As filed with the Securities and Exchange Commission on June 7, 2001
Registration No. 333-[___________]
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
LANDMARK MERGER COMPANY
(Exact Name of Registrant as Specified in its Articles)
6712
(Primary Standard Industrial Classification Code Number)
DELAWARE APPLIED FOR
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
800 POYNTZ AVENUE, MANHATTAN, KANSAS 66502, (785) 565-2000
(Address, including zip code and telephone number, including
area code, of Registrant's principal executive offices)
LARRY SCHUGART, CHAIRMAN
LANDMARK MERGER COMPANY
800 POYNTZ AVENUE
MANHATTAN, KANSAS 66502
(785) 565-2000
(Name, address, including zip code and telephone number, including
area code, of agent for service)
WITH COPIES TO:
DENNIS R. WENDTE, ESQ. SAMUEL J. MALIZIA, ESQ.
ROBERT M. FLEETWOOD, ESQ. RICHARD FISCH, ESQ.
BARACK FERRAZZANO KIRSCHBAUM PERLMAN & NAGELBERG MALIZIA SPIDI & FISCH, PC
333 WEST WACKER DRIVE, SUITE 2700 1100 NEW YORK AVENUE, N.W., SUITE 340 WEST
CHICAGO, ILLINOIS 60606 WASHINGTON, D.C. 20005
(312) 984-3100 (202) 434-4660
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. / /
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
CALCULATION OF REGISTRATION FEE
================================= =================== ============================= ======================= ===================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) REGISTRATION FEE
- --------------------------------- ------------------- ----------------------------- ----------------------- -------------------
Common stock, $0.01 par value 2,155,004 shares $17.92 value per share $38,607,347.50 $9,652
================================= =================== ============================= ======================= ===================
(1) Represents the estimated maximum number of shares to be issued pursuant to
the merger agreement dated as of April 19, 2001, among Landmark Bancshares,
Inc., a Kansas corporation, MNB Bancshares, Inc., a Delaware corporation,
and Registrant.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f)(1) and (2) under the Securities Act of 1933, as
amended, based upon $9.35 per share, the average of the high and low sales
price as quoted on June 4, 2001, for each of the 1,638,137 shares of MNB
Bancshares common stock, the maximum number of shares outstanding at the
effective time of the merger, and $17.94 per share, the average of the high
and low sales price as quoted on June 4, 2001, for each of the 1,298,259
shares of Landmark Bancshares common stock, the maximum number of shares
outstanding at the effective time of the merger, to be exchanged for the
common stock of the registrant pursuant to the merger agreement.
DELAYING AMENDMENT: The Registrant hereby amends this registration statement
on such date or dates as may be necessary to delay its effective date until
the Registrant shall file a further amendment which specifically states that
this registration statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until the registration
statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
PROXY STATEMENT FOR THE SPECIAL MEETING PROXY STATEMENT FOR THE SPECIAL MEETING
OF STOCKHOLDERS OF OF STOCKHOLDERS OF
MNB BANCSHARES, INC. LANDMARK BANCSHARES, INC.
PROSPECTUS OF LANDMARK MERGER COMPANY
IN CONNECTION WITH AN OFFERING OF UP
TO 2,155,004 SHARES OF ITS COMMON STOCK
The boards of directors of MNB Bancshares, Inc. and Landmark
Bancshares, Inc. have approved a merger agreement that would result in our
tax-free merger into a new company known as Landmark Merger Company. As a
result of the merger, MNB stockholders will receive 0.523 Landmark Merger
Company common shares for each MNB common share they own and Landmark
Bancshares stockholders will receive one Landmark Merger Company common share
for each Landmark Bancshares common share they own. At the time of the
completion of the merger, we will also merge our subsidiary banks into a
single financial institution to be known as Landmark National Bank.
To complete this merger, we must obtain the necessary government
approvals and the approvals of the stockholders of both our companies. Each
of us will hold a special meeting of our stockholders to vote on this merger
proposal. YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend your
stockholder meeting, please take the time to vote by completing and mailing
the enclosed proxy card to us. If you sign, date and mail your proxy card
without indicating how you want to vote, your proxy will be counted as a vote
FOR the merger. If you do not return your card, or if you do not instruct
your broker how to vote any shares held for you in your broker's name, the
effect will be a vote against this merger. The dates, times and places of the
meetings are as follows:
- ---------------------------------------------------------- --------------------------------------------------------
FOR MNB BANCSHARES STOCKHOLDERS: FOR LANDMARK BANCSHARES STOCKHOLDERS:
[_________], 2001 [_________], 2001
[____] [__].m., local time [____] [__].m., local time
[-----------------------] [-----------------------]
Manhattan, Kansas Dodge City, Kansas
MNB's board of directors unanimously Landmark Bancshares' board of directors unanimously
recommends that MNB stockholders vote FOR recommends that Landmark Bancshares stockholders
adoption of the merger agreement. vote FOR adoption of the merger agreement.
- ---------------------------------------------------------- --------------------------------------------------------
This joint proxy statement-prospectus gives you detailed information
about the merger we are proposing, and it includes our merger agreement as an
appendix. You can also obtain information about our companies from publicly
available documents we have filed with the Securities and Exchange
Commission. We encourage you to read this entire document carefully.
Patrick L. Alexander Larry Schugart
President President
MNB Bancshares, Inc. Landmark Bancshares, Inc.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES TO BE ISSUED UNDER THIS
JOINT PROXY STATEMENT-PROSPECTUS OR DETERMINED IF THIS JOINT PROXY
STATEMENT-PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE. THE SECURITIES WE ARE OFFERING THROUGH THIS DOCUMENT ARE
NOT SAVINGS OR DEPOSIT ACCOUNTS OR OTHER OBLIGATIONS OF ANY BANK OR NON-BANK
SUBSIDIARY OF EITHER OF OUR COMPANIES, AND THEY ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE FUND OR ANY OTHER GOVERNMENTAL
AGENCY.
- --------------------------------------------------------------------------------
JOINT PROXY STATEMENT-PROSPECTUS DATED [_________], 2001
MNB BANCSHARES, INC.
800 POYNTZ AVENUE
MANHATTAN, KANSAS 66502
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON [________], 2001
A special meeting of stockholders of MNB Bancshares, Inc., a
Delaware corporation, will be held at [_______________________________], on
[_________], 2001, [____] [__].m., local time, for the following purposes:
1. To consider and vote upon a proposal to adopt the Agreement
and Plan of Merger dated as of April 19, 2001, among MNB
Bancshares, Landmark Bancshares, Inc., a Kansas corporation,
and Landmark Merger Company, a Delaware corporation formed by
MNB and Landmark Bancshares, pursuant to which, among other
things, MNB and Landmark Bancshares will merge with and into
Landmark Merger Company upon the terms and subject to the
conditions set forth in the merger agreement.
2. To transact such other business as may properly be brought
before the special meeting, including any motion to adjourn
the special meeting, if necessary, to solicit additional
proxies, or any adjournments or postponements of the special
meeting.
The close of business on [__________], 2001, has been fixed as the
record date for determining those stockholders entitled to vote at the
special meeting and any adjournments or postponements of the special meeting.
Accordingly, only stockholders of record on such date are entitled to notice
of, and to vote at, the special meeting and any adjournments or postponements
of the special meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Mark A. Herpich
[__________], 2001 SECRETARY
YOUR VOTE IS VERY IMPORTANT
Whether or not you plan to attend the special meeting in person, please
take the time to vote by completing and mailing the enclosed proxy card in the
enclosed postage-paid envelope. If you attend the special meeting, you may vote
in person if you wish, even if you have previously returned your proxy card.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE
MERGER AGREEMENT.
LANDMARK BANCSHARES, INC.
CENTRAL AND SPRUCE STREETS
DODGE CITY, KANSAS 62523
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON [________], 2001
A special meeting of stockholders of Landmark Bancshares, Inc., a
Kansas corporation, will be held at [_______________________________], on
[_________], 2001, [____] [__].m., local time, for the following purposes:
1. To consider and vote upon a proposal to adopt the Agreement
and Plan of Merger dated as of April 19, 2001, among Landmark
Bancshares, MNB Bancshares, Inc., a Delaware corporation, and
Landmark Merger Company, a Delaware corporation formed by
Landmark Bancshares and MNB, pursuant to which, among other
things, Landmark Bancshares and MNB will merge with and into
Landmark Merger Company upon the terms and subject to the
conditions set forth in the merger agreement.
2. To transact such other business as may properly be brought
before the special meeting, including any motion to adjourn
the special meeting, if necessary, to solicit additional
proxies, or any adjournments or postponements of the special
meeting.
The close of business on [__________], 2001, has been fixed as the
record date for determining those stockholders entitled to vote at the
special meeting and any adjournments or postponements of the special meeting.
Accordingly, only stockholders of record on such date are entitled to notice
of, and to vote at, the special meeting and any adjournments or postponements
of the special meeting.
BY ORDER OF THE BOARD OF DIRECTORS
[__________], 2001 Gary L. Watkins
SECRETARY
YOUR VOTE IS VERY IMPORTANT
Whether or not you plan to attend the special meeting in person, please
take the time to vote by completing and mailing the enclosed proxy card in the
enclosed postage-paid envelope. If you attend the special meeting, you may vote
in person if you wish, even if you have previously returned your proxy card.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR ADOPTION OF THE
MERGER AGREEMENT.
TABLE OF CONTENTS
HOW TO OBTAIN ADDITIONAL INFORMATION......................
A WARNING ABOUT FORWARD-LOOKING STATEMENTS................
QUESTIONS AND ANSWERS ABOUT THE MERGER....................
SUMMARY...................................................
The Companies..........................................
The Merger.............................................
What You Will Receive in the Merger....................
Effect of the Merger on Options........................
Ownership of Landmark After the Merger.................
Dissenters' Appraisal Rights...........................
Material Federal Income Tax Consequences...............
Comparative Market Prices of Common Stock..............
Our Reasons for the Merger.............................
Fairness Opinions......................................
Special Meetings of Stockholders.......................
Record Date; Vote Required.............................
Our Recommendations to Stockholders....................
Share Ownership of Management and Significant
Stockholders.........................................
Effective Time of the Merger...........................
Exchange of Stock Certificates.........................
Conditions to Completion of the Merger.................
Regulatory Approvals...................................
Waiver, Amendment and Termination......................
Management and Operations After the Merger.............
Interests of Certain Persons in the Merger that Differ
from Your Interests..................................
Accounting Treatment...................................
Expenses and Termination Fees..........................
Material Differences in the Rights of
Stockholders.........................................
Unaudited Comparative Per Share Data...................
Unaudited Pro Forma Consolidated Financial Statements..
Selected Financial Data................................
RISK FACTORS..............................................
INTRODUCTION..............................................
MNB SPECIAL MEETING.......................................
Date, Place, Time and Purpose..........................
Record Date, Voting Rights, Required Vote and
Revocability of Proxies..............................
Solicitation of Proxies................................
Recommendation of MNB Board............................
LBI SPECIAL MEETING.......................................
Date, Place, Time and Purpose..........................
Record Date, Voting Rights, Required Vote and
Revocability of Proxies..............................
Solicitation of Proxies................................
Recommendation of LBI Board............................
DESCRIPTION OF TRANSACTION................................
General................................................
Effect of the Merger on Options........................
Material Federal Income Tax Consequences of the
Merger...............................................
Background of the Merger...............................
Recommendation of the MNB
Board and MNB's Reasons for the Merger.................
Recommendation of the LBI Board and
LBI's Reasons for the Merger...........................
Opinion of MNB's Financial Advisor.....................
Opinion of LBI's Financial Advisor.....................
Effective Time of the Merger...........................
Dissenters' Rights.....................................
Distribution of Landmark Stock Certificates............
Conditions to Completion of the Merger.................
Regulatory Approvals...................................
Waiver, Amendment and Termination......................
Conduct of Business Pending the Merger.................
Management and Operations After the Merger.............
Interests of Certain Persons in the Merger.............
Accounting Treatment...................................
Expenses and Termination Fees..........................
Resales of Landmark Common Stock.......................
EFFECT OF THE MERGER ON RIGHTS OF STOCKHOLDERS............
Anti-Takeover Provisions Generally.....................
Authorized Capital Stock...............................
Amendment of Certificate and Bylaws....................
Director Removal.......................................
Limitations on Director Liability......................
Indemnification........................................
Special Meetings of Stockholders.......................
Stockholder Nominations and Proposals..................
Business Combinations..................................
Business Combinations with Interested Parties..........
Dissenters' Rights of Appraisal........................
Dividends..............................................
COMPARATIVE MARKET PRICES AND DIVIDENDS...................
BUSINESS OF MNB...........................................
BUSINESS OF LBI...........................................
REGULATORY CONSIDERATIONS.................................
General................................................
Recent Regulatory Developments.........................
Payment of Dividends...................................
Capital Adequacy.......................................
Support of Subsidiary Institutions.....................
Prompt Corrective Action...............................
Deposit Insurance......................................
Financing Corporation Assessments......................
Insider Transactions...................................
i
DESCRIPTION OF LANDMARK CAPITAL STOCK.....................
OTHER MATTERS.............................................
STOCKHOLDER PROPOSALS.....................................
EXPERTS...................................................
CERTAIN OPINIONS..........................................
WHERE YOU CAN FIND MORE INFORMATION.......................
APPENDIX A - AGREEMENT AND PLAN OF MERGER
APPENDIX B - FORM OF OPINION OF MCCONNELL,
BUDD & DOWNES, INC.
APPENDIX C - OPINION OF KEEFE BRUYETTE & WOODS, INC.
APPENDIX D - SECTION 262 OF THE DELAWARE GENERAL
CORPORATION LAW (APPRAISAL RIGHTS)
ii
PLEASE NOTE
We have not authorized anyone to provide you with any information other
than the information included in this document and the documents to which we
refer you. If someone provides you with other information, please do not rely on
it as being authorized by us.
This joint proxy statement-prospectus has been prepared as of
[__________], 2001. There may be changes in the affairs of MNB, Landmark
Bancshares or Landmark Merger Company since that date which are not reflected in
this document.
As used in this joint proxy statement-prospectus , the term "MNB"
refers to MNB Bancshares, Inc., and, where the context requires, to MNB and its
subsidiary; the term "LBI" refers to Landmark Bancshares, Inc., and, where the
context requires, to LBI and its subsidiary; and the term "Landmark" refers to
Landmark Merger Company, and, where the context requires, to Landmark and its
subsidiary after the completion of both the merger of MNB and LBI and the merger
of their bank subsidiaries. Unless the context clearly suggests otherwise,
general references to "us," "we," and "our" include MNB and LBI. However, when
we discuss a specific organization such as MNB or LBI, "us," "we," and "our"
refers only to the specific organization being discussed.
HOW TO OBTAIN ADDITIONAL INFORMATION
THIS JOINT PROXY STATEMENT-PROSPECTUS INCORPORATES IMPORTANT BUSINESS
AND FINANCIAL INFORMATION ABOUT US THAT IS NOT INCLUDED IN OR DELIVERED WITH
THIS DOCUMENT. THIS INFORMATION IS DESCRIBED ON PAGE 81 UNDER "WHERE YOU CAN
FIND MORE INFORMATION." YOU CAN OBTAIN FREE COPIES OF THIS INFORMATION BY
WRITING OR CALLING:
FOR MNB DOCUMENTS: FOR LBI DOCUMENTS:
Mark A. Herpich Gary L. Watkins
Secretary Secretary
MNB Bancshares, Inc. Landmark Bancshares, Inc.
800 Poyntz Avenue Central and Spruce Streets
Manhattan, Kansas 66502 Dodge City, Kansas 62523
(Telephone (785) 565-2000) (Telephone (620) 227-8111)
TO OBTAIN TIMELY DELIVERY OF THE DOCUMENTS, YOU MUST REQUEST THE
INFORMATION BY [__________], 2001.
A WARNING ABOUT FORWARD-LOOKING STATEMENTS
We have each made forward-looking statements in this document (and in
documents to which we refer you in this document) that are subject to risks and
uncertainties. These forward-looking statements include information about
possible or assumed future results of our operations or the performance of
Landmark after the merger is completed. When we use any of the words "believes,"
"expects," "anticipates," "estimates" or similar expressions, we are making
forward-looking statements. Many possible events or factors could affect the
future financial results and performance of each of our companies and the new
company after the merger and could cause those results or performance to differ
materially from those expressed in our forward-looking statements. These
possible events or factors include the following:
o our actual cost savings resulting from the merger are less than we
expect, we are unable to realize those cost savings as soon as we
expected or we incur additional or unexpected costs;
o our revenues after the merger are less than we expect as a result of
the loss of customers;
o competition among financial services companies increases;
o we have more trouble integrating our businesses than we expected;
o changes in the interest rate environment reduce our interest margins;
o general economic conditions change or are worse than we expected;
o legislative or regulatory changes adversely affect our business;
o changes occur in business conditions and inflation;
o personal or commercial customers' bankruptcies increase;
o changes occur in the securities markets; and
o technology-related changes are harder to make or more expensive than we
expected.
The forward-looking earnings estimates included in the joint proxy
statement-prospectus have not been examined or compiled by our independent
public accountants, nor have our independent accountants applied any procedures
to our estimates. Accordingly, our accountants do not express an opinion or any
other form of assurance on them. The forward-looking statements included in this
prospectus are made only as of the date of this prospectus. We do not intend,
and undertake no obligation, to update these forward-looking statements. Further
information concerning us and our business, including additional factors that
could materially affect our financial results, is included in our filings with
the Securities and Exchange Commission.
2
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHY DO MNB BANCSHARES AND LANDMARK BANCSHARES WANT TO MERGE?
A: Our companies are proposing a "merger of equals" because we believe that by
combining we can create a stronger and more diversified company that will
provide significant long-term benefits to our stockholders and customers alike.
THE BOARDS OF DIRECTORS OF MNB BANCSHARES AND LANDMARK BANCSHARES UNANIMOUSLY
RECOMMEND VOTING "FOR" THE PROPOSED MERGER.
Q: WHAT WILL I RECEIVE FOR MY SHARES OF MNB BANCSHARES?
A: You will receive 0.523 shares of the common stock of Landmark Merger Company
for each share of MNB Bancshares common stock that you own at the effective time
of the merger. Landmark Merger Company will not issue any fractional shares.
Instead, MNB Bancshares stockholders will receive cash in lieu of any fractional
shares owed to them in an amount based on the average closing price of Landmark
Merger Company common stock for the five trading days immediately after the
completion of the merger.
Q: WHAT WILL I RECEIVE FOR MY SHARES OF LANDMARK BANCSHARES?
A: You will receive one share of the common stock of Landmark Merger Company for
each share of Landmark Bancshares common stock that you own at the effective
time of the merger
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We hope to complete the merger in the third quarter, 2001, or as soon as
possible after the special stockholders' meetings, assuming the required
stockholder approval is obtained. The merger is also subject to the approval of
federal banking regulatory authorities and the satisfaction of other closing
conditions.
Q: WHEN AND WHERE WILL THE SPECIAL MEETINGS TAKE PLACE?
A: The MNB Bancshares special meeting will be held on [_________], 2001, at
[______] [_]m., local time, at [____________________], Manhattan, Kansas.
The Landmark Bancshares special meeting will be held on [_________], 2001, at
[______] [_]m., local time, at [____________________], Dodge City, Kansas.
Q: WHO MUST APPROVE THE PROPOSALS AT THE SPECIAL MEETINGS?
A: Holders of a majority of the outstanding shares of MNB Bancshares common
stock as of the close of business on [__________], 2001 must approve the merger
agreement.
Holders of a majority of the outstanding shares of Landmark Bancshares common
stock as of the close of business on [__________], 2001 must approve the merger
agreement.
Q: WHAT DO I NEED TO DO NOW?
A: After reviewing this document, submit your proxy by executing and returning
the enclosed proxy card. By submitting your proxy, you authorize the individuals
named in the proxy to represent you and vote your shares at your special meeting
in accordance with your instructions. These individuals also may vote your
shares to adjourn your special meeting from time to time and will be authorized
to vote your shares at any adjournments of your special meeting. YOUR PROXY VOTE
IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND YOUR SPECIAL MEETING, PLEASE
SUBMIT YOUR PROXY PROMPTLY IN THE ENCLOSED ENVELOPE.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will vote your shares ONLY if you instruct your broker on how to
vote. Your broker will send you directions on how you can instruct your broker
to vote. Your broker cannot vote your shares without instructions from you.
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 proxies will be counted as a vote for the proposals
3
identified in this document and in the discretion of the persons named as
proxies in any other matters presented for a vote at your 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
your special meeting, your failure to vote will have the same effect as if you
voted against approval of the merger agreement. Therefore, your board of
directors encourages you to vote as soon as possible in favor of the proposed
merger agreement.
Q: CAN I VOTE MY SHARES IN PERSON?
A: Yes, if you own your shares registered in your own name. You may attend your
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 your
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 your special meeting by:
o signing another proxy with a later date,
o giving written notices of the revocation of your proxy to the
Secretary of MNB Bancshares or Landmark Bancshares (whichever
is applicable) prior to your special meeting, or
o voting in person at your special meeting
Your latest dated proxy or vote will be counted.
Q: SHOULD I SEND IN MY STOCK CERTIFICATE NOW?
A: No. Once the merger is completed we will send you written instructions for
exchanging your stock certificates.
Q: WHO CAN ANSWER MY QUESTIONS ABOUT THE MERGER?
A: If you are a stockholder of MNB Bancshares, you can contact Patrick L.
Alexander at (785) 565-2000 or (800) 318-8997 to answer your questions about the
merger.
If you are a stockholder of Landmark Bancshares, you can contact Larry Schugart
at (620) 227-8111 to answer your questions about the merger.
4
SUMMARY
THIS BRIEF SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS JOINT PROXY
STATEMENT-PROSPECTUS AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS
IMPORTANT TO YOU. WE URGE YOU TO CAREFULLY READ THIS ENTIRE DOCUMENT AND THE
OTHER DOCUMENTS WE REFER TO IN THIS DOCUMENT. THESE WILL GIVE YOU A MORE
COMPLETE DESCRIPTION OF THE TRANSACTION WE ARE PROPOSING. FOR MORE INFORMATION
ABOUT OUR TWO COMPANIES, SEE "WHERE YOU CAN FIND MORE INFORMATION." WE HAVE
INCLUDED PAGE REFERENCES IN THIS SUMMARY TO DIRECT YOU TO OTHER PLACES IN THIS
JOINT PROXY STATEMENT-PROSPECTUS WHERE YOU CAN FIND A MORE COMPLETE DESCRIPTION
OF THE TOPICS WE HAVE SUMMARIZED.
THE COMPANIES (PAGES [___] AND [___])
MNB BANCSHARES, INC.
800 Poyntz Avenue
Manhattan, Kansas 66502
(785) 565-2000
MNB is a bank holding company organized under the laws of Delaware in 1992 and
registered under the Bank Holding Company Act. Through Security National Bank,
our wholly owned subsidiary bank, we conduct a range of commercial and personal
banking activities and offer trust and investment services in Kansas. In
addition to our main office in Manhattan, our subsidiary bank operates five
branches in Kansas. At March 31, 2001, our assets were $155.5 million, our
deposits were $132.1 million and our stockholders' equity was $15.4 million.
LANDMARK BANCSHARES, INC.
Central and Spruce Streets
P.O. Box 1437
Dodge City, Kansas 67801
(620) 227-8111
LBI is a savings and loan holding company organized under the laws of Kansas in
1993 and registered under the Home Owners' Loan Act. Through Landmark Federal
Savings Bank, our wholly owned subsidiary bank, we conduct a range of commercial
and personal banking activities in Kansas. In addition to our main office in
Dodge City, our bank operates five branches in Kansas. At March 31, 2001, our
assets were $223.2 million, our deposits were $151.8 million and our
stockholders' equity was $24.7 million.
LANDMARK MERGER COMPANY
800 Poyntz Avenue
Manhattan, Kansas 66502
(785) 565-2000
Landmark Merger Company is a company recently organized under the laws of
Delaware that has filed an application for approval to become a bank holding
company under the Bank Holding Company Act. We incorporated Landmark on April
19, 2001, solely for the purpose of accomplishing the merger. Landmark issued
500 shares to each of us for total consideration of $1,000. Landmark does not
currently engage in any business activity.
THE MERGER (PAGE [__])
WE HAVE ATTACHED THE MERGER AGREEMENT TO THIS DOCUMENT AS APPENDIX A. PLEASE
READ THE MERGER AGREEMENT. IT IS THE LEGAL DOCUMENT THAT GOVERNS THE MERGER.
We propose a combination in which our companies will merge with and into
Landmark to form a new financial services company that will serve eight Kansas
counties with twelve offices. After the completion of the merger, the name of
the newly combined company will be "Landmark Bancshares, Inc." Landmark will
have a new certificate of incorporation and bylaws at the time of the merger.
Landmark's main office will be located in Manhattan, Kansas. We expect to
complete the merger in the third quarter of 2001, although delays could occur.
At the same time as the merger, we also intend to merge our subsidiary banks,
Security National Bank and Landmark Federal Savings Bank, into a single
financial institution to be known as Landmark National Bank.
WHAT YOU WILL RECEIVE IN THE MERGER (PAGE [__])
MNB STOCKHOLDERS. Each of your shares of MNB common stock will automatically
become the right to receive 0.523 shares of Landmark common stock. The total
number of shares you will have the right to receive will therefore be equal to
the number of shares of MNB common stock you own multiplied by 0.523. For
example, if you hold 100 shares of MNB stock, you will receive 52 shares (100 x
0.523) of Landmark stock.
Landmark will not issue any fractions of a share of common stock. Rather,
Landmark will pay cash (without interest) for any fractional share interest
5
any MNB stockholder would otherwise receive in the merger. The cash payment will
be in an amount equal to the fraction of the share multiplied by the average of
the closing sale prices of Landmark common stock for the five business days
immediately after the completion of the merger.
You will need to surrender your MNB common stock certificates to receive new
certificates representing common stock of the newly combined company. However,
this will not be necessary until you receive written instructions on or around
the time of the merger.
LBI STOCKHOLDERS. Each of your shares of LBI common stock will automatically
become the right to receive one share of Landmark common stock. The total number
of shares you will have the right to receive will therefore be equal to the
number of shares of LBI common stock you own multiplied by one. For example, if
you hold 100 shares of LBI stock, you will receive 100 shares (100 x 1) of
Landmark stock.
You will have to surrender your LBI common stock certificates to receive new
certificates representing common stock of the newly combined company. This will
not be necessary until you receive written instructions on or around the time of
the merger.
EFFECT OF THE MERGER ON OPTIONS (PAGE [__])
In the merger, each stock option to buy MNB and LBI common stock that is
outstanding immediately before completing the merger will become an option to
buy Landmark common stock and will continue to be governed by the terms of the
original plans under which they were issued. The number of shares of Landmark
common stock subject to each of these converted stock options, as well as the
exercise price of these stock options, will be adjusted to reflect the exchange
ratios applicable in the merger.
OWNERSHIP OF LANDMARK AFTER THE MERGER
Based on the MNB and LBI exchange ratios contained in the merger agreement, upon
completion of the merger, Landmark will issue 817,922 shares of its common stock
to former MNB stockholders and 1,092,438 shares of its common stock to former
LBI stockholders. Based on these numbers, after the merger and on a fully
diluted basis, former MNB stockholders would own approximately 40%, and former
LBI stockholders would own approximately 60%, of the outstanding shares of
Landmark common stock.
DISSENTERS' APPRAISAL RIGHTS (PAGE [__])
Under Delaware law, MNB stockholders have the right to dissent from the merger
and have the appraised fair value of their shares of MNB common stock paid to
them in cash.
To dissent and receive the appraised fair value of their shares, MNB
stockholders must:
o make a proper demand for appraisal in accordance with the
Delaware law as more fully described on pages [_____];
o hold your shares of MNB common stock until the merger is
completed;
o not vote in favor of the merger (including by appointing a
proxy to vote your shares); and
o otherwise comply with Delaware law.
Kansas law governs the rights of LBI stockholders which does not provide them
any right to dissent from the merger and receive cash for the value of their
shares.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES (PAGE [__])
For United States federal income tax purposes, your exchange of shares of MNB
and LBI common stock for shares of Landmark common stock should not cause you to
recognize any gain or loss. Holders of MNB common stock, however, will recognize
income, gain or loss in connection with any cash received from any fractional
share interest.
THESE TAX CONSEQUENCES MAY NOT APPLY TO EVERY ONE OF OUR STOCKHOLDERS.
DETERMINING THE ACTUAL TAX CONSEQUENCES OF THE MERGER TO YOU MAY BE COMPLICATED.
THEY WILL DEPEND ON YOUR SPECIFIC SITUATION AND ON VARIABLES NOT WITHIN OUR
CONTROL. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR FOR A FULL UNDERSTANDING OF THE
MERGER'S TAX CONSEQUENCES.
COMPARATIVE MARKET PRICES OF COMMON STOCK
Shares of MNB common stock are traded on the Nasdaq Small Cap Market and shares
of LBI common stock are traded on the Nasdaq National Market System. On April
18, 2001, the last trading day before we announced the merger, MNB common stock
closed at $9.95 per share and LBI common stock closed at $17.30 per share. On
6
June [__], 2001, MNB common stock closed at $[_____] per share and LBI common
stock closed at $[_____] per share. Of course, the common stock of Landmark has
not started trading and there is no prediction or guarantee at what price it
will trade after the completion of the merger.
OUR REASONS FOR THE MERGER (PAGES [__] AND [__])
Our companies are proposing to merge because we believe that by combining them
we can create a stronger and more diversified company that will provide
significant benefits to our stockholders and customers alike. For instance, we
estimate that the combination of our businesses should help us to reduce
duplicate costs and enhance revenues by about $1 million annually, before taxes,
within two years. However, due to the contingent nature and timing of these
potential revenue enhancements and efficiency improvements, we have not taken
them into account in arriving at our estimates of the merger's impact on future
earnings per share.
We expect the merger to strengthen our position as a competitor in the financial
services business, which is rapidly changing and growing more competitive.
We also expect to incur merger related costs of $1.8 million, after tax, as a
result of combining our companies.
The discussion of our reasons for the merger includes forward-looking statements
about possible or assumed future results of our operations and the performance
of the combined company after the merger. For a discussion of factors that could
affect these future results, see "A Warning About Forward-Looking Statements" on
page [___].
FAIRNESS OPINIONS (PAGES [__] AND [__])
MNB STOCKHOLDERS. McConnell, Budd & Downes, Inc. has delivered a written opinion
to MNB's board of directors that, as of the date of this document, the MNB
exchange ratio is fair to the holders of MNB common stock, from a financial
point of view. We have attached this opinion to this document as Appendix B. You
should read this opinion completely to understand the procedures followed,
matters considered and limitations on the reviews undertaken by McConnell, Budd
& Downes in providing its opinion.
LBI STOCKHOLDERS. Keefe Bruyette & Woods, Inc. has delivered a written opinion
to LBI's board of directors that, as of the date of this document, the LBI
exchange ratio is fair to the holders of LBI common stock, from a financial
point of view. We have attached this opinion to this document as Appendix C. You
should read this opinion completely to understand the procedures followed,
matters considered and limitations on the reviews undertaken by Keefe Bruyette
in providing its opinion.
SPECIAL MEETINGS OF STOCKHOLDERS (PAGES [__] AND [___])
MNB STOCKHOLDERS. The MNB meeting will be held on [_________], 2001, at [______]
[_]m., local time, at [____________________], Manhattan, Kansas. At MNB's
meeting, you will be asked:
o to adopt a merger agreement that provides for the merger of
MNB and LBI with and into Landmark; and
o to act on other matters that may be submitted to a vote at the
meeting.
LBI STOCKHOLDERS. The LBI meeting will be held on [_________], 2001, at [______]
[_]m., local time, at [____________________], Dodge City, Kansas. At LBI's
meeting, you will be asked:
o to adopt a merger agreement that provides for the merger of
LBI and MNB with and into Landmark; and
o to act on other matters that may be submitted to a vote at the
meeting.
RECORD DATE; VOTE REQUIRED (PAGES [__] AND [__])
MNB STOCKHOLDERS. You can vote at the meeting of MNB's stockholders if you owned
MNB common stock at the close of business on [_________], 2001. You can cast one
vote for each share of MNB common stock that you owned at that time. To adopt
the merger agreement, the holders of a majority of shares of MNB common stock
allowed to vote at the meeting must vote in favor of doing so.
You may vote your shares in person by attending the meeting or by mailing us
your proxy if you are unable to or do not wish to attend. You can revoke your
proxy at any time before we take a vote at the meeting by sending a written
notice revoking the proxy or a later-dated proxy to the secretary of MNB, or by
attending the meeting and voting in person.
7
LBI STOCKHOLDERS. You can vote at the meeting of LBI's stockholders if you owned
LBI common stock at the close of business on [__________], 2001. You can cast
one vote for each share of LBI common stock that you owned at that time. To
adopt the merger agreement, the holders of a majority of shares of LBI common
stock allowed to vote at the meeting must vote in favor of doing so.
You may vote your shares in person by attending the meeting or by mailing us
your proxy if you are unable to or do not wish to attend. You can revoke your
proxy at any time before we take a vote at the meeting by sending a written
notice revoking the proxy or a later-dated proxy to the secretary of LBI, or by
attending the meeting and voting in person.
OUR RECOMMENDATIONS TO STOCKHOLDERS (PAGES [__] AND [__])
MNB STOCKHOLDERS. MNB's board of directors believes that the merger is fair to
you and in your best interests, and unanimously recommends that you vote "FOR"
the proposal to adopt the merger agreement.
LBI STOCKHOLDERS. LBI's board of directors believes that the merger is fair to
you and in your best interests, and unanimously recommends that you vote "FOR"
the proposal to adopt the merger agreement.
SHARE OWNERSHIP OF MANAGEMENT AND SIGNIFICANT STOCKHOLDERS (PAGES [__] AND [__])
MNB. On MNB's record date, its directors and executive officers, their immediate
family members and entities they control owned 382,677 shares, or approximately
23.9% of the outstanding shares of MNB common stock, including shares they may
acquire through exercising stock options. On this record date, MNB's Employee
Stock Ownership Plan held 112,703 shares, or approximately 7.2% of the
outstanding shares of MNB common stock. On the record date, LBI's directors and
executive officers, including their immediate family members, owned 554 shares
of MNB common stock or less than 0.1% of MNB's outstanding shares.
LBI. On LBI's record date, its directors and executive officers, their immediate
family members and entities they control owned 238,669 shares, or approximately
21.9% of the outstanding shares of LBI common stock, including shares they may
acquire through exercising stock options. On this record date, LBI's Employee
Stock Ownership Plan held 120,120 shares, or approximately 11.0% of the
outstanding shares of LBI common stock.
EFFECTIVE TIME OF THE MERGER (PAGE [__])
The merger will become final when a certificate of merger is filed with the
Secretary of State of the State of Delaware and articles of merger are filed
with the Secretary of State of the State of Kansas. If our stockholders approve
the merger at their special meetings, and if Landmark obtains all required
regulatory approvals, we anticipate that the merger will be completed in the
third quarter of 2001, although delays could occur.
We cannot assure you that we can obtain the necessary stockholder and regulatory
approvals or that the other conditions to completion of the merger can or will
be satisfied.
EXCHANGE OF STOCK CERTIFICATES (PAGE [__])
On or around the time of the merger, you will receive a letter and instructions
on how to surrender your stock certificates representing MNB and LBI common
stock in exchange for Landmark stock certificates. You must carefully review and
complete these materials and return them as instructed along with your stock
certificates for MNB and LBI common stock. PLEASE DO NOT SEND MNB OR LBI ANY
STOCK CERTIFICATES UNTIL YOU RECEIVE THESE INSTRUCTIONS.
CONDITIONS TO COMPLETION OF THE MERGER (PAGE [__])
The completion of the merger depends on a number of conditions being met. These
include:
o approval of the merger agreement by our stockholders;
o approval of the merger by certain federal regulatory
authorities;
o receipt by each of us of an opinion that, for United States
federal income tax purposes, our respective stockholders who
exchange their shares for shares of Landmark common stock
should not recognize any gain or loss as a result of the
merger, except in connection with the payment of cash instead
of fractional shares or the payment of cash resulting from the
exercise of appraisal rights (this opinion
8
will be subject to various limitations and we recommend that
you read the fuller description of tax consequences provided
in this document beginning on page [__]); and
o the absence of any injunction or legal restraint blocking the
merger, or of any proceedings by a government body trying to
block the merger.
A party to the merger agreement could choose to complete the merger even though
a condition has not been satisfied, as long as the law allows it to do so. We
cannot be certain when or if the conditions to the merger will be satisfied or
waived, or that the merger will be completed.
REGULATORY APPROVALS (PAGE [__])
We cannot complete the merger unless it is approved by the Board of Governors of
the Federal Reserve System. Once the Federal Reserve approves the merger, we
have to wait anywhere from 15 to 30 days before we can complete the merger,
during which time the Department of Justice can challenge the merger on
antitrust grounds. In addition, the merger is subject to the approval of, or
notice to, other federal regulatory authorities.
We must also file an application with the Office of the Comptroller of the
Currency for approval of the merger of our bank subsidiaries.
We have filed all of the required applications or notices with the Federal
Reserve and these other regulatory authorities.
As of the date of this document, we have not received all of the required
approvals. While we do not know of any reason that we would not be able to
obtain the necessary approvals in a timely manner, we cannot be certain when or
if we will obtain them.
WAIVER, AMENDMENT AND TERMINATION (PAGE [__])
We may jointly amend the merger agreement and each of us may waive our right to
require the other party to adhere to any term or condition of the merger
agreement. However, we may not do so after our stockholders approve the merger,
if the amendment or waiver reduces or changes the consideration that will be
received by our stockholders, unless they approve the amendment or waiver.
We can mutually agree at any time to terminate the merger agreement without
completing the merger. Also, either of us can decide, without the consent of the
other, to terminate the merger agreement if:
o any government agency denies an approval we need to complete
the merger and that denial has become final and nonappealable;
o the merger has not been completed by March 1, 2002, unless the
failure to complete the merger by that time is due to a
violation of the merger agreement by the party that wants to
terminate the merger agreement; or
o the other company breaches the merger agreement in any way
that would entitle the party seeking to terminate the merger
agreement to not consummate the merger, and the breaching
party does not correct the breach promptly, as long as the
party seeking to terminate has not itself materially breached
the merger agreement.
MANAGEMENT AND OPERATIONS AFTER THE MERGER (PAGE [__])
The present management of both our companies will share the responsibility of
managing Landmark, the newly combined company, after the completion of the
merger. The board of directors of Landmark will initially be comprised of ten
members, five of whom have been chosen from among MNB's current directors, and
LBI's five current directors.
These Landmark directors include, among others, Larry Schugart, President and
Chief Executive Officer, of LBI, and Patrick L. Alexander, President and Chief
Executive Officer, of MNB.
Following the merger, Mr. Schugart will be Chairman, Mr. Alexander will be
President and Chief Executive Officer and Mark Herpich of MNB will be Vice
President and Chief Financial Officer of Landmark.
INTERESTS OF CERTAIN PERSONS IN THE MERGER THAT DIFFER FROM YOUR INTERESTS (PAGE
[__])
Some of our directors and officers have interests in the merger that differ
from, or are in addition to, their interests as stockholders in our companies.
These interests exist because of employment agreements that certain officers of
our companies have and rights that the directors and officers have under some of
our benefit plans. These employment
9
agreements and plans will provide the officers with severance benefits as a
result of the merger, although one of these officers has waived the right to
receive severance benefits to which he is entitled.
Additional interests of some of our directors and executive officers are
described under "Management and Operations After the Merger."
The members of our boards of directors knew about these additional interests and
considered them when they approved the merger agreement and the merger.
ACCOUNTING TREATMENT (PAGE [__])
The merger will be accounted for as a "purchase transaction." This means that,
for accounting and financial reporting purposes, we will treat the fair market
value of the consideration received by MNB's stockholders that is in excess of
the fair market value of MNB as goodwill, if any, on the new company's financial
statements. This goodwill will need to be amortized in the future and that would
reduce the new company's profitability.
EXPENSES AND TERMINATION FEES (PAGE [__])
If we mutually agree to terminate the merger agreement, or if either of us
terminates the merger agreement because the merger has not been completed by
March 1, 2002, then we will each pay our own fees and expenses, except that we
will divide the costs and expenses that we have incurred in printing and mailing
this document and the fees that we have paid to the Securities and Exchange
Commission in connection with the merger.
If either of us terminates the merger agreement because its financial advisor
has withdrawn its fairness opinion or the other's stockholders fail to approve
the merger agreement, then the company with the fairness opinion that was
withdrawn or the stockholders that failed to approve the merger must pay the
other's fees and expenses in connection with the merger up to a maximum of
$350,000. Each of us has the same obligation to pay the other's fees and
expenses plus the obligation to pay the other an additional termination fee of
$500,000 if the merger agreement is terminated because one of us breached any of
our respective covenants contained in the merger agreement. In addition, if
within one year after the termination of the merger agreement, the breaching
company or the company with the fairness opinion that was withdrawn or the
stockholders that failed to approve the merger enters into another agreement to
be acquired by an outside third party or group, then the breaching company or
the company with the fairness opinion that was withdrawn or the stockholders
that failed to approve the merger must pay an additional special termination fee
to the other of $1,000,000.
Either of us may also terminate the merger agreement because we have received an
offer from an unrelated third party that our respective board of directors has
concluded is more favorable to our stockholders. In this case, the company
terminating the agreement must pay to the other company a one-time special
termination fee of $1,000,000 if it agrees within one year after the termination
of the merger agreement to be acquired by some other person or group.
We have agreed to pay these special termination fees to each other to increase
the likelihood that we would complete the merger. These fees could discourage
other companies from attempting to combine with either of us before we complete
the merger.
MATERIAL DIFFERENCES IN THE RIGHTS OF STOCKHOLDERS (PAGE [__])
The rights of MNB stockholders are governed by Delaware law and MNB's
certificate of incorporation and bylaws. The rights of LBI stockholders are
governed by Kansas law and LBI's articles of incorporation and bylaws. Upon our
completion of the merger, you will become stockholders of Landmark and your
rights will be governed by Delaware law and by Landmark's certificate of
incorporation and bylaws.
10
UNAUDITED COMPARATIVE PER SHARE DATA
The following table shows information about our earnings per common and
diluted share, dividends per share and book value per share, and similar
information reflecting the merger (which we refer to as "pro forma"
information). In presenting the comparative pro forma information for certain
time periods, we assumed that we had been merged through those periods.
The information listed as "equivalent pro forma" was obtained by
multiplying the pro forma amounts by the exchange ratio of 0.523. We present
this information to reflect the fact that MNB stockholders will receive 0.523
shares of Landmark common stock for each share of MNB common stock exchanged in
the merger. LBI stockholders will receive one share of Landmark common stock for
each share of LBI common stock exchanged in the merger. We expect that we will
incur merger and integration charges as a result of combining our companies. We
also anticipate that the merger will provide the new company with financial
benefits that include reduced operating expenses and the opportunity to earn
more revenue. The pro forma information, while helpful in illustrating the
financial characteristics of Landmark under one set of assumptions, does not
reflect these expenses or benefits and, accordingly, does not attempt to predict
or suggest future results. It also does not necessarily reflect what the
historical results of the combined company would have been had our companies
been combined.
The information in the following table is based on, and should be read
together with, the historical financial information that we have presented in
our prior Securities and Exchange Commission filings. We have incorporated this
material into this document by reference. See "Where You Can Find More
Information."
11
LANDMARK BANCSHARES, INC.
As of and for the As of and for the
six months ended year ended
March 31 September 30,
------------------------- --------------
2001 2000 2000
------------ ------------ --------------
Historical:
Net earnings before cumulative effect of a change
in accounting principle - basic $ 1.16 $ 1.01 $ 2.19
Net earnings before cumulative effect of a change
in accounting principle - diluted 1.08 0.94 2.04
Cash dividends declared 0.30 0.30 0.60
Book value 22.65 20.25 21.37
Pro forma combined(1):
Net earnings before cumulative effect of a change
in accounting principle - basic $ 0.98 $ 0.83 $ 1.84
Net earnings before cumulative effect of a change
in accounting principle - diluted 0.93 0.78 1.75
Cash dividends declared 0.30 0.30 0.60
Book value 20.70 -- --
MNB BANCSHARES, INC.
As of and for the As of and for the
six months ended year ended
March 31 December 31,
------------------------- ---------------
2001 2000 2000
------------ ------------ ---------
Historical:
Net earnings before cumulative effect of a change
in accounting principle - basic $ 0.38 $ 0.30 $ 0.71
Net earnings before cumulative effect of a change
in accounting principle - diluted 0.38 0.30 0.70
Cash dividends declared 0.13 0.12 0.25
Book value 9.85 9.18 9.68
Equivalent pro forma combined(1):
Net earnings before cumulative effect of a change
in accounting principle - basic $ 0.51 $ 0.43 $ 0.96
Net earnings before cumulative effect of a change
in accounting principle - diluted 0.49 0.41 0.91
Cash dividends declared 0.16 0.16 0.31
Book value 10.83 -- --
- ------------------------
(1) Pro forma and equivalent pro forma information is computed utilizing
the historical consolidated statement of earnings of MNB Bancshares,
Inc. for the year ended December 31, 2000.
12
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited Pro Forma Financial Information and
footnotes thereto are presented to show the impact on the historical
financial position and results of operations of Landmark pursuant to the
merger. As a result of the merger, MNB and LBI stockholders will receive
shares of Landmark pursuant to the established exchange ratio. The exchange
ratio is fixed at 0.523 for MNB and one for LBI.
The unaudited Pro Forma Consolidated Balance Sheet reflects the
historical position of MNB and LBI at March 31, 2001 with pro forma
adjustments based on the assumption that the merger was consummated on March
31, 2001. The unaudited Pro Forma Consolidated Balance Sheet does not include
the capitalization of Landmark, which issued 500 shares to each of LBI and
MNB for total consideration of $1,000, based on the assumption that these
shares will be redeemed in full upon the completion of the merger. The pro
forma adjustments are based on the purchase method of accounting. The
unaudited Pro Forma Consolidated Statements of Earnings assumes that the
merger was consummated on October 1 of the earliest indicated period. The
unaudited pro forma consolidated financial statements reflect estimated
nonrecurring charges consisting of management's estimates of legal,
accounting and investment banking fees that will be incurred in connection
with the merger. The adjustments are based on information available and
certain assumptions that we believe are reasonable.
The unaudited pro forma earnings amounts do not reflect any
potential earnings enhancements or cost reductions that are expected to
result from the consolidation of MNB's and LBI's operations and are not
necessarily indicative of the results expected of the future combined
operations. No assurances can be given with respect to the ultimate level of
earnings enhancements or cost reductions to be realized.
The following information should be read in conjunction with, and is
qualified in its entirety by, the consolidated financial statements and
accompanying notes of MNB and LBI included or incorporated by reference
herein. Results of MNB and LBI for the interim periods ended March 31, 2001
are not necessarily indicative of results of operations or the combined
financial position that would have resulted had the merger been consummated
at the beginning of the periods indicated.
The unaudited Pro Forma Financial Information is intended for
information purposes and is not necessarily indicative of the future
financial position or future operating results of the combined company or of
the financial position or operating results of the combined company that
would have actually occurred had the merger been in effect as of the date or
for the period presented.
13
Landmark Merger Company
Unaudited Pro Forma Consolidated Balance Sheet
March 31, 2001
(in thousands)
- ---------------------------------------------------------------------------------------------------------------------------
As reported
------------------------------- Pro
LBI MNB Forma Pro Forma
Historical Historical Adjustments Consolidated
------------- --------------- -------------- --------------
Assets
Cash and due from banks $ 6,860 $ 5,541 $ (600) b $ 10,601
Investments securities:
Available-for-sale, at fair value 51,542 43,135 94,677
Held-to-maturity, at cost -- 907 907
Loans, net 159,457 97,098 256,555
Premises and equipment 1,529 2,238 3,767
Other assets 3,827 6,561 11,588
------------ -------------- ---------- -----------
Total assets $ 223,215 $ 155,480 $ (600) $ 378,095
============ ============== ========== ===========
Liabilities and Stockholders' Equity
Liabilities:
Deposits $ 151,823 $ 132,101 $ $ 283,924
Federal Home Loan Bank advances and other
borrowings 42,000 5,881 47,881
Other liabilities 4,650 2,099 6,749
------------- --------------- ---------- ------------
Total liabilities 198,473 140,081 - 338,554
------------- --------------- ----------- -----------
Stockholders' Equity:
Preferred stock -- -- --
Common stock 228 16 (16) a 19
(209) a
Paid in capital 22,388 9,737 16 a 14,706
209 a
649 a
5,112 a
(600) b
(22,805) a
Retained earnings 24,725 5,112 (5,112) a 24,725
Accumulated other comprehensive income 625 649 (649) a 625
Unearned employee benefits (419) (115) (534)
------------- ---------------- ------------ ------------
47,547 15,339 (23,405) 39,541
Treasury stock (22,805) -- 22,805 a --
------------- -------------- ---------- ----------
Total stockholders' equity 24,742 15,339 (600) 39,541
------------ -------------- ----------------- -----------
Total liabilities and stockholders' equity $ 223,215 $ 155,480 $ (600) $ 378,095
============ ============== ================= ===========
14
Landmark Merger Company
Unaudited Pro Forma Consolidated Statements of Earnings
(in thousands, except per share and weighted average share data)
- -------------------------------------------------------------------------------
For the year
For the six months ended
ended March 31, September 30,(1)
------------------------------- ----------------
2001 2000 2000
-------------- -------------- ----------------
Interest income
Loans and fees on loans $ 11,698 $ 10,928 $ 22,980
Investment securities 2,689 3,024 6,081
Other 30 36 54
-------------- -------------- ----------------
Total interest income 14,417 13,988 29,155
-------------- -------------- ----------------
Interest expense
Deposits 7,055 5,860 12,604
Federal Home Loan Bank advances and other borrowings 1,626 2,140 4,660
-------------- -------------- ----------------
Total interest expense 8,681 8,000 17,264
-------------- -------------- ----------------
Net interest income 5,736 5,988 11,851
Provision for loan losses 135 260 352
-------------- -------------- ----------------
Net interest income after provision for loan
losses 5,601 5,728 11,499
-------------- -------------- ----------------
Non-interest income
Fees and service charges 795 640 1,555
Security transactions, net 214 43 21
Gain on sales of loans, net 456 127 275
Other 88 123 338
-------------- -------------- ----------------
Total non-interest income 1,553 933 2,189
-------------- -------------- ----------------
Non-interest expense
Compensation and benefits 2,370 2,202 4,530
Occupancy and equipment 498 442 945
Amortization 205 149 327
Data processing 146 167 300
Other 1,149 1,197 2,375
-------------- -------------- ----------------
Total non-interest expense 4,368 4,157 8,477
-------------- -------------- ----------------
Earnings before income taxes and cumulative
effect of a change in accounting principle 2,786 2,504 5,211
Income taxes 967 952 1,748
-------------- -------------- ----------------
Net earnings before cumulative effect of a
change in accounting principle $ 1,819 $ 1,552 $ 3,463
============== ============== ================
Per share data:
Basic earnings per share before cumulative effect
of a change in accounting principle(2) $ 0.98 $ 0.83 $ 1.84
Weighted average shares of common stock
outstanding(2) 1,860,169 1,872,121 1,880,345
Diluted earnings per share before cumulative effect
of a change in accounting principle(2) $ 0.93 $ 0.78 $ 1.75
Weighted average shares of common stock and
dilutive potential common shares outstanding(2) 1,955,519 1,979,834 1,980,465
- -----------------------------
(1) The historical consolidated statement of earnings of MNB Bancshares,
Inc. presented is for the year ended December 31, 2000.
(2) Per share data for MNB Bancshares, Inc. has been restated to reflect
annual 5% stock dividends.
15
Landmark Merger Company
Unaudited Pro Forma Consolidated Statements of Earnings
For the six months ended March 31, 2001
(in thousands, except per share and weighted average share data)
- ----------------------------------------------------------------------------------------------------------------------------
As Reported
-------------------------------
LBI MNB Pro Forma Pro Forma
Historical Historical Adjustments Consolidated
------------- -------------- ------------- ------------
Interest income
Loans and fees on loans $ 7,385 $ 4,313 $ $ 11,698
Investments securities 1,368 1,321 2,689
Other - 30 30
------------- -------------- ------------- ------------
Total interest income 8,753 5,664 14,417
------------- -------------- ------------- ------------
Interest expense
Deposits 4,117 2,938 7,055
Federal Home Loan Bank advances and other borrowings 1,404 222 1,626
------------- -------------- ------------- ------------
Total interest expense 5,521 3,160 8,681
------------- -------------- ------------- ------------
Net interest income 3,232 2,504 5,736
Provision for loan losses 90 45 135
------------- -------------- ------------- ------------
Net interest income after provision for loan losses 3,142 2,459 5,601
Non-interest income
Fees and service charges 233 562 795
Security transactions, net 214 214
Gain on sales of loans, net 379 77 456
Other 67 21 88
------------- -------------- ------------- ------------
Total non-interest income 893 660 1,553
------------- -------------- ------------- ------------
Non-interest expense
Compensation and benefits 1,265 1,105 2,370
Occupancy and equipment 133 365 498
Amortization 71 134 205
Data processing 76 70 146
Other 524 625 1,149
------------- -------------- ------------- ------------
Total non-interest expense 2,069 2,299 4,368
------------- -------------- ------------- ------------
Earnings before income taxes and cumulative effect
of a change in accounting principle 1,966 820 2,786
Income taxes 733 234 967
------------- -------------- ------------- ------------
Net earnings before cumulative effect of a change
in accounting principle $ 1,233 $ 586 $ $ 1,819
============= ============== ============= ============
Per share data:
Basic earnings per share before cumulative effect of a
change in accounting principle(1) $ 1.16 $ 0.38 $ 0.98
Weighted average shares of common stock outstanding(1) 1,057,363 1,535,003 (732,196)a 1,860,170
Diluted earnings per share before cumulative effect of
a change in accounting principle(1) $ 1.08 $ 0.38 $ 0.93
Weighted average shares of common stock and dilutive
potential common shares outstanding(1) 1,139,044 1,561,138 (744,663)a 1,955,519
- ------------------------
(1) Per share data for MNB Bancshares, Inc. has been restated to reflect
annual 5% stock dividends.
