Registration No. 333-76758
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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MARSHALL & ILSLEY CORPORATION
(exact name of Registrant as specified in its charter)
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Wisconsin 6021 39-0968604
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
770 North Water Street
Milwaukee, Wisconsin 53202
(414) 765-7000
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
J.B. Wigdale
Chairman of the Board
Marshall & Ilsley Corporation
770 North Water Street
Milwaukee, Wisconsin 53202
(414) 765-7000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies of communications to:
Randall J. Erickson Barry A. Gersick
Godfrey & Kahn, S.C. Maslon Edelman Borman & Brand, LLP
780 North Water Street 3300 Wells Fargo Center
Milwaukee, Wisconsin 53202 90 South Seventh Street
(414) 273-3500 Minneapolis, Minnesota 55402-4140
(612) 672-8200
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Approximate Date of Commencement of Proposed Sale to the Public: As soon as
practicable after this Registration Statement becomes effective and all
conditions to the consummation of the merger described in this document have
been met.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, please check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
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.
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the Registration Statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and we are not soliciting offers to buy these
securities in any state where the offer or sale is not permitted.
Subject To Completion, Dated January 23, 2002
Proxy Statement/Prospectus
Proxy Statement for Century Bancshares, Inc.
Special Meeting
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Prospectus of Marshall & Ilsley Corporation
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The boards of directors of Marshall & Ilsley Corporation and Century
Bancshares, Inc. have agreed that Century Bancshares will merge with and into
Marshall & Ilsley, with Marshall & Ilsley being the surviving corporation. If
the merger is completed, each share of Century Bancshares common stock will be
converted into shares of Marshall & Ilsley common stock having a value of
approximately $7.40, although Century Bancshares shareholders may elect to
receive cash for their shares, up to an aggregate amount of approximately
$22.82 million. We will determine the exact exchange ratio with a formula based
on the trading price of Marshall & Ilsley common stock during the 10 trading
days up to and including the second trading day prior to the merger. The
exchange ratio is intended to provide a value of approximately $7.40 per share
of Century Bancshares common stock. Cash will be paid in lieu of issuing
fractional shares.
Based on the $61.11 average price per share of Marshall & Ilsley common
stock during the 10 trading days up to and including the second trading day
prior to January 18, 2002, the exchange ratio would equal 0.121 of a share of
Marshall & Ilsley common stock for each share of your Century Bancshares common
stock.
The merger cannot be completed unless the shareholders of Century Bancshares
approve the merger and the agreement and plan of merger, including the form of
plan of merger constituting a part thereof. Century Bancshares has scheduled a
special meeting on February 26, 2002 for you to vote on these matters. The
approval of Marshall & Ilsley's shareholders is not required.
The board of directors of Century Bancshares unanimously recommends that the
holders of Century Bancshares common stock vote "FOR" approval of the merger
and the agreement and plan of merger, including the form of plan of merger
constituting a part thereof.
Whether or not you plan to attend the special meeting on February 26, 2002,
please take the time to vote by completing, signing and mailing the enclosed
proxy card to us. Your vote is very important.
Marshall & Ilsley common stock is traded on the New York Stock Exchange
under the symbol "MI." Century Bancshares common stock is not registered on a
national securities exchange or quoted on the Nasdaq Stock Market.
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For a description of certain significant considerations in connection with
the merger and related matters described in this document, see "Risk Factors"
beginning on page 11.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this document. Any representation to the contrary is a
criminal offense.
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The shares of Marshall & Ilsley common stock are not savings accounts,
deposits or other obligations of any bank or savings association and are not
insured by the Federal Deposit Insurance Corporation or any other governmental
agency. Stock is subject to investment risks, including loss of value.
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The date of this proxy statement / prospectus is January 23, 2002 and is
being first mailed to Century Bancshares shareholders on or about January 25,
2002.
This document incorporates by reference important business information and
financial information about Marshall & Ilsley that is not included in or
delivered with this document. See "Where You Can Find More Information" on page
52 of the document for a list of documents that Marshall & Ilsley has
incorporated by reference into this document. These documents are available to
you without charge upon written or oral request made to:
Shareholder/Investor Relations
Marshall & Ilsley Corporation
770 North Water Street
Milwaukee, Wisconsin 53202
(414) 765-7817 or (414) 765-7806
To obtain documents in time for the special meeting, your request should be
received by February 19, 2002.
Century Bancshares, Inc.
11455 Viking Drive
Eden Prairie, Minnesota 55344
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Notice of Special Meeting of Shareholders
To be held on February 26, 2002
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To the Shareholders of Century Bancshares, Inc.:
Please take notice that the board of directors of Century Bancshares, Inc.
has called a special meeting of shareholders. The special meeting will be held
on Tuesday, February 26, 2002 at 10:00 a.m., Minneapolis time, at 11455 Viking
Drive, Eden Prairie, Minnesota, 55344.
The purposes of the meeting are the following:
1. To vote on a proposal to approve the agreement and plan of merger
dated as of December 3, 2001 by and between Marshall & Ilsley Corporation
and Century Bancshares, Inc., including the form of plan of merger
constituting a part thereof, and the merger of Century Bancshares, Inc. with
and into Marshall & Ilsley Corporation contemplated by that agreement; and
2. To transact any other business that may properly come before the
meeting and any adjournment or postponement thereof.
Only Century Bancshares shareholders of record on January 14, 2002 will be
entitled to vote at the special meeting or any adjournments or postponements
thereof.
By approving proposal one, Century Bancshares shareholders are approving the
agreement and plan of merger, the form of plan of merger, and the transactions
contemplated by that agreement and plan, including the merger of Century
Bancshares with and into Marshall & Ilsley.
As described on pages 24 through 27 of this document under the caption "The
Merger--Dissenters' Rights," under Minnesota law, Century Bancshares
shareholders may assert dissenters' rights in connection with the merger and
receive in cash the fair value of their shares of Century Bancshares common
stock. A copy of the Minnesota dissenters' rights statute is included in this
document as Appendix C.
A proxy card for the special meeting is enclosed herewith. Whether or not
you plan to attend the special meeting, please promptly complete and mail the
enclosed proxy card. If you sign, date and mail your proxy card without
indicating how you want to vote, your proxy will be voted in favor of the
merger, the agreement and plan of merger, and the form of plan of merger. If
you fail to return your proxy card, the effect will be the same as a vote
against the merger, the agreement and plan of merger, and the form of plan of
merger. You may still vote in person at the meeting even if you have previously
returned your proxy card so long as you properly revoke your proxy.
By order of the board of directors:
CENTURY BANCSHARES, INC.
Jerome B. Simon
By:________________________________
Jerome B. Simon,
Secretary
January 23, 2002
TABLE OF CONTENTS
Page
SUMMARY.......................................................................................... 3
The Companies................................................................................. 3
The Merger.................................................................................... 3
Holders of Century Bancshares Common Stock will Receive Marshall & Ilsley Common Stock in the
Merger...................................................................................... 3
Electing to Receive Cash in Exchange for Shares of Century Bancshares Common Stock............ 4
No Fractional Shares will be Issued........................................................... 4
Material Federal Income Tax Consequences of the Merger........................................ 4
Reasons for the Merger........................................................................ 4
Recommendation to Century Bancshares Shareholders............................................. 4
The Special Meeting........................................................................... 4
Vote Required................................................................................. 5
Action by Marshall & Ilsley Shareholders Not Required......................................... 5
Regulatory Approvals.......................................................................... 5
Dissenters' Rights Available.................................................................. 5
Share Information and Market Prices for Marshall & Ilsley Common Stock........................ 6
Price Range of Common Stock and Dividends..................................................... 7
Comparison of Unaudited Per Share Data........................................................ 8
Selected Historical Financial Data of Marshall & Ilsley....................................... 9
Selected Historical Financial Data of Century Bancshares...................................... 10
RISK FACTORS..................................................................................... 11
FORWARD-LOOKING STATEMENTS....................................................................... 13
SPECIAL MEETING OF CENTURY BANCSHARES SHAREHOLDERS............................................... 14
Purpose of the Meeting........................................................................ 14
Record Date................................................................................... 14
Required Vote................................................................................. 14
Proxies....................................................................................... 14
Solicitation of Proxies....................................................................... 15
THE MERGER....................................................................................... 16
Structure of the Merger....................................................................... 16
Background of the Merger...................................................................... 16
Management and Operations after the Merger.................................................... 16
Merger Consideration.......................................................................... 17
No Fractional Shares.......................................................................... 17
Effective Time of the Merger.................................................................. 17
Exchange of Certificates...................................................................... 18
Interests of Certain Persons.................................................................. 19
Recommendation of the Century Bancshares Board of Directors and Reasons for the Merger........ 20
Marshall & Ilsley's Reasons for the Merger.................................................... 20
Material Federal Income Tax Consequences...................................................... 20
Regulatory Approvals.......................................................................... 23
Accounting Treatment.......................................................................... 23
Resales of Marshall & Ilsley Common Stock..................................................... 24
Dissenters' Rights............................................................................ 24
TERMS OF THE MERGER AGREEMENT.................................................................... 27
Representations and Warranties................................................................ 27
Conduct of Business Pending the Merger........................................................ 28
No Solicitation of Transactions............................................................... 29
Employee Benefit Matters...................................................................... 30
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Page
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Conditions to Completion of the Merger....... 31
Termination of the Merger Agreement.......... 32
Waiver and Amendment of the Merger Agreement. 32
Shareholder Voting Agreement................. 32
MARSHALL & ILSLEY CORPORATION................... 34
Description of Business...................... 34
Recent Developments.......................... 35
Additional Information....................... 35
CENTURY BANCSHARES, INC......................... 35
Description of Business...................... 35
COMPARATIVE RIGHTS OF SHAREHOLDERS.............. 36
SHAREHOLDER PROPOSALS........................... 52
LEGAL MATTERS................................... 52
EXPERTS......................................... 52
WHERE YOU CAN FIND MORE INFORMATION............. 52
APPENDICES:
Appendix A. Agreement and Plan of Merger
Appendix B. Plan of Merger
Appendix C. Minnesota Dissenters' Rights Statute
Appendix D Management's Discussion and Analysis of Financial Condition and Results of Operations
and Century Bancshares, Inc. and Subsidiaries Financial Statements
ii
QUESTIONS AND ANSWERS ABOUT THIS DOCUMENT AND THE MERGER
Q. What is the purpose of this document?
A. This document serves as both a proxy statement of Century Bancshares and
prospectus of Marshall & Ilsley for the issuance of its common stock in the
merger. As a proxy statement, this document is being provided to you by
Century Bancshares because the board of directors of Century Bancshares is
soliciting your proxy for use at the special meeting of shareholders called
to vote on the proposed merger of Century Bancshares with and into Marshall
& Ilsley. When we use the term merger agreement in this document, we are
referring, collectively, to the agreement and plan of merger, a copy of
which is included in this document as Appendix A, and the form of plan of
merger constituting a part thereof, a copy of which is included in this
document as Appendix B.
As a prospectus, this document is being provided to you by Marshall & Ilsley
because Marshall & Ilsley is offering shares of its common stock in exchange
for your shares of Century Bancshares common stock in connection with the
merger.
Q. Why do Century Bancshares and Marshall & Ilsley want to merge?
A. The Century Bancshares board of directors believes that the merger is
consistent with Century Bancshares's goal of achieving superior shareholder
returns and will create a more competitive company better able to serve its
customers. The Marshall & Ilsley board of directors believes that the merger
will enable Marshall & Ilsley to expand its operations in the Minneapolis,
Minnesota area and strengthen its banking franchise through Century
Bancshares's strong commercial and retail banking presence in the
Minneapolis area.
Q. What will I receive for my Century Bancshares shares of common stock?
A. You will receive a fraction of a share of Marshall & Ilsley common stock
having a total value of approximately $7.40 for each share of Century
Bancshares common stock you own at the effective time of the merger. The
exact number of shares of Marshall & Ilsley common stock you will receive in
exchange for your shares of Century Bancshares common stock will be
determined at the time of the merger based on the average trading price of
Marshall & Ilsley common stock during a measurement period of 10 trading
days up to and including the second trading day before the merger. Marshall
& Ilsley will not issue any fractional shares. Instead, you will receive
cash in lieu of any fractional share owed to you.
You may also elect to receive cash in exchange for your shares of Century
Bancshares common stock. If you make such an election, then you will receive
a cash amount of approximately $7.40 for each of your shares of Century
Bancshares common stock. If you make such an election and if the amount of
cash that holders of shares of Century Bancshares common stock elect to
receive in exchange for their shares exceeds a total of approximately $22.82
million, then the amount of cash that you will receive for each share will
be subject to a pro rata reduction, and you will receive a number of shares
of Marshall & Ilsley common stock with a value equal to the amount of that
reduction.
Each previously issued and outstanding share of Marshall & Ilsley common
stock will remain issued and outstanding and will not be converted or
exchanged in the merger.
Q. How do I elect to receive cash for my shares?
A. A form of election has been included with this proxy statement/prospectus.
You may elect to receive cash for your shares of Century Bancshares common
stock by completing and signing the enclosed form of election and submitting
it as instructed by the election deadline, which is 5:00 p.m., Minneapolis
time, on Monday, February 25, 2002. If you have made an election to receive
cash for your shares, you may at any time change or withdraw your election
by written notice as instructed prior to the election deadline. If you do
not submit a properly completed and signed form of election prior to the
election deadline, then your shares will be converted into the right to
receive Marshall & Ilsley common stock at the effective time.
1
Q. When do you expect the merger to be completed?
A. We hope to complete the merger as soon as possible after Century
Bancshares's special meeting of shareholders, assuming the required
shareholder approval is obtained, together with federal regulatory approval
and the satisfaction of other closing conditions.
Q. When and where will the special meeting take place?
A. Century Bancshares's special meeting of shareholders will be held at 10:00
a.m., Minneapolis time, on Tuesday, February 26, 2002, at 11455 Viking
Drive, Eden Prairie, Minnesota, 55344.
Q. Who must approve the proposal at the special meeting?
A. Holders of a majority of the outstanding Series A and Series B shares of
Century Bancshares common stock as of the close of business on January 14,
2002, voting together as a single class, must approve the merger and the
merger agreement.
Approval of the proposed merger by Marshall & Ilsley's shareholders is not
required.
Q. What do I need to do now?
A. After reviewing this document, submit your proxy by promptly executing and
returning the enclosed proxy card. By submitting your proxy, you authorize
the individuals named in the proxy to represent you and to vote your shares
at the special meeting of shareholders in accordance with your instructions.
These persons also may vote your shares to adjourn the special meeting and
will be authorized to vote your shares at any adjournments or postponements
of the special meeting.
Your vote is important. Whether or not you plan to attend the special
meeting, please promptly submit your proxy in the enclosed envelope.
Q. How will my shares be voted if I return a blank proxy card?
A. If you sign, date and send in your proxy card and do not indicate how you
want to vote, your proxy will be counted as a vote in favor of the merger
and the merger agreement and will be voted in the discretion of the persons
named as proxies in any other matters properly presented for a vote at the
special meeting.
Q. What will be the effect if I do not vote?
A. If you abstain or do not return your proxy card or otherwise do not vote at
the special meeting, your failure to vote will have the same effect as if
you voted against the merger and the merger agreement. Therefore, the board
of directors of Century Bancshares encourages you to vote in favor of the
proposed merger and merger agreement as soon as possible.
Q. Can I vote my shares in person?
A. Yes, if you own your shares registered in your own name. You may attend the
special meeting and vote your shares in person rather than signing and
mailing your proxy card. However, in order to ensure that your vote is
counted at the special meeting, we recommend that you sign, date and
promptly mail the enclosed proxy card.
Q. Can I change my mind and revoke my proxy?
A. Yes, you may revoke your proxy and change your vote at any time before the
polls close at the special meeting by:
. signing another proxy with a later date and filing it with an officer of
Century Bancshares, or
. filing written notice of the revocation of your proxy with an officer of
Century Bancshares.
Q. Should I send in my stock certificates now?
A. No--please do not send in your certificates at this time. Once the merger is
completed we will send you written instructions for exchanging your Century
Bancshares common stock certificates.
Q. Who can answer my questions about the merger?
A. If you have more questions about the merger, please contact Sheldon Wert or
Kim Culp, Chief Executive Officer and Vice Chairman, respectively, of
Century Bancshares, at (952) 943-2300.
2
SUMMARY
This summary highlights selected information from this document and may not
contain all of the information that is important to you. To understand the
merger fully and for a more complete description of the legal terms of the
merger, you should read carefully this entire document, including the
appendices, and the other documents we refer to. For more information about
Marshall & Ilsley and Century Bancshares, see "Where You Can Find More
Information" on page 52.
The Companies
Marshall & Ilsley Corporation
770 North Water Street
Milwaukee, Wisconsin 53202
(414) 765-7700
Marshall & Ilsley, incorporated under the laws of Wisconsin in 1959, is a
registered bank holding company. Marshall & Ilsley's principal assets are the
stock of its bank and nonbank subsidiaries. As of September 30, 2001, Marshall
& Ilsley had consolidated total assets of approximately $27.3 billion and
consolidated total deposits of approximately $16.7 billion, making it the
largest bank holding company headquartered in Wisconsin.
Marshall & Ilsley common stock is traded on the New York Stock Exchange
under the symbol "MI."
Century Bancshares, Inc.
11455 Viking Drive
Eden Prairie, Minnesota 55344
(952) 943-2020
Century Bancshares, Inc. is a registered financial holding company
incorporated under Minnesota law. Century Bancshares's assets primarily consist
of the stock of its subsidiary, Century Bank, National Association, located in
the Minneapolis, Minnesota metropolitan area. As of September 30, 2001, Century
Bancshares had consolidated total assets of $342 million and consolidated total
deposits of $275 million.
The Merger
At the effective time of the merger, Century Bancshares will merge with and
into Marshall & Ilsley. Marshall & Ilsley will issue shares of its common stock
and cash to the shareholders of Century Bancshares in exchange for their shares
of Century Bancshares common stock. Century Bancshares will cease to exist as a
separate corporation. Marshall & Ilsley will be the surviving corporation.
Holders of Century Bancshares Common Stock will Receive Marshall & Ilsley
Common Stock in the Merger
If the merger is completed, you will receive a fraction of a share of
Marshall & Ilsley common stock having a value of approximately $7.40 for each
share of Century Bancshares common stock that you own as of the effective time
of the merger. We will determine the exact number of shares of Marshall &
Ilsley common stock you will receive in exchange for your shares of Century
Bancshares common stock at the time of the merger based on the average trading
price of Marshall & Ilsley common stock during a measurement period of 10
trading days up to and including the second trading day before the merger.
Based on the $61.11 average trading price of Marshall & Ilsley common stock
during the 10 trading days up to and including the second trading day prior to
January 18, 2002, you would receive
0.121 of a share of Marshall & Ilsley common stock for each share of Century
Bancshares common stock you own at the effective time of the merger.
You may also elect to receive cash in exchange for your shares of Century
Bancshares common stock. If you make such an election, then you will receive a
cash amount of approximately $7.40 for each of your shares of Century
Bancshares common stock. If you make such an election and if the amount of cash
that holders of shares of Century Bancshares common stock elect to receive in
exchange for their shares exceeds a total of approximately $22.82 million, the
amount of cash that you will receive for each share will be subject to a pro
rata reduction, and you will receive a number of shares of Marshall & Ilsley
common stock with a value equal to the amount of that reduction.
3
Each share of Marshall & Ilsley common stock issued and outstanding prior to
the merger will remain issued and outstanding and will not be converted or
exchanged in the merger.
Electing to Receive Cash in Exchange for Shares of Century Bancshares Common
Stock
A form of election has been included with this proxy statement/prospectus.
You may elect to receive cash for some or all of your shares of Century
Bancshares common stock by completing and signing the form of election and
returning it as instructed in the form of election by the election deadline,
which is 5:00 p.m., Minneapolis time, on Monday, February 25, 2002. If you have
made an election to receive cash for your shares, you may at any time change or
withdraw your election by written notice prior to the election deadline. If you
do not submit a properly completed and signed form of election prior to the
election deadline, then your shares shall be converted into the right to
receive Marshall & Ilsley common stock at the effective time.
No Fractional Shares will be Issued
Marshall & Ilsley will not issue any fractional shares. Instead, you will
receive cash in lieu of any fractional share of Marshall & Ilsley common stock
owed to you in exchange for your shares of Century Bancshares common stock.
Material Federal Income Tax Consequences of the Merger
The exchange of shares is expected to be tax-free to you for federal income
tax purposes, except for taxes payable on any cash you elect to receive for
your shares or that you receive in lieu of fractional shares. The expected
material federal income tax consequences are set out in greater detail
beginning on page 20.
Tax matters are very complicated and the tax consequences of the merger to
you will depend on the facts of your own situation. You are urged to consult
your own tax advisor for a full understanding of the tax consequences of the
merger to you.
Reasons for the Merger
The Century Bancshares board believes that in the rapidly changing
environment of the banking industry, merging with Marshall & Ilsley is
consistent with Century Bancshares's long-term goal of enhancing shareholder
value. In addition, Century Bancshares's board believes that the customers
served by Century Bancshares will benefit from the merger.
Marshall & Ilsley believes that the merger with Century Bancshares presents
Marshall & Ilsley with a unique opportunity to expand its operations in the
Minneapolis, Minnesota area. In addition, Marshall & Ilsley believes that the
merger will provide growth opportunities and will be accretive to the earnings
per share of the combined company.
You can find a more detailed discussion of the background to the merger
agreement and Century Bancshares's and Marshall & Ilsley's reasons for the
merger in this document under "The Merger--Background of the Merger" beginning
on page 16, "--Recommendation of the Century Bancshares Board of Directors and
Reasons for the Merger" beginning on page 20, and "--Marshall & Ilsley's
Reasons for the Merger" beginning on page 20.
Recommendation to Century Bancshares Shareholders
The Century Bancshares board of directors believes that the merger is in the
best interests of Century Bancshares and its shareholders and unanimously
recommends that you vote "FOR" approval of the merger and the merger agreement.
The Special Meeting
A special meeting of the Century Bancshares shareholders will be held at
10:00 a.m., Minneapolis time, on Tuesday, February 26, 2002, at 11455 Viking
Drive, Eden Prairie, Minnesota, 55344. Holders of Century Bancshares common
stock as of the close of business on January 14, 2002 are entitled to vote at
the Century Bancshares special meeting and will be asked to consider and vote
upon:
. approval of the merger and merger agreement; and
4
. any other matters properly presented at the Century Bancshares special
meeting.
As of the date of this document, the Century Bancshares board did not know
of any other matters that will be presented at the Century Bancshares special
meeting.
Vote Required
At the special meeting of shareholders, the merger and the merger agreement
must be approved by the affirmative vote of at least a majority of the shares
of Series A and Series B Century Bancshares common stock outstanding at the
close of business on January 14, 2002, voting together as a single class. As of
that date, there were 2,499,709 Series A and 5,450,590 Series B shares of
Century Bancshares common stock outstanding. Each share of Century Bancshares
common stock is entitled to one vote.
As of December 18, 2001, Century Bancshares's directors, executive officers
and their affiliates held in the aggregate, on a fully diluted basis,
approximately 1,848,810 Series A and 4,557,420 Series B shares of the
outstanding Century Bancshares common stock, representing approximately 74% of
the total number of outstanding Series A shares and 67% of the total number of
outstanding Series B shares, or 83% of the aggregate number of shares of
Century Bancshares common stock.
Marshall & Ilsley has entered into an agreement with seven Century
Bancshares shareholders who own in aggregate approximately 54 percent of the
outstanding Century Bancshares common stock. Each of these shareholders has
agreed, among other things, to vote its shares in favor of the merger and the
merger agreement.
Approval of the merger and the merger agreement will also authorize the
Century Bancshares board to exercise their discretion on whether to proceed
with the merger in the event Century Bancshares has the right to terminate the
merger agreement. This determination may be made without notice to, or the
resolicitation of proxies from, the Century Bancshares shareholders.
Action by Marshall & Ilsley Shareholders Not Required
Approval of the merger by Marshall & Ilsley's shareholders is not required.
Accordingly, Marshall & Ilsley has not called a special meeting of its
shareholders.
Regulatory Approvals
We cannot complete the merger unless it is approved by the Board of
Governors of the Federal Reserve System. Marshall & Ilsley has filed an
application with the Federal Reserve Board. In addition, the merger is subject
to the approval of, or notice to, other regulatory authorities.
As of the date of this document, we have not received the necessary
regulatory approvals. We cannot be certain of when or if we will obtain them.
However, we do not know of any reason why we should not obtain the required
approvals in a timely manner.
Dissenters' Rights Available
Century Bancshares shareholders who properly dissent from the merger are
entitled to receive the fair value of their shares of Century Bancshares common
stock in cash. To exercise your dissenters' rights, you must follow the
procedures outlined in Appendix C, including, without limitation:
. prior to the vote at the special meeting, delivering to Century Bancshares
written notice of your intention to demand the fair value of your Century
Bancshares shares; and
. not voting to approve the merger and the merger agreement.
If you sign and return your proxy without voting instructions, and do not
revoke the proxy, your proxy will be voted in favor of the merger and the
merger agreement and you will lose your dissenters' rights. Also, you may lose
your dissenters' rights if you fail to comply with other required procedures
contained in Appendix C.
The procedures you are required to follow to exercise your dissenters'
rights are set out in greater detail on pages 24 through 27 and in Appendix C.
5
Share Information and Market Prices for Marshall & Ilsley Common Stock
Marshall & Ilsley common stock is traded on the New York Stock Exchange
under the symbol "MI".
The following table lists the closing price of Marshall & Ilsley common
stock and the equivalent value of a share of Century Bancshares common stock
giving effect to the merger on:
. December 3, 2001, the last trading day before we announced the merger; and
. January 18, 2002, the last practical day to obtain share price information
before the date of this proxy statement/prospectus.
There is not a public trading market for the Century Bancshares common stock.
Equivalent Per
Share Value of
Marshall & Ilsley Century Bancshares Century Bancshares
Common Stock Common Stock Common Stock
----------------- ------------------ ------------------
December 3, 2001 $60.38 N/A $7.29
January 18, 2002 $61.01 N/A $7.38
The equivalent per share value of Century Bancshares common stock on each of
these two days represents the closing price of a share of Marshall & Ilsley
common stock on that day multiplied by the relevant exchange ratio. The exact
exchange ratio will be determined pursuant to a formula based on the average
trading price of Marshall & Ilsley common stock during the 10 days prior to and
including the second trading day prior to the effective time of the merger. The
exchange ratio is intended to provide a value of approximately $7.40 per share
of Century Bancshares common stock. For each of these two days, we calculated
the exchange ratio by dividing $7.40 by the average high and low sale price per
share of Marshall & Ilsley common stock for the 10 trading days ending on and
including the second trading day preceding such date. As of December 3, 2001,
such average trading price of Marshall & Ilsley common stock was $61.32 and as
of January 18, 2002, such average trading price of Marshall & Ilsley common
stock was $61.11.
The market price of Marshall & Ilsley common stock may change at any time.
Consequently, the value of the Marshall & Ilsley common stock you will be
entitled to receive as a result of the merger may be significantly higher or
lower than its current value or its value at the date of the special meeting.
6
Price Range of Common Stock and Dividends
Marshall & Ilsley--Share Prices and Dividends
Marshall & Ilsley common stock is listed on the New York Stock Exchange and
traded under the symbol "MI." The following table sets forth, for the periods
indicated, the high and low reported closing sale prices per share of Marshall
& Ilsley common stock on the NYSE composite transactions reporting system and
cash dividends declared per share of Marshall & Ilsley common stock.
Price Range of Dividends
Common Stock Declared
-------------- ---------
High Low
------ ------
1999
First Quarter.. $59.25 $55.38 $0.220
Second Quarter. 71.94 54.75 0.240
Third Quarter.. 69.75 55.88 0.240
Fourth Quarter. 69.31 57.81 0.240
2000
First Quarter.. $60.44 $43.88 $0.240
Second Quarter. 55.31 41.52 0.265
Third Quarter.. 51.63 43.56 0.265
Fourth Quarter. 51.49 38.63 0.265
2001
First Quarter.. $55.20 $48.04 $0.265
Second Quarter. 54.35 48.91 0.290
Third Quarter.. 59.56 50.99 0.290
Fourth Quarter. 64.12 52.66 0.290
Century Bancshares--Share Prices and Dividends
There is no established public trading market for Century Bancshares common
stock. Transfers of Century Bancshares common stock have been made previously
through private transactions within families and related estates.
The last sales of Century Bancshares stock of which Century Bancshares is
aware occurred on August 1, 2000, at a price of $5.00 per share, and in July
2001, at a price of $7.00 per share. During calendar years 1999, 2000 and 2001,
Century Bancshares did not pay any dividends.
The timing and amount of future dividends paid by Marshall & Ilsley and
Century Bancshares are subject to determination by the applicable board of
directors in their discretion and will depend upon earnings, cash requirements
and the financial condition of the respective companies and their subsidiaries,
applicable government regulations and other factors deemed relevant by the
applicable company's board of directors. Various U.S. state and federal laws
limit the ability of affiliate banks to pay dividends to Marshall & Ilsley and
Century Bancshares. The merger agreement restricts the cash dividends that may
be paid on Century Bancshares common stock pending consummation of the merger.
Century Bancshares has agreed not to declare or pay any dividends with respect
to its common stock, except that Century Bancshares may declare and pay a cash
dividend not to exceed $300,000 in aggregate if the merger has not become
effective on or prior to April 19, 2002. See "The Terms of the Merger
Agreement--Conduct of Business Pending the Merger."
7
Comparison of Unaudited Per Share Data
The following table shows information about Marshall & Ilsley's and Century
Bancshares's net income per share, cash dividends per share and book value per
share, and similar information after giving effect to the merger. This
information is referred to below as "pro forma" information. In presenting the
pro forma information, Marshall & Ilsley and Century Bancshares assumed that we
had been merged as of the beginning of the earliest period presented. The pro
forma information gives effect to the merger under the purchase method of
accounting in accordance with currently existing accounting principles
generally accepted in the United States.
Marshall & Ilsley used the exchange ratio of 0.1185 in computing the pro
forma combined and equivalent pro forma combined per share data. This exchange
ratio is intended to provide a value of approximately $7.40 per share of
Century Bancshares common stock, which includes an adjustment for the decrease
in the total merger consideration described above. We calculated the exchange
ratio by dividing $7.40 by the average of the average high and low sale price
per share of Marshall & Ilsley common stock on the NYSE for the 10 trading days
ending on and including the second trading day preceding December 19, 2001. As
of January 18, 2002, such average price of Marshall & Ilsley common stock was
$61.11.
Marshall & Ilsley expects that it will incur merger and integration charges
as a result of combining our companies. The pro forma information is helpful in
illustrating the financial characteristics of the combined company under one
set of assumptions. However, it does not reflect these merger and integration
charges and, accordingly, does not attempt to predict or suggest future
results. Also, it does not necessarily reflect what the historical results of
the combined company would have been had our companies been combined for the
periods presented.
You should read the information in the following table together with the
historical financial information that Marshall & Ilsley has included in its
prior filings with the United States Securities and Exchange Commission. This
material has been incorporated into this document by reference to those
filings. See "Where You Can Find More Information" on page 52.
Nine Months
Ended Year Ended
September 30, December 31,
2001 2000
------------- ------------
Marshall & Ilsley Common Stock
Income before cumulative effect of changes in accounting principles per basic
common share
Historical.................................................................. $ 2.17 $ 3.01
Pro forma combined (1)...................................................... 2.20 3.02
Income before cumulative effect of changes in accounting principles per diluted
common share
Historical.................................................................. 2.11 2.91
Pro forma combined (1)...................................................... 2.13 2.93
Dividends per basic common share
Historical.................................................................. 0.845 1.035
Pro forma combined(2)....................................................... 0.845 1.035
Book value per basic common share
Historical.................................................................. $23.60 $21.19
Pro forma combined.......................................................... 23.93 21.55
8
Nine Months
Ended Year Ended
September 30, December 31,
2001 2000
------------- ------------
Century Bancshares Common Stock
Net income per basic common share
Historical....................... $0.49 $0.49
Equivalent pro forma combined(3). 0.26 0.36
Net income per diluted common share
Historical....................... 0.46 0.46
Equivalent pro forma combined(3). 0.25 0.35
Dividends per basic common share
Historical....................... 0.00 0.00
Equivalent pro forma combined(3). 0.10 0.12
Book value per basic common share
Historical....................... $3.47 $2.91
Equivalent pro forma combined(3) 2.84 2.55
--------
(1) The effect of estimated non-recurring merger and integration costs
resulting from the merger has not been included in the pro forma amounts.
(2) Pro forma dividends per share represent historical dividends paid by
Marshall & Ilsley.
(3) Represents Marshall & Ilsley's pro forma results multiplied by the exchange
ratio of 0.1185.
Selected Historical Financial Data of Marshall & Ilsley
The table below presents selected Marshall & Ilsley historical financial
data for the five years ended December 31, 2000, which are derived from its
previously filed audited consolidated financial statements for those years, and
historical financial data for the nine months ended September 30, 2001 and
September 30, 2000, which are derived from its previously filed unaudited
consolidated financial statements for those nine months.
You should read the following table together with the historical financial
information that Marshall & Ilsley has presented in its prior SEC filings.
Marshall & Ilsley has incorporated this material into this document by
reference. See "Where You Can Find More Information" on page 52.
As of and for the Nine
Months Ended September 30, As of and for the Twelve Months Ended December 31,
(Unaudited) ------------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ---------- ---------- ----------
(in thousands, except per share data)
Income Statement:
Interest Income.............. $1,307,132 $1,290,479 $1,747,982 $1,496,584 $1,434,044 $1,220,333 $1,045,821
Net Interest Income.......... 605,491 498,241 673,006 705,281 676,070 594,547 535,841
Provision for Loan and Lease
Losses...................... 34,006 21,373 30,352 25,419 27,090 17,633 15,634
Other Income................. 740,501 683,204 978,918 878,545 794,500 634,111 538,333
Other Expense................ 973,109 815,826 1,083,978 1,030,468 954,822 822,853 716,647
Income Before Accounting
Changes & Special
Charges..................... 295,502 271,919 361,636 354,511 317,591 256,685 221,910
Income Before Accounting
Changes..................... 229,600 233,071 317,402 354,511 301,323 256,685 206,635
9
As of and for the Nine
Months Ended September 30, As of and for the Twelve Months Ended December 31,
(Unaudited) -----------------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
----------- ----------- ----------- ----------- ----------- ----------- -----------
(in thousands, except per share data)
Per Share:
Basic:
Income Before Accounting
Changes & Special
Charges.................. $ 2.81 $ 2.58 $ 3.44 $ 3.32 $ 2.94 $ 2.62 $ 2.28
Income Before Accounting
Changes.................. 2.17 2.21 3.01 3.32 2.79 2.62 2.12
Diluted:
Income Before Accounting
Changes & Special
Charges.................. 2.72 2.49 3.32 3.14 2.76 2.43 2.12
Income Before Accounting
Changes.................. 2.11 2.14 2.91 3.14 2.61 2.43 1.98
Common Dividends
Declared.................. 0.845 0.770 1.035 0.940 0.860 0.785 0.720
Average Balance Sheet Data:
Net Loans and Leases....... $17,696,663 $16,800,558 $16,884,443 $14,680,725 $13,186,841 $10,805,088 $ 9,362,630
Total Assets............... 26,145,556 24,903,367 25,041,777 22,700,963 20,790,173 17,001,414 14,645,687
Total Deposits............. 17,285,759 17,270,898 17,497,783 16,156,902 14,757,215 12,239,795 10,897,512
Long-term Borrowings....... 1,797,883 1,185,304 1,178,805 1,009,132 1,046,321 787,819 823,397
Shareholders' Equity....... 2,392,164 2,116,331 2,148,074 2,172,117 2,133,037 1,556,366 1,374,858
Selected Historical Financial Data of Century Bancshares
The table below presents selected Century Banchares historical financial
data for the five years ended December 31, 2000, which are derived from its
audited consolidated financial statements for those years, and historical
financial data for the nine months ended September 30, 2001 and September 30,
2000, which are derived from its unaudited consolidated financial statements
for those nine months. This data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the historical consolidated financial statements and related
notes of Century Bancshares included in Appendix D to this document. Appendix D
is incorporated by reference into this document.
As of and for the Nine
Months Ended September30 As of and for the Twelve Months Ended December 31,
(Unaudited) --------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
-------- -------- -------- -------- -------- -------- --------
(in thousands, except per share data)
Income Statement:
Interest Income........... $ 19,424 $ 17,278 $ 23,772 $ 17,378 $ 16,434 $ 13,211 $ 10,166
Net Interest Income....... 11,308 10,304 14,084 11,468 10,306 8,719 7,028
Provision For Loan Losses. 360 559 1,053 494 653 406 377
All Other Income.......... 3,219 1,220 1,485 1,044 1,027 826 687
All Other Expense......... 7,865 5,974 8,171 6,830 6,720 5,673 4,785
Net Earnings.............. 3,911 3,103 3,969 3,224 2,462 2,151 1,617
Per Share:
Basic Earnings............ $ 0.49 $ 0.39 $ 0.49 $ 0.40 $ 0.30 $ 0.27 $ 0.21
Diluted Ernings........... 0.46 0.36 0.46 0.38 0.29 0.26 0.20
Cash Dividends............ - - - - - - -
Balance Sheet Items:
Loans, net................ $273,147 $226,363 $231,968 $187,570 $155,037 $129,043 $ 97,955
Total Assets.............. 342,590 288,779 278,050 228,602 200,274 163,881 131,397
Total Deposits............ 275,179 236,000 238,956 200,318 176,136 145,175 115,297
Long-Term Debt............ 35,309 9,697 7,697 6,032 3,875 - -
Stockholders' Equity...... 27,565 22,268 23,358 19,601 17,191 14,655 12,362
10
RISK FACTORS
In making your determination as to how to vote on the merger, you should
consider the following factors:
Risks Relating to the Merger
You will not know the exact number of Marshall & Ilsley shares you will
receive until the time of the merger.
If you receive shares of Marshall & Ilsley common stock in exchange for your
shares of Century Bancshares common stock, we will calculate the number of
shares of Marshall & Ilsley common stock you will receive in exchange for each
of your shares of Century Bancshares common stock based on a formula provided
in the merger agreement. The number of Marshall & Ilsley shares you will
receive will depend, in part, on the average trading price of Marshall &
Ilsley's common stock during the 10 trading days up to and including the second
trading day prior to the effective time of the merger. The exact number of
Marshall & Ilsley shares you will receive for each of your shares of Century
Bancshares common stock will depend on the result of dividing approximately
$7.40 by the average trading price of Marshall & Ilsley common stock before the
merger. As a result, you must decide whether to approve the merger without
knowing the exact number of Marshall & Ilsley shares you will receive.
For a complete description of how the number of Marshall & Ilsley shares you
will receive in the merger will be determined, see "The Merger--Merger
Consideration."
The number of Marshall & Ilsley shares you receive will depend on the average
trading price of Marshall & Ilsley common stock during the measurement period
prior to the merger.
If you receive shares of Marshall & Ilsley common stock in exchange for your
shares of Century Bancshares common stock, changes in the market price of
Marshall & Ilsley common stock before the merger will affect the exact number
of Marshall & Ilsley shares you will receive in exchange for your shares of
Century Bancshares common stock. The exchange ratio is intended to provide a
value of approximately $7.40 per share of Century Bancshares common stock. We
cannot predict the price at which Marshall & Ilsley common stock will trade
before the merger. Any number of factors could cause the market price of
Marshall & Ilsley common stock to change, including changes in general market
and economic conditions, changes in Marshall & Ilsley's business, operations
and prospects and changes in the regulatory environment. Many of these factors
are beyond our control. There are no "walk away" or termination rights in the
merger agreement that would permit Century Bancshares to terminate the merger
based on declines in the value of Marshall & Ilsley common stock.
The value of the Marshall & Ilsley common stock you receive may be
substantially lower than anticipated.
The average trading price used to calculate the exchange ratio is likely to
be different from the closing price per share of Marshall & Ilsley common stock
at the effective time of the merger. As a result, if you receive shares of
Marshall & Ilsley common stock in exchange for your shares of Century
Bancshares common stock, the value of the Marshall & Ilsley common stock you
will be entitled to receive for each of your shares of Century Bancshares
common stock may be substantially lower than $7.40.
Century Bancshares Shareholders will be diluted by the merger.
The merger will dilute the ownership position of the present shareholders of
Century Bancshares. Based on the number of shares of Century Bancshares common
stock outstanding on the record dates of the special meeting and an average
trading price of $61.11 per share of Marshall & Ilsley common stock on January
18, 2002, Marshall & Ilsley will issue to Century Bancshares shareholders
approximately 961,986 shares of Marshall & Ilsley common stock in the merger
(assuming no cash elections are made). As a result, Century Bancshares
shareholders will hold approximately 1.0 percent of the Marshall & Ilsley
common stock outstanding immediately after the completion of the merger based
on the number of shares of Marshall & Ilsley common stock outstanding as of
September 30, 2001.
11
Omitted Industry Financial Information
Century Bancshares has excluded certain financial disclosures required of
bank holding companies under rules promulgated by the Securities and Exchange
Commission from the Management's Discussion and Analysis of Financial Condition
and Results of Operations of Century Bancshares attached to this Proxy
Statement/Prospectus as Appendix D. The omitted industry financial information
relates to, among other things, certain disclosures as to Century Bancshares
investments and deposits. Marshall & Ilsley and Century Bancshares have
determined since Century Bancshares has not been required to make such
disclosures in the past to its shareholders, it has not compiled and would be
unable to create such financial information from existing financial records
without incurring considerable expense, effort and delay. Marshall & Ilsley and
Century Bancshares have determined the omission of certain bank holding company
financial disclosures is not material to the shareholders of Century Bancshares.
Post Merger Risks
Share Price Fluctuation
The share price of Marshall & Ilsley common stock on the New York Stock
Exchange is by its nature subject to the general price fluctuations in the
market for publicly traded equity securities. Such fluctuations are not
necessarily related to a change in the financial performance or condition of
Marshall & Ilsley.
Marshall & Ilsley's future acquisitions will dilute your ownership of
Marshall & Ilsley and may cause Marshall & Ilsley to become more susceptible
to adverse economic events.
Marshall & Ilsley has acquired other businesses with its common stock in the
past and intends to acquire or make investments in complementary businesses
with its common stock in the future. Future business acquisitions could be
material to Marshall & Ilsley. Marshall & Ilsley may issue additional shares of
common stock to pay for those acquisitions, which would dilute your ownership
interest in Marshall & Ilsley. Acquisitions also could require Marshall &
Ilsley to use substantial cash or other liquid assets or to incur debt. In
those events, Marshall & Ilsley could become more susceptible to economic
downturns and competitive pressures.
If Marshall & Ilsley does not adjust to rapid changes in the financial
services industry, then its financial performance may suffer.
Marshall & Ilsley's ability to maintain its history of strong financial
performance and return on investment to shareholders will depend in part on
Marshall & Ilsley's ability to expand its scope of available financial services
as required to meet the needs and demands of its customers. In addition to the
challenge of attracting and retaining customers for traditional banking
services, Marshall & Ilsley's competitors now include securities dealers,
brokers, mortgage bankers, investment advisors and finance and insurance
companies that seek to offer one-stop financial services to their customers
that may include services that banks have not been able or allowed to offer to
their customers in the past. The increasingly competitive environment is
primarily a result of changes in regulation, changes in technology and product
delivery systems and the accelerating pace of consolidation among financial
service providers.
Difficulties in combining the operations of acquired entities, including
Century Bancshares, with Marshall & Ilsley's own operations may prevent
Marshall & Ilsley from achieving the expected benefits from its acquisitions.
Marshall & Ilsley may not be able to achieve fully the strategic objectives
and operating efficiencies in its various acquisitions, including Century
Bancshares. Inherent uncertainties exist in integrating the operations of an
acquired company into Marshall & Ilsley. In addition, the markets and
industries in which Marshall & Ilsley
12
operates are highly competitive. Marshall & Ilsley also may lose key personnel,
either from the acquired entities or from itself, as a result of acquisitions.
These factors could contribute to Marshall & Ilsley not achieving the expected
benefits from its acquisitions within the desired time frames, if at all.
Changes in interest rates could reduce Marshall & Ilsley's income and cash
flows.
Marshall & Ilsley's income and cash flows depend to a great extent on the
difference between the interest rates earned on interest-earning assets such as
loans and investment securities, and the interest rates paid on
interest-bearing liabilities such as deposits and borrowings. These rates are
highly sensitive to many factors which are beyond Marshall & Ilsley's control,
including general economic conditions and the policies of various governmental
and regulatory agencies, including, in particular, the Federal Reserve Board.
Changes in monetary policy, including changes in interest rates, will influence
the origination of loans, the purchase of investments, the generation of
deposits and the rates received on loans and investment securities and paid on
deposits. Fluctuations in these areas may adversely affect Marshall & Ilsley.
Future governmental regulation and legislation could limit Marshall &
Ilsley's future growth.
Marshall & Ilsley and its subsidiaries are subject to extensive state and
federal regulation, supervision and legislation that govern almost all aspects
of the operations of Marshall & Ilsley and its subsidiaries. These laws may
change from time to time and are primarily intended for the protection of
consumers, depositors and the deposit insurance funds. Any changes to these
laws may negatively affect Marshall & Ilsley's ability to expand its services
and to increase the value of its business. While we cannot predict what effect
any presently contemplated or future changes in the laws or regulations or
their interpretations would have on Marshall & Ilsley, these changes could be
materially adverse to Marshall & Ilsley's shareholders.
The long-term economic effects of recent terrorist attacks on the United
States and an economic slowdown could negatively affect Marshall & Ilsley's
financial condition.
On September 11, 2001, New York City and Washington, D.C. suffered serious
terrorist attacks. The long-term economic impact of these acts has yet to be
determined, and the ultimate cost associated with these attacks and related
incidents may place significant burdens on the United States economy as a
whole. In addition, an overall economic slowdown could negatively impact the
purchasing and decision making activities of the financial institution
customers of Marshall & Ilsley's data processing subsidiary, Metavante
Corporation. If these acts or additional terrorist attacks or other factors
cause an overall economic decline, the financial condition and operating
results of Marshall & Ilsley could be materially adversely affected.
FORWARD-LOOKING STATEMENTS
This document, including information incorporated by reference into this
document, contains or may contain forward-looking statements about Marshall &
Ilsley and Century Bancshares which we believe are within the meaning of the
Private Securities Litigation Reform Act of 1995. This document contains
certain forward-looking statements with respect to the financial condition,
results of operations, plans, objectives, future performance and business of
Marshall & Ilsley and Century Bancshares, including statements preceded by,
followed by or that include the words "believes," "expects," "anticipates" or
similar expressions. These forward-looking statements involve certain risks and
uncertainties. Factors that may cause actual results to differ materially from
those contemplated by such forward-looking statements include, among others,
those risks discussed above. Further information on other factors which could
affect the financial results of Marshall & Ilsley after the merger are included
in the SEC filings incorporated by reference into this document. See "Where You
Can Find More Information" on page 52.
13
SPECIAL MEETING OF CENTURY BANCSHARES SHAREHOLDERS
This document and the accompanying proxy card are being furnished to you in
connection with the solicitation by the board of directors of Century
Bancshares of proxies to be used at the Century Bancshares special meeting of
shareholders to be held at 10:00 a.m., Minneapolis time, on Tuesday, February
26, 2002, at 11455 Viking Drive, Eden Prairie, Minnesota, 55344, and at any
adjournments thereof. This document, the notice of Century Bancshares's special
meeting and proxy card are first being sent to you on or about January 25, 2002.
