stockholders, determining the fair value of such
shares of WSI Common Stock exclusive of any element of value arising from the
accomplishment or expectation of the WSI Merger, together with a fair rate of
interest to be paid, if any, upon the amount determined to be the fair value. In
determining fair value, the Delaware Court of Chancery is to take into account
all relevant factors. In Weinberger v. UOP Inc., et. al., the Delaware Supreme
Court discussed factors that could be considered in determining fair value in an
appraisal proceeding, stating that "proof of value by any techniques or methods
which are generally considered acceptable in the financial community and
otherwise admissible in court" should be considered and that "[f]air price
obviously requires consideration of all relevant factors involving the value of
a company." The Delaware Supreme Court stated that in making this determination
of fair value the court must consider "market value, asset value, dividends,
earnings prospects, the nature of the enterprise and any other facts which were
known or which could be ascertained as of the date of merger which throw any
light on future prospects of the merged corporation." The Delaware Supreme Court
has construed Section 262 to mean that "elements of future value, including the
nature of the enterprise, which are known or susceptible of proof as of the date
of the merger and not the product of speculation, may be considered." However,
the court noted that Section 262 provides that fair value is to be determined
"exclusive of any element of value arising from the accomplishment or
expectation of the merger."
WSI Stockholders considering seeking appraisal rights should be aware that
the fair value of their shares of WSI Common Stock determined under Section 262
could be more than, the same as or less than the value of the merger
consideration they will be entitled to receive pursuant to the WSI Merger
Agreement if they do not seek appraisal of their shares of WSI Common Stock and
that opinions of investment banking firms as to fairness from a financial point
of view are not necessarily opinions as to fair value under Section 262. The
cost of the appraisal proceeding may be determined by the Delaware Court of
Chancery and taxed upon the parties as the Delaware Court of Chancery deems
equitable in the circumstances. Upon application of a dissenting stockholder,
the Delaware Court of Chancery may order that all or a portion of the expenses
incurred by any dissenting stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorneys' fees and the
fees and expenses of experts, be charged pro rata against the value of all
shares of WSI Common Stock entitled to appraisal. In the absence of such a
determination or assessment, each party bears its own expenses.
Any holder of WSI Common Stock who has duly demanded an appraisal in
compliance with Section 262 will not, after the WSI Effective Time, be entitled
to vote the shares of WSI Common Stock subject to such demand for any purpose or
be entitled to the payment of dividends or other distributions on those shares
(except dividends or other distributions payable to holders of record of shares
of WSI Common Stock as of a date prior to the WSI Effective Time).
If any WSI Stockholder who demands appraisal of his shares of WSI Common
Stock under Section 262 fails to perfect, or effectively withdraws or loses, his
right to appraisal, as provided in the DGCL, the shares of WSI Common Stock of
such stockholder will be converted into the right to receive shares of RBMG
Common Stock in accordance with the WSI Exchange Ratios. A stockholder will fail
to perfect, or effectively lose or withdraw, his right to appraisal if no
petition for appraisal is filed within 120 days after the WSI Effective Time, or
if the stockholder delivers to WSI a written withdrawal of his demand for
appraisal and an acceptance of the WSI Merger, except that any such attempt to
withdraw made more than 60 days after the WSI Effective Time will require the
written approval of WSI as the surviving corporation.
Failure to follow any of the steps required by Section 262 of the DGCL for
perfecting appraisal rights may result in the loss of such rights (in which
event a stockholder will be entitled to receive shares of RBMG Common Stock in
accordance with the WSI Exchange Ratios). In view of the complexity of these
provisions of Delaware law, stockholders who are considering dissenting from the
approval and adoption of the WSI Merger Agreement and the WSI Merger and
exercising their rights under Section 262 should consult their legal advisors.
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Combined Financial Statements
have been prepared based on the historical financial statements of RBMG and RBC
for the year ended December 31, 1996 and the three month period ended March 31,
1997, and based on the historical financial statements of WSI for the nine month
period ended December 31, 1996 and the three month period ended March 31, 1997.
The Unaudited Pro Forma Condensed Combined Statements of Income for the year
ended December 31, 1996 and the three months ended March 31, 1997 give effect to
the RBC Merger as if it and the spin-off of RPG had occurred on January 1, 1996.
The Unaudited Pro Forma Condensed Combined Statements of Income for the year
ended December 31, 1996 and the three months ended March 31, 1997 give effect to
the WSI Merger as if it had occurred on April 1, 1996 (the date of WSI's
leveraged buyout of the Predecessors (as hereinafter defined)). The Unaudited
Pro Forma Condensed Combined Balance Sheets as of March 31, 1997 give effect to
the RBC Merger and the WSI Merger as if they had occurred on March 31, 1997.
RBMG proposes to separately merge with RBC and WSI as further described
elsewhere herein. Accordingly, and consistent with the purposes of this Joint
Proxy Statement/Prospectus, the Unaudited Pro Forma Condensed Combined Financial
Statements separately present and give effect to: (i) the RBC Merger, (ii) the
WSI Merger, and (iii) both the RBC Merger and the WSI Merger.
Pro forma adjustments pertaining to RBC are prepared consistent with the
expectation that the RBC Merger will be accounted for under the purchase method
of accounting. The estimated total purchase price for the RBC Merger has been
allocated to tangible and identifiable intangible assets and liabilities based
upon management's estimate of their respective fair values with the excess of
estimated cost over the fair value of the net assets acquired allocated to
goodwill. The estimated allocations of the purchase price are expected to be
revised as additional information concerning asset and liability valuation is
obtained and as the composition of RBC's assets and liabilities change between
the date of the RBC Merger assumed for purposes of preparing the Unaudited Pro
Forma Condensed Combined Financial Statements and the RBC Effective Time. Pro
forma adjustments pertaining to WSI are prepared consistent with the expectation
that the WSI Merger will be accounted for under the pooling of interests method,
whereby the historical balances and results of RBMG and WSI will be combined and
carried forward on the books of RBMG at previously recorded amounts. Net income
of RBMG after the WSI Merger will include the net income of RBMG and WSI for the
entire fiscal period in which the closing of the WSI Merger occurs. The reported
net income of RBMG for prior periods will be combined with that of WSI from
WSI's inception (April 1, 1996).
The pro forma adjustments are based on currently available information and
upon certain assumptions that management believes to be reasonable in the
circumstances. The Unaudited Pro Forma Condensed Combined Financial Statements
are for illustrative purposes only and should not be viewed as a projection or
forecast of the combined company's performance for any future period. The
Unaudited Pro Forma Condensed Combined Financial Statements do not purport to
present the combined company's actual financial position or results of
operations had the RBC Merger or the WSI Merger actually occurred on the dates
assumed for purposes of preparation. Such Unaudited Pro Forma Condensed Combined
Financial Statements should be read in conjunction with the historical
consolidated financial statements of RBMG, RBC and WSI and the notes relating
thereto, as well as the other information included elsewhere in this Joint Proxy
Statement/Prospectus or incorporated herein by reference.
104
<PAGE> 124
RBMG AND RBC
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
MARCH 31, 1997
<TABLE>
<CAPTION>
PRO FORMA COMBINED
RBMG RBC ADJUSTMENTS RBMG AND RBC
---------- -------- ----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Cash........................................ $ 3,677 $ 8,568 $ (1,400)(1) $ 10,845
Receivables................................. 63,838 2,267 66,105
Mortgage-backed securities.................. 194,525 194,525
Mortgage loans held for sale................ 789,097 789,097
Lease receivables, net...................... 46,709 1,470(2) 48,179
Mortgage servicing rights, net.............. 130,006 1,620 4,380(2) 136,006
Investment in RBMG.......................... 63,374 35,564(2)
(98,938)(3)
Investment in unaffiliated company.......... 1,500 2,300(2) 3,800
Premises and equipment, net................. 21,055 1,097 22,152
Goodwill and other intangibles, net......... 3,007 1,500(1)
(3,007)(2)
6,492(2) 7,992
Other assets................................ 32,493 5,580 (100)(1)
(518)(2) 37,455
---------- -------- -------- ----------
Total assets...................... $1,234,691 $133,722 $(52,257) $1,316,156
========== ======== ======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings....................... $1,001,329 $ 31,596 $ $1,032,925
Accrued expenses and other liabilities...... 71,686 20,199 2,920(2) 94,805
---------- -------- -------- ----------
Total liabilities................. 1,073,015 51,795 2,920 1,127,730
---------- -------- -------- ----------
Common stock................................ 193 85 (74)(3)
(85)(4)
94(5) 213
Additional paid-in capital.................. 150,052 55,085 43,761(2)
(98,864)(3)
26,842(4)
(94)(5) 176,782
Retained earnings........................... 15,872 26,757 (26,757)(4) 15,872
Unearned shares of ESOP..................... (4,441) (4,441)
---------- -------- -------- ----------
Total stockholders' equity........ 161,676 81,927 (55,177) 188,426
---------- -------- -------- ----------
Total liabilities and
stockholders' equity............ $1,234,691 $133,722 $(52,257) $1,316,156
========== ======== ======== ==========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
105
<PAGE> 125
RBMG AND RBC
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
PRO FORMA COMBINED
RBMG RBC ADJUSTMENTS RBMG AND RBC
------------- -------- ------------- --------------
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
REVENUES
Interest income................................ $ 13,455 $1,905 $ (122)(6) $ 15,238
Interest expense............................... (9,720) (663) (10,383)
----------- ------ ------- -----------
Net interest income.................. 3,735 1,242 (122) 4,855
Net gain on sale or securitization and fees on
mortgage loans or leases..................... 17,027 476 17,503
Commercial mortgage origination income......... 477 477
Gain on sale of mortgage servicing rights...... 1,491 1,491
Loan and lease servicing fees.................. 7,535 858 8,393
Equity in undistributed earnings of RBMG....... 1,775 (1,775)(7)
Other income................................... 269 1,607 1,876
----------- ------ ------- -----------
Total revenues....................... 30,057 6,435 (1,897) 34,595
----------- ------ ------- -----------
EXPENSES
Salary and employee benefits................... 12,264 2,483 8(9) 14,755
Occupancy and equipment........................ 1,592 303 1,895
Amortization of mortgage servicing rights...... 4,108 73 137(6) 4,318
Amortization of goodwill and other
intangibles.................................. 50 100(6)
(50)(6) 100
Provision for loan and lease losses............ 265 390 655
General and administrative..................... 4,610 935 5,545
----------- ------ ------- -----------
Total expenses................................. 22,839 4,234 195 27,268
----------- ------ ------- -----------
Income before taxes............................ 7,218 2,201 (2,092) 7,327
Income tax expense............................. 2,748 313 (136)(7)
(3)(9) 2,922
----------- ------ ------- -----------
Net income........................... $ 4,470 $1,888 $(1,953) $ 4,405
=========== ====== ======= ===========
Weighted average common shares outstanding*.... 19,553,072 21,553,072
Net income per common share.................... $ 0.23 $ 0.20
</TABLE>
- ---------------
* Weighted average common shares outstanding of RBMG, for purposes of the
condensed combined RBMG and RBC pro forma presentation, have been adjusted to
consider the issuance of 9,397,238 shares of RBMG Common Stock (which assumes
issuance, prior to the RBC Effective Time, of an additional 211,363 shares of
RBC Common Stock in connection with the termination of RBC's Phantom Stock
Plans) to effect the RBC Merger, net of 7,397,238 shares of RBMG Common Stock
currently owned by RBC.
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
106
<PAGE> 126
RBMG AND RBC
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
COMBINED
SPIN-OFF REVISED PRO FORMA RBMG
RBMG RBC OF RPG RBC ADJUSTMENTS AND RBC
----------- ------- -------- ------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Interest income.............. $ 62,858 $13,342 $ (200) $13,142 $ (490)(6) $ 75,510
Interest expense............. (45,956) (5,212) (5,212) (51,168)
----------- ------- -------- ------- -------- -----------
Net interest income.......... 16,902 8,130 (200) 7,930 (490) 24,342
Net gain on sale or
securitization and fees on
mortgage loans or leases... 79,178 3,124 3,124 82,302
Commercial mortgage
origination income......... 4,416 4,416 4,416
Gain on sale of mortgage
servicing rights........... 1,105 1,105
Loan and lease servicing
fees....................... 28,763 2,508 2,508 31,271
Credit card fees............. 18,424 (18,424)
Equity in undistributed
earnings of RBMG........... 7,424 7,424 (7,424)(7)
Gain on sale of RBMG stock... 2,456 2,456 (2,456)(8)
Other income................. 669 1,121 1,121 1,790
----------- ------- -------- ------- -------- -----------
Total revenues..... 126,617 47,603 (18,624) 28,979 (10,370) 145,226
----------- ------- -------- ------- -------- -----------
EXPENSES
Salary and employee
benefits................... 55,578 18,360 (4,478) 13,882 (213)(9) 69,247
Occupancy and equipment...... 5,640 1,958 (763) 1,195 6,835
Amortization of mortgage
servicing rights........... 14,934 209 209 548(6) 15,691
Amortization of goodwill and
other intangibles.......... 264 264 400(6)
(264)(6) 400
Provision for loan and lease
losses..................... 817 2,391 2,391 3,208
General and administrative... 19,100 16,701 (13,438) 3,263 22,363
----------- ------- -------- ------- -------- -----------
Total expenses..... 96,069 39,883 (18,679) 21,204 471 117,744
----------- ------- -------- ------- -------- -----------
Income before taxes.......... 30,548 7,720 55 7,775 (10,841) 27,482
Income tax expense........... 10,925 467 (280) 187 (568)(7)
(939)(8)
82(9) 9,687
----------- ------- -------- ------- -------- -----------
Net income......... $ 19,623 $ 7,253 $ 335 $ 7,588 $ (9,416) $ 17,795
=========== ======= ======== ======= ======== ===========
Weighted average common
shares outstanding*........ 18,240,994 20,240,994
Net income per common
share...................... $ 1.08 $ 0.88
</TABLE>
- ---------------
* Weighted average common shares outstanding of RBMG, for purposes of the
condensed combined RBMG and RBC pro forma presentation, have been adjusted to
consider the issuance of 9,397,238 shares of RBMG Common Stock (which assumes
issuance, prior to the RBC Effective Time, of an additional 211,363 shares of
RBC Common Stock in connection with the termination of RBC's Phantom Stock
Plans) to effect the RBC Merger, net of 7,397,238 shares of RBMG Common Stock
currently owned by RBC.
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
107
<PAGE> 127
RBMG AND WSI
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
MARCH 31, 1997
<TABLE>
<CAPTION>
PRO FORMA COMBINED
RBMG WSI ADJUSTMENTS RBMG AND WSI
---------- -------- ----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Cash........................................... $ 3,677 $ 2,692 $ $ 6,369
Receivables.................................... 63,838 63,838
Residual certificates.......................... 38,241 38,241
Mortgage-backed securities..................... 194,525 194,525
Mortgage loans held for sale................... 789,097 117,395 906,492
Mortgage servicing rights, net................. 130,006 130,006
Premises and equipment, net.................... 21,055 1,138 22,193
Goodwill and other intangibles, net............ 3,705 3,705
Other assets................................... 32,493 5,586 38,079
---------- -------- ----- ----------
Total assets......................... $1,234,691 $168,757 $ $1,403,448
========== ======== ===== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings.......................... $1,001,329 $123,701 $ $1,125,030
Accrued expenses and other liabilities......... 71,686 18,227 89,913
---------- -------- ----- ----------
Total liabilities.................... 1,073,015 141,928 1,214,943
---------- -------- ----- ----------
Common stock................................... 193 * 163(10) 356
Additional paid-in capital..................... 150,052 250 (163)(10) 150,139
Retained earnings.............................. 15,872 26,579 42,451
Unearned shares of ESOP........................ (4,441) (4,441)
---------- -------- ----- ----------
Total stockholders' equity........... 161,676 26,829 188,505
---------- -------- ----- ----------
Total liabilities and stockholders'
equity............................. $1,234,691 $168,757 $ $1,403,448
========== ======== ===== ==========
</TABLE>
- ---------------
* Amount less than $1.
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
108
<PAGE> 128
RBMG AND WSI
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
PRO FORMA COMBINED
RBMG WSI ADJUSTMENTS RBMG AND WSI
----------- ------- ----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE
DATA)
<S> <C> <C> <C> <C>
REVENUES
Interest income................................ $ 13,455 $ 3,713 $ $ 17,168
Interest expense............................... (9,720) (3,436) (13,156)
----------- ------- ------- -----------
Net interest income.................. 3,735 277 4,012
Net gain on sale or securitization and fees on
mortgage loans............................... 17,027 35,799 52,826
Gain on sale of mortgage servicing rights...... 1,491 1,491
Loan servicing fees............................ 7,535 7,535
Other income................................... 269 269
----------- ------- ------- -----------
Total revenues....................... 30,057 36,076 66,133
----------- ------- ------- -----------
EXPENSES
Salary and employee benefits................... 12,264 3,192 1,993(11) 17,449
Occupancy and equipment........................ 1,592 463 2,055
Amortization of mortgage servicing rights...... 4,108 4,108
Amortization of goodwill and other
intangibles.................................. 103 103
Provision for loan losses...................... 265 242 507
General and administrative..................... 4,610 1,414 6,024
----------- ------- ------- -----------
Total expenses....................... 22,839 5,414 1,993 30,246
----------- ------- ------- -----------
Income before taxes............................ 7,218 30,662 (1,993) 35,887
Income tax expense............................. 2,748 12,282 (767)(11) 14,263
----------- ------- ------- -----------
Net income........................... $ 4,470 $18,380 $(1,226) $ 21,624
=========== ======= ======= ===========
Weighted average common shares outstanding*.... 19,553,072 39,013,826
Net income per common share.................... $ 0.23 $ 0.55
</TABLE>
- ---------------
* Weighted average common shares outstanding of RBMG, for purposes of the
condensed combined RBMG and WSI pro forma presentation, have been adjusted to
consider the issuance, effective April 1, 1996 (the date of WSI's leveraged
buyout of the Predecessors), of 16,315,788 shares of RBMG Common Stock and
treats as issued an additional 3,144,976 shares of RBMG Common Stock
potentially issuable pursuant to the conversion of the WSI Warrant, to effect
the WSI Merger.
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
109
<PAGE> 129
RBMG AND WSI
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRO FORMA COMBINED
RBMG WSI ADJUSTMENTS RBMG AND WSI
------------ --------- ------------ -------------
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
REVENUES
Interest income............................... $ 62,858 $ 13,235 $ $ 76,093
Interest expense.............................. (45,956) (10,161) (56,117)
----------- -------- -------- -----------
Net interest income................. 16,902 3,074 19,976
Net gain on sale or securitization and fees on
mortgage loans.............................. 79,178 26,343 105,521
Gain on sale of mortgage servicing rights..... 1,105 1,105
Loan servicing fees........................... 28,763 28,763
Other income.................................. 669 476 1,145
----------- -------- -------- -----------
Total revenues...................... 126,617 29,893 156,510
----------- -------- -------- -----------
EXPENSES
Salary and employee benefits.................. 55,578 8,757 968(11) 65,303
Occupancy and equipment....................... 5,640....... 1,115 6,755
Amortization of mortgage servicing rights..... 14,934 14,934
Amortization of goodwill and other
intangibles................................. 309 309
Provision for loan losses..................... 817 811 1,628
General and administrative.................... 19,100 4,002 23,102
----------- -------- -------- -----------
Total expenses...................... 96,069 14,994 968 112,031
----------- -------- -------- -----------
Income before taxes........................... 30,548 14,899 (968) 44,479
Income tax expense............................ 10,925 6,700 (373)(11) 17,252
----------- -------- -------- -----------
Net income.......................... $ 19,623 $ 8,199 $ (595) $ 27,227
=========== ======== ======== ===========
Weighted average common shares outstanding*... 18,240,994 32,836,559
Net income per common share................... $ 1.08 $ 0.83
</TABLE>
- ---------------
* Weighted average common shares outstanding of RBMG, for purposes of the
condensed combined RBMG and WSI pro forma presentation, have been adjusted to
consider the issuance, effective April 1, 1996 (the date of WSI's leveraged
buyout of the Predecessors), of 16,315,788 shares of RBMG Common Stock and
treats as issued an additional 3,144,976 shares of RBMG Common Stock
potentially issuable pursuant to the conversion of the WSI Warrant, to effect
the WSI Merger.
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
110
<PAGE> 130
RBMG AND RBC AND WSI
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
MARCH 31, 1997
<TABLE>
<CAPTION>
COMBINED
PRO FORMA COMBINED PRO FORMA RBMG AND
RBMG RBC ADJUSTMENTS RBMG AND RBC WSI ADJUSTMENTS RBC AND WSI
---------- -------- ----------- ------------ -------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash............................ $ 3,677 $ 8,568 $ (1,400)(1) $ 10,845 $ 2,692 $ $ 13,537
Receivables..................... 63,838 2,267 66,105 66,105
Residual certificates........... 38,241 38,241
Mortgage-backed securities...... 194,525 194,525 194,525
Mortgage loans held for sale.... 789,097 789,097 117,395 906,492
Lease receivables, net.......... 46,709 1,470(2) 48,179 48,179
Mortgage servicing rights,
net........................... 130,006 1,620 4,380(2) 136,006 136,006
Investment in RBMG.............. 63,374 35,564(2)
(98,938)(3)
Investment in unaffiliated
company....................... 1,500 2,300(2) 3,800 3,800
Premises and equipment, net..... 21,055 1,097 22,152 1,138 23,290
Goodwill and other intangibles,
net........................... 3,007 1,500(1) 3,705
(3,007)(2)
6,492(2) 7,992 11,697
Other assets.................... 32,493 5,580 (100)(1) 5,586
(518)(2) 37,455 43,041
---------- -------- -------- ---------- -------- ----- ----------
Total assets........... $1,234,691 $133,722 $(52,257) $1,316,156 $168,757 $ $1,484,913
========== ======== ======== ========== ======== ===== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings........... $1,001,329 $ 31,596 $ $1,032,925 $123,701 $ $1,156,626
Accrued expenses and other
liabilities................... 71,686 20,199 2,920(2) 94,805 18,227 113,032
---------- -------- -------- ---------- -------- ----- ----------
Total liabilities...... 1,073,015 51,795 2,920 1,127,730 141,928 1,269,658
---------- -------- -------- ---------- -------- ----- ----------
Common stock.................... 193 85 (74)(3) * 180(12)
(85)(4)
94(5) 213 393
Additional paid-in capital...... 150,052 55,085 43,761(2) 250 (180)(12)
(98,864)(3)
26,842(4)
(94)(5) 176,782 176,572
Retained earnings............... 15,872 26,757 (26,757)(4) 15,872 26,579 42,451
Unearned shares of ESOP......... (4,441) (4,441) (4,441)
---------- -------- -------- ---------- -------- ----- ----------
Total stockholders'
equity............... 161,676 81,927 (55,177) 188,426 26,829 215,255
---------- -------- -------- ---------- -------- ----- ----------
Total liabilities &
stockholders'
equity............... $1,234,691 $133,722 $(52,257) $1,316,156 $168,757 $ $1,484,913
========== ======== ======== ========== ======== ===== ==========
</TABLE>
- ---------------
* Amount less than $1.
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
111
<PAGE> 131
RBMG AND RBC AND WSI
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
PRO FORMA
RBMG RBC ADJUSTMENTS
---------- ------ -----------
(DOLLARS IN THOUSANDS, EXCEPT SHA
<S> <C> <C> <C>
REVENUES
Interest income.......................... $ 13,455 $1,905 $ (122)(6)
Interest expense......................... (9,720) (663)
---------- ------ -------
Net interest income.............. 3,735 1,242 (122)
Net gain on sale or securitization and
fees on mortgage loans or leases....... 17,027 476
Commercial mortgage origination income... 477
Gain on sale of mortgage servicing
rights................................. 1,491
Loan and lease servicing fees............ 7,535 858
Equity in undistributed earnings of
RBMG................................... 1,775 (1,775)(7)
Other income........................... 269 1,607
---------- ------ -------
Total revenues................... 30,057 6,435 (1,897)
---------- ------ -------
EXPENSES
Salary and employee benefits............. 12,264 2,483 8(9)
Occupancy and equipment.................. 1,592 303
Amortization of mortgage servicing
rights................................. 4,108 73 137(6)
Amortization of goodwill and other
intangibles............................ 50 100(6)
(50)(6)
Provision for loan and lease losses...... 265 390
General and administrative............... 4,610 935
---------- ------ -------
Total expenses................... 22,839 4,234 195
---------- ------ -------
Income before taxes...................... 7,218 2,201 (2,092)
Income tax expense....................... 2,748 313 (136)(7)
(3)(9)
---------- ------ -------
Net income............................... $ 4,470 $1,888 $(1,953)
========== ====== =======
Weighted average common shares
outstanding*........................... 19,553,072
Net income per common share.............. $ 0.23
<CAPTION>
COMBINED
COMBINED PRO FORMA RBMG AND
RBMG AND RBC WSI ADJUSTMENTS RBC AND WSI
------------ ------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
REVENUES
Interest income.......................... $ 15,238 $ 3,713 $ $ 18,951
Interest expense......................... (10,383) (3,436) (13,819)
---------- ------- ------- ----------
Net interest income.............. 4,855 277 5,132
Net gain on sale or securitization and
fees on mortgage loans or leases....... 17,503 35,799 53,302
Commercial mortgage origination income... 477 477
Gain on sale of mortgage servicing
rights................................. 1,491 1,491
Loan and lease servicing fees............ 8,393 8,393
Equity in undistributed earnings of
RBMG...................................
Other income........................... 1,876 1,876
---------- ------- ------- ----------
Total revenues................... 34,595 36,076 70,671
---------- ------- ------- ----------
EXPENSES
Salary and employee benefits............. 14,755 3,192 1,993(11) 19,940
Occupancy and equipment.................. 1,895 463 2,358
Amortization of mortgage servicing
rights................................. 4,318 4,318
Amortization of goodwill and other
intangibles............................ 103
100 203
Provision for loan and lease losses...... 655 242 897
General and administrative............... 5,545 1,414 6,959
---------- ------- ------- ----------
Total expenses................... 27,268 5,414 1,993 34,675
---------- ------- ------- ----------
Income before taxes...................... 7,327 30,662 (1,993) 35,996
Income tax expense....................... 12,282 (767)(11)
2,922 14,437
---------- ------- ------- ----------
Net income............................... $ 4,405 $18,380 $(1,226) $ 21,559
========== ======= ======= ==========
Weighted average common shares
outstanding*........................... 42,935,434
Net income per common share.............. $ 0.50
</TABLE>
- ---------------
* Weighted average common shares outstanding of RBMG, for purposes of the
condensed combined RBMG and RBC and WSI pro forma presentation, have been
adjusted to consider: (i) the issuance of 9,397,238 shares of RBMG Common
Stock (which assumes issuance, prior to the RBC Effective Time, of an
additional 211,363 shares of RBC Common Stock in connection with the
termination of RBC's Phantom Stock Plans) to effect the RBC Merger, net of
7,397,238 shares of RBMG Common Stock currently owned by RBC and (ii) the
issuance, effective April 1, 1996 (the date of WSI's leveraged buyout of the
Predecessors) of 17,962,834 shares of RBMG Common Stock and treats as issued
an additional 3,419,528 shares of RBMG Common Stock potentially issuable
pursuant to the conversion of the WSI Warrant, to effect the WSI Merger.
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
112
<PAGE> 132
RBMG AND RBC AND WSI
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
SPIN-OFF REVISED PRO FORMA
RBMG RBC OF RPG RBC ADJUSTMENTS
----------- ------- -------- ------- -----------
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
REVENUES
Interest income.................. $ 62,858 $13,342 $ (200) $13,142 $ (490)(6)
Interest expense................. (45,956) (5,212) (5,212)
----------- ------- -------- ------- --------
Net interest income...... 16,902 8,130 (200) 7,930 (490)
Net gain on sale or
securitization and fees on
mortgage loans or leases....... 79,178 3,124 3,124
Commercial mortgage origination
income......................... 4,416 4,416
Gain on sale of mortgage
servicing rights............... 1,105
Loan and lease servicing fees.... 28,763 2,508 2,508
Credit card fees................. 18,424 (18,424)
Equity in undistributed earnings
of RBMG........................ 7,424 7,424 (7,424)(7)
Gain on sale of RBMG stock....... 2,456 2,456 (2,456)(8)
Other income..................... 669 1,121 1,121
----------- ------- -------- ------- --------
Total revenues........... 126,617 47,603 (18,624) 28,979 (10,370)
----------- ------- -------- ------- --------
EXPENSES
Salary and employee benefits..... 55,578 18,360 (4,478) 13,882 (213)(9)
Occupancy and equipment.......... 5,640 1,958 (763) 1,195
Amortization of mortgage
servicing rights............... 14,934 209 209 548(6)
Amortization of goodwill and
other intangibles.............. 264 264 400(6)
(264)(6)
Provision for loan and lease
losses......................... 817 2,391 2,391
General and administrative....... 19,100 16,701 (13,438) 3,263
----------- ------- -------- ------- --------
Total expenses........... 96,069 39,883 (18,679) 21,204 471
----------- ------- -------- ------- --------
Income before taxes.............. 30,548 7,720 55 7,775 (10,841)
Income tax expense............... 10,925 467 (280) 187 (568)(7)
(939)(8)
82(9)
----------- ------- -------- ------- --------
Net income............... $ 19,623 $ 7,253 $ 335 $ 7,588 $ (9,416)
=========== ======= ======== ======= ========
Weighted average common shares
outstanding*................... 18,240,994
Net income per common share...... $ 1.08
<CAPTION>
COMBINED
COMBINED PRO FORMA RBMG AND
RBMG AND RBC WSI ADJUSTMENTS RBC AND WSI
------------ -------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
REVENUES
Interest income.................. $ 75,510 $ 13,235 $ $ 88,745
Interest expense................. (51,168) (10,161) (61,329)
----------- -------- ------- -----------
Net interest income...... 24,342 3,074 27,416
Net gain on sale or
securitization and fees on
mortgage loans or leases....... 82,302 26,343 108,645
Commercial mortgage origination
income......................... 4,416 4,416
Gain on sale of mortgage
servicing rights............... 1,105 1,105
Loan and lease servicing fees.... 31,271 31,271
Credit card fees.................
Equity in undistributed earnings
of RBMG........................
Gain on sale of RBMG stock.......
Other income..................... 1,790 476 2,266
----------- -------- ------- -----------
Total revenues........... 145,226 29,893 175,119
----------- -------- ------- -----------
EXPENSES
Salary and employee benefits..... 69,247 8,757 968(11) 78,972
Occupancy and equipment.......... 6,835 1,115 7,950
Amortization of mortgage
servicing rights............... 15,691 15,691
Amortization of goodwill and
other intangibles.............. 309 709
400
Provision for loan and lease
losses......................... 3,208 811 4,019
General and administrative....... 22,363 4,002 26,365
----------- -------- ------- -----------
Total expenses........... 117,744 14,994 968 133,706
----------- -------- ------- -----------
Income before taxes.............. 27,482 14,899 (968) 41,413
Income tax expense............... 6,700
9,687 (373)(11) 16,014
----------- -------- ------- -----------
Net income............... $ 17,795 $ 8,199 $ (595) $ 25,399
=========== ======== ======= ===========
Weighted average common shares
outstanding*................... 36,277,765
Net income per common share...... $ 0.70
</TABLE>
- ---------------
* Weighted average common shares outstanding of RBMG, for purposes of the
condensed combined RBMG and RBC and WSI pro forma presentation, have been
adjusted to consider: (i) the issuance of 9,397,238 shares of RBMG Common
Stock (which assumes issuance, prior to the RBC Effective Time, of an
additional 211,363 shares of RBC Common Stock in connection with the
termination of RBC's Phantom Stock Plans) to effect the RBC Merger, net of
7,397,238 shares of RBMG Common Stock currently owned by RBC and (ii) the
issuance, effective April 1, 1996 (the date of WSI's leveraged buyout of the
Predecessors) of 17,962,834 shares of RBMG Common Stock and treats as issued
an additional 3,419,528 shares of RBMG Common Stock potentially issuable
pursuant to the conversion of the WSI Warrant, to effect the WSI Merger.
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
113
<PAGE> 133
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
NOTE A. NET INCOME PER COMMON SHARE
The unaudited pro forma combined net income per common share has been
calculated by dividing pro forma net income by the weighted average common
shares outstanding during the period, adjusted to consider the weighted average
pro forma effect of the shares assumed to be issued in the RBC Merger, the WSI
Merger and both the Mergers. For purposes hereof shares of RBMG Common Stock
potentially issuable pursuant to conversion of the WSI Warrant to the RBMG
Warrant as part of the WSI Merger have been treated as common stock equivalents.
Statement of Financial Accounting Standards No. 128 "Earnings per Share"
(SFAS 128) was issued in February 1997 and is effective for financial statements
for periods ending after December 15, 1997. Earlier application is not
permitted. The unaudited pro forma combined net income per common share
calculations are based on the provisions of Accounting Principles Board Opinion
No. 15, and the related interpretations thereof.
NOTE B. UNAUDITED PRO FORMA ADJUSTMENTS
The following summarizes the unaudited pro forma adjustments which are
necessary to reflect, separately, the RBC Merger and the WSI Merger, and
combined, the Mergers. All dollar amounts are presented in thousands.
RBMG AND RBC UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AND STATEMENTS
OF INCOME
As of the close of business on December 31, 1996, RBC effected a spin-off
of RPG through a distribution of RPG's common stock to RBC Stockholders. In
order to present the historical pro forma results of RBC on a comparable basis
to that of the three month period ended March 31, 1997, the unaudited pro forma
condensed combined financial statements for the year ended December 31, 1996
include adjustments to RBC's historical financial data to give effect to the
spin-off of RPG as if it occurred on January 1, 1996.
The RBMG and RBC Unaudited Pro Forma Condensed Combined Balance Sheet and
Statements of Income are prepared on the assumption that only the RBC Merger is
consummated. The pro forma adjustments are summarized as follows:
(1) To record payment of $1,500 of estimated deferrable acquisition costs,
including investment banking, legal and other professional charges, expected to
be incurred by RBMG in connection with the RBC Merger. Approximately $100 of
such charges had been paid and deferred as a component of other assets as of
March 31, 1997.
(2) To adjust RBC's various assets and liabilities to estimated fair value,
to eliminate existing RBC goodwill and other intangibles, to eliminate existing
deferred organizational and other prepaid costs included in other assets and to
record an offsetting equity adjustment.
<TABLE>
<S> <C> <C>
RBC historical book value as of March 31, 1997.............. $ 81,927
Adjusted by the following:
To adjust the investment in RBMG to estimated fair
value.................................................. 35,564
To adjust lease receivables to estimated fair value....... 1,470
To adjust mortgage servicing rights to estimated fair
value.................................................. 4,380
To adjust the investment in unaffiliated company to
estimated fair value................................... 2,300
To eliminate existing RBC goodwill and other
intangibles............................................ (3,007)
To eliminate existing RBC deferred organization and other
prepaid costs included in other assets................. (518)
To record deferred tax liabilities associated with
adjusting RBC's various assets to fair value........... (2,920)
--------
Fair value of RBC net assets acquired....................... 119,196
Purchase price.............................................. 125,688
--------
Excess of purchase price over fair value of net assets
acquired.................................................. $ 6,492
========
</TABLE>
114
<PAGE> 134
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Estimated goodwill relating to the RBC Merger is based upon a purchase
price of $125,688 which assumes the issuance of 9,397,238 shares of RBMG Common
Stock in exchange for the outstanding RBC Common Stock. For purposes of the pro
forma presentation, RBMG Common Stock was valued at $13.375 per share.
(3) To eliminate RBC's investment in 7,397,238 shares of RBMG Common Stock
at fair value. For purposes of pro forma presentation, RBMG Common Stock was
valued at $13.375 per share.
(4) To eliminate RBC's retained earnings and common stock accounts.
(5) To capitalize at par value the issuance of 9,397,238 shares of RBMG
Common Stock.
(6) To adjust for amortization of goodwill and purchase price basis
adjustments.
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE THREE
ENDED MONTHS ENDED
DECEMBER 31, 1996 MARCH 31, 1997
----------------- --------------
<S> <C> <C>
Amortization of basis adjustment to lease
receivables over an estimated three year life..... $ 490 $ 122
Amortization of basis adjustment to mortgage
servicing rights over an estimated eight year
life.............................................. 548 137
Amortization of new goodwill over an estimated 20
year life......................................... 400 100
Reversal of amortization expense recorded relating
to pre-existing RBC goodwill...................... (264) (50)
------- -----
$1,174 $ 309
======= =====
</TABLE>
(7) To eliminate RBC equity in undistributed earnings of RBMG, together
with the allocable income tax expense.
(8) To eliminate RBC's gain on sale of RBMG Common Stock, together with the
allocable income tax expense.
(9) To adjust pro forma salary and employee benefits expenses and related
income tax expense for RBMG's contractual obligations to provide for annual
bonuses to certain key employees in an amount aggregating 6.5% of pre-tax,
pre-bonus net income. During the negotiations of the Mergers, the parties
discussed possible changes to these compensation arrangements, but deferred
resolution of these matters until after consummation of the Mergers. See "The
WSI Merger -- Interests of Certain Persons in the WSI Merger."
RBMG AND WSI UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AND STATEMENTS
OF INCOME
The RBMG and WSI Unaudited Pro Forma Condensed Combined Balance Sheet and
Statements of Income are prepared on the assumption that only the WSI Merger is
consummated. The pro forma adjustments are summarized as follows.
(10) To capitalize at par value the issuance and exchange of 16,315,778
shares of RBMG Common Stock for all the outstanding WSI Common Stock which
includes 1,745,753 shares of RBMG Common Stock in exchange for the shares of WSI
Class B Common Stock issued to Greenwich in connection with the partial exercise
of the WSI Warrant immediately prior to consummation of the WSI Merger, and
excludes 3,144,976 shares of RBMG Common Stock which would become potentially
issuable pursuant to the conversion of the unexercised portion of the WSI
Warrant. See "The WSI Merger -- Terms of the WSI Merger Agreement."
(11) To adjust pro forma salary and employee benefits and related income
tax expense for RBMG's contractual obligations to provide for annual bonuses to
certain key employees in an amount aggregating 6.5% of pre-tax, pre-bonus net
income. During the negotiations of the Mergers, the parties discussed possible
changes to these compensation arrangements, but deferred resolution of these
matters until after consummation of the Mergers. See "The WSI
Merger -- Interests of Certain Persons in the WSI Merger."
115
<PAGE> 135
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
RBMG AND RBC AND WSI UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AND
STATEMENTS OF INCOME
The RBMG and RBC and WSI Unaudited Pro Forma Condensed Combined Balance
Sheet and Statements of Income are prepared on the assumption that both the RBC
Merger and the WSI Merger are consummated. With the exception of the adjustment
described below, the pro forma adjustments relating to the RBC Merger and the
WSI Merger are identical to those previously presented under the headings "RBMG
and RBC Unaudited Pro Forma Condensed Combined Balance Sheet and Statements of
Income" and "RBMG and WSI Unaudited Pro Forma Condensed Combined Balance Sheet
and Statements of Income" which should be referred to for further information
concerning those adjustments.
(12) To capitalize at par value the issuance and exchange of 17,962,834
shares of RBMG Common Stock for all the outstanding WSI Common Stock which
includes 1,924,459 shares of RBMG Common Stock in exchange for the shares of WSI
Class B Common Stock issued to Greenwich in connection with the partial exercise
of the WSI Warrant immediately prior to consummation of the WSI Merger, and
excludes 3,419,528 shares of RBMG Common Stock which would become potentially
issuable pursuant to the conversion of the unexercised portion of the WSI
Warrant. See "The WSI Merger -- Terms of the WSI Merger Agreement."
NOTE C. EARNINGS CONSIDERATIONS RELATED TO THE RBC MERGER AND THE WSI MERGER
It is expected that RBMG, or RBC or WSI, will incur charges related to the
Mergers and to the assimilation of these entities into the RBMG organization.
Anticipated charges include, but are not limited to, legal and accounting fees,
financial advisory fees, consulting fees, and similar costs which normally arise
from the consolidation of operational activities.
Aggregate charges expected to arise from the RBC Merger have been
preliminarily estimated to be in the range of $3,000 to $3,500, and aggregate
charges expected to arise from the WSI Merger have been preliminarily estimated
to be in the range of $5,000 to $5,500. Such charges have not been included in
the unaudited pro forma condensed combined financial statements.
116
<PAGE> 136
BUSINESS OF RBMG
RBMG is a full-service residential mortgage company which originates and
purchases loans through a network of approximately 897 correspondent lenders,
2,423 brokers and six retail offices at March 31, 1997. RBMG pools the mortgages
it originates or purchases, creating mortgage-backed securities, and sells these
securities to financial institutions throughout the United States. RBMG retains
in its portfolio or sells to other approved servicers the mortgage servicing
rights associated with the loans it originates or purchases. RBMG originates and
services loans made to borrowers located in 48 states and the District of
Columbia. RBMG was formed to acquire, own and operate the mortgage banking
business of the banking subsidiaries of RBC, which operated under the name
Resource Bancshares Mortgage Group, Inc. and commenced operations in May 1989.
The mortgage banking business of these subsidiaries was transferred to RBMG in
connection with an initial public offering of RBMG Common Stock in June 1993. As
part of the initial public offering of RBMG Common Stock, RBC retained
approximately 42% of the outstanding RBMG Common Stock.
BUSINESS OF RBC
GENERAL
RBC was organized as a South Carolina corporation in 1986. RBC's current
principal businesses are the origination, sale and servicing of small ticket
equipment leases and of commercial mortgage loans. RBC now owns approximately
36.5% of the outstanding RBMG Common Stock. RBC also owns an 11% interest in
Intek. As of December 31, 1996 and March 31, 1997, RBC had total consolidated
assets of $140 million and $134 million, respectively, and stockholders' equity
of $80 million and $82 million, respectively. RBC's principal executive offices
are located at 1901 Main Street, Suite 650, Columbia, South Carolina, and its
telephone number is (803) 799-2256.
SMALL TICKET EQUIPMENT LEASING BUSINESS
General. RBC's small ticket equipment leasing business is operated through
Republic Leasing. Republic Leasing originates, sells and services small ticket
equipment leases.
Lease Originations and Sales of Leases. Republic Leasing originates
equipment leases using a network of independent lease brokers as the source of
substantially all its new leases. All applications are transmitted from a broker
to Republic Leasing. As part of the origination process, Republic Leasing
performs various levels of credit analysis based on the type of equipment to be
leased and the value of the lease.
Leases originated by Republic Leasing generally have a lease value ranging
from $3,000 to $250,000 and cover a variety of types of equipment, including
manufacturing equipment, computer equipment, security equipment, office
equipment, furniture, construction equipment and tools. As of March 31, 1997,
the average lease size of Republic Leasing's lease portfolio was approximately
$10,000 and there were only two leases with a current lease receivable in excess
of $250,000.
Republic Leasing does not purchase the equipment to be leased until it has
received a noncancelable lease from a lessee and has determined that the lease
meets its criteria for funding. Upon obtaining a signed lease and other required
documentation, a Republic Leasing credit processor verifies directly with the
lessee that all the items covered by the lease have been delivered and installed
and are in working order to the lessee's satisfaction. Republic Leasing then
initiates payment to the vendor of the equipment.
Since inception, the majority of all leases generated by Republic Leasing
have been full payout, noncancelable leases, where the minimum lease payments
over the lease term cover the full cost of the equipment, installation, broker
commissions and any related expenses plus an interest factor. The leases entered
into by Republic Leasing normally require an initial amount due of between 3.0%
and 10.0% of the cost of the equipment and fixed monthly payments over a term of
one to five years. The terms and conditions of the equipment lease agreements
used by Republic Leasing do not give a lessee the option to pay the lease out in
full by remitting the discounted cash flow of payments or the net balance.
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<PAGE> 137
In December 1994, Republic Leasing completed a lease securitization, which
was accounted for as a financing and in 1995 several lease portfolios were sold
to one investor. During 1996, Republic Leasing entered into an agreement with
that investor to make available for sale a portion of Republic Leasing's lease
originations on a flow basis.
As of March 31, 1997, Republic Leasing was originating leases in 48 states
through approximately 285 independent brokers.
Lease Servicing. Republic Leasing services the lease portfolio owned by
RBC, the lease portfolio owned by the two investors who have purchased leases
from Republic Leasing and the lease portfolio held by the PSSFC Equipment Lease
Trust 1994-3 (the "Trust"). The Trust is RBC's only lease securitization
transaction. Under the terms of the lease servicing agreements, Republic Leasing
is paid servicing fees based on the dollar amount of leases serviced. It is
anticipated that the final lease securitization note secured by Trust assets
will be paid in full on June 20, 1997 at which time the remaining leases will be
transferred back to RBC.
The servicing activities performed by Republic Leasing consist of customer
service; billing and collections; lessee file maintenance; sales and property
tax collection and remittance; accounting and management reporting and
processing payments and late fees. As part of these servicing activities,
Republic Leasing follows up with a lessee who is past due on its account and
attempts to collect such amounts and, in the event the lessee fails to pay, may
repossess the collateral and prepares daily, weekly and monthly reports which
include information summarizing trial balances, past due amounts, new leases,
leases that have been paid in full and the status of collateral.
COMMERCIAL MORTGAGE BANKING BUSINESS
General. RBC operates its commercial mortgage banking business through
Laureate Realty, a second tier wholly owned subsidiary of RBC. Laureate Realty
was organized in September 1994 and during 1995 and 1996 it acquired commercial
mortgage servicing rights in connection with its acquisitions of the assets and
businesses of Mortgage Company of Indiana, Inc. (1995) and Camp & Company
(1996). As a commercial mortgage banker, Laureate Realty performs a wide range
of commercial mortgage banking services, including originating, underwriting,
placing, selling and servicing commercial mortgage loans.
Commercial Mortgage Loan Origination and Sale. As a full service
commercial mortgage banker with offices in Alabama, Indiana, North Carolina,
South Carolina, Tennessee and Virginia, Laureate Realty provides a wide range of
real estate capital markets services to owners and developers of commercial real
estate properties.
The typical users of commercial real estate mortgage banking services are
real estate developers, owners (as borrowers) and investor/lenders (as funding
sources). Due to the more specialized nature of commercial mortgage lending and
the smaller universe of lenders serving this market (in each case relative to
the residential mortgage market), borrowers rely on commercial mortgage brokers
and bankers to find competitive lenders, and these lenders (particularly
insurance companies and pension plans, which do not generally have origination
staffs located in multiple branches) rely on mortgage brokers and bankers to
source potential borrowers. Lenders generally include banks, pension funds,
insurance companies and conduits for commercial mortgage backed securities.
In originating loans, Laureate Realty works closely with both the borrower
and potential lenders from the time a loan prospect is first contacted through
the application and proposal process and throughout the documentation of the
loan to final funding. Laureate Realty typically performs extensive due
diligence and market analysis for the lenders in this process.
Laureate Realty principally targets developers and owners of higher-quality
commercial and multifamily real estate properties. The loans originated by
Laureate Realty generally are funded by institutional lenders, primarily
insurance companies. RBC believes that Laureate Realty's relationship and
credibility with its institutional lender network provide it with a competitive
advantage in the commercial mortgage banking industry.
Laureate Realty is also a member of the FHLMC's multifamily seller/servicer
program in North Carolina, South Carolina, Tennessee and Arkansas and intends to
expand into other states. Through this program, Laureate
118
<PAGE> 138
Realty sells to FHLMC and services for FHLMC multifamily commercial mortgages.
Laureate Realty also originates loans for several conduits sponsored by
investment banks and capital market areas of commercial banks. In connection
with FHLMC loans and the origination of loans for conduits, Laureate Realty may
make representations and warranties covering title to the property, lien
priority, environmental reviews and certain other matters. In the event of a
breach of such a representation and warranty, Laureate Realty could be called
upon to repurchase the loan.
Laureate Realty generally earns a fee of between 50 and 100 basis points of
the loan amount for originated or underwritten loans, plus certain additional
processing fees.
Commercial Mortgage Loan Servicing. Laureate Realty's business commenced
in September 1994 and by January 1995 a number of investors had transferred
commercial loan servicing portfolios totaling $554 million. Since that time,
through acquisitions, loan originations and transfers by other investors the
servicing portfolio has grown to $2.4 billion at March 31, 1997. At March 31,
1997, Laureate Realty was servicing 805 loans for 42 investors. At December 31,
1996 and March 31, 1997, Laureate Realty's commercial mortgage loan servicing
rights had a carrying value of $1.7 million and $1.6 million, respectively.
Currently, the primary source of Laureate Realty's commercial mortgage servicing
business is the loans it originates or underwrites. The revenue stream from
servicing contracts on commercial mortgages is relatively predictable as
prepayment penalties in commercial mortgages discourage early loan payoffs.
Commercial mortgage loan servicing involves collecting monthly mortgage
payments, maintaining escrow accounts for the payment of property taxes and
insurance premiums on behalf of borrowers, remitting payments of principal and
interest promptly to investors in the underlying mortgages, reporting to those
investors on financial transactions related to such mortgages and generally
administering the loans. The servicer also must cause properties to be inspected
periodically, determine the adequacy of insurance coverage on each property,
monitor delinquent accounts for payment and in cases of extreme delinquency,
institute and complete either appropriate forbearance arrangements or
foreclosure proceedings on behalf of investors. Servicing fees are generally
based on the outstanding principal of loans serviced and range from 3% to 25%.
119
<PAGE> 139
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF RBC
The following discussion and analysis should be read in conjunction with
the financial information and the consolidated financial statements of RBC
(including the notes thereto) included in this Joint Proxy Statement/Prospectus.
BACKGROUND
RBC was organized under the laws of the state of South Carolina in 1986.
From 1987 until May 1, 1994, RBC was a bank holding company and operated its
credit card and leasing operations as divisions of a bank subsidiary. Between
1989 and 1993, RBC also operated a residential mortgage banking business as a
division of a bank subsidiary. On June 3, 1993, RBC transferred the assets and
liabilities of its residential mortgage banking business to RBMG, a new
wholly-owned subsidiary of RBC, and RBMG simultaneously sold 58% of its common
stock in an initial public offering. Accordingly, immediately thereafter, RBC
owned 42% of the outstanding RBMG Common Stock. In 1993 and 1994, RBC sold its
retail banking assets, liabilities and operations (the "Retail Banking
Business"), and during 1994, RBC ceased to be a bank holding company. In 1994,
the credit card and leasing operations were contributed to new operating
subsidiaries of RBC, Resource Processing Group, Inc. ("RPG") and Republic
Leasing Company, Inc., respectively. Also during 1994, RBC formed Laureate
Realty, its commercial mortgage loan subsidiary. During 1995 and 1996, Laureate
Realty acquired two commercial mortgage banking operations and accounted for
both transactions under the purchase method of accounting. On December 31, 1996,
Republic Leasing Company, Inc. was merged into RBC which now operates as a
division and as more fully described in Note 3 to RBC's consolidated financial
statements, the common stock of RPG was distributed to the RBC Stockholders in a
spin-off transaction (the "Spin-off").
In March 1996, RBMG completed a common stock offering. In that offering,
RBC purchased an additional 896,552 shares of RBMG Common Stock resulting in an
in-substance sale of a portion of RBC's investment in RBMG. As a result of that
transaction, a number of stock dividends and other stock issuances by RBMG, RBC
owns 36.5% of the outstanding RBMG Common Stock as of the date of this Joint
Proxy Statement/Prospectus.
Subsequent to the Spin-off, RBC, including its subsidiaries, have engaged
primarily in commercial small ticket equipment lease financing and servicing and
commercial mortgage banking.
SMALL TICKET EQUIPMENT LEASING
Substantially all of RBC's lease receivables are acquired from independent
brokers who operate throughout the continental United States. The majority of
the leases are commercial financing leases which do not provide for early payout
and which contain "hell or high water" provisions (i.e., repayment is required
without regard to the suitability, performance or condition of the leased
equipment). In substantially all instances, the lessee obtains title to the
equipment at the end of the lease by payment of either one dollar or a purchase
option which is usually no more than ten percent of the original lease amount.
The small ticket equipment leasing business has become increasingly competitive
in the last 12 to 15 months as more financial institutions enter the leasing
business in search of high yielding assets. As a result, the "all-in" leasing
yield on RBC's new lease production has declined from prime plus 6.0% to 6.5% in
1994 to prime plus 4.5% to 5.0% in 1997.
After steady growth in monthly lease production during 1994 and 1995, RBC's
monthly lease production declined because several major lessors, with whom
Republic Leasing competes, significantly lowered their interest rates and credit
criteria. RBC was not willing either to suffer the margin compression or to take
increased credit risks. As a result, RBC lost some of its market share. In the
first quarter of 1997, RBC introduced a program to originate leases through
community and bankers banks. Under this program, the bank is paid a referral fee
for each lease originated for RBC's portfolio. Initial reception to the program
has been good, and management believes that monthly lease production under the
program will positively impact RBC's revenue during 1997.
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<PAGE> 140
<TABLE>
<CAPTION>
AT OR FOR THE THREE
AT OR FOR THE YEAR ENDED MONTHS ENDED
DECEMBER 31, MARCH 31,
---------------------------- --------------------
1994 1995 1996 1996 1997
------- -------- ------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Lease production during the period........ $75,505 $ 94,334 $63,284 $ 15,905 $10,532
Outstanding balance of leases owned by RBC
at end of period (net of security
deposits)............................... 88,066 106,181 51,113 108,012 43,089
Outstanding balance of leases serviced for
third parties at end of period.......... 29,249 78,747 27,592 81,921
REVENUES:
Interest income on leases................. 7,883 14,587 11,899 3,915 1,681
Gain on sale of leases.................... 1,617 3,124 19 476
Servicing fees............................ 213 727 109 296
</TABLE>
COMMERCIAL MORTGAGE BANKING
RBC entered the commercial mortgage banking business in late 1994. At
December 31, 1994, Laureate Realty was servicing $108 million of commercial
mortgage loans for one investor. By December 31, 1995, servicing was increased
to $1.5 billion for 30 investors. This increase resulted from the purchase of
the business and assets of Mortgage Company of Indiana, Inc. ("MCII") in July
1995 which included the transfer of $503 million in servicing and $317 million
of loan originations closed for investors. The servicing portfolio had an
underlying principal balance of $2.3 billion, $1.5 billion and $2.4 billion at
December 31, 1996 and March 31, 1996 and 1997, respectively. Part of the
increase in the servicing portfolio during 1996 was attributable to the purchase
of the business and assets of Camp & Company ("Camp") in July 1996, which
included the transfer of $524 million in servicing, and $509 million of loan
originations closed during the year 1996. Loan originations were $69 million and
$76 million during the three months ended March 31, 1996 and 1997, respectively.
Substantially all loans originated by Laureate Realty have been originated
in the name of the investor, and in most cases, Laureate Realty has retained the
right to service the loans under a servicing agreement with the investor.
Initially, Laureate Realty originated loans primarily in North Carolina, South
Carolina, Tennessee and Virginia and, with the two acquisitions, expanded to
Indiana and Alabama. Origination fees are generally between 50 and 100 basis
points of the loan amount, and Laureate Realty's average servicing rate is nine
basis points. Most commercial mortgage loan servicing agreements are short-term,
and retention of the servicing contract is dependent on maintaining investor
relationships. Likewise, new loan originations are largely dependent on
relationships with the developer.
<TABLE>
<CAPTION>
AT OR FOR THE THREE
AT OR FOR THE YEAR ENDED MONTHS ENDED
DECEMBER 31, MARCH 31,
---------------------------------- -----------------------
1994 1995 1996 1996 1997
-------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Commercial mortgage loan
originations...................... $ 21,468 $ 317,940 $ 509,415 $ 68,780 $ 76,472
Outstanding balance of commercial
mortgage loans serviced for third
party investors at end of
period............................ 107,691 1,464,360 2,334,451 1,504,774 2,400,990
REVENUES:
Commercial mortgage loan origination
fees 244 3,082 4,416 295 477
Servicing fees...................... 9 801 1,781 360 562
</TABLE>
INVESTMENT IN RBMG
As more fully described in Notes 1, 2 and 8 to the consolidated financial
statements of RBC, RBC accounts for its investment in RBMG under the equity
method of accounting.
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<PAGE> 141
The following table summarizes certain financial data regarding RBC's
investment in RBMG:
<TABLE>
<CAPTION>
AT OR FOR THE THREE
AT OR FOR THE YEAR ENDED MONTHS ENDED
DECEMBER 31, MARCH 31,
---------------------------- --------------------
1994 1995 1996 1996 1997
------- -------- ------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Equity in undistributed earnings of
RBMG............................... $ 7,510 $ 5,885 $ 7,424 $ 1,854 $ 1,775
Gain on equity offering by RBMG...... 2,456 2,456
</TABLE>
CREDIT CARD OPERATIONS
As more fully described in Note 3 of the consolidated financial statements
of RBC, as of the close of business on December 31, 1996, RBC spun-off RPG, its
credit card operation to the RBC Stockholders. Accordingly, the results of
operations of RPG are included in the RBC operating results only through the
date of the Spin-off, and RPG's assets and liabilities are excluded from RBC's
balance sheet at December 31, 1996.
The following table sets forth certain financial data regarding RPG while
it was a part of RBC:
<TABLE>
<CAPTION>
AT OR FOR THE
AT OR FOR THE YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
------------------------------ ------------------
1994 1995 1996 1996
-------- -------- -------- ------------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Number of accounts serviced at end of
period.............................. 226 369 506 374
AVERAGE OUTSTANDING BALANCE OF
ACCOUNTS SERVICED DURING PERIOD:
Long-term agreements with clients... $165,693 $267,298 $391,243 $365,639
Short-term agreements, primarily
with affiliates.................. 22,591
Outstanding balance of accounts
serviced at end of period........... 205,253 369,636 498,306 349,684
Number of accounts originated during
period.............................. 284 192 269 19
Revenues.............................. $ 23,140 $ 11,637 $ 18,424 $ 3,087
Expenses (including taxes)............ (17,927) (10,481) (17,976) (2,841)
-------- -------- -------- --------
Net income.................. $ 5,213 $ 1,156 $ 448 $ 246
======== ======== ======== ========
</TABLE>
RESULTS OF OPERATIONS -- THREE MONTHS ENDED MARCH 31, 1997, COMPARED TO THREE
MONTHS ENDED MARCH 31, 1996
Summary
Total revenues of RBC were $6.4 million for the three months ended March
31, 1997 as compared to $11.3 million for the three months ended March 31, 1996.
This $4.9 million, or 43%, decrease was primarily due to a $2.4 million
non-recurring gain recognized in first quarter 1996 related to a secondary
common stock offering by RBMG and $3.1 million of credit card revenues generated
by RPG during first quarter 1996. These decreases were partially off-set by a
$1.2 million gain realized in first quarter 1997 on the repurchase by Intek of
25% of RBC's investment in that company, a $490 thousand increase in lease and
commercial mortgage loan servicing fees and origination fees and $457 thousand
higher gains on the sale of leases during first quarter 1997 compared to the
same period in 1996.
As a consequence of the foregoing, pre-tax income decreased 38%, or $1.3
million, and net income decreased from $3.0 million to $1.9 million for the
three months ended March 31, 1997 as compared to the three months ended March
31, 1996.
122
<PAGE> 142
The following sections discuss the components of RBC's results of
operations in greater detail.
Net Interest Income
Net interest income was $1.5 million less during the three months ended
March 31, 1997 than during the comparable period in 1996 primarily because of
lower balances of lease receivables outstanding and related borrowings to
finance such leases. For the three months ended March 31, 1996 and March 31,
1997, RBC originated $15.9 and $10.5 million of leases, respectively. The
decrease in lease production was due primarily to several major competitors
lowering their interest rates and credit criteria. As a result of the decrease
in lease production as well as increased lease sales during 1996 and the first
quarter 1997, average month-end lease balances declined from $107.1 million in
first quarter 1996 to $46.1 million in first quarter 1997. During the same
periods, the net yield on the lease portfolio decreased from 13.5% to 12.0%
Net Gain on Sale of Leases
During first quarter 1997, RBC sold $10.2 million of lease receivables
compared to only $477 thousand during first quarter 1996. As a result, net gain
on sale of leases increased from $19 thousand for the three months ended March
31, 1996 to $476 thousand for the three months ended March 31, 1997.
Credit Card Fees
As a result of the Spin-off, there were no credit card fees in first
quarter 1997 compared to $3.1 million during the three months ended March 31,
1996.
Servicing and Other Fees
Servicing and other fees were $1.3 million during first quarter 1997,
compared to $845 thousand for first quarter 1996, an increase of 58%. This
increase is primarily related to a larger commercial mortgage loan servicing
portfolio which increased approximately $896 million, or 60%, to $2.4 billion at
March 31, 1997. The increased commercial mortgage loan serving portfolio
includes the effect of the acquisition of Camp with the transfer of $524 million
of servicing and loan originations of $517 million between March 31, 1996 and
March 31, 1997.
The following table summarizes servicing and other fees for the three
months ended March 31, 1996 and 1997:
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED
MARCH 31,
-------------
1996 1997
---- ------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Lease servicing fees........................................ $109 $ 296
Commercial mortgage loan servicing fees..................... 360 562
Origination and other commercial mortgage loan fees......... 295 477
Other....................................................... 81
---- ------
Total servicing and other fees.................... $845 $1,335
==== ======
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31,
-----------------------
1996 1997
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Lease servicing portfolio for third parties................. $ 27,592 $ 81,921
Number of leases being serviced for third parties........... 1,464 5,490
Commercial mortgage loan servicing portfolio................ $1,504,774 $2,400,990
Number of commercial mortgage loans being serviced.......... 561 805
</TABLE>
123
<PAGE> 143
Other Income
In third quarter 1996, RBC acquired 20,000 shares of preferred stock of
Intek. In February 1997, Intek, in conjunction with a private equity offering,
repurchased 5,000 of the shares owned by RBC, and RBC realized a gain of $1.2
million.
Expenses
Total expenses decreased from $7.8 million in first quarter 1996 to $4.2
million in first quarter 1997, a $3.6 million or 46% decline. The Spin-off
contributed to $2.7 million of the decrease. First quarter 1996 salary and
employee benefits expense included $779 thousand of phantom stock expense
compared to $551 thousand in first quarter 1997. The latter was lower as a
result of the termination of RBC's phantom stock plan. The provision for lease
losses decreased $625 thousand, or 62%, primarily as a result of a decrease in
the amount of leases owned by RBC. At March 31, 1996 and 1997, the reserve for
lease losses was 2.0% and 2.9%, respectively, of net lease receivables and 2.1%
and 3.3%, respectively, of net leases less security deposits.
RESULTS OF OPERATIONS -- YEAR ENDED DECEMBER 31, 1996, COMPARED TO YEAR ENDED
DECEMBER 31, 1995
Summary
Total revenues of RBC were $47.6 million during 1996 compared to $34.5
million for the prior year. This improvement represented an across the board
increase, except for a $1.8 million decrease in net interest income related
primarily to lower balances of lease receivables outstanding and related debt
because of increased lease sales in 1996. The increased revenues included a $2.4
million increase in lease and commercial mortgage loan servicing fees and
origination fees, a $1.5 million increase in gains on the sale of leases, a $2.4
million gain related to a common stock offering by RBMG as discussed in Note 8
of the consolidated financial statements of RBC, a $1.5 million larger equity in
undistributed earnings of RBMG and significantly higher credit card fees. During
the same periods, operating expenses increased $13.1 million or 49%. Credit card
operations accounted for 48% or $6.2 million of the increased expenses
reflecting the additional cost necessary to support a greater level of credit
card accounts serviced. In addition, in 1996 RPG recognized a $600 thousand
valuation write-off on deferred costs as a result of reassessment of margins on
credit card origination programs. Operating expenses related to the MCII
mortgage loan operations were included for a full year in 1996 but only six
months in 1995, and the Camp operations were included only during five months of
1996. In addition, during 1996 RBC incurred approximately $1.4 million of other
nonrecurring expenses related to the Spin-off. Also in 1996, salary and employee
benefits expense include a phantom stock expense increase of $2.8 million of
which $1.9 million resulted from the Spin-off. In conjunction with the Spin-off,
RBC was obligated to distribute to each holder of certain of its phantom stock
units a dividend equivalent payment of one share of RPG stock for each phantom
stock unit held on the record date times the December 31, 1996 value of a share
of RPG stock.
Net income for 1996 was $7.3 million, or 8% higher than net income in 1995.
The following sections discuss the components of RBC's results of
operations in greater detail.
Net Interest Income
Net interest income was $8.1 million in 1996, or 18% less than in 1995.
This decrease reflects lower interest income and interest expense primarily as a
result of the sale of $70.0 million of leases during 1996 as well as a reduction
in the net yield of the lease portfolio and volume of lease production. Lease
production in 1996 decreased $31 million, or 33.0%, primarily due to several
major competitors significantly lowering their interest rates and credit
criteria. During 1996, the average month-end outstanding balance of the lease
portfolio was $82.9 million compared to $103.0 million during 1995. During the
same periods, the net yield on the lease portfolio decreased from 13.3% during
the year 1995 to 13.0% in 1996.
Net interest income for 1996 was also decreased by $270 thousand of
interest income due to repayment of short-term loans to RBMG.
124
<PAGE> 144
Net Gain on Sale of Leases
The $1.5 million or 93% increase in gains on sale of leases in 1996 as
compared to 1995 was primarily attributable to the sale of $70.0 million of
leases during 1996 compared to the sale of $31.6 million of leases during 1995.
However, the leases sold in 1995 were more seasoned and had a lower cost basis
than those sold in 1996.
Credit Card Fees
Credit card fees were $18.4 million, or 59% higher in 1996 than they were
in 1995. The $6.9 million increase resulted from a 39% increase in the average
number of credit card accounts serviced by RPG during 1996 as compared to 1995
and a $124 million increase during 1996 in the average monthly balance of
serviced accounts. During 1995 and 1996, approximately 41% and 71%,
respectively, of RPG's revenues related to servicing which was priced as a
percentage of the average balance of serviced accounts. A significant portion of
RPG's revenue is derived under agreements which provide for more than one
service. Whenever RPG cross-sells services, the price of the services specified
may be expressed as a fee for all services to be provided ("bundled pricing") or
as a separate price for each service. Servicing fees increased as a result of
accounts originated prior to 1996 which were priced under a bundled pricing
arrangement whereby the servicing fee increased beginning in 1996.
Servicing and Other Fees
Servicing and other fees were $6.9 million during 1996, compared to $4.6
million during 1995, an increase of 52%. Commercial mortgage servicing and
origination fees accounted for $980 thousand and $1.3 million, respectively, of
the increase. During 1996, the commercial mortgage loan servicing portfolio
averaged $1.9 billion compared to $803 million during 1995 and included the
effect of the servicing acquired as a result of the MCII and Camp acquisitions.
During 1996, Laureate Realty originated $509 million of new commercial mortgage
loans compared to $318 million during 1995.
The following table summarizes servicing and other fees for the years ended
December 31, 1995 and 1996:
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED
DECEMBER 31,
----------------
1995 1996
------ ------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Lease servicing fees........................................ $ 213 $ 727
Commercial mortgage loan servicing fees..................... 801 1,781
Origination and other commercial mortgage loan fees......... 3,082 4,416
Other....................................................... 464
------ ------
Total servicing and other fees.................... $4,560 $6,924
====== ======
</TABLE>
<TABLE>
<CAPTION>
AT YEAR ENDED
DECEMBER 31,
-----------------------
1995 1996
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Lease servicing portfolio for third parties................. $ 29,429 $ 78,747
Number of leases being serviced for third parties........... 1,444 4,986
Commercial mortgage loan servicing portfolio................ $1,464,360 $2,334,451
Number of commercial mortgage loans being serviced.......... 549 785
</TABLE>
Other Income
Other income increased during 1996 compared to 1995, primarily related to
net gains on the dispositions of leases and increased fees from the leasing
operation.
125
<PAGE> 145
Expenses
Operating expenses increased $13.1 million during 1996. The credit card
operations accounted for $6.8 million of the increase, primarily related to the
larger servicing portfolio and higher costs of originating accounts. Commercial
mortgage banking operations accounted for $2.1 million of higher expenses in
1996 compared to 1995, of which 61% was personnel related. This increase
included the effect of the growth in the commercial mortgage loan servicing
portfolio, including $509 million of new originations in 1996 and the MCII and
Camp acquisitions. Leasing operations and corporate overhead accounted for $786
thousand and $3.5 million, respectively, of increased expenses. Included in
salary and employee benefits expense was a $2.8 million increase in phantom
stock expense related to the Spin-off and increased earnings in 1996. The
provision for lease losses decreased $594 thousand, or 20%, while the amount of
outstanding leases owned by RBC decreased 62% which resulted from the sale of
leases in 1996 and the classification of $14 million of leases held for sale. At
December 31, 1996, the reserve for lease losses was 2.8% of net lease
receivables and 3.1% of net leases less security deposits.
RESULTS OF OPERATIONS -- YEAR ENDED DECEMBER 31, 1995, COMPARED TO YEAR ENDED
DECEMBER 31, 1994
Summary
In 1995, total revenues increased $16.8 million over the amounts for the
year 1994. The primary factors contributing to the increase were the growth in
the lease portfolio, the sale of leases in 1995 whereas none were sold in 1994,
the larger commercial mortgage loan portfolio and originations, including the
addition of the MCII business beginning in July 1995. However, these increases
were more than off-set by the $11.5 million decrease in credit card revenues,
the $12.4 million decrease in retail banking revenues and the non-recurring
January and May 1994 sale of RBC's remaining retail banking operations and the
decrease of $1.6 million in the equity in undistributed earnings of RBMG.
The following sections discuss the components of RBC's results of
operations in greater detail.
Net Interest Income
Net interest income during 1995 was $9.9 million as compared to $7.1
million for the prior year. This 40% increase was primarily attributable to the
growth in the lease portfolio. Between December 31, 1994 and December 31, 1995,
the outstanding lease portfolio grew from $92.4 million to $114.1 million and
lease production grew from $75.5 million in 1994 to $94.3 million in 1995. To
finance the increased production, RBC completed a $68 million public lease
securitization at the end of 1994 which substantially freed-up its $75 million
lease warehouse line to finance new lease production. The lease securitization
was accounting for as a financing. Accordingly, the lease receivables and the
debt are included in RBC's consolidated balance sheet and RBC continues to
record interest income on the securitized leases and to record interest expense
on the related borrowings.
Net interest income for 1995 was also increased by $541 thousand of
interest income from short-term loans to RBMG.
Net Gain on Sale of Leases
Prior to 1995, RBC originated leases solely to be held to maturity.
However, during 1995, RBC sold a portion of its lease portfolio. Currently, RBC
continues to service substantially all of the leases that it has originated
including those sold to third parties. During 1995, RBC sold $31.6 million of
leases and realized a $1.6 million gain.
Credit Card Fees
During 1995, credit card fees decreased significantly even though during
the year there were increases in both the number and average outstanding balance
of accounts being serviced. At December 31, 1995, RPG was servicing
approximately 369,000 accounts, or 64% more accounts than it was servicing at
December 31, 1994. During 1995, the average monthly balance of accounts being
serviced increased $79.0 million, or 42% over the
126
<PAGE> 146
amount for 1994. During 1994, RPG had two highly successful marketing contracts.