16
Landmark Merger Company
Unaudited Pro Forma Consolidated Statements of Earnings
For the six months ended March 31, 2000
(in thousands, except per share and weighted average share data)
- -----------------------------------------------------------------------------------------------------------------------------
As Reported
-------------------------------
LBI MNB Pro Forma Pro Forma
Historical Historical Adjustments Consolidated
------------- --------------- ------------- -------------
Interest income
Loans and fees on loans $ 7,177 $ 3,751 $ $ 10,928
Investments securities 1,759 1,265 3,024
Other - 36 36
------------- --------------- ------------- -------------
Total interest income 8,936 5,052 13,988
------------- --------------- ------------- -------------
Interest expense
Deposits 3,651 2,209 5,860
Federal Home Loan Bank advances and other borrowings 1,661 479 2,140
------------- --------------- ------------- -------------
Total interest expense 5,312 2,688 8,000
------------- --------------- ------------- -------------
Net interest income 3,624 2,364 5,988
Provision for loan losses 230 30 260
------------- --------------- ------------- -------------
Net interest income after provision for loan losses 3,394 2,334 5,728
------------- --------------- ------------- -------------
Non-interest income
Fees and service charges 218 422 640
Security transactions, net 43 - 43
Gain on sales of loans, net 92 35 127
Other 97 26 123
------------- --------------- ------------- -------------
Total non-interest income 450 483 933
------------- --------------- ------------- -------------
Non-interest expense
Compensation and benefits 1,140 1,062 2,202
Occupancy and equipment 125 317 442
Amortization 39 110 149
Data processing 100 67 167
Other 623 574 1,197
------------- --------------- ------------- -------------
Total non-interest expense 2,027 2,130 4,157
------------- --------------- ------------- -------------
Earnings before income taxes and cumulative effect
of a change in accounting principle 1,817 687 2,504
Income taxes 726 226 952
------------- --------------- ------------- -------------
Net earnings before cumulative effect of a change
in accounting principle $ 1,091 $ 461 $ $ 1,552
============= ============== ============= =============
Per share data:
Basic earnings per share before cumulative effect of a
change in accounting principle(1) $ 1.01 $ 0.30 $ 0.83
Weighted average shares of common stock outstanding(1) 1,076,576 1,521,119 (725,574) a 1,872,121
Diluted earnings per share before cumulative effect of
a change in accounting principle(1) $ 0.94 $ 0.30 $ 0.78
Weighted average shares of common stock and dilutive
potential common shares outstanding(1) 1,165,326 1,557,377 (742,869) a 1,979,834
- -------------------
(1) Per share information for MNB Bancshares, Inc. has been restated to
reflect annual 5% stock dividends.
17
Landmark Merger Company
Unaudited Pro Forma Consolidated Statements of Earnings
For the year ended September 30, 2000
(in thousands, except per share and weighted average share data)
- ----------------------------------------------------------------------------------------------------------------------------
As Reported
-------------------------------
LBI MNB Pro Forma Pro Forma
Historical Historical(1) Adjustments Consolidated
------------- -------------- ------------- -------------
Interest income
Loans and fees on loans $ 14,782 $ 8,198 $ $ 22,980
Investments securities 3,448 2,633 6,081
Other 54 54
------------- -------------- ------------- -------------
Total interest income 18,230 10,885 29,115
------------- -------------- ------------- -------------
Interest expense
Deposits 7,340 5,264 12,604
Federal Home Loan Bank advances and other borrowings 3,889 771 4,660
------------- -------------- ------------- -------------
Total interest expense 11,229 6,035 17,264
------------- -------------- ------------- -------------
Net interest income 7,001 4,850 11,851
Provision for loan losses 267 85 352
------------- -------------- ------------- -------------
Net interest income after provision for loan losses 6,734 4,765 11,499
------------- -------------- ------------- -------------
Non-interest income
Fees and service charges 455 1,100 1,555
Security transactions, net 51 (30) 21
Gain on sales of loans, net 181 94 275
Other 290 48 338
------------- -------------- ------------- -------------
Total non-interest income 977 1,212 2,189
------------- -------------- ------------- -------------
Non-interest expense
Compensation and benefits 2,339 2,191 4,530
Occupancy and equipment 259 686 945
Amortization 89 238 327
Data processing 164 136 300
Other 1,205 1,170 2,375
------------- -------------- ------------- -------------
Total non-interest expense 4,056 4,421 8,477
------------- -------------- ------------- -------------
Earnings before income taxes and cumulative effect
of a change in accounting principle 3,655 1,556 5,211
Income taxes 1,272 476 1,748
------------- -------------- ------------- -------------
Net earnings before cumulative effect of a change
in accounting principle $ 2,383 $ 1,080 $ $ 3,463
============= ============== ============= =============
Per share data:
Basic earnings per share before cumulative effect of a
change in accounting principle(2) $ 2.19 $ 0.71 $ 1.84
Weighted average shares of common stock outstanding(2) 1,086,528 1,517,815 (723,998) a 1,880,345
Diluted earnings per share before cumulative effect of
a change in accounting principle(2) $ 2.04 $ 0.70 $ 1.75
Weighted average shares of common stock and dilutive
potential common shares outstanding(2) 1,167,846 1,553,765 (741,146) a 1,980,465
- ---------------------
(1) The historical consolidated statement of earnings for MNB Bancshares,
Inc. is presented for the year ended December 31, 2000.
(2) Per share data for MNB Bancshares, Inc. has been restated to reflect
annual 5% stock dividends.
18
(a) STOCKHOLDERS' EQUITY. In conjunction with the transaction, Landmark, a
new holding company was established. Each outstanding share of LBI
stock will be converted into one share of Landmark stock and each share
of MNB will be converted into 0.523 shares of Landmark. Each share of
Landmark stock will have a par value of $0.01 per share. LBI and MNB
had 1,092,438 and 1,563,905 million shares of common stock outstanding
as of March 31, 2001, respectively. The pro forma average common share
amounts used to calculate pro forma basic and diluted earnings per
share were derived from the actual average share amounts for MNB
adjusted by the exchange ratio of 0.523 and the actual average share
amounts for LBI. The common stock in the Unaudited Pro Forma Balance
Sheet has been adjusted to reflect the reclassification of LBI's
additional paid in capital and elimination of treasury stock. Unaudited
pro forma additional paid in capital reflects the recognition of MNB's
accumulated other comprehensive income, the reclassification of MNB's
retained earnings, the elimination of treasury stock and the estimated
market value of the Landmark shares to be issued to MNB stockholders,
including the estimated adjustment for anticipated merger costs as
described below.
(b) MERGER RELATED COSTS. In connection with the transaction, LBI and MNB
expect to incur merger costs of approximately $600,000 including legal,
accounting and investment banking fees. Change in control payments,
severance pay and related costs for LBI employees are currently
estimated at approximately $1.3 million, net of tax. These employee
related costs will be accrued by LBI upon the completion of the merger,
and accordingly are not included in the Landmark unaudited Pro Forma
Consolidated Statements of Earnings. Additional exit costs related to
contract terminations or other costs may be incurred in the future but
have not been identified or estimated at this time.
19
SELECTED FINANCIAL DATA
The following tables present our respective selected consolidated
financial data for the three month periods for MNB, and the six month periods
for LBI, ended March 31, 2001 and 2000, and for the five year period ended
December 31, 2000 for MNB, and September 30, 2000 for LBI. The information for
MNB is based on the historical financial information that is contained in
reports MNB has previously filed with the Securities and Exchange Commission.
Historical financial statements of MNB can be found in its March 31, 2001 Form
10-Q and its 2000 Annual Report on Form 10-K. The information for LBI is based
on the historical financial information that is contained in reports LBI has
previously filed with the Securities and Exchange Commission. Historical
financial statements of LBI can be found in its March 31, 2001 Form 10-Q and its
2000 Annual Report on Form 10-K. All of these documents are incorporated by
reference in this joint proxy statement-prospectus. See "Where You Can Find More
Information" on page [____].
You should read the following tables in conjunction with our
consolidated financial statements described above and with the notes to them.
Historical results do not necessarily indicate the results that you can
expect for any future period. We believe that we have included all adjustments
(which include only normal recurring adjustments) necessary to arrive at a fair
statement of our interim results of operations. Results for the interim periods
ended March 31, 2001, do not necessarily indicate the results that you can
expect for the year as a whole.
20
Selected Historical Financial and Other Data
MNB Bancshares, Inc.
(dollars in thousands, except per share data)
- --------------------------------------------------------------------------------------------------------------------------
Three months ended
March 31, Years ended December 31,
-------------------- --------------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
--------- --------- ---------- --------- --------- --------- ----------
INCOME STATEMENT DATA
Net interest income $ 1,253 $ 1,175 $ 4,849 $ 4,563 $ 4,696 $ 3,891 $ 3,621
Provision for loan losses 25 15 85 15 90 60 15
Gains on sales of loans 48 14 95 141 384 99 75
Investment securities gains (losses) -- -- (30) 7 11 (21) (15)
Other noninterest income 278 231 1,148 854 817 612 623
Noninterest expense 1,167 1,080 4,421 4,183 4,358 2,977 3,233
Earnings before income taxes 387 325 1,556 1,367 1,460 1,544 1,056
Income taxes 111 104 476 463 478 471 339
Net earnings 276 221 1,080 904 982 1,073 717
PER SHARE DATA(1)
Basic net earnings per share $ 0.18 $ 0.15 $ 0.71 $ 0.60 $ 0.66 $ 0.72 $ 0.48
Diluted net earnings per share 0.18 0.14 0.70 0.58 0.63 0.70 0.47
Cash dividends 0.06 0.06 0.25 0.24 0.23 0.22 0.12
Book value 9.85 9.68 9.56 8.73 8.78 8.28 7.71
BALANCE SHEET DATA AT PERIOD END
Total assets $ 155,480 $ 143,252 $ 152,897 $ 143,262 $ 135,830 $ 144,752 $ 103,420
Loans, net of unearned discount 98,385 89,804 95,334 88,969 76,345 95,059 63,369
Allowance for loan losses (1,287) (1,264) (1,277) (1,249) (1,292) (1,335) (820)
Investment securities 44,042 45,599 47,649 45,005 50,651 42,079 33,239
Deposits 132,101 113,781 130,186 112,336 115,062 122,209 86,710
Borrowings 5,881 14,819 6,498 16,699 6,530 9,099 3,619
Total stockholders' equity 15,398 13,309 14,676 13,290 13,242 12,276 11,334
PROFITABILITY RATIOS
Return on average total assets 0.73% (2) 0.62% (2) 0.73% 0.65% 0.69% 1.03% 0.70%
Return on average stockholders' equity 7.56 (2) 6.67 (2) 7.95 6.82 7.73 9.18 6.54
Net interest income/average interest earning
assets 3.56 (2) 3.49 (2) 3.47 3.49 3.52 3.89 3.67
Loans/deposits 74.61 79.00 72.25 78.09 65.23 72.60 72.14
Equity/assets (period end) 9.90 9.29 9.60 9.28 9.75 8.48 10.96
Average stockholders' equity/average total 9.67 9.30 9.20 9.59 8.96 11.20 10.67
assets
CREDIT QUALITY RATIOS
Allowance/period end loans 1.31% 1.41% 1.34% 1.40% 1.69% 1.40% 1.29%
Nonperforming loans/total loans 0.49 0.69 0.46 0.53 0.19 0.19 0.22
Allowance/nonperforming assets 136.19 204.86 152.00 237.50 897.20 448.90 490.90
Nonperforming assets/total assets 0.61 0.43 0.55 0.37 0.11 0.21 0.16
Provision/average loans 0.03 0.02 0.09 0.02 0.11 0.09 0.02
Net charge offs/average loans 0.02 - 0.06 0.07 0.16 0.01 0.03
- --------------------
(1) Per share data for MNB Bancshares, Inc. has been restated to reflect
annual 5% stock dividends.
(2) Ratios have been annualized and are not necessarily indicative of the
results for the entire year.
21
Selected Historical Financial and Other Data
Landmark Bancshares, Inc.
(dollars in thousands, except per share data)
- ------------------------------------------------------------------------------------------------------------------------------
Six months ended
March 31, Years ended September 30,
--------------------- ---------------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
---------- --------- ---------- --------- --------- --------- ---------
INCOME STATEMENT DATA
Net interest income $ 3,232 $ 3,624 $ 7,001 $ 7,030 $ 6,991 $ 6,927 $ 5,897
Provision for loan losses 90 230 267 785 265 308 135
Gains on sales of loans 379 92 181 463 472 237 82
Investment securities gains (losses) 214 43 51 500 202 -- 135
Other noninterest income 300 315 977 1,636 1,226 1,026 745
Noninterest expense 2,069 2,027 4,056 4,191 4,134 3,581 4,323
Earnings before income taxes and cumulative
effect of a change in accounting
principle 1,966 1,817 3,655 3,690 3,818 4,064 2,184
Income taxes 733 726 1,272 1,334 1,454 1,550 780
Earnings before cumulative effect of a
change in accounting principle 1,233 1,091 2,383 2,356 2,364 2,514 1,404
Cumulative effect of a change in accounting
principle (214) -- -- -- -- -- --
Net earnings 1,019 1,091 2,383 2,356 2,364 2,514 1,404
PER SHARE DATA
Basic earnings per share
Earnings before cumulative effect of a
change in accounting principle $ 1.16 $ 1.01 $ 2.19 $ 2.06 $ 1.56 $ 1.52 $ 0.78
Cumulative effect of a change in
accounting principle 0.20 -- -- -- -- -- --
Net earnings 0.96 1.01 2.19 2.06 1.56 1.52 0.78
Diluted earnings per share
Earnings before cumulative effect of a
change in accounting principle 1.08 0.94 2.04 1.87 1.42 1.42 0.74
Cumulative effect of a change in
accounting principle 0.18 -- -- -- -- -- --
Net earnings 0.90 0.94 2.04 1.87 1.42 1.42 0.74
Cash dividends 0.30 0.30 0.60 0.70 0.60 0.40 0.40
Book value 22.65 20.01 21.37 19.80 18.84 19.10 17.48
BALANCE SHEET DATA AT PERIOD END
Total assets $ 223,215 $244,661 $ 250,676 $ 244,116 $ 225,368 $ 227,850 $ 213,734
Loans, net of unearned discount 159,341 185,051 192,891 179,158 175,870 159,132 130,643
Allowance for loan losses (1,410) (1,424) (1,377) (1,318) (1,137) (969) (740)
Investments in debt and equity securities 51,542 49,022 48,367 54,361 42,520 62,651 79,414
Deposits 151,823 157,606 165,325 158,936 154,793 144,735 143,815
Borrowings 42,000 60,500 57,000 58,000 41,700 46,200 33,467
Total stockholders' equity 24,742 22,959 23,662 22,404 25,024 32,245 32,389
PROFITABILITY RATIOS
Return on average total assets 0.86% (1) 0.89% (1) 0.97% 1.01% 1.03% 1.12% 0.70%
Return on average stockholders' equity 8.42 (1) 9.62 (1) 10.23 10.09 7.52 7.79 4.14
Net interest income/average interest
earning assets 2.81 (1) 3.06 (1) 2.93 3.10 3.12 3.16 3.01
Loans/deposits 104.95 117.41 116.67 112.72 113.62 109.95 0.91
Equity/assets (period end) 11.08 9.38 9.44 9.18 11.10 14.15 15.15
Average stockholders' equity/average total 10.21 9.28 9.48 10.02 13.71 14.44 17.00
assets
CREDIT QUALITY RATIOS
Allowance/period end loans 0.88% 0.78% 0.72% 0.74% 0.65% 0.61% 0.57%
Nonperforming loans/total loans 0.25 0.17 0.59 0.28 0.39 0.27 0.24
Allowance/nonperforming loans 358.78 452.06 122.40 267.34 165.26 229.62 233.44
Nonperforming assets/total assets 0.35 0.31 0.52 0.26 0.34 0.30 0.15
Provision/average loans 0.13 0.05 0.14 0.45 0.16 0.21 0.12
Net charge offs/average loans 0.03 0.07 0.11 0.34 0.06 0.06 0.04
- -------------------
(1) Ratios have been annualized and are not necessarily indicative of the
results for the entire year.
22
RISK FACTORS
In addition to the information contained elsewhere in this proxy
statement/prospectus or incorporated in this proxy statement/prospectus by
reference, as a stockholder of MNB or LBI, you should carefully consider the
following factors in making your decision as to how to vote on the merger. See
"Where You Can Find More Information."
RISKS RELATING TO THE MERGER
THE EXCHANGE RATIO IS FIXED AND WILL NOT BE ADJUSTED TO REFLECT ANY CHANGES IN
THE MARKET VALUE OF MNB OR LBI COMMON STOCK PRIOR TO THE EFFECTIVE TIME OF THE
MERGER.
The precise value of the merger consideration to be paid to you will
not be known at the time of the special meetings. The merger agreement provides
that 0.523 shares of Landmark common stock will be issued in the merger in
exchange for each share of MNB common stock, and that one share of Landmark
common stock will be issued in the merger in exchange for each share of LBI
common stock. These exchange ratios are fixed and will not be adjusted to
reflect any changes in the value of either MNB or LBI common stock between the
date of the merger agreement and the effective time of the merger. Moreover,
shares of Landmark common stock will not be traded before the effective time of
the merger and we cannot predict with any certainty what the value of Landmark
common stock will be after the completion of the merger. There are no "walk
away" or termination rights in the merger agreement that would permit MNB or LBI
to terminate the merger if the value of the other's common stock falls.
YOUR INTERESTS WILL BE DILUTED BY THE MERGER.
After the merger, MNB's stockholders will own less than a majority of
the outstanding voting stock of Landmark and could therefore be outvoted by
former LBI stockholders if they all voted together as a group on any issue that
is presented to Landmark's stockholders. LBI's stockholders will own
approximately 60% of Landmark's outstanding voting stock, but the majority of
the senior management positions of Landmark and half of Landmark's initial board
of directors will be comprised of individuals who formerly served as officers or
directors of MNB. There is no single individual stockholder of MNB or LBI who
controls in excess of 11% of either company's common stock. Neither group of
stockholders will have the same control over Landmark as they currently have
over their respective companies.
SOME DIRECTORS AND EXECUTIVE OFFICERS OF MNB AND LBI WILL RECEIVE BENEFITS IN
THE MERGER IN ADDITION TO THE MERGER CONSIDERATION RECEIVED BY ALL OTHER
STOCKHOLDERS OF MNB AND LBI.
Some officers of MNB and LBI will receive employment agreements in
connection with the merger. In addition, some officers of LBI will receive
severance pay, deferred compensation and change of control payments in
connection with the merger. In addition, all of the members of LBI's current
board of directors and five of the members of MNB's board of directors will
together serve as the entire board of directors of Landmark after the completion
of the merger. They will also serve on the board of Landmark's combined bank
subsidiary and receive payments for their service. Accordingly, our directors
and some of our executive officers may have interests in the merger that are
different from, or in addition to, yours. See "Interests of Certain Persons in
the Merger."
THE VALUE OF MNB AND LBI COMMON STOCK MAY VARY IN THE FUTURE.
The value of MNB and LBI common stock could increase or decrease in the
future. Such value could be either higher or lower than the merger consideration
being offered in the merger. The market value for the MNB and LBI common stock
could fluctuate depending on any number of reasons, including those specific to
MNB and LBI and those that influence trading prices of equity securities
generally.
23
POST MERGER RISKS
DIFFICULTIES IN COMBINING THE OPERATIONS OF MNB AND LBI MAY PREVENT LANDMARK
FROM ACHIEVING THE EXPECTED BENEFITS FROM ITS ACQUISITIONS.
Landmark may not be able to achieve fully the strategic objectives and
operating efficiencies it hopes to achieve in the merger. The success of the
merger will depend on a number of factors, including (but not limited to),
Landmark's ability to:
o integrate the operations of MNB and LBI;
o maintain existing relationships with depositors in MNB and LBI
to minimize withdrawals of deposits after the merger;
o maintain and enhance existing relationships with borrowers to
limit unanticipated losses from loans of MNB and LBI;
o control the incremental non-interest expense from MNB and LBI
to maintain overall operating efficiencies;
o retain and attract qualified personnel; and
o compete effectively in the communities served by MNB and LBI
and in nearby communities.
These factors could contribute to Landmark not achieving the expected benefits
from the merger within the desired time frames, if at all.
LANDMARK'S STOCK PRICE MAY BE VOLATILE.
The trading price of Landmark's common stock may be volatile. The
market for Landmark's common stock may experience significant price and volume
fluctuations in response to a number of factors including actual or anticipated
quarterly variations in operating results, changes in expectations of future
financial performance, changes in estimates of securities analysts, governmental
regulatory action, banking industry reform measures, client relationship
developments and other factors, many of which are beyond Landmark's control.
Furthermore, the stock market in general, and the market for banks and
bank holding companies in particular, has experienced extreme volatility that
often has been unrelated to the operating performance of particular companies.
These broad market and industry fluctuations may adversely affect the trading
price of the combined company's common stock, regardless of actual operating
performance.
FUTURE SALES OF SHARES OF LANDMARK COMMON STOCK COULD NEGATIVELY AFFECT ITS
MARKET PRICE.
Upon completion of the merger, the combined company will have
approximately 2,155,000 outstanding shares of common stock. Future sales of
substantial amounts of Landmark's common stock (including shares issued upon the
exercise of stock options) by MNB's or LBI's current stockholders, or the
perception that such sales could occur, could adversely affect the market price
of Landmark's common stock. We make no prediction as to the effect, if any, that
future sales of shares, or the availability of shares for future sale, will have
on market price of Landmark's common stock.
24
WE CANNOT PREDICT HOW CHANGES IN TECHNOLOGY WILL IMPACT LANDMARK'S BUSINESS.
The financial services industry, including the banking sector, is
increasingly affected by advances in technology, including developments in:
o telecommunications;
o data processing;
o automation;
o Internet banking;
o telebanking; and
o debit cards and so-called "smart cards."
Landmark's ability to compete successfully in the future will depend on
whether it can anticipate and respond to technological changes. To develop these
and other new technologies, Landmark will likely make additional capital
investments. Although both MNB and LBI continually invest in new technology and
Landmark's management will continue to do so for the combined company, we cannot
assure you that Landmark will have sufficient resources or access to the
necessary technology to remain competitive in the future.
LANDMARK MAY BE UNABLE TO MANAGE INTEREST RATE RISKS THAT COULD REDUCE ITS NET
INTEREST INCOME.
Landmark's ability to make a profit after the merger will largely
depend on its net interest income, which could be negatively affected by changes
in interest rates. Net interest income is the difference between interest earned
on loans and investments and interest expense paid on deposits and other
borrowings. If more interest-earning assets than interest-bearing liabilities
reprice or mature during a time when interest rates are declining, then
Landmark's net interest income may be reduced. If more interest-bearing
liabilities than interest-earning assets reprice or mature during a time when
interest rates are rising, then Landmark's net interest income may be reduced.
In addition, certain assets and liabilities may react in different
degrees to changes in market interest rates. For example, interest rates on some
types of assets and liabilities may fluctuate prior to changes in broader market
interest rates, while rates on other types may lag behind. Further, some of
MNB's and LBI's assets, such as adjustable rate mortgages, have features,
including rate caps, which restrict changes in such assets' interest rates.
Neither MNB nor LBI can, nor will Landmark be able to, predict or
control changes in interest rates. Regional and local economic conditions and
the policies of regulatory authorities, including monetary policies of the
Federal Reserve Board System, affect interest income and interest expense. While
MNB and LBI both continually take measures intended to manage the risks from
changes in market interest rates, and management will continue to do so for the
combined company, changes in interest rates can still have a material adverse
effect on Landmark's profitability.
Fluctuations in interest rates are not predictable or controllable. MNB
and LBI both pursue an asset-liability management strategy designed to mitigate
the impact of changes in market interest rates on their net interest income and
Landmark's management will continue to do so for the combined company. However,
there can be no assurance that Landmark will be able to manage interest rate
risk so as to avoid significant adverse effects in its net interest income.
Factors such as inflation, recession, unemployment, money supply, international
disorders, instability in domestic and foreign financial markets and other
factors beyond Landmark's control may affect interest rates. Changes in market
interest rates also will affect the level of voluntary prepayments on Landmark's
loans and the receipt of payments on its mortgage-backed securities resulting in
the receipt of proceeds that may be reinvested at a lower rate than the loan or
mortgage-backed security being prepaid.
25
LANDMARK'S ALLOWANCE FOR LOAN LOSSES MAY NOT BE ADEQUATE TO COVER ACTUAL LOAN
LOSSES.
After the merger, Landmark's loan customers may not repay their loans
according to their terms and the customers' collateral securing the payment of
their loans may be insufficient to assure repayment. Credit losses are inherent
in the lending business and could have a material adverse effect on Landmark's
operating results. Landmark's credit risk with respect to its real estate and
construction loan portfolio relates principally to the general creditworthiness
of individuals and the value of real estate serving as security for the
repayment of loans. Landmark's credit risk with respect to its commercial and
consumer installment loan portfolio relates principally to the general
creditworthiness of businesses and individuals within the local market.
While management of MNB and LBI each believes its respective allowance
is sufficient, MNB and LBI make various assumptions and judgments about the
collectibility of their loan portfolios and provide allowances for potential
losses based on a number of factors, and Landmark's management will continue to
do so for the combined company. If its assumptions are wrong, the allowance for
loan losses may not be sufficient to cover Landmark's future loan losses.
Landmark may have to increase the allowance in the future. Additions to
Landmark's allowance for loan losses would decrease its net earnings.
FUTURE GOVERNMENTAL REGULATION AND LEGISLATION COULD LIMIT LANDMARK'S FUTURE
GROWTH.
Landmark and its bank subsidiary will be subject to extensive state and
federal regulation, supervision and legislation that will govern almost all
aspects of the operations of Landmark and its bank subsidiary. These laws may
change from time to time and are primarily intended for the protection of
consumers, depositors and the deposit insurance funds. The impact of any changes
to these laws may negatively impact Landmark'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 Landmark, these changes could be materially
adverse to Landmark's stockholders.
26
INTRODUCTION
MNB is furnishing this joint proxy statement-prospectus to holders of
MNB common stock, $0.01 par value per share, in connection with the proxy
solicitation by MNB's board of directors. MNB's board of directors will use the
proxies at the special meeting of stockholders of MNB to be held on
[____________], 2001, and at any adjournments or postponements of the meeting.
LBI is furnishing this joint proxy statement-prospectus to holders of
LBI common stock, $0.10 par value per share, in connection with the proxy
solicitation by LBI's board of directors. LBI's board of directors will use the
proxies at the special meeting of stockholders of LBI to be held on
[__________], 2001, and at any adjournments or postponements of the meeting.
Our stockholders will be asked at their respective special meetings to
vote to adopt the Agreement and Plan of Merger, dated as of April 19, 2001,
among MNB, LBI and Landmark Merger Company, a Delaware corporation formed by us
to facilitate the merger. Pursuant to the merger agreement, we will each merge
into Landmark, and each of the outstanding shares of MNB common stock will be
converted into 0.523 shares of Landmark common stock, $0.01 par value per share,
and each of the outstanding shares of LBI common stock will be converted into
one share of Landmark common stock. MNB stockholders will receive cash for any
fractional shares.
MNB SPECIAL MEETING
DATE, PLACE, TIME AND PURPOSE
The special meeting of MNB's stockholders will be held at
[___________________________________], at [_______] [_].m. local time, on
[__________], 2001. At the special meeting, holders of MNB common stock will be
asked to vote upon a proposal to adopt the merger agreement.
RECORD DATE, VOTING RIGHTS, REQUIRED VOTE AND REVOCABILITY OF PROXIES
The MNB board fixed the close of business on [_____________], 2001, as
the record date for determining those MNB stockholders who are entitled to
notice of and to vote at the special meeting. Only holders of MNB common stock
of record on the books of MNB at the close of business on the record date have
the right to receive notice of and to vote at the special meeting. On the record
date, there were 1,563,905 shares of MNB common stock issued and outstanding
held by approximately 450 holders of record.
At the special meeting, MNB stockholders will have one vote for each
share of MNB common stock owned on the record date. The holders of a majority of
the outstanding shares of MNB common stock entitled to vote at the special
meeting must be present in order for a quorum to exist at the special meeting.
To determine if a quorum is present, MNB intends to count the
following:
o shares of MNB common stock present at the special meeting
either in person or by proxy; and
o shares of MNB common stock for which it has received proxies,
but with respect to which holders of shares have abstained on
any matter.
Adoption of the merger agreement requires the affirmative vote of a majority of
the outstanding shares of MNB common stock.
Brokers who hold shares in street name for customers who are the
beneficial owners of such shares may not give a proxy to vote those shares
without specific instructions from their customers. Any abstention, non-voting
share or "broker non-vote" will have the same effect as a vote against the
adoption of the merger agreement.
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Properly executed proxies that MNB receives before the vote at the
special meeting that are not revoked will be voted in accordance with the
instructions indicated on the proxies. If no instructions are indicated, such
proxies will be voted FOR the proposal to adopt the merger agreement, and the
proxy holder may vote the proxy in its discretion as to any other matter which
may come properly before the special meeting. The proxy holders may vote in
favor of a proposal to adjourn the special meeting in order to permit further
solicitation of proxies if there are not sufficient votes to approve the
proposal at the time of the special meeting. However, no proxy holder will vote
any proxies voted against adoption of the merger agreement in favor of a
proposal to adjourn the special meeting.
An MNB stockholder who has given a proxy solicited by the MNB board may
revoke it at any time prior to its exercise at the special meeting by (1) giving
written notice of revocation to the Secretary of MNB, (2) properly submitting to
MNB a duly executed proxy bearing a later date or (3) attending the special
meeting and voting in person. All written notices of revocation and other
communications with respect to revocation of proxies should be sent to: MNB
Bancshares, Inc., 800 Poyntz Avenue, Manhattan, Kansas 66502, Attention: Mark A.
Herpich, Secretary.
On the record date, MNB's directors and executive officers, including
their immediate family members and affiliated entities, owned 382,677 shares or
approximately 23.9% of the outstanding shares of MNB common stock, including
shares subject to options to purchase MNB common stock. On the record date,
MNB's Employee Stock Ownership Plan held 112,703 shares of MNB common stock or
approximately 7.2% of the outstanding shares of MNB common stock. On the record
date, LBI's directors and executive officers, including their immediate family
members and affiliated entities, owned 554 shares of MNB common stock or less
than 0.1% of MNB's outstanding shares.
Additional information with respect to beneficial ownership of MNB
common stock by persons and entities owning more than 5% of such stock and more
detailed information with respect to beneficial ownership of MNB common stock by
directors and executive officers of MNB is incorporated by reference to MNB's
Annual Report on Form 10-K for the year ended December 31, 2000. See "Where You
Can Find More Information."
SOLICITATION OF PROXIES
Directors, officers and employees of MNB may solicit proxies by mail,
in person or by telephone or telegraph. They will receive no additional
compensation for such services. MNB may make arrangements with brokerage firms
and other custodians, nominees and fiduciaries, if any, for the forwarding of
solicitation materials to the beneficial owners of MNB common stock held of
record by such persons. MNB will reimburse any such brokers, custodians,
nominees and fiduciaries for the reasonable out-of-pocket expenses incurred by
them for such services. MNB and LBI will share all expenses related to the
printing and mailing of this joint proxy statement-prospectus , as provided in
the merger agreement. See "Description of Transaction -- Expenses and
Termination Fees."
RECOMMENDATION OF MNB BOARD
THE MNB BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE
MERGER AND BELIEVES THAT THE PROPOSAL TO APPROVE THE MERGER AGREEMENT AND MERGER
IS IN THE BEST INTERESTS OF MNB AND ITS STOCKHOLDERS. THE MNB BOARD UNANIMOUSLY
RECOMMENDS THAT THE MNB STOCKHOLDERS VOTE FOR ADOPTION OF THE MERGER AGREEMENT.
SEE "DESCRIPTION OF TRANSACTION -- RECOMMENDATION OF THE MNB BOARD AND MNB'S
REASONS FOR THE MERGER."
LBI SPECIAL MEETING
DATE, PLACE, TIME AND PURPOSE
The special meeting of LBI's stockholders will be held at
[___________________________________], at [_______] [_].m. local time, on
[__________], 2001. At the special meeting, holders of LBI common stock will be
asked to vote upon a proposal to adopt the merger agreement.
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RECORD DATE, VOTING RIGHTS, REQUIRED VOTE AND REVOCABILITY OF PROXIES
The LBI board fixed the close of business on [_______________], 2001,
as the record date for determining those LBI stockholders who are entitled to
notice of and to vote at the special meeting. Only holders of LBI common stock
of record on the books of LBI at the close of business on the record date have
the right to receive notice of and to vote at the special meeting. On the record
date, there were 1,092,438 shares of LBI common stock issued and outstanding
held by approximately 300 holders of record.
At the special meeting, LBI stockholders will have one vote for each
share of LBI common stock owned on the record date. The holders of a majority of
the outstanding shares of LBI common stock entitled to vote at the special
meeting must be present in order for a quorum to exist at the special meeting.
To determine if a quorum is present, LBI intends to count the
following:
o shares of LBI common stock present at the special meeting
either in person or by proxy; and
o shares of LBI common stock for which it has received proxies,
but with respect to which holders of shares have abstained on
any matter.
Adoption of the merger agreement requires the affirmative vote of a majority of
the outstanding shares of LBI common stock.
Brokers who hold shares in street name for customers who are the
beneficial owners of such shares may not give a proxy to vote those shares
without specific instructions from their customers. Any abstention, non-voting
share or "broker non-vote" will have the same effect as a vote against the
adoption of the merger agreement.
Properly executed proxies that LBI receives before the vote at the
special meeting that are not revoked will be voted in accordance with the
instructions indicated on the proxies. If no instructions are indicated, such
proxies will be voted FOR the proposal to adopt the merger agreement, and the
proxy holder may vote the proxy in its discretion as to any other matter which
may come properly before the special meeting. The proxy holders may vote in
favor of a proposal to adjourn the special meeting in order to permit further
solicitation of proxies if there are not sufficient votes to approve the
proposal at the time of the special meeting. However, no proxy holder will vote
any proxies voted against adoption of the merger agreement in favor of a
proposal to adjourn the special meeting.
An LBI stockholder who has given a proxy solicited by the LBI board may
revoke it at any time prior to its exercise at the special meeting by (1) giving
written notice of revocation to the Secretary of LBI, (2) properly submitting to
LBI a duly executed proxy bearing a later date or (3) attending the special
meeting and voting in person. All written notices of revocation and other
communications with respect to revocation of proxies should be sent to: Landmark
Bancshares, Inc., Central and Spruce Streets, P.O. Box 1437, Dodge City, Kansas
67801, Attention: Gary L. Watkins, Secretary.
On the record date, LBI's directors and executive officers, including
their immediate family members and affiliated entities, owned 238,669 shares or
approximately 21.9% of the outstanding shares of LBI common stock, including
shares subject to options to purchase LBI common stock. On the record date, MNB
owned no shares of LBI common stock. On the record date, LBI's Employee Stock
Ownership Plan held 120,120 shares of LBI common stock or approximately 11.0% of
the outstanding shares of LBI common stock.
Additional information with respect to beneficial ownership of LBI
common stock by persons and entities owning more than 5% of such stock and more
detailed information with respect to beneficial ownership of LBI common stock by
directors and executive officers of LBI is incorporated by reference to LBI's
Annual Report on Form 10-K for the year ended September 30, 2000. See "Where You
Can Find More Information."
29
SOLICITATION OF PROXIES
Directors, officers and employees of LBI may solicit proxies by mail,
in person or by telephone or telegraph. They will receive no additional
compensation for such services. LBI may make arrangements with brokerage firms
and other custodians, nominees and fiduciaries, if any, for the forwarding of
solicitation materials to the beneficial owners of LBI common stock held of
record by such persons. LBI will reimburse any such brokers, custodians,
nominees and fiduciaries for the reasonable out-of-pocket expenses incurred by
them for such services. MNB and LBI will share all expenses associated with the
printing and mailing of this joint proxy statement-prospectus , as provided in
the merger agreement. See "Description of Transaction -- Expenses and
Termination Fees."
RECOMMENDATION OF LBI BOARD
THE LBI BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE
MERGER AND BELIEVES THAT THE PROPOSAL TO APPROVE THE MERGER AGREEMENT AND MERGER
IS IN THE BEST INTERESTS OF LBI AND ITS STOCKHOLDERS. THE LBI BOARD UNANIMOUSLY
RECOMMENDS THAT THE LBI STOCKHOLDERS VOTE FOR ADOPTION OF THE MERGER AGREEMENT.
SEE "DESCRIPTION OF TRANSACTION -- RECOMMENDATION OF THE LBI BOARD AND LBI'S
REASONS FOR THE MERGER."
30
DESCRIPTION OF TRANSACTION
The following information describes material aspects of the merger.
This description does not provide a complete description of all the terms and
conditions of the merger agreement. It is qualified in its entirety by the
Appendices to this document, including the text of the merger agreement,
which is attached as Appendix A to this joint proxy statement-prospectus. The
merger agreement is incorporated into this joint proxy statement-prospectus
by reference. You are urged to read the Appendices in their entirety.
GENERAL
The merger agreement provides for the combination of MNB and LBI
pursuant to the merger of MNB and LBI with and into Landmark. Landmark is a
new Delaware company that was formed by MNB and LBI solely for the purposes
of this transaction. At the time the merger becomes effective, each share of
MNB common stock then issued and outstanding will be converted into and
exchanged for the right to receive 0.523 shares of Landmark common stock (the
"MNB exchange ratio"), and each share of LBI common stock then issued and
outstanding will be converted into and exchanged for the right to receive one
share of Landmark common stock (the "LBI exchange ratio").
No fractional shares of Landmark common stock will be issued to
MNB's stockholders. Rather, Landmark will pay cash (without interest) in an
amount equal to the average of the closing sale prices of Landmark common
stock for the five trading days immediately following the completion of the
merger.
On their respective record dates, MNB had 1,563,905 shares of common
stock issued and outstanding and LBI had 1,092,438 shares of common stock
issued and outstanding. Based on the MNB and the LBI exchange ratios
contained in the merger agreement, upon completion of the merger, Landmark
will issue approximately 817,922 shares of its common stock to former MNB
stockholders and 1,092,438 shares of its common stock to former LBI
stockholders. Based on these numbers, after the merger and on a fully diluted
basis, former MNB stockholders would own approximately 40%, and former LBI
stockholders would own approximately 60%, of the outstanding shares of
Landmark common stock.
EFFECT OF THE MERGER ON OPTIONS
Pursuant to the merger agreement, any options to purchase shares of
MNB common stock and LBI common stock that are outstanding immediately prior
to the completion of the merger will be converted into options to purchase
shares of Landmark common stock. Each share of MNB common stock covered by an
outstanding option will be converted into an option to purchase 0.523 shares
of Landmark common stock and each share of LBI common stock covered by an
outstanding option will converted into an option to purchase one share of
Landmark common stock. The exercise price of the outstanding options will
also be adjusted pursuant to those conversion formulas.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
We have not requested nor do we intend to request a ruling from the
Internal Revenue Service ("IRS") as to the federal income tax consequences of
the merger. Instead, we have obtained the opinion of KPMG LLP as to the
expected material federal income tax consequences of the merger, which is
attached as an exhibit to the registration statement.
The tax opinion does not address, among other matters:
o state, local, foreign or other federal tax consequences of the merger
not specifically addressed in the opinion;
o federal income tax consequences to MNB or LBI stockholders who are
subject to special rules under the Internal Revenue Code, such as
foreign persons, tax-exempt organizations, insurance companies,
31
financial institutions, dealers in stocks and securities and other
persons who do not own the stock as a capital asset;
o federal income tax consequences affecting shares of MNB common stock or
LBI common stock acquired upon the exercise of stock options, stock
purchase plan rights or otherwise as compensation;
o the tax consequences to holders of warrants, options or other rights to
acquire shares of the stock;
o the tax consequences of MNB and LBI of any income and deferred gain
recognized pursuant to Treasury Regulations issued under Section 1502
of the Internal Revenue Code.
Subject to the conditions, qualifications, representations and
assumptions contained in this document and in the tax opinion, KPMG LLP's
opinion provides the following conclusions:
o The acquisition by Landmark of substantially all of the assets of MNB
and of LBI in exchange for shares of Landmark common stock and the
assumption of liabilities of MNB and of LBI pursuant to the merger
should constitute a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code.
o LBI, MNB and Landmark should each be "a party to a reorganization"
within the meaning of Section 368(b) of the Internal Revenue Code.
o No gain or loss should be recognized by either MNB or LBI as a result
of the merger.
o No gain or loss should be recognized by Landmark as a result of the
merger.
o No gain or loss should be recognized by the stockholders of MNB or LBI
as a result of the exchange of MNB common stock and LBI common stock
for Landmark common stock pursuant to the merger, except that a gain or
loss should be recognized by MNB stockholders on the receipt of any
cash in lieu of a fractional share. Assuming that the MNB common stock
is a capital asset in the hands of the respective MNB stockholders, any
gain or loss recognized as a result of the receipt of cash in lieu of a
fractional share should be a capital gain or loss equal to the
difference between the cash received and that portion of the holder's
tax basis in the LBI common stock allocable to the fractional share.
o The tax basis of Landmark common stock to be received by the
stockholders of MNB and LBI should be the same as the tax basis of the
MNB or LBI common stock surrendered in exchange therefor (reduced by
any amount allocable to a fractional share interest for which cash is
received).
o The holding period of the Landmark common stock to be received by
stockholders of MNB or LBI should include the holding period of the MNB
common stock or LBI common stock surrendered in exchange for the
Landmark common stock therefor, provided the MNB shares or LBI shares
were held as a capital asset by the stockholders of MNB or LBI,
respectively, on the date of the exchange.
The tax opinion is based on the Internal Revenue Code, Treasury
Regulations issued under the Internal Revenue Code by the IRS, judicial
decisions and administrative pronouncements of the IRS, all existing and in
effect on the date of this joint proxy statement-prospectus and all of which are
subject to change at any time, possibly retroactively. Any such change could
have a material impact on the conclusions reached in the tax opinion. The tax
opinion represents only the tax advisor's best judgment as to the expected
federal income tax consequences of the merger and is not binding on the IRS or
the courts. The IRS may challenge the conclusions stated in the tax opinion or
positions taken by stockholders on their income tax returns. Stockholders of MNB
or LBI may incur the cost and expense of defending positions taken by them with
respect to the merger. A successful challenge by the IRS could have material
adverse consequences to the parties to the merger, including stockholders of LBI
and MNB.
32
In rendering the tax opinion, KPMG LLP has relied, as to factual
matters, solely on the continuing accuracy of the following:
o the description of the facts relating to the merger contained in the
merger agreement and this joint proxy statement-prospectus ;
o the factual representations and warranties contained in the merger
agreement and this joint proxy statement-prospectus and related
documents and agreements;
o factual matters addressed by representations made by executive officers
of LBI and MNB, as further described in the tax opinion; and
o representations of legal counsel Barack Ferrazzano Kirschbaum Perlman &
Nagelberg as to the characterization of the proposed transaction as a
merger or consolidation under applicable state law.
Events occurring after the date of the tax opinion could alter the facts upon
which the opinion is based. In such case, the conclusions reached in the tax
opinion and in this summary could be materially impacted.
ACCORDINGLY, FOR ALL OF THE ABOVE REASONS, STOCKHOLDERS OF MNB AND LBI
ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES
TO THEM OF THE MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF FEDERAL, STATE,
LOCAL AND OTHER TAX LAWS.
Our obligation to complete the merger is conditioned on, among other
things, receipt by us of an updated opinion of KPMG LLP substantially to the
foregoing effect. The conditions relating to the receipt of the tax opinion may
be waived by both of us. Neither of us currently intends to waive the conditions
relating to the receipt of an updated tax opinion. If the conditions relating to
the receipt of the tax opinion were waived and the material federal income tax
consequences of the merger were substantially different from those described in
this joint proxy statement-prospectus , we would each resolicit the approval of
our respective stockholders prior to completing the merger.
BACKGROUND OF THE MERGER
Each of our boards of directors has regularly reviewed its respective
business strategies in light of general conditions in the banking industry,
local competitive and economic conditions, the results of operations and future
prospects, legislative changes and other developments affecting the banking
industry generally and each of our respective companies specifically.
MNB's board of directors has also considered from time to time the
possible benefits of strategic business combinations with other financial
institutions, including other large bank holding companies, as part of its
evaluation of available methods to increase stockholder value and strengthen its
franchise. To this end, the senior management of MNB has from time to time had
informal discussions with the senior management of other financial institutions
regarding potential business combination transactions.
LBI was formed in connection with LFSB's conversion in March 1994 from
a federally chartered mutual savings and loan association to a federally
chartered stock savings bank. After the conversion, and consistent with its
business plan, LBI's management continued to focus on improving LBI's core
business of obtaining deposits from the public and originating
one-to-four-family mortgage loans. LBI also continued its efforts to control
operating expenses and improve both overall profitability and stockholder value
through various capital enhancement techniques including stock repurchases and
dividends.
In August 1999, LBI's board of directors met with representatives from
Keefe Bruyette & Woods, Inc. ("KBW") to discuss recent trends in the banking
industry and the prospects for LBI. The board of directors discussed the
dramatic change that was occurring in the market for publicly traded thrifts in
recent quarters and the strategic issues facing smaller thrift institutions. At
this meeting, KBW also reviewed the then current merger
33
market, the various pricing methods and a range of value for LBI based on
these pricing methods. At LBI's November 1999 board meeting, LBI decided to
pursue the possibility of an affiliation with another company through merger
or acquisition that would be in the best interests of LBI's constituents,
including stockholders, customers, employees and the communities its served.
Pursuant to board authorization, President Schugart entered into an agreement
on December 1, 1999, with KBW to explore strategic alternatives and for KBW
to conduct a confidential inquiry regarding the interest of other companies
affiliating with Landmark.
Based on discussions with and recommendations of KBW and Mr.
Schugart, a number of thrift and bank holding companies were contacted that
might have a strategic and/or financial interest in the potential acquisition
of or merger with LBI. No definitive interest was expressed in pursuing a
transaction with LBI. The primary reasons given for this lack of interest
were: involvement in another transaction, greater interest in an institution
with a more "bank-like" balance sheet and interest in a more urban location.
Senior executive officers of MNB have known the management of LBI
since the early 1990's when both companies were still organized as mutual
thrifts. They remained in contact through the intervening years as each
company converted from a mutual to stock form of ownership. They had periodic
conversations about the progress each was making on the implementation of
their respective business plans and business philosophies.
On November 30, 1999, the chief executive officers of both LBI and
MNB met in Dodge City, Kansas, and casually discussed business philosophy. At
the conclusion of the meeting, they decided to remain open to future
discussions. On April 20, 2000, senior management of MNB and McConnell, Budd
& Downes, Inc. ("MB&D"), MNB's financial advisor, participated in a telephone
conference with LBI's financial advisor regarding the feasibility of a merger
of equals between the two organizations. No immediate discussions followed
this telephone conference.
In May 2000, LBI entered into an engagement with KBW to conduct a
stockholder enhancement program. During the spring and summer, a general
education on and review of possible merger-of-equals partners occurred. At
the October 2000 board meeting, KBW provided a review of MNB as a potential
merger partner. LBI's board of directors authorized KBW to meet with the
management of MNB and to investigate the possibility of a strategic alliance.
Subsequent to a November 9, 2000 meeting with MNB's senior management and
financial advisor, KBW reported to LBI's board of directors its belief that
further discussions were warranted. MNB's and LBI's senior management and
their respective financial advisors met on December 14 and 15, 2000, to
discuss each organization's respective financial performance, personnel and
business plans. Additional discussions focused upon how the two organizations
might combine in a merger of equals and how the transaction and resulting
company might be structured.
Shortly after the December meeting, MNB and LBI requested MB&D and
KBW, respectively, to assist them in arriving at an appropriate exchange
ratio for such a transaction. A proposed range for the exchange ratio was
ultimately developed by MB&D and KBW and was shared with representatives from
the boards of directors of each of MNB and LBI at a joint meeting held on
January 12, 2001. It was noted at this meeting that a proposed merger between
MNB and LBI:
o created a franchise with total assets of $400 million and deposits of
$293 million;
o could be accretive to both companies' fully-diluted earnings per share;
o improved the market capitalization to approximately $39 million, and
that institutions of the combined company's size traded at improved
price and earnings multiples compared to companies of the size, capital
strength and earnings performance of LBI and MNB;
o positioned the franchise for continued expansion throughout Kansas to a
greater extent than either could do individually; and
o enabled both companies to receive the benefit of cost efficiencies and
revenue enhancements.
34
Subsequent to this meeting, LBI's board of directors authorized an
in-depth review of MNB, and KBW was engaged on February 5, 2001, to advise
LBI on this specific transaction. MNB's board of directors also authorized
further investigation of LBI and the impact of a potential merger of equals
with the organization and how that merger would be structured.
LBI and MNB continued to have discussions that dealt with the
proposed exchange ratio and other key issues such as transaction structure,
management, execution risk, systems compatibility and other potential
integration and transition issues. These discussions between the senior
officers and financial advisors of MNB and LBI continued through March 20,
2001. Throughout this time period, the boards of directors of LBI and MNB
were kept advised of the progress made and the issues under discussion.
On March 20, 2001, MNB's board of directors held a meeting that
included the participation of representatives of MB&D. At this meeting, the
MNB board reviewed the strategic-alliance process to date; a summary of the
joint merger-of-equals transaction proposal; and financial analyses of LBI,
MNB and the proposed transaction. On March 28, 2001, LBI's board of directors
held a meeting, which included the participation of representatives of KBW
and LBI's board of directors reviewed the same types of proposals and
analyses as did MNB's board of directors. At the conclusion of these board
meetings, the companies' boards of directors authorized their respective
executive officers, financial advisors and attorneys to negotiate a
definitive merger agreement between MNB and LBI.
After these board meetings, LBI management, assisted by KBW and
Malizia Spidi & Fisch, PC, counsel to LBI, and MNB management, assisted by
MB&D and Barack Ferrazzano Kirschbaum Perlman & Nagelberg, counsel to MNB,
negotiated the terms of the merger agreement.
On April 18, 2001, the LBI board of directors extended its regular
meeting to consider the negotiated terms of the definitive merger agreement.
The meeting included a detailed discussion by KBW of the proposed transaction
and by LBI's counsel, Malizia Spidi & Fisch, of the terms of the merger
agreement. KBW reviewed the process leading to the proposed transaction,
provided a financial analysis of the proposed transaction and orally
expressed an opinion that the LBI exchange ratio was fair to LBI's
stockholders from a financial point of view. KBW confirmed this oral opinion
in writing by letter dated April 19, 2001. At the conclusion of this portion
of the meeting, the LBI board determined that the proposed merger-of-equals
transaction with MNB was in the best interests of its stockholders and
unanimously approved the merger agreement and related transactions.
On April 18, 2001, the MNB board of directors held its regular board
meeting at which attorneys from Barack Ferrazzano reviewed the proposed
merger agreement. The meeting included a detailed discussion of the proposed
transaction, a draft of the merger agreement and updated explanatory
materials similar to those previously reviewed by the MNB board at the March
20, 2001, meeting. Barack Ferrazzano also reviewed with the board its
fiduciary obligations and the legal standards applicable to a decision by the
MNB board to approve the merger agreement and the related transactions. MB&D
reviewed the process leading to the proposed transaction, provided a
financial analysis of the proposed transaction and orally expressed an
opinion that the MNB exchange ratio was fair to MNB's stockholders from a
financial point of view. MB&D confirmed this oral opinion in writing by
letter dated [___________], 2001. At the conclusion of this portion of the
meeting, the MNB board determined that the proposed merger-of-equals
transaction with LBI was in the best interests of its stockholders and
unanimously approved the merger agreement and related transactions.
The merger agreement was signed by both MNB and LBI after the
closing of the stock markets on April 19, 2001, and was publicly announced on
April 19, 2001.
Several weeks after the public announcement of the merger, MNB
received a letter from a larger financial institution inquiring as to MNB's
interest in affiliating with it instead of completing the merger with LBI. At
the advice of its legal and financial advisors, MNB's board of directors met
on two separate occasions to discuss this inquiry. At each of these meetings,
MNB's board heard presentations from Barack Ferrazzano regarding its
fiduciary responsibilities to MNB's stockholders and its obligations under
the merger agreement. MNB's board also heard presentations from MB&D
regarding the financial analysis and implications of the transaction
generally
35
described by the other financial institution. After substantial discussion
and review, MNB's board of directors found that the merger with LBI was in
the best interest of MNB's stockholders and directed its management and
advisors to proceed with all actions necessary to complete the merger.
RECOMMENDATION OF THE MNB BOARD AND MNB'S REASONS FOR THE MERGER
THE MNB BOARD BELIEVES THAT THE MERGER IS FAIR TO, AND IN THE BEST
INTERESTS OF, MNB AND THE MNB STOCKHOLDERS. ACCORDINGLY, THE MNB BOARD HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT THE
MNB STOCKHOLDERS VOTE FOR THE ADOPTION OF THE MERGER AGREEMENT.
The MNB board believes that the consummation of the merger presents
a unique opportunity to combine two of Kansas' publically traded franchises
to create one of the largest publically traded bank holding companies in the
state of Kansas. The board believes the combined organization will have the
capability to offer a full range of financial products and services through
an extensive distribution network over a significant portion of the state of
Kansas.
In reaching its decision to approve the merger agreement, the MNB
board consulted with MNB's management, as well as with its financial and
legal advisors, and considered a variety of factors, including the following:
o information concerning the businesses, earnings, operations, financial
condition, prospects, capital levels and asset quality of MNB and LBI,
both individually and as combined; in particular, the MNB board focused
on the strategic fit of the business lines and the operating
philosophies of the two institutions;
o the consistency of the merger with MNB's long-term business strategy to
leverage the management personnel and commercial banking systems
infrastructure that it has developed;
o the advantages of a combination with an institution, such as LBI, that
already has a significant market share in the Dodge City and Great
Bend, Kansas markets and the opportunities for increased efficiencies
and significant cost savings from a combination with MNB's current
organization, resulting in increased profitability of the combined
entity over time as opposed to a possible combination with an
institution without a similar market presence;
o the current and prospective economic and competitive environments
facing MNB and other financial institutions characterized by
intensifying competition from both banks and nonbank financial services
organizations, the increasing necessity for strong fee-based income
producing components within a bank holding company and the growing
costs associated with regulatory compliance in the banking industry;
o the high costs of technology and new facilities required to grow
deposits in light of the fact that deposit growth for MNB and the
banking industry in general has been difficult and such funding
limitations would hamper MNB's long-term asset growth;
o the belief that, following the merger, the combined company would be
well positioned to continue to grow through possible future
acquisitions or expansions while at the same time increasing its
attractiveness as a possible acquisition candidate;
o the belief that the merger would result in stockholders of MNB
receiving stock in a high quality combined company that should benefit
stockholders through enhanced operating efficiencies and better
penetration of commercial and consumer banking markets in Kansas;
o the business, operations, financial condition, earnings and prospects
of LBI;
o the scale, scope, strength and diversity of operations, product lines
and delivery systems that could be achieved by combining MNB and LBI;
36
o the complementary nature of the businesses of MNB and LBI and the
anticipated improved stability of the combined company's business and
earnings in varying economic and market climates relative to MNB on a
stand-alone basis made possible by the merger, as a result of greater
geographic, asset and line-of-business diversification;
o the belief of MNB's senior management and the MNB board that MNB and
LBI share a common vision with respect to delivering financial
performance and stockholder value and that their executive officers and
employees possess complementary skills and expertise;
o the MNB board's belief that, while no assurances could be given, the
business and financial advantages contemplated in connection with the
merger were likely to be achieved within a reasonable time frame;
o the opinion of MB&D that, as of April 18, 2001, the MNB exchange ratio
was fair from a financial point of view to MNB stockholders (see "--
Opinion of MNB's Financial Advisor"); and
o the likelihood that the merger will be approved by the appropriate
regulatory authorities (see "-- Regulatory Approvals").
The foregoing discussion of the information and factors considered by
the MNB board is not intended to be exhaustive, but includes all material
factors considered by the MNB board. In reaching its determination to approve
and recommend the merger, the MNB board did not assign any relative or specific
weights to the foregoing factors, and individual directors may have given
differing weights to different factors. The MNB board is unanimous in its
recommendation that MNB stockholders vote for approval and adoption of the
merger agreement.