Purpose of the Meeting
The meeting is being held so that Century Bancshares shareholders may
consider and vote upon a proposal to approve the agreement and plan of merger
with Marshall & Ilsley, including the form of plan of merger constituting a
part thereof, and the merger of Century Bancshares with and into Marshall &
Ilsley contemplated by that agreement, and to transact any other business that
may properly come before the meeting or any adjournment or postponement of the
meeting. Approval of the proposal will constitute approval of the agreement and
plan of merger, the plan of merger and the transactions contemplated by that
agreement and plan, including the merger. A copy of the merger agreement and
plan of merger is contained in Appendix A and a copy of the plan of merger is
contained in Appendix B. When we use the term merger agreement in this
document, we are referring, collectively, to the agreement and plan of merger
and the form of plan of merger.
Record Date
Only holders of record on Century Bancshares shares at the close of business
on January 14, 2002, are entitled to receive notice of and to vote at the
Century Bancshares special meeting or any adjournments or postponements of the
meeting. At the close of business on January 14, 2002, there were 2,499,709
Series A and 5,450,590 Series B, or, in aggregate, 7,950,299 shares of Century
Bancshares common stock outstanding, held by approximately 85 record holders.
Required Vote
The affirmative vote of the holders of a majority of the Series A and Series
B shares of Century Bancshares common stock entitled to vote at the Century
Bancshares special meeting, voting together as a single class, is required to
approve the merger agreement and the merger. For each Series A or Series B
Century Bancshares share you held on the record date, you are entitled to one
vote on each proposal to be presented to shareholders at the meeting.
Abstentions and broker non-votes will have the effect of a vote against
approval of the merger and the merger agreement.
Century Bancshares's board of directors believes that the merger is fair to
and in the best interests of Century Bancshares and its shareholders and has
unanimously approved the merger and the merger agreement. Century Bancshares's
board unanimously recommends that the Century Bancshares shareholders vote
"FOR" approval of the merger and the merger agreement.
Proxies
The persons named on the enclosed proxy card will vote all Century
Bancshares shares represented by properly executed proxies that have not been
revoked. If no instructions are indicated, the persons named will vote the
shares "FOR" approval of the merger and the merger agreement. The affirmative
vote of a majority of the shares entitled to vote is required to approve the
merger and the merger agreement. Proxies which are marked "ABSTAIN" will have
the effect of a vote "AGAINST" approval of the merger and the merger agreement.
14
If your shares are held in an account at a brokerage firm or bank, you must
instruct it on how to vote your shares. Your broker or bank will vote your
shares only if you provide instructions on how to vote by following the
information provided to you by your broker or bank.
Because approval of the merger and the merger agreement requires the
affirmative vote of at least a majority of all votes entitled to be cast,
abstentions, failures to vote and broker non-votes will have the same effect as
a vote against approval of the merger and the merger agreement.
Century Bancshares does not know of any matter not described in the notice
of meeting that is expected to come before the meeting. If, however, any other
matters are properly presented for action at the meeting, the persons named as
proxies will vote the proxies in their discretion, unless authority is withheld.
A shareholder may revoke a proxy at any time prior to its exercise by filing
written notice with an officer of Century Bancshares or by signing and filing
with an officer of Century Bancshares a later dated proxy. Neither attendance
at the meeting or attempting to vote the shares in person at the meeting will
revoke a proxy.
Do NOT send in your Century Bancshares stock certificates with your proxy
card. As soon as practicable after the completion of the merger, the exchange
agent will mail to you transmittal forms with instructions for exchanging your
Century Bancshares stock certificates for the merger consideration.
Solicitation of Proxies
Century Bancshares will pay all the costs of soliciting proxies, except that
Marshall & Ilsley will share equally in the expense of printing and filing this
document and all SEC, NYSE and other regulatory filing fees in connection with
this document. Century Bancshares will reimburse brokerage firms and other
custodians, nominees and fiduciaries for reasonable expenses, if any, incurred
by them in sending proxy materials to the beneficial owners of Century
Bancshares common stock. In addition to solicitations by mail, directors,
officers and employees of Century Bancshares may solicit proxies personally or
by telephone without additional compensation.
15
THE MERGER
The following description summarizes the material terms of the merger
agreement. We urge you to read the agreement and plan of merger, a copy of
which is attached as Appendix A to this document and is incorporated by
reference into this document, and the form of plan of merger, a copy of which
is attached as Appendix B to this document and is incorporated by reference
into this document.
Structure of the Merger
Pursuant to the terms of the merger agreement, Century Bancshares will merge
with and into Marshall & Ilsley. The separate legal existence of Century
Bancshares will cease. Marshall & Ilsley will continue to exist as the
surviving corporation. Marshall & Ilsley will exchange shares of its common
stock and up to approximately $22.82 million in cash for shares of Century
Bancshares common stock. Century Bancshares shareholders who do not perfect
their dissenters' rights under Minnesota law and who do not receive cash for
all of their shares will become Marshall & Ilsley shareholders, with their
rights governed by Wisconsin law and Marshall & Ilsley's restated articles of
incorporation and bylaws.
Background of the Merger
In early 2001, the Board of Directors of Century Bancshares resolved to seek
out potential buyers and merger partners. Sheldon Wert, Chairman of the Board,
was authorized and directed to contact RBC Capital Markets concerning the
prospects for a merger or sale transaction involving Century Bancshares, Inc.
In July of 2001, the dialogue between representatives of Century Bancshares
and RBC Capital Markets resulted in Century Bancshares engaging RBC Capital
Markets to develop an information package and presentation materials for use in
eliciting prospective potential buyers and merger partners for Century
Bancshares. While the information package was being prepared, Mark Furlong,
Chief Financial Officer of Marshall & Ilsley, solicited a meeting with Mr. Wert
to discuss a potential business combination.
At the parties' meeting in August 2001, Mr. Wert advised Mr. Furlong that
Century Bancshares was soliciting indications of interest from several
potential suitors. Mr. Wert agreed to provide M&I with the information package
under development by Century Bancshares and RBC Capital Markets upon its
completion.
Indications of interest were received from several parties, including M&I,
at the end of October 2001. Senior representatives of M&I and Century
Bancshares met in November 2001 to discuss terms of a potential merger
transaction. As a result of that meeting, the parties and M&I accepted the
responsibility for preparing a draft of a merger agreement. During the
remainder of November 2001, the parties and their legal counsel negotiated the
various provisions of the merger agreement.
On December 3, 2001, the Board of Directors of Century Bancshares met with
representatives of RBC Capital Markets to review a presentation concerning the
fairness of the proposed merger transaction, from a financial point of view, to
the shareholders of Century Bancshares. Following the RBC Capital Markets
presentation, the Board of Directors unanimously approved the final draft of
the merger agreement and directed Mr. Wert to execute the merger agreement on
behalf of Century Bancshares. Mr. Wigdale executed the merger agreement on
behalf of M&I on the same day.
Management and Operations after the Merger
After the merger is completed, the directors and officers of Marshall &
Ilsley who were in office prior to the effective time of the merger will
continue to serve as the directors and officers of Marshall & Ilsley for the
term for which they were elected, subject to Marshall & Ilsley's restated
articles of incorporation and bylaws and in accordance with applicable law.
16
Merger Consideration
The total consideration for the merger will be $58,819,946. An additional
$7,180,054 is expected to be paid to holders of options to acquire Century
Bancshares common stock. Unless you elect to receive cash for your shares of
Century Bancshares common stock as described below, at the effective time of
the merger, each share of issued and outstanding Century Bancshares common
stock will be converted to a fraction of a share of Marshall & Ilsley common
stock with a value of approximately $7.40. The number of Marshall & Ilsley
shares you receive will be equal to (i) approximately $7.40, divided by (ii)
the average of the average high and low sale price per share of Marshall &
Ilsley common stock on the NYSE for the 10 trading days ending on and including
the second trading day preceding the effective time of the merger, rounded to
the nearest one-thousandth of a share.
For example, if you do not elect to receive cash in exchange for your shares
of Century Bancshares common stock, and if you hold 100 shares of Century
Bancshares common stock, then assuming the average trading price of Marshall &
Ilsley common stock is $60.00 per share, you will receive approximately 12
shares of Marshall & Ilsley common stock and $20.00 in cash in lieu of a
fractional share of Marshall & Ilsley common stock.
The average trading price used to calculate the exchange ratio is likely to
be different from the closing price per share of Marshall & Ilsley common stock
at the time of merger. As a result, the value of the Marshall & Ilsley common
stock that you are entitled to receive may be different from $7.40.
You may also elect to receive cash in exchange for your shares of Century
Bancshares common stock. If you make such an election then the cash amount you
will receive for each share of your Century Bancshares common stock will be an
amount equal to approximately $7.40. If you make such an election and if the
amount of cash that holders of shares of Century Bancshares common stock elect
to receive in exchange for their shares exceeds a total of approximately $22.82
million, the amount of cash that you will receive for each share will be
subject to a pro rata reduction, and you will receive a number of shares of
Marshall & Ilsley common stock with a value equal to the amount of that
reduction.
A form of election has been included with this proxy statement/prospectus.
You may elect to receive cash for your shares of Century Bancshares common
stock by completing and signing the enclosed form of election and submitting it
as instructed in the form of election by the election deadline, which is 5:00
p.m., Minneapolis time, on Monday, February 25, 2002. If you have made an
election to receive cash for your shares, you may at any time change or
withdraw your election by written notice prior to the election deadline. If you
do not submit a properly completed and signed form of election prior to the
election deadline, then your shares shall be converted into the right to
receive Marshall & Ilsley common stock at the effective time.
No Fractional Shares
Only whole shares of Marshall & Ilsley common stock will be issued in
connection with the merger. In lieu of fractional shares, each holder of
Century Bancshares common stock otherwise entitled to a fractional share of
Marshall & Ilsley common stock will be paid, without interest, an amount of
cash equal to the amount of this fraction multiplied by the average trading
price of a share of Marshall & Ilsley common stock for the 10 trading days
ending on and including the second trading day preceding the merger. No
shareholder will be entitled to interest, dividends, voting rights or other
rights with respect to any fractional share.
Effective Time of the Merger
Unless Century Bancshares and Marshall & Ilsley agree otherwise, the
effective time of the merger will be as soon as practicable after all
conditions contained in the merger agreement have been met or waived, including
the expiration of all applicable waiting periods. Century Bancshares and
Marshall & Ilsley each will have the right, but not the obligation, to
terminate the merger agreement if the effective time of the merger does not
occur
17
on or before June 30, 2002, unless the failure of the merger to occur by such
date is due to the failure of the party seeking such termination to comply with
its obligations under the merger agreement.
Exchange of Certificates
As of the effective time of the merger, Marshall & Ilsley will deposit, or
cause to be deposited, from time to time, with the exchange agent, Continental
Stock Transfer & Trust Company, certificates representing the shares of
Marshall & Ilsley common stock and cash to be issued pursuant to the merger in
exchange for outstanding shares of Century Bancshares common stock. Continental
Stock Transfer & Trust Company will act as the exchange agent for the benefit
of the holders of certificates of Century Bancshares common stock.
After the effective time of the merger, you will cease to have any rights as
a holder of Century Bancshares common stock, and your sole right will be your
right to receive the merger consideration, including cash in lieu of fractional
shares, if any, into which your shares of Century Bancshares common stock will
have been converted by virtue of the merger, or to perfect your dissenter's
rights if you have validly exercised and not withdrawn or lost such rights.
As soon as practicable after the effective time of the merger, the exchange
agent will send to you a letter of transmittal and instructions for use in
submitting to the exchange agent certificates formerly representing shares of
your Century Bancshares common stock to be exchanged for certificates
representing shares of Marshall & Ilsley common stock and, to the extent
applicable, cash which you elected to receive for your shares of Century
Bancshares common stock and cash in lieu of fractional shares of Marshall &
Ilsley common stock, that you are entitled to receive as a result of the
merger. You will also receive instructions for handling share certificates
which have been lost, stolen or destroyed. You will not be entitled to receive
any dividends or other distributions which may be payable to holders of record
of Marshall & Ilsley common stock following the effective time of the merger
until you have surrendered and exchanged your Century Bancshares common stock
certificates, or, in the case of lost, stolen or destroyed share certificates,
such documentation as is reasonably required by Marshall & Ilsley. Any
dividends with a record date after the effective time of the merger payable on
Marshall & Ilsley common stock after the effective time of the merger will be
paid to the exchange agent and, upon receipt of the Century Bancshares common
stock certificates or, in the case of lost, stolen or destroyed share
certificates, such documentation as is required by Marshall & Ilsley, subject
to any applicable abandoned property, escheat or similar laws, the exchange
agent will forward to you the following as applicable:
. certificates representing your shares of Marshall & Ilsley common stock;
. cash, if any, which you elected to receive in exchange for your shares of
Century Bancshares common stock;
. dividends declared on your shares of Marshall & Ilsley common stock with a
record date after the effective time of the merger, without
interest; and
. the cash value of any fractional shares, without interest.
Please DO NOT return your Century Bancshares stock certificates with the
enclosed proxy card. You should not submit your Century Bancshares stock
certificates until you have received written instructions from the exchange
agent to do so.
At the effective time of the merger, the stock transfer books of Century
Bancshares will be closed and no transfer of Century Bancshares common stock
will thereafter be made on Century Bancshares's stock transfer books. If a
certificate formerly representing Century Bancshares common stock is presented
to Century Bancshares or Marshall & Ilsley, it will be forwarded to the
exchange agent for cancellation and exchange for the merger consideration.
18
Interests of Certain Persons
In addition to being shareholders of Century Bancshares, certain members of
the management of Century Bancshares have interests in the proposed merger
transaction.
In connection with the proposed merger transaction, each of the executive
officers and directors identified below entered into agreements with Century
Bancshares, pursuant to which all non-qualified stock options held by such
persons were cancelled in exchange for cash payments equal to $7.398 less the
applicable exercise price for each share covered under the cancelled option
agreements. The number of shares covered under cancelled option agreements and
the resulting gain realized by each of these persons is as follows:
Number of Gain on
Option Cancellation
Name Shares of Options
---- --------- ------------
Sheldon Wert..... 844,700 $5,234,913
Jerome Simon..... 23,000 106,754
Harold Roitenberg 23,000 106,754
Kim Culp......... 152,500 731,518
Gary Holmes...... 23,000 106,754
William Naegele.. 23,000 106,754
Stephen Lieberman 23,000 106,754
Kenneth Brooks... 92,375 368,400
Don McGuire...... 16,000 69,028
Gerald Wright.... 24,000 103,542
Leif Syverson.... 44,225 93,879
Michele Boeder... 11,000 27,588
Daniel Roberts... 6,000 9,888
Gregg Stellick... 5,000 8,240
In December 2001, Century Bank entered into a Consulting and Noncompetition
Agreement (the "Consulting Agreement") with Sheldon Wert, Chairman of the Board
of Directors of Century Bancshares. The Consulting Agreement, which has a term
of three years commencing upon date of the Merger, provides Mr. Wert with
various benefits, including medical and dental insurance, office and
secretarial assistance, reimbursement of country club dues, use of an
automobile and the right to purchase certain assets (including office
furniture, an automobile and a life insurance policy) at their book value as
set forth on the books and records of Century Bank. In exchange for such
compensation, Mr. Wert has agreed to provide Century Bank with consulting
services as required throughout the term of the Consulting Agreement, to
refrain from competing with Century Bank and from soliciting its customers and
employees, and not to disclose to third parties any confidential information
possessed by Mr. Wert with respect to Century Bank or Century Bancshares.
In October 2001, Century Bank entered into executive retention agreements
with each of Kim Culp, Kenneth Brooks and Leif Syverson. Each agreement
provides the executive with financial incentives to remain in the employ of
Century Bank at the time of, and following the Merger, as follows:
. $50,000 payment to the executive on the date of the closing of the merger;
. $100,000 payment to the executive on the six-month anniversary of the closing
of the merger; and
. $100,000 payment to the executive on the one-year anniversary of the closing
of the merger;
Assuming the executive is employed by Century Bank on the date of the
merger, the agreements obligate Century Bank to continue the executive's
employment for a two-year period thereafter. However, the executive's
employment may be terminated for "just cause" (as defined), in which event the
executive would not be entitled to receive any further incentive payments or
other employment compensation for the remainder of the two-year period.
19
Recommendation of the Century Bancshares Board of Directors and Reasons for the
Merger
On December 3, 2001, the Century Bancshares board of directors unanimously
determined that the merger agreement and the transactions contemplated by the
merger agreement were advisable and fair to and in the best interests of
Century Bancshares and its shareholders. In reaching its decision to approve
the merger agreement and the transactions contemplated by the merger agreement,
the Century Bancshares board consulted with its financial advisor, RBC National
Markets, and its legal counsel, Maslon Edelman Borman & Brand, LLP, and with
senior management of Century Bank. The Century Bancshares board concluded that
the price per share being paid for the common stock of Century Bancshares and
other terms and conditions of the proposed merger transaction are favorable to
the shareholders of Century Bancshares and comparable to transactions similar
in size and nature that have recently occurred in Century Bancshares market.
Marshall & Ilsley's Reasons for the Merger
In reaching its decision to approve the merger agreement, Marshall & Ilsley
considered a variety of factors, including the following:
. Marshall & Ilsley's familiarity with and review of Century Bancshares's
business, operations, management, markets, competitors, financial
condition, earnings and prospects;
. Century Bancshares's financial strength, stable credit quality and
concentration in an attractive Midwestern metropolitan area;
. The business, operations, financial condition, earnings and prospects of each
of Marshall & Ilsley and Century Bancshares;
. Century Bancshares's compatible risk philosophy, credit culture, shareholder
focus and operating philosophy;
. Marshall & Ilsley's belief that after the merger the combined company will be
able to continue to generate high revenue growth rates;
. The merger will allow Marshall & Ilsley to expand its operations in the
Minneapolis, Minnesota area;
. Century Bancshares's market is contiguous and similar to Marshall & Ilsley's
Midwest markets;
. The merger is intended to qualify as a transaction of a type that is
generally tax-free for federal income tax purposes; and
. The merger is expected to qualify as a purchase for accounting purposes.
The foregoing discussion of the information and factors considered by
Marshall & Ilsley is not intended to be exhaustive but is believed to include
all material factors considered by Marshall & Ilsley. In reaching its
determination to enter into the merger agreement, Marshall & Ilsley did not
assign any relative or specific weights to the foregoing factors.
Material Federal Income Tax Consequences
As a condition to the consummation of the merger, Century Bancshares will
receive from Maslon Edelman Borman & Brand, LLP, and Marshall & Ilsley will
receive from Godfrey & Kahn, S.C., an opinion that, for federal income tax
purposes, the merger will constitute a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code.
20
The opinions will be based on factors, assumptions and representations set
forth in the opinions, including representations contained in certificates of
officers of Century Bancshares and Marshall & Ilsley. An opinion of counsel
represents only counsel's best legal judgment on the matters addressed in the
opinion, and has no binding effect on the Internal Revenue Service or any
court, and no assurance can be given that contrary positions may not be taken
by the Internal Revenue Service or a court considering the issues. Neither
Century Bancshares nor Marshall & Ilsley has requested or will request a ruling
from the Internal Revenue Service with regard to any of the federal income tax
consequences of the merger.
As discussed below, the federal income tax consequences of the merger to a
Century Bancshares shareholder will depend on whether the shareholder exchanges
the Century Bancshares common stock for Marshall & Ilsley common stock, cash or
a combination thereof.
Exchange Solely for Marshall & Ilsley Common Stock. If, pursuant to the
merger, a shareholder exchanges all of the shares of Century Bancshares common
stock actually owned by such shareholder solely for shares of Marshall & Ilsley
common stock, such shareholder will not recognize any gain or loss except cash
received in lieu of a fractional share of Marshall & Ilsley common stock (as
discussed below). The aggregate adjusted tax basis of the shares of Marshall &
Ilsley common stock received in the exchange will be equal to the aggregate
adjusted tax basis of the shares of Century Bancshares common stock surrendered
therefore (adjusted for fractional shares), and the holding period of such
Marshall & Ilsley common stock will include the period during which such shares
of Century Bancshares common stock were held.
Cash Received in Lieu of a Fractional Share. Cash received by a Century
Bancshares common stockholder in lieu of a fractional share of Marshall &
Ilsley common stock will be treated as received in exchange for such fractional
share, and gain or loss will be recognized, measured by the difference between
the amount of cash received and the portion of the basis of the share of
Century Bancshares common stock allocable to such fractional interest. Such
gain or loss should be long-term capital gain or loss if the holding period for
such share of Century Bancshares common stock was more than one year.
Exchange Solely for Cash. In general, if, pursuant to the merger, a
shareholder exchanges all of the shares of Century Bancshares common stock
actually owned by such shareholder solely for cash, such shareholder will
generally recognize capital gain or loss equal to the difference between the
amount of cash received and its adjusted tax basis in the shares of Century
Bancshares common stock surrendered. The gain or loss will be long-term capital
gain or loss if the shareholder's holding period with respect to the shares of
Century Bancshares common stock surrendered is more than one year. If, however,
any such shareholder constructively owns shares of Century Bancshares common
stock that are exchanged for shares of Marshall & Ilsley common stock in the
merger or owns shares of Marshall & Ilsley common stock actually or
constructively after the merger, the consequences to such shareholder may be
similar to the consequences described below. In addition, the amount of
consideration, if any, treated as a dividend may not be limited to the amount
of such shareholder's gain.
Exchange for Marshall & Ilsley Common Stock and Cash. If, pursuant to the
merger, a shareholder exchanges all of the shares of Century Bancshares common
stock actually owned by it for a combination of Marshall & Ilsley common stock
and cash, the shareholder will generally recognize gain, but not loss, with
respect to Century Bancshares common stock surrendered in an amount equal to
the lesser of (i) the amount of gain realized ( i.e., the excess of the sum of
the amount of cash and the fair market value of Marshall & Ilsley common stock
received over the adjusted tax basis of Century Bancshares Common Stock) and
(ii) the amount of cash received. For this purpose, gain or loss must be
calculated separately for each identifiable block of shares surrendered in the
exchange, and a loss realized on one block of shares may not be used to offset
a gain realized on another block of shares. Any recognized gain will generally
be long-tem capital gain if the shareholder's holding period with respect to
the stock is more than one year. If, however, the cash received has the effect
of the distribution of a dividend, the gain would be treated as a dividend to
the extent of the shareholder's ratable share of Century Bancshares's
accumulated earnings and profits.
21
The aggregate tax basis of Marshall & Ilsley common stock received by a
shareholder that exchanges its shares of Century Bancshares common stock for a
combination of Marshall & Ilsley common stock and cash pursuant to the merger
will be the same as the aggregate adjusted tax basis of the shares of Century
Bancshares common stock surrendered therefor, decreased by the cash received
and increased by any recognized gain (whether capital gain or ordinary income).
The holding period of such Marshall & Ilsley common stock will include the
holding period of the shares of Century Bancshares common stock surrendered
therefor.
Possible Treatment of Cash as a Dividend. In general, the determination of
whether the gain recognized in the exchange will be treated as capital gain or
has the effect of a distribution of a dividend depends upon whether, and to
what extent, the exchange reduces the shareholder's deemed percentage stock
ownership of Marshall & Ilsley. For purposes of this determination, the
shareholder is treated as if such shareholder first exchanged all of such
shareholder's shares of Century Bancshares common stock solely for Marshall &
Ilsley common stock and then Marshall & Ilsley immediately redeemed a portion
of such Marshall & Ilsley common stock in exchange for the cash the shareholder
actually received. The gain recognized in the exchange followed by a deemed
redemption will be treated as capital gain if the deemed redemption is (i)
"substantially disproportionate" with respect to the shareholder, or (ii) not
essentially equivalent to a dividend.
The deemed redemption, generally, will be "substantially disproportionate"
with respect to a shareholder if the percentage described in (ii) below is less
than 80% of the percentage described in (i) below. Whether the deemed
redemption is "not essentially equivalent to a dividend" with respect to a
shareholder will depend upon the shareholder's particular circumstances. At a
minimum, however, in order for the deemed redemption to be "not essentially
equivalent to a dividend," the deemed redemption must result in a "meaningful
reduction" in the shareholder's actual and constructive percentage stock
ownership of Marshall & Ilsley. In general, that determination requires a
comparison of (i) the percentage of the outstanding stock of Marshall & Ilsley
the shareholder is deemed actually and constructively to own immediately before
the deemed redemption and (ii) the percentage of the outstanding stock of
Marshall & Ilsley the shareholder actually and constructively owns immediately
after the deemed redemption. In applying the foregoing tests, a shareholder is
deemed to own stock owned and, in some cases, constructively owned, by certain
family members, by certain estates and trusts of which the shareholder is a
beneficiary, and by certain affiliated entities. As these rules are complex,
each shareholder that may be subject to these rules should consult such
shareholder's tax advisor. The Service has ruled that a relatively minor
reduction in the percentage stock ownership of a minority shareholder in a
publicly held corporation whose relative stock interest is minimal and who
exercises no control with respect to corporate affairs is a "meaningful
reduction."
The foregoing discussion is intended only as a summary of the material
federal income tax consequences of the merger. The foregoing discussion does
not address the tax consequences that may be relevant to particular taxpayers
in light of their personal circumstances or to taxpayers subject to special
treatment under the Internal Revenue Code.
No information is provided in this document with respect to the tax
consequences, if any, of the merger under applicable state, local, foreign and
other tax laws. The foregoing discussion is based upon the provisions of the
Internal Revenue Code, applicable Treasury regulations thereunder, Internal
Revenue Service rulings, and judicial decisions as in effect as of the date of
this document. We cannot assure you that future legislative, administrative or
judicial changes or interpretations will not affect the accuracy of the
statements or conclusions set forth in this document. Any such change could
apply retroactively and could affect the accuracy of such discussion.
You are urged to consult your own tax advisor as to the specific tax
consequences to you of the merger, including the application of federal, state,
local, foreign and other tax laws.
22
Regulatory Approvals
The merger is subject to prior approval by the Federal Reserve Board under
Section 3 of the Bank Holding Company Act of 1956, or BHCA. The BHCA requires
the Federal Reserve Board, when considering a transaction such as this merger,
to take into consideration the financial and managerial resources, including
the competence, experience and integrity of the officers, directors and
principal shareholders, and future prospects of the institutions and the
convenience and needs of the communities to be served. In addition, under the
Community Reinvestment Act of 1977, as amended, the Federal Reserve Board must
take into account the record of performance of the acquiring institution in
meeting the credit needs of the entire community, including low-and
moderate-income neighborhoods, served by the institution.
The BHCA also prohibits the Federal Reserve Board from approving a merger if
it would result in a monopoly or be in furtherance of any combination or
conspiracy to monopolize or attempt to monopolize the business of banking in
any part of the United States, or if its effect in any section of the country
would be substantially to lessen competition or to tend to create a monopoly,
or if it would in any other manner result in a restraint of trade, unless the
Federal Reserve Board finds that the anticompetitive effects of the merger are
clearly outweighed in the public interest by the probable effect of the
transaction in meeting the convenience and needs of the communities to be
served.
Pursuant to the BHCA, the merger may not be consummated until 30 days after
Federal Reserve Board approval, during which time the United States Department
of Justice may challenge the merger on antitrust grounds. The commencement of
an antitrust action would stay the effectiveness of the Federal Reserve Board's
approval unless a court specifically ordered otherwise. With the approval of
the Federal Reserve Board and the concurrence of the Department of Justice, the
waiting period may be reduced to not less than 15 days. Marshall & Ilsley and
Century Bancshares believe that the merger does not raise substantial antitrust
or other significant regulatory concerns and that they will be able to obtain
all requisite regulatory approvals on a timely basis without the imposition of
any condition that would have a material adverse effect on Marshall & Ilsley
and Century Bancshares.
Other Requisite Approvals and Consents. Approvals or notices are also
required from or to the New York Stock Exchange and other self-regulatory
organizations and may be required from or to certain other regulatory agencies.
Status of Regulatory Approvals. Marshall & Ilsley filed an application with
the Federal Reserve Board for approval of the merger on December 31, 2001.
The merger cannot proceed in the absence of the requisite regulatory
approvals. We do not know if or when all of these regulatory approvals will be
obtained. Also, these approvals may contain a condition, restriction or
requirement that causes these approvals to fail to satisfy the conditions for
the merger.
Accounting Treatment
Marshall & Ilsley expects to account for the merger for accounting and
financial reporting purposes as a "purchase," as that term is used under
accounting principles generally accepted in the United States. Under purchase
accounting, the assets and liabilities of Century Bancshares as of the
effective time will be recorded at their fair values and added to those of
Marshall & Ilsley. Any excess of the value of Marshall & Ilsley common stock
issued for Century Bancshares common stock over the fair value of Century
Bancshares's identifiable net assets will be recorded as goodwill. Financial
statements of Marshall & Ilsley issued after the effective time will reflect
these values and will not be restated retroactively to reflect the historical
financial position or results of operations of Century Bancshares.
The Financial Accounting Standards Board has issued several statements of
Financial Accounting Standards that eliminate the pooling-of-interests method
of accounting for business combinations and require that goodwill and certain
intangible assets not be amortized. Instead, these assets will be reviewed for
impairment annually with any
23
related losses recognized in earnings when incurred. These statements are
effective for Marshall & Ilsley for business combinations completed after July
1, 2001 and will be effective for existing goodwill and intangible assets on
December 31, 2001.
Resales of Marshall & Ilsley Common Stock
The shares of Marshall & Ilsley common stock to be issued in the merger will
be freely transferable under the Securities Act of 1933, as amended. However,
this will not be the case for shares issued to any shareholder who may be
deemed to be an "affiliate" of Century Bancshares for purposes of Rule 145
under the Securities Act as of the date of the special meeting. "Affiliates"
generally include directors, certain executive officers, and beneficial owners
of 10 percent or more of any class of capital stock. These affiliates may not
sell their shares of Marshall & Ilsley common stock acquired in the merger
except pursuant to an effective registration statement under the securities
laws or other applicable securities law exemptions from the registration
requirements of the securities laws.
This proxy statement/prospectus does not cover resales of Marshall & Ilsley
common stock received by any person who may be deemed to be an affiliate of
Century Bancshares. Century Bancshares has agreed in the merger agreement to
use its reasonable efforts to cause each person who may be deemed to be an
affiliate of Century Bancshares to execute and deliver to Marshall & Ilsley an
affiliate agreement. As provided for in these agreements, Century Bancshares's
affiliates agree not to offer to sell, transfer or otherwise dispose of any of
the shares of Marshall & Ilsley common stock distributed to them pursuant to
the merger except in compliance with Rule 145, or in a transaction that is
otherwise exempt from the registration requirements of, or in an offering which
is registered under, the Securities Act. Marshall & Ilsley may place
restrictive legends on certificates representing Marshall & Ilsley common stock
issued to all persons who are deemed to be affiliates of Century Bancshares
under Rule 145.
Dissenters' Rights
Shareholders of Century Bancshares are entitled to dissenters' rights in
connection with the merger. The procedures for preserving and exercising
dissenters' rights are set forth in the provisions of Sections 302A.471 and
302A.473 of the Minnesota Business Corporation Act. The following is a
description of those provisions. It is not complete and is qualified by
reference to the actual provisions, copies of which are included in Appendix C
to this document. Appendix C is incorporated by reference into this document.
Notice of Dissenters' Rights. Century Bancshares is required to notify its
shareholders of their dissenters' rights and to provide them with a copy of
Sections 302A.471 and 302A.473 of the Minnesota Business Corporation Act. This
document, including the notice of special meeting of Century Bancshares
shareholders, constitutes the required notice to shareholders of Century
Bancshares. A copy of Sections 302A.471 and 302A.473 of the Minnesota Business
Corporation Act is included in Appendix C to this document.
Preserving Dissenters' Rights. To preserve your dissenters' rights, you
must do each of the following:
. deliver to Century Bancshares, before the vote is taken at the special
meeting of shareholders, written notice of your intent to demand the
fair value of your shares if the merger is completed; and
. not vote your shares of Century Bancshares common stock in favor of the
merger agreement and the merger.
If you sign and return your proxy without voting instructions, and do not
revoke the proxy, the proxy will be voted for the merger and merger agreement
and you will have waived your dissenters' rights.
Beneficial Owners. Beneficial owners of shares who desire to exercise
statutory dissenters' rights must obtain and submit to Century Bancshares the
registered shareholder's written consent at or before the time the notice of
intent to demand fair value is due. A shareholder may not assert dissenters'
rights with respect to less
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than all of the shares registered in the shareholder's name, unless the
shareholder dissents with respect to all shares beneficially owned by another
person and discloses the name and address of such other person.
Notice of Merger Approval. If the merger and merger agreement are approved
by Century Bancshares's shareholders, Century Bancshares must deliver a written
dissenters' notice to all shareholders who preserved their dissenters' rights.
The notice must do all of the following:
. state where and by what date the payment demand must be sent and where and by
what date certificates for certificated shares must be deposited;
. inform holders of uncertificated shares to what extent transfer of the shares
will be restricted after the payment demand is received;
. supply a form for demanding payment and for certifying the date on which the
shareholder, or the beneficial owner on whose behalf the shareholder
dissents, acquired the shares or an interest in the shares; and
. be accompanied by a copy of Sections 302A.471 and 302A.473 of the Minnesota
Business Corporation Act and a brief description of the procedures to be
followed under those Sections.
Duty to Demand Payment. A shareholder who is sent a dissenters' notice must
demand payment and deposit the shareholder's certificates or comply with any
restrictions on transfer of uncertificated shares within 30 days after the
dissenter's notice is given. Under Minnesota law, notice by mail is given when
deposited in the mail. A shareholder who so demands payment and so deposits the
shareholder's certificates or so complies with any restrictions on transfer of
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the merger. A shareholder who does not so
demand payment or who does not so deposit the shareholder's certificate or so
comply with any restrictions on transfer of uncertificated shares is only
entitled to receive the merger consideration for the shareholder's shares.
Share Restrictions. Century Bancshares may restrict the transfer of
uncertificated shares from the date the demand for their payment is received
until the merger is completed or until the restrictions are released because
the merger is not completed.
Payment. Except as to after-acquired shares as discussed below, at the time
the merger is completed, or upon receipt of a payment demand, whichever occurs
later, Century Bancshares must pay to each dissenter who demanded payment in
the manner required the amount Century Bancshares estimates to be the fair
value of the dissenter's shares immediately before the effective time of the
merger plus interest accrued from fifth day after the date of the merger. The
payment must be accompanied by all of the following:
. Century Bancshares's balance sheet and income statement as of and for a
fiscal year ended not more than 16 months before the effective time
of the merger, and the latest available interim financial statements,
if any;
. a statement of Century Bancshares's estimate of the fair value of the shares
and a brief description of the method used to reach the estimate;
. a description of the procedure the dissenter must follow to demand
supplemental payment if the dissenter is dissatisfied with Century
Bancshares's payment offer; and
. a copy of Sections 302A.471 and 302A.473 of the Minnesota Business
Corporation Act and a brief description of the procedure to be followed in
demanding supplemental payment.
Failure of Century Bancshares to Remit Payment. If Century Bancshares does
not remit payment within 60 days after the deposit of share certificates or the
imposition of transfer restrictions on uncertificated shares, Century
Bancshares must return the deposited certificates and release the transfer
restrictions on uncertificated shares. Century Bancshares may again give notice
under the statute and require deposit or restrict transfer at a later time.
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After Acquired Shares. Century Bancshares may elect to withhold payment to
a dissenting shareholder if the dissenter, or person on whose behalf such
dissenter acts, was not the beneficial owner of the shares on the date of the
first announcement to the public of the terms of the merger. The terms of the
merger were first announced to the public on December 4, 2001. If Century
Bancshares elects to withhold payment and the dissenter has complied with the
terms of the statute, it must forward the materials described above to the
dissenter along with a statement of the reason for withholding the payment and
an offer to pay the dissenter the amount listed in the materials if the
dissenter agrees to accept that amount in full satisfaction.
Procedure if Dissatisfied with Payment or Offer. A dissenter may notify
Century Bancshares in writing of the dissenter's own estimate of the fair value
of the dissenter's shares and the amount of interest due, and demand payment of
the dissenter's estimate, less any payment made by Century Bancshares.
A dissenter waives the dissenter's rights to demand payment, and is entitled
only to the amount remitted or offered, unless the dissenter notifies Century
Bancshares of the dissenter's estimate and demand in writing within 30 days
after Century Bancshares mailed payment, or in the case of after-acquired
shares offered payment, for the dissenter's shares.
Court Action. Within 60 days after receiving the payment demand, Century
Bancshares will either petition the court to determine the fair value of the
shares and accrued interest or pay to the dissenter the amount demanded or
agreed to by the dissenter after discussion with the corporation. Century
Bancshares must make all dissenters, whether or not residents of Minnesota,
whose demands remain unsettled, parties to the proceeding and must serve them
all with a copy of the petition. The court may appoint one or more appraisers
to receive evidence and recommend decision on the question of fair value. Each
dissenter made a party to the proceeding is entitled to a judgment for the
amount, if any, by which the court finds the fair value of the dissenter's
shares, plus interest, exceeds the amount paid by Century Bancshares. However,
a dissenter is not liable to Century Bancshares for the amount, if any, by
which the payments remitted by Century Bancshares exceed the fair value of the
dissenter's shares determined by the court, plus interest.
Court Costs and Counsel Fees. The court will determine all costs of the
appraisal proceeding, including the reasonable compensation and expenses of
appraisers appointed by the court. The court will assess the costs against
Century Bancshares, except that the court may assess costs against all or some
of the dissenters to the extent the court finds the dissenters acted
arbitrarily, vexatiously, or not in good faith in demanding payment. Also, the
court may assess the fees and expenses of counsel and experts for the
respective parties as follows:
. against Century Bancshares and in favor of any or all dissenters if the court
finds Century Bancshares did not substantially comply with the
requirements of Section 302A.473 of the Minnesota Business
Corporation Act; or
. against either Century Bancshares or a dissenter, in favor of the 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 in bringing the proceeding.
The court has the discretion to award fees and expenses to an attorney for
the dissenters out of the amount awarded to the dissenters, if any.
No Other Rights. A shareholder of Century Bancshares has no right at law or
equity to set aside the approval of the merger agreement or the consummation of
the merger, except if such approval or consummation is fraudulent with respect
to the shareholder or to Century Bancshares.
The merger and the merger agreement will be approved if the holders of a
majority of the shares of Century Bancshares common stock outstanding on the
record date vote in favor of the merger and merger agreement. The
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holders of, in aggregate, 4,296,000 shares of Century Bancshares common stock,
representing approximately 54 The court has the discretion to award fees and
expenses to an attorney for the dissenters out of the amount awarded to the
dissenters, if any.
No Other Rights. A shareholder of Century Bancshares has no right at law or
equity to set aside the approval of the merger agreement or the consummation of
the merger, except if such approval or consummation is fraudulent with respect
to the shareholder or to Century Bancshares.
The merger and the merger agreement will be approved if the holders of a
majority of the shares of Century Bancshares common stock outstanding on the
record date vote in favor of the merger and merger agreement. The holders of,
in aggregate, 4,296,000 shares of Century Bancshares common stock, representing
approximately 54 holders of, in aggregate, 4,296,000 shares of Century
Bancshares common stock, representing approximately 54 percent of the
outstanding Series A and Series B shares of Century Bancshares common stock on
the record date, have agreed to vote their shares in favor of the merger and
merger agreement and plan of merger. See "Terms of the Merger
Agreement--Shareholder Voting Agreement."
TERMS OF THE MERGER AGREEMENT
The following is a summary of various provisions of the merger agreement.
When we use the term merger agreement in this document, we are referring
collectively to the agreement and plan of merger, a copy of which is included
in this document as Appendix A, and the form of plan of merger, a copy of which
is included in this document as Appendix B. The merger agreement is
incorporated by reference into this document. This summary is qualified in its
entirety by reference to the full text of the merger agreement. You are
encouraged to read the merger agreement carefully and in its entirety.
Representations and Warranties
The merger agreement contains representations and warranties of Century
Bancshares and Marshall & Ilsley, to each other, as to, among other things:
. the corporate organization and existence of each party and its
subsidiaries;
. the capitalization of each party;
. the ability of each party to enter into the merger agreement and make it
valid and binding;
. no conflict between the merger agreement and:
. the articles of incorporation and bylaws of each party,
. applicable law, or
. other agreements, instruments and obligations;
. required governmental approvals;
. the completeness and accuracy of each party's financial statements and
filings with the SEC and bank regulatory agencies;
. the absence of changes in each party's business since December, 2000 which
would have a material adverse effect on the party making the
representation; and
. the completeness and accuracy of the registration statement, of which this
proxy statement/prospectus is a part.
The merger agreement contains additional representations and warranties of
Century Bancshares to Marshall & Ilsley as to, among other things:
. the absence of undisclosed legal proceedings and injunctions which would
have a material adverse effect on Century Bancshares;
. the filing and accuracy of Century Bancshares's tax return;
. Century Bancshares's employee benefit plans and related matters;
. Century Bancshares's compliance with applicable law;
. Century Bancshares's title to its property;
. the absence of environmental liabilities which would have a material
adverse effect on Century Bancshares;
27
. the absence of material restrictions on Century Bancshares's business;
. the validity of, and the absence of material defaults under, material
contracts;
. Century Bancshares's broker's fees;
. the tax treatment of the merger; and
. the shareholder vote required to approve the merger.
Conduct of Business Pending the Merger
Century Bancshares has agreed, unless Marshall & Ilsley's prior consent is
obtained or except as expressly contemplated by the merger agreement, that it
will, and it will cause each of its subsidiaries to:
. operate its business in the usual, regular and ordinary course consistent
with past practices;
. use all reasonable efforts to preserve intact its business organization
and assets, maintain its rights and franchises, retain the services of its
officers and key employees and maintain its relationships with customers;
. use all reasonable efforts to maintain and keep its properties in as good
repair and condition as at present, ordinary wear and tear excepted;
. use all reasonable efforts to keep in full force and effect insurance and
bonds comparable in amount and scope of coverage to that now maintained by
it;
. use all reasonable efforts to perform in all material respects all
obligations required to be performed by it under all material contracts,
leases, and documents relating to or affecting its assets, properties, and
business;
. use all reasonable efforts to comply with and perform in all material
respects all obligations and duties imposed upon it by all applicable
laws; and
. use all reasonable efforts not to take any action or fail to take any
action which individually or in the aggregate can be expected to have a
material adverse effect on it and its subsidiaries, taken as a whole.
Except as expressly contemplated by the merger agreement or as disclosed
prior to the signing of the merger agreement, Century Bancshares has further
agreed that, without the prior written consent of Marshall & Ilsley, it and its
subsidiaries will not, among other things:
. except as required by applicable law or to maintain qualification under
the Internal Revenue Code, adopt, amend, renew or terminate any employee
benefit plan or any agreement with any of its or its subsidiaries' current
or former directors, officers or employees;
. except for normal increases in the ordinary course of business consistent
with past practice or except as required by applicable law, increase the
salary, bonus, incentive compensation or fringe benefits of any director,
officer or employee or pay any benefit not required by any employee
benefit plan or agreement in effect as of the date of the merger agreement;
. declare or pay any dividends or make any distributions in any amount on
Century Bancshares common stock, except for dividends by a subsidiary of
Century Bancshares solely to Century Bancshares; provided, however, that
Century Bancshares may declare and pay a cash dividend not to exceed
$300,000 in aggregate if the merger has not become effective on or prior
to April 19, 2002;
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. redeem or repurchase shares of its capital stock or limited liability
company interests or any securities convertible into its capital stock or
limited liability company interests;
. merge with or into any other corporation or bank, or effect any
reorganization or recapitalization or statutory share exchange;
. acquire or dispose of assets, other than in the ordinary course of
business consistent with past practice;
. issue any shares of its capital stock or any rights, warrants or options
to acquire shares of its capital stock;
. amend its articles of incorporation, bylaws, articles of organization or
operating agreement in a manner adverse to Marshall & Ilsley;
. change any of its methods of accounting or reporting of income and
deductions, except as required by law or accounting principles generally
accepted in the United States; or
. change in any material manner any lending, investment, liability
management or other material policies concerning its business or
operations.
Except as expressly contemplated by the merger agreement or as disclosed
prior to the signing of the merger agreement, Marshall & Ilsley has further
agreed that, without the prior written consent of Century Bancshares, it and
its subsidiaries will not, among other things:
. amend its articles of incorporation or bylaws in a manner that would
adversely affect the terms of its common stock or its ability to
consummate the merger;
. take any action that would adversely affect or delay its ability to obtain
necessary regulatory approvals;
. take any action that would adversely affect or delay its ability to
perform its covenants under the merger agreement;
. take any action that would adversely affect or delay its ability to
consummate the merger; or
. take any action in violation of Regulation M under the Securities Exchange
Act of 1934.
No Solicitation of Transactions
Century Bancshares agreed to immediately cease any existing discussions or
negotiations relating to a competing proposal, not to solicit any competing
proposals and to promptly inform Marshall & Ilsley if any competing proposal is
made.
For purposes of the merger agreement, we agreed that the term "competing
proposal" would mean, with respect to Century Bancshares, any inquiry, proposal
or offer from any person relating to:
. any direct or indirect acquisition or purchase of a business that
constitutes 15 percent or more of the net revenues, net income or the
assets of Century Bancshares and its subsidiaries taken as a whole;
. any direct or indirect acquisition or purchase of 15 percent or more of
any class of equity securities of Century Bancshares or any of its
subsidiaries;
. any tender offer or exchange offer that if consummated would result in any
person beneficially owning 15 percent or more of any class of equity
securities of Century Bancshares or any of its subsidiaries; or
29
. any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving Century
Bancshares or any of its subsidiaries, other than the transactions
contemplated by the merger agreement.
For purposes of the merger agreement, we agreed that the term "superior
competing transaction" would mean any proposal made by a third party to
acquire, directly or indirectly, more than 50 percent of the combined voting
power of the shares of Century Bancshares common stock then outstanding or all
or substantially all of the assets of Century Bancshares and its subsidiaries,
taken as a whole, on terms which the board of directors of Century Bancshares
determines in its good faith judgment, taking into consideration the opinion of
a financial advisor of nationally recognized reputation, to be more favorable
to its shareholders than the merger and for which financing, to the extent
required, is then committed or, in the good faith and judgment of the board of
directors of Century Bancshares, is reasonably capable of being obtained by
such third party.
Marshall & Ilsley and Century Bancshares have also agreed that the
limitations discussed above would not prohibit Century Bancshares's board of
directors, prior to approval of this merger and the merger agreement by the
shareholders of Century Bancshares, from entering into discussions or
negotiations relating to an unsolicited superior competing transaction. Prior
to entering into such discussions or negotiations, however, Century
Bancshares's board of directors must have determined in good faith and after
consultation with and taking into consideration the advice of counsel that such
action is required to fulfill its fiduciary duties to Century Bancshares's
shareholders. In addition, Century Bancshares must provide prior written notice
to Marshall & Ilsley that it is entering into such discussions or negotiations
and receive a confidentiality agreement from the person proposing the superior
competing transaction. Century Bancshares has also agreed to keep Marshall &
Ilsley informed of the status and details of such discussions or negotiations.