However, during 1995 there was a significant decline in the ratio of accounts
originated to the number of offers made to consumers which resulted in a much
lower profit margin on that business. In addition, beginning in 1995 certain
revenues from marketing contracts were deferred and recognized in subsequent
periods as transaction processing and program management services were
performed.
Servicing and Other Fees
During mid-1994, RBC formed a commercial mortgage banking subsidiary.
Experienced commercial mortgage bankers were hired to begin a commercial
mortgage banking operation. Most of the key personnel were hired by September
1994, and by year-end, the operation had originated $21 million of commercial
mortgage loans. In 1995, RBC also decided to sell a portion of its lease
portfolio and, in conjunction with the sale, RBC retained the right to service
the leases under a servicing agreement.
The following table summarizes the servicing and other fees for the years
ended December 31, 1994 and 1995:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
----------------------
1994 1995
-------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Lease servicing fees........................................ $ 213
Commercial mortgage loan servicing fees..................... 801
Origination and other commercial mortgage loan fees......... $ 244 3,082
Other....................................................... 422 464
-------- ----------
Total servicing and other fees.................... $ 666 $ 4,560
======== ==========
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------
1994 1995
-------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Lease servicing portfolio for third parties................. $ 29,249
Number of leases being serviced for third parties........... 1,444
Commercial mortgage loan servicing portfolio................ $107,691 $1,464,360
Number of commercial mortgage loans being serviced.......... 44 549
</TABLE>
Other Income
During 1995, other income from leasing operations increased $348 thousand,
primarily related to net gains on the dispositions of leases and increased fees
from the leasing operation. However, this increase was off-set by fees no longer
received in 1995 due to the sale of the retail banking operations in 1994.
Expenses
During 1995, expenses decreased $4.6 million, or 17%, below 1994 amounts.
This decrease included $4.6 million of 1994 expenses related to retail banking
operations that were sold in 1994 and a decrease of $4.2 million of expenses
related to the credit card operations. These decreases were partially off-set by
$2.7 million of increased costs in 1995 related to the full year effect of the
commencement of the commercial mortgage banking operation including its MCII
acquisition, including $1.9 million of increased personnel costs. During 1995,
personnel costs also increased $578 thousand in conjunction with the growth in
the number and amount of leases under management (i.e., leases owned either by
RBC or investors). The provision for lease losses increased $985 thousand, or
49%, while the amount of outstanding leases owned by RBC increased 21%. The
increase in the provision expense reflected the required adjustment to the
reserve for lease losses to maintain an adequate level of reserves. As a result
of this adjustment, the reserve for lease losses was 2.0% of net lease
receivables and 2.1% of net leases less security deposits at December 31, 1994
compared to 1.9% of net lease receivables and 2.1% of net leases less security
deposits at December 31, 1995.
127
<PAGE> 147
LIQUIDITY AND CAPITAL RESOURCES
RBC's primary cash-flow requirement involves the funding of commercial
small ticket equipment leases and commercial mortgage loan production which is
met primarily through external borrowings. RBC has entered into a 364-day, $50
million revolving credit facility to provide interim financing for its leasing
portfolio that expires in August 1997. The revolving credit facility contains
various covenants requiring RBC to maintain a net worth of at least $40 million
and a leverage ratio not to exceed 10:1 as well as "change of control"
covenants. The provisions of the facility also restricts a certain subsidiary's
ability to incur debt, encumber assets, other than as collateral for the
facility, sell assets, merge, declare or pay any dividends or change its
corporate by-laws or certificate of incorporation. The facility also contains
various covenants regarding characteristics of the collateral and the
performance of leases originated and serviced by RBC. In May 1997 this revolving
credit facility was amended to reduce the facility commitment from $75 million
to $50 million and to provide that RBC may borrow up to 82% of the aggregate
eligible discounted lease receivable balance related to leases on which a first
priority perfected security interest has been granted to the lender.
Additionally, RBC has also entered into a 364-day, $14 million revolving
warehouse credit facility with another financial institution. The warehouse
facility generally provides interim financing between the time FHLMC multifamily
conventional loans are closed and the delivery of the loans to FHLMC, the
investor. In addition, RBC has obtained a 364-day, $2.5 million revolving
working capital line of credit with the financial institution that provides the
$14 million credit facility. Both of these facilities expire in August 1997,
unless extended and include covenants requiring Laureate Realty to maintain
liquid assets of $200 thousand and net worth of at least $1 million and RBC,
guarantor of the lines, is required to maintain liquid assets of at least $3
million, a minimum net worth of $35 million and a ratio of total liabilities to
net worth of not more than 2:1. In addition, RBC must not encumber $5 million of
its investment in RBMG and there are restrictions on changes in ownership,
control and management.
Although management anticipates that RBC will be able to renew its various
financing when they expire or find acceptable replacement financing on
satisfactory terms, there can be no assurance that RBC will be able to do so.
Failure to comply with the debt covenants specified could result in the loss of
the related financing and a requirement to repay immediately the outstanding
loan balance.
128
<PAGE> 148
RBC COMMON STOCK OWNERSHIP BY MANAGEMENT
AND PRINCIPAL STOCKHOLDERS
PRINCIPAL STOCKHOLDERS
The following table sets forth as of May 31, 1997, the only stockholders
which, to the knowledge of the management of RBC, are beneficial owners of five
percent or more of the outstanding shares of RBC Voting Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
-------------------------------------------------------------------------------------------
SHARES OF PERCENT OF
RBMG RBMG
PERCENT OF SHARES OF PERCENT OF COMMON STOCK COMMON STOCK
TOTAL RBMG RBMG BENEFICIALLY BENEFICIALLY
RBC VOTING COMMON STOCK COMMON STOCK OWNED AFTER OWNED AFTER
NUMBER OF COMMON STOCK BENEFICIALLY BENEFICIALLY THE RBC THE RBC
SHARES OF OUTSTANDING OWNED AFTER OWNED AFTER MERGER AND MERGER AND
NAME AND ADDRESS RBC VOTING PRIOR TO THE THE RBC THE RBC THE WSI THE WSI
OF BENEFICIAL OWNER COMMON STOCK(1) RBC MERGER(2) MERGER MERGER(8) MERGER MERGER(8)
------------------- --------------- ------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
APA Excelsior II L.P. and(1)... 1,199,147(3) 13.78% 1,295,391 5.82% 1,295,391 3.38%
APA Excelsior Venture
Capital Holdings (Jersey) Ltd.
c/o Patricof & Co. Ventures,
Inc.
14th Floor
445 Park Avenue
New York, NY 10022
Union Carbide Pension Fund..... 1,199,147(4) 13.78% 1,295,391 5.82% 1,295,391 3.38%
c/o Benefit Capital
Management Corporation
39 Old Ridgebury Road E-2
Danbury, CT 06817-0001
Amelia Holdings Partners....... 1,199,147(5) 13.78% 1,295,391 5.82% 1,295,391 3.38%
c/o Mr. Craig Huff
43rd Floor
153 East 53rd Street
New York, NY 10022
Saugatuck Capital Company
Limited Partnership II....... 726,667(6) 8.35% 784,989 3.53% 784,989 2.05%
c/o Saugatuck Capital Company
One Canterbury Green
Stamford, CT 06901
SBSF First Sun Capital
Group,....................... 700,515(7) 8.05% 756,738 3.40% 756,738 1.98%
a Connecticut Limited
Partnership, and SBSF First Sun
Capital Group II, L.P.
c/o Spears, Benzak, Salomon &
Farrell
45 Rockefeller Plaza
New York, NY 10111
Centennial Business Development
Fund, Ltd.................... 506,668 5.82% 547,333 2.46% 547,333 1.43%
c/o Mr. Jeffrey Schutz
1428 Fifteenth Street
Denver, CO 80202
Allied Corporation Master
Pension Trust................ 383,334 4.41% 414,100 1.86% 414,100 1.08%
c/o The Northern Trust
Company
Allied Signal Pension
Investments
101 Columbia Road
Morristown, NJ 07962-1219
</TABLE>
- ---------------
(1) RBC has 1,577,788 shares of RBC Non-Voting Common Stock outstanding. The RBC
Non-Voting Common Stock has no voting rights (except as required by law, for
example, in connection with the RBC Merger) but
129
<PAGE> 149
is structured to give its holders the same economic benefits as ownership of
RBC Voting Common Stock. Each share is convertible into one share of RBC
Voting Common Stock (subject to proportionate adjustment in the event of
certain corporate transactions). Generally, the holders of shares of RBC
Non-Voting Common Stock have the right to convert the shares into shares of
RBC Voting Common Stock at any time if the conversion will not result in the
holder owning directly or indirectly more than 9.9% of the outstanding RBC
Voting Common Stock. In addition, all of the shares of RBC Non-Voting Common
Stock will be converted automatically into shares of RBC Voting Common Stock
in the event of (1) any sale, transfer or other disposition of all or
substantially all of RBC's assets or the RBC Voting Common Stock; (2) a sale
of all or substantially all of the RBC Voting Common Stock in any merger or
consolidation of RBC in which RBC is not the surviving entity; (3) any
merger or consolidation of RBC in which RBC is the surviving entity and all
or substantially all of the RBC Voting Common Stock is converted into
publicly traded securities of another corporation or into cash or other
property; or (4) any dissolution or liquidation of RBC. Immediately prior to
the RBC Effective Time, each share of RBC Non-Voting Common Stock will
automatically convert into one share of RBC Voting Common Stock.
(2) Based on an aggregate of 8,699,033 shares of RBC Common Stock issued and
outstanding as of May 31, 1997, including, for each Beneficial Owner, the
number of shares of RBC Common Stock issuable upon conversion of shares of
RBC Non-Voting Common Stock beneficially owned by such Beneficial Owner.
(3) Includes 509,780 shares issuable upon conversion of shares of RBC Non-Voting
Common Stock beneficially owned by APA Excelsior II L.P. ("APA II") and APA
Excelsior Venture Capital Holdings (Jersey Ltd. ("APA Jersey"), of which
407,824 shares are beneficially owned by APA II and 101,956 shares are
beneficially owned by APA Jersey.
(4) Includes 509,780 shares issuable upon conversion of shares of RBC Non-Voting
Common Stock beneficially owned by Union Carbide Pension Fund.
(5) Includes 509,780 shares issuable upon conversion of shares of RBC Non-Voting
Common Stock beneficially owned by Amelia Holdings Partners.
(6) Includes 38,300 shares issuable upon conversion of shares of RBC Non-Voting
Common Stock beneficially owned by Saugatuck Capital Company Limited
Partnership II.
(7) Includes 11,148 shares issuable upon conversion of shares RBC Non-Voting
Common Stock beneficially owned by SBSF First Sun Capital Group ("SBSF").
(8) Assumes that the WSI Warrant is not exercised prior to the WSI Effective
Time and Greenwich is issued the RBMG Warrant.
130
<PAGE> 150
STOCK OWNERSHIP OF RBC'S DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth as of May 31, 1997, the ownership of RBC
Voting Common Stock by RBC's directors and executive officers. None of the
directors or executive officers of RBC owns any shares of RBC Non-Voting Common
Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
----------------------------------------------------------------------------------------
SHARES OF PERCENT OF
RBMG RBMG
PERCENT OF SHARES OF PERCENT OF COMMON STOCK COMMON STOCK
TOTAL RBC RBMG RBMG BENEFICIALLY BENEFICIALLY
VOTING COMMON STOCK COMMON STOCK OWNED AFTER OWNED AFTER
NUMBER OF COMMON STOCK BENEFICIALLY BENEFICIALLY THE RBC THE RBC
SHARES OF RBC OUTSTANDING OWNED AFTER OWNED AFTER MERGER AND MERGER AND
VOTING PRIOR TO THE THE RBC THE RBC THE WSI THE WSI
NAME COMMON STOCK RBC MERGER MERGER MERGER MERGER MERGER(1)
- ---- ------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
John C.
Baker(2)(10)....... -0- N/A 6,420 N/A 6,420 *
Stuart M.
Cable(2)(10)....... 42,725(3) * 56,854 * 56,854 *
Ward H. Clegg, III... 42,540 * 45,954 * 45,954 *
Owen S.
Crihfield(4)....... -0- N/A -0- N/A -0- *
John W.
Currie(2)(10)...... 50,000 * 60,433 * 60,433 *
George Jenkins(5).... -0- N/A -0- N/A -0- *
Lock W. Ireland(10).. 78,366(6) * 85,655 * 85,655 *
Edward J.
Sebastian(7)(10)... 238,229(8) 3.35% 325,326 * 325,326 *
Michael T.
Smith(10).......... 10,000 * 12,063 * 12,063 *
Lisa Bishop
Tuckerman(9)....... -0- N/A -0- N/A -0- N/A
Dwight Galloway...... 18,332 * 19,803 * 19,803 *
H. Jackson Upchurch,
Jr................. 3,507 * 3,788 * 3,788 *
Melissa A. Ard....... 104 * 112 * 112 *
All directors and
executive officers
as a group (13
persons)........... 483,803 6.79% 616,408 2.77% 616,408 1.61%
</TABLE>
- ---------------
* Less than one percent
(1) Assumes that the WSI Warrant is not exercised prior to the WSI Effective
Time and Greenwich is issued the RBMG Warrant.
(2) Also a director of RBMG.
(3) Includes 34,000 shares held by Mr. Cable as trustee of a family trust. Mr.
Cable is serving on the RBC Board as the nominee of his father, Austin L.
Cable, who beneficially owns 34,000 shares of RBC Voting Common Stock.
Together Stuart and Austin Cable beneficially own 76,725 shares of RBC
Voting Common Stock as of May 31, 1997.
(4) Mr. Crihfield is serving on the RBC Board as the nominee of Saugatuck
Capital Company ("Saugatuck"). For information concerning the RBC Common
Stock ownership of Saugatuck, see "RBC Common Stock Ownership by Management
and Principal Stockholders -- Principal Stockholders," above.
(5) Mr. Jenkins is serving on the RBC Board as the nominee of APA II and APA
Jersey. For information concerning the RBC Common Stock ownership of APA II
and APA Jersey, see "RBC Common Stock Ownership by Management and Principal
Stockholders -- Principal Stockholders."
(6) Includes 6,925 shares owned by members of Mr. Ireland's immediate family as
to which he disclaims beneficial ownership.
(7) Mr. Sebastian is also a director and executive officer of RBMG.
(8) Includes 108,000 shares owned by members of Mr. Sebastian's immediate
family as to which he disclaims beneficial ownership.
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<PAGE> 151
(9) Ms. Tuckerman is serving on the RBC Board as the nominee of SBSF and SBSF
II. For information concerning the RBC Common Stock ownership of SBSF and
SBSF II, see "RBC Common Stock Ownership by Management and Principal
Stockholders -- Principal Stockholders," above.
(10) Includes shares of RBMG Common Stock owned as of May 31, 1997 or subject to
options for shares exercisable on May 31, 1997, or within 60 days
thereafter in the following amounts: 6,420 shares for Mr. Baker, 10,700
shares for Mr. Cable, 6,420 shares for Mr. Currie, 1,000 shares for Mr.
Ireland, 67,977 shares for Mr. Sebastian and 1,261 shares for Mr. Smith.
The following table sets forth certain information concerning the annual
and other compensation paid and accrued during calendar 1996 to Edward J.
Sebastian, RBC's Chairman and Chief Executive Officer.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
OTHER
ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION COMPENSATION
- --------------------------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Edward J. Sebastian.............................. $141,790 $ (1) $36,646(2) N/A
President and Chief Executive Officer
</TABLE>
- ---------------
(1) The 1996 bonus for Mr. Sebastian has not been determined at this time.
(2) Includes supplemental life insurance policy including 25% gross-up for
income taxes.
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<PAGE> 152
BUSINESS OF WSI
WSI is a specialty mortgage finance company engaged in the business of
purchasing, originating, selling and securitizing non-conforming mortgage loans
secured by one-to-four family residences. Substantially all of WSI's mortgage
loans are secured by first mortgage liens. WSI generally focuses on lending to
individuals who have impaired or limited credit histories or unverifiable
income, and makes loans to these borrowers to finance the purchase of a home, to
consolidate debt, to finance home improvements and to pay for education.
Substantially all of WSI's mortgage loan production is purchased through
its wholesale division which consists of a branch network of 10 sales offices,
two of which are located in each of California and Indiana and one in each of
Illinois, Maryland, Michigan, Massachusetts, New Jersey and Ohio. The sales
offices are staffed with approximately 40 account executives who have developed
relationships with a network of over 1,600 correspondent lenders who originate
mortgage loans in over 40 states. During the nine-month period ended December
31, 1996, and the three months ended March 31, 1997, 95% and 94%, respectively,
of WSI's total loan production was acquired through its Wholesale Division. The
balance of WSI's loan production was originated through its retail division.
This division operates from WSI's New Jersey corporate headquarters and
originates non-conforming loans through a referral network of local real estate
brokers, lawyers and accountants.
WSI was formed in March 1996 as a Delaware corporation to acquire each of
GF Mortgage Corp. (subsequently renamed Walsh Securities, Inc.), the predecessor
to WSI's non-conforming mortgage loan operations, and GF Property Corp.
(subsequently renamed Walsh Property, Inc.) (collectively, the "Predecessors")
from Gruntal Financial Corp., Inc. ("Gruntal"). Gruntal is the parent of an
operating subsidiary Gruntal & Co., which is a retail broker/dealer primarily
involved in trading public and private debt and equity securities on behalf of
retail clients. GF Mortgage Corp. commenced operations in June 1993 as a wholly
owned subsidiary of Gruntal, was managed by a team of executives led by Robert
C. Walsh, the President and principal stockholder of WSI, and began its current
business of purchasing, originating, selling and securitizing non-conforming
mortgage loans in 1994. WSI also maintains a portfolio of distressed commercial
real estate loans and foreclosed properties acquired by GF Mortgage Corp. prior
to engaging in its current residential mortgage loan operations. GF Property
Corp. was organized in June 1993 as a special purpose, wholly owned subsidiary
of Gruntal to own certain residential and commercial properties comprising a
portion of GF Mortgage Corp.'s commercial real estate portfolio and acquired
through foreclosure by GF Mortgage Corp. The combined operations of GF Mortgage
Corp. and GF Property Corp. represent the predecessor reporting entity of WSI.
In connection with its acquisition of the Predecessors from Gruntal, WSI
established and has maintained a relationship with Greenwich and an affiliate.
As part of this relationship, Greenwich or its affiliate has provided warehouse
and term credit facilities to WSI and has acted as placement agent and
underwriter in connection with a securitization of WSI's loans.
LOAN ORIGINATIONS AND PURCHASES
Wholesale Division
Through its wholesale division ("Wholesale Division"), WSI targets
independent mortgage bankers who (i) engage primarily in the business of
originating and closing in their own name conforming loans for sale to
conforming loan purchasers, (ii) originate, or have the opportunity to
originate, some non-conforming loans for sale to non-conforming loan purchasers
and (iii) derive a substantial portion of their income from fees paid by
conforming loan borrowers (rather than premiums on the sale of loans)
("Conforming Mortgage Bankers").
Licensed mortgage bankers act as intermediaries between borrowers and WSI
to sell to WSI mortgage loans which the mortgage banker has originated,
processed, closed and funded in its own name in conformity with WSI's
underwriting standards and for which WSI provides funding at closing. WSI is
seeking to expand its Wholesale Division by forming new relationships with
Conforming Mortgage Bankers in WSI's current and certain other regional markets,
selective geographic expansion of regional sales offices, continued emphasis on
customer service and maintaining the reduced cost of loan purchases so as to
optimize gain on loan sales. WSI typically enters a desired market by hiring
sales representatives who have a demonstrated history of originating
high-quality, non-conforming mortgage loans in that market area. WSI's strategy
is to limit the number of sales
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<PAGE> 153
offices and personnel needed to generate and effectively process and underwrite
loans. As a result, WSI typically opens a sales office only after a minimum
level of loan volume is achieved in a new market.
Prior to approving an independent mortgage banker as a seller of loans to
WSI, WSI performs an investigation of, among other things, the mortgage banker's
lending operations, if it is licensed or registered, and the performance of its
previously originated loans. WSI also requires that each mortgage banker remain
current on all licenses required by federal and state law and regulations. Upon
completion of its due diligence, WSI typically enters into standard form
agreements with the mortgage bankers pursuant to which they may sell and WSI may
buy non-conforming mortgage loans approved by WSI, and for WSI to provide
funding for such loans at closing. None of such mortgage bankers, however, is
contractually obligated to continue to do business with WSI.
WSI's network of independent mortgage bankers sell their non-conforming
loans to WSI generally on an individual flow basis. When selling on a flow
basis, a mortgage banker will typically seek a preapproval from WSI prior to
closing the loan, and WSI will conditionally approve the loan based on a partial
or full credit package, stipulating for any items needed to complete the package
in adherence to WSI's underwriting guidelines. As independent mortgage bankers
may submit loan applications to several prospective lenders simultaneously, WSI
emphasizes personal service to the mortgage banker by having loan processors
follow the loan application through the application and closing process,
including the collection of all information necessary to meet underwriting
conditions and requirements.
Retail Division
In addition to purchasing loans through its Wholesale Division, WSI
originates loans directly through its New Jersey-based retail division ("Retail
Division") which are secured by one-to four-family residential properties
located in New Jersey. Through its relationships with New Jersey-based real
estate brokers, attorneys and accountants, WSI originates and processes loans
from the loan application process (including compliance with federal and state
disclosure requirements) through funding.
The following table highlights certain selected information relating to the
aggregate originations and purchases of loans by WSI's Wholesale and Retail
Divisions during the periods shown.
<TABLE>
<CAPTION>
FOR THE
THREE
MONTHS
FOR THE YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
-------------------- ---------
1995 1996 1997
-------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Total loans purchased or originated........................ $299,500 $660,074 $242,435
Fixed rate loans......................................... 41.3% 59.6% 37.4%
Adjustable rate loans.................................... 58.7 40.4 62.6
Average principal balance per loan(1)...................... $ 99.8 $ 69.4 $ 71.8
Percent of first mortgage loans............................ 96.09% 97.9% 98.1%
Weighted average interest rate............................. 10.60 11.64 11.40
Weighted average initial loan-to-value ratio(2)............ 72.12 72.71 74.17
Loan fees as a percentage of loan principal amount......... .21 .89 .79
Average cost of loan purchase or origination............... 101.3 100.7 100.7
</TABLE>
- ---------------
(1) The decrease in the average principal balance per loan over the period shown
was primarily due to the expansion of WSI's Wholesale Division outside of
New Jersey and the purchase of loans from the expanded branch offices
located in states where real estate values are significantly lower.
(2) The loan-to-value ratio of a loan secured by a first mortgage is determined
by dividing the amount of the loan by the lesser of the appraised value of
the mortgaged property at origination and the purchase price of the
mortgaged property. The loan-to-value ratio of a loan secured by a second
mortgage is determined by taking the sum of the loans secured by the first
and second mortgages and dividing by the appraised value of the mortgaged
property at origination.
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<PAGE> 154
Geographic Distribution of Loans
Although WSI has purchased or originated loans in 46 states, it has
historically concentrated its business in New Jersey, the location of its
corporate headquarters. While this concentration has declined, New Jersey
contributed approximately 42% and 31% of WSI's total loan purchase and
origination volume for the years ended December 31, 1995, and 1996,
respectively, and 24% for the three months ended March 31, 1997. WSI intends to
expand and geographically diversify its loan purchase and origination activities
by continuing its focus on customer service, expanding its network of Conforming
Mortgage Bankers and selectively expanding its regional sales offices.
The following table shows the geographic distribution of loan purchases and
originations for the periods indicated (in thousands).
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1996 MARCH 31, 1997
---------------------- ----------------------
AMOUNT OF PERCENT OF AMOUNT OF PERCENT OF
LOANS TOTAL LOANS TOTAL
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
New Jersey............................................. $203,290 30.80% $ 58,837 24.27%
Michigan............................................... 98,332 14.91 48,921 20.18
Ohio................................................... 95,819 14.53 27,239 11.24
Indiana................................................ 75,276 11.40 18,748 7.73
Illinois............................................... 11,361 1.72 12,730 5.25
California............................................. 27,416 4.15 17,720 7.31
Maryland............................................... 10,125 1.53 8,832 3.64
Massachusetts.......................................... 34,111 5.17 8,097 3.34
New York............................................... 26,149 3.96 8,083 3.33
Connecticut............................................ 15,497 2.35 5,680 2.34
All other states....................................... 62,698 9.48 27,548 11.37
-------- ------ -------- ------
Total........................................ $660,074 100.00% $242,435 100.00%
======== ====== ======== ======
</TABLE>
LOAN UNDERWRITING
Wholesale Division
WSI's underwriting guidelines are provided to all mortgage bankers prior to
accepting any loan applications. Upon receipt of a loan application from a
mortgage banker, WSI's underwriting staff reviews the applicant's credit history
and based on the information contained in the application as well as reports
available from credit reporting bureaus, determines if the credit history meets
WSI's underwriting guidelines and, based on this review, assigns a preliminary
"rating" to the application ("A" through "D," with subratings within those
categories) according to certain characteristics including collateral, loan
size, debt ratio, loan-to-value ratio and term of the loan. Loan applicants with
less favorable credit ratings generally are offered loans with higher interest
rates and lower loan-to-value ratios than applicants with more favorable credit
ratings. The proposed terms of the loan are then communicated to the mortgage
banker responsible for the application who in turn discusses the proposal with
the loan applicant. If the applicant accepts the proposed terms, the mortgage
banker will execute a commitment letter and a mortgage processor will directly
contact the mortgage banker to gather additional information necessary for the
closing, funding and purchase of the loan.
All loan applications require an appraisal of the collateral property prior
to closing the loan. Only company-approved independent, licensed appraisers are
used for appraisals. WSI approves appraisers based upon a review of sample
appraisals, professional experience, education and membership in relevant
professional organizations, and by contacting clients of the appraiser and
reviewing the appraiser's experience with the particular types of properties
that secure WSI's loans. Second appraisals are obtained by WSI where the loan
amount exceeds a designated amount or in the case of lower rated credits.
Certain of WSI's branch sales offices have appraisers on staff.
135
<PAGE> 155
Verification of personal financial information and credit history is also
required prior to closing a loan. Generally, loan applicants are required to
have two years of employment with their current employer or two years of similar
business experience. The decision to commit to the purchase of a loan from a
mortgage banker is based on the value of the offered collateral, the applicant's
creditworthiness and WSI's perception of the applicant's ability to repay the
loan. Assessment of the applicant's ability to repay the loan is one of the
principal elements in distinguishing WSI's lending specialty from methods
employed by conventional mortgage lenders, such as thrift institutions and
commercial banks. Most lenders utilize debt ratios (the borrower's average
monthly expenses for debts, including fixed monthly expenses for housing, taxes
and installment debt, as a percentage of gross monthly income), payment history
on existing indebtedness and the combined loan-to-value ratio (combined loan
amounts as a percentage of collateral value). As opposed to relying on existing
software packages to rate an applicant for a loan approval, WSI employs
experienced non-conforming mortgage loan credit underwriters to scrutinize the
applicant's credit profile and to evaluate whether an impaired credit history is
the result of a previous adverse circumstance (for example, divorce, family
illness or temporary job loss) or a continuing inability or unwillingness to
meet credit obligations in a timely manner.
Upon completion of the underwriting process, the closing of the loan is
scheduled with a closing attorney or settlement agent in accordance with WSI's
closing procedures. A mortgage closer is assigned by WSI to each loan to prepare
the loan documents, to review title, to insure compliance with underwriting
conditions and to coordinate closing of the loan with and issue instructions to
the closing attorney or settlement agent.
Retail Division
WSI follows the loan underwriting guidelines employed in its Wholesale
Division in the origination of loans in its retail division. The same
classification of credit, exceptions, processing and closing procedures apply to
mortgages originated through WSI's retail division. However, in addition to such
procedures WSI is obligated to, and does, make all necessary federal and state
disclosures to the borrower and complies with statutory regulations and rules
governing mortgage lending.
LOAN PRODUCTION BY BORROWER RISK CLASSIFICATION
The following table reflects WSI's loan production by borrower risk
category for the year ended December 31, 1996 and three months ended March 31,
1997.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996 THREE MONTHS ENDED MARCH 31, 1997
-------------------------------------- --------------------------------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
LOAN AVERAGE AVERAGE LOAN AVERAGE AVERAGE
CREDIT RATING AMOUNT COUPON LTV AMOUNT COUPON LTV
- ------------- -------------- -------- -------- -------------- -------- --------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
A....................... $ 65,223 10.00% 81.41% $ 18,894 10.21% 79.75%
A-...................... 278,197 10.90 75.60 117,345 10.83 76.89
B....................... 110,840 11.32 73.18 32,146 11.06 73.68
B-...................... 53,421 12.06 68.99 23,338 11.81 71.49
C....................... 72,565 13.30 67.17 23,932 13.15 67.28
C-...................... 13,516 13.67 64.93 8,063 13.44 67.19
D....................... 66,312 14.28 61.92 18,717 13.69 63.54
-------- ------ ------ -------- ------ ------
Total......... $660,074 11.64% 72.71% $242,435 11.45% 73.83%
======== ====== ====== ======== ====== ======
</TABLE>
FINANCING AND SALE OF LOANS
WSI finances the purchase and origination of loans with borrowings under a
warehouse line of credit facility, two gestation credit facilities and
internally generated cash flows. (See "Management's Discussion and Analysis of
Financial Condition and Results of Operations of WSI -- Liquidity and Capital
Resources"). Prior to September 1996, all of WSI's loan sales had been completed
on a whole loan basis to institutional purchasers for a premium, representing a
cash payment in excess of the par value of the loans. During mid-1996, WSI
adopted a loan sales strategy which focuses on selling loans through
securitization. In implementing this strategy, WSI
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<PAGE> 156
completed a securitization of $113.9 million of loans in September 1996 and
three private securitization transactions aggregating $333.7 million in loans
during the quarter ended March 31, 1997 all through private offerings. WSI
anticipates selling loans through public and private securitizations on a
regular basis in the future. While emphasizing loan sales through
securitization, WSI's loan sale strategy will continue to involve the sale of
loans on a whole loan basis. Management believes that this dual loan sale
strategy allows WSI to diversify funding sources, thereby enhancing its gain on
sale revenues in view of existing market conditions and WSI's cash flow position
and anticipated cash requirements.
LOAN SERVICING AND COLLECTIONS
Servicing. WSI currently purchases or originates all mortgage loans on a
servicing released basis, thereby acquiring the servicing rights on such
mortgage loans (which rights are transferred to the purchaser upon the sale of
the loans through a whole loan sale or to a third party servicer through
securitization). WSI uses third-party servicers to mitigate the overhead,
administrative and other fixed costs associated with servicing its loans. Prior
to September 1996, Financial Mortgage Services ("FMS") serviced all of WSI's
mortgage loans. In September 1996, WSI contracted with Temple-Inland to perform
such servicing functions for the loans included in its first securitization
completed in September 1996. In April 1997, Temple-Inland was retained by WSI to
provide all loan servicing and collection functions.
Pursuant to tri-party pooling and servicing agreements, WSI has sold the
loan servicing rights relating to the loans included in its loan sales through
securitization completed in September 1996 and the first quarter of 1997 to
Temple-Inland (collectively, the "Servicing Agreement"). Servicing includes
collecting and remitting loan payments, making required advances, investor
reporting, accounting for principal and interest, holding escrow or impound
funds for payment of taxes and insurance, if applicable, making required
inspections of the mortgaged property, contacting delinquent borrowers and
supervising foreclosures and property dispositions in the event of unremedied
defaults in accordance with WSI's foreclosure guidelines.
Delinquencies and Foreclosures. Loans purchased or originated by WSI are
secured by mortgages, deeds of trust, security deeds or deeds to secure debt,
depending upon the prevailing practice in the state in which the property
securing the loan is located. Regulation and practices regarding the liquidation
of properties (e.g., foreclosure) and the rights of the mortgagor in default
vary greatly from state to state. Depending on local law, foreclosure is
effected by judicial action or nonjudicial sale and is subject to various notice
and filing requirements. If foreclosure is effected by judicial action, as is
the case in New York and Illinois, for example, the foreclosure proceedings may
take an extended period of time, often exceeding one year.
Although foreclosure sales are typically public sales, third-party
purchasers rarely bid in excess of the lender's lien because of the difficulty
of determining the exact status of title to the property, the possible
deterioration of the property during the foreclosure proceedings and a
requirement that the purchaser pay for the property in cash or by cashier's
check. Thus, the foreclosing lender often purchases the property from the
trustee or referee for an amount equal to the sum of the principal amount
outstanding under the loan, accrued and unpaid interest and the expenses of
foreclosure. Depending on market conditions, the ultimate proceeds of the sale
may not equal the lender's investment in the property.
Prior to completing its first securitization in September 1996, all loan
sales by WSI were made on a whole-loan basis, resulting in the transfer of the
attendant loan servicing rights to the purchasers of such loans. Mortgage loans
comprising a portfolio sold in the secondary market on a whole-loan basis to
institutional purchasers are generally recently originated and outstanding for a
relatively short period of time prior to sale, after which WSI is unable to
determine with any degree of accuracy the delinquency, foreclosure or loss rates
on such loans. Similarly, the loans securitized and sold by WSI in its first
securitization in September 1996 and in the three securitization transactions
completed in the quarter ended March 31, 1997, generally are recently originated
or purchased loans and, as a result, any delinquency, foreclosure or loss
information to date relating to such loans is not believed by WSI to be
indicative of results to be experienced in the future. As WSI continues its
strategy of
137
<PAGE> 157
securitizing the majority of its loan origination and purchase volume in the
future, WSI will have available more meaningful data concerning the rates of
delinquency, foreclosure and loss on its loan servicing portfolio.
The following table sets forth information relating to the delinquency and
loss experience for (i) loans held for sale as of March 31, 1997 and (ii) loans
securitized by WSI in its first securitization in September 1996 and in the
three securitization transactions completed in the quarter ended March 31, 1997.
<TABLE>
<CAPTION>
AT MARCH 31, 1997(1)(2)
---------------------------
LOAN
AMOUNT % OF LOANS
------------ ------------
<S> <C> <C>
Currents loans.............................................. $476,761,501 94.8
30-59 days delinquent....................................... 12,179,861 2.4
60-89 days delinquent....................................... 5,143,760 1.0
90 days or more delinquent.................................. 8,841,915 1.8
------------ ----
Total loans held for sale and securitized................... $502,927,037 100%
============ ====
Net losses on liquidated loans.................... $ 0
============
</TABLE>
- ---------------
(1) The above table does not include delinquency and loss experience information
for loans sales made on a whole-loan basis. Since such sales result in the
transfer of the attendant loan servicing rights to the purchasers of such
loans, WSI is unable to determine with any degree of accuracy the
delinquency, foreclosure or loss rates on such loans.
(2) The above table does not include delinquency and loss experience information
for WSI's portfolio of distressed commercial real estate loans and
foreclosed properties, which are in the process of being liquidated by WSI.
As of March 31, 1997, non-accrual mortgage loans held for sale were $17.6
million.
MARKETING
WSI focuses its marketing efforts on sources of loan purchases or
originations, as opposed to individual borrowers, through its account executives
who seek to establish and maintain WSI's relationships with its principal
sources of loan purchases or originations, the Conforming Mortgage Bankers.
Through its focus on sources of purchases or originations as opposed to loan
applicants, WSI avoids the high fixed costs associated with a large network of
retail offices and retail advertising.
WSI's account executives provide various levels of information and/or
assistance to WSI's network of independent mortgage bankers depending on the
sophistication and resources of the particular customer and are primarily
responsible for maintaining WSI's relationships with its sources of loan
originations. The account executives endeavor to increase the volume of loan
originations from independent mortgage bankers located within their assigned
geographic territory through, among other actions, visits to customer offices
and attendance at trade shows, as well as advertisements in trade magazines.
These account executives also provide WSI with information relating to
customers, competitive products and pricing and new market entrants, all of
which assist WSI in refining its programs and its classifications of borrowers
in order to meet competitive needs. The account executives are compensated with
a variety of salary and commission structures which relate in part to the volume
of loans that are originated or purchased as a result of their efforts.
WALSH PROPERTY, INC.
Prior to its acquisition by WSI in April 1996, GF Property Corp.
(predecessor to Walsh Property, Inc.) was operated by Gruntal to own certain
residential and commercial properties acquired through foreclosure by GF
Mortgage Corp. (predecessor to Walsh Securities, Inc.). Ownership of such
properties was acquired by GF Property Corp. from GF Mortgage Corp.'s portfolio
of distressed commercial real estate loans and foreclosed properties acquired by
GF Mortgage Corp. prior to engaging in its current residential non-conforming
loan operations. Walsh Property, Inc., exclusive of its ownership of such
properties, has no other business operations. As of March 31, 1997, the recorded
value of the residential and commercial properties owned by Walsh Properties,
Inc. was $1,000,000.
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<PAGE> 158
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF WSI
The following discussion should be read in conjunction with the WSI
Selected Historical Consolidated Financial Data and WSI's Consolidated Financial
Statements and Notes thereto and the other financial data included elsewhere in
this Joint Proxy Statement/Prospectus. The following Management's Discussion and
Analysis of Financial Condition and Results of Operations contains
forward-looking statements which involve risks and uncertainties. WSI's actual
results could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set forth under "Risk
Factors" and elsewhere in this Joint Proxy Statement/Prospectus.
Walsh Securities, Inc. (formerly known as GF Mortgage Corp.), commenced
operations in June 1993 in an unrelated business as a wholly owned subsidiary of
Gruntal Financial Corp., during which time Robert C. Walsh, Chairman and Chief
Executive Officer of WSI, served as Managing Director. Walsh Securities, Inc.
began its current business of purchasing, originating, selling and securitizing
non-conforming mortgage loans secured by liens on one-to-four family residential
properties in 1994. Walsh Property, Inc. (formerly known as GF Property Corp.)
was organized in June 1993 to own certain residential and commercial properties
acquired through foreclosure by GF Mortgage Corp.
GENERAL
Overview. WSI is a specialty mortgage finance company that, through its
wholly owned subsidiary Walsh Securities, Inc., is engaged in the business of
purchasing, originating, selling and securitizing non-conforming mortgage loans
secured by one-to-four family residences. WSI generally focuses on lending to
individuals who have impaired or limited credit histories or unverifiable
income, and WSI makes loans to these borrowers to finance the purchase of a
home, to consolidate debt, to finance home improvements and to pay for
education. WSI purchases loans through its Wholesale Division and originates
loans through its Retail Division.
Leveraged Buyout Transaction. WSI was formed in March 1996 and effective
as of April 1, 1996, purchased the capital stock of each of GF Mortgage Corp.
and GF Property Corp., the predecessor entities to Walsh Securities, Inc. and
Walsh Property, Inc., respectively, in a leveraged buyout transaction. For
accounting purposes, the transactions were accounted for under the "purchase"
method of accounting and, accordingly, the assets purchased and liabilities
assumed were adjusted to their respective fair values at the date of
acquisition, and the excess of net assets acquired of $4.1 million has been
recorded as goodwill and is being amortized on a straight-line basis over 10
years.
Recent Growth. WSI has experienced recent and rapid growth. WSI expanded
its branch offices from six at March 31, 1996 to 10 at March 31, 1997 and
increased its network of independent mortgage bankers from approximately 700 at
March 31, 1996 to approximately 1,600 at March 31, 1997. WSI has also
experienced substantial growth in the volume of loans it purchases and
originates. Loan purchases and originations increased $360.5 million or 120% to
$660 million in the fiscal year ended December 31, 1996, as compared to $299.5
million in the fiscal year ended December 31, 1995. Similarly, loan purchase and
origination volume increased $119.2 million or 96.7% to $242 million in the
quarter ended March 31, 1997, as compared to $123.2 million in the comparable
period in 1996.
Loan Sale Strategy. Prior to September 1996, all of WSI's loan sales had
been completed on a whole loan basis to institutional purchasers for a premium,
representing a cash payment in excess of the par value of the loans (par value
being the unpaid principal balance of the loan amount). During mid-1996, WSI
adopted a loan sale strategy which contemplates the sale of a substantial
percentage of loan production through securitization. In implementing this
strategy, WSI completed a securitization through a private offering in September
1996. In addition, WSI completed three private securitization transactions
during the quarter ended March 31, 1997. WSI anticipates selling loans through
public and private securitizations on a regular basis in the future. While WSI's
loan sale strategy will continue to involve the sale of loans on a whole loan
basis, its emphasis in the future will be on loan sales through securitization.
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<PAGE> 159
WSI's recent and rapid growth, shift in loan sale strategy, and the
leveraged buyout transaction may have a distortive impact on certain of WSI's
ratios and financial statistics and makes period-to-period comparisons
difficult. In light of these factors, historical performance of WSI's revenues
and earnings may be of limited relevance in predicting future performance.
Furthermore, WSI's financial statistics may not be indicative of WSI's results
in future periods. Any credit or other problems associated with the increased
number of loans recently purchased or originated may not become apparent until
sometime in the future.
RESULTS OF OPERATIONS
The following table summarizes the results of operations of WSI for the
three months ended March 31, 1997 and the nine months ended December 31, 1996
and the results of operations of the Predecessors for the three months ended
March 31, 1996 and the years ended December 31, 1995 and 1994.
<TABLE>
<CAPTION>
PREDECESSORS WSI
------------------------------------------ ---------------------------
THREE MONTHS NINE MONTHS THREE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, MARCH 31, DECEMBER 31, MARCH 31,
1994 1995 1996 1996(1) 1997
------------ ------------ ------------ ------------ ------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues:
Gain on sale of loans........... $ 7,563 $ 8,940 $2,632 $21,563 $33,879
Interest income................. 2,561 5,340 2,490 13,235 3,713
Fee income...................... -- 798 1,120 5,256 1,920
------- ------- ------ ------- -------
Total income............ 10,124 15,078 6,242 40,054 39,512
------- ------- ------ ------- -------
Expenses:
Interest expense................ 2,478 4,386 1,965 10,161 3,436
Compensation and benefits....... 4,541 4,585 2,225 8,757 3,192
General, administrative and
other........................ 2,471 2,754 1,758 6,237 2,222
------- ------- ------ ------- -------
Total expenses.......... 9,490 11,725 5,948 25,155 8,850
------- ------- ------ ------- -------
Income before income
taxes................. 634 3,353 294 14,899 30,662
Income tax expense................ 259 1,291 135 6,700 12,282
------- ------- ------ ------- -------
Net income.............. $ 375 $ 2,062 $ 159 $ 8,199 $18,380
======= ======= ====== ======= =======
</TABLE>
- ---------------
(1) As previously indicated WSI was formed in March 1996 to acquire the capital
stock of the Predecessors, in a leveraged buyout transaction which was
accounted for using the purchase method of accounting. In connection with
the acquisition, the assets of WSI were increased by $1.5 million and the
liabilities were decreased by $1.1 million to reflect the fair value of the
net identifiable assets of the company acquired. The excess of the purchase
price over the fair value of the net identifiable assets acquired of $4.1
million has been recorded as goodwill and is being amortized on a
straight-line basis over ten years.
Three months ended March 31, 1997 compared to three months ended March 31,
1996
Total revenues increased $33.3 million, or 433%, to the $39.5 million
reported by WSI for the three month period ended March 31, 1997 when compared to
revenues of $6.2 million reported by the Predecessors for the same period in
1996. During the same period, total expenses increased $3 million, or 49%, to
the $8.9 million reported by WSI for the three month period ended March 31, 1997
compared to expenses of $5.9 million reported by the Predecessors for the same
period in 1996. As a result, income before taxes increased $30.4 million, or
913% to the $30.7 reported by WSI for the three month period ended March 31,
1997 compared to pre-tax income of $0.3 million reported by the Predecessors for
the same period in 1996.
Gains on sale of loans. Gains on sales of loans increased approximately
$31.3 million when comparing the $33.9 million reported by WSI for the three
month period ended March 31, 1997 to the $2.6 million reported by the
Predecessors for the same period in 1996. This increase is primarily due to
higher loan purchases and
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<PAGE> 160
originations in 1997 ($242.4 million) compared to 1996 ($123.2 million), as well
as WSI's shift in loan sale strategy in mid-1996.
The sales of loans to institutional investors are generally completed
shortly after purchase or origination with the related gain recognized at the
time of such sale. Under a securitization strategy, loans are accumulated over a
relatively longer period of time, with the related gain recognized upon
completion of the securitization transaction. Since WSI did not complete a
securitization transaction in the fourth quarter of 1996, loans purchased and
originated during that period were accumulated and sold, and the related gain
recognized, during the first quarter of 1997.
Interest income. Interest income increased approximately $1.2 million when
comparing the $3.7 million reported by WSI for the three month period ended
March 31, 1997 to the $2.5 million reported by the Predecessors for the same
period in 1996. This increase was primarily due to higher loan purchase and
origination volume and the longer holding period necessitated by the
securitization process.
Interest expense. Interest expense increased approximately $1.4 million
when comparing the $3.4 million reported by WSI for the three month period ended
March 31, 1997 to the $2.0 million reported by the Predecessors for the same
period in 1996. The increase was primarily due to funding the higher loan
purchase and origination volume and the longer holding period necessitated by
the securitization process.
Compensation and benefits. Compensation and benefits expense increased
approximately $1.0 million when comparing the $3.2 million reported by WSI for
the three month period ended March 31, 1997 to the $2.2 million reported by the
Predecessors for the same period in 1996. The increase was primarily due to the
increased staffing levels related to growth, increased loan originations and an
increase in administrative positions. As of March 31, 1997, WSI operated 10
offices and employed 176 people as compared to the five offices operated and 89
people employed by GF Mortgage at March 31, 1996.
General, administrative and other expense. General, administrative and
other expense, which consists primarily of occupancy, supplies and other
expenses, increased $.4 million when comparing the $2.2 million reported by WSI
for the three month period ended March 31, 1997 to the $1.8 million reported by
the Predecessors for the same period in 1996. The increase in general,
administrative and other expenses was primarily due to expenses incurred in
association with the increase in number of offices and increased loan
origination and purchase volume.
Year ended December 31, 1996 compared to the Year ended December 31, 1995
For purposes of the discussion below, the results of operations for the
year ended December 31, 1996 represent the mathematical addition of the
historical amounts from the combined statement of income of the Predecessors for
the three month period ended March 31, 1996 and historical amounts from the
statement of income of WSI for the nine month period ended December 31, 1996 and
are not indicative of the results of operations that would actually have been
obtained if the WSI leveraged buyout of the Predecessors had occurred on January
1, 1996.
Total revenues increased $31.2 million when comparing full year revenues of
$46.3 million to the $15.1 million for the same period in 1995. During the same
period, full year expenses increased $19.4 million to $31.1 million to the $11.7
million for the same period in 1995. As a result, full year income before taxes
increased $11.8 million to $15.2 million to the $3.4 million for the same period
in 1995.
Gains on sale of loans. Gains on sales of loans increased approximately
$15.3 million when comparing full year gains of $24.2 million to the $8.9
million reported for the same period in 1995. This increase is primarily due to
higher loan purchases and originations in 1996 ($660.1 million) compared to 1995
($299.5 million).
Interest income. Interest income increased approximately $10.4 million
when comparing full year interest income of $15.7 million to the $5.3 million
reported by the Predecessors for the comparable twelve month period in 1995. The
increase is primarily due to higher loan purchase and origination volume and the
longer holding period necessitated by the securitization process.
141
<PAGE> 161
Interest expense. Interest expense increased approximately $7.8 million
when comparing full year interest expense of $12.2 million to the $4.4 million
reported by the Predecessors for the same period in 1995. The increase was
primarily due funding the higher loan purchase and origination volume and the
longer holding period necessitated by the securitization process.
Compensation and benefits. Compensation and benefits expense increase
approximately $6.4 million when comparing full year compensation and benefits
expense of $11.0 million to the $4.6 million reported for the same period in
1995. The increase was primarily due to the increased staffing levels related to
growth, increased loan originations and an increase in administrative positions.
As of December 31, 1996, WSI operated eight offices and employed 143 people as
compared to the five offices operated and 78 people employed by GF Mortgage at
December 31, 1995.
General, administrative and other expense. General, administrative and
other expense increased approximately $5.2 million when comparing full year
general, administrative and other expense of $8.0 million to the $2.8 million
reported for the same period in 1995. The increase in general, administrative
and other expenses was primarily due to expenses incurred in association with
the increase in number of offices and increased loan origination and purchase
volume.
Year ended December 31, 1995 compared to the Year ended December 31, 1994
Total revenues increased $5.0 million, or 49.5%, to the $15.1 million in
1995 compared to revenues of $10.1 million in 1994. During the same period,
total expenses increased $2.2 million, or 23.6%, to $11.7 million in 1995
compared to expenses of $9.5 million in 1994. As a result, income before taxes
increased $2.7 million, or 428.9%, to $3.4 million in 1995 compared to $.6
million in 1994.
Gains on sale of loans. Gains on sales of loans increased $1.3 million, or
18%, to $8.9 million in 1995 from $7.6 million in 1994. This increase is
primarily due to higher loan purchases and originations in 1995 ($299.5 million)
compared to 1994 ($68.7 million).
Interest income. Interest income increased $2.7 million, or 104%, to $5.3
million in 1995 from $2.6 million in 1994. The increase was primarily due to
higher loan purchase and origination volume.
Interest expense. Interest expense increased $1.9 million, or 77%, to $4.4
million in 1995 from $2.5 million in 1994. The increase was primarily due to
higher loan purchase and origination volume.
Compensation and benefits. Compensation and benefits expense remained
constant at $4.6 million in 1995 and 1994.
LIQUIDITY AND CAPITAL RESOURCES
WSI's historical primary operating cash requirements include the funding or
payment of: (i) loan purchases and originations; (ii) investments in
interest-only and residual certificates; (iii) fees and expenses incurred in
connection with securitizations; (iv) interest expense incurred on borrowing
under its warehouse facilities; (v) income taxes; (vi) capital expenditures; and
(vii) other operating and administrative expenses. WSI has previously generated
all of its cash flows through whole loan sales, fee income on loans originated
and purchased, interest income on loans held for sale and borrowings from its
warehouse facilities and more recently has generated cash flow from loans sold
through securitizations. In addition, due to the growth of its loan production
and the increased use of loan sales through securitizations, WSI has accessed a
residual line of credit facility to finance residual securities retained by WSI
or its affiliates from its prior securitization transactions in order to meet
the cash requirements of its operating activities. As a result of the
significant increase in the volume of its loan purchase and origination
activities, WSI will be required to increase the amount available for borrowing
under its warehouse facilities.
WSI relies upon a short-term warehouse facility, two gestation repurchase
facilities, a residual line of credit facility, whole loan sales and loans sold
through securitizations to continue to fund loan purchases and originations. In
April 1996, WSI entered into a warehouse facility with Greenwich in the form of
a Master Repurchase Agreement Governing Purchases and Sales of Mortgage Loans
(the "Greenwich Repo Agreement"),
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<PAGE> 162
pursuant to which WSI has available a $200 million whole loan purchase and
warehouse financing facility (the "Greenwich Facility"). The Greenwich Facility
as set forth in the Greenwich Repo Agreement involves the sale of mortgage loans
to Greenwich with an obligation to repurchase the loans. The Greenwich Facility
allows WSI to borrow up to $200 million and is collateralized by new loan
originations where loan documents are deposited with the note custodian ("Dry
Loans"), and the Greenwich Facility provides that WSI can borrow up to $20
million collateralized by new loan originations where the loan documents are not
yet deposited with the note custodian ("Wet Loans"). Advances bear interest at
one-month LIBOR plus 175 basis points. The Greenwich Facility's initial one year
maturity (which expired on April 17, 1997) has been extended by Greenwich for
another one year term and provides for automatic one year renewals subject to
earlier terminations by Greenwich at any time and for any reason upon 60 days'
prior written notice. WSI is required to comply with various operating and
financial covenants as defined in the agreements governing the Facility. Such
covenants include restrictions on (i) changes in WSI's business that would
materially and adversely affect WSI's ability to perform its obligations under
the Greenwich Facility, (ii) selling any assets other than in the ordinary
course of business, and (iii) guaranteeing the debt obligation of any other
entity. The continued availability of funds provided to WSI under this facility
is subject to WSI's continued compliance with the operating and financial
covenants contained in such agreements. From December 31, 1996 to January 17,
1997, WSI was overextended on the Greenwich Facility by approximately $23
million, as the amount of WSI's borrowings exceeded the amount available under
the Greenwich Facility. As of May 31, 1997, $125.8 million was outstanding under
the Greenwich Facility.
It is contemplated that the Greenwich Facility will be terminated as of the
WSI Effective Time. The WSI Merger Agreement includes a condition precedent to
the completion of the WSI Merger that RBMG or WSI shall have obtained one or
more commitments reasonably satisfactory to the Chief Executive Officer of RBMG
and the Chief Executive Officer of WSI which provide a warehouse facility for
the sub-prime business of at least $300 million from and after the WSI Effective
Time. See "The WSI Merger Agreement -- Terms of the WSI Merger
Agreement -- Conditions to the WSI Merger." In addition to being a condition to
the completion of WSI Merger, an increase in the amount available under WSI's
warehouse facility will be necessary to permit WSI to purchase and originate its
increasing loan production volume while maintaining a neutral or positive cash
flow position for future operations. WSI currently has no commitments for
additional bank borrowings and there can be no assurance that WSI will be
successful in consummating any such financing transaction in the future on terms
that WSI would consider favorable, if at all.
Prior to the completion of WSI's first private securitization of $113.9
million of loans in September 1996, and approximately $337.7 million of loans in
three private securitization transactions completed in the first quarter ended
March 31, 1997, WSI sold its loans to institutional purchasers in whole loan
transactions. In the future, WSI expects to complete both public and private
securitizations of loans in the secondary market in the normal course of its
operation. Several factors may affect WSI's ability to complete securitizations
of its loans, including conditions in the securities markets generally,
conditions in the mortgage-backed securities market specifically, the credit
quality of WSI's portfolio of loans and WSI's ability to obtain credit
enhancement. Adverse changes in such factors may affect WSI's results of
operations and financial condition. In addition, in order to gain access to the
public securitization market, WSI may rely upon credit enhancements provided by
monoline insurance carriers to guarantee senior interests in the relevant
securitizations trusts. Any substantial reductions in the size or availability
of such insurance policies, or increases in the price charged by, or required
level of protection to be provided to the insurance companies issuing such
policies, could have a material adverse effect on WSI's results of operations
and financial condition.
WSI is also a party to an uncommitted gestation financing arrangement with
each of Paine Webber and Smith Barney Inc., pursuant to which WSI may, in the
discretion of such lenders, finance loan production on a transaction-specific
basis. These gestation facilities are uncommitted and discretionary in nature
and each financing under such facilities terminates and must be repaid in full
at the time the loans financed in any particular transaction have been sold or
refinanced. Advances under the Paine Webber facility bear interest at one-month
LIBOR plus 150 basis points. Advances under the Smith Barney facility bear
interest at one-month LIBOR plus 75 basis points. As a result of the substantial
increase in WSI's loan production volume over the recent months, the $200
million maximum commitment under the Greenwich Facility and WSI's intention to
limit the frequency of its securitization transactions to one during each fiscal
quarter, as is more typical industry
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<PAGE> 163
practice, WSI has increasingly relied on these uncommitted gestation facilities
to finance loan purchases and originations. Each of the gestation facilities
with Paine Webber and Smith Barney require WSI to maintain certain minimum
levels of shareholders' equity and restricts (i) changes in WSI's business that
would materially and adversely affect its ability to perform its obligations
under the facility, (ii) the sale of any assets other than in the ordinary
course of business and (iii) the guaranty of the debt obligations of any other
entity. As of May 31, 1996, WSI was in material compliance with all terms and
conditions of such gestation facilities. On December 31, 1996 and on March 31,
1997, WSI had outstanding $75.9 million and $3.9 million, respectively, under
the gestation facilities with Paine Webber. Under the gestation facility with
Smith Barney, WSI had outstanding $45.9 million on March 31, 1997. As of May 31,
1997, WSI had $201.1 million and $45.9 million outstanding under the Paine
Webber and Smith Barney gestation facilities, respectively.
In April 1997, WSI entered into a Residual Line of Credit Facility with
Greenwich (the "Residual Facility") in order to permit WSI to finance residual
securities retained by WSI or its affiliates in connection with its four prior
securitization transactions and to provide needed cash for use in operations.
The Residual Facility is set forth in a Promissory Note and Pledge and Security
Agreement which permits WSI to borrow up to $5 million and is secured by the
residual and interest-only certificates retained by WSI pursuant to its four
completed loan securitization transactions. The Residual Facility has a maturity
date of April 14, 1998, and is guaranteed by each of WSI and WSI's operating
subsidiary, WSI Securities, Inc. It is contemplated that the Residual Facility
will be terminated as of the WSI Effective Time.
There can be no assurance that WSI will be able to comply with the
covenants under its various credit facilities, the failure of which could result
in the loss of the related financing, or that WSI's uncommitted gestation
financing arrangements, or alternative arrangements, will be available to
finance loan production volume in the future. In addition, because WSI's credit
facilities are provided on a short-term basis, there can be no assurances that
WSI will be able to renew these arrangements at the end of their terms or to
obtain alternative financing on terms acceptable to WSI. WSI's failure to renew
its existing financing sources or obtain acceptable replacement financing may
require it to reduce its mortgage purchase and origination activities, which
will have a material adverse effect on WSI's operations and financial condition.
It is management's belief, however, that WSI will be able to renew its existing
financing or, alternatively, obtain replacement financing in the future on
acceptable terms.
WSI's current strategy is to sell a substantial portion of its loan
production through securitizations and to sell a portion of the resulting
interest-only certificates and effect whole loan sales to reduce both negative
cash flow and its need to access the capital markets with any regularity to meet
the cash needs of its business. During the first quarter of 1997, however, WSI
operated on a negative cash flow basis primarily as a result of the sale of a
substantial portion of its loan production volume in three securitization
transactions, the fees and expenses of the securitization transactions, a
reduction in the amount of loans sold on a whole loan basis, higher general and
administrative expenses associated with increased loan purchases and
originations and current payment of income taxes. In order to fund WSI's
operating cash requirements in excess of the cash generated from operations, WSI
borrowed under the Residual Facility with Greenwich and sold the interest-only
certificates received from the three securitization transactions completed
during the first quarter ended March 31, 1997. To the extent that WSI's mix of
whole loan sales and loan sales through securitizations fails to provide for a
neutral or positive cash flow position, management believes that it will be able
to arrange additional cash resources through debt refinancing or bank
borrowings. No assurance can be given, however, that WSI will be successful in
consummating any such financing transaction in the future on terms that WSI
would consider acceptable, if at all.
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<PAGE> 164
WSI COMMON STOCK OWNERSHIP BY MANAGEMENT
AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information known to WSI with
respect to beneficial ownership of the WSI Class A Common Stock as of May 31,
1997, by (i) each stockholder who is known by WSI to own beneficially more than
5% of the WSI Class A Common Stock; (ii) the Chief Executive Officer and the
three other executive officers of WSI; (iii) each director; and (iv) all
executive officers and directors of WSI as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
------------------------------------------------------
PERCENT OF TOTAL
WSI CLASS A SHARES OF RBMG
NUMBER OF COMMON STOCK COMMON STOCK
SHARES OF WSI OUTSTANDING PRIOR BENEFICIALLY OWNED
CLASS A TO THE WSI AFTER THE WSI
BENEFICIAL OWNERS COMMON STOCK MERGER(1) MERGER
- ----------------- ------------- ----------------- ------------------
<S> <C> <C> <C>
Robert C. Walsh.............. 49.56 49.56% 9,645,714
c/o Walsh Holding Co., Inc.
4 Campus Drive
Parsippany, New Jersey
07054
Greenwich Capital Financial
Products, Inc.(3).......... 24.99(3) 24.99 4,863,729
600 Steamboat Road
Greenwich, Connecticut
06830
Melissa C. Walsh............. 5 6.67 973,135
1996 Trust
c/o Walsh Holding Co., Inc.
4 Campus Drive
Parsippany, New Jersey
07054
Stephanie E. Walsh........... 5 6.67 973,135
1996 Trust
c/o Walsh Holding Co., Inc.
4 Campus Drive
Parsippany, New Jersey
07054
James Walsh.................. 5 6.67 973,135
c/o Walsh Holding Co., Inc.
4 Campus Drive
Parsippany, New Jersey
07054
Elizabeth Ann Demola......... 5 6.67 973,135
c/o Walsh Holding Co., Inc.
4 Campus Drive
Parsippany, New Jersey
07054
Arnold Cohn.................. .5 * 97,314
All directors and executive
officers as a group (4
persons)................... 70.06 93.4 13,635,568
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
---------------------------------------------
SHARES OF PERCENT OF
PERCENT OF RBMG RBMG
TOTAL RBMG COMMON STOCK COMMON STOCK
COMMON STOCK OUTSTANDING OUTSTANDING
OUTSTANDING AFTER THE WSI AFTER THE WSI
AFTER MERGER AND MERGER AND
THE WSI THE RBC THE RBC
BENEFICIAL OWNERS MERGER(2) MERGER MERGER
- ----------------- ------------ ------------- --------------
<S> <C> <C> <C>
Robert C. Walsh.............. 24.29% 10,598,158 24.29%
c/o Walsh Holding Co., Inc.
4 Campus Drive
Parsippany, New Jersey
07054
Greenwich Capital Financial
Products, Inc.(3).......... 12.25 5,343,987 12.25%
600 Steamboat Road
Greenwich, Connecticut
06830
Melissa C. Walsh............. 2.5 1,069,225 2.5%
1996 Trust
c/o Walsh Holding Co., Inc.
4 Campus Drive
Parsippany, New Jersey
07054
Stephanie E. Walsh........... 2.5 1,069,225 2.5%
1996 Trust
c/o Walsh Holding Co., Inc.
4 Campus Drive
Parsippany, New Jersey
07054
James Walsh.................. 2.5 1,069,225 2.5%
c/o Walsh Holding Co., Inc.
4 Campus Drive
Parsippany, New Jersey
07054
Elizabeth Ann Demola......... 2.5 1,069,225 2.5%
c/o Walsh Holding Co., Inc.
4 Campus Drive
Parsippany, New Jersey
07054
Arnold Cohn.................. * 106,923 *%
All directors and executive
officers as a group (4
persons)................... 34.33 14,981,981 34.33%
</TABLE>
- ---------------
* Less than one percent.
(1) Based on an aggregate of 75 shares of WSI Class A Common Stock issued and
outstanding as of May 31, 1997, plus, for Greenwich, 24.99 shares of WSI
Class A Common Stock issuable upon conversion of the WSI Class B Common
Stock issuable upon exercise of the WSI Warrant. The WSI Class B Common
Stock is convertible into WSI Class A Common Stock on a one-for-one basis.
(2) Assumes that the WSI Warrant is exercised prior to the WSI Effective Time
and that Greenwich receives shares of RBMG Common Stock.
(3) Includes 24.99 shares of WSI Class A Common Stock issuable upon conversion
of shares of WSI Class B Common Stock issuable upon the exercise of the WSI
Warrant.
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<PAGE> 165
DIRECTORS AND EXECUTIVE OFFICERS
The following information is presented with respect to individuals other
than current directors and executive officers of RBMG who will serve as
directors or executive officers of RBMG effective as of the WSI Effective Time.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Robert C. Walsh................... 45 President and Director of RBMG; Chairman of the Board;
President and Chief Executive Officer of WSI
James Walsh....................... 47 Director of RBMG; Vice President, Director of Underwriting
and Operations of WSI
John J. Oberdorf.................. 50 Director
William Biggs..................... 60 Director
</TABLE>
ROBERT C. WALSH. Robert C. Walsh has been Chairman of the Board, President
and Chief Executive Officer of WSI since its formation in April 1996. He had
been Managing Director of GF Mortgage Corp. (predecessor of Walsh Securities,
Inc.) and the Walsh Securities Division of Gruntal & Co. since 1991 and was
instrumental in founding and organizing the current residential, non-conforming
mortgage loan operations of WSI. From 1984 to 1991, Robert C. Walsh served in
various senior management positions at Carteret Savings Bank, ultimately serving
as its President and Chief Executive Officer. From 1982 to 1984 he served as
President of R.C. Walsh & Company. From 1981 to 1982 he served as Executive Vice
President at Reserve Financial Management Corporation. From 1974 to 1981, he
served in several capacities as Vice President for J.L. Kislak Mortgage
Corporation.
JAMES WALSH. James Walsh has been Vice President of WSI since April 1996.
From April 1989 to April 1996, as Senior Vice President of Donaldson Lufkin &
Jenrette's Real Estate Division, James Walsh oversaw all aspects of the
residential mortgage securitization, servicing brokerage, and mortgage banking
services. In his capacity as head of Residential Mortgage Transactions, James
Walsh was responsible for the trading of over $100 billion in mortgage servicing
rights including selling ten mortgage banking entities. He was instrumental in
the formation of Quality Mortgage and other non-conforming mortgage loan
originators which totaled over $5 billion in originations over the last five
years. James Walsh was President and founder of a newly formed loss mitigation
company specializing in servicing non-conforming mortgage loan mortgages located
in Austin, Texas. Prior to DLJ, he was instrumental in building the mortgage
banking department at Bear Stearns & Company into a primary market force. During
the nineteen months from 1987 to 1989 that James Walsh was at Bear Stearns, the
mortgage banking department traded approximately $20 billion in mortgage
servicing rights.
JOHN J. OBERDORF. John J. Oberdorf is a nominee to become a director of
RBMG commencing at the WSI Effective Time. Mr. Oberdorf has been a Member of the
law firm of St. John & Wayne, L.L.C., legal counsel to WSI, since 1990. From
1983 until 1990, Mr. Oberdorf was a partner in the law firm of Kraft & Hughes,
the predecessor to St. John & Wayne, L.L.C. Mr. Oberdorf served as Senior Vice
President and General Counsel to First National Bank of New Jersey from 1980 to
1983.
WILLIAM BIGGS. Mr. Biggs has been Chairman of the Board and Chief
Executive Officer of the Skylake State Bank since March 1981. From March 1967 to
March 1981, Mr. Biggs was President and Chief Operating Officer of J.L. Kislak
Mortgage Corporation.
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<PAGE> 166
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the annual
and long-term compensation paid and accrued during calendar 1996 to Robert C.
Walsh, WSI's Chairman and Chief Executive Officer, and James Walsh, WSI's Vice
President of Underwriting and Operations.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
OTHER
ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION(1) SALARY BONUS COMPENSATION COMPENSATION
- ------------------------------ -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Robert C. Walsh.................................. $350,000 $500,000 $11,363(2) $1,433(3)
President, Chief Executive Officer and Director
James Walsh...................................... $150,000 $300,000 $ -- $ --
Vice President, Director of Underwriting
and Operations
</TABLE>
- ---------------
(1) Considers payments made to such executive officers by the Predecessors prior
to their acquisition by WSI in April 1996.
(2) Includes car allowance for 1996.
(3) Matching contribution to 401(k) Plan.
EMPLOYMENT AGREEMENTS
Robert C. Walsh is a party to an employment agreement with WSI (the
"Current Walsh Employment Agreement") which provides for his services as the
Chief Executive Officer and President of WSI. The Current Walsh Employment
Agreement has a three year term which is automatically extended unless
terminated by either party on 30 days' prior written notice. The Current Walsh
Employment Agreement further provides for an annual base salary of $350,000
subject to cost-of-living adjustments and an annual bonus equal to 5% of WSI's
pre-tax profit (as defined in the Current Walsh Employment Agreement). The
Current Walsh Employment Agreement also provides for the payment to Robert C.
Walsh of approximately three times his annual base salary upon termination in
the event of certain change of control events. In accordance with the terms of a
certain employment agreement dated as of April 18, 1997 by and among Robert C.
Walsh, WSI and RBMG (the "Walsh Employment Agreement"), the Current Walsh
Employment Agreement will be terminated effective upon the WSI Effective Time
and substituted with the Walsh Employment Agreement. See "The WSI
Merger -- Certain Agreements in Connection with the WSI Merger -- Walsh
Employment Agreement" for a description of the Walsh Employment Agreement.
THE CHARTER AMENDMENTS
GENERAL
In connection with the RBC Merger and the WSI Merger, the RBMG Board has
unanimously declared advisable and approved and adopted the RBC Amendment and
the WSI Amendment, respectively. The approval and adoption of the RBC Amendment
by the RBMG Stockholders is contingent upon the approval and adoption of the RBC
Merger Agreement, the RBC Merger and the RBC Stock Issuance by the RBMG
Stockholders. Similarly, the approval and adoption of the WSI Amendment by the
RBMG Stockholders is contingent upon the approval and adoption of the WSI Merger
Agreement, the WSI Merger and the WSI Stock Issuance by the RBMG Stockholders.
However, the approval and adoption of the RBC Amendment by the RBMG Stockholders
is not contingent upon the approval and adoption of the WSI Amendment by the
RBMG Stockholders, and the approval and the adoption of the WSI Amendment by the
RBMG Stockholders is not contingent upon the approval and adoption of the RBC
Amendment by the RBMG Stockholders. Copies of the RBC Amendment and the WSI
Amendment are attached to this Joint Proxy Statement/Prospectus as Annexes C and
D, respectively, and
147
<PAGE> 167
are incorporated by reference into this Joint Proxy Statement/Prospectus. RBMG
Stockholders are urged to read the RBC Amendment and the WSI Amendment in their
entirety.
RBC AMENDMENT
RBMG is currently authorized to issue 25,000,000 shares of RBMG Common
Stock. The RBC Amendment, if it becomes effective, would increase the number of
shares of RBMG Common Stock that RBMG is authorized to issue from 25,000,000
shares to 50,000,000 shares. Assuming that the RBC Amendment is approved and
adopted and the RBC Merger is consummated (but not the WSI Merger), as of May
31, 1997, 20,347,046 shares of authorized RBMG Common Stock would remain
available for further issuance. RBMG currently does not have a sufficient number
of authorized but unissued shares of RBMG Common Stock to consummate the RBC
Merger. In addition, the RBMG Board believes that the increased flexibility
provided by the RBC Amendment will enable RBMG to respond to possible
acquisitions, financing needs and other business opportunities, to effect stock
dividends or stock splits and to provide appropriate equity-based compensation.
The RBMG Board could issue such additional shares of RBMG Common Stock at such
times and on such terms and conditions as it deemed appropriate and desirable
without further action by the RBMG Stockholders, unless such approval were
required by applicable law, the RBMG Certificate, the RBMG Bylaws or any stock
exchange or market on which RBMG securities may then be listed or traded.
Although the RBMG Board will authorize the issuance of additional shares of
RBMG Common Stock only when it considers doing so to be in the best interests of
the stockholders of RBMG, the issuance of additional shares of RBMG Common Stock
may, among other things, have a dilutive effect on the earnings per share of
RBMG Common Stock and on the voting rights of holders of shares of RBMG Common
Stock. The increase in the authorized number of shares of RBMG Common Stock
pursuant to the RBC Amendment also could be viewed as having anti-takeover
effects. Although the RBMG Board has no current plans to do so, shares of RBMG
Common Stock could be issued in various transactions that would make a change in
control of RBMG more difficult or costly and, therefore less likely. For
example, shares of RBMG Common Stock could be privately sold to purchasers
favorable to the RBMG Board in opposing a change in control or to dilute the
stock ownership of a person seeking to obtain control. RBMG has no present
intention to use the increased shares of authorized RBMG Common Stock for
anti-takeover purposes.