RECOMMENDATION OF THE LBI BOARD AND LBI'S REASONS FOR THE MERGER
THE LBI BOARD BELIEVES THAT THE MERGER IS FAIR TO, AND IN THE BEST
INTERESTS OF, LBI AND THE LBI STOCKHOLDERS. ACCORDINGLY, THE LBI BOARD HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT THE
LBI STOCKHOLDERS VOTE FOR THE ADOPTION OF THE MERGER AGREEMENT.
The LBI board believes that the consummation of the merger presents a
unique opportunity to combine two of Kansas' publically traded franchises to
create one of the largest publically traded bank holding companies in the state
of Kansas. The board believes the combined organization will have the capability
to offer a full range of financial products and services through an extensive
distribution network over a significant portion of the state of Kansas. In the
course of reaching its determination to approve the merger agreement, LBI's
board consulted with its financial and legal advisors, and considered all
factors it deemed material. These included:
o the factors discussed at the several meetings noted above and
specifically the January 12, 2001 meeting;
o the board's consideration of the written opinion of KBW that the
relative consideration to be received by LBI's stockholders pursuant to
the merger agreement was fair from a financial point of view to LBI's
stockholders;
o the detailed financial analysis, pro forma and other information with
respect to LBI and MNB prepared by KBW;
o the types of business that MNB conducts in the region, the desire to
expand into more urban communities and to leverage the more bank-like
MNB products and services in the communities LBI serves;
o the belief of LBI's board that LBI and MNB have similar business
philosophies and an ability to grow as a strong, independent community
institution;
37
o the abilities of Mr. Alexander to lead the combined company as chief
executive officer; and
o the likelihood of receiving the required approvals in a timely manner.
The foregoing discussion of the information and factors considered by
the LBI board is not intended to be exhaustive, but includes all material
factors considered by the LBI board. In reaching its determination to approve
and recommend the merger, the LBI board did not assign any relative or specific
weights to the foregoing factors, and individual directors may have given
differing weights to different factors. The LBI board is unanimous in its
recommendation that LBI stockholders vote for approval and adoption of the
merger agreement.
OPINION OF MNB'S FINANCIAL ADVISOR
THE OPINION OF MCCONNELL, BUDD & DOWNES IS DIRECTED TO MNB'S BOARD OF
DIRECTORS AND ADDRESSES ONLY THE EXCHANGE RATIOS. IT DOES NOT ADDRESS THE
UNDERLYING BUSINESS DECISION TO PROCEED WITH THE MERGER AND DOES NOT CONSTITUTE
A RECOMMENDATION TO ANY STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE WITH
RESPECT TO THE MERGER OR ANY OTHER MATTER RELATED THERETO.
On April 18, 2001, MB&D delivered its oral opinion to MNB's board of
directors, that as of that date, the exchange ratio agreed to with LBI was fair,
from a financial point of view to MNB's stockholders. The basis for MB&D's
opinion, which is unchanged, has been updated for the purposes of this proxy
statement-prospectus and is attached as Appendix B. The exchange ratio of 0.523
shares of Landmark common stock in exchange for each share of MNB common stock,
was negotiated based on the consideration of a number of factors including, but
not limited to, the following:
o an analysis of the historical and projected future contributions of
recurring earnings by the parties;
o an analysis of the possible future earnings per share results for the
parties on both a combined and a stand-alone basis;
o an analysis of the potential to realize reductions of recurring
operating expenses and revenue enhancements by the parties to the
merger;
o consideration of the anticipated dilutive or accretive effects of the
merger to the earnings per share of Landmark and by extension, through
the exchange ratio, to earnings per share equivalent of MNB;
o consideration of the probable impact on dividends per share to be
received by MNB's stockholders as a result of the merger;
o consideration of the relative earning contributions of the parties;
o analysis of the historical trading range, trading pattern and relative
liquidity of the common shares of each of the parties;
o consideration of the capitalization, the tangible equity capitalization
and the market capitalization of each of the parties; and
o contemplation of other factors, including certain intangible factors.
MB&D has acted as general financial advisor to MNB on a contractual
basis since January, 1998, and was retained specifically on March 16, 2001,
regarding a transaction with LBI. With respect to the pending transaction
involving LBI, MB&D advised MNB during the evaluation and negotiation process
leading up to the
38
execution of the merger agreement and provided MNB with a number of analyses
as to a range of financially feasible exchange ratios that might be achieved
in a hypothetical transaction. The determination of the final exchange ratio
was arrived at in an arms-length negotiation between LBI and MNB in a process
in which MB&D advised MNB and participated directly in the negotiations.
MB&D was retained based on its qualifications and experience in the
financial analysis of banking and thrift institutions generally and its
knowledge of the Kansas banking markets in particular as well as its experience
with merger and acquisition transactions involving banking institutions. As a
part of its investment banking business, which is focused exclusively on
financial services industry participants, MB&D is continually engaged in the
valuation of financial institutions and their securities in connection with its
equity brokerage business generally and mergers and acquisitions in particular.
Members of the Corporate Finance Advisory Group of MB&D have extensive
experience in advising financial institution clients on mergers and
acquisitions. In the ordinary course of its business as an NASD broker-dealer,
MB&D may, from time to time purchase securities from or sell securities to MNB
or LBI and as a market maker in securities, MB&D may from time to time have a
long or short position in, and buy or sell debt or equity securities of MNB or
LBI for its own account or for the accounts of its customers. In addition, in
the ordinary course of business, the employees of MB&D may have direct or
indirect investments in the debt or equity securities of either or both of MNB
or LBI.
The full text of the opinion of MB&D, which sets forth assumptions
made, matters considered and limits on the review undertaken is attached as
Appendix B. MB&D urges all of MNB's stockholders to read the opinion and this
proxy statement-prospectus in their entirety. MB&D's opinion is directed only to
the exchange ratio at which shares of MNB common stock will be exchanged for
shares of Landmark common stock. MB&D's opinion does not constitute a
recommendation to any holder of MNB common stock as to how such holder should
vote at MNB's special stockholders' meeting. The summary of MB&D's opinion and
the matters considered in its analysis that is included in this proxy
statement-prospectus are qualified in their entirety by reference to the text of
the opinion itself. MB&D's opinion is necessarily based upon conditions as of
the date of the opinion and upon information made available to MB&D through its
date. No limitations were imposed by the MNB's board of directors upon MB&D with
respect to the investigations made, matters considered or procedures followed in
the course of rendering its opinion.
MATERIALS REVIEWED AND ANALYSES PERFORMED. In connection with the
rendering and updating of its opinion, MB&D reviewed the following documents and
considered the following subjects:
o the merger agreement detailing the pending transaction;
o the proxy statement-prospectus in substantially the form to be mailed
to MNB's stockholders;
o MNB Annual Reports to stockholders for 1997, 1998, 1999 and 2000;
o MNB Annual Reports on Form 10-K for 1997, 1998, 1999 and 2000;
o MNB Quarterly Report on Form 10-Q and related unaudited financial
information for the first quarter of 2001;
o MNB's press release concerning unaudited results for the first quarter
of 2001.
o LBI Annual Reports to Stockholders for 1998, 1999 and 2000;
o LBI Annual Reports on Form 10-K and related financial information for
the three calendar years ended September 30, 2000;
o LBI Quarterly Reports on Form 10-Q and related unaudited financial
information for the first and second quarters of fiscal 2001;
39
o LBI 's press release concerning unaudited results for the first and
second quarters of fiscal 2001.
o internal financial information and financial forecasts, relating to the
business, earnings, cash flows, assets and prospects of the respective
companies furnished to MB&D by MNB;
o the results of discussions with members of the senior management and
board of directors of MNB concerning the past and current results of
operations of MNB, its current financial condition and management's
opinion of its future prospects;
o the results of discussions with members of the senior management of LBI
concerning the past and current results of operations of LBI, its
current financial condition and management's opinion of its future
prospects;
o a review of the historical record of reported prices, trading volume
and dividend payments for both MNB and LBI common stock;
o the results of the application of specific merger analysis models
developed by MB&D to evaluate potential business combinations of
financial institutions using both historical reported information and
projected information for both MNB and LBI;
o a review of the reported financial terms of selected recent business
combinations of financial institutions for purposes of comparison to
the merger; and
o the performance of such other studies and analyses as MB&D considered
appropriate under the circumstances associated with the merger.
MB&D's opinion takes into account its assessment of general economic,
market and financial conditions and its experience in other transactions
involving participants in the financial services industry, as well as its
experience in securities valuation and its knowledge of the banking industry
generally. For purposes of reaching its opinion, MB&D assumed and relied upon
the accuracy and completeness of the information provided to it or made
available by MNB and LBI and does not assume any responsibility for the
independent verification of this information. With respect to financial
forecasts made available to MB&D it is assumed by MB&D that they were prepared
on a reasonable basis and reflect the best currently available estimates and
good faith judgments of the management of MNB and LBI, as to the future
performance of MNB and LBI, respectively. MB&D has also relied upon assurances
of the management of MNB and LBI that they were not aware of any facts or of the
omission of any facts that would make the information or financial forecasts
provided to MB&D incomplete or misleading. In the course of rendering its
opinion, MB&D has not completed any independent valuation or appraisal of any of
the assets or liabilities of either MNB or LBI and has not been provided with
such valuations or appraisals from any other source.
The following is a summary of the material analyses employed by MB&D in
connection with rendering its written opinion. Given that it is a summary, it
does not purport to be a complete and comprehensive description of all the
analyses performed, or an enumeration of every matter considered by MB&D in
arriving at its opinion. The preparation of a fairness opinion is a complicated
process, involving a determination as to the most appropriate and relevant
methods of financial analysis and the application of those methods to the
particular circumstances. In arriving at its opinion, MB&D did not attribute any
particular weight to any one specific analysis or factor considered by it and
made qualitative as well as quantitative judgments as to the significance of
each analysis and factor. Therefore, MB&D believes that its analyses must be
considered as a whole and feels that attributing undue weight to any single
analysis or factor considered could create a misleading or incomplete view of
the process leading to the formation of its opinion. In its analyses, MB&D has
made certain assumptions with respect to banking industry performance, general
business and economic conditions and other factors, many of which are beyond the
control of management of either MNB or LBI. Estimates, which are referred to in
MB&D's analyses are not necessarily indicative of actual values or predictive of
future results or values, which may vary significantly from those set forth. In
addition, analyses relating to the values of businesses do not purport to be
40
appraisals or to reflect the prices at which businesses might actually be sold.
Accordingly, these analyses and estimates are inherently subject to uncertainty
and MB&D does not assume responsibility for the accuracy of these analyses or
estimates.
ANALYSIS OF THE ANTICIPATED TRANSACTION AND THE APPLICABLE EXCHANGE
RATIO IN RELATION TO MNB. Pursuant to the terms of the merger agreement, the
anticipated consideration to be exchanged in the transaction for each
outstanding share of MNB common stock is a fixed exchange of 0.523 shares of
Landmark common stock. It is anticipated that the transaction should be tax free
to those stockholders of MNB who hold their shares as a capital asset and that
the merger will be accounted for as a purchase.
PROJECTED TRANSACTION VALUE. Based upon the exchange ratio of 0.523
Landmark shares for each share of MNB common stock and the last trade value of
$17.80 per share for LBI common stock as reported on April 16, 2001, by The
Nasdaq National Market System, the theoretical market value of the anticipated
transaction was approximately $15.2 million as of that date, based on an
estimated 854,000 shares of Landmark common stock to be issued to MNB's
stockholders (reflecting the conversion of in the money options). On a per share
basis, this is equivalent to approximately $9.31 per share, ($17.80 times
0.523). The merger was announced after the close of trading on April 19, 2001.
Given that the applicable exchange ratio in this case is fixed, the market value
of the exchange will fluctuate as the market value of LBI common stock
fluctuates. Based on the last trade value for LBI common stock reported by
Nasdaq as of [_________], 2001 which was $[___], the theoretical market value of
the anticipated transaction was approximately $[________] million as of such
date, based on an updated estimate of approximately [_________] million shares
of Landmark common stock to be issued to MNB stockholders. This value will
continue to fluctuate as the value of a share of LBI common stock fluctuates in
the market.
MULTIPLE OF HISTORICAL AND PROJECTED EARNINGS FOR MNB COMMON STOCK. The
cited per share theoretical value of $9.31 as of April 16, 2001, represents a
multiple of 12.8 times reported earnings per share for the twelve months ended
March 31, 2001, which was $0.73. The cited per share theoretical value of $9.31
represents a multiple of 10.5 times management's internal estimate of stand
alone earnings per share for 2001 which is $0.88. Based on the closing market
value for LBI common stock as of [_________], 2001 which was $[____] and a
revised transaction value per share of $[___________], the multiples of earnings
were [_____] and [______] times for the twelve months ended March 31, 2001,
earnings per share and management's internal estimate for 2001 stand alone
earnings per share, respectively.
MULTIPLE OF STATED BOOK VALUE OF MNB COMMON STOCK. The cited
theoretical value of $9.31 represents a multiple of 0.96 times MNB's $9.74 fully
diluted book value per share as of March 31, 2001. The updated value per share
of $[____] represents [_____] times MNB's unaudited, fully diluted book value
per share as of [_______], 2001.
MULTIPLE OF TANGIBLE BOOK VALUE OF MNB COMMON STOCK. The cited
theoretical value of $9.31 represents a multiple of 1.16 times MNB's $8.00 fully
diluted tangible book value per share as of March 31, 2001. The updated value
per share of $[____] represents [_____] times MNB's unaudited, fully diluted
tangible book value per share as of [_______], 2001.
PERCENTAGE OF MARKET VALUE OF MNB COMMON STOCK. Based upon the cited
theoretical values of $9.31 and $[____] for the two cited valuation dates, the
theoretical values represent 93.1% and [___]% of the last reported bid prices
for MNB common stock which were $10.00 on April 16, 2001 and $[____] [_______],
2001.
CONTRIBUTION ANALYSIS. Based on adjusted fully converted shares and
share equivalents outstanding for the two companies as of March 31, 2001 and the
exchange ratio of 0.523 Landmark shares for each MNB share, current MNB
stockholders would have owned 39.9% of the pro forma shares outstanding of
Landmark. The following is a summary of the contribution of various balance
sheet and income statement components for MNB and LBI on a combined basis as of
March 31, 2001 or for the periods noted:
41
MNB LBI
------------- --------------
Total assets 41.1% 58.9%
Loans, net 38.1% 61.9%
Deposits 46.5% 53.5%
Equity 38.4% 61.6%
Tangible equity 33.8% 66.2%
Market capitalization (at April 16, 2001) 41.6% 58.4%
Net interest income - calendar year 2000 41.9% 58.1%
Noninterest income- calendar year 2000 50.6% 49.4%
Noninterest expense - calendar year 2000 52.5% 47.5%
Net income - budget for fiscal year 2001 40.0% 60.0%
Cash earnings - budget for fiscal year 2001 43.7% 56.3%
Net income - six months ended March 31, 2001 36.5% 63.5%
Net income - calendar year 2000 32.3% 67.7%
SPECIFIC ACQUISITION ANALYSIS. MB&D employs a proprietary analytical
model to examine hypothetical transactions involving banking companies. The
model uses forecast earnings data, selected current period balance sheet and
income statement data, current market and trading information and a number of
assumptions as to interest rates for borrowed funds, the opportunity costs of
funds, discount rates, dividend streams, effective tax rates, transaction
structures (the alternative or combined uses of common equity, cash, debt or
other securities, to fund a transaction) and the projected impact (if any) of
any required deposit divestitures that might be necessary to complete a given
transaction in conjunction with obtaining all necessary regulatory approvals.
The model distinguishes between purchase and pooling accounting treatments
and inquires into the likely economic feasibility of a given hypothetical
transaction at a given price level or specified exchange rate while employing
a specified transaction structure. The model also permits evaluation of
various levels of potential non-interest expense savings that might be
achieved along with various potential implementation timetables for such
savings, as well as the possibility of revenue enhancement opportunities that
may arise in a given hypothetical transaction.
Based on the exchange ratio of 0.523 Landmark shares for one MNB
share, the transaction would result in an increase of cash dividend payments
to MNB from $0.25 to $0.31 per share based on cash dividends paid by LBI for
2000. Pro forma fully diluted book value for MNB stockholders would increase
by 5.2% to $10.25 at March 31, 2001 and fully diluted tangible book value
would increase by 16.1% to $9.29 at the same date.
EARNINGS PASS-THROUGH ANALYSIS. Earnings pass-through analysis is
based on a comparison of anticipated pro forma values to stand-alone values
as of a given point in time. Based on an MNB management internal forecast of
$0.88 in stand-alone earnings per share for 2001, MB&D's calculations suggest
that with approximately $1.0 million in pre-tax cost savings or revenue
enhancements and factoring out non-recurring and transaction expenses, the
earnings associated with 0.523 shares of Landmark common stock would
represent a 17.0% increase over the earnings associated with one share of MNB
or approximately $1.03 per share. "Cash Earnings" per share (adjusted for the
amortization of intangible assets) at the exchange ratio would increase from
$1.03 to $1.11 on a pro forma basis for 2001, an increase of 7.8%. Similar
comparisons were made by MB&D for calendar 2000 earnings that reflected
increased earnings per share and cash earnings per share of 45.6% and 28.9%,
respectively. The primary conclusion of this analysis is that, based on the
referenced earnings and cost savings/revenue enhancements, an MNB stockholder
who exchanges his or her shares for Landmark common shares at the fixed
exchange ratio of 0.523 shares for one will then hold a security that, MB&D
believes, will generate more earnings per share per future period than the
single share of MNB common stock that is exchanged.
42
DISCOUNTED CASH FLOW ANALYSIS. MB&D reviewed a discounted cash flow
model that it prepared based on projections provided by MNB's management. The
model employed a projection of estimated earnings and cash dividends for MNB
on an independent stand-alone basis for calendar year 2001. MB&D assumed a
growth rate in earnings per share and cash dividends in 2002 through 2005 of
10%. Similar exercises were completed for the hypothetical combination of MNB
and LBI for the same periods employing, in the case of LBI, projections for
LBI starting with its budgeted earnings per share for fiscal 2001 of $1.79
and grew that by 10% annually through 2005, and the 10% growth rate scenario
for MNB. As part of each exercise, MB&D used a 10% annual growth in
hypothetical cash dividends to project dividend streams that would be
available to stockholders. MB&D employed a range of possible future market
price/earnings ratios ranging from a minimum of 13 times earnings to a
maximum of 16 times earnings to project possible future values for a share of
MNB common stock on both an independent basis and on a pro forma basis at the
Landmark exchange rate. Given the model time horizon and a discount rate
range of 10% to 14%, these assumptions resulted in the range of present
discounted values for a share of MNB common stock of $7.75 to $14.01 and
include consideration of the present discounted value of the projected stream
of cash dividends that might be received by a stockholder during the cited
period. The same exercise completed for the pro forma Landmark generated a
range of present discounted values (also using a 10% to 14% range of discount
rates) of $8.95 to $16.10. In the event that there is no difference between
the discounted cash flow analyses represented by the two alternatives, one
could be said to be financially indifferent between alternatives. In each
case reviewed, the full range of present discounted values for the
hypothetical combinations of MNB and LBI exceeded the full range of present
discounted values for MNB on a stand-alone basis.
The point of such a discounted cash flow exercise is not to make a
precise estimate of where MNB on a stand-alone basis will be trading at a
precise point in the future. It is equally not an effort to predict, on a
precise basis, where the pro forma Landmark will be trading at an exact point
in the future. MB&D readily acknowledges that with the large number of
variables involved, including many that are beyond the control of management,
that such predictions with any degree of precision are well beyond the
capability of MB&D, MNB or LBI. Rather, the point of the exercise is to
employ reasonable future point earnings estimates to complete an analysis
designed to test a hypothesis that the result of one given course of action
is likely to be better over time than another.
It is important to note that the discount factors employed embody
both the concept of a time value of money and risk factors that reflect the
uncertainty of the forecasted cash flows and terminal price/earnings
multiples. Use of higher discount rates would result in lower discounted
present values. Conversely, use of lower discount rates would result in
higher discounted present values. MB&D advised MNB's board of directors that
although discounted cash flow analysis is a frequently used valuation
methodology, it relies on numerous assumptions, including discount rates,
terminal values, future earnings performance and asset growth rates, as well
as dividend payout ratios. The accurate specification of such assumptions for
time periods more than one year in the future is a very difficult process and
contains the possibility of inaccuracy despite MB&D's attempts to be both
accurate and conservative in its analysis. Consequently, any or all of these
assumptions may vary from actual future performance and results. Any errors
made in the selection of assumptions for such an exercise can interact with
one another and can lead to conclusions that may demonstrate little
resemblance to actual events.
ANALYSIS OF OTHER COMPARABLE TRANSACTIONS. MB&D is reluctant to
place emphasis on the analysis of comparable transactions, as a valuation
methodology due to what it considers to be inherent limitations of the
application of the results to specific cases. This is particularly true of
non-premium "mergers of equals."
With these reservations in mind, MB&D nonetheless examined
statistics associated with eleven mergers of equals transactions involving
financial institutions that have been announced since January 1, 2000. The
median price/stated book value, price/stated tangible book value and
price/trailing 12 months earnings were 133.1%, 130.6% and 12.8x,
respectively. The comparable price/stated book value, price/stated tangible
book value and price/trailing 12 months earnings for MNB based on LBI's
closing stock price on April 16, 2001 were 96.0%, 116.0% and 12.8x,
respectively.
COMPENSATION OF MB&D. Pursuant to a letter agreement with MNB dated
March 16, 2001, MB&D will receive a fee of $150,000 for its services in
connection with the merger. MB&D was paid $30,000 upon execution of
43
the merger agreement and will be paid $30,000 upon issuance of its opinion to
be included as an exhibit to this proxy statement-prospectus. Payment of the
balance of the fee will be conditioned upon the completion of the merger.
The fee that MB&D will receive represents compensation for services
rendered in connection with the analysis of the hypothetical transaction,
support of the negotiations, its participation in the drafting of
documentation and for the issuance of its opinion. In addition, MNB has
agreed to reimburse MB&D for its reasonable out-of-pocket expenses incurred
in connection with the transaction. MNB also has agreed to indemnify MB&D and
its directors, officers and employees against certain losses, claims, damages
and liabilities relating to or arising out of our engagement, including
liabilities under the federal securities laws.
OPINION OF LBI'S FINANCIAL ADVISOR
THE OPINION OF KEEFE BRUYETTE & WOODS IS DIRECTED TO LBI'S BOARD OF DIRECTORS
AND ADDRESSES ONLY THE EXCHANGE RATIOS. IT DOES NOT ADDRESS THE UNDERLYING
BUSINESS DECISION TO PROCEED WITH THE MERGER AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE WITH
RESPECT TO THE MERGER OR ANY OTHER MATTER RELATED THERETO.
In February 2001, KBW was retained by LBI to evaluate a potential
strategic combination between LBI and MNB. KBW, as part of its investment
banking business, is regularly engaged in the evaluation of business and
securities in connection with mergers and acquisitions, negotiated
underwritings, and distributions of listed and unlisted securities. KBW is
familiar with the market for common stocks of publicly traded banks, thrifts
and bank and thrift holding companies. LBI's board of directors selected KBW
on the basis of the firm's reputation and its experience and expertise in
transactions similar to the merger and its prior work for and relationship
with LBI that commenced in 1999.
Pursuant to its engagement, KBW was asked to render an opinion as to
the fairness, from a financial point of view, of the merger consideration to
stockholders of LBI. KBW delivered its opinion to LBI's board of directors
that, as of April 19, 2001, the merger consideration is fair, from a
financial point of view, to the stockholders of LBI. No limitations were
imposed by LBI's board upon KBW with respect to the investigations made or
procedures followed by it in rendering its opinion. KBW has consented to the
inclusion herein of the summary of its opinion to the LBI Board and to the
reference to the entire opinion attached hereto as Appendix C.
THE FULL TEXT OF THE OPINION OF KBW, WHICH IS ATTACHED AS APPENDIX C
TO THIS PROXY STATEMENT-PROSPECTUS, SETS FORTH CERTAIN ASSUMPTIONS MADE,
MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN BY KBW, AND
SHOULD BE READ IN ITS ENTIRETY. THE SUMMARY OF THE OPINION OF KBW SET FORTH
IN THIS PROXY STATEMENT-PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO THE OPINION.
In rendering its opinion, KBW: (i) reviewed the merger agreement;
(ii) reviewed LBI's annual reports, proxy statements and reports on Form 10-K
for the years ended September 30, 1998, 1999, and 2000, and the unaudited
report on Form 10-Q for the quarter ended December 31, 2000, and MNB's annual
reports, proxy statements and reports on Form 10-K for the years ended
December 31, 1998, 1998, and 2000, and certain other information considered
relevant; (iii) discussed with senior management and the boards of directors
of LBI and its wholly-owned subsidiary, Landmark Federal Savings Bank, the
current position and prospective outlook for LBI to enhance future
stockholder value; (iv) discussed with senior management of MNB and its
wholly-owned subsidiary, Security National Bank, their operations, financial
performance and future plans and prospects; (v) considered historical
quotations, levels of activity and prices of recorded transactions in LBI's
and MNB's common stock; (vi) reviewed financial and stock market data of
other thrifts and banks in a comparable asset range to LBI and MNB,
respectively; (vii) reviewed certain recent business combinations of
strategic alliance transactions that KBW deemed comparable in whole or in
part; and (viii) performed other analyses that KBW considered appropriate.
In rendering its opinion, KBW assumed and relied upon the accuracy
and completeness of the financial information provided to it by LBI and MNB.
In its review, with the consent of the LBI Board, KBW did not
44
undertake any independent verification of the information provided to it, nor
did it make any independent appraisal or evaluation of the assets or
liabilities, and potential or contingent liabilities of LBI or MNB.
PRO FORMA ANALYSIS OF AFFILIATION. KBW analyzed certain pro forma
effects resulting from the strategic alliance. This analysis, based upon
fiscal 2001 budgeted and estimates for the next five years for LBI and MNB
based upon business plan assumptions provided by management of each
institution, projected fully-diluted earnings per share accretion of 13.2%
and fully-diluted cash earnings per share accretion for LBI of 21.2% by 2002.
This assumes cost savings and revenue enhancements of approximately $1.0
million (pre tax). The analysis also reflected a dilution to fully-diluted
book value and fully-diluted tangible book value of 6.0% and 14.5%,
respectively. The purpose of this analysis is to project the financial
effects of the merger on the balance sheet and income statement of LBI, and
the per share impact on the stock of LBI. The outcome of this analysis, both
independently as well as in conjunction with other analyses, partially
formulates the basis for KBW's opinion.
CONTRIBUTION ANALYSIS. KBW reviewed the relative contributions of
various components of the financial position and results of operations to be
made by LBI and MNB to the combined company based on data for the period
ended March 31, 2001 and earnings for fiscal 2001. This analysis placed
primary focus on five relative contributions and indicated that LBI would
contribute 53.5% of the total deposits, 66.2% of tangible equity, 60.0% of
fiscal 2001 budgeted net income, 56.3% of fiscal 2001 budgeted cash earnings
and 61.2% of earnings for the six months ended March 31, 2001 normalized. No
particular weight was placed on any one of these contributions and they were
not all inclusive of the components reviewed. Based upon the exchange ratio
of 0.523 Landmark shares for each MNB share outstanding and "in the money"
option, holders of LBI common stock would own 60.1% of pro forma shares
outstanding of the combined company.
ANALYSIS OF SELECTED MERGER OF EQUALS TRANSACTIONS. KBW reviewed the
general characteristics of 11 merger of equals transactions that occurred
since 1992between thrift institutions. The average asset size of the larger
company in the transactions was 56% greater than the smaller company. LBI's
assets as of March 31, 2001, were 44% larger than MNB's assets. The average
deal value of the acquired company was 9% greater than book value. The deal
value paid for MNB was approximately 5% less than book value and 16% greater
than tangible book value.
No company or transaction used in any of the above analyses as a
comparison is identical to LBI, MNB or the contemplated transaction.
Accordingly, an analysis of the results of the foregoing is not rigid;
rather, it involves complex considerations and judgments concerning
differences in financial, market and operating characteristics of the
companies and other factors that could affect the public trading value of the
companies to which they are being compared.
Based on the above information KBW concluded that the merger
consideration was fair from a financial point of view relative to comparable
transactions. Further, the fairness analysis considered: (i) the relative
market performance of the thrift and bank stocks in general, especially small
cap stocks, over the past year; (ii) the relative historical returns on
equity of LBI and MNB; and (iii) the expected performance of each company
given additional considerations such as the business plan, asset mix, net
interest margin, net interest spread, asset quality and location. The summary
does not purport to be a complete description of the analysis performed by
KBW and should not be construed independently of the other information
considered by KBW in rendering its opinion. Selecting portions of KBW's
analysis or isolating certain aspects of the comparable transactions without
considering all analysis and factors, could create an incomplete or
potentially misleading view of the evaluation process.
In preparing its analysis, KBW made numerous assumptions with
respect to industry performance, business and economic conditions and other
matters, many of which are beyond the control of KBW and LBI. The analyses
performed by KBW are not necessarily indicative of actual values or future
results, that may be significantly more or less favorable than suggested by
such analyses and do not purport to be appraisals or reflect the prices at
which a business may be sold.
COMPENSATION OF KBW. KBW will receive a fee equal to $120,000 for
services rendered in connection with advising and issuing a fairness opinion
regarding the merger. As of the date of this proxy
45
statement-prospectus, KBW has received $55,000 of such fee. The remainder of
the fee is due upon the completion of the merger.
EFFECTIVE TIME OF THE MERGER
Subject to the conditions to our respective obligations to complete
the merger, the merger will become effective when a certificate of merger
reflecting the merger become effective with the Secretary of State of the
State of Delaware and the Secretary of State of the State of Kansas,
respectively. Unless we agree otherwise, we will each use reasonable efforts
to cause the merger to become effective 21 business days after the end of the
calendar month in which all of the following conditions are satisfied:
o the effective date of the last consent of any regulatory authority
having authority over and approving or exempting the merger (taking
into account any required waiting period); and
o the satisfaction or waiver in writing of all of the conditions provided
for in the merger agreement.
We anticipate that the merger will become effective during the third
quarter of 2001, however, delays could occur.
We cannot assure that the necessary stockholder and regulatory
approvals of the merger will be obtained or that other conditions precedent
to the merger can or will be satisfied. Either of our boards of directors may
terminate the merger agreement if the merger is not completed by March 1,
2002, unless it is not completed because of the willful breach of the merger
agreement by the party seeking termination. See "-- Conditions to Completion
of the Merger" and "-- Waiver, Amendment and Termination."
DISSENTERS' RIGHTS
All of MNB's stockholders have the right under Delaware law to
dissent from the merger and to demand and obtain cash payment of the
appraised fair value of their shares of MNB common stock under the
circumstances described below. LBI's stockholders, whose rights are governed
by Kansas law, do not have the right to dissent from the merger and receive
cash for the value of their shares.
The appraised value that MNB's stockholders obtain for their shares
by dissenting may be less than, equal to or greater than the value of the
Landmark common stock you will receive under the merger agreement. If MNB's
stockholders fail to comply with the procedural requirements of Section 262
of the Delaware General Corporation Law, they will lose their right to
dissent and seek payment of the appraised value of their shares.
The following is a summary of Section 262, which specifies the
procedures applicable to dissenting stockholders. This summary is not a
complete statement of the law regarding the right of MNB's stockholders to
dissent under Delaware law, and if you are considering dissenting, we urge
you to review the provisions of Section 262 carefully. The text of Section
262 is attached to this joint proxy statement-prospectus as Appendix D, and
we incorporate that text into this joint proxy statement-prospectus by
reference. Among other matters, MNB's stockholders should be aware of the
following:
o to be entitled to dissent and seek appraisal, you must hold shares of
MNB common stock on the date you make the demand required under
Delaware law, you must continually hold those shares until the merger
has been completed, you must not vote in favor of the merger and you
must otherwise comply with the requirements of Section 262;
o before the special meeting of MNB's stockholders at which you will be
asked to vote on the merger, you must deliver a written notice that
states your identity and your intent to demand appraisal;
46
o MNB stockholders must send this written notice to Mark A. Herpich,
Secretary, MNB Bancshares, Inc., 800 Poyntz Avenue, Manhattan, Kansas
66502 (you should be aware that simply voting against the merger is not
a demand for appraisal rights);
o within ten days after the effective time of the merger, Landmark will
notify all of the dissenting MNB stockholders who have complied with
Section 262 and who have not voted in favor of the merger;
o within 120 days after the effective time of the merger, Landmark or any
stockholder who has complied with the requirements of Section 262 may
file a petition in the Delaware Court of Chancery demanding a
determination of the value of the stock of the dissenting stockholders;
o the Court of Chancery will determine which dissenting stockholders
complied with the requirements of Section 262 and are entitled to
appraisal rights;
o the Court of Chancery will then appraise the shares, determining their
fair value exclusive of any value arising from the expectation of the
merger, together with a fair rate of interest, if any, to be paid on
the appraised fair value; the Court of Chancery will consider all
relevant factors in determining the fair value and the fair interest
rate (if any);
o the Court of Chancery will then direct Landmark to pay the fair value
of the dissenting shares, together with any interest, to the
stockholders entitled to payment; payment will be made when the
stockholder surrenders the certificates to Landmark;
o the costs of the proceeding for appraising the fair value may be
determined by the court and the court may require the parties to bear
the costs in any manner the court believes to be equitable;
o if you dissent from the merger, you will not be entitled to vote your
shares of MNB common stock for any purpose or to receive dividends or
other distributions (other than dividends or other distributions
payable to stockholders of record at a date prior to the effective time
of the merger); and
o you may withdraw your demand for appraisal and accept the shares of
Landmark common stock provided for in the merger agreement at any time
within 60 days after the effective time of the merger.
DISTRIBUTION OF LANDMARK STOCK CERTIFICATES
At or around the time of the merger, you will be mailed a letter of
transmittal and instructions for the exchange of the certificates representing
your shares of MNB or LBI common stock for certificates representing shares of
Landmark common stock. [____________] will serve as the exchange agent.
YOU SHOULD NOT SEND IN YOUR CERTIFICATES UNTIL YOU RECEIVE A LETTER OF
TRANSMITTAL AND INSTRUCTIONS.
After you surrender to the exchange agent your certificates for
shares of MNB or LBI common stock with a properly completed letter of
transmittal, the exchange agent will mail you a certificate or certificates
representing the number of shares of Landmark common stock to which you are
entitled and a check for the amount to be paid in lieu of any fractional
share (without interest), if any, together with all undelivered dividends or
distributions in respect of the shares of Landmark common stock (without
interest thereon), if any. Landmark will not be obligated to deliver the
consideration to you as a former MNB or LBI stockholder until you have
surrendered your MNB or LBI common stock certificates.
Whenever a dividend or other distribution is declared by Landmark on
Landmark common stock with a record date after the date on which the merger
became effective, the declaration will include dividends or other
distributions on all shares of Landmark common stock that may be issued in
the merger. However, Landmark will not pay any dividend or other distribution
that is payable after the effective date of the merger to any former MNB or
LBI stockholder who has not surrendered his or her MNB or LBI common stock
certificate until the holder
47
surrenders the certificate. If any MNB or LBI stockholder's common stock
certificate has been lost, stolen or destroyed, the exchange agent will issue
the shares of Landmark common stock and any cash in lieu of fractional shares
upon the stockholder's submission of an affidavit claiming the certificate to
be lost, stolen or destroyed by the stockholder of record and the posting of
a bond in such amount as Landmark may reasonably direct as indemnity against
any claim that may be made against Landmark with respect to the certificate.
At the time the merger becomes effective, the stock transfer books
of MNB and LBI will be closed to their respective stockholders and no
transfer of shares of MNB or LBI common stock by any stockholder will
thereafter be made or recognized. If certificates for shares of MNB or LBI
common stock are presented for transfer after the merger becomes effective,
they will be canceled and exchanged for shares of Landmark common stock, a
check for the amount due in lieu of fractional shares, if any, and any
undelivered dividends on the Landmark common stock.
CONDITIONS TO COMPLETION OF THE MERGER
We are required to complete the merger only after the satisfaction
of various conditions. These conditions include:
o the holders of a majority of the outstanding shares of each of MNB and
LBI common stock must adopt the merger agreement;
o we must receive all required regulatory approvals;
o we must receive a written opinion as to the tax-free nature of the
merger;
o each of us must receive a written opinion of the other company's
counsel regarding enforceability of the merger agreement, proper
authorization of the merger and other corporate and related matters;
o the Securities and Exchange Commission must declare the registration
statement registering the shares of Landmark common stock to be issued
to our stockholders in the merger effective under the Securities Act of
1933, as amended;
o each party shall have accrued and fully paid all of their respective
costs associated with the merger, including all benefits and
contributions under any of their employee benefit plans;
o our representations and warranties in the merger agreement must be
accurate as of the date of the merger agreement and as of the date the
merger becomes effective;
o we must perform all agreements and comply with all covenants contained
in the merger agreement;
o we must receive all other consents that may be required to complete the
merger or to prevent any default under any contract or permit that
would be reasonably likely to have, individually or in the aggregate, a
material adverse effect on either of us;
o the absence of any law or order or any action taken by any court,
governmental or regulatory authority of competent jurisdiction
prohibiting or restricting the merger or making it illegal or that
would otherwise be expected to have a material adverse effect on either
of us;
o the absence of any other event since the date of the merger agreement
that would be reasonably likely to have a material adverse effect on
either of us;
o we must each receive an opinion from our own financial advisor to the
effect that the merger is fair to our stockholders from a financial
point of view; and
48
o other conditions must be satisfied, including the receipt of various
certificates from our officers.
Neither of us can assure our stockholders as to when or if all of
the conditions to the merger can or will be satisfied or waived by the party
permitted to do so. If the merger is not completed by March 1, 2002, either
of our boards of directors may terminate the merger agreement and abandon the
merger. See "-- Waiver, Amendment and Termination."
REGULATORY APPROVALS
We must receive certain regulatory approvals before the merger can
be completed. There is no assurance that these regulatory approvals will be
obtained or when they will be obtained.
It is a condition to the completion of the merger that we receive
all necessary regulatory approvals to the merger, without the imposition by
any regulator of any condition that, in the reasonable judgment of either us,
would be materially adverse to the success of Landmark. There can be no
assurance that the regulatory approvals of the merger will not contain terms,
conditions or requirements that would have such an impact.
We are not aware of any material governmental approvals or actions
that are required to complete the merger, except as described below. If any
other approval or action is required, we have agreed that we will also seek
this approval or action.
The merger is subject to the prior approval of the Federal Reserve,
pursuant to Section 3 of the Bank Holding Company Act. Factors considered by
the Federal Reserve in evaluating the merger are discussed under the heading
"Regulatory Considerations-General." The merger may not be completed until 30
days following the date of the Federal Reserve approval, although the Federal
Reserve may reduce that period to 15 days. During this period, the United
States Department of Justice is given the opportunity to challenge the
transaction on antitrust grounds. The commencement of any antitrust action
would stay the effectiveness of the approval of the agencies, unless a court
of competent jurisdiction specifically ordered otherwise.
The merger of our two subsidiary banks is subject to the approval of
the Office of the Comptroller of the Currency, pursuant to Section 18(c) of
the Federal Deposit Insurance Act. The Comptroller's Office is directed to
take into consideration the financial and managerial resources and future
prospects of our existing banks and our proposed combined institution and the
convenience and needs of the communities we will serve.
WAIVER, AMENDMENT AND TERMINATION
To the extent permitted by law, our boards of directors may agree in
writing to amend the merger agreement, whether before or after their
respective stockholders have approved the merger agreement. In addition,
before or at the time the merger becomes effective, either of us, or both,
may waive any default in the performance of any term of the merger agreement
by the other or may waive or extend the time for the compliance or
fulfillment by the other of any of its obligations under the merger
agreement. Either of us may also waive any of the conditions precedent to our
obligations under the merger agreement, unless a violation of any law or
governmental regulation would result. To be effective, a waiver must be in
writing and signed by one of our duly authorized officers.
At any time before the merger becomes effective, our boards of
directors may mutually agree to terminate the merger agreement. In addition,
either of us may terminate the merger agreement in the following
circumstances:
o if any representation or warranty of a party contained in the merger
agreement is inaccurate, the inaccuracy would reasonably be expected to
have a material adverse effect on Landmark after the completion of the
merger and if the inaccuracy is such that, in the reasonable opinion of
the party who did not make such representation or warranty, cannot be
cured before March 1, 2002;
49
o if a material breach by the other party of any covenant or agreement
contained in the merger agreement cannot be or has not been cured
within 30 days after the giving of written notice to the breaching
party of such breach (provided that the breach was not as a result of
the failure by the terminating party to perform or comply with any of
its material obligations under the merger agreement);
o if there has occurred since the date of the merger agreement, any
change in any law, rule or regulation, or there has been any decision
or action by any court or governmental agency, that could reasonably be
expected to prevent or delay completion of the merger beyond March 1,
2002;
o if any consent of any regulatory authority required to complete the
merger or other transactions contemplated by the merger agreement has
been denied by final nonappealable action, or if any application or
other filing has been withdrawn at the request of any regulatory
authority and a petition for rehearing shall not have been granted or
an amended application has not been accepted for filing within 60 days
after this withdrawal;
o if the merger is not completed by 11:59 p.m. on March 1, 2002 (provided
that a party shall not have the right to terminate for this reason if
the failure to complete the merger by this time resulted from this
party's failure to perform or comply with any of its obligations,
exclusive of representations and warranties, under the merger
agreement);
o if the other party violates the covenant against dealing with any third
party with respect to an alternative transaction with this third party
instead of the merger;
o if the other party breaches its agreement to call a stockholders'
meeting to vote on the adoption of the merger agreement, fails to
recommend that its stockholders vote to adopt the merger agreement or
the other party's stockholders fail to approve the merger agreement;
o subject to certain prior notice requirements and the obligation to pay
a special termination fee that are contained in the merger agreement,
if the party gives notice that it has received an offer from a third
party with respect to an alternative transaction that the party's board
of directors has determined in good faith is more favorable to its
stockholders than the merger; and
o subject to the obligation to pay a special termination fee, if the
fairness opinion provided to the party by its financial advisor is
withdrawn prior to the completion of the merger.
If the merger is terminated, the merger agreement will become void and
have no effect, except that certain provisions of the merger agreement,
including those relating to the obligation to share some expenses and maintain
the confidentiality of certain information obtained, will survive. Any
termination may trigger the obligation of a party to pay certain expenses and
termination fees to the other party. See "-- Expenses and Termination Fees."
CONDUCT OF BUSINESS PENDING THE MERGER
The merger agreement obligates each of us to conduct our business
diligently before the merger becomes effective only in the usual, regular and
ordinary course. It also imposes limitations on the operations, expenditures
and other actions of each of us and our respective bank subsidiaries. These
items are listed in Articles 6 and 7 of the merger agreement which is
attached as Appendix A to this joint proxy statement-prospectus. The merger
agreement authorizes each of us to declare and pay regular quarterly cash
dividends on our respective common stock in accordance with our past
practices in an amount not to exceed $0.0625 per share per quarter in the
case of MNB and in an amount not to exceed $0.15 per share per quarter in the
case of LBI. The merger agreement contemplates that the merger will be timed
to occur at such a time that each of our stockholders will not fail to
receive a dividend during a quarterly period, nor will they receive a
dividend on both their MNB or LBI common stock and the Landmark common stock
they receive in the merger during the same quarterly period.
50
Each of us has also agreed that neither of us nor any of our
respective representatives will directly or indirectly solicit, negotiate or
enter into an alternative transaction with an outside third party, or furnish
any non-public information concerning ourselves that we are not legally
obligated to furnish, except in each case to the extent necessary to comply
with the fiduciary duties of our respective board of directors and as advised
by our counsel.
We have also agreed not to take any action that would materially and
adversely affect our ability to obtain any consents required for the merger
or prevent the merger from qualifying as a tax-free reorganization under the
Internal Revenue Code (see "-- Material Federal Income Tax Consequences of
the Merger") or materially and adversely affect our ability to perform our
respective obligations under the merger agreement.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
We specifically negotiated and named in the merger agreement those
individuals who will serve as Landmark's directors and executive officers
following the merger. For initial formation purposes only, Larry Schugart and
Patrick L. Alexander were named as Landmark's initial directors, and the
current officers appointed by the initial directors were Larry Schugart,
Chairman; Patrick L. Alexander, President; and Mark A. Herpich, Secretary.
These initial directors and officers will be replaced prior to the completion
of the merger with the following directors and executive officers:
LANDMARK DIRECTORS AND CLASSES
(MNB DESIGNEES) (LBI DESIGNEES)
Patrick L. Alexander (III) Larry Schugart* (III)
Susan E. Roepke (II) Richard Ball (II)
Brent A. Bowman (I) Jim W. Lewis (III)
Jerry R. Pettle (III) C. Duane Ross (II)
Joseph L. Downey (I) David H. Snapp (I)
* Also serves as Chairman of the Board
LANDMARK EXECUTIVE OFFICERS
Larry Schugart Chairman of the Board
Patrick L. Alexander President and Chief Executive Officer
Mark A. Herpich Vice President, Secretary, Treasurer
and Chief Financial Officer
After the merger of our banks, the combined institution's board of
directors will have the same members as Landmark's board of directors, and
Landmark's executive officers will serve in the same positions with our
combined bank subsidiary. In addition to these individuals, Michael E.
Scheopner and Dean R. Thibault will also serve as Executive Vice Presidents
of the bank after the merger. Information concerning the management of MNB
and LBI is included in the documents incorporated by reference in this joint
proxy statement-prospectus. See "Where You Can Find More Information." For
additional information regarding the interests of certain persons in the
merger, see "-- Interests of Certain Persons in the Merger."
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
GENERAL. Certain members of our respective management and boards of
directors may be deemed to have certain interests in the merger that are in
addition to their interests as stockholders of MNB or LBI generally. Each of
our boards of directors was aware of these interests and considered them,
among other matters, in approving the merger agreement on behalf of our
respective company. See "--Management and Operations After the Merger."
MNB EMPLOYMENT AGREEMENTS. MNB is a party to an employment agreement
with Mr. Alexander, who serves as the President and Chief Executive Officer
of both MNB and its bank subsidiary. MNB currently has no other employment or
other agreements with any of its officers or employees.
Mr. Alexander's current employment agreement provides that he will
receive a severance payment if he is terminated after a "change of control"
of MNB. Our pending merger would constitute a change of control triggering
the payment of this severance amount. However, Mr. Alexander has agreed that
he will waive his right to receive this payment provided that the merger is
completed prior to March 1, 2002, and we and Mr. Alexander enter into an
employment agreement in the form attached as an exhibit to the merger
agreement.
This employment agreement initially provides for a base salary of
$200,000, which may be increased but not decreased, and an initial term of
three years, with automatic one year extensions on each anniversary of the
effective date of the agreement unless either party gives the other notice of
its desire to terminate this automatic extension. Upon any such termination,
the agreement would expire at the end of the then current three year term.
The employment agreement will terminate upon the death or disability
of Mr. Alexander, in the event of certain regulatory actions or upon notice
by either us or Mr. Alexander, with or without cause. The employment
agreement will be suspended in the event of a regulatory suspension of Mr.
Alexander's employment. If Mr. Alexander's employment is terminated without
cause (which is defined in the employment agreement), we will be obligated to
pay or to provide to him, as applicable, a cash payment equal to three times
the sum of his then annual salary, plus an amount equal to the average of the
annual performance bonuses paid to him and the contributions made for his
benefit under all employee retirement plans during the most recently ended
three years. We must also provide Mr. Alexander and his immediate family
continued insurance coverage for the three years after this termination of
employment. We will have no continuing obligation to Mr. Alexander if he
voluntarily terminates his employment or we terminate him for cause, except
that we will be obligated to pay him his accrued salary and benefits through
the effective date of his termination of employment.
If Mr. Alexander voluntarily terminates his employment, or his
employment is involuntarily terminated, within six months after a change in
control of us or our bank subsidiary, then our successor will be obligated to
pay or to provide to Mr. Alexander the same cash payment and benefits he
would have received if he had been terminated by us without cause. For
purposes of the employment agreement, Mr. Alexander's employment will be
considered terminated if he is not re-elected or is removed from his position
as our President and Chief Executive Officer or if we otherwise commit a
breach of our obligations under the employment agreement.
The employment agreement includes a covenant which will limit the
ability of Mr. Alexander to compete with us or our bank subsidiary in an area
encompassing a fifty mile radius from any of our banking offices for a period
of one year following the termination of his employment. The geographic area
covered by this provision constitutes a portion of our primary market area.
In addition to the employment agreement with Mr. Alexander, the
merger agreement also provides that we will enter into employment agreements
with Mr. Herpich, who will serve as our Vice President, Secretary, Treasurer,
Chief Financial Officer and Secretary, and Messrs. Scheopner and Thibault,
who will each serve as Executive Vice Presidents of our bank subsidiary.
Except as described below, these employment agreements contain substantially
the same provisions as those included in Mr. Alexander's employment agreement.
52
The base salaries for Messrs. Herpich, Scheopner and Thibault will
be $105,000, $105,000 and $85,000, respectively. The term of these three
agreements will be for one year and they will automatically extend for one
additional year on each anniversary of the effective date of the agreement.
If any of these officers is terminated without cause during the term of his
respective agreement, he will be entitled to receive an amount equal to the
sum of his then annual salary, plus an amount equal to the average of the
annual performance bonuses paid to him and the contributions made for his
benefit under all employee retirement plans during the most recently ended
three years. The payment to be made to each of these three officers upon his
voluntary termination of employment within six months after a change of
control or his involuntary termination without cause within one year of a
change of control will be equal to two times the sum of his then annual
salary, plus an amount equal to the average of the annual performance bonuses
paid to him and the contributions made for his benefit under all employee
retirement plans during the most recently ended three years. Each of these
employees will be subject to the same non-competition covenant as Mr.
Alexander following his termination of employment.
LBI EMPLOYMENT AGREEMENTS. LBI is a party to a number of employment
and other agreements with executive officers of both LBI and its bank
subsidiary. These agreements provide for various payments to be made to these
officers after a "change of control" of LBI or its bank subsidiary. Our
merger, and the merger of our two banks, will constitute a "change of
control" under these agreements.
LBI's bank subsidiary is a party to employment agreements with Mr.
Schugart, as its President and Chief Executive Officer, and with Gary L.
Watkins and Stephen H. Sundberg, each of whom is a Senior Vice President. In
connection with the merger and pursuant to these agreements, LBI's bank
subsidiary will pay Messrs. Schugart, Watkins and Sundberg $729,180, $204,778
and $129,870, respectively, to cancel their agreements. Messrs. Watkins and
Sundberg will not remain as our employees after the completion of the merger.
Mr. Schugart has agreed to enter into a new employment agreement
with us to take effect after the completion of the merger. Under the terms of
this agreement, Mr. Schugart will serve as Chairman of the Board of the
combined companies and our combined bank subsidiary. The agreement will have
a fixed term of three years and provides for an annual salary of $35,000. We
have also agreed to provide Mr. Schugart with health insurance coverage and
to continue his deferred compensation agreement described below during the
term of this employment agreement.
LBI OFFICER DEFERRED COMPENSATION AGREEMENTS. In addition to the
employment agreements described above, LBI's bank subsidiary is also a party
to deferred compensation agreements with Messrs. Schugart and Watkins and
three other employees. If any of these employees terminates his or her
employment at any time after the completion of the merger, we will be
obligated under these agreements to make cash payments to each of these
employees in the approximate amounts as follows: Mr. Schugart--$532,000; Mr.
Watkins--$303,000; and other employees in an aggregate amount of $336,000. We
currently expect that LBI will accrue the approximately $935,000 not already
charged against LBI operations upon completion of the merger. The timing of
when we will need to make these additional payments will depend upon how long
these employees choose to remain employed by us after the completion of the
merger. We do not expect to pay Mr. Schugart the payment due to him until his
normal retirement age, three years after the closing of the merger, which
will be at the end of the term of his employment agreement that he will enter
into with us.
LBI DIRECTOR DEFERRED COMPENSATION AGREEMENTS AND SEVERANCE PLAN.
LBI's bank subsidiary has entered into deferred compensation agreements with
all of its directors, except for Mr. Lewis. The total cost of these payments
has previously been funded by LBI's directors through the deferral of their
directors' fees. We have agreed to assume all of the obligations of LBI's
bank subsidiary under these agreements. Of this total payment, we estimate
that Mr. Schugart will receive approximately $51,000 upon his retirement.
LBI's bank subsidiary has also adopted a director change in control
severance pay plan. This plan requires the bank to pay to any director whose
service is terminated within one year of a change in control of the bank an
amount of cash equal to one year of directors' fees. Although the merger of
the bank subsidiaries of LBI and MNB will constitute a change in control of
LBI's bank subsidiary, all of the directors of LBI's bank subsidiary
53
will continue to serve as directors of the combined bank and we do not expect
to have any additional liability under this plan to the directors of LBI's
bank subsidiary.
LBI GENERAL EMPLOYEE SEVERANCE PLANS. LBI and its subsidiary bank
have adopted general employee plans that provide for payments to be made to
all employees as a result of the contemplated mergers. As of the business day
immediately prior to the closing of the merger, LBI's bank subsidiary is
obligated to make payments equal to two weeks' salary to each of its
employees who is not covered by an employment agreement. We expect the total
cost of these payments, which will be accrued by LBI upon completion of the
merger, to be approximately $54,000.
LBI's change in control severance plan provides for the payment to
any employee who is terminated within 18 months of the closing of the merger
of an amount equal to two weeks' salary for every year or partial year of
employment, with a minimum of four weeks and a maximum of 26 weeks. We have
not yet made any final decisions with respect to our employee needs after the
completion of the merger so we do not know how much we might need to pay
under this change of control severance plan.
MNB AND LBI GENERAL RETIREMENT PLANS. We have agreed in the merger
agreement to honor all the general employee retirement plans of MNB, LBI and
its bank subsidiaries. We have further agreed that in all of the employee
benefit plans we implement after the merger we will consider prior service
with MNB or LBI equally for all purposes, including eligibility, vesting and
benefits accruals.
STOCK OPTIONS. Each of us has granted stock options to our
directors, executive officers and other employees under stock option plans.
As a result of the merger, which will constitute a "change of control" under
these stock option plans, all outstanding, non-vested stock options of both
MNB and LBI will accelerate and will become exercisable immediately following
completion of the merger. All outstanding options that are not exercised
prior to the merger will be converted into options to purchase shares of
Landmark common stock, as described on page [___].
INDEMNIFICATION FOR DIRECTORS AND OFFICERS. We have agreed to
indemnify the present and former directors, officers, employees and agents of
our respective companies and their subsidiaries for a period of six years
after the completion of the merger against certain liabilities arising out of
actions or omissions occurring at or prior to the time the merger. We may
provide this coverage through an insurance policy or through a separate
agreement by us to indemnify them.
We have also agreed to cooperate to obtain after the completion of
the merger directors' and officers' liability insurance coverage for the
officers and directors of Landmark, to the extent this is economically
practicable. We will try to obtain coverage at the same level as the most
protective coverage that either MNB or LBI currently provides to its officers
and directors.