Employee Benefit Matters
Marshall & Ilsley has agreed that it will give employees of Century
Bancshares who become employees of Marshall & Ilsley, whom we refer to as
transferred employees, full credit for their prior service with Century
Bancshares for purposes of eligibility and vesting under retirement plans in
which the transferred employees may be eligible to participate and for all
purposes under any welfare benefit plans, "cafeteria" plans, vacation plans and
similar arrangements maintained by Marshall & Ilsley. However, Marshall &
Ilsley will not give prior service credit in connection with the Marshall &
Ilsley retiree health plan.
Marshall & Ilsley has also agreed to waive all preexisting conditions and
waiting periods with respect to participation and coverage requirements
applicable to transferred employees under any welfare benefit plans maintained
by Marshall & Ilsley in which transferred employees may be eligible to
participate. Marshall & Ilsley is not required to waive limitations or waiting
periods that are currently in effect and that have not been satisfied as of the
effective time of the merger under any welfare plan maintained for the
transferred employees prior to the effective time of the merger.
Transferred employees will be integrated into Marshall & Ilsley's welfare
benefit plans at a time determined on a plan-by-plan basis by Marshall &
Ilsley, but no later than January 1, 2003. Century Bancshares's respective
plans will remain in effect until each integration date. Century Bancshares's
401(k) plan will be frozen as of the effective time of the merger and all
accounts in the plan will be fully vested at that time. Transferred employees
who are eligible to participate in Marshall & Ilsley's qualified retirement
program (taking into account prior service credit) will participate with
respect to compensation paid after the effective time of the merger.
Century Bancshares employees terminated at or after the effective time of
the merger will be eligible to receive severance benefits under Marshall &
Ilsley severance plan, except for employees who have rights under key executive
retention or consulting or certain other agreements with Century Bancshares
that they have not been waived.
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Conditions to Completion of the Merger
Marshall & Ilsley's and Century Bancshares's obligations to complete the
merger are subject to the satisfaction or written waiver, where permissible, of
a number of conditions including, among others, the following:
. the merger agreement must be approved by the holders of a majority of the
outstanding shares of common stock of Century Bancshares;
. the approval of the Federal Reserve Board must have been obtained without
any materially burdensome condition that would significantly adversely
affect Marshall & Ilsley, all conditions to such approvals must have been
satisfied and any statutory waiting periods required by law must have
expired;
. the Marshall & Ilsley common stock that is to be issued in the merger must
be approved for listing on the NYSE and the registration statement filed
with the SEC concurrently with this document must be effective;
. the representations and warranties of each party contained in the merger
agreement must be true and correct in all respects;
. each party must have performed or complied with in all material respects
all of its agreements and covenants in the merger agreement;
. all required consents, approvals and authorizations must be obtained by
the parties;
. no challenge to the merger or the right of Marshall & Ilsley to own or
operate the business of Century Bancshares shall be pending;
. Century Bancshares must have delivered to Marshall & Ilsley evidence that
the total out-of-pocket expenses incurred by or on behalf of Century
Bancshares in connection with the merger agreement do not exceed $750,000;
. all holders of Century Bancshares options must have entered into amendment
agreements that are satisfactory to Marshall & Ilsley, and Marshall &
Ilsley must have received a certificate of the Secretary of Century
Bancshares setting forth the aggregate number of shares of Century
Bancshares subject to options immediately prior to the effective time of
the merger and the aggregate exercise price for those options;
. Century Bancshares must have obtained the consent of landlords under the
leases for certain branches of Century Bank, National Association with
respect to the transactions contemplated in the merger agreement;
. Century Bancshares must have obtained the approval of its shareholders of
each of the Key Executive Retention Agreements to which its subsidiary is
a party in accordance with applicable Treasury Regulations, and Marshall &
Ilsley must have obtained a certificate of the Secretary of Century
Bancshares to that effect;
. the parties must have received legal opinions relating to the merger and
tax opinions stating that the merger will be treated as a tax-free
reorganization under federal tax laws and no gain or loss will be
recognized by Century Bancshares shareholders who receive only Marshall &
Ilsley shares in exchange for their Century Bancshares shares, except with
respect to cash received in lieu of fractional shares; and
. since the date of the merger agreement, there shall not have been any
change in the financial condition, results of operations or businesses of
either party that would have a material adverse effect on such party and
its subsidiaries, taken as a whole.
We cannot assure you that the required regulatory approvals necessary to
consummate the merger will be obtained, when they will be obtained, or whether
all of the other conditions to the merger will be satisfied or waived by the
party permitted to do so. As discussed below, if the merger is not completed on
or before June 30, 2002, either Marshall & Ilsley or Century Bancshares may
terminate the merger agreement, unless the failure to
31
effect the merger by that date is due to the failure of the party seeking to
terminate the merger agreement to comply with its obligations under the merger
agreement.
Termination of the Merger Agreement
The merger agreement may be terminated at any time whether before or after
approval of the merger agreement by the Century Bancshares shareholders:
. by mutual consent of the parties by a vote of a majority of each party's
board of directors;
. by either party if there has been a material breach of any representation,
warranty, covenant or agreement contained in the merger agreement, except
that the breaching party may not terminate the merger agreement for this
reason;
. by either party if a final and non-appealable permanent injunction has
been issued preventing the merger;
. by either party if the merger has not been consummated by June 30, 2002
for a reason other than the failure of the party seeking termination to
comply with its obligations under the merger agreement;
. by either party if the Federal Reserve Board has denied approval of the
merger;
. by either party if Century Bancshares's shareholders do not approve the
merger and the merger agreement;
. by Marshall & Ilsley if there is a proposal for a superior competing
transaction and the board of directors of Century Bancshares withdraws or
modifies in a manner adverse to Marshall & Ilsley its approval or
recommendation of the merger or approves or recommends the superior
competing transaction; or
. by Marshall & Ilsley if record or beneficial holders of more than five
percent of Century Bancshares's common stock in the aggregate exercise
dissenters' rights.
Waiver and Amendment of the Merger Agreement
At any time before completion of the merger, either Marshall & Ilsley or
Century Bancshares may waive compliance by the other party with any provision
contained in the merger agreement. We may also amend the merger agreement by a
written agreement at any time before or after Century Bancshares shareholders
approve the merger agreement, except that after the Century Bancshares
shareholders have given their approval, we may not amend the merger agreement
in any manner that would reduce the amount or change the type of consideration
into which each share of Century Bancshares common stock will be converted in
the merger or which by law would require the further approval of the
shareholders of Century Bancshares, in each case without further approval of
those shareholders.
Shareholder Voting Agreement
In order to induce Marshall & Ilsley to enter into the merger agreement,
shareholders who own, in aggregate, approximately 54 percent of the outstanding
Century Bancshares common stock have each agreed that at any meeting of the
shareholders of Century Bancshares or in connection with any written consent of
the shareholders of Century Bancshares, such shareholder will vote all shares
of Century Bancshares common stock held of record or beneficially owned by such
shareholder:
. in favor of the merger and the merger agreement; and
. against any proposal relating to a competing proposal and against any
action or agreement that would impede or frustrate the shareholder voting
agreement or result in a breach in any respect of any obligation or
agreement of Century Bancshares under the merger agreement or which would
result in any of the conditions to the parties' obligations to effect the
merger described in the merger agreement not being fulfilled.
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Each shareholder has agreed that, except as provided by the merger agreement
and the shareholder voting agreement, such shareholder will not:
. offer to transfer, transfer or consent to transfer any or all shares of
Century Bancshares common stock held of record or beneficially owned by
such shareholder;
. enter into any contract, option or other agreement or understanding with
respect to any transfer of any or all shares of Century Bancshares common
stock held of record or beneficially owned by such shareholder;
. grant any proxy, power-of-attorney or other authorization or consent with
respect to any or all shares of Century Bancshares common stock held of
record or beneficially owned by such shareholder; or
. deposit into a voting trust or enter into a voting agreement or
arrangement with respect to any or all shares of Century Bancshares common
stock held of record or beneficially owned by such shareholder.
Each shareholder has agreed that such shareholder shall not encourage,
solicit, initiate or participate in any way in any discussions or negotiations
with, or provide information or otherwise take any action to assist or
facilitate, any person concerning any competing proposal. Each shareholder has
agreed to cease any such existing activities and to immediately communicate to
Marshall & Ilsley the terms of any competing proposal.
Each shareholder has waived any rights of appraisal or rights to dissent
from the merger.
The shareholder voting agreement with respect to each shareholder shall
terminate upon the earliest of:
. the effective time of the merger; or
. the termination of the merger agreement.
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MARSHALL & ILSLEY CORPORATION
Description of Business
Marshall & Ilsley, incorporated in Wisconsin in 1959, is a registered bank
holding company under the Bank Holding Company Act of 1956. As of September 30,
2001, Marshall & Ilsley had consolidated total assets of approximately $27.3
billion and consolidated total deposits of approximately $16.7 billion, making
it the largest bank holding company headquartered in Wisconsin.
Marshall & Ilsley's principal assets are the stock of its bank and nonbank
subsidiaries, which include Metavante Corporation, three commercial banks, one
federal savings bank and a number of companies engaged in businesses that the
Federal Reserve Board has determined to be closely-related or incidental to the
business of banking. Marshall & Ilsley provides its subsidiaries with financial
and managerial assistance in such areas as budgeting, tax planning, compliance
assistance, asset and liability management, investment administration and
portfolio planning, business development, advertising and human resources
management.
Marshall & Ilsley's bank and savings association subsidiaries provide a full
range of banking services to individuals, businesses and governments throughout
Wisconsin, and in the Phoenix and Tucson, Arizona metropolitan areas, Las
Vegas, Nevada, Naples, Florida and the Minneapolis, Minnesota, metropolitan
area. These subsidiaries offer retail, institutional, international, business
and correspondent banking, investment and trust services through the operation
of 215 banking offices in Wisconsin, 25 offices in Arizona, one office in
Florida, one office in Nevada and two offices in Minnesota. The Marshall &
Ilsley bank and saving association subsidiaries hold a significant portion of
their mortgage and investment portfolios indirectly through their ownership
interests in direct and indirect subsidiaries. M&I Marshall & Ilsley Bank is
Marshall & Ilsley's largest bank subsidiary, with consolidated assets as of
September 30, 2001 of approximately $18.0 billion.
Metavante is a major supplier of financial and data processing services and
software to banking, financial and related organizations. Metavante provides
integrated products and services to financial services providers that enable
them to initiate and process a broad range of financial transactions
electronically, including through the Internet. Metavante's integrated
financial transaction processing, outsourcing, software and consulting products
and services provide virtually all of the technology that a financial services
provider needs to run its operations. As of December 31, 2001, Metavante had
over 3,500 clients in the United States and abroad, including large banks,
mid-tier and community banks, Internet banks and non-traditional financial
services providers. In 2001, Metavante's products and services were used to
originate and/or process nearly 7.8 billion transactions for consumer and
business customer bank accounts.
Marshall & Ilsley's other nonbank subsidiaries operate a variety of
bank-related businesses, including those providing investment management
services, insurance services, trust services, equipment lease financing,
commercial and residential mortgage banking, home equity financing, venture
capital, brokerage services and financial advisory services. M&I Investment
Management Corp. offers a full range of asset management services to Marshall &
Ilsley's trust company subsidiaries, the Marshall Funds and other individual,
business and institutional customers. Marshall & Ilsley's trust company
subsidiaries provide trust and employee benefit plan services to customers
throughout the United States with offices in Wisconsin, Arizona, Florida,
Nevada, North Carolina and Illinois. M&I First National Leasing Corp. leases a
variety of equipment and machinery to large and small businesses. M&I Dealer
Finance, Inc. provides retail vehicle lease financing. M&I Mortgage Corp.
originates, purchases, sells and services residential mortgages. M&I Mortgage
Reinsurance Corporation acts as a reinsurer of private mortgage insurance
written in connection with residential mortgage loans originated in the
Marshall & Ilsley system. The Richter-Schroeder Company originates and services
long-term commercial real estate loans for institutional investors. M&I Capital
Markets Group L.L.C. and M&I Ventures L.L.C. provide venture capital, financial
advisory and strategic planning services to customers, including assistance in
connection with the private placement of securities, raising funds for
expansion, leveraged buy-outs, divestitures, mergers and acquisitions and small
business investment company transactions. M&I Brokerage Services, Inc., a
34
broker-dealer registered with the National Association of Securities Dealers
and the Securities and Exchange Commission, provides brokerage and other
investment related services to a variety of retail and commercial customers.
M&I Support Services Corp. operates an extensive multi-media customer service
center that provides banking customers with 24-hour phone access to personal
bankers and other customer services.
As a registered bank holding company, Marshall & Ilsley is subject to
regulation and examination by various state and federal governmental regulatory
agencies.
Recent Developments
On November 19, 2001, Marshall & Ilsley announced that it had signed an
agreement to acquire privately-held Richfield State Agency, Inc. of
Minneapolis, Minnesota for $157 million payable in a combination of Marshall &
Ilsley stock and cash. Richfield State Agency, Inc. is the privately held
holding company for Richfield Bank & Trust Co. Richfield Bank & Trust Co. has
approximately $695 million in assets and has seven branches in the Minneapolis,
Minnesota area. The transaction, which is expected to close in the first or
second quarter of 2002, is subject to regulatory approval and other customary
conditions.
Additional Information
Information concerning executive compensation, the principal holders of
voting securities, certain relationships and related transactions, and other
related matters concerning Marshall & Ilsley is included or incorporated by
reference in its Annual Report on Form 10-K for the year ended December 31,
2000, as amended. Marshall & Ilsley's Annual Report on Form 10-K, as amended,
is incorporated by reference into this document. Century Bancshares
shareholders who would like a copy of this annual report or any document
incorporated by reference into the report may contact Marshall & Ilsley at the
address or telephone number provided under "Where You Can Find More
Information" on page 52.
CENTURY BANCSHARES, INC.
Description of Business
Century Bancshares was incorporated in 1989 under the laws of the State of
Minnesota. Century Bancshares is a bank holding company under the Bank Holding
Company Act of 1956. Century Bancshares owns 100 percent of the capital stock
of Century Bank, National Association, a commercial bank. It owns no other
subsidiaries.
Century Bank has its main office in Eden Prairie, MN and also serves
customers from two branch facilities. These facilities are full service branch
locations in St. Louis Park, Minnesota and Coon Rapids, Minnesota, both suburbs
of Minneapolis, Minnesota. Century Bank provides customary banking services
including, among others: business, personal and real estate loans, a full range
of deposit services, and safe deposit facilities.
35
COMPARATIVE RIGHTS OF SHAREHOLDERS
The rights of Century Bancshares shareholders are currently governed by the
Minnesota Business Corporation Act, or the MBCA, Century Bancshares's articles
of incorporation and Century Bancshares's bylaws. At the time of the merger,
some or all of the Century Bancshares common shareholders will become Marshall
& Ilsley common shareholders and their rights will be determined by the
Wisconsin Business Corporation Law, or the WBCL, Marshall & Ilsley's restated
articles of incorporation and Marshall & Ilsley's bylaws. The following is a
summary of the material differences between the rights of Century Bancshares
common shareholders and the rights of Marshall & Ilsley common shareholders. It
is not a complete statement of the provisions affecting and the differences
between the rights of Century Bancshares common shareholders and those of
Marshall & Ilsley common shareholders. The summary is qualified in its entirety
by reference to the MBCA, the WBCL, Century Bancshares's articles of
incorporation and (up arrow)restated(up arrow) bylaws, and Marshall & Ilsley's
restated articles of incorporation and bylaws.
Authorized Capital Stock
Century Bancshares Marshall & Ilsley
Authorized: Authorized:
5,000,000 shares of Series A common stock and 320,000,000 shares of common stock.
15,000,000 shares of Series B common stock. 5,000,000 shares of preferred stock, of which
2,000,000 shares are designated as Series A
Convertible Preferred Stock.
Outstanding as of September 30, 2001: Outstanding as of September 30, 2001:
2,499,709 shares of Series A common stock. 106,506,115 shares of common stock.
5,450,590 shares of Series B common stock. 336,370 shares of Series A Convertible Preferred
Stock.
Size of Board of Directors
Century Bancshares Marshall & Ilsley
Century Bancshares's bylaws state that the Marshall & Ilsley's articles of incorporation
number of directors shall not be less than seven or provide that the number of directors constituting the
more than 10, except that where all shares of Century board of directors shall be fixed by a majority vote of
Bancshares are owned beneficially and of record by the board of directors, but shall not be less than three.
fewer than seven persons, the number of directors may By resolution of Marshall & Ilsley's board of
be less than seven but not less than the number of directors, there are currently 21 members on Marshall
shareholders, nor more than 10 persons. The MBCA & Ilsley's board.
provides that the board shall consist of one or more
directors and that the number of directors shall be fixed
by or in the manner provided by the articles or bylaws.
The current number of directors of Century Bancshares
is fixed at 7.
Cumulative Voting
Cumulative voting entitles each shareholder to cast an aggregate number of
votes equal to the number of voting shares held, multiplied by the number of
directors to be elected. Each shareholder may cast all of his or her votes for
one nominee or distribute them among two or more nominees. The candidates, up
to the number of directors to be elected, receiving the highest number of votes
are elected.
36
Century Bancshares Marshall & Ilsley
Under the MBCA, each shareholder entitled to Under the WBCL, shareholders do not have the
vote for directors has the right to cumulate those votes right to cumulate their votes for directors, unless the
unless the articles provide that there shall be no articles of incorporation provide for cumulative
cumulative voting. The articles of incorporation of voting. Marshall & Ilsley's articles of incorporation
Century Bancshares state that shareholders shall not do not provide for cumulative voting.
have cumulative voting rights for directors.
Class of Directors
Century Bancshares Marshall & Ilsley
The MBCA provides that directors of a Minnesota The WBCL provides that directors of a
corporation may be divided into classes as provided in Wisconsin corporation may be divided into two or
the articles or bylaws. Neither the articles nor the three classes if provided by the articles of
bylaws of Century Bancshares divide its board into incorporation. Marshall & Ilsley's board of directors
classes. is divided into three classes and each director serves
for a three-year term or until his or her successor is
elected and qualified.
Qualifications of Directors
Century Bancshares Marshall & Ilsley
The MBCA provides that directors must be Under the WBCL, a director is not required to be
natural persons, but the method of election and any a resident of the state of Wisconsin or a shareholder
additional qualifications for directors may be imposed of the corporation. Marshall & Ilsley's bylaws
by or in the manner provided in the articles or bylaws. provide that Marshall & Ilsley directors do not need
Century Bancshares's bylaws provide that Century to be residents of Wisconsin or Marshall & Ilsley
Bancshares directors do not need to be Century shareholders, but that no person is eligible for election
Bancshares shareholders. to the board after the age of 72, unless this limitation
is waived by the board.
Filling Vacancies on the Board
Century Bancshares Marshall & Ilsley
The MBCA provides that, unless different rules The WBCL provides that unless the articles of
for filling vacancies are provided for in the articles or incorporation provide otherwise, if a vacancy occurs
bylaws, (i) vacancies on the board resulting from on the board of directors it may filled by any of the
death, resignation, removal, or disqualification of a following, (i) the shareholders; (ii) the board of
director may be filled by the affirmative vote of the directors; or (iii) if the directors remaining in office
majority of the remaining directors, even though less constitute fewer than a quorum of the board, the
than a quorum; and (ii) vacancies on the board directors, by an affirmative vote of the majority of all
resulting from newly created directorships may be directors remaining in office. If the vacant office was
filled by the affirmative vote of a majority of the held by a director elected by a voting group of
directors serving at the time of the increase. Directors shareholders, only the holders of shares of that voting
elected under this provision of the MBCA hold office group are entitled to vote to fill the vacancy if it is
until a qualified successor is elected by the filled by shareholders. A vacancy that will occur at a
shareholders at the next regular or special meeting of specific later date may be filled before the vacancy
the shareholders. Century Bancshares's bylaws provide occurs, but the new director will not take office until
that the vacancy created by the resignation or removal that vacancy occurs.
of a director shall be filled by a director selected by a
majority of the remaining directors.
37
Removal of Directors
Century Bancshares Marshall & Ilsley
The MBCA provides that, unless otherwise Under Wisconsin corporate law, shareholders of
provided in the articles, the bylaws or in a shareholder a corporation may remove a director with or without
control agreement, a director may be removed at any cause, unless the corporation's articles of
time, with or without cause, if, (i) the director was incorporation or bylaws provide that a director may
named by the board to fill a vacancy; (ii) the only be removed for cause. Marshall & Ilsley's
shareholders have not elected directors in the interval articles of incorporation provide that a director may
between the time of the appointment to fill a vacancy only be removed for cause and by an affirmative vote
and the time of the removal; and (iii) a majority of the of two-thirds of the outstanding shares entitled to vote
remaining directors present affirmatively vote to at a meeting of shareholders called for such purpose.
remove the director. Any one or all of the directors "Cause" means solely malfeasance arising from the
may be removed at any time by the affirmative vote of performance of a director's duties which has a
the holders of a majority of the voting power of all material adverse effect on Marshall & Ilsley's
shares entitled to vote at an election of directors. business. Directors, if any, elected by the holders of
However, if cumulative voting is authorized, which is Marshall & Ilsley preferred stock may only be
not the case with Century Bancshares, unless the entire removed in accordance with the terms of the preferred
board is removed simultaneously, a director may not be stock.
removed if the number of votes sufficient to elect that
director under cumulative voting is voted against the
director's removal. Century Bancshares's articles of
incorporation and bylaws do not contain provisions
relating to the removal of directors.
Nomination of Directors for Election
Century Bancshares Marshall & Ilsley
No procedure is set forth under Century Marshall & Ilsley's bylaws provide that if a
Bancshares's articles of incorporation or bylaws for the shareholder wishes to nominate a person for election
nomination of directors for election. as a director, then the shareholder must give timely
notice of the nomination to Marshall & Ilsley. In
order to be timely, a notice must be received by
Marshall & Ilsley not less than 90 days before the
anniversary date of the annual meeting of
shareholders in the immediately preceding year.
Notices given by shareholders must be in writing
and contain information regarding the nominee to the
board of directors, the shareholder bringing the
nomination and other information specified in
Marshall & Ilsley's bylaws.
Anti-Takeover Provisions
Century Bancshares Marshall & Ilsley
The MBCA protects certain corporations Wisconsin corporate law protects domestic
incorporated in Minnesota from hostile takeovers and corporations from hostile takeovers and abusive
abusive takeover tactics by preventing a person from takeover tactics by preventing a person from engaging
engaging in specific transactions with the corporation in specified transactions with the corporation or from
or taking certain actions after that person has acquired taking specific actions after that person has acquired a
a significant portion of the corporation's shares. These significant portion of the corporation's shares. These
protections fall into three categories: protections fall into three categories:
38
. the business combination statute, which regulates . the business combination statute, which regulates
specific types of transactions between issuing public specified types of transactions with interested
corporations and interested shareholders; stockholders;
. the fair price statute, which regulates the price at . the fair price statute, which regulates the price at
which large shareholders may acquire additional which large shareholders may acquire the
shares of a publicly held corporation; and remaining shares of the corporation; and
. the control share statute, which regulates the voting . the control share statute, which regulates the voting
power of shares held by specified large shareholders power of shares held by specified large
of an issuing public corporation. shareholders.
Century Bancshares is not a "publicly held The following section summarizes each of these
corporation" because its shares are not registered statutes.
pursuant to or subject to the Securities Exchange Act
of 1934, and does not qualify as an "issuing public Business combination statute. Wisconsin
corporation" under the MBCA because it is not a corporate law prohibits business combinations
"publicly held corporation," it has fewer than 100 between some Wisconsin corporations, including
shareholders and it has not elected to be an "issuing Marshall & Ilsley, and a person who is an interested
public corporation" by express amendment contained stockholder. This prohibition lasts for three years
in its articles or bylaws. The protections afforded by after the date on which that person became an
the MBCA's anti-takeover provisions are therefore not interested stockholder. Business combinations include
applicable to Century Bancshares for purposes of this mergers, share exchanges, sales of assets,
transaction. liquidations, dissolutions, and specified types of stock
transactions and stock issuances. An interested
stockholder is a person who owns at least 10 percent
of a corporation's outstanding shares or who is an
affiliate or associate of the corporation and owned at
least 10 percent of the corporation's outstanding
shares at any time within the prior three-year period.
The prohibition on business combinations does not
apply if the corporation's board of directors approves
either the business combination or the share
acquisition that caused the person to be designated as
an interested stockholder. The board of directors
approval must be given before the date on which a
person becomes an interested stockholder. The
prohibition on business combinations continues after
the initial three-year period unless:
. the corporation's board of directors approved the
share acquisition that caused the interested
stockholder to be designated as an interested
stockholder;
. a majority of the corporation's shareholders,
excluding the interested stockholder, approve the
business combination;
. the interested stockholder pays a fair price, as
defined in the statute, for the shares it acquires in
the business combination; or
. the business combination is specifically excluded
39
from the prohibition on business combinations.
The business combination statutes do not apply
to the merger, because the merger is not a business
combination with an interested stockholder within the
meaning of the business combination statutes.
Fair price statute. Wisconsin corporate law
requires that business combinations between some
Wisconsin corporations, including Marshall & Ilsley,
and a person designated as a significant shareholder
must be approved by 80 percent of all of the
corporation's shareholders and two-thirds of all of the
corporation's shareholders other than the significant
shareholder. This requirement does not apply if the
corporation's shareholders receive a fair price, as
defined in the statute, for their shares from the
significant shareholder in the business combination. A
significant shareholder is a person who owns 10
percent or more of the corporation's outstanding
shares or who is an affiliate of the corporation and
owned at least 10 percent of the corporation's
outstanding shares at any time within the prior two-
year period.
The fair price statutes do not apply to the
merger, because the merger is not a business
combination with a significant shareholder within the
meaning of the fair price statutes.
Control share statute. Under Wisconsin
corporate law, if a person holds more than 20 percent
of the outstanding shares of some Wisconsin
corporations, including Marshall & Ilsley, then the
voting power of the shares held by that person in
excess of 20 percent of the corporation's outstanding
shares is reduced to 10 percent of the voting power
the excess shares would otherwise have had. The full
voting power of the excess shares may be restored by
a vote of a majority of the corporation's shares. The
person seeking restoration of full voting power may
vote on this resolution.
In addition to any other approvals required by
law and by the articles of incorporation and bylaws,
Marshall & Ilsley's articles of incorporation require
that business combinations between Marshall & Ilsley
and an interested stockholder be approved by:
. the holders of 80 percent of Marshall & Ilsley's
shares; or
. the holders of two-thirds of Marshall & Ilsley's
shares, other than the interested stockholder.
40
This requirement does not apply if business
combination with an interested stockholder is
approved by a majority of disinterested directors or
the shareholders receive a fair price, as defined in the
articles of incorporation, for their shares and certain
other conditions are satisfied.
Business combinations under Marshall &
Ilsley's articles of incorporation generally include
mergers, consolidations, sales of $25,000,000 or
more in assets, the issuance or transfer of
$25,000,000 or more in securities, liquidations,
dissolutions, and reclassifications, recapitalizations
and other transactions that have the effect of
increasing the proportionate ownership interest of an
interested stockholder. An interested stockholder is a
person who owns at least 10 percent of Marshall &
Ilsley's shares or who is an affiliate or associate of
Marshall & Ilsley and owned at least 10 percent of
Marshall & Ilsley's shares at any time within the
prior two-year period. A disinterested director means
a director who is not affiliated with the interested
stockholder and who was either a director before the
person became an interested stockholder or was
elected or recommended for election by a majority of
disinterested directors.
Shareholder Rights Plan
Century Bancshares Marshall & Ilsley
Century Bancshares does not have a shareholder Marshall & Ilsley does not have a shareholder
rights plan. rights plan.
Shareholders' Meeting
Century Bancshares Marshall & Ilsley
Annual and Special Meetings. Under the Annual and Special Meetings. Under
MBCA, regular meetings of shareholders may be held Wisconsin corporate law, a corporation must hold an
on an annual or other less frequent periodic basis, but annual meeting at a time specified in its bylaws and
need not be held unless required by the articles of may hold special meetings. Marshall & Ilsley's
incorporation or bylaws. If a regular meeting of bylaws provide for an annual meeting to be held on
shareholders is not held during a 15-month period, a the fourth Tuesday of April of each year, or on a
shareholder or shareholders holding 3% or more of the different date determined by the board of directors.
voting power of all shares entitled to vote may demand
a regular meeting of shareholders by written notice. Place of Meeting Marshall & Ilsley's bylaws
Century Bancshares's bylaws provide for an annual provide that the annual meeting of shareholders shall
meeting to be held on a date in April of each year, as be held either at Marshall & Ilsley's principal office
specified by the chief executive officer, chairman of in Milwaukee, Wisconsin, or at another place
the board or board of directors. selected by Marshall & Ilsley's board of directors.
41
Place of Meeting. Century Bancshares's Attendance and Voting. Shareholders entitled
bylaws provide that the annual meeting of to vote at a meeting may attend and vote at the
shareholders shall be held at the place fixed by the meeting in person or by proxy. A shareholder may
chief executive officer, chairman of the board or appoint a proxy in writing or by transmitting or
board of directors. authorizing the transmission of an electronic
transmission of the appointment including over the
Attendance and Voting. Shareholders entitled internet or by
to vote at a meeting may attend and vote at the
meeting in person or by proxy. Each holder of shares Quorum. Under Marshall & Ilsley's bylaws,
of Century Bancshares common stock shall have one the presence in person or by proxy of the holders of
vote for each share held. record of a majority of the shares entitled to be cast
on a matter by a voting group constitutes a quorum of
Quorum. Under Century Bancshares's bylaws, that voting group for action on that matter.
the holders of a majority of the outstanding stock
entitled to vote at the meeting, present in person or
represented by proxy, constitute a quorum.
Shareholder Action Without a Meeting
Century Bancshares Marshall & Ilsley
In accordance with Section 302A.441 of the Under Wisconsin corporate law, shareholders
MBCA, Century Bancshares's bylaws provide that may take action required or permitted to be taken at a
any action required or permitted to be taken at a meeting without a meeting if a written consent is
shareholders' meeting may be taken without a signed by all of the corporation's shareholders
meeting by written action signed by all of the entitled to vote on the action, unless the corporation's
shareholders entitled to vote on that action. articles of incorporation provide otherwise. Marshall
& Ilsley's articles of incorporation do not provide
otherwise.
Calling Special Meetings of Shareholders
Century Bancshares Marshall & Ilsley
Under the MBCA, special meetings of the Under Wisconsin corporate law, a special
shareholders may be called for any purpose at any meeting of shareholders may be called by the board
time by (i) the chief executive officer; (ii) the chief of directors, by any person authorized by the articles
financial officer; (iii) two or more directors; (iv) a of incorporation or bylaws to call a special meeting
person authorized in the articles or bylaws to do so; or upon the written demand of the holders of 10
or (v) holders of 10% or more of the voting power of percent of the votes entitled to be cast on any issue
all shares entitled to vote. However, a special proposed to be considered at the special meeting.
meeting for the purpose of considering any action to Marshall & Ilsley's bylaws provide that a special
effect a business combination must be called by 25% meeting of the shareholders may be called only by
or more of the voting power of all shares entitled to the chief executive officer or the president pursuant
vote. The bylaws of Century Bancshares provide that to a resolution approved by at least three-quarters of
a special meeting may be called in accordance with the board, except as otherwise provided by the
the provisions of the MBCA as described above. WBCL.
42
Submission of Shareholder Proposals
Century Bancshares Marshall & Ilsley
The Century Bancshares bylaws do not set forth Marshall & Ilsley's bylaws provide that if a
a procedure to be followed by a shareholder who shareholder wishes to bring business before a
wishes to bring business before the annual meeting. meeting, then the shareholder must give timely notice
of the business to Marshall & Ilsley. In order to be
timely, a notice must:
. be received by Marshall & Ilsley not less than 90
days before the anniversary date of the annual
meeting of shareholders in the immediately
preceding year; and
. contain specified information, including a
description of the business to be brought before the
meeting and information about the shareholder
making the proposal.
Notices given by shareholders must be in
writing.
Notice of Shareholder Meetings
Century Bancshares Marshall & Ilsley
The MBCA generally provides that notice of the Under Wisconsin corporate law, a Wisconsin
date, time, and place of all meetings of shareholders corporation must notify its shareholders of an annual
must be given to every holder of shares entitled to or special meeting not less than 10 nor more than 60
vote at least 10 days before the date of the meeting, days before the meeting, unless the corporation's
or a shorter time provided in the articles or bylaws, articles of incorporation or bylaws provide otherwise.
and not more than 60 days before the date of the Marshall & Ilsley's bylaws provide that notice of an
meeting. If shareholders are entitled to vote on a plan annual meeting or a special meeting must be
of merger or exchange notice must be given at least delivered not less than 10 nor more than 60 days
14 days before the date of the meeting. Century before the date of the meeting. Marshall & Ilsley's
Bancshares's bylaws provide for written notice to be bylaws require that notice of a meeting must state the
given to every holder of voting shares at least 14, but place, date and time of the meeting and that notice of
not more than 60, days before the date of all meeting a special meeting must also state the purpose or
of shareholders, except that written notice of a purposes for which the meeting is called. Notice may
meeting at which an agreement of merger is to be be communicated in person, by telephone, telegraph,
considered must be given to all shareholders, no teletype, facsimile or other forms of wire or wireless
matter whether entitled to vote, at least 14 days prior communication, by mail or private carrier, or by
to the meeting. electronic transmission.
Shareholder Vote Required for Mergers
Century Bancshares Marshall & Ilsley
Under the MBCA, the board of directors of the The WBCL provides that a merger to which a
corporation must approve a plan of merger and the Wisconsin corporation is a party must be approved by
shareholders entitled to vote must approve the plan of the affirmative vote of the holders of a majority of the
merger by the affirmative vote of the holders of a shares entitled to vote on the merger and the
majority of the shares entitled to vote on the merger. affirmative vote of the holders of a majority of the
Approval of this merger will, therefore, require an shares of each class or series entitled to vote
affirmative vote by the holders, in aggregate, of at separately on the merger, if any.
43
least 3,975,150 shares of Century Bancshares Approval of a plan of merger by the shareholders
common stock. A class or series of shares is of the surviving corporation is not required if:
generally entitled to vote as a class or series if any
provision of the plan, if contained in a proposed . the articles of incorporation of the surviving
amendment to the articles, would entitle the class or corporation will not differ, except for limited
series to vote as a class or series. However, a class or changes;
series of shares is not entitled to vote as a class or
series solely because the plan effects a cancellation or . the number of shares and the rights and preferences
exchange of the shares of that class or series if all of the shares held by the surviving corporation's
outstanding shares of the corporation of all classes or shareholders prior to the merger will not change
series are cancelled or exchanged and the holders of immediately after the merger; and
that class or series are entitled to dissenters' rights, as
is the case with the merger. Under Century . the number of shares of stock of the surviving
Bancshares's bylaws, the holders of Series A and corporation outstanding immediately after the
Series B shares of Century Bancshares common merger plus the number of shares issuable as a
stock shall vote together, without regard to Series, in result of the merger will not be greater than 20
all matters, other than election of directors, to which percent of the total number of shares of stock of the
shareholders are entitled to vote or give consent. surviving corporation outstanding immediately
before the merger.
Because each of the requirements above is met, the
approval of the merger by the shareholders of
Marshall & Ilsley is not required.
Dividends
Century Bancshares Marshall & Ilsley
A Minnesota corporation may not make a Under the WBCL, distributions are paid at the
distribution if either: (i) the corporation will not be discretion of the board of directors of a Wisconsin
able to pay its debts in the ordinary course of corporation. The board may authorize, and the
business after making the distribution; (ii) all corporation may make distributions to its
amounts payable to preferential shareholders are not shareholders, including in connection with the
paid; or (iii) the distribution would reduce the repurchase of the corporation's shares, in amounts
remaining net assets of the corporation below the determined by the board, unless:
amount payable to preferential shareholders in the
event of liquidation.Century Bancshares's articles of . after the distribution the corporation would not be
incorporation do not authorize the issuance of a class able to pay its debts as they become due in the
of stock with preferential dividend rights. The usual course of business; or
corporation may therefore make a distribution if the
distribution will not render Century Bancshares . the. corporation's total assets after the distribution
unable to pay its debts in the ordinary course of would be less than the sum of its total liabilities,
business. plus, unless the articles of incorporation provide
otherwise, the amount that would be needed to
satisfy the preferential rights upon dissolution of
shareholders whose preferential rights are superior
to those receiving the distribution, if the
corporation were to be dissolved at the time of
distribution.
Holders of Marshall & Ilsley Series A
Convertible Preferred Stock are entitled to receive,
when, as and if declared by the board of directors
dividends at an annual rate fixed by the board of
directors. Such dividends must be paid or declared
44
and set apart for payment for each dividend period
before any dividend for the same period shall be
paid or set apart for payment on the common
stock.
Dissenters' Rights
Century Bancshares Marshall & Ilsley
The MBCA provides that shareholders of a Under Wisconsin corporate law, a shareholder
corporation are generally entitled to dissent from, and may dissent from, and obtain payment of the fair
obtain payment of the fair value of their shares in the value of his or her shares in the event of specified
event of, any of the following corporate actions: mergers, share exchanges and transactions involving
Neither the articles of incorporation nor the bylaws of the sale of all or substantially all of the corporation's
Century Bancshares provide for any other actions property other than in the usual and regular course of
which would entitle shareholders to additional business. However, dissenters' rights generally are
dissenters' rights. not available to holders of shares, such as Marshall &
Ilsley shares, that are registered on a national
. an amendment of the articles that materially and securities exchange or quoted on the National
adversely affects the dissenting shareholders' Association of Securities Dealers, Inc. Automated
preferential rights, right to redemption of the Quotations System, unless the transaction is a
shares, preemptive right to acquire shares or other business combination involving a significant
securities, or right to vote on a matter or to shareholder or the corporation's articles of
cumulate votes; incorporation provide otherwise.
. a sale, lease, transfer or other disposition of all or Because Marshall & Ilsley shareholders do not
substantially all of the property and assets of the have the right to vote on the merger, its shareholders
corporation if the shareholder is entitled to vote on do not have dissenters' rights with respect to the
the disposition, except in the case of a dissolution, merger under Wisconsin corporate law. Marshall &
a disposition pursuant to a court order, or a Ilsley's articles of incorporation do not otherwise
disposition for cash the net proceeds of which will provide for dissenters' rights with respect to the
be distributed to the shareholders within one year; merger.
. a merger, except that a shareholder of the
surviving corporation has dissenter's rights only
with respect to shares entitled to vote on the
merger;
. a plan of exchange, except that shareholders of the
acquiring corporation do not have dissenter's
rights; and
. any other corporate action taken pursuant to
shareholder vote with respect to which the articles,
by laws or a resolution approved by the board
directs that dissenting shareholders may obtain
payment for their shares.
Neither the articles of incorporation nor the
bylaws of Century Bancshares provide for any other
actions which would entitle shareholders to
additional dissenters' rights.
Because Century Bancshares is not the surviving
corporation in the merger, dissenters' rights are
available. See "The Merger-Dissenters' Rights."
45
Shareholder Preemptive Rights
Century Bancshares Marshall & Ilsley
Under the MBCA, unless denied or limited inthe Under Wisconsin corporate law, subject to
articles of incorporation, a shareholder has a specified limitations, holders of shares of a class
preemptive right whenever the corporation proposes authorized before 1991 have preemptive rights to
to issue new or additional shares or rights to purchase acquire a corporation's unissued shares or other
shares of the same series or class held by the securities convertible into unissued shares, unless the
shareholder, with, unless otherwise provided in the articles of incorporation provide otherwise. Marshall
articles, the following exceptions: & Ilsley's articles of incorporation provide that no
holder of its capital stock has or will have any
. shares or rights to purchase shares issued for a preemptive rights.
consideration other than money;
. shares or rights to purchase shares issued pursuant
to a plan of merger or exchange;
. shares or rights to purchase shares issued pursuant
to an employee or incentive benefit plan approved
by the shareholders;
. shares or rights to purchase shares issued upon
exercise of previously issued rights to purchase
securities of the corporation;
. shares or rights to purchase shares issued pursuant
to a public offering of the corporation's securities
or rights to purchase securities; or
. shares or rights to purchase shares issued pursuant
to a court approved plan of reorganization.
The articles of incorporation of Century
Bancshares do not deny, limit, or otherwise provide
for preemptive rights. Thus, according to the MBCA
as described above, Century Bancshares's
shareholders have preemptive right.
46
Shareholder Class Voting Rights
Century Bancshares Marshall & Ilsley
Under the MBCA, holders of a particular class Under Sections 180.1004 and 180.1103 of the
or series of shares are entitled to vote as a separate WBCL, holders of a particular class of shares are
class or series on certain amendments to the articles entitled to vote as a separate class if the rights of that
of incorporation that uniquely affect the rights of the class are affected in various respects by mergers,
holders of that class or series or the attributes of that consolidations or amendments to the articles of
class or series, and, as described above, on certain incorporation. Under Section 180.1003 of the WBCL,
plans of merger. The MBCA provides that in any the presence or absence of dissenters' rights for a
case where a class or series of shares is entitled by voting group affects the right of that group to vote on
the MBCA, the articles of incorporation or the terms amendments to a corporation's articles of
of the shares to vote as a class or series, the matter incorporation. If a voting group would have
being voted upon must also receive the affirmative dissenters' rights as a result of the amendment, then a
vote of the holders of the same proportion of the majority of the votes entitled to be cast by that voting
shares represented of that class or series, or the total group is required for adoption of the amendment.
outstanding shares of that class or series, as required
for approval by all of the voting shareholders of the
corporation.
The outstanding Series A and Series B shares of
Century Bancshares common stock will vote on the
merger as a single series. No shares of Century
Bancshares capital stock have the right to vote on the
merger as a separate class or series.
Indemnification
Century Bancshares Marshall & Ilsley
Unless limited by the articles of incorporation or Wisconsin corporate law requires a corporation
bylaws, the MBCA provides for mandatory to indemnify a director or officer to the extent that he
indemnification of a director, officer, committee or she has been successful on the merits or otherwise
member or employee made or threatened to be made in the defense of a proceeding for all reasonable
a party to a proceeding by reason of that person's expenses that he or she incurred in the proceeding if
former or present official capacity in the corporation the director or officer was a party because he or she
against certain liabilities and expenses if all of the is or was a director or officer of the corporation.
following apply: Indemnification is also required in other instances,
unless the director or officer is personally liable
. the individual has not otherwise been indemnified because the director or officer breached or failed to
against the same liabilities or expenses; perform a duty that he or she owes to the corporation,
and the breach or failure to perform constitutes any
. the individual acted in good faith; of the following:
. the individual received no improper personal . a willful failure to deal fairly with the corporation
benefit and, if applicable, the MBCA's or its shareholders in connection with a matter in
requirements with respect to conflicts of interest which the director or officer has a material conflict
were satisfied; of interest;
. in the case of a criminal proceeding, the individual . a violation of criminal law, unless the director or
had no reasonable cause to believe that the conduct officer had reasonable cause to believe that his or
was unlawful; and depending on the capacity in her conduct was lawful or no reasonable cause to
which the individual is serving, the individual believe that his or her conduct was unlawful;
. a transaction from which the director or officer
derived an improper personal benefit; or
. willful misconduct.
47
. depending on the capacity in which the individual Wisconsin corporate law allows a corporation to
is serving, the individual either reasonably limit its obligation to indemnify directors and
believed the conduct was in the best interests of officers, but Marshall & Ilsley's articles of
the corporation or reasonably believed that the incorporation do not limit Marshall & Ilsley's
conduct was not opposed to the best of interests of obligation to indemnify its directors and officers.
the corporation.
Wisconsin corporate law also permits a
A person requesting indemnification is entitled corporation to provide directors and officers
to the payment or reimbursement by the corporation additional rights of indemnification, except for
for reasonable expenses in advance of the final conduct described above, in the articles of
disposition of the proceeding if (i) he or she provides incorporation or bylaws, by a resolution adopted by
to the corporation a written affirmation of his or her the board of directors or a majority vote of the
good faith belief that the criteria for indemnification shareholders or by written agreement. Marshall &
have been satisfied and a written undertaking to Ilsley's bylaws provide for indemnification of its
repay all amounts so advanced if it is ultimately directors and officers to the fullest extent permitted
determined that the criteria for indemnification have by law and set forth procedural requirements for
not been satisfied; (ii) a determination is made that requesting indemnification. If a director or officer
indemnification is not precluded based on the facts provides Marshall & Ilsley with a written affirmation
then known; and (iii) such advances are not of his or her good faith belief that he or she has not
prohibited by article or bylaw provisions equally breached or failed to perform his or her duties in a
applicable to all members of such person's class. manner listed above and a written undertaking to
repay Marshall & Ilsley if he or she is not entitled to
Century Bancshares's bylaws provide that the indemnification, then Marshall & Ilsley is required to
company will indemnify its directors, officers and pay or reimburse the director or officer for all
employees for expenses and liabilities to the extent reasonable expenses as incurred.
provided in the MBCA, as described above.
Limitations on Directors' Liability
Century Bancshares Marshall & Ilsley
The MBCA provides that the articles of Under Wisconsin corporate law, a director is not
incorporation may contain a provision eliminating or liable to the corporation, its shareholders or any
limiting the personal liability of a director to the person asserting rights on behalf of the corporation or
corporation or its shareholders for monetary damages its shareholders for monetary damages or other
for breach of fiduciary duty as a director, provided monetary liabilities arising from a breach of or
that the provision does not eliminate or limit the failure to perform any duty resulting solely from his
liability of a director for: or her status as a director, unless the breach
constitutes:
. a breach of the director's duty of loyalty to the
corporation or its shareholders; . a willful failure to deal fairly with the corporation
or its shareholders in connection with a matter in
. acts or omissions not in good faith or which which the director has a material conflict of
involved intentional misconduct or a knowing interest;
violation of law;
. a violation of criminal law, unless the director had
reasonable cause to believe that his or her conduct
was lawful or no reasonable cause to believe that
his or her conduct was unlawful;
48
. a transaction from which the director derived an . a transaction from which the director derived an
improper personal benefit; improper personal profit; or
. an unlawful sale of a security or an unlawful . willful misconduct.
distribution to shareholders; or
Under Wisconsin corporate law, a director or
. an act or omission occurring prior to the date when officer, in discharging his or her duties to the
the provision in the articles of incorporation became corporation and determining what he or she believes
effective. is in the best interests of the corporation, may, in
addition to considering the effects of any action on
Century Bancshares articles of incorporation limit shareholders, consider:
the liability of directors for breach of fiduciary duty as
a director to the full extent allowed under the MBCA, . the effects of the action on employees, suppliers
as described above. and customers of the corporation;
Under the MBCA, a director, in determining what . the effects of the action on the communities in
is in the best interests of the corporation, may consider which the corporation operates; and
the following interests:
. any other factors that the director or officer
. the corporation's employees, suppliers, creditors and considers pertinent.
customers;
. the economy of the state and nation;
. community and societal considerations; and
. the long-term, as well as short-term, interests of the
corporation and its shareholders, including the
possibility that these interests may be best served by
the continued independence of the corporation.