WSI AMENDMENT
The WSI Amendment, if it becomes effective, would increase the number of
shares of common stock that RBMG is authorized to issue from 50,000,000 shares
(25,000,000 if the RBC Amendment does not become effective) to 112,000,000,
consisting of 100,000,000 shares of RBMG Common Stock and 12,000,000 shares of
RBMG Class B Common Stock. In addition, the WSI Amendment, if it becomes
effective, would change the name of RBMG to "BCA Financial Corp." Assuming that
the WSI Amendment is approved and adopted and the Mergers are consummated, as of
May 31, 1997, 48,962,546 shares of RBMG Common Stock and 12,000,000 shares of
RBMG Class B Common Stock (60,283,529 shares of RBMG Common Stock and 12,000,000
shares of RBMG Class B Common Stock shares if the RBC Merger is not consummated)
would remain available for further issuance. RBMG currently does not have a
sufficient number of authorized but unissued shares of RBMG Common Stock to
consummate the WSI Merger. In addition, the RBMG Board believes that the
increased flexibility provided by the WSI Amendment would enable RBMG to respond
to possible acquisitions, financing needs, and other business opportunities, to
effect stock dividends or stock splits and to provide appropriate equity-based
compensation. The RBMG Board could issue such additional shares of common stock
at such times and on such terms and conditions as it deemed appropriate and
desirable without further action by the RBMG Stockholders, unless such approval
were required by applicable law, the RBMG Certificate, the RBMG Bylaws or any
stock exchange on which RBMG securities may then be listed or traded.
Although the RBMG Board will authorize the issuance of additional shares of
RBMG Common Stock only when it considers doing so to be in the best interests of
the stockholders of RBMG, the issuance of additional shares of RBMG Common Stock
may, among other things, have a dilutive effect on the earnings per share of
RBMG Common Stock and on the voting rights of holders of shares of RBMG Common
Stock. The increase in the authorized number of shares of RBMG Common Stock
pursuant to the WSI Amendment also could be
148
<PAGE> 168
viewed as having anti-takeover effects. Although the RBMG Board has no current
plans to do so, shares of RBMG Common Stock could be issued in various
transactions that would make a change in control of RBMG more difficult or
costly and, therefore less likely. For example, shares of RBMG Common Stock
could be privately sold to purchasers favorable to the RBMG Board in opposing a
change in control or to dilute the stock ownership of a person seeking to obtain
control. RBMG has no present intention to use the increased shares of authorized
RBMG Common Stock for anti-takeover purposes.
The 12,000,000 shares of RBMG Class B Common Stock authorized by the WSI
Amendment would provide the shares of RBMG Class B Common Stock to be issued to
Greenwich under the RBMG Warrant. Holders of RBMG Class B Common Stock would not
have any voting rights except as otherwise required by applicable law; provided,
however, that holders of RBMG Class B Common Stock will have the right to vote
as a separate class on any merger or consolidation of RBMG with or into another
entity or on any recapitalization or reorganization in which shares of RBMG
Class B Common Stock would receive or be exchanged for consideration different
on a per share basis than that received by or in exchange for shares of RBMG
Common Stock or would otherwise be treated differently than holders of shares of
RBMG Common Stock. The right of holders of RBMG Class B Common Stock to a
separate class vote would not apply in transactions in which shares of RBMG
Class B Common Stock would receive or be exchanged for non-voting securities
which on a per-share basis are otherwise identical in amount and form to the
voting securities received by or exchanged for the RBMG Common Stock, so long as
(i) such non-voting securities are convertible into such voting securities on
the same terms as RBMG Class B Common Stock is convertible into RBMG Common
Stock and (ii) all other consideration is equal on a per share basis. In
addition, holders of RBMG Class B Common Stock would have the right to vote as a
separate class on any amendment or restatement of the RBMG Certificate which in
any way adversely affects the rights of the RBMG Class B Common Stock in a
manner different than the RBMG Common Stock. Shares of RBMG Class B Common Stock
would be convertible for no consideration at any time at the option of the
holder thereof into shares of RBMG Common Stock.
RECOMMENDATIONS OF THE RBMG BOARD
THE BOARD OF DIRECTORS OF RBMG HAS DECLARED EACH OF THE RBC AMENDMENT AND
THE WSI AMENDMENT ADVISABLE AND DETERMINED THAT THEY ARE IN THE BEST INTERESTS
OF RBMG AND ITS STOCKHOLDERS, HAS UNANIMOUSLY APPROVED AND ADOPTED THE RBC
AMENDMENT AND THE WSI AMENDMENT AND RECOMMENDS THAT RBMG STOCKHOLDERS VOTE FOR
EACH OF THE PROPOSALS TO APPROVE AND ADOPT THE RBC AMENDMENT AND THE WSI
AMENDMENT.
EXPERTS
The consolidated financial statements of RBMG incorporated in this Joint
Proxy Statement/Prospectus by reference to RBMG's Annual Report on Form 10-K for
the year ended December 31, 1996, have been so incorporated in reliance upon the
report of Price Waterhouse LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.
The consolidated financial statements of RBC as of December 31, 1996 and
1995 and for each of the three years in the period ended December 31, 1996
included in this Joint Proxy Statement/Prospectus have been so included in
reliance on the report of Price Waterhouse LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
The consolidated financial statements of WSI as of December 31, 1996 and
for the nine month period ended December 31, 1996 included in this Joint Proxy
Statement/Prospectus have been so included in reliance on the report of KPMG
Peat Marwick LLP, independent auditors, given on the authority of said firm as
experts in accounting and auditing.
The combined financial statements of GF Mortgage Corp. and GF Property
Corp. as of March 31, 1996 and December 31, 1995 and for the three month period
ended March 31, 1996 and the year ended December 31, 1995
149
<PAGE> 169
included in this Joint Proxy Statement/Prospectus have been so included in
reliance on the reports of KPMG Peat Marwick LLP, independent auditors, given
upon the authority of that firm as experts in accounting and auditing.
The combined financial statements of GF Mortgage Corp. and GF Property
Corp. as of December 31, 1994 and year then ended included in this Joint Proxy
Statement/Prospectus have been so included in reliance on the report of Kempisty
& Company Certified Public Accountants PC, independent auditors, given on the
authority of said firm as experts in accounting and auditing.
LEGAL MATTERS
The validity of the shares of RBMG Common Stock being registered under the
Registration Statement of which this Joint Proxy Statement/Prospectus forms a
part will be passed upon for RBMG by King & Spalding, Atlanta, Georgia. The tax
consequences of the RBC Merger will be passed upon for RBC by McNair Law Firm,
P.A. John W. Currie, a member of such firm, is a director and the secretary of
RBC and RBMG, and Mr. Currie and other members of the firm are stockholders of
RBC and RBMG. The tax consequences of the WSI Merger will be passed upon for WSI
by St. John & Wayne, L.L.C. John Oberdorf, a member of such firm, will become a
director of RBMG if the WSI Merger is consummated, and Mr. Oberdorf's spouse is
a stockholder of WSI.
STOCKHOLDER PROPOSALS
Stockholders who intend to present proposals for consideration at next
year's annual meeting of RBMG are advised that any such proposal must be
received by the Secretary of RBMG no later than the close of business on
, if such proposal is to be considered for inclusion in the proxy
statement and form of proxy relating to that meeting.
150
<PAGE> 170
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS OF RBC
Report of Independent Accountants......................... F-2
Consolidated Balance Sheet as of December 31, 1995 and
1996 and March 31, 1997................................ F-3
Consolidated Statement of Income for the years ended
December 31, 1994, 1995, and 1996 and for the three
months ended March 31, 1996 and 1997................... F-4
Consolidated Statement of Changes in Stockholders' Equity
for the years ended December 31, 1994, 1995, and 1996
and the three months ended March 31, 1997.............. F-5
Consolidated Statement of Cash Flows for the years ended
December 31, 1994, 1995 and 1996 and for the three
months ended March 31, 1996 and 1997................... F-6
Notes to Consolidated Financial Statements................ F-7
CONSOLIDATED FINANCIAL STATEMENTS OF WALSH HOLDING CO., INC.
Independent Auditors' Report.............................. F-26
Consolidated Balance Sheets as of December 31, 1996 and
March 31, 1997......................................... F-27
Consolidated Statements of Income for the nine months
ended December 31, 1996 and the three months ended
March 31, 1997......................................... F-28
Consolidated Statements of Stockholder's Equity for the
nine months ended December 31, 1996 and the three
months ended March 31, 1997............................ F-29
Consolidated Statements of Cash Flows for the nine months
ended December 31, 1996 and the three months ended
March 31, 1997......................................... F-30
Notes to Consolidated Financial Statements................ F-31
COMBINED FINANCIAL STATEMENTS OF GF MORTGAGE CORP. AND GF
PROPERTY CORP.
Independent Auditors' Report.............................. F-40
Independent Auditors' Report.............................. F-41
Combined Balance Sheets as of December 31, 1994 and 1995,
and March 31, 1996..................................... F-42
Combined Statements of Income for the years ended December
31, 1994 and 1995 and the three months ended March 31,
1996................................................... F-43
Combined Statements of Stockholders' Equity for the years
ended December 31, 1994 and 1995 and the three months
ended March 31, 1996................................... F-44
Combined Statements of Cash Flows for the years ended
December 31, 1994 and 1995 and the three months ended
March 31, 1996......................................... F-45
Notes to Combined Financial Statements.................... F-46
</TABLE>
F-1
<PAGE> 171
REPORT OF INDEPENDENT ACCOUNTANTS
February 28, 1997
To the Board of Directors and Shareholders
of Resource Bancshares Corporation
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, of changes in shareholders' equity
and of cash flows present fairly, in all material respects, the financial
position of Resource Bancshares Corporation and its subsidiaries at December 31,
1996 and 1995, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles. 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 audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Price Waterhouse LLP
Columbia, South Carolina
F-2
<PAGE> 172
RESOURCE BANCSHARES CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
-------------------- ---------
1995 1996 1997
-------- -------- ---------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Cash........................................................ $ 9,899 $ 8,474 $ 8,568
Receivables................................................. 111,885 55,583 46,709
Commercial mortgage loan servicing rights, net.............. 904 1,693 1,620
Premises and equipment, net................................. 2,033 1,120 1,097
Investment in RBMG.......................................... 39,369 61,820 63,374
Notes receivable............................................ 19,000 2,267 2,267
Intangible assets........................................... 1,383 3,057 3,007
Other assets................................................ 12,565 6,114 7,080
-------- -------- --------
Total assets...................................... $197,038 $140,128 $133,722
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Short-term borrowings..................................... $ 77,638 $ 36,957 $ 31,596
Long-term borrowings...................................... 11,380
Accrued expenses and payables............................. 7,716 12,121 10,283
Other liabilities......................................... 16,797 11,011 9,916
-------- -------- --------
Total liabilities................................. 113,531 60,089 51,795
-------- -------- --------
Stockholders' equity
Common stock -- par value $.01 -- 25,000,000 shares
authorized; 7,032,810, 6,909,882 and 6,909,882 shares
issued and outstanding at December 31, 1995 and 1996
and March 31, 1997, respectively....................... 70 69 69
Nonvoting common stock -- par value $.01 -- 2,500,000
shares authorized; 1,577,788 shares issued and
outstanding at December 31, 1995 and 1996 and March 31,
1997................................................... 16 16 16
Additional paid-in capital................................ 56,031 55,085 55,085
Retained earnings......................................... 28,565 24,869 26,757
Unearned shares of employee stock ownership plan.......... (1,175)
-------- -------- --------
Total stockholders' equity........................ 83,507 80,039 81,927
-------- -------- --------
Commitments and contingencies (Note 15).....................
-------- -------- --------
Total liabilities and stockholders' equity........ $197,038 $140,128 $133,722
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 173
RESOURCE BANCSHARES CORPORATION
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
FOR THE YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------------- ---------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
(UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT SHARE INFORMATION)
<S> <C> <C> <C> <C> <C>
REVENUES
Interest income....................... $ 9,514 $ 16,536 $ 13,342 $ 4,390 $ 1,905
Interest expense...................... (2,429) (6,643) (5,212) (1,605) (663)
--------- --------- --------- --------- ---------
Net interest income................... 7,085 9,893 8,130 2,785 1,242
Net gain on sale of leases............ 1,617 3,124 19 476
Credit card fees...................... 23,140 11,637 18,424 3,087
Commercial mortgage loan origination
fees................................ 244 3,082 4,416 295 477
Commercial mortgage loan and lease
servicing fees...................... 9 1,014 2,508 469 858
Equity in undistributed earnings of
RBMG................................ 7,510 5,885 7,424 1,854 1,775
Gain on sale of RBMG stock............ 2,456 2,456
Revenues of Retail Banking Business... 2,454
Gain on sale of Retail Banking
Business............................ 9,931
Other income.......................... 922 1,341 1,121 345 1,607
--------- --------- --------- --------- ---------
Total revenues.............. 51,295 34,469 47,603 11,310 6,435
--------- --------- --------- --------- ---------
EXPENSES
Salary and employee benefits.......... 9,537 11,526 18,360 3,607 2,483
Occupancy expense..................... 1,368 1,748 1,958 441 303
Amortization of commercial mortgage
loan servicing rights............... 61 209 30 73
Provision for lease losses............ 2,000 2,985 2,391 1,015 390
Expenses of Retail Banking Business... 4,631
General and administrative expenses... 13,853 10,467 16,965 2,674 985
--------- --------- --------- --------- ---------
Total expenses.............. 31,389 26,787 39,883 7,767 4,234
--------- --------- --------- --------- ---------
Income before income taxes............ 19,906 7,682 7,720 3,543 2,201
Income tax expense.................... (5,705) (978) (467) (572) (313)
--------- --------- --------- --------- ---------
Net income.................. $ 14,201 $ 6,704 $ 7,253 $ 2,971 $ 1,888
========= ========= ========= ========= =========
Weighted average common shares
outstanding......................... 8,610,698 8,610,598 8,487,670 8,610,598 8,487,670
Net income per common share........... $ 1.65 $ 0.78 $ 0.85 $ 0.35 $ 0.22
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 174
RESOURCE BANCSHARES CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
MANDATORILY
REDEEMABLE STOCK NONVOTING
APPRECIATION RIGHTS COMMON STOCK COMMON STOCK ADDITIONAL
------------------- ------------------ ------------------ PAID-IN RETAINED
UNITS AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS
--------- ------- --------- ------ --------- ------ ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1993............... 100,530 $744 7,017,810 $70 1,477,258 $15 $54,762 $ 16,664
Conversion of stock
appreciation
rights............. (100,530) (744) 100,530 1 708 36
Shares issued under
Stock Option
Plan............... 15,000 * 140
Loan to Employee
Stock Ownership
Plan...............
Shares released under
Employee Stock
Ownership Plan.....
Net income........... 14,201
Dividends declared... (4,305)
-------- ---- --------- --- --------- --- ------- --------
Balance, December 31,
1994............... 0 0 7,032,810 70 1,577,788 16 55,610 26,596
Shares released under
Employee Stock
Ownership Plan..... 421
Net income........... 6,704
Dividends declared... (4,735)
-------- ---- --------- --- --------- --- ------- --------
Balance, December 31,
1995............... 0 0 7,032,810 70 1,577,788 16 56,031 28,565
Loan to Employee
Stock Ownership
Plan...............
Shares redeemed from
Employer Stock
Ownership Plan..... (122,928) (1) (1,227)
Shares released under
Employee Stock
Ownership Plan..... 281
Net income........... 7,253
Spin-off of RPG...... (10,949)
-------- ---- --------- --- --------- --- ------- --------
Balance, December 31,
1996............... 0 0 6,909,882 69 1,577,788 16 55,085 24,869
Net income........... 1,888
-------- ---- --------- --- --------- --- ------- --------
Balance, March 31,
1997 (Unaudited)... 0 $ 0 6,909,882 $69 1,577,788 $16 $55,085 $ 26,757
======== ==== ========= === ========= === ======= ========
<CAPTION>
UNEARNED TOTAL
ESOP STOCKHOLDERS'
SHARES EQUITY
-------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Balance, December 31,
1993............... $(1,256) $ 70,999
Conversion of stock
appreciation
rights............. 1
Shares issued under
Stock Option
Plan............... 140
Loan to Employee
Stock Ownership
Plan............... (765) (765)
Shares released under
Employee Stock
Ownership Plan..... 275 275
Net income........... 14,201
Dividends declared... (4,305)
------- --------
Balance, December 31,
1994............... (1,746) 80,546
Shares released under
Employee Stock
Ownership Plan..... 571 992
Net income........... 6,704
Dividends declared... (4,735)
------- --------
Balance, December 31,
1995............... (1,175) 83,507
Loan to Employee
Stock Ownership
Plan............... (53) (53)
Shares redeemed from
Employer Stock
Ownership Plan..... 1,228 0
Shares released under
Employee Stock
Ownership Plan..... 281
Net income........... 7,253
Spin-off of RPG...... (10,949)
------- --------
Balance, December 31,
1996............... 0 80,039
Net income........... 1,888
------- --------
Balance, March 31,
1997 (Unaudited)... $ 0 $ 81,927
======= ========
</TABLE>
- ---------------
* Amount less than $1
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 175
RESOURCE BANCSHARES CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE THREE
FOR THE YEAR ENDED MONTHS ENDED
DECEMBER 31, MARCH 31,
------------------------------ ------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- -------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 14,201 $ 6,704 $ 7,253 $ 2,971 $ 1,888
Adjustments to reconcile net income to cash provided by
(used in) operating activities:
Depreciation and amortization............................. 556 586 847 163 155
Amortization of intangibles............................... 215 242 264 32 50
Deferred income tax (benefit) expense..................... (315) 5,529 1,003 (50) 61
Employee Stock Ownership Plan Compensation................ (765) 421 228
Provision for lease losses................................ 2,000 2,985 2,391 1,015 390
Net gain on sale of leases................................ (1,617) (3,124) (19) (476)
Gain on sale of Retail Banking Business................... (9,931)
Gain on sale of RBMG stock................................ (2,456) (2,456)
Equity in undistributed earnings of RBMG.................. (7,510) (5,885) (7,424) (1,854) (1,775)
Dividends received from RBMG.............................. 429 221
Accretion of discount on retail banking investment
securities.............................................. (161)
Decrease in retail banking trading account securities..... 27,171
Decrease (increase) in other assets....................... 3,046 (3,727) (12,730) (806) (466)
Increase (decrease) in accrued expenses and other
liabilities............................................. 14,255 (5,304) 6,498 1,968 (2,994)
-------- -------- -------- -------- -------
Net cash provided by (used in) operating
activities........................................ 42,762 (66) (6,821) 964 (2,946)
-------- -------- -------- -------- -------
INVESTING ACTIVITIES
Repayments (advances) on RBMG notes receivable.............. (19,000) 6,000 6,000
Increase in retail banking temporary investments, net....... (15,848)
Proceeds from maturities of retail banking investment
securities................................................ 18,900
Proceeds from sale of leases held for investment............ 31,580 35,373 500
Change in lease receivables held for investment............. (50,365) (52,258) 1,247 (3,202) (4,582)
Proceeds from sale of leases held for sale.................. 34,445 10,530
Change in lease receivables held for sale................... (14,030) 3,012
Decrease in retail banking loans, net....................... 8,465
Disposals (purchases) of intangibles........................ 109 (1,988) (2,965) 83
Cash transferred in connection with sale of Retail Banking
Business.................................................. (53,983)
Cash transferred in connection with the spin-off of RPG..... (70)
Equity investment........................................... (2,000) 500
Sales (purchases) of furniture, fixtures and equipment...... 599 (1,126) (2,448) (325) (59)
-------- -------- -------- -------- -------
Net cash (used in) provided by investing
activities........................................ (92,123) (42,792) 55,552 3,056 9,401
-------- -------- -------- -------- -------
FINANCING ACTIVITIES
Proceeds from borrowings.................................... 67,938 100,146 48,390 21,236 7,392
Repayment of borrowings..................................... (79,066) (98,546) (26,551) (12,753)
Increase in retail banking deposits, net.................... 4,992
Decrease in retail banking short-term borrowings, net....... (3,997)
Proceeds from exercise of stock options..................... 141
Activity under Employee Stock Ownership Plan................ 275 571
Cash dividends.............................................. (9,041)
-------- -------- -------- -------- -------
Net cash provided by (used in) financing
activities........................................ 69,349 12,610 (50,156) (5,315) (5,361)
-------- -------- -------- -------- -------
Net increase (decrease) in cash............................. 19,988 (30,248) (1,425) (1,295) 1,094
Cash, beginning of period................................... 20,159 40,147 9,899 9,899 8,474
-------- -------- -------- -------- -------
Cash, end of period................................. $ 40,147 $ 9,899 $ 8,474 $ 8,604 $ 9,568
======== ======== ======== ======== =======
SUPPLEMENTAL ACTIVITIES
Interest paid............................................... $ 4,487 $ 4,126 $ 5,406 $ 1,474 $ 676
Taxes paid (refunded)....................................... 1,631 1,203 (941) (941) 132
Non-cash activity:
Satisfaction of note receivable in exchange for RBMG
stock................................................... $ 13,000 $ 13,000
Conversion of advance to RPG for note receivable.......... 2,267
Redemption of unallocated RBC common stock held by
Employee Stock Ownership Plan........................... 1,228
Satisfaction of advance to RPG in conjunction with
spin-off of RPG......................................... 3,044
Spin-off of RPG, net of cash transferred.................. (10,879)
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 176
RESOURCE BANCSHARES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE INFORMATION)
NOTE 1 -- THE COMPANY:
Resource Bancshares Corporation ("Resource") was organized under the laws
of the state of South Carolina in 1986. From 1987 until May 1, 1994, Resource
was a bank holding company and operated its credit card and leasing operations
as divisions of a bank subsidiary. Between 1989 and 1993, Resource also operated
a residential mortgage operation as a division of a bank subsidiary. On June 3,
1993, Resource transferred the assets and liabilities of its residential
mortgage banking business to a new wholly-owned subsidiary, Resource Bancshares
Mortgage Group, Inc. ("RBMG"), and RBMG simultaneously sold 58% of its stock in
an initial public offering. In 1993 and 1994, Resource sold its retail banking
assets, liabilities and operations, (the "Retail Banking Business") and on May
1, 1994 Resource ceased to be a bank holding company. Also in 1994, the credit
card and leasing operations were contributed to new operating subsidiaries of
Resource, Resource Processing Group, Inc. ("RPG") and Republic Leasing Company,
Inc. ("Republic Leasing"), respectively. Also during 1994, Resource formed
Laureate Capital Corp. ("LCC") and LCC formed a wholly-owned commercial mortgage
loan subsidiary, Laureate Realty Services, Inc. ("Laureate Realty"). Also,
during that year Resource formed TFP Funding, Inc. and TFP Funding, II, as
special purpose subsidiaries of Republic Leasing. On December 31, 1996, Republic
Leasing was merged into Resource which is now operated as a division and as more
fully described in Note 3, RPG was spun-off (the "Spin-off").
Subsequent to the Spin-off, Resource and its subsidiaries (collectively,
"RBC") are engaged primarily in commercial small ticket equipment lease
financing and servicing and commercial mortgage banking.
RBC originates commercial mortgage loans for various insurance companies
and other investors, primarily in North Carolina, South Carolina, Tennessee,
Virginia, Indiana and Alabama. Commercial mortgage loans are generally
originated in the name of the investor and, in most instances, RBC retains the
right to service the loans under a servicing agreement.
Substantially all of RBC's lease receivables are acquired from independent
brokers who operate throughout the continental United States.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The accounting and reporting policies of Resource and its subsidiaries
reflect industry practices and conform in all material respects with generally
accepted accounting principles. For comparative purposes, Retail Banking
Business revenues and expenses for 1994 are summarized into two line items in
the statement of income. In addition, certain amounts from prior years have been
reclassified to conform to current period presentation.
Unaudited data
The amounts reported at March 31, 1996 and 1997 and for the three months
then ended are unaudited. However, in the opinion of management of RBC, all
adjustments, consisting of normal recurring items, necessary for a fair
presentation of operating results for the periods shown have been made.
Principles of Consolidation
The consolidated financial statements of RBC include the accounts of
Resource and its direct and indirect wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated. As discussed in
Note 3, the assets and liabilities of RPG have been excluded from the
consolidated balance sheet at December 31, 1996; however, the results of
operations of RPG are included through December 31, 1996.
F-7
<PAGE> 177
RESOURCE BANCSHARES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE INFORMATION)
Significant Estimates
In preparing the financial statements, management is required to make
estimates based on available information that can affect the reported amounts of
assets and liabilities and disclosures as of the balance sheet date and revenues
and expenses for the related periods. Such estimates relate principally to RBC's
allowance for lease losses. Additionally, the fair values of leases held for
sale and servicing rights are all relevant to ensuring that leases are carried
at the lower of cost or market, and that potential impairments of servicing
rights are recognized if required. Because of the inherent uncertainties
associated with any estimation process and due to possible future changes in
market and economic conditions that will affect fair values, it is possible that
actual future results in realization of the underlying assets and liabilities
could differ significantly from the amounts reflected as of the balance sheet
date.
Cash
RBC considers all highly liquid debt instruments purchased with a maturity
of three months or less to be cash.
Receivables
Receivables consist of direct financing leases which are carried at the
aggregate of lease payments and estimated residuals less unearned discount and
unamortized origination costs, except for leases held for sale which are carried
at the lower of aggregate cost or market value. Interest income is recognized
monthly based on the net lease outstanding balance. Residuals are recognized
monthly based on the estimated end-of-lease residuals and are included as an
adjustment to interest income. Lease receivables are charged-off at the earlier
of the date they are deemed uncollectible or when they become 120 days past due.
Certain direct costs to originate lease receivables are deferred and recognized
as an adjustment to interest income over the estimated life of the lease.
Allowance for Lease Losses
The allowance for lease losses is established through a provision charged
to operations. The allowance is reviewed and adjusted as needed based upon
management's evaluation of factors affecting the lease receivable portfolios
such as economic conditions, growth and composition of the portfolio, historical
loss experience and analyses of the collectibility of specific lease
receivables. The allowance is established at an amount that management believes
will be adequate to absorb probable losses on outstanding leases that may become
uncollectible.
Mortgage servicing rights
Purchased servicing rights for commercial mortgage loans are recorded at
cost and are amortized in proportion to and over the estimated life of the
servicing. The carrying value of such rights is periodically assessed and is
adjusted to the lower of amortized cost or estimated market value.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets or life of the lease, if less. Gains or losses on
routine dispositions are reflected in current operations. Maintenance and
repairs are expensed when incurred and major replacements and improvements are
capitalized.
F-8
<PAGE> 178
RESOURCE BANCSHARES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE INFORMATION)
Investment and Equity in Undistributed Earnings of Resource Bancshares
Mortgage Group, Inc.
RBC accounts for its investment in RBMG using the equity method.
Accordingly, the investment in RBMG is carried at original cost adjusted to
include RBC's allocable share of the net proceeds of the initial public
offering, subsequent capital changes by RBMG, including stock offerings, and
Resource's allocable share of the undistributed net earnings of RBMG.
Investment in Intek Information, Inc.
In August 1996, RBC purchased for $2,000, 20,000 shares of preferred stock
of Intek Information, Inc. ("Intek"), a teleservicing company based in Colorado.
On February 3, 1997, Intek completed a private offering and as part of the
transaction, Intek repurchased 5,000 shares of preferred stock from RBC for
$1,741. The investment in Intek is accounted for under the cost method and is
recorded in the consolidated balance sheet in other assets.
Gain on Sale of Leases
Beginning in 1995, RBC has sold certain leases with servicing retained.
Gains on the sale of leases are recognized to the extent the net proceeds exceed
the net basis of the leases. In addition, through December 31, 1996 gains were
recognized for excess servicing. Gains attributable to excess servicing were
calculated based on the difference between the actual servicing fee and the
normal servicing fee over the remaining lives of the leases, adjusted for
estimated prepayments and charge-offs. Beginning January 1, 1997, RBC adopted,
on a prospective basis, the provisions of Statement of Financial Accounting
Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities" ("FAS 125"), which provides that after a
transfer of financial assets, an entity recognizes the financial and servicing
assets it controls and the liabilities it has incurred, derecognizes the
financial assets when control has been surrendered, and derecognizes liabilities
when extinguished. A transfer of financial assets in which the transferor
surrenders control over those assets is accounted for as a sale to the extent
that consideration other than beneficial interests in the transferred assets is
received in exchange. Liabilities incurred or obtained by transferors as part of
a transfer of financial assets are initially measured at fair value, if
practicable. Servicing assets and other retained interests in the transferred
assets are measured by allocating the previous carrying amount between the
assets sold, if any, and retained interests, if any, based on their relative
fair values at the date of transfer. In addition, servicing assets and
liabilities are subsequently (a) amortized in proportion to and over the period
of estimated net servicing income or loss and (b) measured for assessment of
asset impairment or increased obligation based on their fair values.
During the years 1995 and 1996 and the three months ended March 31, 1997,
RBC sold lease portfolios in the aggregate amount of $31,580, $69,818 and
$10,157, respectively. During the years 1994, 1995 and 1996 and the three months
ended March 31, 1996 and 1997, gains recognized on the sale of leases was $0,
$1,617, $3,124 and $19 and $476, respectively. The effect of adopting FAS 125
was immaterial.
Credit Card Fees
Credit card fees for servicing and marketing credit card portfolios for
investors were recognized by RPG monthly on an accrual basis based upon the
terms of the underlying agreement. Generally, such agreements provided for fees
based upon a percentage of the outstanding portfolio balance or based upon the
number and types of transactions processed. Certain servicing agreements
provided for retention of all or a portion of certain ancillary credit card
revenues (such as interchange volume, application processing fees, credit
insurance commissions and collection fees). Ancillary revenues which were
retained were recorded as collected. Revenues for advising client on portfolios'
performance and profitability were included in revenues as earned under the
program management agreement, generally on a monthly basis.
F-9
<PAGE> 179
RESOURCE BANCSHARES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE INFORMATION)
Generally, credit card marketing campaigns were conducted over a two to
twelve month period and may have been priced in conjunction with a servicing
agreement or program management agreement. In such case, the related agreements
contained provisions for payment to RBC of the portion of such fees associated
with the marketing services upon early termination of the agreements.
Incremental costs of acquiring servicing and program management agreements and
marketing campaigns, consisted primarily of data processing, postage, credit
bureau reports, payroll and similar direct costs, and were initially deferred as
deferred contract costs. Such deferred costs were amortized based upon the ratio
of estimated total costs to total revenue under the related agreements. Included
in other expenses were amortized deferred contract costs of $0, $1,639, $4,052,
$227 and $0 for the years 1994, 1995 and 1996 and first quarter 1996 and 1997,
respectively. Additionally, included in salaries and other benefit costs were
$0, $262, $503, $120 and $0 for the years 1994, 1995 and 1996 and first quarter
1996 and 1997, respectively. Management periodically reviewed the amortization
and recoverability of deferred contract costs and in 1996 recorded an impairment
write down of $600. See Note 3 regarding the Spin-off of the credit card
operations as of December 31, 1996.
Servicing and other fees
Fees for servicing commercial mortgage loans and lease portfolios are
recognized monthly on an accrual basis based upon the terms of the underlying
agreement. Generally, such agreements provide for fees based upon a percentage
of the outstanding balance. Other fees consist primarily of origination fees for
commercial mortgage loans. Origination fees are recognized when there is a firm
commitment and a firm closing date is scheduled.
Goodwill and Other Intangible Assets
Goodwill arising from purchase transactions is amortized over periods
generally ranging from 15 to 25 years using the straight-line method. Lease
servicing assets are amortized over the estimated remaining lives of the leases,
adjusted for estimated prepayments and charge-offs, in proportion to estimated
net servicing revenues. RBC services leases under long-term servicing agreements
which may not be sold or assigned without the consent of the investor.
Income Taxes
Federal income tax returns for Resource and its wholly-owned subsidiaries
are filed on a consolidated basis. RBC recognizes deferred tax assets and
liabilities in amounts representative of the estimated future tax consequences
of temporary differences between the carrying amounts and tax bases of assets
and liabilities. Deferred tax assets and liabilities are measured using the
enacted tax rate expected to apply to taxable income in the period in which the
difference is expected to be realized or settled. RBC's equity investee and
affiliate, RBMG, files separate federal and state tax returns. Subsequent to
December 31, 1996, RPG will not be included in RBC's consolidated income tax
return but will be obligated for its own taxes and tax returns; however, under
the terms of an income tax sharing agreement, RPG may request RBC to file
amended consolidated income tax returns for periods prior to 1997 to include any
RPG carryback amount. If such carryback results in a tax benefit, RPG is to
receive the benefit.
Fair Value Disclosures
RBC's consolidated financial statements include information about the fair
value of financial instruments. In certain instances, fair values have been
estimated by management in the absence of readily ascertainable market prices.
In developing such values, management has applied methodologies and procedures
which are believed to be reasonable for purposes of estimating fair value.
However, because of the uncertainty inherent in any estimation process,
resultant fair value information may differ significantly from the actual market
values that would have been assigned if an active market existed.
F-10
<PAGE> 180
RESOURCE BANCSHARES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE INFORMATION)
New Accounting Standard
In February 1997 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" (FAS No. 128),
which is effective for financial statements issued for periods ending after
December 15, 1997. Early adoption of FAS No. 128 is not permitted.
NOTE 3 -- SPIN-OFF OF SUBSIDIARY:
As of the close of business on December 31, 1996, Resource effected a
Spin-off of RPG through a distribution of RPG stock to Resource shareholders.
In conjunction with the Spin-off, on December 31, 1996, each Resource
shareholder received one share of RPG's stock for each share of voting and each
share of nonvoting Resource common stock owned as of the December 30, 1996
record date. In addition, Resource was obligated to distribute to each holder of
certain of its Phantom stock units a dividend equivalent payment of (i) .54
shares of RPG stock and (ii) cash equivalent to .46 times the December 31, 1996
value of a share of RPG stock, as determined by an independent valuation, for
each Phantom stock unit held on the record date. RPG assumed the liability to
issue the RPG stock in satisfaction of $1,951 of its borrowings from Resource.
In conjunction with the Spin-off, Resource contributed $3,044 to RPG
through a reduction of RPG's borrowings from Resource which resulted in RPG
having $12,900 of capital after issuance of RPG shares to the Phantom stock unit
holders. The remaining RPG borrowings from Resource were converted into a note
which is more fully described in Note 9.
RBC recorded the Spin-off of RPG by a charge to its retained earnings. A
summary of the net assets distributed as part of the Spin-off is as follows:
<TABLE>
<S> <C>
Cash........................................................ $ 70
Premises and equipment, net................................. 2,722
Deferred contract costs..................................... 16,275
Other assets................................................ 4,830
Notes payable............................................... (4,067)
Liability to issue common stock............................. (1,951)
Deferred income tax payable................................. (5,845)
Other liabilities........................................... (1,085)
-------
$10,949
=======
</TABLE>
The following unaudited pro forma information for the year ended December
31, 1996 represents the results of operations of RBC assuming the elimination of
revenues and expenses attributed to RPG and the elimination of certain expenses
incurred by RBC in conjunction with the Spin-off. Management believes this
presentation is preferable to one which results from applying the terms of the
Spin-off agreements as of January 1, 1996 as the results of such presentation
would differ materially from the actual transaction which occurred on December
31, 1996:
<TABLE>
<CAPTION>
PRO FORMA
(UNAUDITED)
-----------
<S> <C>
Revenues.................................................... $34,191
Expenses.................................................... 26,416
-------
7,775
Provision for income taxes.................................. (187)
-------
Net income.................................................. $ 7,588
=======
</TABLE>
F-11
<PAGE> 181
RESOURCE BANCSHARES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE INFORMATION)
NOTE 4 -- ACQUISITION OF COMMERCIAL MORTGAGE LOAN ASSETS AND BUSINESS:
During 1995 and 1996, RBC acquired the assets and business of two
commercial mortgage loan companies, Mortgage Company of Indiana, Inc. ("MCII")
and Camp & Company ("Camp"), respectively, in transactions accounted for under
the purchase method of accounting. In conjunction with the purchases, RBC paid
cash of $1,085 and assumed liabilities of $720 related to MCII and paid cash of
$2,500 and assumed liabilities of $301 related to Camp. The purchase price was
allocated as follows:
<TABLE>
<CAPTION>
MCII CAMP
------ ------
<S> <C> <C>
Fixed assets and leasehold improvements..................... $ 37 $ 89
Commercial mortgage loan servicing rights................... 965 998
Goodwill.................................................... 720 1,714
Other, net.................................................. 83
------ ------
Total............................................. $1,805 $2,801
====== ======
</TABLE>
NOTE 5 -- RECEIVABLES:
Receivables are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- MARCH 31,
1995 1996 1997
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Lease receivables held for investment.............. $140,770 $ 53,691 $45,746
Lease receivables held for sale.................... 14,030 11,018
Less -- Unearned discount.......................... (26,693) (10,834) (8,893)
Less -- Allowance for lease losses................. (2,192) (1,304) (1,162)
-------- -------- -------
$111,885 $ 55,583 $46,709
======== ======== =======
</TABLE>
At December 31, 1995 and 1996 and March 31, 1997, lease receivables
aggregating $54,806 ($46,776 net of related unearned discount), $25,682 ($22,843
net of related unearned discount), and $20,443 ($18,317 net of related unearned
discount), respectively, were collateral for the Class A and Class B Lease
Backed Notes discussed in Note 11.
The components of RBC's investment in lease receivables are summarized as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- MARCH 31,
1995 1996 1997
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Minimum lease payments due from lessees and
estimated residuals.............................. $134,888 $ 65,342 $54,834
Initial direct costs, net.......................... 5,882 2,379 1,930
-------- -------- -------
$140,770 $ 67,721 $56,764
======== ======== =======
</TABLE>
F-12
<PAGE> 182
RESOURCE BANCSHARES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE INFORMATION)
At December 31, 1996, the maturities of minimum lease receivables are as
follows:
<TABLE>
<S> <C>
1997........................................................ $32,580
1998........................................................ 17,633
1999........................................................ 9,572
2000........................................................ 3,652
2001........................................................ 1,861
2002 and thereafter......................................... 44
-------
$65,342
=======
</TABLE>
Leases represent unconditional obligations of the lessees to pay all
scheduled payments and require the lessees to assume all responsibility with
respect to the equipment, including the obligation to pay all costs relating to
its operation, maintenance, repair, sales and property taxes and insurance. At
December 31, 1996 and March 31, 1997, the average lease size was approximately
$11 and $10, respectively, and there were only three and two leases,
respectively with a current lease receivable in excess of $250.
At December 31, 1996 and March 31,1997, approximately 13% and 12% and 16%
and 18% of RBC's net lease receivables were located in the states of Florida and
California, respectively. At December 31, 1996 and March 31, 1997, approximately
26% and 24%, respectively, of RBC's net lease receivables were collateralized by
computer systems. Otherwise, there are no geographic, equipment type or lessor
industry concentrations greater than 10%.
RBC's leases are collateralized by the equipment subject to the leases. In
most instances, RBC requires a security deposit equal to one monthly payment and
personal guarantees. In addition, where considered necessary other credit
enhancements are obtained. At December 31, 1995 and 1996 and March 31, 1997, RBC
held security deposits and sales and property taxes for the benefit of lessees
of $7,981, $4,981 and $3,767, respectively.
Activity in the allowance for lease losses is summarized as follows:
<TABLE>
<CAPTION>
FOR THE THREE
FOR THE YEAR ENDED MONTHS
DECEMBER 31, ENDED MARCH 31,
--------------------------- ----------------
1994 1995 1996 1996 1997
------- ------- ------- ------- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Balance at beginning of period.............. $ 396 $ 1,840 $ 2,192 $ 2,192 $1,304
Provision for lease losses.................. 2,000 2,985 2,391 1,015 390
Charge-offs................................. (1,009) (3,342) (4,022) (1,065) (758)
Recoveries.................................. 453 709 743 198 226
------- ------- ------- ------- ------
Balance at end of period.................... $ 1,840 $ 2,192 $ 1,304 $ 2,340 $1,162
======= ======= ======= ======= ======
</TABLE>
F-13
<PAGE> 183
RESOURCE BANCSHARES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE INFORMATION)
NOTE 6 -- PREMISES AND EQUIPMENT:
Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
ESTIMATED ----------------- MARCH 31,
USEFUL LIVES 1995 1996 1997
------------ ------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Leasehold improvements......................... 7-10 years $ 105 $ 176 $ 177
Furniture and equipment........................ 3-7 years 5,232 3,385 3,442
------- ------- -------
5,337 3,561 3,619
Less -- Accumulated depreciation and
amortization................................. (3,304) (2,441) (2,522)
------- ------- -------
$ 2,033 $ 1,120 $ 1,097
======= ======= =======
</TABLE>
Depreciation and amortization expense for the years 1994, 1995 and 1996 and
the three months ended March 31, 1996 and 1997 was $556, $525, $638, $133 and
$82, respectively.
NOTE 7 -- LEASE COMMITMENTS:
RBC, as lessee, has entered into various noncancelable operating lease
agreements, primarily for office space and equipment. Certain of the leases
contain renewal options and escalation clauses. In addition, under certain
leases RBC pays maintenance, property taxes and insurance which are not included
in minimum commitments below.
At December 31, 1996, minimum commitments were as follows:
<TABLE>
<S> <C>
1997........................................................ $ 638
1998........................................................ 527
1999........................................................ 465
2000........................................................ 320
2001........................................................ 284
2002 and thereafter......................................... 373
------
$2,607
======
</TABLE>
Rent expense for operating leases for the years 1994, 1995 and 1996 and the
three months ended March 31, 1996 and 1997 was $622, $939, $968, $236 and $169,
respectively.
NOTE 8 -- INVESTMENT AND EQUITY IN UNDISTRIBUTED EARNINGS OF RESOURCE BANCSHARES
MORTGAGE GROUP, INC.:
In March 1996, RBMG completed a public offering of 3,842,961 shares of
common stock. In a concurrent private placement, RBC purchased an additional
896,552 shares of common stock at the offering price of $14.50 per share for
$13,000. This transaction resulted in an in-substance sale of a portion of
Resource's investment in RBMG, and accordingly RBC recognized a gain of $2,456.
At December 31, 1995, RBC held 6,016,755 shares of RBMG (after giving
effect to various stock dividends and other stock issuances in 1995)
representing a 42% equity interest. At December 31, 1996 and March 31, 1997, RBC
held 7,397,238 shares of RBMG (after giving effect to various stock dividends
and other stock issuances in 1996) representing a 38% equity interest. At
December 31, 1995 and 1996, the market value of the shares of RBMG owned by RBC
was approximately $85,739 and $105,411, respectively, based on a closing market
price of $14.25 per share (after giving effect to the various stock dividends)
at both dates. The market value of such shares at March 31, 1997 was
approximately $116,506 based on a closing market price of $15.75 per share.
F-14
<PAGE> 184
RESOURCE BANCSHARES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE INFORMATION)
As result of the above transactions, a number of stock dividends and other
stock issuances by RBMG after March 31, 1997, RBC currently owns 36.5% of the
outstanding RBMG common stock.
Summarized information concerning the assets, liabilities, equity and
results of operations of RBMG is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ MARCH 31,
1995 1996 1997
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Mortgage loans and mortgage servicing rights..... $1,112,750 $ 788,703 $ 919,103
Premises and equipment........................... 16,314 21,135 21,055
Other assets..................................... 102,033 218,556 294,533
---------- ---------- ----------
$1,231,097 $1,028,394 $1,234,691
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Borrowings....................................... $1,071,087 $ 805,730 $1,001,329
Other liabilities................................ 66,606 65,369 71,686
Stockholders' equity............................. 93,404 157,295 161,676
---------- ---------- ----------
$1,231,097 $1,028,394 $1,234,691
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
FOR THE YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------- --------------------
1994 1995 1996 1996 1997
-------- -------- --------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES AND EXPENSES
Net interest income................ $ 7,686 $ 8,635 $ 16,902 $ 3,243 $ 3,735
Net gains on sale of mortgage loans
and mortgage servicing rights.... 34,535 41,168 80,283 18,599 18,518
Loan servicing fees and other
income........................... 14,401 26,894 29,432 7,208 7,804
-------- -------- --------- -------- --------
Total revenues..................... 56,622 76,697 126,617 29,050 30,057
Total expenses..................... (38,579) (62,478) (106,994) (24,590) (25,587)
-------- -------- --------- -------- --------
Net income............... $ 18,043 $ 14,219 $ 19,623 $ 4,460 $ 4,470
======== ======== ========= ======== ========
</TABLE>
NOTE 9 -- NOTES RECEIVABLE:
At December 31, 1995, RBMG owed RBC $19,000 under various short-term notes
receivable. All of the notes contained a due on demand clause, were unsecured
and bore interest at the Wall Street Journal Prime interest rate. Interest
income from the notes was $541, $271 and $271 for the years 1995 and 1996 and
the three months ended March 31, 1996, respectively. The notes were repaid in
March 1996 in conjunction with the RBMG stock offering. In 1994 there were no
loans between RBC and RBMG and since March 1996 there have been none.
At December 31, 1996, RBC has a note receivable from RPG in the amount of
$2,267. The note bears interest at Wall Street Journal Prime, with an interest
rate floor of 6%, and a cap of 10%, per annum. Interest through January 1, 1998
and through January 1, 1999 is payable on such dates in arrears with monthly
payments thereafter. Principal is payable beginning January 1, 1999, based on a
ten-year amortization with the balance due on November 30, 2001. In the event of
a public or private offering of equity or debt of RPG, within 30 days after
closing, the note must be reduced by the lesser of (i) 20% of the net proceeds
to RPG or (ii) the remaining principal and accrued interest of the note.
F-15
<PAGE> 185
RESOURCE BANCSHARES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE INFORMATION)
NOTE 10 -- GOODWILL AND OTHER INTANGIBLE ASSETS:
Goodwill and other intangible assets (net of accumulated amortization) are
summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- MARCH 31,
1995 1996 1997
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Goodwill................................................ $1,042 $2,337 $2,307
Other intangibles....................................... 341 720 700
------ ------ ------
$1,383 $3,057 $3,007
====== ====== ======
</TABLE>
The related amortization expenses were:
<TABLE>
<CAPTION>
FOR THE THREE
FOR THE YEAR ENDED MONTHS ENDED
DECEMBER 31, MARCH 31,
-------------------- --------------
1994 1995 1996 1996 1997
---- ---- ---- ----- -----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Goodwill....................................... $213 $232 $250 $63 $30
Other intangibles.............................. 2 10 14 2 2
---- ---- ---- --- ---
$215 $242 $264 $65 $32
==== ==== ==== === ===
</TABLE>
NOTE 11 -- SHORT-TERM AND LONG-TERM BORROWINGS:
Short-term and long-term borrowings are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ MARCH 31,
1995 1996 1997
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Revolving Credit Facility............................. $53,206 $26,294 $22,682
Equipment Lease Trust................................. 35,812 10,663 6,005
Commercial Mortgage Warehouse......................... 1,800
Commercial Mortgage Working Capital................... 1,109
------- ------- -------
$89,018 $36,957 $31,596
======= ======= =======
</TABLE>
At December 31, 1996, all borrowings are due in 1997.
Revolving Credit Facility
TFP has a 364-day $75,000 (reduced to $50,000 in May 1997) revolving credit
facility to provide interim financing for its leasing portfolio. The warehouse
credit agreement which was due in May 1997 and has been extended until August
1997 generally provides that TFP may borrow up to 85% (reduced to 82% in May
1997) of the aggregate eligible discounted lease receivable balance related to
leases on which a first priority perfected security interest has been granted to
the lender. A discount rate equal to the two-year Treasury plus 3.00% is used to
compute the aggregate discounted eligible lease receivables balance. The
agreement provides for either a variable rate of interest based on the 30 day
London Interbank Offered Rate ("LIBOR") plus 1.00% or at the borrower's
election, amounts may be fixed based on the 60 or 90 day LIBOR rate plus 1.00%.
Interest is payable monthly with principal due at the earlier of the disposition
of the leases or the maturity of the line. In the event the revolver balance
exceeds the credit line, RBC has five days to cure the shortfall or the revolver
will convert to a term loan at a fixed rate of LIBOR plus 1.50% for 60 days and
LIBOR plus 3.50% thereafter. Repayment of a term loan will be based upon
scheduled payments of the underlying lease receivables. Under the credit
facility, Resource is obligated to repurchase or substitute leases up to a
maximum of $20 million for warranty events.
F-16
<PAGE> 186
RESOURCE BANCSHARES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE INFORMATION)
The revolving credit facility contains various covenants regarding
characteristics of the collateral and the performance of the leases originated
and serviced by RBC. During a portion of 1996 and first quarter 1997, RBC did
not comply with several of those conditions; however, the lender has waived the
exception or retroactively modified the covenants so that RBC is in compliance.
The credit agreement includes covenants which restricts TFP's ability to
incur debt, encumber assets, other than as collateral for the facility, sell
assets, merge, declare or pay any dividends or change its corporate by-laws or
certificate of incorporation. The revolving credit facility contains various
covenants requiring RBC to maintain a net worth of at least $40 million and a
leverage ratio not exceeding 10:1 as well as change in control covenants.
Equipment Lease Trust
Effective December 28, 1994, PSSFC Equipment Lease Trust 1994-3 ("Trust"),
a special purpose entity formed by TFP II, issued $58,689 of Class A Senior
8.10% and $9,268 of Class B Subordinated 9.23% Lease Backed Notes (collectively,
the "Notes"). Under the terms of an indenture agreement between TFP II, the
Trust and the indenture trustee, TFP II sold certain of its lease receivables
having a net lease balance of $72,846 to the Trust which in turn granted the
indenture trustee a security interest in all collections on those lease
receivables. Under the terms of the indenture agreement, all collections
thereunder are generally applied in the following priority: (1) to pay interest
on the Class A Notes, (2) to pay interest on the Class B Notes, (3) to pay
principal on the Class A Notes, and (4) to pay principal on the Class B Notes.
Payments on the Class B Notes are subordinated to payments on the Class A Notes.
TFP II has retained a residual interest in the Trust such that any amounts
remaining after full repayment of the Notes, together with interest due thereon
and after payment of all ancillary obligations of the Trust, will be returned to
TFP II. However, neither TFP II nor RBC have any obligation to make payments on
the Notes should collections on the underlying lease receivables prove
insufficient for such purposes. TFP II has an option to prepay the Notes when
the aggregate principal balance of the Notes is less than 10% of the initial
principal amount and the limited right, but not an obligation, to substitute
comparable leases for any lease receivable which defaults, prepays or terminates
prior to its scheduled termination date. RBC has accounted for the sale of the
lease receivables and issuance of the Notes as a collateralized financing.
Commercial Mortgage Warehouse and Working Capital Facility
In August 1996, Laureate Realty entered into a 364 day, $14,000 revolving
warehouse credit facility with a financial institution. The warehouse facility
generally provides interim financing between the time the Federal Home Loan
Mortgage Corporation ("Freddie Mac") multifamily conventional loans are closed
and the delivery of the loans to Freddie Mac, the investor. The loan is secured
by the underlying loans and interest is at the higher of 30 day adjusted LIBOR
plus 1.50% or the interest rate of the collateral. In August 1996, Laureate
Realty also obtained a 364 day, $2,500 revolving working capital line of credit
with the same financial institution. Interest on this line is at 30 day adjusted
LIBOR plus 2.00%. Both facilities expire August 18, 1997, unless extended and
both contain certain covenants with which RBC is in compliance as of December
31, 1996 and March 31, 1997. Under these facilities, Laureate Realty is required
to maintain liquid assets of $200 and net worth of at least $1,000 and Resource,
which is guarantor of the lines, is required to maintain liquid assets of at
least $3,000, a minimum net worth of $35,000 and a ratio of total liabilities to
net worth is not permitted to exceed 2:1. In addition, Resource must not
encumber $5,000 of its stock in RBMG and there are restrictions on changes in
ownership, control and management.
Compliance with Loan Covenants
Although management anticipates continued compliance, there can be no
assurance that RBC will be able to comply with the debt covenants specified for
each of its financing agreements. Failure to comply could result in the loss of
the related financing and the immediate repayment of the outstanding loan
balance.
F-17
<PAGE> 187
RESOURCE BANCSHARES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE INFORMATION)
The monthly average outstanding amount under these credit arrangements
during 1996 and the first quarter of 1997 was $71,418 and $33,002, respectively,
and the weighted average interest rate during such periods was 7.52% and 7.67%,
respectively. RBC incurred interest expense of $2,429, $6,643, $5,212, $1,605
and $663 for the years 1994, 1995 and 1996 and for the three months ended March
31, 1996 and 1997, respectively. RBC also incurred facility fees related to
these credit facilities totaling $701, $147, $43, $0 and $0 for the years 1994,
1995 and 1996 and for the three months ended March 31, 1996 and 1997,
respectively. These fees have been capitalized and included in other assets and
are being amortized as interest expense over the terms of and in proportion to
the estimated loan balances. At December 31, 1996 and March 31, 1997, RBC had
additional advances available under these credit agreements of $21,015 and
$14,661, respectively.
NOTE 12 -- GAIN ON SALE OF RETAIL BANKING BUSINESS:
During 1994, RBC divested itself of its remaining Retail Banking Business.
A reconciliation of the net assets sold to the amount of cash transferred as
reflected in the Consolidated Statement of Cash Flows is set forth below for the
year ended December 31, 1994:
<TABLE>
<S> <C>
LIABILITIES ASSUMED BY PURCHASERS:
Deposits.................................................... $367,377
Short-term borrowings....................................... 7,100
Other liabilities........................................... 3,553
ASSETS TRANSFERRED TO PURCHASERS:
Temporary investments....................................... (146,550)
Trading securities.......................................... (22,692)
Investment securities....................................... (15,053)
Loans, net.................................................. (107,302)
Premises and equipment...................................... (10,978)
Other assets................................................ (1,988)
--------
Net liabilities transferred................................. 73,467
Less -- Gain on sale of branch operations................... (9,931)
Less -- Goodwill and other intangibles charged-off.......... (9,553)
--------
Net cash transfer reflected in the Consolidated Statement of
Cash Flows................................................ $ 53,983
========
</TABLE>
The above gains have been presented on a pre-tax basis. Tax expense for
financial reporting purposes allocable thereto approximated $5,041 for the year
ended December 31, 1994. The amounts reflected as net cash transferred and
pre-tax gains are presented net of related selling expenses of $2,412.
F-18
<PAGE> 188
RESOURCE BANCSHARES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE INFORMATION)
NOTE 13 -- INCOME TAXES:
The components of the provision (benefit) for income taxes are as follows:
<TABLE>
<CAPTION>
FOR THREE
MONTHS
FOR THE YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
------------------------ -----------
1994 1995 1996 1996 1997
------ ------- ----- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current:
Federal........................................ $5,901 $(4,125) $(747) $622 $217
State.......................................... 119 (426) 216 35
------ ------- ----- ---- ----
6,020 (4,551) (531) 622 252
Deferred:
Federal........................................ (288) 5,059 701 (140) 55
State.......................................... (27) 470 297 90 6
------ ------- ----- ---- ----
$5,705 $ 978 $ 467 $572 $313
====== ======= ===== ==== ====
</TABLE>
RBC's effective tax rate varied from the statutory federal tax rate due to
the following:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------
1994 1995 1996
---------------- ---------------- ----------------
% OF % OF % OF
PRETAX PRETAX PRETAX
AMOUNT INCOME AMOUNT INCOME AMOUNT INCOME
------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Tax expense at statutory rate...... $ 6,967 35.0% $ 2,689 35.0% $ 2,702 35.0%
State tax, net of federal
benefit.......................... 647 3.3 250 3.3 76 1.0
Goodwill........................... 1,212 6.1 70 .9 58 .8
Benefit of dividends received
deduction on equity in earnings
of RBMG.......................... (3,553) (17.8) (1,801) (23.5) (2,079) (27.0)
Valuation allowance................ (107) (1.4)
Other, net......................... 432 2.1 (230) (3.0) (183) (2.4)
------- ----- ------- ----- ------- -----
$ 5,705 28.7% $ 978 12.7% $ 467 6.0%
======= ===== ======= ===== ======= =====
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
---------------------------------------
1996 1997
------------------ ------------------
% OF % OF
PRETAX PRETAX
AMOUNT INCOME AMOUNT INCOME
-------- ------- -------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Tax expense at statutory rate....................... $ 1,240 35.0% $ 771 35.0%
State tax, net of federal benefit................... 68 1.9 26 1.2
Goodwill............................................ 14 .4
Benefit of dividends received deduction on equity in
earnings of RBMG.................................. (519) (14.7) (497) (22.6)
Valuation allowance................................. (107) (3.0)
Other, net.......................................... (124) (3.5) 13 .6
------- ----- ------- -----
$ 572 16.1% $ 313 14.2%
======= ===== ======= =====
</TABLE>
F-19
<PAGE> 189
RESOURCE BANCSHARES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE INFORMATION)
RBC provides deferred taxes on its equity in undistributed earnings of RBMG
assuming such earnings will be eligible for an 80% dividends received deduction.
In 1994, RBC cumulatively adjusted its deferred tax liability account to reflect
this policy.
Deferred tax (assets) liabilities arising in accordance with FAS No. 109
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- MARCH 31,
1994 1995 1996 1997
------- ------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Allowance for lease losses.................... $ (844) $(1,162) $ (591) $ (444)
Deferred compensation......................... (2,280) (1,871) (2,843) (2,341)
Prepaid and accrued expense................... (346) (153) 62 (12)
State net operating loss carry forwards....... (107) (107) (662) (662)
Other......................................... (147) (9)
------- ------- ------- -------
Gross deferred tax assets........... $(3,724) $(3,302) $(4,034) $(3,459)
------- ------- ------- -------
Deferred gain on partial sale of RBMG......... $ 6,246 $ 6,246 $ 7,186 $ 7,186
Equity in undistributed earnings of RBMG...... 971 1,421 1,825 1,961
Premises and equipment depreciation........... 2,913 5,989 2,488 1,847
Deferred fees................................. 385 1,698 120 111
Other......................................... 268
------- ------- ------- -------
Gross deferred tax liabilities...... 10,515 15,622 11,619 11,105
------- ------- ------- -------
Valuation allowance against deferred tax
assets...................................... 107 107
------- ------- ------- -------
$ 6,898 $12,427 $ 7,585 $ 7,646
======= ======= ======= =======
</TABLE>
In 1994 and 1995, RBC had provided a valuation allowance relating to the
tax benefits of certain state tax loss carry forwards. Management currently
believes the tax benefits relating to the state tax loss carry forwards are
recoverable.
NOTE 14 -- EMPLOYEE BENEFIT PLANS:
Employee Stock Ownership Plan ("ESOP")
All employees of RBC having attained age 21 and having completed 1,000
hours of employment are eligible to participate in RBC's leveraged ESOP.
Participants vest in RBC's contributions at a rate of 20% per year.
Contributions made by RBC to the ESOP may be made in the form of cash or
Resource common stock at the discretion of the Board of Directors, except that a
cash contribution is required to be made in sufficient amounts to pay any
maturing debt obligations of the ESOP. During 1994, RBC contributed $275 to the
ESOP and loaned the ESOP $765. During 1995, RBC contributed $300 to the ESOP.
During 1994, 1995 and 1996 the ESOP received $121, $133 and $0 of dividends on
shares of Resource held by the plan, respectively. Such dividends were used to
reduce the acquisition loans from Resource. During the three months ended March
31, 1996 and March 31, 1997, there were no contributions made to the ESOP or
dividends received by the ESOP.
Shares held by the ESOP are allocated to participants as the loan and
interest are repaid. Under the provisions of SOP 93-6, "Employers' Accounting
for Employee Stock Ownership Plans," shares purchased on or before December 31,
1992 are "grandfathered" and the ESOP accounts for these shares under SOP 76-3,
"Accounting Practices for Certain Employee Stock Ownership Plans." RBC
recognizes expense based on the number of shares allocated to participants and
the cost or fair market value of the shares released depending on whether the
shares were purchased before or after December 31, 1992. Compensation expense
recorded by RBC in connection with the ESOP was $275, $767 and $281 for the
years ended December 31, 1994, 1995 and 1996,
F-20
<PAGE> 190
RESOURCE BANCSHARES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE INFORMATION)
respectively. There was no compensation expense recorded by RBC during the three
months ended March 31, 1996 and March 31, 1997.
Effective December 31, 1996, the ESOP sold to Resource 122,928 of the
unallocated shares of RBC stock in satisfaction of all of the outstanding ESOP
acquisition loans. The sales price per share was determined by an independent
valuation. The remaining unallocated shares of 33,528 were allocated as of
December 31, 1996 to qualified participants.
At December 31, 1994, 1995 and 1996 and March 31, 1996 and March 31, 1997,
the ESOP had allocated shares to participants of 76,137, 87,090, 118,721, 87,090
and 118,721, respectively. For the same periods and considering the 33,528
shares described above, the ESOP held unallocated shares of 165,512, 154,567,
- -0-, 154,567 and -0-, respectively.
In conjunction with the Spin-off, the December 31, 1996 ESOP benefits
allocated to RPG participants are being spun-off to a separate RPG ESOP plan.
Phantom Stock Plan
Prior to 1994, RBC adopted a Phantom Stock Plan that provided for the
awarding of up to 350,000 deferred compensation units. Under the Plan, a vesting
period and value base was assigned at the time an award was made. The plan
permitted a vesting period of between five and ten years with full vesting by
the end of the vesting period.
Under the plan, upon becoming fully vested a participant is paid, for each
unit held, (i) the difference between the market value of a share of common
stock as defined in the plan and the value base of the unit plus (ii) the amount
of cash dividends paid on a share of RBC common stock that had a record date for
payment between the date of the award and January 14, 1995.
On December 15, 1994, the Board of Directors of Resource amended the
Phantom Stock Plan to provide for current payment to participants of an amount
equal to the product of (i) the common stock per share dividend declared and
paid by RBC which has a record date between January 15, 1995 and the payment
date and (ii) the number of Phantom units. As of December 31, 1994, 1995 and
1996 and March 31, 1996 and 1997, of the 346,350 units which had been awarded,
there were 193,200, 186,700, 183,200, 186,700 and 183,200, respectively units
outstanding. All of the units were awarded at a value base of $7.50 and
originally vested over five years. However, in 1994 and again in 1995,
Resource's Board of Directors extended the vesting period for certain of the
units for an additional twelve months.
During 1994, LCC's Board of Directors adopted a similar Phantom Stock Plan
for the benefit of its employees which provides for awarding of up to 2,200
deferred compensation units. At December 31, 1995 and 1996, LCC had awarded
1,825 and 375 units, respectively, at a value base which approximated book
value. In 1996, LCC's Board of Directors authorized and awarded 2,500 Special
Phantom units. Under the LCC plan, participants receive amounts equivalent to
the amount of any dividend paid on LCC common stock between the date of the
grant and the payment date, times the number of units owned, except to the
extent that the dividend causes book value per share of LCC to be reduced below
the value base, in which case the value base shall be reduced.
Between 1990 and 1993, Resource's Board of Directors approved several
Special Phantom Stock Awards in the aggregate of 700,000 units for RBC's
chairman and chief executive officer and in 1994, Resource's Board of Directors
awarded that officer another 200,000 units. The terms and conditions of those
awards were essentially the same as the regular Phantom Stock Plan except that
any time RBC pays a common stock cash dividend, the employee receives an amount
equivalent to the per share dividend paid times the number of special units,
except with respect to the units awarded for 1994 for which the value base is
reduced by the amount of per share common stock cash dividends paid with a
record date between December 15, 1994 and the payment date. At
F-21
<PAGE> 191
RESOURCE BANCSHARES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE INFORMATION)
December 31, 1996, the value base of the outstanding units was 300,000 at $7.50,
300,000 at $8.50 and 100,000 at $9.00. The 200,000 units awarded in 1994 expired
without any payment due. As of December 31, 1996 the units are scheduled to
fully vest 200,000 in 1996, 400,000 in 1997 and 300,000 in 1998.
At December 31, 1995 and 1996 and March 31, 1997, the accrued phantom stock
expense was $4,439, $6,754 and $5,644, respectively.
Compensation expense on the Phantom Stock Plans is measured by the
difference between market value as defined in the plans (currently 150% of the
book value of a share of common stock) and the value base and is recognized over
the vesting period.
In February 1997, Resource's Board of Directors approved the immediate
vesting of all of the Phantom Stock units outstanding under the Resource Phantom
Stock Plan and Special Phantom Stock Plan, except the 200,000 special units
which expired as of December 31, 1996 (the "Phantom Plans"), and terminated the
plans. In addition, Resource's Board of Directors approved the payment of the
Phantom Plans liability by a combination of Resource common stock and cash. In
conjunction with this action, Resource issued 211,363 shares of Resource voting
common stock and has paid out cash of approximately $2,572.
401(k) Retirement Savings Plan
RBC has a 401(k) Retirement Savings Plan which is available to all regular,
full-time active employees. The plan allows employees to contribute annually up
to 15% of their gross before-tax earnings, subject to the maximum established by
law. Employees become eligible to participate in the plan upon completion of six
months continuous service. RBC matches 50% of the employee's contribution up to
a maximum of 3% of the employee's gross compensation. The employee immediately
vests in contributions made by the employee and vests in employer matching
contributions at a rate of 25% per year. RBC matching contributions were $47,
$120, $203, $68 and $36 for the years 1994, 1995 and 1996 and the three months
ended March 31, 1996 and 1997, respectively.
NOTE 15 -- COMMITMENTS AND CONTINGENCIES:
RBC was servicing commercial mortgage loans of $107,691, $1,464,360,
$2,334,451, $1,504,774 and $2,400,990 at December 31, 1994, 1995 and 1996 and
March 31, 1996 and 1997, respectively. At December 31, 1996 and March 31, 1997,
47% of commercial mortgage loans outstanding were being serviced for a single
customer who accounted for 32% and 22%, respectively, of commercial mortgage
fees and commercial mortgage servicing fees for the year 1996 and the first
quarter of 1997 .
In addition, at December 31, 1994, 1995 and 1996 and March 31, 1996 and
1997, RBC was servicing $0, $29,249, $78,747, $27,592 and $81,921, respectively,
of leases for third parties, the majority of which were serviced for a single
customer who accounted for 65% and 75%, respectively, of leasing non-interest
revenue during 1996 and the three months ended March 31, 1997. Commercial
mortgage loans and leases serviced for others are not included in the
accompanying balance sheet. In addition, escrow balances related to serviced
commercial mortgage loans are not included in the accompanying balance sheet.
In the ordinary course of business, RBC is exposed to liabilities under
representations made to investors in connection with the origination of
commercial mortgage loans and the sale and servicing of leases and, as further
described in Note 11, to a Trust in connection with the issuance of certain
lease backed notes payable. Additionally, RBC is responsible for servicing
commercial mortgage loans and certain lease receivables in conformity with the
terms of the related agreements. Under certain circumstances, RBC could be
required to repurchase certain receivables or to indemnify the issuer or the
Trust if there has been a breach of representations or warranties, or a failure
to service the underlying receivables in a manner consistent with the terms of
the underlying agreements. RBC does not expect to incur any material liabilities
or losses pursuant to these
F-22
<PAGE> 192
RESOURCE BANCSHARES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE INFORMATION)
provisions. Accordingly, no provision for loss related thereto has been made in
the accompanying financial statements.
In conjunction with the Spin-off described in Note 3, Resource agreed to
(i) guarantee until November 30, 2001, up to $5,000 of RPG's bank debt, for
which Resource will be paid an annual guarantee fee of 62.5 basis points, (ii)
continue to guarantee performance under a RPG transaction processing agreement
and a marketing agreement and (iii) indemnify RPG for any taxes associated with
the Spin-off or any taxes for periods prior to 1996 which have not been provided
for in RPG's financial statements. In addition, RPG has agreed to indemnify
Resource for any losses or expenses incurred by Resource in conjunction with the
guarantee of the above bank debt and transaction processing agreement.
RBC is involved in a series of claims and counter claims, including class
actions brought by various parties on behalf of various lessees regarding
equipment which the lessees acquired from a single vendor. Between 1989 and
1996, the vendor sold approximately eleven thousand pieces of advertising
equipment which were financed by various third party lessors. In 1996, the
vendor filed for bankruptcy. At December 31, 1996 and March 31, 1997, RBC has
approximately 281 and 275 of such leases with a net lease receivable balance of
$2,243 and $2,119, respectively. All of RBC's leases contain "hell or high
water" provisions which require the lessee to fully pay the lease without regard
to fitness, suitability, performance of the vendor or any other conditions. The
plaintiffs have claimed, among other things, fraud, breach of duty of good faith
and fair dealing, RICO violations and default by the vendor on a marketing
agreement with the lessees. The plaintiffs are seeking release from the leases
and actual and punitive damages. Similar claims and actions have been filed
against most, if not all of the lessors of the equipment. RBC's management
believes the leases are enforceable and that any claims by the plaintiffs are
against the vendor and not RBC. RBC is aggressively defending itself and has
immediately demanded payment for any such lease which has become past due or
where the lessee has advised RBC that they do not intend to make further payment
of the lease. The risks associated with these leases have been considered in the
allowance for lease losses and RBC's management does not expect these actions to
have a material adverse effect on the financial position of RBC.
RBC has various other lawsuits and claims arising from time to time in the
conduct of its business; however, they are not expected to have any material
adverse effect on the financial position or results of operations of RBC.
NOTE 16 -- FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK:
RBC is not a party to any financial instruments with off-balance sheet risk
or a party to any derivatives.
NOTE 17 -- SHAREHOLDERS' EQUITY:
The nonvoting common stock of RBC is not transferable except under limited
circumstances. The nonvoting common stock may be converted into RBC's voting
common stock but only if conversion does not result in direct or indirect
ownership of greater than 9.9% of such voting common stock. When allowed,
conversion is on a share for share basis. The nonvoting common stock
automatically converts if certain events occur, including a sale of all or
substantially all of RBC's assets or common stock, a merger in which RBC is not
the surviving entity or a dissolution of RBC. The nonvoting stock is also
redeemable at the investor's option at a price specified by the investor but
only to the extent RBC is able to sell newly issued common stock at a price
equal to such specified price.
F-23
<PAGE> 193
RESOURCE BANCSHARES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE INFORMATION)
NOTE 18 -- GENERAL AND ADMINISTRATIVE EXPENSES:
General and administrative expenses are summarized as follows:
<TABLE>
<CAPTION>
FOR THE THREE
FOR THE YEAR ENDED MONTHS ENDED
DECEMBER 31, MARCH 31,
--------------------------- -------------
1994 1995 1996 1996 1997
------- ------- ------- ------ ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Data processing and marketing................ $ 2,779 $ 3,056 $ 4,133 $ 859 $ 65
Filing fees and credit reports............... 1,842 684 1,257 122 20
Legal and professional....................... 1,088 1,117 1,908 406 243
Postage and freight.......................... 5,270 1,803 3,759 355 33
Telephone.................................... 574 767 1,024 186 69
Insurance.................................... 276 521 540 98 124
Other........................................ 2,024 2,519 4,344 648 431
------- ------- ------- ------ ----
$13,853 $10,467 $16,965 $2,674 $985
======= ======= ======= ====== ====
</TABLE>
NOTE 19 -- FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following table presents the carrying amounts and fair values of RBC's
financial instruments at December 31, 1995 and 1996 and March 31, 1997.