ACCOUNTING TREATMENT
The merger will be accounted for using the purchase method of
accounting under generally accepted accounting principles as applied in the
United States. Under this method of accounting, we will record the assets and
liabilities of MNB at their fair market values. Any difference between the
purchase price and the fair value of the tangible and identifiable intangible
assets and liabilities is recorded as goodwill, which will be amortized for
financial accounting purposes.
EXPENSES AND TERMINATION FEES
Subject to the special circumstances described below, we will each
pay our own expenses in connection with the merger, including filing,
registration and application fees, printing fees and fees and expenses of our
own financial or other consultants, investment bankers, accountants and
counsel, except that each of us will bear and pay one-half of the printing
costs incurred in connection with the registration statement and this joint
proxy statement-prospectus. The same agreement with respect to the payment of
expenses will be in effect if we
54
mutually agree to terminate the merger agreement or if either of us
terminates the merger agreement because the merger has not been completed by
March 1, 2002.
If, however, the merger agreement is terminated under the special
circumstances described below, either of us will be obligated to pay all or
part of the other's fees and expenses in connection with the merger and also
perhaps a special termination fee depending upon the reason for the
termination of the merger agreement and subsequent occurrences.
Each of us is obligated to pay the other's fees and expenses in
connection with the merger up to a maximum of $350,000 if our financial
advisor withdraws its fairness opinion prior to the completion of the merger
or our respective stockholders fail to approve the merger. Each of us has the
same obligation to pay the other's fees and expenses, and the obligation to
pay the other an additional termination fee of $500,000 if the merger
agreement is terminated because one of us breached any of our respective
covenants contained in the merger agreement. In addition, if within one year
after the termination of the merger agreement, the breaching company or the
company with the fairness opinion that was withdrawn or the stockholders that
failed to approve the merger enters into another agreement to be acquired by
an outside third party or group, then the breaching company or the company
with the fairness opinion that was withdrawn or the stockholders that failed
to approve the merger must pay an additional one-time special termination fee
to the other of $1,000,000.
Subject to prior notice to the other party, either of us may
terminate the merger agreement because we have received an offer from an
unrelated third party that our board of directors has concluded is more
favorable to our stockholders. In this case, if within one year after the
termination of the merger agreement the company who received the more
favorable offer signs an agreement to be acquired by someone other than its
current merger partner, then the terminating company will not be required to
pay any of the fees listed above, but instead must pay the other party a
one-time special termination fee of $1,000,000.
RESALES OF LANDMARK COMMON STOCK
Landmark common stock to be issued to our stockholders in the merger
will be registered under the Securities Act of 1933, as amended. All shares
of Landmark common stock received by our stockholders in the merger will be
freely transferable after the merger by our stockholders who are not
considered to be "affiliates" of either of us. "Affiliates" generally are
defined as persons or entities who control, are controlled by or are under
common control with either of us at the time of our respective special
meetings (generally, executive officers, directors and 10% or greater
stockholders).
Rule 145 promulgated under the Securities Act restricts the sale of
Landmark common stock received in the merger by affiliates of MNB or LBI and
certain of their family members and related entities. Under the rule, during
the first calendar year after the merger becomes effective, affiliates of LBI
or MNB may publicly resell the Landmark common stock they receive in the
merger but only within certain limitations as to the amount of Landmark
common stock they can sell in any three-month period and as to the manner of
sale. After the one-year period, affiliates of MNB or LBI who are not
affiliates of Landmark may resell their shares without restriction. Landmark
must continue to satisfy its reporting requirements under the Securities
Exchange Act of 1934, as amended, in order for affiliates to resell, under
Rule 145, shares of Landmark common stock received in the merger. Affiliates
would also be permitted to resell Landmark common stock received in the
merger pursuant to an effective registration statement under the Securities
Act of 1933, as amended, or an available exemption from the registration
requirements. This joint proxy statement-prospectus does not cover any
resales of Landmark common stock received by persons who may be deemed to be
affiliates of MNB or LBI.
Subject to the terms of the merger agreement, LBI and MNB have
agreed not to solicit, negotiate, discuss, accept or approve any offers or
proposals from or enter into any agreement with, any third party concerning a
tender offer, merger, consolidation, share exchange or other business
combination involving MNB or LBI or concerning the offer, sale or disposition
of any material assets of MNB or LBI.
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EFFECT OF THE MERGER ON RIGHTS OF STOCKHOLDERS
In the merger, our stockholders will exchange their shares of MNB and
LBI stock for shares of Landmark. MNB is a Delaware corporation governed by
Delaware law and its certificate of incorporation and bylaws, while LBI is a
Kansas corporation governed by Kansas law and its articles of incorporation and
bylaws. Landmark is a Delaware corporation governed by Delaware law and
Landmark's certificate of incorporation and bylaws. Immediately prior to the
completion of the merger, Landmark's current certificate of incorporation will
be amended and restated in the form attached as an exhibit to the merger
agreement. The discussion below of the provisions of Landmark's certificate of
incorporation refers in each case, except as expressly noted, to Landmark's
amended and restated certificate of incorporation.
There are significant differences between the rights of the
stockholders of MNB and LBI, and the rights of Landmark stockholders. The
following is a summary of the principal differences between the current rights
of MNB's and LBI's stockholders and those of Landmark's stockholders.
The following summary is not intended to be complete and is qualified
in its entirety by reference to the Delaware General Corporation Law and the
General Corporation Code of Kansas as well as the respective certificates or
articles of incorporation and bylaws of MNB, LBI and Landmark.
ANTI-TAKEOVER PROVISIONS GENERALLY
Landmark's certificate of incorporation and bylaws contain certain
provisions designed to assist the Landmark board of directors in playing a role
if any group or person attempts to acquire control of Landmark so that the
Landmark board of directors can further protect the interests of Landmark and
its stockholders under the circumstances. These provisions may help the Landmark
board of directors determine that a sale of control is in the best interests of
Landmark's stockholders or enhance the Landmark board of directors' ability to
maximize the value to be received by the stockholders upon a sale of control of
Landmark.
Although Landmark's management believes that these provisions are
beneficial to Landmark's stockholders, they may also tend to discourage some
takeover bids. As a result, Landmark's stockholders may be deprived of
opportunities to sell some or all of their shares at prices that represent a
premium over prevailing market prices. On the other hand, defeating undesirable
acquisition offers can be a very expensive and time-consuming process. To the
extent that these provisions discourage undesirable proposals, Landmark may be
able to avoid those expenditures of time and money.
These provisions may also discourage open market purchases by a company
that may desire to acquire Landmark. Those purchases may increase the market
price of Landmark common stock temporarily, and enable stockholders to sell
their shares at a price higher than they might otherwise obtain. In addition,
these provisions may decrease the market price of Landmark common stock by
making the stock less attractive to persons who invest in securities in
anticipation of price increases from potential acquisition attempts. The
provisions may also make it more difficult and time consuming for a potential
acquiror to obtain control of Landmark through replacing the board of directors
and management. Furthermore, the provisions may make it more difficult for
Landmark's stockholders to replace the board of directors or management, even if
a majority of the stockholders believe that replacing the board of directors or
management is in the best interests of Landmark. Because of these factors, these
provisions may tend to perpetuate the incumbent board of directors and
management.
Landmark's certificate of incorporation and bylaws also contain certain
anti-takeover provisions that are described below. These provisions may
discourage or prevent tender or exchange offers by a corporation or group that
intends to use the acquisition of a substantial number of shares of Landmark to
initiate a takeover culminating in a merger or other business combination. These
provisions may also have the effect of making the removal of current management
more difficult.
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AUTHORIZED CAPITAL STOCK
LANDMARK. Landmark is currently authorized to issue 3,000 shares of
common stock, par value of $0.01 per share, of which 1,000 shares were issued
and outstanding as of the date of this document. Pursuant to the merger
agreement, Landmark will amend and restate its certificate of incorporation
prior to the closing of the merger. Landmark will increase the number of shares
of its authorized common stock to 3 million shares, and authorize 200,000 shares
of a class of preferred stock, par value $0.01 per share. The Landmark board of
directors may authorize the issuance of additional shares of common stock
without further action by its stockholders, unless applicable laws or
regulations or a stock exchange on which Landmark's capital stock is listed
requires stockholder action.
After the filing of its amended and restated certificate of
incorporation, Landmark will be able to issue, without a stockholder vote,
shares of its preferred stock, in one or more classes or series, with voting,
conversion, dividend and liquidation rights as it specifies in its articles. The
Landmark board of directors may determine, among other things, the distinctive
designation and number of shares comprising a series of preferred stock, the
dividend rate or rates on the shares of such series and the relation of such
dividends to the dividends payable on other classes of stock, whether the shares
of such series will be convertible into or exchangeable for shares of any other
class or series of Landmark capital stock, the voting powers if any of such
series, and any other preferences, privileges and powers of such series.
In the event of the voluntary or involuntary liquidation, dissolution,
distribution of assets or winding up of Landmark, holders of preferred stock
will have priority over holders of common stock.
The authority to issue additional shares of common stock or preferred
stock provides Landmark with the flexibility necessary to meet its future needs
without the delay resulting from seeking stockholder approval. The authorized
but unissued shares of common stock and preferred stock may be issued from time
to time for any corporate purpose, including, stock splits, stock dividends,
employee benefit and compensation plans, acquisitions and public or private
sales for cash as a means of raising capital. The shares could be used to dilute
the stock ownership of persons seeking to obtain control of Landmark. The sale
of a substantial number of shares of voting stock to persons who have an
understanding with Landmark concerning the voting of such shares or the
distribution or declaration of a dividend of shares of voting stock (or the
right to receive voting stock) to its stockholders, may have the effect of
discouraging or increasing the cost of unsolicited attempts to acquire control
of Landmark.
Landmark will adopt prior to the completion of the merger a stockholder
rights plan in the same form as that described below for MNB.
MNB. MNB is authorized to issue up to 3,000,000 shares of common stock,
par value of $0.01 per share, of which 1,563,905 shares were issued and
outstanding as of March 31, 2001, and 200,000 shares of preferred stock, par
value of $0.01 per share, of which no shares were issued or outstanding as of
March 31, 2001.
MNB's board of directors has substantially the same powers with respect
to the issuance of common stock and preferred stock as does Landmark's board of
directors described above.
MNB has a stockholder rights plan ("Rights Plan") and under this Rights
Plan distributed a dividend of one preferred share purchase right for each
outstanding share of common stock. Each right entitles the holder to purchase
from MNB one one-thousandth of a share of MNB's Series A Junior Participating
Preferred Stock, par value $0.01 per share, at a price of $30.00 per one
one-thousandth of a share of preferred stock, subject to adjustment ("Preferred
Share Right"). Under the Rights Plan, one Preferred Share Right was
automatically distributed for each share of MNB common stock. The Preferred
Share Rights may deter coercive takeover tactics and encourage persons
interested in potentially acquiring control of MNB to treat each stockholder on
a fair and equal basis. Each Preferred Share Right trades on the same basis with
the share of MNB common stock to which it relates until the occurrence of
certain events. Upon a potential change in control of MNB, the Preferred Share
57
Rights would separate from MNB common stock and each holder of a Preferred Share
Right (other than the potential acquiror) would be entitled to purchase equity
securities of Landmark at prices below their market value. MNB has authorized
3,000 shares of Series A preferred stock for issuance under the Preferred Share
Rights Plan. No shares have been issued as of the date of this joint proxy
statement-prospectus. Until a Preferred Share Right is exercised, the holder has
no rights as a stockholder of MNB. MNB has amended the Rights Plan to provide
that the merger agreement and the merger with LBI and Landmark will not make the
Preferred Share Rights exercisable. MNB will also terminate the Rights Plan
concurrently with the completion of the merger. LBI does not have any share
purchase rights plan.
LBI. LBI is authorized to issue up to 10,000,000 shares of common
stock, $0.10 par value per share, of which 1,092,438 shares were outstanding as
of March 31, 2001, and 5,000,000 shares of preferred stock, no par value per
share, of which no shares were issued or outstanding as of March 31, 2001.
LBI's board of directors has substantially the same powers with respect
to the issuance of common stock and preferred stock as does Landmark's board of
directors described above.
AMENDMENT OF CERTIFICATE AND BYLAWS
LANDMARK. Landmark may amend its certificate in any manner permitted by
Delaware law. The Delaware General Corporation Law provides that a corporation's
certificate may be amended by a majority of the issued and outstanding shares of
a corporation's voting stock, unless the certificate establishes a higher voting
requirement. Landmark's certificate provides that any repeal or amendment of
provisions dealing with:
o the procedure for amending the bylaws and the certificate of
incorporation;
o indemnification of directors and officers;
o the limitation of the liability of directors under some circumstances;
o the number, classification, term, election, replacement and removal of
directors;
o additional voting requirements that are applicable to certain
corporate actions;
o procedure for informal stockholder action;
o how special stockholders' meetings are called;
o restricting certain business transactions, including transactions
between Landmark and an "interested party" (in general, the holder of
15% or more of Landmark's voting stock); and
o stockholders nominations of directors and other proposals;
must be approved by holders of not less than two-thirds of Landmark's
outstanding voting stock. Any other amendment to the certificate must be
approved by the affirmative vote of the holders of at least two-thirds of the
outstanding voting stock, unless the proposed amendment has been approved by at
least two-thirds of the then authorized number of Landmark's directors, in which
case the amendment will be subject only to approval of holders of a majority of
Landmark's outstanding voting stock.
Landmark's board of directors may adopt, amend or repeal Landmark's
bylaws by a majority vote of the entire board of directors. The bylaws may also
be amended or repealed by the affirmative vote of the holders of at least
two-thirds of Landmark's outstanding voting stock.
MNB. MNB's certificate of incorporation may be amended by a majority
vote of its stockholders, except that the certificate provides that any repeal
or amendment of provisions dealing with:
58
o the number, classification, term, election, replacement, removal and
nomination of directors;
o restricting certain business transactions, including transactions
between MNB and an "interested party" (in general, the holder of 15%
or more of MNB's voting stock);
o how special stockholders' meetings are called;
o the procedure for amending the certificate of incorporation and the
bylaws
o stockholder nominations of directors and other stockholder proposals;
o procedure for informal stockholder action; and
o the limitation of the liability of directors under some circumstances;
must be approved by holders of not less than two-thirds of MNB's outstanding
voting stock.
MNB's board of directors may adopt, amend or repeal MNB's bylaws by a
majority vote of the entire board of directors. The bylaws may also be amended
or repealed by the affirmative vote of the holders of at least two-thirds of
MNB's outstanding voting stock.
LBI. LBI may amend its articles of incorporation in any manner
permitted by Kansas law. The General Corporation Code of Kansas provides that
amendments to a corporation's articles must be approved by holders of a majority
of the issued and outstanding shares of a corporation's voting stock. LBI's
articles of incorporation may not be amended unless such resolution is first
approved by a majority of the directors and then approved by a majority vote of
its stockholders, except that the articles provide that any repeal or amendment
of provisions dealing with:
o the number, classification, term, election, replacement, removal
and nomination of directors;
o the pre-emptive right to subscribe for any new equity securities
issued by LBI;
o the limitation of the liability of directors under some circumstances;
o indemnification rights of directors and officers;
o the calling and conduct of annual and special stockholders' meetings;
o procedure for informal stockholder action and dealing with stockholder
proposals;
o limiting the voting rights of holders of more than 10% of LBI's
outstanding voting stock; and
o restricting certain business transactions between LBI and a "principal
stockholder" (in general, the holder of 10% or more of LBI's voting
stock); and
o the procedure for amending the articles of incorporation and the
bylaws,
must be approved by holders of not less than 80% of LBI's outstanding voting
stock.
LBI's board of directors may adopt, amend or repeal LBI's bylaws by a
majority vote of the entire board of directors. The bylaws may also be amended
or repealed by action of LBI's stockholders, except that the articles provide
that any repeal or amendment of provisions dealing with:
59
o organization and conduct of stockholder meetings;
o the number, classification, replacement and removal of directors;
o the declaration and payment of dividends;
o the limitation of the liability of directors under some circumstances;
o restricting certain business transactions between LBI and a principal
stockholder; and
o amendments of the bylaws,
must be approved by holders of not less than 80% of LBI's outstanding voting
stock.
DIRECTOR REMOVAL
LANDMARK. Landmark's certificate provides that a director may be
removed by a majority vote of the stockholders only for "cause" and only at an
annual or special meeting of stockholders called for that purpose. Cause is
defined in the certificate as the conviction of a director by a court of a
felony, or a court judgment that a director is liable for gross negligence or
willful misconduct in the performance of his or her duty to the corporation,
provided that this judgment is no longer appealable. The purpose of this
provision is to prevent a majority stockholder from circumventing the classified
board system by removing directors and filling the vacancies with new
individuals selected by that stockholder.
This provision may have the effect of impeding efforts to gain control
of the board of directors by anyone who obtains a controlling interest in
Landmark's common stock.
MNB. MNB's certificate contains substantially the same provisions as
Landmark's certificate with respect to the removal of directors.
LBI. LBI's articles contains substantially the same removal provisions
as Landmark's certificate, except that cause for removal is also defined to
include a determination by a court that a director is of unsound mind and also
the conviction of any offense (whether or not a felony) that is punishable by a
prison term of more than one year.
LIMITATIONS ON DIRECTOR LIABILITY
LANDMARK. Landmark's certificate provides that a director will not be
personally liable to Landmark or its stockholders for monetary damages resulting
from the director's breach of his or her duty of care to the fullest extent
permitted by the Delaware General Corporation Law. The Delaware General
Corporation Law permits a corporation to limit a director's personal liability
to this extent, except:
o for any breach of a director's duty of loyalty to Landmark or its
stockholders;
o for actions, or the failure to take actions, not in good faith or
which involve intentional misconduct or a knowing violation of law;
o for liability of directors for the unlawful payment of dividends or
unlawful stock repurchases; or
o for any transactions from which the director derived any improper
personal benefit.
MNB AND LBI. Each of our certificate or articles of incorporation
provide substantially the same limitation on the personal liability of its
directors as does Landmark's certificate.
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INDEMNIFICATION
LANDMARK. Under Delaware law, directors, officers, employees and agents
of a corporation may be indemnified against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement under certain
circumstances. In certain types of actions, suits or proceedings, whether they
are civil, criminal, administrative or investigative (other than an action by,
or in the right of the corporation, I.E., a "derivative action"), such
individuals may be indemnified against individual liability if he or she acted
in good faith and in a manner he or she reasonably believed to be in, or not
opposed to, the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. A similar standard applies in the case of derivative
actions, except that indemnification only extends to expenses (including
attorneys' fees) resulting from the defense or settlement of such actions. In
the case of derivative actions, Delaware law requires court approval before
there can be any indemnification when the person seeking indemnification has
been found liable to the corporation. To the extent that a person otherwise
eligible to be indemnified is successful on the merits or otherwise of any claim
or defense, indemnification is required for expenses (including attorneys' fees)
actually and reasonably incurred.
Expenses incurred by a director, officer, employee or agent of a
corporation in defending a proceeding may be paid by the corporation in advance
of the final disposition of the proceeding upon receipt of an undertaking by or
on behalf of the director, officer, employee or agent to repay the amount of any
advance if it shall ultimately be determined that he or she is not entitled to
be indemnified by the corporation as authorized by Delaware law.
Landmark's certificate and bylaws provide for the indemnification of
its directors and officers, and of any person serving at the request of Landmark
as a director, officer or partner of another enterprise, to the fullest extent
permitted by Delaware law.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to directors, officers or persons
controlling Landmark under the provisions described above, Landmark has been
informed that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act, and
is therefore unenforceable.
MNB AND LBI. We are subject to the provisions of Delaware and Kansas
law, respectively, with respect to indemnification. Delaware and Kansas law are
substantially the same in this area, and our respective certificates contain
substantially the same provisions governing indemnification as does Landmark's
certificate.
SPECIAL MEETINGS OF STOCKHOLDERS
LANDMARK. Special meetings of Landmark's stockholders may be called at
any time for any purpose or purposes permitted by law and Landmark's certificate
by a majority of the board of directors.
MNB. MNB's certificate contains substantially the same provisions as
Landmark's certificate with respect to the calling of special meetings of
stockholders.
LBI. A special meeting of LBI's stockholders may only be called by
LBI's Chairman of the Board or President or by a majority of the entire LBI
board of directors.
STOCKHOLDER NOMINATIONS AND PROPOSALS
LANDMARK. Landmark's certificate provides that notice of any
stockholder proposal and nominations that are to be presented at any annual
meeting of stockholders must be sent so it is received by Landmark not less than
30 days in advance of the anniversary date of the previous year's annual meeting
or such other period as established in the bylaws. The bylaws provide that any
stockholder nomination of a director must be sent so that it is received by
Landmark not less than 60 days nor more than 90 days in advance of the first
anniversary date of the previous year's annual meeting.
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MNB. MNB's certificate contains substantially the same provisions as
Landmark's certificate with respect to stockholder nominations and proposals.
LBI. LBI's articles contain provisions with respect to stockholder
nominations and proposals that are not materially different than those of
Landmark and MNB, except that LBI's articles require that notice of any
stockholder proposal must be sent so it is received by LBI not less than 60 days
in advance of the anniversary date of the previous year's annual meeting.
BUSINESS COMBINATIONS
LANDMARK. Subject to contrary provisions in a corporation's
certificate, the Delaware General Corporation Law provides that a corporation
may engage in any merger, consolidation or a sale or lease of all or
substantially all of its assets if such transaction is approved by the
corporation's board of directors and ratified by the vote of holders of a
majority of the corporation's issued and outstanding shares of voting stock.
Subject to different approvals for certain transactions described below,
Landmark's certificate provides that these transactions must be approved by the
affirmative vote of the holders of at least two-thirds of its outstanding voting
stock unless the transaction has been approved by at least two-thirds of the
then authorized number of Landmark's directors, in which case the transaction
must be approved only by holders of a majority of Landmark's outstanding voting
stock.
MNB. Subject to different approvals for certain transactions described
below, MNB's certificate provides that provides that any merger, consolidation
or a sale or lease of all or substantially all of its assets must be approved by
the affirmative vote of the holders of at least two-thirds of its outstanding
voting stock unless the transaction has been approved by at least two-thirds of
MNB's directors, in which case the transaction must be approved only by holders
of a majority of MNB's outstanding voting stock.
LBI. Except for transactions with any of its principal stockholders
(described below), LBI's articles of incorporation do not place any special
requirements on the approval of the type of corporate transactions described
above for Landmark and MNB. These transactions must be approved by a majority
vote of LBI's directors and by its stockholders.
BUSINESS COMBINATIONS WITH INTERESTED PARTIES
The certificate of incorporation of Landmark and MNB, and LBI's
articles of incorporation, contain similar provisions that require special
approvals for certain extraordinary transactions with an "interested party."
Landmark and MNB define an interested party as a person or company, combined
with its respective affiliates, that beneficially owns 15% or more of the
outstanding shares of the company's voting stock. LBI generally uses the same
definition except that 10% is the ownership threshold.
With exceptions, Landmark and MNB require that these types of
transactions be approved by holders (not including the interested party) of not
less than two-thirds of its outstanding voting stock. LBI requires approval by
the affirmative vote of not less than 80% of all of its outstanding voting
stock, including the stock held by the interested party. In general, this
special voting requirement applies to any merger or consolidation of the company
with any interested party, any transaction which has the effect of increasing
the proportionate interest of any interested party in the company's equity
securities or any liquidation or dissolution of the company proposed by or on
behalf of an interested party.
Landmark's special voting requirements described above will not apply
to any business transaction if the transaction has been approved by Landmark's
board of directors prior to the interested party's acquisition of beneficial
ownership of 15% or more of Landmark's common stock. These special voting
requirements will not apply to any business transaction involving Landmark, MNB
or LBI if after a person becomes an interested party the transaction is approved
by 66 2/3% of those members of the company's board of directors who have no
interest in the business transaction; or certain fair price and procedural
requirements are met.
62
The provisions in Landmark's certificate dealing with interested
parties may not be amended without the approval of holders of not less than 80%
of Landmark's voting stock, unless it has been first approved by 75% of
Landmark's directors, in which case they may be amended by a majority vote of
Landmark's stockholders. These provisions in the certificate or articles of MNB
and LBI can only be amended by the affirmative vote of holders of not less than
two-thirds and 80%, respectively, of the company's outstanding voting stock.
DISSENTERS' RIGHTS OF APPRAISAL
LANDMARK. Under the Delaware General Corporation Law, a stockholder is
generally entitled to dissent from a corporate action and obtain payment of the
fair value of his or her shares in certain events. These events generally
include:
o mergers, share exchanges and sales or leases of substantially all of
the corporation's assets if the stockholder is entitled to vote on the
transaction; and
o certain types of amendments of the corporation's certificate that
materially and adversely affect a stockholder's rights.
In the future, however, our stockholders may not have the right to dissent in
connection with some of these transactions because Delaware law limits these
rights in cases where the shares of stock held by prospective dissenters are
quoted on the Nasdaq National Market System. We expect that our shares of common
stock will be quoted on the Nasdaq National Market System and that our
stockholders' future rights to dissent will not be available in all cases.
MNB. The stockholders of MNB generally have the right to dissent
described above as any other stockholder of a Delaware corporation. Because MNB
common stock is not designated as a Nasdaq National Market System security, the
rights of MNB's stockholders to dissent are not limited in the same manner as
they are expected to be for Landmark stockholders after the completion of the
merger.
LBI. The stockholders of LBI generally have the same rights to dissent,
and under the same circumstances, as the stockholders of Landmark. LBI
stockholders' right to dissent is limited in many cases because shares of LBI
common stock are designated as a Nasdaq National Market System security.
DIVIDENDS
LANDMARK. Our future ability to pay dividends on our common stock is
governed by Delaware corporate law. Under Delaware corporate law, unless there
are restrictions in the corporation's certificate of incorporation, dividends
may be declared from the corporation's surplus, or, if there is no surplus, from
its net profits for the fiscal year in which the dividend is declared and the
preceding years. Dividends may not be declared, however, if the corporation's
capital is less than the amount of all capital represented by the issued and
outstanding stock of all classes having a preference upon the distribution of
assets.
There are various statutory limitations that will limit the ability of
Landmark's bank subsidiaries to pay dividends to Landmark. See "Certain
Regulatory Considerations -- Payment of Dividends."
MNB AND LBI. Our ability to pay dividends on our common stock is
governed by Delaware and Kansas corporate law, respectively. MNB's ability to
pay dividends is subject to the same limitations as those that apply to LBI.
Under Kansas corporate law, LBI may declare and pay dividends either out of its
surplus, or if there is no surplus, out of its net profits for the fiscal year
in which the dividend is declared or the preceding fiscal year.
Substantially all of the funds available for the payment by MNB or LBI
of dividends come from the operations of their respective bank subsidiaries.
There are various statutory limitations on the ability of these bank
subsidiaries to pay dividends to MNB and LBI. See "Certain Regulatory
Considerations -- Payment of Dividends."
63
COMPARATIVE MARKET PRICES AND DIVIDENDS
MNB common stock is quoted on the Nasdaq Small Cap Market under the
symbol "MNB." LBI common stock is quoted on the Nasdaq National Market System
under the symbol "LARK."
The following table sets forth, for the indicated periods, the high and
low closing sale prices for the MNB common stock and LBI common stock as quoted
on the Nasdaq Small Cap Market and the Nasdaq National Market System,
respectively, and the cash dividends declared per share on MNB common stock and
LBI common stock for the indicated periods. The stock prices and dividend
amounts have been restated to give effect to stock splits and stock dividends.
The stock prices do not include retail mark-ups, mark-downs or commissions.
MNB LBI
----------------------------------------- -----------------------------------------
Cash Cash
Price Range Dividends Price Range Dividends
-------------------------- ------------ -------------------------- ----------
Declared Declared
High Low Per Share High Low Per Share
----------- ----------- ------------ ------------ ----------- ---------
1999 (for quarter ended)
March 31 $ 12.50 $ 11.00 $ 0.0567 $ 24.00 $ 20.13 $ 0.15
June 30 12.38 8.75 0.0567 21.00 17.75 0.15
September 30 10.50 9.06 0.0595 19.00 15.00 0.15
December 31 9.50 8.25 0.0595 21.50 15.25 0.15
------------ ----------
Total $ 0.2324 $ 0.60
============ ==========
2000 (for quarter ended)
March 31 $ 8.63 $ 7.75 $ 0.0595 $ 20.00 $ 13.25 $ 0.15
June 30 8.25 7.63 0.0595 18.00 14.00 0.15
September 30 9.00 7.56 0.0625 19.50 15.25 0.15
December 31 9.75 7.88 0.0625 19.25 17.50 0.15
------------ ----------
Total $ 0.2440 $ 0.60
============ ==========
2001 (for quarter ended)
March 31 $ 10.50 $ 9.25 $ 0.0625 $ 18.50 $ 15.88 $0.15
Through May 31 10.20 8.70 0.0625 18.10 16.56 0.15
------------ ----------
Total $ 0.1250 $ 0.30
============ ==========
On [_________], 2001, the last sales prices of MNB and LBI common stock
as reported on the Nasdaq Small Cap Market and the Nasdaq National Market
System, respectively, were $[___] and $[____], respectively. The last sales
prices of MNB and LBI common stock as reported on the Nasdaq Small Cap Market
and the Nasdaq National Market System, respectively, prior to the public
announcement of the merger were $9.95 and $17.30, respectively.
The holders of Landmark common stock will be entitled to receive
dividends when and if declared by the board of directors out of funds legally
available therefor. Although Landmark currently intends to continue to pay
quarterly cash dividends on its common stock, there can be no assurance what
Landmark's dividend policy will be after completion of the merger. The
declaration and payment of dividends by Landmark will depend upon
64
business conditions, operating results, capital and reserve requirements and the
Landmark board of directors' consideration of other relevant factors.
Upon completion of the merger, Landmark will be a legal entity separate
and distinct from its subsidiaries and its revenues will depend in significant
part on the payment of dividends and management fees from its subsidiary bank.
Landmark's bank subsidiary will be subject to certain legal restrictions on the
amount of dividends they are permitted to pay. See "Certain Regulatory
Considerations -- Payment of Dividends."
BUSINESS OF MNB
MNB is a bank holding company incorporated under the laws of the State
of Delaware and is engaged in the banking business through its wholly-owned
subsidiary, Security National Bank. The home office for the bank is Manhattan,
Kansas, with additional branch locations in Auburn, Manhattan, Osage City,
Topeka and Wamego, Kansas. On January 6, 2000, we opened an in-store supermarket
branch in Manhattan. We also completed the purchase of the Wamego and Osage City
branches of Commercial Federal Bank on July 21, 2000, that had total deposits of
$14.5 million and total loans of $1 million.
As of March 31, 2001, MNB had total consolidated assets of
approximately $155.5 million, total consolidated loans of approximately $97.1
million, total consolidated deposits of approximately $132.1 million and total
consolidated stockholders' equity of approximately $15.4 million.
The principal executive offices of MNB are located at 800 Poyntz
Avenue, Manhattan, Kansas 66502, and its telephone number at such address is
(785) 565-2000. Additional information with respect to MNB and its subsidiary is
included elsewhere in this joint proxy statement-prospectus and in documents
incorporated by reference in this joint proxy statement-prospectus. See "Where
You Can Find More Information."
Certain information relating to executive compensation, various benefit
plans (including stock option plans), voting securities and the principal
holders thereof, certain relationships and related transactions and other
related matters as to MNB is incorporated by reference or set forth in MNB's
Annual Report on Form 10-K for the year ended December 31, 2000, incorporated
herein by reference. Stockholders who wish to receive copies of such documents
may contact MNB at its address or telephone number indicated under "Where You
Can Find More Information."
BUSINESS OF LBI
LBI is a savings and loan holding company incorporated under the laws
of the State of Kansas and is engaged in the banking business through its
wholly-owned subsidiary, Landmark Federal Savings Bank. The home office for the
bank is Dodge City, Kansas, with additional branch locations in Dodge City,
Garden City, Great Bend, Hoisington, and La Crosse, Kansas, and a loan
production office in Overland Park, Kansas.
As of March 31, 2001, LBI had total consolidated assets of
approximately $223.2 million, total consolidated loans of approximately $159.5
million, total consolidated deposits of approximately $151.8 million and total
consolidated stockholders' equity of approximately $24.7 million.
The principal executive offices of LBI are located at Central and
Spruce Streets, P.O. Box 1437, Dodge City, Kansas, and its telephone number at
such address is (620) 227-8111. Additional information with respect to LBI and
its subsidiary is included elsewhere in this joint proxy statement-prospectus
and in documents incorporated by reference in this joint proxy
statement-prospectus. See "Where You Can Find More Information."
Certain information relating to executive compensation, various benefit
plans (including stock option plans), voting securities and the principal
holders thereof, certain relationships and related transactions and other
related matters as to LBI is incorporated by reference or set forth in LBI's
Annual Report on Form 10-K for the year ended September 30, 2000, incorporated
herein by reference. Stockholders who wish to receive copies of
65
such documents may contact LBI at its address or telephone number indicated
under "Where You Can Find More Information."
REGULATORY CONSIDERATIONS
GENERAL
MNB is a bank holding company registered with the Federal Reserve, and
LBI is a savings and loan holding company registered with the Office of Thrift
Supervision. As such, MNB and LBI are subject to the supervision, examination
and reporting requirements of the Bank Holding Company Act and the Home Owners'
Loan Act, respectively and the regulations of the Federal Reserve and the Office
of Thrift Supervision, respectively. Landmark has filed an application with the
Federal Reserve for approval to become a bank holding company as a result of the
merger. The following discussion summarizes the regulatory framework applicable
to banks and thrifts and bank and thrift holding companies and provides certain
specific information related to us and Landmark. All of the general information
related to the regulation of bank holding companies that is applicable to MNB
will be applicable to Landmark after the completion of the merger. A more
complete discussion of this regulatory framework is included in each of our 2000
Form 10-Ks. See "Where You Can Find More Information."
Bank holding companies are required to obtain the prior approval of the
Federal Reserve before they may:
o acquire direct or indirect ownership or control of more than 5% of the
voting shares of any bank;
o acquire all or substantially all of the assets of any bank; or
o merge or consolidate with any other bank holding company.
The Federal Reserve generally may not approve any transaction that
would result in a monopoly or that would further a combination or conspiracy to
monopolize banking in the United States. Nor can the Federal Reserve approve a
transaction that could substantially lessen competition in any section of the
country, that would tend to create a monopoly in any section of the country or
that would be in restraint of trade. But the Federal Reserve may approve any
such transaction if it determines that the public interest in meeting the
convenience and needs of the community served clearly outweighs the
anticompetitive effects of the proposed transaction. The Federal Reserve is also
required to consider the financial and managerial resources and future prospects
of the bank holding companies and banks concerned, as well as the convenience
and needs of the community to be served. Consideration of financial resources
generally focuses on capital adequacy, which is discussed below. Consideration
of convenience and needs includes the parties' performance under the Community
Reinvestment Act of 1977.
Under the Riegle-Neal Interstate Banking and Branching Efficiency Act
of 1994 (the "Interstate Banking Act"), Landmark (after completion of the
merger) and any other bank holding company may now acquire a bank located in any
state, subject to certain deposit-percentage limitations, aging requirements and
other restrictions. The Interstate Banking Act also generally permits a bank to
branch interstate through acquisitions of banks in other states. By adopting
legislation prior to June 1, 1997, a state had the ability either to "opt in"
and accelerate the date after which interstate branching is permissible or "opt
out" and prohibit interstate branching altogether. Kansas did not opt out of
this legislation.
The Bank Holding Company Act will prohibit Landmark after the
completion of the merger from:
o engaging in activities other than banking, managing or controlling
banks or other permissible subsidiaries; and
66
o acquiring or retaining direct or indirect control of any company
engaged in any activities other than those activities determined by
the Federal Reserve to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto.
In determining whether a particular activity is permissible, the
Federal Reserve must consider whether the performance of such an activity
reasonably can be expected to produce benefits to the public that outweigh
possible adverse effects. Possible benefits the Federal Reserve considers
include greater convenience, increased competition or gains in efficiency.
Possible adverse effects include undue concentration of resources, decreased or
unfair competition, conflicts of interest or unsound banking practices. The
Federal Reserve has determined the following, among others, to be permissible
activities of bank holding companies:
o factoring accounts receivable;
o acquiring or servicing loans;
o leasing personal property;
o conducting discount securities brokerage activities;
o performing certain data processing services;
o acting as agent or broker in selling credit life insurance and certain
other types of insurance in connection with credit transactions; and
o performing certain insurance underwriting activities.
There are no territorial limitations on permissible non-banking
activities of bank holding companies. Despite prior approval, the Federal
Reserve has the power to order a holding company or its subsidiaries to
terminate any activity or to terminate its ownership or control of any
subsidiary when it has reasonable cause to believe that a serious risk to the
financial safety, soundness or stability of any bank subsidiary of that bank
holding company may result from such activity.
The banks now owned by us, and the combined bank that will be owned by
Landmark after the completion of the merger, are members of the Federal Deposit
Insurance Corporation. Their deposits are insured by the Federal Deposit
Insurance Corporation to the extent provided by law. Each bank is also subject
to numerous state and federal statutes and regulations that affect its business,
activities and operations, and each is supervised and examined by one or more
state or federal bank regulatory agencies.
The Office of Thrift Supervision in the case of federal savings banks,
and the Office of the Comptroller of the Currency in the case of national banks,
supervise our bank subsidiaries. The regulatory agencies regularly examine the
operations of such institutions and such examinations will continue after the
completion of the merger of MNB and LBI and of their bank subsidiaries. These
regulatory agencies have authority to approve or disapprove mergers,
consolidations, the establishment of branches and similar corporate actions.
Federal banking regulators also have the power to prevent the continuance or
development of unsafe or unsound banking practices or other violations of law.
RECENT REGULATORY DEVELOPMENTS
On November 12, 1999, President Clinton signed legislation that allows
bank holding companies to engage in a wider range of nonbanking activities,
including greater authority to engage in securities and insurance activities.
Under the Gramm-Leach-Bliley Act, a bank holding company that elects to become a
financial holding company may engage in any activity that the Federal Reserve,
in consultation with the Secretary of the Treasury, determines by regulation or
order is (i) financial in nature, (ii) incidental to any such financial activity
or (iii) complementary to any such financial activity and does not pose a
substantial risk to the safety or soundness of
67
depository institutions or the financial system generally. The act specifies
certain activities that are deemed to be financial in nature, including lending,
exchanging, transferring, investing for others or safeguarding money or
securities; underwriting and selling insurance; providing financial, investment
or economic advisory services; underwriting, dealing in or making a market in,
securities; and any activity currently permitted for bank holding companies by
the Federal Reserve under section 4(c)(8) of the Bank Holding Company Act. A
bank holding company may elect to be treated as a financial holding company only
if all depository institution subsidiaries of the holding company are
well-capitalized, well-managed and have at least a satisfactory rating under the
Community Reinvestment Act.
National banks are also authorized by the Gramm-Leach-Bliley Act to
engage, through "financial subsidiaries," in any activity that is permissible
for a financial holding company (as described above) and any activity that the
Secretary of the Treasury, in consultation with the Federal Reserve, determines
is financial in nature or incidental to any such financial activity, except (i)
insurance or annuity underwriting, (ii) real estate development or real estate
investment activities (unless otherwise permitted by law), (iii) insurance
company portfolio investments and (iv) merchant banking. The authority of a
national bank to invest in a financial subsidiary is subject to a number of
conditions, including, among other things, requirements that the bank must be
well-managed and well-capitalized (after deducting from capital the bank's
outstanding investments in financial subsidiaries).
At this time, we are unable to predict the impact the
Gramm-Leach-Bliley Act may have on Landmark and its combined bank subsidiary.
PAYMENT OF DIVIDENDS
Landmark is, and will continue to be after completion of the merger, a
legal entity separate and distinct from its banking subsidiary. Our principal
sources of cash flow, and after completion of the merger, those of Landmark,
including cash flow to pay dividends to our respective stockholders, is and will
continue to be dividends from our subsidiary banks. There are statutory and
regulatory provisions that currently limit the payment of dividends by our
subsidiary banks to us, as well as by us to our respective stockholders. Many of
these provisions will continue in the same manner to limit the payment of
dividends to and by Landmark.
As to the payment of dividends, MNB's bank subsidiary is (and
Landmark's bank subsidiary will be after the completion of the proposed merger
of our bank subsidiaries) subject to the regulations of the Office of the
Comptroller of the Currency. LBI's bank subsidiary is subject to the regulations
of the Office of Thrift Supervision.
If the federal banking regulator determines that a bank under its
jurisdiction is engaged in or is about to engage in an unsafe or unsound
practice, the regulator may require, after notice and hearing, that the bank
cease and desist from such practice. Depending on the financial condition of the
bank, an unsafe or unsound practice could include the payment of dividends. The
federal banking agencies have indicated that paying dividends that deplete a
bank's capital base to an inadequate level would be an unsafe and unsound
banking practice. Under the Federal Deposit Insurance Corporation Improvement
Act of 1991, a bank may not pay any dividend if payment would cause it to become
undercapitalized or if it already is undercapitalized. See "--Prompt Corrective
Action." The federal agencies have also issued policy statements that provide
that bank holding companies and insured banks should generally pay dividends
only out of current operating earnings.
The payment of dividends by us and our bank subsidiaries currently, and
the payment by Landmark and its bank subsidiary after completion of the merger,
may also be affected or limited by other factors, such as the requirement to
maintain adequate capital above regulatory guidelines and the bank subsidiaries'
level of retained earnings.
68
CAPITAL ADEQUACY
MNB and each of Security National Bank and Landmark Federal Savings
Bank are required to comply, and after completion of the merger, Landmark and
its bank subsidiary will be required to comply, with the capital adequacy
standards established by the Federal Reserve in the case of MNB and Landmark,
and the appropriate federal banking regulator in the case of each subsidiary
bank. LBI, as a savings and loan holding company, is not subject to
regulatory capital requirements. There are two basic measures of capital
adequacy for bank holding companies and the banks that they own: a risk-based
measure and a leverage measure. All applicable capital standards must be
satisfied for a bank holding company to be considered in compliance.
The risk-based capital standards are designed to make regulatory
capital requirements more sensitive to differences in risk profile among
banks and bank holding companies, to account for off-balance-sheet exposure
and to minimize disincentives for holding liquid assets. Assets and
off-balance-sheet items are assigned to broad risk categories, each with
appropriate weights. The resulting capital ratios represent capital as a
percentage of total risk-weighted assets and off-balance-sheet items.
The minimum required ratio ("Total Capital Ratio") of total capital
("Total Capital") to risk-weighted assets (including certain
off-balance-sheet items, such as standby letters of credit) is 8.0%. At least
half of Total Capital must be composed of common equity, undivided profits,
minority interests in the equity accounts of consolidated subsidiary,
noncumulative perpetual preferred stock and a limited amount of cumulative
perpetual preferred stock, less goodwill and certain other intangible assets
("Tier 1 Capital"). The remainder may consist of subordinated debt, other
preferred stock and a limited amount of loan loss reserves ("Tier 2
Capital"). At March 31, 2001, MNB's consolidated Total Capital Ratio and its
Tier 1 Capital Ratio (I.E., the ratio of Tier 1 Capital to risk-weighted
assets) were 13.1% and 11.9%, respectively; and Landmark's consolidated Total
Capital Ratio and its Tier 1 Capital Ratio on a pro forma basis were 19.6%
and 18.4%, respectively.
In addition, the Federal Reserve has established minimum leverage
ratio guidelines for bank holding companies. These guidelines provide for a
minimum required ratio (the "Leverage Ratio") of Tier 1 Capital to average
assets, less goodwill and certain other intangible assets, of 3.0% for bank
holding companies that meet certain specified criteria, including having the
highest regulatory rating. All other bank holding companies generally are
required to maintain a Leverage Ratio of at least 4.0%. The Leverage Ratios
of MNB at March 31, 2001, was 7.8%, and Landmark's Leverage Ratio on a pro
forma basis at March 31, 2001, was 10.6%. The guidelines also provide that
bank holding companies that experience internal growth or make acquisitions
will be expected to maintain strong capital positions substantially above the
minimum supervisory levels without significant reliance on intangible assets.
The Federal Reserve will consider a "tangible Tier 1 Capital Leverage Ratio"
(deducting all intangibles) and other indicia of capital strength in
evaluating proposals for expansion or new activities.
Each of our bank subsidiaries is currently, and after completion of
their proposed merger, the combined bank will continue to be, subject to
risk-based and leverage capital requirements adopted by its federal banking
regulator. Those requirements are substantially the same as those adopted by
the Federal Reserve for bank holding companies. In addition, the capital
requirements applicable to these bank subsidiaries contemplate that the bank
regulators may establish higher capital requirements for a particular
institution based upon the institution's risk profile including exposure to
interest rate risk. Each of our bank subsidiaries was in compliance with
those minimum capital requirements as of March 31, 2001. No federal banking
agency has advised either of us or any of our bank subsidiaries of any
specific minimum capital ratio requirement applicable to it.
A bank that fails to meet its capital guidelines may be subject to a
variety of enforcement remedies and certain other restrictions on its
business. Remedies could include the issuance of a capital directive, the
termination of deposit insurance by the Federal Deposit Insurance Corporation
and a prohibition on the taking of brokered deposits. As described below,
substantial additional restrictions can be imposed upon Federal Deposit
Insurance Corporation-insured depository institutions that fail to meet their
capital requirements. See "- Prompt Corrective Action."
69
The capital requirements described above are minimum requirements,
and higher capital levels will be required if warranted by the particular
circumstances or risk profile of individual institutions. For example, the
regulations of the Federal Reserve, the Office of Thrift Supervision and the
Office of the Comptroller of the Currency include provisions which require
banks to calculate their exposure to increases and decreases in market
interest rates and require banks with excessive interest rate risk exposure
to hold additional amounts of capital against such exposures.
SUPPORT OF SUBSIDIARY INSTITUTIONS
Under Federal Reserve policy, MNB is expected to act as a source of
financial strength for and commit its resources to support its subsidiary
bank. This Federal Reserve policy will apply to Landmark and its combined
subsidiary bank after completion of the merger. This support may be required
at times when we or Landmark may not be inclined to provide it. In addition,
any capital loans by a bank holding company to any of its bank subsidiaries
are subordinate to the payment of deposits and to certain other indebtedness.
In the event of a bank holding company's bankruptcy, any commitment by the
bank holding company to a federal bank regulatory agency to maintain the
capital of a bank subsidiary will be assumed by the bankruptcy trustee and
entitled to a priority of payment.
A depository institution insured by the Federal Deposit Insurance
Corporation can be held liable for any loss incurred by, or reasonably
expected to be incurred by, the Federal Deposit Insurance Corporation in
connection with the default of a commonly controlled Federal Deposit
Insurance Corporation-insured depository institution or any assistance
provided by the Federal Deposit Insurance Corporation to any commonly
controlled Federal Deposit Insurance Corporation-insured depository
institution "in danger of default." "Default" is defined generally as the
appointment of a conservator or receiver, and "in danger of default" is
defined generally as the existence of certain conditions indicating that a
default is likely to occur in the absence of regulatory assistance. The
Federal Deposit Insurance Corporation's claim for damages is superior to
claims of stockholders of the insured depository institution or its holding
company, but is subordinate to claims of depositors, secured creditors and
holders of subordinated debt (other than affiliates) of the commonly
controlled insured depository institution. Our bank subsidiaries are, and
after completion of the merger, the bank subsidiary of Landmark will be,
subject to these cross-guarantee provisions. As a result, any loss suffered
by the Federal Deposit Insurance Corporation in respect of any of these banks
would likely result in assertion of the cross-guarantee provisions, the
assessment of estimated losses against their respective banking affiliates
and a potential loss of their respective parent holding company's investments
in its other banks.
PROMPT CORRECTIVE ACTION
The Federal Deposit Insurance Corporation Improvement Act of 1991
establishes a system of prompt corrective action to resolve the problems of
undercapitalized institutions. Under this system, which became effective in
December 1992, the federal banking regulators are required to establish five
capital categories (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized). With respect to institutions in the three undercapitalized
categories, the regulators must take certain supervisory actions, and are
authorized to take other discretionary actions. The severity of the actions
will depend upon the capital category in which the institution is placed.
Generally, subject to a narrow exception, the Federal Deposit Insurance
Corporation Improvement Act of 1991 requires the banking regulator to appoint
a receiver or conservator for an institution that is critically
undercapitalized. The federal banking agencies have specified the relevant
capital level for each category.
An institution is deemed to be WELL CAPITALIZED if it:
o has a Total Capital Ratio of 10.0% or greater;
o has a Tier 1 Capital Ratio of 6.0% or greater;
o has a Leverage Ratio of 5.0% or greater; and
70
o is not subject to any written agreement, order, capital directive or
prompt corrective action directive issued by its federal banking
agency.
An institution is considered to be ADEQUATELY CAPITALIZED if it has:
o a Total Capital Ratio of 8.0% or greater;
o a Tier 1 Capital Ratio of 4.0% or greater; and
o a Leverage Ratio of 4.0% or greater (or, if the institution received a
composite 1 rating under the regulator's CAMEL rating system, a
Leverage Ratio of less than 3.0%).
A depository institution is considered to be UNDERCAPITALIZED if it has:
o a Total Capital Ratio of less than 8.0%;
o a Tier 1 Capital Ratio of less than 4.0%; or
o a Leverage Ratio of less than 4.0% (or, if the institution received a
composite 1 rating under the regulator's CAMEL rating system, a
Leverage Ratio of 3.0% or greater).
A depository institution is considered to be SIGNIFICANTLY UNDERCAPITALIZED if
it has:
o a Total Capital Ratio of less than 6.0%;
o a Tier 1 Capital Ratio of less than 3.0%; or
o a Leverage Ratio of less than 3.0%.
An institution that has a tangible equity capital to assets ratio equal to or
less than 2.0% is deemed to be critically undercapitalized. "Tangible equity"
includes core capital elements counted as Tier 1 Capital for purposes of the
risk-based capital standards, plus the amount of outstanding cumulative
perpetual preferred stock (including related surplus), minus all intangible
assets, with certain exceptions. A depository institution may be deemed to be
in a capitalization category that is lower than is indicated by its actual
capital position if it receives an unsatisfactory examination rating.
An institution that is categorized as undercapitalized,
significantly undercapitalized or critically undercapitalized is required to
submit an acceptable capital restoration plan to its appropriate federal
banking agency. In addition, a bank holding company must guarantee that a
subsidiary bank will meet its capital restoration plan. This obligation to
fund a capital restoration plan is limited to the lesser of 5.0% of an
undercapitalized subsidiary's assets or the amount required to meet
regulatory capital requirements. Except in accordance with an accepted
capital restoration plan or with the approval of the Federal Deposit
Insurance Corporation, an undercapitalized institution is also generally
prohibited from increasing its average total assets, making acquisitions,
establishing any branches or engaging in any new line of business. In
addition, its primary federal banking regulator is given authority with
respect to any undercapitalized institution to take any of the actions it is
required to or may take with respect to a significantly undercapitalized
institution if it determines "that those actions are necessary to carry out
the purpose" of Federal Deposit Insurance Corporation Act of 1991.
For any institution that is significantly undercapitalized or
undercapitalized and either fails to submit an acceptable capital restoration
plan or fails to implement an approved capital restoration plan, its primary
federal banking regulator must require the institution to take one or more of
the following actions, as the regulator determines will best address the
institution's capital problems:
71
o sell enough shares, including voting shares, to become adequately
capitalized;
o merge with (or be sold to) another institution (or holding company),
but only if grounds exist for appointing a conservator or receiver;
o restrict certain transactions with its bank affiliates;
o restrict transactions with bank or non-bank affiliates;
o restrict interest rates that the institution pays on deposits to
"prevailing rates" in the institution's "region";
o restrict asset growth or reduce total assets;
o alter, reduce or terminate activities;
o hold a new election of directors;
o dismiss any director or senior executive officer who held office for
more than 180 days immediately before the institution became
undercapitalized, provided that in requiring dismissal of a director or
senior officer, the agency must comply with certain procedural
requirements, including the opportunity for an appeal in which the
director or officer will have the burden of proving his or her value to
the institution;
o employ "qualified" senior executive officers;
o cease accepting deposits from correspondent depository institutions;
o divest certain nondepository affiliates that pose a danger to the
institution; or
o be divested by a parent holding company.
In addition, without the prior approval of its federal banking agency, a
significantly undercapitalized institution may not pay any bonus to any
senior executive officer or increase the rate of compensation for such an
officer.
DEPOSIT INSURANCE
As Federal Deposit Insurance Corporation-insured institutions, our
bank subsidiaries are required to pay deposit insurance premium assessments
to the Federal Deposit Insurance Corporation. The Federal Deposit Insurance
Corporation has adopted a risk-based assessment system under which all
insured depository institutions are placed into one of nine categories and
assessed insurance premiums based upon their respective levels of capital and
results of supervisory evaluations. Institutions classified as
well-capitalized (as defined by the Federal Deposit Insurance Corporation)
and considered healthy pay the lowest premium while institutions that are
less than adequately capitalized (as defined by the Federal Deposit Insurance
Corporation) and considered of substantial supervisory concern pay the
highest premium. Risk classification of all insured institutions is made by
the Federal Deposit Insurance Corporation for each semi-annual assessment
period. Annual insurance assessments for members of the Bank Insurance Fund,
like Security National Bank, and of the Savings Association Insurance Fund,
like Landmark Federal Savings Bank,currently range from 0% of deposits to
0.27% of deposits.
The Federal Deposit Insurance Corporation may terminate the deposit
insurance of any insured depository institution if it determines, after a
hearing, that the institution (i) has engaged or is engaging in unsafe or
unsound practices, (ii) is in an unsafe or unsound condition to continue
operations or (iii) has violated any applicable law, regulation, order or any
condition imposed in writing by, or written agreement with, the Federal
Deposit Insurance Corporation. The Federal Deposit Insurance Corporation may
also suspend deposit insurance temporarily during the
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hearing process for a permanent termination of insurance if the institution
has no tangible capital. We are not aware of any activity or condition that
could result in termination of the deposit insurance of any of our bank
subsidiaries.
FINANCING CORPORATION ASSESSMENTS
Since 1987, a portion of the deposit insurance assessments paid by
members of the Federal Deposit Insurance Corporation's Savings Association
Insurance Fund has been used to cover interest payments due on the
outstanding obligations of the Financing Corporation. The Financing
Corporation was created in 1987 to finance the recapitalization of the
Federal Savings and Loan Insurance Corporation, the Savings Association
Insurance Fund's predecessor insurance fund. As a result of federal
legislation enacted in 1996, beginning as of January 1, 1997, both Savings
Association Insurance Fund members and Bank Insurance Fund members became
subject to assessments to cover the interest payments on outstanding
Financing Corporation obligations. These Financing Corporation assessments
are in addition to amounts assessed by the Federal Deposit Insurance
Corporation for deposit insurance. Between January 1, 2000, and the final
maturity of the outstanding Financing Corporation obligations in 2019, Bank
Insurance Fund members and Savings Association Insurance Fund members will
share the cost of the interest on the Financing Corporation bonds on a PRO
RATA basis. For 2001, the Financing Corporation assessment rate for Bank
Insurance Fund members and Savings Association Insurance Fund is
approximately [_____]% of deposits.