Amendment of Articles of Incorporation
Century Bancshares Marshall & Ilsley
Under the MBCA, an amendment of the articles Under Wisconsin corporate law, the board of
of incorporation must be approved by the affirmative directors of a corporation may propose amendments
vote of the majority of the directors present at a duly to a corporation's articles of incorporation and may
held board meeting or proposed by a shareholder establish conditions for the submission of the
holding 3% or more of the voting power of the shares amendment to the shareholders. Under most
entitled to vote. The proposed or approved resolution circumstances, Wisconsin corporate law provides that
must then be submitted to a shareholder vote at the amendments to a corporation's articles of
next regular meeting or special meeting of the incorporation must be approved by both the board of
shareholders, except that certain amendments effected directors of the corporation and its shareholders.
in connection with stock dividends, stock splits and However, any amendment to the articles of
reverse stock splits require only board approval. incorporation of a corporation organized before
Generally, a proposed amendment to the articles January 1, 1973 which did not expressly elect before
requiring shareholder approval is adopted if approved January 1, 1991 to be governed by a majority or
by the affirmative vote of a majority of the voting greater voting requirement must be approved by the
power of the shares present and entitled to vote, or by a affirmative vote of two-thirds of the shares entitled to
larger percentage if required by the articles. For a vote at a meeting called for that purpose. Marshall &
corporation having more than 35 shareholders, if the Ilsley's articles of incorporation were not amended
articles provide for a larger percentage to transact a prior to January 1, 1991 to reduce the vote required
specified type of business, the vote of that larger to amend its articles of incorporation.
percentage is required to amend the articles to
decreasepercentage is required to amend the articles to
decrease the percentage necessary to transact that
business. The articles of incorporation of Century
Bancshares contain no provision with regard to
amendment of the corporation's articles of
incorporation or requiring a supermajority vote to
transact any specified type of business.
49
Amendment of Bylaws
Century Bancshares Marshall & Ilsley
Under the MBCA, the power to adopt, amend or Under Wisconsin corporate law, the board of
repeal the bylaws is vested in the board unless directors or the shareholders of a corporation may
reserved by the articles of incorporation to the adopt, amend or repeal the bylaws, except to the
shareholders. The power of the board is subject to the extent that the articles of incorporation reserve that
power of a shareholder or shareholders holding 3% or power to the shareholders or the shareholders provide
more of the voting power of the shares entitled to in adopting, amending or repealing a particular
vote to propose a resolution for action by the bylaw, that the board of directors may not amend,
shareholders to adopt, amend or repeal bylaws repeal or readopt that bylaw or the shareholders set
adopted, amended or repealed by the board. The specific voting requirements for the board of
board may not adopt, amend or repeal a bylaw fixing directors to amend, repeal or readopt that bylaw.
a quorum for meetings of shareholders, prescribing Marshall & Ilsley's articles of incorporation and
procedures for removing directors or filling vacancies bylaws provide that the bylaws may be amended,
in the board, or fixing the number of directors or their altered or repealed, and new bylaws may be enacted,
classifications, qualifications or terms of office, but only by the affirmative vote of not less than two-
may adopt or amend a bylaw to increase the number thirds of the shares entitled to vote, or by a vote of
of directors. The articles of incorporation of Century not less than three-quarters of the board of directors.
Bancshares provide that the board of directors has the Marshall & Ilsley's bylaws further provide that no
authority to make or alter the bylaws of the bylaw adopted, amended or repealed by the
corporation, except to the extent otherwise limited by shareholders shall thereafter be enacted, amended or
the MBCA. repealed by the directors unless such action by the
shareholders shall expressly confer upon the directors
authority to thereafter enact, amend or repeal such
bylaw as so amended. Marshall & Ilsley's bylaws
also provide that any bylaw adopted, repealed, or
amended by the board of directors shall be subject to
reenactment, repeal or amendment by the
shareholders acting at any meeting of the
shareholders in accordance with the bylaws.
Shareholder's Inspection Rights
Century Bancshares Marshall & Ilsley
Under the MBCA, a shareholder or beneficial Under Wisconsin corporate law, each
owner of a corporation that is not a publicly held shareholder of record and his or her agent or attorney
corporation has a right to demand, examine and copy has the right to inspect and copy for a proper purpose
the corporation's share register containing the names the list of shareholders prepared for a meeting. The
and addresses of the shareholders and the number and list must be arranged by class or series of shares and
classes of shares held by each shareholder, as well as must show the address of, and the number of shares
certain corporate organizational and financial owned by, each shareholder of record. Inspections
documents and reports, shareholder control and voting must be conducted during regular business hours at
trust agreements, and records of corporate proceedings. the shareholder's expense. This right of
inspectionbegins two business days after notice of the
shareholders' meeting is given and continues through
the meeting. This right of inspection may be
exercised upon written demand.
50
Other corporate records, including the record dates of Both shareholders of record and beneficial
issuance of shares, are accessible only upon showing a shareholders of Wisconsin corporation who satisfy
proper purpose. A proper purpose is a purpose specified requirements, and their attorneys and
reasonably related to the person's interest as a agents, have the right to inspect and copy the
shareholder or beneficial owner of the corporation. corporation's bylaws and, subject to the requirements
Inspection rights take effect only upon a demonstration discussed below, minutes of meetings and consent
that the stated purpose for the inspection is a proper actions of the board of directors and shareholders,
purpose and that the corporate records sought to be records of actions taken by a committee of the board
inspected are reasonably related to that stated purpose. of directors on behalf of the corporation, accounting
A corporation need not permit inspection if it can records and the record of shareholders. Inspections
establish that the plaintiff's actual propose for the must be conducted during regular business hours and
inspection is improper, regardless of the stated are conducted at the shareholder's expense. Notice of
purpose. a demand must be given five business days before the
date on which the shareholder wants to inspect and
A Minnesota corporation is also required to copy the records. For records other than the bylaws,
furnish to a shareholder, within 10 business days after the demand must be made in good faith and for
receipt of the shareholder's written request, the proper purpose, and the person must have been a
corporation's most recently prepared annual financial shareholder for at least six months or hold at least
statements, including, at minimum, a balance sheet and five percent of the outstanding shares of the
statement of income as of the end of and for the fiscal outstanding shares of the corporation.
year.
A Wisconsin corporation is also required to mail
a copy of its latest financial statements to any
shareholder who requests a copy in writing.
Issuance of New Shares
Century Bancshares Marshall & Ilsley
Under Minnesota corporate law, a corporation Under Wisconsin corporate law, a corporation
may, by action of its board of directors, issue up to the may, by action of its board of directors, issue up to
number of shares of a class or series authorized in the the number of shares of a class or series authorized in
corporation's articles of incorporation. If a corporation the corporation's articles of incorporation. If a
wishes to increase the number of shares of a class or corporation wishes to increase the number of shares
series authorized in its articles of incorporation, then it of a class or series authorized in its articles of
must amend its articles of incorporation in the manner incorporation, then it must amend its articles of
described above. Except in conjunction with certain incorporation in the manner described above.
stock dividends, stock splits and reverse stock splits, an
amendment to the articles of incorporation to change The listing requirements of the NYSE applicable
the aggregate number of authorized shares requires a to Marshall & Ilsley require prior shareholder
vote of shareholders. approval of specified issuances of shares, including
issuances of shares bearing voting power equal to or
exceeding 20 percent of the pre-issuance outstanding
voting power or pre-issuance outstanding number of
shares. These requirements do not apply to the
issuance of Marshall & Ilsley common stock
pursuant to the terms of the merger agreement
because the shares to be issued do not exceed 20
percent of Marshall & Ilsley's outstanding shares of
common stock.
In general, shareholders of a Wisconsin
corporation are not personally liable for the acts or
debts of the corporation. Shareholders of a Wisconsin
corporation may be directly liable up to the aggregate
par value of the shares owned by them for debts of
the corporation owed to the corporation's employees
for services performed for the corporation, but not
exceeding six months' service in any one case. Some
Wisconsin courts have interpreted par value to mean
the amount paid by the shareholder for their shares.
51
SHAREHOLDER PROPOSALS
The 2002 annual meeting of Marshall & Ilsley shareholders is scheduled for
April 23, 2002. In accordance with Marshall & Ilsley's bylaws, nominations,
other than by or at the direction of the board of directors, of candidates for
election as directors at the 2002 annual meeting and any other shareholder
proposed business to be brought before the 2002 annual meeting must be
submitted to Marshall & Ilsley no later than January 24, 2002. Shareholder
proposed nominations and other shareholder proposed business must be made in
accordance with Marshall & Ilsley's bylaws, which provide, among other things,
that shareholder proposed nominations must be accompanied by certain
information concerning the nominee and the shareholder submitting the
nomination, and that shareholder proposed business must be accompanied by
certain information concerning the proposal and the shareholder submitting the
proposal. To be considered for inclusion in the proxy statement solicited by
the board of directors, shareholder proposals for consideration at the 2002
annual meeting must have been received by Marshall & Ilsley at its principal
executive offices, 770 North Water Street, Milwaukee, Wisconsin 53202, on or
before November 9, 2001. Proposals should be directed to Mr. M.F. Furlong,
Executive Vice President. To avoid disputes as to the date of receipt, it is
suggested that any shareholder proposal be submitted by certified mail, return
receipt requested.
LEGAL MATTERS
The validity of the Marshall & Ilsley common stock to be issued in
connection with the merger will be passed upon by Godfrey & Kahn, S.C.,
Milwaukee, Wisconsin. Godfrey & Kahn, S.C. will also render an opinion to
Marshall & Ilsley regarding the material U.S. federal income tax consequences
of the merger. Maslon Edelman Borman & Brand, LLP will render an opinion to
Century Bancshares regarding the material U.S. federal income tax consequences
of the merger. Messrs. Jerome Simon, Barry Gersick and Charles Bans are
partners in Maslon Edelman Borman & Brand, LLP and shareholders of Century
Bancshares. As of January 14, 2002, Mr. Simon held 186,000 shares of Century
Bancshares Series A common stock and options to purchase 23,000 shares of
Century Bancshares common stock, Mr. Gersick held 8,000 shares of Century
Bancshares Series A common stock and 72,000 shares of Century Bancshares Series
B common stock, and Mr. Bans held 2,500 shares of Century Bancshares Series A
common stock and 22,500 shares of Century Bancshares Series B common stock.
EXPERTS
Arthur Andersen LLP, independent auditors, have audited Marshall & Ilsley's
consolidated financial statements included in Marshall & Ilsley's Annual Report
on Form 10-K, as amended, as of December 31, 2000 and December 31, 1999, and
for the three years ended December 31, 2000, as set forth in their report,
which is incorporated by reference in this prospectus and elsewhere in the
registration statement. Marshall & Ilsley's financial statements are
incorporated by reference in reliance on Arthur Andersen LLP's report, given on
their authority as experts in accounting and auditing.
McGladrey & Pullen, LLP, independent auditors, have audited Century
Bancshares's consolidated financial statements as of December 31, 2000 and
December 31, 1999, and for the three years ended December 31, 2000, as set
forth in their report, which is attached hereto as Appendix D, incorporated by
reference in this prospectus and elsewhere in this registration statement.
Century Bancshares's financial statements are incorporated by reference in
reliance on McGladrey & Pullen., LLP's report, given on their authority as
experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
Marshall & Ilsley has filed a registration statement with the SEC under the
Securities Act of 1933 that registers the distribution to shareholders of
Century Bancshares the shares of Marshall & Ilsley common stock to be issued in
the merger. The registration statement, including the attached exhibits and
schedules, contains additional relevant information about Marshall & Ilsley and
Marshall & Ilsley's common stock. The rules and regulations of the SEC allow us
to omit some information included in the registration statement from this proxy
statement/prospectus.
52
In addition, Marshall & Ilsley (File No. 1-15403) files reports, proxy
statements and other information with the SEC under the Securities Exchange Act
of 1934. You may read and copy this information at the following locations of
the SEC:
Public Reference Room Northeast Regional Office Chicago Regional Office
450 Fifth Street, N.W. 223 Broadway Citicorp Center
Room 1024 New York, New York 10279 500 West Madison Street
Washington, D.C. 20549 Suite 1400
Chicago, Illinois 60661-2511
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates. You may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also
maintains an Internet world wide web site that contains reports, proxy
statements and other information about issuers, like Marshall & Ilsley, that
file information electronically with the SEC. The address of that site is
http:www.sec.gov.
You can also request copies of this information from Marshall & Ilsley by
making a request to:
Shareholder/Investor Relations
Marshall & Ilsley Corporation
770 North Water Street
Milwaukee, Wisconsin 53202
(414) 765-7817 or (414) 765-7806
Marshall & Ilsley's address on the world wide web is http://www.micorp.com,
and Century Bancshares's address is http://www.bankatcentury.com. The
information on our web sites is not a part of this document.
You can also inspect reports, proxy statements and other information about
Marshall & Ilsley at the offices of the NYSE, 20 Broad Street, New York, New
York 10005.
This document incorporates by reference the documents listed below that
Marshall & Ilsley has previously filed with the SEC. They contain important
information about our companies and their financial condition.
Marshall & Ilsley Filings Period or Date Filed
------------------------- --------------------
Annual Report on Form 10-K Year ended December 31, 2000 (as amended by a
Form 10-K/A filed on April 17, 2001)
Quarterly Reports on Form 10-Q Quarters ended March 31, 2001,
June 30, 2001 and September 30, 2001
The description of Marshall & Ilsley common stock October 18, 1999
set forth in the registration statement on Form
8-A filed pursuant to Section 12 of the Securities and
Exchange Act, including any amendment or report
filed with the SEC for the purpose of updating this
description
Current Reports on Form 8-K June 22, 2001, July 12, 2001 and August 24, 2001
53
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein or in any
other subsequently filed document that also is, or is deemed to be,
incorporated by reference herein modifies
or supersedes such statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
hereof.
Additional documents that Marshall & Ilsley may file with the SEC pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934,
as amended, between the date of this document and the date of the special
meeting of Century Bancshares's shareholders or any adjournments or
postponements of the special meeting are also incorporated by reference. These
documents include periodic reports, such as Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as
proxy statements.
In deciding how to vote on the merger, you should rely only on the
information contained or incorporated by reference in this document. Neither
Marshall & Ilsley nor Century Bancshares has authorized any person to provide
you with any information that is different from what is contained in this
document. This document is dated January 23, 2002. You should not assume that
the information contained in this document is accurate as of any date other
than such date, and neither the mailing to you of this document nor the
issuance to you of shares of Marshall & Ilsley common stock will create any
implication to the contrary.
54
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BETWEEN
CENTURY BANCSHARES, INC.
AND
MARSHALL & ILSLEY CORPORATION
Dated as of December 3, 2001
TABLE OF CONTENTS
Page
----
ARTICLE I--THE MERGER
SECTION 1.1 The Merger.......................................... 1
SECTION 1.2 Effective Time...................................... 1
SECTION 1.3 Effect of the Merger................................ 1
SECTION 1.4 Articles of Incorporation; By-Laws.................. 2
SECTION 1.5 Directors and Officers.............................. 2
SECTION 1.6 Merger Consideration................................ 2
SECTION 1.7 Conversion of Securities; Dissenting Shares......... 2
SECTION 1.8 Exchange of Certificates............................ 4
SECTION 1.9 Stock Transfer Books................................ 6
SECTION 1.10 Adjustments for Dilution and Other Matters.......... 6
SECTION 1.11 Company Common Stock................................ 6
ARTICLE II--REPRESENTATIONS AND WARRANTIES OF SELLER
SECTION 2.1 Organization and Qualification; Subsidiaries........ 6
SECTION 2.2 Articles of Incorporation and By-Laws............... 7
SECTION 2.3 Capitalization...................................... 7
SECTION 2.4 Authority........................................... 8
SECTION 2.5 No Conflict; Required Filings and Consents.......... 8
SECTION 2.6 Compliance; Permits................................. 9
SECTION 2.7 Securities and Banking Reports; Financial Statements 9
SECTION 2.8 Absence of Certain Changes or Events................ 10
SECTION 2.9 Absence of Litigation............................... 10
SECTION 2.10 Employee Benefit Plans.............................. 10
SECTION 2.11 Registration Statement; Proxy Statement/Prospectus.. 12
SECTION 2.12 Title to Property................................... 12
SECTION 2.13 Environmental Matters............................... 12
SECTION 2.14 Absence of Agreements............................... 13
SECTION 2.15 Taxes............................................... 14
SECTION 2.16 Insurance........................................... 14
SECTION 2.17 Brokers............................................. 14
SECTION 2.18 Tax Matters......................................... 14
SECTION 2.19 Material Adverse Effect............................. 15
SECTION 2.20 Material Contracts.................................. 15
SECTION 2.21 Vote Required....................................... 15
ARTICLE III--REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.1 Organization and Qualification; Subsidiaries........ 15
SECTION 3.2 Articles of Incorporation and By-Laws............... 16
SECTION 3.3 Capitalization...................................... 16
SECTION 3.4 Authority........................................... 16
SECTION 3.5 No Conflict; Required Filings and Consents.......... 16
SECTION 3.6 Securities and Banking Reports; Financial Statements 17
SECTION 3.7 Absence of Certain Changes or Events................ 18
SECTION 3.8 Registration Statement; Proxy Statement/Prospectus.. 18
ARTICLE IV--COVENANTS OF SELLER
SECTION 4.1 Affirmative Covenants............................... 18
SECTION 4.2 Negative Covenants.................................. 19
SECTION 4.3 Letter of Seller's Accountants...................... 20
SECTION 4.4 No Solicitation of Transactions..................... 20
i
Page
----
SECTION 4.5 Update Disclosure; Breaches................................ 21
SECTION 4.6 Affiliates; Tax Treatment.................................. 21
SECTION 4.7 Delivery of Shareholder List............................... 22
SECTION 4.8 Loan and Investment Policies............................... 22
SECTION 4.9 Access and Information..................................... 22
SECTION 4.10 Confidentiality Letter..................................... 22
ARTICLE V--COVENANTS OF THE COMPANY
SECTION 5.1 Affirmative Covenants...................................... 23
SECTION 5.2 Negative Covenants......................................... 23
SECTION 5.3 Breaches................................................... 23
SECTION 5.4 Stock Exchange Listing..................................... 23
SECTION 5.5 Tax Treatment.............................................. 23
SECTION 5.6 Confidentiality Letter..................................... 23
ARTICLE VI--ADDITIONAL AGREEMENTS
SECTION 6.1 Proxy Statement/Prospectus; Registration Statement......... 23
SECTION 6.2 Meeting of Seller's Shareholders........................... 24
SECTION 6.3 Appropriate Action; Consents; Filings...................... 24
SECTION 6.4 Employee Benefit Matters................................... 24
SECTION 6.5 Directors' and Officers' Indemnification and Insurance..... 24
SECTION 6.6 Notification of Certain Matters............................ 25
SECTION 6.7 Public Announcements....................................... 25
SECTION 6.8 Customer Retention......................................... 25
SECTION 6.9 Expenses................................................... 25
ARTICLE VII--CONDITIONS OF MERGER
SECTION 7.1 Conditions to Obligation of Each Party to Effect the Merger 26
SECTION 7.2 Additional Conditions to Obligations of the Company........ 26
SECTION 7.3 Additional Conditions to Obligations of Seller............. 28
ARTICLE VIII--TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 Termination................................................ 29
SECTION 8.2 Effect of Termination...................................... 30
SECTION 8.3 Amendment.................................................. 30
SECTION 8.4 Waiver..................................................... 30
ARTICLE IX--GENERAL PROVISIONS
SECTION 9.1 Non-Survival of Representations, Warranties and Agreements. 30
SECTION 9.2 Notices.................................................... 31
SECTION 9.3 Certain Definitions........................................ 31
SECTION 9.4 Headings................................................... 32
SECTION 9.5 Severability............................................... 32
SECTION 9.6 Entire Agreement........................................... 32
SECTION 9.7 Assignment................................................. 32
SECTION 9.8 Parties in Interest........................................ 32
SECTION 9.9 Governing Law.............................................. 32
SECTION 9.10 Counterparts............................................... 32
SECTION 9.11 Time is of the Essence..................................... 32
SECTION 9.12 Specific Performance....................................... 32
ANNEX A SUBSIDIARIES OF SELLER
EXHIBIT 1.1 PLAN OF MERGER
EXHIBIT 4.6 AFFILIATE LETTER
ii
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of December 3, 2001 (the
"Agreement"), between Century Bancshares, Inc., a Minnesota corporation (the
"Seller") and Marshall & Ilsley Corporation, a Wisconsin corporation (the
"Company").
WHEREAS, the Boards of Directors of the Company and the Seller have each
determined that it is fair to and in the best interests of their respective
shareholders for the Seller to merge with and into the Company (the "Merger")
upon the terms and subject to the conditions set forth herein and in accordance
with the Minnesota Business Corporation Act (the "MBCA") and the Wisconsin
Business Corporation Law (the "WBCL");
WHEREAS, the respective Boards of Directors of the Company and the Seller
have each approved the Merger of the Seller with and into the Company, upon the
terms and subject to the conditions set forth herein, and adopted and approved
this Agreement and the Plan of Merger (as hereafter defined);
WHEREAS, subsequent to the approval of this Agreement and the Plan of Merger
by Seller's Board of Directors and concurrently with the execution of this
Agreement and as a condition and an inducement to the willingness of the
Company to enter into this Agreement, the Company and certain shareholders of
the Seller have entered into an agreement pursuant to which each such
shareholder has agreed to vote his or her shares of Seller Common Stock in
favor of the Merger;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization under the provisions of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"), and this Agreement
shall constitute the plan of reorganization;
WHEREAS, for financial accounting purposes it is intended that the Merger
shall be accounted for as a purchase.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties and agreements contained herein, and subject to the
terms and conditions set forth herein, the parties hereto hereby agree as
follows:
ARTICLE I--THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the MBCA, the WBCL and the Plan
of Merger attached hereto as Exhibit 1.1 (the "Plan of Merger"), at the
Effective Time (as defined in Section 1.2) Seller shall be merged with and into
the Company. As a result of the Merger, the separate corporate existence of
Seller shall cease and the Company shall continue as the surviving corporation
of the Merger (the "Surviving Corporation").
SECTION 1.2 Effective Time. As promptly as practicable after the
satisfaction or, if permissible, waiver of the conditions set forth in Article
VII, the parties hereto shall cause the Merger to be consummated by filing
articles of merger (the "Articles of Merger") with the Secretary of State of
the State of Minnesota (the "Minnesota Secretary of State") and the Department
of Financial Institutions of the State of Wisconsin (the "DFI"), in such form
as required by, and executed in accordance with the relevant provisions of, the
MBCA and the WBCL (the date and time of the later of such filing with the
Minnesota Secretary of State or the DFI is referred to herein as the "Effective
Time").
SECTION 1.3 Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in this Agreement and the applicable provisions
of the MBCA and the WBCL. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, except as otherwise provided herein,
all the property, rights, privileges, immunities, powers and franchises of the
Company and the Seller shall vest in the Surviving
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Corporation, and all debts, liabilities and duties of the Company and the
Seller shall become the debts, liabilities and duties of the Surviving
Corporation.
SECTION 1.4 Articles of Incorporation; By-Laws. At the Effective Time, the
Articles of Incorporation, as amended, of the Company (the "Company Articles")
and the By-Laws, as amended, of the Company (the "Company By-Laws"), as in
effect immediately prior to the Effective Time, shall be the Articles of
Incorporation and the By-Laws of the Surviving Corporation.
SECTION 1.5 Directors and Officers. At the Effective Time, the directors
of the Company immediately prior to the Effective Time shall be the initial
directors of the Surviving Corporation, each to hold office in accordance with
the Articles of Incorporation and By-Laws of the Surviving Corporation and to
be assigned to the class previously assigned. At the Effective Time, the
officers of the Company immediately prior to the Effective Time, shall be the
initial officers of the Surviving Corporation, in each case until their
respective successors are duly elected or appointed.
SECTION 1.6 Merger Consideration
(a) The aggregate dollar value of the merger consideration shall be
$66,000,000 minus the Option Payment Amount as defined in (c) below (the
"Merger Consideration"). The Merger Consideration shall consist of shares of
common stock, par value $1.00 per share, of the Company ("Company Common
Stock"); provided, however, that up to $30,000,000 minus the Option Payment
Amount (the "Cash Amount") of the Merger Consideration may be payable in cash
at the election of holders of the Seller Common Stock (as hereinafter defined).
For purposes of valuing the Company Common Stock as part of the Merger
Consideration, one share of Company Common Stock will be deemed to have a value
equal to the average of the average high and low sale price per share of
Company Common Stock on the New York Stock Exchange (the "NYSE") as reported in
the Midwest Edition of The Wall Street Journal for the ten (10) consecutive
trading days ending on and including the second trading day preceding the
Effective Time (the "Average Trading Price"). The Company agrees that all of
the Company's purchases of Company Common Stock shall be in accordance with
Regulation M of the Exchange Act.
(b) The "Per Share Merger Consideration" shall be an amount equal to the
aggregate value of the Merger Consideration divided by the total number of
shares of Series A common stock, $.01 par value, and Series B common stock,
$.01 par value, of the Seller (collectively, the "Seller Common Stock") issued
and outstanding immediately prior to the Effective Time (the "Outstanding
Seller Common Stock").
(c) The "Option Payment Amount" shall be an amount equal to (A) the number
of shares of Seller Common Stock subject to options immediately prior to the
Effective Time (such options are referred to collectively as the "Outstanding
Options") multiplied by $7.398 (such product to be rounded to the nearest whole
cent), minus (B) the aggregate exercise price of all Outstanding Options.
SECTION 1.7 Conversion of Securities; Dissenting Shares. Subject to
Section 1.7(h) regarding fractional shares, at the Effective Time, by virtue of
the Merger and without action on the part of the Company, the Seller or the
holders of the Seller's securities:
(a) Each share of Seller Common Stock issued and outstanding immediately
prior to the Effective Time, other than Shares owned by the Company or any
direct or indirect wholly owned Company Subsidiary or Seller Subsidiary for its
own account (all such shares of Seller Common Stock issued and outstanding
immediately prior to the Effective Time being referred to herein as the
"Shares") and other than Dissenting Shares (as defined in Section 1.7(j)),
shall be converted into the right to receive a number of shares of Company
Common Stock, determined by dividing the Per Share Merger Consideration by the
Average Trading Price and rounding the result to the nearest one thousandth of
a share (the "Stock Consideration"); provided, however, that, subject to the
election and allocation procedures set forth in this Section 1.7, each holder
of such Shares will be entitled,
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with respect to the Merger Consideration to be received for each such Share
held by the holder, to elect to receive cash from the Company, without interest
(a "Cash Election"), in an amount equal to the Per Share Merger Consideration
(the "Cash Consideration").
(b) The number of Shares which may be converted into the right to receive
the Cash Consideration in the Merger shall be no more than (i) the Cash Amount
divided by the Per Share Merger Consideration (rounded down to the nearest
whole number) minus (ii) the total number of Dissenting Shares, if any (the
"Cash Election Number").
(c) If the aggregate number of Shares covered by Cash Elections (the "Cash
Election Shares") exceeds the Cash Election Number, each Cash Election Share
shall be converted, at the Effective Time, into the right to receive (i) an
amount in cash, without interest, equal to the product of (x) the Per Share
Merger Consideration and (y) a fraction (the "Cash Fraction"), the numerator of
which shall be the Cash Election Number and the denominator of which shall be
the total number of Cash Election Shares, and (ii) a number of shares of
Company Common Stock equal to the product of (x) the Stock Consideration and
(y) a fraction equal to one minus the Cash Fraction.
(d) In the event that Section 1.7(c) above is inapplicable, all Cash
Election Shares shall be converted, at the Effective Time, into the right to
receive the Cash Consideration and all other Shares, other than Dissenting
Shares, shall be converted, at the Effective Time, into the right to receive
the Stock Consideration.
(e) All Cash Elections shall be made on a form designed for that purpose and
mutually acceptable to the Company and Seller (a "Form of Election") and mailed
to holders of record of Shares as of the record date for the Seller
Shareholders' Meeting (as defined below) or such other date as the Company and
the Seller shall mutually agree (the "Election Form Record Date"). The Company
and the Seller shall make available one or more Election Forms as may be
reasonably requested by all persons who become holders of record of Shares
between the Election Form Record Date and the Election Deadline (as defined
below). Elections shall be made by submitting to the Exchange Agent (as defined
below) a duly completed Form of Election. To be effective, a Form of Election
must be properly completed, signed and submitted to the Exchange Agent in
accordance with Section 1.7(f). The Company will have the discretion, which it
may delegate in whole or in part to the Exchange Agent, to reasonably determine
whether Forms of Election have been properly completed, signed and submitted or
revoked and to disregard immaterial defects in Forms of Election. The decision
of the Company (or the Exchange Agent) shall be conclusive and binding. Neither
the Company nor the Exchange Agent will be under any obligation to notify any
person of any defect in a Form of Election submitted to the Exchange Agent. The
Exchange Agent shall also make all computations contemplated by this Section
1.7 and all computations shall be conclusive and binding on the holders of
Shares.
(f) A Form of Election must be received by the Exchange Agent by the close
of business of the last business day prior to the date of the Seller
Shareholders' Meeting in order to be effective. Such time on such date shall
hereinafter be referred to as the "Election Deadline." Any holder of Shares who
has made an election may at any time prior to the Election Deadline change or
withdraw its election by written notice to the Exchange Agent prior to the
Election Deadline. As soon as practicable after the Election Deadline, the
Exchange Agent shall determine the allocation of the cash portion of the Merger
Consideration and the stock portion of the Merger Consideration and shall
notify the Company of its determination.
(g) The Shares of a holder who does not submit a Form of Election which is
received by the Exchange Agent prior to the Election Deadline (other than
Dissenting Shares) shall be converted into the right to receive the Stock
Consideration at the Effective Time. If the Company or the Exchange Agent shall
determine that any purported Cash Election was not properly made, the purported
Cash Election shall be deemed to be of no force and effect and the Shares of
the holder making such purported Cash Election shall be converted into the
right to receive the Stock Consideration at the Effective Time.
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(h) No fractional shares of Company Common Stock shall be issued in the
Merger. All fractional shares of Company Common Stock that a holder of any
Shares would otherwise be entitled to receive as a result of the Merger shall
be aggregated. If a fractional share of Company Common Stock results from the
aggregation, the holder shall be entitled to receive, in lieu thereof, a cash
amount, without interest, determined by multiplying the Average Trading Price
by the fraction of a share of Company Common Stock to which the holder would
otherwise have been entitled. As promptly as practicable after the
determination of the amount of cash, if any, to be paid to holders of
fractional share interests, the Exchange Agent shall so notify the Company, and
the Company shall deposit that amount with the Exchange Agent and shall cause
the Exchange Agent to forward payments to the holders of fractional share
interests, subject to and in accordance with the terms of this Section 1.7.
(i) Each share of Seller Common Stock held by the Company or any direct or
indirect wholly owned Company Subsidiary or Seller Subsidiary for its own
account shall be canceled and extinguished at the Effective Time without
conversion thereof into the Merger Consideration or payment therefor.
(j) Notwithstanding anything in this Agreement to the contrary, shares of
Seller Common Stock which are issued and outstanding immediately prior to the
Effective Time and which are held by shareholders or beneficial owners who have
validly exercised and perfected dissenter's rights with respect to those Shares
under Sections 302A.471 and 302A.473 of the MBCA and have not withdrawn or lost
such rights (the "Dissenting Shares") shall not be converted into or be
exchangeable for the right to receive the Merger Consideration in accordance
with this Section 1.7, unless and until such holders or beneficial owners shall
have failed to perfect or shall have effectively withdrawn or lost their
dissenter's rights with respect to such Dissenting Shares under the MBCA.
Dissenting Shares shall be treated in accordance with Sections 302A.471 and
302A.473 of the MBCA, if and to the extent applicable. If, after the Effective
Time, any such holder or beneficial owner shall have failed to perfect or shall
have effectively withdrawn or lost such right to dissent with respect to any
Dissenting Shares, such Dissenting Shares shall thereupon be treated as if they
had been converted into and become exchangeable only for the right to receive,
as of the Effective Time, the Stock Consideration in accordance with this
Section 1.7, without any interest thereon. Seller shall give the Company (a)
prompt notice of each and every notice of a shareholder's or beneficial owner's
intent to demand payment of the "fair value" of the shareholder's or beneficial
owner's Shares, attempted withdrawals of such demands, and any other
instruments served pursuant to the MBCA and received by the Seller relating to
rights to be paid the "fair value" of Shares, as provided in Sections 302A.471
and 302A.473 of the MBCA and (b) the opportunity to direct all negotiations and
proceedings with respect to such demands for "fair value." Seller shall not,
except with the prior written consent of the Company, voluntarily make any
payment with respect to, offer to settle or settle, or approve any withdrawal
of any such demands for "fair value."
(k) Each option to purchase shares of Seller Common Stock (each, a "Seller
Option") outstanding under any stock option plan immediately prior to the
Effective Time, whether or not vested or exercisable, shall be converted into
the right to receive cash from the Company in an amount equal to (A) the number
of shares of Seller Common Stock subject to such Seller Option multiplied by
(B) $7.398 (the product of (A) and (B) shall be rounded to the nearest whole
cent), minus (C) the aggregate exercise price for such Seller Option. After the
Effective Time, each Seller Option shall represent only the right to receive
the cash amount described above and shall not represent a right to receive any
securities of the Company.
SECTION 1.8 Exchange of Certificates.
(a) Exchange Agent. The Company shall deposit, or shall cause to be
deposited, from time to time, with a bank or trust company designated by the
Company and which may be an affiliate of the Company (the "Exchange Agent"),
for the benefit of the holders of Shares, for exchange in accordance with this
Article I, through the Exchange Agent, the Merger Consideration, together with
any dividends or distributions with respect thereto, if any, to be paid in
respect of Shares pursuant to this Article I (the "Exchange Fund"). Such
deposits shall be made after the Effective Time as requested by the Exchange
Agent in order for the Exchange Agent to promptly deliver the Merger
Consideration.
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(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate representing Shares which were converted into the right to receive
the Merger Consideration pursuant to Section 1.7 (each, a "Certificate" and
collectively, the "Certificates"), (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in such form and have such other provisions as the Company
may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for the Merger Consideration. Upon
surrender of a Certificate for cancellation to the Exchange Agent together with
such letter of transmittal, duly executed, the holder of such Certificate shall
be entitled to receive in exchange therefor the Merger Consideration and any
unpaid dividends and distributions thereon as provided in this Article I, which
such holder has the right to receive in respect of the Certificate surrendered
pursuant to the provisions of this Article I, and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of
ownership of Shares which is not registered in the transfer records of the
Seller, a transferee may exchange the Certificate representing such Shares for
the Merger Consideration and any unpaid dividends and distributions thereon as
provided in this Article I if the Certificate representing such Shares is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. In the event any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and the
posting by such person of a bond in such amount as the Company may direct as
indemnity against any claim that may be made against it or the Exchange Agent
with respect to such Certificate, the Exchange Agent will issue in exchange for
such lost, stolen or destroyed Certificate the Merger Consideration and any
unpaid dividends and distributions thereon as provided in this Article I, which
such holder would have had the right to receive in respect of such lost, stolen
or destroyed Certificate. Until surrendered as contemplated by this Section
1.8, each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the Merger
Consideration and any unpaid dividends and distributions thereon as provided in
this Article I.
(c) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions declared or made after the Effective Time with respect to Company
Common Stock with a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate with respect to the shares of Company
Common Stock issuable in exchange for the Shares represented thereby, and no
cash payment in lieu of fractional shares shall be paid to any such holder
pursuant to Section 1.7(h), until the holder of such Certificate shall
surrender such Certificate. Subject to the effect of applicable laws, following
surrender of any such Certificate, there shall be paid to the holder of the
certificates representing whole shares of Company Common Stock issued in
exchange therefor, without interest, (i) promptly, the amount of any cash
payable with respect to a fractional share of Company Common Stock to which
such holder is entitled pursuant to Section 1.7(h) and the amount of dividends
or other distributions with a record date after the Effective Time theretofore
paid with respect to such whole shares of Company Common Stock, and (ii) at the
appropriate payment date, the amount of dividends or other distributions, with
a record date after the Effective Time but prior to surrender and a payment
date occurring after surrender, payable with respect to such whole shares of
Company Common Stock.
(d) No Further Rights in the Shares. All Merger Consideration issued or
paid upon conversion of the Shares in accordance with the terms hereof
(including any cash paid pursuant to Section 1.7(h)) shall be deemed to have
been issued or paid in full satisfaction of all rights pertaining to such
Shares.
(e) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the former shareholders of Seller for six (6) months
after the Effective Time shall be delivered to the Company, upon demand, and
any former shareholders of Seller who have not theretofore complied with this
Article I shall thereafter look only to the Company to claim the Merger
Consideration to which they are entitled, any cash in lieu of fractional shares
of Company Common Stock and any dividends or distributions with respect to
Company Common Stock, in each case without interest thereon, and subject to
Section 1.8(f).
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(f) No Liability. Neither the Company nor the Seller shall be liable to any
former holder of Shares for any shares of Company Common Stock (or dividends or
distributions with respect thereto) or cash or other payment delivered to a
public official pursuant to any abandoned property, escheat or similar laws.
(g) Withholding Rights. The Company shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement to
any former holder of Shares or any holder of Seller Options such amounts as the
Company is required to deduct and withhold with respect to the making of such
payment under the Code, or any provision of state, local or foreign tax law. To
the extent that amounts are so withheld by the Company, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to the
former holder of the Shares or the former holder of Seller Options, as the case
may be, in respect of which such deduction and withholding was made by the
Company.
SECTION 1.9 Stock Transfer Books. At the Effective Time, the stock
transfer books of Seller shall be closed and there shall be no further
registration of transfers of shares of Seller Common Stock thereafter on the
records of Seller. From and after the Effective Time, the holders of
certificates evidencing ownership of shares of Seller Common Stock outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such Shares except as otherwise provided herein or by law. On or
after the Effective Time, any Certificates presented to the Exchange Agent or
the Company for any reason shall be converted into the Merger Consideration in
accordance with this Article I.
SECTION 1.10 Adjustments for Dilution and Other Matters. If, after the
date of this Agreement and during the period in which the Average Trading Price
is determined, the Company shall declare a stock dividend or distribution upon
or subdivide, split up, reclassify or combine the Company Common Stock or
declare a dividend or make a distribution on the Company Common Stock in any
security convertible into Company Common Stock, appropriate adjustment or
adjustments, if any, will be made to the Merger Consideration and the Stock
Consideration determined pursuant to Sections 1.6(a) and 1.7(a).
SECTION 1.11 Company Common Stock. The shares of Company Common Stock
issued and outstanding immediately prior to the Effective Time shall be
unaffected by the Merger and, at the Effective Time, such shares shall remain
issued and outstanding.
ARTICLE II--REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth in the Disclosure Schedule delivered by Seller to the
Company prior to the execution of this Agreement (the "Seller Disclosure
Schedule"), which shall identify exceptions by specific Section references,
Seller hereby represents and warrants to the Company that:
SECTION 2.1 Organization and Qualification; Subsidiaries.
(a) Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Minnesota, and is a registered
financial holding company under the Bank Holding Company Act of 1956, as
amended (the "BHCA"). Each subsidiary of Seller ("Seller Subsidiary," or
collectively the "Seller Subsidiaries") is a federally chartered national bank
or a corporation duly organized, validly existing and in good standing under
the laws of the state of its incorporation or organization. Each of Seller and
the Seller Subsidiaries has the requisite corporate power and authority and is
in possession of all franchises, grants, authorizations, licenses, permits,
easements, consents, certificates, approvals and orders ("Seller Approvals")
necessary to own, lease and operate its properties and to carry on its business
as it is now being conducted, including appropriate authorizations from the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
the Office of the Comptroller of the Currency (the "OCC"), the Federal Deposit
Insurance Corporation (the "FDIC"), the Minnesota Secretary of State and the
Minnesota Department of Commerce, and neither Seller nor any Seller Subsidiary
has received any notice of proceedings relating to the revocation or
modification of any Seller
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Approvals, except in each case where the revocations or modifications, or the
failure to have such power, authority and Seller Approvals would not,
individually or in the aggregate, have a Material Adverse Effect (as defined in
Section 2.1(d)) on Seller and Seller Subsidiaries, taken as a whole.
(b) Seller and each Seller Subsidiary is duly qualified or licensed as a
foreign corporation or foreign limited liability company to do business, and is
in good standing, in each jurisdiction where the character of its properties
owned, leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be so duly
qualified or licensed and in good standing that would not, either individually
or in the aggregate, have a Material Adverse Effect on Seller or Seller
Subsidiaries, taken as a whole.
(c) A true and complete list of all of the Seller Subsidiaries, together
with (i) the Seller's percentage ownership of each Seller Subsidiary and (ii)
laws under which the Seller Subsidiary is incorporated or organized is set
forth on Annex A. Except as set forth on Annex A, Seller and/or one or more of
the Seller Subsidiaries owns beneficially and of record all of the outstanding
shares of capital stock or limited liability company interests of each of the
Seller Subsidiaries. Except for the subsidiaries set forth on Annex A, Seller
does not directly or indirectly own any equity or similar interests in, or any
interests convertible into or exchangeable or exercisable for any equity or
similar interest in, any corporation, partnership, joint venture or other
business association or entity other than in the ordinary course of business,
and in no event in excess of 5% of the outstanding equity securities of such
entity.
(d) As used in this Agreement, the term "Material Adverse Effect" means,
with respect to the Company or the Seller, as the case may be, any effect that
(i) is material and adverse to the business, assets, liabilities, results of
operations or financial condition of the Company and the Company Subsidiaries
(as defined in Section 3.1(a)) taken as a whole or the Seller and Seller
Subsidiaries taken as a whole, respectively, or (ii) materially impairs the
ability of the Company or Seller, respectively, to consummate the transactions
contemplated hereby; provided, however, that Material Adverse Effect shall not
be deemed to include the impact of (a) compliance with the terms of, or the
taking of actions contemplated by, this Agreement, (b) changes in laws and
regulations or interpretations thereof that are generally applicable to the
banking industry, (c) changes in generally accepted accounting principles that
are generally applicable to the banking industry, (d) reasonable expenses
incurred in connection with the transactions contemplated hereby, and (e)
changes attributable to or resulting from changes in general economic
conditions affecting banks or their holding companies generally, including
changes in the prevailing level of interest rates.
(e) The minute books of the Seller and each of the Seller Subsidiaries
contain true, complete and accurate records in all material respects of all
meetings and other corporate actions held or taken since January 1, 1998, of
their respective shareholders and Boards of Directors (including committees of
their respective Boards of Directors).
SECTION 2.2 Articles of Incorporation and By-Laws. Seller has heretofore
furnished to the Company a complete and correct copy of the Articles of
Incorporation and the By-Laws, as amended or restated, of Seller ("Seller
Articles" and "Seller By-Laws," respectively) and the Articles of Incorporation
and the By-Laws of each Seller Subsidiary (the "Subsidiary Organizational
Documents"). The Seller Articles, the Seller By-Laws and the Subsidiary
Organizational Documents are in full force and effect. Neither Seller nor any
Seller Subsidiary is in violation of any of the provisions of the Seller
Articles, the Seller By-Laws or the Subsidiary Organizational Documents.
SECTION 2.3 Capitalization. The authorized capital stock of Seller
consists of 5,000,000 shares of Series A Seller Common Stock and 15,000,000
shares of Series B Seller Common Stock. As of the date of this Agreement, (i)
2,499,709 shares of Series A Seller Common Stock and 5,450,590 shares of Series
B Seller Common Stock are issued and outstanding, all of which are duly
authorized, validly issued, fully paid and non-assessable, and not issued in
violation of any preemptive right of any Seller shareholder and (ii) 1,310,425
shares
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of Seller Common Stock are reserved for future issuance pursuant to outstanding
stock options issued pursuant to Seller's stock option plans. Except as set
forth in clause (ii), above, there are no outstanding options, warrants or
other rights, agreements, arrangements or commitments of any character,
including without limitation voting agreements or arrangements, relating to the
issued or unissued capital stock or limited liability company interests of
Seller or any Seller Subsidiary or obligating Seller or any Seller Subsidiary
to issue or sell any shares of capital stock or limited liability company
interests of, or other equity interests in, Seller or any Seller Subsidiary.
All shares of Seller Common Stock subject to issuance as aforesaid, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, shall be duly authorized, validly issued, fully paid
and non-assessable. There are no obligations, contingent or otherwise, of
Seller or any Seller Subsidiary to repurchase, redeem or otherwise acquire any
shares of Seller Common Stock or the capital stock or limited liability company
interests of any Seller Subsidiary or to provide funds to or make any
investment (in the form of a loan, capital contribution or otherwise) in any
Seller Subsidiary or any other entity, except for loan commitments and other
funding obligations entered into in the ordinary course of business. Except as
set forth on the Seller Disclosure Schedule, each of the outstanding shares of
capital stock or limited liability company interests of each Seller Subsidiary
are duly authorized, validly issued, fully paid and non-assessable, and not
issued in violation of any preemptive rights of any Seller Subsidiary
shareholder, and such shares or limited liability company interests owned by
Seller or another Seller Subsidiary are owned free and clear of all security
interests, liens, claims, pledges, agreements, limitations of Seller's voting
rights, charges or other encumbrances of any nature whatsoever.
SECTION 2.4 Authority. Seller has the requisite corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby (other than,
with respect to the Merger, the approval and adoption of this Agreement by
Seller's shareholders in accordance with the MBCA and the Seller Articles and
Seller By-Laws). The execution and delivery of this Agreement by Seller and the
consummation by Seller of the transactions contemplated hereby have been duly
and validly authorized by all necessary corporate action, including without
limitation Seller's Board of Directors, and no other corporate proceedings on
the part of Seller are necessary to authorize this Agreement or to consummate
the transactions so contemplated hereby (other than, with respect to the
Merger, the approval and adoption of this Agreement and the Plan of Merger by
Seller's shareholders in accordance with the MBCA and the Seller Articles and
Seller By-Laws). This Agreement has been duly executed and delivered by Seller,
and assuming the due authorization, execution and delivery by Company,
constitutes a valid and binding obligation of Seller enforceable against Seller
in accordance with its terms, except as enforcement may be limited by laws
affecting insured depository institutions, general principles of equity whether
applied in a court of law or a court of equity and by bankruptcy, insolvency
and similar laws affecting creditors' rights and remedies generally.
SECTION 2.5 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Seller do not, and the
performance of this Agreement and the transactions contemplated hereby by
Seller shall not, (i) conflict with or violate the Seller Articles or Seller
By-Laws or the Subsidiary Organizational Documents, (ii) conflict with or
violate any domestic (federal, state or local) or foreign law, statute,
ordinance, rule, regulation, order, judgment or decree (collectively, "Laws")
applicable to Seller or any Seller Subsidiary or by which its or any of their
respective properties is bound or affected, or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or encumbrance on any of the properties or assets of Seller or any Seller
Subsidiary pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Seller or any Seller Subsidiary is a party or by which Seller or any
Seller Subsidiary or its or any of their respective properties is bound or
affected, except in the case of clauses (ii) and (iii) for any such conflicts,
violations, breaches, defaults or other occurrences that would not,
individually or in the aggregate, have a Material Adverse Effect on Seller and
the Seller Subsidiaries, taken as a whole. Sections 302A.671, 302A.673 and
302A.675 of the MBCA are inapplicable to the Merger, this Agreement and the
transactions contemplated hereby or entered into in connection herewith
(including without
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limitation the execution of that certain Shareholder Voting Agreement dated as
of the date hereof among the Company and certain shareholders of the Seller).
Without limiting, the generality of the foregoing, the Seller is not an
"issuing public corporation," as such term is defined in Section 302A.011 Subd.
39 of the MBCA. No other "control share acquisition," "fair price" (other than
Sections 302A.471 and 302A.473 of the MBCA) or other anti-takeover laws or
regulations enacted under state or federal laws in the United States apply to
the Merger, this Agreement or any of the transactions contemplated hereby or
entered into in connection herewith (including, without limitation, the
execution of the Shareholder Voting Agreement).