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------- MARCH 31,
1995 1996 1997
-------------------- -------------------- --------------------
ESTIMATED ESTIMATED ESTIMATED
CARRYING MARKET CARRYING MARKET CARRYING MARKET
VALUE VALUE VALUE VALUE VALUE VALUE
-------- --------- -------- --------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Long-term notes receivables........... $ $ $ 2,267 $ 2,218 $ 2,267 $ 2,218
Lease receivables, net of unearned
income and allowance for lease
losses.............................. 111,885 115,874 55,583 57,695 46,709 48,179
Investment in Intek................... 2,000 6,964 1,500 3,800
LIABILITIES
Short-term and long-term borrowings... 89,018 89,464 36,957 36,957 31,596 31,596
</TABLE>
The following notes summarize the significant methods and assumptions used
in estimating the fair values of financial instruments:
Long-term notes receivables are estimated by discounting future cash flow
using the current rates at which similar loans would be made to borrowers with
similar credit ratings.
Lease receivables are valued by management for each homogenous category of
leases by discounting future expected cash flows. Lease receivables held for
sale are valued by management based upon recent sales with consideration given
to differences between those leases and leases sold. The implicit discount rate
applied for purposes of determining the aggregate discounted lease balance was
obtained from an investment banker based on a recent lease securitization.
The investment in Intek is valued based upon the price of the shares sold
by RBC in February 1997 and discussed in Note 2.
F-24
<PAGE> 194
RESOURCE BANCSHARES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE INFORMATION)
The carrying value of RBC's short-term borrowings which include the
revolving credit facility and RBC's Class B Note approximate fair value. The
fair value of RBC's Class A Note was valued by an independent third party as of
December 31, 1996 and December 31, 1995.
The carrying values of cash, accounts receivable and payable, and accrued
liabilities approximate fair value due to the short-term maturities of these
assets and liabilities; therefore, these items are not included in the table
above.
NOTE 20 -- SUBSEQUENT EVENT (UNAUDITED):
On April 18, 1997, RBC entered into a definitive merger agreement with
RBMG. The agreement, which is subject to shareholder and regulatory approvals,
provides that RBMG will acquire RBC through the issuance of an aggregate number
of shares of RBMG Common Stock equal to the number of shares of RBMG owned by
RBC (7,397,238 shares as of March 31, 1997) plus two million additional shares.
The merger will be structured as a tax-free reorganization.
F-25
<PAGE> 195
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Walsh Holding Co., Inc.:
We have audited the accompanying consolidated balance sheet of Walsh
Holding Co., Inc. as of December 31, 1996, and the related statements of income,
stockholders' equity, and cash flows for the nine-month period then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Walsh
Holding Co., Inc. as of December 31, 1996, and the results of its operations and
its cash flows for the nine-month period then ended in conformity with generally
accepted accounting principles.
KPMG PEAT MARWICK LLP
New York, New York
March 28, 1997
F-26
<PAGE> 196
WALSH HOLDING CO., INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
-------------- -----------
(UNAUDITED)
($ IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash........................................................ $ 5,066 $ 2,692
Mortgage loans held for sale (note 3)....................... 245,022 108,282
Other loans (note 3)........................................ 8,344 9,113
Residual certificates (notes 5 and 6)....................... 9,861 38,241
Accrued interest receivable................................. 2,331 878
Goodwill.................................................... 3,808 3,705
Premises and equipment (note 7)............................. 1,005 1,138
Real estate owned........................................... 3,073 3,596
Other assets (note 8)....................................... 5,570 1,112
-------- --------
Total assets...................................... $284,080 $168,757
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Borrowings (note 9)....................................... $266,755 $123,701
Accrued tax liabilities (note 10)......................... 6,004 16,062
Other liabilities......................................... 2,872 2,165
-------- --------
Total liabilities................................. 275,631 141,928
-------- --------
Stockholder's equity (note 13):
Common stock, $.01 par value. Authorized 2,500 shares;
issued 75 shares....................................... -- --
Paid-in capital........................................... 250 250
Retained earnings......................................... 8,199 26,579
-------- --------
Total stockholders' equity........................ 8,449 26,829
-------- --------
Commitments and contingencies (note 12)
Total liabilities and stockholders' equity........ $284,080 $168,757
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-27
<PAGE> 197
WALSH HOLDING CO., INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
NINE-MONTH
PERIOD ENDED THREE-MONTH
DECEMBER 31, PERIOD ENDED
1996 MARCH 31, 1997
-------------- --------------
(UNAUDITED)
($ IN THOUSANDS)
<S> <C> <C>
Revenues:
Gain on sales of loans.................................... $21,563 $33,879
Interest income........................................... 13,235 3,713
Fee income................................................ 4,780 1,920
Other income.............................................. 476 --
------- -------
Total revenues.................................... 40,054 39,512
------- -------
Expenses:
Interest expense.......................................... 10,161 3,436
Compensation and benefits................................. 8,757 3,192
Occupancy and equipment................................... 1,115 463
General and administrative................................ 1,794 521
Advertising and promotion................................. 111 55
Lending and servicing..................................... 1,494 749
Goodwill amortization..................................... 309 103
Other..................................................... 1,414 331
------- -------
Total expenses.................................... 25,155 8,850
------- -------
Income before income tax expense.................. 14,899 30,662
Income tax expense (note 10)................................ 6,700 12,282
------- -------
Net income........................................ $ 8,199 $18,380
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-28
<PAGE> 198
WALSH HOLDING CO., INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NINE-MONTH PERIOD ENDED DECEMBER 31, 1996
AND THREE-MONTH PERIOD ENDED MARCH 31, 1997
(UNAUDITED)
-------------------------------------------
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
------ ---------- -------- -------
($ IN THOUSANDS)
<S> <C> <C> <C> <C>
Initial capitalization at April 1, 1996............ $ -- $250 $ -- $ 250
Net income......................................... -- -- 8,199 8,199
---- ---- ------- -------
Balance at December 31, 1996....................... -- 250 8,199 8,449
Net income (unaudited)............................. -- -- 18,380 18,380
---- ---- ------- -------
Balance at March 31, 1997 (unaudited).............. $ -- $250 $26,579 $26,829
==== ==== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-29
<PAGE> 199
WALSH HOLDING CO., INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED
DECEMBER 31, MARCH 31,
1996 1997
-------------- -------------
($ IN THOUSANDS) (UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 8,199 $ 18,380
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation........................................... 148 66
Amortization of goodwill............................... 309 103
Provision for loan losses.............................. 811 242
Mortgage loans originated and purchased................ (567,874) (249,962)
Decrease in premiums from mortgage loans originated and
purchased............................................ 576 1,292
Mortgage loan sales and payoffs........................ 450,574 385,185
Decrease (increase) in accrued interest receivable..... (1,348) 1,453
Increase in other loans................................ (2,200) (785)
Increase in real estate owned.......................... (1,923) (523)
Increase in other liabilities.......................... 5,606 9,350
Decrease (increase) in other assets.................... (5,054) 4,458
Increase in residual certificates...................... (9,861) (28,381)
--------- ---------
Net cash (used in) provided by operating
activities...................................... (122,037) 140,878
--------- ---------
Cash flows from investing activities:
Purchase of Company in leveraged buyout................... (20,599) --
Purchases of premises and equipment....................... (440) (198)
--------- ---------
Net cash used in investing activities............. (21,039) (198)
--------- ---------
Cash flows from financing activities:
Net increase (decrease) in borrowings..................... 147,892 (143,054)
Proceeds from issuance of common stock.................... 250 --
--------- ---------
Net cash provided by (used in) financing
activities...................................... 148,142 (143,054)
--------- ---------
Net increase (decrease) in cash................... 5,066 (2,374)
Cash at beginning of period................................. -- 5,066
--------- ---------
Cash at end of period....................................... $ 5,066 $ 2,692
========= =========
Supplemental information -- interest paid................... $ 9,952 $ 3,331
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-30
<PAGE> 200
WALSH HOLDING CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND MARCH 31, 1997 (UNAUDITED)
(1) ORGANIZATION
Walsh Holding Co., Inc. (the "Company" or "WSI"), together with its
wholly-owned subsidiaries, Walsh Securities, Inc. and Walsh Property, Inc.
originate, purchase and sell high yielding, nonconforming mortgage loans secured
by liens on one- to four-family residential properties.
The Company was formed in April 1996 to acquire the capital stock of GF
Mortgage, Corp., the predecessor to Walsh Securities, Inc. and GF Property,
Corp. the predecessor to Walsh Properties, Inc. which were previously
wholly-owned subsidiaries of Gruntal Financial Corp. ("Gruntal"). In this
transaction Gruntal sold 100% of Walsh Securities, Inc. and Walsh Properties,
Inc. to the Company, a newly formed enterprise organized by Robert Walsh, the
key member of Walsh Securities, Inc. and Walsh Properties, Inc. (formerly GF
Mortgage Corp. and GF Properties Corp.), for the sole purpose of acquiring Walsh
Securities, Inc. and Walsh Properties, Inc. in a leveraged buyout transaction.
The acquisition has been accounted for using the purchase method of accounting
and, accordingly, the results of operations of GF Mortgage Corp. and GF
Properties Corp. have been included in the Company's consolidated financial
statements from April 1, 1996. The purchase acquisition price was $20.6 million.
The assets of the Company were increased by $1.5 million and the liabilities
were decreased by $1.1 million to reflect the fair value of the net identifiable
assets of the Company. The excess of the purchase price over the fair value of
the net identifiable assets acquired of $4.1 million has been recorded as
goodwill and is being amortized on a straight-line basis over ten years.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Walsh Holding
Co., Inc., together with its wholly-owned subsidiaries, Walsh Securities, Inc.
and Walsh Property, Inc.
Basis of Consolidated Financial Statements Presentation
The consolidated financial statements of the Company have been prepared in
conformity with generally accepted accounting principles. In preparing the
financial statements, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities, revenues and
expenses, and the disclosure of contingent assets and liabilities. Actual
results could differ from these estimates.
Unaudited data
The consolidated financial statements as of and for the three-month period
ended March 31, 1997 and related footnote information herein are unaudited.
Mortgage Loans Held for Sale
Mortgage loans held for sale include mortgage loans acquired by the Company
for resale to customers and are carried at the lower of aggregate cost or
market. The cost of mortgage loans held for sale is the cost of the mortgage
loans increased by premiums associated with originating or acquiring the loans.
Management of the Company monitors the loan portfolio on an ongoing basis and
considers such factors as historical loan loss experience, underlying collateral
values, known problem loans, assessment of economic conditions, including
changes in interest rates, and other appropriate data to identify risks in the
loan portfolio. Based on the Company's experience, an allowance for loan losses
has been established (see note 4).
F-31
<PAGE> 201
WALSH HOLDING CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Revenue Recognition
Gains and losses on sale of mortgage loans are recognized when mortgage
loans are sold to investors. The Company primarily sells loans on a non-recourse
basis, at a price above the face value of the loan. Gain on sales of loans is
recorded on the settlement date.
Included in the gain on sales of loans is gain on a securitization
representing the fair value of interest-only and residual certificates received
by the Company which are reflected as trading securities. Gain on sales from
securitization represents the difference between the proceeds received from the
trust plus the fair value of the interest-only and residual certificates less
the carrying value of the loans sold. Fair value of these certificates is
determined based on various economic factors, including loan types, size,
interest rates, dates of origination, terms and geographic locations. The
Company also used other available information such as reports on prepayment
rates, collateral value, economic forecasts and historical default and
prepayment rates of the portfolio under review. The Company reviews these
factors and, if necessary, adjusts the remaining asset to the fair value of the
interest-only and residual certificates.
Although the Company believes it has made reasonable estimates of the fair
value of the interest-only and residual certificates likely to be realized, the
rate of prepayment and the amount of defaults utilized by the Company are
estimates and actual experience may vary from its estimates. The gain on
securitization recognized by the Company upon the sales of loans through
securitizations will have been overstated if prepayments or losses are greater
than anticipated. Higher than anticipated rates of loan prepayments or losses
would require the Company to write down the fair value of the interest-only and
residual certificates, adversely impacting earnings. Similarly, if
delinquencies, liquidations or interest rates were to be greater than was
initially assumed, the fair value of the interest-only and residual certificates
would be negatively impacted which would have an adverse effect on income for
the period in which such events occurred. Should the estimated average loan life
assumed for this purpose be shorter than the actual life, the amount of cash
actually received over the lives of the loans would exceed the gain previously
recognized at the time the loans were sold through securitization and would
result in additional income.
Impaired Loans
The Company has defined the population of impaired loans to be all
nonaccrual commercial real estate loans and mortgage loans greater than
$300,000. Impaired loans are individually assessed to determine that the loan's
carrying value is not in excess of the fair value of the collateral or the
present value of the loan's expected future cash flows. Smaller balance
homogeneous loans that are collectively evaluated for impairment, such as
mortgage loans less than $300,000, are specifically excluded from the impaired
loan portfolio. Loans classified as impaired by the Company at December 31, 1996
and March 31, 1997 total $2.9 million and $3.3 million, respectively. The
average balance of impaired loans for the nine-month period ended December 31,
1996 and the three-month period ended March 31, 1997 is $2.6 million and $3.1
million, respectively.
Interest Income
Interest income is accrued as earned based upon the principal amounts
outstanding at applicable interest rates. Interest accrual is discontinued when
a loan becomes 60 days delinquent.
Premises and Equipment
Premises and equipment are stated at cost, less accumulated depreciation or
amortization. Depreciation is recorded using the straight-line method over the
estimated useful lives of individual assets. Leasehold improvements are
amortized over the shorter of the terms of the related leases or the estimated
useful lives of improvements.
F-32
<PAGE> 202
WALSH HOLDING CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Goodwill Amortization
The Company recognized goodwill for the April 1, 1996 purchase price in
excess of the fair market value of net assets acquired. Goodwill is amortized as
an expense on a straight line basis over a period of ten years. The carrying
value of goodwill is analyzed quarterly by the Company based upon the expected
revenue and profitability levels of the acquired enterprise to determine whether
the value and future benefit may indicate a decline in value. If the Company
determines that there has been a decline in the value of the acquired
enterprise, the Company writes down the value of the goodwill to the revised
fair value.
Real Estate Owned
Real estate owned consists of real estate acquired through foreclosure or
deed-in-lieu of foreclosure on defaulted loan receivables. These properties are
carried at the lower of fair value less estimated selling costs or the
acquisition cost of the properties.
Borrowings
Mortgage loans sold under agreements to repurchase (repurchase agreements)
are treated as collateralized financing transactions and are recorded at their
contracted repurchase amounts plus accrued interest.
Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
Cash
Cash for the purposes of the statement of cash flows consists of demand
accounts in banks.
(3) MORTGAGE LOANS HELD FOR SALE AND OTHER LOANS
Mortgage loans held for sale and other loans consist of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ -----------
(UNAUDITED)
<S> <C> <C>
Mortgage loans held for sale:
First mortgage loans...................................... $241,309 $100,632
Second mortgage loans..................................... 4,182 8,354
Less allowance for loan losses......................... 469 704
-------- --------
$245,022 $108,282
======== ========
Other loans:
Construction.............................................. $ 443 $ 1,700
Commercial................................................ 7,912 7,441
Less allowance for loan losses......................... 11 28
-------- --------
$ 8,344 $ 9,113
======== ========
</TABLE>
F-33
<PAGE> 203
WALSH HOLDING CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
There was $24.1 million and $23.0 million of nonaccrual mortgage loans held
for sale and other loans at December 31, 1996 and March 31, 1997, respectively.
(4) ALLOWANCE FOR LOAN LOSSES
The activity in the allowance for losses on mortgage loans held for sale
and other loans is summarized as follows (in thousands):
<TABLE>
<CAPTION>
NINE-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED
DECEMBER 31, MARCH 31,
1996 1997
-------------- ------------
(UNAUDITED)
<S> <C> <C>
Balance at beginning of period............................ $ $ 480
Provisions for losses..................................... 811 242
Recoveries................................................ 67 95
Charge-offs............................................... (398) (85)
----- -----
Balance at end of period.................................. $ 480 $ 732
===== =====
</TABLE>
(5) TRADING SECURITIES
The interest that the Company receives upon loan sales through
securitizations is in the form of interest-only and residual mortgage securities
which are accounted for as trading securities. In conjunction with loans sold
through these securitizations during the nine-month period ended December 31,
1996, the Company recorded interest-only and residual certificates totaling
$10.5 million ($2.8 million of interest-only certificates and $7.7 million of
residual certificates). The interest-only certificates were sold prior to
December 31, 1996, resulting in a loss on sale of $.3 million. The fair value of
the residual certificates is $7.9 million at December 31, 1996.
The interest-only and residual certificates are accounted for as "trading
securities" and, as such, they are recorded at their fair value. Fair value of
these certificates is determined based on various economic factors, including
loan types, sizes, interests rates, dates of origination, terms and geographic
locations. The Company also used other available information such as reports on
prepayment rates, interest rates, collateral value, economic forecasts and
historical default and prepayment rates of the portfolio under review. If the
fair value of the interest-only and residual certificates is different from the
recorded value, the unrealized gain or loss will be reflected in the
consolidated statement of income.
During the nine-month period ended December 31, 1996 and the three-month
period ended March 31, 1997, the Company sold $113.9 million (in September 1996)
and $333.7 million, respectively, of its loan origination and purchase volume in
securitizations. In loan sales through securitizations, the Company sells loans
that it has originated or purchased to a REMIC trust for a cash purchase price
and an interest in such REMIC trusts which are represented by the interest-only
and residual certificates. The cash purchase price is raised through an offering
of pass-through certificates by the REMIC trust.
(6) LONG-TERM RECEIVABLES
Pursuant to certain loan placement agreements, the Company receives yield
differential payments (interest override payments) on various loans. The present
value of these earnings to be realized in the future is recognized at the time
of sale (net of imputed interest) which contemplates substantially all loans
being prepaid within a five-to seven-year period. The fair value of long-term
receivables is $2.0 million at December 31, 1996 and March 31, 1997 and is
included in residual certificates on the balance sheet.
F-34
<PAGE> 204
WALSH HOLDING CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(7) PREMISES AND EQUIPMENT
Premises and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ -----------
(UNAUDITED)
<S> <C> <C>
Furniture, fixtures and equipment........................... $1,145 $1,343
Leasehold improvements...................................... 205 205
Less accumulated depreciation and amortization.............. 345 410
------ ------
Total premises and equipment...................... $1,005 $1,138
====== ======
</TABLE>
(8) OTHER ASSETS
Included in other assets at December 31, 1996 is a receivable of $5.0
million from a third party from sales of mortgage loans.
(9) BORROWINGS
Loans Sold Under Agreements to Repurchase
The Company has two repurchase agreements (Repo) with financial
institutions as of December 31, 1996 and March 31, 1997. Under the terms of the
first Repo agreement, maturing on April 16, 1998, the Company may borrow up to
$200 million to finance mortgage loans. As of December 31, 1996 and March 31,
1997, $206.5 million and $110.0 million, respectively, was outstanding under the
first Repo agreement. Under the second Repo agreement, which terminates when the
loans financed thereunder have been sold or otherwise refinanced, the Company
originally borrowed $75.9 million; $50.2 million and $4.0 million was
outstanding under this agreement at December 31, 1996 and March 31, 1997,
respectively. The Repo agreements contain covenants which require the Company to
maintain certain minimum levels of stockholder's equity and other restrictions.
As of December 31, 1996 and March 31, 1997, the Company was in compliance with
all terms and covenants of the Repo agreements.
Term Loan Agreement
The Company has a term loan agreement with a financial institution with
$10.0 million and $9.7 million outstanding at December 31, 1996 and March 31,
1977, respectively. This term loan agreement terminates April 16, 1998 and is
renewable for a period of one year. Thereafter, this term loan agreement is
secured by the outstanding balances of other loans of the Company. The term loan
agreement contains certain covenants which require the Company to maintain
certain minimum levels of stockholder's equity and other restrictions. As of
March 31, 1997 and December 31, 1996, the Company is in compliance with all
terms and covenants of the term loan agreement.
Mortgage loans disbursed not subject to borrowings is $.4 million and $.3
million at December 31, 1996 and March 31, 1977, respectively.
F-35
<PAGE> 205
WALSH HOLDING CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(10) INCOME TAXES
The income tax provision consists of the following (in thousands), which is
substantially all current:
<TABLE>
<CAPTION>
NINE-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED
DECEMBER 31, 1996 MARCH 31, 1997
----------------- --------------
(UNAUDITED)
<S> <C> <C>
Federal:
Current............................................... $3,354 $ 2,937
Deferred.............................................. 2,004 6,981
------- -------
5,358 9,918
State:
Current............................................... 828 700
Deferred.............................................. 514 1,664
------- -------
$6,700 $12,282
======= =======
</TABLE>
The difference between income taxes computed at the statutory Federal rate
of 35% and the provision for income taxes is as follows (in thousands):
<TABLE>
<CAPTION>
NINE-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED
DECEMBER 31, 1996 MARCH 31, 1997
----------------- --------------
(UNAUDITED)
<S> <C> <C>
Expected tax provision using statutory rate............. $5,215 10,732
Effects of:
State income taxes, net of federal tax expense........ 872 910
Other................................................. 613 640
------- -------
Total......................................... $6,700 12,282
======= =======
</TABLE>
(11) EMPLOYEE BENEFIT PLANS
The Company provides a deferred contribution savings plan, in the form of a
401K plan for eligible participants. Eligible participants are employees who
have reached 21 years of age and have 12 months of service. The Company provides
a match in the amount of 50% of the first 6% of employee contributions. All
employees are 100% vested in the Company contributions immediately. The
contributions for the nine-month period ended December 31, 1996 and the
three-month period ended March 31, 1997 were $22,531 and $32,718, respectively.
(12) COMMITMENTS AND CONTINGENCIES
The Company occupies office space under various lease agreements, primarily
space occupied under an agreement between the Company and the former parent.
This lease expires in June 2004. As of December 31, 1996, future remaining
rental payments under operating leases are as follows (in thousands):
<TABLE>
<CAPTION>
YEARS PAYMENT
- ----- -------
<S> <C>
1997........................................................ $ 547
1998........................................................ 514
1999........................................................ 396
2000........................................................ 310
2001........................................................ 287
Thereafter.................................................. 498
------
Total............................................. $2,552
======
</TABLE>
F-36
<PAGE> 206
WALSH HOLDING CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As of March 31, 1997 the Company entered into the following new lease
agreements (Unaudited):
<TABLE>
<CAPTION>
LOCATION COMMENCE DATE EXPIRATION DATE MONTHLY RENT
- -------- ------------- --------------- ------------
<S> <C> <C> <C>
Columbia, MD................................. 1/1/97 9/30/98 $3,756
St. Louis, MO................................ 3/1/97 2/28/98 660
Inglewood, CA................................ 3/1/97 3/1/98 1,250
------
Total.............................. $5,656
======
</TABLE>
Outstanding commitments to purchase and originate loans are as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ ------------
(UNAUDITED)
<S> <C> <C>
Commitments to extend credit:
To originate mortgage loans:
Fixed rate............................................. $ 46 $ 145
Variable rate..........................................
To purchase mortgage loans:
Fixed rate............................................. 2,082 4,978
Variable rate.......................................... $3,719 $6,586
</TABLE>
Interest rates on commitments to originate fixed mortgage loans ranged from
8.13% to 13.88% at December 31, 1996 and 8.28% to 18.00% at March 31, 1997. Such
commitments are generally for a 30-day term.
Litigation
In the normal course of business, the Company is subject to various legal
proceedings and claims, the resolution of which, in management's opinion, will
not have a material adverse effect on the financial position or the results of
operations and liquidity of the Company.
Employee Agreements
The Company has an employment agreement with the president of the Company.
The agreement terminates in 1999, subject to renewal and upon the occurrence of
certain events as defined by the respective agreements.
(13) STOCKHOLDERS' EQUITY
On April 18, 1996, the Company issued to Greenwich Capital Financial
Products, Inc. (Greenwich) warrants to purchase 24.99 shares of Class B
nonvoting common stock, $.01 par value per share at an initial exercise price of
$.01 per warrant. Greenwich paid $62,500 for the warrants. The warrants are
exercisable at any time and from time to time. Greenwich's right to exercise
expires in 2001.
(14) RELATED-PARTY TRANSACTIONS
The Company has entered into lending transactions in the ordinary course of
business with officers of the Company, with the same terms as those prevailing
for comparable transactions with other borrowers. At December 31, 1996 and March
31, 1997, loans to officers aggregated $35,525 and $31,107, respectively.
Builder's Construction Funding of America, LLC
Builder's Construction Funding of America, LLC (BCFA) is a limited
liability corporation in the business of originating construction finance loans.
BCFA is partially owned by the majority stockholder of the Company. As of
December 31, 1996 and March 31, 1997, BCFA sold four loans totaling $443,000 and
eleven loans totaling $1.7 million, respectively, to the Company.
F-37
<PAGE> 207
WALSH HOLDING CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(15) FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial Accounting Standards Board's (FASB) Statement of Financial
Accounting Standards (SFAS) No. 107, "Disclosures about Fair Values of Financial
Instruments" (SFAS 107), requires disclosures of fair value information about
financial instruments, whether or not recognized in the balance sheet, for which
it is practicable to estimate that value. Because no market exists for certain
of the Company's assets and liabilities, fair value estimates are based on
judgments regarding credit risk, investor expectations of economic conditions,
normal cost of administration and other risk characteristics, including interest
rate and prepayment risk. These estimates are subjective in nature and involve
uncertainties and matters of judgment and therefore cannot be determined with
precision. Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on-balance-sheet financial
instruments without attempting to estimate the value of anticipated future
business and the value of assets and liabilities that are not considered
financial instruments. The tax ramifications related to the realization of the
unrealized gains and losses can have a significant effect on fair value
estimates and have not been considered in the estimates.
In addition, the fair value estimates presented do not include the value of
anticipated future business and the value of assets and liabilities that are not
considered financial instruments.
The following summarizes the information about the fair value of the
financial instruments recorded on the Company's financial statements at December
31, 1996, in accordance with SFAS 107 (in thousands):
<TABLE>
<CAPTION>
CARRYING FAIR
VALUE VALUE
-------- --------
<S> <C> <C>
Cash........................................................ $ 5,066 $ 5,066
Mortgage loans held for sale................................ 245,022 264,000
Other loans................................................. 8,344 8,344
Residual certificates....................................... 9,861 9,861
Borrowings.................................................. 266,755 266,755
</TABLE>
The methodology and assumptions utilized to estimate the fair value of the
Company's financial instruments, including the off-balance-sheet instruments
disclosed in note 12, are as follows:
Cash
The carrying amount of cash approximates fair value.
Residual Certificates
Fair value of residual certificates is determined based on various
economic factors, including loan types, size, interest rates, dates of
origination, terms and geographic locations. The Company also used other
available information such as reports on prepayment rates, collateral
value, economic forecasts and historical default and prepayment rates of
the portfolio under review. The Company reviews these factors and, if
necessary, adjusts the remaining asset to the fair value of the
interest-only and residual certificates.
Mortgage Loans Held for Sale and Other Loans
The Company has estimated the fair values reported based on recent
sales and securitizations.
Borrowings
The carrying value reported approximates fair value due to the
short-term nature of the borrowings and the variable interest rates charged
on the borrowings.
F-38
<PAGE> 208
WALSH HOLDING CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Commitments to Originate Loans and Loans in Process
Many loan commitments are expected to, and typically do, expire
without being drawn upon. As the rates and terms of the commitments to lend
and loans in process are competitive with others in which the Company
operates, the values disclosed in note 12 are determined to be a reasonable
estimate of fair value.
(16) RECENT ACCOUNTING PRONOUNCEMENTS
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities" (SFAS 125).
SFAS 125 amends portions of SFAS 115, amends and extends to all servicing assets
and liabilities the accounting standards for mortgage servicing rights in SFAS
65, and supersedes SFAS 122. SFAS 125 provides consistent standards for
distinguishing transfers of financial assets which are sales from transfers that
are secured borrowings. Those standards are based upon consistent application of
a financial components approach that focuses on control. SFAS 125 also defines
accounting treatment for servicing assets and other retained interest in the
assets that are transferred. As issued, SFAS 125 is effective for transfers and
servicing of financial assets and extinguishments of liabilities occurring after
December 31, 1996 and is to be applied prospectively. In December 1996, the FASB
issued SFAS No. 127, "Deferral of the Effective Date of Certain Provisions of
FASB Statement No. 125; as amended by FASB Statement No. 125" which defers for
one year the effective date (a) of paragraph 15 of SFAS 125 and (b) for
repurchase agreement, dollar-roll, securities lending and similar transactions
of paragraphs 9-12 and 127(b) of SFAS 125. The adoption of these statements did
not have a material effect on the Company's financial condition or results of
operations.
F-39
<PAGE> 209
INDEPENDENT AUDITORS' REPORT
The Board of Directors
GF Mortgage Corp.
GF Property Corp.:
We have audited the accompanying combined balance sheets of GF Mortgage
Corp. and GF Property Corp., as of March 31, 1996 and December 31, 1995, and the
related combined statements of income, stockholder's equity, and cash flows for
the three-month period ended March 31, 1996 and the year ended December 31,
1995. These combined financial statements are the responsibility of the
Companies' management. Our responsibility is to express an opinion on these
combined financial statements based on our audits.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined 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 audits provide a reasonable basis
for our opinion.
As discussed in note 1 to the combined financial statements, effective
April 1, 1996, GF Mortgage Corp. and GF Property Corp. were sold in a leveraged
buyout transaction to Walsh Holding Co., Inc.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of GF Mortgage
Corp. and GF Property Corp. as of March 31, 1996 and December 31, 1995, and the
results of its operations and its cash flows for the three-month period then
ended March 31, 1996 and the year ended December 31, 1995 in conformity with
generally accepted accounting principles.
KPMG PEAT MARWICK LLP
New York, New York
March 28, 1997
F-40
<PAGE> 210
INDEPENDENT AUDITORS' REPORT
The Board of Directors
of each of GF Mortgage Corp.
and GF Property Corp.
We have audited the accompanying combined balance sheets of GF Mortgage
Corp. and GF Property Corp. as of December 31, 1994 and the related combined
statements of operations, stockholders' equity and cash flows for the year ended
December 31, 1994. These combined financial statements are the responsibility of
the Companies' management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. 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 combined financial statements referred to above present
fairly, in all material respects, the combined financial position of GF Mortgage
Corp. and GF Property Corp. as of December 31, 1994 and the results of its
operations and its cash flows for the year ended December 31, 1994 in conformity
with generally accepted accounting principles.
Kempisty & Company CPAs PC
Kempisty & Company
Certified Public Accountants PC
New York, New York
May 8, 1995
F-41
<PAGE> 211
GF MORTGAGE CORP.
GF PROPERTY CORP.
COMBINED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, MARCH 31,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Mortgage loans held for sale (note 4)..................... $24,085 $70,490 $128,170
Other loans (note 4)...................................... 14,144 8,750 8,123
Receivable from parent.................................... 3,931
Accrued interest receivable............................... 234 956 983
Premises and equipment (note 5)........................... 125 698 713
Real estate owned......................................... 2,279 996 1,808
Other assets.............................................. 477 2,125 516
------- ------- --------
Total assets.................................... $45,275 $84,015 $140,313
======= ======= ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Borrowings (note 6)..................................... $32,462 $66,136 $122,062
Payable to parent (note 10)............................. 2,730 1,760
Other liabilities (note 10)............................. 1,945 1,419 2,602
------- ------- --------
Total liabilities............................... 34,407 70,285 126,424
------- ------- --------
Stockholder's equity:
Common stock, $10.00 par value. Authorized 2,000 shares;
issued and outstanding 200 shares.................... 2 2 2
Paid-in capital......................................... 10,248 11,048 11,048
Retained earnings....................................... 618 2,680 2,839
------- ------- --------
Total stockholder's equity...................... 10,868 13,730 13,889
------- ------- --------
Commitments and contingencies (note 9)....................
Total liabilities and stockholder's equity...... $45,275 $84,015 $140,313
======= ======= ========
</TABLE>
See accompanying notes to combined financial statements.
F-42
<PAGE> 212
GF MORTGAGE CORP.
GF PROPERTY CORP.
COMBINED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTH
YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, MARCH 31,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Gain on sales of loans................................. $ 7,563 $ 8,940 $2,632
Interest income........................................ 2,561 5,340 2,490
Fee income............................................. 798 1,120
------- ------- ------
Total revenues................................. 10,124 15,078 6,242
------- ------- ------
Expenses:
Interest expense....................................... 2,478 4,386 1,965
Compensation and benefits.............................. 4,541 4,585 2,225
Occupancy and equipment................................ 261 451 283
General and administrative............................. 724 377 1,174
Advertising and promotion.............................. 406 410 21
Other.................................................. 1,080 1,516 280
------- ------- ------
Total expenses................................. 9,490 11,725 5,948
------- ------- ------
Income before income tax expense............... 634 3,353 294
Income tax expense (note 7).............................. 259 1,291 135
------- ------- ------
Net income..................................... $ 375 $ 2,062 $ 159
======= ======= ======
</TABLE>
See accompanying notes to combined financial statements.
F-43
<PAGE> 213
GF MORTGAGE CORP.
GF PROPERTY CORP.
COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY
DECEMBER 31, 1994 AND 1995 AND MARCH 31, 1996
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
------ ---------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at December 31, 1993.......................... $ 2 $ 748 $ 243 $ 993
Additional paid-in-capital............................ 9,500 9,500
Net income............................................ 375 375
--- ------- ------ -------
Balance at December 31, 1994.......................... 2 10,248 618 10,868
Additional paid-in-capital............................ 800 800
Net income............................................ 2,062 2,062
--- ------- ------ -------
Balance at December 31, 1995.......................... 2 11,048 2,680 13,730
Net income............................................ 159 159
--- ------- ------ -------
Balance at March 31, 1996............................. $ 2 $11,048 $2,839 $13,889
=== ======= ====== =======
</TABLE>
See accompanying notes to combined financial statements.
F-44
<PAGE> 214
GF MORTGAGE CORP.
GF PROPERTY CORP.
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTH
YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, MARCH 31,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................. $ 375 $ 2,062 $ 159
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation........................................ 11 101 34
Net increase in mortgage and other loans............ (16,745) (41,011) (57,054)
Increase in accrued interest receivable............. (234) (722) (27)
(Increase) decrease in real estate owned............ (1,058) 1,283 (812)
Increase (decrease) in other liabilities............ 1,945 (526) 1,183
(Increase) decrease in other assets................. (418) (5,579) 1,609
-------- -------- --------
Net cash used in operating activities.......... (16,124) (44,392) (54,908)
-------- -------- --------
Cash flows from investing activities -- purchases of
premises and equipment................................. (136) (674) (49)
-------- -------- --------
Cash flows from financing activities:
Net increase in borrowings............................. 14,462 33,674 55,926
(Increase) decrease in receivable from parent.......... (3,931) 3,931
Increase (decrease) in payable to parent............... (3,771) 6,661 (969)
Contribution of capital................................ 9,500 800
-------- -------- --------
Net cash provided by financing activities...... 16,620 45,066 54,957
Net change in cash.............................
Cash balance at beginning of period......................
-------- -------- --------
Cash balance at end of period............................ $ $ $
======== ======== ========
Supplemental information:
Interest paid.......................................... $ 2,388 $ 4,161 $ 1,088
======== ======== ========
Taxes paid............................................. $ 441 $ 2,509 $ 552
======== ======== ========
</TABLE>
See accompanying notes to combined financial statements.
F-45
<PAGE> 215
GF MORTGAGE CORP.
GF PROPERTY CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995 AND MARCH 31, 1996
(1) ORGANIZATION
GF Mortgage Corp. (GFM) and GF Property Corp. (GFP) (the Companies) are
wholly-owned subsidiaries of Gruntal Financial Corp. (the Parent). GFM and GFP
began their current business of originating, purchasing and selling high
yielding, nonconforming mortgage loans secured by liens on one- to four-family
residential properties in the fourth quarter of 1994.
Effective April 1, 1996, the Parent sold 100% of GFM and GFP to Walsh
Holding Co., Inc., a newly formed enterprise organized by Robert Walsh, the key
member of Walsh Securities, Inc. and Walsh Properties, Inc. (formerly GFM and
GFP), for the sole purpose of acquiring Walsh Securities, Inc. and Walsh
Properties, Inc. in a leveraged buyout transaction.
(2) BASIS OF PRESENTATION
The historical operations of the combined Companies as subsidiaries of the
Parent for the years ended December 31, 1994 and 1995 and the three month period
ended March 31, 1996 have been presented in the combined financial statements as
if the Companies had operated as a stand-alone company. In the opinion of
management, the historical accounting records reflect all costs that would have
been incurred had the Companies operated as stand-alone companies during the
years ended December 31, 1994 and 1995 and the three-month period ended March
31, 1996.
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Mortgage Loans Held for Sale
Mortgage loans held for sale include mortgage loans acquired by the
Companies for resale to customers and are carried at the lower of aggregate cost
or market. The cost of mortgage loans held for sale is the cost of the mortgage
loans increased by premiums associated with originating or acquiring the loan.
Management of the Company monitors the loan portfolio on an ongoing basis and
considers such factors as historical loan loss experience, underlying collateral
values, known problem loans, assessment of economic conditions, including
changes in interest rates, and other appropriate data to identify risks in the
loan portfolio.
Revenue Recognition
Gains and losses on sale of mortgage loans are recognized when mortgage
loans are sold to investors. The Companies primarily sell loans on a
non-recourse basis, at a price above the face value of the loan. Gains on the
sale of loans are recorded on the settlement date.
Impaired Loans
The Companies have defined the population of impaired loans to be all
nonaccrual commercial real estate loans and mortgage loans greater than
$300,000. Impaired loans are individually assessed to determine that each loan's
carrying value is not in excess of the fair value of the collateral or the
present value of the loan's expected future cash flows. Smaller balance
homogeneous loans that are collectively evaluated for impairment, such as
mortgage loans less than $300,000, are specifically excluded from the impaired
loan portfolio. Loans classified as impaired by the Companies at December 31,
1995 and March 31, 1996 totaled $3.4 million and $2.7 million, respectively. The
average balance of impaired loans for the year ended December 31, 1995 and three
month period ended March 31, 1996 was $3.9 million and $2.7 million,
respectively.
F-46
<PAGE> 216
GF MORTGAGE CORP.
GF PROPERTY CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Interest Income
Interest income is accrued as earned based upon the principal amounts
outstanding at applicable interest rates. Interest accrual is discontinued when
a loan becomes 60 days delinquent.
Premises and Equipment
Premises and equipment are stated at cost, less accumulated depreciation
and amortization. Depreciation is recorded using the straight-line method over
the estimated useful lives of individual assets. Leasehold improvements are
amortized over the shorter of terms of the related leases or the estimated
useful lives of improvements.
Real Estate Owned
Real estate owned consists of real estate acquired through foreclosure or
deed in lieu of foreclosure on defaulted loan receivables. These properties are
carried at the lower of fair value less estimated selling costs or the
acquisition cost of the properties.
Borrowings
Mortgage loans sold under agreements to repurchase (repurchase agreements)
are treated as collateralized financing transactions and are recorded at their
contracted repurchase amounts plus accrued interest.
Income Taxes
Income taxes are accounted for using the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment data.
The Parent's (including the Companies') taxable income is included in the
consolidated Federal income tax return filed by Home Holdings (Parent of Gruntal
and Co.). Under the terms of the present tax-sharing agreement, the Companies
compute Federal income taxes on a separate return basis.
Use of Estimates
Management of the Companies has made a number of estimates and assumptions
relating to the reporting of assets and liabilities, revenues and expenses, and
the disclosure of contingent assets and liabilities to prepare these financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
F-47
<PAGE> 217
GF MORTGAGE CORP.
GF PROPERTY CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(4) MORTGAGE LOANS HELD FOR SALE AND OTHER LOANS
(in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
------------ ---------
<S> <C> <C>
Mortgage loans held for sale:
First mortgage loans...................................... $67,017 $123,600
Second mortgage loans..................................... 3,473 4,570
------- --------
$70,490 $128,170
======= ========
Other loans:
Commercial................................................ $ 8,750 $ 7,855
Auto...................................................... 268
------- --------
$ 8,750 $ 8,123
======= ========
</TABLE>
Mortgage loans held for sale and other loans were $24,085 and $14,144,
respectively, at December 31, 1994.
There were nonaccrual mortgage loans held for sale and other loans totaling
$5.2 million and $10.0 million at December 31, 1995 and March 31, 1996,
respectively.
(5) PREMISES AND EQUIPMENT
(in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, MARCH 31,
1994 1995 1996
------------ ------------ ---------
<S> <C> <C> <C>
Furniture, fixtures and equipment................... $136 $656 $704
Leasehold improvements.............................. 205 205
---- ---- ----
Total premises and equipment.............. 136 861 909
Less accumulated depreciation and amortization...... 11 163 196
---- ---- ----
$125 $698 $713
==== ==== ====
</TABLE>
(6) BORROWINGS
Loans Sold Under Agreements to Repurchase
The Companies have four repurchase agreements with financial institutions
as of March 31, 1996.
Under the terms of the first Repo agreement, the Companies could borrow up
to $18 million to finance mortgage loans. As of December 31, 1994 and 1995 and
March 31, 1996, $13 million, $18 million and $5.2 million, respectively, were
outstanding under the first Repo agreement.
Under the terms of the second Repo agreement, the Companies could borrow up
to $50 million to finance mortgage loans. As of December 31, 1994 and 1995 and
March 31, 1996, $19.5 million, $35.3 million and $43.8 million, respectively,
were outstanding under the second Repo agreement.
Under the terms of the third Repo agreement, the Companies may borrow funds
to finance mortgage loans on an individual basis. As of December 31, 1995 and
March 31, 1996, $790,000 and $1.4 million, respectively, were outstanding under
the third Repo agreement.
Under the terms of the fourth Repo agreement, the Companies may borrow
funds to finance mortgage loans on an individual basis. As of December 31, 1995
and March 31, 1996, $24.0 million and $71.6 million, respectively, were
outstanding under the fourth Repo agreement.
F-48
<PAGE> 218
GF MORTGAGE CORP.
GF PROPERTY CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The Repo agreements contain covenants which required the Companies to
maintain certain minimum levels of stockholders equity and other restrictions.
As of December 31, 1994 and 1995 and March 31, 1996, the Companies were in
compliance with all terms and covenants of the Repo agreements.
Mortgage loans disbursed not subject to borrowings totaled $2.0 million and
$6.0 million at December 31, 1995 and March 31, 1996, respectively.
(7) INCOME TAXES
The income tax provision consists of the following, which is substantially
all current (in thousands):
<TABLE>
<CAPTION>
THREE MONTH
YEAR ENDED YEAR ENDED PERIOD ENDING
DECEMBER 31, DECEMBER 31, MARCH 31,
1994 1995 1996
------------ ------------ -------------
<S> <C> <C> <C>
Federal:
Current........................................ $ 556 $1,173 $ 94
Deferred....................................... (334)
------ ------ ----
222 1,173 94
State:
Current........................................ 93 118 41
Deferred....................................... (56)
------ ------ ----
$ 259 $1,291 $135
====== ====== ====
</TABLE>
The difference between income taxes computed at the statutory Federal rate
of 35% and the actual provision for income taxes is as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTH
YEAR ENDED YEAR ENDED PERIOD ENDING
DECEMBER 31, DECEMBER 31, MARCH 31,
1994 1995 1996
----------------- ----------------- --------------
<S> <C> <C> <C>
Expected tax provision using statutory
rate.................................. $222 $1,173 $103
Effects of:
State income taxes, net of Federal tax
expense............................ 37 77 27
Other................................. 41 5
------ ------- ----
$259 $1,291 $135
====== ======= ====
</TABLE>
At December 31, 1994 and 1995 and March 31, 1996, the net deferred income
tax liability was $0.
(8) EMPLOYEE BENEFIT PLANS
The Companies provide a deferred contribution savings plan (sponsored by
the Parent), in the form of a 401(k) plan, for eligible participants. Eligible
participants are employees who have reached 21 years of age and have 12 months
of service. The Companies provide a match in the amount of 50% of the first 6%
of employee contributions. All employees are 100% vested in the Companies'
contributions immediately. The contributions for the year ended December 31,
1995 and the three-month period ended March 31, 1996 were $36,000 and $14,000,
respectively.
F-49
<PAGE> 219
GF MORTGAGE CORP.
GF PROPERTY CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(9) COMMITMENTS AND CONTINGENCIES
The Companies occupy office space under various lease agreements, primarily
space occupied under an agreement between the Companies and the parent. This
lease expires in June 2004. Future remaining rental payments under operating
leases as of March 31, 1996 are as follows (in thousands):
<TABLE>
<S> <C>
1996........................................................ $ 271
1997........................................................ 222
1998........................................................ 201
1999........................................................ 199
2000........................................................ 199
Thereafter.................................................. 698
------
$1,790
======
</TABLE>
Outstanding commitments to purchase and originate loans are as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, MARCH 31,
1994 1995 1996
------------ ------------ ---------
<S> <C> <C> <C>
Commitments to extend credit:
To originate mortgage loans:
Fixed rate............................................. $ $ 937 $ 447
Variable rate.......................................... 108 1,098
To purchase mortgage loans:
Fixed rate............................................. 2,934 4,481 4,291
Variable rate.......................................... 1,385 2,414
</TABLE>
At December 31, 1995 and March 31, 1996 interest rates on commitments to
originate fixed rate mortgage loans range from 7.63% to 17.00% and 8.13% to
15.75%, respectively. Such commitments are generally for a 30-day term.
Litigation
In normal course of business, the Companies are subject to various legal
proceedings and claims, the resolution of which, in management's opinion, will
not have a material adverse effect on the combined financial position or the
results of operations of the Companies.
(10) RELATED-PARTY TRANSACTIONS
The Companies relied on the Parent for cash receipts and disbursement
payments during the year ended December 31, 1995 and the three month period
ended March 31, 1996, which are recorded in other assets and other liabilities
in the combined balance sheets. Such amounts totaled $341,000 and $131,000 at
December 31, 1995 and March 31, 1996, respectively. A payable to parent in the
amount of $1.8 million is non-interest-bearing and represents funds paid by the
Parent on behalf of the Companies as of March 31, 1996.
(11) FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Values of Financial Instruments" (SFAS 107), requires disclosures of fair
value information about financial instruments, whether or not recognized in the
combined balance sheet, for which it is practicable to estimate that value.
Because no market exists for certain of the Companies' assets and liabilities,
fair value estimates are based on judgments regarding credit risk, investor
expectations of future economic conditions, normal cost of administration and
other risk characteristics, including interest rate and prepayment risk. These
estimates are subjective in nature and
F-50
<PAGE> 220
GF MORTGAGE CORP.
GF PROPERTY CORP.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
involve uncertainties and matters of judgment and, therefore, cannot be
determined with precision. Changes in assumptions could significantly affect the
estimates.
Fair value estimates are based on existing on-balance-sheet financial
instruments without attempting to estimate the value of anticipated future
business and the value of assets and liabilities that are not considered
financial instruments. The tax ramifications related to the realization of the
unrealized gains and losses can have a significant effect on fair value
estimates and have not been considered in the estimates.
In addition, the fair value estimates presented do not include the value of
anticipated future business and the value of assets and liabilities that are not
considered financial instruments.
The following summarizes the information about the fair value of the
financial instruments recorded on the Companies combined financial statements in
accordance with SFAS 107 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1995 MARCH 31, 1996
------------------ --------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Mortgage loans held for sale.................. $70,490 $70,490 $128,170 $128,841
Other loans................................... 8,750 7,908 8,123 6,831
Borrowings.................................... 66,131 66,131 122,062 122,062
</TABLE>
The methodology and assumptions utilized to estimate the fair value of the
Companies financial instruments, including the off-balance-sheet instruments
disclosed in note 9, are as follows:
Mortgage Loans Held for Sale and Other Loans
The Companies have estimated the fair values reported based on recent
sales.
Borrowings
The carrying value reported approximates fair value due to the
short-term nature of the borrowings and the variable interest rates charged
on the borrowings.
Commitments to Originate Loans and Loans in Process
Many loan commitments are expected to, and typically do, expire
without being drawn upon. As the rates and terms of the commitments to lend
and loans in process are competitive with others in which the Companies
operate, the values disclosed in note 9 are determined to be a reasonable
estimate of fair value.
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ANNEX A
AGREEMENT OF MERGER
AGREEMENT OF MERGER, dated as of April 18, 1997 (this "Agreement"), among
RESOURCE BANCSHARES MORTGAGE GROUP, INC., a Delaware corporation ("RBMG"), RBC
MERGER SUB, INC., a South Carolina corporation and a wholly owned subsidiary of
RBMG ("Merger Sub"), and RESOURCE BANCSHARES CORPORATION, a South Carolina
corporation ("RBC").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of RBMG, Merger Sub and RBC have
determined that it is consistent with and in furtherance of their respective
long-term business strategies and fair to and in the best interests of their
respective companies and stockholders to combine their respective businesses in
a merger transaction as set forth in this Agreement (the "Reorganization");
WHEREAS, upon the terms and conditions of this Agreement and in accordance
with the Business Corporation Act of the State of South Carolina (the "SCBCA"),
RBMG will acquire all of the common stock of RBC through the merger (the
"Merger") of Merger Sub with and into RBC and the stockholders of RBC will
receive shares of common stock of RBMG in proportion to their interests in RBC;
WHEREAS, in furtherance of the Reorganization, the Board of Directors of
RBC has adopted this Agreement and the Merger, as contemplated by this
Agreement, and has recommended that the holders of voting common stock, par
value $.01 per share, of RBC ("RBC Voting Common Stock") and non-voting common
stock, par value $.01 per share, ("RBC Non-voting Common Stock") vote to adopt
this Agreement and the terms of the Merger as contemplated by this Agreement;
WHEREAS, in furtherance of the Reorganization, a special committee of the
Board of Directors of RBMG (the "Special Committee") has recommended that this
Agreement and the Merger, as contemplated by this Agreement, be approved, and
the Board of Directors of RBMG has approved this Agreement and the Merger and
has recommended that the holders of common stock, par value $.01 per share, of
RBMG ("RBMG Common Stock") vote to adopt this Agreement and the terms of the
Merger as contemplated by this Agreement; and
WHEREAS, for United States federal income tax purposes, it is intended that
the Merger qualify as a reorganization under the provisions of Section 368(a) of
the United States Internal Revenue Code of 1986, as amended (the "Code"), and
the Treasury regulations thereunder (the "Regulations");
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. Formation of Merger Subsidiary. RBMG has formed Merger Sub
as a wholly owned subsidiary of RBMG. Merger Sub has been formed solely to
facilitate the Merger and shall conduct no business or activity other than in
connection with the Merger.
SECTION 1.02. The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the SCBCA, at the Effective
Time, Merger Sub shall be merged with and into RBC. As a result of the Merger,
the separate corporate existence of Merger Sub shall cease and RBC shall
continue as the surviving corporation of the Merger as a wholly owned subsidiary
of RBMG (the "Surviving Corporation").
SECTION 1.03. Closing. Unless this Agreement shall have been terminated
and the Merger herein contemplated shall have been abandoned pursuant to Section
8.01, subject to the satisfaction or waiver of the conditions set forth in
Article VII, the consummation of the Reorganization shall take place as promptly
as practicable (and in any event within three business days) after satisfaction
or waiver of the conditions set forth in
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Article VII, at the closing (the "Closing") to be held at the offices of King &
Spalding, 120 West 45th Street, New York, New York 10036-4003, unless another
date, time or place is agreed to by RBMG and RBC.
SECTION 1.04. Effective Time. At the time of the Closing and subject to
the satisfaction or, if permissible, waiver of the conditions set forth in
Article VII, the parties shall cause the Merger to be consummated by filing
articles of merger (the "Articles of Merger") with the Secretary of State of the
State of South Carolina in such form as required by, and executed in accordance
with, the relevant provisions of, the SCBCA (the date and time of such filing,
or such later date or time as set forth therein, being the "Effective Time").
SECTION 1.05. Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of the SCBCA.
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 RBC and Merger Sub shall vest in RBC as the
Surviving Corporation, and all debts, liabilities and duties of RBC and Merger
Sub shall become the debts, liabilities and duties of RBC as the Surviving
Corporation. As of the Effective Time, the Surviving Corporation shall be a
direct wholly owned subsidiary of RBMG.
SECTION 1.06. Articles of Incorporation; Bylaws; Directors and Officers of
Surviving Corporation. Unless otherwise agreed by RBMG and RBC before the
Effective Time, at the Effective Time:
(a) The Articles of Incorporation and the Bylaws of RBC, as in effect
immediately prior to the Effective Time, shall be the Articles of
Incorporation and the Bylaws of the Surviving Corporation until thereafter
amended as provided by Law (as hereinafter defined) and such Articles of
Incorporation or Bylaws;
(b) The officers of RBC immediately prior to the Effective Time shall
continue to serve in their respective offices of the Surviving Corporation
from and after the Effective Time, in each case until their successors are
elected or appointed and qualified or until their resignation or removal.
If, at the Effective Time, a vacancy shall exist in any office of the
Surviving Corporation, such vacancy may thereafter be filled in the manner
provided by Law and the Articles of Incorporation and Bylaws of the
Surviving Corporation; and
(c) The directors of Merger Sub immediately prior to the Effective
Time shall continue to serve as directors of the Surviving Corporation from
and after the Effective Time, in each case until their successors are
elected or appointed and qualified or until their resignation or removal.
If, at the Effective Time, a vacancy shall exist on the Board of Directors
of the Surviving Corporation, such vacancy may thereafter be filled in the
manner provided by Law and the Articles of Incorporation and Bylaws of the
Surviving Corporation.
SECTION 1.07. Amended Certificate of Incorporation of RBMG. Immediately
prior to the Effective Time, RBMG shall cause the Certificate of Incorporation
of RBMG to be amended pursuant to an amendment substantially in the form
attached hereto as Exhibit 1.07. The Certificate of Incorporation of RBMG, as
amended, shall provide, among other things, that the authorized capital stock of
RBMG shall consist of 50,000,000 shares of RBMG Common Stock and 5,000,000
shares of preferred stock, par value $.01 per share ("RBMG Preferred Stock").
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Conversion of Securities. The manner and basis of converting
the securities of RBC and Merger Sub, respectively, at the Effective Time, by
virtue of the Merger, shall be as hereinafter set forth in this Article II.
SECTION 2.02. Conversion of Shares. Each share of RBC Voting Common Stock
and each share of RBC Non-voting Common Stock issued and outstanding immediately
before the Effective Time (excluding those
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owned by RBMG or any wholly owned subsidiary of RBMG) and all rights in respect
thereof, shall, at the Effective Time, without any action on the part of any
holder thereof, forthwith cease to exist and be converted into and become
exchangeable for 1.08026 shares of RBMG Common Stock (such ratio of the shares
of RBC Voting Common Stock or RBC Non-voting Common Stock to shares of RBMG
Common Stock being referred to as the "Exchange Ratio"). Commencing immediately
after the Effective Time, each certificate which, immediately prior to the
Effective Time, represented issued and outstanding shares of RBC Voting Common
Stock and RBC Non-voting Common Stock (collectively, the "Shares"), shall
evidence ownership of RBMG Common Stock on the basis hereinbefore set forth, but
subject to the limitations set forth in this Article II.
SECTION 2.03. Cancellation of Treasury Shares. At the Effective Time, each
share of RBC Voting Common Stock and each share of RBC Non-voting Common Stock
owned by RBC or any wholly owned subsidiary of RBC immediately prior to the
Effective Time shall be canceled and retired and no shares of stock or other
securities of RBMG or the Surviving Corporation or other any other corporation
shall be issuable, and no payment or other consideration shall be made, with
respect thereto.
SECTION 2.04. Conversion of Common Stock of Merger Sub into Common Stock of
the Surviving Corporation. At the Effective Time, each share of common stock,
par value $.01 per share, of Merger Sub issued and outstanding immediately prior
to the Effective Time, and all rights in respect thereof, shall, without any
action on the part of RBMG, forthwith cease to exist and be converted into one
validly issued, fully paid and nonassessable share of voting common stock, par
value $.01 per share, of the Surviving Corporation (the "New RBC Common Stock").
Immediately after the Effective Time and upon surrender by RBMG of the
certificate representing the shares of the common stock of Merger Sub, the
Surviving Corporation shall deliver to RBMG an appropriate certificate or
certificates representing the New RBC Common Stock created by conversion of the
common stock of Merger Sub owned by RBMG.
SECTION 2.05. Exchange of Shares Other than Treasury Shares; Appraisal
Rights. (a) Subject to Section 2.05(b) and the other terms and conditions
hereof, at or prior to the Effective Time, RBMG shall appoint an exchange agent
to effect the exchange of Shares for RBMG Common Stock in accordance with the
provisions of this Article II (the "Exchange Agent"). From time to time after
the Effective Time, RBMG shall deposit, or cause to be deposited, certificates
representing RBMG Common Stock for conversion of Shares in accordance with the
provisions of Section 2.02 hereof (such certificates, together with any
dividends or distributions with respect thereto, being herein referred to as the
"Exchange Fund"). Commencing immediately after the Effective Time and until the
appointment of the Exchange Agent shall be terminated, each holder of a
certificate or certificates theretofore representing Shares may surrender the
same to the Exchange Agent, and, after the appointment of the Exchange Agent
shall be terminated, any such holder may surrender any such certificate to RBMG.
Such holder shall be entitled upon such surrender to receive in exchange
therefor a certificate or certificates representing the number of full shares of
RBMG Common Stock into which the Shares theretofore represented by the
certificate or certificates so surrendered shall have been converted in
accordance with the provisions of Section 2.02 hereof, together with a cash
payment in lieu of fractional shares, if any, in accordance with Section 2.07
hereof, and all such shares of RBMG Common Stock shall be deemed to have been
issued at the Effective Time. Until so surrendered and exchanged, each
outstanding certificate which, prior to the Effective Time, represented issued
and outstanding Shares shall be deemed for all corporate purposes of RBMG, other
than the payment of dividends and other distributions, if any, to evidence
ownership of the number of full shares of RBMG Common Stock into which the
Shares theretofore represented thereby shall have been converted at the
Effective Time. Unless and until any such certificate theretofore representing
Shares is so surrendered, no dividend or other distribution, if any, payable to
the holders of record of RBMG Common Stock as of any date subsequent to the
Effective Time shall be paid to the holder of such certificate in respect
thereof. Upon the surrender of any such certificate theretofore representing
Shares, however, the record holder of the certificate or certificates
representing shares of RBMG Common Stock issued in exchange therefor shall
receive from the Exchange Agent or from RBMG, as the case may be, payment of the
amount of dividends and other distributions, if any, which as of any date
subsequent to the Effective Time and until such surrender shall have become
payable with respect to such number of shares of RBMG Common Stock
("Presurrender Dividends"). No interest shall be payable with respect to the
payment of Presurrender Dividends upon the surrender of certificates theretofore
representing Shares. After the appointment of the Exchange Agent shall have been
terminated, such holders of
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RBMG Common Stock which have not received payment of Presurrender Dividends
shall look only to RBMG for payment thereof. Notwithstanding the foregoing
provisions of this Section 2.05, risk of loss and title to such certificates
representing Shares shall pass only upon proper delivery of such certificates to
the Exchange Agent, and neither the Exchange Agent nor any party hereto shall be
liable to a holder of Shares for any RBMG Common Stock or dividends or
distributions thereon delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law or to a transferee pursuant to
Section 2.06 hereof.
(b) Each outstanding share of RBC Voting Common Stock or RBC Non-voting
Common Stock for which a written notice of intent to demand payment for such
shares is filed in accordance with Section 33-13-210 of the SCBCA, at or prior
to the RBC Stockholders' Meeting (as hereinafter defined) and not withdrawn at
or prior to the RBC Stockholders' Meeting and which is not voted in favor of the
Merger shall not be converted into or represent a right to receive RBMG Common
Stock hereunder unless and until the holder shall have withdrawn his or her
right to appraisal of or payment of his or her RBC Voting Common Stock or RBC
Non-voting Common Stock under Section 33-13-210 of the SCBCA, at which time his
or her shares shall be converted into RBMG Common Stock as set forth in Section
2.02 in accordance with Section 2.05(a). All such shares of RBC Voting Common
Stock or RBC Non-voting Common Stock as to which such demand for appraisal is so
filed and not withdrawn at or prior to the time of such vote and which are not
voted in favor of the Merger are herein called "Dissenting Stock". RBC shall
give RBMG prompt notice of its receipt of any written demands for appraisal
rights or withdrawal of such demands. RBC shall not voluntarily make any payment
with respect to any demands for appraisal rights and shall not, except with the
prior written consent of RBMG, settle or offer to settle any such demands. Each
holder of RBC Voting Common Stock or RBC Non-voting Common Stock that becomes
entitled, pursuant to the provisions of Section 33-13-210 of the SCBCA, to
payment for his or her shares of RBC Voting Common Stock or RBC Non-voting
Common Stock under the provisions of said Section, shall receive payment
therefor from RBMG and such shares shall be canceled.
SECTION 2.06. Stock Transfer Books. At the Effective Time, the stock
transfer books of RBC with respect to Shares shall be closed, and there shall be
no further registration of transfers of Shares thereafter on the records of such
stock transfer books. In the event of a transfer of ownership of Shares that is
not registered in the stock transfer records of RBC, at the Effective Time, a
certificate or certificates representing the number of full shares of RBMG
Common Stock into which such Shares shall have been converted shall be issued to
the transferee together with a cash payment in lieu of fractional shares, if
any, in accordance with Section 2.07 hereof, and a cash payment in the amount of
Presurrender Dividends, if any, in accordance with Section 2.05 hereof, if the
certificate or certificates representing such Shares is or are surrendered as
provided in Section 2.05 hereof, accompanied by all documents required to
evidence and effect such transfer and by evidence of payment of any applicable
stock transfer tax.
SECTION 2.07. No Fractional Share Certificates. (a) No scrip or fractional
share certificate for RBMG Common Stock shall be issued upon the surrender for
exchange of certificates evidencing Shares, and an outstanding fractional share
interest shall not entitle the owner thereof to vote, to receive dividends or to
any rights of a stockholder of RBMG or of the Surviving Corporation with respect
to such fractional share interest.
(b) RBMG shall pay to the Exchange Agent an amount in cash sufficient for
the Exchange Agent to pay each holder of Shares an amount in cash equal to the
product obtained by multiplying (i) the fractional share interest to which such
holder would otherwise be entitled (after taking into account all shares of RBC
Voting Common Stock or RBC Non-voting Common Stock held at the Effective Time by
such holder) by (ii) the arithmetic average of the closing prices for a share of
RBMG Common Stock on the Nasdaq National Market (the "NMS") for each of the ten
trading days immediately prior to the Effective Time.
(c) As soon as practicable after the determination of the amount of cash,
if any, to be paid to holders of Shares with respect to any fractional share
interests, the Exchange Agent shall make available such amounts, net of any
required withholding, to such holders of RBC Voting Common Stock or RBC
Non-voting Common Stock, subject to and in accordance with the terms of Section
2.05 hereof.
(d) Any portion of the Exchange Fund which remains undistributed for six
months after the Effective Time shall be delivered to RBMG, and any holder of
Shares who has not theretofore complied with the provisions of
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this Article II shall thereafter look only to RBMG for satisfaction of their
claims for RBMG Common Stock or any cash in lieu of fractional shares of RBMG
Common Stock and any Presurrender Dividends.
SECTION 2.08. Conversion of Dissenting Stock. If prior to or after the
Effective Time any stockholder of RBC shall fail to comply with the requirements
of Section 33-13-210 of the SCBCA, or shall effectively withdraw or lose, his or
her right to appraisal of and payment for his or her shares of Dissenting Stock,
the Dissenting Stock of such holder shall be treated for purposes of this
Article II like any other shares of outstanding RBC Voting Common Stock or RBC
Non-voting Common Stock.
SECTION 2.09. Certain Adjustments. If between the date of this Agreement
and the Effective Time, the outstanding shares of RBMG Common Stock or RBC
Voting Common Stock and RBC Non-voting Common Stock shall be changed into a
different number of shares by reason of any reclassification, recapitalization,
split-up, combination or exchange of shares, or any dividend payable in stock or
other securities shall be declared thereon with a record date within such
period, the Exchange Ratio established pursuant to the provisions of Section
2.02 hereof shall be adjusted accordingly to provide to the holders of RBMG
Common Stock and RBC Voting Common Stock or RBC Non-voting Common Stock the same
economic effect as contemplated by this Agreement prior to such
reclassification, recapitalization, split-up, combination, exchange or dividend.
SECTION 2.10. Transmittal Procedures. As soon as reasonably practicable
after the Effective Time, RBMG will instruct the Exchange Agent to mail
appropriate and customary transmittal materials (which shall specify that
delivery shall be effected, and risk of loss and title to the certificates
theretofore representing Shares shall pass, only upon proper delivery of such
certificates to the Exchange Agent) to each holder of record of Shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF RBC
RBC hereby represents and warrants to RBMG that:
SECTION 3.01. Organization and Qualification; Subsidiaries. Each of RBC
and each Subsidiary of RBC (the "RBC Subsidiaries") has been duly organized and
is validly existing and in good standing (to the extent applicable) under the
laws of the jurisdiction of its incorporation or organization, as the case may
be, and has the requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as it is now being
conducted. Each of RBC and each RBC Subsidiary is duly qualified or licensed to
do business, and is in good standing (to the extent applicable), in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its business makes such qualification or licensing
necessary, except for such failures to be so qualified or licensed and in good
standing that would not, individually or in the aggregate, have a RBC Material
Adverse Effect. For purposes of this Agreement, "RBC Material Adverse Effect"
means any change in or effect on the business of RBC and the RBC Subsidiaries
that is, or is reasonably likely to be, materially adverse to the business,
assets (including intangible assets), liabilities (contingent or otherwise),
condition (financial or otherwise) or results of operations of RBC and the RBC
Subsidiaries taken as a whole.
SECTION 3.02. Articles or Certificate of Incorporation and Bylaws. The
copies of RBC's and each RBC Subsidiary's Articles or Certificate of
Incorporation and Bylaws that are attached to Section 3.02 of the Disclosure
Schedule delivered to RBMG prior to the execution of (and forming part of) this
Agreement (the "RBC Disclosure Schedule"), are complete and correct copies
thereof. Each such Articles or Certificate of Incorporation and Bylaws are in
full force and effect. Neither RBC nor any RBC Subsidiary is in violation of any
of the provisions of their respective Articles or Certificate of Incorporation
or By-laws except as disclosed in Section 3.02 of the RBC Disclosure Schedule.
SECTION 3.03. Capitalization. The authorized capital stock of RBC consists
of 25,000,000 shares of RBC Voting Common Stock and 2,500,000 shares of RBC
Non-voting Common Stock. As of the date hereof, (i) 7,121,245 shares of RBC
Voting Common Stock and 1,577,788 shares of RBC Non-voting Common Stock were
issued and outstanding, all of which were validly issued, fully paid and
nonassessable, and (ii) no shares of RBC Voting Common Stock or RBC Non-voting
Common Stock were held in the treasury of RBC or by the
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RBC Subsidiaries. Section 3.03 of the RBC Disclosure Schedule also sets forth
all options, warrants or other rights, agreements, arrangements or commitments
entitling any person to acquire any shares of RBC capital stock from RBC. Except
as described in Section 3.03 of the RBC Disclosure Schedule, there are no
options, warrants or other rights, agreements, arrangements or commitments of
any character to which RBC or any RBC Subsidiary is a party or by which RBC or
any RBC Subsidiary is bound, obligating RBC or any RBC Subsidiary to issue or
sell any shares of capital stock of, or other equity interests in, RBC or any
RBC Subsidiary, and no shares of capital stock of RBC are reserved for issuance
or sale. Except as set forth in Section 3.03 of the RBC Disclosure Schedule,
there are no outstanding contractual obligations of RBC or any RBC Subsidiary to
repurchase, redeem or otherwise acquire any shares of RBC Voting Common Stock or
RBC Non-voting Common Stock or any capital stock of any RBC Subsidiary. Except
as disclosed in Section 3.03 of the RBC Disclosure Schedule, each outstanding
share of capital stock of each RBC Subsidiary is duly authorized, validly
issued, fully paid and nonassessable and owned of record and beneficially by RBC
free and clear of all security interests, liens, claims, pledges, options,
rights of first refusal, agreements, limitations on RBC's or such other RBC
Subsidiary's voting rights, charges and other encumbrances of any nature
whatsoever. Except as set forth in Section 3.03 of the RBC Disclosure Schedule,
there are no outstanding contractual obligations of RBC or any RBC Subsidiary
requiring it to provide funds to, or make any investment (in the form of a loan,
capital contribution or otherwise) in, any RBC Subsidiary or any other person.
SECTION 3.04. Authority Relative to this Agreement. RBC has all necessary
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the Merger (other than the approval
of this Agreement and the Merger contemplated hereby by the holders of a
majority of the outstanding shares of RBC Voting Common Stock and a majority of
the outstanding shares of RBC Non-voting Common Stock at the RBC Stockholders'
Meeting (the "RBC Stockholder Vote") and the filing and recordation of the
Articles of Merger as required by the SCBCA). The execution and delivery of this
Agreement by RBC and the consummation by RBC of the Merger contemplated hereby
have been duly and validly authorized by all necessary corporate action, and no
other corporate proceedings on the part of RBC are necessary to authorize this
Agreement or to consummate such Merger (other than the RBC Stockholder Vote and
the filing and recordation of the Articles of Merger as required by the SCBCA).
The board of directors of RBC has approved the execution, delivery and
performance of this Agreement and the Merger and other transactions provided for
herein in accordance with the requirements of the SCBCA. This Agreement has been
duly executed and delivered by RBC and, assuming the due authorization,
execution and delivery by the other parties hereto, constitutes a legal, valid
and binding obligation of RBC, enforceable against RBC in accordance with its
terms.
SECTION 3.05. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by RBC do not, and the performance by
RBC of its obligations hereunder and the consummation of the Merger will not,
(i) conflict with or violate any provision of the Articles of Incorporation or
Bylaws of RBC or any equivalent organizational documents of any RBC Subsidiary,
(ii) assuming that all consents, approvals, authorizations and permits described
in Section 3.05(b) have been obtained and all filings and notifications
described in Section 3.05(b) have been made, conflict with or violate any Law
applicable to RBC or any RBC Subsidiary or by which any property or asset of RBC
or any RBC Subsidiary is bound or affected or (iii) except as set forth in
Section 3.05(a) of the RBC Disclosure Schedule, result in any breach of or
constitute a default (or an event which with the giving of notice or lapse of
time or both would become a default) under, or give to others any right of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of RBC or any
RBC Subsidiary pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation,
except, with respect to clauses (ii) and (iii), for any such conflicts,
violations, breaches, defaults or other occurrences which would neither,
individually or in the aggregate, (A) have a RBC Material Adverse Effect nor (B)
prevent or materially delay the performance by RBC of its obligations pursuant
to this Agreement or the consummation of the Merger. As used in this Agreement,
"Law" means any federal, state or local statute, law, ordinance, regulation,
rule, code, order, other requirement or rule of law of the United States or any
other jurisdiction.