INSIDER TRANSACTIONS
Our respective bank subsidiaries are subject to certain restrictions
imposed by federal law on extensions of credit to us and any of our other
subsidiaries, on investments in the stock or other securities we or our other
subsidiaries issue and the acceptance of the stock or other securities issued
by us or our other subsidiaries as collateral for loans. Certain limitations
and reporting requirements are also placed on extensions of credit by our
bank subsidiaries to their respective directors and officers, to our
directors and officers and the directors and officers of our other
subsidiaries, to our principal stockholders and to "related interests" of
such directors, officers and principal stockholders. In addition, federal law
and regulations may affect the terms upon which our directors, officers and
principal stockholders and the directors and officers of our other
subsidiaries may obtain credit from banks with which our respective bank
subsidiaries maintain correspondent relationships.
DESCRIPTION OF LANDMARK CAPITAL STOCK
Landmark's certificate currently authorizes the issuance of 3,000
shares of Landmark common stock and no shares of Landmark Preferred Stock. On
the date of this joint proxy statement-prospectus, 1,000 shares of Landmark
common stock were outstanding (500 held by each of us) and no shares of
preferred stock, were outstanding. Landmark expects to issue approximately
1,910,360 shares of Landmark common stock in connection with the merger, and
to reserve approximately 244,644 shares of Landmark common stock for the
exercise of converted stock options.
THE CAPITAL STOCK OF LANDMARK DOES NOT REPRESENT OR CONSTITUTE A
DEPOSIT ACCOUNT AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE BANK INSURANCE FUND, THE SAVINGS ASSOCIATION INSURANCE FUND
OR ANY GOVERNMENTAL AGENCY.
GENERAL
Shares of Landmark common stock may be issued at such time or times
and for such consideration (not less than the par value thereof) as the
Landmark board of directors may deem advisable, subject to such limitations
as may be set forth in the laws of the State of Delaware or Landmark's
certificate or bylaws. [______________________], will be the Registrar,
Transfer Agent and Dividend Disbursing Agent for shares of Landmark common
stock. Its address is [____________________________________________].
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DIVIDENDS
Subject to the preferential rights of any outstanding shares of
Landmark preferred stock, the holders of Landmark common stock are entitled
to receive, to the extent permitted by law, only such dividends as may be
declared from time to time by Landmark's board of directors.
Landmark has the right to, and may from time to time, enter into
borrowing arrangements or issue other debt instruments, the provisions of
which may contain restrictions on payment of dividends and other
distributions on Landmark common stock and Landmark preferred stock. Landmark
has no such arrangements in effect at the date hereof.
LIQUIDATION RIGHTS
In the event of the voluntary or involuntary liquidation,
dissolution, distribution of assets or winding-up of Landmark, after
distribution in full of the preferential amounts required to be distributed
to holders of any Landmark preferred stock, holders of Landmark common stock
will be entitled to receive all of the remaining assets of Landmark, of
whatever kind, available for distribution to stockholders ratably in
proportion to the number of shares of Landmark common stock held. The
Landmark board of directors may distribute in kind to the holders of Landmark
common stock such remaining assets of Landmark or may sell, transfer or
otherwise dispose of all or any part of such remaining assets to any other
person or entity and receive payment therefor in cash, stock or obligations
of such other person or entity, and may sell all or any part of the
consideration so received and distribute any balance thereof in kind to
holders of Landmark common stock.
Because Landmark is a holding company, its right and the rights of
its creditors and stockholders, including the holders of Landmark preferred
stock, if any, and Landmark common stock, to participate in the distribution
of assets of a subsidiary on its liquidation or recapitalization may be
subject to prior claims of such subsidiary's creditors except to the extent
that Landmark itself may be a creditor having recognized claims against such
subsidiary.
For a further description of Landmark common stock, see "Effect of
the Merger on Rights of Stockholders."
OTHER MATTERS
As of the date of this joint proxy statement-prospectus , each of
our boards of directors knows of no matters that will be presented for
consideration at the special meeting of our respective stockholders other
than as described in this joint proxy statement-prospectus. However, if any
other matters properly come before the MNB or LBI special meeting or any
adjournment or postponement of the special meeting and are voted upon, the
enclosed proxy will be deemed to confer discretionary authority to the
individuals named as proxies to vote the shares represented by such proxy as
to any such matters; PROVIDED, HOWEVER, that no vote that is voted against
the proposal to approve the merger agreement will be voted in favor of any
adjournment or postponement of the respective meeting.
STOCKHOLDER PROPOSALS
Landmark expects to hold its next annual meeting of stockholders in
May, 2002, after the merger. Under Securities and Exchange Commission rules,
proposals of Landmark stockholders intended to be presented at that meeting
and included in Landmark's Proxy statement must be received by Landmark at
its principal executive offices at 800 Poyntz Avenue, Manhattan, Kansas
66502, no later than March 7, 2002. Otherwise, any stockholder proposal to
take action at the annual meeting must be received by Landmark at its
principal executive office by ______, __, 2002. It is not currently
anticipated that either MNB or LBI will hold its respective annual meeting in
2002, unless the merger has not been completed or the Agreement has been
terminated.
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EXPERTS
The consolidated financial statements of MNB and subsidiary
incorporated in this joint proxy statement-prospectus by reference to MNB's
annual report on Form 10-K for the year ended December 31, 2000, have been
audited by KPMG LLP, independent auditors, as stated in their report, which
is incorporated herein by reference and have been so incorporated in reliance
upon the report of such firm given upon their authority as experts in
accounting and auditing.
The consolidated financial statements of LBI and subsidiary
incorporated in this joint proxy statement-prospectus by reference to LBI's
annual report on Form 10-K for the year ended September 30, 2000, have been
audited by Regier Carr & Monroe, L.L.P., independent auditors, as stated in
their report, which is incorporated herein by reference and have been so
incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
CERTAIN OPINIONS
The legality of the Landmark common stock to be issued as a result
of the merger will be passed upon for Landmark by Barack Ferrazzano
Kirschbaum Perlman & Nagelberg, 333 West Wacker Drive, Chicago, Illinois
60606. Certain legal matters in connection with the merger will be passed
upon for LBI by Malizia Spidi & Fisch, PC, 1100 New York Avenue, N.W., Suite
340 West, Washington, D.C. 20005, and for MNB by Barack Ferrazzano.
KPMG LLP has delivered an opinion to us concerning material federal
income tax consequences of the Merger. See "Description of Transaction
- --Material Federal Income Tax Consequences of the Merger."
WHERE YOU CAN FIND MORE INFORMATION
We each file annual, quarterly and current reports and other
information with the Securities and Exchange Commission under the Securities
Exchange Act of 1934. You may read and copy this information at the Public
Reference Section at the Securities and Exchange Commission at 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549. You may obtain
information on the operation of the Public Reference Room by calling the
Securities and Exchange Commission at 1-800-SEC-0330. The Securities and
Exchange Commission maintains an Internet site that contains reports, proxy
and information statements and other information about issuers that file
electronically with the Securities and Exchange Commission. The address of
that site is http://www.sec.gov. In addition, you can read and copy this
information at the regional offices of the Securities and Exchange Commission
at 7 World Trade Center, 13th Floor, New York, New York 10048 and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Landmark filed a registration statement with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, relating to
the Landmark common stock offered to our stockholders. The registration
statement contains additional information about Landmark and the Landmark
common stock. The Securities and Exchange Commission allows Landmark to omit
certain information included in the registration statement from this joint
proxy statement-prospectus. The registration statement may be inspected and
copied at the Securities and Exchange Commission's public reference
facilities described above. The registration statement is also available on
the Securities and Exchange Commission's internet site.
This joint proxy statement-prospectus incorporates important
business and financial information about us that is not included in or
delivered with this joint proxy statement-prospectus. The following documents
filed with the Securities and Exchange Commission by MNB are incorporated by
reference in this joint proxy statement-prospectus (Securities and Exchange
Commission File No. 0-21878):
(1) MNB's Annual Report on Form 10-K for the fiscal year ended December 31,
2000;
(2) MNB's Quarterly Report on Form 10-Q for the three months ended March
31, 2001;
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(3) MNB's Current Report on Form 8-K dated April 20, 2001;
(4) MNB's Current Report on Form 8-K dated April 25, 2001; and
(5) MNB's Current Report on Form 8-K/A dated May 24, 2001.
The following documents filed with the Securities and Exchange
Commission by LBI are incorporated by reference in this Proxy Statement
(Securities and Exchange Commission File No. 0-23164):
(1) LBI's Annual Report on Form 10-K for the fiscal year ended September
30, 2000;
(2) LBI's Quarterly Report on Form 10-Q for the three months ended December
31, 2000;
(3) LBI's Quarterly Report on Form 10-Q for the six months ended March 31,
2001; and
(4) LBI's Current Report on Form 8-K dated April 20, 2001.
We also incorporate by reference additional documents filed by us
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the
date of this joint proxy statement-prospectus and prior to final adjournment
of our respective special meetings. Any statement contained in this joint
proxy statement-prospectus or in a document incorporated or deemed to be
incorporated by reference in this joint proxy statement-prospectus shall be
deemed to be modified or superseded to the extent that a statement contained
herein or in any subsequently filed document which also is, or is deemed to
be, incorporated by reference herein modifies or supersedes such statement.
You may obtain copies of the information incorporated by reference
in this joint proxy statement-prospectus upon written or oral request. The
inside front cover of this joint proxy statement-prospectus contains
information about how such requests should be made.
All information contained in this joint proxy statement-prospectus
or incorporated herein by reference with respect to MNB was supplied by MNB,
and all information contained in this joint proxy statement-prospectus or
incorporated herein by reference with respect to LBI was supplied by LBI.
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
LANDMARK BANCSHARES, INC.,
MNB BANCSHARES, INC.
AND
LANDMARK MERGER COMPANY
APRIL 19, 2001
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is entered into
as of this 19th day of April, 2001, among LANDMARK BANCSHARES, INC., a Kansas
corporation ("LBI"), MNB BANCSHARES, INC., a Delaware corporation ("MNB"),
and LANDMARK MERGER COMPANY, a Delaware corporation ("NEWCO").
RECITALS
A. LBI and MNB each desire to merge with and into Newco (the
"MERGER") with Newco as the resulting corporation (the "RESULTING
CORPORATION").
B. Subject to the terms of this Agreement, each outstanding
share of the common stock of LBI, $0.10 par value per share ("LBI COMMON
STOCK"), and each outstanding share of the common stock of MNB, $0.01 par
value per share ("MNB COMMON STOCK"), shall be converted at the time of the
consummation of the Merger (the "CLOSING") into the right to receive the
number of shares of the common stock of Newco, $0.01 par value per share
("NEWCO COMMON STOCK"), as set forth below.
C. The parties desire to make certain representations,
warranties and agreements in connection with the Merger and also agree to
certain prescribed conditions of the Merger.
AGREEMENTS
In consideration of the mutual covenants, representations and
warranties contained herein, the parties agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1 DEFINITIONS. In addition to those terms defined
throughout this Agreement, the following terms, when used herein, shall have
the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
(a) "AFFILIATE" means with respect to:
(i) a particular individual: (A) each other
member of such individual's Family; (B) any Person that is directly or
indirectly controlled by such individual or one or more members of such
individual's Family; (C) any Person in which such individual or members of
such individual's Family hold (individually or in the aggregate) a Material
Interest; and (D) any Person with respect to which such individual or one or
more members of such individual's Family serves as a director, officer,
partner, executor or trustee (or in a similar capacity); and
(ii) a specified Person other than an
individual: (A) any Person that directly or indirectly controls, is directly
or indirectly controlled by, or is directly or indirectly under common
control with such specified Person; (B) any Person that holds a Material
Interest in such specified Person; (C) each Person that serves as a director,
officer, partner, executor or trustee of such specified Person (or in a
similar capacity); (D) any Person in which such specified Person holds a
Material Interest; (E) any Person with respect to which such specified Person
serves as a general partner or a trustee (or in a similar capacity); and (F)
any Affiliate of any individual described in clause (B) or (C) of this
subsection (ii).
(b) "APPLICABLE CONTRACT" means any Contract: (i)
under which either MNB or LBI, or any of its respective Subsidiaries, has or
may acquire any rights; (ii) under which either MNB or LBI, or any of its
respective Subsidiaries is or may be subject to any obligation or liability;
or (iii) by which either MNB or LBI, or any of its respective Subsidiaries or
any of the assets owned or used by any of them is or may be bound.
(c) "BEST EFFORTS" means the efforts that a prudent
Person desirous of achieving a result would use in similar circumstances to
ensure that such result is achieved as expeditiously as possible, PROVIDED,
HOWEVER, that an obligation to use Best Efforts under this Agreement does not
require the Person subject to that obligation to take actions that would
result in a materially adverse change in the benefits to such Person of this
Agreement and the Contemplated Transactions.
(d) "BREACH" means with respect to a representation,
warranty, covenant, obligation or other provision of this Agreement or any
instrument delivered pursuant to this Agreement, any inaccuracy in or breach
of, or any failure to perform or comply with, in a material respect, such
representation, warranty, covenant, obligation or other provision.
(e) "BUSINESS DAY" means any day means any day on
which the trading of stocks occurs on the New York Stock Exchange.
(f) "CALL REPORT" means the quarterly report of income
and condition required to be filed with the Federal Deposit Insurance
Corporation by any depository institution (as defined in the Federal Deposit
Insurance Act, as amended).
(g) "CONTEMPLATED TRANSACTIONS" means all of the
transactions contemplated by this Agreement, including: (i) the Merger; (ii)
the performance by MNB, LBI, Newco, SNB and LFSB of their respective
covenants and obligations under this Agreement; and (iii) Newco's acquisition
of control of MNB and LBI and their respective Subsidiaries; and (iv) the
merger of LFSB with and into SNB.
(h) "CONTRACT" means any agreement, contract,
obligation, promise or understanding (whether written or oral and whether
express or implied) that is legally binding.
(i) "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
2
(j) "FAMILY" means with respect to an individual: (i)
the individual; (ii) the individual's spouse; and (iii) any other natural
person who is related to the individual or the individual's spouse within the
second degree who resides with the individual.
(k) "KNOWLEDGE" means with respect to:
(i) an individual, that the individual is
actually aware of the fact or other matter in question; and
(ii) a Person (other than an individual), that
an individual who is serving, as a director, officer, managing partner,
executor or trustee of such Person (or in any similar capacity) has, or at
any time had, Knowledge of the fact or other matter in question, PROVIDED,
HOWEVER, that in the case of MNB, Knowledge means the Knowledge of any
director or executive officer of SNB, and in the case of LBI, Knowledge means
the Knowledge of any director or executive officer of LFSB.
(l) "LBI SUBSIDIARY" means any Subsidiary of LBI.
(m) "LBI TRANSACTIONAL EXPENSES" means all transaction
costs of LBI necessary to consummate the Contemplated Transactions, including
its share of organizational expenses of Newco fees, the aggregate expenses of
attorneys, accountants, consultants, financial advisors and other
professional advisors incurred by LBI in connection with this Agreement and
the Contemplated Transactions, LBI's costs of preparing, printing and mailing
the Proxy Statement-Prospectus and all other non-payroll related costs and
expenses in each case incurred or to be incurred by LBI through the Effective
Time in connection with this Agreement and the Contemplated Transactions,
EXCLUDING, HOWEVER, all payments and expenses associated with the
acceleration of payment of compensation (including severance benefits,
allocation and vesting under any employee stock ownership plan, stock option
plans, retention plans, deferred compensation agreements or any other LBI
Employee Benefit Plan, as defined below).
(n) "LFSB" means Landmark Federal Savings Bank, a
federally chartered savings bank with its main office located in Dodge City,
Kansas, and a Subsidiary of LBI.
(o) "LEGAL REQUIREMENT" means any federal, state,
local, municipal, foreign, international, multinational, or other
administrative order, constitution, law, ordinance, regulation, policy
statement, directive, statute or treaty.
(p) "MATERIAL ADVERSE EFFECT" means with respect to a
Person (other than an individual), a material adverse effect (whether or not
required to be accrued or disclosed under Statement of Financial Accounting
Standards No. 5): (i) on the condition (financial or otherwise), properties,
assets, liabilities, businesses or results of operations of such Person (but
does not include any such effect resulting from or attributable to any action
or omission by MNB or LBI or any Subsidiary of either of them taken by any of
the foregoing with the prior written consent of the other parties hereto in
contemplation of the Contemplated Transactions); or (ii) on the ability of
such Person to perform its obligations under this Agreement on a timely
basis,
3
PROVIDED, HOWEVER, that it does not include the effect of any change of law,
rule or regulation or general economic event or change in interest rates
affecting financial institutions generally.
(q) "MATERIAL INTEREST" means the direct or indirect
beneficial ownership (as currently defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended) of: (i) voting securities or other voting
interests representing at least 10% of the outstanding voting power of a
Person; or (ii) equity securities or other equity interests representing at
least 10% of the outstanding equity securities or equity interests in a
Person.
(r) "MNB SUBSIDIARY" means any Subsidiary of MNB.
(s) "MNB TRANSACTIONAL EXPENSES" means all transaction
costs of MNB necessary to consummate the Contemplated Transactions, including
its share of organizational expenses of Newco fees, the aggregate expenses of
attorneys, accountants, consultants, financial advisors and other
professional advisors incurred by MNB in connection with this Agreement and
the Contemplated Transactions, MNB's costs of preparing, printing and mailing
the Proxy Statement-Prospectus and all other non-payroll related costs and
expenses in each case incurred or to be incurred by MNB through the Effective
Time in connection with this Agreement and the Contemplated Transactions,
EXCLUDING, HOWEVER, all payments and expenses associated with acceleration of
payment of compensation (including severance benefits, allocation and vesting
under any employee stock ownership plan, stock option plans, retention plans,
deferred compensation agreements or any other MNB Employee Benefit Plan, as
defined below).
(t) "ORDER" means any award, decision, injunction,
judgment, order, ruling, extraordinary supervisory letter, memorandum of
understanding, resolution, agreement, directive, subpoena or verdict entered,
issued, made, rendered or required by any court, administrative or other
governmental agency, including any Regulatory Authority, or by any arbitrator.
(u) "ORDINARY COURSE OF BUSINESS" shall include any
action taken by a Person only if such action:
(i) is consistent with the past practices of
such Person and is taken in the ordinary course of the normal day-to-day
operations of such Person;
(ii) is not required to be authorized by the
board of directors of such Person (or by any Person or group of Persons
exercising similar authority), other than loan approvals for customers of a
financial institution; and
(iii) is similar in nature and magnitude to
actions customarily taken, without any authorization by the board of
directors (or by any Person or group of Persons exercising similar
authority), other than loan approvals for customers of a financial
institution, in the ordinary course of the normal day-to-day operations of
other Persons that are in the same line of business as such Person.
4
(v) "PERSON" means any individual, corporation
(including any non-profit corporation), general or limited partnership,
limited liability company, joint venture, estate, trust, association,
organization, labor union or other entity or Regulatory Authority.
(w) "PROCEEDING" means any action, arbitration, audit,
hearing, investigation, litigation or suit (whether civil, criminal,
administrative, investigative or informal) commenced, brought, conducted or
heard by or before, or otherwise involving, any judicial or governmental
authority, including a Regulatory Authority, or arbitrator.
(x) "REGULATORY AUTHORITIES" means any federal, state
or local governmental body, agency or authority that under applicable
statutes and regulations: (i) has supervisory, judicial, administrative,
police, taxing or other power or authority over MNB or LBI or any of its
respective Subsidiaries; (ii) is required to approve, or give its consent to
the Contemplated Transactions; or (iii) with which a filing must be made in
connection with the Contemplated Transactions, including in any case, the
Board of Governors of the Federal Reserve System and the Office of Thrift
Supervision.
(y) "REPRESENTATIVE" means with respect to a
particular Person, any director, officer, manager, employee, agent,
consultant, advisor or other representative of such Person, including legal
counsel, accountants and financial advisors.
(z) "SNB" means Security National Bank, a national
bank with its main office located in Manhattan, Kansas, and a Subsidiary of
MNB.
(aa) "SUBSIDIARY" means with respect to any Person (the
"OWNER"), any corporation or other Person whose securities or other interests
having the power to elect a majority of that corporation's or other Person's
board of directors or similar governing body, or otherwise having the power
to direct the business and policies of that corporation or other Person
(other than securities or other interests having such power only upon the
future occurrence of a contingency), are held by the Owner or one or more of
its Subsidiaries.
(bb) "TFR" means the quarterly Thrift Financial Report
of Condition required to be filed with the Office of Thrift Supervision by
any federally chartered savings bank.
(cc) "TAX" means any tax (including any income tax,
capital gains tax, value-added tax, sales tax, property tax, franchise tax,
gift tax or estate tax), levy, assessment, tariff, duty (including any
customs duty), deficiency or other fee, and any related charge or amount
(including any fine, penalty, interest or addition to tax), imposed, assessed
or collected by or under the authority of any Regulatory Authority or payable
pursuant to any tax-sharing agreement or any other Contract relating to the
sharing or payment of any such tax, levy, assessment, tariff, duty,
deficiency or fee.
(dd) "TAX RETURN" means any return (including any
information return), report, statement, schedule, notice, form or other
document or information filed with or submitted to, or required to be filed
with or submitted to, any Regulatory Authority in connection with the
determination, assessment, collection or payment of any Tax or in connection
with the
5
administration, implementation, or enforcement of or compliance with
any Legal Requirement relating to any Tax.
(ee) "THREATENED" means having received (orally or in
writing) any demand, statement or notice regarding a claim, Proceeding,
dispute, action or other matter, or the occurrence of any other event or the
existence of any other circumstances, that would lead a prudent Person to
conclude that such a claim, Proceeding, dispute, action or other matter is
likely to be asserted, commenced, taken or otherwise pursued in the future.
(ff) "TERMINATION DATE" means March 1, 2002, or such
later date as shall have been agreed to in writing by the parties to this
Agreement.
SECTION 1.2 PRINCIPLES OF CONSTRUCTION.
(a) In this Agreement, unless otherwise stated or the
context otherwise requires, the following uses apply: (i) actions permitted
under this Agreement may be taken at any time and from time to time in the
actor's sole discretion; (ii) references to a statute refer to the statute as
in effect on the date of this Agreement and to any successor statute, and to
all regulations promulgated under or implementing the statute or successor,
as in effect at the relevant time; (iii) in computing periods from a
specified date to a later specified date, the words "from" and "commencing
on" (and the like) mean "from and including," and the words "to," "until" and
"ending on" (and the like) mean "to, but excluding"; (iv) references to a
governmental or quasi-governmental agency, authority or instrumentality shall
also refer to a regulatory body that succeeds to the functions of the agency,
authority or instrumentality; (v) indications of time of day mean Dodge City,
Kansas time; (vi) "including" means "including, but not limited to"; (vii)
all references to sections, schedules and exhibits are to sections, schedules
and exhibits in or to this Agreement unless otherwise specified; (viii) all
words used in this Agreement will be construed to be of such gender or number
as the circumstances require; and (ix) the captions and headings of articles,
sections, schedules and exhibits appearing in or attached to this Agreement
have been inserted solely for convenience of reference and shall not be
considered a part of this Agreement nor shall any of them affect the meaning
or interpretation of this Agreement or any of its provisions.
(b) The Book of Schedules of each of LBI and MNB
referred to in this Agreement consist of the agreements and other
documentation described and referred to in this Agreement with respect to
such party, which Schedules were delivered by each of LBI and MNB to the
other not less than one (1) Business Day before the date of this Agreement.
The disclosures in the Schedules, and those in any supplement thereto, shall
relate only to the representations and warranties in the section of this
Agreement to which they expressly relate and not to any other representation
or warranty in this Agreement. In the event of any inconsistency between the
statements in the body of this Agreement and those in the Schedules (other
than an exception expressly set forth as such in the Schedules with respect
to a specifically identified representation or warranty), the statements in
the body of this Agreement will control.
(c) All accounting terms not specifically defined
herein shall be construed in accordance with generally accepted accounting
principles in the United States consistent with
6
those used in the preparation of the most recent audited consolidated
financial statements of LBI or MNB, as the case may be ("GAAP").
(d) With regard to each and every term and condition
of this Agreement and any and all agreements and instruments subject to the
terms hereof, the parties to this Agreement understand and agree that the
same have or has been mutually negotiated, prepared and drafted, and that if
at any time the parties hereto desire or are required to interpret or
construe any such term or condition or any agreement or instrument subject
hereto, no consideration shall be given to the issue of which party to this
Agreement actually prepared, drafted or requested any term or condition of
this Agreement or any agreement or instrument subject hereto.
ARTICLE 2
THE MERGER
SECTION 2.1 MANNER OF MERGER. Upon the terms and subject to the
conditions of this Agreement, at the Effective Time (as defined below), LBI
and MNB shall be merged with and into Newco pursuant to the provisions of,
and with the effect provided in the General Corporation Law of the State of
Delaware, as amended (the "DELAWARE CODE"), and Newco shall be the Resulting
Corporation. After the Merger, Newco will change its name to "Landmark
Bancshares, Inc." As a result of the Merger, each share of LBI Common Stock
issued and outstanding immediately prior to the Effective Time, other than
any Dissenting Shares held by LBI stockholders or as otherwise provided
herein, and each share of MNB Common Stock issued and outstanding immediately
prior to the Effective Time, other than Dissenting Shares held by MNB
stockholders or as otherwise provided herein, will be converted into the
right to receive the number of shares of Newco Common Stock in accordance
with the LBI Exchange Ratio and the MNB Exchange Ratio, respectively, as set
forth in SECTION 3.1(a).
SECTION 2.2 CLOSING; EFFECTIVE TIME.
(a) Provided that this Agreement shall not have been
terminated in accordance with its terms, the Closing shall occur through the
mail, or at a place that is mutually acceptable to MNB and LBI, or if they
fail to agree, at the main office of LFSB located at Central and Spruce
Streets, Dodge City, Kansas, at 10:00 a.m. on the date that is twenty-one
(21) Business Days after the end of the last month in which all required
approvals or consents of the Regulatory Authorities for the Contemplated
Transactions have been received and all statutory waiting periods relating to
such approvals have expired (the "CLOSING DATE").
(b) The parties to this Agreement agree to file on the
Closing Date the appropriate certificate of merger, as contemplated by
Section 17-6702 of the General Corporation Code of Kansas (the "KANSAS
CODE"), with the Secretary of State of the State of Kansas, and an
appropriate certificate of merger, as contemplated by Section 252(c) of the
Delaware Code, with the Secretary of State of the State of Delaware. The
Merger shall be effective at the time and on the date agreed to by the
parties to this Agreement, and in the event the parties fail to so agree, at
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12:01 a.m. of the day following the date on which the certificate of merger
is accepted for filing by the Secretary of State of the State of Delaware
(the "EFFECTIVE TIME").
SECTION 2.3 EFFECT OF MERGER. At the Effective Time, the effect of
the Merger shall be as provided in Section 259 of the Delaware Code. Without
limiting the generality of the foregoing, at the Effective Time, all the
property, rights, privileges, powers and franchises of MNB and LBI shall be
vested in the Resulting Corporation, and all debts, liabilities and duties of
MNB and LBI shall become the debts, liabilities and duties of the Resulting
Corporation.
SECTION 2.4 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION. MNB
and LBI agree to cause to be filed at the Effective Time with the Secretary
of State of the State of Delaware an amendment and restatement of the
certificate of incorporation of Newco substantially in the form attached as
EXHIBIT A, and such amended and restated certificate of incorporation shall
thereafter represent the certificate of incorporation of the Resulting
Corporation until amended as provided by law.
SECTION 2.5 BYLAWS. The bylaws of Newco, in the form attached as
EXHIBIT B, shall be the bylaws of the Resulting Corporation until amended as
provided by law.
SECTION 2.6 DIRECTORS AND OFFICERS. From and after the Effective
Time, the directors and executive officers of the Resulting Corporation shall
be as set forth in EXHIBIT C, with three (3) members in each of Class I and
Class II, and four (4) members of Class III, of the Resulting Corporation's
board of directors. Such directors and executive officers shall serve until
their successors shall have been elected or appointed and shall have
qualified in accordance with the Delaware Code and the certificate of
incorporation and bylaws of the Resulting Corporation.
SECTION 2.7 LBI'S DELIVERIES AT CLOSING. At the Closing, LBI shall
deliver, or cause to be delivered to MNB the following items:
(a) copies of resolutions of the board of directors
and the stockholders of LBI approving this Agreement and the consummation of
the Contemplated Transactions; certified as of the Closing Date by the
Secretary or any Assistant Secretary of LBI;
(b) a good standing certificate for LBI issued by the
Secretary of State of the State of Kansas and dated not more than fifteen
(15) Business Days prior to the Closing Date;
(c) a good standing certificate for LFSB issued by the
Office of Thrift Supervision (the "OTS") and dated not more than fifteen (15)
Business Days prior to the Closing Date;
(d) a copy of the articles of incorporation of LBI
certified not more than fifteen (15) Business Days prior to the Closing Date
by the Secretary of State of the State of Kansas;
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(e) a copy of the charter of LFSB certified not more
that fifteen (15) Business Days prior to the Closing Date by the OTS;
(f) a certificate of the Secretary or any Assistant
Secretary of LBI dated the Closing Date and certifying a copy of LBI's bylaws;
(g) a certificate of the Secretary or any Assistant
Secretary of LFSB dated the Closing Date and certifying a copy of LFSB's
bylaws;
(h) a certificate executed by the President or Vice
President and Secretary or any Assistant Secretary of LBI, dated the Closing
Date, stating that: (i) there have been no further amendments to the articles
of incorporation and charter delivered pursuant to this Section; (ii) all of
the representations and warranties of LBI set forth in this Agreement, as the
same may have been updated pursuant to SECTION 7.6, are true and correct in
all material respects with the same force and effect as if all of such
representations and warranties were made at the Closing Date, PROVIDED,
HOWEVER, that to the extent such representations and warranties expressly
relate to an earlier date, such representations shall be true and correct in
all material respects on and as of such earlier date, and PROVIDED FURTHER,
that to the extent that representations and warranties are made in this
Agreement subject to a standard of materiality or Knowledge, such
representations and warranties shall be true and correct in all respects; and
(iii) LBI has performed or complied in all material respects with all of the
covenants and obligations to be performed or complied with by it under the
terms of this Agreement on or prior to the Closing Date, PROVIDED, HOWEVER,
that to the extent performance and compliance with such covenants and
obligations are subject in this Agreement to a standard of materiality, LBI
shall have performed and complied in all respects with such covenants and
obligations;
(i) a list of LBI's stockholders as of the Closing
Date certified by the Secretary or any Assistant Secretary of LBI;
(j) a certificate of each of LBI's legal counsel,
accountants and financial advisor or investment banker, if any, representing
that all fees and expenses incurred by LBI prior to and including the
Effective Time have been paid in full, or certificates from these
professionals that all fees and expenses incurred by LBI prior to and
including the Effective Time have been invoiced to LBI and a certificate from
LBI that all invoiced amounts have been paid or accrued;
(k) a legal opinion of LBI's counsel, Malizia Spidi &
Fisch, PC, dated the Closing Date to the effect set forth in EXHIBIT D; and
(l) such other documents as MNB or its counsel shall
reasonably request.
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SECTION 2.8 MNB'S DELIVERIES AT CLOSING. At the Closing, MNB shall
deliver, or cause to be delivered to LBI the following items:
(a) copies of resolutions of the board of directors
and the stockholders of MNB approving this Agreement and the consummation of
the Contemplated Transactions; certified as of the Closing Date by the
Secretary or any Assistant Secretary of MNB;
(b) a good standing certificate for MNB issued by the
Secretary of State of the State of Delaware, dated not more than fifteen (15)
Business Days prior to the Closing Date;
(c) a good standing certificate for SNB issued by the
Office of the Comptroller of the Currency (the "OCC") and dated not more than
fifteen (15) Business Days prior to the Closing Date;
(d) a copy of the certificate of incorporation of MNB
certified not more than fifteen (15) Business Days prior to the Closing Date
by the Secretary of State of the State of Delaware;
(e) a copy of the articles of association of SNB
certified not more that fifteen (15) Business Days prior to the Closing Date
by the OCC;
(f) a certificate of the Secretary or any Assistant
Secretary of MNB dated the Closing Date and certifying a copy of MNB's bylaws;
(g) a certificate of the Cashier or any Assistant
Cashier of SNB dated the Closing Date and certifying a copy of SNB's bylaws;
(h) a certificate executed by the President or Vice
President and Secretary or any Assistant Secretary of MNB, dated the Closing
Date, stating that: (i) there have been no further amendments to the
certificate of incorporation and articles of association delivered pursuant
to this Section; (ii) all of the representations and warranties of MNB set
forth in this Agreement, as the same may have been updated pursuant to
SECTION 6.6, are true and correct in all material respects with the same
force and effect as if all of such representations and warranties were made
at the Closing Date, PROVIDED, HOWEVER, that to the extent such
representations and warranties expressly relate to an earlier date, such
representations shall be true and correct in all material respects on and as
of such earlier date, and PROVIDED FURTHER, that to the extent that
representations and warranties are made in this Agreement subject to a
standard of materiality or Knowledge, such representations and warranties
shall be true and correct in all respects; and (iii) MNB has performed or
complied in all material respects with all of the covenants and obligations
to be performed or complied with by it under the terms of this Agreement on
or prior to the Closing Date, PROVIDED, HOWEVER, that to the extent
performance and compliance with such covenants and obligations are subject in
this Agreement to a standard of materiality, MNB shall have performed and
complied in all respects with such covenants and obligations;
(i) a list of MNB's stockholders as of the Closing
Date certified by the Secretary or any Assistant Secretary of MNB;
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(j) a certificate of each of MNB's legal counsel,
accountants and financial advisor or investment banker, if any, representing
that all fees and expenses incurred by MNB prior to and including the
Effective Time have been paid in full, or certificates from these
professionals that all fees and expenses incurred by MNB prior to and
including the Effective Time have been invoiced to MNB and a certificate from
MNB that all invoiced amounts have been paid or accrued;
(k) a legal opinion of MNB's counsel, Barack
Ferrazzano Kirschbaum Perlman & Nagelberg, dated the Closing Date to the
effect set forth in EXHIBIT E; and
(l) such other documents as LBI or its counsel shall
reasonably request.
SECTION 2.9 NEWCO'S DELIVERIES AT CLOSING. At the Closing, Newco
shall deliver, or cause to be delivered to MNB and LBI the following items:
(a) copies of resolutions of the board of directors
and the stockholders of Newco approving this Agreement and the consummation
of the Contemplated Transactions; certified as of the Closing Date by the
Secretary or any Assistant Secretary of Newco;
(b) a good standing certificate for Newco issued by
the Secretary of State of the State of Delaware, dated not more than fifteen
(15) Business Days prior to the Closing Date;
(c) a copy of the certificate of incorporation of
Newco certified not more than fifteen (15) Business Days prior to the Closing
Date by the Secretary of State of the State of Delaware;
(d) a certificate of the Secretary or any Assistant
Secretary of Newco dated the Closing Date and certifying a copy of Newco's
bylaws;
(e) a certificate executed by the President or Vice
President and Secretary or any Assistant Secretary of Newco, dated the
Closing Date, stating that: (i) there have been no further amendments to the
certificate of incorporation delivered pursuant to this Section; and (ii)
Newco has performed or complied in all material respects with all of the
covenants and obligations to be performed or complied with by it under the
terms of this Agreement on or prior to the Closing Date, PROVIDED, HOWEVER,
that to the extent performance and compliance with such covenants and
obligations are subject in this Agreement to a standard of materiality, Newco
shall have performed and complied in all respects with such covenants and
obligations;
(f) a list of Newco's stockholders as of the Closing
Date certified by the Secretary or any Assistant Secretary of Newco; and
(g) such other documents as MNB, LBI or the counsel of
either shall reasonably request.
SECTION 2.10 BANK MERGER. Concurrently with the Merger and
immediately after the Effective Time, MNB and LBI intend to merge LFSB with
and into, and under the charter of, SNB,
11
with the resulting bank to be known as Landmark National Bank (the "BANK
MERGER"). The Bank Merger will be effected pursuant to a merger agreement in
the form required by the National Bank Act, as amended (the "NATIONAL BANK
ACT"), and by other applicable Legal Requirements, containing terms and
conditions not inconsistent with the Agreement as mutually determined by MNB
and LBI (the "BANK MERGER AGREEMENT"). The Bank Merger shall occur only if
the Merger is consummated, and it shall become effective immediately after
the Effective Time or such later time as may be determined by MNB and LBI. To
obtain the necessary regulatory approvals for the Bank Merger to occur
immediately after the Effective Time, MNB and LBI agree to cause each of SNB
and LFSB, respectively, to approve, adopt, execute and deliver the Bank
Merger Agreement and to take such other steps as are reasonably necessary
prior to the Effective Time to effect the Bank Merger. MNB and LBI agree to
share equally the costs incurred to effect the Bank Merger.
SECTION 2.11 ABSENCE OF CONTROL. Subject to any specific provisions
of this Agreement, it is the intent of the parties to this Agreement that
neither MNB nor LBI by reason of this Agreement shall be deemed (until
consummation of the Contemplated Transactions) to control, directly or
indirectly, the other party and shall not exercise, or be deemed to exercise,
directly or indirectly, a controlling influence over the management or
policies of such other party.
ARTICLE 3
CONVERSION OF SECURITIES IN THE MERGER
SECTION 3.1 MANNER OF MERGER.
(a) Subject to the provisions of this Article, by
virtue of the Merger and without any action on the part of MNB, LBI or Newco,
or the holder of any MNB Common Stock, LBI Common Stock or Newco Common Stock:
(i) each share of Newco Common Stock issued
and outstanding immediately prior to the Effective Time shall at the
Effective Time be canceled without consideration and without any action
required on the part of LBI or MNB, as the holders thereof;
(ii) each share of LBI Common Stock issued and
outstanding immediately prior to the Effective Time shall become and
automatically be converted into one (1) share of Newco Common Stock (the "LBI
EXCHANGE RATIO"), and shall thereafter represent the right to receive and be
exchangeable for such number of shares, rounded to the nearest thousandth of
a share of Newco Common Stock (the "LBI EXCHANGE SHARES"), PROVIDED, HOWEVER,
that all shares of LBI Common Stock held by LBI as treasury stock shall not
be converted into shares of Newco Common Stock, but instead shall be canceled
as a result of the Merger; and
(iii) each share of MNB Common Stock issued and
outstanding immediately prior to the Effective Time shall become and
automatically be converted into five hundred twenty three thousandths (0.523)
shares of Newco Common Stock (the "MNB EXCHANGE RATIO"), and shall thereafter
represent the right to receive and be exchangeable for such number of shares,
rounded to the nearest thousandth of a share of Newco Common Stock
12
(the "MNB EXCHANGE SHARES"), PROVIDED, HOWEVER, that all shares of MNB Common
Stock held by MNB as treasury stock shall not be converted into shares of
Newco Common Stock, but instead shall be canceled as a result of the Merger,
and PROVIDED FURTHER, that no Dissenting Shares (as defined below) held by
stockholders of MNB shall be converted into shares of Newco Common Stock, but
instead shall be treated as described in SECTION 3.4.
(b) After the Effective Time, no holder of LBI Common
Stock or MNB Common Stock which is issued and outstanding immediately prior
to the Effective Time will have any rights in respect of such LBI Common
Stock or MNB Common Stock, respectively, except: (i) to receive shares of
Newco Common Stock for the shares of LBI Common Stock or MNB Common Stock,
respectively, converted as provided in this Section, plus an amount in cash,
as provided below, for any fractional share of Newco Common Stock which such
holder would have been entitled to receive; or (ii) to receive payment for
such shares of LBI Common Stock or MNB Common Stock, respectively, in the
manner and to the extent provided in Section 262 of the Delaware Code.
(c) If prior to the Effective Date either LBI or MNB
changes (or establishes a record date for changing) the number of shares of
MNB Common Stock or LBI Common Stock issued and outstanding as a result of a
stock split, stock dividend, recapitalization or similar transaction with
respect to the outstanding LBI Common Stock or MNB Common Stock and the
record date therefor shall be prior to the Effective Date, the number of
shares of Newco Common Stock to be received by the stockholder of the party
making such change shall be proportionately adjusted to reflect such change
in that party's issued and outstanding shares.
SECTION 3.2 STEPS OF TRANSACTION.
(a) The parties shall mutually select a Person to
serve as exchange agent (the "EXCHANGE AGENT") for the parties to effect the
surrender of certificates representing outstanding shares of either LBI
Common Stock or MNB Common Stock (the "CERTIFICATES") in exchange for Newco
Common Stock and/or cash in redemption of fractional shares. The Exchange
Agent shall serve under the terms of an exchange agent agreement
substantially in the form attached as EXHIBIT F. On the date agreed to by the
parties to this Agreement, and in the event the parties fail to so agree, the
date which is ten (10) Business Days prior to the Closing, the Exchange Agent
shall mail or cause to be mailed to each then current holder of record of a
Certificate or Certificates a form of transmittal letter (the "LETTER OF
TRANSMITTAL") providing instructions for the transmittal of the Certificates
and shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon delivery of the Certificates (or a
lost certificate affidavit and a bond in a form reasonably acceptable to
Newco). LBI and MNB agree to cause the Exchange Agent to use all reasonable
efforts to mail or cause to be mailed the Letter of Transmittal to all
Persons who become holders of LBI Common Stock or MNB Common Stock,
respectively, subsequent to the date the Letter of Transmittal was first
mailed to LBI and MNB stockholders, respectively, and by 5:00 p.m. on the
date which is five (5) Business Days prior to the Closing Date.
13
(b) As promptly as practicable after the Effective
Time, Newco shall cause the Exchange Agent to deliver to each holder of LBI
Common Stock or MNB Common Stock who previously submitted an effective Letter
of Transmittal accompanied by the Certificates covered by such Letter of
Transmittal: (i) certificates representing the number of whole shares of
Newco Common Stock into which the shares of LBI Common Stock or MNB Common
Stock previously represented by the Certificates so surrendered were
converted; plus (ii) an amount in cash, as provided below, for any fractional
share of Newco Common Stock which such holder would have been entitled to
receive.
(c) Within twenty (20) days after the Effective Time,
Newco shall cause the Exchange Agent to send to each holder of record of LBI
Common Stock or MNB Common Stock immediately prior to the Effective Time who
has not previously submitted his or her Certificates, additional transmittal
materials for use in surrendering Certificates to the Exchange Agent and
instructions for use in effecting such surrender in exchange for shares of
Newco Common Stock and cash for any fractional shares.
(d) No dividends or other distributions declared after
the Effective Time with respect to Newco Common Stock and payable to any
former stockholders of record of LBI or MNB shall be paid to a former
stockholder of LBI or MNB who holds any unsurrendered Certificate with
respect to LBI Common Stock or MNB Common Stock, respectively, until the
stockholder shall surrender the Certificate. Until so surrendered and
exchanged, each outstanding Certificate shall for all purposes, other than
the payment of dividends or other distributions, if any, to former holders of
record of shares of LBI Common Stock or MNB Common Stock represent the shares
of Newco Common Stock into and for which such shares have been so converted;
PROVIDED, HOWEVER, that upon surrender of a Certificate, there shall be paid
to the record holder or holders of the Certificate, the amount, without
interest thereon, of such dividends and other distributions, if any, which
previously have become payable with respect to the number of whole shares of
Newco Common Stock represented by such Certificate.
(e) No fractional shares of Newco Common Stock shall
be issued upon the surrender for exchange of Certificates; no dividend or
distribution of Newco shall relate to any fractional share interest; and such
fractional share interests will not entitle the owner thereof to vote or to
any rights of a stockholder of Newco. Instead, each holder of shares of LBI
Common Stock or MNB Common Stock having a fractional interest in shares of
Newco Common Stock arising upon the conversion of such shares of LBI Common
Stock or MNB Common Stock shall, at the time of surrender of the
Certificates, be paid by Newco an amount in cash, without interest,
determined by multiplying such fractional share of Newco Common Stock by the
average of the closing sale prices of Newco Common Stock for the five (5)
trading days immediately following the Closing Date.
(f) All shares of Newco Common Stock, and any required
cash payments for fractional shares, into and for which shares of LBI Common
Stock or MNB Common Stock shall have been converted and exchanged pursuant to
this Agreement, shall be deemed to have been issued in full satisfaction of
all rights pertaining to such converted and exchanged shares of LBI Common
Stock and MNB Common Stock.
14
(g) At the Effective Time, LBI and MNB shall each
deliver to the Exchange Agent a certified copy of a list of its respective
stockholders, after which there shall be no further registration or transfers
on the stock transfer books of LBI of the shares of LBI Common Stock or on
the stock transfer books of MNB of the shares of MNB Common Stock, all of
which were outstanding immediately prior to the Effective Time. If after the
Effective Time Certificates representing shares of LBI Common Stock or MNB
Common Stock are presented to the Exchange Agent or Newco, they shall be
canceled and exchanged for Newco Common Stock as provided in this Agreement.
(h) If a certificate representing shares of Newco
Common Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it shall be a
condition of the issuance thereof that the Certificate so surrendered shall
be properly endorsed, accompanied by all documents required to evidence and
effect such transfer and otherwise in proper form for transfer and that the
Person requesting such exchange shall pay to Newco any transfer or other
taxes required by reason of the issuance of a certificate representing shares
of Newco Common Stock in any name other than that of the registered holder of
the Certificate surrendered, or otherwise required, or shall establish to the
satisfaction of Newco that such tax has been paid or is not payable.
SECTION 3.3 TAX FREE REORGANIZATION. The parties to this Agreement
intend for the Merger to qualify as a nontaxable reorganization within the
meaning of Section 368 and related sections of the Internal Revenue Code of
1986, as amended (the "CODE"), and agree to cooperate and to take such
actions as may be reasonably necessary to ensure such result.
SECTION 3.4 DISSENTING SHARES. Notwithstanding anything to the
contrary contained in this Agreement, to the extent appraisal rights are
available to stockholders of LBI or MNB pursuant to the provisions of any
applicable Legal Requirements, any shares of LBI Common Stock or MNB Common
Stock held by a Person who objects to the Merger, whose shares either were
not entitled to vote or were not voted in favor of the Merger and who
complies with all of the provisions of the applicable Legal Requirements
concerning the rights of such Person to dissent from the Merger and to
require appraisal of such Person's shares and who has not withdrawn such
objection or waived such rights prior to the Effective Time (collectively
with respect to all such LBI or MNB stockholders, the "DISSENTING SHARES"),
shall not be converted pursuant to SECTION 3.1, but shall become the right to
receive such consideration as may be determined to be due to the holder of
such Dissenting Shares pursuant to the applicable Legal Requirements,
including, if applicable, any costs determined to be payable by either LBI or
MNB to its respective holders of Dissenting Shares pursuant to an order of
any court pursuant to any applicable Legal Requirements; PROVIDED, HOWEVER,
that each Dissenting Share held by a Person at the Effective Time who shall,
after the Effective Time, withdraw the demand for appraisal or lose the right
of appraisal, in either case pursuant to applicable Legal Requirements shall
be deemed to be converted, as of the Effective Time, into the number of
shares of Newco Common Stock as is determined in accordance with SECTION 3.1.
15
SECTION 3.5 OPTIONS.
(a) At and after the Effective Time, each option
granted by LBI and MNB to purchase shares of LBI Common Stock and MNB Common
Stock, respectively, which is outstanding and unexercised immediately prior
thereto shall cease to represent a right to acquire shares of either LBI
Common Stock or MNB Common Stock and shall be converted automatically into an
option to purchase shares of Newco Common Stock (the "LBI CONVERTED STOCK
OPTIONS" and the "MNB CONVERTED STOCK OPTIONS," respectively) in an amount
and at an exercise price determined as provided below and otherwise subject
to the terms of the agreements evidencing the grants of such options:
(i) the number of shares of Newco Common
Stock to be subject to each LBI Converted Stock Option shall be equal to the
product of the number of shares of LBI Common Stock subject to the original
option and the LBI Exchange Ratio, PROVIDED that any fractional shares of
Newco Common Stock shall be rounded up to the next highest whole share;
(ii) the exercise price per share of Newco
Common Stock under the LBI Converted Stock Option shall be equal to the
exercise price per share of LBI Common Stock under the original option
divided by the LBI Exchange Ratio, PROVIDED that such exercise price shall be
rounded to the nearest whole cent;
(iii) the number of shares of Newco Common
Stock to be subject to each MNB Converted Stock Option shall be equal to the
product of the number of shares of MNB Common Stock subject to the original
option and the MNB Exchange Ratio, PROVIDED that any fractional shares of
Newco Common Stock shall be rounded up to the next highest whole share; and
(iv) the exercise price per share of Newco
Common Stock under the MNB Converted Stock Option shall be equal to the
exercise price per share of MNB Common Stock under the original option
divided by the MNB Exchange Ratio, PROVIDED that such exercise price shall be
rounded to the nearest whole cent.
(b) The adjustment provided in this Section with
respect to any options which are "incentive stock options" (as defined in
Section 422 of the Code), shall be and is intended to be effected in a manner
which is consistent with Section 424(a) of the Code. The duration and other
terms of the LBI Converted Stock Options and MNB Converted Stock Options
shall be the same as the original option except that all references to LBI or
MNB, as the case may be, shall be deemed to be references to Newco.
16
ARTICLE 4
REPRESENTATIONS AND WARRANTIES BY MNB
MNB hereby represents and warrants to LBI that the following are
true and correct as of the date hereof, and will be true and correct as of
the Effective Time:
SECTION 4.1 MNB ORGANIZATION. MNB: (a) is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware and is also in good standing in each other jurisdiction in which
the nature of the business conducted or the properties or assets owned or
leased by it makes such qualification necessary; (b) is registered with the
Board of Governors of the Federal Reserve System (the "FEDERAL RESERVE") as a
bank holding company under the federal Bank Holding Company Act of 1956, as
amended (the "BHCA"); and (c) has full power and authority, corporate and
otherwise, to operate as a bank holding company and to own, operate and lease
its properties as presently owned, operated and leased, and to carry on its
business as it is now being conducted. Copies of the certificate of
incorporation and bylaws of MNB and all amendments thereto set forth in
SCHEDULE 4.1 OF THE MNB BOOK OF SCHEDULES are complete and correct. MNB owns
no voting stock or equity securities of any corporation, association,
partnership or other entity, other than all of the voting stock of SNB and as
set forth on SCHEDULE 4.1 OF THE MNB BOOK OF SCHEDULES.
SECTION 4.2 MNB SUBSIDIARY ORGANIZATION. SNB is a national banking
association duly organized, validly existing and in good standing under the
laws of the United States of America. SNB has full power and authority,
corporate and otherwise, to own, operate and lease its properties as
presently owned, operated and leased, and to carry on its business as it is
now being conducted, and is duly qualified to do business and is in good
standing in each jurisdiction in which the nature of the business conducted
or the properties or assets owned or leased by it makes such qualification
necessary. Copies of the articles of association and bylaws of SNB and all
amendments thereto set forth in SCHEDULE 4.2 OF THE MNB BOOK OF SCHEDULES are
complete and correct. SNB owns no voting stock or equity securities of any
corporation, association, partnership or other entity, other than as shown on
SCHEDULE 4.2 OF THE MNB BOOK OF SCHEDULES.
SECTION 4.3 AUTHORIZATION. MNB has the requisite corporate power and
authority to enter into and perform its obligations under this Agreement and
the execution, delivery and performance of this Agreement by MNB and the
consummation by it of the transactions contemplated thereby, have been duly
authorized by all necessary corporate action, subject to stockholder
approval. This Agreement constitutes a legal, valid and binding obligation of
MNB enforceable in accordance with its terms except as such enforcement may
be limited by bankruptcy, insolvency, reorganization or other similar laws
and subject to general principles of equity.
SECTION 4.4 NO CONFLICT. Neither the execution nor delivery of this
Agreement nor the consummation or performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time): (a) contravene, conflict with or result in a violation of any
provision of the certificate of incorporation, the articles of association,
the
17
bylaws or any resolution adopted by the board of directors or stockholders
of, MNB or any MNB Subsidiary; (b) contravene, conflict with or result in a
violation of any Legal Requirement or any Order to which MNB or any MNB
Subsidiary, or any of the assets that are owned or used by them, may be
subject, other than any of the foregoing that would be satisfied by
compliance with the provisions of the BHCA, the Securities Act of 1933, as
amended (the "SECURITIES ACT"), the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), the National Bank Act and the Delaware Code;
and (c) contravene, conflict with or result in a violation or breach of any
provision of, or give any Person the right to declare a default or exercise
any remedy under, or to accelerate the maturity or performance of, or to
cancel, terminate or modify any material Applicable Contract to which MNB or
any MNB Subsidiary is a party or by which any of their respective assets is
bound; or (d) result in the creation of any lien, charge or encumbrance upon,
or with respect to, any of the assets owned or used by MNB or any MNB
Subsidiary. Except for the requisite approval of its stockholders, neither
MNB nor any MNB Subsidiary is or will be required to give any notice to, or
obtain any consent from, any Person in connection with the execution and
delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
SECTION 4.5 MNB CAPITALIZATION. The authorized capital stock of MNB
consists, and at March 31, 2001, consisted of: (a) 3,000,000 shares of common
stock, $0.01 par value per share, of which 1,563,905 shares were issued, and
none of which shares were held in the treasury of MNB as of that date; and
(b) 200,000 shares of preferred stock, $0.01 par value per share, none of
which shares were issued and outstanding. The maximum number of shares of MNB
Common Stock (assuming for this purpose that share equivalents constitute MNB
Common Stock) that would be outstanding immediately prior to the Effective
Time (including treasury shares) if all options, warrants, conversion rights
and other rights with respect thereto were exercised and the restrictions on
any restricted stock were no longer applicable is 1,638,137 shares. All of
the outstanding shares of capital stock of MNB have been duly and validly
authorized and issued and are fully paid and nonassessable. To the Knowledge
of MNB and except as disclosed in this Agreement or on the Schedules, none of
the shares of authorized capital stock of MNB are, nor on the Closing Date
will they be, subject to any claim of right except pursuant to this
Agreement. Except as contemplated in this Agreement or as set forth in
SCHEDULE 4.5 OF THE MNB BOOK OF SCHEDULES, there are, as of the date of this
Agreement, no outstanding subscriptions, contracts, conversion privileges,
options, warrants, calls or other rights obligating MNB or any MNB Subsidiary
to issue, sell or otherwise dispose of, or to purchase, redeem or otherwise
acquire, any shares of capital stock of MNB or any MNB Subsidiary. There are
no outstanding securities of MNB that are convertible into, or exchangeable
for, any shares of MNB's capital stock, and except as provided in this
Section or otherwise disclosed in this Agreement, LBI is not a party to any
Contract relating to the issuance, sale or transfer of any equity securities
or other securities of MNB. None of the shares of MNB Common Stock were
issued in violation of any federal or state securities laws or any other
Legal Requirement. MNB does not own or have any Contract to acquire any
equity securities or other securities of any Person or any direct or indirect
equity or ownership interest in any other business except for the capital
stock of SNB and as set forth in SCHEDULE 4.5 OF THE MNB BOOK OF SCHEDULES.
Except as disclosed in or permitted by this Agreement or as provided on
SCHEDULE 4.5 OF THE MNB BOOK OF SCHEDULES, no shares of MNB capital stock
have been purchased, redeemed or
18
otherwise acquired, directly or indirectly, by MNB or any MNB Subsidiary and
no dividends or other distributions payable in any equity securities of MNB
or any MNB Subsidiary have been declared, set aside, made or paid to the
stockholders of MNB.