(b) The execution and delivery of this Agreement by Seller do not, and the
performance of this Agreement by Seller shall not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, domestic or foreign, except (i) for
applicable requirements, if any, of the Securities Act of 1933, as amended (the
"Securities Act"), the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), state securities or blue sky laws ("Blue Sky Laws"), the BHCA,
the banking laws and regulations of the United States of America (the "USBL"),
and the filing and recordation of appropriate merger or other documents as
required by the MBCA and the WBCL and (ii) where the failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not prevent or delay consummation of the Merger or
otherwise prevent Seller from performing its obligations under this Agreement,
and would not have a Material Adverse Effect on Seller or Seller Subsidiaries,
taken as a whole.
SECTION 2.6 Compliance; Permits. Neither Seller nor any Seller Subsidiary
is in conflict with, or in default or violation of, (i) any Law applicable to
Seller or any Seller Subsidiary or by which its or any of their respective
properties is bound or affected, or (ii) any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Seller or any Seller Subsidiary is a party or by which
Seller or any Seller Subsidiary or its or any of their respective properties is
bound or affected, except for any such conflicts, defaults or violations which
would not, individually or in the aggregate, have a Material Adverse Effect on
Seller or Seller Subsidiaries, taken as a whole.
SECTION 2.7 Securities and Banking Reports; Financial Statements.
(a) Seller and each Seller Subsidiary have filed all forms, reports and
documents required to be filed with the Federal Reserve Board, the Office of
the Comptroller of the Currency, the Minnesota Department of Commerce and any
other applicable federal or state securities or banking authorities (all such
reports and statements are collectively referred to as the "Seller Reports").
The Seller Reports, including all Seller Reports filed after the date of this
Agreement, (i) were or will be prepared in all material respects in accordance
with the requirements of applicable Law and (ii) did not at the time they were
filed, or will not at the time they are filed, contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Seller Reports, including any
Seller Reports filed since the date of this Agreement and prior to or on the
Effective Time, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto) and each fairly
presents the consolidated financial position of Seller and Seller Subsidiaries
as of the respective dates thereof and the consolidated results of its
operations and changes in financial position for the periods indicated, except
that any unaudited interim financial statements were or are subject to normal
and recurring year-end adjustments, which were not or are not expected to be
material in amount.
(c) Except (i) for those liabilities that are fully reflected or reserved
against on the consolidated balance sheet of the Seller for the fiscal year
ended December 31, 2000, (ii) for liabilities incurred in the ordinary course
of business consistent with past practice since December 31, 2000, and (iii) as
set forth in Section 2.7 of the Seller Disclosure Schedule, neither Seller nor
any Seller Subsidiary has incurred any liability of any nature
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whatsoever (whether absolute, accrued, contingent or otherwise due or to become
due), that, either alone or when combined with all similar liabilities, has
had, or would reasonably be expected to have, a Material Adverse Effect on the
Seller and the Seller Subsidiaries, taken as a whole.
SECTION 2.8 Absence of Certain Changes or Events. Except as set forth in
Section 2.8 of the Seller Disclosure Schedule, since December 31, 2000 to the
date of this Agreement, Seller and the Seller Subsidiaries have conducted their
businesses only in the ordinary course and in a manner consistent with past
practice and, since December 31, 2000, there has not been (i) any change in the
financial condition, results of operations or business of Seller and any of the
Seller Subsidiaries having a Material Adverse Effect on Seller or the Seller
Subsidiaries, taken as a whole, (ii) any damage, destruction or loss (whether
or not covered by insurance) with respect to any assets of Seller or any of the
Seller Subsidiaries having a Material Adverse Effect on Seller and the Seller
Subsidiaries, taken as a whole, (iii) any change by Seller in its accounting
methods, principles or practices, (iv) any revaluation by Seller of any of its
assets in any material respect, (v) except for regular quarterly cash dividends
on Seller Common Stock with usual record and payment dates, to the date of this
Agreement, any declaration, setting aside or payment of any dividends or
distributions in respect of shares of Seller Common Stock or any redemption,
purchase or other acquisition of any of its securities or any of the securities
of any Seller Subsidiary, (vi) increased the wages, salaries, compensation,
pension, or other fringe benefits or perquisites payable to any executive
officer, employee, or director from the amount thereof in effect as of January
1, 2001 (which amounts have been previously disclosed to Company), granted any
severance or termination pay, entered into any contract to make or grant any
severance or termination pay, or paid any bonus, (vii) suffered any strike,
work stoppage, slow-down or other labor disturbance, (viii) been a party to a
collective bargaining agreement, contract or other agreement or understanding
with a labor union or organization, or (ix) had any union organizing activities.
SECTION 2.9 Absence of Litigation.
(a) Except as set forth in Section 2.9 of the Seller Disclosure Schedule,
neither the Seller nor any of the Seller Subsidiaries is a party to any, and
there are no pending or, to the best of the Seller's knowledge, threatened,
legal, administrative, arbitral or other proceedings, claims, actions or
governmental or regulatory investigations of any nature against the Seller or
any of the Seller Subsidiaries or challenging the validity or propriety of the
transactions contemplated by this Agreement as to which there is reasonable
probability of an adverse determination and which, if adversely determined,
would, individually or in the aggregate, have a Material Adverse Effect on the
Seller and the Seller Subsidiaries, taken as a whole.
(b) There is no injunction, order, judgment, decree or regulatory
restriction imposed upon the Company, any of the Seller Subsidiaries or the
assets of the Seller or any of the Seller Subsidiaries which has had a Material
Adverse Effect on the Seller and the Seller Subsidiaries, taken as a whole.
SECTION 2.10 Employee Benefit Plans.
(a) Current Plans. Section 2.10(a) of the Seller Disclosure Schedule lists
(i) all employee benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), and all bonus,
stock option, stock purchase, restricted stock, incentive, deferred
compensation, retiree medical or life insurance, supplemental retirement,
severance or other benefit plans, programs or arrangements, and all material
employment, termination, severance or other employment contracts or employment
agreements, with respect to which Seller or any Seller Subsidiary has any
obligation (collectively, the "Plans"). Seller has furnished or made available
to the Company a complete and accurate copy of each Plan (or a description of
the Plans, if the Plans are not in writing) and a complete and accurate copy of
each material document prepared in connection with each such Plan, including,
without limitation, and where applicable, a copy of (i) each trust or other
funding arrangement, (ii) each summary plan description and summary of material
modifications, (iii) the three (3) most recently filed IRS Forms 5500 and
related schedules, (iv) the most recently issued IRS determination letter for
each such Plan and the materials submitted to obtain that letter and (v) the
three (3) most recently prepared actuarial and financial statements with
respect to each such Plan.
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(b) Absence of Certain Types of Plans. Except as disclosed in the Seller
Disclosure Schedule, no member of Seller's "controlled group," within the
meaning of Section 4001(a)(14) of ERISA, maintains or contributes to, or within
the five years preceding the Effective Time has maintained or contributed to,
an employee pension benefit plan subject to Title IV of ERISA ("Title IV
Plan"). No Title IV Plan is a "multiemployer pension plan" as defined in
Section 3(37) of ERISA. Except as disclosed in the Seller Disclosure Schedule,
none of the Plans obligates Seller or any of the Seller Subsidiaries to pay
material separation, severance, termination or similar-type benefits solely as
a result of any transaction contemplated by this Agreement or as a result of a
"change in control," within the meaning of such term under Section 280G of the
Code. Except as disclosed in the Seller Disclosure Schedule, or as required by
COBRA, none of the Plans provides for or promises retiree medical, disability
or life insurance benefits to any current or former employee, officer or
director of Seller or any of the Seller Subsidiaries. Each of the Plans is
subject only to the laws of the United States or a political subdivision
thereof.
(c) Compliance with Applicable Law. Except as disclosed in the Seller
Disclosure Schedule, each Plan has been operated in all respects in accordance
with the requirements of all applicable Law and all persons who participate in
the operation of such Plans and all Plan "fiduciaries" (within the meaning of
Section 3(21) of ERISA) have acted in accordance with the provisions of all
applicable Law, except where such violations of applicable Law would not,
individually or in the aggregate, have a Material Adverse Effect on Seller and
the Seller Subsidiaries, taken as a whole. Seller and the Seller Subsidiaries
have performed all obligations required to be performed by any of them under,
are not in any respect in default under or in violation of, and Seller and the
Seller Subsidiaries have no knowledge of any default or violation by any party
to, any Plan, except where such failures, defaults or violations would not,
individually or in the aggregate, have a Material Adverse Effect on Seller and
the Seller Subsidiaries, taken as a whole. No legal action, suit or claim is
pending or, to the knowledge of Seller or the Seller Subsidiaries, threatened
with respect to any Plan (other than claims for benefits in the ordinary
course) and, except as disclosed in the Seller Disclosure Schedule, to the
knowledge of Seller or the Seller Subsidiaries, no fact or event exists that
could reasonably be expected to give rise to any such action, suit or claim.
Except as disclosed in the Seller Disclosure Schedule, neither Seller nor any
Seller Subsidiary has incurred any material liability under Section 302 of
ERISA or Section 412 of the Code that has not been satisfied in full and no
condition exists that presents a material risk of incurring any such liability.
(d) Qualification of Certain Plans. Each Plan that is intended to be
qualified under Section 401(a) of the Code or Section 401(k) of the Code
(including each trust established in connection with such a Plan that is
intended to be exempt from Federal income taxation under Section 501(a) of the
Code) has received a favorable determination letter from the IRS (as defined
herein) that it is so qualified, and, except as disclosed in the Seller
Disclosure Schedule, Seller is not aware of any fact or event that has occurred
since the date of such determination letter from the IRS to adversely affect
the qualified status of any such Plan. Except as disclosed on the Seller
Disclosure Schedule, no trust maintained or contributed to by the Seller or any
of the Seller Subsidiaries is intended to be qualified as a voluntary
employees' beneficiary association or is intended to be exempt from federal
income taxation under Section 501(c)(9) of the Code.
(e) Absence of Certain Liabilities and Events. Except for matters disclosed
in the Seller Disclosure Schedule, there has been no non-exempt prohibited
transaction (within the meaning of Section 406 of ERISA or Section 4975 of the
Code) with respect to any Plan. Seller and each of the Seller Subsidiaries has
not incurred any liability for any excise tax arising under Sections 4971
through 4980E of the Code that would individually or in the aggregate have a
Material Adverse Effect on the Seller and the Seller Subsidiaries, taken as a
whole, and, to the knowledge of Seller or the Seller Subsidiaries, no fact or
event exists that could reasonably be expected to give rise to any such
liability.
(f) Plan Contributions. All contributions, premiums or payments required to
be made with respect to any Plan have been made on or before their due dates.
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(g) Employment Contracts. Except for employment, severance, consulting or
other similar contracts with any employees, consultants, officers or directors
of Seller or any of the Seller Subsidiaries disclosed in Section 2.10(g) of the
Seller Disclosure Schedule, neither Seller nor any Seller Subsidiary is a party
to any such contracts. Neither Seller nor any Seller Subsidiary is a party to
any collective bargaining agreements.
(h) Effect of Agreement. Except as disclosed on the Seller Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement
will not, either alone or in conjunction with another event, entitle any
current or former employee of Seller or any Seller Subsidiary to severance pay,
unemployment compensation or any other payment, except as expressly provided
herein, or accelerate the time of payment or vesting or increase the
compensation due any such employee or former employee, in each case, except as
expressly provided herein.
SECTION 2.11 Registration Statement; Proxy Statement/Prospectus. The
information supplied by Seller for inclusion in the Registration Statement (as
defined in Section 3.8) shall not at the time the Registration Statement is
declared effective 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 the light of the circumstances under which they
were made, not misleading. The information supplied by Seller for inclusion in
the proxy statement/prospectus to be sent to the shareholders of Seller in
connection with the meeting of Seller's shareholders to consider the approval
of this Agreement, the Plan of Merger and the Merger (the "Seller Shareholders'
Meeting") (such proxy statement/prospectus as amended or supplemented is
referred to herein as the "Proxy Statement/Prospectus") shall not at the date
the Proxy Statement/Prospectus (or any amendment thereof or supplement thereto)
is first mailed to shareholders, at the time of the Seller Shareholders'
Meeting and at the Effective Time, be false or misleading with respect to any
material fact required to be stated herein, or omit to state any 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 are made, not
misleading. If at any time prior to the Effective Time any event relating to
Seller or any of its affiliates, officers or directors should be discovered by
Seller which should be set forth in an amendment to the Registration Statement
or a supplement to the Proxy Statement/Prospectus, Seller shall promptly inform
the Company. The Proxy Statement/Prospectus shall comply in all material
respects as to form with the requirements of the Securities Act, the Exchange
Act (to the extent applicable) and the rules and regulations thereunder.
Notwithstanding the foregoing, Seller makes no representation or warranty with
respect to any information about, or supplied or omitted by, the Company which
is contained in any of the foregoing documents.
SECTION 2.12 Title to Property. Except as set forth in Section 2.12 of the
Seller Disclosure Schedule, Seller and each of the Seller Subsidiaries has good
and marketable title to all of their respective properties and assets, real and
personal, free and clear of all mortgage liens, and free and clear of all other
liens, charges and encumbrances except liens for taxes not yet due and payable,
pledges to secure deposits and such minor imperfections of title, if any, as do
not materially detract from the value of or interfere with the present use of
the property affected thereby or which, individually or in the aggregate, would
not have a Material Adverse Effect on Seller and the Seller Subsidiaries, taken
as a whole; and all leases pursuant to which Seller or any of the Seller
Subsidiaries lease from others material amounts of real or personal property
are in good standing, valid and effective in accordance with their respective
terms, and there is not, under any of such leases, any existing material
default or event of default by Seller or any Seller Subsidiary (or event which
with notice or lapse of time, or both, would constitute a material default by
Seller or any Seller Subsidiary and in respect of which the Seller or such
Seller Subsidiary has not taken adequate steps to prevent such a default from
occurring). Substantially all of Seller's and each of the Seller Subsidiaries'
buildings and equipment in regular use have been reasonably maintained and are
in good and serviceable condition, reasonable wear and tear excepted.
SECTION 2.13 Environmental Matters. Except as set forth in Section 2.13 of
the Seller Disclosure Schedule, Seller represents and warrants that to the best
of Seller's knowledge: (i) each of the Seller, the Seller Subsidiaries,
properties owned or operated by the Seller or the Seller Subsidiaries and the
Participation Facilities (each as hereinafter defined) are and have been in
compliance with all applicable federal, state and local laws
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including common law, rules, guidance, regulations and ordinances and with all
applicable decrees, orders, judgments, and contractual obligations relating to
the environment, health, safety, natural resources, wildlife or "Hazardous
Materials" which are hereinafter defined as chemicals, pollutants,
contaminants, wastes, toxic substances, compounds, products, solid, liquid,
gas, petroleum or other regulated substances or materials which are hazardous,
toxic or otherwise harmful to health, safety, natural resources, or the
environment ("Environmental Laws"), except for violations which, either
individually or in the aggregate, would not have a Material Adverse Effect on
Seller or Seller Subsidiaries; (ii) during and prior to the period of (a) the
Seller's or any of the Seller Subsidiaries' ownership or operation of any of
their respective current properties or (b) the Seller's or any of the Seller's
Subsidiaries' participation in the management of any Participation Facility,
Hazardous Materials have not been generated, treated, stored, transported,
released or disposed of in, on, under, above, from or affecting any such
property, except where such release, generation, treatment, storage,
transportation, or disposal would not have, either individually or in the
aggregate, a Material Adverse Effect on the Seller or Seller's Subsidiaries;
(iii) there is no asbestos or any material amount of ureaformaldehyde materials
in or on any property owned or operated by Seller or Seller's Subsidiaries or
any or Participation Facility and no electrical transformers or capacitors,
other than those owned by public utility companies, on any such properties
contain any PCB's; (iv) there are no underground or aboveground storage tanks
and there have never been any underground or aboveground storage tanks located
on, in or under any properties currently or formerly owned or operated by the
Seller or any of Seller's Subsidiaries or any Participation Facility; (v)
neither Seller nor Seller's Subsidiaries have received any notice from any
governmental agency or third party notifying the Seller or Seller's
Subsidiaries of any Environmental Claim; (vi) and there are no circumstances
with respect to any properties currently owned or operated by the Seller or any
of Seller's Subsidiaries or any Participation Facility that could reasonably be
anticipated (a) to form the basis for an Environmental Claim against Seller or
Seller's Subsidiaries or any properties currently or formerly owned or operated
by the Seller or any of Seller's Subsidiaries or any Participation Facility or
(b) to cause any properties currently owned or operated by the Seller or any of
Seller's Subsidiaries or any Participation Facility to be subject to any
restrictions on ownership, occupancy, use or transferability under any
applicable Environmental Law or require notification to or consent of any
Governmental Authority or third party pursuant to any Environmental Law.
The following definitions apply for purposes of this Section 2.13: (a)
"Participation Facility" means any facility in which the Seller or any of the
Seller's Subsidiaries participates in the management and, where required by the
context, said term means the owner or operator of such property; (b)
"Environmental Claims" shall mean any and all administrative, regulatory,
judicial or private actions, suits, demands, demand letters, notices, claims,
liens, notices of non-compliance or violation, investigations, allegations,
injunctions or proceedings relating in any way to (i) any Environmental Law;
(ii) any Hazardous Material including without limitation any abatements,
removal, remedial, corrective or other response action in connection with any
Hazardous Material, Environmental Law or order of a Governmental Authority; or
(iii) any actual or alleged damage, injury, threat or harm to health, safety,
natural resources, wildlife, or the environment, which individually or in the
aggregate would have a Material Adverse Effect on Seller or Seller's
Subsidiaries; and (c) "Governmental Authority" shall mean any applicable
federal, state, regional, county or local person or body having governmental
authority.
SECTION 2.14 Absence of Agreements. Neither Seller nor any Seller
Subsidiary is a party to any agreement or memorandum of understanding with, or
a party to any commitment letter or similar undertaking to, or is subject to
any order or directive by, or is a recipient of any extraordinary supervisory
letter which restricts materially the conduct of its business (including any
contract containing covenants which limit the ability of Seller or of any
Seller Subsidiary to compete in any line of business or with any person or
which involve any restriction of the geographical area in which, or method by
which, Seller or any Seller Subsidiary may carry on its business (other than as
may be required by Law or applicable regulatory authorities)), or in any manner
relates to its capital adequacy, its credit policies or its management, except
as disclosed in the Seller Disclosure Schedule, nor has Seller been advised
that any federal, state, or governmental agency is contemplating issuing or
requesting (or is considering the appropriateness of issuing or requesting) any
such order, decree, agreement, memorandum of understanding, extraordinary
supervisory letter, commitment letter or similar submission, except as
disclosed by Seller in Section 2.14 of the Seller Disclosure Schedule.
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SECTION 2.15 Taxes. Seller and the Seller Subsidiaries have timely filed
all material Tax Returns (as defined below) required to be filed by them, and
Seller and the Seller Subsidiaries have timely paid and discharged all material
Taxes (as defined below) due in connection with or with respect to the filing
of such Tax Returns, except such as are being contested in good faith by
appropriate proceedings and with respect to which Seller is maintaining
reserves adequate for their payment. To the best knowledge of the Seller, the
liability for Taxes set forth on each such Tax Return adequately reflects the
Taxes required to be reflected on such Tax Return. For purposes of this
Agreement, "Tax" or "Taxes" shall mean taxes, charges, fees, levies, and other
governmental assessments and impositions of any kind, payable to any federal,
state, local or foreign governmental entity or taxing authority or agency,
including, without limitation, (i) income, franchise, profits, gross receipts,
estimated, ad valorem, value added, sales, use, service, real or personal
property, capital stock, license, payroll, withholding, disability, employment,
social security, workers compensation, unemployment compensation, utility,
severance, production, excise, stamp, occupation, premiums, windfall profits,
transfer and gains taxes, (ii) customs duties, imposts, charges, levies or
other similar assessments of any kind, and (iii) interest, penalties and
additions to tax imposed with respect thereto; and "Tax Returns" shall mean
returns, reports, and information statements with respect to Taxes required to
be filed with the United States Internal Revenue Service (the "IRS") or any
other governmental entity or taxing authority or agency, domestic or foreign,
including, without limitation, consolidated, combined and unitary tax returns.
For the purposes of this Section 2.15, references to the Seller and the Seller
Subsidiaries include former subsidiaries of Seller for the periods during which
any such corporations were owned, directly or indirectly, by Seller. Except as
otherwise disclosed in the Seller Disclosure Schedule, to the best knowledge of
the Seller, neither the IRS nor any other governmental entity or taxing
authority or agency is now asserting, either through audits, administrative
proceedings or court proceedings, any deficiency or claim for additional Taxes.
Except as otherwise disclosed, neither Seller nor any of the Seller
Subsidiaries has granted any waiver of any statute of limitations with respect
to, or any extension of a period for the assessment of, any Tax. Except as
otherwise disclosed in the Seller Disclosure Schedule and except for statutory
liens for current taxes not yet due, there are no material tax liens on any
assets of Seller or any of the Seller Subsidiaries. Except as otherwise
disclosed in the Seller Disclosure Schedule, neither Seller nor any of the
Seller Subsidiaries has received a ruling or entered into an agreement with the
IRS or any other taxing authority that would have a Material Adverse Effect on
Seller or the Seller Subsidiaries, taken as a whole, after the Effective Time.
Except as otherwise disclosed in the Seller Disclosure Schedule, no agreements
relating to allocating or sharing of Taxes exist among Seller and the Seller
Subsidiaries and no tax indemnities given by Seller or the Seller Subsidiaries
in connection with a sale of stock or assets remain in effect. Neither the
Seller nor any of the Seller Subsidiaries is required to include income either
(i) any amount in respect of any adjustment under Section 481 of the Code, or
(ii) any installment sale gain. Neither Seller nor any of the Seller
Subsidiaries has made an election under Section 341(f) of the Code.
SECTION 2.16 Insurance. Section 2.16 of the Seller Disclosure Schedule
lists all material policies of insurance of Seller and the Seller Subsidiaries
currently in effect. Neither Seller nor any of the Seller Subsidiaries has any
liability for unpaid premiums or premium adjustments not properly reflected on
Seller's financial statements for the fiscal year ended December 31, 2000.
SECTION 2.17 Brokers. No broker, finder or investment banker (other than
RBC Capital Markets) is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Seller. Prior to the date of
this Agreement, Seller has furnished to the Company a complete and correct copy
of all agreements between Seller and RBC Capital Markets pursuant to which such
firm would be entitled to any payment relating to the transactions contemplated
hereunder.
SECTION 2.18 Tax Matters. Neither Seller nor, to the best of Seller's
knowledge, any of its affiliates has through the date of this Agreement taken
or agreed to take any action that would prevent the Merger from qualifying as a
reorganization under Section 368(a)(1)(A) of the Code.
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SECTION 2.19 Material Adverse Effect. Since December 31, 2000, there has
been no Material Adverse Effect on Seller or the Seller Subsidiaries, taken as
a whole.
SECTION 2.20 Material Contracts. Except as disclosed in the Seller
Disclosure Schedule (which may reference other sections of such Schedule),
neither the Seller nor any Seller Subsidiary is a party to or obligated under
any contract, agreement or other instrument or understanding which is not
terminable by Seller or the Seller Subsidiary without additional payment or
penalty within 60 days and obligates Seller or any Seller Subsidiary for
payments or other consideration with a value in excess of $100,000.
SECTION 2.21 Vote Required. The affirmative vote of the holders of a
majority of the then outstanding shares of Series A and Series B Seller Common
Stock voting together as a single class is the only vote of the holders of any
class or series of Seller capital stock necessary to approve this Agreement,
the Plan of Merger and the Merger.
ARTICLE III--REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Disclosure Schedule delivered by the Company to
Seller prior to the execution of this Agreement (the "Company Disclosure
Schedule"), which shall identify exceptions by specific Section references, the
Company hereby represents and warrants to Seller that:
SECTION 3.1 Organization and Qualification; Subsidiaries.
(a) The Company is a corporation duly organized, validly existing and in
active status under the laws of the State of Wisconsin and a registered bank
holding company under the BHCA. Each subsidiary of the Company (a "Company
Subsidiary" or, collectively, "Company Subsidiaries") is a bank, a corporation,
a limited liability company or another form of business entity duly organized,
validly existing and in good standing under the laws of the state of its
organization or the United States of America. Each of the Company and the
Company Subsidiaries have the requisite corporate power and authority and are
in possession of all franchises, grants, authorizations, licenses, permits,
easements, consents, certificates, approvals and orders ("Company Approvals")
necessary to own, lease and operate their respective properties and to carry on
their respective business as now being conducted, including appropriate
authorizations from the Federal Reserve Board, the FDIC, the DFI, the OCC or
the Office of Thrift Supervision and neither Company nor any Company Subsidiary
has received any notice of proceedings relating to the revocation or
modification of any Company Approvals, except in each case where the
revocations or modifications, or the failure to have such power, authority or
Company Approvals would not, individually or in the aggregate, have a Material
Adverse Effect on the Company and the Company Subsidiaries, taken as a whole.
(b) The Company and each Company Subsidiary is duly qualified or licensed as
a foreign business entity to do business, and is in good standing, in each
jurisdiction where the character of its properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and in
good standing that would not, either individually or in the aggregate, have a
Material Adverse Effect on the Company and the Company Subsidiaries, taken as a
whole.
(c) A true and complete list of all of the Company Subsidiaries as of
February 28, 2001 is set forth in Exhibit 21 to the Company's Annual Report on
Form 10-K for the year ended December 31, 2000, ("Exhibit 21") previously
delivered to Seller. Except as set forth in the Company Disclosure Schedule,
the Company and/or one or more of the Company Subsidiaries owns beneficially
and of record substantially all of the outstanding shares of capital stock or
other equity interests of each of the Company Subsidiaries which is a
"significant subsidiary" under Rule 12b-2 under the Exchange Act. Except for
the Company Subsidiaries set forth on said Exhibit 21, the Company did not as
of February 28, 2001 directly or indirectly own any equity or similar interests
in, or any interests convertible into or exchangeable or exercisable for any
equity or similar interest in, any corporation,
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partnership, joint venture or other business, other than in the ordinary course
of business, which would be required to be disclosed on Exhibit 21.
SECTION 3.2 Articles of Incorporation and By-Laws. The Company has
previously furnished to Seller a complete and correct copy of the Company
Articles and the Company By-Laws. The Company Articles and Company By-Laws are
in full force and effect. The Company is not in violation of any of the
provisions of the Company Articles or the Company By-Laws.
SECTION 3.3 Capitalization.
(a) The authorized capital stock of the Company consists of (i) 320,000,000
shares of Company Common Stock of which, as of September 30, 2001, 106,506,115
shares were issued and outstanding, and 10,795,640 shares were held in
treasury; (ii) 5,000,000 shares of Preferred Stock, $1.00 par value ("Company
Preferred Stock"), of which 2,000,000 shares of Company Preferred Stock have
been designated as Series A Convertible Preferred Stock ("Series A Preferred
Stock") and 336,370 of which, as of September 30, 2001 were outstanding. All of
the outstanding shares of the Company's capital stock have been duly authorized
and validly issued and are fully paid and non-assessable, except pursuant to
Section 180.0622(2)(b) of the WBCL (such section, including judicial
interpretations thereof and Section 180.40(6), its predecessor statute, are
referred to herein as "Section 180.0622(2)(b) of the WBCL"). Except as set
forth in clauses (i)-(ii), above, as of the date of this Agreement there are no
options, warrants or other rights, agreements, arrangements or commitments of
any character relating to the issued or unissued capital stock of the Company
or obligating the Company to issue or sell any shares of capital stock of, or
other equity interests in, the Company.
(b) The shares of Company Common Stock to be issued pursuant to the Merger
will, upon issuance in accordance with the provisions of this Agreement, be
duly authorized, validly issued, fully paid and non-assessable, except as
otherwise provided by Section 180.0622(2)(b) of the WBCL.
SECTION 3.4 Authority. The Company has the requisite corporate power and
authority to execute and deliver this Agreement, and to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of the Company,
including without limitation, the Company's Board of Directors, and no other
corporate proceedings on the part of the Company are necessary to authorize
this Agreement or to consummate the transactions so contemplated hereby. This
Agreement has been duly and validly executed and delivered by the Company, and
assuming the due authorization, execution and delivery by the Seller,
constitutes a valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except as enforcement may be limited
by laws affecting insured depository institutions, general principles of
equity, whether applied in a court of law or a court of equity, and by
bankruptcy, insolvency and similar laws affecting creditors' rights and
remedies generally.
SECTION 3.5 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company shall not, (i) conflict
with or violate the Company Articles or Company By-Laws or the Articles of
Incorporation or By-Laws of any Company Subsidiary, (ii) conflict with or
violate any Laws applicable to the Company or any Company Subsidiary or by
which any of their respective properties is bound or affected, or (iii) result
in any breach of or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or encumbrance on any of the properties or assets of the
Company or any Company Subsidiary pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any Company Subsidiary is a
party or by which the Company or any Company Subsidiary or its or any of their
respective
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properties is bound or affected, except in the case of clause (ii) and (iii)
for any such conflicts, violations, breaches, defaults or other occurrences
that would not, individually or in the aggregate, have a Material Adverse
Effect on the Company and the Company Subsidiaries, taken as a whole.
(b) The execution and delivery of this Agreement by the Company do not, and
the performance of this Agreement by the Company shall not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, domestic or foreign, except (i)
for applicable requirements, if any, of the Securities Act, the Exchange Act,
Blue Sky Laws, the BHCA, and the filing and recordation of appropriate merger
or other documents as required by Wisconsin law and Minnesota law and (ii)
where the failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not prevent or delay
consummation of the Merger, or otherwise prevent the Company from performing
its obligations under this Agreement, and would not have a Material Adverse
Effect on the Company or the Company Subsidiaries, taken as a whole.
SECTION 3.6 Securities and Banking Reports; Financial Statements.
(a) The Company and each Company Subsidiary have filed all forms, reports
and documents required to be filed with (x) the SEC since December 31, 2000,
and as of the date of this Agreement have delivered or made available to Seller
through the SEC's EDGAR system, in the form filed with the SEC, (i) its Annual
Reports on Form 10-K for the fiscal years ended December 31, 1998, 1999 and
2000, respectively, (ii) all proxy statements relating to the Company's
meetings of shareholders (whether annual or special) held since December 31,
1998, (iii) all Reports on Form 8-K filed by the Company with the SEC since
December 31, 1998, (iv) all other reports or registration statements filed by
the Company with the SEC since December 31, 1998, and (v) all amendments and
supplements to all such reports and registration statements filed by the
Company with the SEC since December 31, 1998 (collectively, the "Company SEC
Reports") and (y) the OCC, the Federal Reserve Board, the DFI and any other
applicable Federal or state securities or banking authorities (all such reports
and statements are collectively referred to with the Company SEC Reports as the
"Company Reports"). The Company Reports, including all Company Reports filed
after the date of this Agreement, (i) were or will be prepared in accordance
with the requirements of applicable Law and (ii) did not at the time they were
filed, or will not at the time they are filed, contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Company SEC Reports, including any
Company SEC Reports filed since the date of this Agreement and prior to or on
the Effective Time, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto) and each fairly
presents the consolidated financial position of the Company and the Company
Subsidiaries as of the respective dates thereof and the consolidated results of
its operations and changes in financial position for the periods indicated,
except that any unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments, which were not or are not expected
to be material in amount.
(c) Except (i) for those liabilities that are fully reflected or reserved
against on the consolidated statement of condition of the Company included in
the Company Form 10-K for the year ended December 31, 2000, as amended, (ii)
for the liabilities incurred in the ordinary course of business consistent with
past practice since December 31, 2000, and (iii) as set forth in Section 3.7 of
the Company Disclosure Schedule, neither Company nor any Company Subsidiary has
incurred any liability of any nature whatsoever (whether absolute, accrued,
contingent or otherwise and whether due or to become due) that, either alone or
when combined with all similar liabilities, has had, or would reasonably be
expected to have, a Material Adverse Effect on the Company and the Company
Subsidiaries, taken as a whole.
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SECTION 3.7 Absence of Certain Changes or Events. Except as disclosed in
the Company SEC Reports filed prior to the date of this Agreement or in the
Company Disclosure Schedule, since December 31, 2000 to the date of this
Agreement, the Company and the Company Subsidiaries have conducted their
businesses only in the ordinary course and in a manner consistent with past
practice and, since December 31, 2000, there has not been any change in the
financial condition, results of operations or business of the Company or any of
the Company Subsidiaries having a Material Adverse Effect on the Company and
the Company Subsidiaries, taken as a whole.
SECTION 3.8 Registration Statement; Proxy Statement/Prospectus. The
information supplied by the Company for inclusion in the registration statement
of the Company (the "Registration Statement") pursuant to which the shares of
Company Common Stock to be issued in the Merger will be registered with the SEC
shall not, at the time the Registration Statement (including any amendments or
supplements thereto) is declared effective by the SEC, 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. The
information supplied by the Company for inclusion in the Proxy
Statement/Prospectus shall not, at the date the Proxy Statement/Prospectus (or
any amendment thereof or supplement thereto) is first mailed to shareholders,
at the time of the Seller Shareholders' Meeting and at the Effective Time, be
false or misleading with respect to any material fact required to be stated
therein, or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they are
made, not misleading. If at any time prior to the Effective Time any event
relating to the Company or any of its affiliates, officers or directors should
be discovered by the Company which should be set forth in an amendment to the
Registration Statement or a supplement to the Proxy Statement/Prospectus, the
Company will promptly inform the Seller. The Registration Statement and the
Proxy Statement/Prospectus shall comply in all material respects as to form
with the requirements of the Securities Act, the Exchange Act (to the extent
applicable) and the rules and regulations thereunder. Notwithstanding the
foregoing, the Company makes no representation or warranty with respect to any
information about, or supplied or omitted by, Seller which is contained in any
of the foregoing documents.
ARTICLE IV--COVENANTS OF SELLER
SECTION 4.1 Affirmative Covenants. Seller hereby covenants and agrees with
the Company that prior to the Effective Time, unless the prior written consent
of the Company shall have been obtained and except as otherwise contemplated
herein, it will and it will cause each Seller Subsidiary to:
(a) operate its business only in the usual, regular and ordinary course
consistent with past practices;
(b) use all reasonable efforts to preserve intact its business organization
and assets, maintain its rights and franchises, retain the services of its
officers and key employees and maintain its relationships with customers;
(c) use all reasonable efforts to maintain and keep its properties in as
good repair and condition as at present, ordinary wear and tear excepted;
(d) use all reasonable efforts to keep in full force and effect insurance
and bonds comparable in amount and scope of coverage to that now maintained by
it; provided, however, that Seller shall not maintain existing insurance
policies and/or purchase new insurance policies for directors' and officers'
liabilities at an aggregate annual premium cost equal to or in excess of 150%
of the current annual premiums paid by Seller on its existing policies;
(e) use all reasonable efforts to perform in all material respects all
obligations required to be performed by it under all material contracts,
leases, and documents relating to or affecting its assets, properties, and
business;
(f) use all reasonable efforts to comply with and perform in all material
respects all obligations and duties imposed upon it by all applicable Laws; and
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(g) use all reasonable efforts not to take any action or fail to take any
action which individually or in the aggregate can be expected to have a
Material Adverse Effect on the Seller and Seller Subsidiaries, taken as a whole.
SECTION 4.2 Negative Covenants. Except as specifically contemplated by
this Agreement, from the date of this Agreement until the Effective Time,
Seller shall not do, or permit any Seller Subsidiary to do, without the prior
written consent of the Company, any of the following:
(a)(i) except as required by applicable law or to maintain qualification
pursuant to the Code, adopt, amend, renew or terminate any Plan or any
agreement, arrangement, plan or policy between the Seller or any Seller
Subsidiary and one or more of its current or former directors, officers or
employees or (ii) except for normal increases in the ordinary course of
business consistent with past practice, and subject to the specific provisions
of Annex B, or, except as required by applicable law, increase in any manner
the base salary, bonus, incentive compensation or fringe benefits of any
director, officer or employee or pay any benefit not required by any plan or
agreement as in effect as of the date hereof (including, without limitation,
the granting of stock options, stock appreciation rights, restricted stock,
restricted stock units or performance units or shares);
(b) declare or pay any dividend on, or make any other distribution in
respect of, its outstanding shares of capital stock except for dividends by a
Seller Subsidiary solely to Seller; provided, however, that Seller may declare
and pay a cash dividend not to exceed $300,000 in the aggregate if the
Effective Time has not occurred on or prior to 5:00 p.m., Milwaukee time, on
April 19, 2002;
(c) (i) redeem, purchase or otherwise acquire any shares of its capital
stock, limited liability company interests or any securities or obligations
convertible into or exchangeable for any shares of its capital stock or limited
liability company interests, or any options, warrants, conversion or other
rights to acquire any shares of its capital stock, limited liability company
interests or any such securities or obligations; (ii) subject to Section 4.4
hereof, merge with or into any other person, permit any other person to merge
into it or consolidate with any other person, or effect any reorganization or
recapitalization or statutory share exchange; (iii) purchase or otherwise
acquire any substantial portion of the assets, or more than 5% of any class of
stock or other equity interests, of any person other than in the ordinary
course of business and consistent with past practice; (iv) liquidate, sell,
dispose of, or encumber any assets or acquire any assets, other than in the
ordinary course of its business consistent with past practice; or (v) split,
combine or reclassify any of its capital stock or limited liability company
interests or issue or authorize or propose the issuance of any other securities
in respect of, in lieu of or in substitution for shares of its capital stock or
limited liability company interests;
(d) issue, deliver, award, grant or sell, or authorize or propose the
issuance, delivery, award, grant or sale of, any shares of any class of capital
stock or limited liability company interests of Seller or any Seller Subsidiary
(including shares held in treasury) or any rights, warrants or options to
acquire, any such shares or limited liability company interests;
(e) propose or adopt any amendments to its articles of incorporation,
by-laws, articles of organization, or operating agreement, as the case may be,
in any way adverse to the Company;
(f) change any of its methods of accounting in effect at December 31, 2000
or change any of its methods of reporting income or deductions for federal
income tax purposes from those employed in the preparation of the federal
income tax returns for the taxable year ending December 31, 2000, except as may
be required by Law or generally accepted accounting principles;
(g) change in any material manner any lending, investment, liability
management or other material policies concerning the business or operations of
Seller or any of the Seller Subsidiaries, except as required by Law,
A-19
including, without limitation: (i) acquire or sell any contracts for the
purchase or sale of financial or other futures or any put or call options, or
enter into any hedges or interest rate swaps relating to cash, securities, or
any commodities whatsoever or enter into any other derivative transaction; (ii)
sell, assign, transfer, pledge, mortgage or otherwise encumber, or permit any
encumbrances to exist with respect to, any of its assets with a value in excess
of $100,000 individually, except in the ordinary course of business consistent
with past practice; (iii) make any investment with an interest maturity of five
years or more, (iv) incur any material liabilities or material obligations,
whether directly or by way of guaranty, including any obligation for borrowed
money, whether or not evidenced by a note, bond, debenture or similar
instrument, except in the ordinary course of business consistent with past
practice; (v) enter into any agreement with respect to any acquisition of a
material amount of assets or securities or any discharge, waiver, satisfaction,
release or relinquishment of any material contract rights, liens, encumbrances,
debt or claims, not in the ordinary course of business and consistent with past
practices and in no event with a value in excess of $100,000 individually; (vi)
settle any claim, action, suit, litigation, proceeding, arbitration,
investigation or controversy of any kind, for any amount in excess of $100,000
or in any manner which would restrict in any material respect the operations or
business of Seller or any of the Seller Subsidiaries; (vii) purchase any new
financial product or instrument which involves entering into a contract with a
term of six months or longer; (viii) make any capital expenditure, except in
the ordinary course and consistent with past practice and in no event in excess
of $100,000 individually; or (ix) take any action or fail to take any action
which individually or in the aggregate can be expected to have a Material
Adverse Effect on the Seller and the Seller Subsidiaries, taken as a whole; or
(h) agree in writing or otherwise to do any of the foregoing.
SECTION 4.3 Letter of Seller's Accountants. If requested in writing by the
Company, Seller shall use its reasonable best efforts to cause to be delivered
to the Company "comfort" letters of McGladrey & Pullen, LLP, Seller's
independent public accountants, dated the date on which the Registration
Statement shall become effective and the Effective Time, respectively, and
addressed to the Company, in a form reasonably satisfactory to the Company and
reasonably customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the Registration Statement and transactions such as those
contemplated by this Agreement.
SECTION 4.4 No Solicitation of Transactions.
(a) Seller shall immediately cease and cause to be terminated any existing
discussions or negotiations relating to a Competing Proposal (as defined
below), other than with respect to the Merger, with any parties conducted
heretofore. Seller will not, directly or indirectly, and will instruct its
directors, officers, employees, accountants, consultants, legal counsel,
agents, investment bankers, advisors and other representatives (collectively,
"Representatives") not to, directly or indirectly, initiate, solicit or
encourage (including by way of furnishing information or assistance), or take
any other action or facilitate, any inquiries or the making of any proposal
that constitutes, or may reasonably be expected to lead to, any Competing
Proposal, or enter into or maintain discussions or negotiate with any person in
furtherance of or relating to such inquiries or to obtain a Competing Proposal,
or agree to or endorse any Competing Proposal, or authorize or permit any
Representative of Seller or any of the Seller Subsidiaries to take any such
action, and Seller shall use its reasonable efforts to cause the
Representatives of Seller and the Seller Subsidiaries not to take any such
action, and Seller shall promptly notify the Company if any such inquiries or
proposals are made regarding a Competing Proposal, and Seller shall keep the
Company informed, on a current basis, of the status and terms of any such
proposals; provided, however, that prior to such time as the shareholders of
Seller shall have adopted and approved this Agreement, the Plan of Merger, and
the Merger in accordance with the MBCA, nothing contained in this Section 4.4
shall prohibit the Board of Directors of Seller from (i), in connection with a
Superior Competing Transaction (as defined below), furnishing information to,
or entering into discussions or negotiations with, any person that makes an
unsolicited bona fide proposal to acquire Seller pursuant to a merger,
consolidation, share exchange, business combination or other similar
transaction, if, and only to the extent that, (A) the Board of Directors of
Seller, after consultation with and taking into consideration the advice of
independent legal counsel, determines
A-20
in good faith that such action is required for the Board of Directors of Seller
to comply with its fiduciary duties to shareholders imposed by Minnesota law,
(B) prior to furnishing such information to, or entering into discussions or
negotiations with, such person, Seller provides written notice to the Company
to the effect that it is furnishing information to, or entering into
discussions or negotiations with, such person, (C) prior to furnishing such
information to such person, Seller receives from such person an executed
confidentiality agreement, and (D) Seller keeps the Company informed, on a
current basis, of the status and details of any such discussions or
negotiations, or (ii) complying with Rule 14e-2 promulgated under the Exchange
Act.
(b) For purposes of this Agreement, "Competing Proposal" shall mean any of
the following involving Seller or any Seller Subsidiary: any inquiry, proposal
or offer from any person relating to any direct or indirect acquisition or
purchase of a business that constitutes 15% or more of the net revenues, net
income or the assets of Seller and the Seller Subsidiaries taken as a whole, or
15% or more of any class of equity securities of Seller or any of the Seller
Subsidiaries, any tender offer or exchange offer that if consummated would
result in any person beneficially owning 15% or more any class of equity
securities of Seller or any of the Seller Subsidiaries, or any merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving Seller or any of the Seller Subsidiaries,
other than the transactions contemplated by this Agreement.
(c) For purposes of this Agreement "Superior Competing Transaction" shall
mean any of the following involving Seller or any Seller Subsidiary: any
proposal made by a third party to acquire, directly or indirectly, including
pursuant to a tender offer, exchange offer, merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction,
for consideration consisting of cash and/or securities, more than 50% of the
combined voting power of the shares of Seller Common Stock then outstanding or
all or substantially all of the assets of Seller and the Seller Subsidiaries
taken as a whole, and otherwise on terms which the Board of Directors of Seller
determines in its good faith judgment (taking into consideration the opinion of
a financial advisor of nationally recognized reputation) to be more favorable
to its shareholders than the Merger and for which financing, to the extent
required, is then committed or which if not committed is, in the good faith
judgment of its Board of Directors, reasonably capable of being obtained by
such third party.
SECTION 4.5 Update Disclosure; Breaches.
(a) From and after the date of this Agreement until the Effective Time,
Seller shall update the Seller Disclosure Statement on a regular basis by
written notice to the Company to reflect any matters which have occurred from
and after the date of this Agreement which, if existing on the date of this
Agreement, would have been required to be described therein; provided that (i)
to the extent that any information that would be required to be included in an
update under this Section 4.5(a) would have in the past been contained in
internal reports prepared by Seller or any Seller Subsidiary in the ordinary
course, such update may occur by delivery of such internal reports prepared in
accordance with past practice, with appropriate steps taken by Seller to
identify relevant information contained therein, and (ii) to the extent that
updating required under this Section is unduly burdensome to Seller, Seller and
the Company will use their reasonable efforts to develop alternate updating
procedures using, wherever possible, existing reporting systems.
(b) Seller shall, in the event it becomes aware of the impending or
threatened occurrence of any event or condition which would cause or constitute
a material breach (or would have caused or constituted a material breach had
such event occurred or been known prior to the date of this Agreement) of any
of its representations or agreements contained or referred to herein, give
prompt written notice thereof to the Company and use its reasonable efforts to
prevent or promptly remedy the same.
SECTION 4.6 Affiliates; Tax Treatment. Within thirty (30) days after the
date of this Agreement (a) Seller shall deliver to the Company a letter
identifying all persons who are then "affiliates" of Seller, including, without
limitation, all directors and executive officers of Seller, for purposes of
Rule 145 promulgated under the Securities Act (each a "Seller Affiliate") and
(b) Seller shall advise the persons identified in such letter of the resale
restrictions imposed by applicable securities laws. Seller shall use its
reasonable efforts to obtain from
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each person identified in such letter a written agreement, substantially in the
form attached hereto as Exhibit 4.6. Seller shall use its reasonable efforts to
obtain from any person who becomes an affiliate of Seller after Seller's
delivery of the letter referred to above, on or prior to the Effective Time, a
written agreement, substantially in the form attached hereto as Exhibit 4.6 as
soon as practicable after such person attains such status. Seller will use its
reasonable efforts to cause the Merger to qualify as a reorganization under
Section 368(a)(1)(A) of the Code.
SECTION 4.7 Delivery of Shareholder List. Seller shall arrange to have its
transfer agent deliver to the Company or its designee, from time to time prior
to the Effective Time, a true and complete list setting forth the names and
addresses of the Seller shareholders, their holdings of stock as of the latest
practicable date, and such other shareholder information as the Company may
reasonably request.