(b) The execution and delivery of this Agreement do not, and the
performance by RBC of its obligations hereunder or the consummation of the
Merger will not, require any consent, approval, authorization or permit of, or
filing by RBC or any RBC Subsidiary with, or notification by RBC or any RBC
Subsidiary to, any United
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States federal, state or local or any foreign governmental, regulatory or
administrative authority, agent or commission or any court, tribunal or arbitral
body (a "Governmental Entity"), except (i) the premerger notification
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder (the "HSR Act"), the filing
and recordation of the Articles of Merger as required by the SCBCA, and as set
forth in Section 3.05(b) of the RBC Disclosure Schedule and (ii) where failure
to obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not (A) prevent or materially delay the
performance by RBC of its obligations pursuant to this Agreement or the
consummation of the Merger or (B) individually or in the aggregate, have a RBC
Material Adverse Effect.
SECTION 3.06. Permits; Compliance with Laws. Each of RBC and the RBC
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, establishment registrations, permits, easements, variances,
exceptions, consents, certificates, approvals and orders of any Governmental
Entity, necessary for RBC or any RBC Subsidiary to own, lease and operate its
properties or otherwise to carry on its business as it is now being conducted
(the "RBC Permits"), except where the failure to possess any RBC Permits would
not, individually or in the aggregate, have an RBC Material Adverse Effect, and,
as of the date of this Agreement, no suspension or cancellation of any of the
RBC Permits is pending or, to the knowledge of RBC, threatened. Neither RBC nor
any RBC Subsidiary is in conflict with, or in default or violation of, (i) any
Law applicable to RBC or any RBC Subsidiary or by which any property or asset of
RBC or any RBC Subsidiary is bound or affected or (ii) any RBC Permits, except
in the case of clauses (i) and (ii) for any such conflicts, defaults or
violations that would not, individually or in the aggregate, have an RBC
Material Adverse Effect.
SECTION 3.07. Financial Statements. (a) (i) The audited consolidated
financial statements (including, in each case, any notes thereto) of RBC for
each of the years ended December 31, 1994, 1995 and 1996 contained in Section
3.07 of the RBC Disclosure Schedule, were prepared from, and are in accordance
with, the books and records of RBC, which books and records are maintained in
accordance with United States generally accepted accounting principles ("U.S.
GAAP") applied on a consistent basis throughout the periods indicated (except as
may be indicated in the notes thereto). The financial statements contained in
Section 3.07 of the RBC Disclosure Schedule each present fairly, in all material
respects, the consolidated financial position of RBC and the consolidated RBC
Subsidiaries, or their predecessors, as appropriate, as at the respective dates
thereof and for the respective periods indicated therein, except as otherwise
noted therein. The audited consolidated balance sheet of RBC as of December 31,
1996 which is contained in Section 3.07 of the RBC Disclosure Schedule is
hereinafter referred to as the "1996 Balance Sheet."
(b) Except as and to the extent set forth or reserved against on the 1996
Balance Sheet, none of RBC or any RBC Subsidiary has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise),
except for liabilities or obligations incurred in the ordinary course of
business since January 1, 1997 that would not, individually or in the aggregate,
have a RBC Material Adverse Effect.
SECTION 3.08. Absence of Certain Changes or Events. (a) Since January 1,
1997, except as set forth in Section 3.08 of the RBC Disclosure Schedule, RBC
and the RBC Subsidiaries have conducted their businesses only in the ordinary
course and in a manner consistent with past practice and, since such date, there
has not been (i) any RBC Material Adverse Effect, (ii) any event that could
reasonably be expected to prevent or materially delay the performance of its
obligations pursuant to this Agreement and the consummation of the Merger by
RBC, (iii) any material change by RBC in its accounting methods, principles or
practices, (iv) any declaration, setting aside or payment of any dividend or
distribution in respect of the shares of RBC Voting Common Stock or RBC
Non-voting Common Stock or any redemption, purchase or other acquisition of any
of RBC's securities or (v) except in the ordinary course of business consistent
with past practice, any material increase in the compensation or benefits or
establishment of any material 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 the compensation payable or to become
payable to any executive officers of RBC or any RBC Subsidiary.
(b) Except as set forth in Section 3.08 of the RBC Disclosure Schedule, and
except as to events, developments or conditions that have not had and are not
reasonably likely to have an RBC Material Adverse
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Effect, since January 1, 1997, there have not been with respect to RBC (i) any
extraordinary losses suffered or any damage, destruction, loss or casualty to
property or assets of RBC with an aggregate value of more than $200,000, whether
or not covered by insurance, (ii) any assets mortgaged, pledged or made subject
to any lien, charge or other encumbrance, (iii) any liability or obligation
(absolute, accrued or contingent) incurred except in the ordinary course of
business, (iv) any claims, liabilities or obligations (absolute, accrued or
contingent) paid, discharged or satisfied, other than the payment, discharge or
satisfaction in the ordinary course of business consistent with past practice of
claims, liabilities and obligations reflected or reserved against in the 1996
Balance Sheet or incurred in the ordinary course of business consistent with
past practice since January 1, 1997, (v) any guaranteed checks, notes or
accounts receivable which have been written off as uncollectible, except
write-offs in the ordinary course of business consistent with past practice,
(vi) any write-down of the value of any asset or investment on the books or
records of RBC, except for depreciation and amortization taken in the ordinary
course of business consistent with past practice, (vii) any cancellation of any
debts or waiver of any claims or rights of substantial value, or sale, transfer
or other disposition of any properties or assets (real, personal or mixed,
tangible or intangible) of substantial value, except, in each such case, in
transactions in the ordinary course of business consistent with past practice
and which in any event do not exceed $200,000 in the aggregate, (viii) any
single capital expenditure or commitment in excess of $1,000,000 for additions
to property or equipment or aggregate capital expenditures and commitments in
excess of $1,000,000 for additions to property or equipment, (ix) any increase
of any reserves for contingent liabilities (excluding any adjustment to bad debt
reserves in the ordinary course of business consistent with past practice), (x)
any transactions entered into other than in the ordinary course of business,
(xi) any agreements to do any of the foregoing or (xii) any other events,
developments or conditions of any character that have had or are reasonably
likely to have a material adverse effect on the assets, liabilities, results of
operations, financial condition or business of RBC.
SECTION 3.09. Employee Benefit Plans; Labor Matters. (a) With respect to
each employee benefit plan, program, arrangement and contract (including,
without limitation, any "employee benefit plan", as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
maintained or contributed to by RBC or any RBC Subsidiary, or with respect to
which RBC or any RBC Subsidiary could incur liability under Sections 4069,
4212(c) or 4204 of ERISA (the "RBC Benefit Plans"), RBC has delivered or made
available to RBMG a true and correct copy of (i) such RBC Benefit Plan and the
most recent summary plan description related to each RBC Benefit Plan for which
a summary plan description is required, (ii) each trust agreement or other
funding arrangement relating to such RBC Benefit Plan, (iii) the most recent
annual report (Form 5500) filed with the Internal Revenue Service (the "IRS"),
(iv) the most recent actuarial report or financial statement relating to a RBC
Benefit Plan and (v) the most recent determination letter issued by the IRS with
respect to each RBC Benefit Plan qualified under Section 401(a) of the Code.
(b) Each RBC Benefit Plan has been administered in all material respects in
accordance with its terms and all contributions required to be made under the
terms of any of the RBC Benefit Plans as of the date of this Agreement have been
timely made or have been reflected on the 1996 Balance Sheet. Except as set
forth in Section 3.09(b) of the RBC Disclosure Schedule, with respect to the RBC
Benefit Plans, no event has occurred and, to the knowledge of RBC, there exists
no condition or set of circumstances in connection with which RBC or any RBC
Subsidiary is reasonably likely to be subject to any liability under the terms
of such RBC Benefit Plans, ERISA, the Code or any other applicable Law which
would individually or in the aggregate have a RBC Material Adverse Effect.
(c) Except as set forth in Section 3.09(c) of the RBC Disclosure Schedule,
neither RBC nor any RBC Subsidiary is a party to any collective bargaining or
other labor union contract applicable to persons employed by RBC or any RBC
Subsidiary and no collective bargaining agreement is being negotiated by RBC or
any RBC Subsidiary. As of the date of this Agreement, there is no labor dispute,
strike or work stoppage against RBC or any RBC Subsidiary pending or, to the
knowledge of RBC, threatened which may interfere with the respective business
activities of RBC or any RBC Subsidiary, except where such dispute, strike or
work stoppage would not have a RBC Material Adverse Effect. As of the date of
this Agreement, to the knowledge of RBC, none of RBC, any RBC Subsidiary, or any
of their respective representatives or employees has committed any unfair labor
practice in connection with the operation of the respective businesses of RBC or
any RBC Subsidiary, and there is no charge or complaint against RBC or any RBC
Subsidiary by the National Labor Relations Board or any
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comparable governmental agency pending or threatened in writing, except where
such unfair labor practice, charge or complaint would not have a RBC Material
Adverse Effect.
(d) RBC has delivered or made available to RBMG true and complete copies of
(i) all employment agreements with officers of RBC and each RBC Subsidiary
providing for annual compensation in excess of $200,000, (ii) all severance
plans, agreements, programs and policies of RBC and each RBC Subsidiary with or
relating to their respective employees, and (iii) all plans, programs,
agreements and other arrangements of RBC and each RBC Subsidiary with or
relating to their respective employees which contain "change of control"
provisions.
(e) Except as provided in Section 3.09(e) of the RBC Disclosure Schedule or
as otherwise required by Law, no RBC Benefit Plan provides retiree medical or
retiree life insurance benefits to any person.
SECTION 3.10. Tax Matters. Neither RBC nor any of its affiliates has taken
or agreed to take any action (other than actions contemplated by this Agreement)
that would prevent the Merger from constituting a transaction qualifying under
Section 368(a) of the Code. RBC is not aware of any agreement, plan or other
circumstance that would prevent the Merger from so qualifying under Section
368(a) of the Code.
SECTION 3.11. Material Contracts. Section 3.11 of the RBC Disclosure
Schedule contains a true and complete list of the following (hereinafter
referred to as the "RBC Material Contracts"):
(a) All bonds, debentures, notes, mortgages, indentures or guarantees
to which RBC or any RBC Subsidiary is a party as obligor or by which any of
their respective assets is bound;
(b) All loans and credit commitments to RBC or any RBC Subsidiary
which are outstanding, together with a brief description of such
commitments and the name of each financial institution granting the same;
(c) All contracts or agreements which limit or restrict RBC, any RBC
Subsidiary or any of their respective affiliates from engaging in any
business in any jurisdiction or that limit any third party from engaging in
competition with RBC or any RBC Subsidiary;
(d) All contracts and commitments (other than those described in
subparagraphs (a), (b), or (c) of this Section 3.11) which relate to the
business of RBC or any RBC Subsidiary or by which any of their respective
assets may be bound involving an annual commitment or annual payment by any
party thereto of more than $200,000 individually; and
(e) All material contracts, agreements, arrangements or understandings
between RBC or any RBC Subsidiary and any stockholder, officer or director
of RBC or any RBC Subsidiary, or, to RBC's knowledge, any person with whom
any such stockholder, officer or director has any direct or indirect
relation by blood, marriage or adoption, or, to RBC's knowledge, any entity
in which any such person owns any beneficial interest (other than a
publicly held corporation whose stock is traded on a national securities
exchange or in the NMS and less than 5% of the stock of which is
beneficially owned by all such persons).
True and complete copies of all RBC Material Contracts, including all
amendments thereto, have been made available to RBMG. The RBC Material Contracts
are valid and enforceable in accordance with their respective terms with respect
to RBC or the RBC Subsidiary which is a party thereto, and, to the knowledge of
RBC, are valid and enforceable in accordance with their respective terms with
respect to each other party thereto. There is not under any of the RBC Material
Contracts any existing breach, default or event of default by RBC or any RBC
Subsidiary or event that with notice or lapse of time or both would constitute a
breach, default or event of default by RBC or any RBC Subsidiary, nor does RBC
know of, and neither of RBC nor any RBC Subsidiary has received notice of, or
made a claim with respect to, any breach or default by any other party thereto.
SECTION 3.12. Litigation. (a) Except as disclosed in Section 3.12(a) of
the RBC Disclosure Schedule, there are no suits, claims, actions,
investigations, inquiries or proceedings of any nature by any person that are
pending or, to RBC's knowledge, threatened (i) against or otherwise involving,
directly or indirectly, RBC or any of the RBC Subsidiaries, or any of their
respective properties (including, without limitation, any such matter with
respect to Taxes), or (ii) against or otherwise involving, directly or
indirectly, any officer, director, employee, stockholder or agent of RBC or any
RBC Subsidiary, including, without limitation, any derivative actions that
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have been requested, that, with respect to either of (i) or (ii) above, if
finally determined adversely, individually or in the aggregate, is reasonably
likely to have a RBC Material Adverse Effect.
(b) Except as disclosed in Section 3.12(b) of the RBC Disclosure Schedule,
there is no suit, claim, action, proceeding or investigation pending or, to the
knowledge of RBC, threatened against RBC or any RBC Subsidiary before any
Governmental Entity that, individually or in the aggregate, is reasonably likely
to have a RBC Material Adverse Effect and to the knowledge of RBC, there are no
existing facts or circumstances that would be reasonably likely to result in a
suit, claim, action, proceeding or investigation that, individually or in the
aggregate, is reasonably likely to have a RBC Material Adverse Effect. Except as
disclosed in Section 3.12(b) of the RBC Disclosure Schedule, neither RBC nor any
RBC Subsidiary is subject to any outstanding order, writ, injunction or decree
which, insofar as can be reasonably foreseen, individually or in the aggregate,
would have a RBC Material Adverse Effect.
SECTION 3.13. Environmental Matters. Except as disclosed in Section 3.13
of the RBC Disclosure Schedule or as would not, individually or in the
aggregate, have a RBC Material Adverse Effect:
(i) RBC and the RBC Subsidiaries (i) are in compliance with all
applicable Environmental Laws, (ii) hold all required Environmental Permits
and (iii) are in compliance with their respective Environmental Permits.
All past noncompliance with Environmental Laws or Environmental Permits has
been resolved without any pending, ongoing or future obligation, cost or
liability, and there is no requirement proposed for adoption or
implementation under any Environmental Law or Environmental Permit that is
reasonably expected to have a RBC Material Adverse Effect.
(ii) There is no claim, litigation or proceeding pending or threatened
pursuant to an Environmental Law against RBC, any RBC Subsidiary, or any
real property currently or, to the knowledge of RBC and the RBC
Subsidiaries, formerly owned, leased or occupied by RBC or any RBC
Subsidiary, and there are no circumstances that can reasonably be expected
to form the basis of any such claim, including without limitation with
respect to any off-site disposal location presently or formerly used by RBC
or any RBC Subsidiary.
(iii) None of the real property currently or, to the knowledge of RBC
and the RBC Subsidiaries, formerly owned, leased or occupied by RBC or any
RBC Subsidiary is listed or, to the knowledge of RBC and the RBC
Subsidiaries, proposed for listing on the "National Priorities List" under
CERCLA, as updated through the date hereof, the "Comprehensive
Environmental Response, Compensation, and Liability Information System," or
any similar list of sites in the United States or any other jurisdiction
requiring investigation or cleanup of Hazardous Materials.
For purposes of this Agreement:
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended as of the date hereof.
"Environmental Law" means any federal, state or local statute, law,
ordinance, regulation, rule, code or order of the United States or any
other jurisdiction and any enforceable judicial or administrative
interpretation thereof, including any judicial or administrative order,
consent decree or judgment, relating to pollution or protection of the
environment or natural resources, including, without limitation, those
relating to the use, handling, transportation, treatment, storage,
disposal, release or discharge of Hazardous Materials, as in effect as of
the date of this Agreement.
"Environmental Permit" means any permit, approval, identification
number, license or other authorization required under or issued pursuant to
any applicable Environmental Law.
"Hazardous Material" means (a) any petroleum, petroleum products,
by-products or breakdown products, radioactive materials,
asbestos-containing materials or polychlorinated biphenyls or (b) any
chemical, material or substance defined or regulated as toxic or hazardous
or as a pollutant or contaminant or waste under any applicable
Environmental Law.
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SECTION 3.14. Intellectual Property. Except as set forth in Section 3.14
of the RBC Disclosure Schedule, or as would not, individually or in the
aggregate, have a RBC Material Adverse Effect, RBC and the RBC Subsidiaries own
or possess adequate licenses or other valid rights to use all patents, patent
rights, trademarks, trademark rights, trade names, trade dress, trade name
rights, copyrights, service marks, trade secrets, applications for trademarks
and for service marks, know-how and other proprietary rights and information
used or held for use in connection with the respective businesses of RBC and the
RBC Subsidiaries as currently conducted, and RBC is unaware of any assertion or
claim challenging the validity of any of the foregoing. Except as set forth in
Section 3.14 of the RBC Disclosure Schedule, the conduct of the respective
businesses of RBC and the RBC Subsidiaries as currently conducted does not
conflict in any way with any patent right, license, trademark, trademark right,
trade dress, trade name, trade name right, service mark or copyright of any
third party that, individually or in the aggregate, would have a RBC Material
Adverse Effect. To the knowledge of RBC, there are no infringements of any
proprietary rights owned by or licensed by or to RBC or any RBC Subsidiary that,
individually or in the aggregate, would have a RBC Material Adverse Effect.
SECTION 3.15. Taxes. Except as set forth in Section 3.15 of the RBC
Disclosure Schedule and except for matters that have not had and are not
reasonably likely to have an RBC Material Adverse Effect, (a) RBC and each of
the RBC Subsidiaries have timely filed or shall timely file all returns and
reports required to be filed by them with any taxing authority with respect to
Taxes for any period ending on or before the Effective Time, taking into account
any extension of time to file granted to or obtained on behalf of RBC and the
RBC Subsidiaries, (b) all Taxes shown to be payable on such returns or reports
that are due prior to the Effective Time have been paid or shall be paid, (c) as
of the date hereof, no deficiency for any amount of Tax has been asserted or
assessed by a taxing authority against RBC or any of the RBC Subsidiaries and
(d) RBC and each of the RBC Subsidiaries have provided adequate reserves in the
1996 Balance Sheet for any Taxes that have not been paid, whether or not shown
as being due on any returns. As used in this Agreement, "Taxes" shall mean any
and all taxes, fees, levies, duties, tariffs, imposts and other charges of any
kind (together with any and all interest, penalties, additions to tax and
additional amounts imposed with respect thereto) imposed by any government or
taxing authority, including, without limitation, taxes or other charges on or
with respect to income, franchises, windfall or other profits, gross receipts,
property, sales, use, capital stock, payroll, employment, social security,
workers' compensation, unemployment compensation or net worth; taxes or other
charges in the nature of excise, withholding, ad valorem, stamp, transfer,
value-added or gains taxes; and license, registration and documentation fees.
SECTION 3.16. Real Property. Section 3.16(a)(i) of the RBC Disclosure
Schedule lists all Leased Real Property of RBC. Each of the Leases is in full
force and effect and to the knowledge of RBC conveys to RBC a valid and
subsisting leasehold estate. Except for real property owned by RBC as a result
of foreclosure proceedings relating to loans reflected on its 1996 Balance Sheet
or as described in Section 3.16(ii) of the RBC Disclosure Schedule, RBC owns no
real property.
SECTION 3.17. Brokers. No broker, finder or investment banker (other than
Montgomery Securities ("Montgomery")) is entitled to any brokerage, finder's or
other fee or commission in connection with the Merger based upon arrangements
made by or on behalf of RBC. RBC has heretofore made available to RBMG complete
and correct copies of all agreements between RBC and Montgomery pursuant to
which such firm would be entitled to any payment relating to the Merger.
Montgomery has delivered to the board of directors of RBC its written opinion to
the effect that, as of the date of this Agreement, the Exchange Ratio and the
terms of the Merger are fair to RBC and its stockholders, from a financial point
of view. Montgomery has authorized the inclusion of its opinion in the Joint
Proxy Statement (as defined in Section 6.01), and RBC shall promptly, after the
date of this Agreement, deliver a signed copy of such opinion to RBMG.
SECTION 3.18. Disclosure. No representation or warranty by RBC in this
Agreement and no statement contained in the RBC Disclosure Schedule or any
certificate delivered by RBC to RBMG pursuant to this Agreement when taken
together as a whole contains any untrue statement of a material fact or omits
any material fact necessary to make the statements herein or therein not
misleading.
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SECTION 3.19. Regulatory Approvals. RBC is not aware of any reason why the
regulatory approvals required to be obtained by it to consummate the
transactions contemplated hereby would not be satisfied within the time frame
customary for transactions of the nature contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF RBMG
RBMG hereby represents and warrants to RBC that:
SECTION 4.01. Organization and Qualification; Subsidiaries. Each of RBMG
and each Subsidiary of RBMG (the "RBMG Subsidiaries") has been duly organized
and is validly existing and in good standing (to the extent applicable) under
the laws of the jurisdiction of its incorporation or organization, as the case
may be, and has the requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as it is now being
conducted. Each of RBMG and each RBMG Subsidiary is duly qualified or licensed
to do business, and is in good standing (to the extent applicable), in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its business makes such qualification or licensing
necessary, except for such failures to be so qualified or licensed and in good
standing that would not, individually or in the aggregate, have an RBMG Material
Adverse Effect. For purposes of this Agreement, "RBMG Material Adverse Effect"
means any change in or effect on the business of RBMG and the RBMG Subsidiaries
that is, or is reasonably likely to be, materially adverse to the business,
assets (including intangible assets), liabilities (contingent or otherwise),
condition (financial or otherwise) or results of operations of RBMG and the RBMG
Subsidiaries taken as a whole.
SECTION 4.02. Certificate of Incorporation and Bylaws. The copies of
RBMG's Certificate of Incorporation and Bylaws that are incorporated by
reference as Exhibits to RBMG's Form 10-K for the period ending December 31,
1996 are complete and correct copies thereof. Such Certificate of Incorporation
and Bylaws are in full force and effect. RBMG is not in violation of any of the
provisions of its Certificate of Incorporation or By-laws.
SECTION 4.03. Capitalization. The authorized capital stock of RBMG
consists of (i) 25,000,000 shares of RBMG Common Stock and (ii) 5,000,000 shares
of RBMG Preferred Stock. As of the date hereof, 20,255,080 shares of RBMG Common
Stock were issued and outstanding, all of which were validly issued, fully paid
and nonassessable, (ii) no shares of RBMG Common Stock were held in the treasury
of RBMG or by the RBMG Subsidiaries, (iii) 3,614,536 shares of RBMG Common Stock
were reserved for future issuance pursuant to agreements or arrangements
described in Section 4.03 of the RBMG Disclosure Schedule delivered by RBMG to
RBC prior to the execution of (and forming a part of) this Agreement (the "RBMG
Disclosure Schedule"). Except for (a) options granted pursuant to agreements or
arrangements described in Section 4.03 of the RBMG Disclosure Schedule, (b) the
merger agreements described in Section 4.03 of the RBMG Disclosure Schedule and
(c) the rights agreement described in Section 4.03 of the RBMG Disclosure
Schedule, there are no options, warrants or other rights, agreements,
arrangements or commitments of any character to which RBMG is a party or by
which RBMG is bound, obligating RBMG or any RBMG Subsidiary to issue or sell any
shares of capital stock of, or other equity interests in, RBMG or any RBMG
Subsidiary. Between January 1, 1997 and the date of this Agreement, an aggregate
of 323,500 options have been awarded under the Omnibus Stock Award Plan and
23,528 shares of restricted stock have been issued under the Employment
Agreement with David W. Johnson, Jr. As of the date hereof, no shares of RBMG
Preferred Stock are issued and outstanding. All shares of RBMG Common Stock
subject to issuance as aforesaid, upon issuance prior to the Effective Time on
the terms and conditions specified in the instruments pursuant to which they are
issuable, will be duly authorized, validly issued, fully paid and nonassessable.
Except as set forth in Section 4.03 of the RBMG Disclosure Schedule, there are
no material outstanding contractual obligations of RBMG or any RBMG Subsidiary
to repurchase, redeem or otherwise acquire any shares of RBMG Common Stock or
any capital stock of any RBMG Subsidiary. Except as disclosed in Section 4.03 of
the RBMG Disclosure Schedule, each outstanding share of capital stock of each
RBMG Subsidiary is duly authorized, validly issued, fully paid and nonassessable
and each such share owned by RBMG or another RBMG Subsidiary is free and clear
of all security interests, liens, claims, pledges, options, rights of refusal,
agreements, limitations on RBMG's or such other RBMG Subsidiary's voting rights,
charges
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and other encumbrances of any nature whatsoever, except where the failure to own
such shares free and clear would not, individually or in the aggregate, have an
RBMG Material Adverse Effect. Except as set forth in Section 4.03 of the RBMG
Disclosure Schedule, there are no material outstanding contractual obligations
of RBMG or any RBMG Subsidiary to provide funds to, or make any material
investment (in the form of a loan, capital contribution or otherwise) in, any
RBMG Subsidiary or any other person.
SECTION 4.04. Authority Relative to this Agreement. RBMG has all necessary
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and thereunder and to consummate the Merger (other
than the approval of this Agreement and the Merger contemplated hereby and the
Amended Certificate of Incorporation by the holders of a majority of the
outstanding shares of RBMG Common Stock at the RBMG Stockholders' Meeting (the
"RBMG Stockholder Vote") and the filing and recordation of the Articles of
Merger as required by the SCBCA). The execution and delivery of this Agreement
by RBMG and the consummation by RBMG of the Merger contemplated hereby have been
duly and validly authorized by all necessary corporate action, and no other
corporate proceedings on the part of RBMG are necessary to authorize this
Agreement, or to consummate the Merger (other than the RBMG Stockholder Vote and
the filing and recordation of the Articles of Merger as required by SCBCA). The
board of directors of RBMG has approved the execution, delivery and performance
of this Agreement and the Merger and the other transactions provided for herein
in accordance with the Delaware General Corporation Law ("DGCL"). This Agreement
has been duly executed and delivered by RBMG and, assuming the due
authorization, execution and delivery by the other parties hereto, constitutes a
legal, valid and binding obligation of RBMG, enforceable against RBMG in
accordance with its terms.
SECTION 4.05. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by RBMG does not, and the performance
by RBMG of its obligations hereunder and the consummation of the Merger will
not, (i) conflict with or violate any provision of the Certificate of
Incorporation or Bylaws of RBMG or any equivalent organizational documents of
any RBMG Subsidiary, (ii) assuming that all consents, approvals, authorizations
and permits described in Section 4.05(b) have been obtained and all filings and
notifications described in Section 4.05(b) have been made, conflict with or
violate any Law applicable to RBMG or any RBMG Subsidiary or by which any
property or asset of RBMG or any RBMG Subsidiary is bound or affected or (iii)
except as set forth in Section 4.05(a) of the RBMG Disclosure Schedule, result
in any breach of or constitute a default (or an event which with the giving of
notice or lapse of time or both would become a default) under, or give to others
any right of termination, amendment, acceleration or cancellation of, or result
in the creation of a lien or other encumbrance on any property or asset of RBMG
or any RBMG Subsidiary pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation, except, with respect to clauses (ii) and (iii), for any such
conflicts, violations, breaches, defaults or other occurrences which would
neither, individually or in the aggregate, (A) have an RBMG Material Adverse
Effect nor (B) prevent or materially delay the performance by RBMG of its
obligations pursuant to this Agreement or the consummation of the Merger.
(b) The execution and delivery of this Agreement does not, and the
performance by RBMG of its obligations hereunder and thereunder and the
consummation of the Merger will not, require any consent, approval,
authorization or permit of, or filing by RBMG with or notification by RBMG to,
any Governmental Entity, except (i) for applicable requirements of the
Securities Exchange Act of 1934, as amended (together with the rules and
regulations promulgated thereunder, the "Exchange Act"), the Securities Act,
state securities or "blue sky" laws ("Blue Sky Laws"), the rules and regulations
of the NMS, state takeover laws, the premerger notification requirements of the
HSR Act, the filing of the Articles of Merger as required by the SCBCA and as
set forth in Section 4.05(b) of the RBMG Disclosure Schedule, and (ii) where
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not (A) prevent or materially delay
the performance by RBMG of its obligations pursuant to this Agreement or the
consummation of the Merger or (B) individually or in the aggregate, have an RBMG
Material Adverse Effect.
SECTION 4.06. Permits; Compliance with Laws. Each of RBMG and the RBMG
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, establishment registrations, permits, easements, variances,
exceptions, consents, certificates, approvals and orders of any Governmental
Entity, necessary for RBMG or any RBMG Subsidiary to own, lease and operate its
properties and to purchase, originate and sell
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conforming and non-conforming mortgage loans secured by residential properties
or otherwise to carry on its business as it is now being conducted (the "RBMG
Permits"), except where the failure to possess any RBMG Permits would not,
individually or in the aggregate, have an RBMG Material Adverse Effect, and, as
of the date of this Agreement, no suspension or cancellation of any of the RBMG
Permits is pending or, to the knowledge of RBMG, threatened. Neither RBMG nor
any RBMG Subsidiary is in conflict with, or in default or violation of, (i) any
Law applicable to RBMG or any RBMG Subsidiary or by which any property or asset
of RBMG or any RBMG Subsidiary is bound or affected or (ii) any RBMG Permits,
except in the case of clauses (i) and (ii) for any such conflicts, defaults or
violations that would not, individually or in the aggregate, have an RBMG
Material Adverse Effect.
SECTION 4.07. SEC Filings; Financial Statements. (a) RBMG has timely filed
all forms, reports and documents required to be filed by it with the Securities
and Exchange Commission ("SEC") since January 1, 1994 through the date of this
Agreement (collectively and as amended, the "RBMG Reports"). Each RBMG Report
(i) was prepared in all material respects in accordance with the requirements of
the Securities Act or the Exchange Act, as the case may be, and (ii) did not at
the time it was filed contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements made therein, in the light of the circumstances under which
they were made, not misleading. No RBMG Subsidiary is subject to the periodic
reporting requirements of the Exchange Act or required to file any form, report
or other document with the SEC, the NMS or any other stock exchange.
(b) Each of the consolidated financial statements (including, in each case,
any notes thereto) contained in the RBMG Reports and contained in Section 4.07
of the RBMG Disclosure Schedule were prepared in accordance with U.S. GAAP
applied on a consistent basis throughout the periods indicated (except as may be
indicated in the notes thereto) and each presented fairly, in all material
respects, the consolidated financial position of RBMG and the consolidated RBMG
Subsidiaries as at the respective dates thereof and for the respective periods
indicated therein, except as otherwise noted therein (subject, in the case of
unaudited statements, to normal and recurring year-end adjustments which were
not and are not expected, individually or in the aggregate, to have an RBMG
Material Adverse Effect).
(c) Except as and to the extent set forth or reserved against on the
consolidated balance sheet of RBMG and its Subsidiaries as reported in the RBMG
Reports, including the notes thereto, and in Section 4.07 of the RBMG Disclosure
Schedule, none of RBMG or any RBMG Subsidiary 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 notes thereto prepared in
accordance with U.S. GAAP, except for liabilities or obligations incurred in the
ordinary course of business since January 1, 1997 that would not, individually
or in the aggregate, have an RBMG Material Adverse Effect.
SECTION 4.08. Absence of Certain Changes or Events. (a) Since January 1,
1997, except as contemplated by or as disclosed in this Agreement, or as set
forth in Section 4.08 of the RBMG Disclosure Schedule or as disclosed in any
RBMG Report filed since January 1, 1997, RBMG and the RBMG Subsidiaries have
conducted their businesses only in the ordinary course and in a manner
consistent with past practice and, since such date, there has not been (i) any
RBMG Material Adverse Effect, (ii) any event that could reasonably be expected
to prevent or materially delay the performance of its obligations pursuant to
this Agreement and the consummation of the Merger by RBMG, (iii) any material
change by RBMG in its accounting methods, principles or practices, (iv) any
declaration, setting aside or payment of any dividend or distribution in respect
of the shares of RBMG Common Stock, except for dividends in amounts consistent
with past practice, or any redemption, purchase or other acquisition of any of
RBMG's securities or (v) except in the ordinary course of business consistent
with past practice, any material increase in the compensation or benefits 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 the compensation payable or to become
payable to any executive officers of RBMG or any RBMG Subsidiary.
(b) Except as set forth in Section 4.08 of the RBMG Disclosure Schedule,
and except as to events, developments or conditions that have not had and are
not reasonably likely to have an RBMG Material Adverse
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Effect, since January 1, 1997, there have not been with respect to RBMG (i) any
extraordinary losses suffered or any damage, destruction, loss or casualty to
property or assets of RBMG with an aggregate value of more than $200,000,
whether or not covered by insurance, (ii) any assets mortgaged, pledged or made
subject to any lien, charge or other encumbrance, (iii) any liability or
obligation (absolute, accrued or contingent) incurred except in the ordinary
course of business, (iv) any claims, liabilities or obligations (absolute,
accrued or contingent) paid, discharged or satisfied, other than the payment,
discharge or satisfaction in the ordinary course of business consistent with
past practice of claims, liabilities and obligations reflected or reserved
against in the financial statements in the RBMG Reports or incurred in the
ordinary course of business consistent with past practice since January 1, 1997,
(v) any guaranteed checks, notes or accounts receivable which have been written
off as uncollectible, except write-offs in the ordinary course of business
consistent with past practice, (vi) any write-down of the value of any asset or
investment on the books or records of RBMG, except for depreciation and
amortization taken in the ordinary course of business consistent with past
practice, (vii) any cancellation of any debts or waiver of any claims or rights
of substantial value, or sale, transfer or other disposition of any properties
or assets (real, personal or mixed, tangible or intangible) of substantial
value, except, in each such case, in transactions in the ordinary course of
business consistent with past practice and which in any event do not exceed
$50,000 in the aggregate, (viii) any single capital expenditure or commitment in
excess of $1,000,000 for additions to property or equipment or aggregate capital
expenditures and commitments in excess of $1,000,000 for additions to property
or equipment, (ix) any increase of any reserves for contingent liabilities
(excluding any adjustment to bad debt reserves in the ordinary course of
business consistent with past practice), (x) any transactions entered into other
than in the ordinary course of business, (xi) any agreements to do any of the
foregoing or (xii) any other events, developments or conditions of any character
that have had or are reasonably likely to have a material adverse effect on the
assets, liabilities, results of operations, financial conditions or business of
RBMG.
SECTION 4.09. Tax Matters. Neither RBMG nor, to the knowledge of RBMG, any
of its Subsidiaries has taken or agreed to take any action (other than actions
contemplated by this Agreement) that would prevent the Merger from constituting
a transaction qualifying under Section 368(a) of the Code. RBMG is not aware of
any agreement, plan or other circumstance that would prevent the Merger from so
qualifying under Section 368(a) of the Code.
SECTION 4.10. Opinion of Financial Advisor. Prudential Securities
Incorporated ("Prudential") has delivered to the board of directors of RBMG its
written opinion to the effect that, as of the date of this Agreement, the terms
of the Merger are fair from a financial point of view to RBMG and its
stockholders. Prudential has authorized the inclusion of its opinion in the
Proxy Statement and RBMG shall promptly, after the date of this Agreement,
deliver a signed copy of such opinion to RBC.
SECTION 4.11. Brokers. No broker, finder or investment banker (other than
Prudential) is entitled to any brokerage, finder's or other fee or commission in
connection with the Merger based upon arrangements made by or on behalf of RBMG.
RBMG has heretofore made available to RBC complete and correct copies of all
agreements between RBMG and Prudential pursuant to which such firm would be
entitled to any payment relating to the Merger.
SECTION 4.12. Disclosure. No representation or warranty by RBMG in this
Agreement and no statement contained in the RBMG Disclosure Schedule or any
certificate delivered by RBMG to RBC pursuant to this Agreement when taken
together as a whole contains any untrue statement of a material fact or omits
any material fact necessary to make the statements herein or therein not
misleading.
SECTION 4.13. Regulatory Approvals. RBMG is not aware of any reason why
the regulatory approvals required to be obtained by it to consummate the
transactions contemplated hereby would not be satisfied within the time frame
customary for transactions of the nature contemplated hereby.
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ARTICLE V
COVENANTS
SECTION 5.01. Conduct of Business by RBC Pending the Closing. RBC agrees
that, between the date of this Agreement and the Effective Time, except as set
forth in Section 5.01 of the RBC Disclosure Schedule or as expressly
contemplated by any other provision of this Agreement, unless RBMG shall
otherwise agree in writing, which agreement shall not be unreasonably withheld
or delayed, (x) the respective businesses of RBC and the RBC Subsidiaries shall
be conducted in all material respects only in, and RBC and the RBC Subsidiaries
shall not take any material action except in, the ordinary course of business
consistent with past practice and (y) RBC shall use its reasonable efforts to
keep available the services of such of the current officers, significant
employees and consultants of RBC and the RBC Subsidiaries and to preserve the
current relationships of RBC and the RBC Subsidiaries with such of the
customers, suppliers and other persons with which RBC and the RBC Subsidiaries
have significant business relations in order to preserve substantially intact
its business organization. By way of amplification and not limitation, except as
set forth in Section 5.01 of the RBC Disclosure Schedule or as expressly
contemplated by any other provision of this Agreement, neither RBC nor any RBC
Subsidiary shall, between the date of this Agreement and the Effective Time,
directly or indirectly, do, or agree to do, any of the following without the
prior written consent of RBMG, which consent shall not be unreasonably withheld
or delayed:
(a) amend or otherwise change its Articles of Incorporation or Bylaws
or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant, transfer, lease, license,
guarantee or encumber, or authorize the issuance, sale, pledge,
disposition, grant, transfer, lease, license or encumbrance of, (i) any
shares of capital stock of RBC or any RBC Subsidiary of any class, or
securities convertible into or exchangeable or exercisable for any shares
of such capital stock, or any options, warrants or other rights of any kind
to acquire any shares of such capital stock, or any other ownership
interest (including, without limitation, any phantom interest), of RBC or
any RBC Subsidiary; or (ii) any property or assets of RBC or any RBC
Subsidiary, except in the ordinary course of business and except any
property or assets of RBC or any RBC Subsidiary in an aggregate amount not
in excess of $1,000,000;
(c) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any interest in any
corporation, partnership, other business organization or person or any
division thereof or any assets, other than acquisitions of assets
(excluding the acquisition of a business or substantially all of the stock
or assets thereof) in the ordinary course of business consistent with past
practice, and any acquisitions for consideration, calculated as of the date
of execution of the definitive agreement for any such acquisition, that is
not, in the aggregate for all such acquisitions, in excess of $1,000,000;
(ii) incur any indebtedness for borrowed money or issue any debt securities
or assume, guarantee or endorse, or otherwise as an accommodation become
responsible for, the obligations of any person for borrowed money, except
for (A) indebtedness or obligations for borrowed money incurred in the
ordinary course of business and consistent with past practice or incurred
to refinance outstanding indebtedness for borrowed money existing on the
date of this Agreement, (B) other indebtedness for borrowed money with a
maturity of not more than one year in a principal amount not, in the
aggregate, in excess of $5,000,000 or (C) indebtedness for borrowed money
incurred to finance acquisitions permitted by clause (i) of this paragraph
(c); (iii) terminate, cancel or request any material change in, or agree to
any material change in, any RBC Material Contract or enter into any
contract or agreement material to the business, results of operations or
financial condition of RBC and the RBC Subsidiaries taken as a whole, in
either case other than in the ordinary course of business, consistent with
past practice; (iv) make or authorize any capital expenditure, other than
capital expenditures in the ordinary course of business consistent with
past practice that are not, in the aggregate, in excess of $5,000,000 for
RBC and the RBC Subsidiaries taken as a whole; or (v) enter into or amend
any contract, agreement, commitment or arrangement that, if fully
performed, would not be permitted under this Section 5.01(c);
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(d) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock, except that any wholly owned RBC Subsidiary
may pay dividends or make other distributions to RBC or any other wholly
owned RBC Subsidiary;
(e) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(f) increase the compensation payable or to become payable to its
officers or employees, except for increases in accordance with past
practices in salaries or wages of employees or officers of RBC or any RBC
Subsidiary, or grant any rights to severance or termination pay to, or
enter into any employment or severance agreement which provides benefits
upon a change in control of RBC or any RBC Subsidiary that would be
triggered by the Reorganization with, any director, officer or other
employee of RBC or any RBC Subsidiary, who is not currently entitled to
such benefits from the Reorganization, or establish, adopt, enter into or
amend any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any director, officer
or employee of RBC or any RBC Subsidiary;
(g) take any action with respect to accounting policies or procedures,
other than actions in the ordinary course of business and consistent with
past practices or as required by U.S. GAAP;
(h) make any tax election or settle or compromise any material
federal, state or local United States income tax liability, or any income
tax liability of any other jurisdiction, other than those made in the
ordinary course of business consistent with past practice and those for
which specific reserves have been recorded on the 1996 Balance Sheet and
only to the extent of such reserves; or
(i) authorize or enter into any formal or informal agreement or
otherwise make any commitment to do any of the foregoing.
SECTION 5.02 Conduct of Business by RBMG Pending the Closing. RBMG agrees
that, between the date of this Agreement and the Effective Time, except as set
forth in Section 5.02 of the RBMG Disclosure Schedule or as expressly
contemplated by any other provision of this Agreement, unless RBC shall
otherwise agree in writing, which agreement shall not be unreasonably withheld
or delayed, (x) the respective businesses of RBMG and the RBMG Subsidiaries
shall be conducted only in, and RBMG and the RBMG Subsidiaries shall not take
any action except in, the ordinary course of business consistent with past
practice and (y) RBMG shall use its reasonable efforts to keep available the
services of such of the current officers, significant employees and consultants
of RBMG and the RBMG Subsidiaries and to preserve the current relationships of
RBMG and the RBMG Subsidiaries with such of the customers, suppliers and other
persons with which RBMG or any RBMG Subsidiary has significant business
relations in order to preserve substantially intact its business organization.
By way of amplification and not limitation, except as set forth in Section 5.02
of the RBMG Disclosure Schedule or as expressly contemplated by any other
provision of this Agreement, neither RBMG nor any RBMG Subsidiary shall, between
the date of this Agreement and the Effective Time, directly or indirectly, do,
or agree to do, any of the following without the prior written consent of RBC,
which consent shall not be unreasonably withheld or delayed:
(a) amend or otherwise change its Certificate of Incorporation or
Bylaws or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant, transfer, lease, license,
guarantee or encumber, or authorize the issuance, sale, pledge,
disposition, grant, transfer, lease, license or encumbrance of, (i) any
shares of capital stock of RBMG or any RBMG Subsidiary of any class, or
securities convertible into or exchangeable or exercisable for any shares
of such capital stock, or any other options, warrants or other rights of
any kind to acquire any shares of such capital stock, or any other
ownership interest (including, without limitation, any phantom interest),
of RBMG or any RBMG Subsidiary (except for the issuance of (A) a maximum of
1,723,087 shares of RBMG Common Stock issuable pursuant to the options
outstanding on the date of this Agreement, (B) the issuance of shares of
RBMG Common Stock pursuant to the merger agreements described in Section
4.03 of the RBMG Disclosure Schedule, (C) the issuance of preferred stock
purchase
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rights pursuant to the rights agreement described in Section 4.03 of the
RBMG Disclosure Schedule, (D) the issuance of options to acquire RBMG
Common Stock and the issuance of shares pursuant thereto and (E) the
issuance of RBMG Common Stock pursuant to the Stock Investment Plan and the
Dividend Reinvestment and Stock Purchase Plan) or (ii) any property or
assets of RBMG or any RBMG Subsidiary, except in the ordinary course of
business and except any property or assets of RBMG or any RBMG Subsidiary
in an aggregate amount not in excess of $1,000,000;
(c) (i) acquire (including, without limitation, by merger,
consolidation or acquisition of stock or assets) any interest in any
corporation, partnership, other business organization or person or any
division thereof or any assets, other than acquisitions of assets
(excluding the acquisition of a business or substantially all of the stock
or assets thereof) in the ordinary course of business consistent with past
practice, and any acquisitions for consideration, calculated as of the date
of execution of the definitive agreement for any such acquisition, that is
not, in the aggregate for all such acquisitions, in excess of $1,000,000;
(ii) incur any indebtedness for borrowed money or issue any debt securities
or assume, guarantee or endorse, or otherwise as an accommodation become
responsible for, the obligations of any person for borrowed money, except
for (A) indebtedness or obligations for borrowed money incurred in the
ordinary course of business and consistent with past practice or incurred
to refinance outstanding indebtedness for borrowed money existing on the
date of this Agreement, (B) other indebtedness for borrowed money with a
maturity of not more than one year in a principal amount not, in the
aggregate, in excess of $5,000,000 or (C) indebtedness for borrowed money
incurred to finance acquisitions permitted by clause (i) of this paragraph
(c); (iii) terminate, cancel or request any material change in, or agree to
any material change in, any contract or agreement material to the business,
results of operations or financial condition of RBMG and the RBMG
Subsidiaries taken as a whole (a "RBMG Material Contract") or enter into
any contract or agreement which would be a RBMG Material Contract, in
either case, other than in the ordinary course of business, consistent with
past practice; (iv) make or authorize any capital expenditure, other than
capital expenditures in the ordinary course of business consistent with
past practice that are not, in the aggregate, in excess of $5,000,000 for
RBMG and the RBMG Subsidiaries taken as a whole; or (v) enter into or amend
any contract, agreement, commitment or arrangement that, if fully
performed, would not be permitted under this Section 5.01(c);
(d) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock, except (i) for any dividends not in excess of
$.03 per share of RBMG Common Stock for any calendar quarter and (ii) that
any RBMG Subsidiary may pay dividends or make other distributions to RBMG
or any other RBMG Subsidiary;
(e) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock; or
(f) increase the compensation payable or to become payable to its
officers or employees, except for increases in accordance with past
practices in salaries or wages of employees or officers of RBMG or any RBMG
Subsidiary, or grant any rights to severance or termination pay to, or
enter into any employment or severance agreement which provides benefits
upon a change in control of RBMG or any RBMG Subsidiary that would be
triggered by the Reorganization with, any director, officer or other
employee of RBMG or any RBMG Subsidiary, who is not currently entitled to
such benefits from the Reorganization, or establish, adopt, enter into or
amend any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any director, officer
or employee of RBMG or any RBMG Subsidiary;
(g) take any action with respect to accounting policies or procedures,
other than actions in the ordinary course of business and consistent with
past practices or as required by U.S. GAAP;
(h) make any tax election or settle or compromise any material
federal, state or local United States income tax liability, or any income
tax liability of any other jurisdiction, other than those made in the
ordinary course of business consistent with past practice and those for
which specific reserves have been recorded in the financial statements in
the RBMG Reports and only to the extent of such reserves; or
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(i) authorize or enter into any formal or informal agreement or
otherwise make any commitment to do any of the foregoing.
SECTION 5.03. Notices of Certain Events. Each of RBC and RBMG shall give
prompt notice to the other of (i) any notice or other communication from any
person alleging that the consent of such person is or may be required in
connection with the Merger; (ii) any notice or other communication from any
Governmental Entity in connection with the Merger; (iii) any actions, suits,
claims, investigations or proceedings commenced or, to its knowledge, threatened
against, relating to or involving or otherwise affecting RBC, RBMG, the RBC
Subsidiaries or the RBMG Subsidiaries that relate to the consummation of the
Merger; (iv) the occurrence of a default or event that, with the giving of
notice or lapse of time or both, will become a default under any RBC Material
Contract or any RBMG Material Contract; and (v) any change that is reasonably
likely to result in a RBC Material Adverse Effect or an RBMG Material Adverse
Effect or is reasonably likely to delay or impede the ability of any of RBC or
RBMG to perform its respective obligations pursuant to this Agreement and to
effect the consummation of the Merger.
SECTION 5.04. Access to Information; Confidentiality. (a) Except as
required pursuant to any confidentiality agreement or similar agreement or
arrangement to which RBC or RBMG or any of the RBC Subsidiaries or RBMG
Subsidiaries is a party or pursuant to applicable Law or the regulations or
requirements of any stock exchange or other regulatory organization with whose
rules a party hereto is required to comply, from the date of this Agreement to
the Effective Time, RBC and RBMG shall (and shall cause the RBC Subsidiaries and
the RBMG Subsidiaries, respectively, to): (i) provide to the other (and its
officers, directors, employees, accountants, consultants, legal counsel, agents
and other representatives (collectively, "Representatives")) access at
reasonable times upon prior notice to its and its Subsidiaries' officers,
employees, agents, properties, offices and other facilities and to the books and
records thereof and (ii) furnish promptly such information concerning its and
its Subsidiaries' business, properties, contracts, assets, liabilities and
personnel as the other party or its Representatives may reasonably request. No
investigation conducted pursuant to this Section 5.04 shall affect or be deemed
to modify any representation or warranty made in this Agreement.
(b) The parties hereto shall comply with, and shall cause their respective
Representatives to comply with, all of their respective obligations under the
Confidentiality Agreement dated February, 1997, (the "Confidentiality
Agreement") by and among RBC, RBMG and WSI with respect to the information
disclosed pursuant to this Section 5.04.
SECTION 5.05. No Solicitation of Transactions. (a) RBC shall not, directly
or indirectly, and shall instruct its officers, directors, employees,
subsidiaries, agents or advisors or other representatives (including, without
limitation, any investment banker, attorney or accountant retained by it) not
to, directly or indirectly, solicit, initiate or knowingly encourage (including
by way of furnishing non-public information), or take any other action knowingly
to facilitate, any inquiries or the making of any proposal or offer (including,
without limitation, any proposal or offer to its shareholders) that constitutes,
or may reasonably be expected to lead to, any Competing Transaction, or enter
into or maintain or continue discussions 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 the
officers, directors or employees of such party or any of its subsidiaries, or
any investment banker, financial advisor, attorney, accountant or other
representative retained by such party or any of such party's subsidiaries, to
take any such action. RBC shall promptly notify RBMG if any proposal or offer,
or any inquiry or contact with any person with respect thereto, regarding a
Competing Transaction is made.
(b) A "Competing Transaction" means any of the following involving RBC
(other than the Merger contemplated by this Agreement): (i) a merger,
consolidation, share exchange, business combination or other similar
transaction, (ii) any sale, lease, exchange, transfer or other disposition of 50
percent or more of the assets of such party and its subsidiaries taken as a
whole, or (iii) a tender offer or exchange offer for 50 percent or more of the
outstanding voting securities of such party.
SECTION 5.06. Letters of Accountants. Each of RBC and RBMG shall use all
reasonable efforts to cause to be delivered to the other a "comfort" letter of
Price Waterhouse, each such letter dated and delivered as of the date the
Registration Statement shall have become effective and as of the Effective Time,
and addressed to RBC
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and RBMG, respectively, in form reasonably satisfactory to the recipient thereof
and reasonably customary in scope and substance for letters delivered by
independent public accountants in connection with a merger such as is
contemplated by this Agreement.
SECTION 5.07. Plan of Reorganization. This Agreement is intended to
constitute a "plan of reorganization" within the meaning of Section 1.368-2(g)
of the income tax regulations promulgated under the Code. From and after the
date of this Agreement, each party hereto shall use all reasonable efforts to
cause the Merger to qualify, and shall not, without the prior written consent of
the other parties hereto, knowingly take any actions or cause any actions to be
taken which could prevent the Merger from qualifying as a reorganization under
the provisions of Section 368(a) of the Code. RBC agrees to use its reasonable
best efforts to acquire from each holder of five percent of its Common Stock the
stockholder tax certificate substantially in the form contained in Exhibit 5.07.
Such certificate shall form the basis of any opinion of counsel regarding the
tax treatment of the Merger. In the event that counsel is unable to issue its
opinion to the effect that the Merger will qualify as a reorganization under the
provisions of Section 368(a) of the Code as described in Sections 7.02(c)
hereof, then the parties hereto agree to negotiate in good faith to restructure
the Merger in order that such opinion can be issued. Following the Effective
Time, and consistent with any such consent, none of the Surviving Corporation,
RBC, RBMG, nor any of their affiliates shall knowingly take any action or
knowingly cause any action to be taken which would cause the Merger to fail to
qualify as a reorganization under Section 368(a) of the Code.
SECTION 5.08. Subsequent Financial Statements. Prior to the Effective Time
RBMG shall promptly deliver to RBC copies of each RBMG Report filed by RBMG with
the SEC. Prior to the Effective Time, RBC shall promptly deliver to RBMG copies
of all monthly financial reports prepared by RBC and copies of all other
financial and other information regarding RBC and its Subsidiaries reasonably
requested by RBMG.
SECTION 5.09. Control of Operations. Nothing contained in this Agreement
shall give RBC, directly or indirectly, the right to control or direct the
operations of RBMG or the RBMG Subsidiaries prior to the Effective Time. Nothing
contained in this Agreement shall give RBMG, directly or indirectly, the right
to control or direct the operations of RBC or the RBC Subsidiaries prior to the
Effective Time. Prior to the Effective Time, each of RBC and RBMG shall
exercise, consistent with the terms and conditions of this Agreement, complete
control and supervision over its respective operations.
SECTION 5.10. Further Action; Consents; Filings. Upon the terms and
subject to the conditions hereof, each of the parties hereto shall use all
reasonable efforts to (i) 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 or otherwise to consummate and make effective the Merger, (ii)
obtain from Governmental Entities any consents, licenses, permits, waivers,
approvals, authorizations or orders required to be obtained or made by RBC,
RBMG, or the Surviving Corporation or any of their subsidiaries in connection
with the authorization, execution and delivery of this Agreement and the
consummation of the Merger and (iii) make all necessary filings, and thereafter
make any other required or appropriate submissions, with respect to this
Agreement and the Merger required under (A) the rules and regulations of the
NMS, (B) the Securities Act, the Exchange Act and any other applicable federal
or state securities Laws, (C) the HSR Act and (D) any other applicable Law. The
parties hereto shall cooperate and consult with each other in connection with
the making of all such filings, including by providing copies of all such
documents to the non-filing parties and their advisors prior to filing. No party
shall consent to any voluntary extension of any statutory deadline or waiting
period or to any voluntary delay of the consummation of the Merger at the behest
of any Governmental Entity without the consent and agreement of the other
parties hereto, which consent shall not be unreasonably withheld or delayed.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Registration Statement; Joint Proxy Statement. (a) As
promptly as practicable after the execution of this Agreement, RBMG and RBC
shall jointly prepare and RBMG shall file with the SEC a document or documents
that will constitute (i) the prospectus forming part of the registration
statement on Form S-4 of RBMG (together with all amendments thereto, the
"Registration Statement"), in connection with the
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registration under the Securities Act of the RBMG Common Stock to be issued to
RBC's stockholders pursuant to the Merger and (ii) the Joint Proxy Statement
with respect to the Merger relating to the special meeting of each of RBMG's
stockholders (the "RBMG Stockholders' Meeting") and RBC's stockholders (the "RBC
Stockholders' Meeting" and together with the RBMG Stockholders' Meeting, the
"Stockholders' Meetings"), to be held to consider approval of this Agreement and
the Merger contemplated hereby (such document, together with any amendments
thereto, the "Joint Proxy Statement"). Copies of the Joint Proxy Statement shall
be provided to the NMS in accordance with the rules of such market. Each of the
parties hereto shall use all reasonable efforts to cause the Registration
Statement to become effective as promptly as practicable, and, prior to the
effective date of the Registration Statement, the parties hereto shall take all
action required under any applicable Laws in connection with the issuance of
shares of RBMG Common Stock pursuant to the Merger. RBC and RBMG, as the case
may be, shall furnish all information concerning RBC and RBMG as the other party
may reasonably request in connection with such actions and the preparation of
the Registration Statement and Joint Proxy Statement. As promptly as practicable
after the effective date of the Registration Statement, the Joint Proxy
Statement shall be mailed to the stockholders of RBMG and RBC. Each of the
parties hereto shall cause the Joint Proxy Statement to comply as to form and
substance in all material respects with the applicable requirements of (i) the
Exchange Act and (ii) the Securities Act.
(b) (i) The Joint Proxy Statement shall include the approval of the Merger
and recommendation of the Special Committee and of the Board of Directors of
RBMG to RBMG's stockholders that they vote in favor of approval of this
Agreement and the Merger contemplated hereby. In addition, the Joint Proxy
Statement shall include the opinion of Prudential referred to in Section 4.10.
(ii) The Joint Proxy Statement shall include the approval of the Merger and
recommendation of the Board of Directors of RBC to RBC's stockholders that they
vote in favor of approval of this Agreement and the Merger contemplated hereby.
In addition, the Joint Proxy Statement shall include the opinion of Montgomery
referred to in Section 3.17.
(c) No amendments or supplement to the Joint Proxy Statement or the
Registration Statement shall be made without the approval of RBMG and RBC, which
approval shall not be unreasonably withheld or delayed. Each of the parties
hereto shall advise the other parties hereto, promptly after it receives notice
thereof, of the time when the Registration Statement has become effective or any
supplement or amendment has been filed, of the issuance of any stop order, of
the suspension of the qualification of the RBMG Common Stock issuable in
connection with the Merger for offering or sale in any jurisdiction, or of any
request by the SEC or the NMS for amendment of the Joint Proxy Statement or the
Registration Statement or comments thereon and responses thereto or requests by
the SEC for additional information.
(d) The information supplied by RBC for inclusion in the Registration
Statement and the Joint Proxy Statement shall not, at (i) the time the
Registration Statement is filed with the SEC, (ii) if different, the time the
Registration Statement is declared effective, (iii) the time the Joint Proxy
Statement (or any amendment thereof or supplement thereto) is first mailed to
the stockholders of RBMG and RBC, (iv) the time of the RBMG Stockholders'
Meeting, (v) the time of the RBC Stockholders' Meeting, and (vi) the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. If at any time prior to the Effective Time, any event or
circumstances relating to RBC or any RBC Subsidiary, or their respective
officers or directors, should be discovered by RBC that as a result of which it
is necessary to amend or supplement the Registration Statement or Joint Proxy
Statement in order that the Registration Statement or Joint Proxy Statement will
not include any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein not misleading in light
of the circumstances under which they were made, RBC shall promptly inform RBMG.
(e) The information supplied by RBMG for inclusion in the Registration
Statement and Joint Proxy Statement shall not, at (i) the time the Registration
Statement is filed with the SEC, (ii) if different, the time the Registration
Statement is declared effective, (iii) the time the Joint Proxy Statement (or
any amendment thereof or supplement thereto) is first mailed to the stockholders
of RBMG and RBC, (iv) the time of the RBMG Stockholders' Meeting, (v) the time
of the RBC Stockholders' Meeting, and (vi) the Effective Time, contain any
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untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. If, at
any time prior to the Effective Time, any event or circumstances relating to
RBMG or any RBMG Subsidiary, or their respective officers or directors, should
be discovered by RBMG that as a result of which it is necessary to amend or
supplement the Registration Statement or Joint Proxy Statement in order that the
Registration Statement or Joint Proxy Statement will not include any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein not misleading in light of the circumstances
under which they were made, RBMG shall promptly inform RBC. All documents that
RBMG is responsible for filing with the SEC in connection with the Merger will
comply as to form in all material respects with the applicable requirements of
the Securities Act and the Exchange Act.
SECTION 6.02. Stockholders' Meeting. RBMG shall call and hold the RBMG
Stockholders' Meeting as promptly as practicable for the purpose of voting upon
the approval of this Agreement and the Merger contemplated hereby and the
Amended Certificate of Incorporation. RBC shall call and hold the RBC
Stockholders' Meeting as promptly as practicable for the purpose of voting upon
the approval of this Agreement and the Merger contemplated hereby, and each of
RBMG and RBC shall use its reasonable efforts to hold the Stockholders' Meetings
on the same day and as soon as practicable after the date on which the
Registration Statement becomes effective. RBMG shall use its reasonable efforts
to solicit from its stockholders proxies in favor of the approval of this
Agreement and the Merger contemplated hereby and the Amended Certificate of
Incorporation pursuant to the Joint Proxy Statement, and shall take all other
action necessary or advisable to secure the vote or consent of stockholders
required by the DGCL or applicable NMS requirements to obtain such approval. RBC
shall use its reasonable efforts to solicit from its stockholders proxies in
favor of the approval of this Agreement and the Merger contemplated hereby
pursuant to the Joint Proxy Statement, and shall take all other action necessary
or advisable to secure the vote or consent of stockholders required by the SCBCA
to obtain such approval. Each of the parties hereto shall take all other
reasonable action necessary or advisable to promptly and expeditiously secure
any vote or consent of stockholders required by applicable Law and RBMG's and
RBC's Certificate or Articles of Incorporation and Bylaws to effect the Merger.
SECTION 6.03. Employee Benefits Matters. (a) Except as otherwise provided
herein, each of the RBC Benefit Plans and the RBMG Benefit Plans in effect as of
the Effective Time shall be maintained in effect with respect to the employees
or former employees of RBC and the RBC Subsidiaries and of RBMG and the RBMG
Subsidiaries, respectively, who are covered by such benefit plans immediately
prior to the Closing Date until RBMG otherwise determines after the Effective
Time; provided, however, that nothing contained herein shall limit any reserved
right in any such RBC Benefit Plan or RBMG Benefit Plan, as the case may be, to
amend, modify, suspend, revoke or terminate any such plan. "RBMG Benefit Plans"
means employee benefit plans, programs, arrangements and contracts (including,
without limitation, any "employee benefit plan", as defined in Section 3(3) of
ERISA) maintained or contributed to by RBMG or any RBMG Subsidiary, or with
respect to which RBC or any RBC Subsidiary could incur liability under Section
4069, 4212(c) or 4204 of ERISA.
(b) Prior to the Effective Time, RBMG shall develop short and long-term
incentive compensation arrangements for RBMG which are to be implemented after
the Effective Time and make appropriate adjustments, if any, to the performance
goals, target awards and any other relevant criteria under the incentive
compensation plans of RBC and RBMG that are in effect as of the Effective Time
to take the Reorganization into account. In addition, RBMG shall conduct a
review of RBC's and RBMG's respective benefit plans following the execution of
this Agreement in order to coordinate the provision of benefits after the
Effective Time and to eliminate duplicate benefits, including, without
limitation, through the establishment by RBMG of replacement benefit plans (the
"RBMG Replacement Plans"). Each participant in any RBC Benefit Plan or RBMG
Benefit Plan that is replaced by a RBMG Replacement Plan shall receive credit
for purposes of eligibility to participate, vesting, benefit accrual and
eligibility to receive benefits under any RBMG Replacement Plan for service
credited for the corresponding purpose under such benefit plan; provided,
however, that such crediting of service shall not operate to duplicate any
benefit to any such participant of the funding of any such benefit.
(c) With respect to any RBC Benefit Plan or RBMG Benefit Plan under which
the delivery of RBC Voting Common Stock, RBC Non-voting Common Stock or RBMG
Common Stock, as the case may be, is required upon payment of benefits, grant of
awards or exercise of options (the "Stock Plans"), RBMG shall take all
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corporate action necessary or appropriate to (i) obtain stockholder approval
with respect to such plan to the extent such approval is required for purposes
of the Code or other applicable Law, or to enable such plan to comply with Rule
16b-3 promulgated under the Exchange Act, (ii) reserve for issuance under such
plan or otherwise provide a sufficient number of shares of RBMG Common Stock for
delivery upon payment of benefits, grant of awards or exercise of options under
such plan and (iii) as soon as practicable after the Effective Time, file
registration statements on Form S-3 or Form S-8, as appropriate (or any
successor or other appropriate forms), with respect to the shares of RBMG Common
Stock subject to such plan to the extent such registration statement is required
under applicable law, and RBMG shall use its reasonable efforts to maintain the
effectiveness of such registration statements (and maintain the current status
of the prospectuses contained therein) for so long as such benefits and grants
remain payable and such options remain outstanding. With respect to those
individuals who subsequent to the Merger will be subject to the reporting
requirements under Section 16(a) of the Exchange Act, RBMG shall administer the
Stock Plans, where applicable, in a manner that complies with Rule 16b-3
promulgated under the Exchange Act.
(d) Without limiting the applicability of the foregoing, each of the
parties hereto shall take all actions as are necessary to ensure that RBC shall
not be, at the Effective Time, bound by any options, stock appreciation rights,
warrants or other rights or agreements which would entitle any person, other
than RBMG, to own any capital stock of the Surviving Corporation or to receive
any payment in respect thereof, and all RBC Benefit Plans conferring any rights
with respect to Shares or other capital stock of RBC shall be deemed hereby to
be amended to be in conformity with this Section 6.03.
SECTION 6.04. Directors' and Officers' Indemnification and Insurance. (a)
The Articles of Incorporation of RBC and the Certificate of Incorporation of
RBMG and the Bylaws of RBC and RBMG, as the case may be, shall contain the
indemnification provisions that are set forth, as of the date of this Agreement,
in the Articles of Incorporation of RBC, the Certificate of Incorporation of
RBMG and the Bylaws of RBC and RBMG, as the case may be, which provisions shall
not be amended, repealed or otherwise modified for a period of six years from
the Effective Time in any manner that would affect adversely the rights
thereunder of individuals who at or at any time prior to the Effective Time were
directors, officers, employees, fiduciaries or agents of RBC or RBMG,
respectively.
(b) This Section 6.04 is intended to be for the benefit of, and shall be
enforceable by, the indemnified parties, their heirs and personal
representatives and shall be binding on RBC and RBMG and their respective
successors and assigns.
(c) Notwithstanding anything to the contrary contained herein, RBMG and the
Surviving Corporation shall, and RBMG shall cause the Surviving Corporation to,
assume and perform all obligations of RBC arising under any indemnification
agreement entered into prior to the date hereof between RBC and certain officers
and directors of RBC.
(d) From and after the Effective Time, RBMG agrees that it shall indemnify
and hold harmless each present and former director and officer of RBC and RBMG
determined as of the Effective Time (the "Indemnified Parties"), against any
costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages or liabilities (collectively, "Costs") incurred in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of or pertaining
to matters existing or occurring at or prior to the Effective Time, whether
asserted or claimed prior to, at or after the Effective Time, to the fullest
extent that RBMG would have been permitted under Delaware law and RBC would have
been permitted under South Carolina law, and their respective charter documents
(each as in effect on the date hereof) to indemnify such Indemnified Parties
(and RBMG shall also advance expenses as incurred to the fullest extent
permitted under applicable Law; provided, however, that the Indemnified Party to
whom expenses are advanced provides an undertaking to repay such advances if it
is ultimately determined pursuant to a final, non-appealable judgment by a court
of competent jurisdiction that such Indemnified Party is not entitled to
indemnification).
(e) To the extent paragraph (d) shall not serve to indemnify and hold
harmless any Indemnified Party, for a period of six years after the date hereof,
RBMG shall, subject to the terms set forth herein, indemnify and hold harmless,
to the fullest extent permitted under applicable Law (and RBMG shall also
advance expenses as
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incurred to the fullest extent permitted under applicable Law; provided,
however, that the Indemnified Party to whom expenses are advanced provides an
undertaking to repay such advances if it is ultimately determined that such
Indemnified Party is not entitled to indemnification), each Indemnified Party
against any Cost incurred in connection with any claim, action, suit, proceeding
or investigation, whether civil, criminal, administrative or investigative,
arising out of or pertaining to the transactions contemplated by this Agreement;
provided, further, however, that RBMG shall not be required to indemnify any
Indemnified Party pursuant hereto if it shall be determined that the Indemnified
Party acted in bad faith and not in a manner such Indemnified Party believed to
be in or not opposed to the best interests of RBC or RBMG, as the case may be.
(f) Any Indemnified Party wishing to claim indemnification under paragraphs
(d) or (e) of this Section 6.04, upon learning of any such claim, action, suit,
proceeding or investigation, shall promptly notify RBMG thereof, but the failure
to so notify shall not relieve RBMG of any liability it may have to such
Indemnified Party except to the extent that such failure materially prejudices
RBMG. In the event of any such claim, action, suit, proceeding or investigation
(whether arising before or after the Effective Time), (i) RBMG shall have the
right to assume the defense thereof and RBMG shall not be liable to such
Indemnified Parties for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Parties in connection with
the defense thereof, except that if RBMG elects not to assume such defense or
counsel for the Indemnified Parties advises that there are issues which raise
conflicts of interest between RBMG and the Indemnified Parties, the Indemnified
Parties may retain counsel satisfactory to them, and RBMG shall pay all
reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; provided, however, that RBMG shall
be obligated pursuant to this paragraph (f) to pay for only one firm of counsel
for all Indemnified Parties in any jurisdiction unless the use of one counsel
for such Indemnified Parties would present such counsel with a conflict of
interest, (ii) the Indemnified Parties shall cooperate in the defense of any
such matter and (iii) RBMG shall not be liable for any settlement effected
without its prior written consent; and provided further, however, that RBMG
shall not have any obligation hereunder to any Indemnified Party when and if a
court of competent jurisdiction shall ultimately determine, and such
determination shall have become final, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
Law. Notwithstanding the foregoing, if such indemnity is not available with
respect to any Indemnified Party, then RBMG and the Indemnified Party shall
contribute to the amount payable in such proportion as is appropriate to reflect
relative faults and benefits.
(g) If RBMG or any of its successors or assigns (i) shall consolidate with
or merge into any other corporation or entity and shall not be the continuing or
surviving corporation or entity in such consolidation or merger or (ii) shall
transfer all or substantially all of its properties and assets to any
individual, corporation or other entity, then and in each such case, proper
provisions shall be made so that the successors and assigns of RBMG shall assume
all of the obligations set forth in this Section 6.04.
SECTION 6.05. No Shelf Registration. RBMG shall not be required to amend
or maintain the effectiveness of the Registration Statement for the purpose of
permitting resale of the shares of RBMG Common Stock received pursuant hereto by
the persons who may be deemed to be "affiliates" of RBC or RBMG within the
meaning of Rule 145 promulgated under the Securities Act.
SECTION 6.06. Public Announcements. The initial press release concerning
the Reorganization shall be a joint press release and, thereafter, RBC and RBMG
shall consult with each other before issuing any press release or otherwise
making any public statements with respect to this Agreement or the
Reorganization and shall not issue any such press release or make any such
public statement without the prior written approval of the other parties hereto,
except to the extent that RBMG may be required by applicable Law or the
requirements of the NMS, in which case RBMG shall use its reasonable efforts to
consult with RBC before issuing any such release or making any such public
statement.
SECTION 6.07. NMS Additional Listing. Each of the parties hereto shall use
its reasonable efforts to obtain, prior to the Effective Time, the approval for
additional listing on the NMS, effective upon the official notice of issuance,
of the shares of RBMG Common Stock into which the Shares will be converted
pursuant to Article II hereof.