SECTION 4.6 MNB SUBSIDIARY CAPITALIZATION. The authorized capital
stock of SNB consists, and at the Effective Time will consist, exclusively of
2,000,000 shares of common stock, $1.00 par value per share, all of which
shares are, and immediately prior to the Closing will be, duly authorized,
validly issued and outstanding, fully paid and nonassessable except as
provided in Section 55 of the National Bank Act (the "SNB BANK SHARES"). MNB
is, and will be on the Closing Date, the record and beneficial owner of one
hundred percent (100%) of SNB Shares, free and clear of any lien or
encumbrance whatsoever, except as set forth in SCHEDULE 4.6 OF THE MNB BOOK
OF SCHEDULES. The SNB Bank Shares are, and will be on the Closing Date,
freely transferable and are, and will be on the Closing Date, subject to no
claim of right except pursuant to this Agreement and as set forth in SCHEDULE
4.6 OF THE MNB BOOK OF SCHEDULES. There are no options, warrants, rights,
calls or commitments of any character relating to any additional shares of
the capital stock of SNB. No capital stock or other security issued by SNB
has been issued in violation of, or without compliance with, any preemptive
rights of stockholders. There are no outstanding securities of SNB that are
convertible into, or exchangeable for, any shares of SNB's capital stock, and
SNB is not a party to any Contract relating to the issuance, sale or transfer
of any equity securities or other securities of SNB. SNB does not own, or
have any Contract to acquire, any equity securities or other securities of
any Person or any direct or indirect equity or ownership interest in any
other business, except as set forth in SCHEDULE 4.6 OF THE MNB BOOK OF
SCHEDULES.
SECTION 4.7 FINANCIAL STATEMENTS AND REPORTS. True, correct and
complete copies of the following financial statements of MNB are included in
SCHEDULE 4.7 OF THE MNB BOOK OF SCHEDULES:
(a) Consolidated Balance Sheets and the related
Statements of Income, Statements of Changes in Stockholders' Equity and
Statements of Cash Flows of MNB for the years ended December 31, 1998, 1999
and 2000;
(b) Consolidated Balance Sheet and the related
Statement of Income of MNB for the three months ended March 31, 2001; and
(c) Call Reports for SNB at the close of business on
December 31, 1998, 1999 and 2000.
The financial statements described in this Section (the "MNB
FINANCIAL STATEMENTS") are complete and correct in all material respects and
fairly and accurately present the respective financial position, assets,
liabilities and results of operations of MNB and the MNB Subsidiaries at the
respective dates of, and for the periods referred to in, the MNB Financial
Statements. The financial statements described in clause (a) above are
audited statements and have been prepared in conformity with GAAP. The
financial statements described in clauses (b) and (c) above have been
prepared on a basis consistent with past accounting practices and as required
by applicable rules or regulations and fairly present the consolidated
financial condition and results of operations at the
19
dates and for the periods presented, subject to year-end audit adjustments
(which changes in the aggregate would not reasonably be expected to have a
Material Adverse Effect on MNB on a consolidated basis). The MNB Financial
Statements do not include any material assets or omit to state any material
liabilities, absolute or contingent, or other facts, which inclusion or
omission would render the MNB Financial Statements misleading in any material
respect.
SECTION 4.8 BOOKS AND RECORDS. The books of account, minute books,
stock record books and other records of MNB and each MNB Subsidiary are
complete and correct in all material respects and have been maintained in
accordance with sound business practices and all applicable Legal
Requirements, including the maintenance of any adequate system of internal
controls. The minute books of MNB and each MNB Subsidiary contain accurate
and complete records in all material respects of all meetings held of, and
corporate action taken by, its respective stockholders, board of directors
and committees of the board of directors. At the Closing, all of those books
and records will be in the possession of MNB and the MNB Subsidiaries.
SECTION 4.9 TITLE TO PROPERTIES. MNB and each MNB Subsidiary has
good and marketable title to all assets and properties, whether real or
personal, tangible or intangible, that it purports to own, subject to no
valid liens, mortgages, security interests, encumbrances or charges of any
kind except: (a) as noted in the most recent MNB Financial Statement or in
SCHEDULE 4.9 OF THE MNB BOOK OF SCHEDULES; (b) statutory liens for Taxes not
yet delinquent or being contested in good faith by appropriate Proceedings
and for which appropriate reserves have been established and reflected on the
MNB Financial Statements; (c) pledges or liens required to be granted in
connection with the acceptance of government deposits, granted in connection
with repurchase or reverse repurchase agreements or otherwise incurred in the
Ordinary Course of Business; and (d) minor defects and irregularities in
title and encumbrances that do not materially impair the use thereof for the
purposes for which they are held. Except as set forth in SCHEDULE 4.9 OF THE
MNB BOOK OF SCHEDULES, MNB and each MNB Subsidiary as lessee has the right
under valid and existing leases to occupy, use, possess and control any and
all of the respective property leased by it. Except where any failure would
not reasonably be expected to have a Material Adverse Effect on MNB on a
consolidated basis, all buildings and structures owned by MNB and each MNB
Subsidiary lie wholly within the boundaries of the real property owned or
validly leased by it, do not encroach upon the property of, or otherwise
conflict with the property rights of, any other Person
SECTION 4.10 CONDITION AND SUFFICIENCY OF ASSETS. Except as set
forth in SCHEDULE 4.10 OF THE MNB BOOK OF SCHEDULES, the buildings,
structures and equipment of MNB and each MNB Subsidiary are in good operating
condition and repair, and are adequate for the uses to which they are being
put, and none of such buildings, structures or equipment is in need of
maintenance or repairs except for ordinary, routine maintenance and repairs
that are not material in the aggregate in nature or in cost. Except where any
failure would not reasonably be expected to have a Material Adverse Effect on
MNB on a consolidated basis, the real property, buildings, structures and
equipment owned or leased by MNB and each MNB Subsidiary are in compliance
with the Americans with Disabilities Act of 1990, as amended, and the
regulations promulgated thereunder, and all other building and development
codes and other restrictions,
20
including subdivision regulations, building and construction regulations,
drainage codes, health, fire and safety laws and regulations, utility tariffs
and regulations, conservation laws and zoning laws and ordinances. The assets
and properties, whether real or personal, tangible or intangible, that MNB or
any MNB Subsidiary purport to own are sufficient for the continued conduct of
the business of MNB and such MNB Subsidiary after the Closing in
substantially the same manner as conducted prior to the Closing.
SECTION 4.11 LOAN LOSS RESERVE. All loans and loan commitments
extended by SNB and any extensions, renewals or continuations of such loans
and loan commitments (the "MNB LOANS") were made in accordance with customary
lending standards of the MNB Subsidiary in the Ordinary Course of Business.
The MNB Loans are evidenced by appropriate and sufficient documentation and
constitute valid and binding obligations to SNB enforceable in accordance
with their terms, except as may be limited by any bankruptcy, insolvency,
moratorium or other laws affecting creditors' rights generally by the
exercise of judicial discretion. All such MNB Loans are, and at the Closing
will be, free and clear of any encumbrance or other charge, except for
permitted liens, and SNB has materially complied, and at the Closing will
have materially complied with, all Legal Requirements relating to the MNB
Loans. The reserve for probable loan and lease losses of SNB is, and will be
on the Closing Date, adequate in all material respects to provide for
probable or specific losses, net of recoveries relating to loans previously
charged off. None of the MNB Loans is subject to any material offset or claim
of offset, and the aggregate loan balances in excess of MNB's consolidated
reserve for loan and lease losses are to MNB's Knowledge, based on past loan
loss experience, collectible in accordance with their terms (except as
limited above) and all uncollectible loans have been charged off.
SECTION 4.12 UNDISCLOSED LIABILITIES; ADVERSE CHANGES. Except as set
forth in SCHEDULE 4.12 OF THE MNB BOOK OF SCHEDULES, neither MNB nor any MNB
Subsidiary has any material liabilities or obligations of any nature (whether
known or unknown and whether absolute, accrued, contingent or otherwise),
except for liabilities or obligations reflected or reserved against in the
MNB Financial Statements, liabilities and obligations arising under contracts
and arrangements which are either set forth in SCHEDULE 4.18 OF THE MNB BOOK
OF SCHEDULES, or are of a type described in SECTION 4.18, but not included in
SCHEDULE 4.18 OF THE MNB BOOK OF SCHEDULES because the amounts involved do
not meet the amounts specified for inclusion in SCHEDULE 4.18 OF THE MNB BOOK
OF SCHEDULES, current liabilities incurred in the Ordinary Course of Business
since the respective dates thereof and other liabilities or obligations that
in the aggregate would not reasonably be expected to have a Material Adverse
Effect on MNB on a consolidated basis. Since the date of the latest MNB
Financial Statement, there has not been any change in the business,
operations, properties, prospects, assets or condition of MNB or any MNB
Subsidiary, and no event has occurred or circumstance exists, that has had,
or would reasonably be expected to have, a Material Adverse Effect on MNB on
a consolidated basis.
SECTION 4.13 TAXES. MNB and each MNB Subsidiary has duly filed or
will duly file all material Tax Returns required to be filed by it for all
periods prior to the Closing, and each such Tax Return is or will be complete
and accurate in all material respects. Except as set forth on SCHEDULE 4.13
OF THE MNB BOOK OF SCHEDULES, neither MNB nor any MNB Subsidiary is:
21
(a) delinquent in the payment of any Taxes shown on such Tax Returns or on
any assessments received by it for such Taxes; (b) a party to or is the
subject of any pending Order, Proceeding, audit, examination or investigation
by any Regulatory Authority that is related to assessment or collection of
Taxes paid or payable by MNB or any MNB Subsidiary for any year, nor does MNB
have any Knowledge of any of the foregoing that are Threatened; or (c)
subject to any agreement extending the period for assessment or collection of
any Tax. None of the Tax liabilities of MNB or any MNB Subsidiary has ever
been audited by any Regulatory Authority since January 1, 1993. The reserve
for Taxes in the audited financial statements of MNB for the year ended
December 31, 2000, is adequate to cover all of the Tax liabilities of MNB and
each MNB Subsidiary that may become payable in future years in respect to any
transactions consummated prior to December 31, 2000. Neither MNB nor any MNB
Subsidiary has and, to the MNB's Knowledge, will not have any liability for
Taxes of any nature for or in respect of the operation of its respective
businesses or ownership of its respective assets from December 31, 2000, up
to and including the Effective Time, except to the extent reflected on the
audited MNB Financial Statements for the year ended December 31, 2000, or on
the Subsequent MNB Financial Statements or otherwise reflected in the books
and records of MNB and the MNB Subsidiaries for the period following its then
most recent of the Subsequent MNB Financial Statements. MNB has delivered to
LBI true, correct and complete copies of all income Tax Returns previously
filed with respect to the last three fiscal years of MNB and the MNB
Subsidiaries and any tax examination reports and statements of deficiencies
assessed or agreed to for any of MNB or any MNB Subsidiary for any such time
period.
SECTION 4.14 COMPLIANCE WITH ERISA. Except as set forth in SCHEDULE
4.14 OF THE MNB BOOK OF SCHEDULES, all employee benefit plans (as defined in
Section 3(3) of ERISA) established or maintained by MNB or any MNB Subsidiary
or to which MNB or any MNB Subsidiary contributes, are in compliance in all
material respects with all applicable requirements of ERISA, and are in
compliance in all material respects with all applicable requirements
(including qualification and non-discrimination requirements in effect as of
the Effective Time) of the Code for obtaining the tax benefits the Code
thereupon permits with respect to such employee benefit plans. For purposes
of this Section, non-compliance with the Code and ERISA is material if such
non-compliance would reasonably be expected to have a Material Adverse Effect
on MNB. No such employee benefit plan has, or as of the Closing will have,
any amount of unfunded benefit liabilities (as defined in Section 4001(a)(18)
of ERISA) for which MNB or any MNB Subsidiary would be liable to any Person
under Title IV of ERISA if any such employee benefit plan were terminated as
of the Closing, which amounts would be material to MNB and the MNB
Subsidiaries taken as a whole. Each employee benefit plan as defined in
Section 4001(c)(3) of the Code satisfies the minimum funding standards of
Section 412 of the Code (if applicable). There would be no obligations of MNB
or any MNB Subsidiary under Title IV of ERISA relating to any employee
benefit plan that is a multi-employer plan if any such plan were terminated
or if MNB or any MNB Subsidiary withdrew from any such plan as of the
Closing. No payments will be made as a result of the Merger that will be
subject to nondeductibility under Section 280G of the Code or subject to an
excise tax under Section 4999 of the Code.
22
SECTION 4.15 COMPLIANCE WITH LEGAL REQUIREMENTS. MNB and each MNB
Subsidiary holds all licenses, certificates, permits, franchises and rights
from all appropriate Regulatory Authorities necessary for the conduct of its
respective business and where failure to do so would reasonably be expected
to have a Material Adverse Effect on MNB. Except as set forth in SCHEDULE
4.15 OF THE MNB BOOK OF SCHEDULES, MNB and each MNB Subsidiary is, and at all
times since January 1, 1998, has been, in compliance with each Legal
Requirement that is or was applicable to it or to the conduct or operation of
its respective businesses or the ownership or use of any of its respective
assets, except in each case where any non-compliance did not have, or would
not reasonably be expected to have, a Material Adverse Effect on MNB on a
consolidated basis. No event has occurred or circumstance exists that (with
or without notice or lapse of time): (a) may constitute or result in a
violation by MNB or any MNB Subsidiary of, or a failure on the part of MNB or
any MNB Subsidiary to comply with, any Legal Requirement; or (b) may give
rise to any obligation on the part of MNB or any MNB Subsidiary to undertake,
or to bear all or any portion of the cost of, any remedial action of any
nature in connection with a failure to comply with any Legal Requirement,
except for any of the foregoing that would not reasonably be expected to have
a Material Adverse Effect on MNB on a consolidated basis. Except as set forth
in SCHEDULE 4.15 OF THE MNB BOOK OF SCHEDULES, neither MNB nor any MNB
Subsidiary has received, at any time since January 1, 1998, any notice or
other communication (whether oral or written) from any Regulatory Authority
or any other Person, nor does MNB have any Knowledge, regarding any actual,
alleged, possible or potential: (x) violation of, or failure to comply with,
any material Legal Requirement to which MNB or any MNB Subsidiary, or any of
the assets owned or used by any of them, is or has been subject, or
investigation with respect to any of the foregoing conducted by any
Regulatory Authority; or (y) obligation on the part of MNB or any MNB
Subsidiary to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature in connection with a failure to comply with any
material Legal Requirement.
SECTION 4.16 LEGAL PROCEEDINGS; ORDERS. SCHEDULE 4.16 OF THE MNB
BOOK OF SCHEDULES is a true and correct list of all Proceedings and Orders
pending, entered into or, to the Knowledge of MNB, Threatened against,
affecting or involving MNB or any MNB Subsidiary or any of their respective
assets or businesses, or the Contemplated Transactions, since January 1,
1998, that had, or would reasonably be expected to have, a Material Adverse
Effect on MNB on a consolidated basis or that would impair MNB's ability to
consummate any of the Contemplated Transactions, and there is no fact to
MNB's Knowledge that would provide a basis for any other Proceeding or Order
involving MNB or any MNB Subsidiary, or any of its respective officers or
directors in their capacities as such, or its assets, business or goodwill
that would reasonably be expected to have a Material Adverse Effect on MNB or
that would impair MNB's ability to consummate any of the Contemplated
Transactions. To the Knowledge of MNB, no officer, director, agent or
employee of MNB or any MNB Subsidiary is subject to any Order that prohibits
such officer, director, agent or employee from engaging in or continuing any
conduct, activity or practice relating to the businesses of MNB or any MNB
Subsidiary.
SECTION 4.17 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth
in SCHEDULE 4.17 OF THE MNB BOOK OF SCHEDULES, since December 31, 2000, MNB and
each MNB
23
Subsidiary has conducted its respective business only in the Ordinary Course
of Business and with respect to each there has not been any:
(a) change in its authorized or issued capital stock;
grant of any stock option or right to purchase shares of its capital stock;
issuance of any security convertible into such capital stock or evidences of
indebtedness (except in connection with customer deposits); grant of any
registration rights; purchase, redemption, retirement or other acquisition by
it of any shares of any such capital stock; or declaration or payment of any
dividend or other distribution or payment in respect of shares of its capital
stock (except for payment of dividends and distributions from any
wholly-owned MNB Subsidiary to MNB and pursuant to SECTION 6.4);
(b) amendment to its certificate or articles of
incorporation, articles of association or bylaws or any resolutions adopted
by its board of directors or stockholders with respect to the same;
(c) payment or increase of any bonuses, salaries or
other compensation to any of its stockholders, directors, officers or
employees, except for normal increases in the Ordinary Course of Business or
in accordance with any then existing MNB Employee Benefit Plan, or entry by
it into any employment, consulting, non-competition, change in control,
severance or similar Contract with any stockholder, director, officer or
employee;
(d) adoption, amendment (except for any amendment
necessary to comply with any Legal Requirement) or termination of, or
increase in the payments to or benefits under, any MNB Employee Benefit Plan
(as defined below);
(e) material damage to or destruction or loss of any
of its assets or property, whether or not covered by insurance;
(f) entry into, termination or extension of, or
receipt of notice of termination of, any joint venture or similar agreement
pursuant to any Contract or any similar transaction;
(g) except for this Agreement, entry into any Contract
or incurrence of any obligation or liability (fixed or contingent) other than
in the Ordinary Course of Business;
(h) material change in any existing lease of real or
personal property to which it is a party;
(i) sale (other than any sale in the Ordinary Course
of Business), lease or other disposition of any of its assets or properties
or mortgage, pledge or imposition of any lien or other encumbrance upon any
of its material assets or properties, except for tax and other liens that
arise by operation of law and with respect to which payment is not past due
and except for pledges or liens: (i) required to be granted in connection
with the acceptance by any MNB Subsidiary of government deposits; (ii)
granted in connection with repurchase or reverse repurchase agreements; or
(iii) otherwise incurred in the Ordinary Course of Business;
24
(j) incurrence by it of any obligation or liability
(fixed or contingent) other than in the Ordinary Course of Business;
(k) other than in the Ordinary Course of Business,
cancellation or waiver by it of any debts, claims or rights with a value in
excess of $15,000;
(l) any investment by it of a capital nature exceeding
$50,000 or aggregate investments of a capital nature exceeding $100,000;
(m) except for the Contemplated Transactions, merger
or consolidation with or into any other Person, or acquisition of any stock,
equity interest or business of any other Person;
(n) transaction for the borrowing or loaning of
monies, other than in the Ordinary Course of Business;
(o) suffered any change or changes having a Material
Adverse Effect on it, or in the operation or conduct of its respective
business;
(p) conducted its respective business in any manner
other than substantially as it was being conducted prior to such time;
(q) purchased any investment security that is callable
prior to its stated maturity, that has a stated maturity of thirty (30)
months or more or has a purchase price of greater than $250,000;
(r) obtained any variable rate advances with
maturities of greater than one (1) year from the Federal Home Loan Bank;
(s) agreement material change in its accounting
methods used; or
(t) agreement, whether oral or written, by it to do
any of the foregoing.
SECTION 4.18 PROPERTIES, CONTRACTS, EMPLOYEE BENEFIT PLANS AND OTHER
AGREEMENTS. Except for loan agreements evidencing loans or loan commitments
made by SNB in the Ordinary Course of Business, SCHEDULE 4.18 OF THE MNB BOOK
OF SCHEDULES lists or describes the following with respect to MNB and each
MNB Subsidiary:
(a) all real property owned by MNB and each MNB
Subsidiary and the principal buildings and structures located thereon,
together with a legal description of such real estate, and each lease of real
property to which MNB and each MNB Subsidiary is a party, identifying the
parties thereto, the annual rental payable, the expiration date thereof and a
brief description of the property covered, and in each case of either owned
or leased real property, the proper identification, if applicable, of each
such property as a branch or main office or other office of MNB or any MNB
Subsidiary;
(b) All loan and credit agreements, conditional sales
contracts or other title retention agreements or security agreements relating
to money borrowed by MNB or any MNB
25
Subsidiary, exclusive of deposit agreements with customers of SNB entered
into in the Ordinary Course of Business, agreements for the purchase of
federal funds and repurchase agreements;
(c) each Applicable Contract that involves performance
of services or delivery of goods or materials by MNB or any MNB Subsidiary of
an amount or value in excess of $25,000;
(d) each Applicable Contract that was not entered into
in the Ordinary Course of Business and that involves expenditures or receipts
of MNB or any MNB Subsidiary in excess of $25,000;
(e) each Applicable Contract not referred to elsewhere
in this Section which:
(i) relates to the future purchase of goods
or services in excess of the requirements of its respective business
at current levels or for normal operating purposes;
(ii) materially affect the business or financial
condition of MNB or any MNB Subsidiary;
(f) each lease, rental, license, installment and
conditional sale agreement and other Applicable Contract affecting the
ownership of, leasing of, title to or use of any personal property having a
value per item or requiring payments in excess of $25,000, or with terms of
more than one year;
(g) each licensing agreement or other Applicable
Contract with respect to patents, trademarks, copyrights, or other
intellectual property (collectively, "INTELLECTUAL PROPERTY ASSETS"),
including agreements with current or former employees, consultants or
contractors regarding the appropriation or the non-disclosure of any of the
Intellectual Property Assets of MNB or any MNB Subsidiary;
(h) each collective bargaining agreement and other
Applicable Contract to or with any labor union or other employee
representative of a group of employees;
(i) each joint venture, partnership and other
Applicable Contract (however named) involving a sharing of profits, losses,
costs or liabilities by MNB or any MNB Subsidiary with any other Person;
(j) each Applicable Contract containing covenants that
in any way purport to restrict the business activity of MNB or any MNB
Subsidiary or any Affiliate of any of the foregoing, or limit the ability of
MNB or any MNB Subsidiary or any Affiliate of any of the foregoing to engage
in any line of business or to compete with any Person;
(k) each Applicable Contract providing for payments to
or by any Person based on sales, purchases or profits, other than direct
payments for goods;
(l) the name and annual salary of each director and
officer of MNB and each MNB Subsidiary, and the profit sharing, bonus or
other form of compensation (other than salary)
26
paid or payable by MNB, each MNB Subsidiary or a combination of any of them
to or for the benefit of each such person in question for the years ended
December 31, 1999 and 2000, and for the current fiscal year of MNB, and any
employment agreement, consulting agreement, non-competition, severance or
change in control agreement or other similar arrangement or plan with respect
to each such person;
(m) each profit sharing, group insurance,
hospitalization, stock option, pension, retirement, bonus, employment,
severance, change in control, deferred compensation, stock bonus, stock
purchase or other employee welfare or benefit agreements, plans or
arrangements established, maintained, sponsored or undertaken by MNB or any
MNB Subsidiary for the benefit of the officers, directors or employees of MNB
or any MNB Subsidiary, including each trust or other agreement with any
custodian or any trustee for funds held under any such agreement, plan or
arrangement, and all other Contracts or arrangements under which pensions,
deferred compensation or other retirement benefits are being paid or may
become payable by MNB or any MNB Subsidiary for the benefit of the employees
of MNB or any MNB Subsidiary (collectively, the "MNB EMPLOYEE BENEFIT
PLANS"), and, in respect to any of them, the latest three (3) reports or
forms, if any, filed with the Department of Labor and Pension Benefit
Guaranty Corporation under the ERISA, the latest three (3) financial or
actuarial reports and any currently effective Internal Revenue Service
private rulings or determination letters obtained by or for the benefit of
MNB or any MNB Subsidiary;
(n) each Applicable Contract entered into other than
in the Ordinary Course of Business that contains or provides for an express
undertaking by MNB or any MNB Subsidiary to be responsible for consequential
damages;
(o) each Applicable Contract for capital expenditures
in excess of $50,000, or all Applicable Contracts for all capital
expenditures which in the aggregate require payments in excess of $100,000;
and
(p) the name of each Person who is or would be
entitled pursuant to any Contract or MNB Employee Benefit Plan to receive any
payment from MNB or any MNB Subsidiary as a result of the consummation of the
Contemplated Transactions (including any payment that is or would be due as a
result of any actual or constructive termination of a Person's employment or
position following such consummation) and the maximum amount of such payment;
(q) each amendment, supplement and modification
(whether oral or written) in respect of any of the foregoing.
Copies of each document, plan or Contract listed and described in
SCHEDULE 4.18 OF THE MNB BOOK OF SCHEDULES are appended to such Schedule.
SECTION 4.19 NO DEFAULTS. Except as set forth in SCHEDULE 4.19 OF
THE MNB BOOK OF SCHEDULES, each Contract identified or required to be
identified in SCHEDULE 4.18 OF THE MNB BOOK OF SCHEDULES is in full force and
effect in all material respects and is valid and enforceable in accordance
with its terms, except as may be limited by any bankruptcy, insolvency,
27
moratorium or by the exercise of judicial discretion. MNB and each MNB
Subsidiary is, and at all times since January 1, 1998, has been, in full
compliance with all applicable terms and requirements of each Contract under
which MNB or any MNB Subsidiary has or had any obligation or liability or by
which MNB or any MNB Subsidiary or any of their respective assets owned or
used by them is or was bound, except where any such failure to be in full
compliance did not have or would reasonably be expected not to have a
Material Adverse Effect on MNB on a consolidated basis. Each other Person
that has or had any obligation or liability under any such Contract under
which MNB or any MNB Subsidiary has or had any rights is, and at all times
since January 1, 1998, has been, to the Knowledge of MNB, in compliance with
applicable terms and requirements of such Contract in all material respects.
No event has occurred or circumstance exists that (with or without notice or
lapse of time) may contravene, conflict with or result in a violation or
breach of, or give MNB, any MNB Subsidiary or other Person the right to
declare a default or exercise any remedy under, or to accelerate the maturity
or performance of, or to cancel, terminate or modify, any material Applicable
Contract. Except in the Ordinary Course of Business with respect to loans
made by SNB, neither MNB nor any MNB Subsidiary has given to or received from
any other Person, at any time since January 1, 1998, any notice or other
communication (whether oral or written) regarding any actual, alleged,
possible or potential material violation or breach of, or default under, any
Contract. Other than in the Ordinary Course of Business in connection with
workouts and restructured loans, there are no renegotiations of, attempts to
renegotiate or outstanding rights to renegotiate any material amounts paid or
payable to MNB or any MNB Subsidiary under current or completed Contracts
with any Person, and no such Person has made written demand for such
renegotiation.
SECTION 4.20 INSURANCE. SCHEDULE 4.20 OF THE MNB BOOK OF SCHEDULES
lists the policies of insurance (including bankers blanket bond and insurance
providing benefits for employees) owned or held by MNB or any MNB Subsidiary
on the date hereof. Each policy is in full force and effect (except for any
expiring policy that is replaced by coverage at least as extensive) until the
Closing. All premiums due on such policies have been paid in full.
SECTION 4.21 COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as set forth
in SCHEDULE 4.21 OF THE MNB BOOK OF SCHEDULES and except for any of the
following that did not have or would not reasonably be expected to have a
Material Adverse Effect on MNB and the MNB Subsidiaries on a consolidated
basis, there are no actions, suits, investigations, liabilities, inquiries,
Proceedings or Orders involving MNB or any MNB Subsidiary or any of their
respective assets that are pending or, to the Knowledge of MNB, Threatened,
nor to the Knowledge of MNB is there any factual basis for any of the
foregoing, as a result of any asserted failure of MNB or any MNB Subsidiary,
or any predecessor thereof, to comply with any federal, state, county and
municipal law, including any statute, regulation, rule, ordinance, Order,
restriction and requirement, relating to underground storage tanks, petroleum
products, air pollutants, water pollutants or process waste water or
otherwise relating to the environment or toxic or hazardous substances or to
the manufacture, processing, distribution, use, recycling, generation,
treatment, handling, storage, disposal or transport of any hazardous or toxic
substances or petroleum products (including polychlorinated biphenyls,
whether contained or uncontained, and asbestos-containing materials, whether
friable or not), including, the Federal Solid Waste Disposal Act, the
Hazardous and Solid Waste Amendments, the Federal Clean Air
28
Act, the Federal Clean Water Act, the Occupational Health and Safety Act, the
Federal Resource Conservation and Recovery Act, the Toxic Substances Control
Act, the Federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980 and the Superfund Amendments and Reauthorization Act of
1986, all as amended, and regulations of the Environmental Protection Agency,
the Nuclear Regulatory Agency and any state department of natural resources
or state environmental protection agency now or at any time hereafter in
effect (collectively, the "ENVIRONMENTAL LAWS"). No environmental clearances
or other governmental approvals are required for the conduct of the business
of MNB or any MNB Subsidiary or the consummation of the Contemplated
Transactions. To the Knowledge of MNB, neither MNB nor any MNB Subsidiary is
the owner of any interest in real estate on which any substances have been
used, stored, deposited, treated, recycled or disposed of, which substances
if known to be present on, at or under such property, would require clean-up,
removal or some other remedial action under any Environmental Law.
SECTION 4.22 REGULATORY FILINGS. MNB and each MNB Subsidiary has
filed in a timely manner all required filings with all proper Regulatory
Authorities, including: (a) the Securities and Exchange Commission (the
"SEC"); (b) the Federal Reserve; (c) the Federal Deposit Insurance
Corporation (the "FDIC"); and (d) the OCC. To the Knowledge of MNB, all
filings with such federal and state regulatory agencies were accurate and
complete in all material respects as of the dates of the filings, and no such
filing has made any untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements made, in the light of
the circumstances under which they were made, not misleading. Accurate and
complete copies of each document filed by MNB with the SEC since January 1,
2001, are attached as SCHEDULE 4.22 OF THE MNB BOOK OF SCHEDULES.
SECTION 4.23 AGENCY AND CUSTODIAL ACCOUNTS. Each MNB Subsidiary has
properly administered all accounts for which it acts as fiduciary, agent,
custodian or investment advisor, in accordance with the terms of the
governing documents and applicable Legal Requirements and common law. No MNB
Subsidiary or any of its respective directors, officers or employees has
committed any breach of trust with respect to any such account, and the
accountings for each such account are true and correct in all material
respects and accurately reflect the assets of such account.
SECTION 4.24 DISCLOSURE. No representation or warranty made in this
Agreement by MNB contains any untrue statement of a material fact, or omits
to state a material fact necessary to make the statements contained herein
under the circumstances under which they were made not misleading. Except as
and to the extent reflected or reserved against in MNB's audited financial
statements for the year ended December 31, 2000, or the Subsequent MNB
Financial Statements (as such term is defined below), neither MNB nor any MNB
Subsidiary has, and with respect to the Subsequent MNB Financial Statements
will not have, any liabilities or obligations, of any nature, secured or
unsecured, (whether accrued, absolute, contingent or otherwise) including,
any Tax liabilities due or to become due, which would reasonably be expected
to have a Material Adverse Effect on MNB.
SECTION 4.25 BROKERAGE COMMISSIONS. Except as set forth in SCHEDULE
4.25 OF THE MNB BOOK OF SCHEDULES, none of MNB or any MNB Subsidiary or any of
their respective
29
Representatives has incurred any obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement.
SECTION 4.26 DELAYS. To the Knowledge of MNB, there is no reason why
the granting of any of the regulatory approvals referred to in SECTION 8.2
would be denied, unduly delayed or otherwise unavailable.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES BY LBI
LBI hereby represents and warrants to MNB that the following are
true and correct as of the date hereof, and will be true and correct as of
the Effective Time:
SECTION 5.1 LBI ORGANIZATION. LBI: (a) is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Kansas and is also in good standing in each other jurisdiction in which
the nature of the business conducted or the properties or assets owned or
leased by it makes such qualification necessary; (b) is registered with the
OTS as a unitary savings and loan holding company pursuant to the Home
Owners' Loan Act, as amended (the "HOLA"); and (c) has full power and
authority, corporate and otherwise, to operate as a bank holding company and
to own, operate and lease its properties as presently owned, operated and
leased, and to carry on its business as it is now being conducted. Copies of
the articles of incorporation and bylaws of LBI and all amendments thereto
set forth in SCHEDULE 5.1 OF THE LBI BOOK OF SCHEDULES are complete and
correct. LBI owns no voting stock or equity securities of any corporation,
association, partnership or other entity, other than all of the voting stock
of LFSB and as set forth on SCHEDULE 5.1 OF THE LBI BOOK OF SCHEDULES.
SECTION 5.2 LBI SUBSIDIARY ORGANIZATION. LFSB is a federal savings
bank duly organized, validly existing and in good standing under the laws of
the United States of America. LFSB has full power and authority, corporate
and otherwise, to own, operate and lease its properties as presently owned,
operated and leased, and to carry on its business as it is now being
conducted, and is duly qualified to do business and is in good standing in
each jurisdiction in which the nature of the business conducted or the
properties or assets owned or leased by it makes such qualification
necessary. Copies of the charter and bylaws of LFSB and all amendments
thereto set forth in SCHEDULE 5.2 OF THE LBI BOOK OF SCHEDULES are complete
and correct. LFSB owns no voting stock or equity securities of any
corporation, association, partnership or other entity, other than as shown on
SCHEDULE 5.2 OF THE LBI BOOK OF SCHEDULES.
SECTION 5.3 AUTHORIZATION. LBI has the requisite corporate power and
authority to enter into and perform its obligations under this Agreement and
the execution, delivery and performance of this Agreement by LBI and the
consummation by it of the transactions contemplated thereby, have been duly
authorized by all necessary corporate action, subject to stockholder
approval. This Agreement constitutes a legal, valid and binding obligation of
LBI enforceable in accordance with its terms except as such enforcement may
be limited by
30
bankruptcy, insolvency, reorganization or other similar laws and subject to
general principles of equity.
SECTION 5.4 NO CONFLICT. Neither the execution nor delivery of this
Agreement nor the consummation or performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time): (a) contravene, conflict with or result in a violation of any
provision of the articles of incorporation, the charter, the bylaws or any
resolution adopted by the board of directors or stockholders of, LBI or any
LBI Subsidiary; (b) contravene, conflict with or result in a violation of any
Legal Requirement or any Order to which LBI or any LBI Subsidiary, or any of
the assets that are owned or used by them, may be subject, other than any of
the foregoing that would be satisfied by compliance with the provisions of
the HOLA, the Securities Act, the Exchange Act and the Kansas Code; and (c)
contravene, conflict with or result in a violation or breach of any provision
of, or give any Person the right to declare a default or exercise any remedy
under, or to accelerate the maturity or performance of, or to cancel,
terminate or modify any material Applicable Contract to which LBI or any LBI
Subsidiary is a party or by which any of their respective assets is bound; or
(d) result in the creation of any lien, charge or encumbrance upon, or with
respect to, any of the assets owned or used by LBI or any LBI Subsidiary.
Except for the requisite approval of its stockholders, neither LBI nor any
LBI Subsidiary is or will be required to give any notice to, or obtain any
consent from, any Person in connection with the execution and delivery of
this Agreement or the consummation or performance of any of the Contemplated
Transactions.
SECTION 5.5 LBI CAPITALIZATION. The authorized capital stock of LBI
consists, and at March 31, 2001, consisted of: (a) 10,000,000 shares of
common stock, $0.10 par value per share, of which 2,281,312 shares were
issued, and of which 1,188,874 shares were held in the treasury of LBI as of
that date; and (b) 5,000,000 shares of preferred stock, no par value per
share, none of which shares were issued and outstanding. The maximum number
of shares of LBI Common Stock (assuming for this purpose that share
equivalents constitute LBI Common Stock) that would be outstanding
immediately prior to the Effective Time (including treasury shares) if all
options, warrants, conversion rights and other rights with respect thereto
were exercised and the restrictions on any restricted stock were no longer
applicable is 1,298,259 shares. All of the outstanding shares of capital
stock of LBI have been duly and validly authorized and issued and are fully
paid and nonassessable. To the Knowledge of LBI and except as disclosed in
this Agreement or on the Schedules, none of the shares of authorized capital
stock of LBI are, nor on the Closing Date will they be, subject to any claim
of right except pursuant to this Agreement. Except as contemplated in this
Agreement or as set forth in SCHEDULE 5.5 OF THE LBI BOOK OF SCHEDULES, there
are, as of the date of this Agreement, no outstanding subscriptions,
contracts, conversion privileges, options, warrants, calls or other rights
obligating LBI or any LBI Subsidiary to issue, sell or otherwise dispose of,
or to purchase, redeem or otherwise acquire, any shares of capital stock of
LBI or any LBI Subsidiary. There are no outstanding securities of LBI that
are convertible into, or exchangeable for, any shares of LBI's capital stock,
and except as provided in this Section or otherwise disclosed in this
Agreement, LBI is not a party to any Contract relating to the issuance, sale
or transfer of any equity securities or other securities of LBI. None of the
shares of LBI Common Stock were issued in violation of any federal or state
securities laws or any other Legal Requirement. LBI
31
does not own or have any Contract to acquire any equity securities or other
securities of any Person or any direct or indirect equity or ownership
interest in any other business except for the capital stock of LFSB and as
set forth in SCHEDULE 5.5 OF THE LBI BOOK OF SCHEDULES. Except as disclosed
in or permitted by this Agreement or as provided on SCHEDULE 5.5 OF THE LBI
BOOK OF SCHEDULES, no shares of LBI capital stock have been purchased,
redeemed or otherwise acquired, directly or indirectly, by LBI or any LBI
Subsidiary and no dividends or other distributions payable in any equity
securities of LBI or any LBI Subsidiary have been declared, set aside, made
or paid to the stockholders of LBI.
SECTION 5.6 LBI SUBSIDIARY CAPITALIZATION. The authorized capital
stock of LFSB consists, and at the Effective Time will consist, exclusively
of 130,975 shares of common stock, $25.00 par value per share, all of which
shares are, and immediately prior to the Closing will be, duly authorized,
validly issued and outstanding, fully paid and nonassessable (the "LFSB BANK
SHARES"). LBI is, and will be on the Closing Date, the record and beneficial
owner of one hundred percent (100%) of LFSB Shares, free and clear of any
lien or encumbrance whatsoever, except as set forth in SCHEDULE 5.6 OF THE
LBI BOOK OF SCHEDULES. The LFSB Bank Shares are, and will be on the Closing
Date, freely transferable and are, and will be on the Closing Date, subject
to no claim of right except pursuant to this Agreement and as set forth in
SCHEDULE 5.6 OF THE LBI BOOK OF SCHEDULES. There are no options, warrants,
rights, calls or commitments of any character relating to any additional
shares of the capital stock of LFSB. No capital stock or other security
issued by LFSB has been issued in violation of, or without compliance with,
any preemptive rights of stockholders. There are no outstanding securities of
LFSB that are convertible into, or exchangeable for, any shares of LFSB's
capital stock, and LFSB is not a party to any Contract relating to the
issuance, sale or transfer of any equity securities or other securities of
LFSB. The Bank does not own, or have any Contract to acquire, any equity
securities or other securities of any Person or any direct or indirect equity
or ownership interest in any other business, except as set forth in SCHEDULE
5.6 OF THE LBI BOOK OF SCHEDULES.
SECTION 5.7 FINANCIAL STATEMENTS AND REPORTS. True, correct and
complete copies of the following financial statements of LBI are included in
SCHEDULE 5.7 OF THE LBI BOOK OF SCHEDULES:
(a) Consolidated Balance Sheets and the related
Statements of Income, Statements of Changes in Stockholders' Equity and
Statements of Cash Flows of LBI for the years ended September 30, 1998, 1999
and 2000;
(b) Consolidated Balance Sheet and the related
Statement of Income of LBI for the six months ended March 31, 2001; and
(c) TFRs for LFSB at the close of business on December
31, 1998, 1999 and 2000.
The financial statements described in this Section (the "LBI
FINANCIAL STATEMENTS") are complete and correct in all material respects and
fairly and accurately present the respective financial position, assets,
liabilities and results of operations of LBI and the LBI Subsidiaries at
32
the respective dates of, and for the periods referred to in, the LBI
Financial Statements. The financial statements described in clause (a) above
are audited statements and have been prepared in conformity with GAAP. The
financial statements described in clauses (b) and (c) above have been
prepared on a basis consistent with past accounting practices and as required
by applicable rules or regulations and fairly present the consolidated
financial condition and results of operations at the dates and for the
periods presented, subject to year-end audit adjustments (which changes in
the aggregate would not reasonably be expected to have a Material Adverse
Effect on LBI on a consolidated basis). The LBI Financial Statements do not
include any material assets or omit to state any material liabilities,
absolute or contingent, or other facts, which inclusion or omission would
render the LBI Financial Statements misleading in any material respect.
SECTION 5.8 BOOKS AND RECORDS. The books of account, minute books,
stock record books and other records of LBI and each LBI Subsidiary are
complete and correct in all material respects and have been maintained in
accordance with sound business practices and all applicable Legal
Requirements, including the maintenance of any adequate system of internal
controls. The minute books of LBI and each LBI Subsidiary contain accurate
and complete records in all material respects of all meetings held of, and
corporate action taken by, its respective stockholders, board of directors
and committees of the board of directors. At the Closing, all of those books
and records will be in the possession of LBI and the LBI Subsidiaries.
SECTION 5.9 TITLE TO PROPERTIES. LBI and each LBI Subsidiary has
good and marketable title to all assets and properties, whether real or
personal, tangible or intangible, that it purports to own, subject to no
valid liens, mortgages, security interests, encumbrances or charges of any
kind except: (a) as noted in the most recent LBI Financial Statement or in
SCHEDULE 5.9 OF THE LBI BOOK OF SCHEDULES; (b) statutory liens for Taxes not
yet delinquent or being contested in good faith by appropriate Proceedings
and for which appropriate reserves have been established and reflected on the
LBI Financial Statements; (c) pledges or liens required to be granted in
connection with the acceptance of government deposits, granted in connection
with repurchase or reverse repurchase agreements or otherwise incurred in the
Ordinary Course of Business; and (d) minor defects and irregularities in
title and encumbrances that do not materially impair the use thereof for the
purposes for which they are held. Except as set forth in SCHEDULE 5.9 OF THE
LBI BOOK OF SCHEDULES, LBI and each LBI Subsidiary as lessee has the right
under valid and existing leases to occupy, use, possess and control any and
all of the respective property leased by it. Except where any failure would
not reasonably be expected to have a Material Adverse Effect on LBI on a
consolidated basis, all buildings and structures owned by LBI and each LBI
Subsidiary lie wholly within the boundaries of the real property owned or
validly leased by it, do not encroach upon the property of, or otherwise
conflict with the property rights of, any other Person
SECTION 5.10 CONDITION AND SUFFICIENCY OF ASSETS. Except as set
forth in SCHEDULE 5.10 OF THE LBI BOOK OF SCHEDULES, the buildings,
structures and equipment of LBI and each LBI Subsidiary are in good operating
condition and repair, and are adequate for the uses to which they are being
put, and none of such buildings, structures or equipment is in need of
maintenance or repairs except for ordinary, routine maintenance and repairs
that are not material in the aggregate in nature or in cost. Except where any
failure would not reasonably be expected
33
to have a Material Adverse Effect on LBI on a consolidated basis, the real
property, buildings, structures and equipment owned or leased by LBI and each
LBI Subsidiary are in compliance with the Americans with Disabilities Act of
1990, as amended, and the regulations promulgated thereunder, and all other
building and development codes and other restrictions, including subdivision
regulations, building and construction regulations, drainage codes, health,
fire and safety laws and regulations, utility tariffs and regulations,
conservation laws and zoning laws and ordinances. The assets and properties,
whether real or personal, tangible or intangible, that LBI or any LBI
Subsidiary purport to own are sufficient for the continued conduct of the
business of LBI and such LBI Subsidiary after the Closing in substantially
the same manner as conducted prior to the Closing.
SECTION 5.11 LOAN LOSS RESERVE. All loans and loan commitments
extended by LFSB and any extensions, renewals or continuations of such loans
and loan commitments (the "LBI LOANS") were made in accordance with customary
lending standards of the LFSB in the Ordinary Course of Business. The LBI
Loans are evidenced by appropriate and sufficient documentation and
constitute valid and binding obligations to LFSB enforceable in accordance
with their terms, except as may be limited by any bankruptcy, insolvency,
moratorium or other laws affecting creditors' rights generally by the
exercise of judicial discretion. All such LBI Loans are, and at the Closing
will be, free and clear of any encumbrance or other charge, except for
permitted liens, and LFSB has materially complied, and at the Closing will
have materially complied with, all Legal Requirements relating to the LBI
Loans. The reserve for probable loan and lease losses of LFSB is, and will be
on the Closing Date, adequate in all material respects to provide for
probable or specific losses, net of recoveries relating to loans previously
charged off. None of the LBI Loans is subject to any material offset or claim
of offset, and the aggregate loan balances in excess of LBI's consolidated
reserve for loan and lease losses are to LBI's Knowledge, based on past loan
loss experience, collectible in accordance with their terms (except as
limited above) and all uncollectible loans have been charged off.
SECTION 5.12 UNDISCLOSED LIABILITIES; ADVERSE CHANGES. Except as set
forth in SCHEDULE 5.12 OF THE LBI BOOK OF SCHEDULES, neither LBI nor any LBI
Subsidiary has any material liabilities or obligations of any nature (whether
known or unknown and whether absolute, accrued, contingent or otherwise),
except for liabilities or obligations reflected or reserved against in the
LBI Financial Statements, liabilities and obligations arising under contracts
and arrangements which are either set forth in SCHEDULE 5.18 OF THE LBI BOOK
OF SCHEDULES, or are of a type described in SECTION 5.18, but not included in
SCHEDULE 5.18 OF THE LBI BOOK OF SCHEDULES because the amounts involved do
not meet the amounts specified for inclusion in SCHEDULE 5.18 OF THE LBI BOOK
OF SCHEDULES, current liabilities incurred in the Ordinary Course of Business
since the respective dates thereof and other liabilities or obligations that
in the aggregate would not reasonably be expected to have a Material Adverse
Effect on LBI on a consolidated basis. Since the date of the latest LBI
Financial Statement, there has not been any change in the business,
operations, properties, prospects, assets or condition of LBI or any LBI
Subsidiary, and no event has occurred or circumstance exists, that has had,
or would reasonably be expected to have, a Material Adverse Effect on LBI on
a consolidated basis.
34
SECTION 5.13 TAXES. LBI and each LBI Subsidiary has duly filed or will
duly file all material Tax Returns required to be filed by it for all periods
prior to the Closing, and each such Tax Return is or will be complete and
accurate in all material respects. Except as set forth on SCHEDULE 5.13 OF THE
LBI BOOK OF SCHEDULES, neither LBI nor any LBI Subsidiary is: (a) delinquent in
the payment of any Taxes shown on such Tax Returns or on any assessments
received by it for such Taxes; (b) a party to or is the subject of any pending
Order, Proceeding, audit, examination or investigation by any Regulatory
Authority that is related to assessment or collection of Taxes paid or payable
by LBI or any LBI Subsidiary for any year, nor does LBI have any Knowledge of
any of the foregoing that are Threatened; or (c) subject to any agreement
extending the period for assessment or collection of any Tax. None of the Tax
liabilities of LBI or any LBI Subsidiary has ever been audited by any Regulatory
Authority since January 1, 1994. The reserve for Taxes in the audited financial
statements of LBI for the year ended September 30, 2000, is adequate to cover
all of the Tax liabilities of LBI and each LBI Subsidiary that may become
payable in future years in respect to any transactions consummated prior to
September 30, 2000. Neither LBI nor any LBI Subsidiary has and, to the LBI's
Knowledge, will not have any liability for Taxes of any nature for or in respect
of the operation of its respective businesses or ownership of its respective
assets from September 30, 2000, up to and including the Effective Time, except
to the extent reflected on the audited LBI Financial Statements for the year
ended September 30, 2000, or on the Subsequent LBI Financial Statements or
otherwise reflected in the books and records of LBI and the LBI Subsidiaries for
the period following its then most recent of the Subsequent LBI Financial
Statements. LBI has delivered to MNB true, correct and complete copies of all
income Tax Returns previously filed with respect to the last three fiscal years
of LBI and the LBI Subsidiaries and any tax examination reports and statements
of deficiencies assessed or agreed to for any of LBI or any LBI Subsidiary for
any such time period.
SECTION 5.14 COMPLIANCE WITH ERISA. Except as set forth in SCHEDULE
5.14 OF THE LBI BOOK OF SCHEDULES, all employee benefit plans (as defined in
Section 3(3) of ERISA) established or maintained by LBI or any LBI Subsidiary or
to which LBI or any LBI Subsidiary contributes, are in compliance in all
material respects with all applicable requirements of ERISA, and are in
compliance in all material respects with all applicable requirements (including
qualification and non-discrimination requirements in effect as of the Effective
Time) of the Code for obtaining the tax benefits the Code thereupon permits with
respect to such employee benefit plans. For purposes of this Section,
non-compliance with the Code and ERISA is material if such non-compliance would
reasonably be expected to have a Material Adverse Effect on LBI. No such
employee benefit plan has, or as of the Closing will have, any amount of
unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA) for
which LBI or any LBI Subsidiary would be liable to any Person under Title IV of
ERISA if any such employee benefit plan were terminated as of the Closing, which
amounts would be material to LBI and the LBI Subsidiaries taken as a whole. Each
employee benefit plan as defined in Section 4001(c)(3) of the Code satisfies the
minimum funding standards of Section 412 of the Code (if applicable). There
would be no obligations of LBI or any LBI Subsidiary under Title IV of ERISA
relating to any employee benefit plan that is a multi-employer plan if any such
plan were terminated or if LBI or any LBI Subsidiary withdrew from any such plan
as of the Closing. No payments will be
35
made as a result of the Merger that will be subject to nondeductibility under
Section 280G of the Code or subject to an excise tax under Section 4999 of
the Code.
SECTION 5.15 COMPLIANCE WITH LEGAL REQUIREMENTS. LBI and each LBI
Subsidiary holds all licenses, certificates, permits, franchises and rights from
all appropriate Regulatory Authorities necessary for the conduct of its
respective business and where failure to do so would reasonably be expected to
have a Material Adverse Effect on LBI. Except as set forth in SCHEDULE 5.15 OF
THE LBI BOOK OF SCHEDULES, LBI and each LBI Subsidiary is, and at all times
since January 1, 1998, has been, in compliance with each Legal Requirement that
is or was applicable to it or to the conduct or operation of its respective
businesses or the ownership or use of any of its respective assets, except in
each case where any non-compliance did not have, or would not reasonably be
expected to have, a Material Adverse Effect on LBI on a consolidated basis. No
event has occurred or circumstance exists that (with or without notice or lapse
of time): (a) may constitute or result in a violation by LBI or any LBI
Subsidiary of, or a failure on the part of LBI or any LBI Subsidiary to comply
with, any Legal Requirement; or (b) may give rise to any obligation on the part
of LBI or any LBI Subsidiary to undertake, or to bear all or any portion of the
cost of, any remedial action of any nature in connection with a failure to
comply with any Legal Requirement, except for any of the foregoing that would
not reasonably be expected to have a Material Adverse Effect on LBI on a
consolidated basis. Except as set forth in SCHEDULE 5.15 OF THE LBI BOOK OF
SCHEDULES, neither LBI nor any LBI Subsidiary has received, at any time since
January 1, 1998, any notice or other communication (whether oral or written)
from any Regulatory Authority or any other Person, nor does LBI have any
Knowledge, regarding any actual, alleged, possible or potential: (x) violation
of, or failure to comply with, any material Legal Requirement to which LBI or
any LBI Subsidiary, or any of the assets owned or used by any of them, is or has
been subject, or investigation with respect to any of the foregoing conducted by
any Regulatory Authority; or (y) obligation on the part of LBI or any LBI
Subsidiary to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature in connection with a failure to comply with any
material Legal Requirement.
SECTION 5.16 LEGAL PROCEEDINGS; ORDERS. SCHEDULE 5.16 OF THE LBI BOOK
OF SCHEDULES is a true and correct list of all Proceedings and Orders pending,
entered into or, to the Knowledge of LBI, Threatened against, affecting or
involving LBI or any LBI Subsidiary or any of their respective assets or
businesses, or the Contemplated Transactions, since January 1, 1998, that had,
or would reasonably be expected to have, a Material Adverse Effect on LBI on a
consolidated basis or that would impair LBI's ability to consummate any of the
Contemplated Transactions, and there is no fact to LBI's Knowledge that would
provide a basis for any other Proceeding or Order involving LBI or any LBI
Subsidiary, or any of its respective officers or directors in their capacities
as such, or its assets, business or goodwill that would reasonably be expected
to have a Material Adverse Effect on LBI or that would impair LBI's ability to
consummate any of the Contemplated Transactions. To the Knowledge of LBI, no
officer, director, agent or employee of LBI or any LBI Subsidiary is subject to
any Order that prohibits such officer, director, agent or employee from engaging
in or continuing any conduct, activity or practice relating to the businesses of
LBI or any LBI Subsidiary.
36
SECTION 5.17 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth
in SCHEDULE 5.17 OF THE LBI BOOK OF SCHEDULES, since September 30, 2000, LBI and
each LBI Subsidiary has conducted its respective business only in the Ordinary
Course of Business and with respect to each there has not been any:
(a) change in its authorized or issued capital stock;
grant of any stock option or right to purchase shares of its capital stock;
issuance of any security convertible into such capital stock or evidences of
indebtedness (except in connection with customer deposits); grant of any
registration rights; purchase, redemption, retirement or other acquisition by it
of any shares of any such capital stock; or declaration or payment of any
dividend or other distribution or payment in respect of shares of its capital
stock (except for payment of dividends and distributions from any wholly-owned
LBI Subsidiary to LBI and pursuant to SECTION 7.4);
(b) amendment to its articles of incorporation, charter
or bylaws or any resolutions adopted by its board of directors or stockholders
with respect to the same;
(c) payment or increase of any bonuses, salaries or other
compensation to any of its stockholders, directors, officers or employees,
except for normal increases in the Ordinary Course of Business or in accordance
with any then existing LBI Employee Benefit Plan, or entry by it into any
employment, consulting, non-competition, change in control, severance or similar
Contract with any stockholder, director, officer or employee;
(d) adoption, amendment (except for any amendment
necessary to comply with any Legal Requirement) or termination of, or increase
in the payments to or benefits under, any LBI Employee Benefit Plan (as defined
below);
(e) material damage to or destruction or loss of any of
its assets or property, whether or not covered by insurance;
(f) entry into, termination or extension of, or receipt
of notice of termination of, any joint venture or similar agreement pursuant to
any Contract or any similar transaction;
(g) except for this Agreement, entry into any Contract or
incurrence of any obligation or liability (fixed or contingent) other than in
the Ordinary Course of Business;
(h) material change in any existing lease of real or
personal property to which it is a party;
(i) sale (other than any sale in the Ordinary Course of
Business), lease or other disposition of any of its assets or properties or
mortgage, pledge or imposition of any lien or other encumbrance upon any of its
material assets or properties, except for tax and other liens that arise by
operation of law and with respect to which payment is not past due and except
for pledges or liens: (i) required to be granted in connection with the
acceptance by LFSB of government deposits; (ii) granted in connection with
repurchase or reverse repurchase agreements; or (iii) otherwise incurred in the
Ordinary Course of Business;
37
(j) incurrence by it of any obligation or liability (fixed or
contingent) other than in the Ordinary Course of Business;
(k) other than in the Ordinary Course of Business,
cancellation or waiver by it of any debts, claims or rights with a value in
excess of $15,000;
(l) any investment by it of a capital nature exceeding
$50,000 or aggregate investments of a capital nature exceeding $100,000;
(m) except for the Contemplated Transactions, merger or
consolidation with or into any other Person, or acquisition of any stock, equity
interest or business of any other Person;
(n) transaction for the borrowing or loaning of monies,
other than in the Ordinary Course of Business;
(o) suffered any change or changes having a Material
Adverse Effect on it, or in the operation or conduct of its respective business;
(p) conducted its respective business in any manner other
than substantially as it was being conducted prior to such time;
(q) purchased any investment security that is callable
prior to its stated maturity, that has a stated maturity of thirty (30) months
or more or has a purchase price of greater than $250,000;
(r) obtained any variable rate advances with maturities
of greater than one (1) year from the Federal Home Loan Bank;
(s) agreement material change in its accounting methods
used; or
(t) agreement, whether oral or written, by it to do any
of the foregoing.