SECTION 4.8 Loan and Investment Policies. To the extent permitted by
applicable law or regulations, the Company and Seller agree to establish,
within 30 days of the date of this Agreement at Seller and any Seller
Subsidiaries which make loans, loan and investment policies and procedures
designed to insure safe and sound banking practices, which shall remain in
effect, except as otherwise agreed in writing by the Company, for the period
prior to the Effective Time. To the extent permitted by applicable law or
regulations, such policies and procedures shall apply to, among other matters,
the following: (i) making or renewing any commitments or loans, or purchase or
renewals of any participations in loans, in excess of an amount to be agreed
upon; (ii) making, committing to make or renewing any loan to any affiliate of
Seller or the Seller Subsidiaries or any family member of such affiliate or any
entity in which such affiliate has a material interest; (iii) making any
investment or commitment to invest, or making any loan, in excess of an amount
to be agreed with respect to any commercial real estate or in or with respect
to any commercial real estate development project; or (iv) entering into any
contract, lease, or license under which Seller or any Seller Subsidiary will be
bound to pay in excess of an amount to be agreed over the life of such
agreement or voluntarily committing any act or omission which constitutes a
breach or default by Seller or any Seller Subsidiary under any material
contract, lease or license to which Seller or any Seller Subsidiary is a party
or by which it or any of its properties are bound. To the extent permitted by
applicable law or regulations, the Company shall have the right to designate at
least two (2) observers to attend all meetings of Seller's (i) senior credit
committee, or similar committee at any Seller Subsidiary designated by the
Company, and (ii) investment committee or similar committee at any Seller
Subsidiary, and Seller shall ensure that such representatives receive all
information given by Seller or its agents to Seller's members of said
committees.
SECTION 4.9 Access and Information. From the date hereof until the
Effective Time, Seller will give the Company and its representatives,
employees, counsel and accountants reasonable access to the properties, books
and records of the Seller and any other information relating to Seller that is
reasonably requested by the Company for purpose of permitting the Company,
among other things, to: (a) conduct its due diligence review, (b) review the
financial statements of Seller, (c) verify the accuracy of the representations
and warranties of Seller contained in this Agreement, (d) confirm compliance by
Seller with the terms of this Agreement, and (e) prepare for the consummation
of the transactions contemplated by the Agreement. The parties hereto
acknowledge and agree that any investigation by the Company pursuant to this
Section 4.9 shall not unreasonably interfere with the business and operations
of Seller. The Company shall not, without the consent of Seller (which consent
shall not be unreasonably withheld), contact any customers or key employees of
Seller. If the Merger contemplated hereby is not consummated, the Company shall
maintain in confidentiality all non-public and all proprietary information
acquired by the Company from the Seller in connection with its due diligence
review.
SECTION 4.10 Confidentiality Letter. Seller agrees that the
Confidentiality Letter entered into between the Company and the Seller dated as
of October 8, 2001, shall remain in full force and effect and binding upon the
Seller and shall survive termination of this Agreement.
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ARTICLE V--COVENANTS OF THE COMPANY
SECTION 5.1 Affirmative Covenants. The Company hereby covenants and agrees
with Seller that prior to the Effective Time, unless the prior written consent
of Seller shall have been obtained and except as otherwise contemplated herein,
it will:
(a) maintain its corporate existence in good standing and maintain all books
and records in accordance with accounting principles and practices as used in
the Company's financial statements applied on a consistent basis; and
(b) conduct its business in a manner that does not violate any Law, except
for possible violations which individually or in the aggregate do not, and,
insofar as reasonably can be foreseen, in the future will not, have a Material
Adverse Effect on the Company and the Company Subsidiaries, taken as a whole.
SECTION 5.2 Negative Covenants. Except as set forth in Section 5.2 of the
Company Disclosure Schedule or as otherwise contemplated by this Agreement,
from the date of this Agreement until the Effective Time, the Company shall
not, or agree to commit to, or permit any Company Subsidiaries to, without the
prior written consent of Seller, propose or adopt any amendments to its
Articles of Incorporation or By-laws in a manner which would adversely affect
in any manner the terms of the Company Common Stock or the ability of Company
to consummate the transactions contemplated hereby, or agree in writing to do
any of the foregoing; provided, however, that any such amendment to the Company
Articles to increase the authorized number of shares of Company Common Stock
shall not be deemed to have such an adverse effect.
SECTION 5.3 Breaches. The Company shall, in the event it becomes aware of
the impending or threatened occurrence of any event or condition which would
cause or constitute a material breach (or would have caused or constituted a
material breach had such event occurred or been known prior to the date of this
Agreement) of any of its representations or agreements contained or referred to
herein, give prompt written notice thereof to the Seller and use its best
efforts to prevent or promptly remedy the same.
SECTION 5.4 Stock Exchange Listing. The Company shall use all reasonable
efforts to cause the shares of Company Common Stock to be issued in the Merger
to be approved for listing on the NYSE prior to the Effective Time.
SECTION 5.5 Tax Treatment. The Company will use its reasonable best
efforts to cause the Merger to qualify as a reorganization under Section
368(a)(1)(A) of the Code.
SECTION 5.6 Confidentiality Letter. The Company agrees that the
Confidentiality Letter entered into between the Company and the Seller dated as
of October 8, 2001, shall remain in full force and effect and binding upon the
Company and shall survive termination of this Agreement.
ARTICLE VI--ADDITIONAL AGREEMENTS
SECTION 6.1 Proxy Statement/Prospectus; Registration Statement. As
promptly as practicable after the execution of this Agreement, Seller and the
Company shall prepare and file with the SEC the Proxy Statement/Prospectus and
registration statement on Form S-4 promulgated under the Securities Act (or on
such other form as shall be appropriate) relating to the approval of this
Agreement, the Plan of Merger and the Merger by the shareholders of Seller and
the registration with the SEC of the shares of Company Common Stock to be
issued in the Merger, and shall use all reasonable efforts to cause the
Registration Statement to become effective as soon thereafter as practicable.
The Proxy Statement/Prospectus shall include the recommendation of the Board of
Directors of Seller in favor of the Merger; provided, however, that in
connection with the Seller's Board of Directors' recommendation to the Seller's
shareholders in favor of a Superior Competing Transaction (as defined in
Section 4.4), the Board of Directors of Seller may, at any time prior to such
time as the shareholders of Seller
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shall have adopted and approved this Agreement, the Plan of Merger and the
Merger in accordance with the MBCA, withdraw, modify or change any such
recommendation to the extent the Board of Directors of Seller determines in
good faith, after consultation with and taking into consideration the advice of
independent legal counsel, that the failure to so withdraw, modify or change
its recommendation would cause the Board of Directors of Seller to breach its
fiduciary duties to Seller's shareholders under applicable Law.
SECTION 6.2 Meeting of Seller's Shareholders. Seller shall promptly after
the date of this Agreement take all action necessary in accordance with the
MBCA and the Seller Articles and the Seller By-Laws to convene and hold the
Seller Shareholders' Meeting (regardless of whether or not the Board of
Directors of Seller has withdrawn, modified or changed its recommendation in
favor of the Merger). Seller shall use its reasonable efforts to solicit from
shareholders of Seller proxies in favor of the Merger and approval of this
Agreement and the Plan of Merger and shall take all other action necessary or
advisable to secure the vote or consent of shareholders required by the MBCA to
approve the Merger and this Agreement and the Plan of Merger, unless the Board
of Directors of Seller shall have determined in good faith after consultation
with and taking into consideration the advice of counsel, that such actions
would violate its fiduciary duty to Seller's Shareholders under applicable Law.
SECTION 6.3 Appropriate Action; Consents; Filings. Seller and the Company
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 to consummate and make effective the
transactions contemplated by this Agreement, (ii) obtain all consents,
licenses, permits, waivers, approvals, authorizations or orders required under
Law (including, without limitation, all foreign and domestic (federal, state
and local) governmental and regulatory rulings and approvals and parties to
contracts) required in connection with the authorization, execution and
delivery of this Agreement and the consummation by them of the transactions
contemplated hereby, including, without limitation, the Merger, (iii) make all
necessary filings, and thereafter make any other required submissions, with
respect to this Agreement and the Merger required under (A) the Securities Act
and the Exchange Act (to the extent applicable) and the rules and regulations
thereunder, and any other applicable federal or state securities laws, (B) the
BHCA, and any other applicable federal or state banking laws and (C) any other
applicable Law; provided that, the Company and Seller shall cooperate with each
other in connection with the making of all such filings, including providing
copies of all such documents to the non-filing party and its advisors prior to
filing and, if requested, to accept all reasonable additions, deletions or
changes suggested in connection therewith. Seller and the Company shall furnish
all information required for any application or other filing to be made
pursuant to the rules and regulations of any applicable Law (including all
information required to be included in the Proxy Statement/Prospectus and the
Registration Statement) in connection with the transactions contemplated by
this Agreement. In case at any time after the Effective Time any further action
is necessary or desirable to carry out the purposes of this Agreement, the
proper officers and directors of each party to this Agreement shall use all
reasonable efforts to take all such necessary action.
SECTION 6.4 Employee Benefit Matters. Annex B hereto sets forth certain
agreements with respect to Seller's employee benefit matters.
SECTION 6.5 Directors' and Officers' Indemnification and Insurance.
(a) By virtue of the occurrence of the Merger, the Company shall from and
after the Effective Time succeed to Seller's obligations with respect to
indemnification or exculpation now existing in favor of the directors,
officers, employees and agents of Seller and the Seller Subsidiaries as
provided in the Seller Articles, Seller By-Laws, indemnification agreements of
Seller or the Seller Subsidiaries or otherwise in effect as of the date of this
Agreement with respect to matters occurring prior to the Effective Time.
Section 6.5 of the Seller Disclosure Schedule contains a complete list of all
indemnification arrangements to which Seller is a party to on the date of this
Agreement. Seller agrees not to amend or enter into new arrangements or
agreements from and after the date hereof.
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(b) From and after the Effective Time, the Company agrees to use its
reasonable efforts to maintain an insurance policy for directors' and officers'
liabilities for all present and former directors and officers of Seller covered
by Seller's current insurance policies on the date of this Agreement; provided,
however, that the Company's obligation under this subsection (b) shall be
completely satisfied at such time as the Company shall have satisfied either of
the following conditions: (i) the Company shall have maintained an insurance
policy in accordance with this subsection (b) for a period of three years from
and after the Effective Time or (ii) the Company shall have incurred costs to
maintain insurance in accordance with this subsection equal to or exceeding
150% of the annual premium in effect on the date of this Agreement.
(c) The provisions of this Section 6.5 are intended to be for the benefit
of, and shall be enforceable by, each person who is now, or has been at any
time prior to the date of this Agreement or who becomes prior to the Effective
Time, an officer or director of Seller or any Seller Subsidiary (the
"Indemnified Parties") and his or her heirs and representatives.
SECTION 6.6 Notification of Certain Matters. Seller shall give prompt
notice to the Company, and the Company shall give prompt notice to Seller, of
(i) the occurrence, or non-occurrence, of any event the occurrence, or
non-occurrence, of which would be likely to cause any representation or
warranty contained in this Agreement to be untrue or inaccurate and (ii) any
failure of Seller or the Company, as the case may be, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 6.6 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
SECTION 6.7 Public Announcements. The Company and Seller shall consult
with each other before issuing any press release or otherwise making any public
statements with respect to the Merger and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by Law, including disclosures required under the federal
securities laws.
SECTION 6.8 Customer Retention. To the extent permitted by law or
applicable regulation, Seller shall use all reasonable efforts to assist the
Company in its efforts to retain Seller's customers for the Surviving
Corporation. Such efforts shall include making introductions of the Company's
employees to such customers, assisting in the mailing of information prepared
by the Company and reasonably acceptable to Seller to such customers and
actively participating in any "transitional marketing programs" as the Company
shall reasonably request.
SECTION 6.9 Expenses.
(a) All Expenses (as defined below) incurred by the Company and Seller shall
be borne solely and entirely by the party which has incurred the same, except
that the parties shall share equally in the expense of printing and filing the
Registration Statement and the Proxy Statement/Prospectus and all SEC, NYSE and
other regulatory filing fees incurred in connection herewith.
(b) "Expenses" as used in this Agreement shall include all reasonable
out-of-pocket expenses (including, without limitation, all fees and expenses of
counsel, accountants, investment bankers, experts and consultants to the party
and its affiliates) incurred by a party or on its behalf in connection with or
related to the authorization, preparation and execution of this Agreement, the
solicitation of shareholder approvals and all other matters related to the
closing of the transactions contemplated hereby.
(c) Seller hereby agrees that, if this Agreement is terminated, and at the
time of such termination, there shall be a Superior Competing Transaction,
Seller shall promptly (and in any event within two days after such termination)
pay the Company all Expenses of the Company by same day funds pursuant to
electronic funds transfer.
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ARTICL1E VII--CONDITIONS OF MERGER
SECTION 7.1 Conditions to Obligation of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) Effectiveness of the Registration Statement. The Registration Statement
shall have been declared effective by the SEC under the Securities Act. No stop
order suspending the effectiveness of the Registration Statement shall have
been issued by the SEC and no proceedings for that purpose shall, on or prior
to the Effective Time, have been initiated or, to the knowledge of the Company
or Seller, threatened by the SEC. The Company shall have received all other
Federal or state securities permits and other authorizations necessary to issue
Company Common Stock in exchange for Seller Common Stock and to consummate the
Merger.
(b) Shareholder Approval. This Agreement, the Plan of Merger and the Merger
shall have been approved and adopted by the requisite vote of the shareholders
of Seller.
(c) Federal Reserve Board. The Merger shall have been approved by the
Federal Reserve Board, which approval shall not contain any materially
burdensome condition that would significantly adversely affect the Company, all
conditions required to be satisfied prior to the Effective Time imposed by the
terms of such approval shall have been satisfied and all waiting periods
relating to such approval shall have expired.
(d) No Order. No federal or state governmental or regulatory authority or
other agency or commission, or federal or state court of competent
jurisdiction, shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is in effect restricting,
preventing or prohibiting consummation of the transactions contemplated by this
Agreement.
(e) NYSE Listing. The shares of Company Common Stock to be issued at the
Effective Time shall have been authorized for listing on the NYSE subject to
official notice of issuance.
SECTION 7.2 Additional Conditions to Obligations of the Company. The
obligations of the Company to effect the Merger are also subject to the
following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of Seller contained in this Agreement, without giving effect to any
update to the Seller Disclosure Schedule or notice to the Company under Section
4.5 or 6.6, shall be true and correct in all respects as of the date of this
Agreement and (except to the extent such representations and warranties speak
as of an earlier date) as of the Effective Time as though made on and as of the
Effective Time; provided, however, that for purposes of determining the
satisfaction of the condition contained in this clause, no effect shall be
given to any exception in such representations and warranties relating to
materiality or a Material Adverse Effect, and provided, further, however, that,
for purposes of this clause, such representations and warranties shall be
deemed to be true and correct in all material respects unless the failure or
failures of such representations and warranties to be so true and correct,
individually or in the aggregate, represent a Material Adverse Effect on the
Seller and the Seller Subsidiaries, taken as a whole. Company shall have
received a certificate signed on behalf of the Seller by the Chief Executive
Officer and the Chief Financial Officer of the Seller to the foregoing effect.
(b) Agreements and Covenants. The Seller shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Effective
Time.
(c) Consents Obtained. All Seller Approvals and all filings required to be
made by Seller for the authorization, execution and delivery of this Agreement
and the consummation by it of the transactions contemplated hereby shall have
been obtained and made by Seller.
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(d) No Challenge. There shall not be pending any action, proceeding or
investigation before any court or administrative agency or by a government
agency or any other person (i) challenging or seeking material damages in
connection with, the Merger or the conversion of Seller Common Stock into the
Merger Consideration pursuant to the Merger or (ii) seeking to restrain,
prohibit or limit the exercise of full rights of ownership or operation by the
Company or the Company Subsidiaries of all or any portion of the business or
assets of Seller, which in either case is reasonably likely to have a Material
Adverse Effect on either Seller and the Seller Subsidiaries, taken as a whole,
or the Company and the Company Subsidiaries, taken as a whole.
(e) Tax Opinion. An opinion of Godfrey & Kahn, S.C., independent counsel to
the Company, dated as of the Effective Time, substantially to the effect that
on the basis of facts, representations and assumptions set forth in such
opinion which are consistent with the state of facts existing at the Effective
Time, the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, and
accordingly that no gain or loss will be recognized by Seller as a result of
the Merger. In rendering such opinion, Godfrey & Kahn may require and rely upon
representations and covenants contained in certificates of officers of the
Company, the Seller and others.
(f) Opinion of Counsel. The Company shall have received from Maslon Edelman
Borman & Brand, or other independent counsel for Seller reasonably satisfactory
to the Company, an opinion dated the Effective Time, in form and substance
reasonably satisfactory to the Company, covering the matters set forth in Annex
C hereto, which opinion shall be based on such assumptions and containing such
qualifications and limitations as are appropriate and reasonably satisfactory
to the Company.
(g) Comfort Letters. If requested by the Company as provided in Section
4.3, the Company shall have received from McGladrey & Pullen, LLP, the
"comfort" letters referred to in Section 4.3.
(h) Affiliate Agreements. The Company shall have received from each person
who is identified in the affiliate letter as an "affiliate" of Seller a signed
affiliate agreement in the form attached hereto as Exhibit 4.6.
(i) Burdensome Condition. There shall not be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger, by any federal or state governmental entity which, in
connection with the grant of any regulatory approval, imposes any condition or
restriction upon the Company or Seller or their respective subsidiaries (or the
Surviving Corporation or its subsidiaries after the Effective Time), which
would materially adversely impact the economic or business benefits of the
transactions contemplated by this Agreement in such a manner as to render
inadvisable the consummation of the Merger.
(j) No Material Adverse Changes. Since the date of the Agreement, there has
not been any change in the financial condition, results of operations or
business of the Seller and the Seller Subsidiaries, taken as a whole, that
either individually or in the aggregate would have a Material Adverse Effect on
the Seller and the Seller Subsidiaries taken as a whole. The Company shall have
received a certificate of the President and the Chief Financial Officer of the
Seller to that effect.
(k) Seller Expenses. Seller shall have delivered to the Company evidence in
form reasonably satisfactory to the Company that all out-of-pocket expenses
(including, without limitation, all fees and expenses of counsel, accountants,
investment bankers, experts and consultants to the Seller and its affiliates)
incurred by the Seller or on its behalf in connection with or related to the
authorization, preparation and execution of this Agreement, the Registration
Statement and the Proxy Statement/Prospectus and all SEC and other regulatory
filings, the solicitation of shareholder approvals and all other matters
related to the closing of the transactions contemplated hereby are not in
excess of $750,000.
(l) Stock Options. With respect to Seller Options, (i) all holders of
Seller Options shall have entered into amendment agreements in form and
substance reasonably satisfactory to the Company, and (ii) the Company shall
have received a certificate of the Secretary of the Seller setting forth the
aggregate number of shares of
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Seller Common Stock subject to Seller Options immediately prior to the
Effective Time and the aggregate exercise price for such Seller Options.
(m) Lease Consents. Seller shall have obtained the consent of the landlords
under leases for the St. Louis Park Branch (one lease and the landlord is Park
Place OPCO, LLC) and the Eden Prairie Branch (three leases and the landlord is
Century Bank Building Limited Partnership) with respect to the transactions
contemplated in this Agreement.
(n) Retention Agreement Approval. Seller shall have obtained the approval
of its shareholders of each of the Key Executive Retention Agreements to which
its subsidiary is a party in accordance with the requirements of Q&A-7 of
proposed Treasury Regulation Section 1.280G-1. The Company shall have received
a certificate of the Secretary of the Seller to that effect.
SECTION 7.3 Additional Conditions to Obligations of Seller. The obligation
of Seller to effect the Merger is also subject to the following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Company contained in this Agreement, without giving effect to
any notice to Seller under Section 5.3 or 6.6, shall be true and correct in all
respects as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Effective
Time, as though made on and as of the Effective Time; provided, however, that
for purposes of determining the satisfaction of the condition contained in this
clause, no effect shall be given to any exception in such representations and
warranties relating to materiality or a Material Adverse Effect, and provided,
further, however, that, for purposes of this clause, such representations and
warranties shall be deemed to be true and correct in all material respects
unless the failure or failures of such representations and warranties to be so
true and correct, individually or in the aggregate, represent a Material
Adverse Effect on the Company. The Seller shall have received a certificate
signed on behalf of the Company by the Chief Executive Officer and the Chief
Financial Officer of the Company to the foregoing effect.
(b) Agreements and Covenants. The Company shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Effective
Time.
(c) Consents Obtained. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required to
be made by the Company for the authorization, execution and delivery of this
Agreement and the consummation by it of the transactions contemplated hereby
shall have been obtained and made by the Company, except where the failure to
obtain any consents, waivers, approvals, authorizations or orders required to
be obtained or any filings required to be made would not have a Material
Adverse Effect on the Company and the Company Subsidiaries, taken as a whole.
(d) Tax Opinion. The Seller shall have received an opinion of Maslon
Edelman Borman & Brand, in form and substance reasonably satisfactory to the
Seller, dated as of the Effective Time, substantially to the effect
that on the basis of facts, representations and assumptions set forth in
such opinion which are consistent with the state of facts existing at the
Effective Time, the Merger will be treated as a reorganization within the
meaning of Section 368(a) of the Code, and that, accordingly, for federal
income tax purposes:
(i) No gain or loss will be recognized by the Seller as a result of the
Merger;
(ii) No gain or loss will be recognized by the shareholders of the Seller
who exchange their Seller Common Stock solely for Company Common Stock
pursuant to the Merger (except with respect to cash received in lieu of a
fractional share interest in Company Common Stock); and
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(iii) The aggregate tax basis of the Company Common Stock received by
shareholders who exchange their Seller Common Stock solely for Company
Common Stock pursuant to the Merger will be the same as the aggregate tax
basis of the Seller Common Stock surrendered in exchange therefor (reduced
by any amount allocable to a fractional share interest for which cash is
received).
In rendering such opinion, the Seller's Counsel may require and rely upon
representations and covenants contained in certificates of officers of Company,
the Seller and others.
(e) Opinion of Counsel. Seller shall have received from Godfrey & Kahn,
S.C., or other independent counsel for the Company reasonably satisfactory to
Seller, opinions dated the Effective Time, in form and substance reasonably
satisfactory to Seller, covering the matters set forth in Annex D hereto, which
opinion shall be based on such assumptions and contain such qualifications and
limitations as are appropriate and reasonably satisfactory to Seller.
(f) No Material Adverse Changes. Since the date of the Agreement, there has
not been any change in the financial condition, results of operations or
business of the Company and the Company Subsidiaries, taken as a whole, that
either individually or in the aggregate would have a Material Adverse Effect on
the Company and the Company Subsidiaries taken as a whole. The Seller shall
have received a certificate of the President and the Chief Financial Officer of
the Company to that effect.
ARTICLE VIII--TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 Termination.
(a) This Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval of the matters presented in connection
with the Merger by the shareholders of Seller:
(i) by mutual consent of the Company and Seller by a vote of majority of
the members of the entire Board of Directors of both the Company and Seller;
(ii) by Seller or the Company (A) if there has been a breach in any
material respect (except that where any statement in a representation or
warranty expressly includes a standard of materiality, such statement shall
have been breached in any respect) of any representation, warranty, covenant
or agreement on the part of the Company, on the one hand, or the Seller, on
the other hand, respectively, set forth in this Agreement, or (B) if any
representation or warranty of the Company, on the one hand, or the Seller,
on the other hand, respectively, shall be discovered to have become untrue
in any material respect (except that where any statement in a representation
or warranty expressly includes a standard of materiality, such statement
shall have become untrue in any respect), in either case which breach or
other condition has not been cured within 30 business days following receipt
by the nonterminating party of notice of such breach or other condition, or
which breach by its nature, cannot be cured prior to Closing; provided,
however, neither party shall have the right to terminate this Agreement
pursuant to this Section 8.1(a)(ii) unless the breach of any representation
or warranty (but not breaches of covenants or agreements), together with all
other such breaches, would entitle the party receiving such representation
or warranty not to consummate the transactions contemplated hereby under
Section 7.2(a) (in the case of a breach of a representation or warranty by
the Seller) or Section 7.3(a) (in the case of a breach of representation or
warranty by the Company); provided, further, this Agreement may not be
terminated pursuant to this clause (ii) by the breaching party or party
making any representation or warranty which shall have become untrue in any
material respect;
(iii) by either the Company or Seller if any permanent injunction
preventing the consummation of the Merger shall have become final and
nonappealable;
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(iv) by either the Company or Seller if the Merger shall not have been
consummated by June 30, 2002, for a reason other than the failure of the
party seeking termination to comply with its obligations under this
Agreement; provided that if the Merger shall not have been consummated on or
prior to June 30, 2002 as a result of proceedings of a governmental
authority or litigation, then the date on which either the Company or the
Seller may terminate this Agreement under this Section 8.1(a)(iv) shall be
extended to the earlier of (A) the lapse of a reasonable period of time
necessary to consummate the Merger following the final termination of
proceedings of a governmental authority or litigation or (B) September 30,
2002;
(v) by either the Company or Seller if the Federal Reserve Board has
denied approval of the Merger, and neither the Company nor Seller has,
within 30 days after the entry of such order denying approval, filed a
petition seeking review of such order as provided by applicable law;
(vi) by either the Company or the Seller, if at the Seller Shareholders'
Meeting, this Agreement, the Plan of Merger and the Merger shall fail to
receive the requisite vote for approval and adoption by the Seller's
Shareholders;
(vii) by the Company, if there shall exist a proposal for a Superior
Competing Transaction with respect to the Seller and the Board of Directors
of the Seller has withdrawn or modified in a manner adverse to the Company
its approval and recommendation of this Agreement or the Plan of Merger or
its approval or recommendation of the Merger or any other transaction
contemplated hereby or if the Board of Directors of the Seller shall have
approved or recommended such Superior Competing Transaction; or
(viii) by the Company if any person or persons holding of record or
beneficially in the aggregate 5% or more of the outstanding shares of Seller
Common Stock deliver a notice or notices of intent to demand payment in
respect of such shares in accordance with Section 302A.473 of the MBCA.
SECTION 8.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 8.1, this Agreement shall forthwith become void
and all rights and obligations of any party hereto shall cease except: (i) as
set forth in Section 9.1 of this Agreement and (ii) nothing herein shall
relieve any party from liability for any willful breach of this Agreement or
shall restrict either party's rights in the case thereof.
SECTION 8.3 Amendment. This Agreement may be amended by the parties hereto
by action taken by or on behalf of their respective Boards of Directors at any
time prior to the Effective Time; provided, however, that, after approval this
Agreement and the Merger by the shareholders of Seller, no amendment may be
made which would reduce the amount or change the type of consideration into
which each Share shall be converted pursuant to this Agreement upon
consummation of the Merger, or which by law would require the further approval
of the shareholders of the Seller, in each case without the further approval of
the shareholders of the Seller. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
SECTION 8.4 Waiver. At any time prior to the Effective Time, any party
hereto may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other party hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions contained herein. Any such extension
or waiver shall be valid if set forth in an instrument in writing signed by the
party or parties to be bound thereby, but such extension or waiver or failure
to insist on strict compliance with an obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent other failure.
ARTICLE IX--GENERAL PROVISIONS
SECTION 9.1 Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Article VIII, except that the agreements set forth in Article I and
Sections 6.5 and 6.7
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shall survive the Effective Time indefinitely and those set forth in Sections
4.10, 5.6, 6.9, 8.2 and Article IX hereof shall survive termination
indefinitely.
SECTION 9.2 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed given if delivered
personally, mailed by registered or certified mail (postage prepaid, return
receipt requested) or telecopied (with confirmation) to the parties at the
following addresses or telecopy numbers, as the case may be (or at such other
address or telecopy number for a party as shall be specified by like changes of
address or telecopy number) and shall be effective upon receipt:
(a) If to the Company:
Marshall & Ilsley Corporation
770 North Water Street
Milwaukee, Wisconsin 53202
Attention: Michael A. Hatfield
Facsimile: (414) 765-7899
With a copy to:
Godfrey & Kahn, S.C.
780 North Water Street
Milwaukee, Wisconsin 53202
Attention: Randall J. Erickson
Facsimile: (414) 273-5198
(b) If to Seller:
Century Bancshares, Inc.
11455 Viking Drive
Eden Prairie, Minnesota 55344
Attention: Sheldon Z. Wert
Facsimile: (952) 943-2020
With a copy to:
Maslon Edelman Borman & Brand, LLP
3300 Wells Fargo Center
90 South Seventh Street
Minneapolis, Minnesota 55402
Attention: Jerome B. Simon
Facsimile: (612) 672-8397
SECTION 9.3 Certain Definitions. For purposes of this Agreement, the term:
(a) "affiliate" means a person that directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control
with, the first mentioned person; including, without limitation, any
partnership or joint venture in which any person (either alone, or through or
together with any other subsidiary) has, directly or indirectly, an interest of
5% or more;
(b) "business day" means any day other than a day on which banks in
Wisconsin are required or authorized to be closed;
(c) "control" (including the terms "controlled by" and "under common control
with") means the possession, directly or indirectly or as trustee or executor,
of the power to direct or cause the direction of the management or policies of
a person, whether through the ownership of stock or as trustee or executor, by
contract or credit arrangement or otherwise;
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(d) "person" means an individual, corporation, partnership, association,
trust, unincorporated organization, limited liability company, other entity or
group (as defined in Section 13(d) of the Exchange Act); and
(e) "subsidiary" or "subsidiaries" of Seller, the Company, the Surviving
Corporation, or any other person, means any corporation, limited liability
company, partnership, joint venture or other legal entity of which Seller, the
Company, the Surviving Corporation or such other person, as the case may be
(either alone or through or together with any other subsidiary), owns, directly
or indirectly, 10% or more 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 9.4 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 9.5 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
SECTION 9.6 Entire Agreement. This Agreement constitutes the entire
agreement of the parties and supersedes all prior agreements and undertakings,
both written and oral, between the parties, or any of them, with respect to the
subject matter hereof and, except as otherwise expressly provided herein, are
not intended to confer upon any other person any rights or remedies hereunder.
SECTION 9.7 Assignment. This Agreement shall not be assigned by operation
of law or otherwise, except that the Company may assign all or any of its
rights hereunder and thereunder to any affiliate provided that no such
assignment shall relieve the assigning party of its obligations hereunder.
SECTION 9.8 Parties in Interest. Except as provided in Section 9.7, this
Agreement (including Annex B hereto) shall be binding upon and inure solely to
the benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other person any right,
benefit or remedy of any nature whatsoever under or by reason of this
Agreement, other than Section 6.5 (which is intended to be for the benefit of
the Indemnified Parties and may be enforced by such Indemnified Parties).
SECTION 9.9 Governing Law. Except to the extent that the laws of the State
of Minnesota are mandatorily applicable to the matters arising under or in
connection with this Agreement, this Agreement shall be governed by, and
construed in accordance with, the laws of the State of Wisconsin, regardless of
the laws that might otherwise govern under applicable principles of choice of
law or conflicts of law.
SECTION 9.10 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
SECTION 9.11 Time is of the Essence. Time is of the essence of this
Agreement.
SECTION 9.12 Specific Performance. The parties hereto acknowledge that
monetary damages would not be a sufficient remedy for breach of this Agreement.
Therefore, upon breach of this Agreement by any party, the aggrieved party may
proceed to protect its rights and enforce this Agreement by suit in equity,
action at law or other appropriate proceeding, including an action for the
specific performance of any provision herein or any
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other remedy granted by law, equity or otherwise. Any action for specific
performance hereunder shall not be deemed exclusive and may also include claims
for monetary damages as may be warranted under the circumstances. The
prevailing party in any such suit, action or other proceeding arising out of or
related to this Agreement shall be entitled to recover its costs, including
attorney's fees, incurred in such suit, action or other proceeding.
IN WITNESS WHEREOF, the Company and Seller have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
CENTURY BANCSHARES, INC.
/S/ SHELDON Z. WERT
By:_____________________
Name:
Sheldon Z. Wert
Title:
Chairman, President and
Chief
Executive Officer
MARSHALL & ILSLEY CORPORATION
/S/ D. J. KUESTER
By:_____________________
Name:
D. J. Kuester
Title:
President
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APPENDIX B
PLAN OF MERGER
Merging
CENTURY BANCSHARES, INC.
(a Minnesota Corporation)
with and into
MARSHALL & ILSLEY CORPORATION
(a Wisconsin corporation)
Background
Marshall & Ilsley Corporation, a Wisconsin corporation (the "Company"), and
Century Bancshares, Inc., a Minnesota corporation (the "Seller"), are parties
to an Agreement and Plan of Merger dated as of December 3, 2001 (the "Merger
Agreement"), providing for the merger of the Seller with and into the Company
(the "Merger") upon the terms and conditions set forth in this Plan of Merger
and pursuant to the Minnesota Business Corporation Act (the "MBCA") and the
Wisconsin Business Corporation Law (the "WBCL"). The Company and the Seller are
sometimes hereinafter together referred to as the "Constituent Corporations."
Terms used herein that are not defined herein shall have the meanings ascribed
thereto in the Merger Agreement.
Terms and Conditions
1. Merger. The Constituent Corporations shall effect the Merger upon the
terms and subject to the conditions set forth in this Plan of Merger.
1.1 The Merger. Upon the terms and subject to the conditions set forth in
this Plan of Merger, and in accordance with the MBCA and the WBCL, at the
Effective Time (as defined in Section 1.2) Seller shall be merged with and into
the Company. As a result of the Merger, the separate corporate existence of
Seller shall cease and the Company shall continue as the surviving corporation
of the Merger (the "Surviving Corporation").
1.2 Effective Time. As promptly as practicable after the satisfaction or,
if permissible, waiver of the conditions set forth in Article VII of the Merger
Agreement, the parties hereto 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 Minnesota (the "Minnesota Secretary of State") and the
Department of Financial Institutions of the State of Wisconsin (the "DFI"), in
such form as required by, and executed in accordance with the relevant
provisions of, the MBCA and the WBCL (the date and time of the later of such
filing with the Minnesota Secretary of State or the DFI is referred to herein
as the "Effective Time").
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in the Merger Agreement and the applicable provisions of
the MBCA and the WBCL. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, except as otherwise provided herein,
all the property, rights, privileges, immunities, powers and franchises of the
Company and the Seller shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and the Seller shall become the debts,
liabilities and duties of the Surviving Corporation.
1.4 Articles of Incorporation; By-Laws. At the Effective Time, the
Articles of Incorporation, as amended, of the Company (the "Company Articles")
and the By-Laws, as amended, of the Company (the "Company By-Laws"), as in
effect immediately prior to the Effective Time, shall be the Articles of
Incorporation and the By-Laws of the Surviving Corporation.
B-1
1.5 Directors and Officers. At the Effective Time, the directors of the
Company immediately prior to the Effective Time shall be the initial directors
of the Surviving Corporation, each to hold office in accordance with the
Articles of Incorporation and By-Laws of the Surviving Corporation and to be
assigned to the class previously assigned. At the Effective Time, the officers
of the Company immediately prior to the Effective Time, shall be the initial
officers of the Surviving Corporation, in each case until their respective
successors are duly elected or appointed.
1.6 Merger Consideration
(a) The aggregate dollar value of the merger consideration shall be
$66,000,000 minus the Option Payment Amount as defined in (c) below (the
"Merger Consideration"). The Merger Consideration shall consist of shares of
common stock, par value $1.00 per share, of the Company ("Company Common
Stock"); provided, however, that up to $30,000,000 minus the Option Payment
Amount (the "Cash Amount") of the Merger Consideration may be payable in
cash at the election of holders of the Seller Common Stock (as hereinafter
defined). For purposes of valuing the Company Common Stock as part of the
Merger Consideration, one share of Company Common Stock will be deemed to
have a value equal to the average of the average high and low sale price per
share of Company Common Stock on the New York Stock Exchange (the "NYSE") as
reported in the Midwest Edition of The Wall Street Journal for the ten (10)
consecutive trading days ending on and including the second trading day
preceding the Effective Time (the "Average Trading Price"). The Company
agrees that all of the Company's purchases of Company Common Stock shall be
in accordance with Regulation M of the Exchange Act.
(b) The "Per Share Merger Consideration" shall be an amount equal to the
aggregate value of the Merger Consideration divided by the total number of
shares of Series A common stock, $.01 par value, and Series B common stock,
$.01 par value, of the Seller (collectively, the "Seller Common Stock")
issued and outstanding immediately prior to the Effective Time (the
"Outstanding Seller Common Stock").
(c) The "Option Payment Amount" shall be an amount equal to (A) the
number of shares of Seller Common Stock subject to options immediately prior
to the Effective Time (such options are referred to collectively as the
"Outstanding Options") multiplied by $7.398 (such product to be rounded to
the nearest whole cent), minus (B) the aggregate exercise price of all
Outstanding Options.
1.7 Conversion of Securities; Dissenting Shares. Subject to Section 1.7(h)
regarding fractional shares, at the Effective Time, by virtue of the Merger and
without action on the part of the Company, the Seller or the holders of the
Seller's securities:
(a) Each share of Seller Common Stock issued and outstanding immediately
prior to the Effective Time, other than Shares owned by the Company or any
direct or indirect wholly owned Company Subsidiary or Seller Subsidiary for
its own account (all such shares of Seller Common Stock issued and
outstanding immediately prior to the Effective Time being referred to herein
as the "Shares") and other than Dissenting Shares (as defined in Section
1.7(j)), shall be converted into the right to receive a number of shares of
Company Common Stock, determined by dividing the Per Share Merger
Consideration by the Average Trading Price and rounding the result to the
nearest one thousandth of a share (the "Stock Consideration"); provided,
however, that, subject to the election and allocation procedures set forth
in this Section 1.7, each holder of such Shares will be entitled, with
respect to the Merger Consideration to be received for each such Share held
by the holder, to elect to receive cash from the Company, without interest
(a "Cash Election"), in an amount equal to the Per Share Merger
Consideration (the "Cash Consideration").
(b) The number of Shares which may be converted into the right to receive
the Cash Consideration in the Merger shall be no more than (i) the Cash
Amount divided by the Per Share Merger Consideration (rounded down to the
nearest whole number) minus (ii) the total number of Dissenting Shares, if
any (the "Cash Election Number").
(c) If the aggregate number of Shares covered by Cash Elections (the
"Cash Election Shares") exceeds the Cash Election Number, each Cash Election
Share shall be converted, at the Effective Time, into the right
B-2
to receive (i) an amount in cash, without interest, equal to the product of
(x) the Per Share Merger Consideration and (y) a fraction (the "Cash
Fraction"), the numerator of which shall be the Cash Election Number and the
denominator of which shall be the total number of Cash Election Shares, and
(ii) a number of shares of Company Common Stock equal to the product of (x)
the Stock Consideration and (y) a fraction equal to one minus the Cash
Fraction.
(d) In the event that Section 1.7(c) above is inapplicable, all Cash
Election Shares shall be converted, at the Effective Time, into the right to
receive the Cash Consideration and all other Shares, other than Dissenting
Shares, shall be converted, at the Effective Time, into the right to receive
the Stock Consideration.
(e) All Cash Elections shall be made on a form designed for that purpose
and mutually acceptable to the Company and Seller (a "Form of Election") and
mailed to holders of record of Shares as of the record date for the Seller
Shareholders' Meeting or such other date as the Company and the Seller shall
mutually agree (the "Election Form Record Date"). The Company and the Seller
shall make available one or more Election Forms as may be reasonably
requested by all persons who become holders of record of Shares between the
Election Form Record Date and the Election Deadline (as defined below).
Elections shall be made by submitting to the Exchange Agent (as defined
below) a duly completed Form of Election. To be effective, a Form of
Election must be properly completed, signed and submitted to the Exchange
Agent in accordance with Section 1.7(f). The Company will have the
discretion, which it may delegate in whole or in part to the Exchange Agent,
to reasonably determine whether Forms of Election have been properly
completed, signed and submitted or revoked and to disregard immaterial
defects in Forms of Election. The decision of the Company (or the Exchange
Agent) shall be conclusive and binding. Neither the Company nor the Exchange
Agent will be under any obligation to notify any person of any defect in a
Form of Election submitted to the Exchange Agent. The Exchange Agent shall
also make all computations contemplated by this Section 1.7 and all
computations shall be conclusive and binding on the holders of Shares.
(f) A Form of Election must be received by the Exchange Agent by the
close of business of the last business day prior to the date of the Seller
Shareholders' Meeting in order to be effective. Such time on such date shall
hereinafter be referred to as the "Election Deadline." Any holder of Shares
who has made an election may at any time prior to the Election Deadline
change or withdraw its election by written notice to the Exchange Agent
prior to the Election Deadline. As soon as practicable after the Election
Deadline, the Exchange Agent shall determine the allocation of the cash
portion of the Merger Consideration and the stock portion of the Merger
Consideration and shall notify the Company of its determination.
(g) The Shares of a holder who does not submit a Form of Election which
is received by the Exchange Agent prior to the Election Deadline (other than
Dissenting Shares) shall be converted into the right to receive the Stock
Consideration at the Effective Time. If the Company or the Exchange Agent
shall determine that any purported Cash Election was not properly made, the
purported Cash Election shall be deemed to be of no force and effect and the
Shares of the holder making such purported Cash Election shall be converted
into the right to receive the Stock Consideration at the Effective Time.
(h) No fractional shares of Company Common Stock shall be issued in the
Merger. All fractional shares of Company Common Stock that a holder of any
Shares would otherwise be entitled to receive as a result of the Merger
shall be aggregated. If a fractional share of Company Common Stock results
from the aggregation, the holder shall be entitled to receive, in lieu
thereof, a cash amount, without interest, determined by multiplying the
Average Trading Price by the fraction of a share of Company Common Stock to
which the holder would otherwise have been entitled. As promptly as
practicable after the determination of the amount of cash, if any, to be
paid to holders of fractional share interests, the Exchange Agent shall so
notify the Company, and the Company shall deposit that amount with the
Exchange Agent and shall cause the Exchange Agent to forward payments to the
holders of fractional share interests, subject to and in accordance with the
terms of this Section 1.7.
B-3
(i) Each share of Seller Common Stock held by the Company or any direct
or indirect wholly owned Company Subsidiary or Seller Subsidiary for its own
account shall be canceled and extinguished at the Effective Time without
conversion thereof into the Merger Consideration or payment therefor.
(j) Notwithstanding anything in this Plan of Merger to the contrary,
shares of Seller Common Stock which are issued and outstanding immediately
prior to the Effective Time and which are held by shareholders or beneficial
owners who have validly exercised and perfected dissenter's rights with
respect to those Shares under Sections 302A.471 and 302A.473 of the MBCA and
have not withdrawn or lost such rights (the "Dissenting Shares") shall not
be converted into or be exchangeable for the right to receive the Merger
Consideration in accordance with this Section 1.7, unless and until such
holders or beneficial owners shall have failed to perfect or shall have
effectively withdrawn or lost their dissenter's rights with respect to such
Dissenting Shares under the MBCA. Dissenting Shares shall be treated in
accordance with Sections 302A.471 and 302A.473 of the MBCA, if and to the
extent applicable. If, after the Effective Time, any such holder or
beneficial owner shall have failed to perfect or shall have effectively
withdrawn or lost such right to dissent with respect to any Dissenting
Shares, such Dissenting Shares shall thereupon be treated as if they had
been converted into and become exchangeable only for the right to receive,
as of the Effective Time, the Stock Consideration in accordance with this
Section 1.7, without any interest thereon. Seller shall give the Company (a)
prompt notice of each and every notice of a shareholder's or beneficial
owner's intent to demand payment of the "fair value" of the shareholder's or
beneficial owner's Shares, attempted withdrawals of such demands, and any
other instruments served pursuant to the MBCA and received by the Seller
relating to rights to be paid the "fair value" of Shares, as provided in
Sections 302A.471 and 302A.473 of the MBCA and (b) the opportunity to direct
all negotiations and proceedings with respect to such demands for "fair
value." Seller shall not, except with the prior written consent of the
Company, voluntarily make any payment with respect to, offer to settle or
settle, or approve any withdrawal of any such demands for "fair value."
(k) Each option to purchase shares of Seller Common Stock (each, a
"Seller Option") outstanding under any stock option plan immediately prior
to the Effective Time, whether or not vested or exercisable, shall be
converted into the right to receive cash from the Company in an amount equal
to (A) the number of shares of Seller Common Stock subject to such Seller
Option multiplied by (B) $7.398 (the product of (A) and (B) shall be rounded
to the nearest whole cent), minus (C) the aggregate exercise price for such
Seller Option. After the Effective Time, each Seller Option shall represent
only the right to receive the cash amount described above and shall not
represent a right to receive any securities of the Company.
1.8 Exchange of Certificates.
(a) Exchange Agent. The Company shall deposit, or shall cause to be
deposited, from time to time, with a bank or trust company designated by the
Company and which may be an affiliate of the Company (the "Exchange Agent"),
for the benefit of the holders of Shares, for exchange in accordance with
this Section 1, through the Exchange Agent, the Merger Consideration,
together with any dividends or distributions with respect thereto, if any,
to be paid in respect of Shares pursuant to this Section 1 (the "Exchange
Fund"). Such deposits shall be made after the Effective Time as requested by
the Exchange Agent in order for the Exchange Agent to promptly deliver the
Merger Consideration.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate representing Shares which were converted into the right to
receive the Merger Consideration pursuant to Section 1.7 (each, a
"Certificate" and collectively, the "Certificates"), (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk
of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such
other provisions as the Company may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in
exchange for the Merger Consideration. Upon surrender of a Certificate for
cancellation to the Exchange Agent together with such letter of transmittal,
duly executed, the holder of such Certificate shall be entitled to receive
in exchange therefor the Merger Consideration and any unpaid dividends and
distributions thereon as provided in this Section 1,
B-4
which such holder has the right to receive in respect of the Certificate
surrendered pursuant to the provisions of this Section 1, and the
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Shares which is not registered in the transfer
records of the Seller, a transferee may exchange the Certificate
representing such Shares for the Merger Consideration and any unpaid
dividends and distributions thereon as provided in this Section 1 if the
Certificate representing such Shares is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer
and by evidence that any applicable stock transfer taxes have been paid. In
the event any Certificate shall have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and the posting by such person
of a bond in such amount as the Company may direct as indemnity against any
claim that may be made against it or the Exchange Agent with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen
or destroyed Certificate the Merger Consideration and any unpaid dividends
and distributions thereon as provided in this Section 1, which such holder
would have had the right to receive in respect of such lost, stolen or
destroyed Certificate. Until surrendered as contemplated by this Section
1.8, each Certificate shall be deemed at any time after the Effective Time
to represent only the right to receive upon such surrender the Merger
Consideration and any unpaid dividends and distributions thereon as provided
in this Section 1.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the Effective Time with respect
to Company Common Stock with a record date after the Effective Time shall be
paid to the holder of any unsurrendered Certificate with respect to the
shares of Company Common Stock issuable in exchange for the Shares
represented thereby, and no cash payment in lieu of fractional shares shall
be paid to any such holder pursuant to Section 1.7(h), until the holder of
such Certificate shall surrender such Certificate. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
paid to the holder of the certificates representing whole shares of Company
Common Stock issued in exchange therefor, without interest, (i) promptly,
the amount of any cash payable with respect to a fractional share of Company
Common Stock to which such holder is entitled pursuant to Section 1.7(h) and
the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of Company
Common Stock, and (ii) at the appropriate payment date, the amount of
dividends or other distributions, with a record date after the Effective
Time but prior to surrender and a payment date occurring after surrender,
payable with respect to such whole shares of Company Common Stock.
(d) No Further Rights in the Shares. All Merger Consideration issued or
paid upon conversion of the Shares in accordance with the terms hereof
(including any cash paid pursuant to Section 1.7(h)) shall be deemed to have
been issued or paid in full satisfaction of all rights pertaining to such
Shares.
(e) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the former shareholders of Seller for six (6)
months after the Effective Time shall be delivered to the Company, upon
demand, and any former shareholders of Seller who have not theretofore
complied with this Section 1 shall thereafter look only to the Company to
claim the Merger Consideration to which they are entitled, any cash in lieu
of fractional shares of Company Common Stock and any dividends or
distributions with respect to Company Common Stock, in each case without
interest thereon, and subject to Section 1.8(f).