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SECTION 6.08. Blue Sky. Each of the parties hereto shall use all
reasonable efforts to obtain prior to the Effective Time all necessary blue sky
permits and approvals required under Blue Sky Laws to permit the distribution of
the shares of RBMG Common Stock to be issued in accordance with the provisions
of this Agreement.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01. Conditions to the Obligations of Each Party to Consummate the
Merger. The obligations of the parties hereto to consummate the Merger, or to
permit the consummation of the Merger, are subject to the satisfaction or, if
permitted by applicable Law, waiver of the following conditions:
(a) the Registration Statement shall have been declared effective by
the SEC under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued by the
SEC and no proceeding for that purpose shall have been initiated by the SEC
and not concluded or withdrawn;
(b) each of this Agreement and the Merger and the Amended Certificate
of Incorporation of RBMG shall have been duly approved by the requisite
vote of stockholders of RBMG, in accordance with the DGCL and the NMS;
(c) each of the Agreement and the Merger shall have been duly approved
by the requisite vote of the stockholders of RBC, in accordance with the
SCBCA;
(d) no court of competent jurisdiction shall have issued or entered
any order, writ, injunction or decree, and no other Governmental Entity
shall have issued any order, which is then in effect and has the effect of
making the Merger illegal or otherwise prohibiting its consummation;
(e) any waiting period (and any extension thereof) applicable to the
consummation of the Reorganization under the HSR Act or any other
applicable competition, merger control or similar Law shall have expired or
been terminated;
(f) all consents, approvals and authorizations legally required to be
obtained to consummate the Reorganization shall have been obtained from all
Governmental Entities, except where the failure to obtain any such consent,
approval or authorization would not result in a change in or have an effect
on the business of RBC or RBMG that is, or is reasonably likely to be,
materially adverse to the business, assets (including intangible assets),
liabilities (contingent or otherwise), condition (financial or otherwise)
or results of operations of RBMG and its respective subsidiaries, taken as
a whole;
(g) all permits or approvals required by state securities or Blue Sky
Laws to carry out the transactions contemplated hereby shall have been
received; and
(h) the shares of RBMG Common Stock into which the Shares will be
converted pursuant to Article II hereof shall have been authorized for
listing on the NMS, subject to official notice of issuance.
SECTION 7.02. Conditions to the Obligations of RBC. The obligations of RBC
to consummate the Merger, or to permit the consummation of the Merger, are
subject to the satisfaction or, if permitted by applicable Law, waiver of the
following further conditions:
(a) each of the representations and warranties of RBMG contained in
this Agreement that is qualified by materiality shall be true and correct
on and as of the Effective Time as if made at and as of the Effective Time
(other than representations and warranties which address matters only as of
a certain date which shall be true and correct as of such certain date) and
each of the representations and warranties that is not so qualified shall
be true and correct in all material respects on and as of the Effective
Time as if made at and as of the Effective Time (other than representations
and warranties which address matters only as of a certain date which shall
be true and correct in all material respects as of such certain date), in
each case except as
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contemplated or permitted by this Agreement, and RBC shall have received a
certificate of the Chairman or President and Chief Financial Officer of
RBMG to such effect;
(b) RBMG shall have performed or complied in all material respects
with all material agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Effective Time and RBC
shall have received a certificate of the Chairman or President and Chief
Financial Officer of RBMG to that effect;
(c) McNair Law Firm, P.A. or King & Spalding shall have issued its
opinions, such opinions dated on or about the Effective Time and on or
about the date that is two business days prior to the date the Proxy
Statement is first mailed to stockholders of RBMG, addressed to RBC, and
reasonably satisfactory to it, based upon customary representations of RBC
and RBMG and customary assumptions, to the effect that the Merger will be
treated for federal income tax purposes as a reorganization qualifying
under the provisions of Section 368(a) of the Code and that the
stockholders of RBC will recognize no gain or loss upon the receipt of
shares of RBMG Common Stock in exchange for shares of RBC Voting Common
Stock or RBC Non-voting Common Stock in the Merger, which opinions shall
not have been withdrawn or modified in any material respect;
SECTION 7.03. Conditions to the Obligations of RBMG. The obligations of
RBMG to consummate the Merger, or to permit the consummation of the Merger, are
subject to the satisfaction or, if permitted by applicable Law, waiver of the
following further condition: since January 1, 1997, there shall not have
occurred an RBC Material Adverse Effect or, since the date of this Agreement, an
inaccuracy of the representation and warranties of RBC or the failure of RBC to
comply with or perform its agreements and covenants required by this Agreement,
in either case, which results in an RBC Material Adverse Effect, other than an
RBC Material Adverse Effect which may be compensated by adjusting the Exchange
Ratio (and which adjustment is agreed to by the Parties).
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, notwithstanding any
requisite adoption and approval of this Agreement, as follows:
(a) by mutual written consent duly authorized by the Board of
Directors of RBC and RBMG;
(b) by RBC or RBMG, if the Effective Time shall not have occurred on
or before November 1, 1997; provided, however, that the right to terminate
this Agreement under this Section 8.01(b) shall not be available to any
party whose failure to fulfill any obligation under this Agreement shall
have caused, or resulted in, the failure of the Effective Time to occur on
or before such date; provided, further, however, that, if any action is
required to be taken pursuant to Section 5.07 in order to cure any problem
which is curable which caused the Merger to fail to qualify as a
reorganization under the provisions of Section 368(a) of the Code, and such
failure was the sole reason that the Merger could not be consummated on or
prior to November 1, 1997, this Agreement may not be terminated pursuant to
this clause (b) unless the Effective Time shall not have occurred on or
before December 1, 1997;
(c) by RBC or RBMG, if any Governmental Order, writ, injunction or
decree preventing the consummation of any of the Merger shall have been
entered by any court of competent jurisdiction and shall have become final
and nonappealable; or
(d) by RBC or RBMG, (i) if this Agreement and the Merger shall fail to
receive the requisite votes for approval at the RBMG Stockholders' Meeting
or any adjournment or postponement thereof or (ii) if this Agreement and
the Merger shall fail to receive the requisite votes for approval at the
RBC Stockholders' Meeting or any adjournment or postponement thereof.
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SECTION 8.02. Effect of Termination. Except as provided in Section 9.01,
in the event of termination of this Agreement pursuant to Section 8.01, this
Agreement shall forthwith become void, there shall be no liability under this
Agreement on the part of any of RBC or RBMG or any of their respective officers
or directors, and all rights and obligations of each party hereto shall cease,
subject to the remedies of the parties hereto set forth in Section 8.05;
provided, however, that nothing herein shall relieve any party hereto from
liability for the willful or intentional breach of any of its representations
and warranties or the willful or intentional breach of any of its covenants or
agreements set forth in 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 Board of Directors at
any time prior to the Effective Time; provided, however, that no amendment may
be made (except such amendments that have received the requisite stockholder
approval and such amendments as are permitted to be made without RBC stockholder
approval under the SCBCA or RBMG stockholder approval under the DGCL) that would
(i) reduce the amount or change the type of consideration into which each share
of RBC Voting Common Stock and each share of RBC Non-voting Common Stock shall
be converted upon consummation of the Merger, (ii) change any terms of this
Agreement in a manner that would materially and adversely affect RBC or RBMG, as
the case may be, or RBC's stockholders or RBMG's stockholders, as the case may
be, or (iii) change any term of the Articles of Incorporation of RBC or the
Certificate of Incorporation of RBMG. 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 or waive compliance with the performance of
any obligation or other act of any other party hereto or (b) waive any
inaccuracy in the representations and warranties contained herein or in any
document delivered pursuant hereto. 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.
SECTION 8.05. Fees and Expenses. Except as set forth in this Section 8.05,
all Expenses incurred in connection with this Agreement and the Merger shall be
paid by the party incurring such Expenses, whether or not the Merger is
consummated; provided, however, that all Expenses related to (i) regulatory
filing fees pursuant to the HSR Act and (ii) printing, filing and mailing the
Registration Statement and the Joint Proxy Statement and all SEC and other
regulatory filing fees incurred in connection with the Registration Statement
and the Joint Proxy Statement shall be borne equally by RBC and RBMG.
"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 a party
hereto and its affiliates) and regulatory filing fees incurred by a party or on
its behalf in connection with or related to the authorization, preparation,
negotiation, execution and performance of its obligations pursuant to this
Agreement and the consummation of the Merger.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Non-Survival of Representations and Warranties. The
representations and warranties in this Agreement shall terminate at the
Effective Time or upon the termination of this Agreement pursuant to Section
8.01, as the case may be. Each party agrees that, except for the representations
and warranties contained in this Agreement, including the RBC Disclosure
Schedule and the RBMG Disclosure Schedule, no party hereto has made any other
representation and warranties, and each party hereby disclaims any other
representations and warranties made by itself or any of its officers, directors,
employees, agents, financial and legal advisors or other representatives, with
respect to the execution and delivery of this Agreement or the Merger
contemplated herein, notwithstanding the delivery or disclosure to any other
party or any party's representatives of any documentation or other information
with respect to any one or more of the foregoing.
SECTION 9.02. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by telecopy
or facsimile, by registered or certified mail (postage prepaid, return receipt
requested) or by a
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nationally recognized courier service to the respective parties at the following
addresses (or at such other address for a party as shall be specified in a
notice given in accordance with this Section 9.02):
(a) if to RBC:
Resource Bancshares Corporation
1901 Main Street, Suite 650
Columbia, South Carolina 29201
Attention: Melissa A. Ard
Telecopier: (803) 254-3430
with a copy to:
McNair Law Firm, P.A.
1301 Gervais Street, 17th Floor
Columbia, South Carolina 29201
Attention: John W. Currie
Telecopier: (803) 376-2277
(b) if to RBMG or Merger Sub:
Resource Bancshares Mortgage Group, Inc.
7909 Parklane Road
Columbia, South Carolina 29223
Attention: David W. Johnson, Jr.
Telecopier: (803) 741-3708
with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Attention: Russell B. Richards, Esq.
Telecopier: (404) 572-5100
SECTION 9.03. Certain Definitions. For purposes of this Agreement, the
following terms have the following meanings:
(a) "affiliate" has the meaning specified in Rule 144 promulgated by
the SEC under the Securities Act;
(b) "Beneficial Owner" with respect to any shares of capital stock
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 (as
such term is defined in Rule 12b-2 promulgated under the Exchange Act)
beneficially owns, directly or indirectly, (ii) which such person or any of
its affiliates or associates 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, warrants or options, or otherwise, or (B) the right to vote
pursuant to any agreement, arrangement or understanding, or (iii) which are
beneficially owned, directly or indirectly, by any other persons with whom
such person or any of its affiliates or associates or person with whom such
person or any of its affiliates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of
any shares of capital stock;
(c) "Business Day" means any day in which the principal offices of the
SEC in Washington, D.C. are open to accept filings; in the case of
determining a date when any payment is due, any day on which banks are not
required or authorized by law or executive order to close in the City of
New York, USA;
(d) "$" means United States Dollars;
(e) "Governmental Order" means any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any
Governmental Entity;
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(f) "Knowledge" means, with respect to any matter in question, that
the executive officers of RBC or RBMG, as the case may be, (i) have actual
knowledge of such matter or (ii) after due investigation, should have known
of such matter;
(g) "Lease" means each lease of Leased Real Property, wherein RBC is
the tenant (including all amendments, consents for alterations and
documents regarding variations and evidence of commencement dates and
expiration dates);
(h) "Leased Real Property" means the real property leased by RBC, as
tenant, together with, to the extent leased by RBC, all buildings and other
structures, facilities or improvements currently or hereafter located
thereon, all fixtures and improvements thereon, and all easements,
licenses, rights and appurtenances relating to the foregoing;
(i) "Permitted Encumbrances" means (a) liens for Taxes and assessments
not yet payable, and (b) imperfections of title, liens, security interests
and other encumbrances the existence of which, individually and in the
aggregate, do not have a RBC Material Adverse Effect;
(j) "Person" means an individual, corporation, partnership, limited
partnership, limited liability company, syndicate, person (including,
without limitation, a "person" as defined in Section 13(d)(3) of the
Exchange Act), trust, association, entity or government or political
subdivision, agency or instrumentality of a government; and
(k) "Subsidiary" or "Subsidiaries" of any person means any
corporation, limited liability company, partnership, joint venture or other
legal entity of which such person (either alone or through or together with
any other subsidiary of such person) owns, directly or indirectly, more
than 50 percent of the stock or other equity interests, the holders of
which are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal
entity.
SECTION 9.04. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced, 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
Reorganization is not affected in any manner materially 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 paries as
closely as possible in a mutually acceptable manner to the fullest extent
permitted by applicable Law in order that the Merger may be consummated as
originally contemplated to the fullest extent possible.
SECTION 9.05. Assignment; Binding Effect; Benefit. Neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto (whether by operation of Law or otherwise) without the
prior written consent of the other parties hereto. Subject to the preceding
sentence, this Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors, heirs and executors and
permitted assigns. Notwithstanding anything contained in this Agreement to the
contrary, other than Section 6.04, nothing in this Agreement, expressed or
implied, is intended to confer on any person other than the parties hereto or
their respective successors, heirs and executors and permitted assigns any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
SECTION 9.06. Incorporation of Exhibits. The RBC Disclosure Schedule, the
RBMG Disclosure Schedule and all Exhibits attached hereto and referred to herein
are hereby incorporated herein and made a part of this Agreement for all
purposes as if fully set forth herein.
SECTION 9.07. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement were
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
SECTION 9.08. Governing Law. Except to the extent that the Laws of the
jurisdiction of organization of any party hereto, or any other jurisdiction, are
mandatorily applicable to the Merger or to matters arising under or in
connection with this Agreement, this Agreement shall be governed by the Laws of
the State of South Carolina.
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SECTION 9.09. Consent to Jurisdiction; Venue. (a) Each of the parties
hereto irrevocably submits to the exclusive jurisdiction of the state courts of
South Carolina and to the jurisdiction of the United States District Court for
the District of South Carolina, for the purpose of any action or proceeding
arising out of or relating to this Agreement and each of the parties hereto
irrevocably agrees that all claims in respect to such action or proceeding may
be heard and determined exclusively in any South Carolina state or federal court
sitting in the City of Columbia. Each of the parties hereto agrees that a final
judgment in any action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
Law.
(b) Each of the parties hereto irrevocably consents to the service of any
summons and complaints and any other process in any other action or proceeding
relating to the Merger, on behalf of itself or its property, by the personal
delivery of copies of such process to such party. Nothing in this Section 9.09
shall affect the right of any party hereto to serve legal process in any other
manner permitted by Law.
SECTION 9.10. Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 9.11. Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
and delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
SECTION 9.12. Entire Agreement. This Agreement (including the Exhibits,
the RBC Disclosure Schedule, the RBMG Disclosure Schedule and the
Confidentiality Agreement) constitutes the entire agreement among the parties
with respect to the subject matter hereof and supersedes all prior agreements
and understandings among the parties with respect thereto. No addition to or
modification of any provision of this Agreement shall be binding upon any party
hereto unless made in writing and signed by all parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
RESOURCE BANCSHARES CORPORATION
By: /s/ EDWARD J. SEBASTIAN
------------------------------------
Name: Edward J. Sebastian
Title: Chairman of the Board and
Chief Executive Officer
RESOURCE BANCSHARES MORTGAGE
GROUP, INC.
By: /s/ DAVID W. JOHNSON, JR.
------------------------------------
Name: David W. Johnson, Jr.
Title: Vice Chairman of the Board
and Managing Director
RBC MERGER SUB, INC.
By: /s/ EDWARD J. SEBASTIAN
------------------------------------
Name: Edward J. Sebastian
Title: President
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ANNEX B
AGREEMENT OF MERGER
AGREEMENT OF MERGER, dated as of April 18, 1997 (this "Agreement"), among
RESOURCE BANCSHARES MORTGAGE GROUP, INC., a Delaware corporation ("RBMG"),
CAROLINA MERGER SUB, INC., a Delaware corporation and a wholly owned subsidiary
of RBMG ("Merger Sub"), WALSH HOLDING CO., INC., a Delaware corporation ("WSI"),
and ROBERT C. WALSH, the principal stockholder of WSI (the "Principal
Stockholder").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of RBMG, Merger Sub and WSI have
determined that it is consistent with and in furtherance of their respective
long-term business strategies and fair to and in the best interests of their
respective companies and stockholders to combine their respective businesses in
a merger transaction as set forth in this Agreement (the "Reorganization");
WHEREAS, to induce RBMG to enter into this Agreement, the Principal
Stockholder desires to enter into this Agreement for the purposes of making
certain representations and warranties to RBMG;
WHEREAS, in furtherance of the Reorganization, the Board of Directors of
WSI has adopted this Agreement and the Merger (as hereinafter defined), as
contemplated by this Agreement, and has recommended that the holders of Class A
Common Stock, par value $.01 per share, of WSI ("WSI Common Stock") vote to
adopt this Agreement and the terms of the Merger as contemplated by this
Agreement;
WHEREAS, in furtherance of the Reorganization, a special committee of the
Board of Directors of RBMG (the "Special Committee") has recommended that this
Agreement and the Merger, as contemplated by this Agreement, be approved, and
the Board of Directors of RBMG has approved this Agreement and the Merger and
has recommended that the holders of common stock, par value $.01 per share, of
RBMG ("RBMG Common Stock") vote to adopt this Agreement and the terms of the
Merger as contemplated by this Agreement;
WHEREAS, the existing stockholders of WSI (collectively, "WSI
Stockholders") and Greenwich Capital Financial Products, Inc., as the holder of
a warrant to purchase shares of WSI Class B Common Stock (the "Warrantholder"),
have entered into an indemnification agreement (the "Indemnification
Agreement"), dated the date hereof, for the purposes of making certain
representations and warranties and providing certain indemnification to RBMG;
WHEREAS, certain of the WSI Stockholders have entered into a proxy
agreement (the "Proxy Agreement"), dated the date hereof, pursuant to which such
stockholders, among other things, have granted an irrevocable proxy to RBMG to
vote certain of the outstanding shares of the WSI Common Stock in favor of the
approval of this Agreement and the Merger contemplated hereby, upon the terms
and subject to the conditions set forth therein;
WHEREAS, the parties hereto intend that the Merger shall be accounted for
as a "pooling of interests" for financial reporting purposes under applicable
United States accounting rules and the accounting standards of the United States
Securities and Exchange Commission (the "SEC"); and
WHEREAS, for United States federal income tax purposes, it is intended that
the Merger qualify as a reorganization under the provisions of Section 368(a) of
the United States Internal Revenue Code of 1986, as amended (the "Code"), and
the Treasury regulations thereunder (the "Regulations");
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NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. Formation of Merger Subsidiary. RBMG has formed Merger Sub
as a wholly owned subsidiary of RBMG. Merger Sub has been formed solely to
facilitate the Merger and shall conduct no business or activity other than in
connection with the Merger.
SECTION 1.02. The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Delaware General Corporation
Law ("DGCL"), at the Effective Time, Merger Sub shall be merged with and into
WSI (the "Merger"). As a result of the Merger, the separate corporate existence
of Merger Sub shall cease and WSI shall continue as the surviving corporation of
the Merger as a wholly owned subsidiary of RBMG (the "Surviving Corporation").
SECTION 1.03. Closing. Unless this Agreement shall have been terminated
and the Merger herein contemplated shall have been abandoned pursuant to Section
8.01, subject to the satisfaction or waiver of the conditions set forth in
Article VII, the consummation of the Reorganization shall take place as promptly
as practicable (and in any event within three business days) after satisfaction
or waiver of the conditions set forth in Article VII, including that the
transaction be accounted for as a pooling of interests, at the closing (the
"Closing") to be held at the offices of King & Spalding, 120 West 45th Street,
New York, New York 10036-4003, unless another date, time or place is agreed to
by RBMG and WSI.
SECTION 1.04. Effective Time. At the time of the Closing and subject to
the satisfaction or, if permissible, waiver of the conditions set forth in
Article VII, the parties shall cause the Merger to be consummated by filing a
certificate of merger (the "Certificate of Merger") with the Secretary of State
of the State of Delaware in such form as required by, and executed in accordance
with the relevant provisions of, the DGCL (the date and time of such filing, or
such later date or time as set forth therein, being the "Effective Time").
SECTION 1.05. Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of the DGCL.
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 WSI and Merger Sub shall vest in WSI as the
Surviving Corporation, and all debts, liabilities and duties of WSI and Merger
Sub shall become the debts, liabilities and duties of WSI as the Surviving
Corporation. As of the Effective Time, the Surviving Corporation shall be a
direct wholly owned subsidiary of RBMG.
SECTION 1.06. Certificate of Incorporation; Bylaws; Directors and Officers
of Surviving Corporation. Unless otherwise agreed by RBMG and WSI before the
Effective Time, at the Effective Time:
(a) The Certificate of Incorporation and the Bylaws of WSI, as in
effect immediately prior to the Effective Time, shall be the Certificate of
Incorporation and the Bylaws of the Surviving Corporation until thereafter
amended as provided by Law and such Certificate of Incorporation or Bylaws;
(b) The officers of WSI immediately prior to the Effective Time shall
continue to serve in their respective offices of the Surviving Corporation
from and after the Effective Time, in each case until their successors are
elected or appointed and qualified or until their resignation or removal.
If, at the Effective Time, a vacancy shall exist in any office of the
Surviving Corporation, such vacancy may thereafter be filled in the manner
provided by Law and the Certificate of Incorporation and Bylaws of the
Surviving Corporation; and
(c) The directors of Merger Sub immediately prior to the Effective
Time shall continue to serve as directors of the Surviving Corporation from
and after the Effective Time, in each case until their successors are
elected or appointed and qualified or until their resignation or removal.
If, at the Effective Time, a vacancy shall exist on the Board of Directors
of the Surviving Corporation, such vacancy may thereafter be
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filled in the manner provided by Law and the Certificate of Incorporation
and Bylaws of the Surviving Corporation.
SECTION 1.07. Amended Certificate of Incorporation and Amended Bylaws of
RBMG. Immediately prior to the Effective Time, RBMG shall cause the Certificate
of Incorporation of RBMG to be amended pursuant to amendments substantially in
the form attached hereto as Exhibit 1.07 (the "Amended Certificate of
Incorporation") and the Bylaws of RBMG to be amended to provide that the
corporate headquarters of RBMG shall be located in Columbia, South Carolina. The
Amended Certificate of Incorporation of RBMG shall provide, among other things,
that (i) the authorized capital stock of RBMG shall consist of 100,000,000
shares of RBMG Common Stock, 12,000,000 shares of Class B Common Stock of RBMG,
par value $.01 per share ("RBMG Class B Common Stock"), and 5,000,000 shares of
preferred stock, par value $.01 per share ("RBMG Preferred Stock") and (ii) the
name of RBMG shall be BCA Financial Corp.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Conversion of Securities. The manner and basis of converting
the securities of WSI and Merger Sub, respectively, at the Effective Time, by
virtue of the Merger, shall be as hereinafter set forth in this Article II.
SECTION 2.02. Conversion of Shares. Each share of WSI Common Stock and
each share of WSI Class B common stock, par value $.01 per share of WSI (the
"WSI Class B Common Stock"), issued and outstanding immediately before the
Effective Time (excluding those owned by RBMG or any wholly owned subsidiary of
RBMG) and all rights in respect thereof, shall, at the Effective Time, without
any action on the part of any holder thereof, forthwith cease to exist and be
converted into and become exchangeable for (i) 175, 164.30 shares of RBMG Common
Stock (such ratio of the shares of WSI Common Stock and WSI Class B Common Stock
to shares of RBMG Common Stock being referred to as the "Exchange Ratio") and
(ii) the right (the "Escrow Stock Right" and collectively, the "Escrow Stock
Rights") to receive on a deferred basis and pursuant to the terms of the Escrow
Trust Agreement (as hereinafter defined) 19,462.70 additional shares of RBMG
Common Stock (such ratio of the shares of WSI Common Stock and WSI Class B
Common Stock to shares of RBMG Common Stock being referred to as the "Escrow
Stock Ratio"). Notwithstanding the immediately preceding sentence, if the
acquisition (the "RBC Acquisition") of Resource Bancshares Corporation ("RBC")
occurs prior to the Effective Time pursuant to the terms of that certain
Agreement of Merger (the "RBC Merger Agreement"), dated as of the date hereof,
among RBMG, RBC and RBC Merger Sub, Inc., then the Exchange Ratio shall be
192,460.50 and the Escrow Stock Ratio shall be 21,384.50. Any fractional shares
of WSI Common Stock or WSI Class B Common Stock surrendered by a Holder shall be
converted into shares of RBMG Common Stock in accordance with the applicable
Exchange Ratio and Escrow Stock Ratio set forth above. Commencing immediately
after the Effective Time, each certificate which, immediately prior to the
Effective Time, represented issued and outstanding shares of WSI Common Stock
and WSI Class B Common Stock (collectively, the "Shares"), shall evidence
ownership of RBMG Common Stock on the basis hereinbefore set forth, but subject
to the limitations set forth in this Article II.
SECTION 2.03. Cancellation of Treasury Shares. At the Effective Time, each
share of WSI Common Stock owned by WSI or any other wholly owned subsidiary of
WSI immediately prior to the Effective Time shall be canceled and retired and no
shares of stock or other securities of RBMG or the Surviving Corporation or any
other corporation shall be issuable, and no payment or other consideration shall
be made, with respect thereto.
SECTION 2.04. Conversion of Common Stock of Merger Sub into Common Stock of
the Surviving Corporation. At the Effective Time, each share of common stock,
par value $.01 per share, of Merger Sub issued and outstanding immediately prior
to the Effective Time, and all rights in respect thereof, shall, without any
action on the part of RBMG, forthwith cease to exist and be converted into one
validly issued, fully paid and nonassessable share of common stock, par value
$.01 per share, of the Surviving Corporation (the "New WSI Common Stock").
Immediately after the Effective Time and upon surrender by RBMG of the
certificate representing the shares of the common stock of Merger Sub, the
Surviving Corporation shall deliver to RBMG an
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appropriate certificate or certificates representing the New WSI Common Stock
created by conversion of the common stock of Merger Sub owned by RBMG.
SECTION 2.05. Exchange of Shares Other than Treasury Shares. (a) Subject
to Section 2.05(b) and the other terms and conditions hereof, at or prior to the
Effective Time, RBMG shall appoint an exchange agent to effect the exchange of
Shares for RBMG Common Stock in accordance with the provisions of this Article
II (the "Exchange Agent"). From time to time after the Effective Time, RBMG
shall deposit, or cause to be deposited, certificates representing RBMG Common
Stock for conversion of Shares in accordance with the provisions of Section 2.02
hereof (such certificates, together with any dividends or distributions with
respect thereto, being herein referred to as the "Exchange Fund"). Commencing
immediately after the Effective Time and until the appointment of the Exchange
Agent shall be terminated, each holder of a certificate or certificates
theretofore representing Shares may surrender the same to the Exchange Agent,
and, after the appointment of the Exchange Agent shall be terminated, any such
holder may surrender any such certificate to RBMG. Such holder shall be entitled
upon such surrender to receive in exchange therefor a certificate or
certificates representing the number of full shares of RBMG Common Stock
(together with the applicable Escrow Stock Rights) into which the Shares
theretofore represented by the certificate or certificates so surrendered shall
have been converted in accordance with the provisions of Section 2.02 hereof,
together with a cash payment in lieu of fractional shares, if any, in accordance
with Section 2.07 hereof, and all such shares of RBMG Common Stock shall be
deemed to have been issued at the Effective Time. Until so surrendered and
exchanged, each outstanding certificate which, prior to the Effective Time,
represented issued and outstanding Shares shall be deemed for all corporate
purposes of RBMG, other than the payment of dividends and other distributions,
if any, to evidence ownership of the number of full shares of RBMG Common Stock
and Escrow Stock Rights into which the Shares theretofore represented thereby
shall have been converted at the Effective Time. Unless and until any such
certificate theretofore representing Shares is so surrendered, no dividend or
other distribution, if any, payable to the holders of record of RBMG Common
Stock as of any date subsequent to the Effective Time shall be paid to the
holder of such certificate in respect thereof. Upon the surrender of any such
certificate theretofore representing Shares, however, the record holder of the
certificate or certificates representing shares of RBMG Common Stock issued in
exchange therefor shall receive from the Exchange Agent or from RBMG, as the
case may be, payment of the amount of dividends and other distributions, if any,
which as of any date subsequent to the Effective Time and until such surrender
shall have become payable with respect to such number of shares of RBMG Common
Stock and Escrow Stock Rights ("Presurrender Dividends"). No interest shall be
payable with respect to the payment of Presurrender Dividends upon the surrender
of certificates theretofore representing Shares. After the appointment of the
Exchange Agent shall have been terminated, such holders of RBMG Common Stock and
Escrow Stock Rights which have not received payment of Presurrender Dividends
shall look only to RBMG for payment thereof. Notwithstanding the foregoing
provisions of this Section 2.05, risk of loss and title to such certificates
representing Shares shall pass only upon proper delivery of such certificates to
the Exchange Agent, and neither the Exchange Agent nor any party hereto shall be
liable to a holder of Shares for any RBMG Common Stock or dividends or
distributions thereon delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law or to a transferee pursuant to
Section 2.06 hereof.
(b) Prior to the Effective Time, RBMG, the Escrow Agent, the Warrantholder,
the "Stockholder Representative" and the "Independent Committee" (as such terms
are hereinafter defined) shall enter into an escrow trust agreement
substantially in the form as attached hereto as Exhibit 2.05(b) (the "Escrow
Trust Agreement") in order to establish an escrow of shares of RBMG Common Stock
to be available to satisfy any RBMG Losses (as defined in the Indemnification
Agreement) as a result of a breach by WSI of any representation, warranty,
covenant or agreement contained herein, as more fully described in the attached
form of Escrow Trust Agreement. Approval of this Agreement and the Merger by the
WSI Stockholders shall constitute approval of the escrow trust contemplated by
the Escrow Trust Agreement and the appointment of the Escrow Agent and the
Stockholder Representative. At the Effective Time, RBMG shall deposit with the
Escrow Agent that number of whole shares of RBMG Common Stock (rounding up to
the nearest whole share) equal to the product obtained by multiplying (i) the
applicable Escrow Stock Ratio by (ii) the total number of issued and outstanding
shares of WSI Common Stock and WSI Class B Common Stock at the Effective Time.
After the Effective Time, RBMG shall deposit with the Escrow Agent such
additional shares of RBMG Common Stock as may be required under the
circumstances set forth in Section 2(b) of the Escrow Trust Agreement. Such
shares of RBMG Common
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Stock shall be held by the Escrow Agent and distributed to the WSI Stockholders
or the Warrantholder, as applicable, or applied to fund any RBMG Losses in
accordance with the terms of the Escrow Trust Agreement. For purposes of this
Agreement, "Independent Committee" shall mean such persons as determined by the
RBMG Board of Directors on or prior to the Closing; "Stockholder Representative"
shall mean Robert C. Walsh (or such other person as determined by the WSI Board
of Directors on or prior to the Closing); and "Escrow Agent" shall mean a bank
which shall be mutually selected by RBMG, the Warrantholder and the Stockholder
Representative prior to the Closing.
(c) Each outstanding share of WSI Common Stock or WSI Class B Common Stock
as to which a written notice of election to demand the appraisal of such shares
is filed in accordance with Section 262 of the DGCL, at or prior to the
Stockholders' Meetings and not withdrawn at or prior to the Stockholders'
Meetings and which is not voted in favor of the Merger shall not be converted
into or represent a right to receive RBMG Common Stock hereunder unless and
until the holder shall have failed to perfect, or shall have effectively
withdrawn his or her right to appraisal of or payment of his or her WSI Common
Stock or WSI Class B Common Stock under Section 262 of the DGCL, at which time
his or her shares shall be converted into RBMG Common Stock as set forth in
Section 2.02 in accordance with Section 2.05(a). All such shares of WSI Common
Stock or WSI Class B Common Stock as to which such demand for appraisal is so
filed and not withdrawn at or prior to the time of such vote and which are not
voted in favor of the Merger are herein called "Dissenting Stock". WSI shall
give RBMG prompt notice of its receipt of any written demands for appraisal
rights or withdrawal of such demands. WSI shall not voluntarily make any payment
with respect to any demands for appraisal rights and shall not, except with the
prior written consent of RBMG, settle or offer to settle any such demands. Each
holder of WSI Common Stock or WSI Class B Common Stock that becomes entitled,
pursuant to the provisions of Section 262 of the DGCL, to payment for his or her
shares of WSI Common Stock or WSI Class B Common Stock under the provisions of
said Section, shall receive payment therefor from RBMG and such shares shall be
canceled.
SECTION 2.06. Stock Transfer Books. (a) At the Effective Time, the stock
transfer books of WSI with respect to Shares shall be closed, and there shall be
no further registration of transfers of Shares thereafter on the records of such
stock transfer books. In the event of a transfer of ownership of Shares that is
not registered in the stock transfer records of WSI, at the Effective Time, a
certificate or certificates representing the number of full shares of RBMG
Common Stock (together with the applicable Escrow Stock Rights) into which such
Shares shall have been converted shall be issued to the transferee together with
a cash payment in lieu of fractional shares, if any, in accordance with Section
2.07 hereof, and a cash payment in the amount of Presurrender Dividends, if any,
in accordance with Section 2.05 hereof, if the certificate or certificates
representing such Shares is or are surrendered as provided in Section 2.05
hereof, accompanied by all documents required to evidence and effect such
transfer and by evidence of payment of any applicable stock transfer tax.
(b) Notwithstanding anything to the contrary herein, certificates
surrendered for exchange by any person constituting a Pooling Affiliate of WSI
shall not be exchanged until RBMG shall have received from such person an
affiliate letter as provided in Section 6.05(a).
SECTION 2.07. No Fractional Share Certificates. (a) No scrip or fractional
share certificate for RBMG Common Stock shall be issued upon the surrender for
exchange of certificates evidencing Shares, and an outstanding fractional share
interest shall not entitle the owner thereof to vote, to receive dividends or to
any rights of a stockholder of RBMG or of the Surviving Corporation with respect
to such fractional share interest.
(b) RBMG shall pay to the Exchange Agent an amount in cash sufficient for
the Exchange Agent to pay each holder of Shares an amount in cash equal to the
product obtained by multiplying (i) the fractional share interest to which such
holder would otherwise be entitled (after taking into account all shares of WSI
Common Stock and WSI Class B Common Stock, as the case may be, held at the
Effective Time by such holder) by (ii) the arithmetic average of the closing
prices for a share of RBMG Common Stock on the Nasdaq National Market (the
"NMS") for each of the ten trading days immediately prior to the Effective Time.
(c) As soon as practicable after the determination of the amount of cash,
if any, to be paid to holders of Shares with respect to any fractional share
interests, the Exchange Agent shall make available such amounts, net of any
required withholding, to such holders of WSI Common Stock and WSI Class B Common
Stock, subject to and in accordance with the terms of Section 2.05 hereof.
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(d) Any portion of the Exchange Fund which remains undistributed for six
months after the Effective Time shall be delivered to RBMG, and any holder of
Shares who has not theretofore complied with the provisions of this Article II
shall thereafter look only to RBMG for satisfaction of their claims for RBMG
Common Stock (together with the applicable Escrow Stock Rights) or any cash in
lieu of fractional shares of RBMG Common Stock and any Presurrender Dividends.
SECTION 2.08. Conversion of Dissenting Stock. If prior to or after the
Effective Time any stockholder of WSI shall fail to perfect, or shall
effectively withdraw or lose, his or her right to appraisal of and payment for
his or her shares of Dissenting Stock under Section 262 of the DGCL, the
Dissenting Stock of such holder shall be treated for purposes of this Article II
like any other shares of outstanding WSI Common Stock or WSI Class B Common
Stock.
SECTION 2.09. WSI Warrant. If, immediately prior to the Effective Time,
the WSI Warrant shall remain outstanding, then, to the extent the Warrantholder
would otherwise be permitted to purchase shares of WSI Class B Common Stock (the
"WSI Warrant Shares") under the WSI Warrant (without regard to the restrictions
set forth in Section 3.1 of the WSI Warrant Agreement), RBMG shall issue to the
Warrantholder the "RBMG Warrant" (as hereinafter defined), which will provide
for the right to acquire such number of shares of RBMG Class B Common Stock (the
"RBMG Warrant Shares") as would be equal to the total number of shares of RBMG
Common Stock (including, for this purpose, shares of RBMG Common Stock
represented by the Escrow Stock Rights) which the Warrantholder would have been
entitled to receive as of the Effective Time pursuant to Section 2.02 hereof in
exchange for the WSI Warrant Shares (based on the assumption that the WSI
Warrant Shares were outstanding immediately prior to the Effective Time).
SECTION 2.10. Certain Adjustments. If between the date of this Agreement
and the Effective Time, the outstanding shares of RBMG Common Stock, WSI Common
Stock or WSI Class B Common Stock shall be changed into a different number of
shares by reason of any reclassification, recapitalization, split-up,
combination or exchange of shares, or any dividend payable in stock or other
securities shall be declared thereon with a record date within such period, the
Exchange Ratio and the Escrow Stock Ratio established pursuant to the provisions
of Section 2.02 hereof shall be adjusted accordingly to provide to the holders
of RBMG Common Stock, WSI Common Stock and WSI Class B Common Stock the same
economic effect as contemplated by this Agreement prior to such
reclassification, recapitalization, split-up, combination, exchange or dividend.
SECTION 2.11. Transmittal Procedures. As soon as reasonably practicable
after the Effective Time, RBMG will instruct the Exchange Agent to mail
appropriate and customary transmittal materials (which shall specify that
delivery shall be effected, and risk of loss and title to the certificates
theretofore representing Shares shall pass, only upon proper delivery of such
certificates to the Exchange Agent) to each holder of record of Shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF WSI
AND THE PRINCIPAL STOCKHOLDER
WSI and the Principal Stockholder hereby, jointly and severally, represent
and warrant to RBMG that:
SECTION 3.01. Organization and Qualification; Subsidiaries. Each of WSI
and each Subsidiary of WSI (the "WSI Subsidiaries") has been duly organized and
is validly existing and in good standing (to the extent applicable) under the
laws of the jurisdiction of its incorporation or organization, as the case may
be, and has the requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as it is now being
conducted. Each of WSI and each WSI Subsidiary is duly qualified or licensed to
do business, and is in good standing (to the extent applicable), in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its business makes such qualification or licensing
necessary, except for such failures to be so qualified or licensed and in good
standing that would not, individually or in the aggregate, have a WSI Material
Adverse Effect. For purposes of this Agreement, "WSI Material Adverse Effect"
means any change in or effect on the business of WSI and the WSI Subsidiaries
that is, or is reasonably likely to be,
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materially adverse to the business, assets (including intangible assets),
liabilities (contingent or otherwise), condition (financial or otherwise) or
results of operations of WSI and the WSI Subsidiaries taken as a whole.
SECTION 3.02. Certificate of Incorporation and Bylaws. The copies of WSI's
and each WSI Subsidiary's Certificate of Incorporation and Bylaws that are
attached to Section 3.02 of the Disclosure Schedule delivered to RBMG prior to
the execution of (and forming part of) this Agreement (the "WSI Disclosure
Schedule"), are complete and correct copies thereof. Each such Certificate of
Incorporation and Bylaws are in full force and effect. Neither WSI nor any WSI
Subsidiary is in violation of any of the provisions of their respective
Certificate of Incorporation or Bylaws.
SECTION 3.03. Capitalization. The authorized capital stock of WSI consists
of 1,250 shares of WSI Common Stock and 1,250 shares of WSI Class B Common
Stock. As of the date hereof, (i) 75 shares of WSI Common Stock were issued and
outstanding, all of which were validly issued, fully paid and nonassessable,
(ii) 24.99 shares of WSI Common Stock and WSI Class B Common Stock are reserved
for issuance pursuant to an outstanding warrant, (iii) no shares of WSI Class B
Common Stock were issued and outstanding, and (iv) no shares of WSI Common Stock
or WSI Class B Common Stock were held in the treasury of WSI or by the WSI
Subsidiaries. Each of the WSI Stockholders owns, of record, the number of shares
of WSI Common Stock set forth in Section 3.03 of the WSI Disclosure Schedule.
Section 3.03 of the WSI Disclosure Schedule also sets forth all options,
warrants or other rights, agreements, arrangements or commitments entitling any
WSI Stockholder to acquire any shares of WSI capital stock. Except as described
in Section 3.03 of the WSI Disclosure Schedule, there are no options, warrants
or other rights, agreements, arrangements or commitments of any character to
which WSI or any WSI Subsidiary is a party or by which WSI or any WSI Subsidiary
is bound relating to the issued or unissued capital stock of WSI or any WSI
Subsidiary or obligating WSI or any WSI Subsidiary to issue or sell any shares
of capital stock of, or other equity interests in, WSI or any WSI Subsidiary,
and no shares of capital stock of WSI are reserved for issuance or sale. Except
as set forth in Section 3.03 of the WSI Disclosure Schedule, there are no
outstanding contractual obligations of WSI or any WSI Subsidiary to repurchase,
redeem or otherwise acquire any shares of WSI Common Stock or any capital stock
of any WSI Subsidiary. Except as disclosed in Section 3.03 of the WSI Disclosure
Schedule, each outstanding share of capital stock of each WSI Subsidiary is duly
authorized, validly issued, fully paid and nonassessable and owned of record and
beneficially by WSI free and clear of all security interests, liens, claims,
pledges, options, rights of first refusal, agreements, limitations on WSI's or
such other WSI Subsidiary's voting rights, charges and other encumbrances of any
nature whatsoever. Except as set forth in Section 3.03 of the WSI Disclosure
Schedule, there are no outstanding contractual obligations of WSI or any WSI
Subsidiary requiring it to provide funds to, or make any investment (in the form
of a loan, capital contribution or otherwise), in, any WSI Subsidiary or any
other person.
SECTION 3.04. Authority Relative to this Agreement. WSI has all necessary
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the Merger (other than the approval
of this Agreement and the Merger contemplated hereby by the holders of a
majority of the outstanding shares of WSI Common Stock entitled to vote with
respect thereto at the WSI Stockholders' Meeting (the "WSI Stockholder Vote")
and the filing and recordation of the Certificate of Merger as required by the
DGCL). The execution and delivery of this Agreement by WSI and the consummation
by WSI of the Merger contemplated hereby have been duly and validly authorized
by all necessary corporate action, and no other corporate proceedings on the
part of WSI are necessary to authorize this Agreement or to consummate the
Merger (other than the WSI Stockholder Vote and the filing and recordation of
the Certificate of Merger as required by the DGCL). The board of directors of
WSI has approved the execution, delivery and performance of this Agreement and
the Merger and other transactions provided for herein in accordance with the
requirements of the DGCL. This Agreement has been duly executed and delivered by
WSI and the Principal Stockholder and, assuming the due authorization, execution
and delivery by the other parties hereto, constitutes a legal, valid and binding
obligation of WSI and the Principal Stockholder, enforceable against WSI and the
Principal Stockholder in accordance with its terms.
SECTION 3.05. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by WSI and the Principal Stockholder do
not, and the performance by WSI and the Principal Stockholder of their
respective obligations hereunder and the consummation of the Merger will not,
(i) conflict
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with or violate any provision of the Certificate of Incorporation or Bylaws of
WSI or any equivalent organizational documents of any WSI Subsidiary, (ii)
assuming that all consents, approvals, authorizations and permits described in
Section 3.05(b) have been obtained and all filings and notifications described
in Section 3.05(b) have been made, conflict with or violate any Law applicable
to WSI, any WSI Subsidiary or the Principal Stockholder or by which any property
or asset of WSI, any WSI Subsidiary or the Principal Stockholder is bound or
affected or (iii) except as set forth in Section 3.05(a) of the WSI Disclosure
Schedule, result in any breach of or constitute a default (or an event which
with the giving of notice or lapse of time or both would become a default)
under, or give to others any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on any
property or asset of WSI, any WSI Subsidiary or the Principal Stockholder
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation, except, with
respect to clauses (ii) and (iii), for any such conflicts, violations, breaches,
defaults or other occurrences which would neither, individually or in the
aggregate, (A) have a WSI Material Adverse Effect nor (B) prevent or materially
delay the performance by WSI of its obligations pursuant to this Agreement or
the consummation of the Merger. As used in this Agreement, "Law" means any
federal, state or local statute, law, ordinance, regulation, rule, code, order,
other requirement or rule of law of the United States or any other jurisdiction,
including, without limitation, the Federal Truth in Lending Act, the Real Estate
Settlement Procedures Act, the Equal Credit Opportunity Act, the Home Mortgage
Disclosure Act, the Fair Credit Reporting Act, the Fair Housing Act, and any
other similar act or law.
(b) The execution and delivery of this Agreement do not, and the
performance by WSI and the Principal Stockholder of their respective obligations
hereunder or the consummation of the Merger will not, require any consent,
approval, authorization or permit of, or filing by WSI, any WSI Subsidiary or
the Principal Stockholder with, or notification by WSI, any WSI Subsidiary or
the Principal Stockholder to, any United States federal, state or local or any
foreign governmental, regulatory or administrative authority, agent or
commission or any court, tribunal or arbitral body (a "Governmental Entity"),
except (i) the premerger notification requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
thereunder (the "HSR Act"), the filing and recordation of the Certificate of
Merger as required by the DGCL, and as set forth in Section 3.05(b) of the WSI
Disclosure Schedule and (ii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
(A) prevent or materially delay the performance by WSI of its obligations
pursuant to this Agreement or the consummation of the Merger or (B) individually
or in the aggregate, have a WSI Material Adverse Effect.
SECTION 3.06. Permits; Compliance with Laws. Each of WSI and the WSI
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, establishment registrations, permits, easements, variances,
exceptions, consents, certificates, approvals and orders of any Governmental
Entity, necessary for WSI or any WSI Subsidiary to own, lease and operate its
properties and to purchase, originate and sell non-conforming mortgage loans
secured by residential properties or otherwise to carry on its business as it is
now being conducted (the "WSI Permits"), except where the failure to have any
WSI Permits would not, individually or in the aggregate, have a WSI Material
Adverse Effect, and, as of the date of this Agreement, no suspension or
cancellation of any of the WSI Permits is pending or, to the knowledge of WSI,
threatened. Neither WSI nor any WSI Subsidiary is in conflict with, or in
default or violation of, (i) any Law applicable to WSI or any WSI Subsidiary or
by which any property or asset of WSI or any WSI Subsidiary is bound or affected
or (ii) any WSI Permits, except in the case of clauses (i) and (ii) for any such
conflicts, defaults or violations that would not, individually or in the
aggregate, have an WSI Material Adverse Effect.
SECTION 3.07. Financial Statements. (a) (i) The financial statements
(including, in each case, any notes thereto) of the predecessors to each of the
WSI Subsidiaries for the period from the date of inception (June 14, 1993)
through December 31, 1994, for the year ended December 31, 1995 and for the
three months ended March 31, 1996, and (ii) the audited consolidated financial
statements (including, in each case, any notes thereto) of WSI for the period
from the date of inception (April 1, 1996) through December 31, 1996 (including
statements of income, stockholders' equity and cash flows and balance sheets as
of April 1, 1996 and December 31, 1996), each as contained in Section 3.07 of
the WSI Disclosure Schedule, were prepared from, and are in accordance with, the
books and records of WSI, which books and records are maintained in accordance
with United States generally accepted accounting principles ("U.S. GAAP")
applied on a consistent basis
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throughout the periods indicated (except as may be indicated in the notes
thereto). The financial statements contained in Section 3.07 of the WSI
Disclosure Schedule each present fairly, in all material respects, the
consolidated financial position of WSI and the consolidated WSI Subsidiaries, or
their predecessors, as appropriate, as at the respective dates thereof and for
the respective periods indicated therein, except as otherwise noted therein
(subject, in the case of unaudited statements to normal and recurring year end
adjustments). The audited consolidated balance sheet of WSI as of December 31,
1996 which is contained in Section 3.07 of the WSI Disclosure Schedule is
hereinafter referred to as the "1996 Balance Sheet."
(b) Except as and to the extent set forth or reserved against on the 1996
Balance Sheet, none of WSI or any WSI Subsidiary has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise),
except for liabilities or obligations incurred in the ordinary course of
business since January 1, 1997 that would not, individually or in the aggregate,
have a WSI Material Adverse Effect.
(c) The mortgage loans (the "Mortgage Loans") set forth in Section 3.07(c)
of the WSI Disclosure Schedule have an aggregate value as of the date hereof of
at least $33,230,921, which equals the value of the Mortgage Loans as reflected
on the 1996 Balance Sheet ($37,105,715) less the reserve with respect to such
loans reflected on the 1996 Balance Sheet ($3,874,795).
SECTION 3.08. Absence of Certain Changes or Events. (a) Since January 1,
1997, except as set forth in Section 3.08 of the WSI Disclosure Schedule, WSI
and the WSI Subsidiaries have conducted their businesses only in the ordinary
course and in a manner consistent with past practice and, since such date, there
has not been (i) any WSI Material Adverse Effect, (ii) any event that could
reasonably be expected to prevent or materially delay the performance of its
obligations pursuant to this Agreement and the consummation of the Merger by
WSI, (iii) any change by WSI in its accounting methods, principles or practices,
(iv) any declaration, setting aside or payment of any dividend or distribution
in respect of the shares of WSI Common Stock or WSI Class B Common Stock or any
redemption, purchase or other acquisition of any of WSI's securities or (v) any
increase in the compensation or benefits 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
the compensation payable or to become payable to any executive officers of WSI
or any WSI Subsidiary except in the ordinary course of business consistent with
past practice.
(b) Except as set forth in Section 3.08 of the WSI Disclosure Schedule, and
except as to events, developments or conditions that have not had and are not
reasonably likely to have a WSI Material Adverse Effect, since January 1, 1997,
there have not been with respect to WSI (i) any extraordinary losses suffered or
any damage, destruction, loss or casualty to property or assets of WSI with an
aggregate value of more than $200,000, whether or not covered by insurance, (ii)
any assets mortgaged, pledged or made subject to any lien, charge or other
encumbrance, (iii) any liability or obligation (absolute, accrued or contingent)
incurred except in the ordinary course of business, (iv) any claims, liabilities
or obligations (absolute, accrued or contingent) paid, discharged or satisfied,
other than the payment, discharge or satisfaction in the ordinary course of
business consistent with past practice of claims, liabilities and obligations
reflected or reserved against in the 1996 Balance Sheet or incurred in the
ordinary course of business consistent with past practice since January 1, 1997,
(v) any guaranteed checks, notes or accounts receivable which have been written
off as uncollectible, except write-offs in the ordinary course of business
consistent with past practice, (vi) any write-down of the value of any asset or
investment on the books or records of WSI, except for depreciation and
amortization taken in the ordinary course of business consistent with past
practice, (vii) any cancellation of any debts or waiver of any claims or rights
of substantial value, or sale, transfer or other disposition of any properties
or assets (real, personal or mixed, tangible or intangible) of substantial
value, except, in each such case, in transactions in the ordinary course of
business consistent with past practice and which in any event do not exceed
$50,000 in the aggregate, (viii) any single capital expenditure or commitment in
excess of $200,000 for additions to property or equipment or aggregate capital
expenditures and commitments in excess of $200,000 for additions for property or
equipment, (ix) any increase of any reserves for contingent liabilities
(excluding any adjustment to bad debt reserves in the ordinary course of
business consistent with past practice), (x) any transactions entered into other
than in the ordinary course of business, (xi) any agreements to do any of the
foregoing or (xii) any other events, developments or
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conditions of any character that have had or are reasonably likely to have a
material adverse effect on the assets, liabilities, results of operations,
financial conditions or business of WSI.
SECTION 3.09. Employee Benefit Plans; Labor Matters. (a) With respect to
each employee benefit plan, program, arrangement and contract (including,
without limitation, any "employee benefit plan", as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
maintained or contributed to by WSI or any WSI Subsidiary, or with respect to
which WSI or any WSI Subsidiary could incur liability under Section 4069,
4212(c) or 4204 of ERISA (the "WSI Benefit Plans"), WSI has delivered or made
available to RBMG a true and correct copy of (i) such WSI Benefit Plan and the
most recent summary plan description related to each WSI Benefit Plan for which
a summary plan description is required, (ii) each trust agreement or other
funding arrangement relating to such WSI Benefit Plan, (iii) the most recent
annual report (Form 5500) filed with the Internal Revenue Service (the "IRS"),
(iv) the most recent actuarial report or financial statement relating to a WSI
Benefit Plan and (v) the most recent determination letter issued by the IRS with
respect to each WSI Benefit Plan qualified under Section 401(a) of the Code.
(b) Each WSI Benefit Plan has been administered in all material respects in
accordance with its terms and all contributions required to be made under the
terms of any of the WSI Benefit Plans as of the date of this Agreement have been
timely made or have been reflected on the 1996 Balance Sheet. Except as set
forth in Section 3.09(b) of the WSI Disclosure Schedule, with respect to the WSI
Benefit Plans, no event has occurred and, to the knowledge of WSI, there exists
no condition or set of circumstances in connection with which WSI or any WSI
Subsidiary could be subject to any liability under the terms of such WSI Benefit
Plans, ERISA, the Code or any other applicable Law which would individually or
in the aggregate have a WSI Material Adverse Effect.
(c) Except as set forth in Section 3.09(c) of the WSI Disclosure Schedule,
neither WSI nor any WSI Subsidiary is a party to any collective bargaining or
other labor union contract applicable to persons employed by WSI or any WSI
Subsidiary and no collective bargaining agreement is being negotiated by WSI or
any WSI Subsidiary. As of the date of this Agreement, there is no labor dispute,
strike or work stoppage against WSI or any WSI Subsidiary pending or, to the
knowledge of WSI, threatened which may interfere with the respective business
activities of WSI or any WSI Subsidiary, except where such dispute, strike or
work stoppage would not have a WSI Material Adverse Effect. As of the date of
this Agreement, to the knowledge of WSI, none of WSI, any WSI Subsidiary, or any
of their respective representatives or employees has committed any unfair labor
practice in connection with the operation of the respective businesses of WSI or
any WSI Subsidiary, and there is no charge or complaint against WSI or any WSI
Subsidiary by the National Labor Relations Board or any comparable governmental
agency pending or threatened in writing, except where such unfair labor
practice, charge or complaint would not have a WSI Material Adverse Effect.
(d) WSI has delivered to RBMG true and complete copies of (i) all
employment agreements with officers of WSI and each WSI Subsidiary, (ii) all
severance plans, agreements, programs and policies of WSI and each WSI
Subsidiary with or relating to their respective employees, and (iii) all plans,
programs, agreements and other arrangements of WSI and each WSI Subsidiary with
or relating to their respective employees which contain "change of control"
provisions.
(e) Except as provided in Section 3.09(e) of the WSI Disclosure Schedule or
as otherwise required by Law, no WSI Benefit Plan provides retiree medical or
retiree life insurance benefits to any person.
SECTION 3.10. Accounting and Tax Matters. (a) Neither WSI nor any of its
affiliates has taken or agreed to take any action (other than actions
contemplated by this Agreement) that would prevent the Merger from qualifying
for "pooling of interests" accounting treatment under applicable U.S. GAAP,
including, without limitation, applicable SEC accounting standards, or would
prevent the Merger from constituting a transaction qualifying under Section
368(a) of the Code. WSI is not aware of any agreement, plan or other
circumstance that would prevent the Merger from so qualifying under Section
368(a) of the Code.
(b) The representations and warranties made in WSI's letter of compliance
with pooling of interests criteria relating to the Merger and addressed to KPMG
Peat Marwick LLP ("KPMG") will be true and correct as of the date of such
letter.
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SECTION 3.11. Material Contracts. Section 3.11 of the WSI Disclosure
Schedule contains a true and complete list of the following (hereinafter
referred to as the "WSI Material Contracts"):
(a) All bonds, debentures, notes, mortgages, indentures or guarantees
to which WSI or any WSI Subsidiary is a party or by which any of their
respective assets is bound;
(b) All loans and credit commitments to WSI or any WSI Subsidiary
which are outstanding, together with a brief description of such
commitments and the name of each financial institution granting the same;
(c) All contracts or agreements which limit or restrict WSI, any WSI
Subsidiary or any of their respective affiliates from engaging in any
business in any jurisdiction or that limit any third party from engaging in
competition with WSI or any WSI Subsidiary;
(d) All contracts and commitments (other than those described in
subparagraphs (a), (b), or (c) of this Section 3.11) which relate to the
business of WSI or any WSI Subsidiary or by which any of their respective
assets may be bound involving an annual commitment or annual payment by any
party thereto of more than $200,000 individually; and
(e) All contracts, agreements, arrangements or understandings between
WSI or any WSI Subsidiary and any stockholder, officer or director of WSI
or any WSI Subsidiary, or any person with whom any such stockholder,
officer or director has any direct or indirect relation by blood, marriage
or adoption, or any entity in which any such person owns any beneficial
interest (other than a publicly held corporation whose stock is traded on a
national securities exchange or in the NMS and less than 5% of the stock of
which is beneficially owned by all such persons).
True and complete copies of all WSI Material Contracts, including all
amendments thereto, have been made available to RBMG. The WSI Material Contracts
are valid and enforceable in accordance with their respective terms with respect
to WSI or the WSI Subsidiary which is a party thereto, and, to the knowledge of
WSI, are valid and enforceable in accordance with their respective terms with
respect to each other party thereto. There is not under any of the WSI Material
Contracts any existing breach, default or event of default by WSI or any WSI
Subsidiary or event that with notice or lapse of time or both would constitute a
breach, default or event of default by WSI or any WSI Subsidiary, nor does WSI
know of, and neither of WSI nor any WSI Subsidiary has received notice of, or
made a claim with respect to, any breach or default by any other party thereto.
SECTION 3.12. Litigation. (a) Except as disclosed in Section 3.12(a) of
the WSI Disclosure Schedule, there are no suits, claims, actions,
investigations, inquiries or proceedings of any nature by any person that are
pending or, to WSI's knowledge, threatened (i) against or otherwise involving,
directly or indirectly, WSI or any of the WSI Subsidiaries, or any of their
respective properties (including, without limitation, any such matter with
respect to Taxes), or (ii) against or otherwise involving, directly or
indirectly, any officer, director, employee, stockholder or agent of WSI or any
WSI Subsidiary, including, without limitation, any derivative actions that have
been requested, that, with respect to either of (i) or (ii) above, if finally
determined adversely, individually or in the aggregate, is reasonably likely to
have a WSI Material Adverse Effect.
(b) Except as disclosed in Section 3.12(b) of the WSI Disclosure Schedule,
there is no suit, claim, action, proceeding or investigation pending or, to the
knowledge of WSI, threatened against WSI or any WSI Subsidiary before any
Governmental Entity that, individually or in the aggregate, is reasonably likely
to have a WSI Material Adverse Effect and to the knowledge of WSI, there are no
existing facts or circumstances that would be reasonably likely to result in a
suit, claim, action, proceeding or investigation that, individually or in the
aggregate, is reasonably likely to have a WSI Material Adverse Effect. Except as
disclosed in Section 3.12(b) of the WSI Disclosure Schedule, neither WSI nor any
WSI Subsidiary is subject to any outstanding order, writ, injunction or decree
which, insofar as can be reasonably foreseen, individually or in the aggregate,
would have a WSI Material Adverse Effect.
SECTION 3.13. Environmental Matters. Except as disclosed in Section 3.13
of the WSI Disclosure Schedule or as would not, individually or in the
aggregate, have a WSI Material Adverse Effect:
(i) WSI and the WSI Subsidiaries (i) are in compliance with all
applicable Environmental Laws, (ii) hold all required Environmental Permits
and (iii) are in compliance with their respective Environmental
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Permits. All past noncompliance with Environmental Laws or Environmental
Permits has been resolved without any pending, ongoing or future
obligation, cost or liability, and there is no requirement proposed for
adoption or implementation under any Environmental Law or Environmental
Permit that is reasonably expected to have a WSI Material Adverse Effect.
(ii) There is no claim, litigation or proceeding pending or threatened
pursuant to an Environmental Law against WSI, any WSI Subsidiary, or any
real property currently or, to the knowledge of WSI and the WSI
Subsidiaries, formerly owned, leased or occupied by WSI or any WSI
Subsidiary, and there are no circumstances that can reasonably be expected
to form the basis of any such claim, including without limitation with
respect to any off-site disposal location presently or formerly used by WSI
or any WSI Subsidiary.
(iii) None of the real property currently or, to the knowledge of WSI
and the WSI Subsidiaries, formerly owned, leased or occupied by WSI or any
WSI Subsidiary is listed or, to the knowledge of WSI and the WSI
Subsidiaries, proposed for listing on the "National Priorities List" under
CERCLA, as updated through the date hereof, the "Comprehensive
Environmental Response, Compensation, and Liability Information System," or
any similar list of sites in the United States or any other jurisdiction
requiring investigation or cleanup of Hazardous Materials.
For purposes of this Agreement:
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended as of the date hereof.
"Environmental Law" means any federal, state or local statute, law,
ordinance, regulation, rule, code or order of the United States or any
other jurisdiction and any enforceable judicial or administrative
interpretation thereof, including any judicial or administrative order,
consent decree or judgment, relating to pollution or protection of the
environment or natural resources, including, without limitation, those
relating to the use, handling, transportation, treatment, storage,
disposal, release or discharge of Hazardous Materials, as in effect as of
the date of this Agreement.
"Environmental Permit" means any permit, approval, identification
number, license or other authorization required under or issued pursuant to
any applicable Environmental Law.
"Hazardous Material" means (a) any petroleum, petroleum products,
by-products or breakdown products, radioactive materials,
asbestos-containing materials or polychlorinated biphenyls or (b) any
chemical, material or substance defined or regulated as toxic or hazardous
or as a pollutant or contaminant or waste under any applicable
Environmental Law.
SECTION 3.14. Intellectual Property. Except as set forth in Section 3.14
of the WSI Disclosure Schedule, or as would not, individually or in the
aggregate, have a WSI Material Adverse Effect, WSI and the WSI Subsidiaries own
or possess adequate licenses or other valid rights to use all patents, patent
rights, trademarks rights, trade names, trade dress, trade name rights,
copyrights, service marks, trade secrets, applications for trademarks and for
service marks, know-how and other proprietary rights and information used or
held for use in connection with the respective businesses of WSI and the WSI
Subsidiaries as currently conducted, and WSI is unaware of any assertion or
claim challenging the validity of any of the foregoing. Except as set forth in
Section 3.14 of the WSI Disclosure Schedule, the conduct of the respective
businesses of WSI and the WSI Subsidiaries as currently conducted does not
conflict in any way with any patent right, license, trademark, trademark right,
trade dress, trade name, trade name right, service mark or copyright of any
third party that, individually or in the aggregate, would have a WSI Material
Adverse Effect. To the knowledge of WSI, there are no infringements of any
proprietary rights owned by or licensed by or to WSI or any WSI Subsidiary that,
individually or in the aggregate, would have a WSI Material Adverse Effect.
SECTION 3.15. Taxes. Except as set forth in Section 3.15 of the WSI
Disclosure Schedule, (a) WSI and each of the WSI Subsidiaries have timely filed
or shall timely file all returns and reports required to be filed by them with
any taxing authority with respect to Taxes for any period ending on or before
the Effective Time, taking into account any extension of time to file granted to
or obtained on behalf of WSI and the WSI
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Subsidiaries, (b) all Taxes shown to be payable on such returns or reports that
are due prior to the Effective Time have been paid or shall be paid, (c) as of
the date hereof, no deficiency for any amount of Tax has been asserted or
assessed by a taxing authority against WSI or any of the WSI Subsidiaries and
(d) WSI and each of the WSI Subsidiaries have provided adequate reserves in the
1996 Balance Sheet for any Taxes that have not been paid, whether or not shown
as being due on any returns. As used in this Agreement, "Taxes" shall mean any
and all taxes, fees, levies, duties, tariffs, imposts and other charges of any
kind (together with any and all interest, penalties, additions to tax and
additional amounts imposed with respect thereto) imposed by any government or
taxing authority, including, without limitation, taxes or other charges on or
with respect to income, franchises, windfall or other profits, gross receipts,
property, sales, use, capital stock, payroll, employment, social security,
workers' compensation, unemployment compensation or net worth; taxes or other
charges in the nature of excise, withholding, ad valorem, stamp, transfer,
value-added or gains taxes; and license, registration and documentation fees.
SECTION 3.16. Pooling Affiliates. Section 3.16 of the WSI Disclosure
Schedule sets forth the names and addresses of those persons who are, in WSI's
reasonable judgment, "affiliates" within the meaning of Rule 145 of the rules
and regulations promulgated under the Securities Act of 1933, as amended
(together with the rules and regulations promulgated thereunder, the "Securities
Act") or applicable SEC Accounting Releases with respect to pooling-of-interests
accounting treatment (each such person, a "Pooling Affiliate") of WSI.
SECTION 3.17. Real Property. Section 3.17(a)(i) of the WSI Disclosure
Schedule lists all Leased Real Property of WSI. Each of the Leases is in full
force and effect and conveys to WSI a valid and subsisting leasehold estate. The
Leased Real Property is not subject to any liens, security interests or other
encumbrances except (i) as disclosed in Section 3.17(a)(ii) of the WSI
Disclosure Schedule and (ii) Permitted Encumbrances. Except for real property
owned by WSI as a result of foreclosure proceedings relating to loans reflected
on its 1996 Balance Sheet and as more particularly described in Section
3.17(a)(iii) of the WSI Disclosure Schedule, WSI owns no real property.
SECTION 3.18. Brokers. No broker, finder or investment banker (other than
National Westminster Bank Plc ("NatWest") and Donaldson Lufkin & Jenrette
Securities Corporation ("DLJ")) is entitled to any brokerage, finder's or other
fee or commission in connection with the Merger based upon arrangements made by
or on behalf of WSI. WSI has heretofore made available to RBMG complete and
correct copies of all agreements among WSI, NatWest and DLJ pursuant to which
such firm would be entitled to any payment relating to the Merger.
SECTION 3.19. Insurance. All of the policies relating to insurance
maintained by WSI or any WSI Subsidiary with respect to its property and the
conduct of its business (or any comparable policies entered into as a
replacement therefor) are in full force and effect and neither WSI nor any
Subsidiary has received any notice of cancellation with respect thereto and such
policies are adequate to insure the property of WSI and the WSI Subsidiaries and
to meet the requirements for the conduct of their respective businesses.
SECTION 3.20. Mortgage Banking Licenses and Qualifications. (a) Except as
set forth on Section 3.20 to the WSI Disclosure Schedule, WSI (or an affiliate
of WSI performing the origination or servicing of mortgages, as the case may be)
(i) has all certifications, authorizations, licenses, permits and other
approvals necessary to conduct its current mortgage banking business and (ii) is
in good standing under all applicable federal, state and local laws and
regulations thereunder as a mortgage lender, except where the failure to have
such certifications, authorizations, licenses, permits or approvals or to be in
good standing would not individually or in the aggregate have a WSI Material
Adverse Effect.
(b) Neither WSI nor any WSI Subsidiary is a party to any mandatory or
optional forward delivery requirement relating to mortgage loans.
SECTION 3.21. Loan Portfolio. (a) Except as set forth in Section 3.21 of
the WSI Disclosure Schedule, all mortgage loans held for WSI's or any WSI
Subsidiary's account ("WSI Mortgage Loans"), are owned by WSI, free and clear of
any Encumbrances other than Encumbrances in favor of WSI's lender banks pursuant
to warehouse lines of credit and other financing facilities. The mortgage or
deed of trust securing each such WSI Mortgage Loan or an assignment thereof has
been duly recorded or submitted for recordation in due course in the appropriate
filing office in the name of WSI as mortgagee, except where the failure to so
record would not have a
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WSI Material Adverse Effect. WSI has not released any security for any WSI
Mortgage Loan except upon receipt of reasonable consideration for such release,
or accepted prepayment of any such WSI Mortgage Loan which has not been promptly
applied to such WSI Mortgage Loan except where the failure to receive such
reasonable consideration or to so apply such prepayment would not have a WSI
Material Adverse Effect.
(b) Except as set forth in Section 3.21 of the WSI Disclosure Schedule, all
documentation prepared in connection with WSI Mortgage Loans and other mortgage
loans WSI has committed to fund have been prepared, in all material respects, in
accordance with applicable laws and regulations.
SECTION 3.22. Loan Files. (a) Except as set forth in Section 3.22 of the
WSI Disclosure Schedule, the loan documents and loan files maintained by WSI or
any WSI Subsidiary or any custodian or servicer with respect to the WSI Mortgage
Loans (i) contain originals (or where permitted by the terms of the applicable
Mortgage Servicing Agreement, contain true and, in all material respects,
correct copies) of the documents relating to each Mortgage Loan, and (ii) are
being maintained, in all material respects, in compliance with applicable laws
and regulations, including, without limitation, usury, truth-in-lending, real
estate settlement procedures, consumer credit protection, equal credit
opportunity or disclosure laws and, to the extent applicable, the requirements
of the investor acquiring such Mortgage Loan and the requirements of the
governmental or private insurer insuring such Mortgage Loan, if any, in effect
at the time such insurance was obtained.
(b) The terms of the mortgage note, bond, deed of trust or mortgage
relating to any WSI Mortgage Loan have not been impaired, waived, altered or
modified in any respect from the date of their origination except by a written
instrument that has been duly recorded or submitted for recordation in due
course, if recordation is necessary to protect the interests of the owner
thereof, the terms of which have been approved, to the extent required, by the
relevant investor and insurer (if any) and title insurer (to the extent required
by the relevant policy) and are reflected in the loan documents included in the
applicable loan files. Except as reflected in the loan documents maintained in
the applicable loan files, no mortgagor has been released from its obligations
under the applicable WSI Mortgage Loan.
SECTION 3.23. Mortgage Servicing Agreements. WSI has previously made
available to RBMG true and complete copies of all mortgage servicing agreements
to which WSI or any WSI Subsidiary is a party (the "Mortgage Servicing
Agreements"). Except as set forth in Section 3.23 to the WSI Disclosure
Schedule, all the Mortgage Servicing Agreements are (a) valid and binding
obligations of WSI or a WSI Subsidiary and, to the knowledge of WSI, of all the
other parties thereto, and (b) in full force and effect and are enforceable in
accordance with their respective terms. Except as disclosed on Schedule 3.23 the
of WSI Disclosure Schedule, there is no default which individually or in the
aggregate would have a WSI Material Adverse Effect or, to the knowledge of WSI,
claim of default by any party under any such Mortgage Servicing Agreements and,
to the knowledge of WSI, no event has occurred which with the passage of time or
the giving of notice or both would constitute an event of default by any party
under any such Mortgage Servicing Agreements. There is no pending or, to the
knowledge of WSI, threatened cancellation of any Mortgage Servicing Agreement
and all Mortgage Servicing Agreements are being performed in accordance with all
applicable rules and regulations, except where the failure to be so performed
would not, individually or in the aggregate, have a WSI Material Adverse Effect.
Except as set forth in Section 3.23 of the WSI Disclosure Schedule, neither WSI
nor any WSI Subsidiary is a servicer or subservicer with respect to any mortgage
loan for its own account or for others and has no liability, direct, indirect or
contingent, related to the servicing of any mortgage loan in any securitization.
SECTION 3.24. No Indemnification or Reimbursement Requests. Except as set
forth in Section 3.24 of the WSI Disclosure Schedule, neither WSI nor any WSI
Subsidiary is subject to any outstanding repurchase, indemnification or
reimbursement requests made pursuant to the provisions of any mortgage servicing
rights purchase and sale agreements or mortgage loan purchase and sale
agreements pursuant to which WSI or any WSI Subsidiary shall have conveyed any
mortgage loans ("WSI Sold Loans"), except where such repurchase, indemnification
or reimbursement requests pursuant to such agreements would not have a WSI
Material Adverse Effect.