SECTION 5.18 PROPERTIES, CONTRACTS, EMPLOYEE BENEFIT PLANS AND OTHER
AGREEMENTS. Except for loan agreements evidencing loans or loan commitments made
by LFSB in the Ordinary Course of Business, SCHEDULE 5.18 OF THE LBI BOOK OF
SCHEDULES lists or describes the following with respect to LBI and each LBI
Subsidiary:
(a) all real property owned by LBI and each LBI Subsidiary
and the principal buildings and structures located thereon, together with a
legal description of such real estate, and each lease of real property to
which LBI and each LBI Subsidiary is a party, identifying the parties thereto,
the annual rental payable, the expiration date thereof and a brief description
of the property covered, and in each case of either owned or leased real
property, the proper identification, if applicable, of each such property as a
branch or main office or other office of LBI or any LBI Subsidiary;
(b) All loan and credit agreements, conditional sales
contracts or other title retention agreements or security agreements relating
to money borrowed by LBI or any LBI
38
Subsidiary, exclusive of deposit agreements with customers of LFSB entered
into in the Ordinary Course of Business, agreements for the purchase of
federal funds and repurchase agreements;
(c) each Applicable Contract that involves performance of
services or delivery of goods or materials by LBI or any LBI Subsidiary of an
amount or value in excess of $25,000;
(d) each Applicable Contract that was not entered into in
the Ordinary Course of Business and that involves expenditures or receipts of
LBI or any LBI Subsidiary in excess of $25,000;
(e) each Applicable Contract not referred to elsewhere in
this Section which:
(i) relates to the future purchase of goods or
services in excess of the requirements of its respective business at current
levels or for normal operating purposes;
(ii) materially affect the business or financial
condition of LBI or any LBI Subsidiary;
(f) each lease, rental, license, installment and conditional
sale agreement and other Applicable Contract affecting the ownership of,
leasing of, title to or use of any personal property having a value per item or
requiring payments in excess of $25,000, or with terms of more than one year;
(g) each licensing agreement or other Applicable Contract
with respect to Intellectual Property Assets, including agreements with current
or former employees, consultants or contractors regarding the appropriation or
the non-disclosure of any of the Intellectual Property Assets of LBI or any LBI
Subsidiary;
(h) each collective bargaining agreement and other Applicable
Contract to or with any labor union or other employee representative of a group
of employees;
(i) each joint venture, partnership and other Applicable
Contract (however named) involving a sharing of profits, losses, costs or
liabilities by LBI or any LBI Subsidiary with any other Person;
(j) each Applicable Contract containing covenants that in
any way purport to restrict the business activity of LBI or any LBI Subsidiary
or any Affiliate of any of the foregoing, or limit the ability of LBI or any LBI
Subsidiary or any Affiliate of any of the foregoing to engage in any line of
business or to compete with any Person;
(k) each Applicable Contract providing for payments to or
by any Person based on sales, purchases or profits, other than direct payments
for goods;
(l) the name and annual salary of each director and officer
of LBI and each LBI Subsidiary, and the profit sharing, bonus or other
form of compensation (other than salary) paid or payable by LBI, each LBI
Subsidiary or a combination of any of them to or for the benefit of each such
person in question for the years ended September 30, 1999 and 2000, and for
39
the current fiscal year of LBI, and any employment agreement, consulting
agreement, non-competition, severance or change in control agreement or other
similar arrangement or plan with respect to each such person;
(m) each profit sharing, group insurance, hospitalization,
stock option, pension, retirement, bonus, employment, severance, change in
control, deferred compensation, stock bonus, stock purchase or other employee
welfare or benefit agreements, plans or arrangements established, maintained,
sponsored or undertaken by LBI or any LBI Subsidiary for the benefit of the
officers, directors or employees of LBI or any LBI Subsidiary, including each
trust or other agreement with any custodian or any trustee for funds held
under any such agreement, plan or arrangement, and all other Contracts or
arrangements under which pensions, deferred compensation or other retirement
benefits are being paid or may become payable by LBI or any LBI Subsidiary
for the benefit of the employees of LBI or any LBI Subsidiary (collectively,
the "LBI EMPLOYEE BENEFIT PLANS"), and, in respect to any of them, the latest
three (3) reports or forms, if any, filed with the Department of Labor and
Pension Benefit Guaranty Corporation under the ERISA, the latest three (3)
financial or actuarial reports and any currently effective Internal Revenue
Service private rulings or determination letters obtained by or for the
benefit of LBI or any LBI Subsidiary;
(n) each Applicable Contract entered into other than in
the Ordinary Course of Business that contains or provides for an express
undertaking by LBI or any LBI Subsidiary to be responsible for consequential
damages;
(o) each Applicable Contract for capital expenditures in
excess of $50,000, or all Applicable Contracts for all capital expenditures
which in the aggregate require payments in excess of $100,000; and
(p) the name of each Person who is or would be entitled
pursuant to any Contract or LBI Employee Benefit Plan to receive any payment
from LBI or any LBI Subsidiary as a result of the consummation of the
Contemplated Transactions (including any payment that is or would be due as a
result of any actual or constructive termination of a Person's employment or
position following such consummation) and the maximum amount of such payment;
(q) each amendment, supplement and modification (whether
oral or written) in respect of any of the foregoing.
Copies of each document, plan or Contract listed and described in
SCHEDULE 5.18 OF THE LBI BOOK OF SCHEDULES are appended to such Schedule.
SECTION 5.19 NO DEFAULTS. Except as set forth in SCHEDULE 5.19 OF THE
LBI BOOK OF SCHEDULES, each Contract identified or required to be identified in
SCHEDULE 5.18 OF THE LBI BOOK OF SCHEDULES is in full force and effect in all
material respects and is valid and enforceable in accordance with its terms,
except as may be limited by any bankruptcy, insolvency, moratorium or by the
exercise of judicial discretion. LBI and each LBI Subsidiary is, and at all
times since January 1, 1998, has been, in full compliance with all applicable
terms and requirements of each Contract under which LBI or any LBI Subsidiary
has or had any obligation
40
or liability or by which LBI or any LBI Subsidiary or any of their respective
assets owned or used by them is or was bound, except where any such failure
to be in full compliance did not have or would reasonably be expected not to
have a Material Adverse Effect on LBI on a consolidated basis. Each other
Person that has or had any obligation or liability under any such Contract
under which LBI or any LBI Subsidiary has or had any rights is, and at all
times since January 1, 1998, has been, to the Knowledge of LBI, in compliance
with applicable terms and requirements of such Contract in all material
respects. No event has occurred or circumstance exists that (with or without
notice or lapse of time) may contravene, conflict with or result in a
violation or breach of, or give LBI, any LBI Subsidiary or other Person the
right to declare a default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate or modify, any material
Applicable Contract. Except in the Ordinary Course of Business with respect
to loans made by LFSB, neither LBI nor any LBI Subsidiary has given to or
received from any other Person, at any time since January 1, 1998, any notice
or other communication (whether oral or written) regarding any actual,
alleged, possible or potential material violation or breach of, or default
under, any Contract. Other than in the Ordinary Course of Business in
connection with workouts and restructured loans, there are no renegotiations
of, attempts to renegotiate or outstanding rights to renegotiate any material
amounts paid or payable to LBI or any LBI Subsidiary under current or
completed Contracts with any Person, and no such Person has made written
demand for such renegotiation.
SECTION 5.20 INSURANCE. SCHEDULE 5.20 OF THE LBI BOOK OF SCHEDULES
lists the policies of insurance (including bankers blanket bond and insurance
providing benefits for employees) owned or held by LBI or any LBI Subsidiary on
the date hereof. Each policy is in full force and effect (except for any
expiring policy that is replaced by coverage at least as extensive) until the
Closing. All premiums due on such policies have been paid in full.
SECTION 5.21 COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as set forth in
SCHEDULE 5.21 OF THE LBI BOOK OF SCHEDULES and except for any of the following
that did not have or would not reasonably be expected to have a Material Adverse
Effect on LBI and the LBI Subsidiaries on a consolidated basis, there are no
actions, suits, investigations, liabilities, inquiries, Proceedings or Orders
involving LBI or any LBI Subsidiary or any of their respective assets that are
pending or, to the Knowledge of LBI, Threatened, nor to the Knowledge of LBI is
there any factual basis for any of the foregoing, as a result of any asserted
failure of LBI or any LBI Subsidiary, or any predecessor thereof, to comply with
any Environmental Laws. No environmental clearances or other governmental
approvals are required for the conduct of the business of LBI or any LBI
Subsidiary or the consummation of the Contemplated Transactions. To the
Knowledge of LBI, neither LBI nor any LBI Subsidiary is the owner of any
interest in real estate on which any substances have been used, stored,
deposited, treated, recycled or disposed of, which substances if known to be
present on, at or under such property, would require clean-up, removal or some
other remedial action under any Environmental Law.
SECTION 5.22 REGULATORY FILINGS. LBI and each LBI Subsidiary has filed
in a timely manner all required filings with all proper Regulatory Authorities,
including: (a) the SEC; (b) the OTS; and (c) the FDIC. To the Knowledge of LBI,
all filings with such federal and state regulatory agencies were accurate and
complete in all material respects as of the dates of the
41
filings, and no such filing has made any untrue statement of a material fact
or omitted to state a material fact necessary in order to make the statements
made, in the light of the circumstances under which they were made, not
misleading. Accurate and complete copies of each document filed by LBI with
the SEC since October 1, 2000, are attached as SCHEDULE 5.22 OF THE LBI BOOK
OF SCHEDULES.
SECTION 5.23 AGENCY AND CUSTODIAL ACCOUNTS. Each LBI Subsidiary has
properly administered all accounts for which it acts as fiduciary, agent,
custodian or investment advisor, in accordance with the terms of the governing
documents and applicable Legal Requirements and common law. No LBI Subsidiary or
any of its respective directors, officers or employees has committed any breach
of trust with respect to any such account, and the accountings for each such
account are true and correct in all material respects and accurately reflect the
assets of such account.
SECTION 5.24 DISCLOSURE. No representation or warranty made in this
Agreement by LBI contains any untrue statement of a material fact, or omits to
state a material fact necessary to make the statements contained herein under
the circumstances under which they were made not misleading. Except as and to
the extent reflected or reserved against in LBI's audited financial statements
for the year ended September 30, 2000, or the Subsequent LBI Financial
Statements (as such term is defined below), neither LBI nor any LBI Subsidiary
has, and with respect to the Subsequent LBI Financial Statements will not have,
any liabilities or obligations, of any nature, secured or unsecured, (whether
accrued, absolute, contingent or otherwise) including, any Tax liabilities due
or to become due, which would reasonably be expected to have a Material Adverse
Effect on LBI.
SECTION 5.25 BROKERAGE COMMISSIONS. Except as set forth in SCHEDULE
5.25 OF THE LBI BOOK OF SCHEDULES, none of LBI or any LBI Subsidiary or any of
their respective Representatives has incurred any obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement.
SECTION 5.26 DELAYS. To the Knowledge of LBI, there is no reason why
the granting of any of the regulatory approvals referred to in SECTION 8.2 would
be denied, unduly delayed or otherwise unavailable.
ARTICLE 6
COVENANTS OF MNB
From and after the date hereof and until the Effective Time, MNB hereby
covenants and agrees with LBI as follows:
SECTION 6.1 INFORMATION, ACCESS AND CONFIDENTIALITY.
(a) Upon providing reasonable notice, LBI and its
Representatives shall, at all times during normal business hours prior to the
Closing Date, have full and continuing access to the facilities, operations,
records and properties of MNB and each MNB Subsidiary. LBI and its
Representatives may, prior to the Closing Date, make or cause to be made such
reasonable
42
investigation of the operations, records and properties of MNB and each MNB
Subsidiary, including observation of any audit of, and examination of any
audit work papers with respect to, MNB or any MNB Subsidiary, and of its and
their financial and legal condition as LBI shall deem necessary or advisable
to familiarize itself with such records, properties and other matters;
provided, that such access or investigation shall not interfere unnecessarily
with the normal operations of MNB or any of the MNB Subsidiary. Upon request,
MNB and each MNB Subsidiary will furnish LBI or its Representatives its
attorneys' responses to auditors' requests for information and such financial
and operating data and other information reasonably requested by LBI
developed by MNB or any MNB Subsidiary, its auditors, accountants or
attorneys (PROVIDED with respect to attorneys, such disclosure shall be
limited to information that would not result in the waiver by MNB or any MNB
Subsidiary of any claim of attorney-client privilege), and will permit LBI or
its Representatives to discuss such information directly with any individual
or firm performing auditing or accounting functions for MNB or any MNB
Subsidiary, and such auditors and accountants shall be directed to furnish
copies of any reports or financial information as developed to LBI or its
Representatives. No investigation by LBI shall affect the representations and
warranties made by MNB. This Section shall not require the disclosure of any
information the disclosure of which to LBI would be prohibited by law.
(b) Any confidential information or trade secrets received by
MNB, its employees or agents in the course of the examination described in
SECTION 7.1 shall be treated confidentially, and any correspondence, memoranda,
records, copies, documents and electronic or other media of any kind containing
either such confidential information, or trade secrets or both shall be
destroyed by MNB or, at LBI's request, returned to LBI in the event this
Agreement is terminated as provided in SECTION 11.1. Such information shall not
be used by MNB or its agents to the detriment of LBI or any LBI Subsidiary.
SECTION 6.2 CARRY ON IN REGULAR COURSE. MNB and each MNB Subsidiary
shall carry on its business diligently and substantially in the same manner as
is presently being conducted and shall not make or institute any unusual or
material change in its methods of doing business without the prior written
consent of LBI, which consent shall not be unreasonably withheld or delayed. MNB
shall, and shall also cause each MNB Subsidiary to, unless otherwise consented
to in writing in advance by LBI:
(a) conduct its business only in the Ordinary Course of
Business;
(b) use its Best Efforts to preserve intact its current
business organization, keep available the services of its current officers,
employees and agents, and maintain the relations and goodwill with its
suppliers, customers, landlords, creditors, employees, agents and others having
business relationships with it;
(c) confer and consult with LBI concerning operational
matters of a material nature, any sales of investment securities or loans that
were not originated with the intent to sell, and any changes or revisions to the
asset-liability management of SNB;
(d) enter into loan transactions only in accordance with
sound credit practices and only on terms and conditions which are not materially
more favorable than those available to
43
the borrower from competitive sources in transactions in the ordinary course
of business and consistent with prudent banking practices and policies and
regulations of applicable regulatory authorities, and in that connection, MNB
will consult and discuss with LBI all new credits or new lending relationships,
or extensions or renewals of any existing credit relationships, approved in
excess of $1,000,000 to any Person or Persons and his, her or their Affiliates
from the date hereof to the Effective Time;
(e) consistent with past practice, maintain a reserve for
probable loan and lease losses that is adequate in all material respects to
provide for probable losses, net of recoveries relating to loans previously
charged off, on loans outstanding (including accrued interest receivable);
(f) maintain all of its assets necessary for the conduct
of its business in good operating condition and repair, reasonable wear and tear
and damage by fire or unavoidable casualty excepted, and maintain policies of
insurance upon its assets and with respect to the conduct of its business in
amounts and kinds comparable to that in effect on the date hereof and pay all
premiums on such policies when due;
(g) file in a timely manner all required filings with all
Regulatory Authorities and cause such filings to be true and correct in all
material respects; and
(h) maintain its books, accounts and records in the
usual, regular and ordinary manner, on a basis consistent with prior years and
comply with all Legal Requirements.
With respect to any written request by MNB for LBI's consent to any
non-permitted action of MNB or any MNB Subsidiary described in this Section, MNB
shall be entitled to conclusively presume LBI has consented to any such action
unless MNB shall have received LBI's written objection to such action within
three (3) Business Days of the date of LBI's receipt of such written request.
SECTION 6.3 NEGATIVE COVENANTS. Except as otherwise provided by this
Agreement, between the date of this Agreement and the Closing Date, MNB will
not, and will cause each MNB Subsidiary not to, without the prior written
consent of LBI, which consent shall not be unreasonably withheld or delayed,
take any affirmative action, or fail to take any reasonable action within its
control, as a result of which any of the changes or events listed in SECTION
4.17 is likely to occur. With respect to any written request by MNB for LBI's
consent to any non-permitted action of MNB or any MNB Subsidiary described in
this Section, MNB shall be entitled to conclusively presume LBI has consented to
any such action unless MNB shall have received LBI's written objection to such
action within three (3) Business Days of the date of LBI's receipt of such
written request.
SECTION 6.4 DIVIDENDS. Notwithstanding anything contained herein to the
contrary, between the date of this Agreement and the Effective Time, MNB may
continue to declare and pay to its stockholders, on dates consistent with its
past practices, its normal quarterly cash dividend not to exceed $0.0625 per
share of MNB Common Stock, and shall declare, pay or make no other dividend or
other distribution or payment in respect of, or redemption of, shares of
44
MNB Common Stock, PROVIDED, HOWEVER, that MNB shall not declare the record
date for any dividend, or pay or make any such dividend or other distribution
or payment, in the quarter in which the Effective Time shall occur. It is the
intent of this Section to provide that the holders of MNB Common Stock will
receive either payment of dividends on their shares of MNB Common Stock as
permitted under this Section or the payment of cash dividends as the holders
of the MNB Exchange Shares for the calendar quarter during which the
Effective Time shall occur, but will not receive and will not become entitled
to receive for the same calendar quarter both the payment of a permitted
dividend as stockholders of MNB and the payment of a cash dividend as the
holders of the MNB Exchange Shares. If MNB does not declare and pay permitted
dividends on its MNB Common Stock in a particular calendar quarter because of
MNB's reasonable expectation that the Effective Time would occur in such
quarter wherein the holders of MNB Common Stock would have become entitled to
receive cash dividends for such calendar quarter on the MNB Exchange Shares,
and the Effective Time does not in fact occur in said calendar quarter, then,
as a result thereof, MNB shall be entitled to declare and pay a permitted
dividend on said shares of MNB Common Stock for said calendar quarter as soon
as reasonably practicable.
SECTION 6.5 SUBSEQUENT MNB FINANCIAL STATEMENTS. As soon as available
after the date hereof, MNB will furnish LBI copies of: (a) each filing made
subsequent to April 1, 2001, by MNB with the SEC; (b) the monthly unaudited
balance sheets and profit and loss statements of MNB on a consolidated basis,
and SNB on a stand-alone basis, prepared in each case for MNB's internal use,
(c) the Call Report of SNB for each quarterly period completed after the date of
this Agreement and prior to the Effective Time; and (d) all other financial
reports or statements submitted by MNB or any MNB Subsidiary to Regulatory
Authorities after the date hereof, to the extent permitted by law (collectively,
the "SUBSEQUENT MNB FINANCIAL STATEMENTS"). The Subsequent MNB Financial
Statements shall be prepared on a basis consistent with past accounting
practices and shall fairly present in all material respects the financial
condition and results of operations for the dates and periods presented, subject
in the case of unaudited financial statements to year-end audit adjustments
(which changes in the aggregate would not reasonably be expected to be
materially adverse). The Subsequent MNB Financial Statements will not include
any material assets or omit to state any material liabilities, absolute or
contingent, or other facts, which inclusion or omission would render such
financial statements misleading in any material respect.
SECTION 6.6 ADVICE OF CHANGES. Between the date of this Agreement and
the Closing Date, MNB will promptly notify LBI in writing if MNB or any MNB
Subsidiary becomes aware of any fact or condition that causes or constitutes a
Breach of any of MNB's representations and warranties as of the date of this
Agreement, or if MNB or any MNB Subsidiary becomes aware of the occurrence after
the date of this Agreement of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a Breach of any
such representation or warranty had such representation or warranty been made as
of the time of occurrence or discovery of such fact or condition. If any such
fact or condition would require any change in the Schedules if such Schedules
were dated the date of the occurrence or discovery of any such fact or
condition, MNB will promptly deliver to LBI a supplement to the Schedules
specifying such change, PROVIDED, HOWEVER, that receipt of notice of such facts
after the date of
45
this Agreement shall have no effect on the truth and accuracy of the
representations and warranties made in this Agreement and the delivery of any
such updated Schedule shall not in itself be sufficient to cure any prior
Breach. During the same period, MNB will promptly notify LBI of the
occurrence of any Breach of any covenant of MNB in this Article or of the
occurrence of any event that might reasonably be expected to make the
satisfaction of the conditions in ARTICLE 10 impossible or unlikely. MNB
shall also provide to LBI copies of each written communication sent to its
stockholders between the date of this Agreement and the Closing Date.
SECTION 6.7 STOCKHOLDERS' MEETING. MNB shall cause a meeting of its
stockholders for the purpose of acting upon this Agreement to be held at the
earliest practicable date after the Registration Statement (as defined below)
has been declared effective by the SEC. MNB shall send to its stockholders at
least thirty (30) days prior to such meeting, notice of such meeting together
with the Proxy Statement-Prospectus (as defined below) which shall include a
copy of this Agreement and a copy of Section 262 of the Delaware Code governing
the rights of dissenting stockholders. Subject to its fiduciary duties, MNB and
its board of directors shall recommend to stockholders the approval of this
Agreement and shall solicit proxies voting only in favor thereof from the
stockholders of MNB.
SECTION 6.8 INFORMATION PROVIDED TO LBI. MNB agrees that none of the
information concerning MNB or any MNB Subsidiary that is provided or to be
provided by MNB to LBI for inclusion or that is included in the Registration
Statement or Proxy Statement-Prospectus and any other documents to be filed with
any Regulatory Authority in connection with the Contemplated Transactions will,
at the respective times such documents are filed and, in the case of the
Registration Statement, when it becomes effective and, with respect to the Proxy
Statement-Prospectus, when mailed, be false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make the
statements therein not misleading or, in the case of the Proxy
Statement-Prospectus, or any amendment thereof or supplement thereto, at the
time of the meeting of MNB's stockholders referred to above, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of any proxy for the meeting in connection with which the Proxy
Statement-Prospectus shall be mailed. Notwithstanding the foregoing, MNB shall
have no responsibility for the truth or accuracy of any information with respect
to LBI or any LBI Subsidiary or any of their Affiliates contained in the
Registration Statement or the Proxy Statement-Prospectus or in any document
submitted to, or other communication with, any Regulatory Authority.
SECTION 6.9 ENVIRONMENTAL MATTERS. LBI may in its discretion, prior to
the Closing, retain at its own expense an independent professional consultant to
perform an environmental site assessment and render to LBI a report (an
"ENVIRONMENTAL REPORT") to determine if any real property in which MNB holds any
interest contains or gives evidence that any violations of Environmental Laws
have occurred on any such property. Neither LBI nor its independent professional
consultant shall enter upon any such real property in which MNB or any MNB
Subsidiary holds only a mortgagee's interest without the prior permission of MNB
and the Person in possession thereof. MNB shall not withhold such permission
unreasonably, and shall use all reasonable efforts to obtain such permission for
LBI from the Person in possession of any
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such mortgaged real property for which LBI desires its independent professional
consultant to conduct a site assessment. LBI shall have no duty to act upon any
information produced by such reviews or investigations with or for the benefit
of MNB, any MNB Subsidiary or any other Person, but shall provide such
information to MNB as soon as practicable after such information becomes
available to LBI.
SECTION 6.10 EXCLUSIVITY. Subject to its fiduciary duties and except as
otherwise set forth herein, none of MNB, any MNB Subsidiary or any of their
respective directors, officers, employees, professional and financial advisors,
representatives, agents and Affiliates shall, directly or indirectly, make,
encourage, facilitate, solicit, initiate or assist any inquiries, proposals,
offers or expressions of interest from, or provide any nonpublic information or
access to MNB's or any MNB Subsidiary's premises to, or participate in any
discussions or negotiations with, any Person (other than LBI and Newco and their
directors, officers, employees, professional and financial advisors,
representatives, agents and Affiliates) concerning or relating to: (a) any
merger, sale of assets not in the Ordinary Course of Business, acquisition,
business combination, change of control or other similar transaction involving
MNB or any MNB Subsidiary, or (b) any purchase or other acquisition by any
Person of five percent (5%) or more of the capital stock of MNB or of any
capital stock of any MNB Subsidiary, or (c) any issuance by any MNB Subsidiary
of any shares of its capital stock (collectively, a "COMPETING MNB PROPOSAL").
MNB will promptly advise LBI of, and communicate to LBI the terms and conditions
of, and the identity of the Person making, any Competing MNB Proposal, and will
promptly furnish LBI with copies of any non-privileged documents provided to and
received from such Person, and summaries of any other communications with
respect to such Competing MNB Proposal. Upon the date of this Agreement, MNB
will terminate all discussions and negotiations that it has heretofore engaged
in or conducted with any other Person with respect to any of the above, and will
advise its directors, officers, employees, professional and financial advisors,
representatives, agents and Affiliates to also terminate the same.
Notwithstanding the foregoing, MNB may engage in discussions or negotiations
with, furnish nonpublic information concerning MNB and any MNB Subsidiary and
their respective properties, assets and business, and grant access to the
facilities of MNB and any MNB Subsidiary, to any Person that hereafter makes a
Competing MNB Proposal that was not directly or indirectly, after the date
hereof, made, encouraged, facilitated, solicited, initiated or assisted by MNB,
any MNB Subsidiary or any of their respective directors, officers, employees,
professional or financial advisors, representatives, agents or Affiliates (an
"UNSOLICITED MNB PROPOSAL"), but only to the extent that: (i) the board of
directors of MNB receives a written opinion from its independent financial
advisor that such proposal may be superior to the Contemplated Transactions from
a financial point of view to MNB's stockholders; (ii) MNB's outside legal
counsel advises MNB that the maker of the Unsolicited MNB Proposal may legally
acquire MNB and SNB; (iii) MNB's board of directors, after consultation with its
outside legal counsel, determines in good faith that such action is necessary
for MNB's board of directors to comply with its fiduciary duties to its
stockholders under all applicable Legal Requirements; and (iv) prior to
furnishing such information to, or entering into discussions or negotiations
with, such Person, MNB provides reasonable notice to LBI to the effect that it
is furnishing information to, or entering into discussions or negotiations with,
such Person.
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SECTION 6.11 BEST EFFORTS; COOPERATION. Subject to the terms and
conditions of this Agreement, MNB agrees to exercise good faith and use its Best
Efforts to satisfy the various covenants and conditions to Closing in this
ARTICLE 6 and ARTICLE 10, respectively, and to consummate the Contemplated
Transactions as promptly as possible. MNB will not intentionally take or
intentionally permit to be taken any action that would be a Breach of the terms
or provisions of this Agreement. Between the date of this Agreement and the
Closing Date, MNB will, and will cause each MNB Subsidiary and all of the
Affiliates and Representatives of MNB and each MNB Subsidiary to, cooperate with
LBI with respect to all filings that LBI is required by Legal Requirements to
make in connection with the Contemplated Transactions. In case at any time after
the Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement or to vest Newco with full title to all properties,
assets, rights, approvals, immunities and franchises of MNB, the proper officers
and directors of MNB shall take all such necessary action to vest Newco with
such rights.
SECTION 6.12 AMENDMENT OF MNB RIGHTS AGREEMENT. Prior to the Effective
Time, MNB shall take all actions that may be necessary to amend the Rights
Agreement dated as of March 20, 2001, between MNB and SNB, to provide that LBI
is not an "Acquiring Person" as defined by the Rights Agreement.
SECTION 6.13 ACCRUAL OF COSTS. On or prior to the Closing Date, MNB
shall fully pay or accrue as may be required by GAAP: (a) the cost of any
benefits or contributions supplied or made or to be supplied or made through the
Effective Time under any of the MNB Employee Benefit Plans; (b) the costs of any
corrective action to bring any such plans into compliance with applicable law;
(c) the aggregate cost of complying with any representation, warranty or
covenant of MNB set forth in this Agreement; and (d) all MNB Transactional
Expenses.
ARTICLE 7
COVENANTS OF LBI
From and after the date hereof and until the Effective Time, LBI hereby
covenants and agrees with MNB as follows:
SECTION 7.1 INFORMATION, ACCESS AND CONFIDENTIALITY.
(a) Upon providing reasonable notice, MNB and its
Representatives shall, at all times during normal business hours prior to the
Closing Date, have full and continuing access to the facilities, operations,
records and properties of LBI and each LBI Subsidiary. MNB and its
Representatives may, prior to the Closing Date, make or cause to be made such
reasonable investigation of the operations, records and properties of LBI and
each LBI Subsidiary, including observation of any audit of, and examination of
any audit work papers with respect to, LBI or any LBI Subsidiary, and of its and
their financial and legal condition as MNB shall deem necessary or advisable to
familiarize itself with such records, properties and other matters; provided,
that such access or investigation shall not interfere unnecessarily with the
normal operations of LBI or any of the LBI Subsidiary. Upon request, LBI and
each LBI Subsidiary will
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furnish MNB or its Representatives its attorneys' responses to auditors'
requests for information and such financial and operating data and other
information reasonably requested by MNB developed by LBI or any LBI
Subsidiary, its auditors, accountants or attorneys (PROVIDED with respect to
attorneys, such disclosure shall be limited to information that would not
result in the waiver by LBI or any LBI Subsidiary of any claim of
attorney-client privilege), and will permit MNB or its Representatives to
discuss such information directly with any individual or firm performing
auditing or accounting functions for LBI or any LBI Subsidiary, and such
auditors and accountants shall be directed to furnish copies of any reports
or financial information as developed to MNB or its Representatives. No
investigation by MNB shall affect the representations and warranties made by
LBI. This Section shall not require the disclosure of any information the
disclosure of which to MNB would be prohibited by law.
(b) Any confidential information or trade secrets received
by LBI, its employees or agents in the course of the examination described in
SECTION 6.1 shall be treated confidentially, and any correspondence,
memoranda, records, copies, documents and electronic or other media of any
kind containing either such confidential information, or trade secrets or
both shall be destroyed by LBI or, at MNB's request, returned to MNB in the
event this Agreement is terminated as provided in SECTION 11.1. Such
information shall not be used by LBI or its agents to the detriment of MNB or
any MNB Subsidiary.
SECTION 7.2 CARRY ON IN REGULAR COURSE. LBI and each LBI Subsidiary
shall carry on its business diligently and substantially in the same manner as
is presently being conducted and shall not make or institute any unusual or
material change in its methods of doing business without the prior written
consent of MNB, which consent shall not be unreasonably withheld or delayed. LBI
shall, and shall also cause each LBI Subsidiary to, unless otherwise consented
to in writing in advance by MNB:
(a) conduct its business only in the Ordinary Course of
Business;
(b) use its Best Efforts to preserve intact its current
business organization, keep available the services of its current officers,
employees and agents, and maintain the relations and goodwill with its
suppliers, customers, landlords, creditors, employees, agents and others having
business relationships with it;
(c) confer and consult with MNB concerning operational
matters of a material nature, any sales of investment securities or loans that
were not originated with the intent to sell, and any changes or revisions to the
asset-liability management of LFSB;
(d) enter into loan transactions only in accordance with
sound credit practices and only on terms and conditions which are not materially
more favorable than those available to the borrower from competitive sources in
transactions in the ordinary course of business and consistent with prudent
banking practices and policies and regulations of applicable regulatory
authorities, and in that connection, LBI will consult and discuss with MNB all
new credits or new lending relationships, or extensions or renewals of any
existing credit relationships, approved in excess of $1,000,000 to any Person or
Persons and his, her or their Affiliates from the date hereof to the Effective
Time;
49
(e) consistent with past practice, maintain a reserve for
probable loan and lease losses that is adequate in all material respects to
provide for probable losses, net of recoveries relating to loans previously
charged off, on loans outstanding (including accrued interest receivable);
(f) maintain all of its assets necessary for the conduct
of its business in good operating condition and repair, reasonable wear and tear
and damage by fire or unavoidable casualty excepted, and maintain policies of
insurance upon its assets and with respect to the conduct of its business in
amounts and kinds comparable to that in effect on the date hereof and pay all
premiums on such policies when due;
(g) file in a timely manner all required filings with all
Regulatory Authorities and cause such filings to be true and correct in all
material respects; and
(h) maintain its books, accounts and records in the usual,
regular and ordinary manner, on a basis consistent with prior years and
comply with all Legal Requirements.
With respect to any written request by LBI for MNB's consent to any
non-permitted action of LBI or any LBI Subsidiary described in this Section, LBI
shall be entitled to conclusively presume MNB has consented to any such action
unless LBI shall have received MNB's written objection to such action within
three (3) Business Days of the date of MNB's receipt of such written request.
SECTION 7.3 NEGATIVE COVENANTS. Except as otherwise provided by this
Agreement, between the date of this Agreement and the Closing Date, LBI will
not, and will cause each LBI Subsidiary not to, without the prior written
consent of MNB, which consent shall not be unreasonably withheld or delayed,
take any affirmative action, or fail to take any reasonable action within its
control, as a result of which any of the changes or events listed in SECTION
5.17 is likely to occur. With respect to any written request by LBI for MNB's
consent to any non-permitted action of LBI or any LBI Subsidiary described in
this Section, LBI shall be entitled to conclusively presume MNB has consented to
any such action unless LBI shall have received MNB's written objection to such
action within three (3) Business Days of the date of MNB's receipt of such
written request.
SECTION 7.4 DIVIDENDS. Notwithstanding anything contained herein to the
contrary, between the date of this Agreement and the Effective Time, LBI may
continue to declare and pay to its stockholders, on dates consistent with its
past practices, its normal quarterly cash dividend not to exceed $0.15 per share
of LBI Common Stock, and shall declare, pay or make no other dividend or other
distribution or payment in respect of, or redemption of, shares of LBI Common
Stock, PROVIDED, HOWEVER, that LBI shall not declare the record date for any
dividend, or pay or make any such dividend or other distribution or payment, in
the quarter in which the Effective Time shall occur. It is the intent of this
Section to provide that the holders of LBI Common Stock will receive either
payment of dividends on their shares of LBI Common Stock as permitted under this
Section or the payment of cash dividends as the holders of the LBI Exchange
Shares for the calendar quarter during which the Effective Time shall occur, but
will not receive and will not become entitled to receive for the same calendar
quarter both the
50
payment of a permitted dividend as stockholders of LBI and the payment of a
cash dividend as the holders of the LBI Exchange Shares. If LBI does not
declare and pay permitted dividends on its LBI Common Stock in a particular
calendar quarter because of LBI's reasonable expectation that the Effective
Time would occur in such quarter wherein the holders of LBI Common Stock
would have become entitled to receive cash dividends for such calendar
quarter on the LBI Exchange Shares, and the Effective Time does not in fact
occur in said calendar quarter, then, as a result thereof, LBI shall be
entitled to declare and pay a permitted dividend on said shares of LBI Common
Stock for said calendar quarter as soon as reasonably practicable.
SECTION 7.5 SUBSEQUENT LBI FINANCIAL STATEMENTS. As soon as available
after the date hereof, LBI will furnish MNB copies of: (a) each filing made
subsequent to April 1, 2001, by LBI with the SEC; (b) the monthly unaudited
balance sheets and profit and loss statements of LBI on a consolidated basis,
and LFSB on a stand-alone basis, prepared in each case for LBI's internal use,
(c) the TFR of LFSB for each quarterly period completed after the date of this
Agreement and prior to the Effective Time; and (d) all other financial reports
or statements submitted by LBI or any LBI Subsidiary to Regulatory Authorities
after the date hereof, to the extent permitted by law (collectively, the
"SUBSEQUENT LBI FINANCIAL STATEMENTS"). The Subsequent LBI Financial Statements
shall be prepared on a basis consistent with past accounting practices and shall
fairly present in all material respects the financial condition and results of
operations for the dates and periods presented, subject in the case of unaudited
financial statements to year-end audit adjustments (which changes in the
aggregate would not reasonably be expected to be materially adverse). The
Subsequent LBI Financial Statements will not include any material assets or omit
to state any material liabilities, absolute or contingent, or other facts, which
inclusion or omission would render such financial statements misleading in any
material respect.
SECTION 7.6 ADVICE OF CHANGES. Between the date of this Agreement and
the Closing Date, LBI will promptly notify MNB in writing if LBI or any LBI
Subsidiary becomes aware of any fact or condition that causes or constitutes a
Breach of any of LBI's representations and warranties as of the date of this
Agreement, or if LBI or any LBI Subsidiary becomes aware of the occurrence after
the date of this Agreement of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a Breach of any
such representation or warranty had such representation or warranty been made as
of the time of occurrence or discovery of such fact or condition. If any such
fact or condition would require any change in the Schedules if such Schedules
were dated the date of the occurrence or discovery of any such fact or
condition, LBI will promptly deliver to MNB a supplement to the Schedules
specifying such change, PROVIDED, HOWEVER, that receipt of notice of such facts
after the date of this Agreement shall have no effect on the truth and accuracy
of the representations and warranties made in this Agreement and the delivery of
any such updated Schedule shall not in itself be sufficient to cure any prior
Breach. During the same period, LBI will promptly notify MNB of the occurrence
of any Breach of any covenant of LBI in this Article or of the occurrence of any
event that might reasonably be expected to make the satisfaction of the
conditions in ARTICLE 9 impossible or unlikely. LBI shall also provide to MNB
copies of each written communication sent to its stockholders between the date
of this Agreement and the Closing Date.
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SECTION 7.7 STOCKHOLDERS' MEETING. LBI shall cause a meeting of its
stockholders for the purpose of acting upon this Agreement to be held at the
earliest practicable date after the Registration Statement (as defined below)
has been declared effective by the SEC. LBI shall send to its stockholders at
least thirty (30) days prior to such meeting, notice of such meeting together
with the Proxy Statement-Prospectus (as defined below). Subject to its fiduciary
duties, LBI and its board of directors shall recommend to stockholders the
approval of this Agreement and shall solicit proxies voting only in favor
thereof from the stockholders of LBI.
SECTION 7.8 INFORMATION PROVIDED TO MNB. LBI agrees that none of the
information concerning LBI or any LBI Subsidiary that is provided or to be
provided by LBI to MNB for inclusion or that is included in the Registration
Statement or Proxy Statement-Prospectus and any other documents to be filed with
any Regulatory Authority in connection with the Contemplated Transactions will,
at the respective times such documents are filed and, in the case of the
Registration Statement, when it becomes effective and, with respect to the Proxy
Statement-Prospectus, when mailed, be false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make the
statements therein not misleading or, in the case of the Proxy
Statement-Prospectus, or any amendment thereof or supplement thereto, at the
time of the meeting of LBI's stockholders referred to above, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of any proxy for the meeting in connection with which the Proxy
Statement-Prospectus shall be mailed. Notwithstanding the foregoing, LBI shall
have no responsibility for the truth or accuracy of any information with respect
to MNB or any MNB Subsidiary or any of their Affiliates contained in the
Registration Statement or the Proxy Statement-Prospectus or in any document
submitted to, or other communication with, any Regulatory Authority.
SECTION 7.9 ENVIRONMENTAL MATTERS. MNB may in its discretion, prior to
the Closing, retain at its own expense an independent professional consultant to
perform an environmental site assessment and render to MNB an Environmental
Report to determine if any real property in which LBI holds any interest
contains or gives evidence that any violations of Environmental Laws have
occurred on any such property. Neither MNB nor its independent professional
consultant shall enter upon any such real property in which LBI or any LBI
Subsidiary holds only a mortgagee's interest without the prior permission of LBI
and the Person in possession thereof. LBI shall not withhold such permission
unreasonably, and shall use all reasonable efforts to obtain such permission for
MNB from the Person in possession of any such mortgaged real property for which
MNB desires its independent professional consultant to conduct a site
assessment. MNB shall have no duty to act upon any information produced by such
reviews or investigations with or for the benefit of LBI, any LBI Subsidiary or
any other Person, but shall provide such information to LBI as soon as
practicable after such information becomes available to MNB.
SECTION 7.10 EXCLUSIVITY. Subject to its fiduciary duties and except as
otherwise set forth herein, none of LBI, any LBI Subsidiary or any of their
respective directors, officers, employees, professional and financial advisors,
representatives, agents and Affiliates shall, directly or indirectly, make,
encourage, facilitate, solicit, initiate or assist any inquiries,
52
proposals, offers or expressions of interest from, or provide any nonpublic
information or access to LBI's or any LBI Subsidiary's premises to, or
participate in any discussions or negotiations with, any Person (other than
MNB and Newco and their directors, officers, employees, professional and
financial advisors, representatives, agents and Affiliates) concerning or
relating to: (a) any merger, sale of assets not in the Ordinary Course of
Business, acquisition, business combination, change of control or other
similar transaction involving LBI or any LBI Subsidiary, or (b) any purchase
or other acquisition by any Person of five percent (5%) or more of the
capital stock of LBI or of any capital stock of any LBI Subsidiary, or (c)
any issuance by any LBI Subsidiary of any shares of its capital stock
(collectively, a "COMPETING LBI PROPOSAL"). LBI will promptly advise MNB of,
and communicate to MNB the terms and conditions of, and the identity of the
Person making, any Competing LBI Proposal, and will promptly furnish MNB with
copies of any non-privileged documents provided to and received from such
Person, and summaries of any other communications with respect to such
Competing LBI Proposal. Upon the date of this Agreement, LBI will terminate
all discussions and negotiations that it has heretofore engaged in or
conducted with any other Person with respect to any of the above, and will
advise its directors, officers, employees, professional and financial
advisors, representatives, agents and Affiliates to also terminate the same.
Notwithstanding the foregoing, LBI may engage in discussions or negotiations
with, furnish nonpublic information concerning LBI and any LBI Subsidiary and
their respective properties, assets and business, and grant access to the
facilities of LBI and any LBI Subsidiary, to any Person that hereafter makes
a Competing LBI Proposal that was not directly or indirectly, after the date
hereof, made, encouraged, facilitated, solicited, initiated or assisted by
LBI, any LBI Subsidiary or any of their respective directors, officers,
employees, professional or financial advisors, representatives, agents or
Affiliates (an "UNSOLICITED LBI PROPOSAL"), but only to the extent that: (i)
the board of directors of LBI receives a written opinion from its independent
financial advisor that such proposal may be superior to the Contemplated
Transactions from a financial point of view to LBI's stockholders; (ii) LBI's
outside legal counsel advises LBI that the maker of the Unsolicited LBI
Proposal may legally acquire LBI and LFSB; (iii) LBI's board of directors,
after consultation with its outside legal counsel, determines in good faith
that such action is necessary for LBI's board of directors to comply with its
fiduciary duties to its stockholders under all applicable Legal Requirements;
and (iv) prior to furnishing such information to, or entering into
discussions or negotiations with, such Person, LBI provides reasonable notice
to MNB to the effect that it is furnishing information to, or entering into
discussions or negotiations with, such Person.
SECTION 7.11 BEST EFFORTS; COOPERATION. Subject to the terms and
conditions of this Agreement, LBI agrees to exercise good faith and use its Best
Efforts to satisfy the various covenants and conditions to Closing in this
ARTICLE 7 and ARTICLE 9, respectively, and to consummate the Contemplated
Transactions as promptly as possible. LBI will not intentionally take or
intentionally permit to be taken any action that would be a Breach of the terms
or provisions of this Agreement. Between the date of this Agreement and the
Closing Date, LBI will, and will cause each LBI Subsidiary and all of the
Affiliates and Representatives of LBI and each LBI Subsidiary to, cooperate with
MNB with respect to all filings that MNB is required by Legal Requirements to
make in connection with the Contemplated Transactions. In case at any time after
the Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement or to vest Newco with full title to all properties,
assets, rights,
53
approvals, immunities and franchises of LBI, the proper officers and
directors of LBI shall take all such necessary action to vest Newco with such
rights.
SECTION 7.12 DATA PROCESSING AGREEMENT. LBI agrees to consult with MNB
prior to the entry by it or any LBI subsidiary into any new, or any extension of
any existing, data processing agreement. LBI agrees to coordinate with MNB the
negotiation of any new or extension of any existing data processing agreement
with the purpose of achieving the best possible economic and business result in
light of the Bank Merger.
SECTION 7.13 ACCRUAL OF COSTS. On or prior to the Closing Date, LBI
shall fully pay or accrue as may be required by GAAP: (a) the cost of any
benefits or contributions supplied or made or to be supplied or made through the
Effective Time under any of the LBI Employee Benefit Plans; (b) the costs of any
corrective action to bring any such plans into compliance with applicable law;
(c) the aggregate cost of complying with any representation, warranty or
covenant of LBI set forth in this Agreement; and (d) all LBI Transactional
Expenses.
ARTICLE 8
COVENANTS OF ALL PARTIES
SECTION 8.1 NECESSARY APPROVALS. LBI and MNB agree that MNB's counsel
will have primary responsibility for preparation of the Registration Statement
and MNB will have primary responsibility for the preparation of the necessary
applications for regulatory approval of the Contemplated Transactions. Each of
LBI and MNB and their respective Subsidiaries and Newco agree fully and promptly
to cooperate with each other and their respective counsels and accountants in
connection with any steps to be taken as part of their obligations under this
Agreement.
SECTION 8.2 REGULATORY APPROVALS. By no later than forty-five (45) days
after the date of this Agreement, Newco shall make all appropriate filings with
Regulatory Authorities for approval of the Contemplated Transactions, including
the preparation of an application or any amendment thereto or any other required
statements or documents filed or to be filed by any party with: (a) the Federal
Reserve pursuant to the BHCA; (b) the OTS pursuant to the HOLA; (c) the OCC
pursuant to the National Bank Act; and (d) any other Person or Regulatory
Authority pursuant to any applicable Legal Requirement, for authority to
consummate the Contemplated Transactions. LBI and MNB shall pursue in good faith
the regulatory approvals necessary to consummate the Contemplated Transactions.
In advance of any filing made under this Section, LBI and MNB and their
respective counsel shall be provided with the opportunity to comment thereon,
and LBI, MNB and Newco each agree promptly to advise each other and each other's
counsel of any material communication received by it or its counsel from any
Regulatory Authorities with respect to such filings.
SECTION 8.3 SEC REGISTRATION. By no later than sixty (60) days after
the date of this Agreement, Newco shall file with the SEC a Registration
Statement on an appropriate form under the Securities Act covering the shares of
Newco Common Stock to be issued pursuant to
54
this Agreement and shall use all reasonable efforts to cause the same to
become effective and thereafter, until the Effective Time or lawful
termination of this Agreement, to keep the same effective and, if necessary,
amend and supplement the same (the Registration Statement, and any amendments
and supplements thereto, is referred to as the "REGISTRATION STATEMENT"). The
Registration Statement shall include a Proxy Statement-Prospectus prepared by
Newco that is reasonably acceptable to MNB and LBI (the "PROXY
STATEMENT-PROSPECTUS"), for use in connection with the meetings of the
stockholders of MNB and LBI referred to in SECTION 6.7 and SECTION 7.7,
respectively, of this Agreement, all in accordance with the rules and
regulations of the SEC. Newco shall, as soon as practicable after the
execution of this Agreement, make all filings required to obtain all permits,
authorizations, consents or approvals required under any applicable Legal
Requirements (including all state securities laws) for the issuance of the
shares of Newco Common Stock to stockholders of LBI and MNB. In advance of
any filing made under this Section, LBI and MNB and their respective counsel
shall be provided with the opportunity to comment thereon, and LBI, MNB and
Newco each agree promptly to advise each other and each other's counsel of
any material communication received by it or its counsel from the SEC or any
other Regulatory Authorities with respect to such filings.
SECTION 8.4 CUSTOMER AND EMPLOYEE RELATIONSHIPS. Each of LBI and MNB
agrees that its respective representatives may jointly:
(a) participate in meetings or discussions with officers
and employees of MNB and LBI and their Subsidiaries in connection with
employment opportunities with Newco after the Effective Time; and
(b) contact Persons having dealings with MNB or LBI or any
of its respective Subsidiaries for the purpose of informing such Persons of
the services to be offered by Newco after the Effective Time.
SECTION 8.5 NEWCO EXPENSES. Except as otherwise provided herein, all
costs and expenses incurred by a party to this Agreement shall be borne by such
party, including the fees of their respective accountants and attorneys. All
organizational expenses of Newco and other reasonable expenses incurred by Newco
in the performance of its duties under this Agreement shall be shared equally
between MNB and LBI.
SECTION 8.6 PUBLICITY. Prior to the Effective Time, the parties to this
Agreement will consult with each other before issuing any press releases or
otherwise making any public statements with respect to this Agreement or the
Contemplated Transactions and shall not issue any such press release or make any
such public statement without the prior consent of the other parties, except as
may be required by law.
SECTION 8.7 EMPLOYEE BENEFIT PLAN PAYMENTS; NEWCO EMPLOYEE BENEFITS.
LBI and MNB agree to take or cause to be taken the actions described in SCHEDULE
8.7 with respect to the payment of amounts due under the LBI Employee Benefits
Plans and MNB Employee Benefits Plans, and to the organization of Newco. LBI and
MNB further agree to cooperate to determine prior to the Closing the types of
benefits to be offered after the Effective Time by Newco to former employees of
MNB and LBI who become employees of Newco.
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SECTION 8.8 DIRECTOR AND OFFICER LIABILITY COVERAGE. LBI and MNB agree
to cooperate to attempt to obtain after the Effective Time directors' and
officers' liability insurance coverage for the officers and directors of Newco,
to the extent the same is economically practicable. Any such coverage shall be
on substantially the same terms and conditions and provide the same coverage
against personal liability for actions taken after the Effective Time as the
most protective coverage which is currently provided to officers and directors
of either MNB or LBI. Such coverage may be provided through an insurance policy
or through an agreement by Newco to indemnify such officers and directors. LBI
and MNB also agree to cooperate to attempt to obtain as of the Effective Time
and to maintain in effect for a period of not less than three (3) years after
the Effective Time directors' and officers' liability insurance coverage for the
officers and directors of each of LBI and MNB with respect to actions taken by
them prior to the Effective Time to the extent that such coverage is available
and mutually determined by the parties to be economically practicable ("TAIL
COVERAGE"). Notwithstanding any such Tail Coverage, the parties further agree
that after the Effective Time Newco will indemnify for a period of six (6) years
the current and past officers and directors of LBI and MNB for all actions taken
by them prior to the Effective Time in their respective capacities as officers
and directors of LBI and MNB to the same extent as the indemnification provided
by LBI or MNB to its respective officers and directors as of the time
immediately prior to the Effective Time. The directors and officers of LBI and
MNB shall be third party beneficiaries to this Section and this Section shall
survive the Effective Time.
SECTION 8.9 ACTIONS BY NEWCO. Prior to the date hereof, LBI and MNB
have incorporated Newco under the Delaware Code, and Newco has issued one half
of Newco's capital stock to each of MNB and LBI. MNB and LBI agree that from and
after the date hereof they shall each cause Newco to take all other corporate
and other actions that are necessary for Newco to comply with its respective
obligations under this Agreement and to effectuate the Contemplated
Transactions.
SECTION 8.10 EMPLOYMENT AGREEMENTS. Unless otherwise provided in this
Agreement, Newco shall honor the terms of all employment, change in control and
severance agreements in effect as of the date of this Agreement and to which any
of LBI, MNB or any of their respective Subsidiaries is a party. LBI and MNB
shall cause Newco to enter into employment agreements in the form of EXHIBIT G
with the individuals listed on such Exhibit to become effective at the Effective
Time.
SECTION 8.11 TRADEMARKS. Prior to the Closing Date, LBI and MNB shall
cause Newco to purchase any Intellectual Property Assets (including logos) and
associated goodwill owned by LBI, MNB or any of their respective Subsidiaries.
ARTICLE 9
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF MNB
MNB's obligation to consummate the Contemplated Transactions and
to take the other actions required to be taken by MNB at the Closing is subject
to the satisfaction, at or prior to the
56
Closing, of each of the following conditions (any of which may be waived by
MNB, in whole or in part):
SECTION 9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of LBI set forth in this Agreement shall be true
and correct in all material respects with the same force and effect as if all of
such representations and warranties were made at the Closing Date, PROVIDED,
HOWEVER, that to the extent such representations and warranties expressly relate
to an earlier date, such representations shall be true and correct in all
material respects on and as of such earlier date, and PROVIDED FURTHER, that to
the extent that such representations and warranties are made in this Agreement
subject to a standard of materiality or Knowledge, such representations and
warranties shall be true and correct in all respects.
SECTION 9.2 LBI'S PERFORMANCE. LBI shall have performed or complied in
all material respects with all of the covenants and obligations to be performed
or complied with by it under the terms of this Agreement on or prior to the
Closing Date, PROVIDED, HOWEVER, that to the extent performance and compliance
with such covenants and obligations are subject in this Agreement to a standard
of materiality, LBI shall have performed and complied in all respects with such
covenants and obligations.
SECTION 9.3 PROCEEDINGS AND DOCUMENTS SATISFACTORY. All proceedings,
corporate or other, to be taken by LBI in connection with the Contemplated
Transactions, and all documents incident thereto, shall be reasonably
satisfactory in form and substance to counsel for MNB.
SECTION 9.4 STATUTORY REQUIREMENTS. This Agreement shall have been duly
and validly authorized by the stockholders of LBI. Such stockholder approval
shall have been obtained in conformity with all applicable laws at a meeting of
stockholders for which proxies are solicited in compliance with applicable laws
and requirements.
SECTION 9.5 NO PROCEEDINGS. Neither LBI nor any LBI Subsidiary shall be
made a party to, or to the Knowledge of LBI, Threatened by any Proceedings
which, in the reasonable opinion of MNB, have or are likely to have a Material
Adverse Effect on LBI, and no Proceeding shall have been instituted, made or
threatened by any Person relating to the Merger or the validity or propriety of
the Contemplated Transactions that MNB reasonably believes will result in
material damages or an Order enjoining the Merger or a determination that LBI
failed to comply with legal requirements of a material nature in connection with
any of the Contemplated Transactions.
SECTION 9.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. From the date hereof
to the Effective Time, there shall be and have been no Material Adverse Effect
on LBI, or any event or occurrence reasonably likely to result in a Material
Adverse Effect on LBI, excluding costs associated with the Contemplated
Transactions and any payments that become due and payable under any LBI Employee
Benefits Plans as a result of the occurrence of the Contemplated Transactions.
SECTION 9.7 REGULATORY APPROVALS. All of the approvals from Regulatory
Authorities referred to in SECTION 8.2, or otherwise reasonably necessary in the
opinion of MNB to
57
consummate the Contemplated Transactions, shall have been obtained and shall
be reasonably satisfactory to MNB.