(f) No Liability. Neither the Company nor the Seller shall be liable to
any former holder of Shares for any shares of Company Common Stock (or
dividends or distributions with respect thereto) or cash or other payment
delivered to a public official pursuant to any abandoned property, escheat
or similar laws.
(g) Withholding Rights. The Company shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Plan of
Merger to any former holder of Shares or any holder of Seller Options such
amounts as the Company is required to deduct and withhold with respect to
the making of such payment under the Code, or any provision of state, local
or foreign tax law. To the extent that amounts are so withheld by the
Company, such withheld amounts shall be treated for all purposes of this
Plan of Merger as having been paid to the former holder of the Shares or the
former holder of Seller Options, as the case may be, in respect of which
such deduction and withholding was made by the Company.
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1.9 Stock Transfer Books. At the Effective Time, the stock transfer books
of Seller shall be closed and there shall be no further registration of
transfers of shares of Seller Common Stock thereafter on the records of Seller.
From and after the Effective Time, the holders of certificates evidencing
ownership of shares of Seller Common Stock outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such Shares
except as otherwise provided herein or by law. On or after the Effective Time,
any Certificates presented to the Exchange Agent or the Company for any reason
shall be converted into the Merger Consideration in accordance with this
Section 1.
1.10 Adjustments for Dilution and Other Matters. If, after the date of the
Merger Agreement and during the period in which the Average Trading Price is
determined, the Company shall declare a stock dividend or distribution upon or
subdivide, split up, reclassify or combine the Company Common Stock or declare
a dividend or make a distribution on the Company Common Stock in any security
convertible into Company Common Stock, appropriate adjustment or adjustments,
if any, will be made to the Merger Consideration and the Stock Consideration
determined pursuant to Sections 1.6(a) and 1.7(a).
1.11 Company Common Stock. The shares of Company Common Stock issued and
outstanding immediately prior to the Effective Time shall be unaffected by the
Merger and at the Effective Time, such shares shall remain issued and
outstanding.
2. Termination. This Plan of Merger may be terminated at any time on or
before the Effective Time by agreement of the Boards of Directors of the
Constituent Corporations. This Plan of Merger shall be automatically terminated
if the Merger Agreement is terminated in accordance with the terms thereof.
B-6
APPENDIX C
MINNESOTA BUSINESS CORPORATION ACT
DISSENTERS' RIGHTS
302A.471 RIGHTS OF DISSENTING SHAREHOLDERS.--Subdivision 1. Actions
creating rights. A shareholder of a corporation may dissent from, and obtain
payment for the fair value of the shareholder's shares in the event of, any of
the following corporate actions:
(a) An amendment of the articles that materially and adversely affects the
rights or preferences of the shares of the dissenting shareholder in that it:
(1) alters or abolishes a preferential right of the shares;
(2) creates, alters, or abolishes a right in respect of the redemption of
the shares, including a provision respecting a sinking fund for the
redemption or repurchase of the shares;
(3) alters or abolishes a preemptive right of the holder of the shares to
acquire shares, securities other than shares, or rights to purchase shares
or securities other than shares;
(4) excludes or limits the right of a shareholder to vote on a matter, or
to cumulate votes, except as the right may be excluded or limited through
the authorization or issuance of securities of an existing or new class or
series with similar or different voting rights; excepts that an amendment to
the articles of an issuing public corporation that provides that section
302A.671 does not apply to a control share acquisition does not give rise to
the right to obtain payment under this section;
(b) A sale, lease, transfer, or other disposition of all or substantially
all of the property and assets of the corporation, but not including a
transaction permitted without shareholder approval in section 302A.661,
subdivision 1, or a disposition in dissolution described in section 302A.725,
subdivision 2, or a disposition pursuant to an order of a court, or a
disposition for cash on terms requiring that all or substantially all of the
net proceeds of disposition be distributed to the shareholders in accordance
with their respective interests within one year after the date of disposition;
(c) A plan of merger, whether under this chapter or under chapter 322B, to
which the corporation is a constituent organization, except as provided in
subdivision 3;
(d) A plan of exchange, whether under this chapter or under chapter 322B, to
which the corporation is a party as the corporation whose shares will be
acquired by the acquiring corporation, except as provided in subdivision 3; or
(e) Any other corporate action taken pursuant to a shareholder vote with
respect to which the articles, the bylaws, or a resolution approved by the
board directs that dissenting shareholders may obtain payment for their shares.
Subdivision 2. Beneficial owners.
(a) A shareholder shall not assert dissenters' rights as to less than all of
the shares registered in the name of the shareholder, unless the shareholder
dissents with respect to all the shares that are beneficially owned by another
person but registered in the name of the shareholder and discloses the name and
address of each beneficial owner on whose behalf the shareholder dissents. In
that event, the rights of the dissenter shall be determined as if the shares as
to which the shareholder has dissented and the other shares were registered in
the names of different shareholders.
C-1
(b) A beneficial owner of shares who is not the shareholder may assert
dissenters' rights with respect to shares held on behalf of the beneficial
owner, and shall be treated as a dissenting shareholder under the terms of this
section and section 302A.473, if the beneficial owner submits to the
corporation at the time of or before the assertion of the rights a written
consent of the shareholder.
Subdivision 3. Rights not to apply.
(a) Unless the articles, the bylaws, or a resolution approved by the board
otherwise provide, the right to obtain payment under this section does not
apply to a shareholder of (1) the surviving corporation in a merger with
respect to shares of the shareholder that are not entitled to be voted on the
merger and are not canceled or exchanged in the merger or (2) the corporation
whose shares will be acquired by the acquiring corporation in a plan of
exchange with respect to shares of the shareholder that are not entitled to be
voted on the plan of exchange and are not exchanged in the plan of exchange.
(b) If a date is fixed according to section 302A.445, subdivision 1, for the
determination of shareholders entitled to receive notice of and to vote on an
action described in subdivision 1, only shareholders as of the date fixed, and
beneficial owners as of the date fixed who hold through shareholders, as
provided in subdivision 2, may exercise dissenters' rights.
Subdivision 4. Other rights. The shareholders of a corporation who have a
right under this section to obtain payment for their shares do not have a right
at law or in equity to have a corporate action described in subdivision 1 set
aside or rescinded, except when the corporate action is fraudulent with regard
to the complaining shareholder or the corporation. (Last amended by Ch. 264, L.
'00, eff. 8-1-00.)
302A.473 PROCEDURES FOR ASSERTING DISSENTERS' RIGHTS.--Subdivision 1.
Definitions.
(a) For purposes of this section, the terms defined in this subdivision have
the meanings given them.
(b) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action referred to in section 302A.471, subdivision 1 or the
successor by merger of that issuer.
(c) "Fair value of the shares" means the value of the shares of a
corporation immediately before the effective date of the corporate action
referred to in section 302A.471, subdivision 1.
(d) "Interest" means interest commencing five days after the effective date
of the corporate action referred to in section 302A.471, subdivision 1, up to
and including the date of payment, calculated at the rate provided in Section
549.09 for interest on verdicts and judgments.
Subdivision 2. Notice of action. If a corporation calls a shareholder
meeting at which any action described in section 302A.471, subdivision 1 is to
be voted upon, the notice of the meeting shall inform each shareholder of the
right to dissent and shall include a copy of Section 302A.471 and this section
and a brief description of the procedure to be followed under these sections.
Subdivision 3. Notice of dissent. If the proposed action must be approved
by the shareholders, a shareholder who is entitled to dissent under Section
302A.471 and who wishes to exercise dissenters' rights must file with the
corporation before the vote on the proposed action a written notice of intent
to demand the fair value of the shares owned by the shareholder and must not
vote the shares in favor of the proposed action.
Subdivision 4. Notice of procedure; deposit of shares.
(a) After the proposed action has been approved by the board and, if
necessary, the shareholders, the corporation shall send to all shareholders who
have complied with subdivision 3 and to all shareholders entitled to dissent if
no shareholder vote was required, a notice that contains:
C-2
(1) the address to which a demand for payment and certificates of
certificated shares must be sent in order to obtain payment and the date by
which they must be received;
(2) any restrictions on transfer of uncertificated shares that will apply
after the demand for payment is received;
(3) a form to be used to certify the date on which the shareholder, or
the beneficial owner on whose behalf the shareholder dissents, acquired the
shares or an interest in them and to demand payment; and
(4) a copy of section 302A.471 and this section and a brief description
of the procedures to be followed under these sections.
(b) In order to receive the fair value of the shares, a dissenting
shareholder must demand payment and deposit certificated shares or comply with
any restrictions on transfer of uncertificated shares within 30 days after the
notice required by paragraph (a) was given, but the dissenter retains all other
rights of a shareholder until the proposed action takes effect.
Subdivision 5. Payment; return of shares.
(a) After the corporate action takes effect, or after the corporation
receives a valid demand for payment, whichever is later, the corporation shall
remit to each dissenting shareholder who has complied with subdivisions 3 and 4
the amount the corporation estimates to be the fair value of the shares, plus
interest, accompanied by:
(1) the corporation's closing balance sheet and statement of income for a
fiscal year ending not more than 16 months before the effective date of the
corporate action, together with the latest available interim financial
statements;
(2) an estimate by the corporation of the fair value of the shares and a
brief description of the method used to reach the estimate; and
(3) a copy of section 302A.471 and this section, and a brief description
of the procedure to be followed in demanding supplemental payment.
(b) The corporation may withhold the remittance described in paragraph (a)
from a person who was not a shareholder on the date the action dissented from
was first announced to the public or who is dissenting on behalf of a person
who was not a beneficial owner on that date. If the dissenter has complied with
subdivisions 3 and 4, the corporation shall forward to the dissenter the
materials described in paragraph (a), a statement of the reason for withholding
the remittance, and an offer to pay to the dissenter the amount listed in the
materials if the dissenter agrees to accept that amount in full satisfaction.
The dissenter may decline the offer and demand payment under subdivision 6.
Failure to do so entitles the dissenter only to the amount offered. If the
dissenter makes demand, subdivisions 7 and 8 apply.
(c) If the corporation fails to remit payment within 60 days of the deposit
of certificates or the imposition of transfer restrictions on uncertificated
shares, it shall return all deposited certificates and cancel all transfer
restrictions. However, the corporation may again give notice under subdivision
4 and require deposit or restrict transfer at a later time.
Subdivision 6. Supplemental payment; demand. If a dissenter believes that
the amount remitted under subdivision 5 is less than the fair value of the
shares plus interest, the dissenter may give written notice to the corporation
of the dissenter's own estimate of the fair value of the shares, plus interest,
within 30 days after the corporation mails the remittance under subdivision 5,
and demand payment of the difference. Otherwise, a dissenter is entitled only
to the amount remitted by the corporation.
Subdivision 7. Petition; determination. If the corporation receives a
demand under subdivision 6, it shall, within 60 days after receiving the
demand, either pay to the dissenter the amount demanded or agreed to by the
C-3
dissenter after discussion with the corporation or file in court a petition
requesting that the court determine the fair value of the shares, plus
interest. The petition shall be filed in the county in which the registered
office of the corporation is located, except that a surviving foreign
corporation that receives a demand relating to the shares of a constituent
domestic corporation shall file the petition in the county in this state in
which the last registered office of the constituent corporation was located.
The petition shall name as parties all dissenters who have demanded payment
under subdivision 6 and who have not reached agreement with the corporation.
The corporation shall, after filing the petition, serve all parties with a
summons and copy of the petition under the rules of civil procedure.
Nonresidents of this state may be served by registered or certified mail or by
publication as provided by law. Except as otherwise provided, the rules of
civil procedure apply to this proceeding. The jurisdiction of the court is
plenary and exclusive. The court may appoint appraisers, with powers and
authorities the court deems proper, to receive evidence on and recommend the
amount of the fair value of the shares. The court shall determine whether the
shareholder or shareholders in question have fully complied with the
requirements of this section, and shall determine the fair value of the shares,
taking into account any and all factors the court finds relevant, computed by
any method or combination of methods that the court, in its discretion, sees
fit to use, whether or not used by the corporation or by a dissenter. The fair
value of the shares as determined by the court is binding on all shareholders,
wherever located. A dissenter is entitled to judgment in cash for the amount by
which the fair value of the shares as determined by the court, plus interest,
exceeds the amount, if any, remitted under subdivision 5, but shall not be
liable to the corporation for the amount, if any, by which the amount, if any,
remitted to the dissenter under subdivision 5 exceeds the fair value of the
shares as determined by the court, plus interest.
Subdivision 8. Costs; fees; expenses.
(a) The court shall determine the costs and expenses of a proceeding under
subdivision 7, including the reasonable expenses and compensation of any
appraisers appointed by the court, and shall assess those costs and expenses
against the corporation, except that the court may assess part or all of those
costs and expenses against a dissenter whose action in demanding payment under
subdivision 6 is found to be arbitrary, vexatious, or not in good faith.
(b) If the court finds that the corporation has failed to comply
substantially with this section, the court may assess all fees and expenses of
any experts or attorneys as the court deems equitable. These fees and expenses
may also be assessed against a person who has acted arbitrarily, vexatiously,
or not in good faith in bringing the proceeding, and may be awarded to a party
injured by those actions.
(c) The court may award, in its discretion, fees and expenses to an attorney
for the dissenters out of the amount awarded to the dissenters, if any. (Last
amended by Ch. 10, L. '97, eff. 8-1-97.)
C-4
APPENDIX D
CENTURY BANCSHARES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
SELECTED FINANCIAL DATA
Changes in Financial Condition
Total Century Bancshares, Inc. and subsidiaries (the Company) assets at year
end 2000 were $278,050,000. During 2000, assets increased by $49,448,000 or
21.6%. The majority of this increase was in gross loans, which increased by
$46,730,000 or 24.8% to $235,207,000. The loan growth experienced was primarily
due to increased commercial and commercial real estate loan activity within the
Minneapolis metropolitan market.
Most of the increased loan balances were funded by an increase in total
deposits. Total deposits increased from $200,318,000 at December 31, 1999 to
$238,956,000 at December 31, 2000, an increase of $38,638,000, or 19.3%. The
majority of the deposit growth was in additional certificates of deposits
within the Company's Minneapolis metropolitan market area. There was also an
increase in brokered certificates of deposit and Federal Home Loan Bank term
notes. In order to meet the record loan demand, the Company needed to rely more
heavily on non-core deposit funding throughout the year. These sources of funds
however, remain at less than 10% of total assets. The Company refinanced its
note payable and borrowed an additional $665,000 through this financing.
Stockholders' equity increased by $3,757,000 or 19.2% in 2000. This increase
resulted from Company net income of $3,970,000 and a $372,000 increase in
unrealized gains on securities available-for-sale. The Company also redeemed
shares of stock held by a former employee. No dividends were declared or paid.
Total securities increased by $4,891,000 in 2000. Cash and cash equivalents
combined with federal funds sold decreased by $619,000 in 2000.
During the period from December 31, 2000 to September 30, 2001, total assets
grew by $64,540,000, an increase of 23.2%; a significant portion of this
increase was in the purchase of a non-bank subsidiary, Spectrum Commercial
Services Company (Spectrum). Spectrum is an asset based lending company with
total assets as of September 30, 2001 of $20,154,000. On October 31, 2001, the
Company sold its interest in Spectrum to an investor group comprised of certain
officers and directors of the Company for an amount approximating carrying
value.
In addition to the purchase of Spectrum, loan balances at the Company's
subsidiary bank grew by $22,672,000 or 9.6% during the nine-month period.
In September 2001, the Company sold its 60 percent limited partnership
interest in Century Bank Building Partnership to certain officers of the
Company. The sales price was based on the appraised fair value of the building
less existing debt in the partnership and resulted in a gain to the Company of
approximately $1,271,000, of which, approximately $338,000 was deferred. The
Bank's lease with the building partnership was substantially unchanged.
Total deposits increased by $36,223,000, or 15.2% during the period from
December 31, 2000 to September 30, 2001. The Company continued its efforts to
expand depository relationships with its existing customer base. In addition,
several new larger account relationships were initiated within the Twin Cities
market. The growth in deposit balances was balanced in mix between the
following deposit accounts: demand deposits and NOW accounts grew by
$11,465,000, money market savings grew by $11,823,000 and certificates of
deposits grew by $12,935,000.
Notes payable increased $27,612,000 during the nine months ended September
30, 2001. The increase is comprised of $10,000,000 in FHLB advances at the
subsidiary bank, $2,000,000 to fund the purchase of Spectrum, and $15,000,000
in borrowings at Spectrum to fund its asset based lending activities.
Stockholders' equity increased by $4,208,000 from December 31, 2000 to
September 30, 2001. The increase came from $3,911,000 of net income and the
remainder from the change in unrealized gains on available-for-sale securities.
No dividends were declared or paid.
D-1
Results of Operations for the Nine Months Ended September 30, 2001 Compared
with the Nine Months Ended September 30, 2000
For the nine months ended September 30, 2001, the Company's net income
increased by $808,000 or 26.0% over the same nine-month period in 2000. As
discussed in further detail below, the increase primarily resulted from
increased net interest income of $1,004,000 and a gain on sale of the limited
partnership of $933,000.
Net interest income increased by $1,004,000, or 9.7%, to $11,308,000. While
the Company's net interest margin declined to 5.16% from 5.81% for the nine
month period ended September 30, 2001 and 2000, respectively, the primary
component of this decrease was a drop in the prime lending rate of 350 basis
points, an increase in volume of earning assets more than offset this decline.
Another factor contributing to the decline in net interest margin is the
increase in notes payable as a percentage of interest bearing liabilities.
The balance in the allowance for loan losses is based on management's
evaluation of the loan portfolio. Management determines the adequacy of the
allowance for loan losses based on past loan loss experience, current economic
conditions, and composition of the loan portfolio and the potential for future
loss. During the nine month period ended September 30, 2001, there were $21,700
less in net charge-offs compared with the same period in 2000. As a result of
this and due to an increase in the quality of the loan portfolio, the provision
for loan losses decreased by $199,000 to $360,000 for the nine month period
ended September 30, 2001 compared to this same period in 2000. Management
believes the reserve is adequate to absorb estimated losses in the loan
portfolio. The loan loss reserve to total loans was 1.57% as of September 30,
2001.
Other income increased by $1,999,000, or 164% for the first nine months of
2001 compared to the first nine months of 2000. The increase was primarily due
to the gain on sale of the limited partnership interest of $933,000. Also, the
addition of our non bank subsidiary, Spectrum contributed $776,000 in other
income for the period ending September 30, 2001. There was also an increase of
$200,000 in service release premiums and other fees related to Century Bank's
mortgage department.
Operating expenses increased from $5,975,000 to $7,865,000, an increase of
$1,890,000, or 32% for the first nine months of 2001 compared to the same
period in 2000. This increase was primarily related to the addition of
Spectrum, whose total operating expenses were $1,272,000 for the first nine
months of 2001, and a $469,000 increase in salaries and benefits at the
subsidiary bank.
Income tax expense increased by $503,000 in the first nine months of 2001
compared with the same period in 2000 due to an increase of approximately
$1,312,000 in pre-tax income. The effective tax rate was approximately 38%
during both periods.
Results of Operations for the Years Ended December 31, 2000, 1999 and 1998
Net income in 2000 totaled $3,969,000, an increase of $745,000 or 23.1% over
the $3,224,000 earned in 1999. Net income in 1999 was $762,000 or 31.0% over
the 1998 level of $2,462,000. The growth in net income was due largely to the
growth in assets of the Company's subsidiary bank, increased loan fees and
improved operating efficiency. At December 31, 2000, 1999 and 1998, the total
assets per employee were approximately $3.4 million, $3.0 million and $3.0
million, respectively.
Net interest income increased $2,616,000, or 22.8% to $14,084,000 in 2000
compared to $11,468,000 in 1999. The 1999 total represented an increase of
$1,162,000, or 11.3% compared to 1998. The net interest margin for 2000 was
5.86% compared with 6.11% in 1999 and 5.68% in 1998. The margin has been
compressed during the past year as a result of increasing competitive
pressures. Loan yields increased by 73 basis points from 1999 compared to 2000,
however, competitive pressures caused the effective rate paid on deposits to
increase 95 basis points from 4.09% in 1999 to 5.04% in 2000. From 1998 to
1999, the yield on earning assets increased by 28 basis points, from 8.77% in
1998 to 9.05% in 1999. There was also a reduction in the cost of deposits by 55
basis points. The level of year to date average earning assets increased by
$4.7 million from 1998 to 1999 and by $54.7 million from 1999 to 2000.
D-2
The provision for loan losses was $1,053,000 for 2000, representing an
increase of $559,000 or 113.2% over the $494,000 of loss provision charged to
operations in 1999. The 1999 provision was $159,000 or 24.4% less than the
provision of $653,000 incurred in 1998. Net charge-off activity has been
minimal in comparison to total outstanding loans in all of the three comparison
years. The percentage of the allowances for loan losses to total gross loans
outstanding decreased from 1.50% to 1.47% from 1998 to 1999. The percentage of
the allowances for loan losses to total gross loans outstanding increased from
1.47% to 1.59% from 1999 to 2000 due to an increase in credit risk and
provisions made to loan loss reserve totaling $1,053,000.
Other income consists primarily of deposit account service charges, related
fee income, and the equity in earnings of the limited partnership. Other income
increased by $441,000 or 42.3% in 2000 compared to 1999 and by $17,000 or 1.6%
in 1999 compared to 1998. Increases in deposit volume attribute to this
increase in fee income.
Other expenses increased $1,341,000 or 19.6% in 2000 compared to a $110,000
or 1.6% increase in 1999 over 1998 levels. Salary and related benefit expenses
increased by $885,000 or 22.4% in 2000 due to an increase in the number of full
time equivalent employees and also to an increase in base compensation and
individual performance incentives. Salary and benefits decreased by $78,000 or
1.9% from 1998 to 1999. Occupancy expenses increased $153,000 in 2000 and
$237,000 in 1999 primarily due to increases in office space under lease in the
Eden Prairie location.
Income tax expense increased by $412,000 or 21.0% from 1999 to 2000 while
the increase from 1998 to 1999 was $466,000 or 31.1%. The effective income tax
rates approximated 38% during each of these years.
Liquidity and Capital Resources
The concept of liquidity comprises the ability of an enterprise to maintain
sufficient cash flow to meet its needs and obligations on a timely basis. Bank
liquidity must be considered in terms of the nature and mix of the
institution's sources and uses of funds. Bank liquidity is provided from
several asset categories. The asset side of the balance sheet provides
liquidity through maturities of investment securities and repayment of loans.
Cash and amounts due from correspondent banks, investment securities available
for sale and Federal funds sold are primarily sources of asset liquidity. At
December 31, 2000, these categories totaled approximately $39.0 million; these
categories totaled approximately $62.6 million at September 30, 2001.
The Company has no significant plans for major capital expenditures in 2002.
Management believes that, in the current economic environment, the Bank's
liquidity position is adequate. There are no known trends, nor any known
demands, commitments, events or uncertainties that will result or are
reasonably likely to result in a material increase or decrease in the Bank's
liquidity.
Effects of Inflation
The Company's consolidated financial statements and notes thereto have been
prepared in accordance with generally accepted accounting principles, which
require the measurement of financial position and operating results in terms of
historical dollars without considering the changes in the relative purchasing
power of money over time due to inflation. The impact of inflation is reflected
in the increased cost of the Company's operations. Unlike most industrial
companies, nearly all of the assets and liabilities of the Company are monetary
in nature. As a result, interest rates have a greater impact on the Company's
performance than do the effects of general levels of inflation. Interest rates
do not necessarily move in the same direction or to the same extent as the
price of goods and services.
Regulatory Capital Requirements
The Federal Reserve Board, the Company's primary regulator, has adopted
risk-based capital regulations, which require the Company to maintain certain
risk based capital/asset ratios. The Company's capital ratios and those of the
Bank exceed the minimum ratios required by their respective regulators. The
Office of the Comptroller of Currency (OCC) examines and regulates the Bank.
Management is not aware of any pending regulatory requirements or
recommendations that, if enacted, would have a material adverse impact on the
Company's capital, liquidity, or results of operations.
D-3
CENTURY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
September 30, 2001
(Unaudited)
ASSETS
Cash and cash equivalents....................................... $ 25,678,825
Interest-bearing deposits at other financial institutions....... 14,301,000
Available-for-sale securities................................... 22,640,746
Loans, net...................................................... 273,147,474
Premises and equipment, net..................................... 3,382,420
Accrued interest receivable and other assets.................... 3,439,104
------------
$342,589,569
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits:
Noninterest-bearing...................................... $ 67,276,491
Interest-bearing......................................... 207,902,730
------------
Total deposits........................................ 275,179,221
============
Short-term borrowings........................................ 125,000
Notes payable................................................ 35,309,335
Accrued interest payable and other liabilities............... 4,390,725
------------
Total liabilities..................................... 315,004,281
------------
Minority Interest in Consolidated Subsidiary.................... 20,000
------------
Stockholders' Equity
Common stock, $0.01 par value; 20,000,000 shares authorized;
7,950,299 shares issued in 2001 and 2000................... 79,503
Additional paid-in capital................................... 8,353,139
Retained earnings............................................ 18,518,171
Accumulated other comprehensive income....................... 614,475
------------
Total stockholders' equity............................ 27,565,288
------------
$342,589,569
============
See Notes to Condensed Consolidated Financial Statements
D-4
CENTURY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEM ENTS OF INCOME
Nine Months Ended September 30, 2001 and 2000
(Unaudited)
2001 2000
- ----------- -----------
Interest income:
Loans............................................................. $16,485,371 $15,825,941
Asset-based lending............................................... 1,258,772 --
Securities and interest-bearing accounts.......................... 1,679,827 1,432,421
Federal funds sold................................................ -- 19,437
----------- -----------
19,423,970 17,277,799
----------- -----------
Interest expense:
Deposits.......................................................... 6,814,463 6,528,274
Notes payable and short-term borrowings........................... 1,301,565 445,207
----------- -----------
8,116,028 6,973,481
----------- -----------
Net interest income........................................ 11,307,942 10,304,318
Provision for loan losses............................................ 360,000 559,024
----------- -----------
Net interest income after provision for loan losses........ 10,947,942 9,745,294
----------- -----------
Other income:
Service charges and other fees.................................... 2,205,752 1,127,746
Gain on sale of limited partnership to related party.............. 932,872 --
Equity in earnings of limited partnership......................... 80,228 91,965
----------- -----------
3,218,852 1,219,711
----------- -----------
Other expenses:
Salaries and employee benefits.................................... 4,422,318 3,581,178
Occupancy expenses................................................ 1,276,845 1,245,642
Other expenses.................................................... 2,165,424 1,147,581
----------- -----------
7,864,587 5,974,401
----------- -----------
Income before income taxes................................. 6,302,207 4,990,604
Provision for income taxes........................................... 2,390,810 1,887,318
----------- -----------
Net income................................................. $ 3,911,397 $ 3,103,286
=========== ===========
See Notes to Condensed Consolidated Financial Statements.
D-5
CENTURY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 2001 and 2000
(Unaudited)
2001 2000
- ------------ ------------
Cash Flows From Operating Activities
Net income.............................................................. $ 3,911,397 $ 3,103,286
Adjustments to reconcile net income to net cash provided by
operating activities:
Net amortization and accretion of bond premiums and discounts........ (38,477) (2,710)
Gain on sale of limited partnership.................................. (932,872) --
Provision for loan losses............................................ 360,000 559,024
Depreciation......................................................... 502,180 486,857
Equity in earnings from limited partnership, net of distributions of
$42,000 and $56,250, in 2001 and 2000, respectively................ (38,228) (35,715)
Other................................................................ 1,207,831 (233,265)
------------ ------------
Net cash provided by operating activities........................ 4,971,831 3,877,477
------------ ------------
Cash Flows From Investing Activities
Purchases of available-for-sale securities.............................. (6,214,549) (6,060,995)
Maturities of available-for-sale securities............................. 10,197,829 1,480,495
Net increase in interest-bearing accounts............................... (14,301,000) (5,300,000)
Net decrease in federal funds sold...................................... -- 4,725,000
Net increase in loans................................................... (26,634,604) (39,351,866)
Purchases of premises and equipment..................................... (477,000) (450,561)
Proceeds from sale of limited partnership............................... 1,637,466 --
Purchase of certain assets and assumption of certain liabilities of
Spectrum Commercial Services.......................................... (3,500,000) --
------------ ------------
Net cash used in investing activities............................ (39,291,858) (44,957,927)
------------ ------------
Cash Flows From Financing Activities
Net increase in deposits................................................ 36,223,487 35,681,857
Increase (decrease) in short-term borrowings............................ (5,180,677) 17,617,796
Proceeds from notes payable............................................. 20,278,358 14,665,000
Payment on notes payable................................................ (4,271,230) (11,000,000)
Proceeds from sale of stock of subsidiary............................... 20,000 --
Proceeds from issuance of common stock.................................. -- 78,118
Redemption of common stock.............................................. -- (719,751)
------------ ------------
Net cash provided by financing activities........................ 47,069,938 56,323,020
------------ ------------
Increase in cash and cash equivalents............................ 12,749,911 15,242,570
Cash and Cash Equivalents
Beginning............................................................ 12,928,914 8,822,985
------------ ------------
Ending............................................................... $ 25,678,825 $ 24,065,555
============ ============
See Notes to Condensed Consolidated Financial Statements.
D-6
Note 1. Summary of Significant Accounting Policies
Nature of business: Century Bancshares, Inc., is a bank holding company.
Its wholly owned subsidiary, Century Bank, National Association (Bank), is a
commercial bank with branch operations in Eden Prairie, St. Louis Park, and
Coon Rapids, Minnesota. The Bank provides retail and commercial loan and
deposit services principally to customers within the Minneapolis-St. Paul
metropolitan area. Century Bancshares, Inc., purchased a 99 percent interest in
Spectrum Commercial Services Company (Spectrum) in March 2001. Spectrum
provides asset-based lending and factoring services to small to medium-sized
businesses. The acquisition of Spectrum has been accounted for as a purchase,
and results of operations of Spectrum since the date of acquisition have been
included in the consolidated financial statements (see also Note 4).
Basis of financial statement presentation: The accompanying unaudited
interim consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America for
interim financial information. Accordingly, they do not include all information
and disclosures required by generally accepted accounting principles for
complete financial statements. The accompanying condensed consolidated
financial statements do not purport to contain all the necessary financial
disclosures required by generally accepted accounting principles that might
otherwise be necessary in the circumstances.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for fair presentations have been
included. The results of operations for the nine-month periods ended September
30, 2001 and 2000, are not necessarily indicative of the results that may be
expected for the entire fiscal years or any other interim periods.
Note 2. Comprehensive Income
Accumulated comprehensive income is composed of unrealized gains on
available-for-sale securities, net of related deferred income taxes, the change
in which is as follows:
Nine Months Ended
September 30
----------------------
2001 2000
----------- -----------
(Unaudited) (Unaudited)
Beginning balance............................................................. $ 318,427 $ (53,516)
Increase in fair value of available-for-sale securities during the period, net
of deferred taxes........................................................... 296,048 148,527
---------- ----------
Ending balance................................................................ $ 614,475 $ 95,011
========== ==========
Comprehensive income consists of the following:
Net income................................................................. $3,911,397 $3,103,286
Other comprehensive income................................................. 296,048 148,527
---------- ----------
Comprehensive income.......................................................... $4,207,445 $3,251,813
========== ==========
Note 3. Century Bank Building Partnership
In September 2001, the Company sold its 60 percent limited partnership
interest in Century Bank Building Partnership to certain officers of the
Company. The sales price was based on the appraised fair value of the building
less existing debt in the partnership and resulted in a gain to the Company of
approximately $1,271,000, of which approximately $338,000 was deferred. The
Bank's lease with the building partnership was substantially unchanged. The
deferred gain is being amortized over the remaining lease term and will be
immediately recognizable upon the related parties' sale of either the building
or their ownership in the Company.
D-7
Note 4. Acquisition of Spectrum Commercial Services Company
In March 2001, the Company acquired certain assets for cash and assumption
of certain liabilities of an asset-based lending and factoring business. The
total acquisition cost was $15,105,000, which was comprised of assumption of
liabilities totaling $11,605,000 and cash payments totaling $3,500,000.
The acquisition has been accounted for as a purchase, and results of
operations of Spectrum since the date of acquisition are included in the
consolidated financial statements. A summary of the net assets acquired is as
follows:
Receivables arising from asset-based lending and factored accounts, net of discount $ 14,905,000
Other assets....................................................................... 200,000
Revolving note payable............................................................. (11,605,000)
------------
Cash payments...................................................................... $ 3,500,000
============
Note 5. Subsequent Events
The Company entered into a merger agreement on December 3, 2001, which will
result in the merger of the Company with and into Marshall & Ilsley Corporation
and the conversion of each outstanding share of common stock of the Company
into an equivalent number of shares of common stock of Marshall & Ilsley and/or
a cash payment with certain limitations of $7.40, subject to certain closing
conditions. The merger requires regulatory and shareholder approval and is
anticipated to close in the first quarter of 2002.
On October 31, 2001, the Company sold all of its shares of Spectrum
Commercial Services Company to an investor group comprised of certain officers,
directors, and stockholders of the Company. The sales price approximated the
carrying value.
D-8
CENTURY BANCSHARES, INC.
SELECTED FINANCIAL DATA
(AMOUNTS IN THOUSANDS EXCEPT SHARE AND RATIO DATA)
As of and for the nine
months ended
September 30, As of and for the years ended December 31,
---------------------- -------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
--------- --------- --------- --------- --------- --------- ---------
(Unaudited)
Income statement data:
Interest income........... $ 19,424 $ 17,278 $ 23,772 $ 17,378 $ 16,434 $ 13,211 $ 10,166
Interest expense.......... 8,116 6,974 9,688 5,910 6,128 4,492 3,138
--------- --------- --------- --------- --------- --------- ---------
Net interest
income.............. 11,308 10,304 14,084 11,468 10,306 8,719 7,028
Provision for loan losses. 360 559 1,053 494 653 406 377
Other income.............. 3,219 1,220 1,485 1,044 1,027 826 687
Other expenses............ 7,865 5,975 8,171 6,830 6,719 5,673 4,785
--------- --------- --------- --------- --------- --------- ---------
Income before
income taxes........ 6,302 4,990 6,345 5,188 3,961 3,466 2,553
Income tax expense........ 2,391 1,887 2,376 1,964 1,499 1,315 936
--------- --------- --------- --------- --------- --------- ---------
Net income............ $ 3,911 $ 3,103 $ 3,969 $ 3,224 $ 2,462 $ 2,151 $ 1,617
========= ========= ========= ========= ========= ========= =========
Per common share data:
Net income per share
Basic................. $0.49 $0.39 $0.49 $0.40 $0.30 $0.27 $0.21
Diluted............... $0.46 $0.36 $0.46 $0.38 $0.29 $0.26 $0.20
Weighted average shares
outstanding
Basic................. 7,950,299 8,042,766 8,019,459 8,095,517 8,128,267 8,127,999 7,870,136
Diluted............... 8,485,107 8,583,485 8,560,178 8,602,176 8,553,705 8,331,001 7,986,212
Cash dividends per share..... $ -- $ -- $ -- $ -- $ -- $ -- $ --
Balance sheet data:
Total assets.............. $342,590 $288,779 $278,050 $228,602 $200,274 $163,881 $131,397
Loans, net................ 271,370 226,363 231,472 185,709 153,765 128,378 97,544
Allowances for loan
losses.................. 4,321 3,256 3,735 2,768 2,366 1,723 1,545
Total deposits............ 275,179 236,000 238,956 200,318 176,136 145,175 115,297
Stockholders' equity...... 27,565 22,268 23,358 19,601 17,191 14,655 12,362
LOAN PORTFOLIO (amounts in 000's)
All of the Company's loans are domestic.
December 31,
September 30, -------------------------------------------
2001 2000 1999 1998 1997 1996
------------- -------- -------- -------- -------- -------
Commercial Loans.............. $152,627 $126,022 $ 86,730 $ 69,426 $ 56,090 $42,226
Commercial Real Estate Loans.. 78,491 69,713 72,186 60,747 47,187 32,557
Residential Real Estate Loans. 25,058 23,725 17,197 16,490 18,924 11,425
Consumer Loans................ 19,515 15,747 12,364 9,468 7,900 12,881
-------- -------- -------- -------- -------- -------
Total Gross Loans.......... $275,691 $235,207 $188,477 $156,131 $130,101 $99,089
-------- -------- -------- -------- -------- -------
Less Allowance for Loan Losses 4,321 3,735 2,768 2,366 1,723 1,545
-------- -------- -------- -------- -------- -------
Loans, net................. $271,370 $231,472 $185,709 $153,765 $128,378 $97,544
======== ======== ======== ======== ======== =======
Loans held for sale........... 1,777 496 1,861 1,272 665 411
-------- -------- -------- -------- -------- -------
Total Loans, net........... $273,147 $231,968 $187,570 $155,037 $129,043 $97,955
======== ======== ======== ======== ======== =======
D-9
LOAN MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES AS OF DECEMBER 31,
2000 (amounts in 000's)
The following table summarizes the first available repricing period of the
loan principal balances outstanding as of December 31, 2000:
Due after
one year Due after
One year through five
or less five years years Total
-------- ---------- --------- --------
Fixed Rate Maturities
Commercial Loans................. $ 4,494 $12,352 $3,905 $ 20,751
Commercial Real Estate Loans..... 5,070 15,834 3,383 24,287
Residential Real Estate Loans.... 2,137 8,456 698 11,291
Consumer Loans................... 3,008 5,093 23 8,124
-------- ------- ------ --------
Sub-total Fixed Rate Loans.... $ 14,709 $41,735 $8,009 $ 64,453
Variable Rate Loans
Commercial Loans................. $105,264 -- -- $105,264
Commercial Real Estate Loans..... 45,426 -- -- 45,426
Residential Real Estate Loans.... 12,434 -- -- 12,434
Consumer Loans................... 7,587 -- -- 7,587
-------- ------- ------ --------
Sub-total Variable Rate Loans. $170,711 $ -- $ -- $170,711
Nonaccrual Loans 8 35 43
-------- ------- ------ --------
Total Loans................... $185,428 $41,770 $8,009 $235,207
======== ======= ====== ========
PAST DUE AND NONPERFORMING LOANS AND ASSETS (amounts in 000's)
The following table reflects as of the period ended the aggregate amounts of
loans past due and nonperforming:
September 30, December 31,
------------- ------------------------
2001 2000 1999 1998 1997 1996
------------- ---- ---- ---- ---- ----
Loans, excluding restructured loans:
Loans contractually past due over 90 days.... $-- $ 1 $254 $195 $-- $18
Nonaccrual Loans............................. 29 43 182 84 17 4
Restructured loans not in compliance with terms:
Loans contractually past due 30-89 days...... -- -- -- -- -- --
Loans contractually past due over 90 days.... -- -- -- -- -- --
Nonaccrual Loans............................. -- -- -- -- -- --
Other real estate owned......................... -- 277 -- -- 972 --
---- ---- ---- ---- ---- ---
Total.................................... $ 29 $321 $436 $279 $989 $22
==== ==== ==== ==== ==== ===
Interest that would have been recorded on nonaccrual loans was immaterial
during the period ending September 30, 2001 and the years ended December 31,
2000, 1999, 1998, 1997 and 1996.
Nonaccrual Status
Accrual of interest on loans is ceased when principal or interest is due and
has remained unpaid for 90 days or more unless the loan is fully secured by
U.S. government securities,securities issued by agencies of the U.S.
government, marketable securities, verified cash surrender value of life
insurance, and/or assigned deposit accounts. Loans, or portions thereof which
are guaranteed by a government agency are also exempt.
Loans which are on nonaccrual status are not restored to accruing status
until all delinquent principal and/or interest has been brought current.
D-10
LOAN CONCENTRATIONS (amounts in 000's)
September 30, December 31,
2001 2000
------------- ------------
Loans secured by real estate:
Construction and land development. $26,960 $28,646
Investment real estate............ $50,859 $37,039
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES (amounts in 000's)
September 30, December 31,
-------------- --------------------------------------
2001 2000 2000 1999 1998 1997 1996
------ ------ ------ ------ ------ ------ ------
Balance at beginning of period........... $3,737 $2,768 $2,768 $2,366 $1,723 $1,545 $1,197
Charge-offs:
Commercial Loans...................... $ 14 $ 82 $ 83 $ 6 $ 29 $ 17 $ 33
Real Estate Loans..................... 40 -- -- -- 21 157 --
Consumer Loans........................ 2 4 25 91 13 62 2
------ ------ ------ ------ ------ ------ ------
Subtotal.......................... $ 56 $ 86 $ 108 $ 97 $ 63 $ 236 $ 35
Recoveries:
Commercial Loans...................... $ -- $ 10 $ 11 $ -- $ 41 $ -- $ 6
Real Estate Loans..................... -- -- -- -- 4 -- --
Consumer Loans........................ 6 5 11 5 8 8 --
------ ------ ------ ------ ------ ------ ------
Subtotal.......................... $ 6 $ 15 $ 22 $ 5 $ 53 $ 8 $ 6
------ ------ ------ ------ ------ ------ ------
Net charge-offs:......................... $ 50 $ 71 $ 86 $ 92 $ 10 $ 228 $ 29
------ ------ ------ ------ ------ ------ ------
Provisions charged to operations......... $ 360 $ 559 $1,053 $ 494 $ 653 $ 406 $ 377
Allowance of acquired company............ $ 274 $ -- $ -- $ -- $ -- $ -- $ --
------ ------ ------ ------ ------ ------ ------
Balance at end of period................. $4,321 $3,256 $3,735 $2,768 $2,366 $1,723 $1,545
====== ====== ====== ====== ====== ====== ======
Ratio of net charge-offs during period to
average loans outstanding during the
period................................. 0.02% 0.03% 0.04% 0.05% 0.01% 0.17% 0.03%
====== ====== ====== ====== ====== ====== ======
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
DISCUSSION OF RISK ELEMENTS IN THE LOAN PORTFOLIO AND FACTORS CONSIDERED IN
DETERMINING THE ALLOWANCE FOR LOAN LOSSES
Bank management is responsible for recognizing, reporting, monitoring and
controlling delinquencies at proper levels and for prompt, diligent follow-up
of deteriorating credits. Regular procedures are established for routine
follow-up of deteriorating credits and for routine follow-up and collection of
delinquent loans. Immediate attention is given to personal or business loans
when any difficulty becomes apparent in regard to interest payments or
agreed-up principal reductions. Past dues are reviewed weekly. The status of
business loans is monitored by Bank management on a continuing basis through
interim financial statements, personal visits with the principals of the
companies involved, and through other sources such as credit reports. As
potential difficulties arise, management takes timely and appropriate action to
assist the borrower in correcting these problems, if possible, and to protect
the Bank from loss.
D-11
The Board is kept apprised of the status of all problem loans on a monthly
basis. Delinquency reports on problem loans and a list of loans past due over
30 days are reviewed at the regular monthly meeting.
On a quarterly basis, bank management evaluates several external and
internal factors when determining the adequacy of the Allowance for Loan Losses
(ALL). The factors considered are local and national economic trends, loan
concentrations, growth in particular concentration areas, past due loans and
loans subject to classification in recent regulatory agency examinations or
independent audits.
The ALL is maintained at a level adequate to provide for potential loan
losses through provisions charged to operating expense. This adequacy is based
upon a continuing review of loans which includes actual net loan loss
experienced, identification of problem situations which may affect the
borrower's ability to repay, an evaluation of current economic conditions, and
changes in the size and character of the loan portfolio.
Loan losses are recognized through charges to the ALL.
The Bank has implemented a risk rating process and the Senior Lender is
responsible for the overall accuracy of the risk ratings assigned to loans in
the portfolio.
During the credit analysis process, the Bank will assign a risk rating based
upon eight risk rating classifications. When in doubt as to which rating to
assign, lenders are encouraged to use the lower risk rating. All risk ratings
are reviewed by the internal loan committee when the credit is presented for
approval and at the time of all subsequent reviews.
Each month, an ALL adequacy analysis is completed and reviewed by senior
management and the Board of Directors. This report calculates a projected loan
loss allowance based on a factor assigned to each risk rated loan category,
standby letters of credit and undisbursed lines of credit. The risk rating
categories assigned to loans and the related loss factors are as follows:
Risk Rating Category Loss Factor
-------------------- -----------
Standby Letters Of Credit............ 0.05%
Undisbursed Lines Of Credit.......... 0.25%
Risk Rating Class 1.................. 0.10%
Risk Rating Class 2.................. 0.50%
Risk Rating Class 3.................. 0.75%
Risk Rating Class 4.................. 1.00%
Risk Rating Class 5 (Special Mention) 2.50%
Risk Rating Class 6 (Substandard).... 15.00%
Risk Rating Class 7 (Doubtful)....... 50.00%
Risk Rating Class 8 (Loss)........... 100.00%
The Company's internal risk ratings of 6, 7 and 8 correspond with regulatory
definitions of substandard, doubtful and loss. The ALL is maintained at a level
that is greater than or equal to the adequacy calculation.
CHARGE-OFFS ANTICIPATED IN 2002
The management of Century Bank anticipates that loan charge-offs will be in
line with historical numbers of approximately .10% of total loans. For 2002
budget purposes, net charge-offs of $383,000 were planned. Bank management does
not foresee that the changing economic conditions will impact the original
budget.
D-12
CENTURY BANCSHARES, INC. AND SUBSIDIARY
Consolidated Financial Report
December 31, 2000
D-13
CONTENTS
FINANCIAL STATEMENTS
Independent auditor's report.................... D-15
Consolidated balance sheets..................... D-16
Consolidated statements of income............... D-17
Consolidated statements of stockholders' equity. D-18
Consolidated statements of cash flows........... D-19
Notes to consolidated financial statements...... D-20-37
D-14
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Century Bancshares, Inc.
and Subsidiary
Eden Prairie, Minnesota
We have audited the accompanying consolidated balance sheets of Century
Bancshares, Inc. and Subsidiary as of December 31, 2000 and 1999, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the years in the three-year period ended December 31, 2000. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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
audits provide 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 Century
Bancshares, Inc. and Subsidiary as of December 31, 2000 and 1999, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States of America.
MCGLADREY & PULLEN, LLP
Minneapolis, Minnesota
February 23, 2001, except for Note 18,
which is as of December 27, 2001
D-15
CENTURY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 2000 and 1999
2000 1999
------------ ------------
ASSETS
Cash and cash equivalents (Note 2)........................................ $ 12,928,914 $ 8,822,985
Federal funds sold........................................................ -- 4,725,000
Available-for-sale securities (Note 3).................................... 26,087,687 21,196,656
Loans held for sale (Note 4).............................................. 495,720 1,860,900
Loans, net of allowance for loan losses of $3,735,546 and $2,768,205,
respectively (Notes 5, 12, and 14)...................................... 231,471,776 185,709,339
Premises and equipment, net (Note 6)...................................... 3,432,600 3,433,951
Investment in limited partnership (Note 18)............................... 328,475 300,512
Accrued interest receivable and other assets (Note 11).................... 3,304,955 2,552,477
------------ ------------
$278,050,127 $228,601,820
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits (Notes 3 and 7):
Noninterest-bearing................................................ $ 58,140,029 $ 51,704,945
Interest-bearing................................................... 180,815,705 148,612,915
------------ ------------
Total deposits.................................................. 238,955,734 200,317,860
Short-term borrowings (Note 8)......................................... 5,305,677 1,001,651
Notes payable (Note 9)................................................. 7,696,833 6,031,833
Accrued interest payable and other liabilities......................... 2,734,220 1,649,893
------------ ------------
Total liabilities............................................... 254,692,464 209,001,237
------------ ------------
Commitments, Contingencies, and Credit Risk (Notes 12 and 18)
Stockholders' Equity (Notes 10 and 15)
Common stock, $0.01 par value; 20,000,000 shares authorized; 7,950,299
and 8,050,299 shares issued in 2000 and 1999, respectively........... 79,503 80,503
Additional paid-in capital............................................. 8,353,139 8,218,100
Retained earnings...................................................... 14,606,774 11,355,596
Accumulated other comprehensive income (loss) (Note 3)................. 318,247 (53,616)
------------ ------------
Total stockholders' equity...................................... 23,357,663 19,600,583
------------ ------------
$278,050,127 $228,601,820
============ ============
See Notes to Consolidated Financial Statements.