SECTION 3.25. Custodial Accounts. Unless otherwise prohibited by law or an
executed escrow waiver, servicers for WSI and each WSI Subsidiary collect all
escrows related to the WSI Mortgage Loans. Except as set forth in Section 3.25
of the WSI Disclosure Schedule, all escrow accounts have been maintained by
servicers for
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WSI and each WSI Subsidiary and, to the knowledge of WSI, all prior servicers,
in accordance in all material respects, with all applicable laws, rules,
regulations and requirements. Servicers for WSI or a WSI Subsidiary, as the case
may be, have credited to the account for mortgagors all interest required to be
paid on any escrow account in accordance with applicable laws, rules,
regulations and requirements. All escrow, custodial and suspense accounts
related to the WSI Mortgage Loans are held by servicers for WSI and a WSI
Subsidiary.
SECTION 3.26. Servicing Sales and Mergers. Except as set forth in Section
3.26 of the WSI Disclosure Schedule, neither WSI nor any WSI Subsidiary is a
party to any contract or agreement (a) to acquire servicing rights in a "bulk"
transaction or (b) to sell servicing rights in a "bulk" transaction or on a flow
basis. Except as set forth in Section 3.26 of the WSI Disclosure Schedule, since
December 31, 1996, neither WSI nor any WSI Subsidiary has sold any servicing
rights.
SECTION 3.27. Advances. Except as set forth in Section 3.27 of the WSI
Disclosure Schedule, there are no pooling, participation, servicing or other
agreements to which WSI or any WSI Subsidiary is a party which obligate WSI or
any WSI Subsidiary to make servicing advances for principal and interest
payments with respect to defaulted or delinquent mortgage loans.
SECTION 3.28. Single Family Loans. Except as set forth in Section 3.28 of
the WSI Disclosure Schedule, all the WSI Mortgage Loans are valid and existing
and are secured by single family (i.e., one to four family) residential real
property. Except as set forth in Section 3.28 of the WSI Disclosure Schedule, to
the extent that a WSI Mortgage Loan is secured by property other than a single
family residential property, such WSI Mortgage Loan is not pledged under WSI's
or a WSI Subsidiary's warehouse lines of credit except as permitted thereby, and
no WSI Mortgage Loan has been sold to any person where WSI or such WSI
Subsidiary has any recourse obligation, except as set forth in Section 3.24 of
the WSI Disclosure Schedule.
SECTION 3.29. ARM Adjustments. Except as set forth in Section 3.29 of the
WSI Disclosure Schedule, with respect to each WSI Mortgage Loan where the
interest rate is not fixed for the term of the loan, to the knowledge of WSI,
the servicers for WSI and/or a WSI Subsidiary have, since the date WSI or a WSI
Subsidiary acquired such loan, and all prior servicers have (a) properly and
accurately entered into its system all data required to service the WSI Mortgage
Loan in accordance with all regulations, (b) properly and accurately adjusted
the mortgage interest rate on each interest adjustment date, (c) properly and
accurately adjusted the monthly payment on each payment adjustment date, (d)
properly and accurately calculated the amortization of principal and interest on
each payment adjustment date, in each case in compliance with all applicable
laws, rules and regulations and the related mortgage documents, and (e) executed
and delivered any and all necessary notices required under, and at such times
and in a form that complies with, all applicable laws, rules and regulations and
the terms of the related mortgage documents regarding the interest rate and
payment adjustments.
SECTION 3.30. WSI Sold Loans. The representations and warranties made by
WSI or any WSI Subsidiary in connection with any sale of mortgage loans or any
securitization of mortgage loans were true and correct in all material respects
at the time such representations and warranties were made, except where the
failure to be so true and correct, individually or in the aggregate, would not
have a WSI Material Adverse Effect.
SECTION 3.31. Mortgage Insurance. Except as set forth in Section 3.31 of
the WSI Disclosure Schedule, each WSI Mortgage Loan that is indicated in the
loan file to be insured by private mortgage insurance is so insured, WSI or a
WSI Subsidiary has complied with applicable provisions of the insurance, the
insurance is in full force and effect with respect to each such WSI Mortgage
Loan, and, to the knowledge of WSI, there does not exist any event or condition
which, but for the passage of time or the giving of notice or both, can result
in a revocation of any such insurance or constitute adequate grounds for the
applicable insurer to refuse to provide insurance payments thereunder.
SECTION 3.32. Insurance. Except as set forth in Section 3.32 of the WSI
Disclosure Schedule, each WSI Mortgage Loan has been covered by a policy of
hazard insurance and, to the extent required by any laws, rules and regulations
applicable to such WSI Mortgage Loan, flood insurance, all in a form usual and
customary in the industry and which is in full force and effect, except where
the failure to obtain such insurance would not have a WSI Material Adverse
Effect.
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SECTION 3.33. Title Insurance. Each WSI Mortgage Loan is, and each WSI
Sold Loan was at the time of sale, covered by an ALTA lender's title insurance
policy or other generally acceptable form of policy of insurance (or by opinion
of counsel if appropriate in the particular locality), and each such title
insurance policy is issued by a title insurer qualified to do business in the
jurisdiction where the collateral securing such loan is located, and insures the
originator and its successors and assigns as to the first or second priority
lien of the mortgage, as appropriate, in the original principal amount of the
WSI Mortgage Loan or WSI Sold Loan except where the failure to obtain such title
insurance would not have a WSI Material Adverse Effect. With respect to WSI
Mortgage Loans, WSI or the applicable WSI Subsidiary, as assignee of the
originator's rights, is an insured under such lender's title insurance policy,
and such lender's policy is in full force and effect. Neither WSI nor any WSI
Subsidiary nor to the knowledge of WSI, any servicer nor any prior servicer, has
performed any act or omission which would impair the coverage of such lender's
policy.
SECTION 3.34. Condemnation. Except as set forth in Section 3.34 of the WSI
Disclosure Schedule, neither WSI nor any WSI Subsidiary has any notice of or
knowledge of any proceeding pending or threatened for the partial or total
condemnation of any of the collateral securing any of the WSI Mortgage Loans,
and neither WSI nor any WSI Subsidiary has any notice or knowledge that all or
any part of such collateral has been or will be condemned, except where such
condemnation would not have a WSI Material Adverse Effect.
SECTION 3.35. Disclosure. No representation or warranty by WSI and the
Principal Stockholder in this Agreement and no statement contained in the WSI
Disclosure Schedule or any certificate delivered by WSI or the Principal
Stockholder to RBMG pursuant to this Agreement when taken together as a whole
contains any untrue statement of a material fact or omits any material fact
necessary to make the statements herein or therein not misleading.
SECTION 3.36. Regulatory Approvals. WSI is not aware of any reason why the
regulatory approvals required to be obtained by it to consummate the
transactions contemplated hereby would not be satisfied within the time frame
customary for transactions of the nature contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF RBMG
RBMG hereby represents and warrants to WSI and the Principal Stockholder
that:
SECTION 4.01. Organization and Qualification; Subsidiaries. Each of RBMG
and each Subsidiary of RBMG (the "RBMG Subsidiaries") has been duly organized
and is validly existing and in good standing (to the extent applicable) under
the laws of the jurisdiction of its incorporation or organization, as the case
may be, and has the requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as it is now being
conducted. Each of RBMG and each RBMG Subsidiary is duly qualified or licensed
to do business, and is in good standing (to the extent applicable), in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its business makes such qualification or licensing
necessary, except for such failures to be so qualified or licensed and in good
standing that would not, individually or in the aggregate, have a RBMG Material
Adverse Effect. For purposes of this Agreement, "RBMG Material Adverse Effect"
means any change in or effect on the business of RBMG and the RBMG Subsidiaries
that is, or is reasonably likely to be, materially adverse to the business,
assets (including intangible assets), liabilities (contingent or otherwise),
condition (financial or otherwise) or results of operations of RBMG and the RBMG
Subsidiaries taken as a whole.
SECTION 4.02. Certificate of Incorporation and Bylaws. The copies of
RBMG's Certificate of Incorporation and Bylaws that are incorporated by
reference as Exhibits to RBMG's Form 10-K for the period ending December 31,
1996 (the "RBMG 1996 10-K") are complete and correct copies thereof. Such
Certificate of Incorporation and Bylaws are in full force and effect. RBMG is
not in violation of any of the provisions of its Certificate of Incorporation or
Bylaws.
SECTION 4.03. Capitalization. The authorized capital stock of RBMG
consists of (i) 25,000,000 shares of RBMG Common Stock and (ii) 5,000,000 shares
of RBMG Preferred Stock. As of the date hereof, 20,255,080
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shares of RBMG Common Stock were issued and outstanding, all of which were
validly issued, fully paid and nonassessable, (ii) no shares of RBMG Common
Stock were held in the treasury of RBMG or by the RBMG Subsidiaries, (iii)
3,614,536 shares of RBMG Common Stock were reserved for future issuance pursuant
to agreements or arrangements under Section 4.03 of the Disclosure Schedule
delivered by RBMG to WSI prior to the execution of (and forming a part of) this
Agreement (the "RBMG Disclosure Schedule"). Except for (a) options granted
pursuant to agreements or arrangements described in Section 4.03 of the RBMG
Disclosure Schedule, (b) the merger agreements described in Section 4.03 of the
RBMG Disclosure Schedule and (c) the rights agreement described in Section 4.03
of the RBMG Disclosure Schedule, there are no options, warrants or other rights,
agreements, arrangements or commitments of any character to which RBMG is a
party or by which RBMG is bound obligating RBMG or any RBMG Subsidiary to issue
or sell any shares of capital stock of, or other equity interests in, RBMG or
any RBMG Subsidiary. Between January 1, 1997 and the date of this Agreement,
options for an aggregate of 323,500 shares of RBMG Common Stock have been
awarded under the Omnibus Stock Award Plan and 23,528 shares of restricted RBMG
Common Stock have been issued under the Employment Agreement between RBMG and
David W. Johnson, Jr. As of the date hereof, no shares of RBMG Preferred Stock
are issued and outstanding. All shares of RBMG Common Stock subject to issuance
as aforesaid, upon issuance prior to the Effective Time on the terms and
conditions specified in the instruments pursuant to which they are issuable,
will be duly authorized, validly issued, fully paid and nonassessable. Except as
set forth in Section 4.03 of the RBMG Disclosure Schedule, there are no material
outstanding contractual obligations of RBMG or any RBMG Subsidiary to
repurchase, redeem or otherwise acquire any shares of RBMG Common Stock or any
capital stock of any RBMG Subsidiary. Except as disclosed in Section 4.03 of the
RBMG Disclosure Schedule, each outstanding share of capital stock of each RBMG
Subsidiary is duly authorized, validly issued, fully paid and nonassessable and
each such share owned by RBMG or another RBMG Subsidiary is free and clear of
all security interests, liens, claims, pledges, options, rights of refusal,
agreements, limitations on RBMG's or such other RBMG Subsidiary's voting rights,
charges and other encumbrances of any nature whatsoever, except where the
failure to own such shares free and clear would not, individually or in the
aggregate, have an RBMG Material Adverse Effect. Except as set forth in Section
4.03 of the RBMG Disclosure Schedule, there are no material outstanding
contractual obligations of RBMG or any RBMG Subsidiary to provide funds to, or
make any material investment (in the form of a loan, capital contribution or
otherwise) in, any RBMG Subsidiary or any other person.
SECTION 4.04. Authority Relative to this Agreement. RBMG has all necessary
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and thereunder and to consummate the Merger (other
than the approval of this Agreement and the Merger contemplated hereby and the
Amended Certificate of Incorporation by the holders of a majority of the
outstanding shares of RBMG Common Stock at the RBMG Stockholders' Meeting (the
"RBMG Stockholder Vote") and the filing and recordation of the Certificate of
Merger as required by the DGCL). The execution and delivery of this Agreement by
RBMG and the consummation by RBMG of the Merger contemplated hereby have been
duly and validly authorized by all necessary corporate action, and no other
corporate proceedings on the part of RBMG are necessary to authorize this
Agreement, or to consummate the Merger (other than the RBMG Stockholder Vote and
the filing and recordation of the Certificate of Merger as required by the
DGCL). The board of directors of RBMG has approved the execution, delivery and
performance of this Agreement and the Merger and the other transactions provided
for herein in accordance with the DGCL. This Agreement has been duly executed
and delivered by RBMG and, assuming the due authorization, execution and
delivery by the other parties hereto, constitutes a legal, valid and binding
obligation of RBMG, enforceable against RBMG in accordance with its terms.
SECTION 4.05. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by RBMG does not, and the performance
by RBMG of its obligations hereunder and the consummation of the Merger will
not, (i) conflict with or violate any provision of the Certificate of
Incorporation or Bylaws of RBMG or any equivalent organizational documents of
any RBMG Subsidiary, (ii) assuming that all consents, approvals, authorizations
and permits described in Section 4.05(b) have been obtained and all filings and
notifications described in Section 4.05(b) have been made, conflict with or
violate any Law applicable to RBMG or any RBMG Subsidiary or by which any
property or asset of RBMG or any RBMG Subsidiary is bound or affected or (iii)
except as set forth in Section 4.05(a) of the RBMG Disclosure Schedule, result
in any breach of or constitute a default (or an event which with the giving of
notice or lapse of time or both would become a
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default) under, or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or other
encumbrance on any property or asset of RBMG or any RBMG Subsidiary pursuant to,
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation, except, with respect to
clauses (ii) and (iii), for any such conflicts, violations, breaches, defaults
or other occurrences which would neither, individually or in the aggregate, (A)
have a RBMG Material Adverse Effect nor (B) prevent or materially delay the
performance by RBMG of its obligations pursuant to this Agreement or the
consummation of the Merger.
(b) The execution and delivery of this Agreement does not, and the
performance by RBMG of its obligations hereunder and thereunder and the
consummation of the Merger will not, require any consent, approval,
authorization or permit of, or filing by RBMG with or notification by RBMG to,
any Governmental Entity or any other Person, except (i) for applicable
requirements of the Securities Exchange Act of 1934, as amended (together with
the rules and regulations promulgated thereunder, the "Exchange Act"), the
Securities Act, state securities or "blue sky" laws ("Blue Sky Laws"), the rules
and regulations of the NMS, state takeover laws, the premerger notification
requirements of the HSR Act, the filing of the Certificate of Merger as required
by the DGCL and as set forth in Section 4.05(b) of the RBMG Disclosure Schedule,
and (ii) where failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not (A) prevent or
materially delay the performance by RBMG of its obligations pursuant to this
Agreement or the consummation of the Merger or (B) individually or in the
aggregate, have a RBMG Material Adverse Effect.
SECTION 4.06. Permits; Compliance with Laws. Each of RBMG and the RBMG
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, establishment registrations, permits, easements, variances,
exceptions, consents, certificates, approvals and orders of any Governmental
Entity, necessary for RBMG or any RBMG Subsidiary to own, lease and operate its
properties and to purchase, originate and sell conforming and non-conforming
mortgage loans secured by residential properties or otherwise to carry on its
business as it is now being conducted (the "RBMG Permits"), except where the
failure to possess any RBMG Permits would not, individually or in the aggregate,
have an RBMG Material Adverse Effect, and, as of the date of this Agreement, no
suspension or cancellation of any of the RBMG Permits is pending or, to the
knowledge of RBMG, threatened. Neither RBMG nor any RBMG Subsidiary is in
conflict with, or in default or violation of, (i) any Law applicable to RBMG or
any RBMG Subsidiary or by which any property or asset of RBMG or any RBMG
Subsidiary is bound or affected or (ii) any RBMG Permits, except in the case of
clauses (i) and (ii) for any such conflicts, defaults or violations that would
not, individually or in the aggregate, have an RBMG Material Adverse Effect.
SECTION 4.07. SEC Filings; Financial Statements. (a) RBMG has timely filed
all forms, reports and documents required to be filed by it with the SEC since
January 1, 1994 through the date of this Agreement (collectively and as amended,
the "RBMG Reports"). Each RBMG Report (i) was prepared in all material respects
in accordance with the requirements of the Securities Act or the Exchange Act,
as the case may be, and (ii) did not at the time it was filed contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. No RBMG
Subsidiary is subject to the periodic reporting requirements of the Exchange Act
or required to file any form, report or other document with the SEC, the NMS or
any stock exchange.
(b) Each of the consolidated financial statements (including, in each case,
any notes thereto) contained in the RBMG Reports or Section 4.07(b) of the RBMG
Disclosure Schedule were prepared in accordance with U.S. GAAP applied on a
consistent basis throughout the periods indicated (except as may be indicated in
the notes thereto) and each presented fairly, in all material respects, the
consolidated financial position of RBMG and the consolidated RBMG Subsidiaries
as at the respective dates thereof and for the respective periods indicated
therein, except as otherwise noted therein (subject, in the case of unaudited
statements, to normal and recurring year-end adjustments which were not and are
not expected, individually or in the aggregate, to have a RBMG Material Adverse
Effect).
(c) Except as and to the extent set forth or reserved against on the
consolidated balance sheet of RBMG and its Subsidiaries as reported in the RBMG
Reports, including the notes thereto, and in Section 4.07(c) of the
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RBMG Disclosure Schedule, none of RBMG or any RBMG Subsidiary 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
notes thereto prepared in accordance with U.S. GAAP, except for liabilities or
obligations incurred in the ordinary course of business since January 1, 1997
that would not, individually or in the aggregate, have a RBMG Material Adverse
Effect.
SECTION 4.08. Absence of Certain Changes or Events. (a) Since January 1,
1997, except as contemplated by or as disclosed in this Agreement, or as set
forth in Section 4.08(a) of the RBMG Disclosure Schedule or as disclosed in any
RBMG Report filed since January 1, 1997, RBMG and the RBMG Subsidiaries have
conducted their businesses only in the ordinary course and in a manner
consistent with past practice and, since such date, there has not been (i) any
RBMG Material Adverse Effect, (ii) any event that could reasonably be expected
to prevent or materially delay the performance of its obligations pursuant to
this Agreement and the consummation of the Merger by RBMG, (iii) any material
change by RBMG in its accounting methods, principles or practices, (iv) any
declaration, setting aside or payment of any dividend or distribution in respect
of the shares of RBMG Common Stock, except for dividends in amounts consistent
with past practice, or any redemption, purchase or other acquisition of any of
RBMG's securities or (v) except in the ordinary course of business consistent
with past practice, any material increase in the compensation or benefits 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 the compensation payable or to become
payable to any executive officers of RBMG or any RBMG Subsidiary.
(b) Except as set forth in Section 4.08(b) of the RBMG Disclosure Schedule,
and except as to events, developments or conditions that have not had and are
not reasonably likely to have an RBMG Material Adverse Effect, since January 1,
1997, there have not been with respect to RBMG (i) any extraordinary losses
suffered or any damage, destruction, loss or casualty to property or assets of
RBMG with an aggregate value of more than $200,000, whether or not covered by
insurance, (ii) any assets mortgaged, pledged or made subject to any lien,
charge or other encumbrance except those so mortgaged, pledged or made subject
to any lien, charge or other encumbrance in the ordinary course of business,
(iii) any liability or obligation (absolute, accrued or contingent) incurred
except in the ordinary course of business, (iv) any claims, liabilities or
obligations (absolute, accrued or contingent) paid, discharged or satisfied,
other than the payment, discharge or satisfaction in the ordinary course of
business consistent with past practice of claims, liabilities and obligations
reflected or reserved against in the financial statements in the RBMG Reports or
incurred in the ordinary course of business consistent with past practice since
January 1, 1997, (v) any guaranteed checks, notes or accounts receivable which
have been written off as uncollectible, except write-offs in the ordinary course
of business consistent with past practice, (vi) any write-down of the value of
any asset or investment on the books or records of RBMG, except for depreciation
and amortization taken in the ordinary course of business consistent with past
practice, (vii) any cancellation of any debts or waiver of any claims or rights
of substantial value, or sale, transfer or other disposition of any properties
or assets (real, personal or mixed, tangible or intangible) of substantial
value, except, in each such case, in transactions in the ordinary course of
business consistent with past practice and which in any event do not exceed
$50,000 in the aggregate, (viii) any single capital expenditure or commitment in
excess of $1,000,000 for additions to property or equipment or aggregate capital
expenditures and commitments in excess of $1,000,000 for additions to property
or equipment, (ix) any increase of any reserves for contingent liabilities
(excluding any adjustment to bad debt reserves in the ordinary course of
business consistent with past practice), (x) any transactions entered into other
than in the ordinary course of business, (xi) any agreements to do any of the
foregoing or (xii) any other events, developments or conditions of any character
that have had or are reasonably likely to have an RBMG Material Adverse Effect.
SECTION 4.09. Accounting and Tax Matters. (a) Neither RBMG nor, to the
knowledge of RBMG, any of its Subsidiaries has taken or agreed to take any
action (other than actions contemplated by this Agreement) that would prevent
the Merger from qualifying for "pooling of interests" accounting treatment under
applicable U.S. GAAP, including, without limitation, applicable SEC accounting
standards, or would prevent the Merger from constituting a transaction
qualifying under Section 368(a) of the Code. RBMG is not aware of any agreement,
plan or other circumstance that would prevent the Merger from so qualifying
under Section 368(a) of the Code.
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(b) The representations and warranties made in RBMG's letter of compliance
with pooling of interests criteria relating to the Merger and addressed to Price
Waterhouse LLP will be true as of the date of such letter.
SECTION 4.10. Pooling Affiliates. Section 4.10 of the RBMG Disclosure
Schedule sets forth the names and addresses of those persons who are, in RBMG's
reasonable judgment, Pooling Affiliates of RBMG.
SECTION 4.11. Opinion of Financial Advisor. Prudential Securities
Incorporated ("Prudential") has delivered to the board of directors of RBMG its
written opinion to the effect that, as of the date of this Agreement, the terms
of the Merger are fair from a financial point of view to RBMG and its
stockholders. Prudential has authorized the inclusion of its opinion in the
Joint Proxy Statement (as defined in Section 6.01) and RBMG shall promptly,
after the date of this Agreement, deliver a signed copy of such opinion to WSI.
SECTION 4.12. Brokers. No broker, finder or investment banker (other than
Prudential) is entitled to any brokerage, finder's or other fee or commission in
connection with the Merger based upon arrangements made by or on behalf of RBMG.
RBMG has heretofore made available to WSI complete and correct copies of all
agreements between RBMG and Prudential pursuant to which such firm would be
entitled to any payment relating to the Merger.
SECTION 4.13. Mortgage Banking Licenses and Qualifications. (a) Except as
set forth on Section 4.13 to the RBMG Disclosure Schedule, RBMG (or a Subsidiary
of RBMG performing the origination or servicing of mortgages, as the case may
be) (i) has all certifications, authorizations, licenses, permits and other
approvals necessary to conduct its current mortgage banking business and (ii) is
in good standing under all applicable federal, state and local laws and
regulations thereunder as a mortgage lender and servicer, except where the
failure to have such certificates, authorizations, licenses, permits or
approvals or to be in good standing would not, individually or in the aggregate,
have a RBMG Material Adverse Effect.
(b) There is no pending or, to the knowledge of RBMG, threatened
cancellation or material reduction of any mortgage sale agreement to which RBMG
or any RBMG Subsidiary is a party, and the obligations of RBMG or any RBMG
Subsidiary under each such mortgage sale agreement are being performed by RBMG
or such RBMG Subsidiary, as the case may be, in all material respects in
accordance with its terms.
SECTION 4.14. Disclosure. No representation or warranty by RBMG in this
Agreement and no statement contained in the RBMG Disclosure Schedule or any
certificate delivered by RBMG to WSI pursuant to this Agreement when taken
together as a whole contains any untrue statement of a material fact or omits
any material fact necessary to make the statements herein or therein not
misleading.
SECTION 4.15. Regulatory Approvals. RBMG is not aware of any reason why
the regulatory approvals required to be obtained by it to consummate the
transactions contemplated hereby would not be satisfied within the time frame
customary for transactions of the nature contemplated hereby.
ARTICLE V
COVENANTS
SECTION 5.01. Conduct of Business by WSI Pending the Closing. WSI agrees
that, between the date of this Agreement and the Effective Time, except as set
forth in Section 5.01 of the WSI Disclosure Schedule or as expressly
contemplated by any other provision of this Agreement, unless RBMG shall
otherwise agree in writing, which agreement shall not be unreasonably withheld
or delayed, (x) except for the contemplated sale of a substantial portion of
WSI's loan production through securitization transactions, whole loan sales and
other loan sales in the ordinary course of business, the respective businesses
of WSI and the WSI Subsidiaries shall be conducted only in, and WSI and the WSI
Subsidiaries shall not take any action except in, the ordinary course of
business consistent with past practice and (y) WSI shall use its reasonable
efforts to keep available the services of such of the current officers,
significant employees and consultants of WSI and the WSI Subsidiaries and to
preserve the current relationships of WSI and the WSI Subsidiaries with such of
the customers, suppliers and other persons with which WSI and the WSI
Subsidiaries have significant business relations in order to preserve
substantially intact its business organization. By way of amplification and not
limitation, except as set forth in Section 5.01 of the WSI Disclosure Schedule
or as expressly contemplated by any other provision of this
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Agreement, neither WSI nor any WSI Subsidiary shall, between the date of this
Agreement and the Effective Time, directly or indirectly, do, or agree to do,
any of the following without the prior written consent of RBMG, which consent
shall not be unreasonably withheld or delayed:
(a) amend or otherwise change its Certificate of Incorporation or
Bylaws or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant, transfer, lease, license,
guarantee or encumber, or authorize the issuance, sale, pledge,
disposition, grant, transfer, lease, license or encumbrance of, (i) any
shares of capital stock of WSI or any WSI Subsidiary of any class, or
securities convertible into or exchangeable or exercisable for any shares
of such capital stock, or any options, warrants or other rights of any kind
to acquire any shares of such capital stock, or any other ownership
interest (including, without limitation, any phantom interest), of WSI or
any WSI Subsidiary (except for the issuance of a maximum of 24.99 shares of
WSI Class B Common Stock issuable to the Warrantholder pursuant to the WSI
Warrant and the shares of WSI Common Stock issuable upon conversion of the
WSI Class B Common Stock underlying the WSI Warrant); (ii) any property or
assets of WSI or any WSI Subsidiary, except in the ordinary course of
business; or (iii) any property or assets of WSI or any WSI Subsidiary in
an aggregate amount not in excess of $250,000, except sales, pledges and
transfers of loans and servicing rights in the ordinary course of business.
(c) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any interest in any
corporation, partnership, other business organization or person or any
division thereof or any assets, other than acquisitions of assets
(excluding the acquisition of a business or substantially all of the stock
or assets thereof) in the ordinary course of business consistent with past
practice, and any acquisitions for consideration, calculated as of the date
of execution of the definitive agreement for any such acquisition, that is
not, in the aggregate for all such acquisitions, in excess of $250,000;
(ii) incur any indebtedness for borrowed money or issue any debt securities
or assume, guarantee or endorse, or otherwise as an accommodation become
responsible for, the obligations of any person for borrowed money, except
for (A) indebtedness for borrowed money incurred in the ordinary course of
business and consistent with past practice or incurred to refinance
outstanding indebtedness for borrowed money existing on the date of this
Agreement, (B) other indebtedness for borrowed money with a maturity of not
more than one year in a principal amount not, in the aggregate, in excess
of $5,000,000 or (C) indebtedness for borrowed money incurred to finance
acquisitions permitted by clause (i) of this paragraph (c); (iii)
terminate, cancel or request any material change in, or agree to any
material change in, any WSI Material Contract or enter into any contract or
agreement material to the business, results of operations or financial
condition of WSI and the WSI Subsidiaries taken as a whole, in either case
other than in the ordinary course of business, consistent with past
practice; (iv) make or authorize any capital expenditure, other than
capital expenditures in the ordinary course of business consistent with
past practice that are not, in the aggregate, in excess of $200,000 for WSI
and the WSI Subsidiaries taken as a whole; or (v) enter into or amend any
contract, agreement, commitment or arrangement that, if fully performed,
would not be permitted under this Section 5.01(c);
(d) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock, except that any wholly owned WSI Subsidiary
may pay dividends or make other distributions to WSI or any other wholly
owned WSI Subsidiary;
(e) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(f) increase the compensation payable or to become payable to its
officers or employees, except for increases in accordance with past
practices in salaries or wages of employees or officers of WSI or any WSI
Subsidiary, or grant any rights to severance or termination pay to, or
enter into any employment or severance agreement which provides benefits
upon a change in control of WSI or any WSI Subsidiary that would be
triggered by the Reorganization with, any director, officer or other
employee of WSI or any WSI Subsidiary, who is not currently entitled to
such benefits from the Reorganization, or establish, adopt, enter into or
amend any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock,
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pension, retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or arrangement for
the benefit of any director, officer or employee of WSI or any WSI
Subsidiary, except for the "Key Employee Agreements" (as defined in Section
7.03(f) hereof) and the "Employee Agreements" (as defined in Section
7.03(g) hereof);
(g) take any action with respect to accounting policies or procedures,
other than actions in the ordinary course of business and consistent with
past practices or as required by U.S. GAAP;
(h) make any tax election or settle or compromise any material
federal, state or local United States income tax liability, or any income
tax liability of any other jurisdiction, other than those made in the
ordinary course of business consistent with past practice and those for
which specific reserves have been recorded on the 1996 Balance Sheet and
only to the extent of such reserves; or
(i) authorize or enter into any formal or informal agreement or
otherwise make any commitment to do any of the foregoing.
SECTION 5.02 Conduct of Business by RBMG Pending the Closing. RBMG agrees
that, between the date of this Agreement and the Effective Time, except as set
forth in Section 5.02 of the RBMG Disclosure Schedule or as expressly
contemplated by any other provision of this Agreement, unless WSI shall
otherwise agree in writing, which agreement shall not be unreasonably withheld
or delayed, (x) the respective businesses of RBMG and the RBMG Subsidiaries
shall be conducted only in, and RBMG and the RBMG Subsidiaries shall not take
any action except in, the ordinary course of business consistent with past
practice and (y) RBMG shall use its reasonable efforts to keep available the
services of such of the current officers, significant employees and consultants
of RBMG and the RBMG Subsidiaries and to preserve the current relationships of
RBMG and the RBMG Subsidiaries with such of the customers, suppliers and other
persons with which RBMG or any RBMG Subsidiary has significant business
relations in order to preserve substantially intact its business organization.
By way of amplification and not limitation, except as set forth in Section 5.02
of the RBMG Disclosure Schedule or as expressly contemplated by any other
provision of this Agreement, neither RBMG nor any RBMG Subsidiary shall, between
the date of this Agreement and the Effective Time, directly or indirectly, do,
or agree to do, any of the following without the prior written consent of WSI,
which consent shall not be unreasonably withheld or delayed:
(a) amend or otherwise change its Certificate of Incorporation or
Bylaws or equivalent organizational documents except as set forth in the
RBC Merger Agreement;
(b) issue, sell, pledge, dispose of, grant, transfer, lease, license,
guarantee or encumber, or authorize the issuance, sale, pledge,
disposition, grant, transfer, lease, license or encumbrance of, (i) any
shares of capital stock of RBMG or any RBMG Subsidiary of any class, or
securities convertible into or exchangeable or exercisable for any shares
of such capital stock, or any other options, warrants or other rights of
any kind to acquire any shares of such capital stock, or any other
ownership interest (including, without limitation, any phantom interest),
of RBMG or any RBMG Subsidiary (except for the issuance of (A) a maximum of
1,723,087 shares of RBMG Common Stock issuable pursuant to options
outstanding on the date of this Agreement, (B) the issuance of shares of
RBMG Common Stock pursuant to the merger agreements described in Section
4.03 of the RBMG Disclosure Schedule, (C) the issuance of preferred stock
purchase rights pursuant to the rights agreement described in Section 4.03
of the RBMG Disclosure Schedule, (D) the issuance of options to acquire
RBMG Common Stock and the issuance of shares pursuant thereto (which
options shall be issued at fair market value and otherwise in accordance
with normal practices of RBMG, or, in the case of options issued to Edward
J. Sebastian, Robert C. Walsh or David W. Johnson, Jr., such options shall
be approved by the Board of Directors of RBMG) and (E) the issuance of RBMG
Common Stock pursuant to the Stock Investment Plan and the Dividend
Reinvestment and Stock Purchase Plan); or (ii) any property or assets of
RBMG or any RBMG Subsidiary, except in the ordinary course of business and
except any property or assets of RBMG or any RBMG Subsidiary in an
aggregate amount not in excess of $1,000,000;
(c) (i) acquire (including, without limitation, by merger,
consolidation or acquisition of stock or assets) any interest in any
corporation, partnership, other business organization or person or any
division thereof or
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any assets, other than acquisitions of assets (excluding the acquisition of
a business or substantially all of the stock or assets thereof) in the
ordinary course of business consistent with past practice, and any
acquisitions for consideration, calculated as of the date of execution of
the definitive agreement for any such acquisition, that is not, in the
aggregate for all such acquisitions, in excess of $1,000,000; (ii) incur
any indebtedness for borrowed money or issue any debt securities or assume,
guarantee or endorse, or otherwise as an accommodation become responsible
for, the obligations of any person for borrowed money, except for (A)
indebtedness or obligations for borrowed money incurred in the ordinary
course of business and consistent with past practice or incurred to
refinance outstanding indebtedness for borrowed money existing on the date
of this Agreement, (B) other indebtedness or obligations for borrowed money
with a maturity of not more than one year in a principal amount not, in the
aggregate, in excess of $5,000,000 or (C) indebtedness for borrowed money
incurred to finance acquisitions permitted by clause (i) of this paragraph
(c); (iii) terminate, cancel or request any material change in, or agree to
any material change in, any contract or agreement material to the business,
results of operations or financial condition of RBMG and the RBMG
Subsidiaries taken as a whole (a "RBMG Material Contract") or enter into
any contract or agreement which would be a RBMG Material Contract, in
either case other than in the ordinary course of business, consistent with
past practice; (iv) make or authorize any capital expenditure, other than
capital expenditures in the ordinary course of business consistent with
past practice that are not, in the aggregate, in excess of $1,000,000 for
RBMG and the RBMG Subsidiaries taken as a whole; or (v) enter into or amend
any contract, agreement, commitment or arrangement that, if fully
performed, would not be permitted under this Section 5.01(c);
(d) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock, except (i) for any dividends not in excess of
$.03 per share of RBMG Common Stock for any calendar quarter and (ii) that
any RBMG Subsidiary may pay dividends or make other distributions to RBMG
or any other RBMG Subsidiary;
(e) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock other
than in connection with the RBC Acquisition;
(f) increase the compensation payable or to become payable to its
officers or employees, except for increases in accordance with past
practices in salaries or wages of employees or officers of RBMG or any RBMG
Subsidiary, or grant any rights to severance or termination pay to, or
enter into any employment or severance agreement which provides benefits
upon a change in control of RBMG or any RBMG Subsidiary that would be
triggered by the Reorganization with, any director, officer or other
employee of RBMG or any RBMG Subsidiary, who is not currently entitled to
such benefits from the Reorganization, or establish, adopt, enter into or
amend any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any director, officer
or employee of RBMG or any RBMG Subsidiary;
(g) make any tax election or settle or compromise any material
federal, state or local United States income tax liability, or any income
tax liability of any other jurisdiction, other than those made in the
ordinary course of business consistent with past practice and those for
which specific reserves have been recorded in the financial statements in
the RBMG Reports and only to the extent of such reserves;
(h) take any action with respect to accounting policies or procedures,
other than actions in the ordinary course of business and consistent with
past practices or as required by U.S. GAAP; or
(i) authorize or enter into any formal or informal agreement or
otherwise make any commitment to do any of the foregoing.
SECTION 5.03. Cooperation; Steering Committee. Upon the execution and
delivery of this Agreement, WSI and RBMG shall establish a committee (the
"Steering Committee") for the purpose of, to the extent permitted by applicable
Laws, facilitating the efficient combination of the respective businesses of WSI
and RBMG as promptly as practicable following the Effective Time. The Steering
Committee shall consist of the
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following individuals: Edward J. Sebastian, David W. Johnson, Jr., Robert C.
Walsh and James Walsh. The Steering Committee shall be dissolved as of the
Effective Time.
SECTION 5.04. Notices of Certain Events. Each of RBMG and WSI shall give
prompt notice to the other of (i) any notice or other communication from any
person alleging that the consent of such person is or may be required in
connection with the Merger; (ii) any notice or other communication from any
Governmental Entity in connection with the Merger; (iii) any actions, suits,
claims, investigations or proceedings commenced or, to its knowledge, threatened
against, relating to or involving or otherwise affecting WSI, RBMG, the WSI
Subsidiaries or the RBMG Subsidiaries that relate to the consummation of the
Merger; (iv) the occurrence of a default or event that, with the giving of
notice or lapse of time or both, will become a default under any WSI Material
Contract or any RBMG Material Contracts; and (v) any change that is reasonably
likely to result in a WSI Material Adverse Effect or a RBMG Material Adverse
Effect or is reasonably likely to delay or impede the ability of any of WSI or
RBMG to perform its respective obligations pursuant to this Agreement and to
effect the consummation of the Merger.
SECTION 5.05. Access to Information; Confidentiality. (a) Except as
required pursuant to any confidentiality agreement or similar agreement or
arrangement to which WSI or RBMG or any of the WSI Subsidiaries or RBMG
Subsidiaries is a party or pursuant to applicable Law or the regulations or
requirements of any stock exchange or other regulatory organization with whose
rules a party hereto is required to comply, from the date of this Agreement to
the Effective Time, WSI and RBMG shall (and shall cause the WSI Subsidiaries and
the RBMG Subsidiaries, respectively, to): (i) provide to the other (and its
officers, directors, employees, accountants, consultants, legal counsel, agents
and other representatives (collectively, "Representatives")) access at
reasonable times upon prior notice to its and its Subsidiaries' officers,
employees, agents, properties, offices and other facilities and to the books and
records thereof and (ii) furnish promptly such information concerning its and
its Subsidiaries' business, properties, contracts, assets, liabilities and
personnel as the other party or its Representatives may reasonably request. No
investigation conducted pursuant to this Section 5.05 shall affect or be deemed
to modify any representation or warranty made in this Agreement.
(b) The parties hereto shall comply with, and shall cause their respective
Representatives to comply with, all of their respective obligations under the
Confidentiality Agreement dated February, 1997, (the "Confidentiality
Agreement") by and among WSI, RBC and RBMG with respect to the information
disclosed pursuant to this Section 5.05.
SECTION 5.06. No Solicitation of Transactions. (a) Each of RBMG and WSI
shall not, directly or indirectly, and shall instruct its officers, directors,
employees, subsidiaries, agents or advisors or other representatives (including,
without limitation, any investment banker, attorney or accountant retained by
it) not to, directly or indirectly, solicit, initiate or knowingly encourage
(including by way of furnishing non-public information), or take any other
action knowingly to facilitate, any inquiries or the making of any proposal or
offer (including, without limitation, any proposal or offer to its shareholders)
that constitutes, or may reasonably be expected to lead to, any Competing
Transaction, or enter into or maintain or continue discussions 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 the officers, directors or employees of such party or any of its
subsidiaries, or any investment banker, financial advisor, attorney, accountant
or other representative retained by such party or any of such party's
subsidiaries, to take any such action; provided, however, that nothing contained
in this Section 5.06 shall prohibit the Board of Directors of RBMG from
furnishing information to, or entering into discussions or negotiations with,
any person in connection with an unsolicited (from the date of this Agreement)
proposal by such person to acquire RBMG pursuant to a merger, consolidation,
share exchange, tender offer, exchange offer, business combination or other
similar transaction or to acquire all or substantially all of the assets of RBMG
or any of its subsidiaries, if, and only to the extent that, such Board of
Directors, after consultation with outside legal counsel (which may include its
regularly engaged outside legal counsel), determines in good faith that such
action is required for such Board of Directors to comply with its duties to its
stockholders imposed by applicable Law. Each of RBMG and WSI shall promptly
notify the other if any proposal or offer, or any inquiry or contact with any
person with respect thereto, regarding a Competing Transaction is made. Nothing
contained in this Section 5.06 shall prohibit the Board of Directors of RBMG
from complying with Rule 14e-2 promulgated under the Exchange Act with regard to
a tender or exchange offer.
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(b) A "Competing Transaction" means any of the following involving RBMG or
WSI, as the case may be (other than the Merger contemplated by this Agreement
and the RBC Acquisition): (i) a merger, consolidation, share exchange, business
combination or other similar transaction, (ii) any sale, lease, exchange,
transfer or other disposition of 15 percent or more of the assets of RBMG and
the RBMG Subsidiaries taken as a whole or 15 percent or more of the assets of
WSI and the WSI Subsidiaries taken as a whole, as the case may be, or (iii) a
tender offer or exchange offer for 15 percent or more of the outstanding voting
securities of such party.
SECTION 5.07. Letters of Accountants. Each of WSI and RBMG shall use all
reasonable efforts to cause to be delivered to the other a "comfort" letter of
each of KPMG and Price Waterhouse LLP, respectively, each such letter dated and
delivered as of the date the Registration Statement (as defined in Section 6.01)
shall have become effective and as of the Effective Time, and addressed to WSI
and RBMG, respectively, in form and substance reasonably satisfactory to the
recipient thereof and reasonably customary in scope and substance for letters
delivered by independent public accountants in connection with a merger such as
is contemplated by this Agreement.
SECTION 5.08. Plan of Reorganization. This Agreement is intended to
constitute a "plan of reorganization" within the meaning of Section 1.368-2(g)
of the income tax regulations promulgated under the Code. From and after the
date of this Agreement, each party hereto shall use all reasonable efforts to
cause the Merger to qualify, and shall not, without the prior written consent of
the other parties hereto, knowingly take any actions or cause any actions to be
taken which could prevent the Merger from qualifying as a reorganization under
the provisions of Section 368(a) of the Code. WSI agrees to use its reasonable
best efforts to acquire from each holder of five percent of its Common Stock the
stockholder tax certificate substantially in the form contained in Exhibit 5.08.
Such certificate shall form the basis of any opinion of counsel regarding the
tax treatment of the Merger. In the event that counsel is unable to issue its
opinion to the effect that the Merger will qualify as a reorganization under the
provisions of Section 368(a) of the Code as described in Section 7.02(c) hereof,
then the parties hereto agree to negotiate in good faith to restructure the
Merger in order that such opinion can be issued. Following the Effective Time,
and consistent with any such consent, none of the Surviving Corporation, WSI,
RBMG, nor any of their affiliates shall knowingly take any action or knowingly
cause any action to be taken which would cause the Merger to fail to qualify as
a reorganization under Section 368(a) of the Code.
SECTION 5.09. Subsequent Financial Statements. Prior to the Effective Time
RBMG shall promptly deliver to WSI copies of each RBMG Report filed by RBMG with
the SEC. Prior to the Effective Time, WSI shall promptly deliver to RBMG copies
of all monthly financial reports prepared by WSI and copies of all other
financial and other information regarding WSI and its subsidiaries reasonably
requested by RBMG.
SECTION 5.10. Control of Operations. Nothing contained in this Agreement
shall give WSI, directly or indirectly, the right to control or direct the
operations of RBMG or the RBMG Subsidiaries prior to the Effective Time. Nothing
contained in this Agreement shall give RBMG, directly or indirectly, the right
to control or direct the operations of WSI or the WSI Subsidiaries prior to the
Effective Time. Prior to the Effective Time, each of WSI and RBMG shall
exercise, consistent with the terms and conditions of this Agreement, complete
control and supervision over its respective operations.
SECTION 5.11. Further Action; Consents; Filings. Upon the terms and
subject to the conditions hereof, each of the parties hereto shall use all
reasonable efforts to (i) 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 or otherwise to consummate and make effective the Merger, (ii)
obtain from Governmental Entities any consents, licenses, permits, waivers,
approvals, authorizations or orders required to be obtained or made by WSI,
RBMG, or the Surviving Corporation or any of their subsidiaries in connection
with the authorization, execution and delivery of this Agreement and the
consummation of the Merger and (iii) make all necessary filings, and thereafter
make any other required or appropriate submissions, with respect to this
Agreement and the Merger required under (A) the rules and regulations of the
NMS, (B) the Securities Act, the Exchange Act and any other applicable federal
or state securities Laws, (C) the HSR Act and (D) any other applicable Law. The
parties hereto shall cooperate and consult with each other in connection with
the making of all such filings, including by providing copies of all such
documents to the non-filing parties and their advisors prior to filing. No party
shall consent to any voluntary extension of any statutory deadline or waiting
period or to any voluntary delay of the consummation of the
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Merger at the behest of any Governmental Entity without the consent and
agreement of the other parties hereto, which consent shall not be unreasonably
withheld or delayed. The Principal Stockholder further agrees to execute and
deliver on behalf of himself and the WSI Stockholders all agreements
contemplated hereby, including but not limited to the Escrow Trust Agreement,
the Registration Rights Agreement (as hereinafter defined), and the Stockholders
Agreement (as hereinafter defined).
SECTION 5.12. Pooling. From and after the date of this Agreement, none of
the parties hereto, or any of their respective Subsidiaries, shall knowingly
take any action, or knowingly fail to take any action, other than actions which
such parties are required to take or abstain from taking pursuant to this
Agreement or the Ancillary Agreements, which action or failure to act is
reasonably likely to jeopardize the treatment of the Merger as a "pooling of
interests" for accounting purposes. From and after the date of this Agreement,
each of the parties hereto shall take all reasonable actions necessary to cause
the Merger to be characterized as a pooling of interests for accounting
purposes.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Registration Statement; Joint Proxy Statement. (a) As
promptly as practicable after the execution of this Agreement, RBMG and WSI
shall jointly prepare and RBMG shall file with the SEC a document or documents
that will constitute (i) the prospectus forming part of the registration
statement on Form S-4 of RBMG (together with all amendments thereto, the
"Registration Statement"), in connection with the registration under the
Securities Act of the RBMG Common Stock to be issued to WSI's stockholders
pursuant to the Merger and (ii) the Joint Proxy Statement with respect to the
Merger relating to the special meeting of each of RBMG's stockholders (the "RBMG
Stockholders' Meeting") and WSI's stockholders (the "WSI Stockholders' Meeting"
and together with the RBMG Stockholders' Meeting, the "Stockholders' Meetings"),
to be held to consider approval of this Agreement and the Merger contemplated
hereby (such document, together with any amendments thereto, the "Joint Proxy
Statement"). Copies of the Joint Proxy Statement shall be provided to the NMS in
accordance with the rules of such market. Each of the parties hereto shall use
all reasonable efforts to cause the Registration Statement to become effective
as promptly as practicable, and, prior to the effective date of the Registration
Statement, the parties hereto shall take all action required under any
applicable Laws in connection with the issuance of shares of RBMG Common Stock
pursuant to the Merger. WSI and RBMG, as the case may be, shall furnish all
information concerning WSI and RBMG as the other party may reasonably request in
connection with such actions and the preparation of the Registration Statement
and Joint Proxy Statement. As promptly as practicable after the effective date
of the Registration Statement, the Joint Proxy Statement shall be mailed to the
stockholders of RBMG and WSI. Each of the parties hereto shall cause the Joint
Proxy Statement to comply as to form and substance in all material respects with
the applicable requirements of (i) the Exchange Act and (ii) the Securities Act.
(b) (i) The Joint Proxy Statement shall include the approval of the Merger
and recommendation of the Special Committee and of the Board of Directors of
RBMG to RBMG's stockholders that they vote in favor of approval of this
Agreement and the Merger contemplated hereby; provided, however, that the Board
of Directors of RBMG may, at any time prior to the Effective Time, withdraw,
modify or change any such recommendation to the extent that the Board of
Directors of RBMG determines in good faith, after consultation with outside
legal counsel (who may be RBMG's regularly engaged outside legal counsel), that
such withdrawal, modification or change of its recommendation is required by its
fiduciary duties to RBMG's stockholders under applicable Law and prior to such
determination any person (other than WSI) shall have made a public announcement
or otherwise communicated with RBMG with respect to a Competing Transaction
that, as determined by the Board of Directors of RBMG after consulting with its
outside legal counsel (who may be its regularly retained outside legal counsel)
and financial advisors, contains terms more favorable to the stockholders of
RBMG than those provided for in the Reorganization. In addition, the Joint Proxy
Statement shall include the opinion of Prudential referred to in Section 4.11.
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(ii) The Joint Proxy Statement shall include the approval of the Merger and
recommendation of the Board of Directors of WSI to WSI's stockholders that they
vote in favor of approval of this Agreement and the Merger contemplated hereby.
(c) No amendment or supplement to the Joint Proxy Statement or the
Registration Statement shall be made without the approval of RBMG and WSI, which
approval shall not be unreasonably withheld or delayed. Each of the parties
hereto shall advise the other parties hereto, promptly after it receives notice
thereof, of the time when the Registration Statement has become effective or any
supplement or amendment has been filed, of the issuance of any stop order, of
the suspension of the qualification of the RBMG Common Stock issuable in
connection with the Merger for offering or sale in any jurisdiction, or of any
request by the SEC or the NMS for amendment of the Joint Proxy Statement or the
Registration Statement or comments thereon and responses thereto or requests by
the SEC for additional information.
(d) The information supplied by WSI for inclusion in the Registration
Statement and the Joint Proxy Statement shall not, at (i) the time the
Registration Statement is filed with the SEC, (ii) if different, the time the
Registration Statement is declared effective, (iii) the time the Joint Proxy
Statement (or any amendment thereof or supplement thereto) is first mailed to
the stockholders of RBMG and WSI, (iv) the time of the RBMG Stockholders'
Meeting, (v) the time of the WSI Stockholders' Meeting and (vi) the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. If at any time prior to the Effective Time, any event or
circumstances relating to WSI or any WSI Subsidiary, or their respective
officers or directors, should be discovered by WSI that as a result of which it
is necessary to amend or supplement the Registration Statement or Joint Proxy
Statement in order that the Registration Statement or Joint Proxy Statement will
not include any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein not misleading in light
of the circumstances under which they were made, WSI shall promptly inform RBMG.
(e) The information supplied by RBMG for inclusion in the Registration
Statement and Joint Proxy Statement shall not, at (i) the time the Registration
Statement is filed with the SEC, (ii) if different, the time the Registration
Statement is declared effective, (iii) the time the Joint Proxy Statement (or
any amendment thereof or supplement thereto) is first mailed to the stockholders
of RBMG and WSI, (iv) the time of the RBMG Stockholders' Meeting, (v) the time
of the WSI Stockholders' Meeting and (vi) the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. If, at any time
prior to the Effective Time, any event or circumstances relating to RBMG or any
RBMG Subsidiary, or their respective officers or directors, should be discovered
by RBMG that as a result of which it is necessary to amend or supplement the
Registration Statement or Joint Proxy Statement in order that the Registration
Statement or Joint Proxy Statement will not include any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein not misleading in light of the circumstances under which they
were made, RBMG shall promptly inform WSI. All documents that RBMG is
responsible for filing with the SEC in connection with the Merger will comply as
to form in all material respects with the applicable requirements of the
Securities Act and the Exchange Act.
SECTION 6.02. Stockholders' Meetings. RBMG shall call and hold the RBMG
Stockholders' Meeting as promptly as practicable for the purpose of voting upon
the approval of this Agreement and the Merger contemplated hereby and the
Amended Certificate of Incorporation. WSI shall call and hold the WSI
Stockholders' Meeting as promptly as practicable for the purpose of voting upon
the approval of the Agreement and the Merger contemplated hereby, and each of
RBMG and WSI shall use its reasonable efforts to hold the Stockholders' Meetings
on the same day and as soon as practicable after the date on which the
Registration Statement becomes effective. RBMG shall use its reasonable efforts
to solicit from its stockholders proxies in favor of the approval of this
Agreement and the Merger contemplated hereby and the Amended Certificate of
Incorporation pursuant to the Joint Proxy Statement, and shall take all other
action necessary or advisable to secure the vote or consent of stockholders
required by the DGCL or applicable NMS requirements to obtain such approval,
except to the extent that the Board of Directors of RBMG determines in good
faith after consultation with outside legal counsel (who may be RBMG's regularly
engaged outside legal counsel) that the withdrawal,
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modification or change of its recommendation is required by its fiduciary duties
to RBMG's stockholders under applicable Law and prior to such determination any
person (other than WSI) shall have made a public announcement or otherwise
communicated to RBMG with respect to a Competing Transaction that, as determined
by the Board of Directors of RBMG after consulting with its outside legal
counsel (who may be its regularly retained outside legal counsel) and financial
advisors, contains terms more favorable to the stockholders of RBMG than those
provided for in the Reorganization. WSI shall use its reasonable efforts to
solicit from its stockholders proxies in favor of the approval of this Agreement
and the Merger contemplated hereby pursuant to the Joint Proxy Statement and
shall take all other action necessary or advisable to secure the vote or consent
of stockholders required by the DGCL to obtain such approval. Each of the
parties hereto shall take all other reasonable action necessary or advisable to
promptly and expeditiously secure any vote or consent of stockholders required
by applicable Law and RBMG's and WSI's Certificate of Incorporation and Bylaws
to effect the Merger.
SECTION 6.03. Employee Benefits Matters. (a) Except as otherwise provided
herein, each of the WSI Benefit Plans and the RBMG Benefit Plans (as defined
below) in effect as of the Effective Time shall be maintained in effect with
respect to the employees or former employees of WSI and the WSI Subsidiaries and
of RBMG and the RBMG Subsidiaries, respectively, who are covered by such benefit
plans immediately prior to the Closing Date until RBMG otherwise determines at
or after the Effective Time; provided, however, that nothing contained herein
shall limit any reserved right in any such WSI Benefit Plan or RBMG Benefit
Plan, as the case may be, to amend, modify, suspend, revoke or terminate any
such plan. "RBMG Benefit Plans" means employee benefit plans, programs,
arrangements and contracts (including, without limitation, any "employee benefit
plan", as defined in Section 3(3) of ERISA) maintained or contributed to by RBMG
or any RBMG Subsidiary, or with respect to which WSI or any WSI Subsidiary could
incur liability under Section 4069, 4212(c) or 4204 of ERISA.
(b) Prior to the Effective Time, the Steering Committee shall develop short
and long-term incentive compensation arrangements for RBMG which are to be
implemented after the Effective Time and make appropriate adjustments, if any,
to the performance goals, target awards and any other relevant criteria under
the incentive compensation plans of WSI and RBMG that are in effect as of the
Effective Time to take the Reorganization into account. In addition, the
Steering Committee shall conduct a review of WSI's and RBMG's respective benefit
plans following the execution of this Agreement in order to coordinate the
provision of benefits after the Effective Time and to eliminate duplicate
benefits, including, without limitation, through the establishment by RBMG of
replacement benefit plans (the "RBMG Replacement Plans"). Each participant in
any WSI Benefit Plan or RBMG Benefit Plan that is replaced by a RBMG Replacement
Plan shall receive credit for purposes of eligibility to participate, vesting,
benefit accrual and eligibility to receive benefits under any RBMG Replacement
Plan for service credited for the corresponding purpose under such benefit plan;
provided, however, that such crediting of service shall not operate to duplicate
any benefit to any such participant of the funding of any such benefit.
(c) With respect to any WSI Benefit Plan or RBMG Benefit Plan under which
the delivery of WSI Common Stock or RBMG Common Stock, as the case may be, is
required upon payment of benefits, grant of awards or exercise of options (the
"Stock Plans"), RBMG shall take all corporate action necessary or appropriate to
(i) obtain stockholder approval with respect to such plan to the extent such
approval is required for purposes of the Code or other applicable Law, or to
enable such plan to comply with Rule 16b-3 promulgated under the Exchange Act,
(ii) reserve for issuance under such plan or otherwise provide a sufficient
number of shares of RBMG Common Stock for delivery upon payment of benefits,
grant of awards or exercise of options under such plan and (iii) as soon as
practicable after the Effective Time, file registration statements on Form S-3
or Form S-8, as appropriate (or any successor or other appropriate forms), with
respect to the shares of RBMG Common Stock subject to such plan to the extent
such registration statement is required under applicable law, and RBMG shall use
its reasonable efforts to maintain the effectiveness of such registration
statements (and maintain the current status of the prospectuses contained
therein) for so long as such benefits and grants remain payable and such options
remain outstanding. With respect to those individuals who subsequent to the
Merger will be subject to the reporting requirements under Section 16(a) of the
Exchange Act, RBMG shall administer the Stock Plans, where applicable, in a
manner that complies with Rule 16b-3 promulgated under the Exchange Act.
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(d) Without limiting the applicability of the foregoing each of the parties
hereto shall take all actions as are necessary to ensure that WSI shall not be,
at the Effective Time, bound by any options, stock appreciation rights, warrants
or other rights or agreements which would entitle any person, other than RBMG,
to own any capital stock of the Surviving Corporation or to receive any payment
in respect thereof, and all WSI Benefit Plans conferring any rights with respect
to Shares or other capital stock of WSI shall be deemed hereby to be amended to
be in conformity with this Section 6.03.
SECTION 6.04. Executive Officers. At the Effective Time (i) Edward J.
Sebastian shall hold the position of Chairman and Chief Executive Officer of
RBMG, (ii) Robert C. Walsh shall hold the position of President of RBMG and
(iii) David W. Johnson, Jr. shall hold the position of Vice Chairman of RBMG and
Managing Director of RBMG's prime mortgage lending operations. If any of such
persons is unable or unwilling to hold such offices as set forth above, his
successor shall be selected by the Board of Directors of RBMG in accordance with
its Bylaws.
SECTION 6.05. Pooling Affiliates. (a) WSI shall use its reasonable efforts
to deliver or cause to be delivered to RBMG, prior to the Effective Time, an
Affiliate Letter in the form attached hereto as Exhibit 6.05(a) (the "WSI
Affiliate Letter"), executed by each of the Pooling Affiliates of WSI.
(b) RBMG shall use its reasonable efforts to deliver or cause to be
delivered to WSI, prior the Effective Time, an Affiliate Letter in the form
attached hereto as Exhibit 6.05(b) (the "RBMG Affiliate Letter"), executed by
each of the Pooling Affiliates of RBMG.
SECTION 6.06. Directors' and Officers' Indemnification. (a) The
Certificate of Incorporation of WSI and the Certificate of Incorporation of RBMG
and the Bylaws of WSI and RBMG, as the case may be, shall contain the
indemnification provisions that are set forth, as of the date of this Agreement,
in the Certificate of Incorporation of WSI, the Certificate of Incorporation of
RBMG and the Bylaws of WSI and RBMG, as the case may be, which provisions shall
not be amended, repealed or otherwise modified for a period of six years from
the Effective Time in any manner that would affect adversely the rights
thereunder of individuals who at or at any time prior to the Effective Time were
directors, officers, employees, fiduciaries or agents of WSI or RBMG,
respectively.
(b) This Section 6.06 is intended to be for the benefit of, and shall be
enforceable by, the indemnified parties, their heirs and personal
representatives and shall be binding on WSI and RBMG and their respective
successors and assigns.
(c) Notwithstanding anything to the contrary contained herein, RBMG and the
Surviving Corporation shall, and RBMG shall cause the Surviving Corporation to,
assume and perform all obligations of WSI arising under any indemnification
agreement entered into prior to the date hereof between WSI and certain officers
and directors of WSI.
(d) From and after the Effective Time, RBMG agrees that it shall indemnify
and hold harmless each present and former director and officer of WSI and RBMG
determined as of the Effective Time (the "Indemnified Parties"), against any
costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages or liabilities (collectively, "Costs") incurred in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of or pertaining
to matters existing or occurring at or prior to the Effective Time, whether
asserted or claimed prior to, at or after the Effective Time, to the fullest
extent that WSI and RBMG would have been permitted under Delaware law, and their
respective charter documents (each as in effect on the date hereof) to indemnify
such Indemnified Parties (and RBMG shall also advance expenses as incurred to
the fullest extent permitted under applicable Law; provided, however, that the
Indemnified Party to whom expenses are advanced provides an undertaking to repay
such advances if it is ultimately determined pursuant to a final, non-appealable
judgment by a court of competent jurisdiction that such Indemnified Party is not
entitled to indemnification).
(e) To the extent paragraph (d) shall not serve to indemnify and hold
harmless any Indemnified Party, for a period of six years after the date hereof,
RBMG shall, subject to the terms set forth herein, indemnify and hold harmless,
to the fullest extent permitted under applicable Law (and RBMG shall also
advance expenses as incurred to the fullest extent permitted under applicable
Law; provided, however, that the Indemnified Party to
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whom expenses are advanced provides an undertaking to repay such advances if it
is ultimately determined that such Indemnified Party is not entitled to
indemnification), each Indemnified Party against any Cost incurred in connection
with any claim, action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative, arising out of or pertaining to the
transactions contemplated by this Agreement; provided, further, however, that
RBMG shall not be required to indemnify any Indemnified Party pursuant hereto if
it shall be determined that the Indemnified Party acted in bad faith and not in
a manner such Indemnified Party believed to be in or not opposed to the best
interests of WSI or RBMG, as the case may be.
(f) Any Indemnified Party wishing to claim indemnification under paragraphs
(d) or (e) of this Section 6.06, upon learning of any such claim, action, suit,
proceeding or investigation, shall promptly notify RBMG thereof, but the failure
to so notify shall not relieve RBMG of any liability it may have to such
Indemnified Party except to the extent that such failure materially prejudices
RBMG. In the event of any such claim, action, suit, proceeding or investigation
(whether arising before or after the Effective Time), (i) RBMG shall have the
right to assume the defense thereof and RBMG shall not be liable to such
Indemnified Parties for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Parties in connection with
the defense thereof, except that if RBMG elects not to assume such defense or
counsel for the Indemnified Parties advises that there are issues which raise
conflicts of interest between RBMG and the Indemnified Parties, the Indemnified
Parties may retain counsel satisfactory to them, and RBMG shall pay all
reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; provided, however, that RBMG shall
be obligated pursuant to this paragraph (f) to pay for only one firm of counsel
for all Indemnified Parties in any jurisdiction unless the use of one counsel
for such Indemnified Parties would present such counsel with a conflict of
interest, (ii) the Indemnified Parties shall cooperate in the defense of any
such matter and (iii) RBMG shall not be liable for any settlement effected
without its prior written consent; and provided further, however, that RBMG
shall not have any obligation hereunder to any Indemnified Party when and if a
court of competent jurisdiction shall ultimately determine, and such
determination shall have become final, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
Law. Notwithstanding the foregoing, if such indemnity is not available with
respect to any Indemnified Party, then RBMG and the Indemnified Party shall
contribute to the amount payable in such proportion as is appropriate to reflect
relative faults and benefits.
(g) If RBMG or any of its successors or assigns (i) shall consolidate with
or merge into any other corporation or entity and shall not be the continuing or
surviving corporation or entity in such consolidation or merger or (ii) shall
transfer all or substantially all of its properties and assets to any
individual, corporation or other entity, then and in each such case, proper
provisions shall be made so that the successors and assigns of RBMG shall assume
all of the obligations set forth in this Section 6.06.
SECTION 6.07. No Shelf Registration. RBMG shall not be required to amend
or maintain the effectiveness of the Registration Statement for the purpose of
permitting resale of the shares of RBMG Common Stock received pursuant hereto by
the persons who may be deemed to be "affiliates" of WSI or RBMG within the
meaning of Rule 145 promulgated under the Securities Act.
SECTION 6.08. Public Announcements. The initial press release concerning
the Reorganization shall be a joint press release and, thereafter, WSI and RBMG
shall consult with each other before issuing any press release or otherwise
making any public statements with respect to this Agreement or the
Reorganization and shall not issue any such press release or make any such
public statement without the prior written approval of the other parties hereto,
except to the extent that RBMG may be required by applicable Law or the
requirements of the NMS, in which case RBMG shall use its reasonable efforts to
consult with WSI before issuing any such release or making any such public
statement.
SECTION 6.09. NMS Additional Listing. Each of the parties hereto shall use
its reasonable efforts to obtain, prior to the Effective Time, approval for
additional listing on the NMS, effective upon the official notice of issuance,
of the shares of RBMG Common Stock into which the Shares will be converted
pursuant to Article II hereof.
SECTION 6.10. Blue Sky. Each of the parties hereto shall use all
reasonable efforts to obtain, prior to the Effective Time, all necessary blue
sky permits and approvals required under Blue Sky Laws to permit the
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distribution of the shares of RBMG Common Stock to be issued in accordance with
the provisions of the Agreement.
SECTION 6.11. Headquarters. WSI and RBMG agree that the Bylaws of RBMG
will provide that the corporate headquarters of RBMG shall be located in
Columbia, South Carolina.
SECTION 6.12. Post-Merger RBMG Board of Directors. At the Effective Time,
the total number of persons serving on the Board of Directors of RBMG shall be
eight and shall be those six persons set forth on Exhibit 6.12 hereto (unless
otherwise agreed in writing by WSI and RBMG prior to the Effective Time) and two
additional persons to be nominated by Edward J. Sebastian and David W. Johnson,
Jr. and approved by the RBMG Board of Directors, including approval of a
majority of Messrs. John C. Baker, Stuart M. Cable, Boyd M. Guttery, and John O.
Wolcott.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01. Conditions to the Obligations of Each Party to Consummate the
Merger. The obligations of the parties hereto to consummate the Merger, or to
permit the consummation of the Merger, are subject to the satisfaction or, if
permitted by applicable Law, waiver of the following conditions:
(a) the Registration Statement shall have been declared effective by
the SEC under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued by the
SEC and no proceeding for that purpose shall have been initiated by the SEC
and not concluded or withdrawn;
(b) each of this Agreement and the Merger and the Amended Certificate
of Incorporation of RBMG shall have been duly approved by the requisite
vote of stockholders of RBMG, in accordance with the DGCL and the NMS;
(c) each of the Agreement and the Merger shall have been duly approved
by the requisite vote of the stockholders of WSI, in accordance with the
DGCL;
(d) no court of competent jurisdiction shall have issued or entered
any order, writ, injunction or decree, and no other Governmental Entity
shall have issued any order, which is then in effect and has the effect of
making the Merger illegal or otherwise prohibiting its consummation;
(e) any waiting period (and any extension thereof) applicable to the
consummation of the Reorganization under the HSR Act or any other
applicable competition, merger control or similar Law shall have expired or
been terminated;
(f) all consents, approvals and authorizations legally required to be
obtained to consummate the Reorganization shall have been obtained from all
Governmental Entities, except where the failure to obtain any such consent,
approval or authorization would not result in a change in or have an effect
on the business of WSI or RBMG that is, or is reasonably likely to be,
materially adverse to the business, assets (including intangible assets),
liabilities (contingent or otherwise), condition (financial or otherwise)
or results of operations of RBMG and its respective subsidiaries, taken as
a whole;
(g) all permits or approvals required by state securities or Blue Sky
Laws to carry out the transactions contemplated hereby shall have been
received;
(h) the shares of RBMG Common Stock into which the Shares will be
converted pursuant to Article II hereof, the shares of RBMG Common Stock
issuable pursuant to the Escrow Stock Rights and the shares of RBMG Common
Stock issuable upon the exercise of the RBMG Warrant pursuant to Section
2.09 hereof shall have been authorized for listing on the NMS, subject to
official notice of issuance;
(i) RBMG or WSI shall have obtained one or more commitments reasonably
satisfactory to the Chief Executive Officer of RBMG and the Chief Executive
Officer of WSI which provide a warehouse facility for the sub-prime
business of at least $300 million from and after the Effective Time; and
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(j) Both RBMG and WSI shall have been advised in writing, as of the
Effective Time, by Price Waterhouse LLP, that, in accordance with U.S.
GAAP, based upon discussions with officials responsible for financial and
accounting matters and information furnished to Price Waterhouse LLP, Price
Waterhouse LLP concurs with management's conclusion that no conditions
relating to RBMG or WSI exist that would preclude RBMG's accounting for the
Merger as a "pooling of interests," and RBMG and WSI shall have been
advised in writing, as of the Effective Time, by KPMG Peat Marwick that
based upon inquiries and their examination of the financial statements of
WSI they are not aware of any conditions relating to WSI that would
preclude the use of "pooling of interests" accounting in connection with
the Merger.
SECTION 7.02. Conditions to the Obligations of WSI. The obligations of WSI
to consummate the Merger, or to permit the consummation of the Merger, are
subject to the satisfaction or, if permitted by applicable Law, waiver of the
following further conditions:
(a) each of the representations and warranties of RBMG contained in
this Agreement that is qualified by materiality shall be true and correct
on and as of the Effective Time as if made at and as of the Effective Time
(other than representations and warranties which address matters only as of
a certain date which shall be true and correct as of such certain date) and
each of the representations and warranties that is not so qualified shall
be true and correct in all material respects on and as of the Effective
Time as if made at and as of the Effective Time (other than representations
and warranties which address matters only as of a certain date which shall
be true and correct in all material respects as of such certain date), in
each case except as contemplated or permitted by this Agreement, and WSI
shall have received a certificate of the Chairman or President and Chief
Financial Officer of RBMG to such effect;
(b) RBMG shall have performed or complied in all material respects
with all material agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Effective Time and WSI
shall have received a certificate of the Chairman or President and Chief
Financial Officer of RBMG to that effect;
(c) St. John & Wayne, L.L.C. or King & Spalding shall have issued its
opinion, such opinion dated on or about the Effective Time and on or about
the date that is two business days prior to the date the Proxy Statement is
first mailed to stockholders of RBMG, addressed to WSI, and reasonably
satisfactory to it, based upon customary representations of WSI and RBMG
and customary assumptions, to the effect that the Merger will be treated
for federal income tax purposes as a reorganization qualifying under the
provisions of Section 368(a) of the Code and that the stockholders of WSI
will recognize no gain or loss upon the receipt of shares of RBMG Common
Stock in exchange for shares of WSI Common Stock or WSI Class B Common
Stock in the Merger, which opinion shall not have been withdrawn or
modified in any material respect;
(d) RBMG shall have executed an employment agreement in substantially
the form as attached hereto as Exhibit 7.02(d), pursuant to which Robert C.
Walsh shall serve as President of RBMG;
(e) RBMG shall have executed the Stockholders Agreement in
substantially the form as attached hereto as Exhibit 7.02(e) (the
"Stockholders Agreement");
(f) RBMG shall have executed the Registration Rights Agreement in
substantially the form as attached hereto as Exhibit 7.02(f) (the
"Registration Rights Agreement");
(g) RBMG shall have executed the Stock Purchase Warrant in
substantially the form as attached as Exhibit 7.02(g) (the "RBMG Warrant")
(if the WSI Warrant is then outstanding);
(h) The Escrow Agent, RBMG and the Independent Committee shall have
executed the Escrow Trust Agreement; and
(i) RBMG shall have received the written resignations of such members
of the Board of Directors of RBMG so as to permit the reconstitution of the
Board in accordance with Section 6.12 hereof.