SECTION 9.8 REGISTRATION STATEMENT. The Registration Statement shall
have become effective and no stop order suspending such effectiveness shall have
been issued or threatened by the SEC that suspends the effectiveness of the
Registration Statement and no Proceeding shall have been commenced or be pending
or Threatened for such purpose.
SECTION 9.9 FAIRNESS OPINION. As of the date of this Agreement and
prior to distribution of the Proxy Statement-Prospectus to the stockholders of
MNB, MNB shall have received an opinion from McConnell, Budd & Downes, Inc. to
the effect that the consideration to be received by MNB's stockholders in
connection with the Merger, from a financial point of view, is fair to MNB's
stockholders, and the same shall not have been withdrawn prior to the Closing.
SECTION 9.10 ENVIRONMENTAL REPORTS. MNB shall have been granted
acceptable access to any real property in which LBI or any LBI Subsidiary has an
interest and for which MNB desired its independent professional consultant to
prepare an Environmental Report, and the results of any Environmental Report
rendered to MNB with respect to such real property shall have not disclosed any
violation of Environmental Laws which would reasonably be expected to have a
Material Adverse Effect on LBI.
SECTION 9.11 TAX OPINION. MNB shall have received an opinion of KPMG
LLP, in form and substance reasonably satisfactory to it, dated as of the date
of the Registration Statement and updated through the Closing Date,
substantially to the effect that the Merger will constitute a tax free
reorganization under Section 368 of the Code.
SECTION 9.12 OTHER CONSENTS AND APPROVALS. Any consents or approvals
other than those described in Section 9.7 that are required to be secured by LBI
to consummate the Contemplated Transactions shall have been obtained and shall
be reasonably satisfactory to MNB.
ARTICLE 10
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF LBI
LBI's obligation to consummate the Contemplated Transactions and to
take the other actions required to be taken by LBI at the Closing is subject to
the satisfaction, at or prior to the Closing, of each of the following
conditions (any of which may be waived by LBI, in whole or in part):
SECTION 10.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of MNB set forth in this Agreement shall be true
and correct in all material respects with the same force and effect as if all of
such representations and warranties were made at the Closing Date, PROVIDED,
HOWEVER, that to the extent such representations and warranties expressly relate
to an earlier date, such representations shall be true and correct in all
58
material respects on and as of such earlier date, and PROVIDED FURTHER, that to
the extent that such representations and warranties are made in this Agreement
subject to a standard of materiality or Knowledge, such representations and
warranties shall be true and correct in all respects.
SECTION 10.2 MNB'S PERFORMANCE. MNB shall have performed or complied in
all material respects with all of the covenants and obligations to be performed
or complied with by it under the terms of this Agreement on or prior to the
Closing Date, PROVIDED, HOWEVER, that to the extent performance and compliance
with such covenants and obligations are subject in this Agreement to a standard
of materiality, MNB shall have performed and complied in all respects with such
covenants and obligations.
SECTION 10.3 PROCEEDINGS AND DOCUMENTS SATISFACTORY. All proceedings,
corporate or other, to be taken by MNB in connection with the Contemplated
Transactions, and all documents incident thereto, shall be reasonably
satisfactory in form and substance to counsel for LBI.
SECTION 10.4 STATUTORY REQUIREMENTS. This Agreement shall have been
duly and validly authorized by the stockholders of MNB. Such stockholder
approval shall have been obtained in conformity with all applicable laws at a
meeting of stockholders for which proxies are solicited in compliance with
applicable laws and requirements.
SECTION 10.5 NO PROCEEDINGS. Neither MNB nor any MNB Subsidiary shall
be made a party to, or to the Knowledge of MNB, Threatened by any Proceedings
which, in the reasonable opinion of LBI, have or are likely to have a Material
Adverse Effect on MNB, and no Proceeding shall have been instituted, made or
threatened by any Person relating to the Merger or the validity or propriety of
the Contemplated Transactions that LBI reasonably believes will result in
material damages or an Order enjoining the Merger or a determination that MNB
failed to comply with legal requirements of a material nature in connection with
any of the Contemplated Transactions.
SECTION 10.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. From the date hereof
to the Effective Time, there shall be and have been no Material Adverse Effect
on MNB, or any event or occurrence reasonably likely to result in a Material
Adverse Effect on MNB, excluding costs associated with the Contemplated
Transactions and any payments that become due and payable under any MNB Employee
Benefits Plans as a result of the occurrence of the Contemplated Transactions.
SECTION 10.7 REGULATORY APPROVALS. All of the approvals from Regulatory
Authorities referred to in SECTION 8.2, or otherwise reasonably necessary in the
opinion of LBI to consummate the Contemplated Transactions, shall have been
obtained and shall be reasonably satisfactory to LBI.
SECTION 10.8 REGISTRATION STATEMENT. The Registration Statement shall
have become effective and no stop order suspending such effectiveness shall have
been issued or threatened by the SEC that suspends the effectiveness of the
Registration Statement and no Proceeding shall have been commenced or be pending
or Threatened for such purpose.
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SECTION 10.9 ACCRUAL OF COSTS. On or prior to the Closing Date, the
sum of: (a) the cost of any benefits or contributions supplied or made or to
be supplied or made through the Effective Time under any of the MNB Employee
Benefit Plans; (b) the costs of any corrective action to bring any such plans
into compliance with applicable law; (c) the aggregate cost of complying with
any representation, warranty or covenant of MNB set forth in this Agreement;
and (d) all MNB Transactional Expenses shall be fully paid or accrued for in
accordance with GAAP.
SECTION 10.10 FAIRNESS OPINION. As of the date of this Agreement and
prior to distribution of the Proxy Statement-Prospectus to the stockholders
of LBI, LBI shall have received an opinion from Keefe Bruyette & Woods, Inc.
to the effect that the consideration to be received by LBI's stockholders in
connection with the Merger, from a financial point of view, is fair to LBI's
stockholders, and the same shall not have been withdrawn prior to the Closing.
SECTION 10.11 ENVIRONMENTAL REPORTS. LBI shall have been granted
acceptable access to any real property in which MNB or any MNB Subsidiary has
an interest and for which LBI desired its independent professional consultant
to prepare an Environmental Report, and the results of any Environmental
Report rendered to LBI with respect to such real property shall have not
disclosed any violation of Environmental Laws which would reasonably be
expected to have a Material Adverse Effect on MNB.
SECTION 10.12 TAX OPINION. LBI shall have received an opinion of
KPMG LLP, in form and substance reasonably satisfactory to it, dated as of
the date of the Registration Statement and updated through the Closing Date,
substantially to the effect that the Merger will constitute a tax free
reorganization under Section 368 of the Code.
SECTION 10.13 OTHER CONSENTS AND APPROVALS. Any consents or
approvals other than those described in SECTION 10.7 that are required to be
secured by MNB to consummate the Contemplated Transactions shall have been
obtained and shall be reasonably satisfactory to LBI.
ARTICLE 11
TERMINATION AND ABANDONMENT
SECTION 11.1 TERMINATION OF AGREEMENT. This Agreement may be
terminated only as set forth below:
(a) by mutual consent of the Boards of Directors of
MNB and LBI, each evidenced by appropriate written resolutions;
(b) by MNB if: (i) any of the conditions in ARTICLE 9
has not been satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of MNB to
comply with its obligations under this Agreement); (ii) the failure to
satisfy such condition would reasonably be expected to have a Material
Adverse Effect upon Newco or its stockholders if the Closing were to occur;
and (iii) MNB has not waived such condition on or before the Closing Date,
PROVIDED, HOWEVER, that the condition set forth in clause
60
(ii) of this paragraph need not be satisfied to terminate this Agreement if
the failure to satisfy any condition was the result of any intentional or
grossly negligent: (A) action, (B) failure to act or (C) misrepresentation,
of or by LBI;
(c) by LBI if: (i) any of the conditions in ARTICLE 10
has not been satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of LBI to
comply with its obligations under this Agreement); (ii) the failure to
satisfy such condition would reasonably be expected to have a Material
Adverse Effect upon Newco or its stockholders if the Closing were to occur;
and (iii) LBI has not waived such condition on or before the Closing Date,
PROVIDED, HOWEVER, that the condition set forth in clause (ii) of this
paragraph need not be satisfied to terminate this Agreement if the failure to
satisfy any condition was the result of any intentional or grossly negligent:
(A) action, (B) failure to act or (C) misrepresentation, of or by MNB;
(d) by MNB by giving written notice of such
termination to LBI if: (i) there has been (A) a material breach of any
covenant herein (except for breaches of SECTION 7.7 or SECTION 7.10, which
are separately addressed in SECTION 11.1(g)) on the part of LBI which has not
been cured or adequate assurance of cure given, in either case within thirty
(30) Business Days following notice of such breach from MNB, unless such
breach or failure is a result of the failure by MNB to perform and comply in
all material respects with any of its material obligations under this
Agreement that are to be performed or complied with by it prior to or on the
date required hereunder; or (B) a breach of a representation or warranty of
LBI herein that (individually or, together with other such breaches, in the
aggregate) could reasonably be expected to have a Material Adverse Effect on
Newco following the consummation of the Merger, and that, in the reasonable
opinion of MNB's board of directors, by its nature cannot be cured on or
prior to the Termination Date; or (ii) there shall have occurred or been
proposed after the date of this Agreement, any change in any Legal
Requirement, or after the date of this Agreement there shall have been any
Order by any Regulatory Authority that could reasonably be expected to
prevent or delay consummation of the Merger beyond the Termination Date;
(e) by LBI by giving written notice of such
termination to MNB if: (i) there has been (A) a material breach of any
covenant herein (except for breaches of SECTION 6.7 or SECTION 6.10 which are
separately addressed in SECTION 11.1(h)) on the part of MNB which has not
been cured or adequate assurance of cure given, in either case within thirty
(30) Business Days following notice of such breach from LBI, unless such
breach or failure is a result of the failure by LBI to perform and comply in
all material respects with any of its material obligations under this
Agreement which are to be performed or complied with by it prior to or on the
date required hereunder; or (B) a breach of a representation or warranty of
MNB herein that (individually or, together with other such breaches, in the
aggregate) could reasonably be expected to have a Material Adverse Effect on
Newco, following the consummation of the Merger, and that, in the reasonable
opinion of LBI's board of directors, by its nature cannot be cured on or
prior to the Termination Date; or (ii) there shall have occurred or been
proposed after the date of this Agreement, any change in any Legal
Requirement, or after the date of this Agreement there shall have been any
Order by any Regulatory Authority that could reasonably be expected to
prevent or delay consummation of the Merger beyond the Termination Date;
61
(f) by MNB or LBI, by giving written notice of such
termination to the other party or parties, if: (i) the Federal Reserve, the
OTS the OCC or any Regulatory Authority the approval of which is required for
consummation of the Contemplated Transactions has denied approval of any of
the Contemplated Transactions and such denial has become final and
nonappealable; (ii) any application, filing or notice for a regulatory
approval has been withdrawn at the request or recommendation of the
applicable Regulatory Authority and a petition for rehearing shall not have
been granted or an amended application shall not have been accepted for
filing by the applicable Regulatory Authority within the sixty (60) day
period following such withdrawal; or (iii) the Effective Time shall not have
occurred at or before 11:59 p.m. on the Termination Date, PROVIDED, HOWEVER
(and without limiting the applicability, if any, of the provisions of SECTION
11.2 below, with respect to the occurrence of any event described in clauses
(i) or (ii) above), that the right to terminate this Agreement under this
SECTION 11.1(f) shall not be available to any party to this Agreement whose
failure to fulfill any of its obligations (excluding warranties and
representations) under this Agreement has been the cause of or resulted in
the occurrence of the event described in clause (iii) above;
(g) by MNB, by giving written notice of such
termination to LBI, and subject to the special termination fee set forth in
SECTION 11.5(a) if: (i) LBI breaches its obligations under SECTION 7.10; (ii)
LBI breaches any of its obligations under SECTION 7.7 to call a stockholders'
meeting to vote on, and to recommend to its stockholders to vote to approve,
this Agreement and the Contemplated Transactions, including the Merger; or
(iii) LBI's stockholders fail to approve this Agreement and the Merger;
(h) by LBI, by giving written notice of such
termination to MNB, and subject to the special termination fee set forth in
SECTION 11.5(b) if: (i) MNB breaches its obligations under SECTION 6.10; (ii)
MNB breaches any of its obligations under SECTION 6.7 to call a stockholders'
meeting to vote on, and to recommend to its stockholders to vote to approve,
this Agreement and the Contemplated Transactions, including the Merger; or
(iii) MNB's stockholders fail to approve this Agreement and the Merger;
(i) by MNB, by giving written notice of such
termination to LBI, and subject to the special termination fee set forth in
SECTION 11.5(A), if MNB receives an Unsolicited MNB Proposal that is
determined in good faith by the MNB Board of Directors, after consultation
with MNB's financial advisor, is on terms that are more favorable to the
stockholders of MNB than the Merger and has a reasonable prospect of being
consummated in accordance with its terms (a "SUPERIOR MNB PROPOSAL");
PROVIDED, HOWEVER, that MNB shall not be permitted to terminate this
Agreement pursuant to this SECTION 11.1(i) unless MNB shall have given LBI
five (5) Business Days' prior written notice thereof (or, if there are less
than five (5) Business Days remaining prior to the Closing, written notice
prior to the Closing) of its intent to so terminate this Agreement pursuant
to this SECTION 11.1(i), together with a summary of the terms of, and the
identity of the Person making, such Superior MNB Proposal;
(j) by LBI, by giving written notice of such
termination to MNB, and subject to the special termination fee set forth in
SECTION 11.5(b), if LBI receives an Unsolicited LBI Proposal that is
determined in good faith by the LBI Board of Directors, after consultation
with
62
LBI's financial advisor, is on terms that are more favorable to the
stockholders of LBI than the Merger and has a reasonable prospect of being
consummated in accordance with its terms (a "SUPERIOR LBI PROPOSAL"),
PROVIDED, HOWEVER, that LBI shall not be permitted to terminate this
Agreement pursuant to this SECTION 11.1(j) unless LBI shall have given MNB
five (5) Business Days' prior written notice thereof (or, if there are less
than five (5) Business Days remaining prior to the Closing, written notice
prior to the Closing) of its intent to so terminate this Agreement pursuant
to this SECTION 11.1(j), together with a summary of the terms of, and the
identity of the Person making, such Superior LBI Proposal;
(k) by MNB, by giving written notice of such
termination to LBI, and subject to the special termination fee set forth in
SECTION 11.5(b), if the fairness opinion provided for in SECTION 9.9 shall
have been withdrawn prior to the Closing; or
(l) by LBI, by giving written notice of such
termination to MNB, and subject to the special termination fee set forth in
SECTION 11.5(a), if the fairness opinion provided for in SECTION 10.9 shall
have been withdrawn prior to the Closing.
SECTION 11.2 EFFECT OF TERMINATION OR ABANDONMENT. In the event of
the termination of this Agreement and the abandonment of the Merger pursuant
to SECTION 11.1, this Agreement shall become null and void, MNB shall bear
all MNB Transactional Expenses, LBI shall bear all LBI Transactional
Expenses, and there shall be no liability of one party to the other or any
restrictions on the future activities on the part of any party to this
Agreement, or its respective directors, officers or stockholders, except for
the obligations of MNB and LBI concerning confidentiality referred to in
SECTION 6.1 and SECTION 7.1, respectively, and except as provided under
SECTION 11.3, SECTION 11.4 and SECTION 11.5.
SECTION 11.3 PAYMENTS TO LBI. Subject to the further provisions of
this Section, if: (a) LBI terminates this Agreement pursuant to SECTION
11.1(h)(iii); or (b) MNB terminates this Agreement pursuant to SECTION
11.1(k), then in any such case, MNB shall pay to LBI, upon its written
demand, the LBI Transactional Expenses in an amount not to exceed $350,000.
Also subject to the further provisions of this Section, if LBI terminates
this Agreement pursuant to SECTION 11.1(e)(i)(a), SECTION 11.1(h)(i) or
SECTION 11.1(h)(ii), then in any such case, MNB shall pay to LBI, upon its
written demand, the LBI Transactional Expenses in an amount not to exceed
$350,000, and an additional sum equal to $500,000 (the "MNB BASE TERMINATION
FEE"). The payment of the sums described in this Section shall be made by
wire transfer of immediately available funds to such account as LBI shall
designate, such sums shall constitute liquidated damages and the receipt
thereof shall be the sole and exclusive remedy of LBI and the LBI
Subsidiaries against MNB, the MNB Subsidiaries and their respective officers,
directors, employees and stockholders for any claims arising from or relating
in any way to this Agreement or the transactions contemplated herein;
PROVIDED, HOWEVER, that nothing herein shall preclude or bar LBI from
asserting or enforcing any such claim against any Person other than MNB, the
MNB Subsidiaries and their respective officers, directors, employees and
stockholders and the foregoing is made expressly subject to the provisions of
SECTION 11.5. Notwithstanding the foregoing, this SECTION 11.3 shall not
require MNB to pay to LBI any MNB Base Termination Fee or LBI Transactional
Expenses if the Merger is not consummated as a result of the lawful
termination of
63
this Agreement by (x) the mutual consent of LBI and MNB pursuant to SECTION
11.1(a), (y) LBI or MNB pursuant to SECTION 11.1(f), or (z) LBI pursuant to
SECTION 11.1(e)(ii).
SECTION 11.4 PAYMENTS TO MNB. Subject to the further provisions of
this Section, if: (a) MNB terminates this Agreement pursuant to SECTION
11.1(g)(iii); or (b) LBI terminates this Agreement pursuant to SECTION
11.1(l), then in any such case, LBI shall pay to MNB, upon its written
demand, the MNB Transactional Expenses in an amount not to exceed $350,000.
Also subject to the further provisions of this Section, if MNB terminates
this Agreement pursuant to SECTION 11.1(d)(i)(a), SECTION 11.1(g)(i) or
SECTION 11.1(g)(ii), then in any such case, LBI shall pay to MNB, upon its
written demand, the MNB Transactional Expenses in an amount not to exceed
$350,000, and an additional sum equal to $500,000 (the "LBI BASE TERMINATION
FEE"). The payment of the sums described in this Section shall be made by
wire transfer of immediately available funds to such account as MNB shall
designate, such sums shall constitute liquidated damages and the receipt
thereof shall be the sole and exclusive remedy of MNB and the MNB
Subsidiaries against LBI, the LBI Subsidiaries and their respective officers,
directors, employees and stockholders for any claims arising from or relating
in any way to this Agreement or the transactions contemplated herein;
PROVIDED, HOWEVER, that nothing herein shall preclude or bar MNB from
asserting or enforcing any such claim against any Person other than LBI, the
LBI Subsidiaries and their respective officers, directors, employees and
stockholders and the foregoing is made expressly subject to the provisions of
SECTION 11.5. Notwithstanding the foregoing, this SECTION 11.4 shall not
require LBI to pay MNB any LBI Base Termination Fee or MNB Transactional
Expenses if the Merger is not consummated as a result of the lawful
termination of this Agreement by (x) the mutual consent of LBI and MNB
pursuant to SECTION 11.1(a), (y) LBI or MNB pursuant to SECTION 11.1(f), or
(z) MNB pursuant to SECTION 11.1(d)(ii).
SECTION 11.5 SPECIAL TERMINATION FEES. (a) If this Agreement is
terminated by MNB pursuant to SECTION 11.1(d)(i)(a) or SECTION 11.1(g) or by
LBI pursuant to SECTION 11.1(j) or SECTION 11.1(l), and within twelve (12)
months after such termination LBI shall enter into a definitive written
agreement with any Person (other than MNB and its Affiliates) with respect to
an acquisition of not less than twenty-five percent (25%) of the outstanding
shares of LBI Common Stock or all or substantially all of the assets of LBI
or LFSB, LBI shall pay to MNB, within ten (10) Business Days after the
execution of such definitive agreement, the amount of $1.0 million by wire
transfer of immediately available funds to such account as MNB shall
designate.
(b) If this Agreement is terminated by LBI pursuant to SECTION
11.1(e)(i)a) or SECTION 11.1(h) or by MNB pursuant to SECTION 11.1(i) or
SECTION 11.1(K), and within twelve (12) months after such termination MNB
shall enter into a definitive written agreement with any Person (other than
LBI and its Affiliates) with respect to an acquisition of not less than
twenty-five percent (25%) of the outstanding shares of MNB Common Stock or
all or substantially all of the assets of MNB or SNB, MNB shall pay to LBI,
within ten (10) Business Days after the execution of such definitive
agreement, the amount of $1.0 million by wire transfer of immediately
available funds to such account as LBI shall designate.
(c) All payments made pursuant to this Section shall
constitute liquidated damages and the receipt thereof shall be the sole and
exclusive remedy of the receiving party against the party
64
making such payment, its Affiliates and their respective directors, officers
and stockholders for any claims arising out of or relating in any way to this
Agreement or the transactions contemplated herein; PROVIDED, HOWEVER, that
nothing herein shall preclude or bar the party receiving such payment from
asserting or enforcing any such claim against any Person other than the party
making such payment, such party's Affiliates and their respective officers,
directors, employees and stockholders.
ARTICLE 12
MISCELLANEOUS
SECTION 12.1 GOVERNING LAW. All questions concerning the
construction, validity and interpretation of this Agreement, and the
performance of the obligations imposed by this Agreement shall be governed by
the internal laws of the State of Kansas applicable to contracts made and
wholly to be performed in such state without regard to conflicts of laws,
except that the law of the state of Delaware shall apply to all matters of
corporate law and except to the extent superseded by federal law.
SECTION 12.2 ASSIGNMENT. Neither this Agreement nor any of the
rights or obligations hereunder may be assigned, in whole or in part, by any
of the parties to this Agreement without the prior written consent of the
other parties to this Agreement and any purported assignment in violation
hereof shall be void and of no effect.
SECTION 12.3 AMENDMENT AND MODIFICATION. The parties may by written
agreement signed by LBI and MNB: (a) extend the time for the performance of
any of the obligations or other acts of the parties hereto; (b) waive any
inaccuracies in the representations or warranties contained in this Agreement
or in any document delivered pursuant to this Agreement; and (c) waive
compliance with or modify, amend or supplement any of the conditions,
covenants, agreements, representations or warranties contained in this
Agreement or waive or modify performance of any of the obligations of any of
the parties to this Agreement, which are for the benefit of the waiving
party, PROVIDED, HOWEVER, that no such modification, amendment or supplement
agreed to after authorization of this Agreement by the stockholders of LBI or
LBI shall affect the rights of such respective stockholders in any manner
which is materially adverse to such stockholders. The failure of any party to
this Agreement to enforce at any time any provision of this Agreement shall
not be construed to be a waiver of such provision, nor in any way affect the
validity of this Agreement or any part hereof or the right of any party
thereafter to enforce each and every such provision. No waiver of any breach
of this Agreement shall be held to constitute a waiver of any other or
subsequent breach.
SECTION 12.4 NOTICES. All notices, requests and other communications
hereunder shall be in writing (which shall include telecopier communication)
and shall be deemed to have been duly given if delivered by hand or by
overnight express delivery service, mailed certified or registered mail with
first class postage prepaid or telecopied if confirmed immediately thereafter
by also mailing a copy of any notice, request or other communication by
certified or registered mail with first class postage prepaid:
65
(a) If to LBI or Newco, to:
Landmark Bancshares, Inc.
Central and Spruce Streets, P.O. Box 1437
Dodge City, Kansas 67801-1437
Attention: Larry Schugart, President and CEO
Telephone: (620) 227-8111
Telecopier: (620) 227-8681
with copies to:
Malizia Spidi & Fisch, PC
1100 New York Avenue, N.W., Suite 340 West
Washington, D.C. 20005
Attention: Samuel J. Malizia, Esq. and
Richard Fisch, Esq.
Telephone: (202) 434-4660
Telecopier: (202) 434-4661
or to such other Person and place as LBI shall furnish to MNB in writing; or
(b) if to MNB or Newco, to:
MNB Bancshares, Inc.
800 Poyntz Avenue
Manhattan, Kansas 66502
Attention: Patrick L. Alexander, President and CEO
Telephone: (785) 565-2000
Telecopier: (785) 537-0619
with copies to:
Barack Ferrazzano Kirschbaum Perlman & Nagelberg
333 West Wacker, Suite 2700
Chicago, Illinois 60606
Attention: John E. Freechack, Esq. and
Dennis R. Wendte, Esq.
Telephone: (312) 984-3100
Telecopier: (312) 984-3150
or to such other Person or place as MNB shall furnish to LBI in writing.
Except as otherwise provided herein, all such notices, requests or other
communications shall be effective: (i) if delivered by hand, when delivered;
(ii) if mailed in the manner provided in this Section, five (5) Business Days
after deposit with the United States Postal Service; (iii) if delivered by
overnight express delivery service, on the next Business Day after deposit
with such service; (iv) if by telecopier, on the next Business Day if also
confirmed by mail in the manner provided in this Section.
SECTION 12.5 ENTIRE AGREEMENT. This Agreement and any documents
executed by the parties pursuant to this Agreement and referred to herein
constitute the entire understanding and
66
agreement of the parties to this Agreement and supersede all other prior
agreements and understandings, written or oral, relating to such subject
matter between the parties, except for the Joint Confidentiality Agreement
between LBI and MNB dated December 5, 2000. This Agreement and every
representation, warranty, covenant, agreement and provision hereof shall be
binding upon and inure to the benefit of the parties to this Agreement and
their respective successors and permitted assigns.
SECTION 12.6 SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement unless the consummation of the Contemplated Transactions is
adversely affected thereby.
SECTION 12.7 FURTHER INSTRUMENTS. The parties to this Agreement
will, at or before the Effective Time, execute and deliver such further
instruments as may be reasonably requested by any other party which are
necessary to or appropriate with respect to the consummation of the
transactions contemplated by this Agreement.
SECTION 12.8 COUNTERPARTS. This Agreement and any amendments thereto
may be executed in any number of counterparts, each of which shall be deemed
an original, but all of which together shall constitute one and the same
instrument.
SECTION 12.9 ALL REASONABLE EFFORTS. Each party represents and
warrants that it will use all reasonable efforts to bring about the
transactions contemplated by this Agreement as soon as practicable provided
that this Section shall not obligate LBI or MNB to remedy any breach of any
of its representations, warranties and covenants herein. In the event that
any party becomes aware of the occurrence or impending occurrence of any
event which would constitute or cause a breach by it of any of the
representations or warranties herein, or would have constituted or caused a
breach by it of any of the representations or warranties herein, had such an
event occurred or been known prior to the date hereof, said party shall
immediately give detailed and written notice thereof to the other party.
SECTION 12.10 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as
otherwise expressly provided herein, including in SECTION 8.7 and SECTION
8.8, the covenants, representations and warranties contained in this
Agreement shall survive only until the Effective Time.
SECTION 12.11 NO THIRD PARTY BENEFICIARIES. This Agreement is not
intended to and shall not create any rights in or confer any benefits upon
any Person or entity other than the parties hereto and the Persons identified
in SECTION 8.8.
67
IN WITNESS WHEREOF, the parties to this Agreement have caused it to be
executed by their respective officers as of the day and year first written
above.
ATTEST: LANDMARK BANCSHARES, INC.
By: /s/ GARY L. WATKINS By: /s/ LARRY SCHUGART
--------------------------- ---------------------------
Gary L. Watkins Larry Schugart
Secretary President & CEO
ATTEST: MNB BANCSHARES, INC.
By: /s/ MARK A. HERPICH By: /s/ PATRICK L. ALEXANDER
--------------------------- ---------------------------
Mark A. Herpich Patrick L. Alexander
Secretary President & CEO
ATTEST: LANDMARK MERGER COMPANY
By: /s/ MARK A. HERPICH By: /s/ LARRY SCHUGART
--------------------------- ---------------------------
Mark A. Herpich Larry Schugart
Secretary Chairman
ATTEST: LANDMARK FEDERAL SAVINGS BANK
By: /s/ GARY L. WATKINS By: /s/ LARRY SCHUGART
--------------------------- ---------------------------
Gary L. Watkins Larry Schugart
Secretary President & CEO
ATTEST: SECURITY NATIONAL BANK
By: /s/ MARK A. HERPICH By: /s/ PATRICK L. ALEXANDER
--------------------------- ---------------------------
Mark A. Herpich Patrick L. Alexander
Secretary President & CEO
68
APPENDIX B
Form of Fairness Opinion by McConnell, Budd & Downes, Inc.
The Board of Directors
MNB Bancshares, Inc.
800 Poyntz
Manhattan, KS
The Board of Directors:
You have requested our opinion as to the fairness, from a financial
point of view, to the shareholders of MNB Bancshares, Inc. ("MNBB") of the
exchange ratio in the proposed merger (the "Merger") among MNBB, Landmark
Bancshares, Inc. ("LARK") and Landmark Merger Company ("Merger Company"), a
corporation formed to facilitate the Merger. Pursuant to an Agreement and Plan
of Merger, dated April 19, 2001 (the "Merger Document"), each share of MNBB
common stock will be converted into 0.523 shares of Merger Company common stock,
and each share of LARK common stock will be converted into one share of Merger
Company common stock (collectively, the "Exchange Ratio").
McConnell, Budd & Downes, Inc., as part of its investment banking
business, is regularly engaged in the valuation of bank holding companies and
banks, thrift holding companies and thrifts and their securities in connection
with mergers and acquisitions, negotiated underwritings, private placements,
competitive bidding processes, market making as a NASD market maker, secondary
distributions of listed securities and valuations for corporate, estate and
other purposes. Our experience and familiarity with MNBB includes our
participation in the process and negotiations leading up to the proposed merger
with LARK. In the course of our role as financial advisor to MNBB in connection
with the merger, we have received fees for our services and will receive
additional fees contingent on the occurrence of certain defined events. While
the payment of all or a significant portion of fees related to financial
advisory services provided in connection with arm's-length mergers and other
business combination transactions upon consummation of such transactions, as is
the case with this transaction, might be viewed as giving such financial
advisors a financial interest in the successful completion of such transactions,
such compensation arrangements are standard and customary for transactions of
the size and type of this transaction.
In arriving at our opinion, we have reviewed the Merger Document. We
have also reviewed publicly available business, financial and shareholder
information relating to MNBB and its subsidiaries and certain publicly available
financial and shareholder information relating to LARK.
In connection with the foregoing, we have (i) reviewed MNBB's Annual
Reports to Shareholders, Annual Reports on Form 10-K and related financial
information for the four calendar
years ended December 31, 2000 and MNBB's Quarterly Report on Form 10-Q and
related unaudited financial information for the first quarter of 2001; (ii)
reviewed LARK's Annual Reports to Shareholders, Annual Reports on Form 10-K
and related financial information for the three calendar years ended
September 30, 2001 and LARK's Quarterly Reports on Form 10-Q and related
unaudited financial information for the first and second quarters of fiscal
2001; (iii) reviewed certain internal financial information and financial
forecasts, relating to the business, earnings, cash flows, assets and
prospects of MNBB furnished to McConnell, Budd & Downes, Inc. by MNBB; (iv)
held discussions with members of the senior management and board of MNBB
concerning the past and current results of operations of MNBB, its current
financial condition and management's opinion of its future prospects; (v)
held discussions with members of senior management of LARK concerning the
past and current results of operations of LARK, its current financial
condition and management's opinion of its future prospects; (vi) reviewed the
historical record of reported prices, trading volume and dividend payments
for both MNBB and LARK common stock; (vii) considered the current state of
and future prospects for the economy of Michigan generally and the relevant
market areas for MNBB and LARK in particular; (viii) reviewed specific merger
analysis models employed by McConnell, Budd & Downes, Inc. to evaluate
potential business combinations of financial institutions; (ix) reviewed the
reported financial terms of selected recent business combinations in the
banking industry; and (x) performed such other studies and analyses as
McConnell, Budd & Downes, Inc. considered appropriate under the circumstances
associated with this particular transaction.
In the course of our review and analysis we considered, among other
things, such topics as the historical and projected future contributions of
recurring earnings by the parties, the anticipated future earnings per share
results for the parties on both a combined and stand-alone basis, the potential
to realize significant recurring operating expense reductions and the impact
thereof on projected future earnings per share, the relative capitalization and
capital adequacy of each of the parties, the relative asset quality and apparent
adequacy of the reserve for loan losses for each of the parties. We also
considered the composition of deposits and the composition of the loan portfolio
of each of MNBB and LARK. In addition, we considered the historical trading
range, trading pattern and relative market liquidity of the common shares of
each of the parties. In the conduct of our review and analysis we have relied
upon and assumed, without independent verification, the accuracy and
completeness of the financial information provided to us by MNBB and LARK and or
otherwise publicly obtainable. In reaching our opinion we have not assumed any
responsibility for the independent verification of such information or any
independent valuation or appraisal of any of the assets or the liabilities of
either MNBB or LARK, nor have we obtained from any other source, any current
appraisals of the assets or liabilities of either MNBB or LARK. We have also
relied on the management of MNBB as to the reasonableness of various financial
and operating forecasts and of the assumptions on which they are based, which
were provided to us for use in our analyses.
In the course of rendering this opinion, which is being rendered prior
to the receipt of certain required regulatory approvals necessary before
consummation of the merger, we assume that no conditions will be imposed by any
regulatory agency in connection with its approval of the merger that will have a
material adverse effect on the results of operations, the financial condition or
the prospects of LARK following consummation of the merger.
2
Based upon and subject to the foregoing, it is our opinion, that as of
the date of this letter, the Exchange Ratio is fair to the shareholders of MNBB
from a financial point of view.
Very truly yours,
McConnell, Budd & Downes, Inc.
3
APPENDIX C
KEEFE, BRUYETTE & WOODS, INC.
SPECIALISTS IN FINANCIAL SERVICES
211 BRADENTON AVE. DUBLIN, OH 43017
PHONE FAX
614-766-8400 614-766-8406
April 19, 2001
Board of Directors
Landmark Bancshares, Inc.
Central & Spruce Streets
Dodge City, Kansas
Dear Gentlemen:
You have requested our opinion as an independent investment banking firm
regarding the fairness, from a financial point of view, to the stockholders of
Landmark Bancshares Inc. ("Landmark" or the "Company"), of the relative
ownership of Landmark shareholders in the merger (the "Merger") between Landmark
and MNB Bancshares, Inc. ("MNB"). We have not been requested to opine as to, and
our opinion does not in any manner address, Landmark's underlying business
decision to proceed with or effect the Merger.
Pursuant to the Agreement and Plan of Merger, dated April 19, 2001, by and among
Landmark and MNB (the "Agreement"), at the effective time of the Merger,
Landmark and MNB will merge into Landmark Merger Company ("Newco"). Each share
of Landmark Common Stock shall convert into 1.0 share of Newco Common Stock.
Each share of MNB Common Stock shall convert into 0.523 shares of Newco Common
Stock.. At the close of the Merger, Newco will change its name to Landmark
Bancshares, Inc.
In addition, the holders of options awarded pursuant to Landmark's 1994 and 1998
Stock Option and Incentive Plans which are outstanding and unexercised will be
converted automatically into an option to purchase shares of Newco Common Stock
at the current exercise price. The complete terms of the proposed transaction
are described in the Agreement, and this summary is qualified in its entirety by
reference thereto.
Keefe, Bruyette & Woods, Inc., as part of its investment banking business, is
regularly engaged in the evaluation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings, and distributions of
listed and unlisted securities. We are familiar with the market for common
stocks of publicly traded banks, savings institutions and bank and savings
institution holding companies.
In connection with this opinion we reviewed certain financial and other business
data supplied to us by Landmark including (i) the Agreement and Plan of Merger
by and among Landmark, MNB and Newco (ii) Annual Reports, Proxy Statements and
Form 10-Ks for the years ended September 30, 1998, 1999, and 2000, Form 10-Q for
the quarter ended December 31, 2000, and other information
Board of Directors
Landmark Bancshares, Inc.
April 19, 2001
Page 2
we deemed relevant. We discussed with senior management and the boards of
directors of Landmark and its wholly owned subsidiary, Landmark Federal Savings
Bank, the current position and prospective outlook for Landmark. We considered
historical quotations and the prices of recorded transactions in Landmark's
common stock in recent years. We reviewed financial and stock market data of
other savings institutions and banks, particularly in the Midwestern region of
the United States, and the financial and structural terms of several other
recent transactions involving mergers and acquisitions of savings institutions
or proposed changes of control of comparably situated companies.
For MNB, we reviewed Annual Reports, 10K's and Proxy Statements for the years
ended December 31, 1998, 1999, and 2000 and certain other information deemed
relevant. We also discussed with senior management of MNB, the current position
and prospective outlook for MNB.
For purposes of this opinion we have relied, without independent verification,
on the accuracy and completeness of the material furnished to us by Landmark and
MNB and the material otherwise made available to us, including information from
published sources, and we have not made any independent effort to verify such
data. With respect to the financial information, including forecasts and asset
valuations we received from Landmark, we assumed (with your consent) that they
had been reasonably prepared reflecting the best currently available estimates
and judgment of the Landmark's management. In addition, we have not made or
obtained any independent appraisals or evaluations of the assets or liabilities,
and potential and/or contingent liabilities of Landmark or MNB. We have further
relied on the assurances of management of Landmark and MNB that they are not
aware of any facts that would make such information inaccurate or misleading. We
express no opinion on matters of a legal, regulatory, tax or accounting nature
or the ability of the Merger, as set forth in the Agreement, to be consummated.
In rendering our opinion, we have assumed that in the course of obtaining the
necessary approvals for the Merger, no restrictions or conditions will be
imposed that would have a material adverse effect on the contemplated benefits
of the Merger to Landmark or the ability to consummate the Merger. Our opinion
is based on the market, economic and other relevant considerations as they exist
and can be evaluated on the date hereof.
Consistent with the engagement letter with you, we have acted as financial
advisor to Landmark in connection with the Merger and will receive a fee for
such services, a portion of which is contingent upon consummation of the Merger.
In addition, Landmark has agreed to indemnify us for certain liabilities arising
out of our engagement by Landmark in connection with the Merger.
Board of Directors
Landmark Bancshares, Inc.
April 19, 2001
Page 3
Based upon and subject to the foregoing, as outlined in the foregoing paragraphs
and based on such other matters as we considered relevant, it is our opinion
that as of the date hereof, the relative consideration to be received by the
stockholders of Landmark in the Merger under the terms of the Agreement is fair,
from a financial point of view, to the stockholders of Landmark.
This opinion may not, however, be summarized, excerpted from or otherwise
publicly referred to without our prior written consent, although this opinion
may be included in its entirety in the proxy statement of Landmark used to
solicit stockholder approval of the Merger. It is understood that this letter is
directed to the Board of Directors of Landmark in its consideration of the
Agreement, and is not intended to be and does not constitute a recommendation to
any stockholder as to how such stockholder should vote with respect to the
Merger.
Very truly yours,
/s/ Keefe, Bruyette & Woods, Inc.
Keefe, Bruyette & Woods, Inc.
APPENDIX D
SECTION 262 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
RELATING TO DISSENTERS' RIGHTS
SECTION 262 - APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares
of stock on the date of the making of a demand pursuant to subsection (d) of
this section with respect to such shares, who continuously holds such shares
through the effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has neither voted in
favor of the merger or consolidation nor consented thereto in writing
pursuant to ss. 228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair value of the stockholder's shares of stock
under the circumstances described in subsections (b) and (c) of this section.
As used in this section, the word "stockholder" means a holder of record of
stock in a stock corporation and also a member of record of a nonstock
corporation; the words "stock" and "share" mean and include what is
ordinarily meant by those words and also membership or membership interest of
a member of a nonstock corporation; and the words "depository receipt" mean a
receipt or other instrument issued by a depository representing an interest
in one or more shares, or fractions thereof, solely of stock of a
corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class
or series of stock of a constituent corporation in a merger or consolidation
to be effected pursuant to Section 251 (other than a merger effected pursuant
to Section 251(g) of this title), Section 252, Section 254, Section 257,
Section 258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or consolidation,
were either (i) listed on a national securities exchange or designated as a
national market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc. or (ii) held of record by
more than 2,000 holders; and further provided that no appraisal rights shall
be available for any shares of stock of the constituent corporation surviving
a merger if the merger did not require for its approval the vote of the
stockholders of the surviving corporation as provided in subsection (f) of
Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal
rights under this section shall be available for the shares of any class or
series of stock of a constituent corporation if the holders thereof are
required by the terms of an agreement of merger or consolidation pursuant to
Sections 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting
from such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or depository
receipts in respect thereof) or depository receipts at the effective
date of the merger or consolidation will be either listed on a national
securities exchange or designated as a national market system security
on an interdealer quotation system by the National Association of
Securities Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts
and cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under Section 253 of this title is not
owned by the parent corporation immediately prior to the merger, appraisal
rights shall be available for the shares of the subsidiary Delaware
corporation.
(c) Any corporation may provide in its certificate of incorporation
that appraisal rights under this section shall be available for the shares of
any class or series of its stock as a result of an amendment to its
certificate of incorporation, any merger or consolidation in which the
corporation is a constituent corporation or the sale of all or substantially
all of the assets of the corporation. If the certificate of incorporation
contains such a provision, the procedures of this section, including those
set forth in subsections (d) and (e) of this section, shall apply as nearly
as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a meeting
of stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are available
pursuant to subsection (b) or (c) hereof that appraisal rights are available
for any or all of the shares of the constituent corporations, and shall
include in such notice a copy of this section. Each stockholder electing to
demand the appraisal of such stockholder's shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation, a
written demand for appraisal of such stockholder's shares. Such demand will
be sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal
of such stockholder's shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein provided.
Within 10 days after the effective date of such merger or consolidation, the
surviving or resulting corporation shall notify each stockholder of each
constituent corporation who has complied with this subsection and has not
voted in favor of or consented to the merger or consolidation of the date
that the merger or consolidation has become effective; or
2
(2) If the merger or consolidation was approved pursuant to Section
228 or Section 253 of this title, each constituent corporation, either before
the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of stock
of such constituent corporation who are entitled to appraisal rights of the
approval of the merger or consolidation and that appraisal rights are
available for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy of this
section; provided that, if the notice is given on or after the effective date
of the merger or consolidation, such notice shall be given by the surviving
or resulting corporation to all such holders of any class or series of stock
of a constituent corporation that are entitled to appraisal rights. Such
notice may, and, if given on or after the effective date of the merger or
consolidation, shall, also notify such stockholders of the effective date of
the merger or consolidation. Any stockholder entitled to appraisal rights
may, within 20 days after the date of mailing of such notice, demand in
writing from the surviving or resulting corporation the appraisal of such
holder's shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such holder's shares. If such
notice did not notify stockholders of the effective date of the merger or
consolidation, either (i) each such constituent corporation shall send a
second notice before the effective date of the merger or consolidation
notifying each of the holders of any class or series of stock of such
constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or
resulting corporation shall send such a second notice to all such holders on
or within 10 days after such effective date; provided, however, that if such
second notice is sent more than 20 days following the sending of the first
notice, such second notice need only be sent to each stockholder who is
entitled to appraisal rights and who has demanded appraisal of such holder's
shares in accordance with this subsection. An affidavit of the secretary or
assistant secretary or of the transfer agent of the corporation that is
required to give either notice that such notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated therein. For
purposes of determining the stockholders entitled to receive either notice,
each constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the record
date shall be the close of business on the day next preceding the day on
which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who
has complied with subsections (a) and (d) hereof and who is otherwise
entitled to appraisal rights, may file a petition in the Court of Chancery
demanding a determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms
offered upon the merger or consolidation. Within 120 days after the effective
date of the merger or consolidation, any stockholder who has complied with
the requirements of subsections (a) and (d) hereof, upon written request,
shall be entitled to receive from the corporation surviving the merger or
resulting from the consolidation a statement setting forth the aggregate
number of shares not voted in favor of the merger or
3
consolidation and with respect to which demands for appraisal have been
received and the aggregate number of holders of such shares. Such written
statement shall be mailed to the stockholder within 10 days after such
stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service
of a copy thereof shall be made upon the surviving or resulting corporation,
which shall within 20 days after such service file in the office of the
Register in Chancery in which the petition was filed a duly verified list
containing the names and addresses of all stockholders who have demanded
payment for their shares and with whom agreements as to the value of their
shares have not been reached by the surviving or resulting corporation. If
the petition shall be filed by the surviving or resulting corporation, the
petition shall be accompanied by such a duly verified list. The Register in
Chancery, if so ordered by the Court, shall give notice of the time and place
fixed for the hearing of such petition by registered or certified mail to the
surviving or resulting corporation and to the stockholders shown on the list
at the addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail
and by publication shall be approved by the Court, and the costs thereof
shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates
to submit their certificates of stock to the Register in Chancery for
notation thereon of the pendency of the appraisal proceedings; and if any
stockholder fails to comply with such direction, the Court may dismiss the
proceedings as to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of
any element of value arising from the accomplishment or expectation of the
merger or consolidation, together with a fair rate of interest, if any, to be
paid upon the amount determined to be the fair value. In determining such
fair value, the Court shall take into account all relevant factors. In
determining the fair rate of interest, the Court may consider all relevant
factors, including the rate of interest which the surviving or resulting
corporation would have had to pay to borrow money during the pendency of the
proceeding. Upon application by the surviving or resulting corporation or by
any stockholder entitled to participate in the appraisal proceeding, the
Court may, in its discretion, permit discovery or other pretrial proceedings
and may proceed to trial upon the appraisal prior to the final determination
of the stockholder entitled to an appraisal. Any stockholder whose name
appears on the list filed by the surviving or resulting corporation pursuant
to subsection (f) of this section and who has submitted such stockholder's
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that such
stockholder is not entitled to appraisal rights under this section.
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(i) The Court shall direct the payment of the fair value of the
shares, together with interest, if any, by the surviving or resulting
corporation to the stockholders entitled thereto. Interest may be simple or
compound, as the Court may direct. Payment shall be so made to each such
stockholder, in the case of holders of uncertificated stock forthwith, and
the case of holders of shares represented by certificates upon the surrender
to the corporation of the certificates representing such stock. The Court's
decree may be enforced as other decrees in the Court of Chancery may be
enforced, whether such surviving or resulting corporation be a corporation of
this State or of any state.
(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances.
Upon application of a stockholder, the Court may order all or a portion of
the expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded appraisal rights as provided
in subsection (d) of this section shall be entitled to vote such stock for
any purpose or to receive payment of dividends or other distributions on the
stock (except dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the merger or
consolidation); provided, however, that if no petition for an appraisal shall
be filed within the time provided in subsection (e) of this section, or if
such stockholder shall deliver to the surviving or resulting corporation a
written withdrawal of such stockholder's demand for an appraisal and an
acceptance of the merger or consolidation, either within 60 days after the
effective date of the merger or consolidation as provided in subsection (e)
of this section or thereafter with the written approval of the corporation,
then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of
Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court
deems just.
(l) The shares of the surviving or resulting corporation to which
the shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized
and unissued shares of the surviving or resulting corporation.
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PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Delaware law, a Delaware corporation may indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation) by
reason of the fact that he or she is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, against
expenses (including attorneys' fees), judgments if they acted in good faith and
in a manner they reasonably believed to be in or not opposed to the best
interests of the corporation or its stockholders (and, if a criminal proceeding,
if they had no reasonable cause to believe their conduct was unlawful) against:
(i) expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or her in connection with
such action, suit or proceeding if he or she acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best interests of
the corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.
Under Delaware law, a Delaware corporation may also indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he or
she is or was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by him or her in connection with the
defense or settlement of such action or suit if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the corporation; except that no indemnification shall be made
in respect of any claim, issue or matter as to which the person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, the person is fairly and reasonably
entitled to indemnity for his or her expenses which the Court of Chancery or
such other court shall deem proper.
Indemnification under Delaware law is not exclusive of other rights to
indemnification to which a person may be entitled under the corporation's
certificate of incorporation, bylaws or any contractual agreement. Unless
otherwise specified when authorized or ratified, the indemnification provided
for under Delaware law continues as to a person who ceases to be a director,
officer, employee or agent of the corporation. If a corporation has paid
indemnity or advanced expenses pursuant to the above described provisions, the
corporation must report such payment or advancement in writing to the
stockholders in or prior to the notice of the next stockholders meeting.
Delaware law permits a corporation to purchase insurance on behalf of
its directors, officers, employees and agents (or those holding such positions
with another enterprise at the request of the corporation) against liabilities
arising out of their positions, whether or not such liabilities would be within
the above described indemnification provisions.
MNB Bancshares and Landmark Bancshares have agreed to indemnify the
present and former directors, officers, employees and agents of their respective
companies and their subsidiaries against certain liabilities arising out of
actions or omissions occurring at or prior to the time the merger becomes
effective to the fullest extent permitted under Delaware and Kansas law,
respectively, their certificate or articles of incorporation and bylaws and any
indemnity agreements previously entered with these directors, officers,
employees or agents. These obligations will be assumed by Landmark Merger
Company upon completion of the merger.
Landmark Merger Company's certificate and bylaws provide for the
indemnification of its directors and officers, and of any person serving at the
request of Landmark Merger Company as a director, officer or partner of another
enterprise, to the fullest extent permitted by Delaware law.
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Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to directors, officers or persons
controlling Landmark Merger Company under the provisions described above,
Landmark Merger Company has been informed that, in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the Securities Act, and is therefore unenforceable.
MNB Bancshares and Landmark Bancshares have agreed to cooperate to
obtain after the completion of the merger directors' and officers' liability
insurance coverage for the officers and directors of Landmark Merger Company, to
the extent economically practicable. They have also agreed to cooperate to try
to obtain liability insurance coverage for the directors and officers of MNB
Bancshares and Landmark Bancshares for a period of not less than three years
after the completion of the merger and with respect to actions taken by such
directors and officers prior to this completion.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The exhibits filed pursuant to this Item 21 immediately follow the
Exhibit Index. The following is a description of the applicable exhibits
required for Form S-4 as provided by Item 601 of Regulation S-K.
Exhibit
Number Description
2.1 Agreement and Plan of Merger, providing for the combination of
MNB Bancshares and Landmark Bancshares pursuant to their merger
with and into Landmark Merger Company. This document is filed as
Appendix A to the Proxy Statement-Prospectus forming a part of
this Registration Statement.
3.1 Certificate of Incorporation of Landmark Merger Company.
3.2 Form of Amended and Restated Certificate of Incorporation of
Landmark Merger Company.
3.3 Bylaws of Landmark Merger Company.
4.1 Form of Rights Agreement of Landmark Merger Company.
4.2 Form of stock certificate of Landmark Merger Company.
5.1 Opinion of Barack Ferrazzano Kirschbaum Perlman & Nagelberg
regarding legality of Landmark Merger Company Common Stock to be
issued in the Merger.
8.1 Opinion of KPMG LLP regarding certain tax matters.
10.1 Form of employment agreement between Larry Schugart and Landmark
Merger Company.
10.2 Form of employment agreement between Patrick L. Alexander and
Landmark Merger Company.
10.3 Form of employment agreement between Mark A. Herpich and Landmark
Merger Company.
10.4 Form of employment agreement between Michael E. Scheopner and
Landmark Merger Company.
10.5 Form of employment agreement between Dean R. Thibault and
Landmark Merger Company.
13.1 Landmark Bancshares, Inc.'s Annual Report to Shareholders on Form
10-K filed with the Securities and Exchange Commission on
December 21, 2001.
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13.2 Landmark Bancshares, Inc.'s Quarterly Report to Shareholders on
Form 10-Q filed with the Securities and Exchange Commission on
May 15, 2001.
13.3 MNB Bancshares, Inc.'s Annual Report to Stockholders on Form 10-K
filed with the Securities and Exchange Commission on March 20,
2001.
13.4 MNB Bancshares, Inc.'s Quarterly Report to Stockholders on Form
10-Q filed with the Securities and Exchange Commission on May 15,
2001.
23.1 Consent of KPMG LLP.
23.2 Consent of Regier Carr & Monroe, L.L.P.
23.3 Consent of Barack Ferrazzano Kirschbaum Perlman & Nagelberg
(included in Exhibit 5.1)
23.4 Consent of Keefe Bruyette & Woods, Inc.
23.5 Consent of McConnell Budd & Downes, Inc.
24.1 Power of Attorney (contained on the Signature page).
99.1 Form of Proxy to be delivered to the Stockholders of MNB
Bancshares.
99.2 Form of Proxy to be delivered to the Stockholders of Landmark
Bancshares.
99.3 Consent of Richard Ball to be named as future director of
Landmark Merger Company.
99.4 Consent of Brent A. Bowman to be named as future director of
Landmark Merger Company.
99.5 Consent of Joseph L. Downey to be named as future director of
Landmark Merger Company.
99.6 Consent of Jim W. Lewis to be named as future director of
Landmark Merger Company.
99.7 Consent of Jerry R. Pettle to be named as future director of
Landmark Merger Company.
99.8 Consent of Susan E. Roepke to be named as future director of
Landmark Merger Company.
99.9 Consent of C. Duane Ross to be named as future director of
Landmark Merger Company.
99.10 Consent of David H. Snapp to be named as future director of
Landmark Merger Company.
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(a) To file during any period in which offers and 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, as amended (the "Act");
(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;
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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 Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(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.
(b) That for the purpose of determining any liability under the Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) 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.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Act each filing of the registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities and Exchange Act of 1934)
that is incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to, and meeting the
requirements of, Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
The undersigned registrant hereby undertakes that every prospectus: (i)
that is filed pursuant to the immediately preceding paragraph, or (ii) that
purports to meet the requirements of Section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the 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
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such director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Proxy
Statement/Prospectus pursuant to items 4, 10(b), 11, or 13 of this form, within
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in the documents filed subsequent to the effective date of
this registration statement through the date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in this registration statement when it became effective.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Landmark Merger Company has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Manhattan, State of Kansas, this 6th day of June, 2001.
LANDMARK MERGER COMPANY
By: /s/ PATRICK L. ALEXANDER
-------------------------------------
Patrick L. Alexander
President and Chief Executive Officer
POWER OF ATTORNEY
The undersigned officers and directors of Landmark Merger Company Trust
do hereby constitute and appoint Patrick L. Alexander and Larry Schugart and
either one of them, as their attorneys-in fact with power and authority to do
any and all acts and things and to execute any and all instruments which said
attorneys-in-fact, and either one of them, determine may be necessary or
advisable or required to enable said corporation to comply with the Securities
Act of 1933, as amended, and any rules or regulations or requirements of the
Securities and Exchange Commission in connection with this Registration
Statement. Without limiting the generality of the foregoing power and authority,
the powers granted include the power and authority to sign the names of the
undersigned officers and directors in the capacities indicated below to the
Registration Statement, to any and all amendments, both pre-effective and
post-effective, and supplements to this Registration Statement, and to any and
all instruments or documents filed as part of or in conjunction with this
Registration Statement or amendments or supplements thereto, and each of the
undersigned hereby ratifies and confirms all that said attorneys-in-fact or any
of them shall do or cause to be done by virtue hereof. This Power of Attorney
may be signed in several counterparts.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and Power of Attorney has been signed on June 6, 2001, by
the following persons in their capacities indicated.
SIGNATURE CAPACITY
/s/ Larry Schugart Chairman of the Board of Directors
- ------------------------------------------------
Larry Schugart
/s/ Patrick L. Alexander President, Chief Executive Officer and Director
- ------------------------------------------------
Patrick L. Alexander
/s/ Mark A. Herpich Vice President, Secretary, Treasurer and Chief
- ------------------------------------------------
Mark A. Herpich Financial Officer
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