D-16
CENTURY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 2000, 1999, and 1998
2000 1999 1998
- ----------- ----------- -----------
Interest income:
Loans....................................................... $21,889,962 $16,008,119 $14,807,046
Securities.................................................. 1,859,761 1,285,928 1,424,174
Federal funds sold.......................................... 22,145 83,987 202,730
----------- ----------- -----------
23,771,868 17,378,034 16,433,950
----------- ----------- -----------
Interest expense:
Deposits.................................................... 8,904,610 5,420,511 5,848,443
Notes payable and short-term borrowings..................... 783,353 489,425 279,272
----------- ----------- -----------
9,687,963 5,909,936 6,127,715
----------- ----------- -----------
Net interest income..................................... 14,083,905 11,468,098 10,306,235
Provision for loan losses (Note 5)............................. 1,052,719 493,518 652,787
----------- ----------- -----------
Net interest income after provision for loan losses..... 13,031,186 10,974,580 9,653,448
----------- ----------- -----------
Other income:
Service charges and fees on deposit accounts................ 910,826 666,715 598,548
Equity in earnings of limited partnership................... 114,213 84,116 141,209
Other fees.................................................. 460,005 293,136 287,313
----------- ----------- -----------
1,485,044 1,043,967 1,027,070
----------- ----------- -----------
Other expenses:
Salaries and employee benefits (Note 13).................... 4,827,014 3,942,378 4,020,718
Rentals to related party (Note 14).......................... 607,000 563,000 496,000
Other occupancy expenses.................................... 1,047,305 938,775 768,698
Other expenses.............................................. 1,689,204 1,385,743 1,434,096
----------- ----------- -----------
8,170,523 6,829,896 6,719,512
----------- ----------- -----------
Income before income taxes.............................. 6,345,707 5,188,651 3,961,006
Provision for income taxes (Note 11)........................... 2,376,218 1,964,203 1,498,699
----------- ----------- -----------
Net income.............................................. $ 3,969,489 $ 3,224,448 $ 2,462,307
=========== =========== ===========
See Notes to Consolidated Financial Statements.
D-17
CENTURY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 2000, 1999, and 1998
Common Stock
------------------ Additional
Comprehensive Par Paid-In
Income Shares Value Capital
------------- --------- ------- ----------
Balance, December 31, 1997................................................ 8,127,999 $81,280 $8,140,092
Comprehensive income:
Net income............................................................. $2,462,307 -- -- --
Unrealized gain on securities (Note 3)................................. 72,261 -- -- --
----------
$2,534,568
==========
Issuance of common stock (Note 10)...................................... 400 4 656
--------- ------- ----------
Balance, December 31, 1998................................................ 8,128,399 81,284 8,140,748
Comprehensive income:
Net income............................................................. $3,224,448 -- -- --
Unrealized loss on securities (Note 3)................................. (449,414) -- -- --
----------
$2,775,034
==========
Issuance of common stock (Note 10)...................................... 32,600 326 44,872
Redemption of common stock.............................................. (110,700) (1,107) --
Tax benefit recognized from exercise of certain stock options (Note 10). -- -- 32,480
--------- ------- ----------
Balance, December 31, 1999................................................ 8,050,299 80,503 8,218,100
Comprehensive income:
Net income............................................................. $3,969,489 -- -- --
Unrealized gain on securities (Note 3)................................. 371,863 -- -- --
----------
$4,341,352
==========
Issuance of common stock (Note 10)...................................... 43,950 440 77,678
Redemption of common stock.............................................. (143,950) (1,440) --
Tax benefit recognized from exercise of certain stock options (Note 10). -- -- 57,361
--------- ------- ----------
Balance, December 31, 2000................................................ 7,950,299 $79,503 $8,353,139
========= ======= ==========
Accumulated
Other
Retained Comprehensive
Earnings Income (Loss) Total
----------- ------------- -----------
Balance, December 31, 1997................................................ $ 6,110,534 $ 323,537 $14,655,443
Comprehensive income:
Net income............................................................. 2,462,307 -- 2,462,307
Unrealized gain on securities (Note 3)................................. -- 72,261 72,261
Issuance of common stock (Note 10)...................................... -- -- 660
----------- --------- -----------
Balance, December 31, 1998................................................ 8,572,841 395,798 17,190,671
Comprehensive income:
Net income............................................................. 3,224,448 -- 3,224,448
Unrealized loss on securities (Note 3)................................. -- (449,414) (449,414)
Issuance of common stock (Note 10)...................................... -- -- 45,198
Redemption of common stock.............................................. (441,693) -- (442,800)
Tax benefit recognized from exercise of certain stock options (Note 10). -- -- 32,480
----------- --------- -----------
Balance, December 31, 1999................................................ 11,355,596 (53,616) 19,600,583
Comprehensive income:
Net income............................................................. 3,969,489 -- 3,969,489
Unrealized gain on securities (Note 3)................................. -- 371,863 371,863
Issuance of common stock (Note 10)...................................... -- -- 78,118
Redemption of common stock.............................................. (718,311) -- (719,751)
Tax benefit recognized from exercise of certain stock options (Note 10). -- -- 57,361
----------- --------- -----------
Balance, December 31, 2000................................................ $14,606,774 $ 318,247 $23,357,663
=========== ========= ===========
See Notes to Consolidated Financial Statements.
D-18
CENTURY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2000, 1999, and 1998
2000 1999 1998
------------ ------------ ------------
Cash Flows From Operating Activities
Net income.................................................... $ 3,969,489 $ 3,224,448 $ 2,462,307
Adjustments to reconcile net income to net cash provided by
operating activities:
Net amortization and accretion of bond premiums and
discounts................................................ (4,243) 52,409 (717)
Net (increase) decrease in loans held for sale............. 1,365,180 (588,700) (607,200)
Provision for loan losses.................................. 1,052,719 493,518 652,787
Depreciation............................................... 634,493 555,420 411,487
Equity in earnings from limited partnership, net of
distributions of $86,250, $64,200, and $120,000 in 2000,
1999, and 1998, respectively............................. (27,963) (19,916) (21,209)
Other...................................................... 136,094 (641,265) 683,116
------------ ------------ ------------
Net cash provided by operating activities.............. 7,125,769 3,075,914 3,580,571
------------ ------------ ------------
Cash Flows From Investing Activities
Cash flows from securities (Note 16).......................... (4,261,809) 1,850,433 (3,454,368)
Net decrease in federal funds sold............................ 4,725,000 1,425,000 (6,150,000)
Net increase in loans......................................... (46,815,156) (32,437,398) (26,040,529)
Purchases of premises and equipment........................... (633,142) (1,074,822) (956,764)
Proceeds from sale of premises and equipment.................. -- 47,188 --
Contribution to limited partnership........................... -- (86,892) --
------------ ------------ ------------
Net cash used in investing activities.................. (46,985,107) (30,276,491) (36,601,661)
------------ ------------ ------------
Cash Flows From Financing Activities
Net increase in deposits...................................... 38,637,874 24,181,365 30,961,222
Increase (decrease) in short-term borrowings.................. 4,304,026 (6,669) (1,041,284)
Proceeds from notes payable................................... 3,498,333 2,323,500 3,875,000
Payment on notes payable...................................... (1,833,333) (166,667) --
Proceeds from issuance of common stock........................ 78,118 45,198 660
Redemption of common stock.................................... (719,751) (442,800) --
------------ ------------ ------------
Net cash provided by financing activities.............. 43,965,267 25,933,927 33,795,598
------------ ------------ ------------
Increase (decrease) in cash and cash equivalents....... 4,105,929 (1,266,650) 774,508
Cash and Cash Equivalents
Beginning.................................................. 8,822,985 10,089,635 9,315,127
------------ ------------ ------------
Ending..................................................... $ 12,928,914 $ 8,822,985 $ 10,089,635
============ ============ ============
See Notes to Consolidated Financial Statements.
D-19
CENTURY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
Nature of business: Century Bancshares, Inc., is a one-bank holding company
operating a single business segment. Its wholly owned subsidiary, Century Bank,
National Association (Bank), is a commercial bank with branch operations in
Eden Prairie, St. Louis Park, and Coon Rapids, Minnesota. The Bank provides
retail and commercial loan and deposit services principally to customers within
the Minneapolis-St. Paul metropolitan area.
Basis of financial statement presentation and accounting estimates: The
consolidated financial statements 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 as of the date of the
balance sheet and revenues and expenses for the period. Actual results could
differ from those estimates. A material estimate that is particularly
susceptible to significant change in the near term relates to the determination
of the allowance for loan losses.
Principles of consolidation: The accompanying consolidated financial
statements include the accounts of Century Bancshares, Inc., and its wholly
owned subsidiary, Century Bank, National Association. These entities are
collectively referred to herein as the Company. All significant intercompany
balances and transactions have been eliminated in consolidation.
Cash, cash equivalents, and cash flows: For purposes of reporting cash
flows, cash and cash equivalents includes cash on hand and amounts due from
banks. Cash flows from loans, federal funds sold, deposits, and short-term
borrowings are reported net.
Available-for-sale securities: Securities classified as available-for-sale
are those debt securities that the Company intends to hold for an indefinite
period of time, but not necessarily to maturity. Any decision to sell a
security classified as available-for-sale would be based on various factors,
including significant movements in interest rates, changes in the maturity mix
of the Company's assets and liabilities, liquidity needs, regulatory capital
considerations, and other similar factors. Securities available for sale are
carried at fair value. Unrealized gains or losses, net of the related deferred
tax effect, are reported as increases or decreases in accumulated other
comprehensive income. Realized gains or losses, determined on the basis of the
cost of specific securities sold, are included in earnings.
Loans held for sale: Loans that the Company has the intent to sell in the
foreseeable future are carried at the lower of aggregate cost or market value.
The market value calculation includes consideration of all open positions.
Gains and losses on sales of loans are recognized at trade dates and are
determined by the difference between the sales proceeds and the carrying value
of the loans. All sales are made without recourse.
Loans and allowance for loan losses: Loans are stated at the amount of
unpaid principal, reduced by an allowance for loan losses.
D-20
CENTURY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies (Continued)
The allowance for loan losses is established through a provision for loan
losses charged to expense. Loans are charged against the allowance for loan
losses when management believes that collectibility of the principal is
unlikely. The allowance is an amount that management believes will be adequate
to absorb estimated losses on existing loans that may become uncollectible,
based on evaluation of the collectibility of loans and prior loan loss
experience. This evaluation also takes into consideration such factors as
changes in the nature and volume of the loan portfolio, overall portfolio
quality, review of specific problem loans, and current economic conditions that
may affect the borrower's ability to pay. While management uses the best
information available to make its evaluation, future adjustments to the
allowance may be necessary if there are significant changes in economic
conditions.
A loan is impaired when it is probable the Company will be unable to collect
all principal and interest payments due in accordance with the terms of the
loan agreement. Impaired loans are measured based on the present value of
expected future cash flows or, alternatively, the observable market price or
the fair value of the collateral if the loan is collateral dependent. The
amount of impairment, if any, and any subsequent changes are included in the
allowance for loan losses.
Interest on loans is accrued daily on the outstanding balances. For impaired
loans, accrual of interest is discontinued on a loan when management believes,
after considering collection efforts and other factors, that the borrower's
financial condition is such that collection of interest is doubtful. Interest
on these loans is recognized only when actually paid by the borrower if
collection of the principal is likely to occur.
Premises and equipment: Premises and equipment are stated at cost less
accumulated depreciation. Depreciation is provided principally by the
straight-line method over the estimated useful lives of the assets.
Investment in limited partnership: The Company accounts for its investment
in a limited partnership using the equity method of accounting, under which the
Company's equity in the net income of the limited partnership is recognized as
other income in the Company's consolidated statement of income and added to the
investment account, and distributions received from the limited partnership are
treated as a reduction of the investment account (see also Note 18).
Income taxes: Deferred taxes are provided on an asset and liability method
whereby deferred tax assets are recognized for deductible temporary differences
and operating loss or tax credit carry forwards, and deferred tax liabilities
are recognized for taxable temporary differences. Temporary differences are the
differences between the amounts of assets and liabilities recorded for income
tax and financial reporting purposes. Deferred tax assets are reduced by a
valuation allowance when management determines that it is more likely than not
that some portion or all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of changes in
tax laws and rates on the date of enactment.
D-21
CENTURY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies (Continued)
Employee benefit plan:
Salary reduction-401(k) plan: The Company provides a 401(k) plan which
covers substantially all of the Company's employees who are eligible as to age
and length of service. A participant may elect to make contributions of up to
15 percent of the participant's annual compensation. The Company makes
contributions at the discretion of the Board of Directors and complies with the
requirements of the plan agreement.
Fair value of financial instruments: The following methods and assumptions
were used by the Company in estimating the fair value of its financial
instruments:
The carrying amounts reported in the consolidated balance sheets for cash
and cash equivalents, federal funds sold, available-for-sale securities, demand
deposits, NOW and money market deposits, savings deposits, short-term
borrowings, accrued interest receivable, and accrued interest payable
approximate their fair values.
Fair values of variable-rate loans that reprice frequently and that have
experienced no significant change in credit risk are based on carrying values.
Fair values of all other loans are estimated based on discounted cash flows
using interest rates currently being offered for loans with similar terms to
borrowers with similar credit quality.
Fair values of loans held for sale are based on quoted market prices of
similar loans sold on the secondary market.
Fair values of fixed-rate time certificates are estimated using a discounted
cash flow calculation that applies interest rates currently being offered to a
schedule of aggregate expected monthly maturities.
Fair values of fixed-rate notes payable are estimated using a discounted
cash flow calculation that applies an interest rate for similar debt offerings
to the expected maturity of the notes payable.
Note 2. Restrictions on Cash and Cash Equivalents
The Bank is required to maintain reserve balances, in cash or on deposit
with the Federal Reserve Bank, based upon a percentage of deposits. The total
required reserve balances as of December 31, 2000 and 1999, were approximately
$3,185,000 and $1,712,000, respectively.
D-22
CENTURY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3. Available-for-Sale Securities
Summary of securities:
December 31, 2000
---------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
- ----------- ---------- ---------- -----------
U.S. government corporations and agencies....... $10,917,137 $ 77,080 $ (26,363) $10,967,854
Obligations of states and political subdivisions 13,133,949 521,702 (33,352) 13,622,299
Mortgage-backed securities...................... 215,333 -- (3,004) 212,329
Equity and other securities..................... 1,286,400 595 (1,790) 1,285,205
----------- -------- --------- -----------
$25,552,819 $599,377 $ (64,509) $26,087,687
=========== ======== ========= ===========
December 31, 1999
---------------------------------------------
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
----------- ---------- ---------- -----------
U.S. Treasury securities........................ $ 999,773 $ 1,792 $ -- $ 1,001,565
U.S. government corporations and agencies....... 8,997,231 -- (227,931) 8,769,300
Obligations of states and political subdivisions 9,736,963 266,976 (115,434) 9,888,505
Mortgage-backed securities...................... 352,950 -- (13,018) 339,932
Equity and other securities..................... 1,199,850 369 (2,865) 1,197,354
----------- -------- --------- -----------
$21,286,767 $269,137 $(359,248) $21,196,656
=========== ======== ========= ===========
Contractual maturities:
December 31, 1999
-----------------------
Amortized Fair
Cost Value
----------- -----------
Due in one year or less.............. $ 2,950,795 $ 2,942,528
Due after one year through five years 10,161,590 10,305,585
Due after five years through 10 years 5,715,461 5,953,131
Due after 10 years................... 5,523,239 5,687,714
----------- -----------
24,351,085 24,888,958
Mortgage-backed securities........... 215,333 212,329
Other equity securities.............. 986,400 986,400
----------- -----------
$25,552,818 $26,087,687
=========== ===========
D-23
CENTURY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3. Available-for-Sale Securities (Continued)
Anticipated maturities on mortgage-backed securities are not readily
determinable since they may be prepaid without penalty, and equity securities
(Federal Home Loan Bank and Federal Reserve Bank stock) do not have stated
maturity dates.
Realized gains and losses: There were no realized gains or losses for the
years ended December 31, 2000, 1999, and 1998.
Pledged securities: Available-for-sale securities with an approximate
carrying value of $11,005,000 and $14,499,000 at December 31, 2000 and 1999,
respectively, were pledged to secure public deposits and for other purposes as
required or permitted by law.
Changes in the unrealized gain (loss) on available-for-sale securities:
Years Ended December 31
-------------------------------
2000 1999 1998
--------- --------- ---------
Balance, beginning....................................... $ (53,616) $ 395,798 $ 323,537
Unrealized gain (loss) during the year................ 624,979 (755,319) 121,448
Deferred tax effect related to unrealized loss (gain). (253,116) 305,905 (49,187)
--------- --------- ---------
Balance, ending.......................................... $ 318,247 $ (53,616) $ 395,798
========= ========= =========
Note 4. Loans Held for Sale
Years Ended December 31
----------------------------------------
2000 1999 1998
------------ ------------ ------------
Balance, beginning.. $ 1,860,900 $ 1,272,000 $ 664,800
Loans originated. 20,134,820 12,243,900 21,552,500
Loans sold....... (21,500,000) (11,655,000) (20,945,300)
------------ ------------ ------------
Balance, ending..... $ 495,720 $ 1,860,900 $ 1,272,000
============ ============ ============
D-24
CENTURY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5. Loans
Composition of loans:
December 31
-------------------------
2000 1999
------------ ------------
Commercial.................... $126,022,038 $ 86,729,855
Commercial real estate........ 69,713,517 72,185,735
Residential real estate....... 23,725,001 17,197,012
Consumer...................... 15,746,766 12,364,942
------------ ------------
235,207,322 188,477,544
Less allowance for loan losses 3,735,546 2,768,205
------------ ------------
Loans, net.................... $231,471,776 $185,709,339
============ ============
Allowance for loan losses:
Years Ended December 31
----------------------------------
2000 1999 1998
---------- ---------- ----------
Balance, beginning................. $2,768,205 $2,366,269 $1,722,589
Provision charged to operations. 1,052,719 493,518 652,787
Loans charged off............... (107,919) (97,106) (62,027)
Recoveries...................... 22,541 5,524 52,920
---------- ---------- ----------
Balance, ending.................... $3,735,546 $2,768,205 $2,366,269
========== ========== ==========
Impaired loans: Impaired loans during 2000 and 1999 were insignificant.
Note 6. Premises and Equipment
December 31
---------------------
2000 1999
---------- ----------
Land......................... $ 469,856 $ 469,889
Buildings and improvements... 1,823,573 1,669,781
Furniture and equipment...... 4,327,595 3,830,936
---------- ----------
6,621,024 5,970,606
Less accumulated depreciation 3,188,424 2,536,655
---------- ----------
$3,432,600 $3,433,951
========== ==========
D-25
CENTURY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7. Deposits
December 31
-------------------------
2000 1999
------------ ------------
Demand deposits.................... $ 58,140,029 $ 51,704,945
NOW accounts....................... 18,200,609 15,832,663
Savings deposits................... 81,749,782 80,349,544
Time certificates, $100,000 or more 20,240,252 9,189,573
Other time deposits................ 45,046,062 39,944,135
Brokered time deposits............. 15,579,000 3,297,000
------------ ------------
$238,955,734 $200,317,860
============ ============
The scheduled maturities of time deposits are as follows:
Years ending December 31:
2001..................... $64,017,560
2002..................... 11,779,213
2003..................... 5,015,641
2004..................... 13,588
2005..................... 39,312
-----------
$80,865,314
===========
Note 8. Short-Term Borrowings
December 31
---------------------
2000 1999
---------- ----------
Federal funds purchased.......... $4,050,000 $ --
Borrowings from the U.S. Treasury 1,255,677 1,001,651
---------- ----------
$5,305,677 $1,001,651
========== ==========
D-26
CENTURY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9. Notes Payable
December 31
---------------------
2000 1999
---------- ----------
Fixed-rate advances from the Federal Home Loan Bank of Des Moines,
interest at 5.16% to 6.48% payable monthly, $3,000,000 due January
18, 2001, and $1,875,000 due November 19, 2003, secured by
securities and residential real estate loans with a value of $5,595,000 $4,875,000 $3,875,000
Note payable to a bank, interest at 7.46% payable quarterly, secured by
common stock of Century Bank, National Association, matures
February 1, 2000....................................................... -- 1,833,333
Revolving note payable to a bank, variable interest (8.57% at
December 31, 2000) payable quarterly, secured by common stock of
Century Bank, National Association, matures August 1, 2001............. 2,821,833 323,500
---------- ----------
$7,696,833 $6,031,833
========== ==========
In connection with the notes payable to bank, the Company has agreed, among
other things, to maintain certain financial ratios. The agreement also has
restrictions on the payment of dividends and limits future borrowing by the
Company.
Note 10. Stock Options
The Company has granted nonqualified stock options to Board members and
certain employees of the Bank. These options allow for the purchase of common
stock at the exercise price set forth in the stock option agreement. The
options were accounted for under the provisions of APB Opinion No. 25 and
related interpretations. Options granted in 2000, 1999, and 1998 had an
exercise price approximating fair value at the date of grant; therefore, no
compensation cost has been recognized for these grants. Compensation cost based
on the grant date fair value of awards (the method described in FASB Statement
No. 123) was not material in 2000, 1999, and 1998.
D-27
CENTURY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10. Stock Options (Continued)
A summary of the stock option activity is as follows:
Exercise
Price
Options Per Share
--------- ------------
Balance, December 31, 1997 1,115,200 $1.00 - 1.65
Granted................ 79,000 3.12
Exercised.............. (400) 1.65
Expired................ (3,600) 1.65 - 3.12
--------- ------------
Balance, December 31, 1998 1,190,200 1.00 - 3.12
Granted................ 86,600 4.35
Exercised.............. (32,600) 1.35 - 3.12
Expired................ (15,400) 1.35 - 3.12
--------- ------------
Balance, December 31, 1999 1,228,800 1.00 - 4.35
Granted................ 76,000 5.50
Exercised.............. (43,950) 1.35 - 4.35
Expired................ (25,925) 1.35 - 4.35
--------- ------------
Balance, December 31, 2000 1,234,925 $1.00 - 5.50
========= ============
The outstanding options have a weighted-average exercise price of $1.67 and
a weighted-average contractual remaining life of 8.5 years. At December 31,
2000, 1,017,850 options with a weighted-average exercise price of $1.19 were
exercisable.
The Company was able to recognize tax benefits in 2000 and 1999 as a result
of the exercise of stock options by the option holders. The benefit is equal to
the effective tax rate applied to the difference between the fair value of the
common stock issued and the exercise price.
D-28
CENTURY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11. Income Taxes
The cumulative tax effects of the primary temporary differences are shown in
the following table:
December 31
----------------------
2000 1999
---------- ----------
Deferred tax assets:
Loan loss allowances............................. $1,329,000 $1,012,000
Unrealized loss on available-for-sale securities. -- 37,000
Other............................................ 50,000 77,000
---------- ----------
Total deferred tax assets........................... 1,379,000 1,126,000
---------- ----------
Deferred tax liabilities:
Property and equipment........................... (92,000) (85,000)
Unrealized gain on available-for-sale securities. (217,000) --
Deferred loan fees............................... (235,000) (103,000)
Other............................................ (10,000) (4,000)
---------- ----------
Total deferred tax liabilities...................... (554,000) (192,000)
---------- ----------
Net deferred tax asset.............................. $ 825,000 $ 934,000
========== ==========
The provision for income taxes charged to operations consists of the
following:
Years Ended December 31
----------------------------------
2000 1999 1998
---------- ---------- ----------
Current tax expense... $2,521,218 $2,299,203 $1,690,699
Deferred tax (benefit) (145,000) (335,000) (192,000)
---------- ---------- ----------
$2,376,218 $1,964,203 $1,498,699
========== ========== ==========
The income tax provision differs from the amount of income tax determined by
applying the U.S. federal income tax rate of 35 percent to pretax income as
follows:
Years Ended December 31
----------------------------------
2000 1999 1998
---------- ---------- ----------
Computed "expected" tax expense.................... $2,222,000 $1,816,000 $1,386,000
Increase (decrease) in income taxes resulting from:
State income taxes, net of federal tax benefit.. 407,000 333,000 256,000
Tax-exempt interest income (net of expenses)....... (214,000) (167,000) (148,000)
Benefit of income taxed at lower rates.......... (52,000) (42,000) (32,000)
Other........................................... 13,218 24,203 36,699
---------- ---------- ----------
$2,376,218 $1,964,203 $1,498,699
========== ========== ==========
D-29
CENTURY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12. Commitments, Contingencies, and Credit Risk
Contingencies: In the normal course of business, the Company is involved
in various legal proceedings. In the opinion of management, any liability
resulting from such proceedings would not have a material adverse effect on the
consolidated financial statements.
Financial instruments with off-balance-sheet risk: The Company is party to
financial instruments with off-balance-sheet risk in the normal course of
business to meet the financing needs of its customers. These financial
instruments include commitments to extend credit and standby letters of credit.
They involve, to varying degrees, elements of credit risk in excess of amounts
recognized on the consolidated balance sheets.
The Company's exposure to credit loss in the event of nonperformance by the
other parties to the financial instruments for these commitments is represented
by the contractual amounts of the instruments. The Company uses the same credit
policies in making commitments as it does for on-balance-sheet instruments.
These commitments were as follows:
December 31
-----------------------
2000 1999
----------- -----------
Undisbursed lines of credit $73,485,000 $74,091,000
Standby letters of credit.. 9,486,000 7,429,000
----------- -----------
$82,971,000 $81,520,000
=========== ===========
Undisbursed lines of credit: Lines of credit are agreements to lend to a
customer as long as there is no violation of any condition established in the
contract. Since many of the lines of credit will not be fully drawn upon and
some may expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The Bank evaluates each
customer's creditworthiness on a case-by-case basis. If deemed necessary upon
extension of credit, the amount of collateral obtained is based on management's
credit evaluation of the party. Collateral held varies, but may include
accounts receivable, inventory, property and equipment, and income-producing
commercial properties.
Standby letters of credit: Standby letters of credit are conditional
commitments issued by the Bank to guarantee the performance of a customer to a
third party. Those guarantees are primarily issued to support public and
private borrowing arrangements. The credit risk involved in issuing letters of
credit is essentially the same as that involved in extending loan facilities to
customers. Collateral held varies as specified above and is required in
instances which the Bank deems necessary.
D-30
CENTURY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12. Commitments, Contingencies, and Credit Risk (Continued)
Lease commitments: The following is a schedule of approximate future
minimum base rental payments under all operating leases:
Years ending December 31:
2001.................. $ 495,000
2002.................. 499,000
2003.................. 503,000
2004.................. 506,000
2005.................. 510,000
Thereafter............ 835,000
----------
$3,348,000
==========
Total rent expense under these leases for the years ended December 31, 2000,
1999, and 1998, was approximately $710,000, $663,000, and $567,000,
respectively.
Financial instruments with concentrations of credit risk:
Concentration over insured limits: The nature of the Bank's business
requires that it maintain amounts due from banks which, at times, may exceed
federally insured limits. The Bank has not experienced any losses in such
accounts.
Concentration by geographic location: The Bank makes commercial,
residential, and consumer loans to its customers primarily in the Bank's
primary trade areas of Eden Prairie, St. Louis Park, and Coon Rapids and also
in the Bank's secondary trade area, which encompasses the entire
Minneapolis-St. Paul metropolitan area. Although the Bank's loan portfolio is
diversified, a substantial portion of the Bank's customers' ability to honor
their contracts is dependent upon the local business economy, which is taken
into consideration by management in determining the allowance for loan losses.
Concentration by industry: Included in the Company's loan portfolio are
concentrations of loans secured by loans related to real estate. A summary of
those concentrations at December 31, 2000, is as follows:
Loans secured by real estate:
Construction and land development. $28,646,000
Investment real estate............ 37,039,000
Note 13. Benefit Plan
Salary reduction--401(k) plan: Company contributions to the plan were
$148,000, $55,000, and $50,000 in 2000, 1999, and 1998, respectively.
D-31
CENTURY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 14. Loans and Other Transactions With Related Parties
Shareholders of the Company, executive officers, and directors, including
their families and companies of which they are principal owners, are considered
to be related parties. These related parties were loan customers of and had
other transactions with the Bank in the ordinary course of business. In
management's opinion, these loans and transactions were on the same terms as
those for comparable loans and transactions with nonrelated parties.
Loans: Total loans to related parties were approximately $10,022,000 and
$5,841,000 at December 31, 2000 and 1999, respectively.
Leases: The Company leases its main office from a limited partnership in
which the Company, as a limited partner, has a 60 percent ownership interest.
The limited partnership and the Company share common ownership. The Company has
a first-floor lease and a second-floor lease. Both leases have 11-year terms
expiring in April 2011. In addition to the base rents, the Company pays
operating costs (taxes, insurance, maintenance, and repairs). The monthly
amounts for operating costs are adjusted annually based on the actual operating
costs incurred. These leases are accounted for as operating leases (see also
Note 18).
Note 15. Regulatory Capital Requirements
The Bank is subject to various regulatory capital requirements administered
by the Bank's primary federal regulatory agency. Failure to meet minimum
capital requirements can initiate certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct
material effect on the Company's consolidated financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt corrective
action, the Bank must meet specific capital guidelines that involve
quantitative measures of assets and certain off-balance-sheet items as
calculated under regulatory accounting practices. The Bank's capital amounts
and classification are also subject to qualitative judgments by the regulators
about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum ratios (set forth in the table below) of
total and Tier I capital to risk-weighted assets, and of Tier I capital to
average assets (all as defined in the regulations). Management believes, as of
December 31, 2000, that the Bank meets all capital adequacy requirements to
which it is subject.
D-32
CENTURY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 15. Regulatory Capital Requirements (Continued)
As of December 31, 2000, the most recent notification from the Bank's
primary regulator (OCC) categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized, the Bank must maintain minimum total risk-based, Tier I
risk-based, and Tier I leverage ratios as set forth in the table below. There
are no conditions or events since that notification that management believes
have changed the Bank's category.
To Be Well Capitalized
For Capital Adequacy Under Prompt Corrective
Actual Purposes Action Provisions
---------------- ----------------------------- ------------------------------
Amount Ratio Amount Ratio Amount Ratio
----------- ----- ----------- ----------------- ----------- ------------------
As of December 31, 2000:
Total capital (to risk-weighted assets):
Consolidated.......................... $26,313,000 10.1% $20,842,000 (greater or =)8.0% $ N/A N/A
Century Bank,N.A...................... 29,142,000 10.4% 22,417,000 (greater or =)8.0% 28,021,000 (greater or =)10.0%
Tier I capital (to risk-weighted assets):
Consolidated.......................... 23,040,000 8.8% 10,473,000 (greater or =)4.0% N/A N/A
Century Bank,N.A...................... 25,535,000 9.7% 10,530,000 (greater or =)4.0% 15,759,000 (greater or =)6.0%
Tier I capital (to average assets):
Consolidated.......................... 23,040,000 8.1% 8,533,000 (greater or =)3.0% N/A N/A
Century Bank,N.A...................... 25,535,000 8.0% 11,224,000 (greater or =)4.0% 14,030,000 (greater or =)5.0%
Banking regulations restrict the amount of dividends that may be paid by the
Bank without prior approval of bank supervisory authorities.
Note 16. Additional Cash Flow Information
Cash flows from securities:
Years Ended December 31
----------------------------------------
2000 1999 1998
------------ ----------- -------------
Available-for-sale securities:
Maturities................. $ 4,514,090 $ 8,432,048 $ 36,424,335
Purchases.................. (8,775,899) (6,581,615) (39,878,703)
------------ ----------- -------------
($ 4,261,809) $ 1,850,433 ($ 3,454,368)
============ =========== =============
Supplemental disclosures of cash flow information:
Years Ended December 31
--------------------------------
2000 1999 1998
---------- ---------- ----------
Cash payments for interest.... $9,007,730 $6,042,421 $6,196,717
Cash payments for income taxes 2,641,000 2,216,000 1,735,000
========== ========== ==========
D-33
CENTURY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 17. Fair Values of Financial Instruments and Interest Rate Risk
December 31
---------------------------------------------------
2000 1999
------------------------- -------------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
------------ ------------ ------------ ------------
Financial assets:
Cash and cash equivalents. $ 12,928,914 $ 12,928,914 $ 8,822,985 $ 8,822,985
Federal funds sold........ -- -- 4,725,000 4,725,000
Securities................ 26,087,687 26,087,687 21,196,656 21,196,656
Loans held for sale....... 495,720 495,720 1,860,900 1,860,900
Loans..................... 231,471,776 230,470,000 185,709,339 185,286,000
Accrued interest.......... 1,770,395 1,770,395 1,308,186 1,308,186
Financial liabilities:
Deposits.................. 238,955,734 239,435,000 200,317,860 200,363,000
Short-term borrowings..... 5,305,677 5,305,677 1,001,651 1,001,651
Notes payable............. 7,696,833 7,657,000 6,031,833 5,902,000
Accrued interest.......... 1,595,171 1,595,171 914,938 914,938
Fair value of commitments: The estimated fair value of fee income on
letters of credit at December 31, 2000 and 1999, is insignificant. Loan
commitments on which the committed interest rate is less than the current
market rate are also insignificant at December 31, 2000 and 1999.
Interest rate risk: The Bank assumes interest rate risk (the risk that
general interest rate levels will change) as a result of its normal operations.
As a result, the fair values of the Bank's financial instruments will change
when interest rate levels change, and that change may be either favorable or
unfavorable to the Bank. Management attempts to match maturities of assets and
liabilities to the extent believed necessary to minimize interest rate risk.
However, borrowers with fixed-rate obligations are more likely to prepay in a
falling-rate environment and less likely to prepay in a rising-rate
environment. Conversely, depositors who are receiving fixed rates are more
likely to withdraw funds before maturity in a rising-rate environment and less
likely to do so in a falling-rate environment. Management monitors rates and
maturities of assets and liabilities and attempts to minimize interest rate
risk by adjusting terms of new loans and deposits and by investing in
securities with terms that mitigate the Bank's overall interest rate risk.
Note 18. Subsequent Events
Merger: The Company entered into a merger agreement on December 3, 2001,
which will result in the merger of the Company with and into Marshall & Ilsley
Corporation and the conversion of each outstanding share of common stock of the
Company into an equivalent number of shares of common stock of Marshall &
Ilsley and/or a cash payment with certain limitations of $7.40, subject to
certain closing conditions. The merger requires regulatory and shareholder
approval and is anticipated to close in the first quarter of 2002.
D-34
CENTURY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 18. Subsequent Events (Continued)
Spectrum Commercial Services Company: In March 2001, the Company acquired
certain loans approximating $15 million of an asset-based lending and factoring
company through a newly formed subsidiary, Spectrum Commercial Services Company
(Spectrum). The loans were acquired by the assumption of approximately $11.5
million of debt and payment of $3.5 million of cash. Effective October 31,
2001, the Company sold all of its shares of Spectrum to an investor group
comprised of certain officers, directors, and stockholders of the Company. The
sales price approximated the carrying value.
Century Bank Building Partnership: In September 2001, the Company sold its
60 percent limited partnership interest in Century Bank Building Partnership to
certain officers of the Company. The sales price was based on the appraised
fair value of the building less existing debt in the partnership and resulted
in a gain to the Company of approximately $1,271,000, of which approximately
$338,000 was deferred. The Bank's lease with the building partnership was
substantially unchanged. The deferred gain is being amortized over the
remaining lease term and will be immediately recognizable upon the related
parties' sale of either the building or their ownership in the Company.
Note 19. Parent Company Financial Information
Century Bancshares, Inc.'s (parent company only) condensed statements of
financial condition as of December 31, 2000 and 1999, and the condensed
statements of operations and cash flows for the years ended December 31, 2000,
1999, and 1998, are as follows:
CONDENSED STATEMENTS OF FINANCIAL CONDITION
December 31
------------------------
2000 1999
----------- ------------
Assets:
Cash.............................. $ 10,724 $ 56,375
Investment in bank subsidiary..... 25,853,161 21,411,436
Investment in limited partnership. 328,475 300,512
----------- ------------
$26,192,360 $21,768,323
=========== ============
Liabilities and stockholders' equity:
Notes payable..................... 2,821,833 2,156,833
Other liabilities................. 12,864 10,907
----------- ------------
Total liabilities.................... 2,834,697 2,167,740
Stockholders' equity................. 23,357,663 19,600,583
----------- ------------
$26,192,360 $21,768,323
=========== ============
D-35
CENTURY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 19. Parent Company Financial Information (Continued)
CONDENSED STATEMENTS OF OPERATIONS
Years Ended December 31
---------------------------------
2000 1999 1998
---------- ---------- ----------
Cash dividends received from consolidated bank subsidiary......... $ -- $ 350,000 $ --
Equity in earnings of limited partnership...................... 114,213 84,116 141,209
---------- ---------- ----------
Total other income................................................ 114,213 434,116 141,209
========== ========== ==========
Expenses:
Interest expense............................................... 185,915 173,450 137,595
Other.......................................................... 5,592 5,982 5,824
---------- ---------- ----------
Total expenses.................................................... 191,507 179,432 143,419
========== ========== ==========
Income (loss) before income tax benefit andequity in
undistributed earnings of subsidiary......................... (77,294) 254,684 (2,210)
Income tax benefit (expense)................................... 34,282 38,597 (424)
---------- ---------- ----------
Income (loss) before equity in undistributedearnings of subsidiary (43,012) 293,281 (2,634)
Equity in undistributed earnings of subsidiary................. 4,012,501 2,931,167 2,464,941
---------- ---------- ----------
Net income........................................................ $3,969,489 $3,224,448 $2,462,307
========== ========== ==========
D-36
CENTURY BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 19. Parent Company Financial Information (Continued)
CONDENSED STATEMENTS OF CASH FLOWS
Years Ended December 31
-------------------------------------
2000 1999 1998
----------- ----------- -----------
Cash flows from operating activities:
Net income.................................................. $ 3,969,489 $ 3,224,448 $ 2,462,307
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Equity in undistributed earnings of subsidiary.......... (4,012,501) (2,931,167) (2,464,941)
Equity in earnings from limited partnership, net of
distributions......................................... (27,963) (19,916) (21,209)
Other, net.............................................. 1,957 (13,960) (23,133)
----------- ----------- -----------
Net cash provided by (used in) operating activities............ (69,018) 259,405 (46,976)
=========== =========== ===========
Cash flows from investing activities:
Contribution to limited partnership......................... -- (86,892) --
Capital contribution to bank................................ -- -- (2,000,000)
----------- ----------- -----------
Net cash used in investing activities.......................... -- (86,892) (2,000,000)
=========== =========== ===========
Cash flows from financing activities:
Proceeds from notes payable................................. 2,498,333 323,500 2,000,000
Payment on notes payable.................................... (1,833,333) (166,667) --
Proceeds from issuance of common stock...................... 78,118 45,198 660
Redemption of common stock.................................. (719,751) (442,800) --
----------- ----------- -----------
Net cash provided by (used in) financing activities............ 23,367 (240,769) 2,000,660
=========== =========== ===========
Net decrease in cash........................................... (45,651) (68,256) (46,316)
Cash at beginning of year...................................... 56,375 124,631 170,947
----------- ----------- -----------
Cash at end of year............................................ $ 10,724 $ 56,375 $ 124,631
=========== =========== ===========
D-37
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Sections 180.0850 to 180.0859 of the Wisconsin Business Corporation Law
require a corporation to indemnify a director or officer who is a party to any
threatened, pending or completed civil, criminal, administrative or
investigative action, suit, arbitration or other proceeding, whether formal or
informal, which involves foreign, federal, state or local law and which is
brought by or in the right of the corporation or by any other person. A
corporation's obligation to indemnify any such person includes the obligation
to pay any judgment, settlement, penalty, assessment, forfeiture or fine,
including any excise tax assessed with respect to an employee benefit plan, and
all reasonable expenses including fees, costs, charges, disbursements,
attorneys' and other expenses, except in those cases in which liability was
incurred as a result of the breach or failure to perform a duty which the
director or officer owes to the corporation and the breach or failure to
perform constitutes: (i) a willful failure to deal fairly with the corporation
or its shareholders in connection with a matter in which the director or
officer has a material conflict of interest; (ii) a violation of criminal law,
unless the person has reasonable cause to believe his conduct was lawful or had
no reasonable cause to believe his conduct was unlawful; (iii) a transaction
from which the person derived an improper personal profit; or (iv) willful
misconduct.
Unless otherwise provided in a corporation's articles of incorporation or
bylaws, or by written agreement, an officer or director seeking indemnification
is entitled to indemnification if approved in any of the following manners: (i)
by majority vote of a disinterested quorum of the board of directors, or if
such quorum of disinterested directors cannot be obtained, by a majority vote
of a committee of two or more disinterested directors; (ii) by independent
legal counsel; (iii) by a panel of three arbitrators; (iv) by affirmative vote
of shareholders; (v) by a court; or (vi) with respect to any additional right
to indemnification granted, by any other method permitted in Section 180.0858
of the Wisconsin Business Corporation Law.
Reasonable expenses incurred by a director or officer who is a party to a
proceeding may be reimbursed by a corporation at such time as the director or
officer furnishes to the corporation a written affirmation of his good faith
belief that he has not breached or failed to perform his duties and a written
undertaking to repay any amounts advanced if it is determined that
indemnification by the corporation is not required.
The indemnification provisions of Section 180.0850 to 180.0859 are not
exclusive. A corporation may expand an officer's or director's rights to
indemnification: (i) in its articles of incorporation or bylaws; (ii) by
written agreement; (iii) by resolution of its board of directors; or (iv) by
resolution of a majority of all of the corporation's voting shares then issued
and outstanding.
As permitted by Section 180.0858, Marshall & Ilsley has adopted
indemnification provisions in its bylaws which closely track the statutory
indemnification provisions with certain exceptions. In particular, Section 7.1
of Marshall & Ilsley's bylaws, among other items, provides that (i) an
individual shall be indemnified unless it is proven by a final judicial
adjudication that indemnification is prohibited and (ii) payment or
reimbursement of expenses, subject to certain limitations, will be mandatory
rather than permissive. Marshall & Ilsley has purchased directors' and
officers' liability insurance which insures Marshall & Ilsley's officers and
directors against certain liabilities which may arise under the Securities Act
of 1933.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits. See the Exhibit Index.
(b) Financial Statement Schedules. Not applicable.
(c) Report, Opinion or Appraisal. See Exhibits 5 and 8.
II-1
Item 22. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
i. To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
ii. To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the SEC pursuant to Rule 424(b) if in the aggregate, the changes in
volume and price represent no more than 20% change in the maximum
offering price set forth in the "Calculation of Registration Fee" table
in the effective registration statement.
iii. To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) 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 any
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.
(c) 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 to be underwriters, in addition to the information
called for by the other items of the applicable form.
(d) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (c) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, 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.
(e) 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
II-2
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.
(f) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one 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.
(g) 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
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Milwaukee, State of Wisconsin, on January 22, 2002.
MARSHALL & ILSLEY CORPORATION
By: /s/ D.J. KUESTER
------------------------------------
D.J. Kuester,
President and Chief
Executive Officer
(Principal Executive
Officer)
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:
Signature Title Date
--------- ----- ----
/S/ M.F. FURLONG Executive Vice President and Date: January 22, 2002
-------------------- Chief Financial Officer
M.F. Furlong (Principal Financial Officer)
/S/ P.R. JUSTILIANO Senior Vice President and Date: January 22, 2002
-------------------- Corporate Controller (Principal
P.R. Justiliano Accounting Officer)
Directors:
Richard A. Abdoo, David L. Andreas, Oscar C. Boldt, Wendell F. Beuche, Jon
F. Chait, Timothy E. Hoeksema, Bruce E. Jacobs, Burleigh E. Jacobs, Donald
R. Johnson, Ted D. Kellner, James F. Kress, D.J. Kuester, Katharine C.
Lyall, Edward L. Meyer, Jr., San W. Orr, Jr., Peter M. Platten, III, Robert
A. Schaefer, John S. Shiely, James A. Urdan, George E. Wardeberg and J.B.
Wigdale.
/s/ M.F. FURLONG Date: January 22, 2002
*By:___________________
M.F. Furlong
As Attorney-in-Fact*
--------
*Pursuant to authority granted by powers of attorney, copies of which have been
previously filed.
II-4
EXHIBIT INDEX
(2)(a) Agreement and Plan of Merger between Century Bancshares, Inc. and Marshall & Ilsley Corporation
dated as of December 3, 2001 (included as Appendix A to the Proxy Statement/Prospectus included in
this Registration Statement).(Certain exhibits and schedules to the Agreement and Plan of Merger have
been omitted. Such exhibits and schedules are described in the Agreement and Plan of Merger. M&I
hereby agrees to furnish to the Securities and Exchange Commission, upon its request, any or all of
such omitted exhibits or schedules)
(b) Plan of Merger between Century Bancshares, Inc. and Marshall & Ilsley Corporation (included as
Appendix B to the Proxy Statement/Prospectus included in this Registration Statement)
(c) Shareholder Voting Agreement dated as of December 3, 2001 between Marshall & Ilsley Corporation
and each of the shareholders listed on Schedule I thereto*
(3)(a) Restated Articles of Incorporation, as amended, incorporated by reference to M&I's Quarterly Report
on form 10-Q for the quarter ended September 30, 2000, SEC File No. 1-15403
(b) Bylaws, as amended, incorporated by reference to M&I's Quarterly Report on Form 10-Q for the
quarter ended September 30, 2000, SEC File No. 1-15403
(5) Opinion and consent of Godfrey & Kahn, S.C. as to the validity of the securities being registered*
(8)(a) Opinion and consent of Godfrey & Kahn, S.C. regarding the federal income tax consequences of the
merger*
(b) Opinion and consent of Maslon Edelman Borman & Brand, LLP regarding the federal income tax
consequences of the merger*
(23)(a) Consent of Arthur Andersen LLP, regarding the audited financial statements of Marshall & Ilsley
Corporation*
(b) Consent of McGladrey & Pullen, LLP regarding the audited financial statements of Century
Bancshares, Inc.*
(c) Consent of Godfrey & Kahn, S.C. (included in Exhibit 5 hereto)
(d) Consent of Godfrey & Kahn, S.C. (included in Exhibit 8(a)hereto)
(e) Consent of Maslon Edelman Borman & Brand, LLP (included in Exhibit 8(b) hereto)
(24) Powers of Attorney*
(99)(a) Form of Proxy to be used by Century Bancshares, Inc.
(99)(b) Form of Election to be used by Century Bancshares, Inc.
M&I will provide a copy of any instrument defining the rights of holders of
long-term debt to the Commission upon request.
--------
* Previously filed.