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SECTION 7.03. Conditions to the Obligations of RBMG. The obligations of
RBMG to consummate the Merger, or to permit the consummation of the Merger, are
subject to the satisfaction or, if permitted by applicable Law, waiver of the
following further conditions:
(a) each of the representations and warranties of WSI and the
Principal Stockholder contained in this Agreement that is qualified by
materiality shall be true and correct on and as of the Effective Time as if
made at and as of the Effective Time (other than representations and
warranties which address matters only as of a certain date which shall be
true and correct as of such certain date) and each of the representations
and warranties that is not so qualified shall be true and correct in all
material respects on and as of the Effective Time as if made on and as of
such date (other than representations and warranties which address matters
only as of a certain date which shall be true and correct in all material
respects as of such certain date), in each case except as contemplated or
permitted by this Agreement, and RBMG shall have received a certificate of
the Principal Stockholder and the Chairman or President and Chief Financial
Officer of WSI to such effect;
(b) WSI and the Principal Stockholder shall have performed or complied
in all material respects with all material agreements and covenants
required by this Agreement to be performed or complied with by it on or
prior to the Effective Time and RBMG shall have received a certificate of
the Principal Stockholder and the Chairman or President and Chief Financial
Officer of WSI to that effect;
(c) The WSI Stockholders (who are parties thereto) shall have executed
the Stockholders Agreement;
(d) The WSI Stockholders (including the Warrantholder) shall have
executed the Registration Rights Agreement;
(e) The Escrow Agent, the Warrantholder and the Stockholder
Representative shall have executed the Escrow Trust Agreement;
(f) Each of the key employees of WSI listed in Exhibit 7.03(f) shall
have executed an employment agreement in substantially the form as attached
hereto as Exhibit 7.03(f)-1 (collectively, the "Key Employee Agreements")
and a Noncompetition Agreement in substantially the form as attached hereto
as Exhibit 7.03(f)-2 (collectively the "Noncompetition Agreements");
(g) Each of the employees of WSI set forth in Exhibit 7.03(g) shall
have executed an employment agreement in substantially the form as attached
hereto as Exhibit 7.03(g) (collectively, the "Employee Agreements"); and
(h) The Warrantholder shall have surrendered the WSI Warrant (if then
outstanding) in exchange for the RBMG Warrant and terminated the
Warrantholders Agreements (as defined in the Indemnification Agreement).
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, notwithstanding
any requisite adoption and approval of this Agreement, as follows:
(a) by mutual written consent duly authorized by the Board of
Directors of WSI and RBMG;
(b) by WSI or RBMG, if the Effective Time shall not have occurred on
or before November 1, 1997; provided, however, that the right to terminate
this Agreement under this Section 8.01(b) shall not be available to any
party whose failure to fulfill any obligation under this Agreement shall
have caused, or resulted in, the failure of the Effective Time to occur on
or before such date; provided, further, however, that, if any action is
required to be taken either (i) pursuant to Section 5.12 in order to cure
any problem which is curable which caused the Merger to fail to be
characterized as a "pooling of interests" for accounting purposes or (ii)
pursuant to Section 5.08 in order to cure any problem which is curable
which caused the
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Merger to fail to qualify as a reorganization under the provisions of
Section 368(a) of the Code, and such failure, as the case may be, was the
sole reason that the Merger could not be consummated on or prior to
November 1, 1997, this Agreement may not be terminated pursuant to this
clause (b) unless the Effective Time shall not have occurred on or before
December 1, 1997;
(c) by WSI or RBMG, if any Governmental Order, writ, injunction or
decree preventing the consummation of any of the Merger shall have been
entered by any court of competent jurisdiction and shall have become final
and nonappealable;
(d) by WSI if (i) in accordance with the proviso to Section 6.01(b),
the Board of Directors of RBMG withdraws, modifies or changes its
recommendation of this Agreement and the Merger in a manner adverse to WSI
or its stockholders or shall have resolved to do so, (ii) the Board of
Directors of RBMG shall have recommended to the stockholders of RBMG a
Competing Transaction or shall have resolved to do so, or (iii) a tender
offer or exchange offer for 15 percent or more of the outstanding shares of
capital stock of RBMG is commenced and the Board of Directors of RBMG fails
to recommend against acceptance of such tender offer or exchange offer by
its stockholders (including by taking no position with respect to the
acceptance of such tender offer or exchange offer by its stockholders);
(e) by WSI or RBMG, (i) if this Agreement and the Merger shall fail to
receive the requisite votes for approval at the RBMG Stockholders' Meeting
or any adjournment or postponement thereof or (ii) if this Agreement and
the Merger shall fail to receive the requisite votes for approval at the
WSI Stockholders' Meeting or any adjournment or postponement thereof;
(f) by RBMG, if the Board of Directors of RBMG shall withdraw, modify
or change its recommendation of the approval of this Agreement and the
Merger and the Board of Directors of RBMG determines, following
consultation with outside legal counsel (who may be RBMG's regularly
engaged outside legal counsel), that failure to take such action would be
inconsistent with its duties to its stockholders under applicable Law and
prior to such determination any person (other than WSI) shall have made a
public announcement or otherwise communicated with RBMG with respect to a
Competing Transaction that, as determined by the Board of Directors of RBMG
after consultation with its outside legal counsel (who may be its regularly
engaged outside legal counsel) and financial advisors, contains terms more
favorable to the stockholders of RBMG than those provided for in the
Reorganization; provided, however, that RBMG may not terminate this
Agreement pursuant to this Section 8.01(f) until three business days have
lapsed following delivery to WSI of written notice of such determination of
RBMG; provided further, however, that such termination under this Section
8.01(f) shall not be effective until RBMG has made payment to WSI of the
amounts required to be paid pursuant to Section 8.05(b); or
(g) by WSI or RBMG, if the closing price per share of RBMG Common
Stock, as reported by the NMS, for a period of 10 consecutive trading days
during the period from the date hereof until the last trading day prior to
the RBMG Stockholders' Meeting is less than $12.00.
SECTION 8.02. Effect of Termination. Except as provided in Section 9.01,
in the event of termination of this Agreement pursuant to Section 8.01, this
Agreement shall forthwith become void, there shall be no liability under this
Agreement on the part of any of WSI or RBMG or any of their respective officers
or directors, and all rights and obligations of each party hereto shall cease,
subject to the remedies of the parties hereto set forth in Sections 8.05(a),
(b), (c) and (d); provided, however, that nothing herein shall relieve any party
hereto from liability for the wilful or intentional breach of any of its
representations and warranties or the wilful or intentional breach of any of its
covenants or agreements set forth in this Agreement.
SECTION 8.03. Amendment. This Agreement may be amended by the parties
hereto by action taken by such party in the case of the Principal Stockholder or
by or on behalf of their respective Board of Directors in the case of WSI and
RBMG at any time prior to the Effective Time; provided, however, that no
amendment may be made (except such amendments that have received the requisite
stockholder approval and such amendments as are permitted to be made without WSI
stockholder approval or RBMG stockholder approval under the DGCL) that would (i)
reduce the amount or change the type of consideration into which each share of
WSI Common Stock shall be converted upon consummation of the Merger, (ii) change
any terms of this Agreement in a manner that
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would materially and adversely affect WSI or RBMG, as the case may be, or WSI's
stockholders or RBMG's stockholders, as the case may be, or (iii) change any
term of the Certificate of Incorporation of WSI or RBMG except as contemplated
hereby. 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 or waive compliance with the performance of
any obligation or other act of any other party hereto or (b) waive any
inaccuracy in the representations and warranties contained herein or in any
document delivered pursuant hereto. 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.
SECTION 8.05. Fees and Expenses. (a) Except as set forth in this Section
8.05, all Expenses incurred in connection with this Agreement and the Merger
shall be paid by the party incurring such Expenses, whether or not the Merger is
consummated; provided, however, that all Expenses related to (i) regulatory
filing fees pursuant to the HSR Act and (ii) printing, filing and mailing the
Registration Statement and the Joint Proxy Statement and all SEC and other
regulatory filing fees incurred in connection with the Registration Statement
and the Joint Proxy Statement shall be borne equally by WSI and RBMG.
"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 a party
hereto and its affiliates) and regulatory filing fees incurred by a party or on
its behalf in connection with or related to the authorization, preparation,
negotiation, execution and performance of its obligations pursuant to this
Agreement and the consummation of the Merger.
(b) RBMG agrees that, if:
(i) RBMG shall terminate this Agreement pursuant to Section 8.01(f),
(ii) (A) WSI shall terminate this Agreement pursuant to Section
8.01(d) and (B) at the time of such termination, there shall exist a
Competing Transaction with respect to RBMG; or
(iii) (A) WSI shall terminate this Agreement pursuant to Section
8.01(e), (B) prior to the RBMG Stockholders Meeting, RBMG shall have
furnished information to, or entered into discussions or negotiations with,
any person or entity with respect to a Competing Transaction involving RBMG
and RBMG shall not have reaffirmed its recommendation to its stockholders
with respect to the transactions contemplated in this Agreement by the time
of the RBMG Stockholders Meeting and (C) within 12 months thereafter, RBMG
shall enter into a definitive agreement with respect to any Competing
Transaction or any Competing Transaction shall be consummated,
then, in the case of (i), contemporaneous with such termination, in the case of
(ii) promptly (but in no event later than 10 days) after such termination, or,
in the case of (iii), promptly after such entering into of such definitive
agreement or such consummation, RBMG shall pay to WSI an amount equal to the sum
of Ten Million Dollars ($10,000,000), which amount is inclusive of all WSI's
Expenses (the "RBMG Termination Fee").
(c) Any payment required to be made pursuant to Section 8.05(b) shall be
made to WSI not later than two business days after delivery to RBMG of notice of
demand for payment and shall be made by wire transfer of immediately available
funds to an account designated by WSI in the notice of demand for payment
delivered pursuant to this Section 8.05(c).
(d) In the event that RBMG shall fail to pay the RBMG Termination Fee, the
amount of any such RBMG Termination Fee shall be increased to include the cost
and expenses actually incurred or accrued by WSI (including, without limitation,
fees and expenses of counsel) in connection with collection on and enforcement
of this Section 8.05, together with interest on such unpaid RBMG Termination
Fee, commencing on the date that such RBMG Termination Fee became due, at a rate
equal to the rate of interest publicly announced by Citibank, N.A., from time to
time, in the city of New York, from time to time, at such bank's base rate plus
two percent.
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ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Non-Survival of Representations and Warranties. The
representations and warranties in this Agreement shall terminate at the
Effective Time or upon the termination of this Agreement pursuant to Section
8.01, as the case may be; provided, however, that the representations,
warranties, covenants and indemnity obligations of the WSI Stockholders pursuant
to the Indemnity Agreement shall not terminate at the Effective Time and shall
survive the Effective Time for the relevant period set forth therein. Each party
agrees that, except for the representations and warranties contained in this
Agreement, including the WSI Disclosure Schedule and the RBMG Disclosure
Schedule, no party hereto has made any other representation and warranties, and
each party hereby disclaims any other representations and warranties made by
itself or any of its officers, directors, employees, agents, financial and legal
advisors or other representatives, with respect to the execution and delivery of
this Agreement or the Merger contemplated herein, notwithstanding the delivery
or disclosure to any other party or any party's representatives of any
documentation or other information with respect to any one or more of the
foregoing.
SECTION 9.02. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by telecopy
or facsimile, by registered or certified mail (postage prepaid, return receipt
requested) or by a nationally recognized courier service to the respective
parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section 9.02):
(a) if to WSI:
Walsh Holding Co., Inc.
4 Campus Drive
Parisppany, New Jersey 07054
Attention: Robert C. Walsh
Telecopier: (201) 538-0574
with a copy to:
St. John & Wayne, L.L.C.
Two Penn Plaza East
Newark, New Jersey 07105
Attention: John J. Oberdorf, Esq.
Telecopier: (201) 491-3402
(b) if to RBMG or Merger Sub:
Resource Bancshares Mortgage Group, Inc.
7909 Parklane Road
Columbia, South Carolina 29223
Attention: David W. Johnson, Jr.
Telecopier: (803) 741-3708
with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Attention: Russell B. Richards, Esq.
Telecopier: (404) 572-5100
SECTION 9.03. Certain Definitions. For purposes of this Agreement, the
following terms have the following meanings:
(a) "affiliate" has the meaning specified in Rule 144 promulgated by
the SEC under the Securities Act;
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(b) "Ancillary Agreements" means the Indemnity Agreement, the Escrow
Trust Agreement, the Registration Rights Agreement, the Key Employee
Agreements, the Noncompetition Agreements, the Employee Agreements and the
Stockholders Agreement;
(c) "Beneficial Owner" with respect to any shares of capital stock
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 (as
such term is defined in Rule 12b-2 promulgated under the Exchange Act)
beneficially owns, directly or indirectly, (ii) which such person or any of
its affiliates or associates 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, warrants or options, or otherwise, or (B) the right to vote
pursuant to any agreement, arrangement or understanding, or (iii) which are
beneficially owned, directly or indirectly, by any other persons with whom
such person or any of its affiliates or associates or person with whom such
person or any of its affiliates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of
any shares of capital stock;
(d) "Business Day" means any day in which the principal offices of the
SEC in Washington, D.C. are open to accept filings; in the case of
determining a date when any payment is due, any day on which banks are not
required or authorized by law or executive order to close in the City of
New York, USA;
(e) "$" means United States Dollars;
(f) "Governmental Order" means any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any
Governmental Entity;
(g) "Knowledge" means, with respect to any matter in question, that
the principal stockholders, the executive officers of WSI or RBMG, as the
case may be, (i) have actual knowledge of such matter or (ii) after due
investigation, should have known of such matter;
(h) "Lease" means each lease of Leased Real Property, wherein WSI is
the tenant (including all amendments, consents for alterations and
documents regarding variations and evidence of commencement dates and
expiration dates);
(i) "Leased Real Property" means the real property leased by WSI, as
tenant, together with, to the extent leased by WSI, all buildings and other
structures, facilities or improvements currently or hereafter located
thereon, all fixtures and improvements thereon, and all easements,
licenses, rights and appurtenances relating to the foregoing;
(j) "Permitted Encumbrances" means (a) liens for Taxes and assessments
not yet payable, and (b) imperfections of title, liens, security interests
and other encumbrances the existence of which, individually and in the
aggregate, do not have a WSI Material Adverse Effect;
(k) "Person" means an individual, corporation, partnership, limited
partnership, limited liability company, syndicate, person (including,
without limitation, a "person" as defined in Section 13(d)(3) of the
Exchange Act), trust, association, entity or government or political
subdivision, agency or instrumentality of a government;
(l) "Subsidiary" or "Subsidiaries" of any person means any
corporation, limited liability company, partnership, joint venture or other
legal entity of which such person (either alone or through or together with
any other subsidiary of such person) owns, directly or indirectly, more
than 50 percent of the stock or other equity interests, the holders of
which are generally entitled to vote for the election of the board of
directors or other governing body of such corporation of other legal
entity;
(m) "WSI Warrant" means the warrant of the Warrantholder to purchase
24.99 shares of WSI Class B Common Stock issued pursuant to a Warrant
Agreement (the "Warrant Agreement"), dated April 18, 1996, between the
Warrantholder and WSI.
SECTION 9.04. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced, all other
conditions and provisions of this Agreement shall nevertheless remain in
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full force and effect so long as the economic or legal substance of the
Reorganization is not affected in any manner materially 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 a mutually acceptable manner to the fullest extent
permitted by applicable Law in order that the Merger may be consummated as
originally contemplated to the fullest extent possible.
SECTION 9.05. Assignment; Binding Effect; Benefit. Neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto (whether by operation of Law or otherwise) without the
prior written consent of the other parties hereto. Subject to the preceding
sentence, this Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors, heirs and executors and
permitted assigns. Notwithstanding anything contained in this Agreement to the
contrary, other than Section 6.06, nothing in this Agreement, expressed or
implied, is intended to confer on any person other than the parties hereto or
their respective successors, heirs and executors and permitted assigns any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
SECTION 9.06. Incorporation of Exhibits. The WSI Disclosure Schedule, the
RBMG Disclosure Schedule and all Exhibits attached hereto and referred to herein
are hereby incorporated herein and made a part of this Agreement for all
purposes as if fully set forth herein.
SECTION 9.07. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement were
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
SECTION 9.08. Governing Law. Except to the extent that the Laws of the
jurisdiction of organization of any party hereto, or any other jurisdiction, are
mandatorily applicable to the Merger or to matters arising under or in
connection with this Agreement, this Agreement shall be governed by the Laws of
the State of New York.
SECTION 9.09. Consent to Jurisdiction; Venue. (a) Each of the parties
hereto irrevocably submits to the exclusive jurisdiction of the state courts of
New York and to the jurisdiction of the United States District Court for the
Southern District of New York, for the purpose of any action or proceeding
arising out of or relating to this Agreement and each of the parties hereto
irrevocably agrees that all claims in respect to such action or proceeding may
be heard and determined exclusively in any New York state or federal court
sitting in the City of New York. Each of the parties hereto agrees that a final
judgment in any action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
Law.
(b) Each of the parties hereto irrevocably consents to the service of any
summons and complaints and any other process in any other action or proceeding
relating to the Merger, on behalf of itself or its property, by the personal
delivery of copies of such process to such party. Nothing in this Section 9.09
shall affect the right of any party hereto to serve legal process in any other
manner permitted by Law.
SECTION 9.10. Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 9.11. Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
and delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
SECTION 9.12. Entire Agreement. This Agreement (including the Exhibits,
the WSI Disclosure Schedule, the RBMG Disclosure Schedule, the Confidentiality
Agreement and the Ancillary Agreements) constitutes the entire agreement among
the parties with respect to the subject matter hereof and supersedes all prior
agreements and understandings among the parties with respect thereto. No
addition to or modification of any provision of this Agreement shall be binding
upon any party hereto unless made in writing and signed by all parties hereto.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
WALSH HOLDING CO., INC.
By: /s/ ROBERT C. WALSH
------------------------------------
Name: Robert C. Walsh
Title: Chairman of the Board, Chief
Executive Officer and
President
RESOURCE BANCSHARES MORTGAGE
GROUP, INC.
By: /s/ EDWARD J. SEBASTIAN
------------------------------------
Name: Edward J. Sebastian
Title: Chairman of the Board and
Chief Executive Officer
CAROLINA MERGER SUB, INC.
By: /s/ EDWARD J. SEBASTIAN
------------------------------------
Name: Edward J. Sebastian
Title: President
/s/ ROBERT C. WALSH
--------------------------------------
Robert C. Walsh
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ANNEX C
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
RESOURCE BANCSHARES MORTGAGE GROUP, INC.
RESOURCE BANCSHARES MORTGAGE GROUP, INC., a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the "Corporation") hereby certifies:
FIRST: That the Board of Directors of the Corporation duly adopted the
following resolution proposing and declaring advisable an amendment to the
Certificate of Incorporation of the Corporation increasing the number of
authorized shares of Common Stock, par value $.01 per share, of the Company
from Twenty-Five Million (25,000,000) to Fifty Million (50,000,000):
"RESOLVED, that the Company amend its Certificate of Incorporation
by deleting in its entirety the first paragraph of the Fourth Article of
the Certificate of Incorporation and substituting in lieu thereof the
following:
FOURTH: (a) The total number of shares of all classes of stock
which the Corporation shall have authority to issue is 55,000,000
shares, consisting of 50,000,000 shares of Common Stock, par value
$.01 per share, and 5,000,000 shares of Preferred Stock, par value
$.01 per share."
SECOND: That the amendments have been adopted by an affirmative vote
of a majority of the stockholders of the Corporation in accordance with the
provisions of Section 242(b)(2) of the General Corporation Law of the State
of Delaware.
IN WITNESS WHEREOF, the Corporation has caused its duly authorized officers
to execute this Certificate as of this day of , 1997.
RESOURCE BANCSHARES MORTGAGE
GROUP, INC.
By:
------------------------------------
Attest:
----------------------------
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ANNEX D
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
RESOURCE BANCSHARES MORTGAGE GROUP, INC.
RESOURCE BANCSHARES MORTGAGE GROUP, INC., a corporation organized and
existing under and by virtue of the Delaware General Corporation Law (the
"Corporation") hereby certifies:
FIRST: That the Board of Directors of the Corporation duly adopted the
following resolution proposing and declaring advisable an amendment to the
Certificate of Incorporation of the Corporation changing the name of the
Corporation:
"RESOLVED, that the Company amend its Certificate of Incorporation
by deleting in its entirety the First Article of the Certificate of
Incorporation and substituting in lieu thereof the following:
FIRST: The name of the Corporation is BCA Financial Corp."
SECOND: That the Board of Directors of the Corporation duly adopted
the following resolution proposing and declaring advisable an amendment to
the Certificate of Incorporation of the Corporation increasing the number
of authorized shares of Common Stock, par value $.01 per share, of the
Company from Fifty Million (50,000,000) to One Hundred Twelve Million
(112,000,000):
"RESOLVED, that the Company amend its Certificate of Incorporation
by deleting in its entirety the Fourth Article of the Certificate of
Incorporation and substituting in lieu thereof the following:
FOURTH: (a) The total number of shares of all classes of stock
which the Corporation shall have authority to issue is 112,000,000
shares, consisting of 100,000,000 shares of Voting Common Stock, par
value $.01 per share ("Voting Common Stock"); 12,000,000 shares of
Class B Common Stock, par value $.01 per share ("Class B Common
Stock"); and 5,000,000 shares of Preferred Stock, par value $.01 per
share ("Preferred Stock").
(b) Common Stock.
(1) Rights and Privileges.
(i) Except as provided herein, all shares of Voting
Common Stock and Class B Common Stock (collectively "Common
Stock") shall be identical and shall entitle the holders
thereof to the same rights and privileges.
(ii) If the Board of Directors declares a cash dividend
or other distribution on the Voting Common Stock, the Board
of Directors shall simultaneously declare a dividend or
distribution at the same rate on the Class B Common Stock, so
that the Class B Common Stock participates equally with the
Voting Common Stock; provided that if the dividends consist
of other voting securities of the Corporation, the
Corporation shall make available to each holder of Class B
Common Stock, at such holder's request, dividends consisting
of non-voting securities of the Corporation which are
otherwise identical to the voting securities and which are
convertible into or exchangeable for such voting securities
on the same terms as the Class B Common Stock is convertible
into the Voting Common Stock.
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(2) Voting Rights.
(i) Each holder of Voting Common Stock shall be entitled
to one vote for each share of Voting Common Stock held on all
matters as to which holders of Common Stock shall be entitled
to vote.
(ii) The holders of Class B Common Stock shall not have
any voting right except as otherwise required by applicable
law provided that the holders of Class B Common Stock shall
have the right to vote as a separate class on any merger or
consolidation of the Corporation with or into another entity
or entities, or any recapitalization or reorganization, in
which shares of Class B Common Stock would receive or be
exchanged for consideration different on a per share basis
from consideration received with respect to or in exchange
for the shares of Voting Common Stock or would otherwise be
treated differently from shares of Voting Common Stock in
connection with such transaction, except that shares of Class
B Common Stock may, without such a separate class vote,
receive or be exchanged for non-voting securities which are
otherwise identical on a per share basis in amount and form
to the voting securities received with respect to or
exchanged for the Voting Common Stock so long as (a) such
non-voting securities are convertible into such voting
securities on the same terms as the Class B Common Stock is
convertible into Voting Common Stock and (b) all other
consideration is equal on a per share basis.
(iii) The holders of Class B Common Stock shall have the
right to vote as a separate class on any amendment or
restatement of the Certificate of Incorporation of the
Corporation which in any way adversely affects the rights of
the Class B Common Stock in a manner different than the
Voting Common Stock.
(3) Conversion.
(i) Subject to the terms and conditions of this Section
(b)(3), the holder of any shares of Class B Common Stock
shall have the right at any time, and from time to time, at
such holder's option, to convert all or a portion of the
shares of the Class B Common Stock so held into the same
number of shares of Voting Common Stock; provided, however,
that the Corporation shall not be required to record the
conversion of, and no holder of shares shall be entitled to
convert, shares of Class B Common Stock into Voting Common
Stock unless permitted under applicable law. Such right of
conversion shall be exercised (A) by giving written notice
(the "Notice") to the Corporation that the holder elects to
convert a stated number of shares of Class B Common Stock
into shares of Voting Common Stock on the date specified in
such notice or, in the absence of such specified date, as of
the date of such notice (the "Conversion Date") and (B) by
surrendering the certificate or certificates representing at
least the number of shares of Class B Common Stock to be
converted to the Corporation at its principal office at any
time during its usual business hours on or before the
Conversion Date, duly endorsed in blank by the owner of the
certificate so surrendered, together with a statement of the
name(s) (with addresses) of the person(s) in whose name(s)
the certificates for shares of Voting Common Stock issued on
conversion should be registered.
(ii) Promptly after the Conversion Date and the
surrender of such certificate or certificates representing
the shares of Class B Common Stock to be converted, the
Corporation shall issue and deliver, or cause to be issued
and delivered, to the holder requesting conversion,
registered in such name(s) as such holder may direct, a
certificate or certificates for the number of such shares of
Voting Common Stock issuable upon the conversion, together
with a certificate evidencing any balance of the shares of
Class B Common Stock surrendered to the Corporation but not
then being converted. To the extent permitted by law, such
conversion shall be deemed to have been effected on the later
of the Conversion Date or the date on which the Corporation
shall have received the
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certificate(s) representing the shares to be converted, and
at such time the rights of the holder of such shares as such
holder shall cease, and the person(s) in whose name(s) any
certificate(s) for shares shall be issuable upon such
conversion shall be deemed to have become the holder of
record of such shares of Voting Common Stock.
(4) Reserved for Issuance. The Corporation shall at all
times reserve and keep available, out of its authorized but
unissued shares of Voting Common Stock, shares of Voting Common
Stock in a quantity sufficient to provide for the conversion of
all outstanding shares of Class B Common Stock into Voting Common
Stock.
(c) The board of directors is hereby empowered to authorize by
resolution or resolutions from time to time the issuance of one or
more classes or series of Preferred Stock and to fix the voting
powers, full or limited or no voting powers, and such designations,
powers, preferences and relative, participating, optional or other
rights, if any, and the qualifications, limitations or restrictions
thereof, if any, with respect to each such class or series of
Preferred Stock (including without limitation liquidation
preferences, dividend rates, conversion rights and redemption
provisions), and the number of shares constituting each such class or
series, and to increase or decrease the number of shares of any such
class or series to the extent permitted by the Delaware General
Corporation Law."
THIRD: That the amendments have been adopted by an affirmative vote of
the holders of a majority of the outstanding stock of the Corporation
entitled to vote thereon in accordance with the provisions of Section
242(b)(2) of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused its duly authorized officers
to execute this Certificate as of this day of , 1997.
RESOURCE BANCSHARES MORTGAGE
GROUP, INC.
By:
-----------------------------------
Attest:
-------------------------------
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ANNEX E
CHAPTER 13 OF THE SOUTH CAROLINA BUSINESS CORPORATION ACT
SEC. 33-13-101. DEFINITIONS.
In this chapter:
(1) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by
merger or share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Section 33-13-102 and who exercises that right when
and in the manner required by Sections 33-13-200 through 33-13-280.
(3) "Fair value", with respect to a dissenter's shares, means the
value of the shares immediately before the effectuation of the corporate
action to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action to which the dissenter
objects, excluding any appreciation or depreciation in anticipation of the
corporate action unless exclusion would be inequitable. The value of the
shares is to be determined by techniques that are accepted generally in the
financial community.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair
and equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on file
with a corporation.
(6) "Beneficial Shareholder" means the person who is a beneficial
owner of shares held by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SEC. 33-13-102. RIGHT TO DISSENT.
A shareholder is entitled to dissent from, and obtain payment of the fair
value of, his shares in the event of any of the following corporate actions:
(1) consummation of a plan of merger to which the corporation is a
party (i) if shareholder approval is required for the merger by Section
33-11-103 or the articles of incorporation and the shareholder is entitled
to vote on the merger or (ii) if the corporation is a subsidiary that is
merged with its parent under Section 33-11-104 or 33-11-108 or if the
corporation is a parent that is merged with its subsidiary under Section
33-11-108;
(2) consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares are to be acquired, if the
shareholder is entitled to vote on the plan;
(3) consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than in the usual and regular
course of business, if the shareholder is entitled to vote on the sale or
exchange, including a sale in dissolution, but not including a sale
pursuant to court order or a sale for cash pursuant to a plan by which all
or substantially all of the net proceeds of the sale must be distributed to
the shareholders within one year after the date of sale;
(4) an amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(i) alters or abolishes a preferential right of the shares;
(ii) 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;
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(iii) alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(iv) 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; or
(v) reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under Section 33-6-104; or
(5) the approval of a control share acquisition under Article 1 of
Chapter 2 of Title 35;
(6) any corporate action to the extent the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
SEC. 33-13-103. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer
than all the shares registered in his name only if he 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 asserts dissenters' rights. The rights of a partial dissenter
under this subsection are determined as if the shares to which he dissents
and his other shares were registered in the names of different
shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to
shares held on his behalf only if he dissents with respect to all shares of
which he is the beneficial shareholder or over which he has power to direct
the vote. A beneficial shareholder asserting dissenters' rights to shares
held on his behalf shall notify the corporation in writing of the name and
address of the record shareholder of the shares, if known to him.
SEC. 33-13-200. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under
Section 33-13-102 is submitted to a vote at a shareholders' meeting, the
meeting notice must state that shareholders are or may be entitled to
assert dissenters' rights under this chapter and be accompanied by a copy
of this chapter.
(b) If a corporate action creating dissenters' rights under Section
33-13-102 is taken without a vote of shareholders, the corporation shall
notify in writing all shareholders entitled to assert dissenters' rights
that the action was taken and send them the dissenters' notice described in
Section 33-13-220.
SEC. 33-13-210. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under
Section 33-13-102 is submitted to a vote at a shareholders' meeting, a
shareholder who wishes to assert dissenters' rights (1) must give to the
corporation before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated and (2) must
not vote his shares in favor of the proposed action. A vote in favor of the
proposed action cast by the holder of a proxy solicited by the corporation
shall not disqualify a shareholder from demanding payment for his shares
under this chapter.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this chapter.
SEC. 33-13-220. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under Section
33-13-102 is authorized at a shareholders' meeting, the corporation shall
deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Section 33-13-210(a).
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(b) The dissenters' notice must be delivered no later than ten days after
the corporate action was taken and must:
(1) state where the payment demand must be sent and where certificates
for certificated shares must be deposited;
(2) inform holders of uncertificated shares to what extent transfer of
the shares is to be restricted after the payment demand is received;
(3) supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the
proposed corporate action and requires that the person asserting
dissenters' rights certify whether or not he or, if he is a nominee
asserting dissenters' rights on behalf of a beneficial shareholder, the
beneficial shareholder acquired beneficial ownership of the shares before
that date;
(4) set a date by which the corporation must receive the payment
demand, which may not be fewer than thirty nor more than sixty days after
the date the subsection (a) notice is delivered and set a date by which
certificates for certificated shares must be deposited, which may not be
earlier than twenty days after the demand date; and
(5) be accompanied by a copy of this chapter.
SEC. 33-13-230. SHAREHOLDERS' PAYMENT DEMAND.
(a) A shareholder sent a dissenters' notice described in Section 33-13-220
must demand payment, certify whether he (or the beneficial shareholder on whose
behalf he is asserting dissenters' rights) acquired beneficial ownership of the
shares before the date set forth in the dissenters' notice pursuant to Section
33-13-220(b)(3), and deposit his certificates in accordance with the terms of
the notice.
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are cancelled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not comply substantially with the requirements
that he demand payment and deposit his share certificates where required, each
by the date set in the dissenters' notice, is not entitled to payment for his
shares under this chapter.
SEC. 33-13-240. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for payment for them is received until the proposed
corporate action is taken or the restrictions are released under Section
33-13-260.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SEC. 33-13-250. PAYMENT.
(a) Except as provided in Section 33-13-270, as soon as the proposed
corporate action is taken, or upon receipt of a payment demand, the corporation
shall pay each dissenter who substantially complied with Section 33-13-230 the
amount the corporation estimates to be the fair value of his shares, plus
accrued interest.
(b) The payment must be accompanied by:
(1) the corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen 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;
(2) a statement of the corporation's estimate of the fair value of the
shares and an explanation of how the fair value was calculated;
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(3) an explanation of how the interest was calculated;
(4) a statement of the dissenter's right to demand additional payment
under Section 33-13-280; and
(5) a copy of this chapter.
SEC. 33-13-260. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within sixty days
after the date set for demanding payment and depositing share certificates, the
corporation, within the same sixty-day period, shall return the deposited
certificates and release the transfer restrictions imposed on uncertificated
shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Section 33-13-220 and repeat the payment demand
procedure.
SEC. 33-13-270. AFTER-ACQUIRED SHARES.
(a) A corporation may elect to withhold payment required by section
33-13-250 from a dissenter as to any shares of which he (or the beneficial owner
on whose behalf he is asserting dissenters' rights) was not the beneficial owner
on the date set forth in the dissenters' notice as the date of the first
announcement to news media or to shareholders of the terms of the proposed
corporate action, unless the beneficial ownership of the shares devolved upon
him by operation of law from a person who was the beneficial owner on the date
of the first announcement.
(b) To the extent the corporation elects to withhold payment under
subsection (a), after taking the proposed corporate action, it shall estimate
the fair value of the shares, plus accrued interest, and shall pay this amount
to each dissenter who agrees to accept it in full satisfaction of his demand.
The corporation shall send with its offer a statement of its estimate of the
fair value of shares, an explanation of how the fair value and interest were
calculated, and a statement of the dissenter's right to demand additional
payment under Section 33-13-280.
SEC. 33-13-280. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due and demand payment of
his estimate (less any payment under Section 33-13-250) or reject the
corporation's offer under Section 33-13-270 and demand payment of the fair value
of his shares and interest due, if the:
(1) dissenter believes that the amount paid under Section 33-13-250 or
offered under Section 33-13-270 is less than the fair value of his shares
or that the interest due is calculated incorrectly;
(2) corporation fails to make payment under Section 33-13-250 or to
offer payment under Section 33-13-270 within sixty days after the date set
for demanding payment; or
(3) corporation, having failed to take the proposed action, does not
return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within sixty days after the date set for
demanding payment.
(b) A dissenter waives his right to demand additional payment under this
section unless he notifies the corporation of his demand in writing under
subsection (a) within thirty days after the corporation made or offered payment
for his shares.
SEC. 33-13-300. COURT ACTION.
(a) If a demand for additional payment under Section 33-13-280 remains
unsettled, the corporation shall commence a proceeding within sixty days after
receiving the demand for additional payment and petition the court to determine
the fair value of the shares and accrued interest. If the corporation does not
commence the proceeding within the sixty-day period, it shall pay each dissenter
whose demand remains unsettled the amount demanded.
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(b) The corporation shall commence the proceeding in the circuit court of
the county where the corporation's principal office (or, if none in this State,
its registered office) is located. If the corporation is a foreign corporation
without a registered office in this State, it shall commence the proceeding in
the county in this State where the principal office (or, if none in this State,
the registered office) of the domestic corporation merged with or whose shares
were acquired by the foreign corporation was located.
(c) The corporation shall make all dissenters (whether or not residents of
this State) whose demands remain unsettled parties to the proceeding as in an
action against their shares and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication, as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) is plenary and exclusive. The court may appoint persons as
appraisers to receive evidence and recommend decisions on the question of fair
value. The appraisers have the powers described in the order appointing them or
in any amendment to it. The dissenters are entitled to the same discovery rights
as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation.
SEC. 33-13-310. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Section 33-13-300
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously, or not
in good faith in demanding payment under Section 33-13-280.
(b) The court also may assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) against the corporation and in favor of any or all dissenters if
the court finds the corporation did not comply substantially with the
requirements of Sections 33-13-200 through 33-13-280; or
(2) against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this chapter.
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
(d) In a proceeding commenced by dissenters to enforce the liability under
Section 33-13-300(a) of a corporation that has failed to commence an appraisal
proceeding within the sixty-day period, the court shall assess the costs of the
proceeding and the fees and expenses of dissenters' counsel against the
corporation and in favor of the dissenters.
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ANNEX F
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
SEC. 262. APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to sec. 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; and the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec. 251 (other than a merger effected pursuant to
sec. 251(g) of this title), sec. 252, sec. 254, sec. 257, sec. 258, sec. 263 or
sec. 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of sec. 251 of this title
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
sec.sec. 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or held of record by more than 2,000
holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
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(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective or
(2) If the merger or consolidation was approved pursuant to sec. 228
or sec. 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
date on which the notice is given.
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(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statements shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this state or of any state.
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(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal right as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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ANNEX G
[LETTERHEAD OF PRUDENTIAL SECURITIES INCORPORATED]
APRIL 18, 1997
PRIVATE AND CONFIDENTIAL
The Board of Directors
Resource Bancshares Mortgage Group, Inc.
7909 Parkland Road
Columbia, South Carolina 29223
Members of the Committee:
We understand that Resource Bancshares Mortgage Group, Inc. ("RBMG" or the
"Company"), a wholly-owned subsidiary of the Company ("Merger Sub") and Resource
Bancshares Corporation ("RBC") propose to enter into an Agreement of Merger (the
"Agreement"). Pursuant to the Agreement, Merger Sub shall merge with and into
RBC and RBC shall continue as the surviving corporation and a wholly-owned
subsidiary of the Company (the "Merger"). In the Merger each outstanding share
of RBC voting common stock, par value $.01 per share, and each outstanding share
of RBC non-voting common stock, par value $.01 per share, will be converted into
and become exchangeable for the right to receive shares of RBMG common stock
(the "Exchange Ratio"), par value $.01 per share (the "RBMG Common Stock").
You have requested our opinion as to the fairness from a financial point of
view of the Exchange Ratio to the stockholders of the Company.
In conducting our analysis and arriving at the opinion expressed herein, we
have reviewed such materials and considered such financial and other factors we
deemed relevant under the circumstances, including:
(i) the execution copy of the Agreement presented to the Board of
Directors on the date hereof;
(ii) certain publicly available historical financial and operating
data concerning the Company including the Annual Report on Form 10-K of the
Company for the years ended December 31, 1996, 1995 and 1994, the Company's
Proxy Statement for the Annual Meeting of Shareholders held on April 25,
1996, the Company's Prospectus, dated March 11, 1996, relating to the sale
of 3,512,961 shares of RBMG Common Stock and the Company's Prospectus,
dated May 25, 1993, relating to the initial public offering of RBMG Common
Stock;
(iii) certain historical financial and operating data concerning RBC
including the audited consolidated financial statements of RBC and
Subsidiaries for the years ended December 31, 1996, 1995 and 1994;
(iv) certain information of the Company, including financial forecasts
for future fiscal years prepared by the management of the Company;
(v) certain information of RBC, including financial forecasts for the
year ending December 31, 1997, prepared by the management of RBC;
(vi) certain information of RBC, including closing documents relating
to the February 3, 1997 repurchase by Intek Information, Inc. ("Intek") of
5,000 Series A Preferred shares of Intek owned by RBC;
(vii) the pro forma financial impact of the Merger on the Company;
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(viii) publicly available financial, operating and stock market data
concerning certain companies engaged in businesses we deemed comparable to
RBC or otherwise relevant to our inquiry;
(ix) publicly available financial, operating and stock market data
concerning certain companies engaged in businesses we deemed comparable to
Republic Leasing Company, Inc. or otherwise relevant to our inquiry;
(x) the financial terms of certain recent transactions we deemed
relevant; and
(xi) such other financial studies, analyses and investigations that we
deemed appropriate.
We have met with the management of the Company and RBC to discuss (i) the
prospects for their respective businesses, (ii) their estimates of such
businesses' future financial performance, (iii) the financial impact of the
Merger on the respective companies and (iv) such other matters that we deemed
relevant.
In connection with our review and analysis and in arriving at our opinion,
we have relied upon the accuracy and completeness of the financial and other
information provided to us by the Company and RBC and have not undertaken any
independent verification of such information or any independent valuation or
appraisal of any of the assets or liabilities of the Company or RBC. With
respect to certain financial forecasts provided to us by the Company, and
financial forecasts provided to us by RBC, we have assumed that the information
represents each respective management's best currently available estimate as to
the future financial performance of the Company and of RBC. Further, our opinion
is necessarily based on economic, financial and market conditions as they exist
and can be evaluated as of the date hereof and we assume no responsibility to
update or revise our opinion based upon events or circumstances occurring after
the date hereof. Our opinion does not address the relative merits of the Merger
as compared to any alternative business strategies that might exist for the
Company or the effect of any other transaction in which the Company might
engage.
As you know, we have been retained by the Special Committee of the Board of
Directors of the Company to render this opinion and provide other financial
advisory services in connection with the Merger. We received a retainer fee for
our services, are due a fee upon signing of the Agreement and, upon consummation
of the Merger, will receive an additional fee. In the past we have performed
other investment banking services for the Company and we are currently engaged
to represent the Company in, and will receive a fee upon consummation of, the
proposed merger with Walsh Holding Co., Inc. In addition, in the ordinary course
of business we may actively trade the RBMG Common Stock for our own account and
for the accounts of customers and accordingly, may at any time hold a long or
short position in such securities.
This letter and the opinion expressed herein are for the use of the Special
Committee of the Board of Directors of the Company. This opinion does not
constitute a recommendation to the stockholders of the Company as to how such
stockholders should vote regarding the Merger. This opinion may not be
reproduced, summarized, excerpted from or otherwise publicly referred to or
disclosed in any manner, without our prior written consent; except that the
Company may include this opinion in its entirety in any proxy statement or
information statement relating to the Merger sent to the Company's stockholders.
Any summary of this opinion included in such proxy statement must be in a form
acceptable to Prudential Securities Incorporated.
Based upon and subject to the foregoing, we are of the opinion that, as of
the date hereof, the Exchange Ratio is fair to the stockholders of the Company
from a financial point of view.
Very truly yours,
PRUDENTIAL SECURITIES INCORPORATED
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ANNEX H
[LETTERHEAD OF PRUDENTIAL SECURITIES INCORPORATED]
PRIVATE AND CONFIDENTIAL April 18, 1997
The Board of Directors
Resource Bancshares Mortgage Group, Inc.
7909 Parkland Road
Columbia, South Carolina 29223
Members of the Board:
We understand that Resource Bancshares Mortgage Group, Inc. ("RBMG" or the
"Company"), a wholly-owned subsidiary of the Company ("Merger Sub"), Walsh
Holding Co., Inc. ("Walsh") and Robert C. Walsh propose to enter into an
Agreement of Merger (the "Agreement"). Pursuant to the Agreement, Merger Sub
shall merge with and into Walsh and Walsh shall continue as the surviving
corporation and a wholly-owned subsidiary of RBMG (the "Merger"). In the Merger
each outstanding share of Class A common stock, par value $.01 per share, of
Walsh and each outstanding share of Class B common stock, par value $.01 per
share, of Walsh (collectively, the "Walsh Common Stock") will be converted into
and become exchangeable for (i) shares of common stock, par value $.01 per
share, of the Company (the "RBMG Common Stock"), subject to adjustment upon the
occurrence of certain events as described in the Agreement (the "Common Stock
Exchange") and (ii) the right (the "Escrow Stock Right" and collectively the
"Escrow Stock Rights") to receive shares of RBMG Common Stock (the "Escrow Stock
Exchange") (collectively, the Common Stock Exchange and the Escrow Stock
Exchange constitute the Exchange Ratio). In addition, if the warrant owned by
Greenwich Capital Financial Products, Inc. (the "Greenwich Warrant"), to
purchase shares of Walsh Class B common stock, par value $.01 (the "Walsh
Warrant Shares"), remains outstanding immediately prior to the Effective Time
(as defined in the Agreement), the Greenwich Warrant will be exchanged for the
RBMG Warrant (as defined in the Agreement), which will provide for the right to
acquire the number shares of RBMG Common Stock equal to the product of the Walsh
Warrant Shares and the Exchange Ratio, as more fully described in the RBMG
Warrant Agreement.
You have requested our opinion as to the fairness from a financial point of
view of the Exchange Ratio to the stockholders of the Company.
In conducting our analysis and arriving at the opinion expressed herein, we
have reviewed such materials and considered such financial and other factors we
deemed relevant under the circumstances, including:
(i) the execution copy of the Agreement presented to the Board of
Directors on the date hereof;
(ii) certain publicly available historical financial and operating
data concerning the Company including the Annual Report on Form 10-K of the
Company for the years ended December 31, 1996, 1995 and 1994, the Company's
Proxy Statement for the Annual Meeting of Shareholders held on April 25,
1996, the Company's Prospectus, dated March 11, 1996, relating to the sale
of 3,512,961 shares of RBMG Common Stock and the Company's Prospectus,dated
May 25, 1993, relating to the initial public offering of RBMG Common Stock;
(iii) certain historical financial and operating data concerning Walsh
and its predecessors, GF Mortgage Corp. and GF Property Corp., including
Walsh's audited financial statements for the nine months ended December 31,
1996 and the audited combined financial statements of GF Mortgage Corp. and
GF Property Corp. for the three months ended March 31, 1996;
(iv) certain information of the Company, including financial forecasts
for future fiscal years prepared by the management of the Company;
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(v) certain information of Walsh, including financial forecasts for
future fiscal years, prepared by the management of Walsh;
(vi) certain information of Walsh, including written reports regarding
Walsh's non-conforming mortgage loan production for the period from January
1, 1997 to March 31, 1997, prepared by Walsh;
(vii) certain information of the Company, including estimates of the
cost savings and incremental earnings impact of the Merger on the future
financial results of the Company, prepared by the Company;
(viii) the pro forma financial impact of the Merger on the Company;
(ix) publicly available financial, operating and stock market data
concerning certain companies engaged in businesses we deemed comparable to
Walsh or otherwise relevant to our inquiry;
(x) the financial terms of certain recent transactions we deemed
relevant; and
(xi) such other financial studies, analyses and investigations that we
deemed appropriate.
We have assumed that the Merger will be treated as a pooling-of-interests
for accounting purposes. Based upon our discussions with the Special Committee
to the Board of Directors (the "Special Committee") and its legal counsel and
our review of the Agreement and related facts, we have assumed that a change of
control, as such term has been construed by the Delaware courts and expressed in
their published opinions, will not occur as a result of the Merger. Further, we
were not requested by the Special Committee, nor did we, solicit indications of
interest from third parties to merge with or otherwise acquire the Company.
We have met with the management of the Company and Walsh to discuss (i) the
prospects for their respective businesses, (ii) their estimates of such
businesses' future financial performance, (iii) the financial impact of the
Merger on the respective companies, including potential incremental earnings and
cost savings, and (iv) such other matters that we deemed relevant.
In connection with our review and analysis and in arriving at our opinion,
we have relied upon the accuracy and completeness of the financial and other
information provided to us by the Company and Walsh and have not undertaken any
independent verification of such information, including the information
regarding Walsh's non-conforming mortgage loan production from January 1, 1997
to March 31, 1997, or any independent valuation or appraisal of any of the
assets or liabilities of the Company or Walsh. With respect to certain financial
forecasts provided to us by the Company, and financial forecasts provided to us
by Walsh, we have assumed that the information represents each respective
management's best currently available estimate as to the future financial
performance of the Company and of Walsh. With respect to the estimates of the
cost savings and incremental earnings impact of the Merger on the Company,
provided to us by the Company, we have assumed that the information represents
management's best currently available estimates as to the future financial
impact of the Merger on the Company and that the estimates are based on
reasonable assumptions. Further, our opinion is necessarily based on economic,
financial and market conditions as they exist and can be evaluated as of the
date hereof and we assume no responsibility to update or revise our opinion
based upon events or circumstances occurring after the date hereof.
As you know, we have been retained by the Special Committee to render this
opinion and provide other financial advisory services in connection with the
Merger. We received a retainer fee for our services, are due a fee upon signing
of the Agreement and, upon consummation of the Merger, will receive an
additional fee. In the past we have performed other investment banking services
for the Company and we are currently engaged to represent the Company in, and
will receive a fee upon consummation of, the proposed merger with Resource
Bancshares Corporation. In addition, in the ordinary course of business we may
actively trade the shares of RBMG Common Stock for our own account and for the
accounts of customers and accordingly, may at any time hold a long or short
position in such securities.
This letter and the opinion expressed herein are for the use of the Special
Committee of the Board of Directors of the Company. This opinion does not
constitute a recommendation to the stockholders of the Company as to how such
stockholders should vote regarding the Merger. This opinion may not be
reproduced, summarized, excerpted from or otherwise publicly referred to or
disclosed in any manner, without our prior
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written consent; except that the Company may include this opinion in its
entirety in any proxy statement or information statement relating to the Merger
sent to the Company's stockholders. Any summary of this opinion included in such
proxy statement must be in a form acceptable to Prudential Securities
Incorporated.
Based upon and subject to the foregoing, we are of the opinion that, as of
the date hereof, the Exchange Ratio is fair to the stockholders of the Company
from a financial point of view.
Very truly yours,
PRUDENTIAL SECURITIES INCORPORATED
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ANNEX I
[Letterhead of Montgomery Securities]
April 18, 1997
Board of Directors
Resource Bancshares Corporation
1901 Main Street, Suite 650
Columbia, South Carolina 29201
Ladies and Gentlemen:
We understand that Resource Bancshares Corporation, a South Carolina
corporation ("RBC"), Resource Bancshares Mortgage Group, Inc., a Delaware
corporation ("RBMG"), and RBC Merger Sub, Inc., a South Carolina corporation and
a newly-formed, wholly-owned subsidiary of RBMG ("RBC Merger Sub"), propose to
enter into a Merger Agreement dated April 18, 1997 (the "RBC-RBMG Merger
Agreement"), pursuant to which RBC Merger Sub will merge with and into RBC and
RBC will be the surviving corporation and a wholly-owned subsidiary of RBMG (the
"RBC-RBMG Merger"). Further, pursuant to the RBC-RBMG Merger Agreement, we
understand that all of the outstanding shares of voting common stock, par value
$0.01 per share, of RBC and all of the outstanding shares of non-voting common
stock, par value $0.01 per share, of RBC will be converted into and exchangeable
for 9,397,238 shares of the common stock, $0.01 par value per share ("RBMG
Common Stock"), of RBMG, subject to certain adjustments (the "Consideration").
The terms and conditions of the RBC-RBMG Merger are set forth in more detail in
the RBC-RBMG Merger Agreement.
In addition, we understand that RBMG proposes to enter into a second
separate Merger Agreement dated April 18, 1997 (the "WSI-RBMG Merger Agreement")
with Walsh Holding Co., Inc., a Delaware corporation ("WSI"), Robert C. Walsh,
the principal shareholder of WSI, and Carolina Merger Sub, Inc., a Delaware
corporation and a newly-formed, wholly-owned subsidiary of RBMG ("Carolina
Merger Sub"). Pursuant to the WSI-RBMG Merger Agreement and as more fully
described therein, Carolina Merger Sub will merge with and into WSI and WSI will
be the surviving corporation and a wholly-owned subsidiary of RBMG (the
"WSI-RBMG Merger"). Further, pursuant to the WSI-RBMG Merger Agreement, we
understand that all of the outstanding shares of Class A common stock, $0.01 par
value, of WSI and all of the outstanding shares of Class B common stock, $0.01
par value, of WSI will be converted into and exchangeable for 21,382,332 shares
of RBMG Common Stock, subject to certain adjustments. The terms and conditions
of the WSI-RBMG Merger are set forth in more detail in the WSI-RBMG Merger
Agreement.
You have asked for our opinion as investment bankers as to whether the
Consideration to be received by the shareholders of RBC pursuant to the RBC-RBMG
Merger is fair to such shareholders from a financial point of view, as of the
date hereon. Our opinion expressed herein is given irrespective of whether or
not the WSI-RBMG Merger is consummated. We have not been retained to provide an
opinion as to the fairness of the consideration to be paid by RBMG in the
WSI-RBMG Merger. Consequently, this opinion expresses no view concerning the
fairness of the consideration being paid by RBMG in the WSI-RBMG Merger or the
effect of such merger on the shareholders of RBMG, except insofar as the
WSI-RBMG Merger affects the Consideration being received by the shareholders of
RBC in the RBC-RBMG Merger. In addition, as you are aware, we were not retained
to nor did we advise RBC with respect to alternatives to the RBC-RBMG Merger or
RBC's underlying decision to proceed with or effect the RBC-RBMG Merger.
Further, we were not requested to nor did we solicit or assist RBC in soliciting
indications of interest from third parties for all or any part of RBC.
In connection with our opinion, we have, among other things: (i) reviewed
certain publicly available financial and other data with respect to RBC, RBMG,
and WSI including the consolidated financial statements for recent years and
interim periods to December 31, 1996 and certain other relevant financial and
operating data relating to RBC, RBMG, and WSI made available to us from
published sources and from the internal records of RBC, RBMG, and WSI, including
the consolidated financial statements of RBC and WSI for recent years and
interim periods to December 31, 1996; (ii) reviewed the financial terms and
conditions of the RBC-RBMG Merger Agreement and the WSI-RBMG Merger Agreement;
(iii) reviewed certain publicly available information
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concerning the trading of, and the trading market for, RBMG Common Stock; (iv)
compared RBMG, WSI and RBC from a financial point of view with certain other
companies in the mortgage banking and leasing industries which we deemed to be
relevant; (v) reviewed and discussed with representatives of the management of
RBC, RBMG, and WSI certain information of a business and financial nature
regarding RBC, RBMG, and WSI furnished to us by them, including financial
forecasts and related assumptions of RBC, RBMG, and WSI; (vi) made inquiries
regarding and discussed the RBC-RBMG Merger, the RBC-RBMG Merger Agreement, the
WSI-RBMG Merger, and the WSI-RBMG Merger Agreement, and other matters related
thereto with RBC's counsel; and (vii) performed such other analyses and
examinations as we have deemed appropriate.
In connection with our review, we have not assumed any obligation
independently to verify the foregoing information and have relied on its being
accurate and complete in all material respects. With respect to the financial
projections for RBC, RBMG, and WSI provided to us by their respective
managements, upon their advice and with your consent we have assumed for
purposes of our opinion that the projections have been reasonably prepared on
bases reflecting the best available estimates and judgments of their respective
managements at the time of preparation as to the future financial performance of
RBC, RBMG, and WSI and that they provide a reasonable basis upon which we can
form our opinion. We have also assumed that there have been no material changes
in RBC's, RBMG's, or WSI's assets, financial condition, results of operations,
business, or prospects since the respective dates of their last financial
statements made available to us.
We are not experts in the evaluation of loan portfolios for purposes of
assessing the adequacy of the allowances for losses with respect thereto and
have assumed, with your consent, that such allowances for each of RBC, RBMG, and
WSI are in the aggregate adequate to cover such losses. In addition, we have not
assumed responsibility for reviewing any individual credit files, or making an
independent evaluation, appraisal, or physical inspection of any of the assets
or liabilities (contingent or otherwise) of RBC, RBMG, or WSI, nor have we been
furnished with any such appraisals. Similarly, we have, with your consent, not
assumed responsibility for reviewing any aspect of the loan securitization
programs of RBC, RBMG, or WSI and have assumed, for purposes of this opinion,
that each such program was conducted in full compliance with all applicable
regulations. Further, we have not made an independent valuation of the
reasonableness of the projections utilized in each of such securitization
programs and have assumed that such projections are based on assumptions that
are reasonable and have been properly presented in the financial statements in
accordance with generally accepted accounting principles and all applicable
accounting standards and have been recorded on the applicable financial
statements on a reasonable basis. Finally, our opinion is based on economic,
monetary, and market and other conditions as in effect on, and the information
made available to us as of, the date hereof. Accordingly, although subsequent
developments may affect this opinion, we have not assumed any obligation to
update, revise, or reaffirm this opinion.
With respect to the legal and financial reporting matters related to the
transactions, we have relied upon the advice given by the independent
accountants and counsel to the RBC Board, the RBMG Board and the RBMG Special
Committee and have not undertaken any independent investigation of such matters.
We have assumed that both the RBC-RBMG Merger and the WSI-RBMG Merger will be
consummated in a manner that complies in all respects with the applicable
provisions of the Securities Act of 1933, as amended (the "Securities Act"), the
Securities Exchange Act of 1934, as amended, and all other applicable federal
and state statutes, rules and regulations. You have informed us, and we have
assumed, that the RBC-RBMG Merger will be recorded as a purchase under generally
accepted accounting principles and that the WSI-RBMG Merger will be treated as a
pooling-of-interests transaction under generally accepted accounting principles.
Further, you have also informed us and we have assumed, that each of the
RBC-RBMG Merger and the WSI-RBMG Merger, when consummated, will be treated as a
tax-free reorganization under Section 368(a) of the Internal Revenue Code.
We have further assumed with your consent that the RBC-RBMG Merger will be
consummated in accordance with the terms described in the RBC-RBMG Merger
Agreement, without any further amendments thereto, and without waiver by RBC of
any of the conditions to its obligations thereunder. Similarly, we have assumed
with your consent that, the WSI-RBMG Merger will be consummated in accordance
with the terms described in the WSI-RBMG Merger Agreement, without any further
amendments thereto, and without waiver by RBMG of any of the conditions to its
obligations thereunder.
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We have acted as financial advisor to RBC in connection with the RBC-RBMG
Merger and will receive a fee for our services, including rendering this
opinion, a significant portion of which is contingent upon the consummation of
the RBC-RBMG Merger. In the ordinary course of our business, we actively trade
the equity securities of RBMG for our own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities. We have also acted as an underwriter in connection with
offerings of securities of RBMG and performed various investment banking
services for both RBC and RBMG.
Based upon the foregoing and in reliance thereon, it is our opinion as
investment bankers that the Consideration to be received by the shareholders of
RBC pursuant to the RBC-RBMG Merger is fair to such shareholders from a
financial point of view, as of the date hereof. Our opinion expressed herein is
given irrespective of whether or not the WSI-RBMG Merger is consummated.
We are not expressing an opinion regarding the price at which the RBMG
Common Stock may trade at any future time. The Consideration to be received by
the shareholders of RBC pursuant to the RBC-RBMG Merger is based upon a fixed
exchange ratio and, accordingly, the market value of the Consideration may from
time to time vary significantly.
This opinion is directed to the Board of Directors of RBC in its
consideration of the RBC-RBMG Merger and is not a recommendation to any
shareholder as to how such shareholder should vote with respect to the RBC-RBMG
Merger. Further, this opinion addresses only the financial fairness of the
Consideration to the shareholders RBC and does not address the relative merits
of the RBC-RBMG Merger and any alternatives to the RBC-RBMG Merger, RBC's
underlying decision to proceed with or effect the RBC-RBMG Merger, the relative
merits of the WSI-RBMG Merger and any alternatives to the WSI-RBMG Merger, or
any other aspect of either the RBC-RBMG Merger or the WSI-RBMG Merger. This
opinion may not be used or referred to by RBC, or quoted or disclosed to any
person in any manner, without prior written consent, which consent is hereby
given to the inclusion of this opinion in the Joint Proxy Statement/Prospectus
filed with the Securities and Exchange Commission in connection with the
RBC-RBMG Merger and the WSI-RBMG Merger. In furnishing this opinion, we do not
admit that we are experts within the meaning of the term "experts" as used in
the Securities Act and the rules and regulations promulgated thereunder, nor do
we admit that this opinion constitutes a report or valuation within the meaning
of Section 11 of the Securities Act.
Very truly yours,
MONTGOMERY SECURITIES
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Subsection (a) of Section 145 of the Delaware General Corporation Law
empowers a corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
Subsection (c) of Section 145 provides that to the extent a director,
officer, employee or agent of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in
subsections (a) and (b) of Section 145, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
Other subsections of Section 145(i) provide that indemnification provided
for by Section 145 shall not be deemed exclusive of any other rights to which
the indemnified party may be entitled; (ii) provide that indemnification
provided for by Section 145 shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of such person's heirs,
executors and administrators; and (iii) empower the corporation to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or any person who is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the corporation would have the
power to indemnify him against such liabilities under Section 145. Paragraph (c)
of Article Seventh of RBMG's Restated Certificate of Incorporation contains a
provision parallel to (iii) above.
Section 102(b)(7) of the Delaware General Corporation Law provides that a
certificate of incorporation may contain a provision eliminating or limiting the
personal liability of a director to a corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, provided that such
provision shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law or (iv) for any transaction from which the
director derived an improper personal benefit. Paragraph (a) of Article Seventh
of RBMG's Restated Certificate of Incorporation eliminates the personal
liability of RBMG's directors to RBMG and its
II-1
<PAGE> 312
stockholders for monetary damages for breach of fiduciary duty except to the
extent that such elimination or limitation of liability is not permitted under
the Delaware General Corporation Law.
Paragraph (b) of Article Seventh of RBMG's Restated Certificate of
Incorporation provides for indemnification of its directors, officers, employees
and other agents.
The Registrant also maintains liability insurance for its directors and
officers which provides for coverage against loss from claims made against
directors and officers in their capacity as such, including liabilities under
the Securities Act of 1933, as amended.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
a. Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <C> <S>
2.1 -- Merger Agreement, dated as of April 18, 1997, by and among
the Registrant, RBC Merger Sub, Inc. and Resource Bancshares
Corporation (attached as Annex A to the Joint Proxy
Statement/Prospectus forming a part of this Registration
Statement).
2.2 -- Merger Agreement, dated as of April 18, 1997, by and among
the Registrant, Carolina Merger Sub, Inc., Walsh Holding
Co., Inc. and Robert C. Walsh (attached as Annex B to the
Joint Proxy Statement/Prospectus forming a part of this
Registration Statement).
5.1 -- Opinion of King & Spalding
*8.1 -- Opinion of McNair Law Firm, P.A.
*8.2 -- Opinion of St. John & Wayne, L.L.C.
23.1 -- Consent of Price Waterhouse LLP
23.2 -- Consent of Price Waterhouse LLP
23.3 -- Consent of KPMG Peat Marwick LLP
23.4 -- Consent of KPMG Peat Marwick LLP
23.5 -- Consent of Prudential Securities Incorporated (included in
Annex G to the Joint Proxy Statement/Prospectus forming a
part of this Registration Statement)
23.6 -- Consent of Prudential Securities Incorporated (included in
Annex H to the Joint Proxy Statement/Prospectus forming a
part of this Registration Statement)
23.7 -- Consent of Montgomery Securities (included in Annex I to the
Joint Proxy Statement/Prospectus forming a part of this
Registration Statement)
23.8 -- Consent of King & Spalding (included in Exhibit 5.1)
*23.9 -- Consent of McNair Law Firm, P.A.
*23.10 -- Consent of St. John & Wayne, L.L.C.
23.11 -- Consent of Kempisty & Company Certified Public Accountants
PC
24.1 -- Power of Attorney (see page II-4)
*99.1 -- Form of Resource Bancshares Mortgage Group, Inc. Proxy
*99.2 -- Form of Resource Bancshares Corporation Proxy
*99.3 -- Form of Walsh Holding Co., Inc. Proxy
99.4 -- Opinion of Prudential Securities Incorporated (attached as
Annex G to the Joint Proxy Statement/ Prospectus forming a
part of this Registration Statement).
99.5 -- Opinion of Prudential Securities Incorporated (attached as
Annex H to the Joint Proxy Statement/ Prospectus forming a
part of this Registration Statement).
99.6 -- Opinion of Montgomery Securities (attached as Annex I to the
Joint Proxy Statement/Prospectus forming a part of this
Registration Statement).
</TABLE>
II-2
<PAGE> 313
- ---------------
* To be filed by amendment.
b. Financial Statement Schedules.
None.
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
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.
The registrant undertakes that every prospectus: (i) that is filed pursuant
to the immediately preceding paragraph, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
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.
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.
II-3
<PAGE> 314
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 Columbia, State of South
Carolina, on June 13, 1997.
RESOURCE BANCSHARES
MORTGAGE GROUP, INC.
By: /s/ EDWARD J. SEBASTIAN
------------------------------------
Edward J. Sebastian
Chairman of the Board and Chief
Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Edward J. Sebastian and David W.
Johnson, Jr., and each of them acting individually, as his attorney-in-fact,
each with the power of substitution, for him in any and all capacities, to sign
any and all amendments to this Registration Statement, including any amendment
or registration statement filed pursuant to Rule 462, and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming our
signatures as they may be signed by our said attorney to any and all amendments
to said Registration Statement, including any amendment or registration
statement filed pursuant to Rule 462.
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
--------- ----- ----
<C> <S> <C>
/s/ EDWARD J. SEBASTIAN Chairman of the Board and Chief June 13, 1997
- ------------------------------------------------ Executive Officer and Director
Edward J. Sebastian (principal executive officer)
/s/ STEVEN F. HERBERT Senior Executive Vice President June 13, 1997
- ------------------------------------------------ and Chief Financial Officer
Steven F. Herbert (principal financial and
accounting officer)
/s/ DAVID W. JOHNSON, JR. Vice Chairman of the Board and June 13, 1997
- ------------------------------------------------ Managing Director
David W. Johnson, Jr.
/s/ JOHN W. CURRIE Secretary and Director June 13, 1997
- ------------------------------------------------
John W. Currie
/s/ JOHN C. BAKER Director June 13, 1997
- ------------------------------------------------
John C. Baker
/s/ Director June 13, 1997
- ------------------------------------------------
Stuart M. Cable
/s/ BOYD M. GUTTERY Director June 10, 1997
- ------------------------------------------------
Boyd M. Guttery
/s/ JOHN O. WOLCOTT Director June 13, 1997
- ------------------------------------------------
John O. Wolcott
</TABLE>
II-4
<PAGE> 315
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ----------- ------------
<C> <C> <S> <C>
5.1 -- Opinion of King & Spalding
*8.1 -- Opinion of McNair Law Firm, P.A.
*8.2 -- Opinion of St. John & Wayne, L.L.C.
23.1 -- Consent of Price Waterhouse LLP
23.2 -- Consent of Price Waterhouse LLP
23.3 -- Consent of KPMG Peat Marwick LLP
23.4 -- Consent of KPMG Peat Marwick LLP
23.11 -- Consent of Kempisty & Company Certified Public Accountants
PC
*99.1 -- Form of Resource Bancshares Mortgage Group, Inc. Proxy
*99.2 -- Form of Resource Bancshares Corporation Proxy
*99.3 -- Form of Walsh Holding Co., Inc. Proxy
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 5.1
June 13, 1997
Resource Bancshares Mortgage Group, Inc.
7909 Parklane Road
Columbia, South Carolina 29223
Ladies and Gentlemen:
We have acted as counsel to Resource Bancshares Mortgage Group, Inc., a
Delaware corporation (the "Company"), in connection with the registration of
30,779,578 shares of common stock, $.01 par value per share, of the Company (the
"Shares"), pursuant to a Registration Statement on Form S-4 (the "Registration
Statement") of the Company filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended.
In our capacity as such counsel, we have reviewed (i) the Registration
Statement, (ii) the Agreement of Merger dated as of April 18, 1997 (the "WSI
Merger Agreement") among the Company, Carolina Merger Sub, Inc., a Delaware
corporation and a wholly owned subsidiary of the Company, Walsh Holding Co.,
Inc., a Delaware corporation, and Robert C. Walsh and (iii) the Agreement of
Merger dated as of April 18, 1997 (the "RBC Merger Agreement" and, together with
the WSI Merger Agreement, the "Merger Agreements") among the Company, RBC Merger
Sub, Inc., a South Carolina corporation and a wholly owned subsidiary of the
Company, and Resource Bancshares Corporation, a South Carolina corporation. We
have also reviewed such matters of law and examined original, certified,
conformed or photographic copies of such other documents, records, agreements
and certificates as we have deemed necessary as a basis for the opinions
hereinafter expressed. In such review, we have assumed the genuineness of
signatures on all documents submitted to us as originals, the conformity to
original documents of all copies submitted to us as certified, conformed or
photographic copies, and, as to certificates of public officials, we have
assumed the same to be accurate and to have been given properly. We have relied,
as to the matters set forth therein, on certificates of public officials, and we
have assumed the same to have been properly given and to be accurate.
We have assumed that the execution and delivery of, and the performance of
all obligations under, the Merger Agreements have been duly authorized by all
requisite action by each party thereto, and that the Merger Agreements have been
duly executed and delivered by the parties thereto, and will be valid and
binding agreements of the parties thereto (other than the Company) enforceable
against the parties thereto (other than the Company) in accordance with their
respective terms.
This opinion is limited in all respects to the laws of the State of
Delaware and no opinion is expressed with respect to the laws of any other
jurisdiction or any effect that such laws may have on the opinions expressed
herein. This opinion is limited to the matters stated herein, and no opinion is
implied or may be inferred beyond the matters expressly stated herein.
Based upon and subject to the foregoing, we are of the opinion that the
Shares to be issued pursuant to the Merger Agreements are duly authorized, and,
when duly issued and delivered by the Company in accordance with the terms of
the Merger Agreements, will be validly issued, fully paid and nonassessable.
This opinion is given as of the date hereof, and we assume no obligation to
update this opinion to reflect any fact or circumstance that may hereafter come
to our attention or any change in any law or regulation that may hereafter
occur.
<PAGE> 2
We hereby consent to the filing of this opinion letter as an exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the prospectus included in the Registration Statement.
Very truly yours,
KING & SPALDING
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of Resource
Bancshares Mortgage Group, Inc. of our report dated February 3, 1997, which
appears on page 56 of Resource Bancshares Mortgage Group, Inc.'s 1996 Annual
Report to Shareholders, which is incorporated by reference in its Annual Report
on Form 10-K for the year ended December 31, 1996. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
/s/ PRICE WATERHOUSE LLP
Columbia, South Carolina
June 10, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Resource Bancshares Mortgage Group, Inc.
of our report dated February 28, 1997, relating to the financial statements of
Resource Bancshares Corporation, which appears in such Prospectus. We also
consent to the reference to us under the heading "Experts" in such Prospectus.
/s/ PRICE WATERHOUSE LLP
Columbia, South Carolina
June 10, 1997
<PAGE> 1
EXHIBIT 23.3
The Board of Directors
Walsh Holding Co., Inc.:
We consent to the use of our report dated March 28, 1997 relating to the
consolidated balance sheet of Walsh Holding Co., Inc. as of December 31, 1996
and the related statement of income, stockholders' equity and cash flows for the
nine month period then ended included in the Registration Statement on Form S-4
filed by Resource Bancshares Mortgage Group, Inc. and to the reference to our
firm under the heading "Experts".
KPMG Peat Marwick LLP
New York, New York
June 12, 1997
<PAGE> 1
EXHIBIT 23.4
The Board of Directors
Walsh Holding Co., Inc:
We consent to the use of our report dated March 28, 1997 relating to the
combined balance sheets of GF Mortgage Corp. and GF Property Corp. as of March
31, 1996 and December 31, 1995 and the related combined statements of income,
stockholders' equity and cash flows for the three month period ended March 31,
1996 and year ended December 31, 1995, included in the Registration Statement on
Form S-4 filed by Resource Bancshares Mortgage Group, Inc. and to the reference
to our firm under the heading "Experts".
KPMG Peat Marwick, LLP
New York, New York
June 12, 1997
<PAGE> 1
EXHIBIT 23.11
INDEPENDENT AUDITORS' CONSENT
We hereby consent to the use in this Registration Statement of Resource
Bancshares Mortgage Group, Inc. on Form S-4 of our report dated May 8, 1995 with
respect to the combined financial statements of each of GF Mortgage Corp. and GF
Property Corp. appearing in the Prospectus, forming a part of this Registration
Statement, and to the reference to our Firm under the heading "Experts" in such
Prospectus.
KEMPISTY & COMPANY CPAs PC
Kempisty & Company
Certified Public Accountants PC
New York, New York
June 17, 1997
